AVONDALE INDUSTRIES INC Mailing Address Business Address P.O

SECURITIES AND EXCHANGE COMMISSION

FORM 10-K405 Annual report pursuant to section 13 and 15(d), Regulation S-K Item 405

Filing Date: 1996-01-26 | Period of Report: 1995-12-31 SEC Accession No. 0000829444-96-000002

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FILER AVONDALE INDUSTRIES INC Mailing Address Business Address P.O. BOX 50280 P.O. BOX 50280 CIK:829444| IRS No.: 391097012 | State of Incorp.:LA | Fiscal Year End: 1231 NEW ORLEANS LA NEW ORLEANS LA Type: 10-K405 | Act: 34 | File No.: 000-16572 | Film No.: 96507167 70150-0280 70150-0280 SIC: 3730 Ship & boat building & repairing 5044362121

Form 10-K

(Mark One) [X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 1995

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 0-16572

Avondale Industries, Inc. (Exact name of registrant as specified in its charter)

Louisiana 39-1097012 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization)

5100 River Road, Avondale, Louisiana 70094 (Address of principal executive offices) (Zip Code)

(504) 436-2121 (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $1.00 par value per share (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

The aggregate market value of the voting stock held by non-affiliates (affiliates being directors, executive officers and holders of more than 5% of the Company's common stock) of the Registrant at December 31, 1995 was approximately $77,267,832.

The number of shares of the Registrant's common stock, $1.00 par value per share, outstanding at December 31, 1995 was 14,464,175.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement for its 1996 Annual Meeting have been incorporated by reference into Part III of this Form 10-K.

Item 1. Business.

Overview

Avondale is one of the largest shipbuilders in the United States, specializing in the design, construction, conversion, repair and modernization of various types of ocean-going vessels for the military and commercial markets. A majority of Avondale's contracts in recent years has been for the construction of U.S. Navy surface ships, although it has secured two large commercial contracts in the past year for the construction or conversion of double-hulled product carriers. Management believes the Company's low cost structure, experienced and skilled work force, sophisticated construction processes and extensive experience gained over the past 25 years in building a variety of military and commercial vessels, position the Company as one of the most cost-efficient and versatile shipbuilders in the United States. At December 31, 1995, the Company's firm backlog was approximately $1.4 billion exclusive of unexercised options aggregating $485 million held by the U.S. Navy for additional ship orders (including contract escalation) and a commercial contract subject to financing. Of the firm backlog, approximately $1.3 billion was attributable to contracts to build ships for the U.S. Navy.

During the past 25 years, Avondale has built over 72 vessels for the U.S. Navy and other branches of the military, ranging from vessels such as AOs and T-AOs that principally require large-scale steel fabrication at a competitive cost, to highly sophisticated vessels such as the T-AGS 45, the LSD-CVs and the MHCs (with fiberglass hulls) that also require extensive outfitting of electrical, command and control and weapons systems. U.S. Navy vessels currently under construction include four Sealift ships, three MHCs, two LSD- CVs, one T-AO and one Icebreaker. The Company anticipates that it will continue to focus primarily on securing contracts to construct and convert military vessels. See "Glossary of Selected Industry Terms."

Within the past year, Avondale has secured two commercial contracts that should benefit from the Company's expertise and newly adopted construction techniques. In May 1995, Avondale finalized a $143.9 million contract to construct four double-hulled forebodies for product carriers owned by American Heavylift Shipping Company. Construction of these forebodies has begun and is expected to be completed by mid-1997. The Company has also signed a contract with Maritrans Ocean Transport, Inc. ("Maritrans") for the construction of up to six (but not less than four) double-hulled product carriers. This contract is subject to Maritrans' ability to qualify for and receive a Title XI MARAD financing guarantee. Assuming receipt of such guarantee, the contract calls for delivery of the vessels by the end of 1998.

Background. Avondale has historically maintained a flexible, versatile shipyard and has been the successful bidder for a variety of marine construction projects. Organized in 1938, Avondale first began building ocean- going ships in the 1950s. From 1959 to 1985, the Company was operated as a subsidiary of Ogden Corporation, a diversified New York Stock Exchange listed company headquartered in New York, New York. Prior to the 1980s, Avondale built both military and commercial vessels. In addition to the construction of 27 destroyer escorts for the U.S. Navy, Avondale successfully completed a variety of construction projects during that period, including general cargo and multi- product carriers, such as LASH vessels, container vessels, crude oil tankers and product carriers. In the early 1980s, however, several measures were implemented that changed the marine construction industry significantly. The 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

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document to expand the U.S. Navy fleet to 600 vessels, thereby significantly increasing the U.S. Navy shipbuilding opportunities available to Avondale.

Initially, Avondale capitalized on the U.S. Navy shipbuilding opportunities through its construction of five AOs during the early 1980s. Since AOs are essentially oil tankers modified to meet certain military requirements, they were a natural extension of the product carrier vessels previously built by Avondale.

During the remainder of the 1980s and the first part of this decade, Avondale steadily expanded the range of vessels that it built for the U.S. Navy. The Company principally focused on those vessels that were related to, or natural extensions of, predecessor vessels constructed by Avondale, where Avondale could best capitalize on its prior experience and proven capabilities. Among the U.S. Navy vessels built or under construction during this period were 16 T-AOs, five LSDs, four LSD-CVs, five AOJs (which constituted conversions of AOs previously built by Avondale), one T-AGS 45, 15 LCACs, four MHCs and three SL 7 conversions.

With the end of the Cold War, and the pressure of domestic budget constraints, spending for new vessel construction by the U.S. Navy has been substantially reduced, with the rate of new vessel construction reduced to approximately 50% of that in the 1980s. Despite the contraction in U.S. Navy shipbuilding activity, management believes that Avondale's versatility has been a significant factor in its successful efforts to restore its backlog, which efforts have also been bolstered by Avondale's experience in building vessels comparable to those currently in demand.

U.S. Military. Included in the current firm backlog for the military are contracts to construct four Sealift ships at an original contract price of $880 million. The Sealift ships, which are designed to assist in the rapid transportation and deployment of military personnel, equipment and supplies, are comparable to other vessels, such as auxiliary and amphibious support ships, that have been previously constructed by Avondale for the military. In addition, the Company has been awarded options to construct two additional Sealift vessels for an additional $485 million in the aggregate (including contract escalation), which options have not yet been exercised by the U.S. Navy. The first Sealift ship is scheduled for delivery in 1998 with the final ship (assuming exercise by the U.S. Navy of the remaining Sealift options) scheduled for delivery in 2001.

The award of the Sealift contract was one of a series of significant military contract awards received by the Company since the beginning of 1993. In 1993, the Company was awarded a $232.5 million contract for the construction of the Icebreaker for the U.S. Coast Guard (scheduled for delivery in 1998) and a contract to build one LSD-CV for the U.S. Navy at a contract price of $257.5 million. The 1994 LSD-CV award brought the total number of LSD-CV contracts awarded to the Company to four, with two of the vessels having been delivered to date, and the final two vessels scheduled for delivery in 1996 and 1998, respectively. See "Glossary of Selected Industry Terms" and "--Shipbuilding-- Vessel Deliveries and Backlog."

In early 1994 Avondale was one of five U.S. shipyards awarded a contract to undertake a preliminary design study on the U.S. Navy's LPD-17 (formerly LX) ship. The U.S. Navy has stated its expectation that the LPD-17 vessels will be a mainstay of the U.S. Navy over the next two decades, replacing a number of vessels nearing the end of their useful lives. In November 1995, Congress appropriated $974.0 million for the construction of the first of an anticipated 12 vessels under the LPD-17 program. The LPD-17, which the U.S. Navy has announced will be the next significant class of amphibious vessels, will be outfitted with sophisticated command and control systems, as well as ship-based weapon systems. The Company believes that the U.S. Navy will award a contract for the first LPD-17, together with options for two additional vessels, in mid-

In connection with its pursuit of the LPD-17 contract, Avondale has announced an alliance with Bath Iron Works Corporation ("Bath") (recently acquired by General Dynamics Corporation) and Hughes Aircraft Company ("Hughes Aircraft"), a subsidiary of Hughes Electronics Corporation. Under the alliance, which Avondale expects to finalize prior to submission of the LPD-17 contract bid, Avondale would be the lead contractor, and the LPD-17 vessels would be constructed in both the Avondale and Bath shipyards, with Hughes Aircraft being responsible for integration of the ships' electronic and weapons systems. More recently, Ingalls Shipbuilding, a subsidiary of Litton Industries, announced that it had formed an alliance with Tenneco's Newport News Shipbuilding, National Steel and Shipbuilding Company and Lockheed Martin Government Electronic Systems to pursue the same contract. Avondale believes that the formation of its alliance with Bath and Hughes Aircraft, coupled with the Company's low cost structure and proven experience in building vessels comparable to the LPD-17, such as the LSD-CVs, will enhance the viability and competitiveness of the Company's bid for the LPD-17 contracts.

If Avondale is the successful bidder for the first LPD-17 contract, in order to satisfy the terms of the contract, it will be required to make a significant capital investment, including, among others, the enhancement of its computer-aided design capabilities and installation of sophisticated computer- based data systems, which are necessary for completing the LPD-17.

Although funds for the construction of the first LPD-17 vessel have been appropriated as part of the overall Department of Defense appropriations for 1996, the President vetoed the companion defense authorization bill. The veto of the defense authorization bill has created some uncertainty as to the obligation of the Department of Defense to spend appropriated funds, but it is the Company's belief, based on public statements made by Department of Defense representatives, that the veto will not have a negative impact on the shipbuilding programs of the U.S. Navy, including the LPD-17.

In addition to the LPD-17, there are several other anticipated U.S. Navy programs that may offer shipbuilding opportunities to Avondale, including the possible construction of two additional Sealift vessels, a class of prepositioning vessels for the U.S. Marine Corps, up to 14 ADC(X) vessels, and the SC-21, which represents the next generation of surface combatant vessels.

Reemergence of Commercial Shipbuilding. The termination of the U.S. construction-differential subsidy program in 1981 significantly curtailed the ability of U.S. shipyards to compete successfully for international commercial shipbuilding contracts with foreign shipyards, many of which are heavily subsidized by their governments. Most of the commercial ships built in the United States since 1981 have been constructed primarily due to the Jones Act requirement that all vessels transporting products between U.S. ports be constructed by U.S. shipyards. However, two recent legislative initiatives have significantly enhanced U.S. commercial shipbuilding opportunities.

The Oil Pollution Act of 1990, which requires the phased-in transition of single-hulled tankers and product carriers to double-hulled vessels beginning January 1, 1995, has created a demand (that is expected to continue through the remainder of the decade) for the retro-fitting of existing tankers and the construction of new double-hulled tankers, as oil and energy companies and other ship operators upgrade their fleets to comply with the law. Industry analysts believe that other countries may pass laws comparable to the Oil Pollution Act of 1990, which would further increase worldwide demand for double-hulled product carriers.

In late 1993, Congress amended the loan guarantee program under Title XI of the Merchant Marine Act, 1936, to permit the U.S. government to guarantee loan obligations of foreign vessel owners for foreign-flagged vessels that are built

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document in U.S. shipyards. Title XI authorizes MARAD to guarantee debt with a term of up to 25 years in an amount up to 87.5% of the vessel cost, thereby enabling shipowners to obtain construction financing on more favorable terms than those currently offered by other countries having guarantee or subsidy programs for foreign nationals similar to Title XI. These 1993 amendments expanded Title XI in a manner that has attracted foreign owners and created foreign commercial shipbuilding opportunities for U.S. shipyards.

Management believes these initiatives have assisted Avondale in attracting commercial shipbuilding opportunities during the past year. In May 1995, the Company finalized a $143.9 million contract to construct four double-hulled forebodies for product carriers owned by a U.S. shipping company. These double- hulled product carriers are the first U.S.-flag product carriers built in the United States in eight years. The contract is supported by a Title XI guarantee by MARAD. Construction of the forebodies has already begun and is expected to be completed by mid-1997. Avondale believes its receipt of this contract was further assisted by its prior experience in constructing three double-hulled T- AOs on behalf of the U.S. Navy.

In November 1995, the Company signed a contract with Maritrans for the construction of up to six (but not less than four) double-hulled product carriers. This contract is subject to Maritrans' ability to qualify for and receive a Title XI MARAD financing guarantee. Assuming receipt of such guarantee, the contract calls for delivery of the vessels by the end of 1998. These U.S.-flag vessels will comply with all requirements of the Oil Pollution Act of 1990 and will engage in transportation of petroleum products between U.S. ports under the Jones Act.

Recently, bills have been introduced in the U.S. Congress that would eliminate the competitive advantages afforded to U.S. shipyards under the 1993 amendments to the Title XI guarantee program. This legislation would implement a December 1994 trade agreement among the United States, the European Union, Finland, Japan, Korea, Norway and Sweden (which collectively control over 75% of the market share for worldwide vessel construction) negotiated under the auspices of the Organization for Economic Cooperation and Development (the "OECD Agreement"). The OECD Agreement and related accords seek, among other things, to eliminate government subsidies provided to commercial shipbuilders and to adopt a uniform standard of government credit assistance for foreign nationals. Under these multilateral accords, each participating nation agreed not to provide credit assistance to foreign nationals in excess of 80% of the vessel construction price, and to limit the term of any credit assistance to not more than 12 years. In mid-December 1995, a subcommittee of the Ways and Means Committee of the U.S. House of Representatives passed a bill seeking to implement the OECD Agreement. If this bill is enacted by Congress in its current form, the Title XI guarantee program would be modified to be in accord with the uniform credit assistance standards mandated under the OECD Agreement, thereby eliminating the advantages available to U.S. shipyards under the 1993 Title XI amendments.

Avondale is not able at this time to assess whether legislation implementing the OECD Agreement will be enacted by Congress or the ultimate impact that any such legislation may have. Although the OECD Agreement promotes the goal of eliminating commercial shipbuilding subsidies by signatory nations, there can be no assurance that certain safeguards in the agreement will not be circumvented or will be adequately enforced, or that worldwide commercial shipbuilding opportunities may continue to flow to foreign shipyards located in signatory nations (which may have developed structural competitive advantages as a result of their long histories of subsidization) or may be diverted to non-signatory nations. If the competitive advantages of the current Title XI guarantee program are eliminated and the OECD Agreement fails to achieve its objectives, Avondale's ability to compete for international commercial shipbuilding contracts will remain limited, notwithstanding the increased opportunities that are expected to arise as vessels of the worldwide tanker and

The OECD Agreement is not expected to immediately diminish commercial opportunities arising under the Oil Pollution Act of 1990 and the Jones Act. Legislative bills seeking to rescind or substantially modify the provisions of the Jones Act mandating the use of U.S.-built ships for coastwise trade are introduced in Congress from time to time, and are expected to be introduced in the future. Although management believes it is unlikely the Jones Act will be rescinded or materially modified in the foreseeable future, there can be no assurance to this effect with respect to the Jones Act or any other law or regulation benefitting U.S. shipbuilders.

Technological Innovations. To assure that its shipyard remains among the most modern in the world, Avondale regularly reviews and assesses its construction and production process. In this regard, Avondale often consults with other highly successful shipbuilding companies concerning advances in shipbuilding technology. In the early 1980s, the Company was the first U.S. shipyard to successfully implement modular construction techniques that had previously been perfected by Japanese shipbuilders. Management believes these techniques were a major factor in Japan's dominance of the commercial shipbuilding market during the 1970s. Avondale obtained its modular construction capabilities and "know-how" pursuant to an agreement with Ishikawajima-Harima Heavy Industries Co., Ltd. ("IHI"), one of Japan's largest shipbuilders, which worked with Avondale to change its manufacturing processes and to train Avondale's employees. Modular construction afforded Avondale significant production efficiencies in the installation of ship systems, largely due to the greater ease with which such systems could be installed in open modules rather than closed-in hulls. As a result of these efforts, Avondale realized substantial increases in labor productivity.

The Company has also embarked on a modernization program to enhance its ability to build and deliver vessels at a lower cost. In 1994 the Company entered into a technology sharing agreement with AESA of Spain, regarded as an innovative and successful world-class shipyard. After an on-site review of Avondale's shipyard by AESA, as well as a review by Avondale of current shipbuilding technology in other countries, Avondale invested $20 million in capital improvements designed to increase efficiency by improving production flow. In particular, the Company integrated certain assembly-line techniques with its modular construction processes. To that end, the Company has built a covered facility that houses two production lines dedicated to military vessels and two lines for commercial vessels. Avondale believes that sheltering the production process and separating the unit lines will enhance production efficiencies and lower unit production costs.

Because the construction of commercial vessels, particularly the product carriers that Avondale has traditionally built, places an emphasis on steel fabrication rather than the complex technological outfitting involved in U.S. naval construction, the assembly-line process implemented by the Company's new production facility should particularly benefit Avondale's efforts to remain an efficient, low-cost commercial shipbuilder. In addition, the Company's recent experience in constructing U.S. naval vessels that are primarily transport vessels, such as the Sealift and the LSD-CV, can be beneficially applied to the construction of large-scale commercial product carriers.

Shipbuilding

The Company is predominantly engaged in the design, construction, conversion, repair and modernization of various types of military and commercial vessels.

The main shipyard facility, which is located on a 257-acre site on the Mississippi River near New Orleans, includes multiple building ways, side launching facilities, a 900-foot floating dry dock/launch platform that permits

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document construction of vessels up to 1,000 feet in length, and a 650-foot floating dry dock principally used for ship repair. The main shipyard is equipped to build almost any type of vessel other than nuclear submarines and surface vessels of the largest classes, such as ultra-large crude carriers. Avondale also operates several other facilities in the vicinity of the main shipyard, including its Westwego shipyard, which is used primarily for boat construction and repair, and its Algiers shipyard, which is used primarily for the repair and overhaul of ocean-going vessels.

The Company has been and continues to be materially dependent on the U.S. Navy's ship construction and conversion programs. The following table sets forth the distribution of marine construction and repair activities during the last five years based on contract billings. As the table indicates, a majority of Avondale's work in the year ended December 31, 1995 was comprised of new military construction. Commercial new construction increased in 1995, principally due to the construction of the four forebodies for American Heavylift Shipping Company and the construction of the river hopper barges discussed in "--Other Operations--Boat Division."

Distribution of Marine Construction and Repair Work

The percentage of new construction for the U.S. Navy in 1995 was virtually unchanged for 1994. Commercial repair, overhaul and conversion decreased in 1995 as compared to 1994 as the Company's work on several contracts with a private contractor for the repair of Sealift ships approached completion. See "--Other Operations--Repair Operations."

Government Contracting. Avondale's principal U.S. government business is currently being performed under fixed-price and fixed-price incentive contracts. Under fixed-price contracts, the contractor retains all cost savings on completed contracts but is also liable for the full amount of all cost overruns for which it is responsible. Fixed-price incentive contracts, on the other hand, provide for sharing between the government and the contractor of cost savings and cost overruns based primarily on a specified formula that compares the contract target cost with actual cost. In addition, such fixed- price incentive contracts generally provide for payment of escalation of costs based on published indices relating to the shipbuilding industry. Although all cost savings are shared under fixed-price incentive contracts, cost overruns in excess of a specified amount must be borne entirely by the contractor. Recent contract awards for the Sealift vessels, the fourth LSD-CV and the Icebreaker are each fixed-price incentive contracts.

All contracts for the construction and conversion of U.S. Navy vessels are subject to competitive bidding. As a safeguard to anti-competitive bidding practices, the U.S. Navy has recently employed the concept of "cost realism," which requires that each bidder submit information on pricing, estimated costs

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document of completion and anticipated profit margins. The U.S. Navy uses this and other data to determine an estimated cost for each bidder. The U.S. Navy then re- evaluates the bids by using the higher of the bidder's and the U.S. Navy's cost estimates.

Under government regulations, certain costs, including certain financing costs, portions of research and development costs and certain marketing expenses, are not allowable costs under fixed-price incentive contracts. The government also regulates the methods by which overhead costs are allocated to government contracts.

U.S. government contracts are subject to termination by the government either for its convenience or upon default by the contractor. If the termination is for the government's convenience, contracts provide for payment upon termination for items delivered to and accepted by the government, payment of the contractor's costs incurred plus the costs of settling and paying claims by terminated subcontractors, other settlement expenses and a reasonable profit. However, if a contract termination results from the contractor's default, the contractor is paid such amount as may be agreed upon for completed and partially completed products and services accepted by the government. The government is not liable for the contractor's costs with respect to unaccepted items and is entitled to repayment of advance payments and progress payments, if any, related to the terminated portions of the contract. In addition, the contractor may be liable for excess costs incurred by the government in procuring undelivered items from another source.

The continuation of any U.S. Navy shipbuilding program is dependent upon the continuing availability of Congressional appropriations for that program. It is customary for the U.S. Navy to award contracts to build one or more vessels of a program to a contractor together with options (exercisable by the U.S. Navy) to purchase additional vessels in the program. Generally, contracts to build vessels are not awarded until funds to pay the full contract have been appropriated. However, because Congress usually appropriates funds on a fiscal year basis, funds may never be appropriated to permit the U.S. Navy to exercise options that have been awarded. In addition, even if funds are appropriated, the U.S. Navy is not required to exercise the options.

Because its U.S. Navy contracts require the Company to have access to classified information, Avondale must maintain a security clearance for its facility. Among other things, facilities with such clearances must restrict the access of non-U.S. citizens to classified information. If in the future the percentage of foreign ownership of the Company's Common Stock is increased to a level that could result in foreign dominance or control of its activities, the Company would be required to implement additional measures to insure that classified material would not be compromised or risk the loss of its security clearance.

Due to the complexity of government contracts and applicable regulations, contract disputes with the government may occur in the ordinary course of the Company's business. Based upon management's analysis of each such dispute and advice of counsel, the Company records, if appropriate, an estimate of the amount recoverable upon resolution of such disputes. There are currently no such amounts recorded. Although management believes its estimates are based upon a reasonable analysis of such disputes, no assurance can be given that its estimates will be accurate, and variances between such estimates and actual results can be material. The Company believes that adequate provision has been made in its financial statements for this and other normal uncertainties incident to its government business.

There is significant oversight of defense contractors to prevent waste in the defense procurement process. Areas of contract dispute are reviewed by the government for evidence of criminal misconduct such as mischarging, product substitution and false certification of pricing and other data. In the event

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document the government alleges a violation of its procurement regulations, it may seek compensatory, treble or punitive damages in substantial amounts and indictments, fines, penalties and forfeitures. In addition, the government has the right to suspend or debar a contractor from government contracting for significant violations of government procurement regulations. Avondale has never been subject to suspension or debarment.

Vessel Deliveries and Backlog. At December 31, 1995, the Company had a firm backlog of shipbuilding contracts of approximately $1.4 billion (exclusive of unexercised options aggregating $485.0 million held by the U.S. Navy for additional ship orders (including contract escalation) and a commercial contract subject to financing), compared with backlogs of $1.4 billion at December 31, 1994 and $1.3 billion at December 31, 1993. The backlog at December 31, 1995 included $40.0 million to complete the one remaining T-AO out of the seven awarded in the initial contract; $140.0 million to complete two of the four LSD-CV vessels that were awarded (two of which were delivered in 1995); $240.0 million related to the Icebreaker under a contract awarded in 1993; and $880.0 million related to four Sealift ships, under contracts awarded in 1993, 1994 and 1995. Also included in the firm backlog at December 31, 1995 was $35.0 million to complete three MHCs out of the four contracted for by the U.S. Navy. The first MHC has already been delivered. Currently two of the MHCs are scheduled for delivery in 1996 and one in 1997. In addition, Avondale has recently signed two commercial shipbuilding contracts, one of which is subject to the shipping company's ability to qualify for and receive a Title XI MARAD financing guarantee.

All major U.S. Navy contracts in the backlog, except for the contract to construct three LSD-CVs and the last three T-AOs, contain cost escalation clauses that are intended to compensate the Company for increases in wage rates and material costs based on industry indices. The contract to construct the three LSD-CVs and the last three T-AOs, as originally awarded, contained a cost escalation clause, but as part of the contract modifications the contracts were converted to fixed-price contracts.

Vessel deliveries in 1994 and 1995 included three T-AOs, two LSD-CVs, one MHC and three gaming vessels. The Company plans to continue to actively pursue other government construction and conversion opportunities, as well as commercial opportunities, when they become available.

The Company also has been actively pursuing commercial shipbuilding opportunities, although international commercial shipbuilding opportunities remain limited because shipbuilders in foreign countries are often subsidized by their governments, which allows them to sell their ships for prices below their construction costs. Domestic shipbuilding opportunities that are not affected by foreign subsidies offer better possibilities for the Company. See "--Overview--Reemergence of Commercial Shipbuilding."

In connection with the bids and proposals that the Company has submitted or plans to submit to various commercial and government customers, no assurance can be given that the Company will be the successful bidder or that the vessels bid on will actually be built.

Other Operations

Overview. Although the Company has from time to time, on a limited basis, pursued opportunities to diversify its business, management strongly believes that the Company's resources are most profitably employed in marine construction. As noted in "Management's Discussion and Analysis of Financial Condition and Results of Operations," in order to focus on its core shipbuilding business and improve liquidity, the Company sold or discontinued certain of its non-core operations. The Company will continue to evaluate suitable diversification opportunities, principally those that would not detract from Avondale's core business and that would utilize the Company's

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 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 other operations.

Modular Construction. The Company has been able to apply its modular construction methods to a variety of non-marine industrial fabrication projects, including a sulphur recovery plant that was shipped to Saudi Arabia for on-site assembly and installation, two cryogenic gas separation systems, two waste disposal units, six turbine compressors and turbine generators, six condenser modules for inclusion in a nuclear power plant, and two sled and receiver modules for sub-sea pipeline connections. The Company has also fabricated steel bridges and a hydroelectric power plant that was floated up the Mississippi River and installed in Vidalia, Louisiana in 1990. In January 1992, the Company delivered to the City of New York an 800-bed floating detention facility that is 625 feet long, 125 feet wide, and five stories high.

Avondale's modular construction division has not engaged in any significant projects since the floating detention center was delivered in the early 1990s. Although at present there is a minimal level of production activity in this division, Avondale will continue to pursue non-shipbuilding marine and industrial-commercial projects suitable for modular construction as attractive opportunities arise.

Small Vessel Construction. The Company pursues available opportunities for the construction of special purpose vessels, and relatively small, special purpose military vessels, commercial fishing boats, dredges, barges, and ferries.

Boat Division. The Company has a facility equipped for boat construction at its Westwego, Louisiana shipyard that is capable of building vessels up to 450 feet in length. In 1994, the Boat Division delivered two gaming vessels which are 266 and 210 feet in length, and in mid-1995 the division delivered a third gaming vessel which is 350 feet in length. The Boat Division has also recently signed a $26 million contract to construct river hopper barges for Ingram Ohio Barge Company. The Boat Division is actively pursuing other projects, involving the construction of additional gaming boats as well as passenger vessels and ferries, towboats and other vessels. The Boat Division's backlog at December 31, 1995, 1994 and 1993 was approximately $18.8 million, $18.3 million and $13.0 million, respectively.

Steel Operations. Through its Steel Sales operation, Avondale sells steel plate and structural steel to the marine and industrial markets in the Gulf Coast region of the United States. Net sales to other Avondale divisions are not significant. Sales to unrelated parties for the years ended December 31, 1995, 1994 and 1993 were approximately $28.2 million, $22.4 million and $19.0 million, respectively.

Repair Operations. At its main shipyard and the Algiers shipyard, Avondale engages in the repair, overhaul and conversion of ocean-going vessels. With the 900 and 650 foot drydocks located at the Company's main shipyard, the Company is capable of offering a complete range of vessel repairs and overhaul services. The Algiers shipyard is operated under a long-term lease and is designed primarily for the topside repair and overhaul of large ocean-going vessels. Although historically Avondale has engaged in the repair and overhaul of U.S. Navy vessels, these opportunities have been curtailed by the U.S. Navy's current policy of requiring such work to be conducted at or near the vessels' home ports.

Competition

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The shipbuilding industry is divided into two distinct markets, U.S. government contracts, which is dominated by contracts for the U.S. Navy, and domestic and international shipbuilding contracts for commercial customers. The reduced level of shipbuilding activity by the U.S. government during the past decade has significantly intensified competition. With respect to the market for U.S. military contracts, there are principally five private U.S. shipyards, including Avondale, that compete for contracts to construct or convert surface vessels. Three of these companies are subsidiaries of much larger corporations that have substantially greater resources than Avondale.

With respect to commercial vessels that must be constructed by a U.S. shipyard under the Jones Act, there are approximately 20 private U.S. shipyards that can accommodate the construction of vessels up to 400 feet in length, ten of which Avondale considers to be its direct competitors for commercial contracts. Because of the current overcapacity at U.S. shipyards, the current small volume of commercial work available, and the fact that most contracts are awarded on the basis of competitive bidding, price competition is particularly intense. With respect to the international commercial shipbuilding market, Avondale competes with numerous shipyards in several countries, many of which are heavily subsidized by their governments. See "--Overview--Reemergence of Commercial Shipbuilding."

Substantially all military and commercial contracts awarded to U.S. shipyards are competitively bid. The Company has been successful recently in securing competitively bid contracts in large part because the Company submitted the most cost-effective bids for the available contracts. The Company believes that it will continue to be competitive in bidding for selected U.S. Navy and commercial shipbuilding contracts in the future. However, no assurance can be given that the Company will be the successful bidder on any future contracts or that, if successful, it will realize profits on such contracts.

Marketing

The Company's marketing effort is decentralized and conducted separately by each division. Generally, the Company and its competitors are all aware of the shipbuilding, repair and conversion plans of the U.S. Navy and most prospective commercial customers, and are invited to bid on all major projects.

The Company's boatbuilding and repair operations are marketed by the sales and business development personnel of the appropriate divisions primarily through direct, personal sales calls. The services of the Steel Sales operation are marketed through industry advertising, personal sales calls and prior business relationships.

Materials and Supplies

The principal materials used by Avondale in its shipbuilding, conversion and repair business are standard steel shapes, steel plate and paint. Other materials used in large quantities include aluminum, copper-nickel and steel pipe, electrical cable and fittings. The Company also purchases component parts such as propulsion systems, boilers, generators and other equipment. All of these materials and parts are currently available in adequate supply from domestic and foreign sources. Generally, for all its long-term contracts, the Company obtains price quotations for its materials requirements from multiple suppliers to ensure competitive pricing. In addition, through the cost escalation provisions contained in its U.S. military contracts, the Company is 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

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document been and is expected by management to continue to be limited. The Company is not dependent upon any one supply source and believes that its supply sources are adequate to meet its future needs.

Insurance

The Company maintains insurance against property damage caused by fire, explosion and similar catastrophic events that may result in physical damage or destruction to the Company's premises and properties. The Company also maintains general liability insurance in amounts it deems appropriate for its business. The Company is self-insured for workers' compensation liability and employees' health insurance except for losses in excess of $1.0 million per occurrence, for which the Company maintains insurance in amounts it deems appropriate.

Environmental and Safety Matters

General. Avondale is subject to federal, state and local environmental laws and regulations that impose limitations on the discharge of pollutants into the environment and establish standards for the treatment, storage and disposal of toxic and hazardous wastes. Stringent fines and penalties may be imposed for non-compliance with these laws and regulations, and certain environmental laws impose joint and several "strict liability" for remediation of spills and releases of oil and hazardous substances rendering a person liable for environmental damage, without regard to negligence or fault on the part of such person. Such laws and regulations may expose the Company to liability for the conduct of or conditions caused by others, or for acts of the Company which are or were in compliance with all applicable laws at the time such acts were performed. The Company is covered under its various insurance policies for some, but not all, potential environmental liabilities. See Note 10 of the Notes to Consolidated Financial Statements.

The Company is also subject to the federal Occupational Safety and Health Act ("OSHA") and similar state statutes. The Company has an extensive health and safety program and employs a staff of safety inspectors and industrial hygiene technicians, whose primary functions are to develop Company policies that meet or exceed the safety standards set by OSHA, train supervisors and make daily inspections of safety procedures to insure their compliance with Company policies on safety and industrial hygiene. All supervisors are required to attend safety training meetings at which the importance of full compliance with safety procedures is emphasized.

Waste Disposal. Avondale's operations produce a limited amount of industrial waste products and certain hazardous materials. The Company's industrial waste products, which consist principally of residual petroleum, other combustibles and blasting abrasives, are shipped to third party disposal sites that are licensed to handle such materials.

Employees

Since September 1985, when all of its outstanding Common Stock was purchased by the ESOP from Ogden Corporation, Avondale has been owned principally by its current and former employees. At December 31, 1995, Avondale had approximately 5,300 employees, many of whom have been employed by the Company for many years.

None of Avondale's employees are currently covered by any collective bargaining agreement. However, on June 23, 1993 an election was conducted to determine whether certain of the New Orleans area employees desired to have union representation. A total of 3,914 workers cast votes, of which approximately 850 votes were challenged by the NLRB and union organizers on a variety of grounds. Although the union did receive a majority of the unchallenged ballots, challenged ballots (which remain under seal) in numbers

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document sufficient to determine the outcome of the election remain uncounted awaiting the NLRB's decision. The Company has filed objections with the NLRB seeking to have the election set aside. The NLRB is currently reviewing the challenged votes and evaluating the Company's objections to the election. The hearing officer assigned to the case has recommended to the NLRB that certain of the disputed votes be counted and that the Company's objections be rejected. If the NLRB upholds the election and certifies the union, and that decision is not overturned by subsequent judicial proceedings, the Company would be required under federal labor laws to bargain in good faith with the union on matters such as wages, hours and other working conditions. Even though Avondale will only agree to bargaining demands that can be economically justified, union certification may result in an increased risk that the union will engage in potentially disruptive activities such as strikes or picketing, or that the Company may incur higher labor and operating costs.

The union has also filed numerous unfair labor practice charges with the NLRB alleging that Avondale has committed a variety of violations of the National Labor Relations Act principally involving claims that employees were wrongfully disciplined or discharged. Although the Company disputes these claims and is waging a vigorous defense, if there is a finding against the Company, depending on the facts of each case, the employee would be entitled to back pay from the time of his or her claim until the resolution of the case. However, even if there is a finding in favor of some of the claimants with respect to one or more of the unfair labor practice claims, management believes that any judgment would not have a material impact on Avondale's financial condition, results of operations or cash flows.

Glossary of Selected Industry Terms

ADC(X) A class of auxiliary vessels designed to deliver a steady supply of fuel, ammunition and stores to the U.S. Navy fleet. It is currently envisioned that these vessels will have "Refuel at Sea" capabilities similar to the T-AOs currently under construction at Avondale.
AO An auxiliary oil tanker constructed for the U.S. Navy and crewed by U.S. Navy personnel. Avondale has built five AOs.
AOJ An AO which has been "jumboized" i.e., lengthened by the Company by inserting a 108 foot midbody. Avondale has converted five AOJs.
Icebreaker WAGB-20 Polar Icebreaker, which has been ordered by the U.S. Coast Guard for its polar operations.
Jones Act Merchant Marine Act of 1920, as amended.
LASH "Lighter aboard ship," a LASH vessel carries its cargo in pre- loaded barges (lighters). The Company constructed 21 such vessels in the late 1960s and early 1970s for five commercial customers.
LCAC "Landing craft air cushion," a surface effect vessel that was constructed at the Company's Gulfport facility. Avondale has built 15 LCACs.
LPD-17 The next class of amphibious assault ship proposed by the U.S. Navy.
LSD "Landing ship dock," designed to carry troops, materials and up to four LCACs. Avondale has built five LSDs.
LSD-CV An LSD with a "cargo variant" design allowing for carrying of more
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document cargo and only 2 LCACs. Avondale has built four LSD-CVs.
MARAD United States Maritime Administration, Department of Transportation.
MHC MHC-51 class fiberglass coastal minehunter. Avondale has built four MHCs.
REAs Requests for Equitable Adjustments submitted by a government contractor to the U.S. government, as explained further under the heading "Risk Factors."
SC-21 "Surface Combatant 21st Century," the next generation of surface combatant to be built for the U.S. Navy. As currently conceived, this vessel would most closely resemble the Aegis class destroyer.
SL 7 A "Roll on Roll off" vessel operated by a private company for the Military Sealift Command. Avondale has converted three SL 7s.
Sealift As used herein, TAKR 300 Class Sealift vessels are transport vessels built for the U.S. Navy. Avondale has contracts to build four Sealift vessels with options to build an additional two vessels.
T-AGS 45 An oceanographic research vessel constructed by Avondale and delivered to the U.S. Navy in May 1993.
T-AO Same as an "AO" but operated by the military sealift command and crewed by a civilian crew. Avondale has built sixteen T-AOs.

~~Item 2. Properties~~

The Company's corporate headquarters and main shipyard are located on the west bank of the Mississippi River at Avondale, Louisiana, approximately 15 miles from downtown New Orleans. That facility includes approximately 226 acres of Company-owned land with 174 buildings enclosing approximately 2.0 million square feet of space, approximately 31 acres of leased land, a 900-foot floating dry dock/launch platform that permits construction, conversion or repair of vessels up to approximately 1,000 feet in length, and a 650-foot floating dry dock principally used for ship repair and multiple building ways and side launching facilities. The main shipyard includes approximately 6,500 feet of wharves, 1,200 feet of launch ways and 2,900 feet of unimproved waterfront along the Mississippi River. The Company's shipyard facilities have the capacity to build virtually any type of vessel other than submarines and surface vessels of the largest classes, such as ultra-large crude carriers.

The Company's 900-foot floating drydock was constructed in 1975 and financed pursuant to Title XI of the Merchant Marine Act, 1936, as amended. The 900 foot drydock is currently subject to a Title XI mortgage of approximately $3.9 million. As discussed further in Note 4 of the Notes to the Consolidated Financial Statements, these mortgage bonds were refinanced in February 1995.

The Company's 650-foot floating drydock and support facilities were constructed in 1982 and financed with $36.25 million of industrial revenue bonds (see Note 4 of the Notes to the Consolidated Financial Statements). As part of its program to significantly improve its efficiency, in 1995 the Company completed an approximate $20 million capital expenditure program, financed principally through $17.8 million of bonds issued in February 1995 utilizing a Title XI guarantee (see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" and Note 4 to the Notes to the Consolidated Financial Statements). The

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document modernization program includes construction of a covered facility, which should provide productivity gains by eliminating weather-related problems, and adoption of a more automated process for building the various modules which are assembled into a completed vessel.

As part of its program to significantly improve its efficiency, in 1995 the Company completed an approximate $20 million capital expenditure program, financed principally through $17.8 million of bonds issued in February 1995 utilizing a Title XI guarantee (see "Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources" and Note 4 of the Notes to Consolidated Financial Statements). The modernization program includes construction of a covered facility, which should provide productivity gains by eliminating weather-related problems, and adoption of a more automated process for building the various modules which are assembled into a completed vessel.

During February 1995, the Company established two additional entities for the purpose of owning certain parcels of Avondale's real estate which underlie the building and improvements funded with the proceeds of the debt guaranteed under Title XI (as discussed above). The first entity is Avondale Properties, Inc., a Louisiana corporation, wholly owned by Avondale Industries, Inc. The second entity is Avondale Land Management Company, a Louisiana Partnership owned 99% by Avondale Properties, Inc. The properties transferred represent approximately 143 of the 210 acres which comprise the Company's main facility. These parcels are leased back to Avondale Industries, Inc. pursuant to certain lease agreements with a term coincident with the Title XI debt.

The Company also operates several other facilities in the vicinity of the main shipyard. The Westwego Yard is located five miles down-river from the main shipyard on 16.6 acres of leased land and includes facilities for the construction or repair of boats and vessels up to 450 feet in length. The Algiers Yard is located 19 miles down-river from the main shipyard on 22 acres of leased land and includes construction facilities used predominantly for the repair and overhaul of large ocean-going vessels. The Steel Sales operation is located on 4.4 acres of property leased on a month-to-month basis in Harvey, Louisiana, where a steel warehouse is located. The location has direct access to the Mississippi River via the Harvey Canal. The Modular Construction operation, located in an approximately 70,000 square foot facility on a 58 acre Company-owned site a few miles up-river from the main shipyard, consists of a complete machine shop with steel fabricating facilities.

The Avondale Gulfport Marine, Inc. ("AGM") facility is located on 24.5 acres of Company-owned land located six miles northeast of Gulfport, Mississippi on an industrial seaway. The site has a 98,800 square foot manufacturing facility and a 25,000 square foot assembly building. The site also includes a test area, a craft storage area and a waterway access ramp. This facility is currently idle and has been listed for sale. However, the Company continues to seek alternative uses for this facility.

The Avondale Enterprises, Inc. ("AEI") facility is located on a Company- owned 121.5 acre site four miles north northeast of Gulfport, Mississippi on the same industrial seaway as AGM. The facility includes a 263,447 square foot manufacturing facility and a 6,300 square foot administration building. This facility was acquired in 1989 for construction of the MHCs. AEI has pledged a portion of the facility to secure a $3 million loan it entered into in 1991 to finance a portion of its 1989 acquisition debt. Upon the transfer of the final MHC hull to the main shipyard in December 1994, this facility became idle. The Company is currently utilizing a portion of the facility for the construction of barge covers as part of the river hopper barge construction contract discussed at "Business - Other Operations - Boat Division."

~~The main facility operated by the Genco Industries Group ("Genco") is located on a Company-owned 8.7 acre site 20 miles southeast of Beaumont, Texas.~~

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The facility includes five buildings utilized for manufacturing and administration comprising approximately 66,800 square feet. Genco has a smaller facility that is located on a Company-owned 3.2 acre site approximately 80 miles northwest of Beaumont. This facility consists of three manufacturing- administration buildings totaling approximately 26,500 square feet. Genco's facilities became idle in 1994 after completion of their contracts. The Company currently has these facilities listed for sale and is exploring alternative uses.

~~Except as otherwise noted above, the above-described facility leases are for various terms extending through at least 1999, including renewal options.~~

The Company believes that its core marine construction and repair facilities provide it with sufficient capacity to handle any business it reasonable expects to obtain in the foreseeable future. In general, the Company's productive capacity is limited less by physical facilities than by the number of employees the Company can effectively supervise. Management believes that the Company would be operating at full capacity with approximately 10,000 employees. The Company's core business currently operates with more than 5,200 employees.

~~Item 3. Legal Proceedings~~

Environmental Proceedings. Various governmental and private parties have from time to time alleged that the Company is a potentially responsible party with respect to certain hazardous waste sites, including, among other things, the site listed below.

In January 1986, the Louisiana Department of Environmental Quality ("DEQ") advised the Company that it may be a potentially responsible party ("PRP") with respect to an oil reclamation site operated by an unaffiliated company in Walker, Louisiana. The Company sold to the operator a substantial portion of the waste oil that was processed at the reclamation site during the period 1978 through 1982. The Company's potential liability, if any, for cleanup of this site will be based on the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA") or the Louisiana Environmental Affairs Act. Under these statutes, such liability is presumptively joint and several, but is typically apportioned among the responsible parties based on the volume of material sent by each to the waste site. The Company has cooperated with other PRPs to study the potential aggregate liability under these statutes. Moreover, the Company believes it has substantial defenses against liability and defenses that could mitigate the portion of liability, if any, that would otherwise be attributable to it.

To date, the Company and certain of the other PRPs for the site have funded the site's remediation under a preliminary cost-sharing agreement. As of December 31, 1995 clean-up costs totalled $17 million, of which the Company has contributed $3.6 million. Additional work scheduled for the site includes completion of studies in 1996, and if required by the results of these studies, subsequent remediation. Following completion of any such required additional remediation, it will be necessary to obtain Environmental Protection Agency approval to close the site, which consent may require subsequent post-closure activities such as groundwater monitoring and site maintenance for many years. The Company is not able to estimate the final costs for any such additional remedial work or post-closure costs that may be required; however, the Company believes that its proportionate share of expenditures for any additional work will not have a material adverse effect on the Company's financial statements. In addition, the Company believes that its proportionate responsibility for the clean-up costs will not be materially changed.

~~Since July 1986, a number of "toxic tort" suits have been filed against the Company and numerous other defendants alleging claims for personal injury,~~

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document property damage, and "fear of cancer" in connection with the reclamation site discussed above. The plaintiffs also sought substantial punitive damages. These cases were consolidated and certified as a class action. In 1995, the Judge for the Federal District Court for the Western District of Louisiana issued a ruling from the bench approving the Company's settlement of the class action lawsuit. Based on the advice of its counsel, the Company believes that a written order confirming its earlier bench ruling will be issued by the Federal District Court in the near future. Under the terms of the court approved settlement, which is subject to appeal following the issuance of the final written order, the Company paid $4.0 million cash into a settlement fund in the third quarter of 1995, using cash from operations, and issued a $2.0 million unsecured note to the plaintiff class. The note bears interest at 8% per annum and is due on January 28,1997. The Company had previously recorded an accrual sufficient to provide for the $6.0 million settlement and has sufficient liquidity to fund the note. The Company could also be responsible for payment to the plaintiffs of up to an additional $6.0 million (plus interest at 8% per annum) if the plaintiffs are unsuccessful in collecting certain claims under Avondale's insurance policies that have been assigned to the plaintiff class under the settlement agreement. With respect to the potential contingent liability of the Company to pay additional sums under the settlement agreement, management believes that the eventual resolution of this matter will not have a material adverse effect on the Company's results of operations, financial position or cash flows.

Furthermore, the Company has initiated litigation against its insurer for a declaration of coverage of the liability, if any, that may arise in connection with the remediation of the site referred to above. The court has ruled that the insurer has the duty to defend the Company, but has not yet ruled on whether the carrier has a duty to indemnify the Company if any liability is ultimately assessed against it. After consultation with counsel, the Company is unable to predict the eventual outcome of this litigation or the degree to which such potential liability would be indemnified by its insurance carrier.

~~In addition to the above, the Company is also named as a defendant in other lawsuits and proceedings arising in the ordinary course of business, some of which involve substantial claims.~~

The Company has established accruals as appropriate for certain of the matters discussed above. While the ultimate outcome of lawsuits and proceedings against the Company cannot be predicted with certainty, management believes, based on current facts and circumstances and after review with counsel, that, the eventual resolution of these matters is not expected to have a material adverse effect on the Company's financial statements.

~~Item 4. Submission of Matters to a Vote of Security Holders.~~

~~The Company did not submit any matters to a vote of security holders during the fourth quarter of its fiscal year ended December 31, 1995.~~

~~PART II~~

~~Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.~~

The Company's common stock has traded on The Nasdaq Stock Market ("NASDAQ") under the symbol AVDL. The following table sets forth the range of high and low per share sales prices, as reported by NASDAQ, for the periods indicated.

~~At December 31, 1995, there were 719 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, 1995. As discussed in Note 4 of the Notes to Consolidated Financial Statements, the terms of the Company's revolving credit agreement limit or restrict, without bank approval, the payment of cash dividends.

~~Item 6. Selected Consolidated Financial Data.~~

~~SELECTED FINANCIAL DATA~~

The following table contains selected consolidated financial data for the Company and its subsidiaries for each of the fiscal years in the five-year period ended December 31, 1995. The data for each of the fiscal years in the five-year period ended December 31, 1995 are derived from the consolidated financial statements of the Company and its subsidiaries. The consolidated financial statements as of December 31, 1994 and 1995, and for each of the years in the three-year period ended December 31, 1995, and the report of Deloitte & Touche LLP thereon, have been included in this Form 10-K.

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(1) Income statement data for years 1991 through 1993 have been restated to present Avondale's service contracting subsidiary as discontinued operations (see Note 5 of the Notes to Consolidated Financial Statements).
(2) See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Notes to Consolidated Financial Statements relating to, among other things, (i) proceeds received by the Company from the settlements of REAs in December 1993 and December 1995 and (ii) the impact of revisions of estimated profits on several previously completed shipbuilding contracts in 1994.
(3) During 1991, the Company revised its estimated costs to complete certain
contracts which had the effect of decreasing net income by approximately $69.0 million, or $4.78 per share.
(4) During 1991, the Company revised its estimate of the continuing value and future benefits of goodwill. Accordingly, the Company reduced the carrying value of goodwill which had the effect of decreasing net income for 1991 by $57.6 million, or $3.99 per share.
(5) The amounts reflected as Net ESOP contributions for 1991 and 1992 reflect contributions made by the Company to the ESOP, all of which were returned to the Company as repayments of indebtedness owed by the ESOP to the Company incurred in connection with the purchase by the ESOP of the Common Stock of the Company in 1985. Although these contributions were charged against income, they had no net effect on Shareholders' equity.
(6) Net income for the year ended December 31, 1995 includes a deferred income tax benefit of $13.0 million ($.90 per share) attributable to certain net operating loss carryforwards available to offset estimated future taxable earnings.
(7) The Company does not currently pay cash dividends on its Common Stock.
(8) As used herein, EBITDA is income (loss) from operations plus depreciation and amortization. EBITDA is frequently used by securities analysts and is presented here to provide additional information about the Company's operations. EBITDA should not be considered as an alternative to net income as a measure of the Company's operating performance or as an alternative to cash flows as a better measure of the Company's liquidity.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document For 1991, EBITDA does not include a $57.6 million write-down of goodwill.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with Avondale Industries, Inc.'s (the "Company" or "Avondale") Consolidated Financial Statements and Notes thereto included elsewhere in this Form 10-K.
Overview
The Company's results of operations improved substantially during fiscal 1995 compared to the prior year. Net sales were 21% above the level recorded in 1994 while income from continuing operations before income taxes increased 78% from the amount reported for fiscal year 1994. Further, 1995 net income more than tripled that of 1994.
The Company's firm backlog at December 31, 1995 was approximately $1.4 billion exclusive of unexercised options aggregating $485 million held by the U.S. Navy for additional ship orders (including contract escalation) and a commercial contract subject to financing. Firm backlog includes several contracts awarded in 1995 with the most significant occurring in December 1995, when the U.S. Navy exercised a previously awarded option to construct an additional Sealift ship for approximately $206 million (or more than $235 million after considering certain additional components and cost escalation). The exercise of this option represents the fourth ship which the Company has been awarded in the Sealift program. The U.S. Navy holds options for two additional Sealift ships that are exercisable over the next two years.
Other 1995 contract awards include a $143.9 million contract finalized in May 1995 to construct four double-hulled forebodies for product carriers and a $25.9 million contract to construct a series of river hopper barges. Construction of the forebodies has begun and is expected to be completed by mid-1997. In 1995 the Company also signed a contract with a U.S. shipping company for the construction of up to six (but not less than four) double- hulled product carriers. This contract is subject to the shipping company's ability to qualify for and receive a Title XI MARAD financing guarantee. Assuming receipt of such guarantee, the contract calls for delivery of the vessels by the end of 1998.
The Company previously disclosed that it had filed a REA with the U.S. Navy related to the four MHCs currently under contract with the Company (the "Minehunter REA"). On December 29, 1995 the Company announced that it settled the Minehunter REA for an amount that was consistent with the previously recorded estimate of the amount recoverable under the Minehunter REA. The settlement should enable the Company to complete the MHC program on a break- even basis through the remainder of contract performance. The first of the four MHCs was delivered to the U.S. Navy in August 1995, with the remaining three ships scheduled for completion and delivery during 1996 and early 1997.
With the exception of the contracts to construct the four MHCs and the three LSD-CVs, which are projected to be completed on essentially a break-even basis through the remainder of contract performance, the Company's committed backlog is projected to be completed profitably. The operating profit projected for 1996 will be related principally to the LSD-CV 52, the T-AO and the Sealift ship contracts, while profits projected for 1997 and 1998 will reflect the LSD- CV 52 as well as the Sealift, Icebreaker and double-hulled forebodies contracts. The Company records profits under the percentage-of-completion method of accounting based on direct labor charges. Although the Company generally does not begin to record profits on its contracts until contract performance is sufficient to estimate final results with reasonable accuracy, actual profits taken with respect to such contracts may be diminished if the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Company is required in the future to revise its estimate of the cost to complete one or more of such contracts.
As discussed further in Note 10 of the Notes to Consolidated Financial Statements, the Company was informed that it was a potentially responsible party ("PRP") in connection with an oil reclamation site in Walker, Louisiana operated by an unaffiliated company. The Company, along with other PRPs, has fully funded its share of the clean-up costs incurred to date under a preliminary cost-sharing agreement to fund the site's remediation. As of December 31, 1995, clean-up costs totaled $17 million, of which the Company has contributed $3.6 million. Additional work scheduled for the site includes completion of studies in 1996, and if required by the results of these studies, subsequent remediation. Following completion of any such required additional remediation, it will be necessary to obtain Environmental Protection Agency approval to close the site, which consent may require subsequent post-closure activities such as groundwater monitoring and site maintenance for many years. The Company is not able to estimate the final costs for any such additional remedial work or post-closure costs that may be required; however, the Company believes that its proportionate share of expenditures for any additional work will not have a material adverse effect on the Company's financial statements. In addition, the Company believes that its proportionate responsibility for the clean-up costs will not be materially changed.
Since July 1986, a number of "toxic tort" suits have been filed against the Company and numerous other defendants alleging claims for personal injury, property damage, and "fear of cancer" in connection with the reclamation site discussed above. The plaintiffs also sought substantial punitive damages. These cases were consolidated and certified as a class action. In 1995, the Judge for the Federal District Court for the Western District of Louisiana issued a ruling from the bench approving the Company's settlement of the class action lawsuit. Based on the advice of its counsel, the Company believes that a written order confirming its earlier bench ruling will be issued by the Federal District Court in the near future. Under the terms of the court approved settlement, which is subject to appeal following the issuance of the final written order, the Company paid $4.0 million cash into a settlement fund in the third quarter of 1995, using cash from operations, and issued a $2.0 million unsecured note to the plaintiff class. The note bears interest at 8% per annum and is due on January 28,1997. The Company had previously recorded an accrual sufficient to provide for the $6.0 million settlement and has sufficient liquidity to fund the note. The Company could also be responsible for payment to the plaintiffs of up to an additional $6.0 million (plus interest at 8% per annum) if the plaintiffs are unsuccessful in collecting certain claims under Avondale's insurance policies that have been assigned to the plaintiff class under the settlement agreement. With respect to the potential contingent liability of the Company to pay additional sums under the settlement agreement, management believes that the eventual resolution of this matter will not have a material adverse effect on the Company's results of operations, financial position or cash flows.
As previously disclosed, certain of the Company's operations closed in 1994 with the completion of their respective contracts. Two of these facilities are currently offered for sale while the Company continues to seek alternative uses for these facilities. With respect to these properties, the Company currently is not aware of any material environmental liabilities to be incurred for site restoration, post closure, monitoring commitments, or other exit costs.
Results of Operations
1995 VS. 1994. The Company recorded net income of $28.2 million, or $1.95 per share, for 1995 compared to $8.5 million, or $0.59 per share, for 1994 representing a threefold increase in net income over the prior year. The 1995 net income includes a $4.4 million, or $0.30 per share, net income tax benefit (discussed below). Also included in 1995 net income is $4.5 million, or $0.31 per share, which is a reduction of a previously recognized loss which was
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document recorded in prior years on the contract to construct three LSD-CVs. The reduction was due primarily to a revision of the total estimated contract cost as it nears completion. Included in net income for 1994 are a $3.5 million, or $0.24 per share, net gain related to revisions of estimated contract profits on several previously completed shipbuilding contracts and a loss from discontinued operations of $4.6 million, or $0.31 per share, reflecting the Company's decision in 1994 to discontinue its service contracting business.
The significant increases in the Company's operating results in 1995 primarily reflect increased operating profits recognized on the LSD-CV 52 contract, as well as the reversal of part of a previously recognized loss on the contract to construct three LSD-CVs, and the recognition of operating profit on the T-AO contract. Also contributing to the increase in operating results for 1995 were profits recorded by the Company's marine repair and wholesale steel operations and an increase in interest income primarily resulting from an increase in the Company's invested cash balances.
The Company's net sales in 1995 increased $100.5 million, or 21%, as compared to the prior year. The increase in 1995 net sales was due primarily to increases in sales revenues recognized on the contracts to construct the first three Sealift ships, the forebodies for four double-hulled product tankers, the LSD-CV 52 and the Icebreaker, which collectively accounted for 54% of the Company's 1995 net sales revenue. The increase in net sales was partially increase in net sales was partially offset by reductions in sales revenues recognized on the contracts to construct the T-AOs (the fifth and sixth of which were delivered in 1995), three LSD-CVs (the second of which was delivered in 1995) and four MHCs (the first of which was delivered in 1995), as these contracts approach completion. The contracts to construct the T-AOs, three LSD- CVs, and four MHCs collectively accounted for 28% of the Company's 1995 net sales revenue.
Gross profit for 1995 increased $11.2 million, or 24%, compared to 1994. The increase in 1995 gross profit was primarily due to profits recognized on the contract to construct the LSD-CV 52 as the percentage of completion was sufficient to begin profit recognition in 1995.
Selling, general and administrative ("SG&A") expenses increased $1.6 million, or 5%, for 1995 compared to 1994. The overall increase in SG&A expenses primarily reflected increased operating activity at the Company's main shipyard and, in part, an increase in indirect labor and associated costs resulting from a wage increase given in January 1995 to all employees. These increases in SG&A expenses were partially offset by a decrease in SG&A expenses resulting from the closing of certain subsidiary operations.
Interest expense increased by $457,000, or 10%, in 1995 as compared to 1994. The increase was due principally to interest expense associated with the $17.8 million Title XI financing completed in February 1995 (as discussed below), $36.3 million of Series 1994 industrial revenue bonds (see Note 4 of the Notes to Consolidated Financial Statements) and a note issued as part of a litigation settlement (discussed in Note 10 of the Notes to Consolidated Financial Statements). These increases were partially offset by an increase in interest capitalized on assets under construction relating primarily to the modernization project.
The Company's 1995 operating results include a net income tax benefit of $4.4 million, or $0.30 per share. As further discussed in Note 7 of the Notes to Consolidated Financial Statements, the net income tax benefit is principally the result of recognizing, for financial reporting purposes, a $13 million income tax benefit from certain net operating loss carryforwards available to offset estimated future taxable earnings. The $13 million tax benefit was partially offset by an income tax provision of $8.6 million related to 1995 operating results. There was a minor provision for income taxes in the same period in 1994 as an income tax benefit related to available net operating loss
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document carryforwards was recognized only to the extent of then current operating results. The further recognition of any remaining available tax benefit (approximately $9.5 million) will depend on future assessments of estimated taxable income.
During 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long- Lived Assets and for Long-Lived Assets to be Disposed Of" and Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." These statements are effective for fiscal 1996. Management believes that implementation of these new accounting standards will not have a material impact on the Company's financial statements.
1994 VS. 1993. The Company recorded income from continuing operations of approximately $13.1 million, or $0.90 per share, for the year ended December
31, 1994 compared to a loss of approximately $5.2 million, or $0.36 per share, for 1993. The improvement in the Company's 1994 income from continuing operations principally reflects net gains of approximately $3.5 million, or $0.24 per share, related to revisions of estimated contract profits on several previously completed shipbuilding contracts, increases in operating income at the Company's marine repair, wholesale steel and boat building operations and a reduction in interest expense. The decrease in interest expense was due primarily to the Company's repayment in early 1994 of balances owed on its previously outstanding revolving credit facilities and senior notes. The repayment of these debt obligations was made possible by the successful resolution and settlement of the Company's REAs in December 1993.
In the third quarter of 1994 the Company decided to discontinue its service contracting subsidiary formed in 1990 to pursue large-scale service contracts with government and commercial operations. The Company concluded that managerial and financial resources devoted to service contracting could be more productively invested in the Company's core marine construction operations. As a result, the operating results for 1994 and prior years are reported as discontinued operations (see Note 5 of the Notes to Consolidated Financial Statements). The Company recorded a loss from discontinued operations of approximately $4.6 million (including estimated costs related to a contract termination), or $0.31 per share, for the year ended December 31, 1994 and has restated prior year results to reflect a loss from discontinued operations of approximately $3.6 million, or $0.25 per share, for the year ended December 31, 1993.
The Company's net sales from continuing operations in 1994 increased approximately $19.1 million, or 4.2%, compared to the prior year. The increase in 1994 net sales was due primarily to increases in sales revenues recognized on the contracts to construct the fourth LSD-CV, the contracts to construct the three gaming vessels (two of which were delivered in 1994) and the start-up of the first Sealift ship. These increases in sales were partially offset by reductions in sales revenues recognized on the contracts to construct the three LSD-CVs (the first of which was delivered in 1994), the T-AOs (the fourth of which was delivered in 1994) and the four MHCs, as these contracts approached completion. Additionally, the Company experienced reduced sales revenues in 1994 associated with the T-AGS 45 contract, which was delivered in 1993, and at its Avondale Gulfport Marine, Inc. ("AGM") and Genco Industries, Inc. ("Genco") operations. AGM delivered its last LCAC in June 1993, and Genco completed its remaining construction contracts in August 1994. The contracts to construct the four LSD-CVs, the four MHCs and the seven T-AOs collectively accounted for approximately 69% of the Company's 1994 net sales revenue.
Gross profit for 1994 increased approximately $14.3 million, or 43%, compared to 1993. The increase in 1994 gross profit was primarily due to profits recognized on the contract to construct the seven T-AOs and revisions of contract profits on several previously completed shipbuilding contracts. Also contributing to the 1994 gross profit were profits recognized on the two
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document gaming vessels delivered in 1994 and profits recognized by the Company's marine repair and wholesale steel operations.
SG&A expenses increased by approximately $756,000, or 2.5%, for 1994 compared to 1993. The overall increase in SG&A expenses primarily resulted from increased operating activity at the Company's main shipyard and a wage increase given in January 1994 to all employees. This increase in SG&A expenses was partially offset by a decrease in SG&A expenses resulting from the closing of the AGM and Genco operations.
Interest expense decreased by approximately $4.4 million, or 50%, in 1994 compared to 1993. The decrease was due to the reduction in the Company's overall level of debt, which decreased by approximately $37 million, or 41.7%, at December 31, 1994 as compared to December 31, 1993. See "--Liquidity and Capital Resources."
The Company recorded a $300,000 provision for income taxes in 1994 while no provision was recorded in 1993 due to the loss from operations. See Note 7 of the Notes to Consolidated Financial Statements for further discussion.
Liquidity and Capital Resources
The Company's cash and cash equivalents totaled $38.5 million at December 31, 1995 compared to $15.4 million at December 31, 1994. The Company's principal sources of cash in 1995 consisted of $28 million of funds provided by operations, $3.2 million of proceeds from the sale of assets and $17.8 million from long-term borrowings (both of which are discussed below). The Company's primary uses of cash in 1995 consisted of $21.3 million of capital expenditures, principally representing the plant modernization project, and payment of long-term borrowings of $5.9 million.
In February 1995 the Company completed financing of its approximately $20 million plant modernization effort by issuing $17.8 million of mortgage bonds utilizing a Title XI MARAD financing guarantee. The terms of the Title XI guarantee provide for the bond proceeds to be held in escrow and released to the Company as allowable project costs are incurred by the Company and approved by MARAD. At December 31, 1995, $17.4 million of these bond proceeds had been released to the Company. The Company has recorded project costs to date of $20.1 million of which $17.3 million were incurred in 1995. Outstanding purchase commitments on the project at December 31, 1995 were $741,000.
In the second quarter of 1995 the Company obtained additional liquidity as its improved financial condition enabled it to amend its revolving credit agreement. The amendment, among other things, increased the amount available under the credit agreement to $42.5 million and extended its term to May 1997. Further, the amendment permitted the issuance of the Title XI mortgage bonds and revised the level of permitted capital expenditures and certain coverage ratios to take into consideration the plant modernization project. While there have been no borrowings in 1995 under the revolving credit agreement, there are $25.4 million of letters of credit outstanding under the facility at December 31, 1995. See Note 4 of the Notes to Consolidated Financial Statements.
In connection with the year-end settlement of the Minehunter REA, the Company submitted invoices totaling approximately $30.7 million to the U.S. Navy. The Company expects that these invoiced amounts will be collected in full during the first quarter of 1996.
As previously disclosed, in May 1995 the Company sold substantially all of the operating assets used in its foundry operations. The sale generated $3.2 million of cash proceeds and did not significantly affect the Company's results of operations.
The Company believes that its liquidity and capital resources will be
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document sufficient to finance current and projected operations.
Item 8. Financial Statements and Supplementary Data.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of Avondale Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Avondale Industries, Inc. and subsidiaries as of December 31, 1994 and 1995, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Avondale Industries, Inc. and subsidiaries at December 31, 1994 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP ------DELOITTE & TOUCHE LLP
New Orleans, Louisiana January 19, 1996
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollars in thousands)
December 31, ------ASSETS 1994 1995 ------ Current Assets: Cash and cash equivalents...... $ 15,414 $ 38,524 Receivables (Note 2)...... 84,510 93,184 Inventories (Note 3)...... 16,109 15,289 Deferred tax assets (Note 7)...... 4,100 23,650 Prepaid expenses and other current assets...... 7,803 2,946 ------Total current assets...... 127,936 173,593 ------Property, Plant and Equipment (Note 4): Land...... 9,324 9,161
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Buildings and improvements...... 47,979 59,991 Machinery and equipment...... 174,694 182,547 ------Total...... 231,997 251,699 Less accumulated depreciation...... (112,836) (121,661) ------Property, plant and equipment--net...... 119,161 130,038 ------Goodwill--net (Note 7)...... 15,431 8,637 Deferred tax assets--net (Note 7)...... 7,000 -- Other assets...... 3,975 4,459 ------TOTAL ASSETS...... $273,503 $316,727 ======
LIABILITIES AND SHAREHOLDERS' EQUITY ------ Current Liabilities: Current maturities of long-term debt (Note 4)...... $ 5,866 $ 5,062 Accounts payable...... 60,917 65,517 Accrued employee compensation...... 12,948 10,777 Other...... 13,369 11,249 ------Total current liabilities...... 93,100 92,605 Long-term debt (Note 4)...... 45,875 60,593 Other liabilities and deferred credits...... 11,650 12,471 ------Total liabilities...... 150,625 165,669 ------Commitments and Contingencies (Notes 6 and 10) SHAREHOLDERS' EQUITY (Note 9): Common stock, $1.00 par value; authorized--30,000,000 shares; issued--15,927,191 shares in 1995 and 1994...... 15,927 15,927 Additional paid-in capital...... 373,911 373,911 Accumulated deficit...... (255,104) (226,924) ------Total...... 134,734 162,914 Treasury stock (1,463,016 shares in 1995 and 1994) at cost...... (11,856) (11,856) ------Total shareholders' equity...... 122,878 151,058 ------TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...... $273,503 $316,727 ======
See Notes to Consolidated Financial Statements.
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)
Years ended December 31, ------1993 1994 1995 ------ Continuing Operations: Net sales (Note 2)...... $456,724 $475,810 $576,308 Cost of sales...... 423,544 428,325 517,637 ------
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Gross profit...... 33,180 47,485 58,671 Selling, general and administrative expenses..... 29,780 30,536 32,123 ------Income from operations...... 3,400 16,949 26,548 Interest expense...... (8,769) (4,385) (4,842) Other--net...... 136 811 2,074 ------Income (Loss) from continuing operations before income taxes...... (5,233) 13,375 23,780 Income taxes (Note 7)...... -- 300 (4,400) ------Income (Loss) from continuing operations...... (5,233) 13,075 28,180 ------Discontinued Operations (Note 5): Loss from discontinued operations...... (3,561) (1,909) -- Disposal costs...... -- (2,643) ------Loss from discontinued operations...... (3,561) (4,552) ------NET INCOME (LOSS)...... $ (8,794) $ 8,523 $ 28,180 ======Income (Loss) per share of common stock (Note 9): Continuing operations...... $ (0.36) $ 0.90 $ 1.95 Discontinued operations...... (0.25) (0.31) ------INCOME (LOSS) PER SHARE OF COMMON STOCK...... $ (0.61) $ 0.59 $ 1.95 ======Weighted average number of shares outstanding.... 14,464 14,464 14,464 ======
See Notes to Consolidated Financial Statements.
F-4
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended December 31, 1993, 1994 and 1995 (in thousands)
Additional Total Common Paid-in Accumulated Treasury Shareholders' Stock Capital Deficit Stock Equity ------ BALANCE, JANUARY 1, 1993...... $15,927 $373,911 $(254,833) $(11,856) $123,149 Net (loss)...... (8,794) (8,794) ------BALANCE, DECEMBER 31, 1993...... 15,927 373,911 (263,627) (11,856) 114,355 Net income...... 8,523 8,523 ------BALANCE, DECEMBER 31, 1994...... 15,927 373,911 (255,104) (11,856) 122,878 Net income...... 28,180 28,180 ------BALANCE, DECEMBER 31, 1995...... $15,927 $373,911 $(226,924) $(11,856) $151,058
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document ======
See Notes to Consolidated Financial Statements.
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Years ended December 31, ------1993 1994 1995 ------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)...... $(8,794) $ 8,523 $28,180 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization...... 11,810 11,552 9,819 Deferred income tax benefit...... -- -- (5,900) Gain on sale of assets...... -- -- (813) Change in operating assets and liabilities, net of dispositions: Receivables...... 16,634 45,542 (9,674) Inventories...... 189 (2,500) 296 Prepaid expenses and other current assets...... 653 (1,251) 3,429 Accounts payable...... (4,476) 4,120 4,600 Accrued employee compensation...... (248) 596 (2,171) Other--net...... 1,098 2,546 229 ------Net cash provided by operating activities...... 16,866 69,128 27,995 ------CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures...... (2,863) (5,120) (21,290) Proceeds from sale of assets...... 9,467 -- 3,248 Change in restricted short-term investments--net... -- (1,811) 1,243 Payment to former corporate parent (Note 4)...... -- (5,000) ------Net cash provided by (used for) investing activities...... 6,604 (11,931) (16,799) ------CASH FLOWS FROM FINANCING ACTIVITIES: Payment of long-term borrowings...... (27,888) (81,228) (5,866) Proceeds from issuance of long-term borrowings (Note 4)...... -- 36,250 17,780 ------Net cash provided by (used for) financing activities...... (27,888) (44,978) 11,914 ------NET INCREASE IN CASH AND CASH EQUIVALENTS...... (4,418) 12,219 23,110 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR..... 7,613 3,195 15,414 ------CASH AND CASH EQUIVALENTS AT END OF YEAR...... $ 3,195 $15,414 $38,524 ======SUPPLEMENTAL CASH FLOW DISCLOSURES: Cash paid during the year for: Interest (net of amounts capitalized)...... $ 8,659 $ 4,537 $ 5,255 ======Income taxes paid...... $ 945
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document ======Noncash investing and financing activities: Note issued in litigation settlement (Note 10)..... $ 2,000 ======Note issued to former corporate parent...... $ 8,000 ======
See Notes to Consolidated Financial Statements.
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Avondale Industries, Inc. and its wholly-owned subsidiaries ("Avondale" or the "Company") which are primarily engaged in marine construction and repair. All significant intercompany transactions have been eliminated.
Revenue Recognition
Profits on long-term contracts are recorded on the basis of the Company's estimates of the percentage of completion of individual contracts, commencing when progress reaches a point where contract performance is sufficient to estimate final results with reasonable accuracy. Estimates of the percentage of completion are based on direct labor charges. Revisions in cost and profit estimates during the course of the work are reflected in the accounting period in which the facts requiring the revisions become known. Amounts in excess of agreed upon contract price for customer caused delays, disruptions, unapproved change orders or other causes of additional contract costs are recognized in contract value if it is probable that the claim for such amounts will result in additional revenue and the amount can be reasonably estimated (see Note 2). Provisions for estimated losses, if any, on uncompleted contracts are made in the period in which such losses are determined.
Statements of Cash Flows
For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.
Fair Value Disclosures
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments" ("SFAS 107"), requires the disclosure of the fair value of all significant financial instruments. The estimated fair value amounts have been developed by the Company based on available market information and appropriate valuation methodologies. However, considerable judgment is required in developing the estimates of fair value. Therefore, such estimates are not necessarily indicative of the amounts that could be realized in a current market exchange. After such analysis, management believes that the carrying values of the Company's significant financial instruments (consisting of cash and cash equivalents, short-term investments, receivables, payables, certain accrued liabilities and long-term debt) approximate fair values.
Inventories
Inventories are recorded principally at the lower of cost (average or first- in, first-out) or market.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 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:
TYPE PERIOD ------ ~~Machinery and equipment...... 3-20 years Buildings and improvements...... 15-40 years~~
Accelerated depreciation methods are generally used for income tax purposes. Maintenance and repairs are charged directly to expense as incurred. Additions, improvements and major renewals are capitalized. Interest costs for the construction of certain long-term assets are capitalized as part of the cost of property, plant and equipment and amortized over the related assets' useful lives. Interest costs capitalized in fiscal 1993 and 1994 were not material. Interest costs capitalized in fiscal 1995 approximated $1.2 million.
Goodwill
Goodwill represents the excess of the purchase price over the underlying fair value of the net assets of acquired businesses and is being amortized on a straight-line basis over its estimated useful life of twenty years. Management evaluates the continuing value and future benefits of goodwill, including the appropriateness of related amortization periods, on a current basis.
The recoverability of goodwill is assessed by determining whether the unamortized balance can be recovered through projected cash flows and operating results over its remaining life. Any impairment of the asset is recognized when it is probable that such future undiscounted cash flows will be less than the carrying value of the asset.
Accumulated amortization at December 31, 1994 and 1995 amounted to $73.7 million and $74.5 million, respectively.
Income Taxes
The Company and its subsidiaries file a consolidated Federal income tax return. Deferred income taxes are provided in the financial statements, where necessary, to account for the tax effect of temporary differences resulting from reporting revenues and expenses for income tax purposes in periods different from those used for financial reporting purposes. The temporary differences result principally from the use of different methods of accounting for depreciation, long-term contracts and certain employee benefits.
New Accounting Standards
During 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long- Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"). SFAS 121 establishes accounting standards for recording the impairment of long-lived assets, certain identifiable intangibles, goodwill, and assets to be disposed of. The Company is required to adopt SFAS 121 effective for fiscal 1996. Management believes that the implementation of SFAS 121 will not have a material impact on the Company's financial statements.
During 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Compensation" ("SFAS 123"). SFAS 123, which the Company is required to adopt effective for fiscal 1996, provides guidance relating to the recognition, measurement and disclosure of stock-based compensation. Management believes that the implementation of SFAS 123 will not have a material impact on the Company's financial statements.
Reclassifications
Certain reclassifications of prior year amounts have been made to conform to the current year presentation. These reclassifications were made for comparative purposes only and have no effect on net income as previously reported.
2. Receivables
Receivables consisted of the following at December 31, 1994 and 1995 (in thousands):
1994 1995 ------ Long-term contracts: U.S. Government: Amounts billed...... $13,754 $30,151 Unbilled costs, including retentions, and estimated profits on contracts in progress...... 48,254 41,119 ------Total...... 62,008 71,270 Commercial: Amounts billed...... 7,568 4,364 Unbilled costs, including retentions, and estimated profits on contracts in progress...... 10,914 12,312 ------Total from long-term contracts...... 80,490 87,946 Trade and other current receivables...... 4,020 5,238 ------Total...... $84,510 $93,184 ======
Unbilled costs, including retentions, and estimated profits on contracts in progress were not billable to customers at the balance sheet dates under terms of the respective contracts. Of the unbilled costs and estimated profits, approximately $5.1 million is expected to be collected in 1996 with the balance to be collected in subsequent years as contract deliveries are made and warranty periods expire. Net sales to the United States Government in 1993, 1994 and 1995 account for approximately 79%, 77% and 74% of the net sales, respectively.
Costs and estimated profits (losses) on contracts in progress at December 31, 1994 and 1995 were as follows (in thousands):
1994 1995 ------ Costs incurred on contracts in progress...... $2,177,750 $2,668,388 Estimated profits recognized...... 25,634 49,287 Reserve for anticipated contract losses...... (39,000) (34,500) ------
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Total...... 2,164,384 2,683,175 Less billings to date...... (2,108,384) (2,643,912) ------Net value of contracts in progress...... $ 56,000 $ 39,263 ======
Net value of contracts in progress was comprised of the following amounts (in thousands):
1994 1995 ------ Unbilled costs and estimated profits on contracts in progress (included in receivables)...... $59,168 $53,431 Billings in excess of costs and estimated profits on contracts in progress (included in accounts payable)...... (3,168) (14,168) ------Total...... $56,000 $39,263 ======
The reserve for anticipated contract losses of $39.0 million and $34.5 million included in the net value of contracts in progress at December 31, 1994 and 1995, respectively, is related to certain U.S. Navy contracts which are presently scheduled for delivery at varying dates into 1997. The reserve decreased in 1995 when the Company recorded a $4.5 million reduction of a previously recognized loss due primarily to a revision of the total estimated contract cost as it nears completion.
The Company filed a Request for Equitable Adjustment ("Minehunter REA") with the U.S. Navy seeking substantial increases in the contract prices related to four MHC-51 Class Minehunters currently under contract. The Company believes that the additional costs addressed by the Minehunter REA resulted from defective ship specifications provided to the Company that proved impossible to perform at the original cost estimate developed by the Company. In December 1995, the Company settled the Minehunter REA for $23 million, which approximates the previously recorded estimate of the amount recoverable. This should enable the Company to complete the MHC program on a break-even basis through the remainder of contract performance. In connection with the settlement of the Minehunter REA in December 1995, the Company submitted invoices totalling $30.7 million to the U.S. Navy, which includes certain contractual cost sharing and cost escalation provisions which obligate the U.S. Navy to bear a portion of the additional costs. The Company expects that these amounts will be collected in full during the first quarter of 1996.
3. Inventories
Inventories consisted of the following at December 31, 1994 and 1995 (in thousands):
1994 1995 ------ ~~Goods held for sale...... $ 7,908 $ 7,409 Materials and supplies...... 8,201 7,880 ------Total...... $16,109 $15,289 ======~~
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 4. Financing Arrangements
Revolving Credit Agreement
In 1994, the Company entered into a two-year revolving credit agreement with various financial institutions, which established an available line of credit equal to the lesser of $35 million or a specified borrowing base. Borrowings under the facility bear interest at fluctuating rates. The credit facility is collateralized by substantially all of the Company's working capital assets and its 900-foot floating drydock and, among other things, (1) requires the Company to meet certain financial covenants (relating to net worth, debt coverage, interest coverage and backlog), (2) imposes limitations and restrictions related to annual capital expenditures, the incurrence of new indebtedness and the payment of dividends and (3) requires compliance with the terms and conditions of all other debt agreements.
During 1995, the Company amended the revolving credit agreement. The amendment, among other things, increased the amount available under the credit agreement to $42.5 million and extended its term to May 1997. Further, the amendment permitted the issuance of $17.8 million of mortgage bonds (as discussed below) and revised the level of permitted capital expenditures and certain coverage ratios to take into consideration the plant modernization project. There were no borrowings in 1994 and 1995 under the revolving credit agreement.
The credit facility also provides the Company with the right to require the bank group to post letters of credit on the Company's behalf in support of its operations (see Note 10).
Long-Term Debt
Long-term debt consisted of the following at December 31, 1994 and 1995 (in thousands):
1994 1995 ------ Industrial revenue bonds...... $36,250 $36,250 Mortgage bonds, interest at 8.16%, payable in semi-annual principal installments to 2010...... 17,780 Mortgage bonds, payable in semi-annual principal installments to 2000...... 4,656 3,880 General obligation industrial bonds, interest at 7%, payable in annual installments to 2011...... 2,835 2,745 Other long-term debt...... 8,000 5,000 ------Total...... 51,741 65,655 Less current maturities of long-term debt...... (5,866) (5,062) ------Long-term debt...... $45,875 $60,593 ======
The $36.3 million of industrial revenue bonds represent Series 1994 bonds which consist of (1) $6 million bearing interest at 8.25% and payable in annual principal installments ranging from $550,000 in 1997 to final payment of $985,000 in 2004 and (2) $30.3 million bearing interest at 8.50% and payable in annual principal installments ranging from $340,000 in 1997 to final payment of $3.8 million in 2014. The Series 1994 bonds are secured by certain property and equipment. Among other things, the terms and conditions of the Series 1994
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document bonds (1) require the Company to meet certain financial covenants (relating to net worth, debt and debt service coverage and liquidity), (2) impose limitations and restrictions related to the incurrence of new indebtedness and the payment of dividends, and (3) require compliance with the terms and conditions of other specified debt agreements.
The $17.8 million of mortgage bonds were issued in February 1995 as part of the financing of the Company's approximately $20 million plant modernization effort. The bonds were issued utilizing a U.S. Government guarantee under Title XI of the Merchant Marine Act, 1936, as amended ("Title XI"), bear interest at the annual rate of 8.16% and are payable in equal semi-annual principal payments of $593,000 over a 15 year period beginning in 1996. The terms of the financing include various restrictive covenants including provisions relating to the maintenance of working capital, incurrence of additional indebtedness, and the maintenance of a minimum net worth. The plant modernization assets have been pledged as collateral for these mortgage bonds.
The $3.9 million of mortgage bonds at December 31, 1995 represent the balance of an earlier mortgage bond issue which also utilized a Title XI guarantee. The Company refinanced these mortgage bonds in February 1995 (approximately $4.3 million) which reduced the annual interest rate from 9.30% to 7.86%. The refinancing agreement contains various restrictive covenants similar to those for the $17.8 million of Title XI mortgage bonds discussed above. These bonds are payable in equal semi-annual principal payments of $388,000 and mature in the year 2000. Property, plant and equipment having a net book value of approximately $13.5 million at December 31, 1995 has been pledged as collateral for these mortgage bonds.
Included in other long-term debt at December 31, 1995 is the $3 million balance of a two-year $8 million unsecured note issued to the Company's former corporate parent as part of a settlement in 1994 which terminated certain arrangements which had existed since 1985. The note bears interest at 10% per annum with the $3 million balance payable on June 30, 1996. Also included in other long-term debt at December 31, 1995 is a $2 million unsecured note issued as part of the settlement of certain claims against the Company (as further discussed in Note 10). The note bears interest at 8% per annum and is due in January 1997.
Annual maturities of long-term debt for each of the next five years and in total thereafter follow (in thousands):
~~1996...... $ 5,062 1997...... 4,957 1998...... 3,047 1999...... 3,137 2000...... 3,237 Thereafter...... 46,215 ------Total...... $65,655 ======~~

~~5. Discontinued Operations~~
During the third quarter of 1994 the Company decided to discontinue operation of its service contracting subsidiary formed in 1990 to pursue large-scale service contracts with government and commercial operations. The Company concluded that managerial and financial resources could be more productively invested in the Company's core marine construction operations.
~~The operating results for the prior-year periods are reported as discontinued~~
~~Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document operations. Summarized results are as follows (in thousands):~~
1993 1994 ------ Net sales...... $14,442 $13,520 Costs and expenses...... 18,003 15,429 ------Income (Loss) from discontinued operations...... (3,561) (1,909) Loss on disposal of discontinued operations...... -- (2,643) ------Income (Loss) from discontinued operations...... $(3,561) $(4,552) ======
~~6. Leases~~
The Company leases equipment and real property in the normal course of business under various operating leases, including non-cancelable and month-to- month agreements. Certain of the leases provide for renewal privileges with escalation of the lease payments based on changes in selected economic indices.
~~Rental expense for operating leases was $5.3 million, $5.8 million and $6.3 million in 1993, 1994 and 1995, respectively.~~
~~Minimum rental commitments under leases having an initial or remaining noncancelable term in excess of twelve months follow (in thousands):~~
~~1996...... $3,243 1997...... 1,747 1998...... 1,260 1999...... 297 2000...... 52 ------Total...... $6,599 ======~~

~~7. Income Taxes~~
Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). The statement requires the use of the asset and liability approach for financial accounting and reporting for income taxes. Financial statements for prior years have not been restated and the cumulative effect of the accounting change was not material.
~~The Company has provided for Federal income taxes as follows (in thousands):~~
1993 1994 1995 ------ Current provision...... $ -- $ 600 $ 1,500 Deferred provision (benefit)...... -- (300) 7,100 Deferred benefit attributable to the realization of net operating loss carryforwards...... -- -- (13,000) ------
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Provision (benefit) for income taxes...... $ -- $ 300 $(4,400) ======
~~The provision (benefit) for income taxes varied from the Federal statutory income tax rate due to the following (dollars in thousands):~~
Years ended December 31, ------1993 1994 1995 ------Amount % Amount % Amount % ------ Taxes at Federal statutory rate...... $(3,078) (35) $3,088 35 $ 8,323 35 Amortization of goodwill not deductible...... 357 4 511 6 246 1 Net operating loss carryforwards utilized...... ------(13,000) (55) Settlement of prior year tax examinations...... -- -- (3,200) (36) -- -- Losses for which no tax benefit was provided...... 2,595 30 ------Other...... 126 1 (99) (1) 31 ------Total...... $ -- -- $ 300 4 $( 4,400) (19) ======
At December 31, 1995 the Company has available for Federal income tax purposes net operating loss carryforwards and tax credit carryforwards of $69.5 million and $5.3 million, respectively. The net operating loss carryforwards expire in years 2004 through 2008 and the tax credit carryforwards expire in the years 2000 through 2010. Additionally, the Company has $1.9 million of minimum tax credits which may be carried forward indefinitely.
Deferred income taxes represent the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases, and (b) operating loss and tax credit carryforwards. The tax effects of significant items comprising the Company's net deferred tax balances at December 31, 1994 and 1995 are as follows (in thousands):
1994 1995 ------ Deferred Tax Liabilities: Differences between book and tax basis of property, plant and equipment...... $27,018 $26,266 Other...... 1,511 759 ------Total...... 28,529 27,025 ------Deferred Tax Assets: Reserves not currently deductible...... 6,020 5,174 Long-term contracts...... 5,252 18,557 Other temporary differences...... 3,598 4,263 Operating loss carryforwards...... 47,600 24,334 Tax credit carryforwards...... 5,800 7,200 ------68,270 59,528
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Valuation Allowance...... (28,641) (9,703) ------Total...... 39,629 49,825 ------Net deferred tax assets...... $11,100 $22,800 ======
~~The net deferred tax assets are included in the following balance sheet captions (in thousands):~~
1994 1995 ------ Current deferred tax assets...... $ 4,100 $23,650 Non-current deferred tax assets...... 7,000 -- Other non-current liabilities and deferred tax credits...... -- (850) ------Net deferred tax assets...... $11,100 $22,800 ======
During 1995, the deferred tax valuation allowance decreased approximately $19.0 million as a result of the Company's current year operating results and a re-evaluation of its expectations of the likelihood of future operating income related to its existing backlog. Approximately $6.0 million of this decrease in the valuation allowance was recorded as a reduction in goodwill in accordance with SFAS 109, which requires that the realization of tax benefits first be attributed to any acquired tax assets. In the event that additional tax benefits are realized in future periods, all such benefits will be recorded as a reduction of income tax expense.
~~8. Retirement Plans~~
~~ESOP~~
In 1985, the Company established the Avondale Industries, Inc. Employee Stock Ownership Plan (the "ESOP"). The ESOP is a qualified, defined contribution plan designed primarily to invest in equity securities of the Company and is specifically authorized to leverage its acquisition of these securities. The ESOP is intended to cover all employees of the Company upon completion of one year of service, except certain employees who are covered by collective bargaining agreements, unless, by the terms of such agreements, the employees are to participate in the ESOP. The ESOP owned approximately 7,096,000 and 6,822,000 shares of the Company's Common Stock at December 31, 1994 and 1995, respectively.
~~401(k) Savings Plan~~
Beginning in 1996 the Company will sponsor a 401(k) Savings Plan. Participation in this defined contribution plan is available to substantially all employees of the Company. The Company may elect to make contributions to the Plan; however, the timing and amount of such contributions is at the discretion of the Company's Board of Directors.
~~Pension Plan~~
The Company also sponsors a defined benefit pension plan, which is coordinated with the benefits payable to participating employees in the ESOP. At retirement, a person's benefit is based upon the greater of (i) the market value of the shares of common stock allocated to his ESOP account or (ii) the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document benefit calculated under the pension plan formula. The pension plan formula benefits are based on a defined dollar amount multiplied by a fraction related to a participant's credited service.
~~The net periodic pension cost for the years ended December 31, 1993, 1994 and 1995 included the following components (in thousands):~~
1993 1994 1995 ------ Service costs of the current period...... $ 3,700 $ 3,400 $3,300 Interest cost on the projected benefit obligation.... 4,400 3,800 4,200 Actual return on plan assets...... (7,000) (2,700) (3,600) Net amortization of transition liability and deferred investment gain (loss)...... 5,000 (200) 300 ------Net periodic pension cost...... $ 6,100 $ 4,300 $4,200 ======
~~The following table sets forth the pension plan's estimated funded status as of December 31, 1994 and 1995 (in thousands):~~
1994 1995 ------ Projected benefit obligation: Vested benefits...... $40,800 $49,100 Nonvested benefits...... 600 400 ------Accumulated benefit obligation...... 41,400 49,500 Effect of projected future compensation levels...... 4,200 12,700 ------Projected benefit obligation...... 45,600 62,200 Plan assets at market value...... 44,200 50,400 ------Plan assets less than projected benefit obligation...... (1,400) (11,800) Unrecognized net transition obligation...... 200 100 Unrecognized prior service costs...... (3,000) (2,500) Unrecognized net loss...... 6,800 12,600 ------Prepaid pension costs (pension liability)...... $ 2,600 $(1,600) ======
The Company's funding policy is to contribute each year an amount equal to the minimum required contribution under the Employee Retirement Income Security Act of 1974. However, the contribution for any year will not be greater than the maximum tax deductible contribution. Plan assets consist primarily of United States Government and Agency securities, corporate bonds and notes, corporate stocks, and an unallocated insurance contract. The weighted-average discount rate used in determining the actuarial present value of the projected benefit obligation was 8.5% for 1994 and 7.25% for 1995. The rate of increase in future compensation levels used was 3.5% for 1994 and 4.0% for 1995 and thereafter. The expected long-term rate of return on the assets was 9.0% for 1994 and 1995.
~~9. Shareholders' Equity~~
~~Preferred Stock~~
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The Company is authorized to issue 5,000,000 shares of preferred stock, $1.00 par value, none of which was outstanding at December 31, 1994 and 1995.
~~Income (Loss) Per Share~~
The weighted average number of shares used in the computation of income (loss) per share was 14,464,000, for each of the years ended December 31, 1993, 1994 and 1995, respectively. The assumed exercise of stock options would not result in dilution in any of such periods.
~~Performance Share Plan~~
The Company's Performance Share Plan provided for the award of shares of common stock to senior executives of the Company, as designated by a committee of the Board of Directors, which were earned upon the attainment of specified performance objectives. These performance objectives have been attained and therefore no further awards will be made. Transactions relating to the plan during 1993, 1994 and 1995 were not material.
The plan provided for a cash distribution in an amount equal to the Participant's income tax liability resulting from the settlement of an award. To the extent that a Participant received cash in lieu of common stock as payment of an award, options were granted to the participant to purchase an equivalent number of such shares. There were 303,159 stock options outstanding at December 31, 1993, 279,155 stock options outstanding at December 31, 1994 and 240,971 stock options outstanding at December 31, 1995 . The stock options are exercisable at prices of $3.875 to $19.00 per share, the majority of which contain a stock appreciation right feature and expire on various dates to February 2002.
~~Stock Appreciation Plan~~
The Company maintains a Stock Appreciation Plan for key management employees which contains a stock appreciation right feature. There are 500,000 shares of common stock of the Company reserved for award under the plan. Transactions of the Stock Appreciation Plan during 1993, 1994 and 1995 were as follows:
Number of Shares ------1993 1994 1995 ------ Outstanding, January 1...... 60,000 50,000 40,000 Canceled...... (10,000) (10,000) (40,000) ------Outstanding, December 31...... 50,000 40,000 -- ======Exercisable at end of year...... 2,000 -- -- ======Available for grant at end of year...... 387,000 397,000 437,000 ======
Options were outstanding at prices ranging from $11.25 to $18.375 per share at December 31, 1993 and $11.25 per share at December 31, 1994. Under the terms of the plan, options expired on March 31, 1995.
~~10. Commitments and Contingencies~~
~~Litigation~~
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document In January 1986, the Louisiana Department of Environmental Quality ("DEQ") advised the Company that it may be a potentially responsible party ("PRP") with respect to an oil reclamation site operated by an unaffiliated company in Walker, Louisiana. The Company sold to the operator a substantial portion of the waste oil that was processed at the reclamation site during the period 1978 through 1982. The Company's potential liability, if any, for cleanup of this site will be based on the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA") or the Louisiana Environmental Affairs Act. Under these statutes, such liability is presumptively joint and several, but is typically apportioned among the responsible parties based on the volume of material sent by each to the waste site. The Company has cooperated with other PRPs to study the potential aggregate liability under these statutes. Moreover, the Company believes it has substantial defenses against liability and defenses that could mitigate the portion of liability, if any, that would otherwise be attributable to it.
To date, the Company and certain of the other PRPs for the site have funded the site's remediation under a preliminary cost-sharing agreement. As of December 31, 1995 clean-up costs totalled $17 million, of which the Company has contributed $3.6 million. Additional work scheduled for the site includes completion of studies in 1996, and if required by the results of these studies, subsequent remediation. Following completion of any such required additional remediation, it will be necessary to obtain Environmental Protection Agency approval to close the site, which consent may require subsequent post-closure activities such as groundwater monitoring and site maintenance for many years. The Company is not able to estimate the final costs for any such additional remedial work or post-closure costs that may be required; however, the Company believes that its proportionate share of expenditures for any additional work will not have a material adverse effect on the Company's financial statements. In addition, the Company believes that its proportionate responsibility for the clean-up costs will not be materially changed.
Since July 1986, a number of "toxic tort" suits have been filed against the Company and numerous other defendants alleging claims for personal injury, property damage, and "fear of cancer" in connection with the reclamation site discussed above. The plaintiffs also sought substantial punitive damages. These cases were consolidated and certified as a class action. In 1995, the Judge for the Federal District Court for the Western District of Louisiana issued a ruling from the bench approving the Company's settlement of the class action lawsuit. Based on the advice of its counsel, the Company believes that a written order confirming its earlier bench ruling will be issued by the Federal District Court in the near future. Under the terms of the court approved settlement, which is subject to appeal following the issuance of the final written order, the Company paid $4.0 million cash into a settlement fund in the third quarter of 1995, using cash from operations, and issued a $2.0 million unsecured note to the plaintiff class. The note bears interest at 8% per annum and is due on January 28,1997. The Company had previously recorded an accrual sufficient to provide for the $6.0 million settlement and has sufficient liquidity to fund the note. The Company could also be responsible for payment to the plaintiffs of up to an additional $6.0 million (plus interest at 8% per annum) if the plaintiffs are unsuccessful in collecting certain claims under Avondale's insurance policies that have been assigned to the plaintiff class under the settlement agreement. With respect to the potential contingent liability of the Company to pay additional sums under the settlement agreement, management believes that the eventual resolution of this matter will not have a material adverse effect on the Company's results of operations, financial position or cash flows.
Furthermore, the Company has initiated litigation against its insurer for a declaration of coverage of the liability, if any, that may arise in connection with the remediation of the site referred to above. The court has ruled that the insurer has the duty to defend the Company, but has not yet ruled on whether the carrier has a duty to indemnify the Company if any liability is ultimately assessed against it. After consultation with counsel, the Company is
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document unable to predict the eventual outcome of this litigation or the degree to which such potential liability would be indemnified by its insurance carrier.
~~In addition to the above, the Company is also named as a defendant in other lawsuits and proceedings arising in the ordinary course of business, some of which involve substantial claims.~~
The Company has established accruals as appropriate for certain of the matters discussed above. While the ultimate outcome of lawsuits and proceedings against the Company cannot be predicted with certainty, management believes, based on current facts and circumstances and after review with counsel, that, the eventual resolution of these matters is not expected to have a material adverse effect on the Company's financial statements.
~~Letters of Credit~~
In the normal course of its business activities, the Company is required to provide letters of credit to secure the payment of workers' compensation obligations. Additionally, under certain contracts, the Company may be required to provide letters of credit to secure certain performance obligations of the Company thereunder. At December 31, 1995, outstanding letters of credit relating to these business activities amounted to approximately $25.4 million.
~~11. Quarterly Results (Unaudited)~~
~~Consolidated operating results for the four quarters of 1994 and 1995 were as follows (in thousands, except per share data):~~
1994 1995 ------(1) (1) (2) (3) (3) (3) First Second Third Fourth First Second Third Fourth Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter ------ Net Sales...... $101,329 $118,437 $125,487 $130,557 $133,575 $152,788 $148,785 $141,160 Gross Profit...... 9,506 11,283 14,943 11,753 13,404 13,820 14,793 16,654 Income (Loss) from Continuing Operations.. 1,918 2,470 6,323 2,364 3,044 8,493 12,054 4,589 Income (Loss) from Discontinued Operations...... 116 (396) (4,272) ------Net Income...... 2,034 2,074 2,051 2,364 3,044 8,493 12,054 4,589 Net Income (Loss) per Share: Continuing Operations... $ 0.13 $ 0.17 $ 0.44 $ 0.16 $ 0.21 $ 0.59 $ 0.83 $ 0.32 Discontinued Operations. 0.01 (0.03) (0.30) ------Net Income per Share.... $ 0.14 $ 0.14 $ 0.14 $ 0.16 $ 0.21 $ 0.59 $ 0.83 $ 0.32 ======
------
(1) Income statement data for these periods have been restated to present discontinued operations (See Note 5).
(2) During the third quarter of 1994, the Company revised its estimated profits on several previously-completed shipbuilding contracts which had the effect of increasing net income for the third quarter of 1994 by approximately $3.5 million, or $0.24 per share.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (3) During 1995, the Company recorded a reduction of a previously recorded loss on a shipbuilding contract which had the effect of increasing net income for the second, third and fourth quarters of 1995 by approximately $2.3 million (or $0.16 per share), $750,000 (or $0.05 per share) and $1.5 million (or $0.10 per share), respectively.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None
PART III
Item 10. Directors and Executive Officers of the Registrant.
Information concerning the Company's directors and officers called for by this item will be included in the Company's definitive Proxy Statement prepared in connection with the 1996 Annual Meeting of shareholders and is incorporated herein by reference.
Item 11. Executive Compensation.
Information concerning the executive compensation called for by this item will be included in the Company's definitive Proxy Statement prepared in connection with the 1996 Annual Meeting of shareholders and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Information concerning security ownership of certain beneficial owners and management called for by this item will be included in the Company's definitive Proxy Statement prepared in connection with the 1996 Annual Meeting of shareholders and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
Information concerning certain relationships and related transactions called for by this item will be included in the Company's definitive Proxy Statement prepared in connection with the 1996 Annual Meeting of shareholders and is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1)Financial Statements
Independent Auditors' Report.
Consolidated Balance Sheets as of December 31, 1994 and 1995.
Consolidated Statements of Operations for the years ended
December 31, 1993, 1994 and 1995.
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1993, 1994 and 1995.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995.
Notes to Consolidated Financial Statements.
(a)(2)Financial Statement Schedules
Not applicable
(a)(3)Exhibits
3.1 Articles of Incorporation of the Company.(1)
3.2 By-laws of the Company.(2)
4.1 See Exhibits 3.1 and 3.2 for provisions of the Company's Articles of Incorporation and By-laws defining the rights of holders of Common Stock.
4.2 Specimen of Common Stock Certificate.(3)
4.3 Instruments Relating to Title XI Vessel Financing
(a) Trust Indenture dated October 21, 1975, by and between the Company and Manufacturers Hanover Trust Company, as Indenture Trustee, relating to $19,012,000 of United States Government Guaranteed Ship Financing Bonds, as amended by an Assumption Agreement and Supplemental Indenture dated September 16, 1985(4), as further amended by a Master Assumption Agreement, Supplemental Indenture No. 2 and Amendment to Title XI Finance Agreements dated March 13, 1991 (the "Master Assumption Agreement"),(5) which has been further amended by a Third Supplemental Indenture dated February 9, 1995.(6)
(b) Title XI Reserve Fund and Financial Agreement dated October 21, 1975, by and between the Company and the United States of America, as amended by Amendments Nos. 1 and 2(4), as further amended by the Master Assumption Agreement (filed as Exhibit 4.3(a) hereto). The Reserve Fund and Financial Agreement has been further amended, including the most recent Amendment No. 5 to the Title XI Reserve Fund and Financial Agreement dated February 9, 1995.(6)
(c) Form of 8.80% Sinking Fund Bond, Series A (included in Exhibit 4.3(a)).
(d) Form of 9.30% Sinking Fund Bond, Series B (included in Exhibit 4.3(a)).
(e) Form of 7.86% Sinking Bond Fund, 2000 Series.(6)
4.4 Instruments relating to AEI's and the Company's obligations arising in connection with the issuance of General Obligation Bonds by Harrison County, Mississippi.
(a) Loan Agreement dated April 1, 1991 between Harrison County, Mississippi and AEI, pursuant to which AEI is obligated to repay $3 million in order to fund the County's bond payment obligations.(3)
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (b) Guaranty Agreement dated April 1, 1991 between the Company, Harrison County, Mississippi and the State of Mississippi.(3)
4.5 Instruments relating to the Company's $36.25 million Industrial Revenue Refunding Bond Series 1994 Financing.
(a) Refunding Agreement dated April 1, 1994 between the Company and the Board of Commissioners of the Port of New Orleans, Exhibit A and First Preferred Vessel Mortgage thereto.(7)
(b) Trust Indenture dated April 1, 1994 between the Board of Commissioners of the Port of New Orleans and First National Bank of Commerce.(7)
(c) Form of Industrial Revenue Refunding Bond Series 1994.(7)
4.6 Instruments Relating to February 1995 Title XI Vessel Financing.
(a) Trust Indenture dated February 9, 1995 by and between the Company and Chemical Bank, as Indenture Trustee, relating to $17,780,000.00 of United States Government Guaranteed Ship Financing Bonds.(6)
(b) Title XI Reserve Fund and Financial Agreement dated February 9, 1995, by and between the Company and the United States of America.(6)
(c) Form of 8.16% Sinking Bond Fund, 2010 Series.(6)
10.1 Contracts With The United States Navy
(a) Agreement dated June 28, 1985, by and between the Company and the United States of America (Contract No. N00024-85-C-2131) for the construction of T-AO 187 Class Oiler Ships and various modifications thereto(4) including modification P00005 thereto entered into on June 16, 1988, and the related Acknowledgement of Transfer and Transfer Agreement relating to the Company's agreement to assume certain of the rights and obligations to build two such vessels under an Agreement dated May 6, 1985, by and between Pennsylvania Shipbuilding Co. and the United States of America.(8)
(b) Agreement dated June 20, 1988, by and between the
Company and the United States of America (Contract No. N00024-88-C-2050) for the construction of T-AO 187 Class Oiler Ships and various modifications thereto(8) and modification P00036 thereto.(5)
(c) Agreement dated November 21, 1983, by and between the Company and the United States of America (Contract No. N00024-84-C-2027) for the construction of LSD-41 Class Landing Ship Dock vessels and various modifications thereto.(4)
(d) Agreement dated June 17, 1988, by and between the Company and the United States of America (Contract No. N00024-88-C-2048) for the construction of LSD-41 Class
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Landing Ship Dock vessels and modification nos. P00001 and P00002(8), modification nos. P00008 and P00013 thereto(3) and modification P00029 thereto.(5)
(e) Agreement dated July 15, 1988, by and between the Company and the United States of America (Contract No. N00024-88-C-2221) for the conversion of AO-177 Class Oilers to AO-177 Jumbo Class and various modifications thereto.(8)
(f) Agreement dated December 13, 1988, by and between AGM and the United States of America (Contract No. N00024- 89-C-2110) for the construction of three LCACs.(8)
(g) Agreement dated July 1, 1987, by and between Lockheed Shipbuilding Company and the United States of America (Contract No. N00024-87-C-2089) for the construction of seven LCACs (assumed by AGM in 1988).(8)
(h) Agreement dated October 3, 1989, by and between the Company and the United States of America (Contract No. N00024-89-C-2162) for the construction of one MHC Class 51 ship and various modifications thereto(9), modification no. P00020(5) and modification no. P00027 thereto.
(i) Agreement dated August 2, 1990, by and between the Company and the United States of America (Contract N00024-90-C-2304) for the construction of one MHC Class 51 ship,(3) and modification nos. P00002(5), P00013(5) and modification no. P00020 thereto.
(j) Agreement dated November 30, 1990, by and between the Company and the United States of America (Contract No. N00024-90-C-2307) for the construction of one T-AGS 45 ship and various modifications thereto.(3)
(k) Agreement dated July 15, 1993, by and between the Company and the United States of America (Contract No. N00024-93-C-2300) for the construction of one WAGB 20 Coast Guard Polar Icebreaker ship, amendment 0001 and modification nos. P0001 and P00013 thereto.(1)
(l) Agreement dated September 3, 1993, by and between the
Company and the United States of America (Contract No. N00024-93-C-2205) for the construction of one T-AKR 300 Class Strategic Sealift ship, various amendments and modifications nos. P00001, and P00003 and P00004 thereto(5) and modification P00007 thereto.(7)
(m) Agreement dated October 12, 1993, by and between the Company and the United States of America (Contract No., N00024-94-C-2200) for the construction of one LSD 41 Class Landing Ship Dock.(5)
10.2 Other Operating Contracts
(a) Agreement dated July 10, 1991 by and between Crawford Technical Services, Inc. and the Dallas Area Rapid Transit Authority, and the supplement thereto, relating to providing operational and maintenance services for paratransit van services for the Dallas, Texas metropolitan area.(5)
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (b) Agreement dated January 28, 1991, by and between Crawford Technical Services, Inc. and the United States of America and various modifications thereto (Contract No. FO3602-91-C0007) relating to providing maintenance services with respect to family housing units located in a Little Rock, Arkansas air force base.(5)
(c) Agreement dated January 12, 1994 by and between the Company and Belle of Orleans, L.L.C. for the construction of a 350-foot-long paddlewheel gaming vessel, various exhibits and Amendment nos. 1, 2 and 3 thereto.(7)
(d) Agreement dated May 12, 1995 by and between the Company and American Heavy Lift Shipping Company for the construction of one ocean-going product tanker, S/S King.(2)
(e) Agreement dated May 12, 1995 by and between the Company and American Heavy Lift Shipping Company for the construction of one ocean-going product tanker, S/S Knight.(2)
(f) Agreement dated May 12, 1995 by and between the Company and American Heavy Lift Shipping Company for the construction of one ocean-going product tanker, S/S Solar.(2)
(g) Agreement dated May 12, 1995 by and between the Company and American Heavy Lift Shipping Company for the construction of one ocean-going product tanker, S/S Spray.(2)
10.3 Employee Benefit Plans
(a) The Company's Amended and Restated Performance Share Plan dated April 24, 1989(10), as amended by Amendment No. 1 adopted December 5, 1994.(7)
(b) The Company's Amended and Restated Stock Appreciation Plan and attachments thereto dated April 24, 1989(10), as amended by Amendment No. 1 adopted December 5, 1994.(7)
(c) The Company's Amended and Restated Employee Stock Ownership Plan and the Related Trust Agreement(4), as amended and restated on December 5, 1994(7), as further amended by Amendment No. 1 adopted April 5, 1995(6) and as further amended by Amendment No. 2 adopted June 16, 1995.(2)
(d) The Company's Pension Plan as Amended and Restated(7) as further amended by Amendment No. 1 adopted June 16, 1995.(2)
(e) The Company's Amended and Restated Supplemental Pension Plan(4), as amended by Amendment Nos. 1 and 2 thereto(3).
(f) The Company's Excess Retirement Plan.(3)
(g) Executive Group Insurance Benefits Plan specifying the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document excess insurance benefits provided to the Company's executive officers and certain other key personnel, and a summary description of health, accidental death and dismemberment, disability and life insurance benefits made available to employees of Avondale Services Corporation(3), as amended on March 25, 1994.(7)
(h) The Company's Directors' Deferred Compensation Plan.(3)
(i) Avondale Industries, Inc. Management Incentive Plan.(6)
(j) Form of the Company's 401(k) Plan and related Trust effective January 1, 1996.
10.4 Employment Agreements
(a) Employment Agreement dated September 27, 1985, by and between the Company and Albert L. Bossier, Jr.(4) the term of which has been extended such that its current term extends through December 31, 1997.(7)
(b) Employment Agreement dated June 18, 1987, by and between the Company and Thomas M. Kitchen(4) the term of which has been extended such that its current term extends through December 31, 1997.(7)
(c) Employment Agreement dated June 18, 1987, by and between the Company and Kenneth B. Dupont(4) the term of which has been extended such that its current term extends through December 31, 1997.(7)
10.5 Avondale/Ogden Letter Agreement.(11)
10.6 Acquisition and Disposition Agreements
(a) Asset Purchase Agreement dated January 27, 1987 by and between the Company and Connell Industries, L.P.(4)
(b) Purchase Agreement dated June 22, 1988, by and between AGM, Lockheed Shipbuilding Company and Lockheed Corporation.(8)
(c) Stock Purchase Agreement dated February 15, 1991, by and between Avondale Technical Services, Inc. and Oliver R. Crawford relating to the purchase of Crawford Technical Services, Inc.(3)
(d) Asset Purchase Agreement dated November 20, 1992 between the Company and Bollinger Machine Shop & Shipyard, Inc., a Louisiana corporation (without exhibits).(5)
10.7 Lease Agreements
(a) Lease Agreement dated June 24, 1988, by and between the Company and the Board of Commissioners of the Port of New Orleans.(8)
(b) Lease Agreement dated June 4, 1979, by and between the Company and Marrero Land and Improvement Association, Ltd.(8)
(c) Adoption Agreement dated July 22, 1988, by and between the Company and Missouri Pacific Railroad Company, as
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document supplemented on the date thereof.(8)
(d) Lease of Commercial Property dated July 1, 1970 by and between the Company and Metal Building Products Co., Inc.(3)
10.8 Other Material Agreements
(a) Registration Rights Agreement between the Company and the ESOP as Annex I of the Common Stock Purchase Agreement dated as of September 27, 1985, by and between Ogden American Corporation and the trustees of the Avondale Industries, Inc., Employee Stock Ownership Trust.(4)
(b) Registration Rights Agreement between the Company and the participants in the Amended and Restated Performance Share Plan (included in Exhibit 10.3(a)).
(c) License dated October 13, 1989 by and between the Company and Intermarine S.p.A. relating to the license of molded, glass-reinforced polyester hull construction technology.(3)
(d) Stockholder Protection Rights Agreement dated as of September 26, 1994 between Avondale Industries, Inc. and Boatmen's Trust Company, as Rights Agent.(12)
10.9 Revolving Credit Agreement dated as of May 10, 1994 among
Avondale Industries, Inc., various financial institutions signatory thereto (the "Banks") and Continental Bank N.A. as the Agent for the Banks, and Amendment Nos. 1 and 2 thereto.(7)
(a) Third Amendment, Waiver and Consent to Revolving Credit Agreement, dated May 10, 1995.
(b) Fourth Amendment and Consent to Revolving Credit Agreement, dated September 1, 1995.
(c) Fifth Amendment to Revolving Credit Agreement, dated November 17, 1995.
21 List of subsidiaries of the Company
23 Consent of Deloitte & Touche LLP
27 Financial Data Schedule
99 Additional Exhibits
(a) Subscription to Combustion, Inc. litigation preliminary settlement agreement setting forth specific terms of the settlement between Avondale and the Plaintiff Class.
______(1) Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1993.
(2) Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1995.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (3) Incorporated by reference from the Company's Annual Report on Form 10- K for the fiscal year ended December 31, 1991, as amended by Form 10- K/A.
(4) Incorporated by reference from the Company's Registration Statement on Form S-1 (Registration No. 33-20145) filed with the Commission on February 16, 1988.
(5) Incorporated by reference from the Company's Annual Report on Form 10- K for the fiscal year ended December 31, 1993.
(6) Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1995.
(7) Incorporated by reference from the Company's Annual Report on Form 10- K for the fiscal year ended December 31, 1994.
(8) Incorporated by reference from the Company's Registration Statement on Form S-1 (Registration No. 33-27342) filed with the Commission on March 6, 1989.
(9) Incorporated by reference from the Company's Annual Report on Form 10- K for the fiscal year ended December 31, 1990.
(10) Incorporated by reference from the Company's Registration Statement on Form S-8 and Form S-3 (Registration No. 33-31984) filed with the Commission on November 8, 1989.
(11) Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1994.
(12) Incorporated by reference from the Company's Current Report on Form 8- K filed with the Commission on September 30, 1994.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the three month period ended December 31, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on January 19,1996.
AVONDALE INDUSTRIES, INC.
By: /s/Albert L. Bossier, Jr. ------Albert L. Bossier, Jr. Chairman of the Board, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and on the dates indicated.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Signature Title Date ------
/s/Albert L. Bossier, Jr. Chairman of the Board, January 19, 1996 ------President and Chief Albert L. Bossier, Jr. Executive Officer
/s/Thomas M. Kitchen Vice President, Chief January 19, 1996 ------Financial Officer Thomas M. Kitchen Corporate Secretary and a Director
/s/Kenneth B. Dupont Vice President and a January 19, 1996 ------Director Kenneth B. Dupont
/s/Anthony J. Correro, III Director January 19, 1996 ------Anthony J. Correro, III
/s/Francis R. Donovan Director January 19, 1996 ------Francis R. Donovan
/s/William A. Harmeyer Director January 19, 1996 ------William A. Harmeyer
/s/Hugh A. Thompson Director January 19, 1996 ------Hugh A. Thompson
/s/Bruce L. Hicks Vice President & January 19, 1996 ------Controller Bruce L. Hicks
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------| 1. CONTRACT ID CODE | PAGE OF PAGES AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT | L | 1 | 7 ------2. AMENDMENT/MODIFICATION NO. | 3. EFFECTIVE DATE | 4. REQUISITION/PURCHASE REG. NO. 5. PROJ NO. (if applicable) P00027 | SEE BLK 16C. | N0002496MR20706 2-0292-20706 ------|------|------ISSUED BY CODE | N00024 | 7. ADMINISTERED BY (if other than Item 6) CODE | N63124 BUYER/SYMBOL: L. NEWTON SEA 02223 SUPSHIP, New Orleans 2531 JEFFERSON DAVIS HWY Bldg. 16, Naval Support Activity ARLINGTON, VA 22242-5160 New Orleans, LA 70142-5700 PHONE: Area Code 703/602-3102 Ext 226 ------8. NAME AND ADDRESS OF CONTRACTOR (No., street, State and ZIP Code) |----|9A. AMENDMENT OF SOLICITATION NO. CEC NO: 60004899F | | | |------| |% DATED (SEE ITEM 11) | | Avondale Industries, Inc. |----|------GRP Division | |10A. MODIFICATION OF CONTRACT/ORDER NO. P.O. Box 2309 | X | Gulfport, MS 39505 | | N00024-89-C-2162 | |------| |10B. DATED (SEE ITEM 13) CAGE CODE ICC97 | FACILITY CODE | | 89OCT03 ------11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS ------| The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers __ ------is extended, __ is not extended. Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation as amended, by one of the following methods: (a) By completing Items 8 and 15, and returning __ copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or telegram which incudes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULLT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter; provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening hour and date specified. ------12. ACCOUNTING AND APPROPRIATION DATE (If required) See Attached Financial Accounting Data Sheet ------13. THIS ITEM APPLIES ONLY TO MODIFICATINS AND CONTRACTS/ORDERS, IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14. ------| A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ------| ORDER NO. IN ITEM 10A. ------|------| B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMISTRATIVE CHANGES (such as changes in paying office, | appropriation data, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b) ------|------| C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF: X | Special Contract Requirement H-16 entitled Documentation of Request For Equitable Adjustment ------|------| D. OTHER (Specify type of modification and authority) ------E. IMPORTANT: Contractor ( ) is not, (X) is required to sign this document and return 2 copies to the issuing office. ------14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where feasible.)
SEE ATTACHED
Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains unchanged and in full force and effect. ------|------15A. NAME AND TITLE OF SIGNER (Type or print) |16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print) A.L. BOSSIER, JR. | John Kimener Chairman, President & Chief Executive Officer | Contracting Officer ------|------|------|------15B. CONTRACTOR/OFFEROR | 15C. DATE SIGNED | 16B. UNITED STATES OF AMERICA | 16C. DATE SIGNED [SIGNATURE APPEARS HERE] | 12-28-95 | [SIGNATURE APPEARS HERE] | ------| (Signature of person authorized to sign) (Signature of Contracting Officer) | ------NSN 7540-01-152-8070 STANDARD FORM 30 (REV 10-83) PREVIOUS EDITION UNUSABLE Prescribed by GSA FAR (48 CFR) 53.243 ------
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WHEREAS, Avondale Industries, Inc. (AII) (the Contractor) has submitted a Request for Equitable Adjustable (REA) dated 15 November 1994 seeking price and delivery schedule adjustments, damages, and/or other relief under and/or relating to Contracts N00024-89-C-2162 (MHC 53) and N00024-90-C-2304 (MHC 54,56,57), as updated and supplemented by additional submissions and representations at various times; and
WHEREAS, the Contractor has certified its REA and all supporting data in accordance with the requirements of the Truth in Negotiations Act, 10 U.S.C. 2306a, Section (c)(1) of the Contract Disputes Act of 1978, 41 U.S.C. 605(c)(1), and P.L. 95-485, Section 813; and
WHEREAS, Modification A00198 established a maximum price increase for a period of fourteen (14) days of proposed compensable delay based on a 50/50 sharing of the costs of said delay resulting from FMR 204; and
WHEREAS, the Contractor has also asserted its entitlement to equitable adjustments to the contract price(s) and/or delivery schedule(s) of Contracts N00024-89-C-2162 and N00024-90-C-2304, to damages, and/or to other relief under or relating to those contracts, in connection with: defects in Government furnished test instrumentation used during MHC 54 Builder's trials; extension of vendor warranties; lack of buffering on M/SCS signal outputs; calibration of test equipment; EMI conductive paint; accepted mass properties estimates for full load displacement and subcontractor delays, inter alia (see Attachment A hereto); and
WHEREAS, the parties hereto desire to effect a full and final settlement of the Contractor's entitlement to price adjustments, damages, and other relief from the Government pursuant to its REA, and also to effect the full and final settlement of any and all other actual and potential entitlement of the Contractor to price and/or schedule adjustments, damages, and/or other relief under and/or relating to Contracts N00024-89-C-2162 and N00024-90-C-2304, any and all other Government contracts, and any and all contracts between the Contractor and any third party, caused by Covered Events except as specifically reserved below; and
WHEREAS, the parties have reached agreement as to an appropriate resolution of all matters raised by the Contractor in its REA, and all other matters relating to or in any manner connected with Contracts N00024-89-C-2162 and N00024-90-C-2304, any other Government contract, or any contract between the Contractor and any third party, which actually do or potentially could give rise to Contractor entitlement against the Government to price and/or
N00024-89-C-2162 P00027 Page 3 of 7 schedule adjustments, damages, and/orother relief under or in any connection with this contract; and
WHEREAS, funds are not currently available for this modification; and
WHEREAS, the parties therefore acknowledge and agree that their rights and obligations hereunder are contingent upon the availability of appropriated funds from which payments for purposes of this modification can be made, and that no legal liability on the part of the Government for any payment may arise until: (a) funds are made available to the Contracting Officer for this modification; and (b) the Contractor receives notice that such funds have been made available, said notice to be provided by the Contracting Officer in writing.
NOW THEREFORE, in consideration of the foregoing and of the mutual covenants herein contained, the parties agree as follows:
1. The parties hereto have negotiated this modification on the basis that all matters, which actually do or potentially could give rise to Contractor entitlement to price and/or schedule adjustments, damages (including but not limited to money and other damages for breach of contract), and/or relief, which are known to or should have been known to the Contractor, whether or not actually discussed by the parties, and whether or not included in any claim, REA, or other request or demand, have been included and incorporated into this agreement. This modification accounts for all price, schedule and other adjustments, and for all damages and other relief, appropriate for all such matters, except for those specifically reserved below in paragraph 3.d of this modification.
2. As a result of this modification, the actual adjustment in target cost, target price and ceiling price for CLIN 0001 for the fourteen days of delay identified in Modification A00198 dated 14 September 1995 is as follows:
CLIN 0001 Target Cost: $0.00
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Target Profit: $0.00 Target Price: $0.00 Ceiling Price: $0.00
N00024-89-C-2162 P00027 Page 4 of 7
The contract is hereby modified as follows: a. Under SECTION B: SUPPLIES OR SERVICES AND PRICES, the target costs, target profits and target prices and ceiling prices are increased as follows:
CLIN 0001 Target Cost: $19,871,959 Target Profit: 0 Target Price: $19,871,959 Ceiling Price: $19,871,959
b. Under SECTION C: DESCRIPTION/SPECIFICATION/WORK STATEMENT, for CLIN 0001 and 0021 add the following paragraph:
As a result of this settlement the Contractor agrees to take all necessary and appropriate actions to correct the MHC 53 Acceptance trial cards listed in Attachment B screened for Contractor Action (KA) and identified to the Contractor prior to 1 December 1995. The trial cards which are listed in Attachment C to this modification are not included as part of this settlement. Additionally, the Contractor agrees to promptly take all necessary actions to comply with the contract requirements stated in the following Letters of Direction:
(i) SUPSHIP New Orleans letter serial 421.4/08246 dated 22 Nov 95 Subj: LACK OF BUFFERING ON M/SCS SIGNAL OUTPUTS
(ii) SUPSHIP New Orleans letter serial 421.4/07896 dated 6 Oct 94 Subj: CALIBRATION OF TEST EQUIPMENT
c. Under SECTION F--DELIVERIES OR PERFORMANCE, the contract delivery date for MHC 53 is 11 August 1995.
d. Under SECTION H--SPECIAL CONTRACT REQUIREMENTS, CLAUSE-57 entitled MASS PROPERTIES CONTROL, paragraph (a) change the Full Load Displacement value from 885 metric tons to 907 metric tons.
N00024-89-C-2162 P00027 Page 5 of 7
3. RELEASE
a. As used in this paragraph 3:
(1) "Events" refer to any contract modification, any Government breach, any Government tort, any change order, any stop work order, any suspension of work, any acceleration order, any Government action or omission pertaining to Government property or information, and any other occurrence, action, or omission (whether fortuitous or accidental, of or by the Government, contractor or third party) to the extent included or depicted in the REA and/or REA Supplements.
(2) "Covered Events" refer to "Events" occurring on or before the effective date of this modification, whether formal or constructive, which were known or should have been known by the Contractor on the effective date of this modification, whether or not such events were discussed between the parties, all of which events: (I) arise out of or under or are in any way related to this contract and affect this contract, or (ii) arise out of or under or are in any way related to this contract and affect any other contract between the Contractor and the Government, or (iii) arise out of or under or are any way related to any other contract between the Contractor and the Government or the Contractor and any third party and affect this contract but only to the extent of the effect on this contract.
(3) "Costs" includes, but is not limited to, any or all:
(i) direct performance (hardcore) and material costs; (ii) indirect costs; (iii) delay and disruption costs including local, cumulative, and any other type; (iv) overhead costs; (v) costs associated with dislocation, accelerations, and inefficiencies in performance; (vi) interest costs and other consideration for financing; (viii) costs for preparing proposals, claims, and requests for equitable adjustments; and (viii) subcontract costs.
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b. In consideration for the provisions of this modification, the Contractor, for itself, its successors, assigns, vendors, suppliers, and subcontractors hereby remises, releases, and forever discharges the Government, its officers, agents, and employees from (i) any or all actual or potential entitlement of the Contractor to an equitable adjustment of the price and/or delivery schedule of this contract by reason of Covered Events, or the impact of Covered Events, (ii) any or all actual or potential liabilities to the Contractor for money damages and/or other relief for Covered Events or the impact of Covered Events upon this contract, (iii) any and all actual or potential entitlement of the Contractor to an equitable adjustment of the price and/or delivery schedule of any other Government contract or any contract between the Contractor and any third party by reason of Covered Events or the impact of Covered Events, and (iv) any and all actual or potential liabilities to the Contractor for money damages and/or other relief under or relating to any other Government contract or any contract between the Contractor and any third party for Covered Events, or for the impact of Covered Events, arising under or related to this contract. By this release, the Contractor does not release claims under any other Government contract for Covered Events solely arising under, or relating to, such other Government contract to the extent they do not affect this contract.
c. The Contractor hereby confirms and acknowledges that in agreeing to the terms of this modification, it is releasing all rights to any entitlement for any and all costs under, and any and all impacts upon this contract or any other contract by reason of Covered Events, whether or not such costs and impacts of Covered Events are known or should have been known or should have been foreseeable as of the effective date of this modification, whether or not such costs and impacts of Covered Events have been discussed with, or for any reason reserved for future discussion with the Government, or have been made the basis for other assertions of claims or requests for equitable adjustment, whether or not such costs or impacts of Covered Event were, or are, incurred and sustained, respectively, before, on, or after the effective date of this modification, and whether or not such costs and impacts of Covered Events are caused directly by, indirectly by, cumulatively by, or in consequence of any of the Covered Events.
N00024-89-C-2162 P00027 Page 7 of 7
d. Except for the items listed in Attachment c and pending change orders, the Contractor's release set forth in this provision is complete and final, no rights are reserved under this modification and, in any event, any and all such rights shall be deemed to have been waived without exception. Nothing set forth herein shall in any way affect or operate to reserve any item covered by another release executed by the Contractor either prior to, concurrent with, or subsequent to the date of the execution of this modification nor shall anything set forth herein in any way affect the operation of any statute, including but not limited to 10 USC 2405.
4. The parties agree that the retentions against this contract shall be the current amount plus one and one half percent (1.5%) of the amount increased as result of this modification.
5. Nothing set forth herein shall in any manner affect or operate to reserve any event or item covered by any other release executed by the Contractor prior to, contemporaneous with, or subsequent to the effective date of this modification.
6. Funds are not currently available for this modification. The Government's obligation under this modification is contingent upon the availability of appropriated funds from which payments for purposes of this modification can be made. No legal liability on the part of the Government for any payment may arise until funds are made available to the Contracting Officer for this modification and until the Contractor receives notice of such availability, to be provided by the Contracting Officer in writing.
7. Except as modified herein all other terms and conditions of this contract remain unchanged and in full force and effect.
N00024-89-C-2162 P00027
ATTACHMENT "A"
1. Request for Equitable Adjustment dated 15 November 1994
2. Modification A00198 dated 14 September 1995
3. Avondale Letter serial MHC53/10692WDJ dated 27 Jun 94 Subj: Insurance Claim EMI COnductive Paint Casualty Loss
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 4. SUPSHIP New Orleans letter serial 421.4/08246 dated 22 Nov 95 Subj: LACK OF BUFFERING ON M/SCS SIGNAL OUTPUTS
5. SUPSHIP New Orleans letter serial 421.4/07896 dated 6 Oct 94 Subj: CALIBRATION OF TEST EQUIPMENT
6. Avondale subcontractor delay claims from General Marine Industries Inc., Jamestown Metal Inc. and Loral Defense Systems East
N00024-89-C-2162 P00027
ATTACHMENT B
MHC 53 ACCEPTANCE TRIAL CARDS
1. 1 015 AX 01
2. 2 087 AX 01
3. 2 094 AX 01
4. 2 128 AX 01
5. 1 024 EL 01
6. 1 024 EL 02
7. 1 024 EL 03
8. 1 024 EL 04
9. 2 038 EL 01 *
10. 2 006 HB 02
11. 1 027 MP 01
12. 2 069 MP 01 *
13. 2 072 MP 01
* Based on approval of pending deviations
ATTACHMENT B
2 097 AX 01 2 098 AX 01 2 099 AX 01 2 101 AX 01 2 106 AX 01 2 027 CC 01 2 044 CC 01 2 044 CC 02 2 044 CC 03 2 044 CC 04 2 044 CC 05 1 024 DC 01 2 095 MP 01 2 126 MP 01 2 032 WP 01 2 044 WP 01 2 044 WP 02
THE PARTIES AGREE TO NEGOTIATE IN GOOD FAITH TO REACH AGREEMENT ON THE ABOVE ITEMS WITHIN SIXTY (60) DAYS OF THE EFFECTIVE DATE OF THIS MODIFICATION.
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------| 1. CONTRACT ID CODE | PAGE OF PAGES AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT | L | 1 | 7 ------2. AMENDMENT/MODIFICATION NO. | 3. EFFECTIVE DATE | 4. REQUISITION/PURCHASE REG. NO. 5. PROJ NO. (if applicable) P00020 | SEE BLK 16C. | N0002496MR20707 2-0292-20707 ------|------|------ISSUED BY CODE | N00024 | 7. ADMINISTERED BY (if other than Item 6) CODE | N63124 NAVAL SEA SYSTEMS COMMAND ------| |------BUYER/SYMBOL: L. NEWTON SEA 02223 SUPSHIP, New Orleans 2531 JEFFERSON DAVIS HWY Bldg. 16, Naval Support Activity ARLINGTON, VA 22242-5160 New Orleans, LA 70142-5700 PHONE: Area Code 703/602-3102 Ext 226 ------8. NAME AND ADDRESS OF CONTRACTOR (No., street, State and ZIP Code) |----|9A. AMENDMENT OF SOLICITATION NO. CEC NO: 60004899F | | | |------| |% DATED (SEE ITEM 11) | | Avondale Industries, Inc. |----|------GRP Division | |10A. MODIFICATION OF CONTRACT/ORDER NO. P.O. Box 2309 | X | Gulfport, MS 39505 | | N00024-90-C-2304 | |------| |10B. DATED (SEE ITEM 13) CAGE CODE ICC97 | FACILITY CODE | | 90AUG02 ------11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS ------| The above numbered solicitation is amended as set forth in Item 14. The hour and date specified for receipt of Offers __ ------is extended, __ is not extended. Offers must acknowledge receipt of this amendment prior to the hour and date specified in the solicitation as amended, by one of the following methods: (a) By completing Items 8 and 15, and returning __ copies of the amendment; (b) By acknowledging receipt of this amendment on each copy of the offer submitted; or (c) By separate letter or telegram which incudes a reference to the solicitation and amendment numbers. FAILURE OF YOUR ACKNOWLEDGMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULLT IN REJECTION OF YOUR OFFER. If by virtue of this amendment you desire to change an offer already submitted, such change may be made by telegram or letter; provided each telegram or letter makes reference to the solicitation and this amendment, and is received prior to the opening hour and date specified. ------12. ACCOUNTING AND APPROPRIATION DATE (If required) See Attached Financial Accounting Data Sheet ------13. THIS ITEM APPLIES ONLY TO MODIFICATINS AND CONTRACTS/ORDERS, IT MODIFIES THE CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14. ------| A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ------| ORDER NO. IN ITEM 10A. ------|------| B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE ADMISTRATIVE CHANGES (such as changes in paying office, | appropriation data, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR 43.103(b) ------|------| C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF: X | Special Contract Requirement H-16 entitled Documentation of Request For Equitable Adjustment ------|------| D. OTHER (Specify type of modification and authority) ------E. IMPORTANT: Contractor ( ) is not, (X) is required to sign this document and return 2 copies to the issuing office. ------14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings, including solicitation/contract subject matter where feasible.)
SEE ATTACHED
Except as provided herein, all terms and conditions of the document referenced in Item 9A or 10A, as heretofore changed, remains unchanged and in full force and effect. ------|------15A. NAME AND TITLE OF SIGNER (Type or print) |16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print) A.L. BOSSIER, JR. | John Kimener Chairman, President & Chief Executive Officer | Contracting Officer ------|------|------|------15B. CONTRACTOR/OFFEROR | 15C. DATE SIGNED | 16B. UNITED STATES OF AMERICA | 16C. DATE SIGNED [SIGNATURE APPEARS HERE] | 12-28-95 | [SIGNATURE APPEARS HERE] | ------| (Signature of person authorized to sign) (Signature of Contracting Officer) | ------NSN 7540-01-152-8070 STANDARD FORM 30 (REV 10-83) PREVIOUS EDITION UNUSABLE Prescribed by GSA FAR (48 CFR) 53.243
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document ------
N00024-90-C-2304 P00020 Page 2 of 7
WHEREAS, Avondale Industries, Inc. (AII) (the Contractor) has submitted a Request for Equitable Adjustable (REA) dated 15 November 1994 seeking price and delivery schedule adjustments, damages, and/or other relief under and/or relating to Contracts N00024-89-C-2162 (MHC 53) and N00024-90-C-2304 (MHC 54,56,57), as updated and supplemented by additional submissions and representations at various times; and
WHEREAS, the Contractor has certified its REA and all supporting data in accordance with the requirements of the Truth in Negotiations Act, 10 U.S.C. 2306a, Section (c)(1) of the Contract Disputes Act of 1978, 41 U.S.C. 605(c)(1), and P.L. 95-485, Section 813; and
WHEREAS, the Contractor has also asserted its entitlement to equitable adjustments to the contract price(s) and/or delivery schedule(s) of Contracts N00024-89-C-2162 and N00024-90-C-2304, to damages, and/or to other relief under or relating to those contracts, in connection with: defects in Government furnished test instrumentation used during MHC 54 Builder's trials; extension of vendor warranties; lack of buffering on M/SCS signal outputs; calibration of test equipment; EMI conductive paint; accepted mass properties estimates for full load displacement and subcontractor delays, inter alia (see Attachment A hereto); and
WHEREAS, the parties hereto desire to effect a full and final settlement of the Contractor's entitlement to price adjustments, damages, and other relief from the Government pursuant to its REA, and also to effect the full and final settlement of any and all other actual and potential entitlement of the Contractor to price and/or schedule adjustments, damages, and/or other relief under and/or relating to Contracts N00024-89-C-2162 and N00024-90-C-2304, any and all other Government contracts, and any and all contracts between the Contractor and any third party, caused by Covered Events except as specifically reserved below; and
WHEREAS, the parties have reached agreement as to an appropriate resolution of all matters raised by the Contractor in its REA, and all other matters relating to or in any manner connected with Contracts N00024-89-C-2162 and N00024-90-C-2304, any other Government contract, or any contract between the Contractor and any third party, which actually do or potentially could give rise to Contractor entitlement against the Government to price and/or schedule adjustments, damages, and/or other relief under or in any connection with this contract; and
WHEREAS, funds are not currently available for this modification; and
N00024-90-C-2304 P00020 Page 3 of 7
WHEREAS, the parties therefore acknowledge and agree that their rights and obligations hereunder are contingent upon the availability of appropriated funds from which payments for purposes of this modification can be made, and that no legal liability on the part of the Government for any payment may arise until: (a) funds are made available to the Contracting Officer for this modification; and (b) the Contractor receives notice that such funds have been made available, said notice to be provided by the Contracting Officer in writing.
NOW THEREFORE, in consideration of the foregoing and of the mutual covenants herein contained, the parties agree as follows:
1. The parties hereto have negotiated this modification on the basis that all matters, which actually do or potentially could give rise to Contractor entitlement to price and/or schedule adjustments, damages (including but not limited to money and other damages for breach of contract), and/or relief, which are known to or should have been known to the Contractor, whether or not actually discussed by the parties, and whether or not included in any claim, REA, or other request or demand, have been included and incorporated into this agreement. This modification accounts for all price, schedule and other adjustments, and for all damages and other relief, appropriate for all such matters, except for those specifically reserved below in paragraph 3.d of this modification.
2. The contract is hereby modified as follows:
a. Under SECTION B: SUPPLIES OR SERVICES AND PRICES, the target costs, target profits and target prices and ceiling prices are increased as follows:
CLIN 0001 Target Cost: $2,799,538 Target Profit: 419,931 Target Price: $3,219,469
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Ceiling Price: $3,359,446
CLIN 0021AA Target Cost: $2,583,584 Target Profit: 387,537 Target Price: $2,971,121 Ceiling Price: $3,100,300
CLIN 0021AB Target Cost: $2,416,417 Target Profit: $ 362,482 Target Price: $2,778,899 Ceiling Price: $2,899,700
N00024-90-C-2304 P00020 Page 4 of 7
b. Under SECTION C: DESCRIPTION/SPECIFICATION/WORK STATEMENT, for CLIN 0001 and 0021 add the following paragraph:
As a result of this settlement the Contractor agrees to take all necessary and appropriate actions to correct the MHC 54 Builders trial cards screened for Contractor Action (KA) and identified to the Contractor prior to 1 December 1995, except for those trial cards which are listed in Attachment B to this modification. The Contractor also agrees to promptly take such actions with respect to MHCs 56 and 57 as may be necessary and appropriate to correct, prevent or otherwise address such Contractor responsible deficiencies identified in the aforesaid MHC 54 Builder's trial cards. Additionally, the Contractor agrees to promptly take all necessary actions to comply with the contract requirements stated in the following Letters of Direction:
(i) SUPSHIP New Orleans letter serial 421.4/08246 dated 22 Nov 95 Subj: LACK OF BUFFERING ON M/SCS SIGNAL OUTPUTS
(ii) SUPSHIP New Orleans letter serial 421.4/07896 dated 6 Oct 94 Subj: CALIBRATION OF TEST EQUIPMENT
c. Under SECTION F--DELIVERIES OR PERFORMANCE, the contract delivery dates revised as follows:
MHC 54 9 February 1996 ------MHC 56 9 August 1996 ------MHC 57 3 January 1997 ------
d. Under SECTION H--SPECIAL CONTRACT REQUIREMENTS, CLAUSE-57 entitled MASS PROPERTIES CONTROL, paragraph (a) change the Full Load Displacement value from 885 metric tons to 907 metric tons.
N00024-90-C-2304 P00020 Page 5 of 7
3. RELEASE
a. As used in this paragraph 3:
(1) "Events" refer to any contract modification, any Government breach, any Government tort, any change order, any stop work order, any suspension of work, any acceleration order, any Government action or omission pertaining to Government property or information, and any other occurrence, action, or omission (whether fortuitous or accidental, of or by the Government, contractor or third party) to the extent included or depicted in the REA and/or REA Supplements.
(2) "Covered Events" refer to "Events" occurring on or before the effective date of this modification, whether formal or constructive, which were known or should have been known by the Contractor on the effective date of this modification, whether or not such events were discussed between the parties, all of which events: (I) arise out of or under or are in any way related to this contract and affect this contract, or (ii) arise out of or under or are in any way related to this contract and affect any other contract between the Contractor and the Government, or (iii) arise out of or under or are any way related to any other contract between the Contractor and the Government or the Contractor and any third party and affect this contract but only to the extent of the effect on this contract.
(3) "Costs" includes, but is not limited to, any or all:
(i) direct performance (hardcore) and material costs; (ii) indirect costs; (iii) delay and disruption costs including local, cumulative, and any other type;
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (iv) overhead costs; (v) costs associated with dislocation, accelerations, and inefficiencies in performance; (vi) interest costs and other consideration for financing; (viii) costs for preparing proposals, claims, and requests for equitable adjustments; and (viii) subcontract costs.
N00024-90-C-2304 P00020 Page 6 of 7
b. In consideration for the provisions of this modification, the Contractor, for itself, its successors, assigns, vendors, suppliers, and subcontractors hereby remises, releases, and forever discharges the Government, its officers, agents, and employees from (i) any or all actual or potential entitlement of the Contractor to an equitable adjustment of the price and/or delivery schedule of this contract by reason of Covered Events, or the impact of Covered Events, (ii) any or all actual or potential liabilities to the Contractor for money damages and/or other relief for Covered Events or the impact of Covered Events upon this contract, (iii) any and all actual or potential entitlement of the Contractor to an equitable adjustment of the price and/or delivery schedule of any other Government contract or any contract between the Contractor and any third party by reason of Covered Events or the impact of Covered Events, and (iv) any and all actual or potential liabilities to the Contractor for money damages and/or other relief under or relating to any other Government contract or any contract between the Contractor and any third party for Covered Events, or for the impact of Covered Events, arising under or related to this contract. By this release, the Contractor does not release claims under any other Government contract for Covered Events solely arising under, or relating to, such other Government contract to the extent they do not affect this contract.
c. The Contractor hereby confirms and acknowledges that in agreeing to the terms of this modification, it is releasing all rights to any entitlement for any and all costs under, and any and all impacts upon this contract or any other contract by reason of Covered Events, whether or not such costs and impacts of Covered Events are known or should have been known or should have been foreseeable as of the effective date of this modification, whether or not such costs and impacts of Covered Events have been discussed with, or for any reason reserved for future discussion with the Government, or have been made the basis for other assertions of claims or requests for equitable adjustment, whether or not such costs or impacts of Covered Event were, or are, incurred and sustained, respectively, before, on, or after the effective date of this modification, and whether or not such costs and impacts of Covered Events are caused directly by, indirectly by, cumulatively by, or in consequence of any of the Covered Events.
N00024-90-C-2304 P00020 Page 7 of 7
d. Except for the items listed in Attachment B and pending change orders, the Contractor's release set forth in this provision is complete and final, no rights are reserved under this modification and, in any event, any and all such rights shall be deemed to have been waived without exception. Nothing set forth herein shall in any way affect or operate to reserve any item covered by another release executed by the Contractor either prior to, concurrent with, or subsequent to the date of the execution of this modification nor shall anything set forth herein in any way affect the operation of any statute, including but not limited to 10 USC 2405.
4. The parties agree that the retentions against this contract shall be the current amount plus five percent (5%) of the amount increased as result of this modification.
5. Nothing set forth herein shall in any manner affect or operate to reserve any event or item covered by any other release executed by the Contractor prior to, contemporaneous with, or subsequent to the effective date of this modification.
6. Funds are not currently available for this modification. The Government's obligation under this modification is contingent upon the availability of appropriated funds from which payments for purposes of this modification can be made. No legal liability on the part of the Government for any payment may arise until funds are made available to the Contracting Officer for this modification and until the Contractor receives notice of such availability, to be provided by the Contracting Officer in writing.
7. Except as modified herein all other terms and conditions of this contract remain unchanged and in full force and effect.
N00024-90-C-2304 P00020
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document ATTACHMENT "A"
1. Request for Equitable Adjustment dated 15 November 1994
2. Avondale letter serial MHC 54-1261-JMS dated 20 NOV 95 Subj: Notification of Change: Government Furnished Test Instrumentation Extending Builders's Trials of MHC-54
3. All Avondale vendor warranty extension costs related to the delivery schedule(s) established in this modification
4. SUPSHIP New Orleans letter serial 421.4/08246 dated 22 Nov 95 Subj: LACK OF BUFFERING ON M/SCS SIGNAL OUTPUTS
5. SUPSHIP New Orleans letter serial 421.4/07896 dated 6 Oct 94 Subj: CALIBRATION OF TEST EQUIPMENT
6. Avondale subcontractor delay claims from General Marine Industries Inc., Jamestown Metal Inc. and Loral Defense Systems East
ATTACHMENT B
AX-2098.1 AX-2156 AX-2002 AX-2003 AX-2004 AX-2005 AX-2006 AX-2007 AX-2008 AX-2009 EL-1004 EL-1082 EL-1165 EL-1194 EL-1195 EL-1210 EL-1217
THE PARTIES AGREE TO NEGOTIATE IN GOOD FAITH TO REACH AGREEMENT ON THE ABOVE ITEMS WITHIN SIXTY (60) DAYS OF THE EFFECTIVE DATE OF THIS MODIFICATION.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document AVONDALE INDUSTRIES, INC.
401(k)
SAVINGS PLAN
(Effective January 1, 1996)
PREAMBLE
Effective January 1, 1996, Avondale Industries, Inc. hereby establishes a 401(k) (the "Plan") governed by the provisions of this Plan document and any amendments hereto. The Plan and its related Trust are intended to qualify as a profit-sharing plan and a cash-or-deferred arrangement under Sections 401(a), 501(a), 401(k) and 401(m) of the Internal Revenue Code of 1986, as amended. Any ambiguity shall be resolved by giving effect to these intentions.
The purpose of this Plan is to encourage Employees to save and invest systematically a portion of their current compensation in order that they may have an additional source of income upon their retirement or disability. The benefits provided by the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Plan are paid from the Trust Fund established by the Employer and are in addition to the benefits Employees are entitled to receive under any other programs of the Employer and the United States Social Security Administration.
The Plan and the Trust forming a part hereof are maintained for the exclusive benefit of the Participants and their Beneficiaries.
ARTICLE I DEFINITIONS
All capitalized terms used in this Plan shall have the meaning set forth in this Article I, unless a different meaning is plainly required by the context:
2 Accounts shall mean each of a Participant's Employee- Deferral Account, Employer Contribution Account and Rollover Contribution Account (including subaccounts established from time to time under each such Account) established and maintained to record the interest of a Participant in the Trust Fund as more fully described in Sections 1.15, 1.18 and 1.35.
2.1 Active Participant shall mean an Eligible Employee who is employed by a Participating Employer through the last payroll period ending within the Plan Year.
2.2 Affiliated Company means the Company and all other entities required to be aggregated with the Company under Sections 414(b), (c), (m) or (o) of the Code.
2.3 Beneficiary shall mean the person or persons designated by a Participant to receive the amount, if any, payable under the Plan in the event of a Participant's death. Each Beneficiary designation shall be in the form prescribed by the Committee.
If the Participant is married and designates someone other than his legal spouse, his Beneficiary designation must include the written consent of his spouse at the time the designation is 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.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document If no valid Beneficiary designation is in effect at the time of the Participant's death, then, to the extent, if any, benefits are payable under the Plan after such death, Beneficiary shall mean the Participant's legal spouse, if he is married at the time of his death, otherwise the Participant's estate.
2.4 Board of Directors shall mean the Board of Directors of Avondale Industries, Inc.
2.5 Code shall mean the Internal Revenue Code of 1986, as amended from time to time. Reference to any Section of the Code shall include any successor provision thereto.
2.6 Committee shall mean the 401(k) Administrative Committee designated by the Company to administer the Plan in accordance with Section 12.2 or a person or entity designated by the 401(k) Administrative Committee.
2.7 Company shall mean Avondale Industries, Inc. and any successor company that may continue the Plan.
2.8 Compensation. The term "Compensation" as modified below, has the following meaning for each respective purpose under the Plan: (a)Plan Compensation. For purposes of determining contributions to the Plan, Plan Compensation means base pay plus overtime, bonuses and short-term Disability payments, if any, and shall exclude permanent Disability payments and any other extra compensation in any form paid to the Employee by the Employer during the Plan Year. Plan Compensation will include any amount which is contributed by the Employer pursuant to a salary reduction agreement and which is not includible in the gross income of an Employee under Sections 125 or 402(e)(3).
(a)Section 415 Compensation. For the purpose of applying the limitations of Section 415 of the Code, Section 415 Compensation means the Participant's wages, within the meaning of Section 3401(a) of the Code and all other payments of compensation to the Participant by the Employer (in the course of the Employer's trade or business) for which the Employer is required to furnish the Participant a written statement under Sections 6041(d) and 6051(a)(3) of the Code.
(a)Total Compensation means Section 415 Compensation plus all amounts contributed by an Employer on behalf of the Participant pursuant to a salary reduction agreement which are not includible in the gross income of the Participant under Sections 125, 402(e)(3), and 402(h)(1)(B) of the Code.
The amount of a Participant's annual Compensation that can be taken into account under any of Subparagraphs (a) - (c) for
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document any Plan Year shall not exceed $150,000, as adjusted from time to time in accordance with Section 401(a)(17) of the Code. In determining the Compensation of a Participant for purposes of this limitation, the rules of Code Section 414(q)(6) shall apply, except in applying these rules, "family" will include only the Participant's spouse and any lineal descendants of the Participant who have not attained age 19 before the close of the year. If, as a result of the application of these rules, the adjusted $150,000 limit is exceeded then the limit will be prorated among the affected individuals determined under this section before this limit is applied.
2.9 Disability of a Participant shall mean the total and permanent incapacity of a Participant to engage in any substantial gainful employment, as determined by the Committee and which qualifies him for commencement of benefits for permanent and total disability under Federal Old Age and Survivor Insurance.
2.10 Disability Retirement Date shall have the meaning set forth in Section 9.2.
2.11 Eligible Employee is defined at Section 2.1.
2.12 Employee shall mean a person employed by an Employer, excluding any employee who is included in a unit of employees covered by a negotiated collective bargaining agreement which does not provide for his participation in the Plan. A leased employee, as described in Section 414(n)(2) of the Code, shall not be considered an Employee; provided, however, that any leased employee who subsequently becomes an Employee shall have his previous service as a leased employee used in calculating his Years of Service under the Plan.
2.13 Employee-Deferral or Employee-Deferral Contribution shall mean the amount contributed by the Employer on behalf of a Participant in accordance with Article III.
2.14 Employee-Deferral Account shall mean the Account maintained for a Participant to record the Employee-Deferrals under Article III, and any contributions under Section 4.6, contributed by the Employer on such Participant's behalf.
2.15 Employee-Deferral Agreement shall mean the agreement described in Article III.
2.16 Employer shall mean a Participating Employer or a Non- Participating Employer.
2.17 Employer Contribution means any (a) Matching Contributions, (b) Employer Discretionary Contributions and (c)
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document contributions required on account of a Top-Heavy Plan Year.
2.18 Employer Contribution Account shall mean the account established for a Participant which is funded by Employer Contributions.
2.19 Employer Discretionary Contribution shall mean a contribution by an Employer to the Trust Fund as described in Article V.
2.20 Entry Date shall mean February 1, 1996 and the first day of each month thereafter and any other date during the Plan Year specified by the Committee.
2.21 ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. References to any section of ERISA include any successor provision thereto.
2.22 Highly Compensated Employee shall mean any highly compensated active Employee and any highly compensated former Employee as described in this Section 1.23.
A highly compensated active Employee includes any Employee who performs service for the Employer during the determination year and who, during the look-back year: (i) received Total Compensation from the Employer in excess of $75,000 (as adjusted pursuant to section 415(d) of the Code); (ii) received Total Compensation from the Employer in excess of $50,000 (as adjusted pursuant to section 415(d) of the Code) and was a member of the top-paid group for such year; or (iii) was an officer of the Employer and received Total Compensation during such year that is greater than 50 percent of the dollar limitation in effect under section 415(b)(1)(A) of the Code. The term Highly Compensated Employee also includes: (i) Employees who are both described in the preceding sentence if the term "determination year" is substituted for the term "look-back year" and the Employee is one of the 100 Employees who received the most Total Compensation from the Employer during the determination year; and (ii) Employees who are 5 percent owners at any time during the look-back year or determination year.
If no officer has satisfied the compensation requirement of (iii) above during either a determination year or look-back year, the highest paid officer for such year shall be treated as a Highly Compensated Employee.
For purposes of this Section 1.23, the determination year shall be the Plan Year. The look-back year shall be the twelve- month period immediately preceding the determination year.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document A Highly Compensated former Employee includes any Employee who separated from service (or was deemed to have separated) prior to the determination year, performs no service for the Employer during the determination year, and was a highly compensated active Employee for either the separation year or any determination year ending on or after the Employee's 55th birthday.
If an Employee is, during a determination year or look-back year, a family member of either a five percent (5%) owner who is an active or former Employee or a Highly Compensated Employee who is one of the ten (10) most Highly Compensated Employees ranked on the basis of Total Compensation paid by the Employer during such year, then the family member and the five percent (5%) owner or top-ten Highly Compensated Employee shall be aggregated. In such case, the family member and five percent (5%) owner or top- ten (10) Highly Compensated Employee shall be treated as a single Employee receiving compensation and Plan contributions or benefits equal to the sum of such compensation and contributions or benefits of the family member and five percent (5%) owner or top-ten Highly Compensated Employee. For purposes of this Section 1.23, family member includes the spouse, lineal ascendants and descendants of the Employee or former Employee and the spouses of such lineal ascendants and descendants.
The determination of who is a Highly Compensated Employee, including the determinations of the number and identity of Employees in the top-paid group, the top one hundred (100) Employees, and number of Employees treated as officers and the compensation that is considered, will be made in accordance with Section 414(q) of the Code and the Regulations thereunder.
2.23 Hour of Service shall mean:
(a)Each hour for which an Employee is directly or indirectly paid or entitled to payment by a Participating Employer or Non-Participating Employer for the performance of duties, including periods of vacation and holidays;
(b)Each hour for which an Employee is directly or indirectly paid or entitled to payment by a Participating Employer or Non-Participating Employer (including payments made or due from a trust fund or insurer to which the Participating Employer or Non-Participating Employer contributes or pays premiums) on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence, provided that:
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (i)no more than 501 Hours of Service shall be credited under this paragraph (b) to an Employee on account of any single continuous period during which the Employee performs no duties; and
(ii)Hours of Service shall not be credited under this paragraph (b) to an Employee for a payment which solely reimburses the Employee for medically-related expenses incurred by the Employee or which is made or due under a plan maintained solely for the purpose of complying with applicable worker's compensation, unemployment compensation or disability insurance laws;
(c)Each hour not already included under this Section 1.24 above for which back pay, irrespective of mitigation of damages, is either awarded or agreed to by such Employer, provided that crediting of Hours of Service under this Section 1.24 with respect to periods described in this Section 1.24 above shall be subject to the limitation therein set forth; and
(d)Solely for purposes of determining whether a Break in Service, as defined in Section 1.29, for participation and vesting purposes has occurred in a computation period, if an Employee is away from work on a Parental Absence, he shall receive credit for the Hours of Service which would otherwise have been credited to such individual but for such absence, or in any case in which such hours cannot be determined, 8 Hours of Service per day of such absence. The Hours of Service credited under this Section 1.24(d) shall be credited (1) in the computation period in which the absence begins if the crediting is necessary to prevent a Break in Service in that period, or (2) in all other cases, in the following computation period.
To the extent not credited above, Hours of Service will also be credited based on the customary work week of the Employee for periods of military duty (as required by applicable law) and approved leaves of absence.
The number of Hours of Service to be credited under this Section 1.24 above on account of a period during which an Employee performs no duties, and the Plan Years to which Hours of Service shall be credited under this Section 1.24 above shall be determined by the Committee in accordance with Sections 2530.200b-2(b) and (c) of the Regulations of the U.S. Department of Labor.
2.24 Matching Contribution shall mean a contribution by an Employer to the Trust Fund as described in Article IV.
2.25 Non-Highly Compensated Employee shall mean an Employee
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document who is not a Highly Compensated Employee.
2.26 Non-Participating Employer shall mean an Affiliated Company which is not a Participating Employer.
2.27 Normal Retirement Date shall have the meaning set forth in Section 9.1. Normal Retirement Age means the Participant's sixty-fifth (65th) birthday.
2.28 One-Year Break-in-Service or Break in Service shall mean a twelve-month consecutive period following an Employee's Service Termination Date, as defined in Section 1.36, during which the Employee fails to be credited with an Hour of Service. 2.29 Parental Absence shall mean an Employee's absence from work for any of the following reasons: (i) the pregnancy of the Employee, (ii) the birth of the Employee's child, (iii) the adoption of a child by the Employee, or (iv) the need to care for the Employee's child immediately following its birth or adoption; provided, however, that the Committee, in its sole discretion, may require evidence that any absence is on account of a reason enumerated herein and evidence as to the duration of such absence.
2.30 Participant shall mean (i) any Eligible Employee for whom Employee-Deferral Contributions have been made or (ii) any former Eligible Employee on whose behalf an Account continues to be maintained in the Plan pursuant to Article II. An Eligible Employee remains a Participant as long as he has an Account balance, as provided in Section 2.2.
2.31 Participating Employer shall mean the Company, Avondale Services Corporation, and any Affiliated Company that adopts this Plan pursuant to authorization by the Board of Directors of the Company and the board of directors of the newly- adopting entity.
By authorizing the adoption of this Plan, the governing body of any Participating Employer expressly recognizes and delegates to the Company and its Board of Directors the right to exercise on the behalf of the Participating Employer all power and authority conferred by the Plan to the Company or its Board of Directors.
2.32 Plan shall mean the Avondale Industries, Inc. 401(k) Savings Plan, as set forth in this document and as amended from time to time.
2.33 Plan Year shall mean the calendar year.
2.34 Rollover Contribution Account shall mean the Account
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document maintained for a Participant to record his rollover contribution made pursuant to Section 3.8.
2.35 Service Termination Date shall mean the earlier of the following:
(a)the date on which by reason of an Employee's resignation, discharge, retirement or death the Employee is no longer employed by any Employer; or
(b)the first anniversary of the date on which an Employee is laid off, starts an authorized leave of absence, or is absent from work for any other reason (other than those instances covered under paragraphs (a) and (c)), including holidays, paid vacations, sick leaves and absence on account of disability.
2.36 Trust or Trust Agreement shall mean the agreement and any and all amendments and supplements thereto entered into between the Company and the Trustee. The Trust Agreement shall be deemed to be part of this Plan as if all the terms and provisions were fully set forth herein.
2.37 Trustee shall mean the person or persons appointed by the Board of Directors to be Trustee under the Trust Agreement.
2.38 Trust Fund shall mean all assets held by the Trustee in accordance with the Trust Agreement.
2.39 Valuation Date shall mean the last day of each quarter during the Plan Year or any other date or dates during the Plan Year specified by the Committee upon which the assets of the Trust Fund are valued as described in Article VIII. The Annual Valuation Date shall mean the last day of the Plan Year.
2.40 Vested Interest shall mean the portion of a Participant's Accounts which has become vested and nonforfeitable, under Section 6.3.
2.41 Year of Service shall mean a 12-month period commencing on the first day on which an Employee is credited with an Hour of Service (or commencing on such Employee's date of rehire in the case of an Employee who has not previously become an Eligible Employee and who has incurred five or more consecutive One Year Breaks in Service) or anniversary thereof during which he is continuously employed by an Employer, provided that:
(a)An Employee shall be credited with one Year of Service for each 12 complete months of employment, whether or not
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document consecutive.
(b)An Employee shall cease accruing Years of Service on his Service Termination Date; except that if such Employee performs an Hour of Service within the 12-month period commencing on his Service Termination Date, his period of absence shall be treated as employment.
(c)Years of Service shall include any one or more of the following:
(i)any period of absence because of service in the military forces of the United States, provided the Employee returns to work within 90 days after first becoming eligible for discharge from active duty;
(ii) any period of layoff not in excess of one year in duration;
(iii) any period while the Employee is on an approved leave of absence with or without pay (including any leave of absence for maternity or paternity reasons);
(iv) any other period of absence approved by an Employer including paid holidays, paid vacations and sick leaves;
(v) any other period of absence provided the Employee returns to work with an Employer within the one-year period after his Service Termination Date;
(vi) to the extent not otherwise credited above, the first 12 months of a Parental Absence if the Employee provides the Committee with any evidence it may reasonably require to determine that the absence is on account of such Parental Absence. Except as otherwise specifically provided under this Section 1.42, a partial Year of Service shall be determined by dividing the number of days of employment, whether or not consecutive, by the number of days in the calendar year. All of an Employee's Years of Service with the Employer shall be taken into account for purposes of satisfying the Plan's eligibility requirements and for calculating a Participant's Vested Interest in his Employer Contribution Account.
ARTICLE II PARTICIPATION
2.1 Commencement of Participation. Each Employee shall become an Eligible Employee as of the first Entry Date on which
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document he is employed by a Participating Employer and which coincides with or immediately follows the date as of which such Employee has both (a) attained age 21 and (b) completed one Year of Service.
2.2 Termination of Participation. An Eligible Employee or Participant who (i) has a Service Termination Date (ii) becomes a member of a group of employees covered by a negotiated collective bargaining agreement which does not provide for participation in the Plan or (iii) becomes an Employee of a Non-Participating Employer shall no longer be an Eligible Employee but shall continue as a Participant in the Plan entitled to share in the earnings and losses of the Trust Fund and to exercise the rights of a Participant hereunder until his Vested Interest has been distributed and the non-vested portion of his Accounts, if any, has been forfeited pursuant to Section 6.4.
The participation of any Participant shall end when (i) no further benefits are payable to him or his Beneficiary under the Plan and (ii) no further amounts are credited to his Accounts.
2.3 Participation Following Reemployment.
If an Employee has a Service Termination Date but is reemployed before a One Year Break in Service occurs, he shall be treated as if his employment was not broken.
If an Employee who had not had a Year of Service incurs a One Year Break in Service and is later reemployed by an Employer, he shall be treated as a new Employee for purposes of determining eligibility to participate in the Plan.
If an Eligible Employee experiences a One-Year Break in Service and is later reemployed by a Participating Employer, he shall automatically become an Eligible Employee again and the Committee shall allow him to elect to make Employee-Deferrals, pursuant to Section 3.1.
ARTICLE III EMPLOYEE-DEFERRALS
3.1 Employee-Deferrals. An Eligible Employee may enter into an Employee-Deferral Agreement with his Employer on such form or forms as the Committee shall prescribe or through a voice response system after such Participant has entered his personal identification number. In the Employee-Deferral Agreement the Eligible Employee shall agree to accept a deferral of his Plan Compensation expressed as a whole percentage no less than 1% and no more than 13%. The Employee-Deferral Agreement shall remain
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document in effect until changed or discontinued as provided in Section 3.3. An Employee's election under this Section 3.1 can be made when the Employee becomes an Eligible Employee effective on the next calendar month following the date on which such election is received by the Committee.
No Employee-Deferral may be paid to the Plan by the Employer on behalf of a Participant after he ceases to be an Employee or during any period when such Participant is not receiving Plan Compensation from the Employer.
3.2 Delivery of Employee-Deferral Contributions. The Employee-Deferral made by the Employer on behalf of any Participant shall be transmitted to the Trustee by the Employer as soon as practicable after the close of the calendar month in which the Employee-Deferral occurs; provided, however, that no Employee-Deferral for any portion of a Plan Year shall be delivered to the Trustee later than 90 days after the close of the month in which the amount was deducted from Participant's Plan Compensation.
3.3 Changes in and Discontinuance of Employee-Deferrals. A Participant may change the rate of Employee-Deferrals or discontinue Employee-Deferrals paid by his Employer to the Plan on his behalf effective as of the next payroll period provided the Participant has given the Committee advance notice of such change in such form and within such time period preceding the effective date of the change as the Committee may prescribe.
3.4 Dollar Limitation. In no event shall a Participant's Employee-Deferral Contributions for a Participant's taxable year exceed $9,500, or such larger amount as allowed under Code Section 402(g) to reflect increases in the cost of living.
3.5 Return of Excess Deferral Amounts. If a Participant's Employee-Deferral Contributions under the Plan should exceed the dollar limitation under Section 3.4 for a Plan Year, the excess amount and the earnings thereon shall be distributed to the Participant no later than the April 15 following the calendar year of the excess deferral. If a Participant notifies the Committee in writing no later than March 1 following the calendar year of the excess deferral that he was also a participant in a plan of an unrelated employer governed by the Code Section 402(g) dollar limitation described in Section 3.4, that the total deferrals under the plans exceeded the dollar limitation described in Section 3.4, and that he has allocated some or all of the excess deferrals to this Plan, then the excess allocated to this Plan (and the earnings thereon) shall be distributed to the Participant no later than the following April 15.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Any returned excess deferrals must include income or loss for the calendar year of the excess deferral, and must include income or loss for the "gap period" between the end of that year and the date of distribution. The gain or loss allocable to the Excess Deferral Amount for the preceding calendar year shall be determined by any reasonable method, provided that such method does not violate Section 401(a)(4) of the Code, is consistently applied, and is used for allocating income to Participants' Accounts.
Any Matching Contributions attributable to returned Employee-Deferrals shall be forfeited unless they can be deemed to match previously unmatched Employee-Deferrals as provided in Section 4.1. The amount of excess deferrals to be distributed shall be reduced by Excess Contributions previously distributed for the taxable year ending in the same Plan Year, as provided in Section 3.7.
3.6 Non-Discrimination Rules
(a)Definition. The term "Actual Deferral Percentage" (hereinafter "ADP") as used in this Section 3.6 shall mean, for each specified group of Eligible Employees for a Plan Year, the average of the ratios (calculated separately for each Eligible Employee in such group) of (1) the amount of Employee-Deferrals actually delivered to the Trustee for the Eligible Employee for the Plan Year to (2) the Eligible Employee's Total Compensation for the portion of such Plan Year (during which) the Employee was an Eligible Employee. The ADP shall be calculated separately for the group consisting of Highly Compensated Employees and the group consisting of Non-Highly Compensated Employees.
(b)An Eligible Employee who fails to make Employee- Deferrals shall be included in the testing with a ratio of zero.
(c)The Tests. In each Plan Year the Plan must satisfy one of the following tests:
(i)The ADP for Eligible Employees who are Highly Compensated Employees for the Plan Year shall not exceed the ADP for Eligible Employees who are Non-Highly Compensated Employees for the same Plan Year multiplied by 1.25; or
(ii)The ADP for Eligible Employees who are Highly Compensated Employees for the Plan Year shall not exceed the ADP for Eligible Employees who are Non-Highly Compensated Employees for the same Plan Year multiplied by 2.0, provided that the ADP for Eligible Employees who are Highly Compensated Employees does not exceed the ADP for Eligible Employees who are Non-Highly Compensated Employees by more than two (2) percentage points.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (d)Special Rules in Connection with ADP Testing:
(i)The ADP for any Eligible Employee who is a Highly Compensated Employee for the Plan Year and who is eligible to have Employee-Deferrals allocated to his accounts under two or more arrangements described in Code Section 401(k), that are maintained by one or more Employers, shall be determined as if such contributions were made under a single arrangement. If a Highly Compensated Employee participates in two or more cash or deferred arrangements that have different plan years, all cash or deferred arrangements ending with or within the same calendar year shall be treated as a single arrangement.
(ii)In the event that this Plan satisfies the requirements of Code Sections 401(k), 401(a)(4), or 410(b) only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of such Code Sections only if aggregated with this Plan, then this Section 3.6 shall be applied by determining the ADP of Employees as if all such plans were a single plan.
(iii)For purposes of determining the ADP of an Eligible Employee who is a five (5%) owner or one of the ten (10) most highly-paid Highly Compensated Employees, the Employee- Deferrals and Total Compensation of such Eligible Employee shall include the Employee-Deferrals and Total Compensation for the Plan Year of members of the Eligible Employee's Family (as defined at Section 1.9). Family members with respect to such
Highly Compensated Employees shall be disregarded as separate Employees in determining the ADP both for Eligible Employees who are Non-Highly Compensated Employees and for Eligible Employees who are Highly Compensated Employees.
(iv)For purposes of determining the ADP test, Employee-Deferrals shall be taken into account only if: paid to the Trust before the last day of the twelve (12) month period immediately following the Plan Year to which the contributions relate; and which relate to Total Compensation which would have been received by the Eligible Employee in the Plan Year (but for the deferral election) or which is attributable to services performed by the Eligible Employee in the Plan Year and would have been received by the Eligible Employee within 2 1/2 months after the close of the Plan Year (but for the deferral election).
(v)The determination and treatment of the ADP amounts of any Eligible Employee shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (vi)In the event that the ADP of the Highly Compensated Employees for the Plan Year determined as a date prior to the last day of the Plan Year indicates that the Plan for the year will not otherwise comply with either ADP test, the Committee has the authority to reduce the Employee-Deferral rate for the remainder of the Plan Year for all or a portion of the Highly Compensated Employees in an equitable manner to increase the likelihood that one of the ADP tests will be satisfied.
3.7 Return of Excess Contributions
(a)Definition. "Excess Contributions" shall mean, with respect to any Plan Year, the excess of: (i)The aggregate amount of Employee-Deferrals actually taken into account in computing the ADP of Highly Compensated Employees for such Plan Year, over
(ii)The maximum amount of such Deferrals permitted by the ADP test (determined by reducing Deferrals made on behalf of Highly Compensated Employees in order of the ADPs, beginning with the highest of such percentages).
(b)Determination of Income or Loss. The income or loss allocable to Excess Contributions shall be determined using any reasonable method, provided that such method does not violate Section 401(a)(4) of the Code, is consistently applied, and is used for allocating income to Participants' Accounts. Earnings must include income or loss for the "gap period" between the end of the taxable year and the date of distribution.
(c)Distribution of Excess Contributions. Notwithstanding any other provision of this Plan, Excess Contributions, plus any income and minus any loss allocable thereto, shall be distributed no later than the last day of the Plan Year to Participants to whose accounts such Excess Contributions were allocated for the preceding Plan Year. Such distributions shall be made to Highly Compensated Employees on the basis of the respective portions of the Excess Contributions attributable to each of such Employees. With respect to Participants who are subject to the family member aggregation rules of Code Section 414(q)(6), the ADP of such Participants shall be reduced in accordance with the "leveling" method described in the regulations and the Excess Contributions of such Participants shall be allocated in the manner prescribed by the regulations. Excess Contributions shall be treated as Annual Additions under the Plan. The amount of Excess Contributions to be distributed shall be reduced by excess deferrals previously distributed for the same year pursuant to Section 3.5 and any Matching Contributions with respect to such distributed Excess Contributions (and the earnings thereon) shall be forfeited.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 3.8 Rollover Contributions. A Participant who has entered into an Employee-Deferral Agreement may contribute to the Plan any amount distributed from the Participant's individual retirement account, individual retirement annuity, or qualified plan which qualifies under either of Code Sections 402(c) or 408(d)(3)(A)(ii), which is transferred within the required time, and which meets all other requirements of law for a rollover to the Plan. The Employer, the Committee, and the Trustee shall rely upon the Participant's written certification that the transfer is a permitted rollover meeting all the above requirements. Such a contribution shall be held in a separate Rollover Contribution Account for the Participant. If the Committee should learn that the rollover did not meet all the aforesaid requirements, the value of the Participant's Rollover Contribution Account as of the preceding Valuation Date (or the date of the rollover, if later) shall be returned to him.
ARTICLE IV MATCHING CONTRIBUTIONS
4.1 Matching Contributions. The Board of Directors shall annually determine the amount of a Matching Contribution, if any, to be contributed for the Plan Year. The Matching Contribution shall be allocated based on the ratio of each Active Participant's Employee-Deferrals for the Plan Year to the total of Employee-Deferrals made by all Active Participants for the year. For purposes of this allocation, Participant Employee- Deferrals in excess of 6% of each Participant's Plan Compensation shall be disregarded.
4.2 Forfeitures. Forfeitures shall be allocated in the same manner as Matching Contributions under Section 4.1.
4.3 Delivery of Contributions. An Employer's Matching Contributions shall be delivered to the Trustee at such time as the Employer determines, but in no event shall any contribution for a Plan Year be made later than the deadline, including extensions, for the filing of the Company's tax return for that year.
4.4 Adjustments if Employee-Deferral Contributions Adjusted. If under Section 3.5 or Section 3.7 a Participant's Employee-Deferral Contributions are returned to him, and as a result the net Employee-Deferral Contributions for the Plan Year are a smaller percentage of Plan Compensation than the amount taken into account in making Matching Contributions, the amount of the Matching Contributions shall be reduced accordingly. The reduction in the Matching Contribution (and any earnings
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document attributable to the reduction) shall be treated as a Forfeiture under the provisions of Section 4.2.
4.5 Discrimination Test - Matching Contributions.
(a)Definitions:
(i)"Average Contribution Percentage" or "ACP" shall mean the average of the Contribution Percentages of the Eligible Employees in a group.
(ii)"Contribution Percentage" shall mean the ratio (expressed as a percentage) of an Eligible Employee's Contribution Percentage Amounts to the Eligible Employee's Total Compensation for the portion of the Plan Year in which he was eligible to make Employee-Deferrals.
(iii)"Contribution Percentage Amounts" shall mean the Matching Contributions under the Plan on behalf of the Eligible Employee for the Plan Year. The Employer may elect to use Employee-Deferrals in the Contribution Percentage Amounts so long as the ADP test is met before the Employee-Deferrals are used in the ACP test and continues to be met following the exclusion of those Employee-Deferrals that are used to meet the ACP test.
(b)The Tests. In each Plan Year the Plan must satisfy one of the following tests:
(i)The ACP for Eligible Employees who are Highly Compensated Employees for the Plan Year shall not exceed the ACP for Eligible Employees who are Non-Highly Compensated Employees for the same Plan Year multiplied by 1.25; or
(ii)The ACP for Eligible Employees who are Highly Compensated Employees for the Plan Year shall not exceed the ACP for Eligible Employees who are Non-Highly Compensated Employees for the same Plan Year multiplied by two (2), provided that the ACP for Eligible Employees who are Highly Compensated Employees does not exceed the ACP for Eligible Employees who are Non-Highly Compensated Employees by more than two (2) percentage points.
(c)Special Rules:
(i)(A)"Aggregate Limit" shall mean the greater of (A) or (B) below:
(1)The sum of
a)one hundred twenty-five percent (125%) of the greater of the ADP or the ACP of the Non-Highly
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Compensated Employees in the same Plan Year, plus
b)Two (2) percentage points plus the lesser of such ADP or ACP of Non-Highly Compensated Employees in the same Plan Year, provided, however, that in no event shall this amount exceed two hundred percent (200%) of the lesser of the ADP or the ACP of Non-Highly Compensated Employees, and
(2)The sum of
a)one hundred twenty-five percent (125%) of the lesser of the ADP or the ACP of the Non-Highly Compensated Employees in the same Plan Year, plus
b)Two (2) percentage points plus the greater of the ADP or the ACP of Non-Highly Compensated Employees in the same Plan Year, provided, however, that in no event shall this amount exceed two hundred percent (200%) of the greater of the ADP or the ACP of Non-Highly Compensated Employees. (B)Multiple Use: If the sum of the ADP and ACP of the Highly Compensated Employees exceeds the Aggregate Limit, then the ACP of the Highly Compensated Employees will be reduced (beginning with the Highly Compensated Employee whose ACP is the highest) so that the limit is not exceeded. If the Employer elects to reduce the ACP of the Highly Compensated Employee, the required reduction shall be treated as an Excess Aggregate Contribution described below. If the Employer elects to reduce the ADP of the Highly Compensated Employees, the required reduction shall be treated as an Excess Contribution as described in Section 3.7. The ADP and ACP of the Highly Compensated Employees are determined after any corrections required to meet the ADP and ACP tests. Multiple use does not occur if both the ADP and ACP of the Highly Compensated Employees does not exceed 1.25 multiplied by the ADP and ACP of the Non- Highly Compensated Employees.
(ii)For purposes of this section, the Contribution Percentage for any Eligible Employee who is a Highly Compensated Employee and who is eligible to have Contribution Percentage Amounts allocated to his account under two (2) or more plans described in Code Section 401(a), or arrangements described in Code Section 401(k) that are maintained by one or more Employers, shall be determined as if the total of such Contribution Percentage Amounts was made under each plan. If a Highly Compensated Employee participates in two (2) or more cash or deferred arrangements under Code Section 401(k) ("CODA"), that have different plan years, all CODAs ending with or within the same calendar year shall be treated as a single arrangement.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (iii)In the event that this Plan satisfies the requirements of Code Sections 401(m), 401(a)(4) or 410(b) only if aggregated with one or more other plans, or if one or more other plans satisfy the requirements of such Code Sections only if aggregated with this Plan, then this section shall be applied by determining the Contribution Percentages of Eligible Employees as if all such plans were a single plan.
(iv)For purposes of determining the Contribution Percentage of an Eligible Employee who is a five percent (5%) owner or one of the ten (10) most highly-paid Highly Compensated Employees, the Contribution Percentage Amounts and Total Compensation of such Eligible Employee shall include the Contribution Percentage Amounts and Total Compensation for the
Plan Year of Family members. Family members, with respect to Highly Compensated Employees, shall be disregarded as separate Employees in determining the Contribution Percentage both for Eligible Employees who are Non-Highly Compensated Employees and for Eligible Employees who are Highly Compensated Employees.
(v)For purposes of determining the Average Contributions Percentage test, Employer Matching Contributions will be considered made for a Plan Year only if (i) paid to the trust no later than the end of the twelve (12) month period beginning on the day after the close of the Plan Year and (ii) made on account of the Employee's Employee-Deferral for the Plan Year.
(d)Excess Aggregate Contributions. If the Plan fails to satisfy the ACP Test, Excess Aggregate Contributions (the excess of the aggregate amount of Matching Contributions actually made on behalf of Highly Compensated Employees for such Plan Year, over the maximum amount of such contributions permitted under the limitations of Section 401(m)(2)(A) of the Code) and income or loss allocable thereto for the Plan Year in which the ACP Test is failed, shall be treated as follows:
(i)Disposition of Excess Aggregate Contributions. Notwithstanding any other provision of this Plan, Excess Aggregate Contributions, plus any income and minus any loss allocable thereto, shall be distributed, no later than the last day of each Plan Year, to Highly Compensated Employees or forfeited, where otherwise appropriate, from the accounts of Participants in which such Excess Aggregate Contributions were allocated for the preceding Plan Year. Excess Aggregate Contributions shall be allocated to Participants who are subject to the family member aggregation rules of Code Section 414(q)(6), the ACP of such Participants shall be reduced in accordance with the "leveling" method described in the regulations and the Excess Contributions of such Participants shall be allocated in the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document manner prescribed by the regulations.
(ii)Determination of Income or Loss. Excess Aggregate Contributions shall be adjusted for any income or loss attributable thereto in the year in which the contribution was made. The income or loss allocable to Excess Aggregate Contributions shall be determined using any reasonable method, provided that such method does not violate Section 401(a)(4) of the Code, is consistently applied, and is used for allocating income to Participants' Accounts.
(iii)Accounting for Excess Aggregate Contributions. Excess Aggregate Contributions shall be distributed on a pro-rata basis from the Participant's Employer Contribution Account (and, if applicable, the Participant's Employee-Deferral Account).
4.6 Qualified Matching Contributions, Qualified Nonelective Contributions. The Company may, in its sole discretion, use the following contributions to enable the Plan to satisfy the nondiscrimination requirements of Section 3.6 and/or Section 4.5:
(a)Qualified Matching Contributions. A Qualified
Matching Contribution may be made by the Employers with respect to Employee-Deferrals made on behalf of the Employee. Such Qualified Matching Contributions shall be nonforfeitable when made and shall be subject to the same restrictions on distribution that apply to Employee-Deferrals.
(b)Qualified Nonelective Contributions. A Qualified Nonelective Contribution may be made by the Employer on the basis of either a specified dollar amount or a specified percentage of Plan Compensation. Such Qualified Nonelective Contributions shall be nonforfeitable and shall be subject to the same restrictions on distribution that apply to Employee-Deferrals.
(c)The use of contributions described above shall be as provided in regulations under Section 401(k) and Section 401(m) of the Code.
ARTICLE V EMPLOYER DISCRETIONARY CONTRIBUTIONS
5.1 Employer Discretionary Contributions. The Board of Directors shall annually determine the amount of Employer Discretionary Contributions, if any, to be contributed for the Plan Year. The Company may contribute all or part of the entire amount due on behalf of one or more Participating Employers and charge the amount thereof to the Participating Employers
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document responsible therefor.
In no event shall the contribution, when added to the other contributions under the Plan, exceed the maximum amount which may be claimed as a deduction by the Company for federal income tax purposes under Code Section 404(a)(3).
The contribution, if any, shall be delivered in one or more installments to the Trustee no later than the due date (including extensions) of the Company's federal income tax return for its fiscal year ending with or during the Plan Year for which the contribution is made.
5.2 Allocation of Employer Discretionary Contributions. As of each Annual Valuation Date, the Employer Discretionary Contribution, if any, shall be allocated to the Employer Contribution Accounts of all Active Participants in the proportion that each such Active Participant's Plan Compensation bears to the Plan Compensation for all Active Participants for such year.
5.3 Top-Heavy Contributions. As of the end of any Plan Year in which the Plan is Top-Heavy, the Employer shall contribute to the Employer Contribution Account of each Participant who is a Non-Key Employee the amount required under Article XV.
ARTICLE VI VESTING
6.1 Employee-Deferral Account. The interest of a Participant in his Employee-Deferral Account shall be fully vested and nonforfeitable at all times.
6.2 Rollover Contribution Account. The interest of a Participant in his Rollover Contribution Account shall be fully vested and nonforfeitable at all times.
6.3 Employer Contribution Account. The interest of a Participant in his Employer Contribution Account shall be fully vested and nonforfeitable upon such Participant's death prior to termination of employment, attainment of the Normal Retirement Age while still employed, or termination of employment by reason of Disability. When a Participant's employment is terminated for any other reason, the vested and nonforfeitable interest of such Participant shall be determined in accordance with the following schedule:
------Years Vested %
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document of Service 0 Less than 5 years 100 5 years or more
6.4 Forfeitures.
(a)For purposes of this Section 6.4, if a Participant's account is 0% vested upon his Service Termination Date, he shall be deemed to have received a distribution of his account balance (and therefore a forfeiture results) as of the end of the Plan Year in which the Service Termination Date occurred.
(b)The forfeitures shall be applied in accordance with Section 4.2.
(c)A Participant can have a forfeiture restored after reemployment, but only under the circumstances described in Section 6.6.
6.5 Reemployment Before Break in Service. If an Employee has a Service Termination Date and is reemployed before a One- Year Break in Service occurs, he will be treated for vesting purposes as if the termination had not occurred.
6.6 Reemployment After Break in Service. The following special rules apply if an Employee has a One-Year Break in Service and is later reemployed by an Employer.
(a)His Years of Service prior to the Break in Service shall be taken into account for purposes of determining the vested portion of such Participant's Employer Contribution Account funded after reemployment (i) if any portion of the Participant's Employer Contribution Account is vested at the time of the Break in Service, or (ii) if he incurs fewer than five consecutive one-year Breaks in Service.
(b)His Years of Service which accrue after the Break in Service shall be taken into account for purposes of determining the vested portion of such Participant's Employer
Contribution Account funded prior to the Break in Service, provided such Participant is reemployed by the Employer before he receives a distribution or incurs five (5) consecutive one-year Breaks in Service.
(c)(i)If a Participant has a Service Termination Date and receives a distribution of the balance of his Employer Contribution Account, he will be credited with the full value of his forfeited account balance, determined as of the date of the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document distribution, provided the Participant repays the amount of the distribution before the earlier of (1) five (5) years after the first day on which an Employee is subsequently reemployed by the Employer, or (2) the close of the first period of five (5) consecutive Breaks in Service. Any Participant who terminates employment with zero vesting shall be credited with the full value of his Employer Contribution Account determined as of the date of the deemed distribution under Paragraph 6.4(a) if the Participant is reemployed before he incurs five (5) consecutive One-Year Breaks in Service.
(ii)If any credit is required under this Paragraph (c), the credit shall be made at the close of the Plan Year in which occurs the later of the reemployment or the repayment. The credit shall be satisfied first from Forfeitures, second from Employer Discretionary Contributions.
ARTICLE VII ALLOCATIONS
7.1 Allocation of Contributions. Contributions to the Plan shall be allocated in the following manner:
(a)Employee-Deferral Contributions shall be allocated to the Employee-Deferral Account of each Participant in accordance with the provisions of Article III.
(b)Employer Discretionary Contributions shall be allocated to the Employer Contribution Account of each Participant in accordance with the provisions of Article V.
(c)Matching Contributions shall be allocated to the Employer Contribution Account of each Participant in accordance with the provisions of Article IV.
(d)Qualified Matching Contributions and Qualified Nonelective Contributions shall be allocated to the Employee- Deferral Account of each Participant in accordance with the provisions of Section 4.6.
7.2 Definitions. For purposes of this Article VII, the term Accounts shall mean a Participant's Employee-Deferral Account and Employer Contribution Account. The term Annual Addition shall mean, for any Limitation Year, the sum of (a) Matching Contributions, (b) Employee- Deferral Contributions, (c) Employer Discretionary Contributions, Qualified Matching Contributions, Qualified Non-elective Contributions and (d) forfeitures.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The term Defined Benefit Plan Fraction shall mean, for any year, a fraction (a) the numerator of which is the projected annual benefit of the Participant under any defined benefit plan maintained by the Employer (determined as of the close of the Plan Year), and (b) the denominator of which is the lesser of (i) the product of 1.25 multiplied by the maximum dollar limitation in effect under Code Section 415(b)(1)(A) for such year, or (ii) the product of 1.4 multiplied by the amount which may be taken into account under Code Section 415(b)(1)(B) for such year.
The term Defined Contribution Plan Fraction shall mean, for any year, a fraction (a) the numerator of which is the sum of the Annual Additions to the Participant's Accounts as of the close of the Plan Year, and (b) the denominator of which is the sum of the lesser of the following amounts determined for such year and each prior year of service with a Employer: (i) the product of 1.25 multiplied by the dollar limitation in effect under Code Section 415(c)(1)(A) for such year (determined without regard to Code Section 415(c)(6)), or (ii) the product of 1.4 multiplied by the amount which may be taken into account under Code Section 415(c)(1)(B) for such year.
The term Employer includes the group of Employers, if any, which constitute a controlled group of corporations, trades or businesses under common control (within the meaning of Code Sections 1563(a) or 414(b) as modified by 415(h) and 414(c)), or an affiliated service group (within the meaning of Code Sections 414(m) and 318) with an Employer. All such Employers shall be treated as a single Employer for purposes of applying the Code Section 415 limitations.
The term Limitation Year shall mean the Plan Year or any other twelve-month period designated by the Board of Directors.
7.3 Annual Additions. No contribution or forfeiture shall be allocated to the Accounts of an Employee for a Limitation Year in excess of an amount which, when expressed as an Annual Addition to such Employee's Accounts, is equal to the lesser of (a) $30,000 or such larger amount equal to 1/4 of the defined benefit dollar limitation as adjusted for cost-of-living increases pursuant to Code Sections 415(c)(1), 415(d)(1) and 415(d)(3), or (b) twenty-five percent of such Employee's Section 415 Compensation for such limitation.
7.4 Limitation for Other Defined Contribution Plans. In the event that the Annual Addition which would otherwise be made to an Employee's accounts under all defined contribution plans maintained by the Employer for any Limitation Year exceeds the limitations set forth in this Article VII, the excess Annual Addition shall be attributed first to the Plan, and the Employer
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document shall treat such excess as follows:
(a)First, the Employee-Deferral Contributions in excess of six percent of Plan Compensation shall be returned to the Employee to the extent necessary.
(b)Second, the portion of the excess consisting of
Matching Contributions shall be allocated and reallocated to the Employer Contribution Accounts of other Participants in accordance with Section 4.1 to the extent such allocations would not cause Annual Additions to each Participant's Accounts to exceed the limitations of this Section 7.4
(c)Third, the portion of the excess consisting of Employer Discretionary Contributions shall be allocated and reallocated to the Employer Contribution Accounts of other Participants in accordance with Section 5.2 to the extent such allocations would not cause Annual Additions to each Participant's Accounts to exceed the limitation of this Section 7.4.
(d)If treated in accordance with subparagraphs (a) through (c) above, the excess amounts shall not be deemed Annual Additions in that limitation year if the excess amounts are a result of the allocation of forfeitures, a reasonable error in estimating a Participant's annual Plan Compensation, a reasonable error in determining the amount of elective deferrals (within the meaning of Section 402(g)(3)) that may be made with respect to any individual under the limits of Section 415 or under other limited facts and circumstances that the Commissioner finds justify the availability of the rules set forth in this subparagraph.
(e)To the extent excess Annual Additions exist after the distributions described in subparagraphs (a) through (c), such excess amounts shall be allocated to a Section 415 Suspense Account. All amounts in the Section 415 Suspense Account must be used to reduce Matching Contributions, contributions required on account of a Top-Heavy Plan Year, or Employer Discretionary Contributions in succeeding Limitation Years. In the event of termination of the Plan, the balance of the Section 415 Suspense Account shall revert to the Company to the extent it may not then be allocated to any Participants' Accounts.
7.5 Limitation for Defined Benefit Plan. If an Employee is also a Participant in one or more defined benefit plans maintained by the Employer (or an Employee was a Participant in any defined benefit plan previously maintained by an Employer), the sum of such Employee's Defined Benefit Plan Fraction and Defined Contribution Plan Fraction (as determined pursuant to
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Code Section 415(e)) for any Limitation Year may not exceed 1.0.
In the event that the sum of an Employee's Defined Contribution Plan and Defined Benefit Plan Fractions would otherwise exceed 1.0 for any Limitation Year, the benefit accrual which would otherwise be made under all applicable defined benefit plans for such Employee shall be considered not to have accrued, to the extent necessary, so that the sum of such fractions does not exceed 1.0. If after all such adjustments the sum of the fractions would still exceed 1.0, then the annual addition which would otherwise be made with respect to such Employee shall be reduced in this Plan pursuant to Section 7.4 and finally under any applicable defined contribution plan to the extent necessary so that the sum does not exceed 1.0.
ARTICLE VIII TRUST FUND
8.1 Plan Assets. Avondale Industries, Inc. and the Trustee have entered into a Trust Agreement, which agreement provides for the establishment of a single Trust for the purpose of holding and administering all amounts contributed to Accounts under the Plan. All contributions, and the earnings on such amounts, shall be delivered to the Trustee and held and administered pursuant to the provisions of the Plan and the Trust Agreement.
8.2 Separate Accounts. A separate Employee-Deferral Account and Employer Contribution Account and Rollover Contribution Account shall be maintained by the Trustee or a recordkeeping agent appointed by the Plan Administrator for each Participant.
8.3 Valuation. The fair market value of the assets comprising the Trust shall be determined as of each Valuation Date, in accordance with generally-accepted valuation methods and accounting practices.
As of each Valuation Date, the value of each Account shall be adjusted to reflect the effect on each sub-account of any change in the value of each Investment Fund since the preceding Valuation Date, as well as the effect of any deposits, withdrawals, distributions, or other transactions occurring since the last Valuation Date. The Committee shall provide to each Participant, Beneficiary and alternate payee as of the end of each calendar quarter a statement of the value of each Account in which such person has an interest.
8.4 Investment Funds.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (a)The Committee shall determine what investment funds to offer under the Plan and may, from time to time, change the investment funds offered hereunder. As of the Effective Date of this Plan, the investment funds are Merrill Lynch Retirement Preservation Trust, Merrill Lynch Capital Fund, Merrill Lynch Corporate Bond Fund Investment Grade, AIM Constellation Fund, AIM Value Fund, and Templeton Growth Fund.
(b)As of each Valuation Date, the Trustee shall perform a valuation of each Investment Fund in order to determine the value of each Investment Fund and to reconcile the Investment Funds from the prior Valuation Date. Such valuation shall recognize any appreciation or depreciation in the fair market value of all securities or other property held by each respective Investment Fund, any cash and accrued earnings and shall take into account any accrued expenses and proper charges against the Investment Fund as of such Valuation Date.
8.5 Investment of Contributions.
(a)A Participant may direct that his Employee-Deferral Contributions, Employer Contributions and Rollover Contributions, if any, be allocated to one or more of the Investment Funds then available, in multiples of one percent (1%), by providing voice consent after such Participant has accessed a voice response system by entering his personal identification number in accordance with limitations reasonably determined by the Committee, or in writing on a form acceptable to the Committee. The total of all such allocations shall equal one hundred percent of the Participant's interest in his Accounts. The Committee will provide, upon Participant's request, a written confirmation of his written investment instructions.
(b)If no investment direction exists the Participant's affected interest shall automatically be invested in a short term income fund until adequate instructions are received through a voice response system or in writing on an acceptable form; provided that such investment will not result in violation of ERISA.
(c)Each Participant must consent to the allocation of his contributions among the Investment Funds. Such direction shall continue in effect until such time as the Participant consents to a different allocation. The investment of future contributions may be changed daily, provided such change is received by the Committee within such time period preceding the effective date as shall be prescribed by the Committee.
8.6 Transfer of Amounts Among Investment Funds
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (a)A Participant may elect to transfer amounts from one Investment Fund to another in increments of one percent (1%). Any such change shall be by providing voice consent after the Participant has accessed a voice response system by entering his personal identification number, or in writing on a form acceptable to the Committee. Such election shall be effective on the business day transacted if requested via the voice response system before 3 p.m. Eastern Standard Time or as soon as administratively feasible if requested on a written form. Transfers out of an investment fund can be processed in terms of dollars, shares, or percentages. Dollar and percent transfers will be converted into shares, traded based on the previous night's price, and processed based on the current night's price.
(b)In the event an acceptable form is not received by the Committee for all or any portion of a Participant's Accounts, the current investment direction shall continue in effect until adequate instructions are received through a voice response system or in writing on an acceptable form.
(c)The timing and frequency of transfers among investment options may be further restricted if such restrictions are required by the institution handling or providing the investment fund.
8.7 Liability for Investment Decisions. This Plan is intended to constitute a plan described in Section 404(c) of ERISA, and Title 29 of the Code of Federal Regulations Section 2550.404c-1. Fiduciaries of the Plan may be relieved of liability for any losses which are the direct and necessary result of investment instructions given by each Participant or Beneficiary. Neither the Employer, the Trustee nor the Committee shall be responsible for any loss which may result from a Participant's exercise of control over the investment of his Accounts.
Each Participant shall have exclusive responsibility for and control over the investment of amounts allocated to his Accounts. Neither the Employers, the Trustee nor the Committee shall have any duty, responsibility or right to question a Participant's investment directions or to advise a Participant with respect to the investment of his accounts.
The Committee will be obligated to follow the Participant's investment directions except when the instructions:
(a)are not in accordance with this Plan document and instruments governing this Plan insofar as such documents and instruments are consistent with the provisions of Title I of ERISA;
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (b)would result in a prohibited transaction described in ERISA section 406 or Code section 4975 that is not otherwise exempted by statute or regulation;
(c)would generate income that would be taxable to this Plan;
(d)would cause a fiduciary to maintain the indicia of ownership of any assets of the Plan outside the jurisdiction of the district courts of the United States other than as permitted by section 404(b) of ERISA and related regulations;
(e)would jeopardize the Plan's tax qualified status under the Code; or
(f)could result in a loss in excess of the Account balance.
8.8 Accounting Procedures. The Committee shall establish such equitable accounting procedures as may be required to make (a) allocations, (b) valuations, and (c) adjustments to Partici- pants' accounts in accordance with the provisions of the Plan. The Plan Administrator may modify its accounting procedures, from time to time, for the purpose of achieving equitable and nondiscriminatory allocations.
ARTICLE IX BENEFITS
9.1 Normal Retirement Date. The Normal Retirement Date shall be the later of (a) the Participant's Normal Retirement Age or (b) the first day of the month coincident with or next following a Participant's fourth anniversary of commencement of participation in the Plan. Any Participant who remains an Employee beyond Normal Retirement Date, or becomes a Participant after such date, shall participate in the contributions and benefits of the Plan in the same manner as any other Participant.
9.2 Disability Retirement Date. Any Participant who has incurred a Disability, as determined by the Committee, may retire on a Disability Retirement Date by making written application to the Committee specifying a Disability Retirement Date which is the first day of a month not more than 90 days following the date of the filing of the application. Former Employees shall not be eligible for Disability Retirement unless the Disability was determined to have occurred during the course of such former Employee's employment with the Employer. Subject to Section 12.6 the determination of the Committee as to whether a Participant
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document has a Disability and the date of such Disability shall be final, binding and conclusive.
9.3 Nonalienation of Benefits. Except with respect to federal income tax withholding and federal tax levies, benefits payable under this Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, either voluntary or involuntary, including any such liability which is for alimony or other payments for the support of a spouse or former spouse or for any other relative of the Employee, prior to actually being received by the person entitled to the benefit under the terms of the Plan; and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any right to benefits payable hereunder, shall be void. The Trust Fund shall not in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements or torts of any person entitled to benefits hereunder.
Notwithstanding the above, the Committee shall direct the Trustee to comply with a qualified domestic relations order described in Section 9.4.
9.4 Qualified Domestic Relations Order. All rights and benefits, including election rights, provided to Participants pursuant to this Plan, are subject to the rights afforded to any "alternate payee" pursuant to a "qualified domestic relations order," as those terms are defined below.
Payment to an "alternate payee" pursuant to a "qualified domestic relations order" shall be made at such time as determined pursuant to the qualified domestic relations order, based on the value of the alternate payee's interest in the account as of the Valuation Date preceding the date the payment is made. No payment to an alternate payee can be made later than when the Participant's benefit is paid to him as a result of his termination of employment. If the Participant has a loan as an investment of his account, such Participant will continue to be responsible for the entire loan. The Plan Administrator is authorized to establish any additional rules necessary to determine the rights of alternate payees under qualified domestic relations orders.
Pursuant to the provisions of Section 414(p) of the Code, a "qualified domestic relations order" shall mean a judgment, decree or order (including approval of a property settlement agreement) made pursuant to a state domestic relations law (including a community property law) that relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child or other dependent of a
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 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:
(A)the earliest date benefits are payable hereunder to a Participant, or
(B)the later of the date the Participant attains age 50 or the earliest date on which the Participant could obtain a distribution under the Plan if the Participant terminated employment;
(iii)pay any benefits which are not vested under the Plan;
(iv)provide increased benefits; or
(v)pay benefits to an alternate payee which are required to be paid to another alternate payee under a prior qualified domestic relations order.
Upon receipt of any judgment, decree or order (including approval of a property settlement agreement) relating to the provision of payment by the Plan to an alternate payee pursuant to a state domestic relations law, the Committee shall promptly notify the affected Participant and any person identified in the document as an alternate payee of the receipt of such judgment, decree order and shall notify the affected Participant and any such designated alternate payee of the Committee's procedure for determining whether or not the judgment, decree or order is a qualified domestic relations order.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 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 Treasury Regulations.
In the event that the Committee is informed in writing of a claim by a person (a "Claimant") that may result in the rendering of a qualified domestic relations order with respect to a Participant's Accounts in the Plan, the Committee is authorized to suspend any payments from those Accounts until receipt of a judgment, decree or order setting forth the rights of Claimant as an alternate payee, or upon receipt of an order or written release by the Claimant evidencing that the Claimant has no further claim to the Participant's interest in the Plan.
If the judgment, decree or order is determined to be a qualified domestic relations order within the 18-month period following the receipt by the Committee of the qualified domestic relations order, then payment of the amount shall be paid to the appropriate alternate payee at the time and in the form specified in such order. If such a determination is not made within the 18-month period, the amount shall be returned to the Participant's Accounts under the Plan and shall be paid at the time and in the manner provided under the Plan as if no order, judgment or decree had been received by the Committee.
ARTICLE X PAYMENT OF BENEFITS
10.1 Time of Payment. A Participant shall be eligible to receive a distribution of his Vested Interest when he has had a Service Termination Date.
Such a Participant shall be entitled to receive his Vested Interest at any time, provided that payment cannot be made sooner than 30 days following his Service Termination Date and no later than the later of the Participant's Normal Retirement Age or his Service Termination Date. A distribution is based upon the value of the Participant's Vested Interest as of the Valuation Date coincident with or immediately preceding the date of distribution.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The foregoing notwithstanding:
(a)If the value of a Participant's Vested Interest is less than $3,500, the Vested Interest will be distributed as soon as administratively practicable following the Service Termination Date;
(b)If the value of a Participant's Vested Interest is greater than $3,500, the Participant must consent to the distribution;
(c)Notwithstanding (b) above, if an Employee is employed on the March 31 following the year in which he attains age 70 1/2, the payment of his Vested Interest shall be made no later than that date.
In no event shall a distribution occur while a Participant remains in the employ of an Employer, except in the event of a withdrawal by reason of Financial Hardship or after age 59 1/2, as described in Sections 11.1 and 11.2, below.
The distribution rules that apply to an "alternate payee" pursuant to a "qualified domestic relations order" are stated in Section 9.4 herein.
10.2 Death Benefit. If a Participant dies with a balance in his Accounts, the interest of such Participant shall be distributed to the Participant's Beneficiary in a single-sum payment as soon as administratively practicable after 90 days from the Participant's death.
10.3 Form of Distribution. Distributions shall be made in a single-sum payment.
10.4 Temporary Non-Payment of Benefits.
(a)Unless the Participant elects otherwise in writing, the payment of his Vested Interest shall commence no later than the sixtieth (60th) day after the close of the Plan Year in which the last of the following occurs:
(i)the Participant achieves Normal Retirement Age, or
(ii)the Participant terminates his service with the Employer, whichever is the latest.
(b)If a Participant or Beneficiary fails to furnish information reasonably requested by the Committee which is
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document necessary to determine whether such Participant or Beneficiary has satisfied all requirements for payment of benefits, the Committee shall delay payment of benefits until the requested information is furnished and shall make reasonable efforts to obtain such information.
10.5 Direct Rollover Rules. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee's election under this Article, the Distributee may elect, at the time and in the manner prescribed by the Committee, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover. Definitions are as follows:
(a)The term Eligible Rollover Distribution means any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; and the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities).
(b)An Eligible Retirement Plan includes an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, that accepts the Distributee's Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to the surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity.
(c)The term Distributee includes an employee or former employee. In addition, the employee's or former employee's surviving spouse and the employee's or former employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are Distributees with regard to the interest of the spouse or former spouse.
(d)The term Direct Rollover means a payment by the plan to the eligible retirement plan specified by the Distributee.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 10.6 Notice. The notice required by section 1.411(a)-11(c) of the Income Tax Regulations must be provided to a Participant no less than 30 days and no more than 90 days before the date of distribution. The notice explains a Participant's right to defer receipt of the distribution if his Vested Interest exceeds $3,500. A Participant will also receive an explanation of his distribution options no less than 30 days and no more than 90 days before the date of distribution. The distribution may commence no less than 30 days after the notice required under section 1.411(a)-11(c) of the Income Tax Regulations is given, provided that:
(a)the Committee clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution, and
(b)the Participant, after receiving the notice, affirmatively elects a distribution.
ARTICLE XI IN-SERVICE DISTRIBUTION AND LOANS
11.1 Distribution after Attaining Age 59 1/2. A Participant who is still an Employee and has attained age 59 1/2 shall be entitled to make withdrawal(s) from his Employee- Deferral Account, Rollover Account and the vested portion of the Participant's Employer Contribution Account by notifying the Committee.
11.2 Financial Hardship. Prior to a Participant's termination of employment or age 59 1/2 he may apply to the Committee for a withdrawal of funds held in his Rollover Contribution Account and Employee-Deferral Account on account of a Financial Hardship. The total of such withdrawals from a Participant's Employee-Deferral Account shall not exceed the total of his Employee-Deferral Contributions. The withdrawal shall be made only under the following conditions:
(a)The withdrawal may be made only to meet one of the following needs:
(i)Medical expenses described in Code Section 213(d), incurred by the Participant, the Participant's spouse, or any dependent (as defined in Code Section 152) of the Participant;
(ii)Purchase (excluding mortgage payments) of a principal residence for the Participant;
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (iii)Payment for all or a portion of the next twelve (12) months of post-secondary education for the Participant, his spouse, children, or dependents;
(iv)To prevent the eviction of the Participant from his principal residence or foreclosure on the mortgage of the Participant's principal residence; or
(v)Any other need permitted under Code Section 401(k) and the regulations issued thereunder and authorized by the Committee.
(b)The Participant provides to the Committee a letter containing the following:
(i)A statement of the amount needed and the purpose for which it is needed;
(ii)A representation that the expense will not be paid for by insurance or other source specific to the expense, that the Participant and his spouse (and the Participant's minor child, if the expense is for the child's benefit) have no assets he can liquidate to pay for the expense without creating a new hardship, and that ceasing Employee Deferrals will not suffice to satisfy the needs;
(iii)A representation that the Participant has not been able to borrow from commercial sources on reasonable commercial terms in an amount sufficient to satisfy the need; and
(iv)A promise that the funds will be used only for the specified purpose.
(c)The withdrawal cannot exceed the amount necessary to satisfy the need described at paragraph (a), plus any amounts necessary to pay federal or state income taxes or penalties reasonably anticipated to result from the distribution.
(d)The Participant has obtained all distributions, other than hardship distributions, and all non-taxable loans currently available under all "plans" (as contemplated by U.S. Treasury Regulation Section 1.401(k)-1(d)(2)(iii)), maintained by the Employer.
(e)The Participant shall not be allowed to make
Employee-Deferral Contributions until the Entry Date next following the 12-month anniversary of the withdrawal.
(f)The Participant's limit on Employee-Deferral
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Contributions in the year immediately following the year of the withdrawal shall be the limit under Section 3.4 for that year, less the amount of the Participant's Employee-Deferral Contributions made in the year of the hardship withdrawal. 11.3 Loans to Participant. A Participant who is an Employee may make a loan from the Plan, subject to the following rules and limitations:
(a)The total amount of a Participant's loan when added to the outstanding balance of all the Participant's prior loans from the Plan during the one year period ending the day before the loan is made shall not exceed $50,000, nor shall the total amount of the loan when added to the outstanding balance of the Participant's loans under the Plan exceed one-half the Participant's Vested Interest under the Plan. Amounts set aside for an alternate payee shall not be included. The Plan Administrator can establish uniform nondiscriminatory policies further limiting the amount or frequency of Employee loans.
(b)Each loan shall be deemed an investment of the account of the Participant receiving the loan. Loan disbursements shall be pro rated across all funds.
(c)Each loan shall bear a reasonable rate of interest as determined by the Trustee.
(d)A Participant can have no more than two (2) loans outstanding at anytime if a Participant makes a final payment on one of two outstanding loans, a new loan can be obtained after a 30-day delay following that final payment.
(e)Each loan may not be less than $1,000.
(f)The Plan Administrator shall provide each loan applicant with a clear statement of the charges with respect to each loan transaction. Such statement shall include the dollar amount and annual interest rate or the finance charge.
(g)The term of a loan shall be determined by the Participant but shall not be less than 12 months or exceed five years.
(h)A loan made pursuant to this Article XI shall be repaid in accordance with a schedule established by the Committee which schedule shall call for payments of interest and amortized payments of principal over the term of the loan.
(i)Each loan shall be evidenced by the Participant's promissory note for the amount of the loan, including interest, payable to the order of the Trust, and each loan shall be secured by collateral. The collateral shall consist of the assignment of
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document the Participant's right, title and interest in the Participant's Vested Interest in the Trust.
(j)During paid employment each loan shall be repaid by withholding from the Participant's pay. Upon termination of employment, the Participant has 90 days to pay the loan in full. If the Participant terminates employment and receives an immediate lump sum distribution, any promissory note held by the Plan for his account shall be distributed to him. While on an unpaid leave, the Participant shall pay to the Trustee all amounts due on the repayment frequency on which the loan is amortized. Payments must be made by certified or bank check. Except as provided in this Paragraph, the failure to make timely payment of any one payment causes the full amount of the note to become due, and if permitted by law the note shall be distributed to the Participant.
(k)Repayments shall be credited to the Participant's accounts out of which the loan was made, and allocated among the Investment Funds pursuant to the Participant's most recent allocation election.
ARTICLE XII ADMINISTRATION
12.1 Board of Directors. The Board of Directors shall have the following duties and responsibilities in connection with the administration of the Plan:
(a)making decisions with respect to contributions to the Plan;
(b)making decisions with respect to amending or terminating the Plan;
(c)making decisions with respect to the selection, retention and removal of the Trustee and the members of the Committee;
(d)periodically reviewing the performance of the Trustee and the members of the Committee; and
(e)performing such additional duties as are imposed by law.
The Board of Directors will have all powers and authority necessary or appropriate to carry out its duties and responsibilities with respect to the administration of the Plan. The Board of Directors may by written resolution allocate its
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document duties and responsibilities to one or more of its members or delegate such duties and responsibilities to any other persons, provided, however, that any such allocation or delegation shall be terminable upon such notice as the Board of Directors deems reasonable and prudent under the circumstances.
12.2 401(k) Administrative Committee. The 401(k) Administrative Committee (the "Committee") shall administer the Plan and is designated as the "administrator" within the meaning of Section 3(16) of ERISA. The Committee shall have not less than three nor more than five members, who shall be appointed by the Board of Directors and who may be removed by the Board of Directors at any time with or without cause. A Committee member may resign at any time by filing his written resignation with the Board of Directors.
All members of the Committee are designated as agents of the Plan for the service of legal process.
The Company will notify the Trustee in writing of each Committee member's appointment, and the Trustee may assume such appointment continues in effect until written notice to the contrary is given by the Company. 12.3 Committee's Duties and Responsibilities. The Committee shall have the following duties and responsibilities in connection with the administration of the Plan:
(a)interpreting and construing the provisions of the Plan;
(b)determining all questions of eligibility to participate, eligibility for benefits, the allocation of contributions, and the status and rights of Participants, Beneficiaries and alternate payees;
(c)complying with the reporting and disclosure requirements established by ERISA;
(d)determining and deciding any dispute arising under the Plan and administering the Plan's claims procedures;
(e)directing the Trustee concerning all payments to be made out of the Trust in accordance with the provisions of the Plan;
(f)establishing procedures for withholding of federal income tax from distributions;
(g)establishing procedures to prevent the Plan from engaging in transactions described in Section 406 of ERISA and
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document transactions described in Section 4975(c) of the Code;
(h)establishing equitable accounting methods and designating additional Valuation Dates;
(i)communicating with Participants, Beneficiaries and alternate payee;
(j)reviewing the investment performance of the Trustee;
(k)reviewing the performance of any advisors appointed by the Committee;
(l)selecting and reviewing selected investment funds;
(m)making recommendations to the Board of Directors with respect to the amendment or termination of the Plan; and
(n)keeping minutes to record its proceedings, acts and decisions pertaining to the administration of the Plan.
12.4 Committee's Powers. The Committee will have all powers and authority necessary or appropriate to carry out its duties and responsibilities with respect to the operation and administration of the Plan. It shall interpret and apply all provisions of the Plan and may supply any omission or reconcile any inconsistency or ambiguity in such manner as it deems advisable, including the adoption of interpretative memoranda. All determinations and any actions of the Committee will be conclusive and binding upon all persons, except as otherwise provided herein or by law; provided, however, that the Committee may revoke or modify a determination or action previously made in error. The Committee shall exercise all powers and authority given to it in a nondiscriminatory manner, and will apply uniform administrative rules of general application in order to assure similar treatment to persons in similar circumstances.
The Committee may delegate to any such agent or any subcommittee or member of the Committee its authority to perform any duty or responsibility specified in Section 12.3, including those matters involving the exercise of discretion, provided that such delegation shall be subject to revocation at any time at the discretion of the Committee. Any member of the Committee, any sub-committee or agent to whom the Committee delegates any authority, and any other person or group of persons, may serve in more than one fiduciary capacity (including service as both Committee member and Trustee) with respect to the Plan.
Any action or decision concurred in by a majority of the Committee members, either at a meeting or in writing without a
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document meeting, will constitute an action or decision of the Committee. The Committee may adopt and amend such rules for the conduct of its business and administration of the Plan as it deems advisable.
12.5 Chairman of the Committee. The Committee shall elect any Committee member to serve as Chairman, and may remove him at any time. The Chairman, or a majority of the Committee members then in office, will have the authority to execute all instruments or memoranda necessary or appropriate to carry out the actions and decisions of the Committee; and any person may rely upon any instrument or memoranda so executed as evidence of the Committee's action or decision indicated thereby.
12.6 Claims Review Procedure. If a Participant (Beneficiary or alternate payee) believes a benefit or distribution is due under the Plan, he may request the distribution of such benefit, in writing, on forms acceptable to the Committee. At such time, the Participant (or Beneficiary) will be given the information and materials necessary to complete any request for the distribution of a benefit.
If the request for distribution is disputed or denied, the following action shall be taken:
(a)First, the Participant (or Beneficiary) will be notified, in writing, of the dispute or denial as soon as possible (but no later than 90 days) after receipt of the request for a distribution. The notice will set forth the specific reasons for the denial, including any relevant provisions of the
Plan. The notice will also explain the claims review procedure of the Plan.
(b)Second, the Participant (or Beneficiary) shall be entitled to a full review of his request for a distribution. A Participant (or Beneficiary) desiring a review of the dispute or denial must request such a review, in writing, no later than 60 days after notification of the dispute or denial is received. During the review, the Participant (or Beneficiary) may be represented and will have the right to inspect all documents pertaining to the dispute or denial. Any such review may include a hearing for the Participant or his designated representative.
(c)The Committee shall render its decision within 60 days after receipt of the request for the review. In the event special circumstances require an extension of time, the Committee shall notify the Participant (or Beneficiary), and the decision will be rendered no later than 120 days after the receipt of the request. The decision of the Committee shall be in writing. The decision shall include specific reasons for the action taken and
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document specific references to the Plan provisions on which the decision is based.
12.7 Information from Participants, Beneficiaries and Alternate Payees. Each Participant, Beneficiary and alternate payee shall be required to furnish to the Committee, in the form prescribed by it, such personal data, affidavits, authorization to obtain information, and other information as the Committee may deem appropriate for the proper administration of the Plan.
12.8 Actions. Any action taken by the Plan Administrator or Committee on matters within its discretion shall be final and binding on the parties and on all Participants, Beneficiaries or other persons claiming any right or benefit under the Plan, in the Trust, or in the administration of the Plan.
All decisions of the Plan Administrator or Committee shall be uniform and made in a nondiscriminatory manner.
12.9 Bond. The Company shall purchase a bond for the Plan Administrator or Committee and any other fiduciaries of the Plan in accordance with the requirements of the Code and ERISA.
12.10 Indemnification. The Company shall defend and indemnify to the full extent permitted by law (including ERISA), which indemnification shall include, but not be limited to, attorney's fees and any tax imposed as a result of a claim asserted by any person, persons or entity (including a governmental entity), any individual serving as a member of the Committee made or threatened to be made a part to any action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that such individual is or was a member of the Committee.
ARTICLE XIII AMENDMENT OF THE PLAN
13.1 Right to Amend or Suspend Contributions. Subject to the provisions of Section 13.3, the Board of Directors reserves the right to amend the Plan or Trust or suspend contributions to the Plan, in whole or in part, at any time and for any reason without the consent of any Participating Employer, Participant, Beneficiary, or alternate payee. Each amendment of the Plan shall be in writing, executed by order of the Board of Directors and shall be effective on the date specified therein. Notice of any amendment, modification or suspension of contributions to the Plan shall be given by the Board of Directors to the Committee, the Trustee, and to all Participating Employers.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 13.2 Amendment by Committee. Notwithstanding Section 13.1 the Committee may adopt any amendment which may be necessary or appropriate to facilitate the administration, management and interpretation of the Plan or to conform the Plan thereto, or to qualify or maintain the Plan and Trust as a plan and trust meeting the requirements of Sections 401(a), 501(a), 401(k) and 401(m) of the Code or any other applicable section of law and the Regulations issued thereunder, provided said amendment does not have any material effect on the currently estimated cost to the Employer maintaining the Plan. Such amendment shall be in writing, executed by a majority of the Committee members and shall be effective on the date specified therein. Notice of any amendment by the Committee shall be given to the Board of Directors, the Trustee and to all Participating Employers within a reasonable time.
13.3 Restriction on Amendment. No amendment under Sections 13.1 or 13.2 shall:
(a)authorize or permit any part of the Plan assets (other than such part as is required to pay taxes, if any, and administrative expenses as provided in Section 16.16) to be used for or diverted to purposes other than for the exclusive benefit of the Participants and that Beneficiaries and alternate payees under the Plan prior to the satisfaction of all liabilities of the Plan; and
(b)deprive a Participant of his nonforfeitable right to benefits accrued as of the date of such amendment. If the vesting schedule of the Plan is amended in such a way that an Employee might in any Plan Year have less vesting credit under the new schedule than under the schedule prior to the amendment, each Employee with at least three Years of Service may elect to have his nonforfeitable percentage computed without regard to such amendment. The period during which such election may be made shall commence with the date the amendment is adopted and shall end on the later of (i) sixty days after the amendment is adopted, (ii) sixty days after the amendment becomes effective, or (iii) sixty days after the Employee or Participant is provided with written notice of the amendment.
13.4 Retroactivity. Any amendment or modification of any provisions of the Plan may be made retroactively if necessary or appropriate to qualify or maintain the Plan or the Trust as a plan and trust meeting the requirements of Section 401(a), 501(a), 401(k), or 401(m) of the Code or any other applicable section of law (including ERISA) and the Regulations issued thereunder.
13.5 Merger. The Plan may be merged or consolidated with, or its assets and liabilities may be transferred to any other
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document plan only if the benefits which would be received by a Participant in the event of a termination of the Plan immediately after such transfer, merger or consolidation are at least equal to the benefit such Participant would have received if the Plan had terminated immediately prior to the transfer, merger or consolidation.
ARTICLE XIV TERMINATION OF THE PLAN
14.1 Events Constituting Termination. It is expressly declared to be the desire and intention of each Participating Employer to continue the Plan in existence for an indefinite period of time. However, circumstances not now anticipated or foreseeable may arise in the future, as a result of which a Participating Employer may deem it impractical or unwise to continue the Plan established hereunder, and each Participating Employer therefore reserves the right to terminate the Plan at any time insofar as it affects its Employees. Any Participating Employer may terminate its participation in the Plan by action of its board of directors. Such termination shall be evidenced by an instrument of termination executed by an officer of the Participating Employer pursuant to authorization by its board of directors and shall be delivered to the Board of Directors, the Committee and to each other Participating Employer. To the maximum extent permitted by ERISA, the termination of the Plan as to any Participating Employer shall not in any way affect any other Participating Employer's participation in the Plan.
With respect to any Participating Employer which has adopted the Plan, its adjudication of bankruptcy or insolvency by any court of competent jurisdiction, its making of a general assignment for the benefit of creditors, its dissolution, merger, consolidation, other reorganization or discontinuance of business, unless coverage for its Employees under the Plan is continued by a successor company, or its complete discontinuance of contributions, shall operate to terminate the Plan with respect to such Participating Employer.
The Committee may require any Participating Employer to withdraw from the Plan for failure of the Participating Employer to make proper contributions or to comply with any other provision of the Plan.
14.2 Partial Termination. Upon the withdrawal of one or more Participating Employers or upon the termination of active participation of a group of Employees, the Committee shall determine, upon the advice of counsel to the Plan and under applicable law, whether a partial termination has occurred with respect to a group of Participants.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 14.3 Disposition of Accounts After a Termination. Upon termination or partial termination of the Plan or upon complete discontinuance of contributions, the Accounts of all affected Participants shall become fully vested and nonforfeitable. Upon the termination or partial termination or upon complete discontinuance of contributions, the Committee shall continue to administer the Plan, the Trustee shall continue to administer the Trust Fund, and all payments to Participants shall continue in accordance with the provisions of Article X; provided, however, that in the event of a partial termination the Committee may direct the Trustee to segregate the assets attributable to the Accounts of the affected Participants and apply such segregated assets for the benefit of such Participants.
After a Plan termination, the assets of the Plan shall be distributed to the Participants (and others for whose benefits accounts are then maintained) at such time as the Committee determines. No distribution shall be made of Employee-Deferral Account balances as a result of a termination of the Plan unless the Plan is terminated without the establishment or maintenance of another defined contribution plan, as provided in Code Sections 401(k)(2)(B)(i)(II) and 401(k)(10)(A)(i).
Notwithstanding the foregoing paragraph, upon or after the termination of the Plan, the Board of Directors shall have the power to terminate the Trust.
14.4 Internal Revenue Service Approval for Distribution. In the event that the Committee applies to the Internal Revenue Service for a determination that the termination of the Plan does not disqualify it, no person shall have any right or claim to any assets of the Trust Fund before the Internal Revenue Service shall determine that the Plan is qualified through the proposed distribution of assets under this Article XIV.
ARTICLE XV STAND-BY TOP-HEAVY PROVISIONS
15.1 Top Heavy Plan. The Plan will be considered a Top Heavy Plan for any Plan Year if it is determined to be a Top Heavy Plan as of the last day of the preceding Plan Year. Notwithstanding any other provisions in the Plan, the provisions of this Article XV shall apply and supersede all other provisions in the Plan with respect to a Plan Year for which the Plan is a Top Heavy Plan.
15.2 Definitions. For purposes of this Article XV and as otherwise used in this Plan, the following terms shall have the meanings set forth below:
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (a)"Aggregation Group" shall mean the group composed of each qualified retirement plan of a Participating Employer or an Affiliated Company in which a Key Employee is a Participant and each other qualified retirement plan of a Participating Employer or an Affiliated Company which enables a plan of a Participating Employer or an Affiliated Company in which a Key Employee is a Participant to satisfy Sections 401(a)(4) or 410 of the Code. In addition, the Company may choose to treat any other qualified retirement plan as a member of the Aggregation Group if such Aggregation Group will continue to satisfy Sections 401(a)(4) and 410 of the Code with such plan being taken into account.
(b)"Key Employee" shall mean a "Key Employee" as defined in Section 416(i)(1) and (5) of the Code or Regulations. For purposes of determining which employee is a Key Employee, compensation shall mean "compensation" as defined in Section 1.415-2(d) of the Regulations but including employer contributions made pursuant to a salary reduction arrangement.
(c)This Plan shall be a "Top Heavy Plan" for any Plan Year if, as of the Determination Date (as defined in paragraph (d) below), the aggregate of the Accounts under the Plan for Participants who are Key Employees (as defined in paragraph (b), above) exceeds 60% of the aggregate of the Accounts of all Participants or if this Plan is required to be in an Aggregation Group (as defined in paragraph (a), above) which for such Plan Year is a top-heavy group.
(d)"Determination Date" means for any Plan Year the last day of the immediately preceding Plan Year.
15.3 Vesting. If the Plan is a Top Heavy Plan with respect to any Plan Year, the Vested Interest of each Participant who has performed one Hour of Service on or after the date the Plan becomes a Top Heavy Plan shall not be less than the percentage determined in accordance with the following vesting schedule:
------Years of Service Vested Interest
Less than 2 years 0% 2 years but less than 3 20% 3 years but less than 4 40% 4 years but less than 5 60% 5 years but less than 6 80% 6 years or more 100%
15.4 Minimum Contribution. For each Plan Year that the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Plan is a Top Heavy Plan, the Employer Contribution (including forfeitures but excluding rollovers pursuant to Section 3.8) allocable to the Accounts of each Participant who has performed an Hour of Service at the end of the Plan Year and who is not a Key Employee, shall not be less than the lesser of (i) 3% of such Participant's compensation, within the meaning of Section 415 of the Code, or (ii) the percentage at which contributions and forfeitures for such Plan Year are made and allocated on behalf of the Key Employee for whom such percentage is the highest. Such allocation shall be made for each Participant who is not a Key Employee and who is employed by the Employer through the last payroll period ending within the Plan Year. For the purpose of determining the appropriate percentage under clause (i), all defined contribution plans required to be included in an Aggregation Group shall be treated as one plan. Clause (ii) shall not be applicable if the Plan is required to be included in an Aggregation Group which enables a defined benefit plan also required to be included in said Aggregation Group to satisfy Sections 401(a)(4) or 410 of the Code. Compensation, for purposes of determining a minimum contribution, is Section 415 Compensation.
15.5 Limitations on Contributions. For each Plan Year that the Plan is a Top Heavy Plan, 1.0 shall be substituted for 1.25 as the multiplicand of the dollar limitation in determining the denominator of the defined benefit plan fraction and of the defined contribution plan fraction for purposes of Section 415(e) of the Code. If, after substituting 90 percent for 60 percent wherever the latter appears in Section 416(g) of the Code, the Plan is not determined to be a Top Heavy Plan, the provisions of this Section 15.5 shall not be applicable if the minimum Employer Contribution (including forfeitures) allocable to the Accounts of any Participant who is not a Key Employee is determined by substituting "4" for "3". If the Participant is a participant in both a defined contribution plan and a defined benefit plan, the benefit from the defined contribution plan minimum shall be comparable to a 3% defined benefit plan benefit.
15.6 Other Plans. The Committee shall, to the extent permitted by the Code and in accordance with the Regulations, apply the provisions of this Article XV by taking into account the benefits payable and the contributions made under any other plans maintained by a Participating Employer or Affiliated Company which are qualified under Section 401(a) of the Code to prevent inappropriate omissions or required duplication of minimum benefits or contributions by making a comparability analysis to prove that the defined contribution plan is providing a benefit at least equal to the minimum benefit under the defined benefit plan.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document ARTICLE XVI GENERAL PROVISIONS
16.1 Plan Voluntary. Although it is intended that the Plan shall be continued indefinitely, this Plan is entirely voluntary on the part of the Participating Employers and the continuance of this Plan and the payment of contributions hereunder are not to be regarded as contractual obligations of the Participating Employers. The Plan shall not be deemed to constitute a contract between a Participating Employer and any Employee or to be a consideration for, or an inducement for, the employment of an Employee by an Employer. Nothing contained in the Plan shall be deemed to give any Employee the right to be retained in the service of an Employer or to interfere with the right of an Employer to discharge or to terminate the service of any Employee at any time without regard to the effects such discharge or termination may have on any rights under the Plan.
16.2 Payments to Minors and Incompetents. If a Participant, Beneficiary or alternate payee entitled to receive any benefits hereunder is a minor or is deemed by the Committee, or is adjudged, to be legally incapable of giving valid receipt and discharge for such benefits, such benefits will be paid to such person or institution as the Committee may designate or to the duly appointed guardian. Such payment shall, to the extent made, be deemed a complete discharge of any liability for such payment under the Plan.
16.3 Missing Payee. The Committee shall retain the address of each Participant, Beneficiary or alternate payee. Any notice sent to the last address filed with the Plan Administrator or for the last address indicated on an Employer's records will be binding upon a Participant or Beneficiary.
16.4 Required Information. Each Participant shall file with the Committee such pertinent information concerning himself, his spouse and his Beneficiary as the Committee may specify, and no Participant, or Beneficiary, or other person shall have any rights or be entitled to any benefits under the Plan unless and until such information is filed by or with respect to him.
16.5 Subject to Trust Agreement. Any and all rights or benefits accruing to any persons under the Plan shall be subject to the terms of the Trust Agreement.
16.6 Communications to Committee. All elections, designations, requests, notices, instructions, and other communications from an Employee, a Participant, Beneficiary, or alternate payee to the Committee required or permitted under the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Plan (i) shall be in such form as is prescribed from time to time by the Committee, (ii) shall be mailed by first-class mail or delivered to such location as shall be specified by the Committee, and (iii) shall be deemed to have been given and delivered only upon actual receipt thereof by the Committee at such location.
16.7 Communications from Employer or Committee. All notices, statements, reports and other communications from an Employer or the Committee to any Employee, Participant, Beneficiary or alternate payee shall be deemed to have been duly given when delivered to, or when mailed by first-class mail, postage prepaid and addressed to, such Employee, Participant, Beneficiary or alternate payee at his address last appearing on the records of the Committee or Company, or when posted by the Company or the Committee as permitted by law.
16.8 Action. Except as may be specifically provided herein, any action required or permitted to be taken by an Employer may be taken on behalf of the Employer by any authorized officer of the Employer.
16.9 Liability for Benefits. Neither the Trustee, the Employers, the Committee nor the Plan Administrator guarantee the Trust from loss or depreciation, nor do they guarantee any payment to any person. The liability of the Trustee, the Employers, the Committee and the Plan Administrator to make any payment is limited to the available assets of the Trust.
16.10 Named Fiduciary. The "named fiduciaries" of the Plan within the meaning of ERISA Section 403 shall be (a) the Employer, (b) the Plan Administrator, (c) the Trustee, and (d) the Committee.
16.11 Gender. Whenever used in the Plan the masculine gender includes the feminine.
16.12 Captions. The captions preceding the sections of the Plan have been inserted solely as a matter of convenience and in no way define or limit the scope or intent of any provisions of the Plan.
16.13 Applicable Law. The Plan and all rights thereunder shall be governed by and construed in accordance with ERISA and the laws of the State of Louisiana.
16.14 Reversion of Employer Contributions. In no event shall the assets of the Plan revert to the benefit of the Employer. Notwithstanding any provision of the Plan to the contrary, however, all contributions by Employers are conditioned upon the deductibility of such contribution under Code Section
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 404. To the extent that a deduction is disallowed for an Employer's contribution, the Trustee shall return the principal amount of such contribution upon the demand of the Employee. Any such demand shall be made within one year following the final determination of the disallowance.
Further, notwithstanding any provision of the Plan to the contrary, any contribution which is made by the Employer on account of a good faith mistake of fact may be returned to the Employer. The Employer shall notify the Trustee, in writing, of such mistake within one year of the contribution. The Trustee shall return the principal amount of the Employer Contribution as soon as possible, but in any event within 60 days after written notification by the Employer.
The maximum amount that may be returned to an Employer in the case of a mistake of fact or the disallowance of a deduction is the excess of (a) the amount contributed, over, as relevant, (b)(i) the amount that would have been contributed had no mistake of fact occurred, or (ii) the amount that would have been contributed had the contribution been limited to the amount that is deductible after any disallowance by the Internal Revenue Service. Earnings attributable to the excess contribution may not be returned to the Employer, but losses attributable thereto must reduce the amount to be so returned. Furthermore, if the withdrawal of the amount attributable to the mistaken or nondeductible contribution would cause the balance of the individual account of any Participant to be reduced to less than the balance which would have been in the account had the mistaken or nondeductible amount not been contributed, then the amount to be returned to the Employer must be limited so as to avoid such reduction.
16.15 Expenses. All expenses of administration shall be paid from the Trust unless paid directly by the Employer. The Employer may reimburse the Trust for any administrative expense paid by the Trust; such reimbursement shall not be treated as an Employer Contribution under the terms of the Plan. EXECUTED in multiple originals in New Orleans, Louisiana, effective as of the _____ day of ______, 1995.
WITNESSES: AVONDALE INDUSTRIES, INC.
BY:
AVONDALE GULFPORT MARINE INC.
BY:
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document AVONDALE INDUSTRIES OF NEW YORK, INC.
BY:
AVONDALE SERVICES CORP.
BY:
AVONDALE SHIPYARDS OF TEXAS, INC.
BY:
AVONDALE TRANSPORTATION COMPANY, INC.
BY:
AVONDALE ENTERPRISES, INC.
BY:
AVONDALE CONSTRUCTION MANAGEMENT,INC.
BY:
ACKNOWLEDGMENT
STATE OF LOUISIANA
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came and appeared ______, who being by me sworn did depose and state that he signed the foregoing Avondale Industries, Inc. 401(k) Savings Plan as a free act and deed on behalf of Avondale Industries, Inc. for the purposes therein set forth.
BY:
Print Name:
Title:
SWORN TO AND SUBSCRIBED BEFORE ME THIS _____ DAY OF ______, 1995.
NOTARY PUBLIC
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came and appeared ______, who being by me sworn did depose and state that he signed the foregoing Avondale Industries, Inc. 401(k) Savings Plan as a free act and deed on behalf of Avondale Gulfport Marine, Inc. for the purposes therein set forth.
BY:
Print Name:
Title:
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document SWORN TO AND SUBSCRIBED BEFORE ME THIS _____ DAY OF ______, 1995.
NOTARY PUBLIC
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came and appeared ______, who being by me sworn did depose and state that he signed the foregoing Avondale Industries, Inc. 401(k) Savings Plan as a free act and deed on behalf of Avondale Industries of New York, Inc. for the purposes therein set forth.
BY:
Print Name:
Title:
SWORN TO AND SUBSCRIBED BEFORE ME THIS _____ DAY OF ______, 1995.
NOTARY PUBLIC
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came and appeared ______, who being by me sworn did depose and state that he signed the foregoing Avondale Industries, Inc. 401(k) Savings Plan as a free act and deed on behalf of Avondale Services Corporation for the purposes therein set forth.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document BY:
Print Name:
Title:
SWORN TO AND SUBSCRIBED BEFORE ME THIS _____ DAY OF ______, 1995.
NOTARY PUBLIC
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came and appeared ______, who being by me sworn did depose and state that he signed the foregoing Avondale Industries, Inc. 401(k) Savings Plan as a free act and deed on behalf of Avondale Shipyards of Texas, Inc. for the purposes therein set forth.
BY:
Print Name:
Title:
SWORN TO AND SUBSCRIBED BEFORE ME THIS _____ DAY OF ______, 1995.
NOTARY PUBLIC
ACKNOWLEDGMENT
STATE OF LOUISIANA
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came and appeared ______, who being by me sworn did depose and state that he signed the foregoing Avondale Industries, Inc. 401(k) Savings Plan as a free act and deed on behalf of Avondale Transportation Company, Inc. for the purposes therein set forth.
BY:
Print Name:
Title:
SWORN TO AND SUBSCRIBED BEFORE ME THIS _____ DAY OF ______, 1995.
NOTARY PUBLIC
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came and appeared ______, who being by me sworn did depose and state that he signed the foregoing Avondale Industries, Inc. 401(k) Savings Plan as a free act and deed on behalf of Avondale Enterprises, Inc. for the purposes therein set forth.
BY:
Print Name:
Title:
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document SWORN TO AND SUBSCRIBED BEFORE ME THIS _____ DAY OF ______, 1995.
NOTARY PUBLIC
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came and appeared ______, who being by me sworn did depose and state that he signed the foregoing Avondale Industries, Inc. 401(k) Savings Plan as a free act and deed on behalf of Avondale Construction Management, Inc. for the purposes therein set forth.
BY:
Print Name:
Title:
SWORN TO AND SUBSCRIBED BEFORE ME THIS _____ DAY OF ______, 1995.
NOTARY PUBLIC
AVONDALE INDUSTRIES, INC. 401(k) SAVINGS PLAN
TABLE OF CONTENTS
Article Contents Section
I. DEFINITIONS Accounts 1.1 Active Participant 1.2 Affiliated Company 1.3 Beneficiary 1.4
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Board of Directors 1.5 Code 1.6 Committee 1.7 Company 1.8 Compensation 1.9 Plan Compensation Section 415 Compensation Total Compensation Disability 1.10 Disability Retirement Date 1.11 Eligible Employee 1.12 Employee 1.13 Employee-Deferral or Employee-Deferral Contribution 1.14 Employee-Deferral Account 1.15 Employee-Deferral Agreement 1.16 Employer 1.17 Employer Contribution 1.18 Employer Contribution Account 1.19 Employer Discretionary Contribution 1.20 Entry Date 1.21 ERISA 1.22 Highly Compensated Employee 1.23 Hour of Service 1.24 Matching Contribution 1.25 Non-Highly Compensated Employee 1.26 Non-Participating Employer 1.27 Normal Retirement Date and Normal Retirement Age 1.28 One-Year Break-in-Service 1.29 Parental Absence 1.30 Participant 1.31 Participating Employer 1.32 Plan 1.33 Plan Year 1.34 Rollover Contribution Account 1.35 Service Termination Date 1.36 Trust or Trust Agreement 1.37 Trustee 1.38 Trust Fund 1.39 Valuation Date 1.40 Vested Interest 1.41 Year of Service 1.42
II. PARTICIPATION Commencement of Participation 2.1 Termination of Participation 2.2 Participation Following Reemployment 2.3
III. EMPLOYEE-DEFERRALS Employee-Deferrals 3.1
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Delivery of Employee-Deferral Contributions 3.2 Changes in and Discontinuance of Employee-Deferrals 3.3 Dollar Limitation 3.4 Return of Excess Deferral Amounts 3.5 Non-Discrimination Rules 3.6 Return of Excess Contributions 3.7 Rollover Contributions 3.8
IV. MATCHING CONTRIBUTIONS Matching Contributions 4.1 Forfeitures 4.2 Delivery of Contributions 4.3 Adjustments if Employee-Deferral Contributions Adjusted 4.4 Discrimination Test-Matching Contributions 4.5 Qualified Matching Contributions, Qualified Nonelective Contributions 4.6
V. EMPLOYER DISCRETIONARY CONTRIBUTIONS Employer Discretionary Contributions 5.1 Allocation of Employer Discretionary Contributions 5.2 Top-Heavy Contributions 5.3
VI. VESTING Employee-Deferral Account 6.1 Rollover Contribution Account 6.2 Employer Contribution Account 6.3 Forfeitures 6.4 Reemployment Before Break in Service 6.5 Reemployment After Break in Service 6.6
VII. ALLOCATIONS Allocation of Contributions 7.1 Definitions 7.2 Annual Additions 7.3 Limitation for Other Defined Contribution Plans 7.4 Limitation for Defined Benefit Plan 7.5 VIII. TRUST FUND Plan Assets 8.1 Separate Accounts 8.2 Valuation 8.3 Investment Funds 8.4 Investment of Contributions 8.5 Transfer of Amounts Among Investment Funds 8.6
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Liability for Investment Decisions 8.7 Accounting Procedures 8.8
IX. BENEFITS Normal Retirement Date 9.1 Disability Retirement Date 9.2 Nonalienation of Benefits 9.3 Qualified Domestic Relations Order 9.4
X. PAYMENT OF BENEFITS Time of Payment 10.1 Death Benefit 10.2 Form of Distribution 10.3 Temporary Non-Payment of Benefits 10.4 Direct Rollover Rules 10.5 Notice 10.6
XI. IN-SERVICE DISTRIBUTION AND LOANS Distribution after Attaining Age 59 1/2 11.1 Financial Hardship 11.2 Loans to Participant 11.3
XII. ADMINISTRATION Board of Directors 12.1 401(k) Administrative Committee 12.2 Committee's Duties and Responsibilities 12.3 Committee's Powers 12.4 Chairman of the Committee 12.5 Claims Review Procedure 12.6 Information from Participants Beneficiaries and Alternate Payees 12.7 Actions 12.8 Bond 12.9 Indemnification 12.10
XIII. AMENDMENT OF THE PLAN Right to Amend or Suspend Contributions 13.1 Amendment by Committee 13.2 Restriction on Amendment 13.3 Retroactivity 13.4 Merger 13.5
XIV. TERMINATION OF THE PLAN Events Constituting Termination 14.1 Partial Termination 14.2 Disposition of Accounts After a Termination 14.3 Internal Revenue Service Approval for Distribution 14.4
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document XV. STAND-BY TOP-HEAVY PROVISIONS Top Heavy Plan 15.1 Definitions 15.2 Vesting 15.3 Minimum Contribution 15.4 Limitation on Contributions 15.5 Other Plans 15.6
XVI. GENERAL PROVISIONS Plan Voluntary 16.1 Payments to Minors and Incompetents 16.2 Missing Payee 16.3
Required Information 16.4 Subject to Trust Agreement 16.5 Communications to Committee 16.6 Communications from Employer or Committee 16.7 Action 16.8 Liability for Benefits 16.9 Named Fiduciary 16.10 Gender 16.11 Captions 16.12 Applicable Law 16.13 Reversion of Employer Contributions 16.14 Expenses 16.15
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document THIRD AMENDMENT, WAIVER AND CONSENT TO REVOLVING CREDIT AGREEMENT
THIS THIRD AMENDMENT, WAIVER AND CONSENT TO REVOLVING CREDIT AGREEMENT (this "Amendment") is entered into as of May 10, 1995, by and among AVONDALE INDUSTRIES, INC., a Louisiana corporation (the "Company"), the various financial institutions signatory hereto (collectively, the "Banks," and, individually, a "Bank"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as LC Issuer and as successor agent to BANK OF AMERICA ILLINOIS (successor-in-interest to CONTINENTAL BANK), as agent for the Banks (the "Agent"). Words and phrases having defined meanings in the Credit Agreement referred to below shall have the same respective meanings when used herein, unless otherwise expressly defined herein.
WITNESSETH:
WHEREAS, the parties hereto have entered into a Revolving Credit Agreement, dated as of May 10, 1994 as amended by that certain First Amendment and Waiver to Revolving Credit Agreement dated as of May 31, 1994 and that certain Second Amendment to Revolving Credit Agreement dated as of February 9, 1995 (collectively, the "Existing Agreement" and as amended by this Amendment, the "Credit Agreement"), relating to a revolving credit facility in an amount not to exceed $35,000,000 for the Company's ongoing working capital and general corporate needs;
WHEREAS, the Company, the Banks and the Agent desire (i) to amend and waive certain provisions of the Existing Agreement to permit the Company to extend certain financial accommodations to or for the benefit of American Heavy Lift Shipping Company, Inc., a Delaware corporation ("American Heavy Lift") in connection with the Company's construction of four (4) product tankers to be flagged under the United States flag for use in the United States coastwise trade and that comply with the requirements of the Oil Pollution Act of 1990 (collectively, the "AHL Tankers") and (ii) to increase the amount of the revolving credit facility to $42,500,000, in each case, on the terms and conditions set forth herein; and
WHEREAS, Bank of America National Trust and Savings Association has succeeded to the rights and duties of the Agent under the Credit Agreement and the other Loan Documents;
WHEREAS, the Company has delivered to the Agent and the Agent has delivered to the Banks an Extension Notice in which the Company requested that the Expiration Date of the Existing Agreement be extended for one additional year;
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document NOW THEREFORE, in consideration of the premises and the mutual agreements set forth herein and for other consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows; 1. Amendments to the Existing Agreement. Subject to and conditioned upon the fulfillment of each of the conditions precedent set forth in Section 4 hereof, the Existing Agreement is hereby amended as follows:
(a) The definition of "LC Issuer" is hereby amended to delete the terms thereof in their entirety and to insert the following therefor:
"LC Issuer" shall mean Bank of America Illinois and/or Bank of America National Trust and Savings Association in its individual capacity and not as Agent and, with the consent of the Agent, the Company and Bank of America National Trust and Savings Association, any Bank. With respect to Letters of Credit issued by the LC Issuer, the LC Issuer shall have the benefits of each provision of this Agreement as if it were a Bank, and provisions of this Agreement and the other Loan Documents which are for "the benefit of the Banks" shall also be for the benefit of the LC Issuer. If there shall be more than one LC Issuer at any time, to the extent relevant, the term "LC Issuer" shall mean both LC Issuers.
(b) The definition of "Line of Credit" is hereby amended to delete the terms thereof in their entirety and to insert the following therefor:
"Line of Credit" shall mean the aggregate revolving credit line extended by the Banks to the Company for Loans and Letters of Credit pursuant to and in accordance with the terms of this Agreement, in the amount of $42,500,000.00 as such amount may be reduced from time to time in accordance with Section 2.5 or Section VIII.
(c) Section 2.2(a) is hereby amended to delete the terms thereof in their entirety and to insert the following therefor:
The Loans made by each Bank pursuant hereto shall be evidenced by a promissory note of the Company substantially in the form of Exhibit J (as amended, supplemented, amended and restated, or otherwise modified, each a "Revolving Note" and collectively the "Revolving Notes"), made payable to the order of such Bank in a principal amount equal to such Bank's Commitment as of the Effective Date (or such other amount as may otherwise be relevant as a result of any
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document assignments permitted by this Agreement).
(d) Section 10.2 is hereby amended to delete the terms of the first sentence of the second paragraph thereof in its entirety and to insert the following therfor:
Notwithstanding the foregoing, without the consent of any Bank or the LC Issuer, the Agent, upon the request of the Company, shall release its Lien, or enter into intercreditor and/or subordination agreements with lenders to the Company's and any Subsidiary Guarantor's customers subordinating the Agent's Lien, on certain Inventory which shall constitute or form a part of work-in-process with
respect to which both title thereto has passed to customers of the Company or any Subsidiary Guarantor pursuant to the terms of the applicable contract with such customers and for which an Account has arisen (whether or not such Account has been billed).
(e) Schedule I is hereby amended to delete the terms thereof in their entirety and to insert Exhibit A attached hereto therefor.
2. Waiver Relating to American Heavy Lift Contract. Subject to and conditioned upon the fulfillment of each of the conditions precedent set forth in Section 4 hereof, and effective as of the date of this Amendment, the Required Banks hereby (i) waive the provisions of Sections 7.3 and 7.13 of the Existing Agreement to the extent, and solely to the extent, necessary to permit the Company to extend financial accommodations to American Heavy Lift (in the form of a guarantee) in connection with the Company's construction of the AHL Tankers in an aggregate principal amount not to exceed $6,000,000 for all such extensions and (ii) waive the provisions of Section 7.9 of the Existing Agreement to permit the Company to purchase the sterns of the AHL Tankers for consideration not to exceed $20,000,000 in the aggregate, which sterns shall be simultaneously resold to American Heavy Lift for consideration in the same amount and of the same type as that paid by the Company therefor. The documentation pursuant to which such extensions of credit are made and governed shall be substantially in the form of that documentation delivered to each of the Banks prior to the date of this Amendment, with any material changes thereto requiring the further consent of the Required Banks.
3. Acknowledgment Relating to Existing DOL Letter of Credit. Each of the Banks hereby acknowledges that Bank of America National Trust and Savings Association ("BofA") and Bank of America Illinois ("BAI") in their respective capacities as LC Issuers are contemplating the substitution of the current
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document $20,000,000 Letter of Credit issued by BAI in favor of the United States Department of Labor (the "DOL") (the "BAI Letter of Credit") with a $20,000,000 Letter of Credit issued by BofA in favor of the DOL (the "BofA Letter of Credit"). In order to facilitate such exchange the BofA Letter of Credit will be delivered to the DOL prior to the surrender of the BAI Letter of Credit to BAI. Each of the Banks acknowledges and agrees that it shall continue to have a participation interest in both the BAI Letter of Credit and the BofA Letter of Credit notwithstanding the limitations on their respective commitments set forth in the Credit Agreement. Upon BAI's actual receipt of the BAI Letter of Credit the BAI Letter of Credit shall be cancelled and the Agent shall notify each of the Banks of such cancellation.
4. Conditions Precedent to Effectiveness of Amendments, Waiver and Consent. The amendments and modifications set forth in Section 1 hereof and the waivers and consents set forth in Sections 2 hereof shall become effective upon, and are expressly conditioned upon, the fulfillment of each of the following conditions precedent on or prior to June 1, 1995:
(a) Amendment. The Agent shall have received this Amendment, duly executed and delivered by an authorized officer of the Company and each of the Banks.
(b) Subsidiary Guarantor Consent. The Agent shall have received (with a copy for each of the other Banks) from each of the Subsidiary Guarantors a reaffirmation of the Subsidiary Guarantee executed by it.
(c) Material Adverse Change. In the opinion of the Banks (as evidenced by their execution of this Amendment), no event or condition shall have occurred or exist which could reasonably be expected to have a Material Adverse Effect.
(d) MARAD Approval. The Agent shall have received copies of MARAD documentation approving the increase in the Line of Credit and the amendment to the 900 Foot Floating Drydock Mortgage reflecting such increase.
(e) Legal Opinion. The Agent shall have received the favorable opinion of Jones, Walker, Waechter, Poitevent, Carrere & Denegre, Louisiana counsel to the Company, addressed to the Agent, the LC Issuer and the Banks in form and substance satisfactory to the Agent and its counsel.
(f) Revised Revolving Notes. The Agent shall have received an Amended and Restated Revolving Note (or an amendment to the existing Revolving Notes) for each of the Banks evidencing the increase in each Bank's Commitment as contemplated by this Amendment.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (g) Fee. The Agent shall have received a fee equal to 0.25% of the $7,500,000 increase in the Line of Credit (which fee shall be paid to the Banks (including Bank of America Illinois as a Bank) pro rata based upon the respective increases in their Commitments), and an amendment processing fee for its own account pursuant to a separate letter agreement with the Company.
(h) American Heavy Lift Documentation. The Agent shall have received copies of all documentation relating to American Heavy Lift's issuance of bonds guaranteed by MARAD and the Company's related guarantees and such documents shall be in form and substance satisfactory to Agent and its counsel.
(i) Extension Documentation. The Agent shall have received a duly executed Consent Notice satisfactory to Agent from each of the Banks agreeing to extend the Expiration Date for one additional year (to May 10, 1997).
(j) Other Documents. The Agent shall have received such other documents, instruments and agreements as it shall have reasonably requested in connection with the transactions contemplated by this Amendment.
5. Representations, Warranties and Covenants. In order to induce the Agent and the Banks to enter into this Amendment, the Company hereby represents, warrants and covenants to the Agent and the Banks as follows:
(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
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document the legal, valid and binding obligations of the Company, and are enforceable against the Company in accordance with their terms.
(c) The representations and warranties contained in the Credit Agreement and the other Loan Documents are true and correct in all material respects on and as of the date hereof as though made on the date hereof, except to the extent that such representations expressly relate solely to an earlier date (in which case such representations and warranties were true and accurate on and as of such earlier date).
(d) No Default or Event of Default has occurred and is continuing.
(e) On or prior to May 31, 1995 the Company shall cause to be delivered to the Agent the favorable opinion of Jones, Walker, Waechter, Poitevent, Carrere & Denegre, Louisiana counsel to the Company, addressed to the Agent, the LC Issuer and the Banks in form and substance satisfactory to the Agent and its counsel with respect to the amendment to the 900 Foot Floating Drydock Mortgage reflecting the increase in the Commitments contemplated by this Amendment.
(f) The Company will not, without the prior written consent of the Required Banks, amend or otherwise modify (or agree to amend or otherwise modify) any provision of (i) those certain Credit Support Agreements, dated on or about the date hereof, by and between the Company and American Heavy Lift or (ii) any promissory notes, mortgages, security agreements or similar instruments or agreements executed pursuant to or in connection with such Credit Support Agreements.
6. Reference to and Effect Upon the Credit Agreement.
Upon the effectiveness of this Amendment, each reference in the Existing Agreement to "the Agreement", "hereunder", "hereof", "herein", or words of like import, shall mean and be a reference to the Credit Agreement, as amended hereby and each reference to the Existing Agreement in any other Loan Document shall mean and be a reference to the Credit Agreement, as amended hereby.
7. Reaffirmation; Expenses. The Company hereby reaffirms to the Agent and each of the Banks that, except as modified hereby, the Credit Agreement and all of the Loan Documents remain in full force and effect and have not been otherwise waived, modified or amended. Except as expressly modified hereby, all of the terms and conditions of the Credit
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Agreement shall remain unaltered and in full force and effect. The Company acknowledges that all reasonable legal expenses of the Agent related to this Amendment shall be paid by the Company.
8. Confirmation of Collateral Documents. The Company hereby (i) ratifies and confirms its obligations under the Collateral Documents and acknowledges and agrees that the Collateral Documents to which the Company is a party are the legal, valid and binding obligations of the Company, enforceable against it in accordance with their terms; and (ii) agrees that the Obligations (for purposes of each of such Collateral Documents) shall include, without limitation, the Obligations under and as defined in the Credit Agreement as amended by this Amendment.
9. Choice of Law. THIS AMENDMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF THE STATE OF ILLINOIS AND ANY DISPUTE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE COMPANY, THE SUBSIDIARIES, THE AGENT AND THE BANKS IN CONNECTION WITH THIS AMENDMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS OF THE STATE OF ILLINOIS.
10. Counterparts. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. One or more counterparts of this Amendment may be delivered by telecopier, with the intention that they shall have the same effect as an original counterpart thereof.
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Agreement as of the date first above written.
AVONDALE INDUSTRIES, INC.
By: /s/ THOMAS M. KITCHEN ------Name: Thomas M. Kitchen Title: Vice President
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent
By: /s/ DANIEL G. FARTHING ------Name: Daniel G. Farthing
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Title: Vice President
THE BANKS:
BANK OF AMERICA ILLINOIS, successor- in-interest to CONTINENTAL BANK, as a Bank and as LC Issuer
By: /s/ THOMAS BARNETT ------Name: Thomas Barnett Title: Vice President
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as LC Issuer
By: /s/ THOMAS BARNETT ------Name: Thomas Barnett Title: Vice President
WHITNEY NATIONAL BANK
By: /s/ ELMER H. HEMPHILL, JR. Name: Elmer H. Hemphill, Jr. Title: Senior Vice President
FIRST INTERSTATE BANK OF TEXAS,N.A.
By: /s/ FRANK W. SCHAGEMAN ------Name: Frank W. Schageman Title: Vice President
FIRST NATIONAL BANK OF COMMERCE
By: /s/ DAVID A. DOHERTY ------Name: David A. Doherty Title: VIce President
EXHIBIT A
SCHEDULE I TO AVONDALE INDUSTRIES, INC. REVOLVING CREDIT AGREEMENT
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Commitments Amount Percentage
Bank of America Illinois $18,200,000 42.8235295% Whitney National Bank $12,150,000 28.5882353% First National Bank of Commerce $ 6,075,000 14.2941176% First Interstate Bank $ 6,075,000 14.2941176%
Total $42,500,000 100.0000000%
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the "Guarantee"), the undersigned (the "Guarantor") guaranteed to the Secured Parties (as defined therein), subject to the terms, conditions and limitations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to the Company's execution of the foregoing Third Amendment, Waiver and Consent to Revolving Credit Agreement and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to the Company, whether heretofore or hereafter made, together with all interest thereon and all expenses in connection therewith.
AVONDALE GULFPORT MARINE, INC.
By /s/ THOMAS M. KITCHEN ------Thomas M. Kitchen Title:
Dated: May 10, 1995
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the "Guarantee"), the undersigned (the "Guarantor") guaranteed to the Secured Parties (as defined therein), subject to the terms, conditions and limitations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to the Company's execution of the foregoing Third Amendment, Waiver and Consent to Revolving Credit Agreement and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to the Company, whether heretofore or hereafter made, together with all interest thereon and all expenses in connection therewith.
AVONDALE TECHNICAL SERVICES, INC.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document By /s/ THOMAS M. KITCHEN ------Thomas M. Kitchen Title:
Dated: May 10, 1995
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the "Guarantee"), the undersigned (the "Guarantor") guaranteed to the Secured Parties (as defined therein), subject to the terms, conditions and limitations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to the Company's execution of the foregoing Third Amendment, Waiver and Consent to Revolving Credit Agreement and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to the Company, whether heretofore or hereafter made, together with all interest thereon and all expenses in connection therewith.
CRAWFORD TECHNICAL SERVICES, INC.
By \S\ B. L. HICKS ------B. L. Hicks Title:
Dated: May 10, 1995
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the "Guarantee"), the undersigned (the "Guarantor") guaranteed to the Secured Parties (as defined therein), subject to the terms, conditions and limitations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to the Company's execution of the foregoing Third Amendment, Waiver and Consent to Revolving Credit Agreement and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to the Company, whether heretofore or hereafter made, together with all interest thereon and all expenses in connection therewith.
GENCO INDUSTRIES, INC.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document By /s/ THOMAS M. KITCHEN ------Thomas M. Kitchen Title:
Dated: May 10, 1995
CONSENT
By Subsidiary Guarantee dated as of February 9, 1995 (the "Guarantee"), the undersigned (the "Guarantor") guaranteed to the Secured Parties (as defined therein), subject to the terms, conditions and limitations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to the Company's execution of the foregoing Third Amendment, Waiver and Consent to Revolving Credit Agreement and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to the Company, whether heretofore or hereafter made, together with all interest thereon and all expenses in connection therewith.
AVONDALE PROPERTIES, INC.
By /s/ THOMAS M. KITCHEN ------Thomas M. Kitchen Title:
Dated: May 10, 1995
By Subsidiary Guarantee dated as of February 9, 1995 (the "Guarantee"), the undersigned (the "Guarantor") guaranteed to the Secured Parties (as defined therein), subject to the terms, conditions and limitations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to the Company's execution of the foregoing Third Amendment, Waiver and Consent to Revolving Credit Agreement and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to the Company, whether heretofore or hereafter made, together with all interest thereon and all expenses in connection therewith.
AVONDALE LAND MANAGEMENT COMPANY, a Louisiana general partnership
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document By Avondale Industries, Inc., a general partner
By /s/ THOMAS M. KITCHEN ------Name: Thomas M. Kitchen Title:
By Avondale Properties, Inc., a general partner
By /s/ THOMAS M. KITCHEN ------Name: Thomas M. Kitchen Title:
Dated: May 10, 1995
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document FOURTH AMENDMENT AND CONSENT TO REVOLVING CREDIT AGREEMENT
THIS FOURTH AMENDMENT AND CONSENT TO REVOLVING CREDIT AGREEMENT (this "Amendment") is entered into as of September 1, 1995, by and among AVONDALE INDUSTRIES, INC., a Louisiana corporation (the "Company"), the various financial institutions signatory hereto (collectively, the "Banks," and, individually, a "Bank"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as LC Issuer and as successor agent to BANK OF AMERICA ILLINOIS (successor-in-interest to CONTINENTAL BANK), as agent for the Banks (the "Agent"). Words and phrases having defined meanings in the Credit Agreement referred to below shall have the same respective meanings when used herein, unless otherwise expressly defined herein.
WITNESSETH:
WHEREAS, the parties hereto have entered into a Revolving Credit Agreement, dated as of May 10, 1994 as amended by that certain First Amendment and Waiver to Revolving Credit Agreement dated as of May 31, 1994, that certain Second Amendment to Revolving Credit Agreement dated as of February 9, 1995 and that certain Third Amendment, Waiver and Consent to Revolving Credit Agreement dated as of May 10, 1995 (collectively, the "Existing Agreement" and as amended by this Amendment, the "Credit Agreement"), relating to a revolving credit facility in an amount not to exceed $42,500,000 for the Company's ongoing working capital and general corporate needs;
WHEREAS, the Company intends to submit certain bids to construct (i) an ocean roll on, roll off passenger ferry for the State of Alaska for a sale price of approximately $150,000,000 (the "Alaskan Ferry Project") and (ii) a Steel Hulled Barracks Craft, APL-61 Series, for the Naval Sea Systems Command (the "APL Project");
WHEREAS, in connection with its bid for the Alaskan Ferry Project, the Company must submit certain assurances in the form of a bid bond and payment and performance bonds in favor of the State of Alaska and in connection with its bid for the APL Project, the Company must submit certain assurances in the form of a bid and payment and performance bonds in favor of the Naval Sea Systems Command;
WHEREAS, in connection with the Alaskan Ferry Project, the Company has arranged with the State of Louisiana through the Department of Economic Development and the Commission of Administration, to provide a bid bond in an amount not to exceed
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document $5,000,000 and payment and performance bonds not to exceed $33,000,000 each (for an aggregate bonding of $71,000,000 of which no more than $66,000,000 shall be outstanding at any one time; all such bonds being hereinafter referred to as the "Alaskan Ferry Bonds"); WHEREAS, in connection with the APL Project, the Company has arranged with United States Fidelity and Guaranty Company to provide a bid bond in an amount not to exceed
$3,000,000, a payment bond in an amount not to exceed $3,000,000 and a performance bond in an amount not to exceed $5,000,000 (for an aggregate bonding of $11,000,000 of which no more than $8,000,000 shall be outstanding at any one time; all such bonds being hereinafter referred to as the "APL Bonds");
WHEREAS, as a condition precedent to providing the Alaskan Ferry Bonds, the State of Louisiana has required the Company to secure its reimbursement obligations with respect thereto with (i) a lien on the vessel to be constructed by the Company as part of the Alaskan Ferry Project, (ii) the related construction contract, (iii) all receivables arising therefrom and (iv) all proceeds and products of the foregoing (collectively, the "Alaskan Ferry Collateral");
WHEREAS, the Company has requested that the Banks waive and amend certain provisions of the Existing Agreement to (i) allow the Company to obtain the Alaskan Ferry Bonds and the APL Bonds, (ii) secure the Company's reimbursement obligations with respect to the Alaskan Ferry Bonds with the Alaskan Ferry Collateral and (iii) permit the Agent to subordinate any lien it has on the Alaskan Ferry Collateral;
NOW THEREFORE, in consideration of the premises and the mutual agreements set forth herein and for other consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows;
1. Amendments to the Existing Agreement. Subject to and conditioned upon the fulfillment of each of the conditions precedent set forth in Section 4 hereof, the Existing Agreement is hereby amended as follows:
(a) Section 1.1 of the Existing Agreement is hereby amended to add the following definitions thereto in proper alphabetical order:
"Alaskan Ferry Bonds" means, collectively, (i) a bid bond in an amount not to exceed $5,000,000 and (ii) payment and performance bonds not to exceed $33,000,000 each issued by the State of Louisiana through the Department of Economic Development and the Commission of Administration for the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document account of the Company in connection with the Alaskan Ferry Project.
"Alaskan Ferry Collateral" means, collectively, (i) the vessel to be constructed by the Company as part of the Alaskan Ferry Project, (ii) the related construction contract, (iii) all receivables arising therefrom, and (iv) all proceeds and products of the foregoing, but only to the extent such proceeds and products do not otherwise constitute Collateral.
"Alaskan Ferry Liens" means those Liens granted by the Company on the Alaskan Ferry Collateral to secure the Company's obligations to the State of Louisiana in connection with the Alaskan Ferry Bonds.
"Alaskan Ferry Project" means the Company's bid to
construct, and the construction of, an ocean roll on, roll off passenger ferry for the State of Alaska, which bid is to be made by the Company during September 1995.
"APL Bonds" means, collectively, (i) a bid bond in an amount not to exceed $3,000,000, (ii) a payment bond in an amount not to exceed $3,000,000 and (iii) a performance bond in an amount not to exceed $5,000,000 each issued by United States Fidelity and Guaranty Company for the account of the Company.
"APL Project" means the Company's bid to construct, and the construction of, a Steel Hulled Barracks Craft, APL-61 Series, for the Naval Sea Systems Command.
(b) Section 1.1 of the Existing Credit Agreement is hereby further amended to add the following sentence at the end of the definition of "Contingent Obligation" contained therein:
In no event shall the "Contingent Obligations" of the Company include its contingent reimbursement obligations to the State of Louisiana under or with respect to the Alaskan Ferry Bonds or its contingent reimbursement obligations to United States Fidelity and Guaranty Company under or with respect to the APL Bonds.
(c) Section VII of the Existing Agreement is hereby amended by adding the following new Section 7.23 thereto:
Section 7.23 Commingling of Alaskan Ferry Collateral with Collateral; Limitation on Alaskan Ferry Bonds; Limitation on APL Bonds. The Company shall not deposit, nor
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document shall it permit to be deposited, into any bank or depositary account in which the Agent has been granted a security interest or in which any proceeds of and Collateral are deposited, including, without limitation, the Control Accounts (as defined in the Security Agreement (Company)) any monies constituting Alaskan Ferry Collateral. At no time shall the aggregate outstanding amount of the Alaskan Ferry Bonds exceed $66,000,000. At no time shall the aggregate outstanding amount of the APL Bonds exceed $8,000,000.
(d) Section 7.2 of the Existing Agreement is hereby amended to delete clause (m) thereof in its entirety and to insert the following therefor:
(m) the MARAD Financing Liens and the Alaskan Ferry Liens;
2. Consent Relating to Subordination of Liens in the Alaskan Ferry Collateral. Notwithstanding anything to the contrary set forth in Section 10.2 of the Existing Agreement, without any further consent of any Bank or the LC Issuer, the Agent, upon the request of the Company, shall subordinate its Lien (if any) on the Alaskan Ferry Collateral in favor of the State of Louisiana. Any such subordination shall be made pursuant to an agreement in form and substance satisfactory to the Majority Banks in their sole discretion.
3. Conditions Precedent to Effectiveness of Amendments and Consent. The amendments and modifications set forth in Section 1 hereof and the consents set forth in Sections 2 hereof shall become effective upon, and are expressly conditioned upon, the fulfillment of each of the following conditions precedent on or prior to October 1, 1995:
(a) Amendment. The Agent shall have received this Amendment, duly executed and delivered by an authorized officer of the Company and each of the Banks.
(b) Subsidiary Guarantor Consent. The Agent shall have received (with a copy for each of the other Banks) from each of the Subsidiary Guarantors a reaffirmation of the Subsidiary Guarantee executed by it in the forms attached hereto.
(c) Material Adverse Change. In the opinion of the Banks (as evidenced by their execution of this Amendment), no event or condition shall have occurred or exist which could reasonably be expected to have a Material Adverse Effect.
(d) Legal Opinion. The Agent shall have received the favorable opinion of Jones, Walker, Waechter, Poitevent, Carrere
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document & Denegre, Louisiana counsel to the Company, addressed to the Agent, the LC Issuer and the Banks in form and substance satisfactory to the Agent and its counsel.
(e) Alaskan Ferry Project and APL Project Documentation. The Agent shall have received copies of all documentation relating to the Alaskan Ferry Project and the issuance of the Alaskan Ferry Bonds and the APL Project and the issuance of the APL Bonds and such documents shall be in form and substance satisfactory to the Majority Banks as evidenced by their execution hereof.
(f) Other Documents. The Agent shall have received such other documents, instruments and agreements as it shall have reasonably requested in connection with the transactions contemplated by this Amendment.
4. Representations, Warranties and Covenants. In order to induce the Agent and the Banks to enter into this Amendment, the Company hereby represents, warrants and covenants to the Agent and the Banks as follows:
(a) The execution, delivery and performance by the Company of this Amendment (i) are within the Company's corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) require no action by or in respect of, or filing with, any governmental body, agency or official, (iv) do not contravene, or constitute a default under, any provision of any applicable law, statute, ordinance, regulation, rule, order or other governmental restriction or of the Certificate or Articles of Incorporation or By-Laws of the Company, (v) do not contravene, or constitute a default under, any agreement, judgment, injunction, order, decree, indenture, contract, lease, instrument or other commitment to which the Company is a party or by which the Company or any of its assets are
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
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document true and correct in all material respects on and as of the date hereof as though made on the date hereof, except to the extent that such representations expressly relate solely to an earlier date (in which case such representations and warranties were true and accurate on and as of such earlier date).
(d) No Default or Event of Default has occurred and is continuing.
5. Reference to and Effect Upon the Credit Agreement. Upon the effectiveness of this Amendment, each reference in the Existing Agreement to "the Agreement", "hereunder", "hereof", "herein", or words of like import, shall mean and be a reference to the Credit Agreement, as amended hereby and each reference to the Existing Agreement in any other Loan Document shall mean and be a reference to the Credit Agreement, as amended hereby.
6. Reaffirmation; Expenses. The Company hereby reaffirms to the Agent and each of the Banks that, except as modified hereby, the Credit Agreement and all of the Loan Documents remain in full force and effect and have not been otherwise waived, modified or amended. Except as expressly modified hereby, all of the terms and conditions of the Credit Agreement shall remain unaltered and in full force and effect. The Company acknowledges that all reasonable legal fees and expenses of the Agent related to this Amendment shall be paid by the Company.
7. Confirmation of Collateral Documents. The Company hereby (i) ratifies and confirms its obligations under the Collateral Documents and acknowledges and agrees that the Collateral Documents to which the Company is a party are the legal, valid and binding obligations of the Company, enforceable against it in accordance with their terms; and (ii) agrees that the Obligations (for purposes of each of such Collateral Documents) shall include, without limitation, the Obligations under and as defined in the Credit Agreement as amended by this Amendment.
8. Choice of Law. THIS AMENDMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF THE STATE OF ILLINOIS AND ANY DISPUTE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE COMPANY,
THE SUBSIDIARIES, THE AGENT AND THE BANKS IN CONNECTION WITH THIS AMENDMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS OF THE STATE OF ILLINOIS.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 9. Counterparts. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. One or more counterparts of this Amendment may be delivered by telecopier, and if so delivered shall be deemed to be delivered with the intention that they shall have the same effect as an original counterpart hereof. Any party delivering any such counterpart by telecopy shall promptly forward to the Agent an original counterpart hereof.
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Agreement as of the date first above written.
AVONDALE INDUSTRIES, INC.
By: /s/ THOMAS M. KITCHEN ------Name: Thomas M. Kitchen Title: Vice President
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent
By: /s/ DANIEL G. FARTHING ------Name: Daniel G. Farthing Title: Vice President
THE BANKS:
BANK OF AMERICA ILLINOIS, successor- in-interest to CONTINENTAL BANK, as a Bank and as LC Issuer
By: /s/ W. THOMAS BARNETT ------Name: W. Thomas Barnett Title: Vice President
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as LC Issuer
By: /s/ W. THOMAS BARNETT ------Name: Thomas Barnett Title: Vice President
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document WHITNEY NATIONAL BANK
By: /s/ ELMER H. HEMPHILL, JR. ------Name: Elmer H. Hemphill, Jr. Title: Senior Vice President
FIRST INTERSTATE BANK OF TEXAS,N.A.
By: /s/ FRANK W. SCHAGEMAN ------Name: Frank W. Schageman Title: Vice President
FIRST NATIONAL BANK OF COMMERCE
By: /s/ DAVID A. DOHERTY ------Name: David A. Doherty Title: Vice President
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the "Guarantee"), the undersigned (the "Guarantor") guaranteed to the Secured Parties (as defined therein), subject to the terms, conditions and limitations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to the Company's execution of the foregoing Fourth Amendment and Consent to Revolving Credit Agreement and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to the Company, whether heretofore or hereafter made, together with all interest thereon and all expenses in connection therewith.
AVONDALE GULFPORT MARINE, INC.
By /s/ THOMAS M. KITCHEN ------Thomas M. Kitchen Title: Vice President, Secretary & Treasurer
Dated: September 1, 1995
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the "Guarantee"), the undersigned (the "Guarantor") guaranteed to the Secured Parties (as defined therein), subject to the terms, conditions and limitations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to the Company's execution of the foregoing Fourth Amendment and Consent to Revolving Credit Agreement and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to the Company, whether heretofore or hereafter made, together with all interest thereon and all expenses in connection therewith.
AVONDALE TECHNICAL SERVICES, INC.
By /s/ B. L. HICKS ------B. L. Hicks Title: Secretary/Treasurer
Dated: September 1, 1995
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the "Guarantee"), the undersigned (the "Guarantor") guaranteed to the Secured Parties (as defined therein), subject to the terms, conditions and limitations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to the Company's execution of the foregoing Fourth Amendment and Consent to Revolving Credit Agreement and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to the Company, whether heretofore or hereafter made, together with all interest thereon and all expenses in connection therewith.
CRAWFORD TECHNICAL SERVICES, INC.
By /s/ B. L. HICKS ------B. L. Hicks Title: Secretary/Treasurer
Dated: September 1, 1995
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the "Guarantee"), the undersigned (the "Guarantor") guaranteed to the Secured Parties (as defined therein), subject to the terms, conditions and limitations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to the Company's execution of the foregoing Fourth Amendment and Consent to Revolving Credit Agreement and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to the Company, whether heretofore or hereafter made, together with all interest thereon and all expenses in connection therewith.
GENCO INDUSTRIES, INC.
By /s/ B. L. HICKS ------B. L. Hicks Title: Secretary/Treasurer
Dated: September 1, 1995
CONSENT
By Subsidiary Guarantee dated as of February 9, 1995 (the "Guarantee"), the undersigned (the "Guarantor") guaranteed to the Secured Parties (as defined therein), subject to the terms, conditions and limitations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to the Company's execution of the foregoing Fourth Amendment and Consent to Revolving Credit Agreement and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to the Company, whether heretofore or hereafter made, together with all interest thereon and all expenses in connection therewith.
AVONDALE PROPERTIES, INC.
By /s/ THOMAS M. KITCHEN ------Thomas M. Kitchen Title: Vice President & Secretary
Dated: September 1, 1995
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document By Subsidiary Guarantee dated as of February 9, 1995 (the "Guarantee"), the undersigned (the "Guarantor") guaranteed to the Secured Parties (as defined therein), subject to the terms, conditions and limitations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to the Company's execution of the foregoing Fourth Amendment and Consent to Revolving Credit Agreement and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to the Company, whether heretofore or hereafter made, together with all interest thereon and all expenses in connection therewith.
AVONDALE LAND MANAGEMENT COMPANY, a Louisiana general partnership
By Avondale Industries, Inc., a general partner
By /s/ THOMAS M. KITCHEN ------Name: Thomas M. Kitchen Title: Vice President & CFO & Secretary
By Avondale Properties, Inc., a general partner
By /s/ THOMAS M. KITCHEN ------Name: Thomas M. Kitchen Title: Vice President & CFO & Secretary
Dated: September 1, 1995
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document FIFTH AMENDMENT TO REVOLVING CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO REVOLVING CREDIT AGREEMENT (this "Amendment") is entered into as of November 17, 1995, by and among AVONDALE INDUSTRIES, INC., a Louisiana corporation (the "Company"), the various financial institutions signatory hereto (collectively, the "Banks," and, individually, a "Bank"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as LC Issuer and as successor agent to BANK OF AMERICA ILLINOIS (successor-in-interest to CONTINENTAL BANK), as agent for the Banks (the "Agent"). Words and phrases having defined meanings in the Credit Agreement referred to below shall have the same respective meanings when used herein, unless otherwise expressly defined herein.
WITNESSETH:
WHEREAS, the parties hereto have entered into a Revolving Credit Agreement, dated as of May 10, 1994 as amended by that certain First Amendment and Waiver to Revolving Credit Agreement dated as of May 31, 1994, that certain Second Amendment to Revolving Credit Agreement dated as of February 9, 1995, that certain Third Amendment, Waiver and Consent to Revolving Credit Agreement dated as of May 10, 1995 and that certain Fourth Amendment and Consent to Revolving Credit Agreement dated as of September 1, 1995 (collectively, the "Existing Agreement" and as amended by this Amendment, the "Credit Agreement"), relating to a revolving credit facility in an amount not to exceed $42,500,000 for the Company's ongoing working capital and general corporate needs; and
WHEREAS, the Company has requested that the Banks agree to certain amendments and modifications to the terms of the Existing Agreement;
NOW THEREFORE, in consideration of the premises and the mutual agreements set forth herein and for other consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows;
1. Amendments to the Existing Agreement. Subject to and conditioned upon the fulfillment of each of the conditions precedent set forth in Section 2 hereof, the Existing Agreement is hereby amended as follows:
(a) Section 1.1 of the Existing Agreement is hereby amended to delete the definition of Applicable Margin set forth therein and to insert the following therefor:
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document "Applicable Margin" shall mean in respect of any Eurodollar Rate Loan, one and one-half percent (1.5%).
(b) Section 1.1 of the Existing Agreement is hereby further amended to delete clause (iii) of the definition of Cash Equivalent Investments and to insert the following therefor
(iii) repurchase agreements or reverse repurchase agreements with terms of not more than thirty (30) days from the date acquired, for securities of the type described in clause (i) above and entered into only with commercial banks having the qualifications described in clause (ii) above;
(c) Section 1.1 of the Existing Agreement is hereby amended to delete clause (i) of the definition of Eligible Billed Commercial Receivables thereof in its entirety and to insert the following therefor:
(i) with respect to such Account, no Account Debtor is
(i) incorporated in or primarily conducting business in any jurisdiction located outside the United States unless (A) such sale is either on an irrevocable letter of credit acceptable to the Agent or acceptance terms acceptable to the Agent or (B) such Account and the related Account Debtor is otherwise approved by the Agent in writing; provided that, the provisions of this clause (i) shall not apply (1) to the extent that such Account Debtor is British Petroleum or any of its Subsidiaries to the extent such Account is guaranteed by British Petroleum, or Holland America or any of its Subsidiaries to the extent such Account is guaranteed by Holland America or (2) to Primorsk Shipping Corporation (or an Affiliate thereof) with respect to the Primorsk Tanker Accounts to the extent, and only to the extent, that amounts are either on deposit with MARAD or guaranteed by MARAD and available for disbursement to pay such Accounts and no event has occurred or condition exists which allows MARAD not to disburse, or not to authorize disbursement of, such amounts in payment of such Accounts, or which allows a third party lender not to disburse such amounts in payment of such Accounts
(ii) an Affiliate of the Company or any of its Subsidiaries,
(iii) a foreign government or any agency, department or instrumentality thereof unless such sale
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document is on an irrevocable letter of credit acceptable to the Agent or acceptance terms acceptable to the Agent; provided that, the provisions of this clause (iii) shall not apply to Primorsk Shipping Corporation (or an Affiliate thereof) with respect to the Primorsk Tanker Accounts to the extent, and only to the extent, that amounts are either on deposit with MARAD or guaranteed by MARAD and available for disbursement to pay such Accounts and no event has occurred or condition exists which allows MARAD not to disburse, or authorize the disbursement of, such amounts in payment of such Accounts, or which allows a third party lender not to disburse such amounts in payment of such Accounts,
(iv) the subject of any reorganization, bankruptcy, debt arrangement, receivership,
custodianship, insolvency or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding (and such Account Debtor has not become insolvent or generally failed to pay, or admitted in writing its inability or unwillingness to pay, debts as they become due), or
(v) an agency, department or instrumentality of the United States or any state or local governmental authority in the United States;
(d) Section 1.1 of the Existing Agreement is hereby further amended to delete the definition of Letter of Credit Commission set forth therein and to insert the following therefor:
"Letter of Credit Commission" shall mean seven- eighths percent (0.875%) per annum.
(e) Section 1.1 of the Existing Agreement is hereby amended to add the following definition thereto in appropriate alphabetical order:
"Primorsk Tanker Accounts" means the Accounts owing to the Company by Primorsk Shipping Corporation (or an Affiliate thereof) in connection with Company's construction of up to seven 42,000 ton tankers for an aggregate purchase price equal to approximately $320 million pursuant to the terms of that certain contract dated August 7, 1995 between the Company and Primorsk Shipping Corporation, the construction of which is to be financed by MARAD.
(f) Section 2.6 of the Existing Agreement is hereby
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document amended by deleting the first sentence thereof in its entirety and inserting the following therefor:
The Company may, from time to time, on any Business Day, prepay the Base Rate Loans, in whole or in part, without premium or penalty, upon irrevocable written notice to the Agent by the Company no later than 10:00 a.m. Chicago time on the date of such prepayment which notice shall specify the date and amount of the prepayment.
(g) Section 6.2(e) of the Existing Agreement is hereby amended by deleting the phrase "within 90 days" set forth therein and inserting the phrase "within 95 days" therefor.
(h) Section 6.9 of the Existing Agreement is hereby amended to delete the terms thereof in their entirety and to insert the following therefor:
6.9 [Intentionally Omitted.]
2. Conditions Precedent to Effectiveness of Amendments and Consent. The amendments and modifications set forth in Section 1 hereof shall become effective upon, and are expressly conditioned upon, the fulfillment of each of the following conditions precedent on or prior to December 1, 1995:
(a) Amendment. The Agent shall have received this Amendment, duly executed and delivered by an authorized officer of the Company and each of the Banks.
(b) Subsidiary Guarantor Consent. The Agent shall have received (with a copy for each of the Banks) from each of the Subsidiary Guarantors a reaffirmation of the Subsidiary Guarantee executed by it in the form attached hereto.
(c) Material Adverse Change. In the opinion of the Banks (as evidenced by their execution of this Amendment), no event or condition shall have occurred or exist which could reasonably be expected to have a Material Adverse Effect.
(d) Legal Opinion. The Agent shall have received the favorable opinion of Jones, Walker, Waechter, Poitevent, Carrere & Denegre, Louisiana counsel to the Company, addressed to the Agent, the LC Issuer and the Banks in form and substance satisfactory to the Agent and its counsel.
(e) Other Documents. The Agent shall have received such other documents, instruments and agreements as it shall have reasonably requested in connection with the transactions contemplated by this Amendment.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 3. Additional Condition to Eligibility of the Primorsk Tanker Accounts. The Company, the Agent and the Banks agree that the Primorsk Tanker Accounts shall not constitute Eligible Billed Commercial Receivables unless and until the documentation relating to the financing of such Accounts is reviewed and consented to by Bank of America Illinois (in its capacity as a Bank), which consent is hereby authorized by each of, and may be given without further direction from any of, the other Banks.
4. Representations, Warranties and Covenants. In order to induce the Agent and the Banks to enter into this Amendment, the Company hereby represents, warrants and covenants to the Agent and the Banks as follows:
(a) The execution, delivery and performance by the Company of this Amendment (i) are within the Company's corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) require no action by or in respect of, or filing with, any governmental body, agency or official, (iv) do not contravene, or constitute a default under, any provision of any applicable law, statute, ordinance, regulation, rule, order or other governmental restriction or of the Certificate or Articles of Incorporation or By-Laws of the Company, (v) do not contravene, or constitute a default under, any agreement, judgment, injunction, order, decree, indenture, contract, lease, instrument or other commitment to which the Company is a party or by which the Company or any of its assets are bound and (vi) will not result in the creation or imposition of any Lien upon any asset of the Company under any existing indenture, mortgage, deed of trust, loan or credit agreement or other agreement or instrument to which the Company is a party or by which it or any of its assets may be bound or
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).
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (d) No Default or Event of Default has occurred and is continuing.
5. Reference to and Effect Upon the Credit Agreement. Upon the effectiveness of this Amendment, each reference in the Existing Agreement to "the Agreement", "hereunder", "hereof", "herein", or words of like import, shall mean and be a reference to the Credit Agreement, as amended hereby and each reference to the Existing Agreement in any other Loan Document shall mean and be a reference to the Credit Agreement, as amended hereby.
6. Reaffirmation; Expenses. The Company hereby reaffirms to the Agent and each of the Banks that, except as modified hereby, the Credit Agreement and all of the Loan Documents remain in full force and effect and have not been otherwise waived, modified or amended. Except as expressly modified hereby, all of the terms and conditions of the Credit Agreement shall remain unaltered and in full force and effect. The Company acknowledges that all reasonable legal fees and expenses of the Agent related to this Amendment shall be paid by the Company.
7. Confirmation of Collateral Documents. The Company hereby (i) ratifies and confirms its obligations under the Collateral Documents and acknowledges and agrees that the Collateral Documents to which the Company is a party are the legal, valid and binding obligations of the Company, enforceable against it in accordance with their terms; and (ii) agrees that the Obligations (for purposes of each of such Collateral Documents) shall include, without limitation, the Obligations under and as defined in the Credit Agreement as amended by this Amendment.
8. Choice of Law. THIS AMENDMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF THE STATE OF ILLINOIS AND ANY DISPUTE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE COMPANY, THE SUBSIDIARIES, THE AGENT AND THE BANKS IN CONNECTION WITH THIS AMENDMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS OF THE STATE OF ILLINOIS.
9. Counterparts. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. One or more counterparts of this Amendment may be delivered by telecopier, and if so delivered shall be deemed to be delivered with the intention that they shall have the same effect as an original counterpart hereof. Any party delivering any such counterpart by telecopy shall promptly forward to the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Agent an original counterpart hereof.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Agreement as of the date first above written.
AVONDALE INDUSTRIES, INC.
By: /s/ THOMAS M. KITCHEN ------Name: Thomas M. Kitchen Title: Vice President
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent
By: /s/ DANIEL G. FARTHING ------Name: Daniel G. Farthing Title: Vice President
THE BANKS:
BANK OF AMERICA ILLINOIS, successor- in-interest to CONTINENTAL BANK, as a Bank and as LC Issuer
By: /s/ W. THOMAS BARNETT ------Name: W. Thomas Barnett Title: Vice President
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as LC Issuer
By: /s/ W. THOMAS BARNETT ------Name: Thomas Barnett Title: Vice President
WHITNEY NATIONAL BANK
By: /s/ ELMER H. HEMPHILL, JR. ------
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Name: Elmer H. Hemphill, Jr. Title: Senior Vice President
FIRST INTERSTATE BANK OF TEXAS,N.A.
By: /s/ RANDALL L. WALKER ------Name: Randall L. Walker Title: Senior Vice President
FIRST NATIONAL BANK OF COMMERCE
By: /s/ DAVID A. DOHERTY ------Name: David A. Doherty Title: Vice President
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the "Guarantee"), the undersigned (the "Guarantor") guaranteed to the Secured Parties (as defined therein), subject to the terms, conditions and limitations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to the Company's execution of the foregoing Fifth Amendment to Revolving Credit Agreement and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to the Company, whether heretofore or hereafter made, together with all interest thereon and all expenses in connection therewith.
AVONDALE GULFPORT MARINE, INC.
By /s/ THOMAS M. KITCHEN ------Title: Vice President
Dated: November 17, 1995
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).
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The Guarantor consents to the Company's execution of the foregoing Fifth Amendment to Revolving Credit Agreement and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to the Company, whether heretofore or hereafter made, together with all interest thereon and all expenses in connection therewith.
AVONDALE TECHNICAL SERVICES, INC.
By /s/ THOMAS M. KITCHEN ------Title: President
Dated: November 17, 1995
CONSENT
By Subsidiary Guarantee dated as of May 10, 1994 (the "Guarantee"), the undersigned (the "Guarantor") guaranteed to the Secured Parties (as defined therein), subject to the terms, conditions and limitations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to the Company's execution of the foregoing Fifth Amendment to Revolving Credit Agreement and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to the Company, whether heretofore or hereafter made, together with all interest thereon and all expenses in connection therewith.
CRAWFORD TECHNICAL SERVICES, INC.
By /s/ B. L. HICKS ------B. L. Hicks Title: Secretary
Dated: November 17, 1995
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
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document foregoing Fifth Amendment to Revolving Credit Agreement and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to the Company, whether heretofore or hereafter made, together with all interest thereon and all expenses in connection therewith.
GENCO INDUSTRIES, INC.
By /s/ B. L. HICKS ------B. L. Hicks Title: Secretary
Dated: November 17, 1995
CONSENT
By Subsidiary Guarantee dated as of February 9, 1995 (the "Guarantee"), the undersigned (the "Guarantor") guaranteed to the Secured Parties (as defined therein), subject to the terms, conditions and limitations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to the Company's execution of the foregoing Fifth Amendment to Revolving Credit Agreement and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans, advances and extensions of credit to the Company, whether heretofore or hereafter made, together with all interest thereon and all expenses in connection therewith.
AVONDALE PROPERTIES, INC.
By /s/ THOMAS M. KITCHEN ------Title: Vice President
Dated: November 17, 1995
By Subsidiary Guarantee dated as of February 9, 1995 (the "Guarantee"), the undersigned (the "Guarantor") guaranteed to the Secured Parties (as defined therein), subject to the terms, conditions and limitations set forth therein, the prompt payment and performance of all of the Obligations (as defined therein). The Guarantor consents to the Company's execution of the foregoing Fifth Amendment to Revolving Credit Agreement and acknowledges the continued validity, enforceability and effectiveness of the Guarantee with respect to all loans,
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document advances and extensions of credit to the Company, whether heretofore or hereafter made, together with all interest thereon and all expenses in connection therewith.
AVONDALE LAND MANAGEMENT COMPANY, a Louisiana general partnership
By Avondale Industries, Inc., a general partner
By /s/ THOMAS M. KITCHEN ------Name: Thomas M. Kitchen Title: Vice President & CFO
By Avondale Properties, Inc., a general partner
By /s/ THOMAS M. KITCHEN ------Name: Thomas M. Kitchen Title: Vice President & CFO
Dated: November 17, 1995
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 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.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No. 33-65267 of Avondale Industries, Inc. on Form S-3 and in Registration Statement No. 33-31984 of Avondale Industries, Inc. on Forms S-8 and S-3 of our report dated January 19, 1996, appearing in this Annual Report on Form 10-K of Avondale Industries, Inc. for the year ended December 31, 1995.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana January 24, 1996
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document

5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AVONDALE INDUSTRIES, INC.'S ANNUAL REPORT FILED ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000
YEAR DEC-31-1995 DEC-31-1995 38,524 0 93,184 0 15,289 173,593 251,699 (121,661) 316,727 92,605 58,593 0 0 15,927 135,131 316,727 576,308 576,308 517,637 517,637 0 0 4,842 23,780 (4,400) 28,180 0 0 0 28,180 1.95 1.95
~~Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document~~

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document SUBSCRIPTION TO COMBUSTION LITIGATION PRELIMINARY SETTLEMENT AGREEMENT SETTING FORTH SPECIFIC TERMS OF THE SETTLEMENT BETWEEN AVONDALE AND THE PLAINTIFF CLASS
1. Avondale Industries, Inc. ("Avondale") has agreed to fully and completely settle all claims by the Plaintiff Class for the sum of $24,000,000, plus interest at the rate of 8% per annum from date of entry of judgment until paid, payable as detailed below and subject to the limitations described below. For purposes of this addendum and the Preliminary Settlement Agreement ("PSA") itself, the term "Related Parties" shall mean any and all of Avondale's representatives, agents, parent or subsidiary companies or corporations, affiliated companies or corporations as defined in 15 U.S.C. 80a-2, all brother or sister corporations (that is, all such entities that share a common parent with Avondale), predecessors in interest, successors in interest, and all of their employees, officers, shareholders, and directors, and any other person, firm, corporation or entity not heretofore named in this proceeding as a defendant or third-party defendant for which Avondale may be liable concerning the subject matter of the Combustion Litigation. The term Related Parties shall not include any party presently named as a defendant or third party defendant in these proceedings who is not a Compromising Party. Notwithstanding the definition of "Related Parties" contained in the PSA, for purposes of the PSA (insofar as it pertains to Avondale) and this addendum, the term "Related Parties" shall not include the insurers of Avondale or its Related Parties.
By execution of this Subscription and attachment to the Preliminary Settlement Agreement, Avondale stipulates to entry of judgment ("the judgment") granting judgment in favor of the Plaintiff Class and against Avondale Industries, Inc., in the sum of $24,000,000, plus interest at the rate of 8% per annum from date of entry of judgment until paid, subject to the terms of the PSA, all exhibits to the PSA, and all judgments or orders of any Court in the Combustion Litigation approving and incorporating the PSA and subject to the terms of this Subscription, and in accordance with the following terms:
~~A. Avondale will pay the sum of $4,000,000 cash or check into the Settlement Fund established by the PSA within thirty (30) days of the Court's preliminary approval thereof.~~
B. Avondale will execute a note in favor of the Plaintiff Class, payable through the Settlement Fund and in the form attached hereto, in the sum of $2,000,000 bearing interest at the rate of 8% per annum, due 18 months from the Court's preliminary approval of the PSA, to be delivered to the escrow agent of the Settlement Fund within thirty (30) days of the preliminary approval of the PSA.
C. Avondale assigns, pledges and transfers to the Plaintiff Class all of Avondale's rights, titles and interests in the proceeds of any and all primary, excess and umbrella insurance policies that may provide
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document coverage to Avondale for the tort claims asserted in the Combustion Litigation. Except as specifically set forth in subparagraph D(2) or D(3) below, the balance of the $24,000,000, plus interest at the rate of 8% per annum from date of entry of judgment until paid, shall be paid and payable solely out of the proceeds of the litigation against Avondale's insurers connected to the tort claims made in the Combustion Litigation, whether by way of the assignment, pledge and transfer contained herein, the direct action that has been filed by the PSC and the Plaintiff Class, or otherwise (hereinafter sometimes
referred to as "the litigation against Avondale's insurers"). The Plaintiff Class will be paid first, through the escrow agent of the Settlement Fund, all amounts recovered from Avondale's insurers (whether by way of the principal judgment or interest thereon) up to and including the sum of $18,000,000 plus the interest carry as defined below, and any recovery from Avondale's insurers (whether by way of the principal judgment or interest thereon) in excess of $18 million plus the interest carry as defined below will be paid 50% to the Plaintiff Class, through the escrow agent of the Settlement Fund, and 50% to Avondale. Except as specifically provided herein, neither Avondale, the Related Parties to Avondale, nor the Plaintiff Class will be liable to the others for interest on the obligations set forth in this subparagraph C. The term "interest carry" shall mean an amount equal to interest computed at the rate of 8% per annum on the sum of $6 million, with said interest computed from the date of preliminary approval of the PSA.
Nothing in this subscription shall affect, and Avondale expressly retains and reserves all rights, titles and interests in and to the claims, causes of action and proceeds of any and all of these policies that may provide coverage to Avondale for the costs incurred by Avondale associated with the remediation of the Combustion Site and/or the CERCLA cost recovery claims asserted in the Combustion Litigation.
Neither Avondale nor the Related Parties to Avondale shall have any responsibility for payment of any costs and/or legal fees associated with the litigation against Avondale's insurers incurred subsequent to the date of the Preliminary Settlement Agreement. However, nothing herein shall cause the PSC or the Plaintiff Class to become liable for the payment of legal fees incurred independently and exclusively by Avondale in pursuit of its right to recover for the costs incurred by Avondale associated with the remediation of the Combustion Site and/or CERCLA cost recovery claims asserted in the Combustion Litigation.
D. (1) Despite the assignment, pledge and transfer by Avondale to the Plaintiff Class of its rights to the proceeds of its applicable insurance policies for the tort claims, Avondale nevertheless remains liable for the remaining sum of $18,000,000 necessary to satisfy the full judgment of $24,000,000. However, in consideration of the above agreements and promises, it is stipulated and covenanted that the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Plaintiff Class will not execute on the judgement against Avondale and will not execute on the judgment against any of the Related Parties to Avondale if the sums detailed in subparagraphs 1.A. and 1.B. above are paid and if the litigation against Avondale's insurers results in a judgment (including judicial interest) or settlement equal to or greater than $6,000,000 plus interest at the rate of 8% per annum from the date of preliminary approval of the PSA, in which event neither the PSC nor the Plaintiff Class shall execute on its judgment. Any settlement with Avondale's insurers related to the claims made in the litigation against Avondale's insurers or any other settlement with Avondale's insurers related to the tort claims asserted in the Combustion Litigation that is in excess of $6,000,000 plus interest at the rate of 8% per annum from the date of preliminary approval of the PSA may be entered into at the sole discretion of the Plaintiffs' Steering Committee and the Plaintiff Class without Avondale's prior consent or agreement, and Avondale grants to the Plaintiffs' Steering Committee and the Plaintiff Class full authority and consent to enter into any such settlement with its insurers.
(2) If the litigation against Avondale's insurers results in a judgment (including judicial interest) of less than $6,000,000 plus interest at the rate of 8% per annum from the date of preliminary approval of the PSA, then he Plaintiff Class may execute on its judgment only to the extent necessary to obligate Avondale to pay the Plaintiff Class, in addition to those sums set forth in Subparagraphs 1.A. and 1.B. above, the difference between $6,000,000 plus interest at the rate of 8% per annum from the date of preliminary approval of the PSA and the amount of the judgment (including judicial interest).
(3) If the litigation against Avondale's insurers results in a settlement for less than $6,000,000 plus interest at the rate of 8% per annum from the date of preliminary approval of the PSA, which settlement may not be entered into without Avondale's expressly stated written approval, then the Plaintiff Class may execute on its judgment only to the extent necessary to obligate Avondale to pay the Plaintiff Class the difference between $6,000,000 plus interest at the rate of 8% per annum from the date of preliminary approval of the PSA and the amount of the settlement. If the Plaintiff Class settles the litigation against Avondale's insurers for less than $6,000,000 plus interest at the rate of 8% per annum from the date of preliminary approval of the PSA without Avondale's expressly stated written approval, then the Plaintiff Class may not execute on the judgment, and neither Avondale nor the Related Parties to Avondale shall have any further obligation to the Plaintiff Class.
~~(4) In no event shall the PSC or the Plaintiff Class execute on the judgment without giving Avondale reasonable advance notice of its intention to do so.~~
~~E. It is understood and agreed that Avondale shall have no personal obligation to fund the payment of any amount to the Plaintiff Class~~
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document other than the amounts specifically set forth in subparagraphs 1.A., 1.B., and, if required by the terms of this subscription, subparagraph 1.D.(2) or 1.D.(3), the intention of the covenant by the PSC and the Plaintiff Class not to execute on the judgment being that, while Avondale remains liable for all amounts, it will have no personal obligation to pay (and its assets, other than the insurance rights specifically assigned, transferred and pledged herein, shall not be used to satisfy or be subject to execution for satisfaction of) any amount in excess of the amounts specifically set forth in subparagraphs 1.A., 1.B., and, if required by the terms of this subscription, subparagraph 1.D.(2) or 1.D.(3). That is, Avondale shall not be obligated, either conditionally or unconditionally, to fund payments to the Plaintiff Class other than the $4,000,000 cash payment set forth in subparagraph 1.A., the $2,000,000 note set forth in subparagraph 1.B., and the conditional $6,000,000. Any other payment obligations to the Plaintiff Class shall be payable solely out of the proceeds of a recovery from Avondale's insurers for the tort claims, with no further contribution from Avondale. More specifically, without limitation, Avondale shall not be obligated to pay for or fill in any gaps in the excess insurance coverage, and the Class and the Class members will not attempt to execute or to collect any judgment or any portion of any judgment against Avondale's insurers to the extent and in the manner that the execution or collection of the judgment or any portion thereof would create in the judgment debtor any right to recover from Avondale or its Related Parties in such a manner as to cause Avondale to fund any amount in excess of the specific funding
~~obligations set forth in subparagraphs 1.A., 1.B., and, if required by the terms of this subscription, subparagraph 1.D.(2) or 1.D.(3).~~
2. In furtherance of this agreement and after a diligent, good faith review of its records and other information reasonably available to it, Avondale has by separate correspondence identified to the PSC the insurance policies that Avondale believes were in force and effect during the time periods pertinent to the Combustion Litigation. However, the identification and listing of those policies, or the failure to list or identify any policy or policies, is not intended to modify or limit the broad language of the assignment contained herein. Avondale makes no warranty or representation whatsoever as to the nature, extent or amount of the coverage provided by any policies, it being expressly understood and agreed that the Plaintiff Class and the PSC have relied exclusively upon the analysis and opinions of their own attorneys and experts to evaluate the coverage provided by the listed policies.
3. Avondale warrants that it has duly placed its insurers on notice of the claims of the Plaintiff Class and has placed the insurers on notice of the proposed settlement, and has recommended that the settlement of $24,000,000, plus interest at the rate of 8% per annum from date of entry of judgment until paid, is a fair, reasonable and just settlement, but that the insurers have declined to participate in settlement.
~~4. Now in further consideration of this subscription to the Preliminary~~
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Settlement Agreement, Avondale hereby assigns, pledges and transfers to the Plaintiff Class all of its rights, titles and interests in and to the proceeds which may be derived from any policies of insurance in Avondale's favor for the time periods in question with respect to the tort claims asserted in the Combustion Litigation and assigns, pledges and transfers to the Plaintiff Class all further claims, demands and causes of action of whatever nature or kind which Avondale has or may have against its insurers (primary, excess or umbrella) arising out of or related to or connected with the tort claims asserted in the Combustion Litigation and/or the referenced policies of insurance, including claims for penalties, interest and attorney's fees, but expressly excluding any claims related to or arising out of the costs incurred by Avondale associated with the remediation of the Combustion Site and/or CERCLA or LEQA cost recovery litigation related thereto.
5. In light of the insurers' refusal to provide coverage and/or to participate in settlement, it may become necessary to file declaratory judgment actions, third party claims and/or other suits or claims against the insurers. It is agreed that the prosecution of such a declaratory judgment action, third party claim or other claim or suit against Avondale's insurers, whether in the United States District Court for the Western District of Louisiana, or in any other court or proceeding, may be pursued in the name of Avondale, at the cost of the Plaintiff Class. Avondale agrees to provide reasonable cooperation in the pursuit of such claims, including but not limited to making witnesses available, providing documents and otherwise assisting and consulting with the Plaintiffs' Steering Committee. The Plaintiffs' Steering Committee agrees that it will consult reasonably with Avondale with regard to strategy decisions affecting the course of any litigation pursued in the name of Avondale.
Avondale agrees that subject to prior notification to it, the Plaintiff Class may file and pursue any such tort claims or suits against Avondale's insurers in the name of Avondale. To the extent that such representation of Avondale by the Plaintiffs' Steering Committee may present an actual or potential conflict of interest, the parties hereto expressly waive any objection to any such conflict of interest.
6. In the event of a settlement with Avondale's insurers made in accordance with the terms of this subscription, Avondale agrees to release and dismiss with prejudice its tort claims and suits against its insurers and, in order to effect such settlement, Avondale agrees to execute any necessary settlement agreements, receipts, releases and motions of dismissal that reasonably may be necessary to effectuate the terms of the settlement. Except as specifically set forth in this subscription and subject to the other terms of this subscription, any and all proceeds obtained through such settlement with Avondale's insurers connected with the tort claims asserted in the Combustion Litigation and resulting from the litigation against Avondale's insurers (except as set forth below) shall be the exclusive property of the Plaintiff Class, as is provided in the above pledge, assignment and transfer of its insurance proceeds by Avondale to the Plaintiff Class. Settlement of the tort claims by the Plaintiff Class shall not affect Avondale's CERCLA cost recovery claims in any manner and the proceeds of any settlement of the CERCLA cost recovery claims shall be the exclusive property of Avondale, as is provided
~~Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document in subparagraph 1.C.~~
~~7. Avondale and the Plaintiffs' Steering Committee hereby warrant, agree and stipulate that this subscription to the Preliminary Settlement Agreement is in fact a good faith settlement.~~
8. The PSC and the Plaintiff Class agree to diligently pursue the litigation contemplated by this subscription, and agree that they shall neither move to dismiss (except in connection with a settlement made in accordance with the foregoing) or abandon such litigation without first notifying Avondale and obtaining Avondale's written consent. If, after receiving such notice Avondale so requests, the Plaintiff Class shall assign, pledge, and transfer to Avondale the rights, titles and interests assigned herein by Avondale to the Plaintiff Class.
9. Provided that Avondale makes the payments set forth in subparagraphs 1.A. and 1.B. above, neither the PSC nor the Class shall record or cause to be recorded any judgment contemplated by this subscription or by the PSA in such a manner as to create a mortgage or lien affecting Avondale or its Related Parties or any of their respective properties or other assets. If, notwithstanding this provision, such a mortgage or lien is created, the Plaintiff Class is irrevocably obligated to execute such releases or other instruments as may be prepared and presented by Avondale or its Related Parties in order to release or terminate such mortgage or lien, and the Plaintiff Class hereby irrevocably appoints Liaison Counsel for the PSC, Calvin C.Fayard, Jr., or any successor Liaison Counsel for the PSC that may be appointed by the Court, as agent and attorney for the PSC to execute such releases or other instruments.
10. Upon request of Avondale, after satisfaction of the obligations undertaken by Avondale, whether by payment or by way of settlement with or judgment against Avondale's insurers, as set forth in this subscription, the PSC, through its Liaison Counsel, Calvin C. Fayard, Jr., or any successor Liaison Counsel for the PSC that may be appointed by the Court, shall execute a motion for issuance by the Clerk of Court of a Satisfaction of Judgment with regard to Avondale.
This subscription to the Combustion Litigation Preliminary Settlement Agreement has been executed on the date indicated below by the duly authorized representative of Avondale Industries, Inc. subject to and in accordance with the terms and conditions of the Preliminary Settlement Agreement.
~~AVONDALE INDUSTRIES, INC.~~
~~BY: /s/ R. DEAN CHURCH ------R. Dean Church~~
~~Date: 7/21/95 ------~~
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document This subscription to the Combustion Litigation Preliminary Settlement Agreement is accepted subject to and in accordance with the Preliminary Settlement Agreement.
~~THE PLAINTIFFS' STEERING COMMITTEE~~
~~BY: /s/ CALVIN C. FAYARD, JR. ------Calvin C. Fayard, Jr.~~
~~Date: July 24, 1995 ------~~
~~Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document~~