SECURED PROMISSORY NOTE
$337,500 Seattle, Washington
September 28, 1999
FOR VALUE RECEIVED, the undersigned, STEPHEN G. WELCH, a resident of the
State of
Washington ("Executive") hereby promises to pay to the order of TODD
SHIPYARDS
CORPORATION, a Delaware corporation with its chief executive office located
at 1801 16th
Avenue Southwest, Seattle, Washington, 98134 (the "Company") in lawful money
of the United
States of America, the principal sum of THREE HUNDRED THIRTY SEVEN THOUSAND
FIVE HUNDRED AND NO/100 DOLLARS ($337,500.00), together with interest thereon
from
the date hereof at an annual rate equal to 5.42%, compounded annually.
Principal and accrued interest shall be due and payable in full on the
earlier of: (a) September 28,
2001, or (b) the effective date as of which a Change of Control (as
hereinafter defined) occurs
with respect to the Company; provided, however, in the event any of the
Pledged Shares (as
hereinafter defined) and/or proceeds thereof are sold pursuant to and in
accordance with the
provisions of the Pledge Agreement (as hereinafter defined) and/or in the
event any cash
distribution is made in respect of any such Pledged Shares and/or proceeds
thereof, the net
proceeds generated therefrom (after deduction for brokerage commissions and
transfer taxes, if
any) shall be paid to the Company and shall be applied by the Company against
the indebtedness
evidenced hereby as a mandatory prepayment hereunder in the following order
of priority: (a)
first, to the payment of all accrued and unpaid interest on this Note; and
(b) second, the balance,
if any, to the payment of principal.
For purposes of this Note, "Change of Control" means: (a) the consummation by
the Company of
a merger, consolidation or other reorganization if the percentage of the
voting common stock of
the surviving or resulting entity held or received by all persons who were
owners of common
stock of the Company immediately prior to such merger, consolidation or
reorganization is less
than 50.1% of the total voting common stock of the surviving or resulting
entity outstanding, on
a fully diluted basis, immediately after such merger, consolidation or
reorganization and after
giving effect to any additional issuance of voting common stock contemplated
by the plan for
such merger, consolidation or reorganization; or (b) the acquisition by any
person or group (other
than (i) Executive, or (ii) a group composed solely of persons designated as
proxy-holders in
connection with a solicitation by or on behalf of the Company's management or
board of
directors) of ownership or voting rights (including voting rights pursuant to
any revocable or
irrevocable proxy) of a number of shares of the Company's voting common stock
equal to the
number of shares of the Company's voting common stock constituting 50.1% of
the number of
such shares actually voting in the election of directors of the Company at
the most recent
meeting of shareholders of the Company, and such person or group has made a
filing under
Section 13(d) of the Securities and Exchange Act of 1934 affirmatively
stating such persons' or
groups' intent to change control of the Company; or (c) the sale of all or
substantially all of the
assets of the Company to another corporation or enterprise that is not a
subsidiary, direct or
indirect, or other affiliate of the Company.
This Promissory Note (the "Note") is with full recourse and is further
secured by that certain
Collateral Pledge and Security Agreement between Executive and the Company of
even date
herewith (as the same may be amended, restated and/or otherwise modified from
time to time,
the "Pledge Agreement"), pursuant to which Executive has pledged, among other
things, certain
shares of the Company's common stock, $.01 par value (the "Pledged Shares")
as security for
the obligations evidenced hereby. The holder of this Note shall have full
recourse against the
Executive, but shall proceed first against the collateral.
Executive shall prepay this Note at the time and in the manner set forth
above, and may
otherwise prepay this Note in whole or in part at any time and from time to
time, without penalty
or premium.
The occurrence of any Event of Default (as defined in the Pledge Agreement)
shall constitute an
event of default under this Note and shall entitle the Company, at its
option, to declare the then
outstanding principal balance and accrued interest thereon to be, and the
same shall thereupon
become, immediately due and payable without notice to or demand upon
Executive, all of which
Executive hereby expressly waives.
Upon the occurrence of an event of default under this Note which has not been
waived by the
Company in writing, then the outstanding principal balance of this Note shall
bear interest from
and after the occurrence of such event of default at a rate equal to three
percent (3%) in excess of
the interest rate set forth above until said event of default is waived by
the Company in writing.
In the event the Company commences enforcement action to collect any amount
due hereunder,
the Company shall be entitled to recover all of its costs of collection
including, without
limitation, its reasonable attorneys fees.
This Note shall be governed by and construed in accordance with the laws of
the State of
Washington.
IN WITNESS WHEREOF, Executive has executed this Note as of the date first
above written.
___________________________
Name: Stephen G. Welch
Address:
16220 Fifth Court N.W.
Shoreline, Washington 98177