SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
AVONDALE INDUSTRIES, INC.
(Name of Registrant as Specified In Its Charter)
Board of Directors of Avondale Industries, Inc.
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth amount on which
the filing fee is calculated and state how it was determined.):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously.
Identify the previous filing by registration statement number, or
the Form of Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
Avondale Industries, Inc.
5100 River Road
Avondale, Louisiana 70094
______________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
______________________________
TO THE SHAREHOLDERS OF AVONDALE INDUSTRIES, INC.:
The Annual Meeting of Shareholders of Avondale Industries, Inc. will
be held at 10:00 a.m. local time on Friday, May 23, 1997, at the Waldorf-
Astoria Hotel, 301 Park Avenue, New York, New York 10022, to elect two
directors, consider a stock incentive plan, consider such of the three
shareholder proposals described in the proxy statement as are presented
at the Annual Meeting, and transact such other business as may properly
come before the meeting or any adjournment thereof.
Only shareholders of record at the close of business on April 10,
1997, are entitled to notice of, to vote at, and to attend the Annual
Meeting.
Shareholders are cordially invited to attend the meeting. If you
are unable to attend in person and wish to have your stock voted, PLEASE
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE
ACCOMPANYING POSTPAID ENVELOPE AS PROMPTLY AS POSSIBLE. Your proxy may
be revoked by appropriate notice to the Secretary at any time before it
is voted.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Thomas M. Kitchen
Thomas M. Kitchen
Secretary
Avondale, Louisiana
April 17, 1997
Avondale Industries, Inc.
5100 River Road
Avondale, Louisiana 70094
April 17, 1997
PROXY STATEMENT
This Proxy Statement is furnished to the shareholders of Avondale
Industries, Inc. (the "Company") in connection with the solicitation on
behalf of its Board of Directors of proxies for use at the Annual Meeting
of Shareholders of the Company on Friday, May 23, 1997, at 10:00 a.m.
local time, at the Waldorf-Astoria Hotel, 301 Park Avenue, New York, New
York 10022, and at any adjournment thereof (the "Annual Meeting").
Only shareholders of record at the close of business on April 10,
1997 are entitled to notice of, to vote at, and to attend the Annual
Meeting. On that date, the Company had outstanding 14,493,211 shares of
common stock, $1.00 par value per share (the "Common Stock"), with each
share being entitled to one vote with respect to each matter considered
at the Annual Meeting.
The enclosed proxy may be revoked by a shareholder at any time prior
to its exercise by filing with the Secretary of the Company a written
revocation or duly executed proxy bearing a later date. The proxy will
also be deemed revoked if the shareholder votes in person at the Annual
Meeting.
This Proxy Statement is first being mailed to shareholders on or
about April 17, 1997, and the Company will bear the cost of soliciting
proxies hereunder. In addition to the use of the mails, proxies may be
solicited by personal interview, telephone, telegraph, facsimile or e-
mail. Banks, brokerage houses and other institutions, nominees and
fiduciaries will be requested to forward the soliciting material to their
principals and to obtain authorization for the execution of proxies, and
the Company will, upon request, reimburse them for their expenses in so
acting. In addition, proxies will be solicited by Georgeson & Company,
Inc., an investor relations firm paid $8,000 plus its out-of-pocket
expenses to assist the Company in the solicitation of proxies.
ELECTION OF DIRECTORS
(Item 1 on the accompanying proxy card)
The Company's Articles of Incorporation and By-laws provide for a
Board of Directors of seven persons allocated among three classes of
directors who serve three-year staggered terms, with one class elected at
each annual shareholders' meeting. The term of one class of two
directors expires at the Annual Meeting. Accordingly, proxies cannot be
voted for more than two persons.
Unless authority to vote for the election of directors is withheld,
the persons named in the enclosed proxy will vote all shares represented
by the proxies received by them for the election of each of the below-
named persons who have been proposed for election by the Board of
Directors. In accordance with the Company's By-laws, if either of these
nominees declines or should become unable to serve for any reason, votes
will be cast instead for a substitute nominee designated by the Board of
Directors or, if none is designated, the number of authorized directors
will be automatically reduced by the total number of nominees withdrawn
from consideration. Directors are elected by plurality vote.
The following table sets forth certain information relating to the
directors of the Company as of April 1, 1997, including their beneficial
ownership of shares of Common Stock as determined in accordance with Rule
13d-3 under the Securities Exchange Act of 1934 (the "Exchange Act").
Unless otherwise indicated, (i) each director has been engaged in the
principal occupation shown for more than the past five years and (ii) the
shares shown as being beneficially owned are held with sole voting and
investment power.
Proposed Nominees for Election:
Name, Age, Principal Occupation Nominated
and Directorships in For Term Director Number of Shares
Other Public Corporations Expiring Since Beneficially Owned(1)
- -------------------------------- --------- -------- --------------------
Albert L. Bossier, Jr., 64 2000 1985 220,410(3)
Chairman of the Board, Chief
Executive Officer, and
President of the Company(2)
Hugh A. Thompson, 62 2000 1988 2,500
Emeritus Professor of
Mechanical Engineering,
Emeritus Dean of Engineering,
School of Engineering, Tulane
University (4)
The Board of Directors recommends a vote FOR each of the proposed
nominees.
Other Directors:
Name, Age, Principal Occupation Serving
and Directorships in Term Director Number of Shares
Other Public Corporations Expiring Since Beneficially Owned(1)
- ------------------------------- -------- -------- --------------------
Vice Admiral Francis R. Donovan, 62 1998 1994 --
Retired, U.S. Navy; President,
Designers and Planners,
Inc.(5)
William A. Harmeyer, 76 1998 1993 500
Retired; Vice President of the
Company until 1986
Thomas M. Kitchen, 49 1998 1987 116,409(6)
Vice President, Chief
Financial Officer and
Secretary of the Company(2)
Anthony J. Correro, III, 55 1999 1988 500
Partner, Correro Fishman
Haygood Phelps Weiss Walmsley
& Casteix, L.L.P. (law
firm)(7)
Kenneth B. Dupont, 58 1999 1987 34,033(8)
Vice President of the
Company;(2)
All directors and executive 374,344
officers as a group
(7 persons)
_____________________________
(1) None of the proposed nominees or directors beneficially owns in
excess of one percent of the Common Stock, except Mr. Bossier, who
beneficially owns approximately 1.5%. The 374,344 shares of Common
Stock beneficially owned by all directors and executive officers as
a group constitute approximately 2.6% of the Common Stock.
(2) Messrs. Bossier, Kitchen and Dupont are the executive officers of
the Company for whom compensation information is disclosed in this
Proxy Statement.
(3) Includes 8,776 shares allocated to Mr. Bossier's ESOP account and
100,215 shares that he has the right to acquire under currently
exercisable stock options.
(4) From 1991 to 1996, Dr. Thompson was a Professor of Engineering at,
and from 1976 to 1991 Dr. Thompson was the Dean of, the School of
Engineering of Tulane University, from which he retired in 1996.
(5) Until August 31, 1992, Admiral Donovan was on active duty with the
U.S. Navy, most recently as Commander, Military Sealift Command.
Since September 1992, he has served as a consultant to various
companies on maritime issues, and from November 1994 to June 1996 he
was employed as Strategic Mobility Coordinator, PRC Inc., an
information technology company. Since July 1996 he has served as
President of Designers and Planners, Inc., a marine engineering,
naval architecture and environmental planning firm.
(6) Includes 4,424 shares allocated to Mr. Kitchen's ESOP account and
59,160 shares that he has the right to acquire under currently
exercisable stock options.
(7) For more than five years prior to June 1994, Mr. Correro was a
partner in the law firm of Jones, Walker, Waechter, Poitevent,
Carrere & Denegre, L.L.P. Mr. Correro is also a director of Campo
Electronics, Appliances and Computers, Inc.
(8) Includes 3,829 shares allocated to Mr. Dupont's Avondale Employee
Stock Ownership Plan ("ESOP") account and 17,000 shares that he has
the right to acquire under currently exercisable stock options.
During 1996, the Board of Directors held nine meetings. Each
director attended at least 75% of the aggregate number of meetings held
during 1996 of the Board and any committees of which he was a member.
Members of the Board who are not officers receive an annual fee of
$12,000 and an additional fee of $1,500 for each meeting of the Board or
committee thereof attended, all or a portion of which they are permitted
to defer under a Directors' Deferred Compensation Plan. Deferred fees
earn interest at a rate of 8.5% per annum compounded annually, and are
payable in five equal installments or a lump sum upon the earliest of the
director's resignation, removal, attainment of age 65, or death. The
provisions of the plan, including the interest rate payable on deferred
fees, may be amended at any time by the Board of Directors. In addition
to the foregoing directors' fees, each director is reimbursed for
expenses incurred in attending meetings.
The Board has an Audit Committee, of which Messrs. Correro, Harmeyer
and Thompson are members, that coordinates communications between non-
committee directors and the Company's management, independent public
accountants and internal auditors with respect to financial accounting,
reporting and controls, assists the Board in fulfilling its fiduciary
responsibilities as to the accounting policies and reporting practices
and the sufficiency of auditing relative thereto of the Company, and
ensures the independence of the Company's independent accountants, the
integrity of management and the adequacy of disclosure to shareholders.
The Audit Committee met twice during 1996. The Board also has a
Compensation Committee, of which Admiral Donovan and Mr. Thompson are
members, that determines the general compensation policies of the
Company, determines the compensation to be paid to the executive officers
of the Company and administers the Company's Performance Share Plan and
Stock Appreciation Plan. The Compensation Committee met five times
during 1996.
The Board of Directors does not have a nominating committee. Any
shareholder desiring to nominate persons for election to the Board must
comply with the procedures set forth in the Company's Articles of
Incorporation ("Articles") and By-laws. Such nominations must be made by
written notice delivered to the Company's Secretary at its principal
executive offices, 5100 River Road, Avondale, Louisiana 70094, and
generally must be received no later than the close of business on the
tenth day following the date on which notice of the annual meeting is
mailed; provided that if notice or public disclosure of the date of the
meeting is given or made to shareholders more than 55 days prior to the
meeting, such nominations must be delivered to the Company's Secretary
not less than 45 days nor more than 90 days prior to the meeting. The
notice must include the following information with respect to each person
the shareholder proposes to nominate: (i) the name, age, business address
and residential address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares of
capital stock of the Company of which such person is the beneficial owner
(determined in accordance with Article VA. of the Company's Articles),
and (iv) any other information relating to such person that would be
required to be disclosed in solicitations of proxies for election of
directors, or would be otherwise required, in each case pursuant to
Regulation 14A under the Exchange Act. The notice must also include the
following information with respect to the shareholder giving the notice:
(i) the name and address of such shareholder and (ii) the class and
number of shares of capital stock of the Company of which such
shareholder is the beneficial owner (determined in accordance with
Article VA.).
PRINCIPAL SHAREHOLDERS
The following persons are, to the knowledge of the Company, the only
persons that beneficially owned, as of April 1, 1997, more than five
percent of the Common Stock, calculated in accordance with Rule 13d-3
under the Exchange Act. Unless otherwise indicated, all shares indicated
as beneficially owned are held with sole voting and investment power.
Number of Shares Percent of
Name and Address Beneficially Owned Class
- ---------------------------------- ------------------ ----------
Blanche S. Barlotta, R. Dean Church 2,953,362(1) 20.4%
and Rodney J. Duhon, Jr., as
Trustees of the Avondale Employee
Stock Ownership Trust
P. O. Box 50280
New Orleans, Louisiana 70150
Pioneering Management Corporation 1,199,500(2) 8.3%
60 State Street
Boston, Massachusetts 02109-1820
Mellon Bank Corporation 1,119,000(3) 7.7%
One Mellon Bank Center
Pittsburgh, PA 15258
____________
(1) The right to vote shares allocated to an ESOP participant's account
is passed through to the participant. There are currently no
unallocated shares other than a nominal number of shares that have
been forfeited by participants since January 1, 1997. Voting rights
of unallocated shares are exercised by the ESOP Trustees at the
direction of the ESOP Administrative Committee, the members of which
are the three ESOP Trustees and two other officers of the Company,
Ernest F. Griffin, Jr. and Eugene E. Blanchard, Jr. Investment
power over the ESOP shares is exercised by the ESOP Trustees at the
direction of the ESOP Administrative Committee, provided the ESOP
Trustees determine such direction to be consistent with their
fiduciary duties.
(2) Based solely upon information contained in a Schedule 13G filed by
Pioneering Management Corporation. Pioneering Management
Corporation is an investment adviser registered under the Investment
Advisers Act of 1940 and shares investment power with respect to all
of the shares reported.
(3) Based solely upon information contained in a Schedule 13G filed by
Mellon Bank Corporation. Mellon Bank Corporation shares dispositive
power with respect to 716,000 of the shares reported.
_________________________
EXECUTIVE COMPENSATION
Summary of Executive Compensation
The following table sets forth certain information regarding the
compensation of the Company's Chief Executive Officer and each of the
Company's other executive officers.
SUMMARY COMPENSATION TABLE
Annual
Compensation
------------
Name and All Other
Principal Positions Year Salary(1) Bonus Compensation
------------------- ---- --------- ----- ------------
Albert L. Bossier, Jr. 1996 $ 684,821 $ 173,870 $ 10,702(2)
Chairman of the Board, 1995 643,632 216,453 10,820
Chief Executive Officer 1994 621,864 46,640 12,425
and President
Thomas M. Kitchen 1996 320,415 81,351 7,660(3)
Vice President, Chief 1995 301,152 101,277 8,595
Financial Officer and 1994 290,952 21,821 10,080
Secretary
Kenneth B. Dupont 1996 240,231 60,993 6,423(4)
Vice President 1995 225,768 75,926 5,785
1994 218,112 16,358 3,329
______________________________
(1) Includes a lump sum payment equal to 2.8% of salary in lieu of a general
increase made to all employees in 1996.
(2) Consists of $1,902 in medical expense reimbursement and $8,800 in group
life and disability insurance premiums.
(3) Consists of $560 in medical expense reimbursement and $7,100 in group
life and disability insurance premiums.
(4) Consists of $1,323 in medical expense reimbursement and $5,100 in group
life and disability insurance premiums.
_________________________
Stock Options and Stock Appreciation Rights
The following table sets forth certain information concerning the
exercise of options and stock appreciation rights during 1996 and
unexercised options and stock appreciation rights on December 31, 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
Number of securities Value of Unexercised
underlying unexercised In-the-Money Options/SARs
Shares options/SARs at 12/31/96 at 12/31/96
acquired Value ----------------------------- --------------------------
Name on exercise realized Exercisable(1) Unexercisable Exercisable Unexercisable
---- ----------- -------- -------------- ------------- ----------- -------------
Albert L. Bossier, Jr. 10,710 $49,121 129,251 0 $ 585,451 $ 0
Thomas M. Kitchen 0 0 59,160 0 169,731 0
Kenneth B. Dupont 0 0 17,000 0 78,175 0
_____________________________
(1) All options are in tandem with stock appreciation rights except options
of Mr. Bossier with respect to 29,036 shares.
Pension Plans
Messrs. Bossier, Kitchen and Dupont participate in a qualified
defined-benefit pension plan (the "Qualified Pension Plan"), a non-
qualified supplemental pension plan (the "Supplemental Pension Plan") and
a non-qualified executive excess retirement plan (the "Excess Retirement
Plan").
The following table reflects the aggregate annual benefits under the
Qualified Pension Plan, Supplemental Pension Plan and Excess Retirement
Plan that an executive officer with the years of service and average
annual earnings (as calculated in accordance with the Qualified Pension
Plan and Supplemental Pension Plan) indicated can expect to receive under
the plans upon retirement at age 65. The benefits under the Qualified
Pension Plan and the Excess Retirement Plan are not subject to reduction
for Social Security but are offset by the actuarially equivalent value of
the shares of Common Stock and other assets allocated to the ESOP account
of each participant. This offset is not reflected in the table below.
Avondale Industries, Inc.
Estimated Annual Retirement Benefits
(Before Reduction for ESOP Benefits)
Years of Service
Average -----------------------------------------------------------------
Annual 15 20 25 30 35 40
Earnings years years years years years years
- -------- ----- ----- ----- ----- ----- -----
$250,000 $ 93,750 $ 112,500 $ 131,250 $ 150,000 $ 168,750 $ 187,500
300,000 112,500 135,000 157,500 180,000 202,500 225,000
350,000 131,250 157,500 183,750 210,000 236,250 262,500
400,000 150,000 180,000 210,000 240,000 270,000 300,000
450,000 168,750 202,500 236,250 270,000 303,750 337,500
500,000 187,500 225,000 262,500 300,000 337,500 375,000
550,000 206,250 247,500 288,750 330,000 371,250 412,500
600,000 225,000 270,000 315,000 360,000 405,000 450,000
650,000 243,750 292,500 341,250 390,000 438,750 487,500
700,000 262,500 315,000 367,500 420,000 472,500 525,000
750,000 281,250 337,500 393,750 450,000 506,250 562,500
800,000 300,000 360,000 420,000 480,000 540,000 600,000
850,000 318,750 382,500 446,250 510,000 573,750 637,500
900,000 337,500 405,000 472,500 540,000 607,500 675,000
950,000 356,250 427,500 498,750 570,000 641,250 712,500
Compensation covered by the plans consists of salary, bonus and an
automobile allowance. Covered compensation for Messrs. Bossier, Kitchen
and Dupont equals the amount reported in the Summary Compensation Table
under the heading "Annual Compensation" plus the automobile allowance.
Messrs. Bossier, Kitchen and Dupont have 40, 19 and 33 years of service,
respectively, under each of the plans.
Employment and Change in Control Agreements
All amounts set forth under "Salary" in the Summary Compensation
Table (other than amounts set forth in footnote 1 thereto) were paid
under employment agreements between the Company and each executive
officer (the "Employment Agreements") which provide for base salaries and
for annual bonuses as determined by the Board of Directors. The term of
the Employment Agreements has been extended to December 31, 1999. After
December 31, 1999, the Employment Agreement of each executive officer
continues from year to year, subject to the right of the Company or the
employee to terminate such Employment Agreement without cause at December
31, 1999 or on any subsequent December 31 (a "normal termination date"),
by giving at least 60 days prior written notice to the other.
Termination of employment that is properly effected by either party with
respect to a normal termination date is not a breach of the Employment
Agreement. Under the Employment Agreements, base salaries may be
increased but not decreased by the Board and bonuses are fixed from time
to time by the Board, provided that Mr. Bossier may not be paid a bonus
in an amount less than the bonus paid for the immediately preceding year.
For fiscal year 1995 and for any year for which the Management Incentive
Plan adopted by the Compensation Committee in early 1995 is in effect,
Mr. Bossier has waived his bonus rights under his Employment Agreement
with the understanding that he would instead receive the bonus that he
may become entitled to receive under the terms of such Plan.
Under the Employment Agreements, if the employment of an executive
officer is terminated by him for certain specified reasons or by the
Company (at any time other than a normal termination date) for any reason
other than cause (as defined therein), the executive officer is entitled
to a lump sum severance payment equal to three times the sum of his
annual salary and annual bonus, which amount is reduced if the executive
officer's employment is terminated after age 62. If the employment of
any of Messrs. Bossier, Kitchen or Dupont is terminated under
circumstances giving rise to their entitlement to claim their severance
benefits, the lump sum severance payments to which each would currently
be entitled are approximately $224,000, $1,200,000 and $885,000,
respectively.
The severance benefits payable under the Employment Agreements also
include the continuation of health and insurance benefits, and
supplemental lump sum pension benefits. These supplemental pension
benefits are based upon compensation and are reduced by benefits earned
under the Qualified Pension Plan. If supplemental pension benefits are
paid as part of an executive officer's severance benefits under an
Employment Agreement, benefits otherwise payable to him under the Excess
Retirement Plan are reduced. To the extent that any executive officer
had shares of Common Stock withheld from allocation to his ESOP account
because of the limits imposed by the Internal Revenue Code, the Company
has agreed to pay to him the fair market value of such shares upon
termination of his employment.
Each of Messrs. Bossier, Kitchen and Dupont is a party to a change
in control agreement with the Company. The agreements provide for the
payment of certain benefits upon an involuntary or constructive
termination of the officers' employment, except for cause, within three
years following a change in control. Benefits payable under the change
in control agreements include a cash payment in an amount equal to three
times salary plus bonus, continued health and life insurance benefits for
three years after termination and accelerated vesting under the Company's
supplemental retirement plans. To the extent payments are made under
these change in control agreements, no severance payments will be made
under the Employment Agreements.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee of the Board of Directors
are Mr. Thompson and Admiral Donovan, neither of whom is, or was
formerly, an officer or employee of the Company or any of its
subsidiaries, nor has or has had any other significant relationship with
the Company. The Compensation Committee determines the general
compensation policies of the Company, determines the compensation to be
paid to the executive officers of the Company and administers the
Company's Performance Share Plan and Stock Appreciation Plan. No
executive officer of the Company served in the last fiscal year as a
director or member of the compensation committee of another entity, one
of whose executive officers served as a director or on the Compensation
Committee.
Compensation Committee Report on Executive Compensation
The Compensation Committee (the "Committee") of the Board of
Directors furnished the following report with respect to compensation
paid to the executive officers of the Company in 1996.
Under the By-laws of the Company, the Committee, which is required
to be made up of outside independent directors, determines the general
compensation policies of the Company, determines the compensation to be
paid to the executive officers of the Company and administers the
Company's stock incentive plans.
As disclosed under the heading "Executive Compensation - Employment
and Change in Control Agreements," each of the Company's three executive
officers has an employment agreement with the Company that, as extended
by the Committee in December 1996, may not be terminated prior to
December 31, 1999 and that provides among other things, that the Board of
Directors has only the authority to increase, and not decrease, each
executive officer's base salary as compared to the amount paid during the
immediately preceding year. The decision by the Committee to extend the
contracts recognized such persons' significant contributions to the
improvement in the Company's financial position and performance during
1996, evidenced by the successful procurement in December 1996 of the
LPD-17 contract by a Company-led alliance, as well as additional
shipbuilding backlog, the significant increase in the Company's profits
and the substantial increase in shareholder value during 1996. The
Committee also believes that the extension of the Employment Agreements
will assure that the Company will continue to benefit from this
management group's experience in order to meet future challenges and
opportunities in the shipbuilding industry, including opportunities for
the Company to compete for potential commercial shipbuilding
opportunities and other shipbuilding initiatives of the U.S. Navy.
Compensation paid to the three executive officers during 1996
essentially consisted of two components, annual salary and a performance-
based cash bonus payable pursuant to a Management Incentive Plan adopted
by the Committee in early 1995 in which the executive officers
participate. With respect to salaries, the named executive officers and
all other employees were given an increase of approximately 3.5% during
1996, reflecting a cost of living adjustment. In lieu of a salary
increase for 1997, the executive officers and all other employees
received a lump-sum payment equal to 2.8% of salary in December 1996.
The bonuses paid to the executive officers were calculated as a
percentage of base salary in accordance with a formula established by the
Committee at the beginning of 1995. The formula for 1996 was based on
the Company achieving certain targets with respect to the following
criteria (in order of weight given by the Committee): operating profit
less interest charges, profit estimates at contract completion, direct
man hour estimates at contract completion, direct material estimates at
contract completion and composite labor rates. The formula called for
the bonus to be earned by the executive officers in increments of 1% of
their base salary based on their degree of success in achieving the
targets. If all of the targets established at the beginning of 1996 had
been achieved but not exceeded, then the bonuses payable to the executive
officers would have been approximately 25% of their respective base
salaries. Although the Company exceeded certain of the pre-established
targets, application of the formula resulted in a bonus paid of 25% of
their respective base salaries. For future years, the Committee may
establish different performance goals, criteria and formulas for
calculation of the bonus.
Although no stock options or other stock-based awards were granted
to executive officers in 1996, each of the executive officers continues
to hold stock options granted in earlier years. In addition, if the 1997
Stock Incentive Plan is approved by shareholders at the Annual Meeting,
the Committee intends to grant options to executive officers in 1997 and
to utilize stock compensation as a significant component of executive
compensation in the future. See "Proposal to Approve the Avondale
Industries, inc. 1997 Stock Incentive Plan."
Under Section 162(m) of the Internal Revenue Code, publicly held
companies may be prohibited from deducting as compensation expense for
federal income tax purposes total compensation paid in a single year to
an officer that is in excess of $1 million. When making its future
compensation decisions, the Compensation Committee intends to consider
the effects of Section 162(m) on the Company.
Hugh A. Thompson Francis R. Donovan
Performance Graph
The graph and corresponding table below compare the cumulative total
shareholder return on the Company's Common Stock from December 31, 1991
to December 31, 1996 with the cumulative total return on a NASDAQ index
and a peer group index, in each case assuming the investment of $100 on
December 31, 1991 at the closing price on that date and reinvestment of
dividends. The peer group index consists of Bethlehem Steel Co., General
Dynamics Corp., Litton Industries, Inc., McDermott International Inc.,
Tenneco Inc., Todd Shipyards Corp. and Trinity Industries Inc., and the
returns of each issuer are weighted according to its stock market
capitalization at the beginning of each period for which a return is
indicated.
[insert graph here]
Cumulative Total Shareholder Return
Index December 31,
----- __________________________________________________
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
The Company 100.00 50.58 178.79 187.88 351.52 521.21
Peer Group 100.00 147.79 235.26 212.12 257.98 288.84
NASDAQ 100.00 100.98 121.13 127.17 164.96 204.98
___________________________________________________
CERTAIN TRANSACTIONS
The law firm of Blue Williams, L.L.P., of which a son of Mr. Albert
L. Bossier, Jr., a director and the chief executive officer of the
Company, is one of the partners, was paid $885,285 in 1996 by the Company
for legal services rendered. The law firm of Correro Fishman Haygood
Phelps Weiss Walmsley & Casteix, L.L.P., of which Mr. Correro, a director
of the Company, is one of the partners, was retained by the Company to
render a nominal amount of legal services in 1996.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's
directors, executive officers and 10% shareholders to file with the
Securities and Exchange Commission initial reports of beneficial
ownership, and changes in beneficial ownership, of the Common Stock of
the Company. In February 1996 the Avondale Industries, Inc. Employee
Stock Ownership Plan ("ESOP") sold stock in a public offering. As a
result, a Statement of Changes in Beneficial Ownership on Form 4 ("Form
4") was required to have been filed by each of the members of the
Administrative Committee of the ESOP by March 10, 1996. However, the
determination of the actual number of shares sold out of each
participant's account was not finalized until after March 10, 1996, at
which time a Form 4 was filed by each of Blanche S. Barlotta, Eugene E.
Blanchard, Jr., Ronald Dean Church, Rodney J. Duhon, Jr. and Ernest F.
Griffin, Jr., to report sales of shares of Common Stock from each of
their ESOP accounts on February 12, 1996 and February 23, 1996.
PROPOSAL TO APPROVE THE AVONDALE INDUSTRIES, INC.
1997 STOCK INCENTIVE PLAN
(Item 2 on the accompanying proxy card)
General
The Board of Directors of the Company strongly believes that the
growth of the Company depends upon the efforts of its directors, officers
and key employees and that directors, officers and key employees are best
motivated to put forth maximum effort on behalf of the Company if a part
of their financial reward is tied to the performance of the Company's
Common Stock. In accordance with this philosophy, the Avondale
Industries, Inc. 1997 Stock Incentive Plan (the "Plan") was adopted by
the Board of Directors, subject to approval by the shareholders at the
Annual Meeting. The principal features of the Plan are summarized below.
This summary is qualified in its entirety, however, by reference to the
Plan, which is attached to this Proxy Statement as Exhibit A.
Key employees of the Company (including officers and directors
who are also full-time employees of the Company) will be eligible to
receive awards ("Incentives") under the Plan when designated by the
Compensation Committee. The Company currently has approximately 35
employees eligible to be granted Incentives under the Plan. Incentives
under the Plan may be granted in any one or a combination of the
following forms: (a) incentive stock options and non-qualified stock
options; (b) stock appreciation rights; (c) restricted stock; and (d)
performance shares.
Directors of the Company who are not also full-time employees of
the Company ("Outside Directors") will automatically be granted non-
qualified stock options through the Plan on an annual basis. The Company
currently has four Outside Directors.
Purpose of the Proposal
The Board of Directors is committed to creating and maintaining a
compensation system based to a significant extent on grants of equity-
based awards. The Board of Directors believes that providing directors,
members of management and key personnel with a proprietary interest in
the growth and performance of the Company stimulates individual
performance while simultaneously enhancing shareholder value. The Board
further believes that the Plan will provide the Company with the ability
to attract, retain and motivate key personnel and directors in a manner
that is tied to the interests of shareholders.
Terms of the Plan
Shares Issuable through the Plan. A total of 1,430,000 shares of
Common Stock is authorized to be issued under the Plan, representing
approximately 10% of the outstanding shares of Common Stock. Incentives
with respect to no more than 45,000 shares of Common Stock may be granted
through the Plan to a single participant in a calendar year. There are
currently options to acquire 197,368 shares outstanding under the
Company's Stock Appreciation Plan, substantially all of which expire in
mid-1999, and no additional awards may be granted thereunder. The
Committee intends that the total of outstanding options granted under the
Stock Appreciation Plan plus Incentives outstanding under the Plan will
at no time exceed 10% of the outstanding shares of Common Stock. The
closing sale price of a share of Common Stock, as reported by the Nasdaq
National Market on April 1, 1997, was $16.75.
The number and kind of shares of Common Stock subject to the Plan
and subject to outstanding Incentives would be appropriately adjusted in
the event of any change in the capital structure of the Company. The
Compensation Committee may also amend the terms of any Incentive to the
extent appropriate to provide participants with the same relative rights
before and after the occurrence of such an event. Shares of Common Stock
subject to Incentives that are cancelled, terminated or forfeited, or
shares of Common Stock that are issued as Incentives and forfeited or
reacquired by the Company will again be available for issuance under the
Plan. Incentives that are paid in cash are not counted against the total
number of shares issuable through the Plan.
Administration of the Plan. The Compensation Committee
administers the Plan and has authority to award Incentives under the
Plan, to interpret the Plan, to establish any rules or regulations
relating to the Plan that it determines to be appropriate, to make any
other determination that it believes necessary or advisable for the
proper administration of the Plan and to delegate its authority as
appropriate.
Amendments to the Plan. The Board may amend or discontinue the
Plan at any time, except that any amendment that would materially
increase the benefits under the Plan, materially increase the number of
securities that may be issued through the Plan or materially modify the
eligibility requirements must be approved by the shareholders. In
addition, no amendment or discontinuance may change or impair, without
the consent of the recipient thereof, an Incentive previously granted.
Types of Incentives to Employees. The Compensation Committee
will be authorized under the Plan to grant stock options, restricted
stock, stock appreciation rights and performance shares, each of which is
described further below.
Stock Options. The Compensation Committee may grant non-
qualified stock options or incentive stock options to purchase shares of
Common Stock. The Compensation Committee will determine the number and
exercise price of the options, and the time or times that the options
become exercisable, provided that the option exercise price may not be
less than the fair market value of the Common Stock on the date of grant.
The term of an option will also be determined by the Compensation
Committee, provided that the term of an incentive stock option may not
exceed 10 years. The Compensation Committee may accelerate the
exercisability of any stock option at any time. The Compensation
Committee may also approve the purchase by the Company of an unexercised
stock option from the optionee by mutual agreement for the difference
between the exercise price and the fair market value of the shares
covered by the option.
The option exercise price may be paid in cash, in shares of
Common Stock held for six months, in a combination of cash and shares of
Common Stock or through a broker assisted exercise arrangement approved
in advance by the Company.
Incentive stock options will be subject to certain additional
requirements necessary in order to qualify as incentive stock options
under Section 422 of the Code.
Restricted Stock. Shares of Common Stock may be granted by the
Compensation Committee to an eligible employee and made subject to
restrictions on sale, pledge or other transfer by the employee for a
certain period (the "Restricted Period"). A Restricted Period of at
least three years is required, except that if vesting of the shares is
subject to the attainment of specified performance goals, a Restricted
Period of one year or more is permitted. All shares of restricted stock
will be subject to such restrictions as the Compensation Committee may
provide in an agreement with the employee, including, among other things,
that the shares are required to be forfeited or resold to the Company in
the event of termination of employment or in the event specified
performance goals or targets are not met. Subject to the restrictions
provided in the agreement and the Plan, a participant receiving
restricted stock shall have all of the rights of a shareholder as to such
shares.
Stock Appreciation Rights. A stock appreciation right or "SAR"
is a right to receive, without payment to the Company, a number of shares
of Common Stock, cash or any combination thereof, the amount of which is
determined pursuant to the formula described below. A SAR may be granted
in conjunction with a stock option or alone without reference to any
stock option. A SAR granted in conjunction with a stock option may be
granted concurrently with the grant of such option or at such later time
as determined by the Committee and as to all or any portion of the shares
subject to the option.
The Plan confers on the Committee discretion to determine the
number of shares to which a SAR will relate as well as the duration and
exercisability terms of a SAR. In the case of a SAR granted with respect
to a stock option, the number of shares of Common Stock to which the SAR
pertains will be reduced in the same proportion that the holder exercises
the related option. Unless otherwise provided by the Committee, a SAR
will be exercisable for the same time period as any stock option to which
it relates. The Committee may accelerate the exercisability of an SAR.
Upon exercise of an SAR, the holder is entitled to receive an
amount which is equal to the aggregate amount of the appreciation in the
shares of Common Stock as to which the SAR is exercised. For this
purpose, the "appreciation" in the shares consists of the amount by which
the fair market value of the shares of Common Stock on the exercise date
exceeds (a) in the case of a SAR related to a stock option, the purchase
price of the shares under the option or (b) in the case of a SAR granted
alone without reference to a related stock option, an amount determined
by the Committee at the time of grant.
Performance Shares. Performance Shares consist of the grant by
the Company to an eligible employee of a contingent right to receive
shares of Common Stock or cash with or without any payment by the
employee. Each performance share will be subject to the achievement of
performance objectives by the Company, a subsidiary, division or
department by the end of a specified period. The number of shares
granted and the performance criteria will be determined by the
Compensation Committee. The award of performance shares shall not create
any rights in a participant as a shareholder of the Company until the
issuance of shares of Common Stock with respect to an award. Performance
shares may be awarded in conjunction with the grant of dividend
equivalent payment rights that entitle a participant to receive an amount
equal to the cash dividends paid on an equal number of shares of Common
Stock during the period beginning on the date of grant of an award and
ending on the date on which the award is paid or is forfeited.
Grant of Options to Outside Directors. The Plan provides for the
automatic grant to each Outside Director of an option to acquire 1,065
shares of Common Stock on the day following the annual meeting of
shareholders beginning with the 1997 annual meeting and each year
thereafter that the Plan remains in effect and shares of Common Stock
remain available for grant under the Plan on such dates.
The options granted to Outside Directors become exercisable 25%
per year beginning one year after grant, but become immediately
exercisable in full in the event of a change of control of the Company or
in the event of the Outside Director's retirement from the Board on or
after reaching age 65, death or disability. No stock option granted to
an Outside Director may be exercised more than 10 years after the date of
grant or more than one year after termination of Board service. The
exercise price of stock options granted to Outside Directors shall be
equal to the fair market value of a share of Common Stock on the date of
grant.
Termination of Employment. If an employee participant ceases to
be an employee of the Company for any reason, including death, any
Incentive may be exercised or shall expire at such time or times as may
be determined by the Committee in the Incentive agreement.
Change of Control. In the event of a change of control of the
Company, as defined in the Plan, all outstanding options and Incentives
granted pursuant to the Plan shall become fully exercisable, all
restrictions or limitations on any Incentives shall lapse and all
performance criteria and other conditions relating to the payment of
Incentives will be deemed to be achieved. Furthermore, the Compensation
Committee may take such other action with respect to an option or
Incentive as shall be provided in an agreement with the holder thereof.
In the event of any merger, consolidation or reorganization of
the Company with any other corporation, there shall be substituted for
each of the shares of Common Stock subject to the Plan and subject to
outstanding Incentives, the number and kind of shares of stock or other
securities to which the holders of Common Stock will be entitled in the
transaction.
Transferability of Incentives. Options, SARs and performance
shares are not transferable except (a) by will, (b) by the laws of
descent and distribution, or (c) only in the case of stock options,
pursuant to a domestic relations order, to family members, to a family
partnership, to a family limited liability company or to a trust for the
benefit of family members, if permitted by the Committee and so provided
in the Incentive Agreement.
Awards To Be Granted
If the Plan is approved by shareholders, the Committee currently
intends to grant non-qualified stock options soon after the Annual
Meeting to officers and employees as described in the table below. The
size of the grants to officers and employees is within the discretion of
the Committee and may change based upon future developments. The grants
to Outside Directors will be made on the day following the Annual Meeting
and grants of the same size will automatically be made under the terms of
the Plan on the day following future annual meetings while the Plan
remains in effect and shares of Common Stock remain available for
issuance through the Plan.
New Plan Benefits
Under the Avondale Industries, Inc.
1997 Stock Incentive Plan
Number of Shares
Name and Position Underlying Options
----------------- ------------------
Albert L. Bossier, Jr., Chairman of the Board, 27,826
Chief Executive Officer and President
Thomas M. Kitchen, Vice President, Chief Financial 13,019
Officer, Secretary and Director
Kenneth B. Dupont, Vice President and Director 9,761
Anthony J. Correro, III, Director 1,065
Francis R. Donovan, Director 1,065
William A. Harmeyer, Director 1,065
Hugh A. Thompson, Director 1,065
All Executive Officers 50,606
All Outside Directors 4,260
All Employees Other Than Executive Officers 135,073
Federal Income Tax Consequences
Under existing federal income tax provisions, a participant who
receives stock options, SARs, performance shares or who receives shares
of restricted stock that are subject to restrictions that create a
"substantial risk of forfeiture" (within the meaning of Section 83 of the
Code) will not normally realize any income, nor will the Company normally
receive any deduction for federal income tax purposes in the year such
Incentive is granted.
When a non-qualified stock option granted pursuant to the Plan is
exercised, the option holder will realize ordinary income measured by the
difference between the aggregate purchase price of the shares of Common
Stock as to which the option is exercised and the aggregate fair market
value of the shares of Common Stock on the exercise date and, subject to
the limitations of Section 162(m) of the Code, the Company will be
entitled to a deduction in the year the option is exercised equal to the
amount the option holder is required to treat as ordinary income.
An employee generally will not recognize any income upon the
exercise of any incentive stock option, but the excess of the fair market
value of the shares at the time of exercise over the option price will be
an item of tax preference, which may, depending on particular factors
relating to the employee, subject the employee to the alternative minimum
tax imposed by Section 55 of the Code. The alternative minimum tax is
imposed in addition to the federal individual income tax, and it is
intended to ensure that individual taxpayers do not completely avoid
federal income tax by using preference items. An employee will recognize
capital gain or loss in the amount of the difference between the exercise
price and the sale price on the sale or exchange of stock acquired
pursuant to the exercise of an incentive stock option, provided the
employee does not dispose of such stock within two years from the date of
grant and one year from the date of exercise of the incentive stock
option (the "required holding periods"). An employee disposing of such
shares before the expiration of the required holding period will
recognize ordinary income generally equal to the difference between the
option price and the fair market value of the stock on the date of
exercise. The remaining gain, if any, will be capital gain. The Company
will not be entitled to a federal income tax deduction in connection with
the exercise of an incentive stock option, except where the employee
disposes of the Common Stock received upon exercise before the expiration
of the required holding period.
If the exercise price of an option is paid by the surrender of
previously owned shares, the basis of the previously owned shares carries
over to the shares received in replacement therefor. If the option is a
non-qualified option, the income recognized on exercise is added to the
basis. If the option is an incentive stock option, the optionee will
recognize gain if the shares surrendered were acquired through the
exercise of an incentive stock option and have not been held for the
applicable holding period. This gain will be added to the basis of the
shares received in replacement of the previously owned shares.
When a SAR is exercised, the employee will recognize ordinary income
in the year of exercise equal to the value of the appreciation to which
the employee is entitled, and subject to Section 162(m) of the Code, the
Company will be entitled to a deduction in the same year and in the same
amount.
An employee who receives restricted stock or performance shares will
normally recognize taxable income on the date the shares become
transferable or no longer subject to substantial risk of forfeiture or on
the date of their earlier disposition. The amount of such taxable income
will be equal to the amount by which the fair market value of the shares
of Common Stock on the date such restrictions lapse (or any earlier date
on which the shares are disposed of) exceeds their purchase price, if
any. An employee may elect, however, to include in income in the year of
purchase or grant the excess of the fair market value of the shares of
Common Stock (without regard to any restrictions) on the date of purchase
or grant over its purchase price. Subject to the limitations imposed by
Section 162(m) of the Code, the Company will be entitled to a deduction
for compensation paid in the same year and in the same amount as income
is realized by the employee. Dividends currently paid to the participant
will be taxable compensation income to the participant and deductible by
the Company.
If, upon a change in control of the Company, the exercisability or
vesting of an Incentive granted under the Plan is accelerated, any excess
on the date of the change in control of the fair market value of the
shares or cash issued under accelerated Incentives over the purchase
price of such shares, if any, may be characterized as Parachute Payments
(within the meaning of Section 280G of the Code) if the sum of such
amounts and any other such contingent payments received by the employee
exceeds an amount equal to three times the "Base Amount" for such
employee. The Base Amount generally is the average of the annual
compensation of such employee for the five years preceding such change in
ownership or control. An Excess Parachute Payment, with respect to any
employee, is the excess of the Parachute Payments to such person, in the
aggregate, over and above such person's Base Amount. If the amounts
received by an employee upon a change in control are characterized as
Parachute Payments, such employee will be subject to a 20% excise tax on
the Excess Parachute Payment pursuant to Section 4999 of the Code, and
the Company will be denied any deduction with respect to such Excess
Parachute Payment.
The Company has entered into change of control agreements with its
three executive officers in which the Company has agreed, in the event of
a change of control, to pay each such officer the amounts necessary to
place the officer in the same position after payment of federal income
and excise taxes as the officer would have been in if Section 4999 of the
Code had not been applicable to him. See "Executive Compensation --
Change of Control Agreements." Such payment by the Company would not be
deductible for federal income tax purposes.
This summary of federal income tax consequences of non-qualified
stock options, incentive stock options, stock appreciation rights,
restricted stock and performance shares does not purport to be complete.
Reference should be made to the applicable provisions of the Code. There
also may be state and local income tax consequences applicable to
transactions involving Incentives.
Vote Required
Approval of the Plan requires the affirmative vote, cast in person
or by proxy, of the holders of at least a majority of the shares of
Common Stock present and entitled to vote at the Meeting.
The Board of Directors recommends a vote FOR approval of the 1997
Stock Incentive Plan.
SHAREHOLDER PROPOSALS
(Items 3-5 on the accompanying proxy card)
Set forth under this heading are three shareholder proposals, all of
which are unanimously opposed by the Company's Board of Directors. As
noted in further detail below all of these proposals were submitted to
the Company pursuant to Rule 14a-8 of the Exchange Act, and therefore, in
accordance with such rule, each of those proposals is set forth in full
below and is accompanied by the proponent's statement in support thereof.
The Board of Directors unanimously recommends a vote AGAINST each of
the shareholder proposals.
Statement by the Board of Directors in Opposition to all three
shareholder proposals
The proposals submitted under Rule 14a-8 (the "Rule 14a-8
Proposals"), and the statements in support thereof, were submitted by
three Company employees, Messrs. Angus Fountain, Steve Rodriguez and
Roger McGee, Sr., each of whom holds his shares of the Company's Common
Stock as a participant in the Avondale Employee Stock Ownership Plan (the
"ESOP"). All three of the proposals submitted for the 1997 Annual
Meeting are substantially identical to proposals submitted by the same
nominal proponents for the 1995 and 1996 Annual Meetings (and two of them
are also substantially identical to proposals submitted by a
"Shareholders Committee" for the 1994 Annual Meeting), and all were
overwhelmingly rejected by the Company's shareholders at the 1994, 1995
and 1996 Annual Meetings. The Board believes that the submission of
these three proposals is a continuation of the "corporate campaign" waged
against the Company by the United Brotherhood of Carpenters and Joiners
of America (the "UBC") and its affiliate, the Metal Trades Department,
AFL-CIO (the "AFL-CIO", and collectively with the UBC, the "Union"), and
follows upon similar campaigns sponsored by the Union during the
Company's last three annual meetings.
The Board of Directors unanimously opposes each of the three
shareholder proposals that are described below. The specific "corporate
governance" reasons for the Board's opposition to these proposals are set
forth under "Board of Directors' Statement in Opposition" that follows
each of the proposals. Each of these proposals attempts to undermine the
authority of the Board of Directors to manage the Company, and thereby
diminish the ability of the Board to deal resolutely with the Union. The
Board believes that it is the Union's hope that success in obtaining
support for any of the three proposals will demonstrate a lack of
confidence by the Company's shareholders in the Board of Directors.
It is apparent to your Board of Directors that the proposals and the
Union's corporate campaign are not in any sense motivated by a legitimate
desire to advance the best interests of the Company's shareholders.
Instead, the Union's tactics are a misguided effort to pressure
management to accede to the Union's demands as well as to give to the
Company's employees the appearance that the Union is actively working on
their behalf. The Board of Directors asks for your vote against each of
the three shareholder proposals in order to discourage the Union from
continuing to employ its abusive tactics. However, in addition to
objecting to these proposals because the Board and management believe
they are Union-sponsored, the Board and management also believe that each
of the proposals should be rejected by the shareholders for the reasons
set forth under the Company's specific "Statements in Opposition" which
immediately follow each of the three proposals and the proponent's
statement in support thereof.
Shareholder Proposals
The following three shareholder proposals were submitted by Messrs.
Angus Fountain, Steve Rodriguez and Roger McGee, Sr., respectively, each
of whom has notified the Company that he is the beneficial owner of more
than $1,000 of the Company's Common Stock and intends to remain a
beneficial holder of these shares through the date of the 1997 Annual
Meeting. Information regarding the addresses of each of these
shareholders will be furnished by the Company to any person, orally or in
writing as requested, promptly upon the receipt of any oral or written
request therefor. For the reasons set forth in its Statement in
Opposition above and its individual Statements in Opposition immediately
following each proposal, none of these proposals is supported by the
Board of Directors and the Board of Directors unanimously urges you to
vote AGAINST each of the three proposals.
A. Shareholder Proposal Regarding Shareholder Rights Plan
(Item 3 on the accompanying Proxy Card)
The resolution submitted by Mr. Fountain is as follows:
RESOLVED: That the shareholders of Avondale Industries, Inc.
("Company") urge the Board of Directors to redeem the rights issued
pursuant to the Stockholder Protection Rights Plan (unilaterally
adopted by the Board of Directors on September 26, 1994) unless a
majority of voting shares approve of these rights at a meeting of
shareholders held as soon as is practical.
Shareholder's Supporting Statement
This proposal received 49% of the vote last year. Avondale's
Stockholder Protection Rights Plan, commonly referred to as a "poison
pill," is an extremely powerful anti-takeover device that effectively
prevents a buyout or replacement of the board of directors without the
prior approval of the incumbent board of directors. The purpose of
Avondale's poison pill is to force shareholders interested in purchasing
the Company to negotiate with the board of directors instead of making a
tender offer directly to shareholders that would allow them to receive an
above market price in exchange for their shares.
Under Avondale's Stockholder Protection Rights Plan, the board of
directors may designate a shareholder owning 15% or more of the Company's
stock a hostile bidder and trigger the poison pill. Once triggered, all
shareholders, except the shareholder designated a hostile bidder, can
purchase one new share at half the market price for each share previously
owned. Triggering a poison pill would largely deplete the retained
earnings of the Company and reduce the value of the potential bidder's
investment in Avondale by half. It is this draconian financial penalty
that forces a potential bidder to negotiate with the board.
We believe poison pills hurt long-term shareholder value in two
ways:
1. We believe a poison pill is a powerful anti-takeover defense
that makes it extremely difficult to replace a board of
directors and senior management team whose performance is
deemed inadequate by shareholders.
2. We believe poison pills force potential buyers to work through
the board, making it more difficult to prepare an offer to
shareholders. We believe this added obstacle reduces the
probability that a potential buyer will make an offer to
shareholders to buy the Company.
We strongly believe that it is the shareholders (who are the owners
of the Company), not the directors and managers (who merely act as agents
for the owners), who should have the right to decide what is or is not a
fair price for their shareholdings. Poison pills take this decision away
from shareholders by forcing potential acquirors to negotiate with
management through the threat of severe dilution.
In the past five years, precatory shareholder proposals to redeem or
allow shareholder votes on poison pills have received majority support at
24 U.S. publicly-traded companies including Advanced Micro Devices,
Community Psychiatric Centers, Intel, Ryder and Wellman in 1994 alone.
Furthermore, since 1990 Philip Morris, Time Warner, United Technologies,
Lockheed and La Quinta Inns have voluntarily redeemed their poison pills.
None of these companies have experienced coercive or abusive takeover
tactics after the redemption of their poison pills.
Board of Directors' Statement in Opposition
The Board first notes that there are several inaccuracies in the
proponent's supporting statement, including his report of last year's
vote. In fact, as reported in the Company's Form 10-Q for the second
quarter of 1996, over 65% of the vote present at the 1996 Annual Meeting
was cast against the proposal regarding the redemption of rights issued
pursuant to the Avondale Stockholder Protection Rights Plan. Moreover,
although the proponent has listed a handful of companies at which
shareholder proposals requesting the redemption of a rights plan
apparently received a majority of the votes cast, most of these companies
did not redeem their rights plans and several re-adopted rights plans to
replace existing rights plans that were expiring. Moreover, some
companies listed by the proponent as having redeemed their rights plans
in fact have current rights plans or simply allowed their rights plan to
expire in accordance with its terms. While a number of companies may
have redeemed their rights, there is no indication as to the
circumstances that may have led the Boards of Directors of those
companies to conclude that such action was in the best interest of their
respective company's shareholders.
In adopting a shareholder protection rights plan (the "Rights
Plan"), the Board's goal was (and still is) to protect the interests of
the Company and all shareholders. The Rights Plan is designed to protect
against attempts to acquire the Company for an inadequate price and to
protect against abusive practices that do not treat all shareholders
equally, such as coercive, partial or two-tiered bids and stock
accumulation programs in which all shareholders do not share in the
premium associated with a change in control. Such practices can, and are
often intended to, pressure shareholders into tendering their investments
prior to realizing the full value or total potential of such investments.
The Rights Plan also permits the Board to deal more effectively with
"greenmail" transactions where an acquiring person seeks a large short-
term profit at the expense of the Company and its shareholders.
The Rights Plan is intended to create an incentive for a potential
acquiror to negotiate in good faith with the Board. The Plan also gives
the Board a greater period of time within which it can properly evaluate,
and respond in an orderly and considered manner to, an unsolicited bid.
This additional time is important because hostile bidders frequently seek
to "stampede" shareholders into accepting their offer at an unfair price.
The Rights Plan positions the Board to negotiate a higher price for the
shareholders, from the original bidder or a third party, when the sale of
the Company is considered to be in the best interests of the Company and
its shareholders. Even though a bidder may offer a premium over the
current market price of the target company's stock, that premium does not
necessarily recognize the inherent value of the target company. The
bidder, of course, can be expected to act in its own self interest; in
other words, to try to acquire the target company at the lowest possible
price and to pressure shareholders into selling. The Rights Plan
provides, in the Board's opinion, valuable shareholder protection against
that happening.
The Board's overriding objective in adopting the Plan was to
preserve and obtain the Company's long-term value for the benefit of all
of its shareholders. The Board believes there is strong empirical
evidence that such plans better position the Board to meet this
objective.
The Rights Plan is not intended to, and will not, prevent
unsolicited, non-abusive offers to acquire the Company at a fair price.
The Rights Plan simply strengthens the ability of the Board to fulfill
its fiduciary responsibilities to the Company's shareholders because it
provides the Board with the opportunity to evaluate the fairness of any
unsolicited offer and the credibility of the bidder. The Board's ability
to negotiate with a potential acquiror on behalf of all shareholders is
significantly greater than that of the shareholders individually. Of
course, in deciding whether to redeem the rights in connection with any
unsolicited offer, the Board will be bound by its fiduciary obligations
to act in the best interests of the Company and its shareholders.
The Board of Directors adopted the Rights Plan in September 1994
following its review of comprehensive analytical materials presented to
the Board by a well-regarded independent investment banking firm and
special outside legal counsel and a face-to-face presentation made by
such investment banking firm and legal counsel to the Board. Based on
such review and the respective advice of such firms, the Board believes
that the adoption and continuing existence of the Rights Plan is in the
best interests of the Company and shareholders and will not deter a
suitably-financed offer that is made at a fair price to all shareholders.
The success of any such offer will of course depend on various factors,
including the source of the bidder's financing. More than 1,000 U.S.
corporations, including other companies engaged in businesses similar to
the Company's, have adopted shareholder protection plans similar to the
Rights Plan, including Western Atlas, Inc., Litton Industries Inc.,
McDermott International Inc., McDonnell Douglas Corporation, Reebok
International, Inc., Georgia Pacific Corporation, General Dynamics
Corporation, Martin Marietta Corporation, Tenneco, Inc. and Walt Disney
Co.
Under Louisiana law, the Board has the responsibility to manage and
direct the Company's business and affairs, and the Board believes that
the adoption of the Rights Plan was a valid exercise of that
responsibility. The Board believes that the proper time to consider
redemption of the rights is at the time a specific acquisition proposal
is made. Redemption of the rights prior to that time would be premature
and would remove any incentive for a potential acquiror to negotiate with
the Board so that the shareholders are treated fairly and, in the Board's
view, would potentially reduce the long-term value for all shareholders.
The Board of Directors unanimously recommends a vote AGAINST this
shareholder proposal.
B. Shareholder Proposal Regarding Confidential Voting
(Item 4 on the accompanying Proxy Card)
The resolution submitted by Mr. Rodriguez is as follows:
RESOLVED: To amend Section 2.7 of Avondale Industries, Inc.'s
("Corporation") by-laws by adding the following language after the
existing language:
The voting of all proxies, consents and authorizations be
secret, and no such document shall be available for examination nor
shall the vote or identity of any shareholder be disclosed except to
the extent necessary to meet the legal requirements, if any, of the
Corporation's state of incorporation. Further, the receipt,
certification and tabulation of such votes shall be performed by
independent election inspectors.
Shareholder's Supporting Statement
It is the proponent's believe that it is vitally important that a
system of confidential proxy voting be established at our Corporation.
Confidential balloting is a basic tenet of our political electorial
process that ensures its integrity. The integrity of corporate board
elections should also be protected against potential abuses given the
importance of corporate policies and practices to corporate owners and
our national economy.
The implementation of a confidential voting system would enhance
shareholder rights in several ways.
First, absent confidential voting, incumbent managers and directors
have the power to review incoming proxies prior to a tabulation of votes
and resolicit proxies from shareholders voting against management.
Independent board candidates and shareholders submitting advisory
proposals or by-law changes are not allowed to see proxy votes. This
non-confidential system provides an unfair advantage to incumbents.
Second, in protecting the confidentiality of the corporate ballot,
shareholders would feel free to oppose management nominees and issue
positions without fear of retribution. This is especially important for
professional money managers whose business relationships can be
jeopardized by their voting positions.
Finally, it is our belief that the enhancement of the proxy voting
process would change the system where too often shareholders vote "with
their feet," not with their ballots. This change would help to develop a
long-term investment perspective where corporate assets could be
deployed, and used in a more effective and efficient manner.
Confidential voting is gaining popularity. Approximately 156 major
U.S. publicly-traded companies had adopted confidential proxy voting
procedures for corporate elections. The list of Fortune 500 companies
with confidential voting includes AT&T, US West, American Express,
American Brands, Coca Cola, CitiCorp, Gillette, Exxon, Sara Lee, JP
Morgan, Bear Stearns, General Electric, General Mills, General Motors,
Colgate-Palmolive, American Home Products, Honeywell, Avon Products, 3M,
Du Pont, Boeing, Lockheed, Rockwell International, Amoco, Mobil, Eastman
Kodak, IBM, Xerox and many others. It's time for our Corporation to do
the same.
For the reasons outlined above, we urge you to VOTE FOR THIS
PROPOSAL.
Board of Directors' Statement in Opposition
The Board does not believe that the implementation of this proposal
is justified. Any shareholder desiring to have his or her ownership and
vote confidential has a means readily available to do so merely by
placing his or her shares in a nominee account. Additionally, the Board
believes that it is to the Company's benefit that the Board have the
ability to know the opinion of the Company's major shareholders on
important initiatives because it enables the Board to better communicate
with the Company's shareholders with respect to initiatives it deems
important to the Company and its shareholders as a whole, as well as to
better understand the reasons for any opposition to such initiatives by
major shareholders. Moreover, under the terms of the ESOP, employees and
other participants in the ESOP already vote confidentially, with their
votes tabulated by a "Big Six" auditing firm. The participant's voting
cards are returned directly to the auditing firm and no information
regarding how individual participants vote is provided to the Company's
management. Finally, the Board believes that the proponent's expressed
concern that the absence of confidential voting protection has a
potentially chilling effect on the free exercise of voting rights by the
Company's shareholders is naive and misplaced. It has not been the
experience of the Company's management that its shareholders are
reluctant to communicate with management because of the absence of
confidential voting procedures. Thus, the Board of Directors does not
believe the adoption of a system of confidential voting is warranted.
The Board of Directors unanimously recommends a vote AGAINST this
shareholder proposal.
C. Shareholder Proposal Regarding Board Declassification
(Item 5 on the accompanying Proxy Card)
The resolution submitted by Mr. McGee, Sr., is as follows:
RESOLVED: To amend Section 3.3 of Avondale Industries, Inc.'s
("Company") bylaws by replacing existing language with the
following:
All directors shall stand for election annually.
Shareholder's Supporting Statement
Avondale Industries currently divides its board into three classes.
Each class of directors has three year terms and the terms are staggered
so that only one-third of the board of directors is elected at any given
time.
The election of corporate directors is the primary avenue in the
American corporate governance system for shareholders to influence
corporate affairs and exert accountability on management. We strongly
believe that our Company's financial performance is closely linked to its
corporate governance policies and procedures, and the level of management
accountability they impose. Therefore, as shareholders concerned about
the value of our investment, we are very disturbed by our Company's
current system of electing only one-third of the board of directors each
year. We believe this staggering of director terms prevents shareholders
from annually registering their views on the performance of the board
collectively and each director individually.
Concerns that the annual election of all directors would leave our
Company without experienced Board members in the event that all
incumbents are voted out is unfounded. If the owners should choose to
replace the entire board, it would be obvious that the incumbent
directors' contributions were not valued.
Most alarming is that the staggered Board can help insulate
directors and senior executives from the consequences of poor performance
by denying shareholders the opportunity to replace an entire Board which
is pursuing failed policies. Regardless of whether you believe the
current Board and management team is performing satisfactorily or not, we
believe it is clearly in the best interest of the Company and its
shareholders that a process be in place that allows shareholders to take
definitive action if they believe the Board is failing to realize the
full potential of the Company's assets.
We believe that allowing shareholders to annually register their
views on the performance of the Board collectively and each director
individually is one of the best method's to insure that our Company will
be managed in the best interests of the shareholders.
We urge you to VOTE FOR THIS RESOLUTION.
Board of Directors' Statement in Opposition
The Company's Board is divided into three classes of directors
serving three-year staggered terms, with one class being elected each
year. The Board believes the election of directors by classes is
advantageous to the Company and its shareholders because, by providing
that the directors will serve three-year terms rather than one-year
terms, it enhances the likelihood of continuity and stability in the
composition of the Board of Directors and in the policies formulated by
the Board, a stability that has been fundamental in the Company's recent
successes. Stability and continuity at the Board level also permits the
Board to represent more effectively the interests of all shareholders,
including responding to circumstances created by demands or actions of a
single shareholder or a small group of shareholders. Board
classification is also intended to deter any person seeking to acquire
control of the Company from initiating such action through a surprise
proxy contest designed to result in a change of control of the Company in
a single election. Finally, the Board points out that this provision is
contained not only in the Company's By-laws but also in its Articles of
Incorporation and that the shareholder proposal, by seeking only an
amendment to the Company's By-laws, would result in a direct conflict
between the Company's Articles of Incorporation and By-laws which would
be unlawful under the Louisiana Business Corporation Law. Moreover, the
Board notes that this provision of the Company's Articles of
Incorporation was approved by the Company's shareholders in 1990 when
they voted upon the re-incorporation of the Company in Louisiana.
The Board of Directors unanimously recommends a vote AGAINST this
shareholder proposal.
OTHER MATTERS
Quorum and Voting of Proxies
The presence, in person or by proxy, of a majority of the
outstanding shares of Common Stock of the Company is necessary to
constitute a quorum. If a quorum is present,
(a) directors will be elected by plurality vote;
(b) the Shareholder Proposals proposing amendments to the
Company's By-laws with respect to:
(i) Confidential Voting (Item 4); and
(ii) Board Declassification (Item 5)
must receive the affirmative vote of 80% of the total outstanding Common
Stock; and
(c) (i) the proposal to adopt the 1997 Stock Incentive Plan
(Item 2);
(ii) the Shareholder Proposal urging the Board of
Directors to redeem the Shareholder Rights Plan (Item
3); and
(ii) any other matters properly brought before such
meeting
must receive the approval of a majority of the shares of Common Stock
present or represented at the Annual Meeting.
If a quorum is not present, those shareholders present may adjourn
the meeting to such time and place as they may determine; however, with
respect to the election of directors, the meeting may be adjourned only
from day to day until such directors are elected. Those shareholders who
attend the second such adjournment will constitute a quorum for the
purpose of electing directors.
All proxies in the form enclosed that are received by the Board of
Directors will be voted as specified and, in the absence of instructions
to the contrary, will be voted for the election of the nominees named
above, for the 1997 Stock Incentive Plan and against each of the three
shareholder proposals.
Shares as to which proxy authority to vote for any nominee for
election as a director is withheld by a shareholder and shares that have
not been voted by brokers who hold shares on behalf of the beneficial
owner ("broker non-votes") will not be counted as voted for any affected
nominees, the proposal to adopt the 1997 Stock Incentive Plan, or any of
the Shareholder Proposals. With respect to each of the Shareholder
Proposals identified as Items 4 and 5, which require the affirmative vote
of 80% of the outstanding Common Stock in order to be adopted,
abstentions and broker non-votes will have the effect of a vote against
the proposal. With respect to the proposal to adopt the 1997 Stock
Incentive Plan identified as Item 2, the Shareholder Proposal identified
as Item 3 and any other matter (other than the election of directors)
that may be properly brought before the Annual Meeting, which require the
affirmative vote of a majority of the voting power present at the Annual
Meeting, abstentions will have the effect of a vote against the proposal
while broker non-votes will be counted as not present with respect to the
proposal and therefore will not have an effect on the outcome of the vote
with respect to such proposal.
The Board of Directors does not know of any matters to be presented
at the Annual Meeting other than the election of directors, adoption of
the 1997 Stock Incentive Plan and the three Shareholder Proposals.
However, if any other matters properly come before the meeting or any
adjournment thereof, it is the intention of the persons named in the
enclosed proxy to vote the shares represented by them in accordance with
their best judgment.
Independent Public Auditors
The Board of Directors has appointed Deloitte & Touche LLP as
independent auditors of the Company for the fiscal year ended December
31, 1997. Deloitte & Touche LLP and its predecessors have served as the
Company's auditors since 1987. Representatives of Deloitte & Touche LLP
are expected to be present at the Annual Meeting. They will have the
opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions.
Shareholder Proposals for 1998 Annual Meeting
Any shareholder who desires to present a proposal qualified for
inclusion in the Company's proxy materials relating to the 1998 annual
shareholders' meeting must forward the proposal to the Secretary of the
Company at the address shown on the first page of this Proxy Statement in
time to arrive at the Company prior to December 18, 1997. The Company's
By-laws also require any shareholder who desires to present a proposal
before the 1998 annual shareholders' meeting to notify the Secretary of
the Company of such intent no later than December 18, 1997.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Thomas M. Kitchen
Thomas M. Kitchen
Secretary
Avondale, Louisiana
April 17, 1997
EXHIBIT A
AVONDALE INDUSTRIES, INC.
1997 STOCK INCENTIVE PLAN
1. Purpose. The purpose of the 1997 Stock Incentive Plan (the
"Plan") of Avondale Industries, Inc. ("Avondale") is to increase
shareholder value and to advance the interests of Avondale and its
subsidiaries (collectively, the "Company") by furnishing a variety of
economic incentives (the "Incentives") designed to attract, retain and
motivate key employees, officers and directors and to strengthen the
mutuality of interests between such persons and Avondale's shareholders.
Incentives may consist of opportunities to purchase or receive shares of
common stock, $1.00 par value per share, of Avondale (the "Common
Stock"), monetary payments or both, on terms determined under the Plan.
As used in the Plan, the term "subsidiary" means any corporation of which
Avondale owns (directly or indirectly) within the meaning of Section
425(f) of the Internal Revenue Code of 1986, as amended (the "Code"), 50%
or more of the total combined voting power of all classes of stock.
2. Administration.
2.1 Composition. The Plan shall be administered by the
compensation committee (the "Committee") of the Board of Directors
of Avondale. The Committee shall consist of not fewer than two
members of the Board of Directors, each of whom shall (a) qualify as
a "non-employee director" under Rule 16b-3 under the Securities
Exchange Act of 1934 (the "1934 Act"), as currently in effect or any
successor rule, and (b) qualify as an "outside director" under
Section 162(m) of the Code.
2.2 Authority. The Committee shall have plenary authority
to award Incentives under the Plan, to interpret the Plan, to
establish any rules or regulations relating to the Plan that it
determines to be appropriate, to enter into agreements with
participants as to the terms of the Incentives (the "Incentive
Agreements") and to make any other determination that it believes
necessary or advisable for the proper administration of the Plan.
Its decisions in matters relating to the Plan shall be final and
conclusive on the Company and participants. The Committee may
delegate its authority hereunder to the extent provided elsewhere
herein. The Committee shall not have authority to award Incentives
under the Plan to directors of Avondale who are not also full-time
employees of the Company ("Outside Directors"). Outside Directors
may receive awards under the Plan only as specifically provided in
Section 10 hereof.
3. Eligible Employees. Key employees of the Company (including
officers and directors who are full-time employees of the Company, but
excluding Outside Directors) shall become eligible to receive Incentives
under the Plan when designated by the Committee. Employees may be
designated individually or by groups or categories, as the Committee
deems appropriate. With respect to participants not subject to Section
16 of the 1934 Act and not covered employees under Section 162(m) of the
Code, the Committee may delegate its authority to designate participants,
to determine the size and type of Incentive to be received by those
participants and to determine or modify performance objectives for those
participants.
4. Types of Incentives. Incentives may be granted under the Plan
in any of the following forms, either individually or in combination:
(a) incentive stock options and non-qualified stock options; (b) stock
appreciation rights ("SARs"); (c) restricted stock; and (d) performance
shares.
5. Shares Subject to the Plan.
5.1 Number of Shares. Subject to adjustment as provided
in Section 11.5, a total of 1,430,000 shares of Common Stock are
authorized to be issued under the Plan. Incentives with respect to
no more than 45,000 shares of Common Stock may be granted through
the Plan to a single participant in one calendar year. In the event
that a stock option, SAR or performance share granted hereunder
expires or is terminated or cancelled prior to exercise or payment,
any shares of Common Stock that were issuable thereunder may be
issued again under the Plan. In the event that shares of Common
Stock are issued as Incentives under the Plan and thereafter are
forfeited or reacquired by the Company pursuant to rights reserved
upon issuance thereof, such forfeited and reacquired shares may be
issued again under the Plan. If an Incentive is to be paid in cash
by its terms, the Committee need not make a deduction from the
shares of Common Stock issuable under the Plan with respect thereto.
If and to the extent that an Incentive may be paid in cash or shares
of Common Stock, the total number of shares available for issuance
hereunder shall be decreased by the number of shares payable under
such Incentive, provided that upon any payment of all or part of
such Incentive in cash, the total number of shares available for
issuance hereunder shall be increased by the appropriate number of
shares represented by the cash payment, as determined in the sole
discretion of the Committee. Additional rules for determining the
number of shares granted under the Plan may be made by the
Committee, as it deems necessary or appropriate.
5.2 Type of Common Stock. Common Stock issued under the
Plan may be authorized and unissued shares or issued shares held as
treasury shares.
6. Stock Options. A stock option is a right to purchase shares of
Common Stock from Avondale. Stock options granted under this Plan may be
incentive stock options or non-qualified stock options. Any option that
is designated as a non-qualified stock option shall not be treated as an
incentive stock option. Each stock option granted by the Committee under
this Plan shall be subject to the following terms and conditions:
6.1 Price. The exercise price per share shall be
determined by the Committee, subject to adjustment under Section
11.5; provided that in no event shall the option price be less than
the Fair Market Value of a share of Common Stock on the date of
grant.
6.2 Number. The number of shares of Common Stock subject
to the option shall be determined by the Committee, subject to
adjustment as provided in Section 11.5.
6.3 Duration and Time for Exercise. The term of each
stock option shall be determined by the Committee. Each stock
option shall become exercisable at such time or times during its
term as shall be determined by the Committee. The Committee may
accelerate the exercisability of any stock option.
6.4 Repurchase. Upon approval of the Committee, the
Company may repurchase a previously granted stock option from a
participant by mutual agreement before such option has been
exercised by payment to the participant of the amount per share by
which: (i) the Fair Market Value (as defined in Section 11.12) of
the Common Stock subject to the option on the date of purchase
exceeds (ii) the exercise price.
6.5 Manner of Exercise. A stock option may be exercised,
in whole or in part, by giving written notice to the Company,
specifying the number of shares of Common Stock to be purchased.
The exercise notice shall be accompanied by the full purchase price
for such shares. The option price shall be payable in United States
dollars and may be paid (a) by cash, uncertified or certified check
or bank draft, (b) by delivery of shares of Common Stock held by the
optionee for at least six months in payment of all or any part of
the option price, which shares shall be valued for this purpose at
the Fair Market Value on the date such option is exercised, (c) by
delivering a properly executed exercise notice together with
irrevocable instructions to a broker approved by the Company (with a
copy to the Company) to promptly deliver to the Company the amount
of sale or loan proceeds to pay the exercise price or (d) in such
other manner as may be authorized from time to time by the
Committee. In the case of delivery of an uncertified check upon
exercise of a stock option, no shares shall be issued until the
check has been paid in full. Prior to the issuance of shares of
Common Stock upon the exercise of a stock option, a participant
shall have no rights as a shareholder.
6.6 Incentive Stock Options. Notwithstanding anything in
the Plan to the contrary, the following additional provisions shall
apply to the grant of stock options that are intended to qualify as
Incentive Stock Options (as such term is defined in Section 422A of
the Code):
(a) Any Incentive Stock Option agreement authorized under
the Plan shall contain such other provisions as the Committee
shall deem advisable, but shall in all events be consistent
with and contain or be deemed to contain all provisions
required in order to qualify the options as Incentive Stock
Options.
(b) All Incentive Stock Options must be granted within
ten years from the date on which this Plan is adopted by the
Board of Directors.
(c) Unless sooner exercised, all Incentive Stock Options
shall expire no later than ten years after the date of grant.
(d) The option price for Incentive Stock Options shall be
not less than the Fair Market Value of the Common Stock subject
to the option on the date of grant.
(e) No Incentive Stock Options shall be granted to any
participant who, at the time such option is granted, would own
(within the meaning of Section 422A of the Code) stock
possessing more than 10% of the total combined voting power of
all classes of stock of the employer corporation or of its
parent or subsidiary corporation.
(f) The aggregate Fair Market Value (determined with
respect to each Incentive Stock Option as of the time such
Incentive Stock Option is granted) of the Common Stock with
respect to which Incentive Stock Options are exercisable for
the first time by a participant during any calendar year (under
the Plan or any other plan of the Company or any of its
subsidiaries) shall not exceed $100,000. To the extent this
$100,000 limitation is exceeded, the options that relate to the
excess shall be treated as non-qualified stock options.
7. Restricted Stock.
7.1 Grant of Restricted Stock. The Committee may award shares
of restricted stock to such key employees as the Committee
determines to be eligible pursuant to the terms of Section 3. An
award of restricted stock may be subject to the attainment of
specified performance goals or targets, restrictions on transfer,
forfeitability provisions and such other terms and conditions as the
Committee may determine, subject to the provisions of the Plan. To
the extent restricted stock is intended to qualify as performance
based compensation under Section 162(m) of the Code, it must meet
the additional requirements imposed thereby.
7.2 The Restricted Period. At the time an award of restricted
stock is made, the Committee shall establish a period of time during
which the transfer of the shares of restricted stock shall be
restricted (the "Restricted Period"). Each award of restricted
stock may have a different Restricted Period. A Restricted Period
of at least three years is required, except that if vesting of the
shares is subject to the attainment of specified performance goals,
a Restricted Period of one year or more is permitted. The
expiration of the Restricted Period shall also occur as provided
under Section 11.11.
7.3 Escrow. The participant receiving restricted stock shall
enter into an Incentive Agreement with the Company setting forth the
conditions of the grant. Certificates representing shares of
restricted stock shall be registered in the name of the participant
and deposited with the Company, together with a stock power endorsed
in blank by the participant. Each such certificate shall bear a
legend in substantially the following form:
The transferability of this certificate and the shares of
Common Stock represented by it is subject to the terms and
conditions (including conditions of forfeiture) contained
in the Avondale Industries, Inc. 1997 Stock Incentive Plan
(the "Plan") and an agreement entered into between the
registered owner and Avondale Industries, Inc. thereunder.
Copies of the Plan and the agreement are on file and
available for inspection at the principal office of the
Company.
7.4 Dividends on Restricted Stock. Any and all cash and stock
dividends paid with respect to the shares of restricted stock shall
be subject to any restrictions on transfer, forfeitability
provisions or reinvestment requirements as the Committee may, in its
discretion, prescribe in the Incentive Agreement.
7.5 Forfeiture. In the event of the forfeiture of any shares
of restricted stock under the terms provided in the Incentive
Agreement (including any additional shares of restricted stock that
may result from the reinvestment of cash and stock dividends, if so
provided in the Incentive Agreement), such forfeited shares shall be
surrendered and the certificates cancelled. The participants shall
have the same rights and privileges, and be subject to the same
forfeiture provisions, with respect to any additional shares
received pursuant to Section 11.5 due to a recapitalization, merger
or other change in capitalization.
7.6 Expiration of Restricted Period. Upon the expiration or
termination of the Restricted Period and the satisfaction of any
other conditions prescribed by the Committee or at such earlier time
as provided for in Section 7.2 and in the Incentive Agreement or an
amendment thereto, the restrictions applicable to the restricted
stock shall lapse and a stock certificate for the number of shares
of restricted stock with respect to which the restrictions have
lapsed shall be delivered, free of all such restrictions and legends
other than those required by law, to the participant or the
participant's estate, as the case may be.
7.7 Rights as a Shareholder. Subject to the terms and
conditions of the Plan and subject to any restrictions on the
receipt of dividends that may be imposed in the Incentive Agreement,
each participant receiving restricted stock shall have all the
rights of a shareholder with respect to shares of stock during any
period in which such shares are subject to forfeiture and
restrictions on transfer, including without limitation, the right to
vote such shares.
8. Stock Appreciation Rights. A SAR is a right to receive,
without payment to the Company, a number of shares of Common Stock, cash
or any combination thereof, the amount of which is determined pursuant to
the formula set forth in Section 8.4. A SAR may be granted (a) with
respect to any stock option granted under the Plan, either concurrently
with the grant of such stock option or at such later time as determined
by the Committee (as to all or any portion of the shares of Common Stock
subject to the stock option), or (b) alone, without reference to any
related stock option. Each SAR granted by the Committee under the Plan
shall be subject to the following terms and conditions:
8.1 Number. Each SAR granted to any participant shall relate
to such number of shares of Common Stock as shall be determined by
the Committee, subject to Section 5.1 and subject to adjustment as
provided in Section 11.5. In the case of a SAR granted with respect
to a stock option, the number of shares of Common Stock to which the
SAR pertains shall be reduced in the same proportion that the holder
of the option exercises the related stock option.
8.2 Duration and Time for Exercise. The term and
exercisability of each SAR shall be determined by the Committee.
Unless otherwise provided by the Committee in the Incentive
Agreement, each SAR issued in connection with a stock option shall
become exercisable at the same time or times, to the same extent and
upon the same conditions as the related stock option. The Committee
may in its discretion accelerate the exercisability of any SAR at
any time.
8.3 Exercise. A SAR may be exercised, in whole or in part, by
giving written notice to the Company, specifying the number of SARs
that the holder wishes to exercise. The Company shall, within 30
days of receipt of notice of exercise, deliver to the exercising
holder certificates for the shares of Common Stock or cash or both,
as determined by the Committee, to which the holder is entitled
pursuant to Section 8.4.
8.4 Payment. Subject to the right of the Committee to deliver
cash in lieu of shares of Common Stock, the number of shares of
Common Stock that shall be issuable upon the exercise of an SAR
shall be determined by dividing:
(a) the number of shares of Common Stock as to which the
SAR is exercised multiplied by the dollar amount of the
appreciation in such shares (for this purpose, the
"appreciation" shall be the amount by which the Fair Market
Value of the shares of Common Stock subject to the SAR on the
Exercise Date exceeds (1) in the case of a SAR related to a
stock option, the purchase price of the shares of Common Stock
under the stock option or (2) in the case of a SAR granted
alone, without reference to a related stock option, an amount
equal to the Fair Market Value of a share of Common Stock on
the date of grant, which shall be determined by the Committee
at the time of grant, subject to adjustment under Section
11.5); by
(b) the Fair Market Value of a share of Common Stock on
the Exercise Date.
In lieu of issuing shares of Common Stock upon the exercise of
a SAR, the Committee may elect to pay the holder of the SAR cash
equal to the Fair Market Value on the Exercise Date of any or all of
the shares that otherwise would be issuable. No fractional shares
of Common Stock shall be issued upon the exercise of a SAR; instead,
the holder of a SAR shall be entitled to receive a cash adjustment
equal to the same fraction of the Fair Market Value of a share of
Common Stock on the Exercise Date or to purchase the portion
necessary to make a whole share at its Fair Market Value on the
Exercise Date.
9. Performance Shares. A performance share consists of an award
that may be paid in shares of Common Stock or in cash, as described
below. The award of performance shares shall be subject to such terms
and conditions as the Committee deems appropriate.
9.1 Performance Objectives. Each performance share will be
subject to performance objectives for Avondale or one of its
subsidiaries, divisions or departments to be achieved by the end of
a specified period. The number of performance shares awarded shall
be determined by the Committee and may be subject to such terms and
conditions as the Committee shall determine. If the performance
objectives are achieved, each participant will be paid (a) a number
of shares of Common Stock equal to the number of performance shares
initially granted to that participant; (b) a cash payment equal to
the Fair Market Value of such number of shares of Common Stock on
the date the performance objectives are met or such other date as
may be provided by the Committee or (c) a combination of shares of
Common Stock and cash, as may be provided by the Committee. If such
objectives are not met, each award of performance shares may provide
for lesser payments in accordance with a pre-established formula set
forth in the Incentive Agreement. Notwithstanding the foregoing,
unless otherwise provided in the Incentive Agreement, the Committee
may in its discretion declare the performance objectives achieved or
waived. To the extent a performance share is intended to qualify as
performance based compensation under Section 162(m) of the Code, it
must meet the additional requirements imposed thereby.
9.2 Not a Shareholder. The award of performance shares to a
participant shall not create any rights in such participant as a
shareholder of the Company, until the payment of shares of Common
Stock with respect to an award, at which time such stock shall be
considered issued and outstanding.
9.3 Dividend Equivalent Payments. A performance share award
may be granted by the Committee in conjunction with dividend
equivalent payment rights or other such rights. Dividend equivalent
payments may be made to the participant at the time of the payment
of the dividend or issuance of the other right or at the end of the
specified performance period or may be deemed to be invested in
additional performance shares at the Fair Market Value of a share of
Common Stock on the date of payment of the dividend or issuance of
the right.
10. Stock Options for Outside Directors
10.1 Eligibility. Each Outside Director shall be automatically
granted a non-qualified stock option to acquire 1,065 shares of
Common Stock on the day following the annual meeting of shareholders
beginning with the 1997 annual meeting of shareholders and
thereafter on the day following subsequent annual meetings of
shareholders for as long as the Plan remains in effect and shares of
Common Stock remain available for grant under Section 5.1 hereof.
10.2 Exercisability of Stock Options. The stock options granted
to Outside Directors under this Section 10 shall become exercisable
as follows:
25% of the total number of shares covered by the
stock options beginning one year after the date of
grant;
50% of the total number of shares covered by the
stock options beginning two years after the date of
grant, less any shares previously issued;
75% of the total number of shares covered by the
stock options beginning three years after the date of
grant, less any shares previously issued;
100% of the total number of shares covered by the
stock options beginning four years after the date of
grant, less any shares previously issued;
provided, however, that such stock options shall become immediately
exercisable under Section 11.11 hereof and in the event of retirement
from the Board on or after reaching age 65, death or disability.
No stock option granted to an Outside Director under the terms of this
Section 10 may be exercised more than ten years after the date of
grant.
10.3 Exercise Price. The per share exercise price of stock
options granted to Outside Directors shall be equal to 100% of the
Fair Market Value as defined in the Plan, of a share of Common Stock
on the date of grant.
10.4 Exercise after Termination of Board Service. In the event
that an Outside Director ceases to serve on the Board of Directors
for any reason, the stock options granted hereunder must be
exercised, to the extent otherwise exercisable, within one year from
the date of termination of Board service, but in no event later than
ten years after the date of grant.
11. General.
11.1 Duration. Subject to Section 11.10, the Plan shall remain
in effect until all Incentives granted under the Plan have either
been satisfied by the issuance of shares of Common Stock or the
payment of cash or been terminated under the terms of the Plan and
all restrictions imposed on shares of Common Stock in connection
with their issuance under the Plan have lapsed.
11.2 Transferability of Incentives. Options, SARs and
performance shares granted under the Plan may not be transferred
except:
(a) by will;
(b) by the laws of descent and distribution; or
(c) in the case of stock options only, if permitted by the
Committee and so provided in the Incentive Agreement or an
amendment thereto, (i) pursuant to a domestic relations order,
as defined in the Code, (ii) to Immediate Family Members, (iii)
to a partnership in which Immediate Family Members, or entities
in which Immediate Family Members are the sole owners, members
or beneficiaries, as appropriate, are the only partners, (iv)
to a limited liability company in which Immediate Family
Members, or entities in which Immediate Family Members are the
sole owners, members or beneficiaries, as appropriate, are the
only members, or (v) to a trust for the sole benefit of
Immediate Family Members. "Immediate Family Members" shall be
defined as the spouse and natural or adopted children or
grandchildren of the participant and their spouses. To the
extent that an incentive stock option is permitted to be
transferred during the lifetime of the participant, it shall be
treated thereafter as a non-qualified stock option.
Stock options or SARs may be exercised during the lifetime of a
participant only by the participant, by the participant's guardian
or legal representative or, in the case of stock options, by a
permitted transferee as provided in (c) above. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of
an Incentive, or levy of attachment or similar process upon the
Incentive not specifically permitted herein, shall be null and void
and without effect.
11.3 Effect of Termination of Employment or Death. In the event
that an employee participant ceases to be an employee of the Company
for any reason, including death, disability, early retirement or
normal retirement, any Incentives may be exercised, shall vest or
shall expire at such times as may be determined by the Committee in
the Incentive Agreement.
11.4 Additional Condition. Anything in this Plan to the
contrary notwithstanding: (a) the Company may, if it shall
determine it necessary or desirable for any reason, at the time of
award of any Incentive or the issuance of any shares of Common Stock
pursuant to any Incentive, require the recipient of the Incentive,
as a condition to the receipt thereof or to the receipt of shares of
Common Stock issued pursuant thereto, to deliver to the Company a
written representation of present intention to acquire the Incentive
or the shares of Common Stock issued pursuant thereto for his own
account for investment and not for distribution; and (b) if at any
time the Company further determines, in its sole discretion, that
the listing, registration or qualification (or any updating of any
such document) of any Incentive or the shares of Common Stock
issuable pursuant thereto is necessary on any securities exchange or
under any federal or state securities or blue sky law, or that the
consent or approval of any governmental regulatory body is necessary
or desirable as a condition of, or in connection with the award of
any Incentive, the issuance of shares of Common Stock pursuant
thereto, or the removal of any restrictions imposed on such shares,
such Incentive shall not be awarded or such shares of Common Stock
shall not be issued or such restrictions shall not be removed, as
the case may be, in whole or in part, unless such listing,
registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the
Company.
11.5 Adjustment. In the event of any merger, consolidation or
reorganization of the Company with any other corporation or
corporations, there shall be substituted for each of the shares of
Common Stock then subject to the Plan, including shares subject to
restrictions, options, or achievement of performance share
objectives, the number and kind of shares of stock or other
securities to which the holders of the shares of Common Stock will
be entitled pursuant to the transaction. In the event of any
recapitalization, stock dividend, stock split, combination of shares
or other change in the Common Stock, the number of shares of Common
Stock then subject to the Plan, including shares subject to
outstanding Incentives, shall be adjusted in proportion to the
change in outstanding shares of Common Stock. In the event of any
such adjustments, the purchase price of any option, the performance
objectives of any Incentive, and the shares of Common Stock issuable
pursuant to any Incentive shall be adjusted as and to the extent
appropriate, in the reasonable discretion of the Committee, to
provide participants with the same relative rights before and after
such adjustment.
11.6 Incentive Agreements. The terms of each Incentive shall be
stated in an agreement approved by the Committee.
11.7 Withholding. At any time that a participant is required to
pay to the Company an amount required to be withheld under the
applicable income tax laws in connection with the issuance of shares
of Common Stock under the Plan or upon the lapse of restrictions on
shares of restricted stock, the participant may, subject to the
Committee's right of disapproval, satisfy this obligation in whole
or in part by electing (the "Election") to have the Company withhold
from the distribution shares of Common Stock having a value equal to
the amount required to be withheld. The value of the shares
withheld shall be based on the Fair Market Value of the Common Stock
on the date that the amount of tax to be withheld shall be
determined (the "Tax Date").
Each Election must be made prior to the Tax Date. The
Committee may disapprove of any Election or may suspend or terminate
the right to make Elections. If a participant makes an election
under Section 83(b) of the Internal Revenue Code with respect to
shares of restricted stock, an Election is not permitted to be made.
A participant may also satisfy his or her total tax liability
related to an Incentive by delivering shares of Common Stock that
have been owned by the participant for at least six months. The
value of the shares delivered shall be based on the Fair Market
Value of the Common Stock on the Tax Date.
11.8 No Continued Employment. No participant under the Plan
shall have any right, because of his or her participation, to
continue in the employ of the Company for any period of time or to
any right to continue his or her present or any other rate of
compensation.
11.9 Deferral Permitted. Payment of cash or distribution of
any shares of Common Stock to which a participant is entitled under
any Incentive shall be made as provided in the Incentive Agreement.
Payment may be deferred at the option of the participant if provided
in the Incentive Agreement.
11.10 Amendment of the Plan. The Board may amend or discontinue
the Plan at any time; provided, however, that no such amendment or
discontinuance shall change or impair, without the consent of the
recipient, an Incentive previously granted; and provided further,
that an amendment to materially increase the number of shares of
Common Stock issuable through the Plan, materially modify the
eligibility requirements or materially increase the benefits under
the Plan must be approved by the shareholders of the Company.
11.11. Change of Control.
(a) A Change of Control shall mean:
(i) the acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the 1934 Act) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the 1934 Act) of more than 25% of
the outstanding shares of the Common Stock; provided, however,
that for purposes of this subsection (i), the following
acquisitions shall not constitute a Change of Control:
a) any acquisition of Common Stock directly from
the Company,
b) any acquisition of Common Stock by the
Company,
c) any acquisition of Common Stock by any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by
the Company, or
d) any acquisition of Common Stock by any
corporation pursuant to a transaction that complies with
clauses a), b) and c) of subsection (iii) of this Section
9.10(a); or
(ii) individuals who, as of the date this Plan was
adopted by the Board of Directors (the "Approval Date"),
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the Approval Date whose election, or nomination
for election by the shareholders of the Company, was approved
by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered a member of
the Incumbent Board, unless such individual's initial
assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or
removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a person other than
the Incumbent Board; or
(iii) consummation of a reorganization, merger or
consolidation, or sale or other disposition of all or
substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business
Combination,
a) all or substantially all of the individuals
and entities who were the beneficial owners of the
outstanding Common Stock and the voting securities of the
Company entitled to vote generally in the election of
directors immediately prior to such Business Combination
have direct or indirect beneficial ownership,
respectively, of more than 50% of the then outstanding
shares of common stock, and more than 50% of the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors,
of the corporation resulting from such Business
Combination (which, for purposes of this clause a) and
clauses b) and c), shall include a corporation that as a
result of such transaction owns the Company or all or
substantially all of the assets of the Company either
directly or through one or more subsidiaries), and
b) except to the extent that such ownership
existed prior to the Business Combination, no person
(excluding any corporation resulting from such Business
Combination or any employee benefit plan or related trust
of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 20% or more of the then outstanding shares of
common stock of the corporation resulting from such
Business Combination or 20% or more of the combined voting
power of the then outstanding voting securities of such
corporation, and
c) at least a majority of the members of the
board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board
at the time of the execution of the initial agreement, or
of the action of the Board, providing for such Business
Combination; or
(iv) approval by the shareholders of the Company of a
plan of complete liquidation or dissolution of the Company.
(b) Upon a Change of Control, or immediately prior to the
closing of a transaction that will result in a Change of
Control if consummated, all outstanding options and SARs
granted pursuant to the Plan shall automatically become fully
exercisable, all restrictions or limitations on any Incentives
shall lapse and all performance criteria and other conditions
relating to the payment of Incentives shall be deemed to be
achieved and waived by the Company, without the necessity of
action by any person.
(c) The Committee may take such other action with respect
to an Option or Incentive as shall be provided in an agreement
with the holder thereof.
11.12 Definition of Fair Market Value. Whenever "Fair Market
Value" of Common Stock shall be determined for purposes of this
Plan, it shall be determined as follows: (a) if the Common Stock is
listed on an established stock exchange or any automated quotation
system that provides sale quotations, the closing sale price for a
share of the Common Stock on such exchange or quotation system on
the applicable date, or if no sale of the Common Stock shall have
been made on that day, on the next preceding day on which there was
a sale of the Common Stock; (b) if the Common Stock is not listed on
any exchange or quotation system, but bid and asked prices are
quoted and published, the mean between the quoted bid and asked
prices on the applicable date, and if bid and asked prices are not
available on such day, on the next preceding day on which such
prices were available; and (c) if the Common Stock is not regularly
quoted, the fair market value of a share of Common Stock on the
applicable date as established by the Committee in good faith.
Adopted by the Board of Directors _______________, 1996.
AVONDALE INDUSTRIES, INC.
POST OFFICE BOX 50280
AVONDALE, LOUISIANA 70150
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF AVONDALE
INDUSTRIES, INC.
The undersigned hereby appoints Bruce L. Hicks and Eugene K. Simon,
Jr., or either of them, as proxies, each with full power of substitution,
and hereby authorizes each of them to represent and to vote, as designated
below, all shares of common stock of Avondale Industries, Inc. held of
record by the undersigned on April 10, 1997 at the annual meeting of
shareholders to be held on May 23, 1997, or any adjournment thereof.
COMPANY PROPOSALS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR BOTH OF THE NOMINEES LISTED
BELOW AND FOR PROPOSAL NUMBER 2 BELOW:
1. Election of Directors
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the to vote for all
contrary below) all nominees listed
below
INSTRUCTIONS: To withhold authority to vote for any nominee, strike
a line through the nominee's name listed below.
Albert L. Bossier, Jr. Hugh A. Thompson
2. Adoption of Avondale Industries, Inc. 1997 Stock Incentive Plan
[ ] FOR [ ] AGAINST [ ] ABSTAIN
SHAREHOLDER PROPOSALS
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST SHAREHOLDER PROPOSALS
3 THROUGH 5, BY CHECKING THE BOX MARKED "AGAINST."
3. Shareholder Rights Plan Proposal
[ ] AGAINST [ ] FOR [ ] ABSTAIN
4. Confidential Voting Proposal
[ ] AGAINST [ ] FOR [ ] ABSTAIN
5. Board of Directors Declassification Proposal
[ ] AGAINST [ ] FOR [ ] ABSTAIN
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTIONS ARE GIVEN, THIS
PROXY WILL BE VOTED FOR BOTH OF THE DIRECTOR NOMINEES NAMED ABOVE AND
PROPOSAL 2 AND AGAINST PROPOSALS 3 THROUGH 5. THE PROXY HOLDERS NAMED ABOVE
WILL VOTE IN THEIR DISCRETION ON ANY OTHER MATTER THAT MAY PROPERLY COME
BEFORE THE MEETING.
Date: ____________________, 1997
______________________________________
Signature of Shareholder
______________________________________
Additional Signature, if held jointly
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON.
WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE
GIVE FULL TITLE AS SUCH. IF A CORPORATION,
PLEASE SIGN FULL CORPORATE NAME BY PRESIDENT
OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME
BY AUTHORIZED PERSON.
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.