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