EMPLOYMENT AGREEMENT


     THIS  AGREEMENT,  made  and  entered into as of the 23rd day of March,
1998, by and between AVONDALE INDUSTRIES,  INC.,  a  Louisiana  corporation
maintaining  its  principal  office at 5100 River Road, Avondale, Louisiana
70094 (the "Company") and Thomas  M.  Kitchen,  now  residing at 6627 Canal
Boulevard,   New   Orleans,   Louisiana   70124  (hereinafter  called   the
"Employee").

                        W I T N E S S E T H

     WHEREAS,  the  Employee is employed by the  Company  in  an  executive
capacity, and the Company  desires  to  ensure  that  the  Employee will be
available to provide executive services to the Company in the future, which
services are significant to the Company's long range prospects;

     WHEREAS,  the  Company  and  Employee  desire, among other things,  to
prohibit Employee from disclosing or utilizing,  outside the scope and term
of his employment, any non-public, confidential or proprietary information,
knowledge and data relating to the business and operations  of  the Company
or  its  subsidiaries  received  by  Employee  during  the  course  of  his
employment,  and  to  restrict  the ability of Employee to compete with the
Company or its subsidiaries for a limited period of time; and

     WHEREAS, to induce the Employee  to  agree to provide such services on
the terms provided herein, the Company is offering  to provide the Employee
with  the  compensation,  benefits  and  security  provided   for  in  this
Agreement.

     NOW,  THEREFORE,  in  consideration  of  the  covenants and agreements
herein contained, the parties hereto agree as follows:

     1.   EMPLOYMENT/CAPACITY/TERM.  The Company agrees  to and does hereby
employ the Employee, and the Employee agrees to be employed  by the Company
upon the terms and conditions set forth in this Agreement.  Such employment
shall  be  in a managerial and executive capacity in the operation  of  the
business of  the Company and/or a subsidiary, subject to the supervision of
the Board of Directors  of  the Company.  Such employment shall commence on
the date hereof and shall continue through December 31, 2000, and from year
to year thereafter subject to  the  right of the Employee or the Company to
terminate  such  employment as of December  31,  2000,  or  any  subsequent
December 31, by written notice given to the other party at least sixty (60)
days prior to such  termination  date  stating an intention to so terminate
such  employment.  Termination  by either party,  in  accordance  with  the
provisions of the preceding sentence,  shall not require a statement of the
reason or cause for such termination and  shall  not  be deemed a breach or
violation of this Agreement by the party giving such notice.   As  used  in
this  Agreement,  the  phrase  "term  of this Agreement" shall be deemed to
include the period subsequent to the date  hereof  and prior to termination
of this Agreement; however, such phrase shall not be  construed as limiting
the enforceability by either party of any rights which  survive termination
of this Agreement.
<PAGE>
     2.   TIME AND EFFORT/ABSENCES.  During the term of this Agreement, the
Employee shall devote his entire time and attention during  normal business
hours to the business of the Company, and its subsidiaries, subject  to the
supervision  of  the  Board  of  Directors of the Company, and he shall not
engage in any other business activity whether or not such business activity
is  pursued  for  gain,  profit  or other  pecuniary  advantage,  but  this
restriction  shall not be construed  to  restrict  the  Employee  (i)  from
performing services  as  a  member  of  the  Board  of  Directors, Board of
Trustees or the like for any non-profit or for profit entity whether or not
the Employee receives compensation therefor, provided that,  such  services
do  not  unreasonably interfere with the ability of the Employee to perform
the services  and discharge the responsibilities required of him under this
Agreement (it generally  being  agreed and understood that the quantity and
quality of the services heretofore performed by the Employee for non-profit
and for profit entities would not  constitute  a violation of the aforesaid
restriction), and (ii) from investing his assets  in such form or manner as
will not require any services on the part of the Employee  in the operation
of  the  business  of the entity in which such investments are  made.   The
employee shall be excused  from  rendering  his  services during reasonable
vacation  periods and during other reasonable temporary  absences,  all  as
authorized  from time to time by the Board of Directors of the Company.  At
the date hereof,  the  Employee  maintains  his  residence  at  6627  Canal
Boulevard,  New  Orleans,  Louisiana  70124  and  performs services for the
Company  in  New  Orleans, Louisiana; it is understood  that,  without  his
consent, the Employee  will  not  be  required  to  relocate to a different
location to discharge his responsibilities under this Agreement.

     3.   CORPORATE OFFICES.  If elected, the Employee  will serve, without
additional compensation, as a director of the Company or  as  an officer or
director of any subsidiary of the Company.

     4.   SALARY/BONUS/OTHER  BENEFITS.   In consideration of the  services
and duties to be rendered and performed by  the Employee during the term of
this Agreement, including the assumption of the duties and responsibilities
of  an  executive officer of the Company, the Company  agrees  to  pay  and
provide for the Employee the compensation and benefits described below:

          (a)  An  annual salary, payable in equal monthly installments, in
the amount of Three  Hundred  Twenty-Two  Thousand  Nine  Hundred  Nine and
00/100  ($322,909)  or  in such greater amount as may from time to time  be
fixed by the Board of Directors  or the Compensation Committee of the Board
of Directors of the Company.  The  Employee's  annual salary shall never be
reduced.

          (b)  An annual incentive bonus in such amount as may from time to
time  be fixed by the Board of Directors or the Compensation  Committee  of
the Board  of  Directors, provided that, the annual incentive bonus for any
period of less than  twelve (12) months (other than for the period from the
date hereof through December  31,  1998)  shall  be  prorated.   The annual
incentive  bonus  shall  be  paid  to  the  Employee  (or  to  his personal
representative  in  the  event  of  his  death) in a lump sum prior to  the
expiration of the period for which such bonus  is payable or within 45 days
following the expiration of such period.
<PAGE>
          (c)  OTHER   BENEFITS.   All  other  payments   and/or   benefits
described or provided for  in  this  Agreement,  including  the  Appendices
hereto.   It  is  intended that such payments and/or benefits shall provide
the Employee and/or his personal representative(s) and/or beneficiaries, as
the case may be, with  benefits  which will be at least as favorable as the
benefits which on December 31, 1997  were  provided for the Employee by the
Company.  In addition, the Employee shall also  be  eligible  for and shall
participate  in  any  other employee benefit plan, including, any  pension,
supplemental pension, retirement,  supplemental retirement, profit-sharing,
thrift,  bonus, incentive, deferred compensation,  stock  option  or  stock
appreciation  or other employee benefit plan, including any life insurance,
accident, medical,  disability, health or relocation plan or policy (all of
which are included by  reference  to  the  term  "Plan")  maintained by the
Company  for  its  employees,  generally, or for its senior executives,  in
particular, on the same basis and  subject  to  the  same  requirements and
limitations  as may be made applicable to other senior executive  employees
of the Company,  provided  that  participation  in  and  the  terms  of any
participation in the Avondale Industries, Inc. 1997 Stock Incentive Plan or
any successor plan shall be at the discretion of the Compensation Committee
as  provided  in such plans.  The benefit plan structure and benefits which
shall be provided  for the Employee and other senior executive employees of
the Company are described  in  Appendix A hereto.  Nothing herein, however,
shall be construed as limiting the  right  of the Employee to additional or
other and greater benefits than are described  in  said  Appendix A, if the
provisions of this Agreement obligate the Company to provide  such other or
greater  benefits,  and  in  particular,  but  without  limitation  by  the
specification  hereof,  the benefits described in Paragraphs 6, 7, 8 and  9
hereof and Appendices B,  C  and D hereto.  In addition, the Company agrees
that where credited service of  the Employee for the Company is relevant in
determining eligibility for or benefits  under  any  Plan,  the  Employee's
credited service for the Company shall be determined to include service for
any parent, subsidiary or affiliate of the Company or for a predecessor  of
the Company.

     5.   EXPENSES.   The  Employee  shall  be reimbursed for out-of-pocket
expenses  incurred  from  time to time on behalf  of  the  Company  or  any
subsidiary or in the performance  of  his duties under this Agreement, upon
the presentation of such supporting documents  and  forms  as  the  Company
shall reasonably request.

     6.   DISABILITY/DISABILITY BENEFIT.  In the event that the Employee is
incapable  because  of physical or mental illness of rendering services  of
the character contemplated  hereby,  for  a  period  of six (6) consecutive
months,  the  Board  of  Directors  of the Company may determine  that  the
Employee has become disabled.  In the  event  of  such  a  determination of
disability,  the Company shall have the continuing right and  option  while
such disability continues by notice in writing to the Employee to terminate
this Agreement  effective thirty (30) days after such notice of termination
is so given, unless  within  such  thirty  (30)  day  period,  the Employee
resumes rendering full-time services of the character contemplated  hereby.
The incapacity due to physical or mental illness to render the services  of
the  character  contemplated  hereby, shall not constitute a breach of this
Agreement by the Employee.  If  this Agreement is terminated by the Company
as a result of a determination of  disability,  as  aforesaid,  the Company
shall be obligated to pay to the Employee the disability benefits described
in Appendix B hereto.
<PAGE>
     7.   DEATH/DEATH  BENEFIT.  In the event of the death of the  Employee
during the term of this  Agreement,  this  Agreement will terminate and the
Employee's  then  rate  of  annual salary and an  annual  incentive  bonus,
(prorated in accordance with subparagraph 4(b) hereof) shall be paid to the
Employee's personal representative  through  the  last  day of the month in
which such death occurs.  In addition, the Company shall  be  obligated  to
provide   the   Employee,   his   personal   representative(s)  and/or  his
beneficiaries with the death benefits described in Appendix C hereto.

     8.   SEVERANCE PAY.  If the employment of  the  Employee is terminated
at any time during the period that this Agreement is in  effect  (i) by the
Employee for Good Reason (as defined in Paragraph 9 hereof) or (ii)  by the
Company for any reason other than for Cause (as hereafter defined) or other
than in accordance with Paragraph 6 hereof on account of the disability  of
the  Employee,  the  Company  shall be obligated to pay to the Employee the
severance  pay  and  benefits described  in  Appendix  D  attached  hereto.
Termination  of the Employee's  employment  on  account  of  his  death  or
Retirement (as  hereafter  defined) will not be considered a termination of
the Employee's employment by  the  Company and will not require the Company
to pay and provide any severance pay  or  benefits  pursuant to Appendix D.
Accordingly,  the  Company  acknowledges  that  if  the employment  of  the
Employee  is terminated by it for any reason during the  period  that  this
Agreement is in effect other than for Cause or other than on account of the
disability  of  the  Employee  in  accordance  with Paragraph 6 hereof, the
Company will be obligated to pay and provide the severance pay and benefits
described in Appendix D, in order to reinforce and  encourage the continued
loyalty,  attention,  and  dedication  of  the  Employee to  the  Company's
business  and affairs without the concerns which normally  arise  from  the
possibility  of  a  loss of employment security.  As used herein, the terms
"Retirement" and "Cause" shall have the following meanings, respectively:

          (a)  RETIREMENT.    Termination   of  the  Employee's  employment
"Retirement"  shall  mean termination on the Employee's  normal  retirement
date in accordance with the terms of the Avondale Industries, Inc.  Pension
Plan (or any successor or substitute plan or plans of the Company or of any
subsidiary of the Company  under  which the Employee may be a participant);
and
<PAGE>
          (b)  CAUSE.   Termination   by  the  Company  of  the  Employee's
employment  for "Cause" shall mean termination  as  a  result  of  (i)  the
willful and continued  failure by the Employee to perform substantially the
services contemplated by  this  Agreement  (other  than  any  such  failure
resulting from the Employee's incapacity due to physical or mental illness)
after  a  written  demand  for  substantial performance is delivered to the
Employee by a member or representative  of  the  Board  of Directors of the
Company  which specifically identifies the manner in which  it  is  alleged
that the Employee  has  not  substantially performed such services, or (ii)
the  willful  engaging  by  the  Employee  in  gross  misconduct  which  is
materially and demonstrably injurious  to  the  Company;  provided that, no
act,  or  failure  to  act,  on  the  Employee's  part  shall be considered
"willful"  unless  done,  or omitted to be done, in bad faith  and  without
reasonable belief that such  action  or omission was in, or not opposed to,
the best interests of the Company.  It  is  also  expressly understood that
the Employee's attention to or engagement in matters  not  directly related
to  the  business of the Company shall not provide a basis for  termination
for Cause  if  such  attention  or engagement is authorized by the terms of
this Agreement or has otherwise been  approved by the Board of Directors of
the Company.  Anything in this Agreement  to  the contrary notwithstanding,
the Employee's employment may not be terminated  for Cause unless and until
there shall have been delivered to the Employee a copy of a resolution duly
adopted  by  the affirmative vote of not less than three  quarters  of  the
entire membership  of  the  Board at a meeting of the Board called and held
for the purpose (after reasonable notice to the Employee and an opportunity
for the Employee, together with his counsel, to be heard before the Board),
finding that in the good faith opinion of the Board the Employee was guilty
of the conduct set forth in clause (i) or (ii) of this subparagraph (b) and
specifying the particulars thereof in detail.

     9.   TERMINATION BY THE  EMPLOYEE FOR GOOD REASON.  The termination by
the  Employee  of his employment  for  "Good  Reason"  shall  be  deemed  a
justifiable termination  of  his  employment  and shall excuse the Employee
from the obligation to render services as provided  in  Paragraph 2 hereof.
In  that  event  (i)  the full amount of the Employee's annual  salary  and
annual incentive bonus,  together  with  all  other benefits required to be
provided under this Agreement, shall be continued until the next succeeding
December 31st as of which the Company could have  terminated the Employee's
employment  pursuant  to  Paragraph  1  hereof  without  such   termination
constituting  a  breach  or  violation  of  this  Agreement;  and  (ii) the
Employee's  employment shall be deemed to terminate on such December  31st.
As used herein, the term "Good Reason" shall mean:

          (a)  a  change  in the Employee's status, title or position(s) as
an officer of the Company which,  in  his  reasonable  judgment,  does  not
represent a promotion from or enhancement of his status, title and position
as an executive officer, or the assignment by the Board of Directors of the
Company  to  the  Employee  of any duties or responsibilities which, in his
reasonable judgment, are inconsistent  with such status, title or position,
or any removal of the Employee from or any  failure to reappoint or reelect
him to such position, except in connection with  a  justifiable termination
by  the Company of the Employee's employment for Cause  or  on  account  of
disability,  the  Retirement or death of the Employee or the termination by
the Employee of his employment other than for Good Reason;
<PAGE>
          (b)  a reduction  in the Employee's annual salary or a failure by
the Company to pay to the Employee  any  installment  of  the annual salary
and/or the annual incentive bonus required pursuant to Paragraph  4 hereof,
which  failure  continues  for  a  period  of  20 days after written notice
thereof is given by the Employee to the Company;

          (c)  the failure by the Company to adopt, continue or maintain in
effect, any Plan or benefit which is required to be provided by the Company
pursuant to this Agreement (unless the Company provides  the  Employee with
the equivalent or at least substantially similar benefits under one or more
other Plans) other than as a result of the normal expiration of  such Plan;
or  the  taking  of any action or the failure to act by the Company,  which
could adversely affect  the  Employee's continued participation in any such
Plan(s)  or the ability of the  Employee  to  enjoy  or  realize  upon  any
material benefit  intended, or which could materially reduce the Employee's
benefits under any such Plan(s) or deprive him of any material benefit then
enjoyed by the Employee;

          (d)  the  Company's  requiring  the Employee to be based anywhere
other  than  the  New  Orleans,  Louisiana metropolitan  area,  except  for
required  travel  on  the Company's business  to  an  extent  substantially
consistent  with  the  business   travel  obligations  which  the  Employee
undertook on behalf of the Company prior to such required change;

          (e)  the failure by the Company  to obtain the assumption of this
Agreement  by  any  successor  of  the Company (other  than  by  merger  or
consolidation); provided, however, that  upon  a  Change  of Control of the
Company, as defined in the Change of Control Agreement between the Employee
and the Company (the "Change of Control Agreement"), the obligations  of  a
successor  hereunder  shall  be  limited  to the obligations of the Company
hereunder through the date of the Change of  Control  after  which date the
Change of Control Agreement shall govern.

          (f)  any  purported termination by the Company of the  Employee's
employment which is not  effected  pursuant  to  a  Notice  of  Termination
satisfying  the  requirements  of  Paragraph  10  hereof,  or  which is not
justified as a termination of the Employee's employment based on Cause; and
for  purposes  of  this  Agreement, no such purported termination shall  be
effective; or

          (g)  any refusal  by  the Company to allow the Employee to attend
to matters or engage in activities  not directly related to the business of
the Company which is permitted by this  Agreement  or which, prior thereto,
was permitted by the Board of Directors of the Company.

     10.  NOTICE OF TERMINATION.  Any purported notice  of  termination  of
the  Employee's employment (other than a Notice given by either pursuant to
Paragraph  1  hereof)  shall  be communicated in a writing delivered to the
other party as provided in Paragraph  14  hereof, (hereinafter a "Notice of
Termination").  For purposes of this Agreement  a  "Notice  of Termination"
shall mean a notice which specifies the termination provision  relied  upon
by  the  party  giving such notice and shall set forth in detail such facts
and circumstances  claimed  by  said party to provide a justified basis for
termination  of  the  Employee's  employment   under  the  provision(s)  so
indicated.
<PAGE>
     11.  NONDISCLOSURE, NONCOMPETITION AND PROPRIETARY RIGHTS.

          (a)  CERTAIN DEFINITIONS.  For purposes  of  this  Agreement, the
following terms shall have the following meanings:

               (i)  "Company  Business" means the design, construction  and
overhaul of both military and commercial ships.

               (ii) "Confidential   Information"   means  any  information,
knowledge or data of any nature and in any form (including information that
is  electronically  transmitted  or  stored  on  any form  of  magnetic  or
electronic  storage  media)  relating to the past, current  or  prospective
business or operations of the  Company  and  its  subsidiaries, that at the
time  or  times  concerned  is  not generally known to persons  engaged  in
businesses similar to those conducted  or  contemplated  by the Company and
its  subsidiaries (other than information known by such persons  through  a
violation  of  an  obligation  of  confidentiality to the Company), whether
produced by the Company and its subsidiaries  or  any of their consultants,
agents or independent contractors or by Employee, and whether or not marked
confidential,  including  without limitation information  relating  to  the
Company's  or its subsidiaries'  products  and  services,  business  plans,
business  acquisitions,   processes,   product   or  service  research  and
development methods or techniques, training methods  and  other operational
methods or techniques, quality assurance procedures or standards, operating
procedures,  files,  plans,  specifications,  proposals, drawings,  charts,
graphs, support data, trade secrets, supplier lists,  supplier information,
purchasing  methods  or  practices,  distribution  and selling  activities,
consultants' reports, marketing and engineering or other technical studies,
maintenance   records,  employment  or  personnel  data,  marketing   data,
strategies or techniques,  financial  reports,  budgets,  projections, cost
analyses,  price  lists,  formulae  and analyses, employee lists,  customer
records,  customer  lists,  customer  source  lists,  proprietary  computer
software,  and  internal  notes  and  memoranda  relating  to  any  of  the
foregoing.

          (b)  NONDISCLOSURE OF CONFIDENTIAL  INFORMATION.  During the term
of  this  Agreement, Employee shall hold in a fiduciary  capacity  for  the
benefit of  the  Company all Confidential Information which shall have been
obtained by Employee  during  Employee's  employment  (whether  prior to or
after  the  date  of  this  Agreement)  and  shall  use  such  Confidential
Information  solely  within  the  scope of his employment with and for  the
exclusive benefit of the Company.   For  a  period of three years after the
date  of  termination of Employee's employment  by  the  Company,  Employee
agrees (i)  not  to communicate, divulge or make available to any person or
entity (other than  the  Company) any such Confidential Information, except
upon the prior written authorization  of  the Company or as may be required
by law or legal process, and (ii) to deliver  promptly  to  the Company any
Confidential  Information  in  his  possession,  including  any  duplicates
thereof  and any notes or other records Employee has prepared with  respect
thereto.   In  the  event  that the provisions of any applicable law or the
order of any court would require  Employee  to  disclose  or otherwise make
available  any  Confidential Information, Employee shall give  the  Company
prompt prior written  notice of such required disclosure and an opportunity
to contest the requirement  of  such  disclosure  or apply for a protective
order  with  respect  to  such  Confidential  Information   by  appropriate
proceedings.
<PAGE>
          (c)  LIMITED  COVENANT NOT TO COMPETE.  During the term  of  this
Agreement and for a period  of  two  years  thereafter, commencing with the
date of termination of employment by the Employee  for  Good Reason, by the
Company for any reason other than for Cause, or by the Company for Cause if
the Company chooses to extend to Employee upon termination  for  Cause  the
severance  benefits  provided  in Paragraph 8 hereof and Appendix D hereto,
Employee agrees that, with respect  to  each  State of the United States or
other jurisdiction, or specified portions thereof,  in  which  the Employee
regularly  (i)  makes contact with customers of the Company or any  of  its
subsidiaries, (ii)  conducts  the  business  of  the  Company or any of its
subsidiaries or (iii) supervises the activities of other  employees  of the
Company  or  any  of  its  subsidiaries,  which states and jurisdictions or
portions thereof are identified in Appendix E attached hereto and forming a
part of this Agreement, and in which the Company or any of its subsidiaries
engages in the Company Business on the Date  of  Termination (collectively,
the  "Subject  Areas"),  Employee will restrict his activities  within  the
Subject Areas as follows:

               (i)  Employee  will not, directly or indirectly, for himself
or others, own, manage, operate,  control,  be  employed  in  an executive,
managerial  or  supervisory capacity by, or otherwise engage or participate
in or allow his skill,  knowledge,  experience  or reputation to be used in
connection with, the ownership, management, operation  or  control  of, any
company or other business enterprise engaged in the Company Business within
any  of the Subject Areas; provided, however, that nothing contained herein
shall prohibit Employee from making passive investments as long as Employee
does not  beneficially  own  more  than  10%  of  the equity interests of a
business  enterprise  engaged in the Company Business  within  any  of  the
Subject Areas.  For purposes  of  this  paragraph, "beneficially own" shall
have  the  same  meaning ascribed to that term  in  Rule  13d-3  under  the
Securities Exchange Act of 1934.

               (ii) Employee will not call upon any customer of the Company
or its subsidiaries  for  the  purpose of soliciting, diverting or enticing
away the business of such person  or  entity,  or  otherwise disrupting any
previously established relationship existing between  such person or entity
and the Company or its subsidiaries;

               (iii)  Employee  will  not  solicit,  induce,  influence  or
attempt to influence any supplier, lessor, licensor, potential  acquiree or
any  other person who has a business relationship with the Company  or  its
subsidiaries,  or  who on the date of termination of employment of Employee
is  engaged  in discussions  or  negotiations  to  enter  into  a  business
relationship with the Company or its subsidiaries, to discontinue or reduce
the extent of such relationship with the Company or its subsidiaries; and

               (iv) Employee   will  not  make  contact  with  any  of  the
employees of the Company or its  subsidiaries  with  whom  he  had  contact
during  the  course  of his employment with the Company for the purpose  of
soliciting such employee  for  hire,  whether as an employee or independent
contractor, or otherwise disrupting such  employee's  relationship with the
Company or its subsidiaries.
<PAGE>
               (v)  Employee further agrees that, for a  period of one year
from  and  after the date of termination of employment, Employee  will  not
hire, on behalf  of  himself or any company engaged in the Company Business
with which Employee is  associated,  any  employee  of  the  Company or its
subsidiaries as an employee or independent contractor, whether  or not such
engagement   is   solicited   by  Employee;  provided,  however,  that  the
restriction contained in this subsection  (v)  shall  not  apply to Company
employees who reside in, or are hired by Employee to perform  work  in  any
Subject Areas located within the State of Virginia.

     Employee  agrees  that  he  will  from time to time upon the Company's
request promptly execute any supplement,  amendment,  restatement  or other
modification  of Appendix E as may be necessary or appropriate to correctly
reflect the jurisdictions  which,  at the time of such modification, should
be covered by Appendix E and this Paragraph  11(c).   Furthermore, Employee
agrees that all references to Appendix E in this Agreement  shall be deemed
to refer to Appendix E as so supplemented, amended, restated  or  otherwise
modified from time to time.  Enforcement of this Paragraph 11(c) is subject
to the provisions of Paragraph 11(e) hereof.

          (d)  CERTAIN  PROPRIETARY RIGHTS.  Employee agrees to and  hereby
does assign to the Company  all  his  interest  in  and  to all inventions,
whether or not patentable, which are made or conceived solely or jointly by
him:

               (i)  At  any time during the term of his employment  by  the
Company  in  an executive,  managerial,  planning,  technical  research  or
engineering  capacity   (including   development,  manufacturing,  systems,
applied science and sales), or

               (ii) During the course  of  or in connection with his duties
during the term of this Agreement, or

               (iii) With the use of time or materials of the Company.

     Employee agrees to communicate to the Company  or  its representatives
all  facts  known to him concerning such inventions, to sign  all  rightful
papers, make  all rightful oaths and generally to do everything possible to
aid the Company in obtaining and enforcing proper patent protection for all
such inventions  in  all  countries and in vesting title to such inventions
and patents in  the Company.   For  the  purpose  of  this  Agreement,  the
subject  matter  of any application for patent naming Employee as a sole or
joint inventor filed  during  the  course  of employment or within one year
subsequent to the termination thereof shall  be  deemed  to be an invention
made or conceived by him during the course of his employment by the Company
and assignable to the Company hereunder, unless the Employee establishes by
a preponderance of the evidence that such invention was made  or  conceived
by  him  subsequent  to  termination  of  his employment hereunder.  At the
Company's request (during or after the term of this Agreement) and expense,
the Employee will promptly execute a specific  assignment  of  title to the
Company,  and perform any other acts reasonably necessary to implement  the
foregoing assignment.
<PAGE>
          (e)  INJUNCTIVE  RELIEF;  OTHER  REMEDIES.  Employee acknowledges
that  a  breach by Employee of Paragraph 11(b),  (c)  or  (d)  would  cause
immediate  and  irreparable  harm  to  the  Company  for  which an adequate
monetary remedy does not exist; hence, Employee agrees that,  in  the event
of a breach or threatened breach by Employee of the provisions of Paragraph
11(b), (c) or (d) during or after the Employment Term, the Company shall be
entitled  to  injunctive  relief  restraining  Employee from such violation
without the necessity of proof of actual damage or the posting of any bond,
except  as  required  by  non-waivable,  applicable law.   Nothing  herein,
however, shall be construed as prohibiting  the  Company  from pursuing any
other remedy at law or in equity to which the Company may be entitled under
applicable  law  in  the  event  of a breach or threatened breach  of  this
Agreement by Employee, including without limitation the recovery of damages
and/or costs and expenses, such as  reasonable attorneys' fees, incurred by
the Company as a result of any such breach.  It shall be a condition to the
enforceability by the Company of the  provisions  of  this Paragraph 11(c),
however, that the Company pays to and provides for the  Employee  the  full
amount  of  severance pay and benefits described in Appendix D.  Unless the
Company notifies  the  Employee in the Notice of Termination for Cause that
it intends to enforce the  provisions  of Paragraph 11(c) and agrees to pay
the Employee the full amount of severance  pay  and  benefits  described in
Appendix  D,  it  shall  be conclusively presumed for all purposes of  this
Agreement that the Company  has  elected  to waive the right to enforce the
provisions  of  this  Paragraph  11(c).   Employee  acknowledges  that  the
payments provided under Paragraph 8 and Appendix  D  are  conditioned  upon
Employee   fulfilling   any  noncompetition  and  nondisclosure  agreements
contained in Paragraph 11.   In  the  event  Employee  shall  at  any  time
materially  breach any noncompetition or nondisclosure agreements contained
in Paragraph  11,  the  Company  may  suspend  or  eliminate payments under
Paragraph  8  and  Appendix D during the period of such  breach.   Employee
acknowledges that any  such  suspension or elimination of payments would be
an exercise of the Company's right  to suspend or terminate its performance
hereunder  upon Employee's breach of this  Agreement;  such  suspension  or
elimination   of   payments   would  not  constitute,  and  should  not  be
characterized as, the imposition of liquidated damages.

          (f)  REQUESTS FOR WAIVER  IN  CASES  OF  UNDUE  HARDSHIP.  In the
event  that Employee should find any of the limitations of Paragraph  11(c)
(including without limitation the geographic restrictions of Appendix E) to
impose a  severe hardship on Employee's ability to secure other employment,
Employee may  make  a request to the Company for a waiver of the designated
limitations before accepting employment that otherwise would be a breach of
Employee's promises and  obligations  under  this  Agreement.  Such request
must  be  in  writing  and clearly set forth the name and  address  of  the
organization with that employment  is sought and the location, position and
duties that Employee will be performing.   The  Company  will  consider the
request and, in its sole discretion, decide whether and on what  conditions
to grant such waiver.
<PAGE>
          (g)  GOVERNING LAW OF THIS PARAGRAPH 11; CONSENT TO JURISDICTION.
Any  dispute  regarding  the reasonableness of the covenants and agreements
set forth in this Paragraph  11,  or  the  territorial  scope  or  duration
thereof,  or the remedies available to the Company upon any breach of  such
covenants  and   agreements,  shall  be  governed  by  and  interpreted  in
accordance with the  laws  of  the  State  of  the  United  States or other
jurisdiction  in  which  the  alleged  prohibited  competing  activity   or
disclosure  occurs, and, with respect to each such dispute, the Company and
Employee each  hereby  irrevocably consent to the exclusive jurisdiction of
the state and federal courts  sitting  in the relevant State for resolution
of such dispute, and agree to be irrevocably bound by any judgment rendered
thereby in connection with such dispute,  and further agree that service of
process may be made upon him or it in any legal proceeding relating to this
Paragraph 11 and/or Appendix E by any means  allowed under the laws of such
jurisdiction.  Each party irrevocably waives any  objection  he  or  it may
have as to the venue of any such suit, action or proceeding brought in such
a  court  or  that such a court is an inconvenient forum.  It is the desire
and intent of the parties that the provisions of this Agreement be enforced
to the fullest  extent  permitted  under  applicable  law,  whether  now or
hereafter  in  effect and, therefore, to the extent permitted by applicable
law, the parties  hereto  waive  any provision of applicable law that would
render any provision of this Paragraph 11 invalid or unenforceable.

     12.  BINDING EFFECT.  This Agreement  shall  be binding upon and inure
to the benefit of:

          (a)  The Company, and any successors or assigns  of  the Company,
except  that in the event of a Change of Control of the Company as  defined
in the Change  of  Control Agreement, this Agreement shall be superseded by
the Change of Control  Agreement.   In  the  event of the assignment by the
Company of this Agreement, the Company shall nevertheless remain liable and
obligated to the Employee in accordance with the terms hereof; and

          (b)  The  Employee,  his  estate, his executors,  administrators,
heirs and beneficiaries.

     13.  EXPENSES RELATING TO ENFORCEMENT  OF  RIGHTS.   If  either  party
shall  successfully  seek  to enforce any provision of this Agreement or to
collect any amount claimed to be due hereunder, such successful party shall
be entitled to be reimbursed  by  the  other  party for any and all out-of-
pocket  expenses,  including  reasonable  attorneys'   fees,   incurred  in
connection with such enforcements and/or collection.
<PAGE>
     14.  SEVERABILITY.   If  any  term  or  provision  of  this  Agreement
(including  without  limitation those contained in an Appendix hereto),  or
the application thereof to any person or circumstance, shall at any time or
to any extent be invalid,  illegal  or  unenforceable  in  any  respect  as
written,  Employee  and  the  Company  intend for any court construing this
Agreement  to  modify  or  limit such provision  temporally,  spatially  or
otherwise so as to render it  valid  and  enforceable to the fullest extent
allowed  by  law.   Any  such provision that is  not  susceptible  of  such
reformation shall be ignored  so  as  to  not  affect  any  other  term  or
provision  hereof,  and the remainder of this Agreement, or the application
of such term or provision  to  persons or circumstances other than those as
to  which  it  is held invalid, illegal  or  unenforceable,  shall  not  be
affected thereby  and  each  term  and provision of this Agreement shall be
valid and enforced to the fullest extent permitted by law.

     15.  NOTICES.  Any notice or other  communication  required under this
Agreement  shall  be  in  writing, shall be deemed to have been  given  and
received when delivered in  person,  or, if mailed, shall be deemed to have
been  given  when  deposited  in  the  United  States  mail,  first  class,
registered and certified, return receipt  requested,  with  proper  postage
prepaid,  and  shall  be deemed to have been received on the third business
day thereafter, and shall be addressed as follows:

     If to the Company, addressed to:

               Avondale Industries, Inc.
               5100 River Road
               Avondale, Louisiana 70094

     If to the Employee, addressed to:

               Thomas M. Kitchen
               6627 Canal Boulevard
               New Orleans, Louisiana 70124

     or such other address  as  to which any party hereto may have notified
the other in writing.

     16.  GOVERNING  LAW.   This  Agreement   shall   be  governed  by  and
interpreted in accordance with the laws of the State of  Louisiana  without
regard  to the principles of conflict of laws, except as expressly provided
in Paragraph 11(g) above with respect to the resolution of disputes arising
under, or the Company's enforcement of Paragraph 11 of this Agreement.

     17.  ENTIRE AGREEMENT.  This document contains or refers to the entire
arrangement or understanding between the parties relating to the employment
of the Employee by the Company prior to a Change of Control of the Company,
as defined  in  the Change of Control Agreement.  This Agreement, including
Appendices A through  E, inclusive, all of which are herein incorporated by
reference  and  made a part  hereof,  contains  or  refers  to  the  entire
arrangement or understanding  between the Employee and the Company relating
to the employment of the Employee  by  the  Company.   No  provision of the
Agreement, including the Appendices, may be modified or amended  except  by
an instrument in writing signed by or for both parties hereto.
<PAGE>
                                   AVONDALE INDUSTRIES, INC.


                                   By:     /s/ Hugh A. Thompson
                                         ------------------------
                                               Hugh A. Thompson
                                     Chairman, Compensation Committee


                                           /s/ Thomas M. Kitchen
                                         -------------------------
                                               Thomas M. Kitchen
<PAGE>
                        LIST OF APPENDICES


                         DESCRIPTION         NUMBER OF PAGES

Appendix A          Benefit Plan Structure         5


Appendix B          Disability Benefits            1

Appendix C          Death Benefits                 1

Appendix D          Severance Benefits             3

Appendix E          Subject Areas under Limited    1
                    Covenant Not to Compete
<PAGE>
                                 APPENDIX "A"

                           AVONDALE INDUSTRIES, INC.
                         AVONDALE SERVICES CORPORATION

                                EXECUTIVE GROUP

                            Effective Date:  1-1-98

COVERAGE                DESCRIPTION

EMPLOYEE LIFE           Two times base salary and bonus
                        Optional  Coverage  -  additional one or two times base
                        salary and bonus
                        Maximum Coverage - Two million dollars

DEPENDENT LIFE          $2,000.00 Spouse - Optional $100,000.00
                        $1,000.00 Dependent (over six months old)
                        $100.00 Dependent (less than six months old)

Accidental Death and    Death - Same as Life     (Employee Only)
DISMEMBERMENT           Dismemberment - Benefit Schedule

Business                According to rate of pay - Maximum $50,000.00
TRAVEL ACCIDENT

TRAVEL ACCIDENT (SALARIED) 5 Times Annual Salary - Maximum $500,000.00

RETIREE LIFE            One-half  of  Life  Insurance   in  force  at  time  of
                        retirement

SHORT TERM DISABILITY   Schedule based on length of service (see Page 2)

LONG TERM DISABILITY    60%  of  monthly  base salary, after  180  day  waiting
                        period.
                        Maximum $15,000 per month coordinated with Disability
                        Social Security Benefit.
<PAGE>
HEALTH CARE             100% Hospital - private  room  rate  plus miscellaneous
                        expenses

                        100%  Hospital Medical Expenses - (doctor's  visits  to
                        hospital)

                        100% Surgical Expenses

                        100% Laboratory and X-ray Expenses

                        100% Vision and Hearing Care Expenses

                        100% Dental and Orthodontia

                        100% Annual Physicals

                        100% Psychiatric and Nervous Care - expenses up to
                        $6,500.00 per year per individual

                        No Life-Time Maximum

                        Subject to applicable employee contribution requirement
<PAGE>
SHORT TERM DISABILITY

Benefits begin on first day absent  due  to  a  non-occupational  injury or
illness.   Original  medical documentation required if absent five or  more
consecutive working days.

Benefits will be reduced by any amount received from Social Security.

Successive periods of  disability  separated  by less than two (2) weeks of
full-time work considered as one continuous period  of  disability,  unless
later disability due to a different cause.

Benefits  will  be paid up to a maximum of twenty-six (26) weeks, based  on
the following schedule:

        YEARS OF SERVICE  FULL SALARY UP TO   HALF SALARY UP TO

        Less than 1 Year        4 Weeks             0 Weeks
             1 Year             4 Weeks            22 Weeks
             2 Years            6 Weeks            20 Weeks
             3 Years            8 Weeks            18 Weeks
             4 Years           10 Weeks            16 Weeks
             5 Years           12 Weeks            14 Weeks
             6 Years           14 Weeks            12 Weeks
             7 Years           16 Weeks            10 Weeks
             8 Years           18 Weeks             8 Weeks
             9 Years           20 Weeks             6 Weeks
            10 Years           22 Weeks             4 Weeks
            11 Years           24 Weeks             2 Weeks
            12 Years or more   26 Weeks             0 Weeks

JURY DUTY

Pays difference between  employee's  base pay and jury pay received, not to
exceed eight hours pay per day.

BLOOD BANK

To be eligible, must be a participant  in  Group  Health Insurance Program.
In joining the Blood Bank Program, the employee agrees  to donate a unit of
blood  as  requested  at  irregular  intervals.   The Program provides  the
employee  and  insured dependents with blood for as long  as  the  employee
remains in the Program.

HOLIDAYS

Eight Paid Holidays  - New Years Day, Mardi Gras, Good Friday, July Fourth,
Labor  Day,  Thanksgiving   Day,  Day  After  Thanksgiving  and  Christmas.
Eligible upon completion of thirty days service.

<PAGE>
VACATION

Vacation year is from January  1  to  December  31.  Upon completion of one
full  year  of  service, eligible for two weeks of vacation.   An  employee
joining the Company  after  January  1 but prior to July 1 will be eligible
for one week's vacation the following  January 1.  Vacation time may not be
carried over from one vacation period to  the  next.   Vacation time may be
taken  in one-hour increments.  Beginning with ten full years  of  service,
eligible  for  additional  days  of  vacation,  up  to  a  maximum  of five
additional days, based on the following schedule:

          YEARS OF SERVICE         ADDITIONAL DAYS OF VACATION

              10 Years                     1 Day
              11 Years                     2 Days
              12 Years                     3 Days
              13 Years                     4 Days
              14 Years                     5 Days

SICK/PERSONAL TIME

Eligible  for  twenty-four  hours per calendar year.  Time may be taken  in
one-hour increments.  Unused time may not be carried over to the next year.

FUNERAL LEAVE

None

TUITION ASSISTANCE

Eligible upon completion of one  year's  service.   Only  courses  directly
related to employee's position and taken at an accredited institution  will
be considered.  Approval must be obtained prior to the start of the course.
Reimbursement  will be made for the cost of tuition only, and will be based
on the following schedule:

      COURSE LEVEL       FINAL GRADE       REIMBURSEMENT PERCENTAGE

      Under-Graduate     Not Lower Than "C"       100%
      Post-Graduate      Not Lower Than "B"       100%

AUTOMOBILE ALLOWANCE

$600 per month

RETIREMENT

Formula - 1.5% of  final  average  compensation,  multiplied  by  years  of
credited   service,   less  Massachusetts  Mutual  Annuity  and  equivalent
actuarial value of any shares in ESOP account.
Early Retirement Benefits  available  at  age  55  with  ten years service,
actuarially reduced by years and months early.
<PAGE>
SUPPLEMENTAL RETIREMENT PLAN

Vesting: 100% vesting upon completion of ten (10) years service

Formula: 15% of final average compensation.

Early Retirement Benefits available at Age 55 with ten (10)  years service,
actuarially reduced by years and months early

EXECUTIVE EXCESS RETIREMENT PLAN

If designated as a participant by the Board of Directors.

Purpose of the plan is to reimburse participants for benefits  not  payable
under  the  Pension  Plan  and  ESOP because of limitations in the Internal
Revenue Code and the Pension Plan.

Benefits paid upon attainment of age 75 or upon retirement, if earlier.

Benefit is unfunded.

EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)

Plan Year - September 1 to August 31

Eligibility - 1st of month following one year of service

Compensation - Total salary, excluding  severance  pay, moving expenses and
non-cash contribution

Stock Allocation - Each year the Trustees divide the  available  shares  of
stock   among   eligible   participants,   based   on   each  participant's
compensation.   These  allocated shares are held in the participant's  ESOP
account.  Must be on payroll  last  pay period of each plan year to receive
allocation.

Distribution -  (1)  Retirement - Age 55 or later
                (2)  Total & Permanent Disability with Social Security Award
                (3)  Death

Vesting -  Employees who were eligible  to receive Special Shares were 100%
vested.
Vesting for Loan Shares is as follows:

          Less than 4 years        0%
          4 years but less than 5 40%
          5 years but less than 6 50%
          6 years but less than 7 60%
          7 years but less than 8 70%
          8 years but less than 9 80%
          9years but less than 10 90%
          10 years or more       100%

<PAGE>
                            APPENDIX B

                        DISABILITY BENEFIT

     In  the  event  of  termination  by  the  Company  of  the  Employee's
employment  on  account  of  disability  pursuant to  Paragraph  6  of  the
Agreement, the disability benefit to be provided  to  the Employee shall be
determined under this Appendix, unless a greater or more  favorable benefit
is required to be provided pursuant to the provisions of Subparagraph  4(c)
of the Agreement and/or Appendix A.

     1.   CONTINUATION  OF  FULL  ANNUAL  SALARY:   The  full amount of the
Employee's  annual  salary  (pursuant to paragraph 4(a) of this  Agreement)
shall be continued according to the following formula:

          (i)  If the Employee's  credited  service  for the Company totals
(5) five years or less his annual salary shall be continued for twelve (12)
months commencing with the month following such termination  of employment;
and

          (ii) If  the  Employee's credited service for the Company  totals
more than five (5) years,  the  payment  period referred to in (i) shall be
increased by two-tenths (2/10) of a year for  each year of credited service
in excess of five (5) up to a maximum payment period  of  five  (5)  years.
Thus,  if  the Employee's employment is terminated on account of disability
at a time when he has twelve (12) years of credited service, the Employee's
full annual  salary  would  be  continued  for  2.4  years  following  such
termination  of  employment  and  an Employee with twenty-five (25) or more
years  of  credited service as of the  termination  of  his  employment  on
account of disability  will  receive  his  full  annual salary for five (5)
years.

     2.   CONTINUATION OF PARTIAL ANNUAL SALARY.   Following the expiration
of  the  period  calculated  pursuant  to  the preceding Paragraph  1,  the
Employee will receive long term disability benefits  equal to sixty percent
(60%)  of  his  full  annual  salary  subject  to such limitations  as  are
contained in Appendix A.

     3.   LIMITATIONS.    The  disability  benefit  will   in   any   event
discontinue and terminate upon  the  death of the Employee or upon the date
of his Retirement as defined in subparagraph  9(a)  of  the Agreement would
have occurred.

     4.   OTHER  BENEFITS.   Other  benefits  which  may  be  provided   or
continued  for  the Employee following the termination of his employment on
account of disability  depend  upon  the terms of the Plan under which such
benefits are provided or required to be provided.

<PAGE>
                            APPENDIX C

                          DEATH BENEFITS


     The death benefits to be provided  by  the  Company  subsequent to the
death of the Employee shall be determined by reference to the plan or plans
under which such benefits are provided.  Reference is made  to subparagraph
4(c) of the Agreement and to Appendix A.
<PAGE>
                            APPENDIX D

                        SEVERANCE BENEFITS

     Upon   the   termination  of  the  Employee's  employment  under   any
circumstance requiring  the  Company to pay to and provide for the Employee
the severance pay and other benefits  set  forth  in  this  Appendix D, the
Company  shall  be obligated to pay to and/or provide for the Employee  the
following compensation and other benefits:

     (a)  PAYMENT  IN  LIEU  OF COMPENSATION:  The Company shall pay to the
Employee in cash an amount equal  to the product of (i) and (ii); where (i)
shall  equal  the  sum of (A) the Employee's  annual  salary  and  (B)  the
Employee's annual incentive  bonus  during  the  twelve  (12)  month period
ending with the close of the month in which such termination of  employment
occurs  (the  "Date  of Termination") , divided by twelve (12) ; and  where
(ii) shall be the lesser  of (x) thirty-six (36), (y) six (6), plus two (2)
for each twelve (12) months  of  credited  service  of the Employee for the
Company (determined in accordance with subparagraph 4(c)  of the Agreement)
through  the  Date  of Termination, or (z) the number of months  until  the
Employee's normal retirement  date,  as defined in the Avondale Industries,
Inc.  Pension Plan (or any successor,  or  substitute  plan or plans of the
Company or of any subsidiary of the Company under which the Employee may be
a  participant,  hereinafter  the  "Pension Plan").  The number  determined
under  clause  (ii)  is sometimes herein  referred  to  as  the  "Measuring
Period".

     (b)  ACCELERATION  OF  STOCK OPTIONS:  Immediately following such Date
of  Termination,  all options and  stock  appreciation  rights  granted  to
Employee under the  1997  Stock Incentive Plan or any other stock option or
similar plan before or after  the  date  hereof  (collectively  referred to
herein  as "Stock Option Plans") shall immediately become fully exercisable
and execution  of this Agreement shall constitute an amendment to any stock
option agreement  to  so  provide  and  an agreement and undertaking by the
Company to take such action as may be required to cause any and all options
or rights granted, or to be granted, to Employee  thereunder  to  make them
consistent herewith.
<PAGE>
     (c)  PAYMENT  FOR  NON-VESTED RETIREMENT BENEFIT:  In addition to  the
vested portion of the Employee's  interest  under any employee benefit plan
maintained by the Company as a qualified plan pursuant to Section 401(a) of
the Internal Revenue Code of 1986, as amended,  to which the Company or any
subsidiary has made contributions for the Employee's  account which are not
otherwise  expressly  provided  for herein, if the Employee  is  not  fully
vested under any such plan or plans,  the Company shall pay to the Employee
in  cash  an  amount  equal  to the then present  value  of  the  actuarial
equivalent (within the meaning  of the following Paragraph (d)) of the non-
vested portion of the Employee's  account,  to the extent that such account
would  have  become vested based on additional  credited  service  for  the
Company, if the  Employee had remained in the employ of the Company (or any
subsidiary) for an  additional  period  of  months  equal  to the Measuring
Period.

     (d)  SUPPLEMENTAL  RETIREMENT BENEFIT:  In addition to any  retirement
or severance benefit to which  the  Employee  is entitled under the Pension
Plan,  the  Employee  shall receive in cash, an amount  equivalent  of  the
excess of (i) over (ii),  where  (i)  equals  the  aggregate  amount of the
retirement  pension  (calculated  as  a  straight  life annuity payable  to
Employee on his normal retirement date) to which Employee  would  have been
entitled  under  the  terms of the Pension Plan and any other qualified  or
non-qualified defined benefit  plan  maintained by the Company and covering
the Employee, if Employee were fully vested  thereunder  (without regard to
(w) whether the Employee shall actually have completed the  number of years
of credited service required to qualify for full vesting under  such plans,
(x) any limitation on the amount of compensation used in the calculation of
the  regular  pension  thereunder,  (y) any offset thereunder for severance
allowances payable hereunder or (z) any  amendment to such plans made prior
to the Employee's Date of Termination, which amendment adversely affects in
any manner the computation of retirement benefits under such plans) and had
accumulated an additional period of months  of  credited  service after the
Date  of Termination equal to the Measuring Period (but in no  event  shall
Employee  be  deemed  to  have accumulated an additional period of credited
service subsequent to Employee's  sixty-fifth  (65th) birthday), and, where
(ii) equals the amount of the retirement pension  (calculated as a straight
1ife annuity payable to Employee on his normal retirement  date),if any, to
which Employee is entitled pursuant to the provisions of the  Pension  Plan
and  such  other  plans.  For purposes of Clause (i) of this Paragraph (d),
the amount payable  pursuant  to Paragraph (a) of this Appendix D, shall be
deemed to represent the Employee's  earnings for the period of months equal
to the Measuring Period, and for purposes of this Paragraph (d), "actuarial
equivalent" shall be determined using  the  same  methods  and  assumptions
utilized   under  the  Pension  Plan  immediately  prior  to  the  Date  of
Termination.   All  other  terms  used in this Paragraph (d) shall have the
same meanings, respectively, as such terms have in the Pension Plan, unless
otherwise required by the context.
<PAGE>
     (e)  OTHER BENEFITS:  The Company  shall  also  maintain in full force
and effect, for the continued benefit of the Employee  and  his dependents,
for  a  period terminating on the earliest of (i) a period of months  after
the  Date   of   Termination  equal  to  the  Measuring  Period;  (ii)  the
commencement date  of  equivalent  benefits  for  the  Employee  from a new
employer;  or  (iii)  the  Employee's  normal  retirement  date  under  the
Company's  Pension  Plan,  after  which the terms of the Pension Plan shall
govern; all insured and self-insured  employee  benefit  plans in which the
Employee  is  entitled  to  participate  immediately prior to the  Date  of
Termination;  provided  that  the  Employee's  continued  participation  is
possible under the general terms and  provisions  of  such  Plans  (and any
applicable funding media) and the Employee continues to pay an amount equal
to  Employee's  regular  contribution for such participation.  In the event
that the Employee participation in any such Plan is barred, the Company, at
its sole cost and expense,  shall arrange to have issued for the benefit of
Employee  and his dependents individual  policies  of  insurance  providing
benefits substantially  similar  (on an after-tax basis) to those which the
Employee would have been entitled  to  receive  under  such  Plan  or Plans
pursuant to this Paragraph (e) if such participation were not barred or, if
such  insurance  is not available at a reasonable cost to the Company,  the
Company shall otherwise  provide  the  Employee  and  his  dependents  with
equivalent  benefits  (on an after-tax basis) and the Employee shall not be
required to pay any premiums  or  other  charges  in an amount greater than
that  which the Employee would have paid in order to  participate  in  such
Plans.   If, at the end of a period of months after the Date of Termination
equal to the  Measuring  Period,  the  Employee is not receiving equivalent
benefits from a new employer, the Company  shall  arrange, at its sole cost
and  expense,  to  enable  Employee  to  convert  the  Employee's  and  his
dependents'  coverage under such Plans to individual policies  or  programs
upon the same  terms  as  employees  of the Company may apply for until the
Employee is able to receive equivalent  benefits  from  a source other than
the Company.

     (f)  MITIGATION:  The Employee shall not be required  to  mitigate the
amount of any payment or benefit provided for in this Appendix D by seeking
other  employment  or  otherwise,  nor (except as specifically provided  in
Paragraph (e) above) shall the amount  of  any  payment or benefit provided
for in this Appendix D be reduced by any compensation  or benefit earned by
Employee as a result of employment by another employer after  the  Date  of
Termination, or otherwise.

     (g)  MANNER OF PAYMENT:  All payments which are required to be made in
cash  under Paragraphs (a), (c) or (d), above, shall be paid on the Date of
Termination,  or  within  five  (5)  business  days  thereafter, unless the
Employee  has  made  a  Deferred  Payment  Election  with respect  to  such
payment(s) pursuant to the succeeding Paragraph (h).
<PAGE>
     (h)  ELECTION TO DEFER PAYMENT:  Upon entering into this Agreement and
for a period of fourteen (14) days following each anniversary  of  the date
hereof  (the  "Election Period"), the Employee may, in writing, direct  the
Company that any  amounts  which become payable to the Employee pursuant to
Paragraphs (a), (c) and (d),  above, shall be paid to the Employee in three
(3) equal annual installments,  with  the  first of such installments to be
paid not later than five (5) business days after  the  Date  of Termination
and   successive   installments   paid  on  the  next  two  (2)  succeeding
anniversaries of the Date of Termination or the next following business day
if such date is not a business day  (the  "Deferred  Payment Election").  A
Deferred Payment election, once made, shall be irrevocable except during an
Election Period.

     (i)  EFFECT ON OTHER BENEFITS:  Nothing contained  in  this Appendix D
shall  be  construed  or  interpreted  as  limiting  any rights or benefits
payable to or for the Employee under any other provision of this Agreement.
<PAGE>
                            APPENDIX E
                      TO EMPLOYMENT AGREEMENT
                 BETWEEN AVONDALE INDUSTRIES, INC.
                                AND
                         THOMAS M. KITCHEN


                Jurisdictions In Which Competition
                     Is Restricted As Provided
                        In Paragraph 11(c)


A.   STATES

     1.   LOUISIANA -- The following parishes in the State of Louisiana:

          Orleans and Jefferson

     2.   MISSISSIPPI   --   The  following  counties  in  the   State   of
          Mississippi:

          Harrison

          as well as any other  counties  in  the  State  of Mississippi in
          which the Employee regularly (a) makes contact with  customers of
          the Company or any of its subsidiaries, (b) conducts the business
          of  the Company or any of its subsidiaries or (c) supervises  the
          activities  of  other  employees  of  the  Company  or any of its
          subsidiaries as of the date of termination of employment.

     3.   VIRGINIA-- The following counties in the State of Virginia:

          Arlington

          as well as any other counties in the State of Virginia  in  which
          the  Employee  regularly  (a) makes contact with customers of the
          Company or any of its subsidiaries,  (b) conducts the business of
          the  Company or any of its subsidiaries  or  (c)  supervises  the
          activities  of  other  employees  of  the  Company  or any of its
          subsidiaries as of the date of termination of employment.

Agreed to and Accepted:

Avondale Industries, Inc.                  Employee


By: /S/ HUGH A. THOMPSON                   /S/ THOMAS M. KITCHEN
    --------------------                   ---------------------
Its: Compensation Committee Chairman           Thomas M. Kitchen
Date: MARCH 23, 1998                       Date: MARCH 23, 1998