Document:

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                                                                   Exhibit 10.10

                                    PREAMBLE

This Agreement between NORFOLK SHIPBUILDING & DRYDOCK CORPORATION (herein called
the Company) party of the first part, and INTERNATIONAL BROTHERHOOD OF
BOILERMAKERS, IRON SHIP BUILDERS, BLACKSMITHS, FORGERS AND HELPERS, AFL-CIO, AND
ITS LOCAL LODGE 684 (herein together called the Union), party of the second part
is made and entered into and effective on February 9, 2001.

                                   ARTICLE I
                                UNION RECOGNITION

Section 1. The Company recognizes the Union as the exclusive representative for
the purpose of collective bargaining with respect to rate of pay, wages, hours
of employment, and other conditions of employment for all production and
maintenance employees of the Company at the Berkley yard, including
transportation department employees, storeroom employees, launch captains, fire
watch employees, operators, lead mechanics, trainees and apprentices, but
excluding, office employees, technical employees, draftspersons, planners,
inspectors, material clerks, clerical employees, timekeepers, plant protection
employees, dock masters, assistant dock masters, instructors, Craft Supervisors,
lead persons, and all other supervisory employees with authority to hire,
promote, discharge, discipline, or otherwise effect changes in the status of
employees, or effectively recommend such action. The term "Employee" wherever
used in this Agreement means one of the employees in such bargaining unit; and
the term "Employees", means two or more of such employees.

Section 2. The Union will notify the Company, in writing, of the appointment of
the Shop Stewards and Grievance Committee persons. No Employee shall have or
exercise any authority as Shop Steward or Grievance Committee person until such
notice of appointment shall have been filed with the Company. The above
procedure shall apply when the Union appoints an interim Steward or Committee
person for the regular Steward or Committee person's vacation period or other
period of prolonged absence.

Section 3. The Company will be permitted to "Z" out any shop steward for up to
one (1) full working day, if all employees in the same department and
classification on the vessel or other project to which the Shop Steward is
assigned are also "Z"ed Out. If any employee in the same department and
classification as the Shop Steward is reassigned from the vessel or project to
other work, the Shop Steward shall also be reassigned rather than being "Z"ed
out. Shop Stewards shall not be required to work offsite for more than three (3)
days, unless the Shop Steward's specific skills are needed. Shop Stewards may
voluntarily accept a "Z" out for any length of time in conformity with this
Article.

Section 4. For the day shift, the number of Shop Stewards shall be recognized
for each of the following as specified: Night shift shall have five (5)
Stewards, however, that no more than two (2) Stewards be selected from any one
shop, as listed:
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                          Group I Six (6) Shop Stewards

                                   Plate Shop
                                  Welding Shop
                                 Blacksmith Shop
                                   Boiler Shop
                                 Sheetmetal Shop
                                Labor Department

                         Group II Five (5) Shop Stewards

                               Inside Machine Shop
                              Outside Machine Shop
                                    Pipe Shop
                                   Rigger Shop
                                    DMI / NIE

                        Group III Four (4) Shop Stewards

                                   Facilities
                                 Dock Department
                       Storeroom / Transportation / Crane
                            Environmental Department

                         Group IV Four (4) Shop Stewards

                                 Insulation Shop
                                   Paint Shop
                                 Carpenter Shop
                                  Electric Shop

                         Group V Five (5) Shop Stewards

                                   Night Shift

For down riverwork, the Union shall be permitted to appoint one (1) Steward at
NOB and one (1) at Little Creek Amphibious Base. The Company shall not be
limited in any way in work assignment at any location by such appointments by
the Union.

When the regularly established third shift is worked, the Union may appoint one
(1) Shop Steward for each group in which work is being performed.

Section 5. If during the term of this extended Agreement any new department or
departments are established by the Company or shops consolidated or eliminated,
the Company and the Union will meet to discuss whether additional or fewer shop
stewards shall be permitted.

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Section 6. Members of the Union's Grievance Committee, which shall be comprised
of four (4) active employees of the Company, will receive a maximum of four (4)
hours pay per month for attendance at the regular monthly Step III Grievance
Meetings.

                                   ARTICLE II
                                   COOPERATION

           The Union recognizes the responsibilities imposed upon it as the
exclusive bargaining agent for the Employees and agrees that in order to provide
maximum opportunities for continued employment and good working conditions, it
will cooperate with the Company and support its efforts to assure a full day's
work on the part of its members and it will actively combat absenteeism, leaving
the job before the proper time and any other practice which restricts
production. It further agrees that it will support the Company, in its efforts
to eliminate waste in production, conserve materials and supplies, improve the
quality of workmanship, prevent accidents and strengthen goodwill between the
Company, the Employees, the Customer and the Public to enable the Company to
become competitive and preserve jobs.

                                  ARTICLE III
                          APPLICATION OF THE AGREEMENT

Section 1. The purpose of this Agreement is to set forth all the terms agreed
upon by the Company and the Union.

Section 2. The Company will not discourage nor discriminate against any
Employee for any reason whatsoever arising out of Union membership or
participation in Union affairs.

Section 3. The Union agrees that neither it nor any of its officers, members,
or representatives will threaten, intimidate or coerce Employees into membership
in the Union or will conduct any internal Union activities on Company time.

Section 4. The Union agrees that the DavisBacon Act and Service Contract Act
will provide a higher hourly rate of pay only for those contracts and will not
alter the rate for nonDavis/Bacon Service Contract Act jobs.

           (a) SERVICE CONTRACT ACT of 1965 - The Service Contract Act specifies
           certain wage requirements that employers must meet if they provide
           services for the federal government under a contract with a federal
           agency.

           (b) DAVISBACON ACT - The DavisBacon Act requires federal construction
           contractors and subcontractors to pay certain prescribed wage rates
           to workers on federally funded projects.

Section 5. Any Employee designated by the Union to serve on any joint committee
shall have a minimum of two (2) years of seniority with the Company. Loss of
seniority shall necessitate the Employee's immediate replacement.

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Section 6. The use of the masculine or feminine gender or titles in this
Agreement shall be construed as including both genders and not as sex
limitations.

Section 7. The Company will at the time of hiring provide to each new employee
a copy of the then current Collective Bargaining Agreement and a copy of the
Union's dues checkoff authorization, membership application, safety rules,
environmental handbook, and acknowledgment. The Company shall provide the Union
a copy of all new hires' addresses and telephone numbers. The Company shall also
provide the Union with an accurate roster of employees' names, addresses, and
telephone numbers quarterly.

Section 8. The Local Union President, or his designee, shall be notified in
advance of orientation meetings for new employees covered by this labor
agreement. The Union President, or his designee shall be allowed to attend
orientation meetings on Union time to present information regarding the Union.
The Union President, or his designee shall not present any material or
information of a political or controversial nature, or reflecting adversely in
any way on the Company operations or management. This provision shall be subject
to revocation by the Company in the event the Union violates the intent of this
section.

Section 9. The Company will provide to the Union a list of the hires, recalls,
layoffs and terminations that occurred on a weekly basis.

Section 10. After the effective date of this Agreement, all Bargaining Unit
Employees shall receive a copy of this Agreement, and current safety rules, and
sign an acknowledgement form reflecting their receipt of such documents and
their understanding and agreement that all terms and conditions set forth
therein govern their employment with the Company.

                                   ARTICLE IV
                       NONDISCRIMINATION/EQUAL EMPLOYMENT

Section 1. The Company and the Union agree that, as required by applicable
laws, they will not discriminate against any employee because of race, color,
sex, religion, national origin, age, disability, veteran status, marital status
or because of membership or non-membership in the labor union or any activity on
behalf of the labor union.

Section 2. The company is an Equal Employment Opportunity Employer and will
develop an Affirmative Action Compliance Program in accordance with Executive
Order 11246. It is the practice of the Company to recruit, hire, train, and
promote in accordance with such affirmative action plan and Executive Order
11246. The Company will not tolerate harassment based upon any protected status,
including sexual harassment by Employees or supervisors against any person at
its place of business and will take appropriate corrective action if such
conduct comes to its attention.

Section 3. This Agreement shall be administered in accordance with the
applicable provisions of Title VII of the Civil Rights Act of 1964, the
Americans with Disabilities Act, the Age Discrimination in Employment Act, and
other state and federal non-discrimination statutes and regulations.

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Section 4. Any and all disputes arising under this Article, as with all other
articles of this contract, shall be subject to the jurisdiction of the Grievance
and Arbitration provisions of this contract. Decisions rendered in arbitration
with respect to such disputes shall be final and binding upon the parties and
the affected employees. Nothing contained in this Article shall preclude any
employee from exercising his/her rights under Federal and State law.

                                   ARTICLE V
                                  HOURS OF WORK

Section 1. For purposes of this Agreement pay week is defined as that period
which begins at 7:15 a.m on Monday and continues until 7:15 a.m. on the
following Monday. The normal workweek will be from Monday until Friday
inclusive. The normal workday consists of eight (8) consecutive hours excluding
time for eating periods.

Section 2. Nothing contained in this Article shall be deemed to be a guarantee
to any Employee of eight (8) hours work in any one day or forty (40) hours work
in any one week.

Section 3. The hours of work for regular shifts shall be as follows, except
that the Company shall be free to adjust this schedule to meet production
requirements in a cost-effective manner. However, in the case of early starts of
shifts between 4 a.m. and 6 a.m., the Company shall give consideration in making
such assignments to possible hardships, such as childcare responsibilities.

           (a) When not more than two regular shifts are worked, the shift hours
           shall be:

                     First Shift:         7:15 a.m. to 12:00 noon
                                          12:45 p.m. to 4:00 p.m.

                     Second Shift:        4:00 p.m. to 8:30 p.m.
                                          9:00 p.m. to 12:30 a.m.

           (b) When three regular shifts are worked, the shift hours shall be:

                     First Shift:         7:15 a.m. to 12:00 noon
                                          12:45 p.m. to 4:00 p.m.

                     Second Shift:        4:00 p.m. to 8:30 p.m.
                                          9:00 p.m. to 12:30 a.m.

                     Third Shift:         11:45 p.m. to 7:45 a.m.

Section 4. The Company retains the right to establish and maintain a Flexible
Work Week Schedule where it deems such a schedule to be desirable. A Flexible
Work week Schedule requires employees to work any 5 days during the work Week,
including Saturday and/or Sunday as part of their regular straight time work
week. The Company agrees that such a schedule shall not be used except in the
compressor room. Any other exceptions shall be by mutual agreement with the
Union.

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One example of a Flexible Work Week Schedule:

<TABLE>
<CAPTION>
    Team       Mon      Tues     Wed      Thur     Fri       Sat       Sun
    ----------------------------------------------------------------------
<S>            <C>      <C>      <C>      <C>      <C>       <C>       <C>
     1A                                                       6         7
    ----------------------------------------------------------------------
     1B                                                       6         7
    ----------------------------------------------------------------------
     1C                                                       6         7
    ----------------------------------------------------------------------
     1D                                                       6         7
    ----------------------------------------------------------------------
     2E         6                                                       7
    ----------------------------------------------------------------------
     4F                   6       7
    ----------------------------------------------------------------------
     6G                                     6       7
</TABLE>

Employees who are to be assigned to the Flexible Work Week will be so notified
no later than the end of their shift on the Thursday preceding the week in which
the Flexible Work Week assignment becomes effective. Employees may agree to
start such shifts without such notice. Employees who have been assigned to the
5/7 Flexible Workweek, which includes weekend assignments within that schedule,
for a period three (3) months shall be rotated off that shift for a minimum of
three (3) months before being reassigned to that schedule.

Section 5. The Company may at its discretion, and to the extent it deems
feasible, establish a workweek schedule in any department or shop consisting of
four (4) consecutive days of ten (10) hours each Monday through Friday, with
Employees so assigned to be paid at (40) straight time hours.

Notwithstanding the provisions of Article VII, or any other provisions of this
Agreement, where such a 4-day workweek schedule is utilized, overtime will be
paid after ten (10) hours in a workday, respectively, and for work performed in
excess of forty (40) hours. Assignments to such schedule will be limited in
duration to the length of the project or vessel for which the schedule is
established.

The Company will make every reasonable effort to assign to those shifts
Employees who desire to work such shifts. In the event of any conflict between
this section and any other Article in this Agreement, this provision shall
control.

Section 6. Employees on 1st shift (45 minutes) and 2nd shift (30 minutes) shall
be provided a lunch period in accordance with Section 3a & 3b without pay. Third
shift shall be provided a 20-minute lunch break without loss of pay. Anyone who
works in excess of 10 hours in a day shall be given an additional 30-minute
lunch break, if desired, after eight (8) hours, with pay at their regular
straight-time rate of pay after the 8th hour. However, Employees must take such
a 30-

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minute break to be paid for the break. Employees who work through such a break
will be paid for such time worked in accordance with the other provisions of
this Agreement. Should such an Employee work through his regularly scheduled
lunch break on the following shift, he/she will be paid for such a break as if
assigned to that shift.

Section 7. Employees assigned to the 4/10 hour shift shall be given an
additional 30-minute lunch break, if desired, after the 8th hour, if they are to
work in excess of ten (10) hours, at their regular straight-time rate of pay.
Employees must take such a 30-minute break to be paid for the break. If
employees on such shifts work past the regularly scheduled lunch break on the
following shift, he/she will also be permitted to observe such breaks, and will
be paid for such break as if assigned to such following shift. Employees
assigned to a 12-hour shift beginning at 4 a.m. shall be provided the 30-minute
paid break from 6:45 a.m. to 7:15 a.m., in addition to the unpaid break at 12:00
noon.

Section 8. Employees shall be at their reporting-in station fully prepared to
begin work at no later than the starting time of their assigned shift. Reporting
in station may be designated by the company.

           (a) When the whistle signaling the start of the shift sounds, all
           Employees shall be at their designated reporting site on the shop
           floor ready to begin work. Any Employee not at the designated
           reporting site ready to begin work when the shift starts shall not be
           paid until the Employee is at the designated reporting site ready to
           begin work. In addition, the Employee shall be considered tardy for
           work and will be subject to discipline pursuant to the Company's
           tardiness policy.

           (b) Employees shall remain at their work site performing their
           assigned work function until the whistle sounds signaling personal
           clean-up prior to lunch. This whistle shall sound five (5) minutes
           prior to lunch. Any Employee who violates this requirement shall be
           subject to disciplinary action.

           (c) Employees shall be required, when the whistle sounds signaling
           the end of lunch break, to proceed directly to their work site. This
           means when the lunch period has ended, Employees should have already
           stored, cleaned up, or otherwise disposed of their lunch material.
           Employees who fail to go directly to their work site, or fail to
           report to their work site in a reasonable amount of time shall be
           docked accordingly. In addition, these Employees shall be considered
           tardy for work and will be subject to discipline pursuant to the
           Company's tardiness policy.

           (d) Employees shall remain at their work site performing their
           assigned work function until the whistle sounds signaling personal
           clean-up prior to the end of their shift. This whistle shall sound
           ten (10) minutes prior to the end of their shift. Any Employee who
           violates this requirement shall be subject to disciplinary action.

Section 9. The reporting in may be designated by the Company to be off-site.
Employees will not be paid for time traveling from their home to such off-site
stations if within a 25 mile radius.

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If the Company establishes such reporting in stations, it shall provide gang
boxes or time on the clock to secure Employees' or Company tools.

Section 10. The Parties recognize that shift work by Employees may from time to
time create undue hardships necessitating Employee requests to change shifts.
The Company agrees that consideration of legitimate requests for shift transfers
promotes good Employee relations and is a good management policy.

The Company agrees to consider all reasonable requests by Employees for shift
change. Any Employee who desires a shift change shall submit a request to their
immediate supervisor on a form designated for that purpose. These forms will be
maintained in a department file and when an opening occurs on a particular
shift, the Company shall give priority to those Employees who have thus
indicated a desire for shift change.

However, the Parties recognize that the assignment of work to Employees,
including the shift on which Employees perform their work, shall be at the sole
discretion of the Company. The Company agrees that placement and shift transfers
shall not be done for punitive purposes.

Section 11. Any Employee who is assigned to, and works on, the second or third
regular shift shall be paid a shift differential in accordance with the
following schedule:

<TABLE>
<S>                                             <C>    <C>
           Mechanics and above                  =      $.50 per hour
           Below Mechanics and above Helpers    =      $.40 per hour
           Helpers and below                    =      $.30 per hour.
</TABLE>

                                   ARTICLE VI
                                  OFF-SITE WORK

Section 1. An Employee who is required to travel and does travel to a job
within 25 miles of the yard, either before the Employee's starting time or after
Employee's quitting time, shall be paid travel mileage at the current IRS rate
and in accordance with the mileage chart attached as Appendix 6. For locations
outside the 25-mile radius of the yard, Employees shall be paid straight time
for the time spent engaged in such travel.

Section 2. The Company shall provide a posted form identifying locations to
volunteer for off-site work.

Section 3. When an Employee who regularly reports to work at the Berkley Yard
is required during the course of the Employee's workday to go to any other site
within the Tidewater area where Company work is being performed, the Employee
shall be provided transportation and returned to the Employee's regular
reporting place by quitting time, in a Company vehicle, when a Company vehicle
and driver are available, unless the Employee, or Employees concerned, shall
otherwise request. Provided, however, that no Employee shall be required against
the Employee's will to drive the Employee's own vehicle and that no Employee
shall be required against the Employee's will to ride in a personal vehicle
driven by another Employee.

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When Employees are required to work away from the yard, an effort will be made
to notify such Employees in advance of the availability or non-availability of
eating facilities at the location of the work. When eating facilities are not
available and no advance notice has been given, the Company will either provide
transportation to and from an eating establishment or bring food to the
Employees, whichever is more practical.

Section 4. Employees assigned as boat crews, and Employees who are assigned to
vessels for sea trials, and Employees assigned to vessels as riding crews, will
while so engaged be paid as follows:

                      (1)        In each twenty-four (24) hour period beginning
                                 at 7:15 a.m. an Employee shall be guaranteed a
                                 minimum of twelve (12) hours work and shall be
                                 paid in accordance with Article VII hereof.
                                 Employees assigned to vessels for trips of less
                                 than twelve (12) hours duration shall be paid
                                 for the actual time it takes to make the trip.

                      (2)        If an Employee is required to perform work in
                                 excess of twelve (12) hours in any twentyfour
                                 (24) hour period, the Employee shall be paid
                                 for actual hours worked and in accordance with
                                 Article VII hereof.

Section 5. If during any twenty-four (24) hour period beginning at 7:15 a.m. an
Employee on Company business outside of the Tidewater area is required to be
gone for more than 24 hours, such Employee shall be guaranteed eight (8) hours
of pay per day, if such Employee is not provided an opportunity to work, unless
through the fault of the Employee, such as personal illness or injury. Such
guarantee shall not apply to weekend work. Paid travel time shall be considered
as hours worked for purposes of overtime computation.

Section 6. The Company agrees to pay Thirty Five Dollars ($35) Per Diem per day
when employees are working off site at a United States Marine Repair facility.
The Company shall pay Federal Per Diem rate by city for out-of-town work not at
another United States Marine Repair facility.

                                  ARTICLE VII
                                    OVERTIME

Section 1. Except where specified differently in this Agreement, an Employee
shall be paid at the rate of time and one-half (1-1/2) his applicable
straight-time hourly rate of pay for:

           (a) time worked in excess of eight (8) hours per regular workday, or
           forty (40) hours in the Employee' s work week, except as otherwise
           provided in Article V, Section 5;

           (b) time worked in excess of sixteen (16) hours in any 24-hour
           period, without regard to the Employee's starting time, until the
           Employee has had an eight (8) hour rest period; except that the
           Company reserves the right to change the Employee's starting time in
           such cases;

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<PAGE>
           (c) time worked on any of the following holidays: New Years Day,
           Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Friday
           after Thanksgiving, Christmas Eve, and Christmas Day.

Section 2. For purposes of computing overtime on any basis, none of the
following shall be considered as time worked: disciplinary time off, and time
lost due to nonwork-related illness or injury.

Section 3. For the purpose of computing overtime compensation under this
Article, the term "regular rate of pay" shall mean the rate at which the
Employee is regularly paid, excluding overtime, but including any shift
differential.

Section 4. If more than one provision of this Agreement with regard to the
payment of overtime applies, the time worked shall be paid at the highest
overtime rate specified in this Agreement, but the Employee shall not be
entitled to additional overtime pay for any time worked under more than one
provision of this Agreement.

Section 5. For the purpose of computing overtime compensation after forty (40)
straighttime working hours of an Employee's scheduled work week, and Holidays,
as specified in Section 1 of this Article, the day shall begin at 7:15 a.m. and
the 24 hours immediately following shall be considered as belonging to that day.
Inclusive in the forty (40) straight time working hours shall be hours within
the Employee's normal shift hours Monday through Friday that due to provisions
of the labor contract required the payment of overtime hours.

Section 6. It is the intent of the Company, as far as practicable, to use the
Employees assigned to work that continues into or requires overtime work. This
shall not be applicable when an employee is not requested to work overtime and
another Employee performs the incidental work on the job of the Employee not
working overtime. The provisions of Section 6 shall take precedent over
provisions of Section 7 in the assignment of overtime work.

Section 7. Management will make a reasonable effort to divide overtime in each
three (3) months' period beginning thirty (30) days after the effective date of
this Agreement as equally as practicable, consistent with efficient operations,
among Employees in each seniority unit in each department.

However, management may consider the skill, ability and attendance records of
Employees and the desirability of continuity on a particular job. Any claim that
an Employee has not worked an equal share of available overtime in any three (3)
month period may be grieved. The remedy available under the
grievance/arbitration procedure shall be limited to such Employee being given an
opportunity for additional overtime work in the following three (3) month
period, if such overtime work is available without breaking the continuity of
the workforce assigned to a particular job. Payment for overtime lost shall not
be a remedy available under this Section.

Section 8. The Company will make reasonable effort to notify Employees required
to work overtime on a regular work day of the need to work such overtime at
least one hour prior to the end of the Employee's regular shift.

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<PAGE>
Where overtime work is required in excess of forty (40) straight-time hours
during an Employee's scheduled work week, the Company will make a reasonable
effort to notify Employees at least four (4) hours in advance of the end of
their last regular work shift of the need for such overtime work.

Failure to provide such notice shall not, however, be deemed to excuse Employees
from the requirement that they perform the assigned overtime work. The Company
shall give consideration to possible hardships such as childcare responsibility,
car pooling, etc.

The Company shall make a reasonable effort to seek volunteers, as far as
practicable. The Company shall post an overtime volunteer list for Employees to
sign on a weekly basis.

Section 9. Any Employee who has worked in excess of 48 hours in three (3)
consecutive work weeks and who has not been absent from work during the
preceding three (3) weeks may indicate his/her desire to be excused from
overtime work on the following sixth and/or seventh days of their scheduled work
week.

The desire to be excused from such overtime must be made known to the Craft
Supervisors in writing during the first half of the first day of an Employee's
scheduled work week by use of a standard form provided by the Company. The Craft
Supervisors shall thereupon make a reasonable effort to accommodate the
Employee's desire to be excused from such work. Failure or inability to
accommodate an Employee's desire shall not, however, excuse an Employee from
performing any assigned overtime work.

For purposes of this section, absences resulting from medically-certified
illness or injury, approved time off for Union Business or any day for which
compensation in any form is received from the Company, shall be considered as
time worked, including "z-out" time.

Section 10. Contractors' employees (i.e. non-Norshipco employees hired through
a labor broker) shall be allowed to work overtime in emergencies or when a
qualified regular Company Employee is not available. In addition, when
contractors' employees are assigned to ten (10) hour shifts, they will be
allowed to work the overtime hours (Monday through Friday only). The Company
shall, as far as practicable, attempt to assign its regular Employees to these
ten (10) hour shifts.

                                  ARTICLE VIII
                                  PAID HOLIDAYS

Section 1. For the purposes of this Article, the term "Paid Holiday" means one
of the following days: New Year's Day, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day. Friday after Thanksgiving, Christmas Eve and Christmas
Day. A paid holiday shall be deemed to begin at the beginning of the First Shift
on such paid holiday and to end at the beginning of the First Shift on the next
succeeding day.

Section 2. If one of the above-listed holidays falls on a Saturday or Sunday of
the Employee's regular workweek, the holiday shall be observed on Friday if
holiday falls on Saturday, observed on Monday if holiday falls on Sunday.

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<PAGE>
Section 3. An eligible Employee (as hereinafter defined) shall be paid for such
paid holiday an amount equal to eight times the Employee's hourly base rate, or
in the case of an eligible Employee who is regularly scheduled to work other
than eight hours per day, the number of hours for which the Employee is
regularly scheduled to work times the Employee's hourly base rate if the holiday
falls on a regularlyscheduled workday. An Employee shall not be deemed to have
worked on a paid holiday by reason of the Employee completing a regularly
scheduled shift that began before the beginning of the First Shift on such paid
holiday.

For the purposes of this Article, an eligible Employee is one who:

           (a) has required length of service in accordance with the provisions
           of Section 10 of Article XI, which service has not been broken by any
           of the methods described in Section 3 of Article XI and;

           (b) has worked the last scheduled workday before and the first
           scheduled workday after the day on which the paid holiday is observed
           and;

           (c) on the day on which the paid holiday is observed is not on
           layoff, except on a layoff arising from a layoff slip issued during
           the normal work week in which the paid holiday is observed, in
           military service, or absent due to illness/injury, except
           illness/injury that is substantiated by a doctor's certificate.

           (d) Employees who are unable to work as required above shall be
           eligible for holiday pay if their absence is due to death in the
           immediate family (mother, father, wife, husband, brother, sister,
           son, daughter, mother-in-law or father-in-law) or previously
           scheduled vacation.

Section 4. An Employee who is required to report for work on a paid holiday and
who fails to report for work shall be disqualified from receiving pay for the
holiday provided by Section 3 of this Article. Documented excuses will be
handled on a case by case basis.

An Employee who is required to report for work on a paid holiday and works less
than the hours required by the Company shall be disqualified from receiving pay
for the holiday provided by Section 3 of this Article. This shall not apply when
an Employee is less than one (1) hour tardy. Documented excuses will be handled
on a case by case basis.

                                   ARTICLE IX
                           CALLIN PAY AND MINIMUM PAY

Section 1. Any Employee who is ordered to report for work and who does report
at the time scheduled but who is not then put to work within one (1) hour after
the Employee's scheduled starting time shall receive an amount not less than two
(2) hours' pay; unless such Employee shall not be put to work at the Employee's
own request or because of the Employee's own fault or because of any strike or
other Union caused stoppage of work.

Section 2. Any Employee who is initially put to work (i.e. physically on the
job site performing work) on any shift during the work week shall receive not
less than four (4) hours' pay, unless

                                       12
<PAGE>
the Employee shall have voluntarily quit work or been sent home because of the
Employee's own fault or because of a strike or other Union caused stoppage of
work or circumstances beyond the control of the Company, in which event the
Employee shall be paid only for the time actually worked, but not less than two
(2) hours pay. Any employee who works in excess of four (4) hours shall be paid
for the time actually worked.

Section 3. Any Employee who is called-in to work outside the Employees normal
shift hours or on Saturday, Sunday or Holiday shall receive not less than four
(4) hours pay, unless the Employee shall have voluntarily quit work or been sent
home because of the Employee's own fault or because of a strike or other Union
caused stoppage of work, in which event the Employee shall be paid only for the
time actually worked.

Section 4. An Employee who is assigned to a regular shift during the normal
work week who is ordered to report at a later time in the day, due to a change
in the workload, and who, consequently, does not perform any work in the 24-hour
period beginning at 7:15 a.m. on the day the change was made, shall be entitled
to at least four (4) hours' pay.

This Section is applicable only to Employees who would lose a day's pay due to
the canceling or rescheduling of work and who ordinarily would continue to work
on their regularly assigned shift the following day.

Section 5. Call-in pay and minimum pay provided for in this Article shall be
computed at the regular hourly base rate of pay of the Employee who shall be
entitled thereto, except if such Employee is entitled to be paid at the overtime
rate, in which case the call-in or minimum pay shall be computed at such
overtime rate of pay.

                                   ARTICLE X
                                    VACATIONS

Section 1. Length of service shall be determined as of an Employee's
anniversary date of employment as of the date of his last hire.

Section 2. In order to be eligible for vacation under this Section, an Employee
must be employed by the Company on his eligibility date. To qualify for paid
vacation provided for in this Article, an Employee must have worked the
following minimum straight-time production scheduled hours in the year preceding
the Employee's vacation eligibility date:

           (a) for full vacation benefit, a minimum of 1480 such hours;

           (b) for 3/4 vacation benefit, a minimum of 1280 such hours;

           (c) for 1/2 vacation benefit, a minimum of 1080 such hours, the year
           preceding

These minimums shall not apply to Employees who have worked 1900 or more hours
during the preceding year. For purposes of this provision, hours worked means
hours actually worked or hours paid by the Company as if actually worked,
including any periods for which approved Union Business and/or workers'
compensation benefits were paid.

                                       13
<PAGE>
Notwithstanding any other provision of this Article, an Employee shall not be
entitled to a vacation in any year in which the Employee does not perform at
least thirty (30) days of work for the Company.

Section 3. Employees who, on their vacation eligibility date, have satisfied
the various requirements set forth in this Article in order to qualify for a
vacation, shall be provided with paid vacations in accordance with the following
schedule:

One year or more, but less than five years of continuous service - 1 week of
vacation.

Five years or more, but less than ten years of continuous service - 2 weeks of
vacation.

Ten years or more, but less than 20 years of continuous service - 3 weeks of
vacation.

Twenty years or more of continuous service - 4 weeks of vacation.

Section 4. The vacation eligibility dates for individual Employees shall remain
constant and shall be determined as follows:

Any Employee who, on the effective date of this Agreement, has previously
qualified for paid vacation pay shall have the Employee's most recent qualifying
date as the Employee's continuing vacation eligibility date. Employees hired
subsequent to the effective date of this Agreement, shall have their vacation
eligibility date determined in the following manner:

<TABLE>
<CAPTION>
          Completion of one year of
          continuous service between:                 Eligibility Date
          ---------------------------                 ----------------
<S>                                                   <C>
          January 1 and March 31                           April 1
          April 1 and June 30                               July 1
          July 1 and September 30                         October 1
          October 1 and December 31                       January 1
</TABLE>

Section 5. Any Employee who qualifies for vacation shall be paid an amount
equal to 40 hours' pay at the Employee's current rate of pay for each week of
vacation.

Section 6. If an Employee who has earned a vacation under the terms of this
Article shall die before taking such vacation, the amount of pay to which the
Employee would have been entitled had the Employee lived, shall be paid by the
Company to the Employee's estate.

Section 7. An Employee who is laid off and who at the time of the Employee's
layoff shall have a vacation due the Employee and has not received it, may, at
the Employee's request, obtain what vacation pay is due the Employee on the
regular pay day or pay days following the Employee's layoff.

Section 8. An Employee who has previously become eligible for and received a
vacation payment and who during the year following their last vacation
eligibility date voluntarily quits

                                       14
<PAGE>
with 5 work days notice to the Company, or who retires, shall be entitled to
accrued unused vacation upon separation:

           (a) for full vacation benefit, a minimum of 1480 such hours;

           (b) for 3/4 vacation benefit, a minimum of 1280 such hours;

           (c) for 1/2 vacation benefit, a minimum of 1080 such hours.

           (d) An Employee terminated for just cause shall not be eligible for
           prorata vacation for the year in which they are terminated; however,
           such Employee shall be paid accrued, unused vacation carried over
           from prior years, if any.

Section 9. As far as practicable, vacations shall be granted at times most
desired by the Employees, with preference to Employees having greatest seniority
in case of conflict but final right to allot vacation periods is reserved to the
Company in order to insure the orderly operation of the yard.

Section 10. Vacation awarded prior to November 1, 1988 may be carried over,
provided no more than 65 work days (13 calendar weeks) are on the books at any
one time. Such accumulated vacation shall be paid for at the individual
employee's rate of pay in effect on November 1, 1988 regardless when taken.

Section 11. Employees who are unable to take the current year's vacation due to
company workload or personal desire may carryover up to two years of the maximum
vacation hours awarded.

Section 12. An Employee may request a vacation on a form furnished by the
Company and signed by the Employee's Craft Supervisor. When approval has been
granted by a Department Head for such vacation dates, such approval shall not be
withdrawn except by mutual agreement between the Employee and the Craft
Supervisor.

An Employee who requests three (3) or more consecutive days of vacation, and
makes such request in writing between the 30th - 45th day prior to the first day
of vacation, if such request is received in a timely manner, the Craft
Supervisor shall respond to the request within 10 days after such request is
received.

Section 13. Earned vacation may be taken in increments of not less than two (2)
hours.

                                   ARTICLE XI
                                    SENIORITY

Section 1. Employees shall be laid off and recalled in each seniority unit in
accordance with their skill, ability and efficiency, and length of service.
Where skill, ability and efficiency are approximately equal between two or more
Employees in a seniority unit, length of continuous service with the Company
shall be the controlling factor. The determination of skill, ability, and
efficiency, shall be made in good faith by the Company.

                                       15
<PAGE>
A non probationary Employee with less than twelve (12) months service shall be
laid off first within each classification. Temporary Employees as defined in
Article XXIV shall not accrue seniority under this Article.

Section 2. For the purpose of this Article, Employees within each
classification in each department, as such departments are listed in Appendix 2,
shall constitute a separate seniority unit.

Section 3. For the purpose of this Article, the length of Service of each
Employee in a seniority unit as of the date of this Agreement shall begin with
the date the Employee was last hired by the Company, except that the length of
service of an Employee shall be broken and no prior period of service shall be
counted, if such Employee:

           (a) quits the Employee's employment for any reason, or

           (b) is discharged for just cause, or

           (c) is absent from employment without permission for five (5)
           consecutive work days unless the Employee shall notify the Company
           within the five (5) day period informing the Company of the reason
           the Employee is absent from work and when the Employee expects to
           return to work and that the Company retains the right to determine
           whether or not the stated reason is acceptable. The Employee would be
           excused from such reporting during the 5-day period only if the
           Employee can provide documentation that he/she was physically or
           mentally unable to do so. Upon return to work, the Employee must
           present satisfactory proof that such disability has existed.

           (d) has at least fifteen (15) months length of service and is laid
           off and not recalled to work within fifteen (15) months, or has less
           than fifteen (15) months length of service and is not recalled to
           work prior to the layoff being of a duration equal to their length of
           service.

           (e) has been unable to work due to personal illness/injury or
           occupational injury or any incapacitation for a period of not more
           than fifteen (15) months. Employees absent due to illness or injury
           will be given 30 days written notice prior to removal from the
           payroll.

           (f) does not respond as specified herein to a seniority recall, when
           given notice by Certified Mail. Upon receipt of the Certified Mail,
           an Employee has forty-eight (48) hours, exclusive of Saturdays,
           Sundays and Holidays, to contact the Company and inform the Human
           Resources Department as to whether he/she will be returning back to
           work. Thereafter, an Employee has five (5) days, exclusive of
           Saturdays, Sundays and Holidays, to report to work unless the
           Employee presents a reasonable excuse. It is each Employee's personal
           responsibility to maintain a current mailing address and telephone
           number on file with the Human Resources Department.

Section 4. Notwithstanding the provisions of Section 3 of this Article, an
Employee that had his/her length of service broken under the provisions of this
Section, may upon mutual agreement between the Company and the Union, have
his/her length of service reinstated.

                                       16
<PAGE>
Section 5. When a permanent lay off (one of more than ten (10) working days
duration) from a seniority unit becomes necessary, those Employees who are
subject to layoff, and who have been transferred into the affected unit from
another seniority unit shall, in accordance with their Company-wide seniority be
permitted to return only to their immediately previous seniority unit to a job
which they have previously performed and which is held by the Employee with
least continuous service with the Company.

Employees who exercise such seniority to bump back into a previous seniority
unit must do so by giving notice to Personnel within three (3) working days of
the official layoff notice. The least senior Employee, displaced by an Employee
returning from another department, shall then be subject to layoff.

Should a permanent layoff become necessary in the seniority unit to which a
previously transferred Employee has been returned in accordance with the
procedure set forth above, the Employee will not, in the event the Employee was
previously transferred into the now affected seniority unit from another
seniority unit, again be given an opportunity to claim a job in the seniority
unit from which the Employee was earlier transferred into the Employee's present
seniority unit. When permanent job openings again become available in a
seniority unit in which a layoff took place, the Employees previously removed
from those jobs shall be recalled in accordance with the provision and
principles set down in Section 1 of this Article in order to fill the job
vacancies.

Section 6. For the purposes of this Article, an Employee may be temporarily
shifted (see Article XII) from one occupation or type of work to another
occupation or type of work as the Company may decide the workload requires, and
still retain the Employee's seniority in the Employee's regular seniority unit.
Such temporary assignment will end upon the availability of work for such
Employee in the Employee's regular seniority unit.

Any Employee who has been incapacitated at the Employee's regular work by injury
or compensable occupational disease while employed by the Company may be
employed on any other work which the Employee can do without regard to any
seniority provisions of this Agreement.

Section 7. Leaves of absence shall, be available to Employees to the extent
provided by and in accordance with the provisions of the FMLA. Employees shall
be provided a summary of their rights under the FMLA when hired or when they
otherwise request such information from Human Resources. Employee's rights of
reinstatement shall be as required by law, but subject to the other provisions
of this agreement affecting layoffs, recall and seniority.

An Employee's used vacation hours and workman's compensation time off shall be
counted as hours worked, exclusively for the purpose of the employee meeting
FMLA 1250 hour threshold.

An Employee shall be allowed a leave of absence due to an emergency not covered
by FMLA, subject to appropriate documentation and approval of Employee's Craft
Manager. Any denial of this emergency leave of absence shall be subject to
review by the Company's Human Resources

                                       17
<PAGE>
Department. This leave of absence shall not exceed thirty (30) calendar days
within a twelve (12) month period.

Section 8. A leave of absence for the purpose of assuming an office or position
with the International Brotherhood of Boilermakers, Iron Ship Builders,
Blacksmiths, Forgers and Helpers, shall be made available to an Employee who
makes a written request for such leave. Such Employee shall continue to accrue
seniority during such leave for a period not to exceed two (2) years, and shall
have rights to reinstatement to his/her classification upon the completion of
such leave of absence. Such leave may be extended only by written agreement of
the Employee and the Company.

Section 9. An Employee shall be allowed to decline employment offered the
Employee on a recall without prejudicing the Employee's seniority status if it
appears that such employment shall be of a temporary nature (less than 10
working days); in which case, the Company shall provide the Employee with a
letter permitting the decline of such temporary employment.

Section 10. New Employees shall be considered as "probationary" Employees and
shall not be deemed to have any length of service until they have performed 90
days of work, except in the case of Apprentices, whose probationary period shall
be six (6) months, after which, if they are continued in employment, their names
shall be added to the seniority lists as of the date of their employment. It is
agreed that the probationary period is a time frame for the Company to determine
new employees skills and performance levels. Therefore, it is a management
function to use the probationary period to determine which probationary
Employees have the appropriate skills and performance levels and to eliminate
from the workforce those that do not, prior to them gaining seniority.
Notwithstanding the provisions of Article XXVIII Discipline, it is the Company's
right to discharge any probationary Employee for violation of any Company rule,
including but not limited to, "lack of requisite skills" and "insufficient
production".

Section 11. A permanent layoff, for the purpose of this Article, shall be
recognized only after an Employee has been issued a slip marked "LAYOFF".
However, the Company may retain a regular Employee without regard to the
seniority provision of this Agreement for the purpose of maintaining job
continuity, in order to complete a job already in progress, but in no event to
exceed five (5) working days, except that the Company may retain Employees
assigned to Composite Crews for the purpose of maintaining job continuity on
such crews for up to ten (10) working days without regard to seniority. The
Company will be permitted to "Z" out any employee for up to five (5) working
days in accordance with this Section, except as set forth in Sections 12 and 13.
The Company, as far as practicable, shall not repeatedly "Z" out the same
Employees. The Company, as far as practicable, shall "Z" out on a rotational
basis.

Section 12. The Company will notify any Employee two (2) hours in advance of
its intention to layoff. If notice of layoff, of less than two (2) hours is
given, but notice is adequate to obtain a clearance, then clearance shall be
obtained before the Employee's regularly scheduled quitting time, but the
Employee shall be paid two (2) hours pay for clearing-out. In the event such
notice is not given two (2) hours will be allowed the Employee for the purpose
of obtaining a clearance on any regularly scheduled work day on or before the
following payday. The parties recognize that two (2) hours pay is the
appropriate pay for clearing out. Notwithstanding this, there may be

                                       18
<PAGE>
rare occasions when more time is needed. When this happens, additional clearing
out pay up to four (4) hours pay may be warranted on a case by case basis.

Section 13. Members of the Union Grievance Committee (not to exceed four (4)
members), Union Officers (not to exceed seven (7) members) and duly appointed
shop stewards shall have super seniority for the purposes of layoff and recall,
provided that they have at least two (2) years continuous service with the
Company from the date of last rehire and can perform the work available. Union
Shop Stewards may be laid off if there is no work in their respective
departments of which they can perform and will be the first recalled.

The Union Negotiating Committee (not to exceed six (6) members), shall have
"super seniority" for the purposes of layoff provided they can perform the work
available. This "super seniority" begins thirty (30) calendar days prior to the
date the bargaining parties agree to begin bargaining for a new collective
bargaining agreement, and ceases upon ratification of a new contract.

Section 14. The Company shall provide to the union and post in the shops an
updated seniority list in January, April, July and October of each year during
the life of this Agreement.

Section 15. The Company, as far as practicable, shall make a "good faith"
effort to transfer an employee into another trade in order to avoid a layoff.
However, it is recognized that this shall not in any way whatsoever limit the
Company's right to layoff employees pursuant to the provisions of Article XVII
Management Functions.

                                  ARTICLE XII
                                 TRADE TRANSFERS

Section 1. The permanent transfer of an Employee from one seniority unit to
another seniority unit within the same trade or into a different trade shall be
a function of management, subject to the provisions of this Section and shall
not be deemed to be a violation of any of the seniority rules set forth in this
contract.

A permanent transfer shall be recognized as such only when a written transfer
document has been issued giving the Employee a badge number in the new
department.

The Employee shall be entitled to be retained in the seniority unit to which the
Employee has been permanently transferred based upon the factors referred to in
Section 1 of Article XI.

The Company shall request volunteers prior to initiating any permanent transfer
of an Employee from one seniority unit to another seniority unit within the same
trade. The Company shall, as far as practicable, use the volunteer list in
making the decision on a permanent transfer.

The Company shall request volunteers prior to initiating any permanent transfer
of an Employee from one seniority unit to another seniority unit in a different
trade. This permanent transfer shall be subject to the written approval of the
Employee.

Subject to the provisions of Section 3 of Article XI, the following provisions
shall apply with respect to permanent transfers:

                                       19
<PAGE>
           (a) An Employee who is permanently transferred from one seniority
           unit to another seniority unit will, for the purposes of layoff and
           recall only, be credited with the Employee's full companywide
           seniority.

           (b) If an Employee is transferred out of the bargaining unit, the
           Employee shall continue to accumulate and retain length of service in
           the seniority unit from which the Employee has been transferred up to
           a maximum of twenty four (24) months, provided the Employee is
           transferred back to the bargaining unit prior to the expiration of
           the twenty four (24) month period. If the Employee remains in the
           nonbargaining position beyond the twenty four (24) month period, the
           Employee's length of service shall be frozen as of the initial date
           of the Employee's promotion to the non-bargaining position.

Section 2. In order to maximize the efficient utilization of the current
workforce and because of the inherent delays in increasing the workforce, it
shall be a management function, subject to the provisions of this Article, to
temporarily shift an Employee from one trade or type of work to another trade or
type of work. When this happens, the Employee shall retain his/her seniority in
the Employee's regular seniority unit.

The temporary shifting of an Employee from one trade or type of work to another
trade or type of work shall be governed by the following guidelines:

           (a) When all seniority Employees in a trade are working, there shall
           be no restrictions on the temporary shifting of Employees from other
           trades to that trade.

           (b) When seniority Employees are on lay off in a trade, the following
           restrictions on temporarily shifting Employees from other trades into
           that trade shall apply:

                      (1)        For work of less than three (3) days, there
                                 shall be no restrictions on temporary shifting.
                                 Temporary shifting shall not be done
                                 consecutively, within a short timeframe, for
                                 the purpose of circumventing the seniority
                                 recall provision.

                      (2)        For work of less than ten (10) days, but
                                 greater than three (3) days, the Company shall
                                 have the right to temporarily shift Employees
                                 provided that the laid off Employees in the
                                 trade into which the shifting is to occur are
                                 afforded the opportunity to be recalled to
                                 work. These events can take place
                                 simultaneously (i.e. the shifting can take
                                 place at the same time the Human Resources
                                 Department attempts to recall the laid off
                                 employees). The Union shall receive a copy of
                                 the Recall From Lay-off Notice form the same
                                 day the recall is attempted.

                      (3)        For work of ten (10) days or more, the Company
                                 shall have the right to temporarily shift
                                 Employees provided that the laid off Employees
                                 in the trade into which the shifting is to
                                 occur are on seniority recall in accordance
                                 with the provisions of Section 3(f) and Section
                                 9 of Article XI. These events can take place
                                 simultaneously (i.e. the shifting can take
                                 place

                                       20
<PAGE>
                                 at the same time the Human Resources Department
                                 attempts to recall the laid off Employees).

                      (4)        The Union President or Vice President shall be
                                 notified prior to any temporary shifting.

                      (5)        It is understood an Employee will not be
                                 disciplined for his/her inability to perform
                                 work assignments outside his/her primary trade.

                                  ARTICLE XIII
                               GRIEVANCE PROCEDURE

Section 1. The term "Grievance" as used in this Agreement shall mean any
complaint, disagreement or difference of opinion between any Employee or the
Union and the Company that concerns the interpretation of application of an
article or provision of this Agreement. A grievance may be filed by the union,
or individual employee acting on his/her own, or by the Company.

Section 2. Grievances shall be processed in accordance with the steps set forth
below; provided, however, that any Employee who feels aggrieved shall first
discuss the Employee's complaint with the Employee's immediate Supervisor with
or without the presence of the Employee's Shop Steward, as the Employee may
desire.

If a written grievance is filed by an Employee, or the Union, the Grievant shall
not be approached or conferred with by the Company unless such Shop Steward or
Union President are present. A grievance shall be barred from processing beyond
the complaint stage unless referred by the Employee to Step 1, below, within
seven (7) working days of the day on which said complaint or grievance arose or
the day on which the aggrieved Employee could have been reasonably expected to
be aware of the cause for complaint.

A Shop Steward or Union Representative may request permission (which permission
shall not be unreasonably withheld) to leave the Shop Steward's or Union
Representative's employment to investigate a grievance in his/her Group when it
is an urgent matter and with the understanding that the Shop Steward or Union
Representative will spend the minimum time away from work.

A Shop Steward may attend grievance meetings by appointment with a Supervisor in
the department or Group over which the Shop Steward or Union Representative has
authority, with the understanding that payment by the Company for grievance time
shall not exceed two (2) hours per week for the authorized Stewards in each
Department.

Such permission shall be granted in writing on a form supplied by the Company;
this form shall be returned to the Craft Manager when the Shop Steward resumes
work.

                                       21
<PAGE>
Section 3.

STEP 1

Grievances shall, in all cases, be submitted in writing in not less than
duplicate, on forms to be provided by the Company and shall be signed by the
Shop Steward or Employee submitting the grievance. The name or names of the
aggrieved Employees shall be set forth in said form. The contract article or
provision alleged to have been violated, and the nature of the relief sought,
shall be included in said written submission.

Grievances may be presented (a) by the Shop Steward or President or Vice
President of the Local Union, with or without the aggrieved being present, or
(b) the Employee or Employees concerned may present such grievance to the Craft
Manager directly without having first registered such grievance with the Shop
Steward or (c) the Shop Steward or President or Vice president of the Local
Union having knowledge of the grievance may, without the presence of the
Employee or Employees concerned, present the grievance to the Craft Manager. All
grievances must be presented to the Craft Manager designated in this step within
seven (7) working days of the occurrence or failure of occurrence; whichever may
be the case, of the incident upon which the grievance is based.

STEP 2

If unable to reach a satisfactory answer in writing from the Craft Manager or
Craft Supervisor within three (3) working days, the Union President or Employee
concerned may submit the grievance to the Manager of Human Resources within five
(5) working days.

STEP 3

If unable to reach a satisfactory answer in writing from the Manager of Human
Resources within three (3) working days, the Union President or the Employee
concerned may, within five (5) working days of the answer, submit the grievance
to the next regular monthly grievance meeting between the Union Grievance
Committee and Representatives of Management provided, however, that should an
emergency case arise such as, but not limited to, a discharge case, the
Representatives of Management and the Union Grievance Committee will, as soon as
possible, hold a special meeting and take prompt action on any such emergency
case or cases. In the absence of the aggrieved, the Shop Steward who processed
the grievance shall be permitted to attend.

At the request of the Union President, or in the event of the Union President's
absence, the Grievance Committee, a grievance arising from discharge, layoff, or
transfer will be given priority over other grievances in the order named.

If a grievance is filed with and moved to Step 3, the Company shall provide the
Union with copies of all relevant documents known and/or available to the
Company at the time, including written statements of Employees and supervisors,
if any, prior to the Third Step meeting. Nothing in this Section shall limit the
Union's right to information relevant and necessary to the processing of
grievances at earlier stages of the procedure.

                                       22
<PAGE>
Section 4. The settlement of any grievance that shall be submitted to an
arbitrator shall not in any case be retroactive to a date prior to fifteen (15)
working days before the date on which such grievance shall have been first
presented in written form under Step 1 of the procedure set forth in Section 3
of this Article.

                                  ARTICLE XIV
                                   ARBITRATION

Section 1. If a grievance is not satisfactorily adjusted at the 3rd Step of the
Grievance Procedure, which decision shall be rendered within five (5) working
days following the regular grievance meeting or the special grievance meeting
where applicable the Union may submit the case to Arbitration. Notification of
decision to arbitrate a grievance, which was processed through the prescribed
grievance procedure, shall be filed within twenty (20) calendar days of the
rendering of the decision by the Company at the 3rd Step.

Section 2. The Company and the Union shall, within ten (10) calendar days, make
a joint application to the National Office of the Federal Mediation and
Conciliation Service at Washington, D.C., to submit a panel of seven (7) names
of qualified arbitrators.

Section 3. If the parties cannot agree on the selection of an arbitrator from
this panel, each side shall, within fifteen (15) calendar days from the receipt
of the panel, strike three (3) of the names listed and the remaining individual
shall be the arbitrator.

Section 4. The Arbitrator shall have authority only to interpret and apply the
Provisions of this Agreement. The Arbitrator shall be without power to change,
alter, or amend the language of this Agreement.

Section 5. The decision of such arbitrator on any grievance that shall have
been submitted to the arbitrator in accordance with the Provisions of this
Agreement shall be final and binding upon the Company and the Union and the
Employees concerned therein, except insofar as such decision shall be contrary
to law.

Section 6. The fees and expenses of the arbitrator and the Federal Mediation
and Conciliation Service shall be shared equally between the parties. Any fees
resulting from one party canceling a scheduled Arbitration Hearing, shall be
paid by the canceling party.

Section 7. The parties agree that any grievance submitted to arbitration shall
be scheduled as expeditiously as possible.

Section 8. Except as provided for in this Article, and Article XIII, the Union
shall be liable for the payment of time to Union Representatives while
participating in grievance meetings and arbitration proceedings.

Section 9. The payment for time lost from work by witnesses called by the Union
in arbitration proceedings shall be borne by the Union.

                                       23
<PAGE>
                                   ARTICLE XV
                          SAFETY, SANITATION AND HEALTH

Section 1. The Company shall make reasonable effort to protect the health of
its Employees and to provide safe working conditions and adequate first aid
service.

Section 2.

           (a) ANSI-approved leather-top work shoes, with a heel, must be worn.

           (b) Adequate lighting, protective devices and equipment, such as
           goggles, safety glasses and personal fall arrest systems, necessary
           to protect Employees shall be made available by the Company in
           accordance with its established practices.

           (c) Damaged ANSI approved personal prescription eyeglasses will be
           accepted for credit if damage is not due to the carelessness of the
           Employee and the item broken is turned in with a Broken Tool Report
           Slip signed by the Craft Supervisor or Craft Manager in charge of the
           shop.

Section 3. Outer garment protection shall be provided to Employees in situations
requiring their use.

Section 4. Working alone in tanks or confined spaces shall not be permitted.

Section 5. Crane Operators shall not be required to perform work for more than
fifteen and a half (15-1/2) hours in any twenty four (24) hour period.

Section 6. If an Employee shall be injured while employed on Company work and
shall remain subject to partial disability or limitation, the Company insofar as
its operations will permit, will endeavor to transfer such Employee to some work
which is within the Employee's capacity to perform.

Section 7. If an Employee shall be injured on the job and shall be sent home by
the Company doctor or nurse, the Employee shall receive eight (8) hours of pay
on the day the injury occurred, or the number of hours that the employee is
scheduled to work (i.e. 4/10 shift).

If an Employee receives a flash burn, and it is medically certified that the
Employee cannot work on the day following the flash burn, that Employee shall
receive 8 hours pay for that day.

Section 8. If an Employee shall be injured on the job, the Union Office shall
be notified of any injury requiring outside medical attention and the Shop
Steward of the Employee's department shall have the right to ascertain the facts
of the accident, but the Shop Steward shall, not leave the Shop Steward's job
without permission of the Shop Steward's immediate supervisor.

Section 9. The Employees agree to cooperate with the Company in keeping all
toilet rooms maintained in a clean, dry and sanitary condition. The Company
agrees to keep these premises

                                       24
<PAGE>
properly lighted, heated, and ventilated. Pure and properly cooled drinking
water shall be furnished Employees at all times.

Section 10. The Union will cooperate with the Company in encouraging Employees
to observe all safety regulations prescribed by the Company and to work in a
safe manner. To that end, a Safety Committee shall be established to be composed
of four (4) representatives of the Company and four (4) representatives of the
Union.

Employees on such Committee shall be recognized by the Company upon written
notification by the Union. The Employees appointed by the Union shall be
selected from those who have worked for the Company a minimum of two (2) years.

           (a) The Safety Director shall serve as chairperson of the Safety
           Committee.

           (b) The Safety Committee shall meet every month at a designated time
           and place.

           (c) Where a majority of the Safety Committee vote approval of any
           suggestions to the Company, this shall be considered as a
           recommendation of the Safety Committee to the Company. Where the
           Safety Committee is evenly divided as to any proposals to the
           Company, this shall be considered a report and should also be
           submitted to the Company but in no event shall the Company be advised
           as to those voting for or against such proposal.

           (d) The Safety Committee shall submit in writing any recommendation
           or report concerning safety conditions to the Manager of Facilities.

           (e) The Manager of Facilities, within a reasonable time, shall, in
           writing, give an answer to the recommendation or report of the Safety
           Committee stating the decision of the Company on such proposal, and
           the action taken, if any.

           (f) The Company reserves the right to accept or reject any
           recommendations.

           (g) There will be a Joint Committee meeting monthly. Six (6) of those
           meetings per year (bi-monthly) will consist of a tour of the
           facility.

           (h) The Company shall assign at least one Bargaining Unit Employee
           one day each week to assist with the ship safety walk-through. These
           Bargaining Unit Employees shall be rotated each week.

                                  ARTICLE XVI
                             NO STRIKES OR LOCKOUTS

Section 1. During the term of this Agreement the Company shall not engage in
any lockouts.

Section 2. During the term of this Agreement neither the Union nor any of its
officers, agents or representatives nor any member of the bargaining unit, shall
engage in, prolong, sanction, or

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<PAGE>
encourage any strike, work stoppage, slow-down or other interference with or
curtailment of work or production.

Section 3. In the event that any officers, agents or representatives of the
Union, or any member of the bargaining unit shall engage in, prolong, sanction,
or encourage any strike, work stoppage, slow-down or other interference with
work or production, the Union agrees to immediately take all possible steps to
terminate same, including but not limited to the posting, not later than
twenty-four (24) hours after the Union is notified by the Employer a condition
exists as set forth above and particularly in Article XVI hereof at the
Employee's entrance to the Employer's premises a notice signed by the Local
Union President, reading as follows:

                                     NOTICE

           To all members of the bargaining unit represented by Local No. 684,
           International Brotherhood of Boilermakers, Iron Ship Builders,
           Blacksmiths, Forgers, and Helpers of America, AFL-CIO: The current
           strike, slow-down or interference with the work is unauthorized and a
           violation of our Agreement with the Employer, and you are hereby
           directed to terminate the same at once. Those participating therein
           are subject to disciplinary action, including discharge, and the
           Union will not defend them against such action unless they return to
           work. If you terminate such action immediately, the Union will
           process through the grievance machinery any just grievance you may
           have.

                                  ARTICLE XVII
                              MANAGEMENT FUNCTIONS

Subject to the provisions of this Agreement, the Company retains the sole right
to manage its business and direct the work force, including but not limited to
the right to: hire, rate, classify, transfer, assign work (including the right
to assign to an Employee in such craft, work which is not normally performed by
the Employees in such craft, whenever practicable for the purpose of efficient
operations or necessary to eliminate standby time), promote, demote because of
inability to properly perform (i.e. performance and skills) the work assigned,
discipline (including right to suspend) or discharge for just cause, supervise
all personnel, lay off Employees because of lack of work or for any legitimate
reason, distribute work among departments, consolidate departments, to
subcontract work, to make and enforce rules and regulations, to regulate the use
of equipment and other property of the Company, to determine and control all
procedures and methods of production and exercise any and all other powers
necessary to the efficient operation of the business of the Company; provided,
however, that these functions will not be exercised for the purpose of
discrimination against any Employee because of the Employee's membership in the
Union.

                                 ARTICLE XVIII
                                 DUES CHECK-OFF

Section 1. Upon receipt by the Company of a voluntary written assignment (in
the form hereinafter set forth) by an Employee covered by a collective
bargaining agreement between the

                                       26
<PAGE>
Union and the Company which shall provide for the check-off of Union dues, the
Company, so long as such agreement and assignment shall remain in effect, shall
make the deductions and payments provided in such assignment. The form of such
voluntary written assignment shall be as follows:

                     AUTHORIZATION FOR CHECK-OFF FROM WAGES

                      To: ___________________ (Employer), I _______________, an
           employee of ____________________, hereby authorize and direct my
           employer to deduct from my wages and pay to the International
           Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers
           and Helpers, AFL-CIO, Local Lodge No. 684, (herein the "Union"), an
           amount equal to dues, initiation fees, and reinstatement fees fixed
           by the Union. This authorization is voluntarily made in order to pay
           my fair share of the Union's costs of representing me for purposes of
           collective bargaining and this authorization is not conditioned upon
           my present or future membership in the Union. In addition, this
           authorization is made with the specific understanding that it is not
           a condition of employment with my employer.

           This assignment, authorization and direction shall be irrevocable for
           a period of one (1) year from the date thereof or until the
           termination of the collective bargaining agreement between the
           employer and the Union, whichever occurs sooner, without regard to
           whether or not I am a Union member.

           I agree and direct that this agreement, authorization and direction
           shall be automatically renewed and shall be irrevocable for
           successive periods of one (1) year each or for the period of each
           succeeding applicable collective bargaining agreement between the
           employer and the Union, whichever shall be shorter, without regard to
           whether or not I am a member of the Union, unless written notice is
           given by me to the employer and the Local Union Secretary-Treasurer
           by registered mail not more than twenty (20) days and not less than
           ten (10) days prior to the expiration of each period of one (1) year
           or of each applicable collective bargaining agreement between the
           employer and the Union, whichever occurs sooner.

           "Union dues, contributions or gifts to Lodge 684, International
           Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers
           and Helpers AFL-CIO are not tax deductible as charitable
           contributions for Federal Income Tax purposes. However, they may be
           deductible as ordinary and necessary business expenses"

           _______________________________
           Name (Signature)

           _______________________________               _________________
           Social Security Number                        Date

                                       27
<PAGE>
           _______________________________
           Employee Clock Number

Section 2. The Union shall indemnify the Company and hold it harmless against
any and all suits, claims, demands and liabilities that shall arise out of or by
reason of any action that shall be taken by the Company for the purpose of
complying with the provisions of this Article or in reliance on any assignment
or notice, which shall have been furnished to the Company under any of such
provisions.

                                  ARTICLE XIX
                        PENSION PLAN AND GROUP INSURANCE

Section 1. The Employer shall pay into the BOILERMAKER-BLACKSMITH NATIONAL
PENSION TRUST the sum of twenty five cents ($0.25) per hour for each hour paid
by the Employer for all Employees covered by this agreement during the first
year, to be increased to fifty cents ($0.50) the second year, and to be
increased to seventy five cents ($.75) the third year. The Employer agrees to
and shall be bound by the Trust Agreement creating the Boilermaker-Blacksmith
National Pension Trust and all amendments now or hereafter approved by the Board
of Trustees, said Agreement and amendments are incorporated by reference and
made a part of this agreement as if affixed hereto. No contributions shall be
made to the Pension Plan on behalf of probationary or part time/temporary
employees.

Section 2. Effective midnight February 8, 2001, the NORSHIPCO PENSION PLAN
(i.e. Appendix 4, Section 1) will be frozen on the basis of each member's
Pension Credit as of that date. For the purposes of this plan no additional
years of service will be applied after that date unless the Pension Plan is
unfrozen in future years. All benefits accrued as of that date are retained by
the employees until retirement at which time benefits will be paid in accordance
with the Pension Plan document. The Company at its discretion may terminate the
Plan at any time and distribute the Pension credits to the member in accordance
with existing ERISA rules and law.

Section 3. Group Insurance benefits shall be in accordance with the package
program heretofore agreed upon by the Company and the Union.

Section 4. Any increase in the monthly premium payment for the medical and
dental insurance plans required of eligible Employees desiring coverage shall be
shared equally by the Company and Employee during the term of this Agreement.

Section 5. The specific provisions of the Health and Dental insurance policies
shall prevail in all instances and be final and binding on all parties to this
Agreement.

Section 6. Employees who have been laid off and who have existing Health
Insurance plan coverage may have the coverage continued for two (2) months
following the month in which the layoff occurred. A laid off Employee must
promptly pay any Employee contributions required in order to retain coverage.

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<PAGE>
Section 7. Employees who are out due to personal injury/illness or occupational
injury will have coverage continued for fifteen (15) months following the month
in which the illness/injury occurred.

The employer will pay the same percentage of premium as it was paying at the
time of the injury or illness, providing the Employee had completed six (6)
months of service at the time of illness/injury. The Employee must promptly pay
any Employee contributions required in order to retain coverage.

Section 8. A Ten Thousand dollar ($10,000) Accidental Death and Dismemberment
plan shall be provided by the Company at its expense for all regular full-time
Employees covered by this Agreement and who have completed their probationary
period. In case of an accidental dismemberment the benefit will be paid in
accordance with the schedule provided in the plan.

A Ten Thousand dollar ($10,000) Life Insurance Policy shall be provided by the
Company at its expense, for all regular full-time Employees covered by this
Agreement and who have completed their probationary period.

Section 9. Weekly Accident and Sickness Benefits will be provided to all
eligible Employees in accordance with Appendix 3.

Section 10. Employees on Union business shall receive pension contributions for
all straight time hours so involved. This shall only be applicable for the
following Union business and Employees:

           (a) Normal Union business for the Union President, Vice president and
           Secretary/Treasurer.

           (b) Normal Executive Board meetings.

           (c) Grievance Committee preparations.

           (d) Negotiating Committee.

Any deviation from the normal practices relative to the above shall require the
consent of the Company.

                                   ARTICLE XX
                                      TOOLS

Section 1. Any Company tool which is checked out by any Employee becomes the
sole responsibility of said Employee and is not subject to the control of any
supervisor except as provided in Section 2 of this Article until such tool has
been returned and the Employee's check has been returned. If, in the performance
of the work, said tool is damaged or lost, upon presentation of reasonable proof
of such damage or loss, the Company shall bear the cost of such loss and return
the Employee's tool check. If a serialized tool is damaged or lost due to

                                       29
<PAGE>
Employee negligence, the Employee shall bear the replacement cost of the tool,
in accordance with the following schedule:

           -          less than (1) year old, 100% of replacement cost;
           -          1 to 2 years old, 80% of original cost;
           -          2 to 4 years old, 60% of original cost.
           -          more than 4 years old, 40% of original cost

However, if an Employee is assessed such costs for the loss of a tool, he/she
may substitute a new tool of the exact same type and model in lieu of payment of
the assessment. The tool clearance form provided by the Company shall be amended
to comply with this Article and Section of this Agreement.

Section 2. If and when any supervisor wishes any tool belonging to the Company
left on the job after such Employee departs at the end of the shift or is
ordered to leave, then such supervisor or one of the Employees under the direct
supervision of said supervisor, such supervisor shall sign a form provided by
the Company identifying such tool(s) and such supervisor shall assume full
responsibility to the Employee and/or Company for such tool.

Section 3. The Company and Union agree that Employees should have one (1)
designated storage area for personal tools for each shop that affords Employees
reasonable safety from theft. Employees that have their personal tools stolen
from these designated storage areas shall upon investigation and verification by
the Company have the reasonable costs (i.e. based on the depreciated value of an
average priced tool) of these personal tools reimbursed by the Company.
Notwithstanding the above, an Employee shall not be eligible for reimbursement
of personal tools stolen from a designated storage area unless he/she has on
file with the Company a current tool inventory list approved by the appropriate
Craft Supervisor.

The Company and Union shall work together to formulate and implement reasonable
means, policy and procedure in order to deal with this matter.

                                  ARTICLE XXI
                            JURY AND BEREAVEMENT PAY

Section 1. An Employee who is called for jury duty on a regularly scheduled
work day, and has at least one year's length of service with the company shall
be paid for each day served on a jury, not to exceed ten (10) days in any
calendar year, the difference between eight (8) times the base hourly rate and
the pay he received for jury duty, or the number of hours that the Employee is
scheduled to work (i.e., 4/10 hour shift). Such jury duty must be substantiated
by a written statement from the court.

Section 2. Employees, except those who have a financial stake in the outcome of
a particular matter, who are subpoenaed or summoned as a witness in a court of
law or who are subpoenaed or summoned to appear before a government agency in a
matter as to which the Company has no adverse interest shall be paid for each
day they serve as a witness, not to exceed ten (10) days in any calendar year,
the difference between eight (8) times the base hourly rate and the pay he

                                       30
<PAGE>
received for being a witness. The Employee must present proof of being
subpoenaed or summoned and the amount of pay received therefore.

Section 3. An Employee who has completed his or her probationary period will,
in the event of the death of his parent, mother-in-law, father-in-law, sister or
brother, be paid for up to three days of time required to be lost from work
during the Employee's regularly scheduled work week. The time off and pay which
is provided is for the purpose of permitting the Employee to participate in
arrangements for and attendance at the funeral. The days for which payment is
made shall include the day of the funeral but shall not in any of the foregoing
instances extend beyond the day following the funeral.

In the event of the death of the spouse or child of an employee who has
completed their probationary period, the period of time for which payment shall
be made for time required to be lost from work will be extended to 5 days: not
more than 3 of which shall extend beyond the day of the funeral. Pay for any
such days required to be lost from work shall be calculated on the basis of
eight (8) times the Employee's basic hourly rate of pay, or the number of hours
that the Employee is scheduled to work. The Company shall permit an employee to
take such leave in the event of the death of a grandparent, aunt or uncle, if
such relative acted in the role of parent to the Employee, and such fact is
verifiable.

To be eligible to receive bereavement pay, an Employee must notify the Company
promptly of the necessary absence from work and of the date the Employee intends
to return to work. The Company may, as a condition for payment, require proof of
the relationship between the Employee and the deceased.

                                  ARTICLE XXII
                                 TRAINEE PROGRAM

There shall be a Joint Labor/Management Trainee Program Committee. The Committee
shall be comprised of four (4) Company representatives and four (4) Union
representatives. The Committee shall be responsible for developing and
implementing the various training parameters, rates of pay, etc. Implementation
of this Program shall be by mutual consent.

                                 ARTICLE XXIII
                                MILITARY SERVICE

Section 1. An Employee who is a member of an organized unit of the Federally
recognized Armed Services, including Reserves or the Public Health Service
Reserve shall upon presentation of orders to attend a regular or annual course
of training or similar military service in such organization as prescribed by
the U.S. Secretary of Defense, be granted a leave of absence for such regular or
annual training period or similar military service. Upon presentation by the
Employee of a certificate signed by his superior officer in such military
service, showing the duration of such military service and the amount paid to
the Employee by the Government, the Employee shall, in any one calendar year, be
paid the difference between:

           (1)        The amount the Employee would have been paid by the
                      Company at the Employee's regular hourly base rate of pay
                      for the work (not to exceed

                                       31
<PAGE>
                      eight (8) hours per day or forty (40) hours per week) that
                      the Employee would otherwise have performed during the
                      first consecutive fourteen (14) calendar days of such
                      military service and;

           (2)        The amount, exclusive of any travel allowance, paid by the
                      government for such fourteen (14) days not to exceed
                      eighty (80) hours pay. In the event an Employee is granted
                      a leave of absence beyond such fourteen (14) days, the
                      Employee's vacation allowance, if any, may be applied for
                      such additional period of absence and the Employee may be
                      paid the amount of the Employee's vacation allowance as
                      though the Employee had taken the Employee's vacation
                      during such extended period of absence.

Section 2. An Employee ordered to report for a pre-induction physical
examination prior to entry into the Armed Forces will be paid for up to eight
(8) hours for time lost from work while taking such examination, providing proof
of same is shown. In no instance will payment be made under this provision more
than once in any calendar year.

                                  ARTICLE XXIV
                               TEMPORARY EMPLOYEES

Section 1. A temporary employee is one who is designated by the company's
records as part-time (or temporary). Temporary Employees (i.e. mechanics only)
are not to work overtime except in emergencies or when a regular employee of the
same classification is not available. Temporary and part-time employees (i.e.
mechanics only) are not to work sixth and seventh days or holidays when
full-time employees are available. Temporary and part-time employees are not to
work when full-time employees of the same classification are on lay off.

Section 2. In the event that a temporary Employee desires to become a regular
Employee and where the Company accepts the temporary Employee as a regular
Employee, such Employee will then become entitled to all of the provisions and
benefits of this Agreement, effective as of the date the Employee was accepted
as such by the Company as indicated by the Company records.

Section 3. Temporary Employees will receive overtime payment only for work
performed in accordance with the overtime provisions of this Agreement.

Section 4. In the event that a Temporary Employee works more than forty (40)
hours per week in each of more than twelve (12) weeks in a six-month period,
such Employee shall be permitted to become a regular employee under the terms of
this collective bargaining agreement, if such employee chooses to do so. If an
employee declines to become a regular employee, his/her opportunities for
further overtime shall be governed by Section 1 of this Article.

                                  ARTICLE XXV
                   NON-BARGAINING EMPLOYEES WORKING WITH TOOLS

Non-bargaining Employees shall not work with tools except in the following
instances:

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<PAGE>
           (a) instances of incidental work, which do not exceed one (1) hour;

           (b) when necessary to train and instruct Employees working under
           their supervision;

           (c) when performing experimental work;

           (d) when setting up work, or making the first assembly on a new job;

           (e) in cases of emergency.

If a non-bargaining unit Employee performs work in violation of this article and
the Employee who otherwise would have performed this work can be reasonably
identified, the Company shall pay such Employee the applicable standard hourly
wage rate for the time involved.

                                  ARTICLE XXVI
                             WAGES AND RATES OF PAY

The wage rates for each classification of employees covered by this Agreement
are those in existence as of the effective date of this Agreement and are set
forth in Appendix I.

Section 1. Effective February 9, 2001, a wage increase shall be provided to all
employees covered by this Agreement in the classifications set forth herein.

Section 2. Payroll checks will be issued weekly on Thursdays unless the Company
determines to change payday to Fridays. If such change in payday is made, the
Company shall notify the Union five (5) working days in advance of such change.
If payday is changed to Fridays, any employees working on 4/10 hour shifts or
night shifts shall receive their paychecks on Thursdays. The stubs of paychecks
due to Employees will show separately the number of straight time and overtime
hours worked and paid and vacation hours available.

Section 3. If at any time during the life of this Agreement a new bargaining
unit job is created which is not specifically covered by this Agreement and for
which no wage rate has been specifically provided by this Agreement, the Company
shall establish the rate to be paid for the new job. Such new position shall be
posted and a copy provided to the Union seven (7) days prior to the position
being filled. Such new job may be filled by the Company as it deems necessary.
If the Union disagrees with the rate of pay established for the job, it may
process its grievance with respect to the rate of pay assigned by the company to
such position directly to arbitration. Employees within the shipyard possessing
the skill, technical training, and ability will be given consideration for such
job.

Section 4. All job openings, as far as practicable, shall be posted as soon as
possible in order to allow interested parties to apply.

Section 5. The Company has established for its bargaining unit Employees
incentive bonus programs entitled the Project Bonus Program and the Hourly Bonus
Program. The Company reserves the right to change, modify, or discontinue these
bonus programs at its sole discretion.

                                       33
<PAGE>
Section 6. It is recognized that from time to time market conditions may be
such that the Company may experience problems retaining and/or attracting
qualified Employees in the various skilled classifications. When this happens,
at the request of the Company, the Company and Union shall meet and negotiate
for the purpose of determining the appropriate wage rate to be applied to the
affected skilled classification(s). Any agreement shall require the mutual
consent of both parties, if an agreement is not reached, the current contractual
classification(s) and wage rates will prevail.

                                 ARTICLE XXVII
                             SUBSTANCE ABUSE TESTING

Section 1. Application of Policy

This Policy provides for the Drug and Alcohol testing of all bargaining unit
employees. Drug and Alcohol testing will be conducted in the following areas:

                      (1) Pre-employment

                      (2) Occupational injuries

                      (3) Industrial accidents

                      (4) Under EAP Program

                      (5) When required by law or special contracts

                      (6) On a random basis

                      (7) Reasonable suspicion

Section 2. Testing

Pre-employment - The pre-employment drug screen will be 7-panel; for
amphetamines, cocaine, opiates, phencyclidine, barbiturates, methamphetamine and
THC. Alcohol screening will also be conducted by utilizing a breath alcohol test
(BAT). Any positive result disqualifies an applicant for Employment
consideration for a minimum of one (1) year.

Occupational injuries - Any Employee who sustains an occupational injury (first
report) and who requires the Company to make a referral to an outside doctor
(other than foreign particle in eye, flash burns or diagnostic x-rays) will be
subject to screening for amphetamines, cocaine, opiates, phencyclidine,
barbiturates, methamphetamine, THC and alcohol. The Company will not screen
Employees more than 90 days after each occupational injury occurs, unless on a
random, reasonable suspicion, or probable cause basis.

Industrial accidents - Any Employee involved in an industrial accident in which
any Employee is injured of property damage is $1000 or more, will immediately be
tested for the 7-panel of drugs and alcohol. Except if the employee does not in
any way contribute to the cause of the accident.

                                       34
<PAGE>
Employee Assistance Program - Any Employee in the Company's Employee Assistance
Program who is scheduled for a post-check will be screened for the 7-panel of
drugs and alcohol, if warranted by the EAP contract.

Department of Transportation (DOT) - The DOT requires random and periodic drug
(5-panel) and alcohol screens.

Special contracts - Drug and alcohol testing will be conducted as required by
special contracts; such as customer requirements (SEARIVER). These requirements
will be accomplished in addition to any other drug and alcohol testing covered
by this policy.

Random - Annually, a maximum of 20% of all bargaining unit Employees will be
randomly selected for drug and alcohol testing, not including random testing
required by customers on special projects. Selection will be performed by an
independent certified facility.

Reasonable suspicion - Reasonable suspicion exists when direct observation of
specific physical, behavioral or performance indicators suggest the probability,
or reasonable belief, of use, possession or impairment.

Section 3. Testing Procedure:

           (1)        Urine Drug Screens (UDS) -Drug testing will be conducted
                      employing the industry standard set forth in 49 CFR Part
                      40 of the Code of Federal Regulations (Controlled
                      Substance Abuse Procedures).

           (2)        Breath Alcohol Test (BAT) -Alcohol testing will be
                      conducted employing an Evidential Breath Testing (EBT)
                      device approved by the Department of Transportation and
                      operated by a Breath-Alcohol Technician.

Actions taken will be based upon the confirmation reading. Confirmation tests
will be taken on all positive tests.

Section 4. Cut-off levels.

The cut-off levels for the seven panel drug tests are as follows:

Marijuana                     50 ng/ml            15 ng/ml
Cocaine                       300 ng/ml           150 ng/ml
Opiates                       2000 ng/ml          2000 ng/ml
Amphetamines                  1000 ng/ml          1500 ng/ml
Phencyclidine(PCP)            25 ng/ml            25 ng/ml
Barbiturates                  200 ng/ml           200 ng/ml
Methamphetamine               1000 ng/ml          500 ng/ml

Section 5. The Company and the Union agree that testing for drugs and alcohol
may be performed by the Company in accordance with this Article.

                                       35
<PAGE>
Section 6. Any Employee who tests positive on the first occasion will be
suspended for a minimum period of ten (10) working days. Any suspension over ten
(10) working days shall be based upon an EAP recommendation. Upon returning to
work, Employees who test positive for drugs or alcohol while under an EAP
contract for substance abuse shall be discharged.

Section 7. Employees who test positive for alcohol shall be disciplined in
accordance with the following schedule:

           -- Test result > .02 < .05: Disciplinary action in accordance with
the schedule set forth at Article XXVIII. Employee may return to work the next
scheduled workday with a negative test. Upon the third such incident within a
six-month (6) period, Employee will be suspended for one full workday, and will
be referred to the Employee Assistance Program for substance abuse and must
comply with all terms of the EAP.

           -- Test result > .05: Immediate suspension for a minimum of ten (10)
working days, written warning notice and corporate referral to the EAP. Employee
may return to work with a recommendation by the EAP, a negative BAT and a
negative UDS.

Section 8. Time missed due to suspension as a result of a positive drug or
alcohol test in excess of the minimum set forth in Section 6 shall not be
considered as disciplinary time off. Such time in excess of minimum shall be
treated as justified time off, and not as sick leave, unless the Employee is
enrolled in a Residential Substance Abuse Program upon a referral of a
physician. If enrolled in such a program in such period of time, Employee may be
eligible for that period of time for A & S benefits.

                                 ARTICLE XXVIII
                                   DISCIPLINE

Section 1. It is agreed that the Company's Rules appearing in this Article are
a part of this Agreement and are binding upon the parties and employees.

Section 2. The parties anticipate that employees will be disciplined and/or
discharged in accordance with this Article and that discipline, including
discharge may arise for conduct or infractions which are not specifically noted.

Section 3. A copy of any written discipline given to employees shall be
provided to the Employee and the Union. The Union's copy shall be received
within three (3) working days. A Shop Steward shall be permitted to be present
in any disciplinary interview conducted by the Company if the Employee requests
the Steward to be present. Such right shall not include a discharge meeting. The
appropriate Shop Steward shall be notified of any disciplinary meeting at which
an Employee is to be discharged, and shall be permitted to meet with the Craft
Supervisor and/or Craft Manager or his designated representative prior to such
discharge meeting, at which time the basis of the discharge and a copy of the
Notice of Discharge shall be provided to the Shop Steward. The Shop Steward
shall be permitted to meet with the Employee following the discharge meeting
prior to the Employee leaving the premises if the Employee requests to meet with
a Steward. This Section shall not require the Craft Manager to meet with the
Union Steward and aggrieved at the time of the discharge to discuss settlement
of the matter.

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<PAGE>
Section 4. Except for offenses which justify immediate suspension or discharge,
Employees shall be disciplined in a progressive manner, as follows:

           Step 1 - Written Warning
           Step 2 - Written Warning
           Step 3 - 3-Day Suspension
           Step 4 - 5-Day Suspension
           Step 5 - Discharge

It is not the intention of the parties that an Employee shall be subject to
progressive discipline for violation of each individual rule. Discipline shall
accumulate for violation of any rule, except that discipline based upon
tardiness, absenteeism, and positive tests for drugs or alcohol shall be
undertaken in coordination and in accordance with other provisions of this
Agreement.

Section 5. The following offenses shall be cause for discipline and/or
discharge as noted below:

TERMINATION ON THE FIRST OFFENSE:

           (1)        Stealing, pilfering or attempting to remove from the
                      premises or a location at which work is being performed by
                      the Company, the property of the Company, Government,
                      customer, crewmembers, or fellow Employees, or the
                      concealment of any property of another, without authority,
                      while upon the Company premises or a location at which
                      work is being performed by the Company.

           (2)        Any Employee after being admitted to the Company property
                      or while engaged in work for the Company, who is found in
                      possession of intoxicating liquors or narcotics, drinking,
                      or who is found distributing or conspiring to distribute
                      any form of illegal drug or alcohol or distributing or
                      conspiring to distribute any form of legal drug or alcohol
                      illegally.

           (3)        Intentional destruction or damage to Company, Government,
                      customer, crewmember, or fellow Employee-owned material.

           (4)        Fighting, attempting or inflicting bodily injury to
                      another, except in self-defense.

           (5)        Falsification of any Company documents within the prior
                      one (1) year.

           (6)        Possession of firearms or concealed weapons on Company
                      property or where work is being performed by the Company.

           (7)        Violation of Company EEO discrimination policy, including
                      but not limited to, sexual harassment.

                                       37
<PAGE>
           (8)        Refusal to take a drug/alcohol test immediately upon
                      request from a supervisor, medical department personnel or
                      plant protection force officers.

           (9)        Testing positive for drugs/alcohol while under an EAP
                      contract for substance abuse.

           (10)       Failure to report for work for five consecutive days.

           (11)       Gross Insubordination - a direct and willful act of
                      disobedience of a proper order of a recognized Company
                      supervisor or official without any reasonable mitigating
                      circumstances.

           (12)       Intentional sleeping while on duty.

STEP 4-LEVEL DISCIPLINE ON THE FIRST OFFENSE:

           (1)        Gross insubordination.

           (2)        Disregard or violation of a major safety-rule or
                      precipitation of accidents through their own carelessness.

           (3)        Failure to cooperate with members of the Plant Protection
                      Force or any Company Supervisor while on Company premises
                      or elsewhere where work is being performed by the Company,
                      as follows:

                                 (a) By not following instructions relating to
                      the checking of any items, parcels, bundles, lunch boxes,
                      or tool boxes, or

                                 (b) By walking, running, driving, or in any
                      way, moving away after having been instructed to comply
                      with lawful instructions in regard to the incident
                      involved.

           (4)        Testing positive for alcohol/drugs, the period of such
                      suspension shall be as set forth in Article XXVII.

           (5)        Smoking in any area of the Company or where work is being
                      performed by the Company where smoking is not permitted
                      and which creates a safety hazard.

           (6)        Negligent destruction or damage to Company, Government,
                      customer, crewmember or fellow employee-owned material.

           (7)        Willful and intentional release of Company confidential or
                      proprietary information.

                                       38
<PAGE>
Notwithstanding the provisions of Section 5 of this Article (i.e. specific
disciplinary measures for specific offenses), the Company retains the right to
enforce more severe disciplinary measures for violation of Step 4 offenses when
an Employee is involved in an "egregious incident".

STEP 3-LEVEL DISCIPLINE ON THE FIRST OFFENSE:

           (1)        Employees who are deemed to be accident or injury prone or
                      who have an excessive number of accidents and/or injuries
                      in a given period of time.

           (2)        Failure to cooperate with members of the Plant Protection
                      Force or any other Company Supervisor while on Company
                      premises or elsewhere where work is being performed by the
                      Company by not showing company-issued identification when
                      directed to do so.

           (3)        Smoking in any area of the Company or where work is being
                      performed by the Company where smoking is not permitted.

THE FOLLOWING OFFENSES SHALL BE CAUSE FOR DISCIPLINE IN ACCORDANCE WITH SECTION
4 OF THIS ARTICLE:

           (1)        Conducting a gaming activity for profit in any form on
                      Company property or while engaged in work for the Company.

           (2)        Insubordination, including failure to observe
                      instructions, or failure to perform assigned tasks.

           (3)        Sleeping while on duty.

           (4)        Disregard or violation of established safety rules or
                      precipitation of accidents.

           (5)        Failure to notify the Supervisor prior to the start of the
                      designated shift, if going to be late or absent.

           (6)        Inciting or indulging in horseplay.

           (7)        Leaving the job before proper time (before established
                      quitting time), in the absence of express permission by
                      the Employee's supervisor(s).

           (8)        Being in an area of the premises or elsewhere where work
                      is being performed by the Company, other than areas
                      connected with the Employee's work or assignment or other
                      neglect of duty without good cause.

           (9)        Inefficiency (e.g. Inefficient use of time and/or
                      material.)

           (10)       Excessive tardiness or repeated failure to be at work at
                      starting time.

                                       39
<PAGE>
           (11)       Excessive absenteeism.

           (12)       Defacing Company property.

           (13)       Without regard to the other provisions of this Article,
                      any Employee who receives a second (2nd) garnishment in a
                      twelve-month (12) period which requires a payroll
                      deduction will be referred by the Company to Consumer
                      Credit Counseling, and such garnishments shall remain
                      active for a period of twelve months from the date of the
                      most recent garnishment. If the Employee receives a third
                      (3rd) garnishment while others are active, the Employee
                      will be referred to the EAP by the Company. The Employee
                      may be subject to discharge if a garnishment is received
                      during the EAP.

Violation of the above rules shall be considered just cause for disciplinary
action. However, the above-listed rules are not intended to be all-inclusive.
The Company retains the right to discharge any Employee for just cause and such
right of discharge shall be deemed to include the right to suspend or otherwise
discipline any employee in lieu of discharge. Conduct that is inconsistent with
proper Employee behavior shall be considered just cause for discipline.

Discipline for any of the above rule violations shall remain active for twelve
(12) months of active employment (or six months as provided in Section 6 of this
Article) and may be relied upon in taking further disciplinary action. If no
further disciplinary action is taken within twelve (12) months, such discipline
shall not be considered active for further discipline. Absences due to illness
or injury and totaling not more than two (2) weeks shall be considered as time
worked for the purpose of computing a year of active employment.

Section 6. In the case of tardiness and absenteeism, discipline for either or
both shall be taken separately from any other rules violations. However,
infractions for these two rules may be taken in concert and progressively for
violations in either or both areas.

Two (2) incidents of unexcused absences, or three (3) incidents or unexcused
tardiness, or two (2) incidents unexcused tardiness and one (1) incident
absence, within a four month period shall result in progressive discipline being
taken in accordance with Step 1 of Section 4. Thereafter, any incident of
unexcused tardiness or absence within the four (4) month period from the last
unexcused tardiness or absence shall result in progressive discipline being
taken in accordance with Step 2, Step 3, Step 4, Step 5 of Section 4. Discipline
for tardiness/absenteeism shall remain active for six (6) months and may be
relied upon in taking further disciplinary action. If no further disciplinary
action is taken within six (6) months, such discipline will be removed at the
end of six months.

Section 7. The date that an Employee violated a Company rule shall be
considered the date of the discipline enforced against the Employee.
Notwithstanding the above, if the Company was not aware of the violation at the
time of the occurrence, the date that the Company could have reasonably been
expected to be aware of the violation shall be considered the date of the
discipline enforced against the Employee.

                                       40
<PAGE>
The Company shall not enforce progressive discipline for the same offence by
enforcing multiple disciplinary steps on an Employee on the same day, when there
was sufficient time for the Company to have given the Employee separate
progressive discipline.

Section 8.  Company Rules and Regulations

In order to promote and maintain discipline, morale, and efficiency, and a
reasonable amount of uniformity, all organizations must have rules to govern the
conduct of their employees. These rules apply to all alike. Each Supervisor is
expected to set the example for his workers, in addition to seeing that the
rules are observed by all. The Company agrees to provide each Employee with a
copy of the Company's rules and in addition to post copies on all bulletin
boards. It is further agreed that the copies of these Company rules shall note
that violation of same is considered just cause for discharge under this
Agreement.

                       REASON FOR DISCIPLINE OR DISCHARGE

           (1)        Stealing, pilfering or attempting to remove from the
                      premises or a location at which work is being performed by
                      the Company, the property of the Company, Government,
                      customer, crewmembers or fellow employees, or the
                      concealment of any property of another, without authority,
                      while upon the Company premises or a location at which
                      work is being performed by the Company.

           (2)        Any employee after being admitted to the Company property
                      or while engaged in work for the Company, who is found in
                      possession of intoxicating liquors or narcotics, drinking
                      or under the influence of liquor or narcotics, or who is
                      found distributing or conspiring to distribute any form of
                      illegal drug or alcohol or distributing or conspiring to
                      distribute any form of legal drug or alcohol illegally.

           (3)        Intentional destruction or damage to Company, Government,
                      customer, crewmember, or fellow Employee-owned material.

           (4)        Fighting, attempting or inflicting bodily injury to
                      another, except in self-defense.

           (5)        Falsification of any Company documents within the prior
                      one (1) year.

           (6)        Possession of firearms or concealed weapons on Company
                      property or where work is being performed by the Company.

           (7)        Violation of Company EEO discrimination policy, including
                      but not limited to, sexual harassment.

           (8)        Refusal to take a drug/alcohol test immediately upon
                      request from a supervisor, medical department personnel or
                      plant protection force officers.

                                       41
<PAGE>
           (9)        Testing positive for drugs or alcohol while under an EAP
                      contract for substance abuse.

           (10)       Failure to report for work for five (5) consecutive days.

           (11)       Gross insubordination.

           (12)       Disregard or violation of a major safety rule or
                      precipitation of accidents through their own carelessness,
                      or who are deemed to be accident or injury prone or who
                      have an excessive number of accidents and/or injuries in a
                      given period of time.

           (13)       Intentional sleeping on duty.

           (14)       Failure to cooperate with members of the Plant Protection
                      Force or any Company supervisor while on Company premises
                      or elsewhere where work is being performed by the Company,
                      as follows:

                                 a.         By not showing Company-issued
                                            identification when directed, or

                                 b.         By not following instructions
                                            relating to the checking of any
                                            items, parcels, bundles, lunch
                                            boxes, or tool boxes, or

                                 c.         By walking, running, driving, or in
                                            any way, moving away after having
                                            been instructed to comply with
                                            lawful instructions in regard to the
                                            incident involved.

           (15)       Testing positive for alcohol or drugs, the period of
                      suspension or discharge shall be as set forth in Article
                      XXVII.

           (16)       Smoking in any area of the Company or where work is being
                      performed by the Company where smoking is not permitted
                      and that creates a safety hazard.

           (17)       Negligent destruction or damage to Company, Government,
                      customer, crewmember of fellow employee-owned material.

           (18)       Willful or intentional release of Company confidential or
                      proprietary information.

           (19)       Conducting a gaming activity for profit in any form on
                      Company property or while engaged in work for the Company.

           (20)       Insubordination, including failure to observe
                      instructions, or failure to perform assigned tasks.

           (21)       Sleeping while on duty.

                                       42
<PAGE>
           (22)       Disregard or violation of established safety rules or
                      precipitation of accidents.

           (23)       Failure to call a supervisor prior to start of the
                      designated shift if the employee is going to be tardy or
                      absent.

           (24)       Smoking in any area of the Company or where work is being
                      performed by the Company where smoking is not permitted.

           (25)       Inciting or indulging in horseplay.

           (26)       Leaving the job before proper time (before established
                      quitting time), in the absence of express permission by
                      the Employee's supervisor(s).

           (27)       Being in an area of the premises or elsewhere where work
                      is being performed by the Company, other than areas
                      connected with the Employee's work or assignment or other
                      neglect of duty without good cause.

           (28)       Inefficiency (e.g. Inefficient use of time and/or
                      material.)

           (29)       Excessive tardiness or repeated failure to be at work at
                      starting time.

           (30)       Excessive absenteeism.

           (31)       Defacing Company property.

Violation of any of the above listed rules shall be considered just cause for
discipline or discharge. The foregoing rules are not intended to be
all-inclusive.

                                  ARTICLE XXIX
                                   EVALUATIONS

Section 1. During the evaluation review, the Employee and Supervisor shall
review his/her evaluation with an eye toward improvement. The Supervisor shall
inform the Employee of areas of which improvement can be made in order to become
eligible for the next level of advancement. These areas shall be noted on the
Employees evaluation sheet. Employees shall be given a copy of their evaluation.

                                  ARTICLE XXX
                                  LEAD MECHANIC

Section 1. The signatory parties hereby agree to implement a new bargaining
unit position entitled Lead Mechanic. The parameters of this new position are as
follows:

           The duties of a Lead Mechanic shall include, but not be limited to
           the following: conveying instructions from Craft Supervisors (i.e.
           non-bargaining supervisors),

                                       43
<PAGE>
           assigning work and directing a crew of employees, planning,
           initiating verbal warnings, identifying problems to the Company and
           bearing witness as to the problems identified, supporting and
           enforcing the Company rules and regulations including those aimed at
           eliminating production inefficiencies, training, working with tools.

The Lead Mechanic shall not have the authority to hire, fire or discipline
(except for verbal warnings), nor recommend discipline.

Section 2. The Company in selecting Lead Mechanics shall consider both
Employees in the bargaining unit, as well as Employees holding non-bargaining
unit supervisory positions. A job posting procedure for Lead Mechanic openings
shall be implemented. The Company shall maintain a list of those Employees
interested. The Company shall consider an Employee who has expressed an interest
in the Lead Mechanic position, provided the Employee has journey level skills in
the specific trade and has the skill and ability to lead other employees.

Section 3. Employees holding non-bargaining unit positions as of the date of
implementation of the Lead Mechanic position shall only be eligible for the Lead
Mechanic position for a ninety (90) calendar day window. Thereafter, a
non-bargaining unit employee transferred into a bargaining unit position (i.e.
Specialist, 1st Class Mechanic) shall be eligible for promotion to a Lead
Mechanic position provided the promotion does not replace an existing Lead
Mechanic or the employee works in the bargaining unit position for a period of
thirty (30) calendar days.

Section 4. The Company shall have the sole discretion in determining the need
for and number of Lead Mechanics, selecting Lead Mechanics and downgrading Lead
Mechanics.

Section 5. The Lead Mechanic position is not a separate seniority unity within
the meaning of Article XI Seniority, Sections 1 and 2 of this contract. Each
Lead Mechanic's seniority shall be with the seniority unit from which they were
promoted. Lead Mechanics shall continue to accrue and retain length of service
in the seniority unit from which they were promoted.

Section 6. The Company shall be entitled to retain Lead Mechanics without
regard to seniority provided the Lead Mechanic has a crew and is performing Lead
Mechanic functions. Lead Mechanics not working with a crew and not performing
Lead Mechanic functions shall be subject to the normal layoffs within their
seniority unit. There may be instances when a lead Mechanic does not have a crew
such as pre-availability planning, etc. and post-availability paperwork, etc.

Section 7. The Company shall not upgrade an Employee to Lead Mechanic
immediately prior to a layoff for the purpose of circumventing the seniority
provisions.

Section 8. At the Unions request, Lead Mechanics shall provide a written
statement regarding issues involving discipline or grievances that they have
direct knowledge about.

Section 9. When a Lead Mechanic is replacing another Lead Mechanic on an
ongoing job, the Company shall be allowed two (2) days turnover time in order to
facilitate this transition. This shall not be considered to be a violation of
any of the provisions of the contract.

                                       44
<PAGE>
Section 10. For the purposes of these provisions, a "crew" shall be defined as
a minimum of four (4) employees. However, there may be occasional unique
circumstances where a "crew" may be smaller than four (4) employees, to include
the Lead Mechanic. It is not the intent of the Company to split larger crews
into smaller crews for the primary purpose of Lead Mechanics circumventing the
seniority provisions of this contract.

Section 11. Employees promoted to Lead Mechanic positions, shall have a minimum
one (1) year seniority and be either a Specialist or 1st Class Mechanic.

Section 12. Upon implementation of the Lead Mechanic position, the Company and
Union agree to meet immediately to resolve disputes on any issues involving
implementation or interpretation of these provisions.

                                  ARTICLE XXXI
                            SUBCONTRACTING COMMITTEE

Section 1. The Company understands Employee concerns about the subcontracting
of work. To that end, a Subcontract Committee shall be established to be
composed of four (4) representatives from the Company and four (4)
representatives from the Union. The Employees on such Committee shall be
recognized by the Company upon written notification by the Union. The Employees
appointed by the Union shall be selected from those who have worked for the
Company a minimum of two (2) years.

           (a) A company representative shall serve as chairperson of the
           Committee.

           (b) The Committee shall meet every month at a designated time and
           place.

           (c) Where a majority of the Committee vote approval of any
           suggestions to the Company, this shall be considered as a
           recommendation of the Committee to the Company. Where the Committee
           is evenly divided as to any proposals to the Company, this shall be
           considered a report and should also be submitted to the Company but
           in no event shall the Company be advised as to those voting for or
           against such proposal.

           (d) The Committee shall submit in writing any recommendation or
           report to the Company.

           (e) The Company, within a reasonable time, shall in writing, give an
           answer to the recommendation or report of the Committee stating the
           decision of the Company on such proposal, and any action taken, if
           any.

           (f) The Company reserves the right to accept or reject any
           recommendations or reports.

           (g) The committee shall be advisory only and shall not in any way
           whatsoever limit the Company's right to subcontract as specified in
           Article XVII Management Functions.

           (h) The Committee shall have no right to change, modify or negotiate
           on any terms or conditions of the collective bargaining agreement.

                                       45
<PAGE>
Section 2. "All discretionary subcontractors" shall comply with the following
Norshipco guidelines:

           (a) Safety guidelines

           (b) Environmental Best Management Practices

           (c) Drug/Alcohol policy that complies with governmental guidelines

           (d) In the event of an accident, post accident drug/alcohol test
           result shall be submitted to the Company's Safety Department.

           (e) Prime contract quality requirements.

This shall not in any way whatsoever limit the Company's right to subcontract
pursuant to the provisions of Article XVII Management Functions.

                                 ARTICLE XXXII
                             APPRENTICESHIP PROGRAM

Section 1. The Apprenticeship Program standards shall not be less than those
established by the Federal Committee on Apprenticeship, Division of Labor
Standards, U.S. Department of Labor, and the Virginia Apprenticeship Act of
April 1, 1938, as amended by Acts of Assembly 1942.

Section 2. There shall be a Joint Labor/Management Apprenticeship Program
Committee. The Committee shall be comprised of four (4) Company representatives
and four (4) Union representatives. The Committee shall be responsible for
developing and implementing the various training parameters, rates of pay, etc.
Implementation of this Program shall be by mutual consent.

                                 ARTICLE XXXIII
                                 BULLETIN BOARDS

Bulletin boards will be made available to the Union, by the Company, for the
posting of official Union notices. Union Bulletin Boards may be used for Union
sponsored activities that do not conflict with Company Programs. No Political
materials may be posted. Copies of all notices shall be submitted to the Company
prior to being posted and they shall not be posted if they shall contain any
matter of a controversial nature or reflecting in any way upon the Company, its
operations or management.

                                 ARTICLE XXXIV
                                  SUCCESSORSHIP

If during the term of this collective bargaining agreement, the Company decides
to offer for sale the assets of the Berkley yard, the Company will request that
any potential buyer recognize the Union, assume the collective bargaining
agreement, and offer employment to bargaining unit Employees. It is understood,
however, that acceptance of this request by the buyer is not a

                                       46
<PAGE>
condition of the Company's right to sell the assets of the Berkley yard. The
Company will promptly notify the Union if an agreement for the sale of the
assets is reached with any purchaser and to disclose to the Union any provisions
of the acquisition agreement that may address employment opportunities for the
bargaining unit Employees or the Union's status as bargaining representatives.

                                  ARTICLE XXXV
                     EFFECTIVE DATES AND TERMS OF AGREEMENT

Section 1. The provisions of this Agreement shall become effective as of
February 9, 2001 and shall be binding upon the parties hereto until midnight
February 8, 2004 and thereafter from year to year unless either party hereto
shall notify the other in writing at least sixty (60) days prior to the
expiration of this Agreement of any intention to terminate this Agreement.

Section 2. This Agreement expresses the full, complete and final agreement of
the parties for the duration hereof. It cancels and supersedes any and all
agreements and understandings which may have been in effect previously and this
Agreement may be amended only by agreement of the parties in writing. The
parties acknowledge that during the negotiations which resulted in this
Agreement, each had the unlimited right and opportunity to make demands and
proposals with respect to any subject or matter not removed by law from the area
of collective bargaining, and that the understandings and agreements arrived at
by the parties after the exercise of that right and opportunity are set forth in
this Agreement. Therefore, the Company and the Union, for the life of this
Agreement, voluntarily and unqualifiedly waive the right, and each agrees that
the other shall not be obligated to bargain collectively with respect to any
subject or matter referred to or covered in this Agreement, except as expressly
provided in this Agreement, or with respect to any subject matter not
specifically referred to or covered in this Agreement, even though such subject
or matter may not have been within the knowledge or contemplation of either or
both parties at the time they negotiated or signed this Agreement. The execution
of this Agreement shall not result in any abridgment of the rights held by
Management.

                                       47
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
on this 15th day of February 2001, in their respective names by their respective
representatives thereunto duly authorized.

                   NORFOLK SHIPBUILDING & DRYDOCK CORPORATION

By     /s/ Al J. Krekich
       -------------------------------------------------------------------------
       Al J. Krekich, President, Norshipco & Chief Operating Officer, USMR

By     /s/ Tom Epley
       -------------------------------------------------------------------------
       Tom Epley, Senior Vice President Operations, Norshipco

By     /s/ Michael A. Adams
       -------------------------------------------------------------------------
       Michael A. Adams, Vice President Human Resources, USMR

By     /s/ Joe Williams
       -------------------------------------------------------------------------
       Joe Williams, Director of Fabrications, Norshipco

By     /s/ Samuel Baker
       -------------------------------------------------------------------------
       Samuel Baker, Manager of Industrial Relations, Benefits and Security,
       Norshipco

By     /s/ Brian Bish
       -------------------------------------------------------------------------
       Brian Bish, Human Resources Manager, San Francisco Drydock

         INTERNATIONAL BROTHERHOOD OF BOILERMAKERS, IRON SHIP BUILDERS,
            BLACKSMITHS, FORGERS, AND HELPERS AND LOCAL 684, AFL-CIO

By     /s/ Johnny Thomas
       -------------------------------------------------------------------------
       Johnny Thomas, President, Local 684

By     /s/ Michael T. Patterson
       -------------------------------------------------------------------------
       Michael T. Patterson, Vice President, Local 684

By     /s/ Sandra K. Frye
       -------------------------------------------------------------------------
       Sandra K. Frye, Member Negotiating Committee, Local 684

By     /s/ Donald L. Arsenault
       -------------------------------------------------------------------------
       Donald L. Arsenault, Member Negotiating Committee, Local 684

By     /s/ James S. Anderson
       -------------------------------------------------------------------------
       James S. Anderson, Member Negotiating Committee, Local 684

By     /s/ Karl L. Autrum
       -------------------------------------------------------------------------
       Karl L. Autrum, Member Negotiating Committee, Local 684

                                       48
<PAGE>
                                  APPENDIX 1(a)
                                      WAGES

Effective February 9, 2001

<TABLE>
<CAPTION>
Classification                                  Spec.          1st            2nd           3rd
--------------                                  -----          ---            ---           ---
<S>                                             <C>           <C>            <C>           <C>
Armature Winder                                               15.66          15.00         14.35
Blacksmith                                      15.34         15.00          14.35         13.83
Boilermaker                                     15.34         15.00          14.35         13.83
Burner                                          15.34         15.00          14.35         13.83
Carpenter                                       15.34         15.00          14.35         13.83
Crane Operator                                  15.34         15.00          14.35         13.83
Dispatcher                                                    11.76          11.50
Dock person                                     15.34         15.00          14.35         13.83
Electrician                                     15.34         15.00          14.35         13.83
Electronics Technician                          15.34         15.00          14.35         13.83
Handyperson Hired Prior to 11/1/88                            11.50          11.24         10.86
Handyperson Hired On or After 11/1/88                         11.50          10.65          9.71
Heavy Equipment Operator                                      11.76          11.50
Helper Hired Prior to 11/1/88                                 10.46          10.28
Helper Hired On or After 11/1/88                               9.32           9.12
Insulator                                       15.34         15.00          14.35         13.83
Joiner                                          15.34         15.00          14.35         13.83
Laborer Hired Prior to 11/1/88                                10.06           9.69
Laborer Hired On or After 11/1/88                              8.73           8.15
Lead Mechanic                                   15.84
Lofts person                                    16.02         15.73          15.00         14.35
Machinist                                       15.34         15.00          14.35         13.83
Material Controller                                           12.20          11.92         11.67
Outside Machinist                               15.34         15.00          14.35         13.83
Painter                                                       15.00          14.35         13.83
Pipe fitter                                     15.34         15.00          14.35         13.83
Power Plant Operator                                          12.06          11.49
Rigger                                          15.34         15.00          14.35         13.83
Sandblaster                                                   15.00          14.35         13.83
Sandblaster Trainee                                           12.06          11.49
Senior Material Controller                                    13.24
Sheet Metal Worker                              15.34         15.00          14.35         13.83
Shipfitter                                      15.34         15.00          14.35         13.83
Sign Painter                                                  15.31
Storeroom Clerk                                 11.50         11.24          11.05         10.70
Tack Welder                                                   11.33
</TABLE>

                                       49
<PAGE>
<TABLE>
<S>                                             <C>           <C>            <C>           <C>
Tank Cleaner                                                  11.33          10.86         10.39
Tankerperson                                                  12.19
Truck Driver                                                  10.88          10.28         10.06
Tug & Launch Captain                            15.34         15.00          14.35         13.83
Ventilation Mechanic                                          15.00          14.35         13.83
Waste Water Treatment Operator                  15.34         15.00          14.35         13.83
Welder                                          15.34         15.00          14.35         13.83
</TABLE>

                                       50
<PAGE>
                                  APPENDIX 1(b)
                                      WAGES

Effective February 9, 2002

<TABLE>
<CAPTION>
Classification                                  Spec.          1st            2nd           3rd
--------------                                  -----          ---            ---           ---
<S>                                             <C>           <C>            <C>           <C>
Armature Winder                                               16.03          15.35         14.65
Blacksmith                                      15.70         15.35          14.65         14.13
Boilermaker                                     15.70         15.35          14.65         14.13
Burner                                          15.70         15.35          14.65         14.13
Carpenter                                       15.70         15.35          14.65         14.13
Crane Operator                                  15.70         15.35          14.65         14.13
Dispatcher                                                    11.96          11.70
Dock person                                     15.70         15.35          14.65         14.13
Electrician                                     15.70         15.35          14.65         14.13
Electronics Technician                          15.70         15.35          14.65         14.13
Handyperson Hired Prior to 11/1/88                            11.70          11.44         11.06
Handyperson Hired On or After 11/1/88                         11.70          10.85          9.91
Heavy Equipment Operator                                      11.96          11.70
Helper Hired Prior to 11/1/88                                 10.66          10.48
Helper Hired On or After 11/1/88                               9.52           9.32
Insulator                                       15.70         15.35          14.65         14.13
Joiner                                          15.70         15.35          14.65         14.13
Laborer Hired Prior to 11/1/88                                10.26           9.89
Laborer Hired On or After 11/1/88                              8.93           8.35
Lead Mechanic                                   16.20
Lofts person                                    16.40         16.10          15.35         14.65
Machinist                                       15.70         15.35          14.65         14.13
Material Controller                                           12.40          12.12         11.87
Outside Machinist                               15.70         15.35          14.65         14.13
Painter                                                       15.35          14.65         14.13
Pipe fitter                                     15.70         15.35          14.65         14.13
Power Plant Operator                                          12.26          11.69
Rigger                                          15.70         15.35          14.65         14.13
Sandblaster                                                   15.35          14.65         14.13
Sandblaster Trainee                                           12.26          11.69
Senior Material Controller                                    13.44
Sheet Metal Worker                              15.70         15.35          14.65         14.13
Shipfitter                                      15.70         15.35          14.65         14.13
Sign Painter                                                  15.66
Storeroom Clerk                                 11.70         11.44          11.25         10.90
Tack Welder                                                   11.53
Tank Cleaner                                                  11.53          11.06         10.59
</TABLE>

                                       51
<PAGE>
<TABLE>
<S>                                             <C>           <C>            <C>           <C>
Tankerperson                                                  12.39
Truck Driver                                                  11.08          10.48         10.26
Tug & Launch Captain                            15.70         15.35          14.65         14.13
Ventilation Mechanic                                          15.35          14.65         14.13
Waste Water Treatment Operator                  15.70         15.35          14.65         14.13
Welder                                          15.70         15.35          14.65         14.13
</TABLE>

                                       52
<PAGE>
                                  APPENDIX 1(c)
                                      WAGES

Effective February 9, 2003

<TABLE>
<CAPTION>
Classification                                  Spec.          1st            2nd           3rd
--------------                                  -----          ---            ---           ---
<S>                                             <C>           <C>            <C>           <C>
Armature Winder                                               16.44          15.75         15.00
Blacksmith                                      16.11         15.75          15.00         14.48
Boilermaker                                     16.11         15.75          15.00         14.48
Burner                                          16.11         15.75          15.00         14.48
Carpenter                                       16.11         15.75          15.00         14.48
Crane Operator                                  16.11         15.75          15.00         14.48
Dispatcher                                                    12.21          11.95
Dock person                                     16.11         15.75          15.00         14.48
Electrician                                     16.11         15.75          15.00         14.48
Electronics Technician                          16.11         15.75          15.00         14.48
Handyperson Hired Prior to 11/1/88                            11.95          11.69         11.31
Handyperson Hired On or After 11/1/88                         11.95          11.10         10.16
Heavy Equipment Operator                                      12.21          11.95
Helper Hired Prior to 11/1/88                                 10.91          10.73
Helper Hired On or After 11/1/88                               9.77           9.57
Insulator                                       16.11         15.75          15.00         14.48
Joiner                                          16.11         15.75          15.00         14.48
Laborer Hired Prior to 11/1/88                                10.51          10.14
Laborer Hired On or After 11/1/88                              9.18           8.60
Lead Mechanic                                   16.60
Lofts person                                    16.82         16.52          15.75         15.00
Machinist                                       16.11         15.75          15.00         14.48
Material Controller                                           12.65          12.37         12.12
Outside Machinist                               16.11         15.75          15.00         14.48
Painter                                                       15.75          15.00         14.48
Pipe fitter                                     16.11         15.75          15.00         14.48
Power Plant Operator                                          12.51          11.94
Rigger                                          16.11         15.75          15.00         14.48
Sandblaster                                                   15.75          15.00         14.48
Sandblaster Trainee                                           12.51          11.94
Senior Material Controller                                    13.69
Sheet Metal Worker                              16.11         15.75          15.00         14.48
Shipfitter                                      16.11         15.75          15.00         14.48
Sign Painter                                                  16.06
Storeroom Clerk                                 11.95         11.69          11.50         11.15
Tack Welder                                                   11.78
Tank Cleaner                                                  11.78          11.31         10.84
</TABLE>

                                       53
<PAGE>
<TABLE>
<S>                                             <C>           <C>            <C>           <C>
Tankerperson                                                  12.64
Truck Driver                                                  11.33          10.73         10.51
Tug & Launch Captain                            16.11         15.75          15.00         14.48
Ventilation Mechanic                                          15.75          15.00         14.48
Waste Water Treatment Operator                  16.11         15.75          15.00         14.48
Welder                                          16.11         15.75          15.00         14.48
</TABLE>

                                       54
<PAGE>
                                  APPENDIX 1(d)
                               MISCELLANEOUS RATES

Any painter or blaster who is actually engaged in spray painting or blasting or
authorized employees engaged in asbestos removal shall be paid twenty-five cents
($.25) per hour extra while so engaged.

Any employee rated less than 3/c mechanic, who is certified and is actually
engaged in sandblasting shall be paid 3/c mechanic wages while so engaged.

Any laborer who is actually engaged in cleaning tanks in which oil has been
carried and in which there is a substantial residue of oil or who is actually
engaged in cleaning boilers shall be paid ten cents ($.10) per hour extra while
so engaged, or who is actually engaged in cement washing double-bottom or
domestic tanks shall be paid ten cents ($.10) per hour extra while so engaged.

After 90 working days, Laborers Second Class shall be raised to Laborer First
Class.

After 90 working days, Truck drivers Third Class shall be raised to Truck driver
Second Class. The requirements for promotion to First Class Truck driver will be
the ability to operate all equipment required of a First Class Truck driver.

After 90 working days, Heavy Equipment Operators Second Class shall be raised to
Heavy Equipment Operator First Class.

                                       55
<PAGE>
                                   APPENDIX 2
                                   DEPARTMENTS

For the purposes of Article XI, Section 2, the following departments are
recognized:

           Outside Machine Shop
           Inside Machine Shop
           Pipe Shop
           Insulation Shop
           Sheet Metal Shop
           Electric Shop
           Plate Shop
           Boiler Shop
           Welding Shop
           Blacksmith Shop
           Paint Shop
           Carpenter Shop
           Rigging
           Labor Department
           Dock Department
           Crane Department/Storeroom/Transportation Department
           Facilities Department
           Environmental Department

                                       56
<PAGE>
                                   APPENDIX 3
                         A & S AND GROUP HEALTH BENEFITS

1.         Weekly Accident and Sickness Benefits

           A.         Weekly A & S benefits shall be paid only to those
                      employees who suffer from a non-occupational illness or
                      injury. Employees who have a work-related illness or
                      injury shall not be covered or eligible for such benefits.

           B.         Pays from the first day for accident or when hospitalized
                      as a result of illness, or on the eighth day for sickness,
                      with maximum of twenty-six (26) weeks in a twelve month
                      period for one ailment, per schedule below:

<TABLE>
<CAPTION>
           Group                                                                                      Weekly Benefit
<S>                                                                                                   <C>
           (1)        Laborers and others below prevailing pay rate of Helper 1/c...................          $110.00
           (2)        Helper 1/c and others below prevailing pay rate of Handyperson 3/c............          $120.00
           (3)        Handyperson 3/c and others below prevailing pay rate of Mechanic 3/c..........          $130.00
           (4)        Mechanic 3/c and above of others in Bargaining Unit...........................          $140.00
</TABLE>

           Weekly A & S Benefits are basically determined by hourly rate of pay
and are updated monthly.

           A.         Group Health Plan

                      A comprehensive health insurance plan is available to
                      Employees and their dependents through the Company's Group
                      Health Plan.

           B.         Dental Insurance

                      A dental insurance plan is available to Employees and
                      their dependents participating in the group health plan.

           The plan provides two groupings of dental services, as follows:

           Group 1 - known as Diagnostic and Preventive Services - includes
exam, x-rays, cleaning, fluoride, emergency treatment and exam, space
maintainers, biopsies of oral tissues, and pulp vitality tests. The full cost of
treatment described in Group 1 will be met by the plan.

           Group 2 - known as Primary Dental Services - includes maintenance
service - fillings, extractions, endodontics, denture repair, re-cement of
crowns, inlays and/or bridges, and visits to home when medically necessary.
There is a $50.00 deductible payment for an individual, with a $150.00 maximum
per family, required during any calendar year for the treatment provided under
Group 2. Thereafter, the plan will pay for 80% of the cost of treatment
described in Group 2, with the remaining 20% of the cost being borne by the
insured. The maximum payment to be made on behalf of any individual during a
calendar year is $1,000.00.

                                       57
<PAGE>
           Group 3 - known as Delta Care - an HMO dental product option at no
additional cost to covered employees.

                                       58
<PAGE>
                                   APPENDIX 4
                                  PENSIONS/401K

1.         The Pension Plan previously agreed to between the Company and the
           Union and which covers Bargaining Unit Employees is amended and
           provides the following:

           A.         All credited years of service with the Company shall be
                      used for the purpose of calculating present Employee
                      pension benefits.

           B.         Effective January 1, 1993, pensions for all present
                      employees will be calculated on the basis of:

           1)         Twelve Dollars ($12.00) per month for each year of the
                      first ten (10) years of credited service, and

           2)         Thirteen Dollars ($13.00) per month for each year of
                      credited service in excess of ten (10) but less than
                      twenty (20) years, and

           3)         Fourteen Dollars ($14.00) per month for each year of
                      credited service in excess of twenty (years).

           C.         The vesting provisions shall provide 100% vesting in the
                      plan upon an Employee's completion of 5 years of credited
                      service. Any pension payment will be deferred until age
                      65.

           D.         No requirement exists for Company consent to early
                      retirement.

           E.         Employees receiving a monthly disability benefit under the
                      provisions of the plan shall be paid under the same
                      benefit both before and after age 65.

2.         The Company will provide a 401-K, Retirement Security Plan, to all
           Bargaining Unit Employees. The maximum Employee contribution will be
           15% of the employee's pay. The Company will match the employee's
           contribution at the rate of 25% for each one percent contribution up
           to a maximum of 4% Employee contribution.

                                       59
<PAGE>
                                   APPENDIX 5
                         CONTINUOUS IMPROVEMENT PROCESS

The Company and the Union agree to jointly support a proactive Productivity
Improvement Process, the goal of which is to improve all Company work practices
and methods in order to eliminate inefficiencies and reduce the cost of
performing work. This will allow the Company to be more competitive in the
regional and world marketplaces.

Therefore, in recognition that productivity improvement is an ongoing process,
there shall be established a Labor/Management Productivity Improvement
Committee. The Committee shall be comprised of a maximum of four (4)
representatives from the Union and four representatives from the Company. The
committee shall meet at times and dates mutually acceptable, but in no case,
less than once a month.

The goal of the Committee shall be to improve the productivity of the Company's
workforce. In order to accomplish this, the Committee shall be empowered to
negotiate productivity improvements, implement these productivity improvements,
establish criteria for measuring the effectiveness of these productivity
improvements, establish trial periods, as necessary, for these productivity
improvements and all other productivity improvement functions that are mutually
agreed to by the Committee.

In order to further this productivity improvement process, the Company and the
Union agree that the Company must organize, manage and perform all jobs in the
most efficient manner. Therefore, to help support the achievement of improving
the productivity of the Company, the following is agreed to:

COMPOSITE CREWS

The Union and the Company recognize the need for the Company to organize jobs on
a composite crew basis, thereby improving efficiency, reducing costs and standby
time and increasing the Company's competitive position in the industry. The
parties agree to the use of Composite Crews where such crews will reduce the
overall cost of performing work. Composite Crews shall be defined as crews
comprised of traditional craft members who will be called upon to work without
regard to their specific craft jurisdiction to accomplish the project.

Situations which lend themselves to the use of Composite Crews include: ship
alterations which require multi-craft integrations, shafting removals,
integrated outfitting, and work situations such as repetitive operations,
small/short duration or remote location jobs on a vessel. These examples are not
all-inclusive of the situations intended by the applications of this agreement.

In the process of evaluation, each job may be assigned to a lead craft
supervisor for supervising and organizing the work. It will be the
responsibility of the supervisor to meet budgets and schedules, and to direct
composite teams in the completion of the jobs.

                                       60
<PAGE>
MULTI-CRAFT ASSIGNMENTS

During the life of this Agreement, the Company shall have the right to train and
assign Employees across job classification and shop lines when the Company
determines that to do so would improve efficiency or reduce costs and/or standby
time. Such cross-training and assignment shall involve only the following
departments: Plate (01), Welding (02), Outside Machine (04), Pipe (07),
Maintenance (10), Rigging (12), Storeroom (13), and Boiler (01). The Employees
designated to work in one or more craft or job classifications shall have
proficiency in two or more skills or crafts to do so.

CRAFT ASSIST

The parties agree to the principles and program of craft assistance. It is the
intent of the Company to maintain the traditional craft functions within the
yard. However, it is recognized and understood that inefficiencies and standby
time are detrimental and are not desired by either party, and are to be
eliminated whenever possible.

Craft assistance shall mean an Employee of a particular craft performing or
assisting in the performance of work items not traditionally assigned to his/her
respective craft for limited durations of time Reduction of standby time shall
mean minimization of those periods of time spent waiting for another craft to
appear to perform a task that is incidental to the main task being performed and
those limited periods of time spent waiting to perform a task that is incidental
to the main task being performed.

Incidental shall be defined as work that is casual, unplanned or of less than
four (4) hours' duration.

It is in the intention and agreement of the parties to minimize standby time by
providing for the concept and reality of craft assistance.

The intent of this agreement is the elimination of standby time. Job requiring
full-time assignment will continue to be performed by traditional craft,
composite crews or multi-craft assignments made up of members of traditional
crafts.

All Employees will be expected to accept direction and work assignment in
accordance with the intent of this agreement, and from any Craft Supervisor. Any
abuse of this agreement shall be subject to the grievance procedure.

                                       61
<PAGE>
                                   APPENDIX 6
                                  MILEAGE CHART

<TABLE>
<S>                                                               <C>
           Airport                                                26
           Atlantic Cement Docks                                  11
           Cargil Grain                                            5
           Coast Guard Base                                       20
           Convoy Escort Piers                                    21
           Craney Island                                          25
           CSX Pier 14                                            40
           DTA Coal Pier/Pier 9                                   43
           D & S Piers                                            21
           Engineers Piers (Boissevain Avenue)                    12
           ESSO Oil Docks                                         20
           Elizabeth River Terminals                              10
           Fort Monroe                                            46
           Fort Norfolk (Front Street)                             8
           Fort Story                                             40
           Grain Elevator                                         21
           Great Bridge                                           24
           Gulf Oil Dock                                          10
           Lambert's Point Docks                                  12
           Little Creek Amphibious Base                           28
           Little Creek (Penn Railway)                            25
           Moon Engineering                                       16
           Naval Air Station                                      26
           N & W Coal Piers                                       18
           NOB                                                    23
           Navy Yard                                               7
           Newport News Shipyard                                  45
           NNMT                                                   44
           NIT                                                    19
           Portsmouth Marine Terminals                            14
           Norfolk Yacht Club                                     14
           Rudee Inlet                                            42
           Smith Douglass Docks                                   10
           Sinclair Oil                                           11
           South Annex                                            19
           Southgate Terminals                                    11
           St. Julian Creek                                       16
           Texas Oil Docks                                         9
           Virginia Chemical & Shelting (W. Norfolk)              26
           York Street (Atlantic Basin)                            8
           Virginia Beach                                         42
</TABLE>

                                       62<PAGE>

                                                                   Exhibit 10.11

                         COLLECTIVE BARGAINING AGREEMENT

                                     between

                           SAN FRANCISCO DRYDOCK, INC.

                                     and the

                     METAL TRADES DEPARTMENT OF THE AFL-CIO

                                       the

                   PACIFIC COAST METAL TRADES DISTRICT COUNCIL

                                       the

                         BAY CITIES METAL TRADES COUNCIL

                                     and the

                      INTERNATIONAL UNIONS SIGNATORY HERETO

EFFECTIVE: JULY 1, 2000                               TERMINATING: JUNE 30, 2002
<PAGE>
                                    AGREEMENT
                                       FOR
                              SAN FRANCISCO DRYDOCK
                          JULY 1, 2000 - JUNE 30, 2002
                                TABLE OF CONTENT

ARTICLE                          SUBJECT                                    PAGE

            MISSION STATEMENT AND DECLARATION OF PRINCIPLES....................1

ARTICLE 1.  PARTIES............................................................2

ARTICLE 2.  WARRANTY OF AUTHORITY..............................................2

ARTICLE 3.  COMPLETE AGREEMENT.................................................2

ARTICLE 4.  SCOPE OF AGREEMENT.................................................2

ARTICLE 5.  RECOGNITION........................................................3

ARTICLE 6.  JURISDICTION.......................................................3

ARTICLE 7.  UNION SECURITY.....................................................3

ARTICLE 8.  MANAGEMENT/WORKER/UNION RESPONSIBILITIES...........................4

ARTICLE 9.  BUSINESS REPRESENTATIVES & STEWARDS................................4

ARTICLE 10. SUBCONTRACTING.....................................................5

ARTICLE 11. OUT-OF-YARD, OUT-OF-TOWN WORK AND TRAVEL...........................5

ARTICLE 12. TOOLS..............................................................6

ARTICLE 13. SAFETY.............................................................6

ARTICLE 14. HIRING.............................................................7

ARTICLE 15. SENIORITY..........................................................8

ARTICLE 16. HOURS OF WORK AND SHIFTS..........................................11

ARTICLE 17. OVERTIME..........................................................14

ARTICLE 18. HEALTH, WELFARE AND PENSIONS......................................15

ARTICLE 19. WAGES SCALES AND COMPENSATION.....................................16
<PAGE>
ARTICLE 20. HOLIDAYS..........................................................20

ARTICLE 21. VACATIONS.........................................................23

ARTICLE 22. GRIEVANCES, COMPLAINTS & ARBITRATION..............................24

ARTICLE 23. SUBSTANCE ABUSE PROGRAM...........................................26

ARTICLE 24. STRIKES AND LOCKOUTS BARRED.......................................27

ARTICLE 25. SAVINGS CLAUSE....................................................27

ARTICLE 26. EFFECTIVE DATE AND DURATION OF AGREEMENT..........................27

ARTICLE 27. EVALUATION........................................................28

ARTICLE 28. TRAINING..........................................................28

ARTICLE 29. LABOR MANAGEMENT COMMITTEE........................................30

            SCHEDULE "A"......................................................31

            SCHEDULE "B"......................................................31

            NOTES TO SCHEDULES "A" AND "B"....................................31

                                       ii
<PAGE>
                 MISSION STATEMENT AND DECLARATION OF PRINCIPLES

Our joint mission is to increase market share to sustain profitable union
shipyards on the West Coast. We will perform quality work at competitive prices
in a timely manner while providing jobs earning family wages and benefits. All
work will be performed safely in the most efficient manner with the lowest
overall cost.

         Declaration of Principles

         1.       Traditional craft jurisdiction will remain intact by
                  guaranteeing the maintenance of historical craft work force
                  percentages in the yard.

         2.       Traditional work practices cannot stay the same if we are to
                  survive.

         3.       All skills and abilities of all employees will be utilized to
                  perform the available work safely in the most efficient
                  manner.

         4.       Safety will be improved to enhance the overall health and
                  viability of the shipyard and its workforce.

         5.       Wages will provide rewards based on demonstrated skills and
                  performance, and opportunities will be provided to increase
                  pay through skill upgrading and training.

         6.       Market recovery agreements will be utilized where necessary to
                  increase market share and work opportunities.

         7.       A wage and benefits package will be designed to retain the
                  shipyard workforce and attract new shipyard workers.

         8.       There will be open and frank communication with the workforce.
                  Survival depends on the commitment and the involvement of all
                  parties.

Labor and Management will continue to work together to ensure that the mission
is accomplished through the application of these principles.

                                       1
<PAGE>
ARTICLE 1. PARTIES

                  PARTIES: This Agreement is made and entered into by and
                  between San Francisco Drydock, Inc. (hereinafter referred to
                  as the "Employer") and the Metal Trades Department of the
                  AFL-CIO, the Pacific Coast Metal Trades District Council, the
                  Bay Cities Metal Trades Council and the International Unions
                  signatory hereto, (hereinafter referred to as the "Unions").

ARTICLE 2. WARRANTY OF AUTHORITY

                  WARRANTY OF AUTHORITY: The officials executing this Agreement
                  on behalf of the Employer and the Unions signatory hereto,
                  hereby warrant and guarantee that they have the authority to
                  act for, bind and collectively bargain on behalf of the
                  organizations which they represent.

ARTICLE 3. COMPLETE AGREEMENT

                  COMPLETE AGREEMENT: This Agreement shall constitute the
                  complete Agreement between the parties. There are no other
                  Agreements written or oral.

ARTICLE 4. SCOPE OF AGREEMENT

         4.1      This Agreement shall cover ail production, repair and
                  maintenance employees (hereinafter referred to as the
                  "bargaining unit") in the employ of the Employer signatory
                  hereto, and shall apply to all work and activities of the
                  Employer in connection with the construction, conversion,
                  repair or scrapping of any vessel on the Pacific Coast,
                  including but not limited to, dredges, floating drydocks,
                  offshore drilling vessels, barges, Mobil drilling platforms,
                  platforms and all component parts, plant equipment, and all
                  auxiliary equipment used in conjunction therewith, and other
                  new work as shall be mutually agreed to by the parties.

         4.2      The ship repair industry consists of work on temporary
                  projects that are for a defined and limited period.
                  Historically, both the ship repair industry and the Employer
                  have operated on a project-specific basis, and for this reason
                  employees have been, and continue to be, hired for a limited
                  duration. Therefore, the signatory parties understand and
                  agree that employment is on a project-specific basis.

         4.3      The parties agree to amend the content of this contract by
                  mutual agreement when bidding against non-union shipyards. In
                  order to initiate this process, the Employer shall give
                  written notice of a request to bargain to the Bay Cities Metal
                  Trades Council. The notice shall be followed by a meeting
                  between the Employer and the Bay Cities Metal Trades Council,
                  in order for the Employer to explain its position. Thereafter,
                  the Employer shall give written notice of a request to bargain
                  to the Pacific Coast Metal Trades District Council.

                                       2
<PAGE>
ARTICLE 5. RECOGNITION

         5.1      The Employer recognizes the Unions as set forth in ARTICLE 1.
                  PARTIES and signatories hereto as the sole collective
                  bargaining agents for all of their employees engaged in work
                  covered by ARTICLE 4. SCOPE OF AGREEMENT.

         5.2      The Employer recognizes the IAM & AW as the sole and exclusive
                  representatives as certified by NLRB Case No. 20-RC-1275.

         5.3      This Agreement shall cover all electrical production, repair
                  and maintenance employees within the bargaining unit (as
                  defined in NLRB Case No. 20-RC-2157 dated March 4, 1966). The
                  Employer recognizes the I.B.E.W as the sole and exclusive
                  representative for all employees as defined in the
                  aforementioned NLRB Case.

         5.4      The Employer, pursuant to the decision of the NLRB in Case No.
                  20-RC-1327, recognizes the Northern California Carpenters
                  Regional Council, and the affiliated Local Union No. 2236 of
                  the United Brotherhood of Carpenters and Joiners of America as
                  the sole and exclusive bargaining agent for all employees who
                  are covered under their jurisdiction.

ARTICLE 6. JURISDICTION

         6.1      Traditional craft jurisdiction shall remain as established
                  between the crafts. Issues regarding traditional craft
                  jurisdiction between the unions shall be resolved exclusively
                  through the Metal Trades Department Jurisdictional Policy.
                  However, during the term of this Agreement, jurisdiction and
                  past practices shall be relaxed to allow for all skills and
                  abilities of all employees to be utilized to perform the
                  available work safely in the most efficient manner.

         6.2      Labor and Management shall establish initial percentages of
                  work by craft and monitor these percentages over the course of
                  the Agreement. Craft percentages will be reviewed locally on a
                  semi-annual basis in order to adjust to changing conditions.

ARTICLE 7. UNION SECURITY

         7.1      Employees included in the Bargaining Unit covered by this
                  Agreement who are members of their respective Union as of the
                  effective date of this Agreement, shall as a condition of
                  continued employment maintain their membership in the Union.

         7.2      Employees included in the Bargaining Unit covered by this
                  Agreement who are not members of the respective Union as of
                  the effective date of this Agreement, shall apply for
                  membership in said Union on the thirty-first (31st) day after
                  such

                                       3
<PAGE>
                  effective date, and all employees who are accepted into
                  membership in the Union shall maintain their membership in the
                  Union as a condition of employment.

         7.3      Employees hired after the effective date of this Agreement,
                  shall apply for membership in the respective Union on the
                  thirty-first (31st) day following the beginning of such
                  employment, and all employees who are accepted into membership
                  in the Union shall maintain their membership in the Union as a
                  condition of employment.

         7.4      The Employer shall, upon written request of the Local Union,
                  suspend any employee within two (2) working days after receipt
                  of such notice, who fails to tender the periodic dues and
                  initiation fees uniformly required by the Union. Thereafter,
                  the Employer shall, upon written request of the Local Union,
                  terminate such employee within two (2) working days after
                  receipt of such notice, who fails to tender the periodic dues
                  and initiation fees uniformly required by the Union as a
                  condition of acquiring or retaining membership in
                  good-standing in the Union.

ARTICLE 8. MANAGEMENT/WORKER/UNION RESPONSIBILITIES

         8.1      MANAGEMENT RESPONSIBILITIES: To provide a safe and efficient
                  working environment, expand work opportunities for the yard,
                  to train workers, and to cooperate with workers and the Unions
                  to continuously improve shipyard operations.

         8.2      WORKERS RESPONSIBILITIES: To provide a productive day's work
                  for a day's pay, participate in training to improve and
                  maintain their skills, and to cooperate with management and
                  the Unions to continuously improve shipyard operations.

         8.3      UNION RESPONSIBILITIES: To supply skilled and experienced
                  workers, train workers, recruit new workers, and to cooperate
                  with management to continuously improve shipyard operations.

ARTICLE 9. BUSINESS REPRESENTATIVES & STEWARDS

         9.1      BUSINESS REPRESENTATIVES: Business Representatives of the
                  various Unions shall have access to the shipyard and shipyard
                  shops. Such representatives shall make every effort not to
                  cause employees to neglect their work.

         9.2      SHOP STEWARDS: It is recognized by the Employer that Shop
                  Stewards are desirable for the proper administration of the
                  terms of this Agreement. The Employer also recognizes that it
                  is desirable that the person designated as Steward shall
                  receive his fair share of the work he is qualified to perform.
                  In no event shall the Employer discriminate against a Steward
                  in the matter of overtime, layoffs, or rehires, or discharge
                  him on account of the proper performance of his duties.
                  Twenty-four (24) clock hours advance notice will be given
                  individually to

                                       4
<PAGE>
                  the Steward if he is to be laid off. The Employer shall make
                  every effort to deliver such notice during regular shift
                  hours. There may be designated by each Union, one (1) Chief
                  Shop Steward on each shift who will be granted super seniority
                  during his respective term of office. Such Chief Shop Steward
                  shall have at least one (1) year of seniority and be qualified
                  to perform the work available. With regard to Unions with
                  multiple seniority lists, the Employer shall make every
                  reasonable effort, as far as practicable, to retain the Chief
                  Shop Steward regardless of his craft for the express purpose
                  of providing Union representation for the remaining employees
                  working under the jurisdiction of such Union.

ARTICLE 10. SUBCONTRACTING

         10.1     While it is the intent of the Employer to have all available
                  work performed by its employees, the Employer retains the
                  right to subcontract work. A permanent committee will be
                  formed consisting of labor and management to investigate how
                  to increase the amount of available work which is performed by
                  the employees of the shipyard.

         10.2     In the event that the Employer subcontracts work within the
                  port and connected navigable waterways, the subcontractor
                  shall pay wages and benefits under this Agreement or monetary
                  equivalents thereof.

         10.3     The Employer will assist in the enforcement of this Article.

ARTICLE 11. OUT-OF-YARD, OUT-OF-TOWN WORK AND TRAVEL

         11.1     OUT-OF-TOWN WORK: Travel time shall be paid for at the
                  applicable rate provided under the contract, up to a maximum
                  eight (8) hours per day. The Company will pay coach class
                  transportation and lodging. Lodging will be of the minimum
                  standard established by the American Automobile Association.
                  An allowance shall be paid by the Employer of thirty-five
                  dollars ($35.00) per day for costs associated with meals.

         11.2     NEARBY OUT-OF-YARD WORK: If employees are required to report
                  to a job site at the beginning of their shift within a radius
                  of forty-five (45) miles from the yard, the Employer will at
                  the request of the employee(s) provide courtesy transportation
                  to such job site on the employee's time.

         11.3     TRIAL TRIPS AND WORK AT SEA:

                  (A)      When employees are required to work at sea or are
                           assigned to vessels on trial trips, or vessels
                           anchored offshore, they shall receive regular shift
                           pay, meal and room accommodations when necessary.

                                       5
<PAGE>
                  (B)      If employees are required to work or stand-by outside
                           of the regular shift hours or on the sixth (6th) or
                           seventh (7th) day of an employee's normal work week
                           and holidays, they shall receive the established
                           overtime rate as defined in ARTICLE 17.

                  (C)      When employees are required to work at sea or are
                           assigned to vessels on trial trips, or vessels
                           anchored offshore, they shall be guaranteed a minimum
                           of either (8) hours pay at the straight-time rate for
                           each twenty-four (24) hour period. In addition they
                           shall receive a guaranteed captive pay allowance of
                           thirty-five dollars ($35.00) for each twenty-four
                           (24) hour period.

ARTICLE 12. TOOLS

         12.1     Employees will be furnished tools. They shall use all
                  reasonable care in the use of tools and return them to the
                  custody of the Employer when no longer used. Employees shall
                  have sufficient time, prior to the end of each shift, to put
                  away tools on the Employer's time. Determination of sufficient
                  time shall be at the Employer's discretion, but shall be not
                  less than ten (10) minutes. The Employer has the right to take
                  action against those employees who misuse property supplied to
                  them by the Employer.

         12.2     Inside and Outside Machinist and Sheetmetal workers who supply
                  their own tools shall be compensated at fifteen cents ($0.15)
                  per hour. This will continue for the duration of this
                  Agreement.

                  (A)      Seniority employees eligible for tool pay shall
                           retain their tool pay upon rehire.

                  (B)      New hires will have their tools checked and reviewed
                           by their craft designated supervisor for tool pay
                           approval.

ARTICLE 13. SAFETY

         13.1     Management, Unions, and Employees are dedicated to the concept
                  that all accidents are preventable. Accordingly, all parties
                  are committed to achieving and sustaining ZERO ACCIDENT
                  TOLERANCE through continuous improvement practices.

         13.2     Employees and Management share responsibility for the
                  prevention of injuries and illness. Management and Company
                  Supervision are required to enforce safety rules and to take
                  corrective actions to eliminate hazardous conditions and
                  practices.

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<PAGE>
         13.3     A Labor Management Safety and Health Committee shall be
                  formed. This Committee will be responsible for the formation
                  and continuous revision of a Safety and Health Program for the
                  Employer's facility.

         13.4     On a red tagged, or on all energized circuits of two hundred
                  and seventy-seven (277) volts or over, as a safety measure,
                  two (2) or more Journeymen Electricians must work together,
                  except for testing or replacing fuses or when the electrical
                  system has been locked out and tagged out by qualified
                  personnel.

ARTICLE 14. HIRING

         14.1     When additional employees are required, the Employer will
                  notify the appropriate Local Union twenty-four (24) hours in
                  advance so that the Union may have a reasonable opportunity to
                  refer applicants for employment. If less than twenty-four (24)
                  hours notice is given, the Union will make every reasonable
                  effort to provide the manpower as soon as possible.

         14.2     The Employer may reject applicants referred by the Unions, but
                  will provide in writing, within two (2) working days, the
                  reasons for any rejection. The Employer may discharge any
                  employee for just and sufficient cause. The Employer agrees to
                  notify the appropriate Local Union in writing of any workers
                  not eligible for rehire and the reason(s) for same. In the
                  event that the Union disagrees with the position of the
                  Employer with respect to the appropriateness of the "not
                  eligible for rehire" letter(s) on a former employee or
                  employees, it may submit the matter to the Grievance
                  Procedure, including Arbitration, if the Parties are not able
                  to settle the matter. The "not eligible for rehire" letter(s)
                  sent to the Union will be reviewed quarterly upon the request
                  of the Union. This quarterly review upon request of the Union
                  of the "not eligible for rehire" letter(s) is not subject to
                  the Grievance Procedure.

         14.3     The Unions will not discriminate against non-union workmen in
                  referring workmen to the Employer, and the Employer will not
                  discriminate against Union members in selecting job applicants
                  referred by the Unions.

         14.4     A copy of this ARTICLE 14 shall be posted in the Employer's
                  personnel office and in the Local Union's dispatch office.

         14.5     The Employer may request any former unemployed employee by
                  name and the Unions shall refer such person after compliance
                  with the provisions set forth in ARTICLE 15. SENIORITY. The
                  Employer will provide proof of former employment of such
                  person if requested by the Union and in the case of the
                  I.B.E.W., the Employer may request any unemployed workman by
                  name and the Union shall refer such workman provided such
                  workman has been in the employ of the Employer within the
                  previous thirty (30) days, provided further, that such named
                  workman must have been employed by the Employer for a minimum
                  of thirty

                                       7
<PAGE>
                  (30) days within the last ninety (90) days immediately
                  preceding termination by the Employer.

         14.6     If the Employer hires employees other than those referred by
                  the Unions, the Employer shall advise the appropriate Local
                  Union within two (2) working days after such person is hired,
                  as to the name, address, social security number, date of hire,
                  classification, and rate of pay of such employee. The same
                  information shall be furnished in writing by the Employer to
                  the appropriate Local Union within forty-eight (48) hours
                  after the termination of such employee.

         14.7     The Unions and Employer agree to hold each of the other
                  Parties signatory hereto harmless from any money damages and
                  penalties assessed against them by any Government Agency or
                  court of law because of any charge of unfair labor practice or
                  act, where such practice or act was approximately or solely
                  caused by any one of the individual Unions or Employer.

         14.8     NON-DISCRIMINATION: The Employer and the Unions agree that
                  there will be no discrimination in employment because of race,
                  creed, color, national origin, age, sex or handicap, as
                  defined by Federal and State Laws. Nor shall there be any
                  discrimination of disabled veterans or veterans of the Vietnam
                  era. In referring to the employees in this Agreement, the
                  masculine gender is used for convenience only, and shall refer
                  to both males and females. Compliance with State and/or
                  Federal Laws shall not be considered discrimination under this
                  sub-section.

ARTICLE 15. SENIORITY

         15.1     For the purpose of layoff and recall, the principle of
                  seniority is hereby established for employees in the
                  bargaining unit, with the exception of the I.B.E.W., and
                  SCHEDULE "B" employees.

         15.2     Seniority shall be established after an employee has worked in
                  an established represented classification for a period of
                  ninety (90) cumulative working days within a six (6) month
                  period. Any employee who acquired seniority prior to the
                  effective date of this Agreement shall retain the seniority
                  date currently assigned. Any non-seniority employee hired or
                  rehired after the effective date of this Agreement shall
                  acquire seniority in accordance with this paragraph. There
                  shall be one (1) yard-wide seniority list for utility workers.

                  FOR EXAMPLE: If any employee starts in January, he has until
                  the end of June to qualify for seniority. If at the end of
                  June he has not qualified for seniority, then the six (6)
                  month period is extended to July, and the month of January is
                  dropped.

         15.3     An employee's seniority under this Article shall be terminated
                  under the following conditions:

                  (A)      If the employee is discharged for cause.

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<PAGE>
                  (B)      If the employee quits.

                  (C)      If the employee is laid off for lack of work from the
                           Employer's active payroll for a period of one (1)
                           year.

                  (D)      If an employee is absent for three (3) or more
                           consecutive work days without notification to the
                           Employer and furnishing no justifiable reason for
                           such absence shall be considered to have voluntarily
                           terminated his employment. Exceptional cases will be
                           handled on their merit. Employees on
                           employer-approved leave of absence or industrial
                           injury shall not be subject to this provision.

                  (E)      An employee on employer-approved sick leave or
                           industrial injury at the time of lay-off for lack of
                           work shall be recalled according to his respective
                           seniority recall eligibility, and if still unable to
                           return to work shall be returned to the employer's
                           sick leave or industrial injury status.

                  (F)      If an employee fails to report to work at the time
                           specified by the Employer or within forty-eight (48)
                           hours (Saturdays, Sundays and holidays excluded) of
                           an "Official Seniority Recall".

                        1.    The Employer will place his recall order with the
                              Union, naming employees eligible to be recalled
                              for such order by Seniority List. The Employer
                              shall at the time of placing such order send the
                              "Official Notice of Recall" to such eligible
                              employee in the manner covered in Item 4. below.
                              Upon receipt of such "Official Notice of Recall"
                              the employee must report for work within
                              forty-eight (48) hours or suffer loss of
                              seniority.

                        2.    The Union shall make every reasonable effort to
                              notify the employee by telephone of his recall and
                              time to report to the Employer.

                        3.    Employees contacted by the Union shall make every
                              reasonable effort to report to work at the time
                              specified by the Employer.

                        4.    A list of those employees not contacted by the
                              Union, and those who inform the Union that they
                              are not answering the recall, shall be given to
                              the Employer within twenty-four (24) hours after
                              the Union receives the recall order.

                                    The Employer shall then notify the employee
                                    (unless "Official Notice of Recall" is sent
                                    under Item (1) above) by Certified or
                                    Registered letter to the employee's last
                                    address on record. The Employer shall notify
                                    the Union, in writing, within two (2)
                                    working days of receipt of an unacknowledged
                                    letter. It is the employee's personal
                                    responsibility to maintain a current address

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<PAGE>
                                    and telephone number with the Employer and
                                    the Union. Upon receipt of such "Official
                                    Notice of Recall", the employee must report
                                    for work within forty-eight (48) hours or
                                    suffer loss of seniority. Individual problem
                                    cases shall be handled on their merit by the
                                    Employer and the Union.

         15.4     Loss of seniority shall not apply to recall for jobs of less
                  than seven (7) working days duration starting on the first day
                  following the placing of the order at the Union Hall for
                  employee(s).

                  (A)      The Employer has the responsibility, under ARTICLE
                           15.3 (F) 1, to call the Union Hall for employees with
                           seniority for jobs regardless of duration.

                  (B)      The provision under ARTICLE 15.4 is only to give the
                           right to the employee with seniority to reject a job
                           offer of less than seven (7) days. Further, there is
                           no guarantee of pay for days not worked.

                  (C)      The Employer can call employees for more than one (1)
                           job in a seven (7) day period or less.

                  (D)      If the job is not completed within the seven (7)
                           working days' duration and needs to be extended from
                           one (1) to three (3) working days beyond the seven
                           (7) day duration, the Employer is not required to
                           call seniority employees who originally rejected the
                           initial call back for that period of time.

         15.5     The Employer shall be entitled to retain Supervisors and
                  classifications above Supervisor paid on an hourly rate
                  without regard to seniority. Supervisors paid on an hourly
                  rate will be laid off and recalled to work according to
                  Journeyman Seniority if he is not working in a supervisory
                  capacity.

         15.6     Seniority shall apply to the classifications of the Craft or
                  Union as set forth in this Agreement, and other such
                  classifications as may be agreed upon by the Employer and the
                  appropriate Union.

         15.7     On layoffs and recalls in any classification or agreed
                  classification, the following factors shall apply:

                  (A)      Length of continuous seniority with the Employer in
                           the classification or agreed classification.

                  (B)      Demonstrated skill and ability to perform the work to
                           be done in the classification or agreed
                           classification. Where factor (B) is equal between
                           employees to be laid off and recalled, then factor
                           (A) shall prevail.

                                       10
<PAGE>
         15.8     Employees who are laid off in accordance with ARTICLE 15.7
                  shall be recalled to work in inverse order of layoff, provided
                  the employee is qualified to perform the work within the
                  classification or agreed classification.

         15.9     Employees promoted to any higher classification or to
                  Supervisor paid on an hourly basis shall continue to accrue
                  seniority in the classification from which they are promoted
                  during the time they serve in such capacity. Employees
                  promoted to jobs outside the bargaining unit shall retain such
                  seniority as they had in the classification from which they
                  were promoted as of the day of the promotion. There will be no
                  seniority accrual while out of the bargaining unit.

         15.10    The Employer shall furnish a current Seniority List on a
                  monthly basis to each appropriate Union. Such Seniority List
                  shall designate foremen or the immediate classifications above
                  leading man and will be posted in the office of the Union(s)
                  and the Employer, and it shall be the responsibility of the
                  employee to review such list as to his individual seniority
                  status.

                  No employee shall have seniority and all its rights and
                  benefits except as follows:

                           a)       For the purpose of layoff and recall,
                                    seniority shall be effective on the
                                    fourteenth (14th) calendar day from the date
                                    the employee worked ". . . ninety (90)
                                    cumulative working days within a six (6)
                                    month period."

                           b)       For the purpose of eligibility for the
                                    seniority provisions for holiday pay
                                    pursuant to ARTICLE 20. HOLIDAYS,
                                    eligibility for accrual of vacation pay
                                    pursuant to ARTICLE 21. VACATIONS, and
                                    eligibility for jury pay pursuant to ARTICLE
                                    19.4. JURY DUTY, seniority shall be
                                    effective on the day after the employee
                                    worked ". . .ninety (90) cumulative working
                                    days within a six (6) month period."

         15.11    In addition to employees retained by skill and ability for
                  available work, the Employer may designate key employees on
                  each seniority list at a ratio of 1:10, with a minimum of two
                  (2) and a maximum of four (4) per seniority list. For Unions
                  with multiple Seniority Lists, no more than ten (10) key
                  employees per union will be permitted. Key employees may be
                  retained and recalled out of seniority. The local union and
                  Employer will agree to accommodate retention of additional key
                  employees who have unique qualifications.

ARTICLE 16. HOURS OF WORK AND SHIFTS

         16.1     HOURS OF WORK: Forty (40) hours shall constitute a work week,
                  eight (8) hours a day, five (5) days a week, Monday to through
                  Friday inclusive, starting between the hours of 6:00 A.M. to
                  8:00 A.M. and ending between the hours of 2:30 P.M. to 4:30
                  P.M. By mutual agreement between the Employer and the Bay
                  Cities

                                       11
<PAGE>
                  Metal Trades Council, starting time may be adjusted within the
                  above-stated times. 16.2 SHIFTS: Shift work shall be permitted
                  in all classifications on the following basis, without
                  restrictions.

                  (A)      FIRST SHIFT: An eight and one-half (8-1/2) hour
                           period less thirty (30) minutes for meals on the
                           employee's time, starting between the hours of 6:00
                           A.M. to 8:00 A.M. and ending between the hours of
                           2:30 P.M. to 4:30 P.M. Pay for a full shift period
                           shall be a sum equivalent to eight (8) times the
                           employee's regular hourly rate with no shift premium.

                  (B)      SECOND SHIFT: An eight and one-half (8-1/2) hour
                           period less thirty (30) minutes for meals on the
                           employee's time, starting between the hours 2:30 P.M.
                           to 4:30 P.M. and ending between the hours of 11:00
                           P.M. to 1:00 A.M. Pay for a full shift period shall
                           be a sum equivalent to eight (8) times the employee's
                           regular hourly rate plus one dollar ($1.00) for each
                           hour worked.

                  (C)      THIRD SHIFT: An eight and one-half (8-1/2) hour
                           period less thirty (30) minutes for meals on the
                           employee's time, starting between the hours of 11:00
                           P.M. to 1:00 A.M. and ending between the hours of
                           6:30 A.M. and 8:30 A.M. pay for a full shift shall be
                           a sum equivalent to eight (8) times the employee's
                           regular hourly rate plus one dollar ($1.00) for each
                           hour worked.

                  (D)      The signatory Parties recognize that shift work by
                           employees may from time to time create undue
                           hardships necessitating employee requests to change
                           shifts. The Employer agrees that consideration of
                           legitimate requests for shift transfers promotes good
                           employee relations and is a good management policy.
                           Therefore, the Employer agrees to consider all
                           reasonable requests by employees for shift transfers
                           for such reasons as marital problems, schooling,
                           childcare problems, etc. However, the signatory
                           Parties recognize that the assignment of work to
                           employees, including the shift on which employees
                           perform their work, shall be at the sole discretion
                           of the Employer. The Employer agrees that shift
                           placement and shift transfers shall not be done for
                           punitive purposes.

         16.3     In the event operating conditions should require the
                  adaptation or modification of hours apart from the regular
                  shifts outlined under ARTICLE 16.2, the affected Union(s) and
                  the Employer agree to discuss the situation, and if required
                  may modify work hours, providing the terms are mutually
                  acceptable.

         16.4     The regularly established starting time of the day shift shall
                  be recognized as the beginning of the twenty-four (24) hour
                  work day period. When irregular or broken shifts are worked,
                  overtime rates shall apply before the regular starting

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<PAGE>
                  time and after the regular quitting time on the shift on which
                  the employee is regularly employed, provided the employee has
                  satisfied the provisions of ARTICLE 17.1.

         16.5     Employees transferred from one shift to another, unless
                  relieved from work at least seven and one-half (7-1/2) hours
                  before starting their new shift, shall be paid at the
                  applicable overtime rate for the first such shift worked.

         16.6     No employee shall be transferred from his regular assigned
                  shift to another shift more than once in a work week; however,
                  he may be returned to his regular assigned shift. This shall
                  not apply in an extreme emergency or where there is a shortage
                  of manpower. Any violation of this ARTICLE 16.6 shall entitle
                  the employee to a time and one-half (1-1/2) wage rate for the
                  first such shift worked.

         16.7     STARTING AND QUITTING TIMES: The signatory Parties recognize
                  that for the Employer to be competitive, it is critical that
                  employee maximize their actual working time on the job. It is
                  further recognized that the historical abuse of time at the
                  shift start, lunch breaks, and shift end, constitutes a
                  significant productivity problem that must be corrected in
                  order to maximize employee working time on the job. Therefore,
                  the principle of eight (8) hours pay for eight (8) hours work
                  on the job is hereby established within the following
                  guidelines:

                  (A)      When the whistle signaling the start of the shift
                           sounds, all employees shall be at their designated
                           reporting site ready to begin work. Any employee not
                           at the designated reporting site ready to begin work
                           when the shift starts shall not be paid until the
                           employee is at the designated reporting site ready
                           for work. In addition, the employee shall be
                           considered tardy for work and will be subject to
                           discipline pursuant to the Employer's Tardiness
                           Policy.

                  (B)      Employees shall remain at their work site performing
                           their assigned work function until the whistle sounds
                           signaling clean-up time prior to lunch. This whistle
                           shall sound five (5) minutes prior to lunch. Any
                           employee who violates this requirement shall be
                           subject to disciplinary action.

                  (C)      Employees shall be required, when the whistle sounds
                           signaling the end of the lunch break, to proceed
                           directly to their work site. This means when the
                           lunch period has ended, employees should have already
                           stored, cleaned up or otherwise disposed of their
                           lunch material. Employees who fail to go directly to
                           their work site, or fail to report to their work site
                           in a reasonable time shall be docked accordingly. In
                           addition, the employee shall be considered tardy for
                           work and subject to discipline pursuant to the
                           Employer's Tardiness Policy.

                  (D)      Employees shall remain at their work site performing
                           their assigned work function until the whistle sounds
                           signaling clean-up time prior to the end

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<PAGE>
                           of the shift. This whistle shall sound ten (10)
                           minutes prior to the end of the shift. Any employee
                           who violates their requirement shall be subject to
                           disciplinary action.

ARTICLE 17. OVERTIME

         17.1     Overtime shall be paid at the rate of one-and-one-half (1-1/2)
                  times the employee's regular hourly rate of pay as set forth
                  in SCHEDULES "A" AND "B" of this Agreement for all hours
                  worked in excess of eight (8) hours, up to twelve (12) hours,
                  Monday through Friday, and all hours worked on Saturday and
                  Sunday, up to twelve (12) hours. Double the employee's
                  established hourly rate of pay shall be paid for all hours
                  worked in excess of twelve (12) hours on any day and all hours
                  worked on Holidays.

         17.2     Overtime is not mandatory, but if the Employer has an overtime
                  requirement, the Employer has the right to fill that need. If
                  this overtime requirement cannot be met by volunteers,
                  seniority will be asked from the top down. If the requirement
                  is still not met, inverse seniority will be used to meet the
                  need at which point it is mandatory.

         17.3     A lunch period shall be allowed on the Employer's time at the
                  end of a regular shift, if the employees are required to work
                  overtime in excess of two (2) hours. A lunch period shall be
                  allowed on the Employer's time when an employee is required to
                  work more than two (2) hours before his regular shift and
                  continues working into his regular shift thereafter.

         17.4     Employees working overtime shall receive a lunch period of
                  thirty (30) minutes on the Employer's time every four (4)
                  hours.

                  (A)      The foregoing shall not apply to the first lunch
                           period on Saturday, Sunday and holidays.

                  (B)      An employee required to work during his regular lunch
                           period shall receive the established overtime rate
                           for such lunch period and shall thereafter be allowed
                           a reasonable opportunity to eat his lunch on the
                           Employer's time. This provision shall not apply to
                           drydock crews where at least one (1) hour notice is
                           given prior to the regular lunch period. An employee
                           that is not allowed a reasonable opportunity to eat
                           lunch during his lunch period shall be paid an
                           additional one-half (1/2) hour at the rate applicable
                           to the first working hour immediately following the
                           lunch period.

                  (C)      The applicable overtime rate for non-worked lunch
                           periods on the Employer's time shall be
                           time-and-one-half (1-1/2) unless the employee is
                           receiving double time prior to the lunch period. In
                           that case, double time will be the applicable rate.

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<PAGE>
         17.5     Employees required to work overtime past the quitting time of
                  their regular shift, unless relieved from work at least
                  seven-and-one-half (7-1/2) hours before starting to work on
                  their next regular shift, shall be paid time-and-one-half
                  (1-1/2) for such shift.

         17.6     If an employee working on the "first shift" is required to
                  return to work for a full "third shift" within the same
                  twenty-four (24) hour work day period, he shall be paid the
                  applicable overtime rate as if it were a continuation of the
                  "first shift".

                  The twenty-four (24) hour work day period mentioned herein
                  shall be the twenty-four (24) hour period commencing with the
                  starting time of the "first shift". The term "first shift"
                  referred to herein shall be interpreted to mean ARTICLE 16.2
                  (A) of this Agreement.

         17.7     Foremen and immediate supervisors above leading men, leading
                  men and mechanics from other crews, cannot be used to complete
                  a job or work assignment which continues into or requires
                  overtime work. The intent of the Parties signatory to this
                  Agreement is to continue to use foremen or immediate
                  supervisors above leading men, leading men and mechanics
                  already assigned in the completion of the work which extends
                  into an overtime period, except in emergency situations.

ARTICLE 18. HEALTH, WELFARE AND PENSIONS

         18.1     EFFECTIVE JULY 1, 2000, the Employer shall pay four dollars
                  and three cents ($4.03) per hour for all actual hours worked
                  to the applicable jointly administered Trust(s) as allocated
                  by the individual Local Unions. Each Local Union shall mail a
                  copy of that Local Union's allocation of hourly contributions
                  to the Employer and Fund Manager of each jointly administered
                  Trust(s), to which the Local Union is allocating
                  contributions. The twenty-five ($0.25) cents benefit increase
                  negotiated effective July 1, 2000 shall be contributed into
                  the Pacific Coast Shipyards Metal Trades Trust Fund.

         18.2     EFFECTIVE JULY 1, 2001, the Employer shall pay four dollars
                  and eighteen cents ($4.18) per hour for all actual hours
                  worked to the applicable jointly administered Trust(s) as
                  allocated by the individual Local Unions. Each Local Union
                  shall mail a copy of that Local Union's allocation of hourly
                  contributions to the Employer and Fund Manager of each jointly
                  administered Trust(s), to which the Local Union is allocating
                  contributions. The fifteen ($0.15) cents benefit increase
                  negotiated effective July 1, 2001 shall be contributed into
                  the Pacific Coast Shipyards Metal Trades Trust Fund.

         18.3     An individual Local Union may reallocate money from its
                  present employees' wages into an existing Pension and/or
                  Health and Welfare Fringe Benefit Trust(s), by the Pacific
                  Coast Metal Trades District Council serving written notice
                  upon the Employer. The change in allocation for the Trust(s)
                  involved will be effective on

                                       15
<PAGE>
                  the first of the month after receipt of a minimum of thirty
                  (30) days written notice. This reallocation of wages must be
                  uniform for all employees represented by the individual Local
                  Union. On the effective date of wages being reallocated to
                  fringe benefit money, the reallocated wages will thereafter be
                  considered fringe benefit money and not wages for the purpose
                  of any applicable provisions in the Collective Bargaining
                  Agreement and for any applicable Federal and/or State
                  statutory requirements.

         18.4     FAILURE TO MAKE PAYMENTS. Upon failure of the Employer
                  signatory to this Agreement to make any of the payments
                  required by this Article, the Pacific Coast Metal Trades
                  District Council may authorize the Local Unions to undertake
                  economic action against such defaulting Employer to enforce
                  prompt payment, and such action shall not be deemed to be a
                  violation of this Agreement or any of the provisions thereof.

         18.5     It is the joint responsibility of the Employer and the Unions,
                  signatory to this Agreement, to instruct the Trustees of the
                  applicable Pension Plans to take appropriate action to
                  eliminate any unfunded liability that currently exists or
                  unfunded liability that develops during the term of this
                  Agreement as soon as practical.

         18.6     There will be no contributions made to a pension trust on
                  behalf of a trainee until he has completed five hundred (500)
                  hours. Exception shall be made for this article when: a) the
                  Employer is required by a specific Pension Fund to make
                  pension contributions, or b) the Employee is already
                  participating in the Pension Plan.

ARTICLE 19. WAGES SCALES AND COMPENSATION

         19.1     The Employer agrees to pay to its employees, and the Unions
                  agree that their members employed by the Employer will accept
                  the wage scales for the various classifications set forth and
                  contained in SCHEDULES "A" AND "B" of this Agreement.

         19.2     The wage rates established within SCHEDULES "A" AND "B" of
                  this Agreement are minimum rates only, and shall not prohibit
                  the Employer from paying a premium wage rate to any of its
                  employees. Where an employee is receiving a premium wage rate
                  at the time a general increase becomes effective pursuant to
                  SCHEDULES "A" AND "B", such employees shall receive such
                  general increase. The granting of a premium wage rate to any
                  employee and the elimination of such premium wage rate, shall
                  remain the sole prerogative of the Employer. However, this
                  section shall not be used to avoid payment of a negotiated
                  wage increase to premium employees.

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<PAGE>
         19.3     PAY DAY: Pay day shall be weekly and in no case shall more
                  than one (1) week's pay be held back. Employees shall be paid
                  prior to the end of their assigned shift, exclusive of the
                  lunch period.

                  (A)      It is the intent of the Employer, as far as
                           practicable, that in case an employee is laid off, is
                           discharged or voluntarily terminates his employment,
                           he shall receive his full pay upon separation of
                           employment, but in no case later than two (2) working
                           days from the day of separation.

                  (B)      It is the intent of the Employer that any error in an
                           employee's paycheck shall be corrected by the
                           Employer within two (2) working days from the time
                           the error was brought to the Employer's attention.

                  (C)      The Employer, upon the request of an employee, shall
                           mail the employee's final paycheck to the address
                           stated by the employee, provided that the employee
                           has returned or accounted for all employer-issued
                           property.

                  (D)      Second shift employees are to be paid on Thursday
                           each week, and the third shift employees no later
                           than Friday morning.

                  (E)      Employees laid off shall be given one-half (1/2)
                           hour's time, prior to the time of layoff, to allow
                           for turning in company tools and equipment, cleaning
                           out lockers, collecting personal belongings, etc.
                           This shall not be interpreted to require, on the part
                           of the Employer, the payment of overtime due to
                           failure to comply with the above.

                  (F)      It is the intent of the Employer, as far as
                           practicable, that when an employee is scheduled for a
                           layoff during the weekend, he shall be paid at the
                           time of his layoff through the preceding Friday. If
                           requested, the paycheck for the additional hours
                           worked on the weekend will be mailed to the
                           employee's last known address, provided the employee
                           has fully complied with the provisions of the
                           following paragraph.

                  All employees will be responsible for turning in or accounting
                  for all employer-issued tools and equipment at the time of
                  their layoff. In order to facilitate this when tool room
                  personnel are not available, the Employer will utilize
                  alternative means to collect tools and equipment from
                  employees. These tools and equipment will then be turned into
                  the tool room. Employees that are not allowed to turn in or
                  account for employer-issued tools and equipment at the time of
                  their layoff, shall be paid two (2) hours at the straight time
                  rate to accomplish this process.

         19.4     JURY DUTY: An employee having seniority and on the active
                  payroll, having been regularly employed and required by law to
                  serve as a juror shall upon satisfactory proof to the Employer
                  of such service rendered, be reimbursed by the Employer

                                       17
<PAGE>
                  for his work time lost on the basis of the difference between
                  his straight-time day shift hourly job classification rate and
                  his jury pay (excluding travel allowance), provided, however,
                  such Employer reimbursement shall not be applicable to any
                  period of time during which said employee juror did not
                  perform work for the Employer other than when prevented from
                  doing so solely because of said jury service, and further
                  provided that such Employer reimbursement is, in no event, to
                  be applicable for a period of more than eight (8) hours in a
                  standard work day, nor more than five (5) days in a standard
                  work week.

                  In applying the foregoing, it is understood that if an
                  employee is called for jury service, responds to the call and
                  loses time, but is not accepted for service or serves and is
                  relieved there from by the middle of his work shift, the
                  employee will be reimbursed by the Employer for his work time
                  lost on the basis of the difference between his straight-time
                  day shift hourly job classification rate and his jury pay
                  (excluding travel allowance), provided he reruns to his job
                  immediately, and promptly reports these facts to the Employer,
                  provided further that if an employee works his regular shift
                  in addition to performing jury duty, he shall not be paid by
                  the Employer under the provisions of this Article.

                  (A)      For the purpose of jury pay, employees covered under
                           the I.B.E.W. shall be considered to have seniority as
                           defined under ARTICLE 15 of this Agreement.

         19.5     DIRTY WORK: Dirty Work shall be recognized by the Parties as
                  work within the shipyard industry as conditions more dirty,
                  disagreeable, or unpleasant than normal shipyard working
                  conditions.

                  It is the intent of the Parties to limit dirty work pay to
                  situations that are exceptionally dirty, relative to normal
                  shipyard work.

                  The Employer shall provide, at no cost to the employee(s)
                  adequate protective clothing for all employees assigned
                  unusually dirty work.

                  Employees required to work where unusually dirty conditions
                  exist relative to normal shipyard conditions in tanks, bilges,
                  sumps, or under floor plates where oil or water has
                  accumulated, or in boilers, uptakes or stacks, or in machinery
                  spaces where unusually dirty conditions exist, shall be paid
                  at the overtime rate for the entire period so employed, unless
                  adequate protective clothing is provided. The Employer shall
                  determine, in advance, what areas warrant dirty work pay.
                  However, if a dispute arises, a steward, a company
                  representative and a safety representative shall make the
                  determination of dirty work pay prior to work commencing.

                           HUMAN WASTE - Employees required to work in tanks, or
                           break into tanks or related wet or dry systems
                           containing human waste, shall receive one (1)
                           additional hour at straight-time pay for each hour
                           worked, and shall

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<PAGE>
                           continue to receive such penalty pay until they are
                           allowed to shower or clean up. Clean up shall be at
                           the Employer's time and shall be paid at the
                           employee's regular rate of pay for the day.

                           The Employer shall make available, at no cost to the
                           employees, proper preventative care, including, but
                           not limited to gamma globulin shots for hepatitis and
                           other diseases caused by exposure to human waste.

                           MUNITIONS WORK - Employees required to work within
                           the control boundaries of an area that has been
                           declared by the U.S. Navy, in writing, to be a
                           secured area where munitions are being handled, shall
                           be compensated at a rate of one-and-one-half times
                           the prevailing straight-time hourly wage rate. This
                           rate shall only be applicable for actual time exposed
                           to the munitions within the control boundaries.

         19.6     SUPERVISION: General Foremen, Foremen and Leading men in all
                  departments shall be selected, as far as practicable, from
                  their craft with a view to both their mechanical and
                  leadership ability, and will be classified at least at the
                  journeyman level. In addition, the immediate Supervisors above
                  the first level of supervision, when paid on an hourly basis,
                  will be selected as above. Supervisors shall be paid at least
                  one dollar and fifty cents ($1.50) per hour over their regular
                  pay rate under this Agreement.

         19.7     The signatory Parties agree that the job functions of the
                  Leading man and Foremen are key elements in the effective
                  supervision of the workforce. Because of this, the Parties
                  give full support to these Leading men and Foremen being
                  allowed to perform their job functions without outside
                  interference. To that end, the Unions agree they will not in
                  any way interfere or otherwise attempt to influence Leading
                  men either overtly or covertly in the performance of their job
                  functions.

                  Therefore, it is recognized that the job functions of Leading
                  men as members of the Bargaining Unit include, but are not
                  limited to the following:

                  (A)      Lead the workforce.

                  (B)      Recommend for consideration by management,
                           promotions, demotions, hires, layoffs, transfers,
                           etc.

                  (C)      Initiate lower levels of disciplinary action (verbal
                           warnings only).

                  (D)      Identify problem employees to management and bear
                           witness as to the problems identified.

                  (E)      Support and enforce the Employer's rules and
                           regulations including those aimed at eliminating
                           production inefficiencies.

                                       19
<PAGE>
                  This provision is not intended to limit any functions or
                  activities that Leadmen have historically performed.

                  Therefore, it is recognized that the supervisory functions of
                  Foremen as members of bargaining unit include, but are not
                  limited to, the following:

                  (A)      Supervise the workforce.

                  (B)      Recommend to management promotions, demotions, hires,
                           layoffs, transfers, disciplinary action, etc.

                  (C)      Initiate lower levels of disciplinary action (i.e.
                           verbal and written warnings).

                  (D)      Identify problem employers to management and bear
                           witness as to the problems identified.

                  (E)      Support and enforce the Employer's Rules and
                           Regulations, including those aimed at eliminating
                           production inefficiencies.

                  This provision is not intended to limit any functions or
                  activities that Foremen have historically performed.

         19.8     REPORTING PAY AND MINIMUM PAY: Employees starting a shift or
                  called and start to work after the starting time of a shift,
                  shall receive not less than one-half (1/2) a shift's pay. If
                  an employee continues to work into the second half of the
                  shift, they shall receive clock time thereafter.

                  (A)      Employees required to report to work not continuous
                           with their regular assigned shift hours, or on
                           Saturday, Sunday and Holidays, shall receive not less
                           than two (2) hours' pay at the applicable overtime
                           rate.

                  (B)      The foregoing shall not apply where an employee is
                           not put to work because of bad weather or breakdown
                           of machinery, except that this shall not be construed
                           to cover failure to have work available.

ARTICLE 20. HOLIDAYS

         20.1     The following shall be fixed, paid Holidays:

                  NEW YEAR'S DAY, PRESIDENT'S DAY, MEMORIAL DAY, INDEPENDENCE
                  DAY, LABOR DAY, THANKSGIVING DAY, THE DAY AFTER THANKSGIVING
                  DAY, CHRISTMAS DAY, THE DAY BEFORE OR THE DAY AFTER CHRISTMAS
                  DAY, THE DAY BEFORE OR THE DAY AFTER NEW YEAR'S DAY

                                       20
<PAGE>
         20.2     The following shall be a floating paid holiday:

                  EMPLOYEE'S BIRTHDAY - Time off can be deferred/floated as
                  mutually agreed between the Employer and the employee to
                  another day within a year with pay. Once the deferred Holiday
                  has been rescheduled (with ten (10) days notice), the
                  re-scheduled Holiday becomes a fixed date for that employee.

         20.3     "SENIORITY EMPLOYEES" HOLIDAY QUALIFYING CONDITIONS: An
                  employee shall receive eight (8) times the employee's regular
                  hourly rate of pay for each of the above fixed or floating
                  Holidays provided:

                  (A)      The employee has worked all of the hours required by
                           the Employer on both the regularly scheduled work day
                           prior to and the regularly scheduled work day
                           following the applicable Holiday.

                                      -OR-

                  (B)      Being laid-off for "lack of work" within ten (10)
                           regularly scheduled work days before the Holiday, and
                           is recalled to work within ten (10) regularly
                           scheduled work days after the Holiday.

         20.4     "SENIORITY"/"NON-SENIORITY" QUALIFYING CONDITIONS: The
                  employee shall receive Holiday pay in spite of absence on the
                  work day prior to or the work day following such Holiday,
                  where such absence was due to:

                  (A)      Industrial accident

                  (B)      Bonafide illness covered by a Doctor's Certificate

                  (C)      Absence approved by the Employer.

                  See ARTICLE 20.6 for limitation.

         20.5     "NON-SENIORITY" HOLIDAY QUALIFYING CONDITIONS: Employees
                  without seniority will be paid Holiday Pay if they have:

                  (A)      been in the continuous employee of the Employer for
                           thirty (30) calendar days immediately prior to each
                           Holiday and;

                  (B)      worked the day prior to and the day after the
                           Holiday.

                                       21
<PAGE>
         20.6     CLARIFICATION TO ARTICLES 20.3 (A), 20.4 AND 20.5 (B)

                  Employees will receive Holiday Pay in spite of non-compliance
                  with ARTICLES 20.3 (A), 20.4 and 20.5 (B) above, if:

                  (A)      they have been retained on "stand-by status" or "on
                           the hook" by the Employer, or if,

                  (B)      They are off due to an industrial accident that
                           occurred sometime during the five (5) regularly
                           scheduled work days prior to the Holiday, or if,

                  (C)      they are off due to a bonafide illness covered by a
                           doctor's certificate, or other evidence of illness
                           which occurred sometime during the five (5) regularly
                           scheduled work days prior to the Holiday, or if,

                  (D)      they are off for any other absence excused by the
                           Employer, providing the excused absence commenced
                           sometime within the five (5) regularly scheduled work
                           days prior to the Holiday.

         20.7     HOLIDAYS ON SATURDAY OR SUNDAY: If a Holiday set forth above
                  falls on a Saturday, the preceding Friday shall be observed as
                  the Holiday. If a Holiday set forth above falls on a Sunday,
                  the following Monday shall be observed as the Holiday.
                  Existing Holidays whose dates are changed by Congressional Law
                  shall be changed in this Article.

         20.8     HOLIDAY DURING VACATION: When a paid Holiday occurs during an
                  employee's approved Vacation period, the employee shall
                  receive Holiday pay as provided in this Article and is
                  entitled to take another day of Vacation at his discretion, if
                  arrangements to do so are made in advance with the Employer.
                  It is the intention of the Parties that earned Vacation days
                  are not to be forfeited in this situation.

         20.9     WORK ON ANY HOLIDAY: An employee who qualifies for Holiday pay
                  under ARTICLE 20.3, 20.4 AND 20.5, who works on a Holiday
                  listed under ARTICLES 20.1 and 20.2, shall be compensated in
                  accordance with the overtime provisions of this Agreement in
                  addition to such Holiday pay. An employee who does not qualify
                  for Holiday pay, but who works on any such Holiday, shall be
                  compensated in accordance with the overtime provisions of this
                  Agreement as described in ARTICLE 17.

         20.10    TARDINESS AND EARLY LEAVES: Employees' requests for early
                  leaves on the day before the Holiday or tardiness on either
                  the day before or after the Holiday shall be considered on the
                  merits of each individual case and the "Rule of
                  Reasonableness" will apply.

         20.11    LAID OFF: The term laid off shall mean actual written
                  termination by the Employer.

                                       22
<PAGE>
         20.12    "STAND-BY" OR "ON THE HOOK" STATUS: Such employees are not on
                  layoff status, as defined, but requested to stand-by for
                  recall to work, and shall be considered to be an active
                  employee of the Employer during this period.

         20.13    FAILURE TO REPORT: If an employee is scheduled to work on any
                  Holiday and fails to report for work, except where such
                  failure to report is due to one of the reasons listed in
                  ARTICLE 20.3 or 20.4 above, he shall not be entitled to
                  Holiday pay for that Holiday.

ARTICLE 21. VACATIONS

         21.1     All employees covered by this Agreement who have seniority
                  shall receive vacations with pay. For the purpose of vacation
                  pay, employees covered under the I.B.E.W. shall be considered
                  to have seniority in accordance with and as defined in ARTICLE
                  15. of this Agreement.

         21.2     COMPUTATION OF VACATION PAY: Vacation pay shall be computed at
                  the following percentages of the actual hours worked (except
                  as to second and third shifts) multiplied by the employee's
                  established straight-time hourly rate (exclusive of shift
                  premiums) being received by the employee calculated on a daily
                  basis and accumulated until the vacation is paid. Vacation pay
                  will be treated separate from other types of pay and wages for
                  the purpose of withholding taxes except in the case of
                  termination.

                  EFFECTIVE JULY 1, 2000:

                  (A)      FIRST YEAR PERIOD: Three (3%) percent as computed
                           above.

                  (B)      SECOND YEAR PERIOD: Three and one-half (3-1/2%)
                           percent as computed above.

                  (C)      THIRD YEAR PERIOD: Four (4%) percent as computed
                           above.

                  (D)      FOURTH YEAR PERIOD: Four and one-half (4-1/2%)
                           percent as computed above.

                  (E)      FIFTH YEAR PERIOD: Five (5%) percent as computed
                           above.

                  (F)      SIXTEENTH YEAR PERIOD AND THEREAFTER: Seven (7%)
                           percent as computed above.

         21.3     EFFECTIVE JULY 1, 2001 vacation pay for ten (10) years through
                  fifteen (15) years of service will be paid at five and
                  one-half (5-1/2%) percent.

         21.4     To advance from one (1) year period percentage to the next
                  higher percentage, as above provided, an employee is required
                  to accumulate one thousand (1,000) hours or more in the employ
                  of the Employer in any vacation year. Years of

                                       23
<PAGE>
                  Service need not be consecutive regardless of method of
                  termination. Time lost due to industrial accident not to
                  exceed six (6) months shall be credited at the rate of forty
                  (40) hours per week toward the minimum one thousand (1,000)
                  hours advancement requirement as described above.

         21.5     Vacation periods or vacation pay are not cumulative from year
                  to year and the vacation shall be taken at the time mutually
                  agreeable between the Employer and the employee.

         21.6     It is understood and agreed by the signatory Parties that
                  vacation pay accrued shall be paid to qualified employees upon
                  termination, unless requested otherwise by the employee.

ARTICLE 22. GRIEVANCES, COMPLAINTS & ARBITRATION

         22.1     The grievance procedure shall be as follows:

                  STEP 1. VERBAL PROCEDURE

                  No matter shall be considered a grievance until it is first
                  taken up verbally by the employee and/or the Shop Steward with
                  the General Foreman or Support Superintendent who will attempt
                  to settle the matter. If the alleged grievance is not settled
                  within two (2) working days, it shall be reduced to writing
                  and processed directly into STEP 2., at which time it is
                  considered an official grievance and subject to the time
                  limits set forth herein.

                  STEP 2. WRITTEN GRIEVANCE

                  The Shop Steward shall take up the grievance with the General
                  Foreman or Support Superintendent who will attempt to adjust
                  the grievance, and the Employer will render a decision in
                  writing within three (3) working days from the time of its
                  presentation to the General Foreman or Support Superintendent.
                  When an unsatisfactory answer is received, the grievance may
                  be referred to STEP 3. in writing. If the grievance is
                  unanswered at the expiration of three (3) working days, the
                  grievance shall automatically be referred to STEP 3.

                  STEP 3. BUSINESS REPRESENTATIVE AND MANAGEMENT

                  The Business Representative or authorized Union Representative
                  (not a Shop Steward) and a designated representative of the
                  Employer, authorized to handle such matters, shall meet within
                  five (5) working days. The Employer shall render an answer
                  within five (5) working days after such meeting. When an
                  unsatisfactory answer is received, or if the grievance is
                  unanswered within the above time limit, either party may refer
                  the grievance to the Grievance Review Committee. The parties
                  may bypass STEP 4. by mutual agreement and submit the
                  grievance to arbitration. The decision for either submission
                  to the Grievance

                                       24
<PAGE>
                  Review Committee or arbitration must be made in writing within
                  five (5) working days.

                  STEP 4. GRIEVANCE REVIEW COMMITTEE

                  There shall be a Committee known as the Grievance Review
                  Committee comprised of two (2) Employer Representatives and
                  two (2) Union Representatives. The Union and Employer
                  representatives shall be selected by the Unions and the
                  Employer respectively.

                  The Grievance Review Committee shall review the cases
                  presented to it, investigate the circumstances and facts, hear
                  testimony and question witnesses. The decision of the majority
                  of the Grievance Review Committee shall be final and binding
                  on the Employer and the Unions. Such decisions shall be
                  limited to interpretation and application of the express terms
                  of this Agreement and shall not change or add to any of its
                  terms or conditions. All decisions rendered by the Grievance
                  Review Committee shall be without prejudice or precedent value
                  whatsoever to either party. The decision shall be rendered in
                  writing within three (3) days from the time of presentation to
                  the Grievance Review Committee, and shall specify the
                  effective date of the decision.

                  STEP 5. ARBITRATION

                  (A)      Upon written request for arbitration of a grievance,
                           the Employer and the Union shall choose a mutually
                           acceptable impartial arbitrator within five (5)
                           working days.

                  (B)      In the event that agreement cannot be reached on an
                           impartial arbitrator within the time limit set forth
                           in (A) above, the Federal Mediation and Conciliation
                           Service shall be requested to submit a panel of five
                           (5) established arbitrators from the State of
                           California. Both the Employer and the Union shall
                           have the right to strike two (2) names from the
                           panel. The remaining name on the panel shall
                           automatically become the arbitrator. This selection
                           of the arbitrator shall be made within ten (10)
                           working days after receipt by the parties of the list
                           of arbitrators. The selection of an arbitrator so
                           made will be equally effective as if made directly by
                           the parties hereto.

                  (C)      The decision of the arbitrator shall be final and
                           binding on the Employer and the Union. Such decision
                           shall be limited to the interpretation and
                           application of the express terms of this Agreement
                           and shall not change or add to any of its terms and
                           conditions. In his decision, the arbitrator will
                           specify whether or not the decision is retroactive
                           and the effective date thereof.

                                       25
<PAGE>
                  (D)      Awards or settlements of grievances may or may not be
                           retroactive as the equities of each case demand, but
                           in no event shall any arbitration award be
                           retroactive beyond thirty (30) calendar days prior to
                           the date on which the grievance was first presented
                           to the Employer, unless agreed to by both parties;
                           provided, however, that this provision shall not have
                           any application to grievances pertaining to the
                           payment of either the fringe benefits provided for in
                           this Agreement or the wage scales for the various
                           classifications set forth in SCHEDULES "A" AND "B" of
                           this Agreement.

         22.2     GENERAL RULES

                  (A)      The expenses authorized and incurred by the
                           arbitrator shall be borne equally by the parties.

                  (B)      Time limits may be extended by mutual agreement
                           between the parties.

                  (C)      In the event the Union, as such, has a grievance, the
                           grievance shall be processed directly into STEP 3.

                  (D)      Any complaint, dispute or grievance not brought up,
                           or carried forward to adjustment or arbitration, as
                           provided for in this Article shall, unless the
                           parties otherwise agree, be regarded as waived.

                  (E)      All grievances must be filed within five (5) working
                           days from the date the employee, employees or the
                           Union first acquired, or by ordinary observation
                           should have acquired, knowledge of the fact or facts
                           upon which the grievance is based. No employees shall
                           refuse to work or otherwise curtail production or
                           engage in any slowdown or interfere with the
                           Employer's operation because of any complaint,
                           dispute or grievance which he may have.

                  (F)      If the Employer has any complaint, dispute or
                           grievance with any Union or any employee covered by
                           this Agreement, the Employer shall likewise avail
                           itself of any or all of the foregoing grievance
                           procedural steps.

ARTICLE 23. SUBSTANCE ABUSE PROGRAM

         23.1     The Parties are committed to a drug and alcohol free
                  workplace. The Parties recognize that substance abuse by an
                  employee performing work can have an adverse effect upon the
                  employee's ability to perform and can expose the employee,
                  fellow employees, the public and the Employer to risk. To
                  minimize this exposure, the following guidelines are
                  developed.

                  (A)      Create a work environment free from the effects of
                           employees impaired by the use of alcohol and drugs,
                           through the use of pre-hire, random, and for cause
                           testing.

                                       26
<PAGE>
                  (B)      Prohibit the unauthorized possession, use or
                           distribution of alcohol-containing beverages and
                           drugs within the work environment.

                  (C)      Provide for an assistance program for employees,
                           whose personal problems affect their ability to
                           perform their duties.

                  (D)      Comply with the provisions of the Drug Free Workplace
                           Act of 1988 and the Federal Acquisition Resolution
                           Interim Rule implemented by the Department of
                           Defense.

         23.2     There shall be a Drug and Alcohol Testing Policy, dated
                  January 25, 1999 incorporated and attached hereto as part of
                  this Agreement.

ARTICLE 24. STRIKES AND LOCKOUTS BARRED

         24.1     There shall be no lockouts on the part of the Employer nor
                  shall there be an suspension of work on the part of the
                  employees. This Agreement is a guarantee that for its duration
                  there will be neither strikes nor lockouts, and that all
                  complaints, grievances or disputes arising under its
                  provisions will be settled pursuant to its grievance
                  machinery, ARTICLE 22. "GRIEVANCES, COMPLAINTS & ARBITRATION".

ARTICLE 25. SAVINGS CLAUSE

         25.1     Should any part hereof or any provision herein contained be
                  rendered or declared invalid by reason of any existing or
                  subsequently enacted legislation or by any decree of a court
                  of competent jurisdiction, such invalidation of such part or
                  portion of this Agreement shall not invalidate the remaining
                  portions hereof provided, however, upon such invalidation the
                  Parties agree immediately to meet to negotiate such parts or
                  provisions affected. The remaining parts or provisions shall
                  remain in full force and effect.

ARTICLE 26. EFFECTIVE DATE AND DURATION OF AGREEMENT

         26.1     This Agreement shall become effective July 1, 2000 and shall
                  continue in full force and effect through June 30, 2002, and
                  shall continue thereafter from year to year unless, at least
                  sixty (60) days, but no more than ninety (90) days, prior to
                  the 30th day of June 2002 or the 30th day of June of any
                  subsequent year, either Party shall serve written notice to
                  the other of its desire to amend, modify, or terminate this
                  Agreement.

         26.2     If either Party notified the other as above provided,
                  representatives of the Employer and the Unions shall meet and
                  shall negotiate such proposed changes without unnecessary
                  delay.

         26.3     All existing practices, customs, understandings or local
                  agreements of interpretation, or other local agreements of any
                  nature whatsoever, whether

                                       27
<PAGE>
                  expressly covered by this Agreement or otherwise, will
                  continue in effect unchanged until June 30, 2002, except as
                  specifically modified as provided herein or by mutual
                  agreement between the Parties.

ARTICLE 27. EVALUATION

         27.1     An Evaluation Development Committee will be formed to
                  determine the criteria for pay levels, the methodology for
                  reviewing demonstrated skill and ability of employees at
                  various pay levels agreed to herein.

                  Each employee will be evaluated on a periodic basis as agreed.
                  New employees shall be initially evaluated by Management. The
                  Evaluation Development Committee composition shall be
                  determined by the Labor Management Committee.

         27.2     There shall be Craft Evaluation Boards that will evaluate
                  employees as determined by the Evaluation Development
                  Committee. The Craft Evaluation Boards Composition may include
                  representatives of company supervision and the workforce.
                  Craft Evaluation Boards determinations shall be made in
                  writing and dated.

         27.3     The exclusive right of appeal of any and all decisions of the
                  Craft Evaluation Boards shall be to the Appeals Board. The
                  Appeals Board composition shall be determined by the Labor
                  Management Committee. All appeals shall be made in writing,
                  shall state all the reasons for the appeal. Appeals shall be
                  submitted to the HR Department within five (5) working days of
                  the Craft Evaluation Boards decision on placement. The Appeals
                  Board shall hear the appeal within ten (10) working days of
                  receipt of the written appeal. The exclusive remedy to be
                  granted by the Craft Evaluation Board shall be either: a) to
                  affirm the Review Board decision on placement, or b) to
                  reverse the Review Board decision and grant a different
                  placement. In no event shall back pay be awarded from the time
                  of Craft Evaluation Board placement. All decisions of the
                  Appeals Board shall be final and binding on all parties.

         27.4     Either Management or the employee can request an evaluation of
                  that employee at periodic intervals, as established by the
                  local Labor Management Committee.

ARTICLE 28. TRAINING

         28.1     In order to ensure that an adequate supply of competent,
                  skilled journeymen be available, it is agreed that continuing
                  training programs be established. Each Union at the request of
                  the Employer shall participate in establishing a Joint
                  Labor/Management Training or Apprenticeship Committee
                  (hereafter for this Article called "Committee") for the
                  purpose of establishing and implementing viable marine related
                  training programs for trainees or apprentices and for
                  journeyman upgrade.

                                       28
<PAGE>
         28.2     EFFECTIVE JULY 1, 2000, Employer contributions for training
                  shall cease. Thereafter, any craft training needing funding
                  shall be funded directly by the Employer. The decision to
                  directly fund any craft training shall be at the sole
                  discretion of the Employer.

         28.3     Training money currently exists in the San Francisco Shipyards
                  Training Trust Fund. This is pooled training money without a
                  specific craft designation. No craft training program shall
                  have any specific right to the pooled training money
                  contributed on behalf of employees of a specific craft.
                  Distribution of the training money shall be at the sole
                  discretion of the Trustees based upon the overall industry
                  training needs and the specific financial needs of each
                  training program. No craft training program shall be eligible
                  for training funds unless it has an established Committee.
                  Such Committee shall be established by written agreement and
                  include the make-up and function of the Committee and the
                  general guidelines for implementation of the training
                  program(s). All requests for training funds must be made by
                  the Committee. These requests must provide appropriate
                  documentation and be signed by the Chairman or Co-Chairman.

         28.4     The Employer and the Unions agree to work with the San
                  Francisco Community in development of journeyman upgrade and
                  training programs.

         28.5     Trainees shall be fully productive. The ratio of trainees to
                  journeymen shall be no greater than 1 to 4 for each seniority
                  classification. For the purpose of this provision only, the
                  term journeymen shall be interpreted as all bargaining unit
                  employees within a classification, except the General Foreman.
                  Trainees shall progress through the levels set forth below
                  based on the time specified and skill, ability and experience.
                  Existing mutually agreed upon training programs that have
                  shorter training time frames shall remain in effect until
                  mutually agreed otherwise.

                            Level I   -    60% of Journeyman rate/12 Months
                            Level II  -    70% of Journeyman rate/12 Months
                            Level III -    85% of Journeyman rate/12 Months
                            100% of Journeyman rate will be paid after 36 months

         28.6     The Employer and Unions recognize that the work involved in
                  the ship repair industry entails many non-traditional skills
                  for females. Because of this, the current availability of
                  females with requisite skills in the ship repair industry
                  labor pool is highly restricted. In order to help alleviate
                  this situation, the Employer and the Unions agree to work
                  together to maximize the opportunities provided by training
                  programs implemented pursuant to the provisions of this
                  Article as a means to bring more females into the ship repair
                  industry.

         28.7     In addition, the Employer and the Unions agree to work
                  together to maximize the opportunities for minorities to
                  participate in these training programs.

                                       29
<PAGE>
         28.8     For the purpose of vacation pay, holiday pay and jury pay
                  only, trainees and apprentices will be considered to have
                  seniority in accordance with and as defined in ARTICLE 15.

         28.9     The bargaining parties may choose by mutual agreement to
                  utilize any excess training money in the San Francisco
                  Shipyard Training Trust, after paying for closure of the San
                  Francisco Shipyards Training Center and its training facility
                  located at Pier 70.

ARTICLE 29. LABOR MANAGEMENT COMMITTEE

                  There shall be a Labor Management Committee to oversee the
                  operation of this Agreement.

                                       30
<PAGE>
<TABLE>
<CAPTION>
   -----------------------------------------------------------------------------------------------
                                                         SCHEDULE "A"
   -----------------------------------------------------------------------------------------------
   Level                          Wage         Wage         H&W         H&W       Pen.        Pen.
    No.       Classification      Rate         Rate         Rate        Rate      Rate        Rate
                                  7/1/00      7/1/01      7/1/00      7/1/01     7/1/00     7/1/01
   -----------------------------------------------------------------------------------------------
<S>           <C>                 <C>         <C>         <C>         <C>        <C>        <C>
     1        Utility Worker      $ 9.50      $ 9.75
                                  $14.00      $14.25       $2.53       $2.68      $1.50      $1.50
   -----------------------------------------------------------------------------------------------
     2        Journeyperson       $18.00      $18.50       $2.53       $2.68      $1.50      $1.50
   -----------------------------------------------------------------------------------------------
     3        Craftsperson        $19.50      $20.00       $2.53       $2.68      $1.50      $1.50
   -----------------------------------------------------------------------------------------------
     4        Master
              Craftsperson        $21.00      $21.50       $2.53       $2.68      $1.50      $1.50
   -----------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
   -----------------------------------------------------------------------------------------------
                                             SCHEDULE "B"
   -----------------------------------------------------------------------------------------------
   Level                           Wage        Wage        H&W         H&W        Pen.       Pen.
    No.       Classification       Rate        Rate        Rate        Rate       Rate       Rate
                                  7/1/00      7/1/01      7/1/00      7/1/01     7/1/00     7/1/01
   -----------------------------------------------------------------------------------------------
<S>           <C>                 <C>         <C>         <C>         <C>        <C>        <C>
       I      Apprentice &
              60% Trainee         $10.80      $11.10       $2.53       $2.68      $1.50      $1.50
   -----------------------------------------------------------------------------------------------
      II      Apprentice &
              70% Trainee         $12.60      $12.95       $2.53       $2.68      $1.50      $1.50
   -----------------------------------------------------------------------------------------------
     III      Apprentice &
              85% Trainee         $15.30      $15.73       $2.53       $2.68      $1.50      $1.50
   -----------------------------------------------------------------------------------------------
</TABLE>

NOTES TO SCHEDULES "A" AND "B"

         1.       All seniority workers will be given priority over
                  non-seniority workers within the terms of ARTICLE 6 of this
                  Agreement.

         2.       The above rates are minimums only.

         3.       Wage and fringe rates listed are subject to individual Local
                  Union allocations per ARTICLE 18.

         4.       No more than 30% of the workforce shall be paid at below
                  Journeyman scale. Basis of payment of employees within the
                  Utility Worker range has been developed by the yard Labor
                  Management Committee. (See Utility Worker procedure dated
                  October 6, 1996.)

                  No less than 25% of the workforce shall be paid at the
                  Journeyman level.

                  No less than 30% of the workforce shall be paid at the
                  Craftsman level.

                  No less than 5% of the workforce shall be paid at the Master
                  Craftsmen level.

                                       31
<PAGE>
         5.       Apprentice/Trainee rates will continue under the guidelines of
                  existing Apprenticeship/trainee Program Agreements.

                  Laggers, while engaged in the installation or removal of
                  asbestos and fiberglass, shall receive sixty-five ($0.65)
                  cents per hour in addition to their applicable rate of pay.

DRUG AND ALCOHOL TESTING POLICY

         The Company is committed to providing a safe, healthy and productive
         work place. The Company recognizes that substance abuse by an employee
         performing work can have an adverse effect upon the employee's ability
         to perform and can expose the employee, fellow employees, the public
         and Company to risk. To minimize this exposure, the following
         guidelines were developed.

         The goals of the Company's Alcohol and Drug Policy are as follows:

         a)       Assure employees are fit for duty and able to conduct business
                  in a safe, productive and healthy manner;

         b)       Create a work environment free from the effects of employees
                  impaired by the use of alcohol or drugs;

         c)       Prohibit the unauthorized possession, use, or distribution of
                  alcohol-containing beverages and drugs within the work
                  environment;

         d)       Provide for an assistance program for employees whose personal
                  problems affect their ability to perform their duties;

         e)       Comply with the provisions of the Drug-Free Workplace Act of
                  1988 and the Federal Acquisition Resolution Interim Rule
                  implemented by the Department of Defense; and

         f)       Comply with SeaRiver Maritime, Inc. (SRM) contractor drug and
                  alcohol guidelines.

         All employees shall be subject to the following substance abuse
         requirements:

         A)       PRE-HIRE TESTING

                  It is understood that Drug and Alcohol testing will be part of
                  the pre-hire program. Any applicant who has failed the
                  Employer's pre-hire test is not eligible for hire until such
                  time as they pass the pre-hire test. Any subsequent pre-hire
                  tests will be administered by the Employer and shall be at the
                  applicant's expense.

                                       32
<PAGE>
         B)       FOR CAUSE TESTING

                  All employees shall be subject to alcohol and drug tests for
                  the following reasons:

                  1)       Anytime there is suspicion of alcohol or drug use,
                           possession (including paraphernalia) or impairment.

                  2)       Anytime an incident/accident (post incident) occurs.

         Those employees involved in the above circumstances will be immediately
         ineligible to perform work. An employee shall only be eligible to
         return to work when the employee is tested and passed all applicable
         standards, provided the test takes place immediately following the
         removal of the employee from the work location.

         Employees involved in "for cause" testing shall have the right to have
         a shop steward present during the investigation and actual alcohol and
         drug testing process.

         All employees shall be subject to the following substance abuse testing
         requirements:

         C)       PRE-ACCESS TESTING

                  No employee will be permitted to perform work for SRM unless
                  the employee has passed a pre-access alcohol and drug test
                  within the twelve (12) month period immediately prior to
                  commencing SRM work. Therefore, all employees will be required
                  to be tested for alcohol and drugs once every twelve months.

         D)       FOR CAUSE TESTING

                  All employees while performing SRM work shall be subject to
                  alcohol and drug tests for the following reasons:

                  1)       Anytime there is a suspicion of alcohol or drug use,
                           possession (including paraphernalia) or impairment.

                  2)       Anytime an incident/accident (post incident) occurs
                           where alcohol or drug use could have been a
                           contributing factor.

                  Those employees involved in the above circumstances will be
                  immediately ineligible to perform SRM work. An employee shall
                  only be eligible to return to SRM work when the employee is
                  tested and passes all applicable SRM testing standards,
                  provided the test takes place immediately following the
                  removal of the employee from SRM work.

                  Employees involved in "for cause testing" shall have the right
                  to have a shop steward present during the investigation and
                  actual alcohol and drug testing process.

                                       33
<PAGE>
                  Reasonable cause exists when direct observation of specific
                  physical, behavioral or performance indicators suggest the
                  probability, or reasonable belief, of use, possession or
                  impairment and is presumed to exist in the event of an
                  incident.

         E)       UNANNOUNCED/RANDOM TESTS

                  All employees are subject to unannounced/random alcohol and
                  drug tests. Employees will be tested at a rate equal to at
                  least 67% of all employees every twelve (12) months.

                  In order to comply with this unannounced/random testing, the
                  Company shall require employees working on an SRM contract to
                  be tested during each ship availability at a rate that if
                  projected for an entire twelve (12) month period is equal to
                  67% of the employees (i.e., 100 employees working on a one (i)
                  month SRM job - during that period, unannounced tests will be
                  equal to 1/2 x 67% x 100 employees = 6 employees).

                  All selection of employees for the unannounced/random drug
                  testing shall be performed by an independent party.

         F)       If an employee refuses to take drug/alcohol test when
                  requested under these guidelines, the employee will be
                  terminated.

         G)       All testing shall be conducted by a National Institute of Drug
                  Abuse (NIDA) approved testing laboratory. The detection method
                  that will be used for all alcohol and drug testing will be
                  urinalysis. The protocol to be used in the actual testing
                  shall be as per the attachment.

         H)       All alcohol and drug testing shall comply with SRM minimum
                  substance abuse detection levels (see attachment).

         I)       Any employee who tests positive shall be subject to the
                  following:

                  1)       Contact the Employer's Employees Assistance Program
                           (EAP) counselor for assessment of the employee's
                           substance abuse problem.

                  2)       Sign a "last chance agreement" containing the
                           following provisions:

                           a)       Employee must submit to random drug/alcohol
                                    testing for a one (1) year period.

                           b)       Any refusal to be tested or a positive test
                                    shall be cause for employee's termination.

                           c)       The employee must comply with the EAP
                                    counselor's recommendations for substance
                                    abuse treatment. Failure to

                                       34
<PAGE>
                                    successfully complete the EAP counselor's
                                    recommendation shall be cause for the
                                    employee's termination.

         This shall not apply to any employee who fails to pass SRM's minimum
         substance abuse detection levels, but is under the Department of
         Transportation minimum substance abuse detection levels.

         J)       All test results shall be treated with confidentiality. This
                  means that only those individuals necessary to enforce the
                  above policies shall be informed of the test results.

         K)       There shall be established a Labor/Management Alcohol and Drug
                  Testing Committee. This Committee shall be comprised of two
                  (2) Union representatives appointed by the Bay Cities Metal
                  Trades Council and two (2) Employer representatives appointed
                  by the Company. This Committee, acting within the guidelines
                  established hereinabove, shall have the authority to oversee
                  the implementation and ongoing application of the entire
                  alcohol and drug testing program.

         L)       The above alcohol and drug testing program is being
                  implemented to satisfy the requirements of SRM and allow the
                  Company to be eligible to bid on their repair contracts.
                  Therefore, it is acknowledged and recognized as a "make work"
                  program. In order to further this "make work" program, the
                  Parties recognize that other customers may in the future
                  require some form of an alcohol and drug testing program.
                  Should this occur, the Parties agree to make whatever
                  modifications to this program are necessary to satisfy the
                  customer(s). No modifications shall exceed the general alcohol
                  and drug testing guidelines and limitations set forth herein
                  without the mutual consent of both Parties.

                                    EXHIBIT I

                    MINIMUM SUBSTANCE ABUSE DETECTION LEVELS

<TABLE>
<S>                <C>                                   <C>          <C>
             -     Blood Alcohol Content                 0.04         g/dl
             -     Amphetamines, Methamphetamines        1000         ng/ml
             -     Barbiturates                          300          ng/ml
             -     Benzodiazepines                       300          ng/ml
             -     Cannabinoids/Marijuana                50           ng/ml
             -     *                                     20           ng/ml
             -     Methadone                             300          ng/ml
             -     Methaqualone                          300          ng/ml
             -     Opiates (Codeine, Morphine)           300          ng/ml
             -     Cocaine Metabolite                    300          ng/ml
             -     Phencyclidine                         25           ng/ml
</TABLE>

                                       35
<PAGE>
<TABLE>
<S>                <C>                                   <C>          <C>
             -     Propoxyphene                          300          ng/ml
</TABLE>

         *Personnel at 20 or more ng/ml will be excluded from work on Sea River
         vessels.

                                       36
<PAGE>
EMPLOYER:                           INTERNATIONAL UNIONS:

San Francisco Drydock, Inc.
P.O. Box 7644                       International Brotherhood of Boilermakers
San Francisco, CA  94120

By:  /s/ D. Carl Hanson             By:  /s/ John A. Yiatts
     ----------------------------        ------------------
Name and Title:  D. Carl Hanson,
President & General Manager
                                    Carpenters International

                                    By:  /s/ Signature Illegible
                                        ----------------------------------------
UNIONS:

The Metal Trades Department of      Electric Workers International
the AFL-CIO

BY:  /s/ Gordon A. Baxter           By:  /s/ Arthur J. Jones
     ----------------------------       ----------------------------------------

The Pacific Coast Metal Trades      Laborers International
District Council

By:  /s/ Richard E. Harden          By:  /s/ Signature Illegible
     ----------------------------       ----------------------------------------

Bay Cities Metal Trades Council     MACHINISTS INTERNATIONAL

By:  /s/ Richard E. Harden          By:  /s/ Brian Severns
     ----------------------------       ----------------------------------------

                                    Operating Engineers International

                                    By:  /s/ Signature Illegible
                                        ----------------------------------------

                                    The Painters International

                                    By:  /s/ Signature Illegible
                                        ----------------------------------------

                                    Sheet Metal Workers International

                                    By:  /s/ Signature Illegible
                                        ----------------------------------------

                                    Teamsters International

                                    By:  /s/ James P. Hoffa
                                        ----------------------------------------

                                    United Association of Plumbers International

                                    By:  /s/ Frank J. Terranova
                                        ----------------------------------------

                                       37

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