Document:

<PAGE>

                                                                    EXHIBIT 10.2

                        2002 UNITED STATES MARINE REPAIR
                             KEY EMPLOYEE BONUS PLAN

PURPOSE

U.S.M.R is committed to reducing costs, increasing productivity, and eliminating
waste through improved planning, execution of objectives, and communication both
within the company and with our customer. The bonus plan is designed to reward
Key employees who meet and exceed the established objectives. As company
performance improves through their control of costs and increased EBITDA while
reducing Company debt, these employees are rewarded through the Key bonus plan
as described in this document.

ADMINISTRATION AND ELIGIBILITY

The Bonus Plan will be administered by the Vice President of Human Resources
and directed by a Bonus Committee comprised of the C.E.O. and Chief Operating
Officer.  Key employees are identified by the C.E.O. as employees critical to
company performance.  Key employees are identified as Key 1 and Key 2, which
determines their bonus eligibility.

BONUS AWARDS

The bonus targets are established by the C.E.O. at the beginning of each fiscal
year and approved by the Board of Directors (see attached). The Bonus is based
upon an EBITDA target which is established for the Corporation, but each
Division of USMR has a targeted EBITDA level. The Debt Reduction target is
established for all divisions based upon corporate goals. The bonus targets are
Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA) and
Debt Reduction (includes long term and short term debt). Bonus awards are a
percentage of annual salary based upon the EBITDA performance of the company in
both of the bonus target areas. Individual performance or divisional performance
may affect the planned bonus percentage as determined by the Bonus Committee.

BONUS PROCEDURE

At the completion of the fiscal year, the Chief Financial Officer will provide
the financial results of the company in the targeted bonus areas. Claim revenues
arising after the effective date of the plan will be included in EBITDA either
in the year the job is performed or in the year the claim revenue is actually
received as determined by the Bonus Committee. Based upon the approved schedule
of bonus percentages that was established in January of the year, the plan
administrator will prepare a bonus pay out schedule for the Chief Executive
Officer's review. The Chief Operating Officer and President of U.S.M.R. will
recommend any changes to the amounts based upon Key employee performance and the
C.E.O. will give final approval.
<PAGE>
PAYMENT OF BONUS

No Bonus will be paid unless the Company attains a threshold level of EBITDA
and/or Debt Reduction. An interim payment of up to 80% of the expected bonus may
be paid during the last quarter of the year based on the discretion of the Bonus
Committee.

EXTRAORDINARY EVENTS

The Bonus Committee may either postpone or eliminate bonus payments under this
plan when payment of the bonus might endanger the Company's financial capability
to perform contracts. Examples of extraordinary events include the occurrence of
catastrophic losses after the end of the year or an overall loss for the
Corporation. The targets are subject to change based upon changed cash flow
targets due to divestitures or acquisitions.

------------------------------------      ------------------------------------
Approved                                  Date
<PAGE>
                           UNITED STATES MARINE REPAIR
                          KEY EMPLOYEE BONUS PLAN 2002

<TABLE>
<CAPTION>
========================================================================================================
            ANNUAL              KEY 1             KEY 2                  DEBT PAYDOWN
            EBITDA*             BONUS             BONUS                       BONUS
========================================================================================================
<S>                             <C>               <C>        <C>
            $30M                 10%               10%                      2002 KEY DEBT
            $31M                 20%               20%                  REDUCTION BONUS PLAN
            $32M                 30%               23%             DEBT PAYMENT BONUS TO BE PAID ON
            $33M                 40%               25%           ACHIEVING $20M IN DEBT REDUCTION. IF
            $34M                 50%               33%        ACHIEVED, THIS WILL RESULT IN AN ADDITIONAL
            $36M                 60%               40%                  20% BONUS PAYMENT.
            $38M                 70%               50%
            $40M                 80%               60%
            $42M                 88%               68%
            $44M                 95%               75%
            $45M                100%               80%
            $47M                110%               90%
            $49M                115%               95%

          /s/ B. Edward Ewing 11-8-01        /s/ Alexander J. Krekich  11-08-2001
         -----------------------------       -------------------------------------
          B. EDWARD EWING      DATE           ALEXANDER J. KREKICH      DATE

</TABLE>
<PAGE>
                         EXECUTIVE WELLNESS PROGRAM 2002

The Executive Wellness Program has been renewed for the calendar year of 2002.
This program allows participants to be reimbursed up to $1200 per year for
approved costs associated with wellness, physical fitness, preventative health
care and stress reduction that are not covered by the Company's health plans.

Specific program service should have the prior approval of the Vice President of
Human Resources. The following provides examples of programs that are intended
to be covered.

-  PHYSICAL FITNESS: equipment, health clubs, and other fitness programs.

-  WELLNESS PROGRAMS: dietitian consultations, programs for weight control
   and cessation programs for smoking.

-  PREVENTATIVE HEALTH CARE: physical examinations and medical testing relative
   to health risk appraisal, nutritional counseling including cholesterol
   control, and other such programs.

-  STRESS REDUCTION: stress, relaxation and anger management programs and
   other means to accomplish these results.

Reimbursement for approved expenses is limited to $1200 a year. Costs of unused
funds can not be "carried over" to the following year. A year is defined as the
period for January 1 through December 31.

                                   PROCEDURE:

1.  An eligible employee should obtain prior approval for the expense from the
    Vice President of Human Resources.

2.  If a dispute exists between the eligible employee and the Vice President of
    Human Resources with regards to the event meeting the intent of the program,
    the Chief Operating Officer will resolve the issue.

3. The company provides an Executive Wellness reimbursement form, which requires
   the eligible employee to attach a receipt for the services or other event and
   submit to the Vice President of Human Resources for approval.

4. The Vice President of Human Resources will submit the approved expense report
   to the appropriate divisional accounting department for payment.

5.  It is the responsibility of the Human Resources department to maintain a
    record of approved expenses.

--------------------------------          ------------------------------
Approved                                  Date
<PAGE>
                        2001 UNITED STATES MARINE REPAIR
                SALARIED BONUS PROGRAM - SUMMARY PLAN DESCRIPTION

                   SALARY GRADES 1 THROUGH 9 AND 11 THROUGH 19

PURPOSE

U.S.M.R. and all of its divisions are committed to reducing costs, increasing
productivity and eliminating waste through improved planning, execution of
objectives, and communication both within the company and with our customer. The
bonus plan is designed to reward those employees who help us accomplish these
objectives. As company performance improves, salaried employees are rewarded
through the incentive bonus plan described in this document.

ADMINISTRATION AND ELIGIBILITY

The Bonus Plan will be administered by the Vice President of Human Resources and
directed by a Bonus Committee comprised of the Chief Operating Officer, Chief
Financial Officer, President U. S.M. R. West, and the Vice President of Human
Resources. All salaried employees in each division are eligible to receive
bonuses on the portion of their base salary earned while working in the division
provided that the service requirement of 1000 hours has been met. Any employee
who resigns or is terminated prior to award of bonus is not eligible for the
bonus.

BONUS AWARDS

The bonus to be paid is based upon the financial performance criteria
established at the beginning of the year for each division. Prior to the fiscal
year, the Bonus Committee will establish a Threshold, Expected, Stretch and
Maximum EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization)
target for the division. Based upon the targeted EBITDA for the division, a
bonus will be paid if the target is achieved. Final bonus awards will also
incorporate an evaluation of employee performance(degreE)AS determined by the
annual employee rating and ranking of employees within the division. The
targeted bonus amounts for employees are based upon company performance. A pro
rata amount will be determined if the financial performance is between threshold
and maximum:

<TABLE>
<CAPTION>
       SALARY GRADES                THRESHOLD                   MAXIMUM
       -------------                ---------                   -------
<S>                                 <C>                         <C>
      7 to 9 or 17 to 19                3%                          15%
      4 to 6 or 14 to 16                2%                          10%
      1 to 3 or 11 to 13                1%                           5%
      1 to 3 San Diego                  1%                         7.5%
</TABLE>

BONUS PROCEDURE

If the maximum bonus is achieved, a special bonus fund of 10% of the division's
accrual will be added to the pool for special bonus payments. It is the
responsibility of the managing Vice President or Director to make
recommendations to the divisional Presidents for reductions in an
<PAGE>
employee's targeted bonus payment or recommendations on who should be considered
for a special bonus payment. These recommendations will be based on the
employee's annual rating and ranking within the division. An employee may
receive a reduction from the targeted bonus including no bonus, if performance,
as evaluated by the divisional compensation committee, is below expected
performance levels. It is expected that the majority employees with satisfactory
performance will receive the targeted bonus. Any bonus money that is reduced
from an employee's bonus will be added to the special bonus pool. The respective
Presidents of USMR West and East will determine all special bonus awards and
amount of awards. The special bonuses awarded cannot exceed the special bonus
pool for the division. If the Maximum target is not met, all unawarded funds
will be returned to the Company's general funds and no special bonus pool will
be established. The final approval of all bonus payments is the responsibility
of the C.O.O.

PAYMENT OF BONUS

No bonus pool will be declared unless the Company attains a threshold level of
EBITDA. An interim payment of up to 90% of the expected bonus may be paid during
the last quarter of the year based on the discretion of the Bonus Committee.

EXTRAORDINARY EVENTS

The Bonus Committee may either postpone or eliminate bonus payments under this
plan when payment of the bonus might endanger the Company's financial capability
to perform contracts. Examples of extraordinary events include the occurrence of
catastrophic losses after the end of the year or an overall loss for the
Corporation. The targets are subject to change based upon changed cash flow
targets due to divestitures or acquisitions.

------------------------------------      -----------------------------------
Approved                                  Date
<PAGE>
                               U.S. MARINE REPAIR
                             PROJECT BONUS PLAN 2002

1.0   PURPOSE:

      1.1   A Division may establish a Project Bonus Plan for individual fixed
            priced contracts if the appropriate criteria are met. The purpose of
            the bonus program is to encourage employees to reduce costs, rework,
            overtime, control man-hours on the project, create a safe working
            environment and other criteria to improve performance as determined
            by the division.

2.0   DEFINITIONS:

      2.1   USMR Bonus Committee: Chief Operating Officer, President USMR West,
            Chief Financial Officer, VP Finance USMR West, and Vice President
            Human Resources USMR.

3.0   CRITERIA:

      3.1   Fixed Price projects.

      3.2   Exceeds 20,000 hours prior to the commencement of work.

      3.3   Management believes that opportunities to improve financial and job
            performance exist on the project.

4.0   PROCEDURE:

      4.1   The Divisional Bonus Committee will develop a recommended schedule
            for bonus payments to employees based upon Recovery Rate or net
            profit on the job. The bonus will be a target that is inclusive of a
            bonus payment and recalculated overtime premium for hourly
            employees. The bonus plan will be based upon the BET criteria
            established for the job and will exclude changes in indirect rates.
            A predetermined set of criteria that will provide a reasonable bonus
            opportunity for identified employees will be prepared. Bonus
            payments will not be considered until the job is profitable or meets
            and exceeds the targeted Recovery Rate or targeted net profit.

      4.2   The Vice President of Operation will provide a list of those
            employees eligible for a bonus on the project.

      4.3   The Vice President of Finance will review the calculations and make
            a recommendation to accept or change the bonus payment schedule.

      4.4   The Divisional Manager of Human Resources will review the plan and
            make recommendations for approval or a change to the plan based upon
            policy.
<PAGE>
      4.5   The Divisional Bonus Committee will approve the final bonus plan and
            forward a copy of the approved plan to the Manager of Human
            Resources.

      4.6   The Vice President of Human Resources and Divisional Managers of
            Human Resources will administer the plan and bonus payments.

5.0   ELIGIBILITY AND BONUS CALCULATION:

      5.1   The bonus payment schedule should be approved prior to the
            commencement of work on the job.

      5.2   To be eligible for a bonus payment, an employee must work 40 hours
            on the job and be eligible based upon the list of eligible jobs
            provided by the Vice President of Operations.

      5.3   Any employee, who resigns or is discharged for cause prior to the
            bonus payment being made, will not receive a bonus.

      5.4   An employee will earn a bonus on all hours direct charged to the job
            at an equivalent of one hour whether it is straight time or overtime
            or a percentage of the bonus payment based upon time spent on the
            project depending upon the bonus plan type.

      5.5   For all share bonus plans an employee's charged hours will be
            multiplied by the employee's hourly rate to determine the number of
            bonus shares the employee has earned. For all net profit bonus
            plans, the straight time earnings on the job will be used in
            calculating the bonus. For all flat rate bonus plans, the hours
            worked on the project will be used to determine the percent of bonus
            an employee is eligible to earn.

      5.6   The bonus payment is calculated by multiplying an employee's bonus
            shares times the pay out rate as determined by the final Recovery
            Rate or net profit for the job. In plans that have flat bonus
            amounts, hours are used to determine the percentage of bonus an
            employee will earn

      5.7   Any exceptions to this plan must have the prior approval of the USMR
            Bonus Committee. The Project Bonus plan is administered at the sole
            discretion of the Company and may be changed or cancelled at any
            time by management.

------------------------------------      --------------------------------
Approved                                  Date
<PAGE>
                     PROJECT EFFICIENCY INCENTIVE PLAN 2002
                              SAN FRANCISCO DRYDOCK

Specified below are the criteria for the Project Efficiency Incentive Program
for our ship managers. The weighting percentage for each of the criterion is
also noted. This would also be applicable to the Director of Operations.
However, for that position he would receive one half of the bonus amount that
each ship manager receives.

      1.    Revenue on a specific project that is above 6% profit. This will be
            on a progressive scale that establishes a threshold monetary
            incentive, expected monetary incentive, stretch monetary incentive
            and a maximum monetary incentive. For specific projects that are bid
            at less than 6% profit, the monitory incentive threshold will be
            adjusted accordingly - (50% weighting).

      2.    In addition to the above, other factors that will be taken into
            consideration include the following:

            A.    Size of Project - (10% weighting)

            B.    Duration of the project - (5% weighting)

            C.    Level of effort - (15% weighting)

            D.    Complexity of project - (10% weighting)

            E.    Manpower difficulties - (5% weighting)

            F.    Estimating deficiencies - (5% weighting)

      3.    Project bonus potential will be tied to the amount of gross
            revenue for the project (i.e. for every $1,000,000 of gross
            revenue, there is a potential for $2,000.00 bonus).

      4.    The criteria listed in paragraphs 1 and 2 will be applied to the
            potential bonus amounts as specified in paragraph 3, in order to
            determine the precise bonus for each project. This will be
            determined as follows:

            A.    The precise project bonus amount will be determined by
                  evaluating on a 1 to 5 scale (i.e. 1 - lowest score and 5 -
                  highest score) each of the relevant criteria. The scores will
                  be totaled using the above specified weighting.

            B.    Depending on the specified project parameters, some of the
                  above specified criteria may or may not be applicable. In this
                  circumstance, the criteria that are not applicable will not be
                  evaluated and; therefore, not counted when totaling the
                  evaluation.
<PAGE>
            C.    The total evaluation score will be used as a multiplier to the
                  potential project bonus amount as specified in paragraph 3, in
                  order to determine the precise project bonus amount (i.e.
                  total evaluation score of .90 x $5,000 potential bonus =
                  $4,500.00 project bonus).

---------------------------------         -----------------------------------
Approved                                  Date
<PAGE>
                        PROJECT MANAGEMENT INCENTIVE PLAN
                             COST PLUS PROGRAM 2002

1.  PURPOSE:

This plan is designed to encourage key employees to improve performance on Cost
Contracts for the benefit of the Customer and Southwest Marine by:

      a.  Maximizing Program Performance evaluation scores above 95%.

      b.  Maximizing Revenue growth to the contract.

      c.  Reducing overtime.

Individuals eligible for participation are key people who through their
individual and collective performance enable the Cost Plus Program to improve
performance. The above-identified variables are similar to those used in the
senior management plan. This is not a ship by ship plan, but rather a plan that
encompasses all efforts of the entire year for the Cost Plus Program and will be
paid on a quarterly basis. Those eligible for the plan have been identified by
Senior Management as indicated in the Table below.

2.  PROCEDURE AND BONUS CALCULATION

The Bonus Paid is the equivalent of all eligible personnel based upon the total
number of shares divided into the Bonus Pool. The Bonus Pool will be determined
on a quarterly basis and 90% of the Bonus Pool will be distributed at the end of
each quarter. In the last quarter, 100% of the remaining Bonus Pool will be
paid.

Each eligible employee will receive a portion of the bonus pool based upon the
three criteria listed below and the jobs' ability to impact the performance of
each identified criterion. See below:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
CRITERIA             %     JOB    JOB    JOB   JOB    JOB   JOB    JOB    JOB    JOB    JOB
                   VALUE    1      2      3     4      5     6      7      8      9     10
----------------------------------------------------------------------------------------------
<S>                <C>     <C>    <C>    <C>   <C>    <C>   <C>    <C>   <C>     <C>    <C>
1.  AWARD FEE
SCORE (ROS)         25%     E      E      E     E      E     E      E      E      E     2/3E
----------------------------------------------------------------------------------------------
2. REVENUE
GROWTH              75%     E      E      E     E      E     E      E                   2/3E
----------------------------------------------------------------------------------------------
</TABLE>

Job 1/ Program Manager 100% Share, Job 2/Lead&Ship Superintendent 100% Share,
Job 3/Craft Department Head 100% Share, Job4/Contracts Supervisor 100% Share,
Job 5/Contracts Coordinator 100% Share, Job 6/Asst. Contracts Coordinator
100% Share, Job 7/Cost Analyst Supv&SubContracts Mgr. 100% Share, Job 8/Cost
Analyst 25% Share, Job 9/Sub Contracts Administrators 25% Share, Job 10/Asst.
Trainee Ship Supt.67% Share
<PAGE>
The value of a bonus share is determined by dividing the bonus pool for the
quarter by the number of eligible shares as indicated above. Each eligible
individual will receive a bonus payment based upon their percentage of bonus
share eligibility.

The bonus pool will be determined by metrics established by the Finance and
approved by the Sr. VP Operations and President-USMR West according to the three
bonus criteria identified for this plan.

Any employee who did not work in the program for the entire quarter of the year
will receive a pro-rated bonus, based upon the time spent in the program.
Persons leaving the project in good standing shall continue to participate in
the plan based upon the pay out amount earned prior to their departure date.
Persons who quit the project, or are dismissed for cause prior to the bonus pay
out immediately cease to participate in the plan, forfeiting any bonus.

/s/ Monty Dickinson                       1/11/02
---------------------------------         -----------------------------------
Approved                                  Date
<PAGE>
                          2002 CASH VELOCITY BONUS PLAN
                          SOUTHWEST MARINE - SAN DIEGO

PURPOSE:

   Increase the velocity of receipt of cash to decrease the need for increased
   money supply or debt. By increasing the velocity of cash, the Company will
   reduce the need for borrowing and accelerate the generation of free cash. The
   additional free cash will allow for accelerated debt reduction or to apply
   for other purposes as deemed appropriate by senior USMR Management. Through
   accelerated debt reduction, the worth of the enterprise is further enhanced
   through Value Creation.

POLICY:

1.    The Bonus Committee will meet prior to the beginning of the fiscal year
      and will determine eligible employees based upon those jobs that directly
      impact the cash flow and receipt of cash. The eligible employees will be
      given full or partial bonus shares based upon the ability of the
      employees' performance and the nature of the employees' position to
      accelerate cash receipts and improve cash flow.

2.    The Finance department will establish a baseline using data from fiscal
      years 2000 and 2001 to measure the cost of capital. The cost of capital
      analysis will include: line of credit usage costs and the benefit of
      internal cash generation. All data will be measured on a daily basis. The
      term Credit Cost includes both the cost of credit (borrowings - whether
      from Bank Lines or Internal Company) and cost savings from the generation
      of free cash.

3.    The Finance department will prepare this analysis with a Targeted Credit
      Cost for the 2002 - year based upon the analysis of 2000 and 2001 and
      present it to the Bonus Committee for approval.

4.    A determination of the Annual Credit Cost Savings will be determined at
      year-end by subtracting the Actual Credit Cost from the Targeted Credit
      Cost.

5.    The Bonus Committee and the Vice President of Human Resources will
      determine the Bonus Pool by establishing a percentage of the Annual Credit
      Cost Savings to be distributed to eligible employees.

6.    A Bonus Share value will be determined by dividing the total number of
      bonus shares into the Bonus Pool.

7.    As is the case with all Bonus programs and individual bonus may be
      increased or decreased based upon individual performance at the sole
      discretion of the Bonus Committee.
<PAGE>
 8.   This Bonus Program is a pilot program and if it produces little or no
      value then at the sole discretion of the Bonus Committee, it may be
      cancelled without bonus payment.

/s/ Monty Dickinson                       1/11/02
------------------------------            -----------------------------------
Approved                                  Date<PAGE>
                                                                    Exhibit 10.3

                                                                           Final
                                                                        01/31/01

                        UNITED STATES MARINE REPAIR, INC.
                           DEFERRED COMPENSATION PLAN

                          (EFFECTIVE FEBRUARY 1, 2001)
<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
ARTICLE I
ESTABLISHMENT AND PURPOSE ................................................     1
    1.1 Establishment and Purpose ........................................     1
    1.2 Applicability ....................................................     1

ARTICLE II
DEFINITIONS ..............................................................     2
    2.1 Account Balance ..................................................     2
    2.2 Beneficiary ......................................................     2
    2.3 Change in Control ................................................     2
    2.4 Code .............................................................     2
    2.5 Compensation .....................................................     2
    2.6 Deferred Compensation Committee ..................................     2
    2.7 Disability .......................................................     3
    2.8 Employee .........................................................     3
    2.9 Employer .........................................................     3
    2.10 ERISA ...........................................................     3
    2.11 Fiscal Year .....................................................     3
    2.12 Participant .....................................................     3
    2.13 Plan ............................................................     3
    2.14 Plan Year .......................................................     3
    2.15 Spouse ..........................................................     3

ARTICLE III
ELIGIBILITY AND PARTICIPATION ............................................     4
    3.1 Eligibility and Participation ....................................     4
    3.2 Duration .........................................................     4
    3.3 Revocation of Future Participation ...............................     4
    3.4 Notification .....................................................     4

ARTICLE IV
BENEFITS, COMPENSATION REDUCTION AGREEMENTS, AND EARNINGS ................     5
    4.1 Deferred Compensation Benefit ....................................     5
    4.2 Payment of Benefits ..............................................     5
    4.3 Form of Payment ..................................................     5
    4.4 Compensation Reduction Agreements ................................     5
    4.5 Prohibition Against Compensation Reduction Agreement Modifications     5
    4.6 Adjustments to Account Balances ..................................     6
    4.7 Matching Contributions from Employer .............................     6

ARTICLE V
DISABILITY BENEFIT, DEATH BENEFIT, AND SPECIAL WITHDRAWALS ...............     7
    5.1 Disability Benefit ...............................................     7
</TABLE>

                                       i
<PAGE>
<TABLE>
<S>                                                                         <C>
    5.2 Death Benefit ....................................................     7
    5.3 Hardship Withdrawal ..............................................     7
    5.4 In-Service Withdrawal ............................................     7
    5.5 Change in Control ................................................     7

ARTICLE VI
ADMINISTRATION ...........................................................     8
    6.1 Plan Administration ..............................................     8
    6.2 Deduction of Taxes from Amounts Payable ..........................     8
    6.3 Indemnification ..................................................     8
    6.4 Expenses .........................................................     8
    6.5 Delegation of Authority ..........................................     8
    6.6 Binding Decisions or Actions .....................................     8

ARTICLE VII
AMENDMENT AND TERMINATION ................................................     9
    7.1 Amendment and Termination ........................................     9
    7.2 Constructive Receipt Termination .................................     9
    7.3 Amendment or Termination After Change in Control .................     9

ARTICLE VIII
FUNDING ..................................................................    10
    8.1 General Assets ...................................................    10
    8.2 Rabbi Trust ......................................................    10
    8.3 Change in Control ................................................    10

ARTICLE IX
GENERAL CONDITIONS .......................................................    11
    9.1 Anti-assignment Rule .............................................    11
    9.2 No Legal or Equitable Rights or Interest .........................    11
    9.3 Applicable Plan Provisions .......................................    11
    9.4 No Employment Contract ...........................................    11
    9.5 Headings .........................................................    11
    9.6 Invalid or Unenforceable Provisions ..............................    11
    9.7 Governing Law ....................................................    12
</TABLE>

                                       ii
<PAGE>
                        UNITED STATES MARINE REPAIR, INC.
                           DEFERRED COMPENSATION PLAN
                          (EFFECTIVE FEBRUARY 1, 2001)

                                    ARTICLE I
                            ESTABLISHMENT AND PURPOSE

1.1   Establishment and Purpose. United States Marine Repair, Inc. (the
      "Employer") hereby adopts The United States Marine Repair, Inc. Deferred
      Compensation Plan (the "Plan"), effective as of February 1, 2001 (the
      "Effective Date"). The purpose of the Plan is to provide each Participant
      in the Plan with an opportunity to defer receipt of salary and annual
      bonuses. The Company shall be referred to hereinafter as "Employer." The
      Plan is intended to benefit a select group of management, of the Employer
      within the meaning of Sections 201,301, and 401 of ERISA, and to therefore
      be exempt from the requirements of Parts 2, 3, and 4 of Title I of ERISA.

1.2   Applicability. The provisions of the Plan shall apply only to a
      participant employed by the Employer, on or after the Effective Date. The
      Plan shall not apply to any person whose employment with the Employer was
      terminated (due to death, disability, retirement or any other separation)
      prior to the Effective Date.

                                       1
<PAGE>
                                   ARTICLE II
                                   DEFINITIONS

2.1   Account Balance. Account Balance means the cumulative value of each
      Participant's deferred compensation elections for each year of
      participation in the Plan plus earnings on those deferrals. Earnings on a
      Participant's Account Balance shall be determined in accordance with
      Section 4.6.

2.2   Beneficiary. Beneficiary means a natural person, estate, or trust
      designated by a Participant in accordance with Section 5.2 to receive
      benefits under and in accordance with provisions of the Plan. The
      Participant's estate shall be the Beneficiary if:

      (a)   the Participant has not designated a natural person or trust as
            Beneficiary, or

      (b)   the designated Beneficiary has predeceased the Participant.

2.3   Change in Control. Change in Control means a Change in Control of the
      Employer. A Change in Control of the Employer shall occur if:

      (a)   Thirty percent voting shares. A third party becomes the beneficial
            owner of shares of the Employer having 30 percent or more of the
            total number of votes that may be cast for the election of directors
            of the Employer; or

      (b)   Change in majority of Directors. As a result of, or in connection
            with, any cash tender or exchange offer, merger or other business
            combination, sale of assets or contested election, or any
            combination of the foregoing transactions, the persons who are
            directors of the Employer before the transaction shall cease to
            constitute a majority of the Board of Directors of the Employer or
            any successor to the Corporation; or

      (c)   Sale of Assets. All or substantially all of the assets and business
            of the Employer are sold, transferred or assigned to, or otherwise
            acquired by, any other entity or entities; or

      (d)   Sale of Geographic Division. Any of the above provisions would apply
            in regards to the sale of a specific geographic division or
            location.

In no event shall the distribution by the Employer to its shareholders of stock
in a subsidiary be deemed a Change in Control.

2.4   Code. Code means the Internal Revenue Code of 1986, as amended from time
      to time.

2.5   Compensation. Compensation means, for purposes of the Plan, base salary
      (including any deferred salary approved by the Deferred Compensation
      Committee as compensation for purposes of the Plan) and annual bonuses.

2.6   Deferred Compensation Committee. Deferred Compensation Committee means the
      Employer's Chief Executive Officer ("CEO"), Chief Financial Officer
      ("CFO"), and Vice

                                       2
<PAGE>
      President Risk Management and Benefits ("VP RM"), who shall serve until
      the earlier of termination of employment or appointment of a replacement
      by the CEO.

2.7   Disability. Disability means that a Participant had been determined to
      have incurred total and permanent disability, as defined by the long-term
      disability ("LTD") group insurance plan of the Employer to which the
      Participant belongs at the date of total and permanent disability.

2.8   Employee. Employee means an employee of an Employer who is a member of a
      select group of management who is selected by the Deferred Compensation
      Committee to participate in the Plan and who timely elects to participate
      in the Plan. These employees are designated as "Key 1 Employees" or "Key 2
      Employees."

2.9   Employer. Employer means United States Marine Repair, Inc. (and its
      designated subsidiaries and/or affiliates).

2.10  ERISA. ERISA means the Employee Retirement Income Security Act of 1974, as
      amended from time to time.

2.11  Fiscal Year. Fiscal Year means January 1 through December 31.

2.12  Participant. Participant means an Employee who meets the requirements for
      eligibility under Section 3.1.

2.13  Plan. Plan means the United States Marine Repair, Inc. Deferred
      Compensation Plan, as documented herein and as may be amended thereafter.

2.14  Plan Year. Plan Year means January 1 through December 31.

2.15  Spouse. Spouse means the person legally married to the Participant at the
      date benefits become payable under the Plan.

                                       3
<PAGE>
                                   ARTICLE III
                          ELIGIBILITY AND PARTICIPATION

3.1   Eligibility and Participation. Each person who is an Employee is eligible
      to participate in the Plan. Selection for participation in the Plan will
      be made by the Deferred Compensation Committee of the Employer.

3.2   Duration. Any person who becomes a Participant shall continue to be a
      Participant as long as he or she is entitled to benefits hereunder.

3.3   Revocation of Future Participation. The Deferred Compensation Committee
      may revoke a Participant's eligibility to make future compensation
      deferrals under the Plan. Such revocation will not affect in any manner a
      Participant's Account Balance or other terms of the Plan.

3.4   Notification. A Participant shall be notified by the Deferred Compensation
      Committee, in writing, of his or her eligibility to participate in the
      Plan.

                                       4
<PAGE>
                                   ARTICLE IV
            BENEFITS, COMPENSATION REDUCTION AGREEMENTS, AND EARNINGS

4.1   Deferred Compensation Benefit. Each Participant who retires or terminates
      employment with the Employer and its subsidiaries and/or affiliates shall
      be entitled to a deferred compensation benefit equal to his or her Account
      Balance as of the end of the month in which retirement or termination of
      employment occurs.

4.2   Payment of Benefits. Benefits are paid in accordance with the method
      selected under Section 4.3 and 4.5 upon the earlier of termination of
      employment with the Employer, Retirement, Death (see Section 5.2),
      Disability (see Section 5.1), or a Change in Control (see Sections 2.3 and
      5.5).

4.3   Form of Payment. A Participant may timely (as defined in Section 4.5)
      elect to have benefits paid (under Section 4.2): (a) in a single lump sum;
      (b) in equal annual installment payments over a period of 5 years; (c) in
      equal annual installment payments over a period of 10 years; or (d) in
      equal periodic payments, over a specified period, commencing at an age
      specified by the participant on their compensation reduction agreement.
      "Equal" payment is not intended to require exactly equal payments, in that
      continued earnings adjustments under Section 4.6 (Gains or Losses) will
      require the Deferred Compensation Committee to adjust quarterly
      installments.

4.4   Compensation Reduction Agreements. Deferrals made under the Plan must be
      made in accordance with a written compensation reduction agreement.
      Deferral elections shall be made in writing on a compensation reduction
      agreement form provided by the Deferred Compensation Committee for that
      purpose. Such agreement forms shall specify separate elections for salary
      and for bonuses. Salary deferral elections shall be made no later than
      December 15 preceding the Plan Year for which the deferrals are made (with
      the exception that deferral elections for the Plan Year beginning February
      1, 2001 may be made prospectively for pay periods beginning as late as
      March 1, 2001). Notwithstanding the foregoing, an Employee who becomes a
      Participant during any Plan Year may make a salary deferral election for
      such Plan Year within 30 days after becoming a Participant. Bonus deferral
      elections shall be made no later than November 1 of the Fiscal Year to
      which such bonus relates. A compensation reduction agreement shall
      designate the amount to be deferred in whole percentages of compensation
      or bonuses and/or as a dollar amount of compensation or bonuses. Salary
      deferrals are made on a pro rata basis each pay period during the Plan
      Year. Bonus deferrals are made upon the Employee's payment of the bonus. A
      compensation reduction agreement shall specify the form of distribution
      under Section 4.3 for deferrals made during the Plan Year to which the
      salary reduction agreement applies. To be effective, a compensation
      reduction agreement must be received and approved by the Deferred
      Compensation Committee.

4.5   Prohibition Against Compensation Reduction Agreement Modifications. A
      Participant shall make an irrevocable (subject to the last portion of this
      sentence) election as to the amount and form of payment under Section 4.3
      at the time of each deferral election; provided, however, that a
      Participant shall be permitted to revise such irrevocable election, in
      another irrevocable election, which such second election shall be

                                       5
<PAGE>
      implemented only if it is made in writing at least six (6) months prior to
      the Participant's date of termination. Notwithstanding anything above to
      the contrary, a Participant may not modify a compensation reduction
      agreement during a Plan Year, either by changing the amount of the
      compensation or bonus reduction or the designated form of distribution for
      the compensation reduction. A Participant may not revoke a compensation
      reduction agreement once approved by the Deferred Compensation Committee.

4.6   Adjustments to Account Balances. All amounts credited to a Participant's
      Account Balance shall be further credited with earnings at a rate
      (adjusted quarterly on the last day of each quarter) which mirrors the
      mutual fund selected by such Participant on the Compensation Reduction
      Agreement. The Deferred Compensation Committee reserves the right to
      change the manner in which earnings adjustments are determined. Plan
      Participants will be allowed to change their selected mutual fund on a
      daily basis, with a maximum of four changes per year. Investment changes
      will be allowed after termination of employment with Employer (subject to
      the maximum four changes per year) until such time as account balances are
      paid in full. Earnings shall continue to be credited quarterly after
      commencement of payment of benefits to a Participant based on the Account
      Balance at the end of the applicable quarter.

4.7   Matching Contributions from Employer. At the end of each calendar year, or
      upon such time as the Employer makes a 401(k) Plan matching contribution
      for such calendar year, the Employer will make a matching contribution to
      each Participant's account equal to the lesser of (a) the I.R.S. deferral
      maximum for the calendar year in question (Year 2001 is $10,500) or (b)
      the dollar amount of the deferral election made by such Participant to the
      Plan for that calendar year.

                                       6
<PAGE>
                                    ARTICLE V
           DISABILITY BENEFIT, DEATH BENEFIT, AND SPECIAL WITHDRAWALS

5.1   Disability Benefit. There is no special payment method applying to
      termination of employment due to Disability. Section 4.1 shall apply.

5.2   Death Benefit. In the event that a Participant dies before or after
      retirement, the Participant's Beneficiary shall be entitled to payment of
      a single lump sum equal to the Participant's Account Balance as of his or
      her date of death unless such Participant elected periodic payment of his
      or her Account Balance under Article IV, in which event the portion of the
      Account Balance payable in periodic installments shall be paid under
      Section 4.3(b) (over five (5) years).

5.3   Hardship Withdrawal. Prior to termination of employment, a Participant may
      request a payment under the Plan if the Participant experiences a
      financial hardship. A "financial hardship" is an unanticipated emergency
      that is caused by an event beyond the control of a Participant and that
      would result in severe financial hardship to the Participant if early
      withdrawal were not permitted, including, but not limited to college
      tuition. The Deferred Compensation Committee, at its sole discretion, will
      determine whether a Participant has experienced a financial hardship. The
      amount of any payment on account of financial hardship is limited to the
      amount of the severe financial need which cannot be met with other
      resources of the Participant.

5.4   In-Service Withdrawal. Prior to termination of employment, a Participant
      may request a payment under the Plan as an In-Service Withdrawal. A
      distribution to a Participant in the form of an In-Service Withdrawal may
      not exceed 90% of the Participant's Account Balance. All In-Service
      Withdrawals are subject to a mandatory Account Balance forfeiture equal to
      10% of such withdrawal. Forfeitures will remain the property of the
      Employer, and the Participant's Account Balance will be reduced
      accordingly. In-Service Withdrawals must be approved by the Employer upon
      review by the Deferred Compensation Committee.

5.5   Change in Control. Notwithstanding anything in the Plan to the contrary,
      each Participant shall have the right within six (6) months following a
      Change in Control to receive an immediate payment of such Participant's
      Account Balance, provided that such Participant has elected in advance for
      a mandatory payment of their Account Balance upon a Change in Control.
      "Elected in advance" shall mean the Participant has elected such option on
      his or her initial deferral election form for the deferrals attributable
      to a particular calendar year. For purposes of this Section 5.5, a
      Participant's Account Balance shall be valued as of the last day of the
      month in which such request is received by the Deferred Compensation
      Committee, and payment shall be made within thirty (30) days following
      such valuation date. Notwithstanding any of the above, any Participant not
      electing in advance to receive a mandatory payment of their Account
      Balance upon Change in Control may elect to receive all or any portion of
      their Account Balance in accordance with Section 5.4 (after the applicable
      10% penalty).

                                       7
<PAGE>
                                   ARTICLE VI
                                 ADMINISTRATION

6.1   Plan Administration. This Plan shall be administered by the Deferred
      Compensation Committee, which shall have authority to make, amend,
      interpret and enforce all appropriate rules and regulations for the
      administration of the Plan and decide or resolve any and all questions
      including interpretations of the Plan, as may arise in connection with the
      Plan.

6.2   Deduction of Taxes from Amounts Payable. The Employer may deduct from the
      amount to be distributed under the Plan such amount as the Employer, in
      its sole discretion, deems proper for the payment of income, employment,
      death, succession, inheritance, or other taxes with respect to benefits
      under the Plan.

6.3   Indemnification. The Employer shall indemnify and hold harmless each
      employee, officer, or director of the Employer to whom is delegated
      duties, responsibilities, and authority with respect to the Plan against
      all claims, liabilities, fines and penalties, and all expenses reasonably
      incurred by or imposed upon him or her (including but not limited to
      reasonable attorney fees) which arise as a result of his or her actions or
      failure to act in connection with the operation and administration of the
      Plan to the extent lawfully allowable and to the extent that such claim,
      liability, fine, penalty, or expense is not paid for by liability
      insurance purchased or paid for by the Employer. Notwithstanding the
      foregoing, the Employer shall not indemnify any person for any such amount
      incurred through any settlement or compromise of any action unless the
      Employer consents in writing to such settlement or compromise.

6.4   Expenses. The expenses of administering the Plan shall be paid by the
      Employer.

6.5   Delegation of Authority. In the administration of the Plan, the Deferred
      Compensation Committee may, from time to time, employ agents and delegate
      to them such administrative duties as it sees fit, and may from time to
      time consult with legal counsel who may be legal counsel to the Employer.

6.6   Binding Decisions or Actions. The decision or action of the Deferred
      Compensation Committee in respect of any question arising out of or in
      connection with the administration, interpretation and application of the
      Plan and the rules and regulations thereunder shall be final and
      conclusive and binding upon all persons having any interest in the Plan.
      Decisions of the Deferred Compensation Committee within the purview of its
      discretionary authority, may be overturned upon judicial review only if
      such decisions were arbitrary and capricious.

                                       8
<PAGE>
                                   ARTICLE VII
                            AMENDMENT AND TERMINATION

7.1   Amendment and Termination. The Plan is intended to be permanent, but the
      Deferred Compensation Committee may at any time modify, amend, or
      terminate the Plan, provided that such modification, amendment or
      termination shall not cancel, reduce, or otherwise adversely affect the
      amount of benefits of any Participant accrued (and any form of payment
      elected) as of the date of any such modification, amendment, or
      termination, without the consent of the Participant. The Deferred
      Compensation Committee shall be permitted upon Plan termination to pay
      each Participant (without such Participant's consent) a lump sum in the
      amount of such Participant's Account Balance as of the date of such Plan
      termination.

7.2   Constructive Receipt Termination. Notwithstanding anything contrary in the
      Plan, if any Participant receives a deficiency notice from the United
      States Internal Revenue Service asserting constructive receipt of amounts
      payable under the Plan, the Deferred Compensation Committee, in its sole
      discretion, may terminate the Plan or such Participant's participation in
      the Plan.

7.3   Amendment or Termination After Change in Control. Notwithstanding anything
      to the contrary in the Plan, the Plan shall not be amended or terminated
      without the prior written consent of affected Participants for a period of
      six (6) months following a Change in Control and shall not thereafter
      amend or terminate the Plan in any manner which affects any Participant
      who commences receiving payment of benefits under the Plan prior to the
      end of such six (6) month period following a Change in Control.

                                       9
<PAGE>
                                  ARTICLE VIII
                                     FUNDING

8.1   General Assets. All benefits under the Plan shall be paid directly from
      the general funds of the Employer, and no special or separate fund shall
      be established and no other segregation of assets shall be made to assure
      payment. No Participant, Employee, Spouse or Beneficiary shall have any
      right, title or interest whatever in or to any investments which the
      Employer may make to aid the Employer in meeting its obligation hereunder.
      Nothing contained in the Plan, and no action taken pursuant to its
      provisions, shall create or be construed to create a trust of any kind, or
      a fiduciary relationship, between the Employer and any Participant,
      Employee, Spouse, or Beneficiary.

8.2   Rabbi Trust. To the extent that any person acquires a right to receive
      payments from the Employer hereunder, such rights shall be no greater than
      the right of an unsecured creditor of the Employer. Notwithstanding the
      foregoing, the Employer may, at its sole discretion, establish a grantor
      type trust, commonly known as a Rabbi Trust, as a vehicle for accumulating
      the assets needed to pay the promised benefit. Such Rabbi Trust, however,
      must, in accordance with Internal Revenue Regulations applicable to Rabbi
      Trusts, remain available to satisfy the Employer's creditors in the event
      of the Employer's insolvency or bankruptcy.

8.3   Change in Control. Upon a Change in Control, as defined in Section 2.3,
      the Employer may make an irrevocable contribution to a Rabbi Trust
      (referenced in Section 8.2) in an amount that is sufficient to pay each
      Participant or Beneficiary the promised benefit to which the Participant
      or Beneficiary would be entitled pursuant to the terms of the Plan as of
      the date on which the Change in Control occurred.

                                       10
<PAGE>
                                   ARTICLE IX
                               GENERAL CONDITIONS

9.1   Anti-assignment Rule. No interest of any Participant, Employee, Retired
      Employee, Spouse or Beneficiary under the Plan and no benefit payable
      hereunder, shall be assigned as security for a loan. Any such purported
      assignment shall be null, void and of no effect, nor shall any such
      interest or any such benefit be subject in any manner, either voluntarily
      or involuntarily, to anticipation, sale, transfer, assignment or
      encumbrance by or through a Participant, Employee, Retired Employee,
      Spouse or Beneficiary. If any attempt is made to alienate, pledge or
      charge any such interest or any such benefit for any debt, liabilities in
      tort or contract, or otherwise, of any Participant, Employee, Retired
      Employee, Spouse, or Beneficiary, contrary to the prohibitions of the
      preceding sentences, then the Deferred Compensation Committee at its
      discretion may suspend or forfeit the interests of such person. During the
      period of such suspension, or in case of forfeiture, the Employer shall
      hold such interest for the benefit of, or shall make the benefit payments
      to which such person would otherwise be entitled to, the designated
      Beneficiary or to some member of such Participant's, Employee's, Retired
      Employee's, Spouse's or Beneficiary's family to be selected in the
      discretion of the Deferred Compensation Committee. Similarly, in cases of
      misconduct, incapacity or disability, the Deferred Compensation Committee,
      in its sole discretion, may make payments to some member of the family of
      any of the foregoing to be selected by it or to whomsoever it may
      determine is best fitted to receive or administer such payments.

9.2   No Legal or Equitable Rights or Interest. No Employee and no other person
      shall have any legal or equitable rights or interest in the Plan that are
      not expressly granted in the Plan. Participation in the Plan does not give
      any person any right to be retained in the service of the Employer. The
      right and power of the Employer to dismiss or discharge any Employee is
      expressly reserved.

9.3   Applicable Plan Provisions. The rights under the Plan or an Employee who
      retires or leaves the service of the Employer at any time, and the rights
      of anyone entitled to receive any payments under the Plan by reason of the
      death of such Employee, shall be governed by the provisions of the Plan in
      effect on the date such Employee retires or leaves the service of the
      Employer, except as otherwise specially provided in the Plan.

9.4   No Employment Contract. Nothing contained herein shall be construed to
      constitute a contract of employment between an Employee and the Employer.

9.5   Headings. The headings of Sections are included solely for convenience of
      reference, and if there is any conflict between such headings and the text
      of the Plan, the text shall control.

9.6   Invalid or Unenforceable Provisions. If any provision of the Plan shall be
      held invalid or unenforceable, such invalidity or un-enforceability shall
      not affect any other provisions hereof and the Plan shall be construed and
      enforced as if such provisions, to the extent invalid or unenforceable,
      had not been included.

                                       11
<PAGE>
9.7   Governing Law. The laws of the State of California shall govern the
      construction and administration of the Plan.

IN WITNESS WHEREOF, the Employer has executed this Plan this 31st day of
January     , 2001.

                                    UNITED STATES MARINE REPAIR, INC.

                                    By:  /s/ Ellen Vinck
                                         -------------------------------------
                                         Ellen Vinck

                                    Its: Vice President
                                         -------------------------------------

                                    ATTEST: /s/ Lloyd A. Schwartz
                                            ----------------------------------
                                              Lloyd A. Schwartz

                                    Its:      Secretary
                                          ------------------------------------

                                       12

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