Sample Business Contracts


Collective Bargaining Agreement - San Francisco Drydock Inc., AFL-CIO, Pacific Coast Metal Trades District Council, Bay Cities Metal Trades Council and International Unions


                         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


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                 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.


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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.

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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


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                  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

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                  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.

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                  (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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         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

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                  (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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                  (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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                                    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.

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         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

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                  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>


   -----------------------------------------------------------------------------------------------
                                                         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
   -----------------------------------------------------------------------------------------------
                                                                      
     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
   -----------------------------------------------------------------------------------------------





   -----------------------------------------------------------------------------------------------
                                             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
   -----------------------------------------------------------------------------------------------
                                                                      
       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
   -----------------------------------------------------------------------------------------------


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


                                                            
             -     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



                                       35
<PAGE>

                                                            
             -     Propoxyphene                          300          ng/ml




         *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
                                        ----------------------------------------

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