Capital Construction Fund Agreement - US Department of Transportation, Maritime Administration, and National Steel and Shipbuilding Co.

                                                        Addendum No. 5
                                                        Contract No. MA/CCF-478

                                  ADDENDUM TO
                            MARITIME ADMINISTRATION
                      CAPITAL CONSTRUCTION FUND AGREEMENT
                                      WITH
                    NATIONAL STEEL AND SHIPBUILDING COMPANY


     This Addendum is made by and between the Maritime Administrator (the
'Administrator'), and National Steel and Shipbuilding Company, a citizen of the
United States (the 'Party'), as an addendum to that certain Capital Construction
Fund ('CCF') Agreement Contract No. MA/CCF-478 (the 'Agreement').

     WHEREAS:

     1.   The Administrator and the Party entered into the Agreement on 
September 3, 1988, under Section 607, Merchant Marine Act, 1936, as amended 
(the 'Act');

     2.   The Administrator approved the extension of the Party's commercial 
paper program under certain terms;

     3.   The parties hereto desire to amend the Agreement to reflect the 
approval; and

     4.   The parties hereto have agreed to said amendment and desire to 
incorporate the same into the Agreement.



     NOW THEREFORE, the Administrator and the Party agree as follows:

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     I.   Effective July 30, 1997, the Agreement is amended to reflect the 
following approvals:

     (1) the extension of the Party's commercial paper program with such 
approval terminating on a date 25 years from the date of the last deposit into 
the Party's CCF account of the proceeds from the construction of a qualified 
vessel; (2) the extension of the underlying Liquidity agreement beyond the 
current January 9, 1998 expiration date coinciding with the date referred to in 
(1) above; and (3) the increase in the Party's commercial paper program level 
to $60 million with an over-collateralization range of 11 to 16 percent, such 
approvals being subject to the condition that all other provisions relating to 
the commercial paper program as approved by the Administrator on May 3, 1993, 
remain in full force and effect (which provisions are principally set forth 
below, as modified to reflect the modifications in (3) above):

          a. Consent is granted for NASSCO Funding Corporation (NFC) to pledge
             assets held in its CCF sub-account as collateral for a commercial
             paper issue by NFC in connection with constructing CCF qualified
             vessels, provided the Maritime Administration is supplied with
             specific details of the program when available and that all such
             details and related documents are in a form and substance
             satisfactory to the Administrator.


          b. It is a requirement that the proceeds of the commercial paper be
             deposited into the NFC CCF sub-account within the consolidated
             NASSCO Holdings, Incorporated (NHI) CCF account or be used for a
             qualified project and that CCF withdrawals will not be reimbursed
             from the commercial paper proceeds.

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          c. The funds derived from the commercial paper program (up to $60
          million) or securities acquired with these funds would be deposited in
          the NFC CCF sub-account within the NHI consolidated CCF account and
          that additional CCF funding of up to 11 to 16 percent of the
          commercial paper proceeds would be provided from NFC internal funds to
          cover shortfalls on the commercial paper resulting from the duration
          mismatch between the commercial paper notes and the eligible assets.

          d. At the time of withdrawal from the CCF account for investment
          in a qualified project, NHI would pay off the commercial paper as it 
          became due with non-CCF funds and that in order to maintain the 
          bankruptcy remote nature of NFC, this would be accomplished as a 
          technical accounting matter within the consolidated fund by using 
          funds from the NFC CCF sub-account to pay off the commercial paper 
          as it becomes due and having NHI or the Party simultaneously fund the 
          identical amount into the NHI/NASSCO CCF sub-account.

          e. Pursuant to Section 6(C) of the Agreement, consent is granted to 
          make a non-qualified withdrawal in the event that there is a default 
          in the payment of the commercial paper and it becomes necessary to 
          repay the commercial paper from the NFC CCF sub-account without 
          counterbalancing CCF funding.

     II.  The Administrator reserves the right to review his approval of the
Party's commercial paper program at any time after the fifth anniversary of the
date of the July 30, 1997 approval, provided that the Party has a full
opportunity to

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participate in such review and that any decision to terminate the program
arising from such a review would not be effective for a period of 12 months from
the date that the Party is notified of such decision.

    III. Except as herein otherwise expressly provided, the Agreement, as
heretofore amended, shall remain in full force and effect.


          IN WITNESS WHEREOF, the Parties have executed this Addendum No. 5 in
four counterparts, effective as of the date specified hereinabove and actually
on the 20th day of October, 1997.

(SEAL)                                UNITED STATES OF AMERICA
                                      SECRETARY OF TRANSPORTATION
                                      MARITIME ADMINISTRATION
ATTEST:



BY: /s/ [SIGNATURE ILLEGIBLE]          By: /s/ James J. Zok
   -----------------------------           ---------------------------
     Secretary                               Contracting Officer


(SEAL)                                  NATIONAL STEEL AND
                                        SHIPBUILDING COMPANY


By: /s/ S. D. Timmons                   By: /s/ F. N. Hallett
   -----------------------------           ---------------------------

Name: S. D. Timmons                     Name: F. N. Hallett
     ---------------------------               ------------------------
      Vice President                          Senior Vice President,
      General Counsel & Secretary             Finance
Title:                                  Title:
      --------------------------              ------------------------




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Approved as to form:



   
By:[SIGNATURE ILLEGIBLE]
   -----------------------
   Assistant Chief Counsel
   Maritime Administrator


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