EMPLOYMENT AGREEMENT

This Employment Agreement (“Agreement”) is entered into effective as of
October 14, 2005 by and between The Shaw Group Inc., a Louisiana corporation
(collectively with the affiliates and subsidiaries hereinafter referred to as
“Company”), and Gary P. Graphia (“Employee”).

WHEREAS, the Company employs Employee and desires to continue such employment
relationship and Employee desires to continue such employment;

NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties, and agreements contained herein, and for other valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties agree as follows:

1. Employment. The Company continues to employ Employee, and Employee hereby
accepts continued employment by the Company, on the terms and conditions set
forth in this Agreement.

2. Term of Employment. Subject to the provisions for earlier termination
provided in this Agreement, the term of this agreement (the “Term”) shall be two
(2) years commencing on the date hereof, and shall be automatically renewed on
each day following the date hereof so that on any given day the unexpired
portion of the Term of this Agreement shall be two (2) years. Notwithstanding
the foregoing provision, at any time after the date hereof the Company or
Employee may give written notice to the other party that the Term of this
Agreement shall not be further renewed from and after a subsequent date
specified in such notice (the “fixed term date”), in which event the Term of
this Agreement shall become fixed and this Agreement shall terminate on the
third anniversary of the fixed term date.

3. Employee’s Duties. During the Term of this Agreement, Employee shall serve as
Secretary and General Counsel of the Company, and with such duties and
responsibilities as may from time to time be assigned to him by the board of
directors of the Company (the “Board”), provided that such duties are consistent
with the customary duties of such position.

Employee agrees to devote his full attention and time during normal business
hours to the business and affairs of the Company and to use reasonable best
efforts to perform faithfully and efficiently his duties and responsibilities.
Employee shall not, either directly or indirectly, enter into any business or
employment with or for any person, firm, association or corporation other than
the Company during the Term of this Agreement; provided, however, that Employee
shall not be prohibited from making financial investments in any other company
or business or from serving on the board of directors of any other company.
Employee shall at all times observe and comply with all lawful directions and
instructions of the Board.

4. Base Compensation. For services rendered by Employee under this Agreement,
the Company shall pay to Employee his current base salary as of the date of this
Agreement (“Base Compensation”), per annum payable in accordance with the
Company’s customary pay periods and subject to customary withholdings. The
amount of Base Compensation may be reviewed by the Board on an annual basis as
of the close of each fiscal year of the Company and may be increased as the
Board may deem appropriate. In the event the Board deems it appropriate to
increase Employee’s annual base salary, said increased amount shall thereafter
be the “Base Compensation”. Employee’s Base Compensation, as increased from time
to time, may not thereafter be decreased unless agreed to by Employee. Nothing
contained herein shall prevent the Board from paying additional compensation to
Employee in the form of bonuses or otherwise during the Term of this Agreement.

5. Additional Benefits. In addition to the Base Compensation provided for in
Section 4 herein, Employee shall be entitled to the following:

(a) Expenses. The Company shall, in accordance with any rules and policies that
it may establish from time to time for executive officers, reimburse Employee
for business expenses reasonably incurred in the performance of his duties.

(b) Reserved.

(c) Vacation. Employee shall be entitled to three (3) weeks of vacation per
year, without any loss of compensation or benefits. Employee shall be entitled
to carry forward any unused vacation time.

(d) General Benefits. Employee shall be entitled to participate in the various
employee benefit plans or programs provided to the employees of the company in
general, including but not limited to, health, dental, disability, 401K and life
insurance plans, subject to the eligibility requirements with respect to each of
such benefit plans or programs, and such other benefits or perquisites as may be
approved by the Board during the Term of this Agreement. Nothing in this
paragraph shall be deemed to prohibit the Company from making any changes in any
of the plans, programs or benefits described in this Section 5, provided the
change similarly affects all executive officers of the Company similarly
situated.

(e) Options. Upon the resignation for Good Reason as defined in Section 7 (e),
discharge as defined in Section 7 (c) (i), or disability as defined in Section 7
(d), Employee shall be considered as immediately and totally vested in any and
all stock options, restricted stock and other similar awards previously made to
Employee by the Company or its subsidiaries under a “Long Term Incentive Plan”
duly adopted by the Board (such options or similar awards are hereinafter
collectively referred to as “Options”). In the event that the Options become
vested under this paragraph, employee will be allowed not less than one year
from the date of such vesting in which to exercise such options.

6. Confidential Information. Employee, during the Term, may have access to and
become familiar with confidential information, secrets and proprietary
information concerning the business and affairs of the Company. As to such
confidential information, Employee agrees as follows:

(a) During the employment of Employee with the Company and thereafter Employee
will not, either directly or indirectly, disclose to any third party without the
written permission of the Company, nor use in any way (except as required in the
course of his employment with the Company) any confidential information, secret
or proprietary information of the Company. In the event of a breach or
threatened breach of the provisions of this Section 6 (a), the Company shall be
entitled, in addition to any other remedies available to the Company, to an
injunction restraining Employee from disclosing such confidential information.

(b) Upon termination of employment of Employee, for whatever reason, Employee
shall surrender to the Company any and all documents, manuals, correspondence,
reports, records and similar items then or thereafter coming into the possession
of Employee which contain any confidential, secret or proprietary information of
the Company.

7. Termination This Agreement may be terminated prior to the end of its Term as
set forth below:

(a) Resignation (other than for Good Reason). Employee may resign, including by
reason of retirement, his position at any time by providing written notice of
resignation to the Company in accordance with Section 11 hereof. In the event of
such resignation, except in the case of resignation for Good Reason (as defined
below), this Agreement shall terminate and Employee shall not be entitled to
further compensation pursuant to this Agreement other than the payment of any
unpaid Base Compensation accrued hereunder as of the date of Employee’s
resignation.

(b) Death. If Employee’s employment is terminated due to his death, one (1) year
of Employee’s Base Compensation shall be paid by the Company in lump sum in cash
within thirty (30) days after Employee’s death to Employee’s surviving spouse or
estate, and one (1) year of paid group health and dental insurance benefits
shall be provided by the Company to Employee’s surviving spouse and the minor
children, and after said payments and provision of insurance benefits, this
Agreement shall terminate and the Company shall have no obligations to Employee
or his legal representatives with respect to this Agreement other than the
payment of any unpaid Base Compensation previously accrued hereunder. This
provision shall not be exclusive, and shall be in adddition to death benefits
payable by the Company or Insurer under any plan.

(c) Discharge.

(i) The Company may terminate Employee’s employment for any reason at any time
upon written notice thereof delivered to Employee in accordance with Section 11
hereof. In the event that Employee’s employment is terminated during the Term by
the Company for any reason other than his Misconduct or Disability (both as
defined below), then (A) the Company shall pay in lump sum in cash to Employee,
within fifteen (15) days following the date of termination, an amount equal to
the product of (i) Employee’s Base Compensation as in effect immediately prior
to Employee’s termination, multiplied by (ii) the Remaining Term, (B) for the
Remaining Term, the Company, at its cost, shall provide or arrange to provide
Employee (and, as applicable, Employee’s dependents) with disability, accident
and group health insurance benefits substantially similar to those which
Employee (and Employee’s dependents) were receiving immediately prior to
Employee’s termination; however, the welfare benefits otherwise receivable by
Employee pursuant to this clause (B) shall be reduced to the extent comparable
welfare benefits are actually received by Employee (and/or Employee’s
dependents) during such period under any other employer’s welfare plan(s) or
program(s) , with Employee being obligated to promptly disclose to the Company
any such comparable welfare benefits, (C) in addition to the aforementioned
compensation and benefits, the Company shall pay in lump sum in cash to Employee
within fifteen (15) days following the date of termination an amount equal to
the product of (i) Employee’s highest bonus paid by the Company during the most
recent two (2) years immediately prior to the Date of Termination, multiplied by
(ii) the Remaining Term, and (D) Employee shall be considered as immediately and
totally vested in any and all Options previously made to Employee by Company or
its subsidiaries.

(ii) Notwithstanding the foregoing provisions of this Section 7, in the event
Employee is terminated because of Misconduct, the Company shall have no
obligations pursuant to this Agreement after the Date of Termination other than
the payment of any unpaid Base Compensation accrued through the Date of
Termination. As used herein, “Misconduct” means (a) the continued failure by
Employee to substantially perform his duties with the Company (other than any
such failure resulting from Employee’s incapacity due to physical or mental
illness or any such actual or anticipated failure after the issuance of a Notice
of Termination by Employee for Good Reason), after a written demand for
substantial performance is delivered to Employee by the Board, which demand
specifically identifies the manner in which the Board believes that Employee has
not substantially performed his duties, (b) the-engaging by Employee in conduct
which is demonstrably and materially injurious to the Company, monetarily or
otherwise (other than such conduct resulting from Employee’s incapacity due to
physical or mental illness or any such actual or anticipated conduct after the
issuance of a Notice of Termination by Employee for Good Reason), or
(c) Employee’s conviction for the commission of a felony. Anything contained in
this Agreement to the contrary notwithstanding, the Chief Executive officer of
the Company shall have the sole power and authority to terminate the employment
of Employee on behalf of the Company.

(d) Disability. If Employee shall have been absent from the full-time
performance of Employee’s duties with the Company for ninety (90) consecutive
calendar days as a result of Employee’s incapacity due to physical or mental
illness, Employee’s employment may be terminated by the Company for “Disability”
and Employee shall not be entitled to further compensation pursuant to this
Agreement, except that Employee shall (1) be paid monthly (but only for up to a
twelve (12) month period beginning with the Date of Termination) the amount by
which Employee’s monthly Base Compensation exceeds the monthly benefit received
by Employee pursuant to any disability insurance covering Employee; (2) continue
to receive paid group health and dental insurance benefits for Employee and his
dependents for up to twelve (12) month period beginning with Date of
Termination; and (3) be considered as immediately and totally vested in any and
all Options previously granted to Employee by Company or its subsidiaries.

(e) Resignation for Good Reason. Employee shall be entitled to terminate his
employment for Good Reason as defined herein. If Employee terminates his
employment for Good Reason he shall be entitled to the compensation and benefits
provided in Paragraph 7 (c) (i) hereof. “Good Reason” shall mean the occurrence
of any of the following circumstances without Employee’s express written consent
unless such breach or circumstances are fully corrected prior to the Date of
Termination specified in the Notice of Termination given in respect hereof:

(1) the material breach of any of the Company’s obligations under this Agreement
without Employee’s express written consent,

(2) the continued assignment to Employee of any duties inconsistent with the
office of Secretary and General Counsel of the Company;

(3) the failure by the Company to pay to Employee any portion of Employee’s
compensation on the date such compensation is due;

(4) the failure by the Company to continue to provide Employee with benefits
substantially similar to those enjoyed by other executive officers who have
entered into similar employment agreements with Employer under any of the
Company’s medical, health, accident, and/or disability plans in which Employee
was participating immediately prior to such time; or

In addition, the occurrence of any Corporate Change (as defined below), shall
constitute “Good Reason” hereunder, but only if Employee gives notice of his
intent to terminates his employment within ninety (90) days following the
effective date of such Corporate Change.

A “Corporate Change” shall occur if (i) the Company shall not be the surviving
entity in any merger or consolidation (or survives only as a subsidiary of
another entity), (ii) the Company sells all or substantially all of its assets
to any other person or entity (other than a wholly-owned subsidiary), (iii) the
Company is to be dissolved and liquidated, (iv) when any “person” as defined in
Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and as used in Sections 13 (d) and 14 (d) thereof, including a
“group” as defined in Section 13 (d) of the Exchange Act but excluding any 10%
or larger shareholder of record of the Company as of January 10, 2004, directly
or indirectly, becomes the “beneficial owner” (as defined in Rule 13d-3 under
the Exchange Act, as amended from time to time), of securities of the Company
representing 20% or more of the combined voting power of the Company’s then
outstanding securities which are entitled to vote with respect to the election
of the directors of the Company; or (v) as a result of or in connection with a
contested election the members of the Board as of the date of this Agreement
shall cease to constitute a majority of the Board. “Contested” as used herein
shall not include election by a majority of the current Board.

(f) Notice of Termination. Any purported termination of Employee’s employment by
the Company under Sections 7(c)(ii) or 7(d), or by Employee under Section 7(e),
shall be communicated by written Notice of Termination to the other party hereto
in accordance with Section 11 hereof. For purposes of this Agreement, a “Notice
of Termination” shall mean a notice which, if by the Company and is for
Misconduct or Disability, shall set forth in reasonable detail the reason for
such termination of Employee’s employment, or in the case of resignation by
Employee for Good Reason, said notice must specify in reasonable detail the
basis for such resignation. A Notice of Termination given by Employee pursuant
to Section 7(e) shall be effective even if given after the receipt by Employee
of notice that the Board has set a meeting to consider terminating Employee for
Misconduct. Any purported termination for which a Notice of Termination is
required which is not effected pursuant to this Section 7(f) shall not be
effective.

(g) Date of Termination, Etc. “Date of Termination” shall mean the date
specified in the Notice of Termination, provided that the Date of Termination
shall be at least 15 days following the date the Notice of Termination is given.
Notwithstanding the foregoing, in the event Employee is terminated for
Misconduct, the Company may refuse to allow Employee access to the Company’s
offices (other than to allow Employee to collect his personal belongings under
the Company’s supervision) prior to the Date of Termination.

(h) Mitigation. Employee shall not be required to mitigate the amount of any
payment provided for in this Section 7 by seeking other employment or otherwise,
nor shall the amount of any payment provided for in this Agreement be reduced by
any compensation earned by Employee as a result of employment by another
employer, except that any severance amounts payable to Employee pursuant to the
Company’s severance plan or policy for employees in general shall reduce the
amount otherwise payable pursuant to Sections 7(c)(i) or 7(e).

(i) Excess Parachute Payments. Notwithstanding anything in this Agreement to the
contrary, to the extent that any payment or benefit received or to be received
by Employee hereunder in connection with the termination of Employee’s
employment would, as determined by tax counsel selected by the Company,
constitute an “Excess Parachute Payment” (as defined in Section 280G of the
Internal Revenue Code), the Company shall fully “gross-up” such payment so that
Employee is in the same “net” after-tax position he would have been if such
payment and gross-up payments had not constituted Excess Parachute Payments.

8. Non-Compete.

8.1 No Other Activities. Employee agrees that during the term of this Agreement,
he shall not, directly or indirectly, represent or otherwise engage in or
participate in, the business or ventures of any person, firm, partnership,
association, or corporation other than the Company, without first obtaining the
written consent of the Company. Employee further agrees that during the term of
this Agreement, he shall not, directly or indirectly, solicit or attempt to
solicit any products or agreements for the purpose of using the products or
agreements in the formation of a business outside of the Company, regardless of
whether any such products or the subject of such agreements are then being
handled by the Company.

8.2 Non-Disclosure. Employee further agrees that he will not, during or after
the term of his employment, disclose to any person, firm, partnership,
association, or corporation, the names and addresses of any past or present
customers, or prospective customers, of the Company, any of their methods or
practices of obtaining business, their trade secrets, consultant contracts and
the details thereof, their pricing policies, their operational methods, their
marketing plans or strategies, their business acquisition plans and all other
information pertaining to the business of the Company that is not publicly
available. Employee agrees to keep all information gained as a result of his
relationship with the Company on a confidential basis and shall not disclose
that information to anyone not authorized by the Company to receive information.
If Employee should cease, either voluntarily or involuntarily, to be an employee
of the Company, he hereby expressly agrees that, for a period of two (2) years
following termination of his employment, he shall not assist any competitor or
prospective competitor located in the territories serviced by the Company (as
set forth in Attachment 1 or otherwise) during his employment in any way
detrimental to the Company through the use of any information gained as a result
of his employment with the Company. Employee agrees that all computer programs,
print-outs, customer lists, methods, forms, systems and procedures used by the
Company constitute the exclusive property and will remain the exclusive property
of the Company and agrees that he will not disclose any of these matters without
the prior written permission of the Company.

8.3 Non-Solicitation, etc. In further consideration of the other terms and
provisions of this Agreement, and to protect the vital interests of the Company,
upon termination of his employment for any reason, for a period of two (2) years
after the termination of his employment, Employee agrees and binds himself that
he shall not, directly or indirectly, or as a member, shareholder, officer,
director, consultant or employee of any other person or entity, compete with the
Company or own, manage, operate, join, control or participate in the ownership,
management, operation, or control of, or become employed by, consult or advise,
or be connected in any manner with any business or activity which is in actual,
direct or indirect competition or anticipated competition with the Company,
within those counties, parishes, municipalities or other places listed in
Attachment 1 annexed hereto and made a part hereof, so long as the Company, or
carries on the business presently conducted by the Company,. Not by way of
limitation or exclusion, Employee shall not, within the aforesaid locations and
during the aforesaid time period, call upon, solicit, advise or otherwise do, or
attempt to do, business with any customers or distributors of the Company, with
whom the Company had any dealings during the period of Employee’s employment
hereunder or take away or interfere or attempt to interfere with any custom,
trade, business or patronage of the Company, or interfere with or attempt to
interfere with any officers, employees, distributors, representatives or agents
of the Company, or employ or induce or attempt to induce any of them to leave
the employ of the Company or violate the terms of their contracts, or any
employment arrangements, with the Company. Employee acknowledges and agrees that
any breach of the foregoing covenant not to compete would cause irreparable
injury to the Company and that the amount of injury would be impossible or
difficult to fully ascertain. Employee agrees that the Company shall, therefore,
be entitled to obtain an injunction restraining any violation, further violation
or threatened violation of the covenant not to compete hereinabove set forth, in
addition to any other remedies that the Company may pursue.

8.4 Duration. If the two (2) year period referred to in any of this Article 8
shall be finally determined by a court to exceed the maximum period which is
permissible by applicable law, the said period shall be reduced to the maximum
period permitted by such law.

9. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit
Employee’s continuing or future participation in any benefit, bonus, incentive,
or other plan or program provided by the Company or any of its affiliated
companies and for which Employee may qualify, nor shall anything herein limit or
otherwise adversely affect such rights as Employee may have under any Options
with the Company or any of its affiliated companies.

10. Assignability. The obligations of Employee hereunder are personal and may
not be assigned or delegated by him or transferred in any manner whatsoever, nor
are such obligations subject to involuntary alienation, assignment or transfer.
The Company shall have the right to assign this Agreement and to delegate all
rights, duties and obligations hereunder, either in whole or in part, to any
parent, affiliate, successor or subsidiary organization or company of the
Company, so long as the obligations of the Company under this Agreement remain
the obligations of the Company.

11. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
Company at its principal office address, directed to the attention of the Board
with a copy to the Secretary of the Company, and to Employee at Employee’s
residence address on the records of the Company or to such other address as
either party may have furnished to the other in writing in accordance herewith
except that notice of change of address shall be effective only upon receipt.

12. Validity. The invalidity or unenforcability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.

13. Successors; Binding Agreement.

(a) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle Employee to
compensation from the Company in the same amount and on the same terms as he
would be entitled to hereunder if he terminated his employment for Good Reason,
except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination. As
used herein, the term “Company” shall include any successor to its business
and/or assets as aforesaid which executes and delivers the Agreement provided
for in this Section 13 or which otherwise becomes bound by all terms and
provisions of this Agreement by operation of law.

(b) This Agreement and all rights of Employee hereunder shall inure to the
benefit of and be enforceable by Employee’s personal or legal representatives,
executors, administrators, successors, heirs distributees, devisees and
legatees. if Employee should die while any amounts would be payable to him
hereunder if he had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
Employee’s devisee, legatee, or other designee or, if there be no such designee,
to Employee’s estate.

14. Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by Employee and such officer as may be specifically authorized by the
Board. No waiver by either party hereto at any time of any breach by the other
party hereto of, or in compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. This Agreement is an integration of the parties agreement; no
agreement or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party, except
those which are set forth expressly in this Agreement. THE VALIDITY,
INTERPRETATION, CONSTRUCTION AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED
BY THE LAWS OF THE STATE OF LOUISIANA.

15. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to ‘be an original but all of which together will
constitute one and the same instrument.

16. Arbitration. Either party may elect that any dispute or controversy arising
under or in connection with this Agreement be settled by arbitration in Baton
Rouge, Louisiana in accordance with the rules of the American Arbitration
Association then in effect. If the parties cannot mutually agree on an
arbitrator, then the arbitration shall be conducted by a three arbitrator panel,
with each party selecting one arbitrator and the two arbitrators so selected
selecting a third arbitrator. The findings of the arbitrator(s) shall be final
and binding, and judgment may be entered thereon in any court having
Jurisdiction. The findings of the arbitrator(s) shall not be subject to appeal
to any court, except as otherwise provided by applicable law. The arbitrator(s)
may, in his or her (or their) own discretion, award legal fees and costs to the
prevailing party.

IN WITNESS WHEREOF, the parties have executed this Agreement on October 14,
2005, effective for all purposes as provided above.

THE SHAW GROUP INC.

      By /s/ T. A. Barfield, Jr.

 
     

 
   
Name:
  _T. A. Barfield, Jr.
 
   

President and Chief Operating Officer

EMPLOYEE:
Name:/s/ Gary P. Graphia
Gary P. Graphia
Secretary and General Counsel