INCENTIVE STOCK OPTION AGREEMENT

The Shaw Group Inc.

2001Employee Incentive Compensation Plan

This Incentive Stock Option Agreement (“Agreement”) dated as of    , 200   (the
date on which the option evidenced hereby was granted) is entered into between
The Shaw Group Inc. (the “Company”) and    (the “Optionee”), pursuant to the The
Shaw Group Inc. 2001 Employee Incentive Compensation Plan (the “Plan”).

THE PARTIES HERETO AGREE AS FOLLOWS:

1. Grant of Option. In consideration of the services performed and to be
performed by the Optionee, the Company hereby grants to the Optionee an option
(the “Option”) under the Plan to purchase a total of    of the Company’s no par
value common stock (the “Common Stock”), upon the following terms and
conditions:

(a) The Option is granted under and pursuant to the Plan, a copy of which is
attached hereto as Exhibit A and incorporated herein by reference, and the
Option is subject to all of the provisions thereof. In case of conflict between
one or more provisions of this Agreement and one ore more provisions of the
Plan, the provision(s) of the Plan shall govern. Capitalized terms used herein
without definition shall have the same meanings given such terms in the Plan.
The Optionee represents and warrants that he or she has read the Plan and is
fully familiar with all the terms and conditions of the Plan and agrees to be
bound thereby.

(b) The Option is an incentive stock option or ISO (as defined in the Plan) that
is intended to be governed by Section 422 of the Internal Revenue Code, as
amended (the “Code”).

(c) The Exercise Price of the Option is $  per share (the fair market value per
share on the date of grant of the Option).

2. Exercise of Option.

(a) With the exception of the Optionee’s death, disability or retirement, the
ramifications of which are expressly provided for in the Plan, and subject to
earlier expiration of this Option as set forth below and in the Plan, the Option
shall not be exercisable for more than a percentage of the aggregate number of
shares subject to the Option determined by the number of full years from the
date of this Agreement to the date of exercise in accordance with the following
schedule:

          Number of Full Years   Percentage of Shares that may be Purchased

(b) Notwithstanding any other provision of this Agreement or the Plan, the
Option shall not be exercised prior to the date on which the shareholders of the
Company approve the adoption of the Plan. The Option may not be exercised
unless, at the date of exercise (i) a registration statement under the
Securities Act of 1933, as amended, relating to the Shares covered by the Option
shall be in effect, or (ii) an exemption from registration is applicable to the
shares in the opinion of counsel for the Company.

3. Termination of Option. Except as otherwise provided herein, the Option shall
terminate:

(a) upon the expiration of ten (10) years from the date of this Agreement, or if
sooner,

(b) three (3) months after termination of employment of the Optionee, unless
employment is terminated (i) as a result of death, disability or retirement, in
which case the right of the Optionee or his or her representative to purchase
shares of Common Stock hereunder shall expire as of the first anniversary
following such termination, or (ii) for “Cause” (as defined in the Plan) in
which case the Option shall immediately terminate and no longer be exercisable.

In no case shall the Option continue to vest during the limited period of
exercisability following the Optionee’s termination of employment provided for
in (b)(i) above. During such period, the Option may only be exercised with
respect to the number of shares for which it was exercisable at the time of such
termination of employment.

4. Rights Prior to Exercise of Option. The Optionee shall have no rights as a
stockholder with respect to the shares of Common Stock subject to the Option
until the exercise of his or her rights hereunder and the issuance and delivery
to Optionee of a certificate or certificates evidencing such shares.

5. Miscellaneous.

(a) No Representations or Warranties. Neither the Company nor the Committee nor
any of their representatives or agents has made any representations or
warranties to the Optionee with respect to the income tax or other consequences
of the transactions contemplated by this Agreement, and the Optionee is in no
manner relying on the Company, the Committee or any of their representatives or
agents for an assessment of such tax or other consequences.

(b) Employment. Nothing in this Agreement nor in the Plan nor in the granting of
the Option shall confer on the Optionee any right to or guarantee of continued
employment with the Company or any of its Affiliates or in any way limit the
right of the Company or any of its Affiliates to terminate the employment of the
Optionee at any time.

(c) Investment. The Optionee hereby agrees and represents that the Option and
any purchase of the shares of Common Stock under the Option is for the
Optionee’s own account for investment purposes only and not with a view of
resale or distribution unless such shares acquired pursuant to the Option are
registered under the Securities Act of 1933, as amended.

(d) Stock Issuance. The exercise by the Optionee of the Option granted herein
will not become final nor will shares of Common Stock be issued pursuant thereto
unless such exercise fully complies with the requirements of the Plan and all
applicable federal, state and local laws.

(e) Necessary Acts. The Optionee and the Company hereby agree to perform any
further acts and to execute and deliver any documents, which may be reasonably
necessary to carry out the provisions of this Agreement.

(f) No Transfer. The Option may not be assigned, encumbered or transferred,
except by will or the laws of descent and distribution in the event of death of
the Optionee or pursuant to a qualified domestic relations order pursuant to the
Code or the Employee Retirement Security Act of 1974, as amended.

(g) Severability. The provisions of this Agreement are severable and if any one
or more provisions may be determined to be illegal or otherwise unenforceable,
in whole or in part, the remaining provisions, and any partially enforceable
provision to the extent enforceable in any jurisdiction, shall nevertheless be
binding and enforceable.

(h) Waiver. The waiver by the Company of a breach of any provision of this
Agreement by the Optionee shall not operate or be construed as a waiver of any
subsequent breach by the Optionee.

(i) Binding Effect; Applicable Law. This Agreement shall bind and inure to the
benefit of the Company and its successors and assigns, and the Optionee and any
heir, legatee, legal representative or assignee as specified in Section 5(f)
above of the Optionee. This Agreement shall be interpreted under and governed by
and constructed in accordance with the laws of the State of Louisiana.

IN WITNESS WHEREOF, the parties to this Agreement have executed this Agreement
effective as of the date first above written.

COMPANY:

THE SHAW GROUP INC.

   

By: Gary P. Graphia
Title: Secretary and General Counsel

OPTIONEE:

Signature of Optionee