10.3 Incentive Stock Option Agreement between Tollycraft and D.R. Cooley

TOLLYCRAFT YACHT CORPORATION
INCENTIVE STOCK OPTION AGREEMENT

January 11, 1996
(Date of Grant)

TOLLYCRAFT YACHT CORPORATION, a Minnesota corporation ("Company"), 
pursuant to its desire to create employee benefit plans to retain and motivate 
outstanding employees and to align such employees interests with the interests 
of the Company, hereby grants to D. R. Cooley("Optionee"), an option 
("Option") to purchase a total of 1,000,000 shares of the common stock of the 
Company ("Common Stock") at the price of per share on the terms and conditions 
set forth herein. 

1. Exercisable in Installments.  This Option is effective as of the date of 
grant set forth above and shall be exercisable as follows:

1.1  Up to 250,000 shares at $.37 per share, which is the fair value at 
the time this option is granted, on or before 12-31-96.
1.2  Any unexercised shares issuable pursuant to Section 1.1 herein and 
up to 250,000 additional shares, all at $.50 per share on or before 12-31-97.
1.3  Any unexercised shares issuable pursuant to Sections 1.1 and 1.2 
herein and up to 250,000 additional shares, all at 50% of the bid price of the 
stock as quoted at the time notice of exercise is given, on or before 12-31-98
1.4  Any unexercised shares issuable pursuant to Sections 1.1, 1.2, and 
1.3 herein and up to 250,000 additional shares, all at 50% of the bid price of 
the stock as quoted at the time notice of exercise is given, on or before 12-
31-99

In no event shall this Option be exercisable in whole or in part after 
December 31, 1999.

2. Restrictions on Transfer and Legend of Certificates.  The Company intends 
to register the Common Stock subject to this Option with the Securities and 
Exchange Commission using Form S-8 when appropriate, although the Company 
makes no assurance of such registration.  Accordingly, the Optionee warrants, 
represents and agrees that unless a registration statement under the 
Securities Act of 1933 is effective with respect to the Option and/or the 
Common Stock, he has acquired the Option and will acquire any of the Common 
Stock underlying this Option for his own account, with no view to any 
distribution thereof, and that he will not make any distribution thereof other 
than pursuant to an exemption from registration under the Securities Act of 
1933. The Company shall have the right to place upon any certificate 
evidencing shares issuable upon the exercise of this Option such legend as the 
Board of Directors may prescribe restricting the transferability of such 
shares.


3. Certain Rights Not Conferred by Option.  The Optionee shall not, by virtue 
of holding this Option, be entitled to any of the rights of a stockholder in 
the Company.

4. Expenses.  The Company shall pay all original issue and transfer taxes with 
respect to the issuance and transfer of shares of Common Stock pursuant to 
this Agreement and all other fees and expenses necessarily incurred by the 
Company in connection therewith.

5. Exercise of Option.  

5.1 The Option shall be exercisable only by delivering written notice of 
exercise in a form specified by the Company to the Secretary of the Company at 
its principal office within the time specified in Section 1 hereof, together 
with payment as hereinafter described. Payment shall be in cash, except that 
the Board of Directors, may, upon application of the Optionee, permit the 
Optionee to pay the option price all or in part with shares of Common Stock 
(other than shares acquired within the preceding two-year period by way of 
exercise of an incentive stock option). The fair market value of the shares as 
of the date of delivery of the certificates therefor to the Secretary of the 
Company (as determined by the Board of Directors), accompanied by a stock 
power executed in blank with signature guaranteed by a national bank, shall be 
utilized as the basis for determining how much of the option price was paid 
with such shares. The notice shall specify the number of shares for which the 
Option is being exercised (which number, if less than all of the shares then 
subject to exercise under the Option, shall be 100 or a multiple thereof not 
resulting in any fractional shares) and shall be accompanied by payment in 
full of the purchase price of the shares of Common Stock with respect to which 
the Option is being exercised. No shares shall be delivered upon any exercise 
of the Option until there has been compliance with all applicable laws, rules 
and regulations. If a registration statement under the Securities Act of 1933 
is not then in effect with respect to the shares issuable upon such exercise, 
the person exercising the Option shall represent and warrant at the time of 
any such exercise that the shares are being purchased only for investment and 
without any present intention to sell or distribute such shares if, in the 
opinion of counsel for the Company, such a representation is required under 
the Securities Act of 1933 or any other applicable federal, state or foreign 
law, or any regulation or rule of any governmental agency, and make such other 
representations as the Company reasonably may determine to be necessary. 
Except as provided in Section 6 hereof, the Option may be exercised only if, 
at all times during the period beginning on the date of the granting of the 
Option and ending on the day of exercise, the Optionee was an employee of 
either the Company (or a parent or subsidiary corporation of the Company) or a 
corporation (or a parent or subsidiary corporation of such corporation).


5.2 Upon and after any exercise of the Option, the Company shall be 
entitled to withhold such amounts from any wages or other sums due the 
Optionee necessary in order for the Company to satisfy any federal, state or 
foreign income, employment or other withholding tax requirements. If the 
amount required to be withheld exceeds 30% of the wages and other amounts then 
owed to the Optionee, the Company at its election may determine that the 
exercise of the Option shall not apply to some portion or all of the number of 
shares designated in the notice of exercise unless the Optionee pays to the 
Company in cash the amount necessary in order for the Company to satisfy the 
withholding requirements.

5.3 Until the Optionee becomes a shareholder of record, no right to vote 
or to receive dividends or any other rights as a shareholder shall exist with 
respect to shares of Common Stock notwithstanding the exercise of the Option. 
 No adjustment shall be made for dividend or other rights as to which the 
record date precedes the date the Optionee becomes a shareholder of record, 
except as provided in Section 9 hereof.

6. Termination of Option.  To the extent it is not exercised, the Option 
granted hereunder shall terminate (i) upon breach by the Optionee of any 
provision of this Agreement or (ii) upon the termination of Optionee's 
employment for any reason, including voluntary or involuntary termination with 
or without cause, with the Company, a parent or subsidiary corporation of the 
Company, or a corporation (or a parent or subsidiary corporation of such 
corporation).

6.1 In the case of death of the Optionee who was employed by the Company 
at the date of death, the Option may be exercised (to the extent accrued at 
the date of death) within six months after the death of the Optionee, by (and 
only by) the person or persons to whom the rights of the Optionee under the 
Option shall have passed by will or by the applicable laws of descent and 
distribution.

6.2 In the event of termination of employment of the Optionee for any 
reason, this Option shall be deemed to have terminated thirty days after the 
date such Optionee ceases, for any reason, to be an employee of the Company, 
its parents or subsidiaries.

7. The Effect of Sale or Other Disposition of the Company.  In the event the 
Company or its shareholders enter into an agreement, plan of reorganization or 
other arrangement to dispose of all or substantially all of the assets or 
stock of the Company by means of a sale, reorganization, liquidation, or 
otherwise, the Option shall become exercisable with respect to the full number 
of shares subject to the Option, whether or not otherwise then accrued, during 
the period commencing as of the date of such agreement, plan of reorganization 
or other arrangement and ending the day before its consummation or 
termination. All options which have not been exercised upon such consummation 
thereupon shall terminate.

8. Non-assignability of Option.  Neither this Option nor any part thereof or 
interest therein may be sold, pledged, assigned or transferred in any manner 
otherwise than by will or by the laws of descent and distribution, and may be 
exercised during the lifetime of the Optionee only by the Optionee.


9. Adjustments Upon Changes in Capitalization.  If all or any portion of the 
Option is exercised subsequent to any stock dividend, split up, 
recapitalization, combination or exchange of shares, merger, consolidation, 
acquisition of property or stock, separation, reorganization, or liquidation, 
as a result of which shares of Common Stock shall be changed into the same or 
a different number of shares of the same or another class or classes, the 
person or persons exercising the Option shall receive for the aggregate price 
payable upon such exercise of the Option, the aggregate number and class of 
shares which, if shares of Common Stock (as authorized at the date of grant of 
the Option) had been purchased at the date of grant of the Option for the same 
aggregate price (on the basis of the price per share provided in the Option) 
and had not been disposed of, such person or persons would be holding at the 
time of such exercise, as a result of such purchase and any such stock 
dividend, split up, recapitalization, combination or exchange of shares, 
merger, consolidation, acquisition of property or stock, separation, 
reorganization or liquidation; provided, however, that no fractional share 
shall be issued upon any such exercise, and the aggregate price paid shall be 
appropriately reduced on account of any fractional share not issued. In the 
event of any such change in the outstanding Common Stock of the Company, the 
aggregate number and class of shares remaining available under the Option 
shall be that number and class which a person, to whom an option had been 
granted for all of the available shares under the Option on the date preceding 
such change, would be entitled to receive as provided in the first sentence of 
the second paragraph of this Section 9.

10. Reservation of Shares and Common Stock.  The Company, during the term of 
the Option, shall at all times reserve and keep available, and shall seek or 
obtain from any regulatory body having jurisdiction any requisite authority in 
order to issue and sell such number of the shares of Common Stock as shall be 
sufficient to satisfy the requirements of the Option.  Inability of the 
Company to obtain from any regulatory body having jurisdiction authority 
deemed by counsel for the Company to be necessary to the lawful issuance and 
sale of any shares of its stock hereunder shall relieve the Company of any 
liability with respect to the nonissuance or sale of such share(s) as to which 
such requisite authority shall not have been obtained.

TOLLYCRAFT YACHT CORPORATION

By /s/ Tony Tulleners

Title: Chairman of the Board

Accepted as of the date set forth above

_____/s/___________________________
D. R. Cooley