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                                                                    EXHIBIT 10.3

                                                                  EXECUTION COPY

                              EMPLOYMENT AGREEMENT

     This Employment Agreement (the "Agreement") by and between Conrad
Industries, Inc., a Delaware corporation (the "Company"), and Lewis J. Derbes,
Jr. ("Executive") is hereby entered into effective as of September 3, 2002 (the
"Effective Date").

                                    RECITALS

     WHEREAS, the Company desires to employ Executive, and Executive desires to
be employed by the Company, all on the terms and conditions set forth in this
Agreement;

     NOW, THEREFORE, in consideration of the mutual promises, terms, covenants
and conditions set forth herein and the performance of each, it is hereby agreed
as follows:

                                   AGREEMENTS

     1.   Employment and Duties.

          (a)  Effective on September 30, 2002 (the "Start Date"), the Company
     shall employ Executive as the Vice President and Chief Financial Officer of
     the Company. As such, Executive shall have responsibilities, duties and
     authority reasonably accorded to, expected of and consistent with
     Executive's positions as the Vice President and Chief Financial Officer of
     the Company. Executive hereby accepts this employment upon the terms and
     conditions herein contained and, subject to paragraph 1(c), agrees to
     devote substantially all of his time, attention and efforts during normal
     business hours to promote and further the business and interests of the
     Company and its affiliates.

          (b)  Executive shall faithfully adhere to, execute and fulfill all
     lawful policies established by the Company.

          (c)  Executive shall not, during the term of his employment hereunder,
     engage in any other business activity pursued for gain, profit or other
     pecuniary advantage if such activity interferes in any material respect
     with Executive's duties and responsibilities hereunder. The foregoing
     limitations shall not be construed as prohibiting Executive from making
     personal investments in such form or manner as will neither require his
     services in the operation or affairs of the companies or enterprises in
     which such investments are made nor violate the terms of paragraph 3
     hereof.

     2.   Compensation. For all services rendered by Executive, the Company
shall compensate Executive as follows:

          (a)  Base Salary. The base salary payable to Executive during the term
     of his employment hereunder, commencing on the Start Date, shall be
     $140,000 per year, payable in accordance with the Company's payroll
     procedures for executives, but not less frequently than monthly. Such base
     salary may be increased from time to time, at the discretion of the Board
     of Directors of the Company (the "Board"), in light of the

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     Executive's position, responsibilities and performance, and, as increased
     from time to time, may not be reduced.

          (b)  Company Stock. Effective on the Start Date, the Company shall
     grant to Executive 2,500 shares of common stock of the Company ("Company
     Stock"), subject to the following terms:

               (i)    Executive shall not be immediately vested in any of the
          shares of the Company Stock;

               (ii)   Executive shall vest in 100% of the shares of Company
          Stock (the "Nonvested Shares") on the anniversary of the Start Date as
          long as Executive continues to be an employee of the Company, subject
          to the further provisions of this Agreement;

               (iii)  Executive shall become automatically 100% vested in the
          Nonvested Shares immediately prior to a "Change in Control" of the
          Company, as such term is defined in the Conrad Industries, Inc. 2002
          Stock Plan (a "Change in Control");

               (iv)   prior to becoming vested, the Nonvested Shares may not be
          transferred (except by will or the laws of descent and distribution),
          pledged or encumbered in any manner by Executive;

               (v)    all distributions made by the Company with respect to the
          Nonvested Shares (cash, stock or other property), and any shares
          issued upon a stock split or stock dividend or by the Company in
          exchange for the Nonvested Shares shall be subject to the same
          restrictions applicable to the Nonvested Shares as set forth in this
          Agreement; and

               (vi)   the Company may place such legends on the certificate for
          the Nonvested Shares evidencing the restrictions provided herein as it
          deems appropriate.

          (c)  Options. On the Start Date, the Company will grant Executive
     options pursuant to the Conrad Industries, Inc. 2002 Stock Plan (the
     "Plan") to purchase 25,000 shares of Company Stock, which options shall
     vest in three equal annual installments on the first, second and third
     anniversary of the Start Date, with an exercise price equal to the fair
     market value of the Company Stock on the grant date, and having other terms
     and conditions substantially similar to options granted to other executive
     officers of the Company. The options shall be incentive stock options for
     the maximum number that shall qualify as incentive stock options, and the
     balance shall be nonqualified stock options. In the event of a Change in
     Control, all such options automatically shall become fully vested
     immediately prior to such Change in Control (or such earlier time as set by
     the Board or committee administering the Plan).

          (d)  Bonus. Executive shall be eligible to participate in any
     executive bonus programs maintained by the Company.

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          (e)  Executive Perquisites, Benefits and Other Compensation. Executive
     shall be entitled to receive additional benefits and compensation from the
     Company in such form and to such extent as specified below:

               (i)    Executive shall be entitled to an automobile allowance of
          $525 per month. The Company will reimburse Executive for all fuel and
          maintenance and will provide Executive with automobile insurance;

               (ii)   Executive shall be promptly reimbursed for all business
          travel and other out-of-pocket expenses reasonably incurred by
          Executive in the performance of his duties pursuant to this Agreement
          and in accordance with the Company's policy for executives of the
          Company. All such expenses shall be appropriately documented in
          reasonable detail by Executive upon submission of any request for
          reimbursement, and in a format and manner consistent with the
          Company's expense reporting policy;

               (iii)  Executive shall, subject to the satisfaction of any
          general eligibility criteria, be eligible to participate in all
          compensation and benefit plans and programs as are maintained from
          time to time for executives of the Company. Employee benefit plans
          maintained by the Company as of the Effective Date are listed on
          Appendix B attached hereto. The Company undertakes no obligation to
          continue any such plans in effect. If Executive is ineligible to
          participate in the Company's health insurance program, the Company
          shall provide Executive with health insurance similar to the Company's
          program as may be from time to time in effect;

               (iv)   Executive shall be entitled to vacation in accordance with
          the Company's policy; and

               (v)    the Company shall provide Executive with such other
          perquisites as may be deemed appropriate for Executive by the Board.

     3.   Non-Competition Agreement.

          (a)  Executive recognizes that the Company's willingness to enter into
     this Agreement is based in material part on Executive's agreement to the
     provisions of this paragraph 3 and that Executive's breach of the
     provisions of this paragraph 3 could materially damage the Company. Subject
     to the further provisions of this Agreement, Executive will not, during the
     term of his employment with the Company, and for a period of one year
     immediately following the termination of such employment for any reason
     whatsoever, except as may be set forth herein, directly or indirectly:

               (i)    carry on or engage in any business in direct competition
          with the construction, conversion or repair of marine vessels or the
          fabrication of modular components for offshore drilling rigs or
          floating production, storage and offloading vessels (collectively, the
          "Businesses") of the Company or any subsidiary of the Company
          (collectively, the "Companies") in any State of the United States or
          other jurisdiction, or specified portions thereof, in which the

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          Executive regularly (a) makes contact with customers of the Company or
          any of its subsidiaries, (b) conducts the business of the Company or
          any of its subsidiaries or (c) supervises the activities of other
          employees of the Company or its subsidiaries, as identified in
          Appendix "A" attached hereto and forming a part of this Agreement, so
          long as the Company or any of its subsidiaries carries on any of the
          Businesses therein (collectively the "Territory");

               (ii)   call upon any person who is, at that time, an employee of
          any of the Companies for the purpose or with the intent of enticing
          such employee away from or out of the employ of any of the Companies;

               (iii)  call upon any customer of any of the Companies within the
          Territory for the purpose of soliciting or selling products or
          services in direct competition with any of the Companies within the
          Territory;

               (iv)   call upon any prospective acquisition candidate, on
          Executive's own behalf or on behalf of any competitor, which candidate
          was, to Executive's knowledge after due inquiry, either called upon by
          any of the Companies or for which any of the Companies made an
          acquisition analysis, for the purpose of acquiring such entity; or

               (v)    disclose customers, whether in existence or proposed, of
          any of the Companies to any person, firm, partnership, corporation or
          business for any reason or purpose whatsoever except to the extent
          that any of the Companies has in the past disclosed such information
          to the public for valid business reasons.

          Notwithstanding the above, the foregoing covenant shall not be deemed
     to prohibit Executive from acquiring as in investment (i) not more than 1%
     of the capital stock of a competing business, whose stock is traded on a
     national securities exchange, the Nasdaq Stock Market or similar market or
     (ii) not more than 5% of the capital stock of a competing business whose
     stock is not publicly traded unless the Board consents to such acquisition.

          Executive agrees that he will from time to time upon the Company's
     request promptly execute any supplement, amendment, restatement or
     modification of Appendix "A" as may be necessary or appropriate to
     correctly reflect the jurisdictions which, at the time of such
     modification, should be covered by Appendix "A" and this Paragraph 3.
     Furthermore, Executive agrees that all references to Appendix "A" in this
     Agreement shall be deemed to refer to Appendix "A" as so supplemented,
     amended, restated or otherwise modified from time to time.

          (b)  Because of the difficulty of measuring economic losses to the
     Company as a result of a breach of the foregoing covenant, and because of
     the immediate and irreparable damage that could be caused to the Company
     for which it would have no other adequate remedy, Executive agrees that the
     foregoing covenant may be enforced by the Company, in the event of breach
     by him, by injunctions and restraining orders.

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     Executive further agrees to waive any requirement for the Company's
     securing or posting of any bond in connection with such remedies.

          (c)  It is agreed by the parties that the foregoing covenants in this
     Paragraph 3 impose a reasonable restraint on Executive in light of the
     activities and business of the Companies on the date of the execution of
     this Agreement and the current plans of the Companies.

          (d)  It is further agreed by the parties hereto that, in the event
     that Executive shall cease to be employed by the Company and shall enter
     into a business or pursue other activities not in competition with the
     Businesses of the Companies or similar activities or businesses in
     locations the operation of which, under such circumstances, does not
     violate clause (a)(i) of this paragraph 3, and in any event such new
     business, activities or location are not in violation of this paragraph 3
     or of Executive's obligations under this paragraph 3, if any, Executive
     shall not be chargeable with a violation of this paragraph 3 if the
     Companies shall thereafter enter the same, similar or a competitive (i)
     business, (ii) course of activities or (iii) location, as applicable.

          (e)  The covenants in this paragraph 3 are severable and separate, and
     the enforceability of any specific covenant shall not affect the provisions
     of any other covenant. Moreover, in the event any court of competent
     jurisdiction shall determine that the scope, time or territorial
     restrictions set forth are unenforceable, then it is the intention of the
     parties that such restrictions be enforced to the fullest extent permitted
     by law, and the Agreement shall thereby be reformed.

          (f)  All of the covenants in this Paragraph 3 shall be construed as an
     agreement independent of any other provision in this Agreement, and the
     existence of any claim or cause of action of Executive against the Company,
     whether predicated on this Agreement or otherwise, shall not constitute a
     defense to the enforcement by the Company of such covenants.

          (g)  The Company and Executive hereby agree that this covenant is a
     material and substantial part of this Agreement.

          (h)  Executive acknowledges that the payments provided under paragraph
     4(d), (relating to termination without Cause or termination for Good
     Reason) are conditioned upon Executive fulfilling the noncompetition and
     nondisclosure provisions of this Agreement. In addition, such payments are
     conditioned upon Executive refraining, for a one-year period after
     termination of employment, from carrying on or engaging in, as an employee,
     officer, director, shareholder, owner, partner, joint venturer, or in a
     managerial capacity, whether as an executive, independent contractor,
     consultant or advisor, or as a sales representative or otherwise, any
     business in direct competition with the Businesses of the Companies in the
     Territory, to the extent such activity is not prohibited by paragraph 3(a).
     In the event Executive shall at any time materially breach any
     noncompetition or nondisclosure agreements contained in this Agreement,
     including the agreements in this paragraph 3(h), the Company may cancel
     payments otherwise due under paragraph 4(d) during the period of such
     breach. Executive acknowledges that any

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     such elimination of payments would be an exercise of the Company's right to
     terminate its performance hereunder upon Executive's breach of this
     Agreement and such elimination of payments would not constitute and shall
     not be characterized as the imposition of liquidated damages.

          (i)  Any dispute regarding the reasonableness of the covenants and
     agreements set forth in this paragraph 3 or the territorial scope or
     duration thereof or the remedies available to the Company upon any breach
     of such covenants and agreements, shall be governed by and interpreted in
     accordance with the laws of the State of United States or other
     jurisdiction in which the alleged prohibited competing activity or
     disclosure occurs, and with respect to each such dispute, the Company and
     Executive each hereby irrevocably consent to the exclusive jurisdiction of
     the state and federal courts sitting in the relevant State (or, in the case
     of any jurisdiction outside the United States, the relevant courts of such
     jurisdiction) for resolution of such dispute, and agree to be irrevocably
     bound by any judgment rendered thereby in connection with such dispute, and
     further agree that service of process may be made upon him or it in any
     legal proceeding related to this paragraph 3 and/or Appendix "A" by any
     means allowed under the laws of such jurisdiction. Each party irrevocably
     waives any objection he or it may have as to the venue of such suit, action
     or proceeding brought in such a court or that such a court is an
     inconvenient forum. The parties agree that it is their intent and desire
     that the provisions of this Agreement be enforced to the fullest extent
     permitted under applicable law, whether now or hereafter in effect, and
     therefore, to the extent permitted by applicable law, the parties hereto
     waive any provision of applicable law that would render any provision of
     this paragraph 3 invalid or unenforceable.

          (j)  Notwithstanding anything in this paragraph 3 to the contrary,
     nothing in this paragraph 3 shall prohibit or restrict Executive from being
     employed by one of the five largest shipyards in the United States, as long
     as Executive is not involved in any manner in any products or services
     similar to products or services provided or offered by the Companies to
     their customers, or for which any of the Companies has submitted a bid,
     within five years prior to the date of termination of employment.

     4.   Term; Termination; Rights on Termination. Executive's term of
employment under this Agreement shall begin on the Start Date and continue until
December 31, 2004 (the "Initial Term") and, unless terminated sooner as herein
provided, shall continue thereafter at Executive's and Company's mutual election
on a year-to-year basis on the same terms and conditions contained herein in
effect as of the time of renewal (the "Extended Term"); provided, however, upon
a Change in Control of the Company, the term of this Agreement shall
automatically continue following such Change in Control for a period equal to
the then remaining term or two years, whichever period is longer, unless earlier
terminated as provided in paragraph 11. This Agreement and Executive's
employment may be terminated in any one of the following ways:

          (a)  Death. The death of Executive shall immediately terminate this
     Agreement with no severance compensation due Executive's estate; provided,
     however, all Nonvested Shares, if any, shall immediately vest in full.

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          (b)  Disability. If Executive becomes entitled to receive benefits
     under an insured long-term disability plan of the Company that includes its
     officers, the Company may terminate Executive's employment hereunder with
     no severance compensation due Executive; provided, however, all Nonvested
     Shares, if any, shall immediately vest in full.

          (c)  Cause. The Company may terminate this Agreement and Executive's
     employment 10 days after written notice to Executive for "Cause," which
     shall be: (1) Executive's willful, material and irreparable breach of this
     Agreement (which remains uncured 10 days after receipt of written notice);
     (2) Executive's gross negligence in the performance or intentional
     nonperformance (in either case continuing for 10 days after receipt of
     written notice of need to cure) of any of Executive's material duties and
     responsibilities hereunder; (3) Executive's dishonesty or fraud with
     respect to the business, reputation or affairs of the Company which
     materially and adversely affects the Company (monetarily or otherwise); or
     (4) Executive's conviction of a felony crime involving moral turpitude. In
     the event of a termination for Cause, Executive shall have no right to any
     severance compensation.

          (d)  Without Cause. Executive may only be terminated without Cause by
     the Company during either the Initial Term or Extended Term if such
     termination is approved by at least 51% of the members of the Board. Should
     Executive be terminated by the Company without Cause or should Executive
     terminate with Good Reason, then:

               (i)    Subject to paragraph 3(h), Executive shall receive from
          the Company the equivalent of one year of base salary at the rate then
          in effect if the remaining term of the contract is one year or less,
          and two years of base salary at the rate then in effect if the
          remaining term of the contract is greater than one year, payable
          ratably over a one-year period;

               (ii)   All Nonvested Shares and any stock options immediately
          shall be vested in full, and

               (iii)  Executive shall be vested in all unvested amounts to the
          fullest extent permitted under the Company's 401(k) plan.

          Executive shall have "Good Reason" to terminate his employment
     hereunder upon the occurrence of any of the following events, unless such
     event is agreed to in writing by Executive: (a) Executive is demoted by
     means of a material reduction in authority, responsibilities or duties to a
     position of less stature or importance within the Company than the position
     described in paragraph 1(a) hereof; (b) Executive's annual base salary as
     then in effect is reduced; (c) the relocation of the Company's principal
     executive offices to a location outside the Morgan City, Louisiana area, or
     the Company's requiring Executive to relocate anywhere other than the
     Company's principal executive offices; or (d) the Company's requiring
     Executive to change his principal residence from the address set forth in
     paragraph 16.

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     If termination of Executive's employment arises out of the Company's
failure to pay Executive on a timely basis the amounts to which he is entitled
under this Agreement or as a result of any other breach of this Agreement by the
Company, as determined by a court of competent jurisdiction or pursuant to the
provisions of paragraph 18 below, the Company shall pay all amounts and damages
to which Executive may be entitled as a result of such breach, including
interest thereon and all reasonable legal fees and expenses and other costs
incurred by Executive to enforce his rights hereunder. Further, none of the
provisions of paragraph 3 shall apply in the event this Agreement is terminated
as a result of a breach by the Company.

     Upon termination of this Agreement for any reason provided above, in
addition to the above payments, if any, Executive shall be entitled to receive
all compensation earned and all benefits and reimbursements due through the
effective date of termination, paid to Executive in a lump sum on the effective
date. All other rights and obligations of the Company and Executive under this
Agreement shall cease as of the effective date of termination, except that the
Executive's obligations under paragraphs 3, 5, 6, 7 and 8 herein shall survive
such termination in accordance with their terms.

     5.   Return of Company Property. All records, designs, patents, business
plans, financial statements, manuals, memoranda, lists, and other property
delivered to or compiled by Executive by or on behalf of the Company or any of
the Companies or their representatives, vendors or customers which pertain to
the business of the Company or any of the Companies, shall be and remain the
property of the Company or the Companies, as the case may be, and be subject at
all times to their discretion and control. Likewise, all correspondence,
reports, records, charts, advertising materials, and other similar data
pertaining to the business, activities or future plans of the Company of the
Companies which is collected by Executive, shall be delivered promptly to the
Company without request by it upon termination of Executive's employment.

     6.   Inventions. Executive shall disclose promptly to the Company any and
all significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by
Executive, solely or jointly with another, during the period of employment or
within one year thereafter, if conceived during employment, and which are
directly related to the business or activities of the Company and which
Executive conceives as a result of his employment by the Company. Executive
hereby assigns and agrees to assign all his interests therein to the Company or
its nominee. Whenever requested to do so by the Company, Executive shall execute
any and all applications, assignments or other instruments that the Company
shall deem necessary to apply for and obtain Letters Patent of the United States
or any foreign country or to otherwise protect the Company's interest therein.

     7.   Trade Secrets. Executive agrees that he will not, during or after the
term of this Agreement, disclose the specific terms of the Company's
relationships or agreements with their respective significant vendors or
customers or any other significant and material trade secret of the Company,
whether in existence or proposed, to any person, firm, partnership, corporation
or business for any reason or purpose whatsoever.

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     8.   Confidentiality.

          (a)  Executive acknowledges and agrees that all Confidential
     Information (as defined below) of the Company is confidential and a
     valuable, special and unique asset of the Company that gives the Company an
     advantage over its actual and potential, current and future competitors.
     Executive further acknowledges and agrees that Executive owes the Company a
     fiduciary duty to preserve and protect all Confidential Information from
     unauthorized disclosure or unauthorized use, that certain Confidential
     Information constitutes "trade secrets" under applicable laws, and that
     unauthorized disclosure or unauthorized use of the Company's Confidential
     Information would irreparably injure the Company.

          (b)  Both during the term of Executive's employment and after the
     termination of Executive's employment for any reason (including wrongful
     termination), Executive shall hold all Confidential Information in strict
     confidence, and shall not use any Confidential Information except for the
     benefit of the Company, in accordance with the duties assigned to
     Executive. Executive shall not, at any time (either during or after the
     term of Executive's employment), disclose any Confidential Information to
     any person or entity (except other employees of the Company who have a need
     to know the information in connection with the performance of their
     employment duties), or copy, reproduce, modify, decompile or reverse
     engineer any Confidential Information, or remove any Confidential
     Information from the Company's premises, without the prior written consent
     of the Chairman of the Company, or permit any other person to do so.
     Executive shall take reasonable precautions to protect the physical
     security of all documents and other material containing Confidential
     Information (regardless of the medium on which the Confidential Information
     is stored). This Agreement applies to all Confidential Information, whether
     now known or later to become known to Executive.

          (c)  Upon the termination of Executive's employment with the Company
     for any reason, and upon request of the Company at any other time,
     Executive shall promptly surrender and deliver to the Company all documents
     and other written material of any nature containing or pertaining to any
     Confidential Information and shall not retain any such document or other
     material. Within five days of any such request, Executive shall certify to
     the Company in writing that all such materials have been returned.

          (d)  As used in this Agreement, the term "Confidential Information"
     shall mean any information or material known to or used by or for the
     Company (whether or not owned or developed by the Companies and whether or
     not developed by Executive) that is not generally known to persons in the
     Business. Confidential Information includes, but is not limited to, the
     following: all trade secrets of the Companies; all information that the
     Companies have marked as confidential or have otherwise described to
     Executive (either in writing or orally) as confidential; all nonpublic
     information concerning the Companies' products, services, prospective
     products or services, research, product designs, prices, discounts, costs,
     marketing plans, marketing techniques, market studies, test data,
     customers, customer lists and records, suppliers and contracts; all
     business records and plans; all personnel files; all financial information
     of or concerning the Companies; all information relating to operating
     system software, application

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     software, software and system methodology, hardware platforms, technical
     information, inventions, computer programs and listings, source codes,
     object codes, copyrights and other intellectual property; all technical
     specifications; any proprietary information belonging to the Companies; all
     computer hardware or software manuals; all training or instruction manuals;
     and all data and all computer system passwords and user codes.

     9.   No Prior Agreements. Executive hereby represents and warrants to the
Company that the execution of this Agreement by Executive, his employment by the
Company and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Executive agrees to indemnify the Company for any claim,
including, but not limited to, reasonable attorneys' fees and expenses of
investigation, for any such third party that such third party may now have or
may hereafter come to have against the Company based upon or arising out of any
non-competition agreement, invention or secrecy agreement between Executive and
such third party which was in existence as of the date of this Agreement.

     10.  Assignment; Binding Effect. Executive understands that he has been
selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Executive agrees, therefore, that he
cannot assign all or any portion of his performance under this Agreement. The
Company will require any successor, by agreement in form and substance
reasonably acceptable to Executive, 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. Subject to the
preceding, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.

     11.  Change in Control.

          (a)  In the event a Change in Control is initiated or occurs during
     the Initial Term or Extended Term, then the provisions of this paragraph 11
     shall be applicable.

          (b)  If, on or within two years following the effective date of a
     Change in Control, the Company terminates Executive's employment other than
     for Cause or Executive terminates his employment for Good Reason, or if
     Executive's employment with the Company is terminated by the Company within
     six months before the effective date of a Change in Control and it is
     reasonably demonstrated by Executive that such termination (i) was at the
     request of a third party who has taken steps reasonably calculated to
     effect a Change in Control, or (ii) otherwise arose in connection with or
     in anticipation of a Change in Control, then Executive shall receive from
     Company:

               (i)    in a lump sum payment due on the later of the effective
          date of Executive's termination or the Change in Control, as the case
          may be, the equivalent of three times the sum of (A) Executive's base
          salary at the rate in effect on Executive's termination date, plus (B)
          the last bonus received by Executive during the twelve months
          preceding the Change in Control; and

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               (ii)   all options granted pursuant to paragraph 2(c)
          automatically shall become fully vested immediately prior to the
          Change in Control (or such earlier time as set by the Board or
          committee administering the Plan).

          (c)  Notwithstanding anything in this Agreement to the contrary, a
     termination pursuant to paragraph 11(b) shall operate to automatically
     waive in full the noncompetition restrictions imposed on Executive pursuant
     to paragraph 3(a).

          (d)  If it shall be determined that any payment made or benefit (a
     "Payment") provided to Executive, whether or not made or provided pursuant
     to this Agreement and whether or not upon a Change in Control as defined
     herein, is subject to the excise tax imposed by Section 4999 of the
     Internal Revenue Code of 1986, as amended, or any successor thereto, the
     Company shall pay Executive an amount of cash (the "Additional Amount")
     such that the net after-tax benefit received by Executive after paying all
     applicable taxes on such Payment and the Additional Amount shall be equal
     to the net after-tax amount that Executive would have received with respect
     to the Payment if Section 4999 had not been applicable.

     12.  No Mitigation or Offset. Executive shall not be required to mitigate
the amount of any Company payment provided for in this Agreement by seeking
other employment or otherwise. The amount of any payment required to be paid to
Executive by the Company pursuant to this Agreement shall not be reduced by any
amounts that are owed to the Company by Executive, or by any setoff,
counterclaim, recoupment, defense or other claim, right or action.

     13.  Release. Notwithstanding anything in this Agreement to the contrary,
Executive shall not be entitled to receive any payments pursuant to this
Agreement unless Executive has executed a general release of all claims
Executive may have against the Company and its affiliates in a form of such
release reasonably acceptable to the Company and such release has become final.

     14.  Indemnification. In the event Executive is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the Company
against Executive), by reason of the fact that he is or was performing services
under this Agreement, then the Company shall indemnify Executive against all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement, as actually and reasonably incurred by Executive in connection
therewith. In the event that both Executive and the Company are made a party to
the same third-party action, complaint, suit or proceeding, the Company agrees
to engage competent legal representation, and Executive agrees to use the same
representation, provided that if counsel selected by the Company shall have a
conflict of interest that prevents such counsel from representing Executive,
Executive may engage separate counsel and the Company shall pay all reasonable
attorneys' fees and reasonable expenses of such separate counsel. Further, while
Executive is expected at all times to use his best efforts to faithfully
discharge his duties under this Agreement, Executive cannot be held liable to
the Company for errors or omissions made in good faith where Executive has not
exhibited gross, willful and wanton negligence and misconduct nor performed
criminal and fraudulent acts which materially damage the business of the
Company.

                                       11

<PAGE>

     15.  Complete Agreement. Executive has no oral representations,
understandings or agreements with the Company or any of its officers, directors
or representatives covering the same subject matter as this Agreement. This
written Agreement is the final, complete an exclusive statement and expression
of the agreement between the Company and Executive and of all the terms of this
Agreement, and it cannot be varied, contradicted or supplemented by evidence of
any prior or contemporaneous oral or written agreements. This written Agreement
may not be later modified except by a further writing signed by a duly
authorized officer of the Company and Executive, and no term of this Agreement
may be waived except by writing signed by the party waiving the benefit of such
term. Without limiting the generality of the foregoing, either party's failure
to insist on strict compliance with this Agreement shall not be deemed a waiver
thereof.

     16.  Notice. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:

       To the Company:   Conrad Industries, Inc.
                         150 Front St.
                         P. O. Box 790
                         Morgan City, Louisiana 70381
                         Attn: Kenneth G. ("Jerry") Myers, Jr.

       To Executive:     Lewis J. Derbes, Jr.
                         4513 Senac Drive
                         Metairie, LA 70003

Notice shall be deemed given and effective on the earlier of three days after
the deposit in the U.S. mail of a writing addressed as above and sent first
class mail, certified, return receipt requested, or when actually received.
Either party may change the address for notice by notifying the other party of
such change in accordance with this paragraph 16.

     17.  Severability; Headings. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.

     18.  Dispute Resolutions. Except with respect to injunctive relief as
provided in paragraph 3(b), neither party shall institute a proceeding in any
court or administrative agency to resolve a dispute between the parties before
that party has sought to resolve the dispute through direct negotiation with the
other party. If the dispute is not resolved within two weeks after a demand for
direct negotiation, the parties shall attempt to resolve the dispute through
mediation. If the parties do not promptly agree on a mediator, the parties shall
request the Association of Attorney Mediators in Louisiana (or similar
association) to appoint a mediator. If the mediator is unable to facilitate a
settlement of the dispute within a reasonable period of time, as determined by
the mediator, the mediator shall issue a written statement to the parties to
that effect and any unresolved dispute or controversy arising under or in
connection with this Agreement shall be

                                       12

<PAGE>

settled exclusively by arbitration, conducted before a panel of three
arbitrators in Morgan City, Louisiana in accordance with the rules of the
American Arbitration Association then in effect. The arbitrators shall have the
authority to order back-pay, severance compensation, vesting of options (or cash
compensation in lieu of vesting options), reimbursement of costs, including
those incurred to enforce this Agreement, and interest thereon in the event the
arbitrators determine that Executive was terminated without disability or Cause,
as defined in paragraphs 4(b) and 4(c), respectively, or that the Company has
otherwise materially breached this Agreement. A decision by a majority of the
arbitration panel shall be final and binding. Judgment may be entered on the
arbitrators' award in any court having jurisdiction. The costs and expenses,
including reasonable attorneys' fees of the prevailing party in any dispute
arising under this Agreement, will be promptly paid by the other party.

     19.  Governing Law. This Agreement shall in all respects be construed
according to the laws of the State of Louisiana without regard to its conflicts
of law provisions, except as expressly provided in paragraph 3(i) above with
respect to the resolution of disputes arising under, or the Company's
enforcement of, paragraph 3 of this Agreement.

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

                                       13


<PAGE>

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective for all purposes as of the Effective Date.

                                      CONRAD INDUSTRIES, INC.


                                      By:  /s/ Kenneth G. Myers, Jr.
                                           -------------------------
                                           Kenneth G. Myers, Jr.
                                           President and Chief Executive Officer


                                      EXECUTIVE


                                      /s/ Lewis J. Derbes, Jr.
                                      ------------------------
                                      Lewis J. Derbes, Jr.

                                       14


<PAGE>

                                         [Appendix A - Territorial Restrictions]

                                    [Appendix B - List of Company Benefit Plans]

                                       15