Document:

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                                                                   EXHIBIT 10.28

                               LAND O'LAKES, INC.
              RESTATED CALIFORNIA COOPERATIVE VALUE INCENTIVE PLAN

Land O'Lakes, Inc. (the "Company"), a Minnesota cooperative association, hereby
establishes the Land O'Lakes, Inc. California Cooperative Value Incentive Plan
(the "Plan") in order to provide deferred compensation to certain key employees
of the Company effective January 1, 2001. The Company has determined that it is
in its interest to provide certain key employees with financial incentives to
reward the employees for their performance and to encourage long-term commitment
to employment with the Company. These financial incentive awards shall be
determined under the terms of this Plan.

                                    ARTICLE 1
                                   DEFINITIONS

         Section 1.1 Definitions. When used in this document with initial
capital letters, the following terms have the meanings indicated unless a
different meaning is plainly required by the context:

         "Board of Directors" or "Board" means the Board of Directors of the
Company.

         "Deferred Compensation Plan" means the Land O'Lakes, Inc. Non-Qualified
Deferred Compensation Plan.

         "Disability" means a medically determinable physical or mental
condition which is expected to result in death or to be of a long continued and
indefinite duration and which renders a Participant unable to engage in any
employment or occupation for remuneration for which the Participant is
reasonably qualified by reason of the Participant's training, education and
experience. The existence or nonexistence of such Disability shall be
established by the certificate of a medical doctor selected by or satisfactory
to the Company.

         "Economic Commitment" means a Participant's financial stake in the
Company as required under Section 3.6.

         "Executive Committee" means the Executive Committee of the Board, to
which the Board has delegated authority for administration of the Plan.

         "Incentive Award" means an award made by the Company to a Participant
under this Plan as described in Article 3.

         "Option" means an option to acquire Units as described in Section 3.1.

         "Participant" means any employee or individual described in Section
2.1.

         "Participant's Beneficiary" has the meaning set forth in Section 6.3.

         "Plan" means the Land O'Lakes, Inc. California Cooperative Value
Incentive Plan, as set forth herein, including any amendments hereto, which is
maintained by the Company primarily for the purpose of providing financial
incentives for certain key employees.

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         "Plan Year" means the given fiscal year of the Company for which
Incentive Awards are available. Specific Plan Years shall be designated by the
specific fiscal year in question.

         "Retirement" means a voluntary termination of employment by a
Participant on or after the date that will enable the Participant to be eligible
to receive an "early" or "normal" retirement benefit under the Company's
Employee Retirement Plan.

         "Strike Price" means the price at which a Unit may be acquired as
provided in Section 3.4.

         "Unit" means a performance unit used to value contributions made, and
benefits received, by Participants under the Plan.

                                    ARTICLE 2
                                  PARTICIPATION

         Section 2.1 Eligibility. The employees of the Company who are eligible
to become Participants in the Plan are those employees of the Company who reside
in the state of California and (i) are the officers of the Company who have
attained the level of a Vice President or above or (ii) any other employees of
the Company who are designated by the Chief Executive Officer as eligible to
become Participants in the Plan.

                                    ARTICLE 3
                           NATURE OF INCENTIVE AWARDS

         Section 3.1 Description of Incentive Awards. Annual Incentive Awards
will be made in the form of an Option (an "Option") to acquire performance Units
("Units") all as further provided in this Plan. In general, a Participant will
receive an Option to acquire a specified number of Units with respect to a
particular Plan Year. The Chief Executive Officer shall be responsible for
determining the level and annual Incentive Award for all Participants (including
those new employees of the Company who become Participants during a Plan Year).
In general, the number of Options available to a Participant each year as an
Incentive Award shall be within the following guidelines:

<Table>
<Caption>
Level of Participant                    Incentive Award
--------------------                    ---------------
<S>                                     <C>
Level 1 Officer                         Options to Acquire up to 7,000 Units
Level 2 Officer                         Options to Acquire up to 3,000 Units
Level 3 Officer                         Options to Acquire up to 1,500 Units
Level 4 Non-Officer                     Options to Acquire up to 1,500 Units
</Table>

Notwithstanding the foregoing, the Chief Executive Officer may make Incentive
Awards in excess of the amount set forth above. The Chief Executive Officer
shall report annually to the Executive Committee with regard to the
participating Participants and the Incentive Awards made to each Participant
under this Plan.

         Section 3.2 Vesting of Incentive Awards. The Options to acquire Units
granted under Section 3.1 shall vest over four (4) years with the first 25% of
the Options to be vested on December 31 of the Plan Year in which the Incentive
Award is made, and the remaining 75% of the Options vesting in 25% increments on
December 31 of the three (3) succeeding years. Notwithstanding the foregoing, in
the event a Participant's employment status with the Company changes, the
special vesting rules set forth in Article 5 shall apply.

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         Section 3.3 Option Exercise Period. A Participant may exercise an
Option to acquire Units between the date the Option is vested and the March 31
following the ten (10) year anniversary date of the original grant of the
Incentive Award. The exercise of an Option to acquire Units must occur between
January 1 and March 31 of a given year. The Option may be exercised in whole or
in part. Options not exercised within the ten (10) year Option period shall
lapse and the Participant shall have no further rights with respect to lapsed
Options.

         Section 3.4 Valuation of Units. Units to be issued under the Plan shall
be initially valued as of December 31 of the year immediately preceding the year
for which the Incentive Award is granted. The initial valuation shall be used to
establish the price at which a Participant may exercise an Option to acquire the
Units (the "Strike Price"). The Strike Price shall be fixed at the time of the
Incentive Award, regardless of the date upon which the Option becomes vested or
is exercised by the Participant. The annual valuation of Units shall also be
used to establish the value of any Units to be redeemed that year, as further
provided in Articles 4 and 5. The valuation of Units shall be determined in
accordance with the following formula:

<Table>
<S>                                        <C>
        Enterprise Value:                  8 x 5-Year Average EBIT
                                           (Earnings Before Interest and Taxes)

        Less:                              5-Year Average Long-Term
                                           Debt and Capital Securities

        Plus:                              5-Year Average Cash to Members
                                           (Patronage Plus Equity Redemption)

        Equals: Total Equity Value

        Divided By:                        10-Million

        Equals:                            Value per Unit
</Table>

         Section 3.5 Acquisition of Units.

         (a) A Participant may exercise his or her Option to acquire Units by
providing written notice to the Company on a form provided by the Company. The
written notice shall specify the number of Units to be acquired by the
Participant and the specific Options to which the Units relate. The notice must
be received by the Company within the January 1 through March 31 exercise period
set forth in Section 3.3.

         (b) A Participant must utilize the appreciated value of Options to
acquire Units for the Participant's account under the Plan. The value of the
Units acquired will equal the appreciated value of the Options exchanged for the
Units. The Participant will acquire Units by exchanging a selected number of
Options for Units based on the following formula:

                               U = (1 - SP/V) x O

                  Where:

                  U = Number of Units that may be acquired with the number of
                      Options exchanged

                  V = The current value of a Unit

                  O = The number of Options exchanged

                  SP = The Strike Price of an Option

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                           Example 1: If a Participant holds 1,000 vested
                           Options having a Strike Price of $100 per Unit and
                           the current value of Units is $160 per Unit, the
                           Participant may exchange 1,000 Options with an
                           appreciated value of $60,000 ($60 x 1,000 Options) to
                           acquire 375 Units having a value of $60,000 (375 x
                           $160).

                           Example 2: If a Participant holds 1,000 vested
                           Options having a Strike Price of $100 per Unit and
                           the current value of Units is $200 per Unit, the
                           Participant may exchange 1,000 Options with an
                           appreciated value of $100,000 ($100 x 1,000 Options)
                           to acquire 500 Units having a value of $100,000 (500
                           x $200).

                  (c) At such time as a Participant exercises an Option to
         acquire Units, the Company shall establish an "account" under the Plan
         in the name of the Participant to reflect the number of Units held by
         such Participant.

         Section 3.6 Economic Commitment. Each Participant will be expected to
maintain a financial stake in the Company (the "Economic Commitment") in order
to receive the benefits associated with the appreciation of Units. A
Participant's Economic Commitment shall be accomplished by (i) the acquisition
of Units, in which case the Economic Commitment shall be measured by the then
current value of Units owned by the Participant, or (ii) the appreciation in the
value of vested Options, in which case the Economic Commitment shall be measured
by the difference between the Strike Price of the vested Options and the current
value of the Units if the Options are exercised; or (iii) a combination of (i)
and (ii). A Participant will be expected to achieve the Economic Commitment
within seven (7) years of becoming a Participant in the Plan. The size of a
Participant's Economic Commitment will be commensurate with the Participant's
level within the Company (such level to be determined by the Chief Executive
Officer pursuant to Section 3.1) as provided in the following table:

<Table>
<Caption>
Level of Participant                       Economic Commitment
--------------------                       -------------------
<S>                                        <C>
Level 1 Officer                            2 x Base Compensation
Level 2 and 3 Officers                     1 x Base Compensation
Level 4 Non-Officer                        No expected Economic Commitment
</Table>

As a Participant moves from one level to another, the amount of the Economic
Commitment and the number of years in which it is to be achieved shall be
revised accordingly. Notwithstanding the obligation to maintain the Economic
Commitment, in the event a Participant's employment status changes, the
provisions set forth in Article 5 of the Plan shall define the rights of the
Participant with respect to participation in the Plan. If a Participant has not
achieved the Economic Commitment within the seven (7) year period, or does not
maintain the Economic Commitment thereafter, the Chief Executive Officer may
determine that no further Incentive Awards shall be made to the Participant
under this Plan for such period as such officer shall determine.

                                    ARTICLE 4
                                  DISTRIBUTIONS

         Section 4.1 Voluntary Distributions. A Participant who remains an
employee of the Company may request a distribution from the Plan through the
redemption of Units owned by the Participant. A request for a distribution must
be made between January 1 and March 31 of a given

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year. The value of a Unit will be determined at the time of redemption as
described in Section 3.4. The actual distribution to a Participant upon
redemption shall be equal to the then current value of a Unit multiplied by the
number of Units to be redeemed. A request for distribution must be made on forms
to be provided by the Company and must specify the specific Units to be
redeemed. Until a Participant has achieved the required Economic Commitment, the
Participant may not redeem Units having a value in excess of 50% of the
appreciated value of the cumulative total of all Units previously acquired by
the Participant from the inception of the Plan. At such time as a Participant
has achieved the required Economic Commitment, a Participant may redeem any
Units in excess of the Economic Commitment.

         Section 4.2 Distribution Limitations. If the Participant receives a
distribution, then upon such distribution the original acquisition price for the
Units redeemed will be retained in the Participant's account under this Plan and
the remaining value of the Units (the appreciation) shall be distributed in cash
as provided in Section 4.3 of this Plan. The portion of the value of the Units
that is retained in a Participant's account under this paragraph shall be
credited with a return that is equal to the return being earned by participants
in the Deferred Compensation Plan.

         Section 4.3 Distribution Requirements.

                  (a) Subject to the limitations provided in Section 4.2,
         payment to or on behalf of a Participant with regard to a distribution
         under the Plan shall be made in a lump sum payment of cash. Upon
         payment, the Participant shall have no further interest in the Units
         that have been redeemed, and the Participant shall have no further
         right to any increase in the value of the Units.

                  (b) The Company shall have the right to deduct any federal or
         state taxes required by law to be withheld from all distributions made
         pursuant to the Plan.

                  (c) The payment by the Company to the Participant shall be
         made as soon as it is administratively feasible after a request for a
         distribution, unless Participant has made an election to defer such
         distribution under this Plan. If such an election has been made, no
         payment shall be made directly to the Participant, but the amount
         otherwise payable to the Participant shall be allocated to the Deferred
         Compensation Plan for the benefit of the Participant. A Participant's
         election under this subsection must be made at the time of, or prior
         to, the exercise of the Option to acquire the Units that are presently
         being redeemed. Further, in no event will any such election be
         effective if it precedes the Participant's termination of employment
         with the Company by less than one (1) year.

                  (d) Notwithstanding any other provision of the Plan to the
         contrary, if, at any time, a court or the Internal Revenue Service
         determines that an amount awarded under the Plan, but not yet
         distributed to a Participant, is includible in the gross income of a
         Participant and subject to tax, the Executive Committee may, in its
         sole discretion, permit a lump sum cash distribution of an amount equal
         to the amount determined to be included in the Participant's gross
         income. The number of Units held by a Participant shall be reduced on a
         "last in, first out" basis to the extent of any such distribution.

                                       5
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                                    ARTICLE 5
                           CHANGE IN EMPLOYMENT STATUS

         Section 5.1 Termination of Employment. In the event a Participant's
employment with the Company is terminated for any reason, except death,
Disability, or Retirement, the Participant shall cease to be a Participant in
the Plan as of the date of termination, except as otherwise provided in this
Section. Upon such termination of employment:

                  (a) Any Options of the Participant that are vested as of the
         date of termination of employment may be exercised no later than 45
         days following the date of termination. The Options shall be exercised
         as provided in Section 3.5 of the Plan.

                  (b) Any unvested Options held by the Participant shall be
         forfeited as of the date of the termination of employment.

                  (c) Any Units owned by the Participant (including those Units
         related to Options exercised following termination as provided above)
         must be redeemed by the Participant no later than 45 days following the
         date of termination. Any Units held by the Participant that are not
         redeemed as of such date will be redeemed by the Company effective as
         of such date. Any redemption shall be in accordance with the procedure
         set forth in Section 4.1. Upon redemption, the valuation of the Units
         and the distribution to the Participant shall occur as set forth in
         Sections 3.4, 4.2, and 4.3, respectively; provided, that, the value of
         the Units shall be determined as of December 31 of the year prior to
         the termination.

         Section 5.2 Retirement. In the event a Participant's employment with
the Company is terminated as a result of the Participant's Retirement, the
Participant shall cease to be a Participant in the Plan as of the date of
Retirement, except as otherwise provided in this Section. Upon such termination
of employment:

                  (a) Any Incentive Award made with respect to the year of
         Retirement shall be prorated to the Retirement date.

                  (b) In the event that a Participant's termination of
         employment results from "normal" Retirement it shall be the general
         rule that any unvested Options will be permitted to vest in the normal
         sequence; provided that, the vesting schedule shall be accelerated with
         respect to the final year of vesting such that all Options shall vest
         no later than December 31 of the third year following the award. In the
         event a Participant's termination of employment results from "early"
         Retirement, it shall be the general rule that the Participant will
         forfeit any unvested Options. Notwithstanding the foregoing, the Chief
         Executive Officer shall have the discretion to depart from the general
         rules, in such manner as may be determined in his/her sole discretion,
         to permit all or any portion of the unvested Options to vest in the
         normal sequence or to cause any unvested Options to be forfeited by the
         Participant.

                  (c) Any Options of the Participant that are vested as of the
         date of Retirement must be exercised on or before the third March 31
         following the date of Retirement; provided that, if the Retirement
         occurs between January 1 and March 31, the Options must be exercised on
         or before the fourth March 31 following the date of Retirement. Vested
         Options must be exercised within the period of January 1 through March
         31 of a given year as provided in Section 3.5.

                                       6
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                  (d) Any Units owned by the Participant (including those Units
         related to Options exercised following Retirement) must be redeemed by
         the Participant no later than the third March 31 following the date of
         Retirement; provided that, if the Retirement occurs between January 1
         and March 31, the Units must be redeemed on or before the fourth March
         31 following the date of Retirement. Any Units not redeemed by the
         Participant as of such date will be redeemed by the Company as of such
         date. Any redemption shall be in accordance with the procedure set
         forth in Section 4.1. Upon redemption, the valuation of the Units and
         the distribution to the Participant shall occur as set forth in
         Sections 3.4, 4.2, and 4.3, respectively.

         Section 5.3 Disability. In the event that a Participant's employment
status with the Company has changed as a result of Participant's Disability, the
Participant shall cease to be a Participant in the Plan as of the date of such
status change, except as otherwise provided in this Section. Upon such status
change:

                  (a) Any Incentive Award made with respect to the year of the
         status change shall be prorated.

                  (b) Any Options previously issued to the Participant shall
         vest in the normal sequence based upon the date upon which they were
         issued; provided that, the vesting schedule shall be accelerated with
         respect to the final year of vesting such that all Options shall vest
         no later than December 31 of the third year following the award.

                  (c) Any Options of the Participant must be exercised on or
         before the third March 31 following the date of the status change;
         provided that, if the Status Change occurs between January 1 and March
         31, the Options must be exercised on or before the fourth March 31
         following the date of the status change. Vested Options must be
         exercised within the period of January 1 through March 31 of a given
         year as provided in Section 3.5.

                  (d) Any Units owned by the Participant (including those Units
         related to Options exercised following the status change) must be
         redeemed by the Participant no later than the third March 31 following
         the date of the status change; provided that, if the status change
         occurs between January 1 and March 31, the Units must be redeemed on or
         before the fourth March 31 following the date of the status change. The
         Company will redeem any Units not redeemed by the Participant as of
         such date. Any redemption shall be in accordance with the procedure set
         forth in Section 4.1. Upon redemption, the valuation of the Units and
         the distribution to the Participant shall occur as set forth in
         Sections 3.4, 4.2, and 4.3, respectively.

                  (e) In the event the disabled Participant returns to work
         prior to the third March 31 following the change of employment status,
         the provisions of this Section 5.3 shall no longer apply and the
         Participant's participation in the Plan shall be restored to the
         predisability condition.

         Section 5.4 Death. In the event that a Participant's employment with
the Company is terminated as a result of the Participant's death, the
Participant shall cease to be a Participant in the Plan as of the date of death,
except as otherwise provided in this Section. Upon Participant's death:

                                       7
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                  (a) Any unvested Options held in the name of the deceased
         Participant shall be forfeited as of the date of death.

                  (b) Any Options of the deceased Participant that were vested
         as of the date of Participant's death must be exercised by
         Participant's Beneficiary on or before March 31 following the
         Participant's death. Vested Options must be exercised within the period
         of January 1 through March 31 of a given year as provided in Section
         3.5.

                  (c) Any Units owned by the deceased Participant (including
         those Units related to Options exercised by the Participant's
         Beneficiary following death) must be redeemed on behalf of the
         Participant no later than the March 31 following the date of death. Any
         Units not redeemed on behalf of the deceased Participant as of such
         date will be redeemed by the Company as of such date. Any redemption
         shall be in accordance with the procedure set forth in Section 4.1.
         Upon redemption, the valuation of the Units and the distribution to the
         Participant shall occur as set forth in Sections 3.4, 4.2, and 4.3,
         respectively.

                                    ARTICLE 6
                               NON-TRANSFERABILITY

         Section 6.1 Anti-alienation of Options and Units. Options granted to a
Participant and Units acquired by a Participant, and any rights and privileges
pertaining thereto, may not be anticipated, alienated, sold, transferred,
assigned, pledged, encumbered, or subjected to any charge or legal process; and
no interest or right to receive a benefit may be taken, either voluntarily or
involuntarily, for the satisfaction of the debts of, or other obligations or
claims against, such person or entity, including claims for alimony, support,
separate maintenance and claims in bankruptcy proceedings.

         Section 6.2 Incompetent Participants. If any Participant has been
declared incompetent and a conservator or other person legally charged with the
care of such Participant or of his or her estate has been appointed, any
distribution under the Plan to which the Participant is entitled shall be paid
to such conservator or other person legally charged with the care of the
Participant or his or her estate. Except as provided above, when the Company has
determined that a Participant is unable to manage his or her affairs, the
Company may provide for such distribution or any part thereof to be made to any
other person or institution then contributing toward or providing for the care
and maintenance of such Participant. Any such distribution shall be a payment
for the account of such Participant and a complete discharge of any liability of
the Company and the Plan therefor.

         Section 6.3 Designated Beneficiary. In the event of a Participant's
death prior to the distribution of any amounts payable under the Plan, the
payment of any amounts on behalf of the Participant under the Plan shall be made
to the Participant's Beneficiary designated on a form provided to the
Participant by the Company (the "Participant's Beneficiary"). If no such
beneficiary has been designated, payments shall be made to the duly appointed
and qualified executor or other personal representative of the Participant to be
distributed in accordance with the Participant's will or applicable intestacy
law; or in the event that there shall be no such representative duly appointed
and qualified within six (6) months after the date of death of such deceased
Participant, then to such persons as, at the date of the Participant's death,
would be entitled to share in the distribution of such deceased Participant's
personal estate under the provisions of the applicable statute then in force
governing the descent of intestate property, in the proportions specified in
such statute.

                                       8
<PAGE>

                                    ARTICLE 7
                           ADMINISTRATION OF THE PLAN

         Section 7.1 Administrator. The administrator and named fiduciary of the
Plan shall be the Company.

         Section 7.2 Authority of Administrator. The Company shall have
authority, duty and power to interpret and construe the provisions of the Plan
as it deems appropriate, to temporarily suspend the Plan, to adopt, establish
and revise rules, procedures and regulations relating to the Plan, to determine
the conditions subject to which the value of any Incentive Awards that may be
made or payable, and to make any other determinations which it believes
necessary or advisable for the administration of the Plan. The Company shall
have the duty and responsibility of maintaining records, making the requisite
calculations and dispersing payments hereunder. The Company's determinations,
interpretations, regulations and calculations shall be final and binding on all
persons and parties concerned. The Chief Executive Officer of the Company shall
be the agent of the Plan for the service of legal process in accordance with
Section 502 of the Employee Retirement Income Security Act of 1974, as amended.

         Section 7.3 Operation of Plan. The Company shall be responsible for the
general operation and administration of the Plan and for carrying out the
provisions thereof. The Company shall be responsible for the expenses incurred
in the administration of the Plan. The Company shall also be responsible for
determining eligibility for payments and the amounts payable pursuant to the
Plan. The Company shall be entitled to rely conclusively upon all tables,
valuations, certificates, opinions and reports furnished by any actuary,
accountant, controller, counsel or other person employed or engaged by the
Company with respect to the Plan. The procedures for filing claims for payments
under the Plan are described below.

         Section 7.4 Claims Procedures.

                  (a) It is the intent of the Company to make distributions
         under the Plan without the Participant having to complete or submit any
         claims forms other than notices contemplated by the Plan. However, a
         Participant who believes he or she is entitled to a payment under the
         Plan may submit a claim for such payment in writing to the Company. Any
         claim must be made by the Participant or his or her beneficiary in
         writing and state the claimant's name and the nature of the payment to
         be made under the Plan on a form acceptable to the Company. If for any
         reason a claim under this Plan is denied by the Company, the Claims
         Manager shall deliver to the claimant a written explanation setting
         forth the specific reasons for the denial, specific references to the
         pertinent provisions under the Plan on which the denial is based, a
         description of any additional material or information necessary for the
         claimant to perfect the claim and an explanation of why such material
         or information is necessary, and information on the procedures to be
         followed by the claimant in obtaining a review of his or her claim, all
         written in a manner reasonably understandable to the claimant. For this
         purpose: (i) the claimant's claim shall be deemed to be filed when
         presented orally or in writing to the Claims Manager and (ii) the
         Claims Manager's explanation shall be in writing delivered to the
         claimant within 90 days of the date the claim is filed.

                                       9
<PAGE>

                  (b) The claimant shall have 60 days following his or her
         receipt of the denial of the claim to file with the Claims Manager a
         written request for review of the denial. For such review, the claimant
         or the claimant's representative may review pertinent documents and
         submit written issues and comments.

                  (c) The Claims Manager shall decide the issue on review and
         furnish the claimant with a copy within 60 days of receipt of the
         claimant's request for review of the claimant's claim. The decision on
         review shall be in writing and shall include specific reasons for the
         decision, written in a manner reasonably understandable to the
         claimant, as well as specific references to the pertinent provisions in
         the Plan on which the decision is based. If a copy of the decision is
         not so furnished to the claimant within such 60 days, the claim shall
         be deemed denied on review. In no event may a claimant commence legal
         action for benefits the claimant believes are due the claimant until
         the claimant has exhausted all of the remedies and procedures afforded
         the claimant by this Section 7.4.

                  (d) For claims procedures purposes, the "Claims Manager" shall
         be the Company.

         Section 7.5 Participant's Address. Each Participant shall keep the
Company informed of his or her current address and the current address of his or
her beneficiary. The Company shall not be obligated to search for any person. If
the location of a Participant is not made known to the Company within three (3)
years after the date on which payment of the Participant's benefits payable
under this Plan may be made, payment may be made as though the Participant had
died at the end of the three-year period. If, within one (1) additional year
after such three-year period has elapsed, or, within three (3) years after the
actual death of a Participant, the Company is unable to locate any designated
beneficiary of the Participant, then the Company shall have no further
obligation to pay any benefit hereunder to such Participant or designated
beneficiary and such benefits shall be irrevocably forfeited.

         Section 7.6 Liability. Notwithstanding any of the provisions of the
Plan to the contrary, neither the Company nor any individual acting as an
employee or agent of the Company shall be liable to any Participant or any other
person for any claim, loss, liability or expense incurred in connection with the
Plan, unless attributable to fraud or willful misconduct on the part of the
Company or any such employee or agent of the Company.

                                    ARTICLE 8
                            MISCELLANEOUS PROVISIONS

         Section 8.1 No Employment Rights. Neither the Plan nor any action taken
hereunder shall be construed as giving any employee any right to be retained in
the employ of the Company.

         Section 8.2 Unfunded and Unsecured. The Plan shall at all times be
considered entirely unfunded both for tax purposes and for purposes of Title I
of the Employee Retirement Income Security Act of 1974, as amended, and no
provision shall at any time be made with respect to segregating assets of the
Company for payment of any amounts hereunder. Any funds with respect to payment
to be made hereunder shall continue for all purposes to be part of the general
assets of the Company and available to the general creditors of the Company in
the event of the Company's bankruptcy (when the Company is involved in a pending
proceeding under the

                                       10
<PAGE>

Federal Bankruptcy Code) or insolvency (when the Company is unable to pay its
debts as they mature). No Participant or any other person shall have any
interests in any particular assets of the Company by reason of the right to
receive a benefit under the Plan and to the extent the Participant or any other
person acquires a right to receive benefits under this Plan, such right shall be
no greater than the right of any general unsecured creditor of the Company. The
Plan constitutes a mere promise by the Company to make payments to the
Participants in the future. Nothing contained in the Plan shall constitute a
guaranty by the Company or any other person or entity that any funds in any
trust or the assets of the Company will be sufficient to pay any benefit
hereunder. Furthermore, no Participant shall have any right to a benefit under
the Plan except in accordance with the terms of the Plan.

         Section 8.3 Plan Provisions. Except when otherwise required by the
context, any singular terminology shall include the plural.

         Section 8.4 Severability. If a provision of the Plan shall be held to
be illegal or invalid, the illegality or invalidity shall not affect the
remaining parts of the Plan and the Plan shall be construed and enforced as if
the illegal or invalid provision had not been included.

         Section 8.5 Applicable Law. To the extent not preempted by the laws of
the United States, the laws of the State of Minnesota shall apply with respect
to this Plan.

         Section 8.6 Successor to Company. In the event there is a successor or
assignee to or of the Company, whether direct or indirect, by acquisition,
merger, consolidation or otherwise, to all or substantially all (at least 85% of
the assets or the common stock) of the Company, the Company, in its sole
discretion, may either cash out or require such successor or assignee to assume
and agree to perform the Company's obligations under the Plan, in the same
manner and to the same extent that the Company would be required to perform if
no such succession or assignment had occurred or terminate the Plan pursuant to
the provisions of Article 10. If a successor or assignee assumes the Plan
pursuant to this Section 8.6, the term "Company," as used in the Plan, shall
mean the Company as hereinbefore defined and any successor or assignee to the
Company which by reason hereof becomes bound by the terms and provisions of the
Plan.

         Section 8.7 Authority of CEO. Except in cases where the
responsibilities are reserved to the Board or Executive Committee under this
Plan, the Chief Executive Officer of the Company (or his designee) may act on
behalf of the Company under this Plan.

                                    ARTICLE 9
                                    AMENDMENT

The Company reserves the power to alter, amend or wholly revise or terminate the
Plan at any time and from time to time by the action of the Board and the
interest of each Participant is subject to the powers so reserved. An amendment
shall be authorized by the Board or Executive Committee and shall be stated in
an instrument in writing signed in the name of the Company by a person or
persons authorized by the Board. After the instrument has been so executed, the
Plan shall be effectively amended in the manner therein set forth, and all
Participants shall be bound thereby. No amendment to the Plan may alter, impair,
or reduce the methodology for valuation of Incentive Awards (Options and Units)
of Participants that have been awarded under the Plan prior to the effective
date of such amendment without the written consent of the affected Participants.

                                       11
<PAGE>

                                   ARTICLE 10
                               TERMINATION OF PLAN

The Company may at any time terminate the Plan by action of the Board. No
further Incentive Awards will be granted after the date of termination of the
Plan. The Termination of the Plan shall not alter, impair, or reduce the
benefits of a Participant that have been awarded prior to the effective date of
such termination, without the written consent of the affected Participant.
Provided, however, upon termination of the Plan, the Company shall have the
option to redeem all outstanding interests of the Participants in the Plan. The
Company shall exercise such option by providing written notice to each
Participant. Upon providing such notice, all unvested Options outstanding under
the Plan shall immediately vest and each Participant shall have thirty (30) days
in which to exercise all, or a portion of, such Participant's outstanding
Options to acquire Units pursuant to the procedures set forth in Section 3.5.
The Participants shall forfeit any Options that are not exercised within such
thirty-day period. Thereafter, the Company shall redeem all outstanding Units
held by Participants (including those Units acquired by Participants within the
aforementioned thirty-day period) and the Participants shall have no further
rights or benefits under the Plan. The valuation of Units so redeemed and the
distribution to the Participants shall occur as set forth in Sections 3.4, 4.2,
and 4.3, respectively.

IN WITNESS WHEREOF, this Restatement is effective as of ___________________,
2002.

                                       LAND O'LAKES

                                       By:
                                          --------------------------------------
                                       Title:
                                             -----------------------------------

                                       12<PAGE>
                                                                    EXHIBIT 10.6

                          GULF ISLAND FABRICATION, INC.
                          2002 LONG-TERM INCENTIVE PLAN

      1. PURPOSE. The purpose of the 2002 Long-Term Incentive Plan (the "Plan")
of Gulf Island Fabrication, Inc. ("Gulf Island") is to increase shareholder
value and to advance the interests of Gulf Island and its subsidiaries
(collectively, the "Company") by furnishing stock-based economic incentives (the
"Incentives") designed to attract, retain, reward and motivate key employees,
officers, directors and consultants or advisors to the Company and to strengthen
the mutuality of interests between such employees, officers and directors and
Gulf Island's shareholders. Incentives consist of opportunities to purchase or
receive shares of common stock, no par value per share, of Gulf Island (the
"Common Stock"), on terms determined under the Plan. As used in the Plan, the
term "subsidiary" means any corporation, limited liability company or other
entity, of which Gulf Island owns (directly or indirectly) within the meaning of
Section 424(f) of the Internal Revenue Code of 1986, as amended (the "Code"),
50% or more of the total combined voting power of all classes of stock,
membership interests or other equity interests issued thereby.

      2. ADMINISTRATION.

         2.1 COMPOSITION. The Plan shall be administered by the Compensation
Committee of the Board of Directors of Gulf Island or by a subcommittee thereof
(the "Committee"). The Committee shall consist of not fewer than two members of
the Board of Directors, each of whom shall (a) qualify as a "non-employee
director" under Rule 16b-3 under the Securities Exchange Act of 1934 (the "1934
Act") or any successor rule, and (b) qualify as an "outside director" under
Section 162(m) of the Code ("Section 162(m)").

         2.2 AUTHORITY. The Committee shall have plenary authority to award
Incentives under the Plan, to interpret the Plan, to establish any rules or
regulations relating to the Plan that it determines to be appropriate, to enter
into agreements with or provide notices to participants as to the terms of the
Incentives (the "Incentive Agreements") and to make any other determination that
it believes necessary or advisable for the proper administration of the Plan.
Its decisions in matters relating to the Plan shall be final and conclusive on
the Company and participants. The Committee may delegate its authority hereunder
to the extent provided in Section 3 hereof. Directors who are not also employees
of the Company ("Outside Directors") may receive awards under the Plan only as
specifically provided in Section 10 hereof.

      3. ELIGIBLE PARTICIPANTS. Key employees, officers and directors of the
Company and persons providing services as consultants or advisors to the Company
shall become eligible to receive Incentives under the Plan when designated by
the Committee. Employees may be designated individually or by groups or
categories, as the Committee deems appropriate. With respect to participants not
subject to Section 16 of the 1934 Act or Section 162(m) of the Code, the
Committee may delegate to appropriate officers of the Company its authority to
designate participants, to determine the size and type of Incentives to be
received by those participants and to set and modify the terms of the
Incentives; provided, however, that the per share exercise price

                                      -1-
<PAGE>

of any options granted by an officer, rather than by the Committee, shall be
equal to the Fair Market Value (as defined in Section 11.11) of a share of
common stock. Outside Directors may participate in the Plan only as specifically
provided in Section 10 hereof.

      4. TYPES OF INCENTIVES. Incentives may be granted under the Plan to
eligible participants in the forms of (a) incentive stock options; (b)
non-qualified stock options; (c) restricted stock and (d) Other Stock-Based
Awards (as defined in Section 8 hereof).

      5. SHARES SUBJECT TO THE PLAN.

         5.1 NUMBER OF SHARES. Subject to adjustment as provided in Section
11.5, the maximum number of shares of Common Stock that may be delivered to
participants and their permitted transferees under the Plan shall be 500,000
shares.

         5.2 SHARE COUNTING. To the extent any shares of Common Stock covered by
a stock option are not delivered to a participant or permitted transferee
because the Option is forfeited or canceled, or shares of Common Stock are not
delivered because an Incentive is paid or settled in cash or used to satisfy the
applicable tax withholding obligation, such shares shall not be deemed to have
been delivered for purposes of determining the maximum number of shares of
Common Stock available for delivery under this Plan. In the event that shares of
Common Stock are issued as an Incentive and thereafter are forfeited or
reacquired by the Company pursuant to rights reserved upon issuance thereof,
such forfeited and reacquired Shares may again be issued under the Plan. If the
exercise price of any stock option granted under the Plan or the applicable
withholding tax obligation is satisfied by tendering shares of Common Stock to
the Company (by either actual delivery or by attestation), only the number of
shares of Common Stock issued net of the shares of Common Stock tendered shall
be deemed delivered for purposes of determining the maximum number of shares of
Common Stock available for delivery under the Plan.

         5.3 LIMITATIONS ON AWARDS. Subject to Section 11.5, the following
additional limitations are imposed under the Plan:

             A. The maximum number of shares of Common Stock that may be issued
      upon exercise of stock options intended to qualify as incentive stock
      options under Section 422 of the Code shall be 500,000 shares.
      Notwithstanding any other provision herein to the contrary, (i) all shares
      issuable under incentive stock options shall be counted against this limit
      and (ii) shares that are issued and are later forfeited, cancelled or
      reacquired by the Company, shares withheld to satisfy withholding tax
      obligations and shares delivered in payment of the option exercise price
      or withholding taxes shall have no effect on this limitation.

             B. The maximum number of shares of Common Stock that may be covered
      by Incentives granted under the Plan to any one individual during any one
      calendar-year period shall be 200,000.

             C. The maximum number of shares of Common Stock that may be issued
      as restricted stock and Other Stock-Based Awards (as defined in Section 8)
      shall be 50,000 shares.

                                      -2-
<PAGE>

             D. The maximum dollar amount of cash compensation that may be paid
      as an Other Stock-Based Award to a participant in any calendar year is
      $200,000.

         5.4 TYPE OF COMMON STOCK. Common Stock issued under the Plan may be
authorized and unissued shares or issued shares held as treasury shares.

      6. STOCK OPTIONS. A stock option is a right to purchase shares of Common
Stock from Gulf Island. Stock options granted under the Plan may be incentive
stock options (as such term is defined in Section 422 of the Code) or
non-qualified stock options. Any option that is designated as a non-qualified
stock option shall not be treated as an incentive stock option. Each stock
option granted by the Committee under this Plan shall be subject to the
following terms and conditions:

         6.1 PRICE. The exercise price per share shall be determined by the
Committee, subject to adjustment under Section 11.5; provided that in no event
shall the exercise price be less than the Fair Market Value of a share of Common
Stock on the date of grant, except in case of a stock option granted in
assumption or substitution for an outstanding award of a company acquired by the
Company or with which the Company combines.

         6.2 NUMBER. The number of shares of Common Stock subject to the option
shall be determined by the Committee, subject to Section 5 and subject to
adjustment as provided in Section 11.5.

         6.3 DURATION AND TIME FOR EXERCISE. The term of each stock option shall
be determined by the Committee. Each stock option shall become exercisable at
such time or times during its term as shall be determined by the Committee.
Notwithstanding the foregoing, the Committee may accelerate the exercisability
of any stock option at any time, in addition to the automatic acceleration of
stock options under Section 11.10.

         6.4 REPURCHASE. Upon approval of the Committee, the Company may
repurchase a previously granted stock option from a participant by mutual
agreement before such option has been exercised by payment to the participant of
the amount per share by which: (i) the Fair Market Value (as defined in Section
11.11) of the Common Stock subject to the option on the business day immediately
preceding the date of purchase exceeds (ii) the exercise price.

         6.5 MANNER OF EXERCISE. A stock option may be exercised, in whole or in
part, by giving written notice to the Company, specifying the number of shares
of Common Stock to be purchased. The exercise notice shall be accompanied by the
full purchase price for such shares. The option price shall be payable in United
States dollars and may be paid (a) in cash; (b) by check; (c) by delivery of
shares of Common Stock which, unless otherwise determined by the Committee,
shall have been held by the optionee for at least six months, and which shares
shall be valued for this purpose at the Fair Market Value on the business day
immediately preceding the date such option is exercised; (d) by delivery of
irrevocable written instructions to a broker approved by the Company (with a
copy to the Company) to immediately sell a portion of the shares issuable under
the option and to deliver promptly to the Company the amount of sale proceeds
(or loan proceeds if the broker lends funds to the participant for delivery

                                      -3-
<PAGE>

to the Company) to pay the exercise price; or (e) in such other manner as may be
authorized from time to time by the Committee.

         6.6 INCENTIVE STOCK OPTIONS. Notwithstanding anything in the Plan to
the contrary, the following additional provisions shall apply to the grant of
stock options that are intended to qualify as incentive stock options (as such
term is defined in Section 422 of the Code):

             A. Any incentive stock option agreement authorized under the Plan
      shall contain such other provisions as the Committee shall deem advisable,
      but shall in all events be consistent with and contain or be deemed to
      contain all provisions required in order to qualify the options as
      incentive stock options.

             B. All incentive stock options must be granted within ten years
      from the date on which this Plan is adopted by the Board of Directors.

             C. Unless sooner exercised, all incentive stock options shall
      expire no later than ten years after the date of grant.

             D. No incentive stock options shall be granted to any participant
      who, at the time such option is granted, would own (within the meaning of
      Section 422 of the Code) stock possessing more than 10% of the total
      combined voting power of all classes of stock of the employer corporation
      or of its parent or subsidiary corporation.

             E. The aggregate Fair Market Value (determined with respect to each
      incentive stock option as of the time such incentive stock option is
      granted) of the Common Stock with respect to which incentive stock options
      are exercisable for the first time by a participant during any calendar
      year (under the Plan or any other plan of Gulf Island or any of its
      subsidiaries) shall not exceed $100,000. To the extent that such
      limitation is exceeded, such options shall not be treated, for federal
      income tax purposes, as incentive stock options.

      7. RESTRICTED STOCK.

         7.1 GRANT OF RESTRICTED STOCK. The Committee may award shares of
restricted stock to such eligible participants as the Committee determines
pursuant to the terms of Section 3. An award of restricted stock shall be
subject to such restrictions on transfer and forfeitability provisions and such
other terms and conditions, including the attainment of specified performance
goals, as the Committee may determine, subject to the provisions of the Plan. To
the extent restricted stock is intended to qualify as "performance-based
compensation" under Section 162(m), it must be granted subject to the attainment
of performance goals as described in Section 9 below and meet the additional
requirements imposed by Section 162(m).

         7.2 THE RESTRICTED PERIOD. At the time an award of restricted stock is
made, the Committee shall establish a period of time during which the transfer
of the shares of restricted stock shall be restricted and after which the shares
of restricted stock shall be vested (the "Restricted Period"). Except for shares
of restricted stock that vest based on the attainment of performance goals, the
Restricted Period shall be a minimum of three years, with incremental

                                      -4-
<PAGE>

vesting of portions of the award over the three-year period permitted. If the
vesting of the shares of restricted stock is based upon the attainment of
performance goals, a minimum Restricted Period of one year is allowed, with
incremental vesting of portions of the award over the one-year period permitted.
Each award of restricted stock may have a different Restricted Period. The
expiration of the Restricted Period shall also occur as provided under Section
11.3 and under the conditions described in Section 11.10 hereof.

         7.3 ESCROW. The participant receiving restricted stock shall enter into
an Incentive Agreement with the Company setting forth the conditions of the
grant. Certificates representing shares of restricted stock shall be registered
in the name of the participant and deposited with the Company, together with a
stock power endorsed in blank by the participant. Each such certificate shall
bear a legend in substantially the following form:

      The transferability of this certificate and the shares of Common Stock
      represented by it are subject to the terms and conditions (including
      conditions of forfeiture) contained in the Gulf Island Fabrication, Inc.
      2002 Long-Term Incentive Plan (the "Plan"), and an agreement entered into
      between the registered owner and Gulf Island Fabrication, Inc. thereunder.
      Copies of the Plan and the agreement are on file at the principal office
      of the Company.

         7.4 DIVIDENDS ON RESTRICTED STOCK. Any and all cash and stock dividends
paid with respect to the shares of restricted stock shall be subject to any
restrictions on transfer, forfeitability provisions or reinvestment requirements
as the Committee may, in its discretion, prescribe in the Incentive Agreement.

         7.5 FORFEITURE. In the event of the forfeiture of any shares of
restricted stock under the terms provided in the Incentive Agreement (including
any additional shares of restricted stock that may result from the reinvestment
of cash and stock dividends, if so provided in the Incentive Agreement), such
forfeited shares shall be surrendered and the certificates cancelled. The
participants shall have the same rights and privileges, and be subject to the
same forfeiture provisions, with respect to any additional shares received
pursuant to Section 11 due to a recapitalization, merger or other change in
capitalization.

         7.6 EXPIRATION OF RESTRICTED PERIOD. Upon the expiration or termination
of the Restricted Period and the satisfaction of any other conditions prescribed
by the Committee, the restrictions applicable to the restricted stock shall
lapse and a stock certificate for the number of shares of restricted stock with
respect to which the restrictions have lapsed shall be delivered, free of all
such restrictions and legends, except any that may be imposed by law, to the
participant or the participant's estate, as the case may be.

         7.7 RIGHTS AS A SHAREHOLDER. Subject to the terms and conditions of the
Plan and subject to any restrictions on the receipt of dividends that may be
imposed in the Incentive Agreement, each participant receiving restricted stock
shall have all the rights of a shareholder with respect to shares of stock
during the Restricted Period, including without limitation, the right to vote
any shares of Common Stock.

                                      -5-
<PAGE>

      8. OTHER STOCK-BASED AWARDS.

         8.1 GRANT OF OTHER STOCK-BASED AWARDS. Subject to the limitations
described in Section 8.2 hereof, the Committee may grant to eligible
participants "Other Stock-Based Awards," which shall consist of awards (other
than options or restricted stock in Sections 6 and 7) the value of which is
based in whole or in part on the value of shares of Common Stock. Other
Stock-Based Awards may be awards of shares of Common Stock or may be denominated
or payable in, valued in whole or in part by reference to, or otherwise based on
or related to, shares of, or appreciation in the value of, Common Stock
(including, without limitation, securities convertible or exchangeable into or
exercisable for shares of Common Stock), as deemed by the Committee consistent
with the purposes of this Plan. The Committee shall determine the terms and
conditions of any Other Stock-Based Award (including which rights of a
shareholder, if any, the recipient shall have with respect to Common Stock
associated with any such award) and may provide that such award is payable in
whole or in part in cash. An Other Stock-Based Award may be subject to the
attainment of such specified performance goals or targets as the Committee may
determine, subject to the provisions of this Plan. To the extent that an Other
Stock-Based Award is intended to qualify as "performance-based compensation"
under Section 162(m), it must be granted subject to the attainment of
performance goals as described in Section 9 below and meet the additional
requirements imposed by Section 162(m).

         8.2 LIMITATIONS. Other Stock-Based Awards granted under this Section 8
shall be subject to a vesting period of at least three years, with incremental
vesting of portions of the award over the three-year period permitted; provided,
however, that if the vesting of the award is based upon the attainment of
performance goals, a minimum vesting period of one year is allowed, with
incremental vesting of portions of the award over the one-year period permitted,
and further provided that the Committee may make special awards under this
Section 8 with respect to an aggregate of no more than 25,000 shares of Common
Stock, as adjusted under Section 11.5, which special awards shall not be subject
to any minimum vesting requirements.

      9. SECTION 162(m) AWARDS.

         9.1 PERFORMANCE GOALS. To the extent that shares of restricted stock or
Other Stock-Based Awards granted under the Plan are intended to qualify as
"performance-based compensation" under Section 162(m), the vesting, grant or
payment of such awards shall be conditioned on the achievement of one or more
performance goals and must satisfy the other requirements of Section 162(m). The
performance goals pursuant to which such awards shall vest, be granted or be
paid out shall be any or a combination of the following performance measures
applied to the Company, Gulf Island, a division or a subsidiary: earnings per
share, return on assets, an economic value added measure, shareholder return,
earnings, stock price, return on equity, return on total capital, safety
performance, reduction of expenses or increase in cash flow. For any performance
period, such performance objectives may be measured on an absolute basis or
relative to a group of peer companies selected by the Committee, relative to
internal goals or relative to levels attained in prior years. For
performance-based compensation under Section 162(m), the Committee may not waive
any of the pre-established performance goal objectives, except for an automatic
waiver under Section 11.10 hereof, or as may be provided by the Committee in the
event of death or disability.

                                      -6-
<PAGE>

          9.2 ADJUSTMENTS TO PERFORMANCE GOALS. The terms used in Section 9.1 to
describe the performance goals shall have the same meanings as used in the
Company's financial statements, or if the terms are not used in the Company's
financial statements, they shall have the meanings generally applied pursuant to
generally accepted accounting principles, or as used in the industry, as
applicable. The Committee may appropriately adjust any evaluation of performance
under a performance goal to exclude any of the following events that occurs
during a performance period: (i) asset write-downs, (ii) litigation or claim
judgments or settlements, (iii) the effect of changes in tax law, accounting
principles or other such laws or provisions affecting reported results, (iv)
accruals for reorganization and restructuring programs, and (v) extraordinary,
non-recurring items as described in Accounting Principles Board Opinion No. 30
and/or in management's discussion and analysis of financial condition and
results of operations appearing in the Company's annual report to shareholders
for the applicable year.

      10. STOCK OPTIONS FOR OUTSIDE DIRECTORS.

          10.1 GRANT OF OPTIONS. During each calendar year that the Plan remains
in effect, each Outside Director may be granted, in the discretion of the
Committee, non-qualified stock options to purchase up to 5,000 shares of Common
Stock, the exact number of which shall be set each year by the Committee.

          10.2 EXERCISABILITY OF STOCK OPTIONS. The stock options granted to
Outside Directors under this Section 10 shall be exercisable six months after
the date of grant and shall expire no later than ten years following the date of
grant.

          10.3 EXERCISE PRICE. The Exercise Price of the Stock Options granted
to Outside Directors shall be equal to the Fair Market Value, as defined in the
Plan, of a share of Common Stock on the date of grant. The Exercise Price may be
paid as provided in Section 6.5 hereof.

          10.4 EXERCISE AFTER TERMINATION OF BOARD SERVICE. In the event an
Outside Director ceases to serve on the Board, the stock options granted
hereunder must be exercised, to the extent otherwise exercisable at the time of
termination of Board service, within one year from termination of Board service;
provided, however, that

               A. In the event of termination of Board service as a result of
      death or disability, the stock options may be exercised within two years
      from the date of termination of Board service; and

               B. In the event of termination of Board service as a result of
      retirement (at age 65 or later or after having completed five or more
      years of service on the Board), the stock options may be exercised within
      five years from the date of termination of Board service;

      and further provided, that no stock options may be exercised later than
      ten years after the date of grant.

                                      -7-
<PAGE>

      11. GENERAL.

          11.1 DURATION. Subject to Section 11.9, the Plan shall remain in
effect until all Incentives granted under the Plan have either been satisfied by
the issuance of shares of Common Stock or otherwise been terminated under the
terms of the Plan and all restrictions imposed on shares of Common Stock in
connection with their issuance under the Plan have lapsed.

          11.2 TRANSFERABILITY. No Incentives granted hereunder may be
transferred, pledged, assigned or otherwise encumbered by a participant except:
(a) by will; (b) by the laws of descent and distribution; (c) pursuant to a
domestic relations order, as defined in the Code; or (d) as to options only, if
permitted by the Committee and so provided in the Incentive Agreement or an
amendment thereto, (i) to Immediate Family Members, (ii) to a partnership in
which Immediate Family Members, or entities in which Immediate Family Members
are the sole owners, members or beneficiaries, as appropriate, are the sole
partners, (iii) to a limited liability company in which Immediate Family
Members, or entities in which Immediate Family Members are the sole owners,
members or beneficiaries, as appropriate, are the sole members, or (iv) to a
trust for the sole benefit of Immediate Family Members. "Immediate Family
Members" shall be defined as the spouse and natural or adopted children or
grandchildren of the participant and their spouses. To the extent that an
incentive stock option is permitted to be transferred during the lifetime of the
participant, it shall be treated thereafter as a nonqualified stock option. Any
attempted assignment, transfer, pledge, hypothecation or other disposition of
Incentives, or levy of attachment or similar process upon Incentives not
specifically permitted herein, shall be null and void and without effect.

          11.3 EFFECT OF TERMINATION OF EMPLOYMENT OR DEATH. Except as provided
in Section 10.4 with respect to Outside Directors, in the event that a
participant ceases to be an employee of the Company or to provide services to
the Company for any reason, including death, disability, early retirement or
normal retirement, any Incentives may be exercised, shall vest or shall expire
at such times as may be determined by the Committee and provided in the
Incentive Agreement.

          11.4 ADDITIONAL CONDITIONS. Anything in this Plan to the contrary
notwithstanding: (a) the Company may, if it shall determine it necessary or
desirable for any reason, at the time of award of any Incentive or the issuance
of any shares of Common Stock pursuant to any Incentive, require the recipient
of the Incentive, as a condition to the receipt thereof or to the receipt of
shares of Common Stock issued pursuant thereto, to deliver to the Company a
written representation of present intention to acquire the Incentive or the
shares of Common Stock issued pursuant thereto for his own account for
investment and not for distribution; and (b) if at any time the Company further
determines, in its sole discretion, that the listing, registration or
qualification (or any updating of any such document) of any Incentive or the
shares of Common Stock issuable pursuant thereto is necessary on any securities
exchange or under any federal or state securities or blue sky law, or that the
consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with the award of any Incentive,
the issuance of shares of Common Stock pursuant thereto, or the removal of any
restrictions imposed on such shares, such Incentive shall not be awarded or such
shares of Common Stock shall not be issued or such restrictions shall not be
removed, as the case

                                      -8-
<PAGE>

may be, in whole or in part, unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Company.

          11.5 ADJUSTMENT. In the event of any merger, consolidation or
reorganization of the Company with any other corporation or corporations, there
shall be substituted for each of the shares of Common Stock then subject to the
Plan, including shares subject to restrictions, options or achievement of
performance objectives, the number and kind of shares of stock, other securities
or property (including cash) to which the holders of the shares of Common Stock
are entitled pursuant to the transaction. In the event of any recapitalization,
stock dividend, stock split, combination of shares or other similar change in
the Common Stock, the number of shares of Common Stock then subject to the Plan,
including shares subject to outstanding Incentives, and all limitations on the
number of shares that may be issued hereunder shall be adjusted in proportion to
the change in outstanding shares of Common Stock. In the event of any such
adjustments, the purchase price of any option and the performance objectives of
any Incentive, shall also be adjusted as and to the extent appropriate, in the
reasonable discretion of the Committee, to provide participants with the same
relative rights before and after such adjustment. No substitution or adjustment
shall require the Company to issue a fractional share under the Plan and the
substitution or adjustment shall be limited by deleting any fractional share.

          11.6 WITHHOLDING.

               A. The Company shall have the right to withhold from any payments
      made or stock issued under the Plan or to collect as a condition of
      payment, issuance or vesting, any taxes required by law to be withheld. At
      any time that a participant is required to pay to the Company an amount
      required to be withheld under applicable income tax laws in connection
      with the lapse of restrictions on Common Stock or the exercise of an
      option, the participant may, subject to disapproval by the Committee,
      satisfy this obligation in whole or in part by electing (the "Election")
      to deliver currently owned shares of Common Stock or to have the Company
      withhold shares of Common Stock, in each case having a value equal to the
      minimum statutory amount required to be withheld under federal, state and
      local law. The value of the shares to be delivered or withheld shall be
      based on the Fair Market Value of the Common Stock on the date that the
      amount of tax to be withheld shall be determined ("Tax Date").

               B. Each Election must be made prior to the Tax Date. The
      Committee may disapprove of any Election, may suspend or terminate the
      right to make Elections, or may provide with respect to any Incentive that
      the right to make Elections shall not apply to such Incentive. If a
      participant makes an election under Section 83(b) of the Code with respect
      to shares of restricted stock, an Election to have shares withheld to
      satisfy withholding taxes is not permitted to be made.

          11.7 NO CONTINUED EMPLOYMENT. No participant under the Plan shall have
any right, because of his or her participation, to continue in the employ of the
Company for any period of time or to any right to continue his or her present or
any other rate of compensation.

                                      -9-
<PAGE>

          11.8 DEFERRAL PERMITTED. Payment of an Incentive may be deferred at
the option of the participant if permitted in the Incentive Agreement.

          11.9 AMENDMENTS TO OR TERMINATION OF THE PLAN. The Board may amend or
discontinue this Plan at any time; provided, however, that no such amendment
may:

                A. without the approval of the shareholders, (i) except for
      adjustments permitted herein, increase the maximum number of shares of
      Common Stock that may be issued through the Plan, (ii) materially increase
      the benefits accruing to participants under the Plan or (iii) materially
      expand the classes of persons eligible to participate in the Plan, or

                B. materially impair, without the consent of the recipient, an
      Incentive previously granted.

          11.10 CHANGE OF CONTROL.

                A. A Change of Control shall mean:

                   (i) the acquisition by any person of beneficial ownership of
          30% or more of the outstanding shares of the Common Stock or 30% or
          more of the combined voting power of Gulf Island's then outstanding
          securities entitled to vote generally in the election of directors;
          provided, however, that for purposes of this subsection (i), the
          following acquisitions shall not constitute a Change of Control:

                       (a) any acquisition (other than a Business Combination
                (as defined below) which constitutes a Change of Control under
                Section 11.10(A)(iii) hereof) of Common Stock directly from
                the Company,

                       (b) any acquisition of Common Stock by the Company,

                       (c) any acquisition of Common Stock by any employee
                benefit plan (or related trust) sponsored or maintained by the
                Company or any corporation controlled by the Company, or

                       (d) any acquisition of Common Stock by any corporation
                pursuant to a Business Combination that does not constitute a
                Change of Control under Section 11.10(A)(iii) hereof; or

                       (e) any acquisition by Huey J. Wilson, Alden J. Laborde,
                their Immediate Family Members or any entity controlled by
                Huey J. Wilson, Alden J. Laborde or their Immediate Family
                Members, or

                   (ii) individuals who, as of January 1, 2002, constituted the
          Board of Directors of Gulf Island (the "Incumbent Board") cease for
          any reason to constitute at least a majority of the Board of
          Directors; provided, however, that any individual becoming a
          director subsequent to such date whose election, or

                                      -10-
<PAGE>

          nomination for election by Gulf Island's shareholders, was approved
          by a vote of at least two-thirds of the directors then comprising
          the Incumbent Board shall be considered a member of the Incumbent
          Board, unless such individual's initial assumption of office occurs
          as a result of an actual or threatened election contest with respect
          to the election or removal of directors or other actual or
          threatened solicitation of proxies or consents by or on behalf of a
          person other than the Incumbent Board; or

                   (iii) consummation of a reorganization, share exchange,
          merger or consolidation (including any such transaction involving
          any direct or indirect subsidiary of Gulf Island) or sale or other
          disposition of all or substantially all of the assets of the Company
          (a "Business Combination"); provided, however, that in no such case
          shall any such transaction constitute a Change of Control if
          immediately following such Business Combination:

                        (a) the individuals and entities who were the beneficial
                owners of Gulf Island's outstanding Common Stock and Gulf
                Island's voting securities entitled to vote generally in the
                election of directors immediately prior to such Business
                Combination have direct or indirect beneficial ownership,
                respectively, of more than 50% of the then outstanding shares
                of common stock, and more than 50% of the combined voting
                power of the then outstanding voting securities entitled to
                vote generally in the election of directors of the surviving
                or successor corporation, or, if applicable, the ultimate
                parent company thereof (the "Post-Transaction Corporation"),
                and

                        (b) except to the extent that such ownership existed
                prior to the Business Combination, no person (excluding the
                Post-Transaction Corporation and any employee benefit plan or
                related trust of either Gulf Island, the Post-Transaction
                Corporation or any subsidiary of either corporation)
                beneficially owns, directly or indirectly, 25% or more of the
                then outstanding shares of common stock of the corporation
                resulting from such Business Combination or 25% or more of the
                combined voting power of the then outstanding voting
                securities of such corporation, and

                        (c) at least a majority of the members of the board of
                directors of the Post-Transaction Corporation were members of
                the Incumbent Board at the time of the execution of the
                initial agreement, or of the action of the Board of Directors,
                providing for such Business Combination; or

                   (iv) approval by the shareholders of Gulf Island of a
          complete liquidation or dissolution of Gulf Island.

For purposes of this Section 11.10, the term "person" shall mean a natural
person or entity, and shall also mean the group or syndicate created when two or
more persons act

                                      -11-
<PAGE>

as a syndicate or other group (including, without limitation, a partnership or
limited partnership) for the purpose of acquiring, holding, or disposing of a
security, except that "person" shall not include an underwriter temporarily
holding a security pursuant to an offering of the security.

                B. Upon a Change of Control of the type described in clause
      (A)(i) or (A)(ii) of this Section 11.10 or immediately prior to any Change
      of Control of the type described in clause (A)(iii) or (A)(iv) of this
      Section 11.10, all outstanding Incentives granted pursuant to this Plan
      shall automatically become fully vested and exercisable, all restrictions
      or limitations on any Incentives shall automatically lapse and, unless
      otherwise provided in the applicable Incentive Agreement, all performance
      criteria and other conditions relating to the payment of Incentives shall
      be deemed to be achieved or waived by Gulf Island without the necessity of
      action by any person. As used in the immediately preceding sentence,
      'immediately prior' to the Change of Control shall mean sufficiently in
      advance of the Change of Control to permit the grantee to take all steps
      reasonably necessary (i) if an optionee, to exercise any such option fully
      and (ii) to deal with the shares purchased or acquired under any such
      option or any Other Stock-Based Award and any formerly restricted shares
      on which restrictions have lapsed so that all types of shares may be
      treated in the same manner in connection with the Change of Control as the
      shares of Common Stock of other shareholders.

                C. No later than 30 days after a Change of Control of the type
      described in subsections (A)(i) or (A)(ii) of this Section 11.10 and no
      later than 30 days after the approval by the Board of a Change of Control
      of the type described in subsections (A)(iii) or (A)(iv) of this Section
      11.10, the Committee, acting in its sole discretion without the consent or
      approval of any participant (and notwithstanding any removal or attempted
      removal of some or all of the members thereof as directors or Committee
      members), may act to effect one or more of the alternatives listed below,
      which may vary among individual participants and which may vary among
      Incentives held by any individual participant:

                   (i) require that all outstanding options or Other Stock-Based
          Awards be exercised on or before a specified date (before or after
          such Change of Control) fixed by the Committee, after which
          specified date all unexercised options and Other Stock-Based Awards
          and all rights of participants thereunder shall terminate,

                   (ii) make such equitable adjustments to Incentives then
          outstanding as the Committee deems appropriate to reflect such
          Change of Control (provided, however, that the Committee may
          determine in its sole discretion that no adjustment is necessary),

                   (iii) provide for mandatory conversion of some or all of the
          outstanding options or Other Stock-Based Awards held by some or all
          participants as of a date, before or after such Change of Control,
          specified by the Committee, in which event such options and Other
          Stock-Based Awards shall be deemed automatically cancelled and the
          Company shall pay, or cause to be paid, to each

                                      -12-
<PAGE>

          such participant an amount of cash per share equal to the excess, if
          any, of the Change of Control Value of the shares subject to such
          option or Other Stock-Based Award, as defined and calculated below,
          over the exercise price of such options or the exercise or base
          price of such Other Stock-Based Awards or, in lieu of such cash
          payment, the issuance of Common Stock or securities of an acquiring
          entity having a Fair Market Value equal to such excess, or

                   (iv) provide that thereafter, upon any exercise of an option
          or Other Stock-Based Award that entitles the holder to receive
          Common Stock, the holder shall be entitled to purchase or receive
          under such option or Other Stock-Based Award, in lieu of the number
          of shares of Common Stock then covered by such option or Other
          Stock-Based Award, the number and class of shares of stock or other
          securities or property (including, without limitation, cash) to
          which the holder would have been entitled pursuant to the terms of
          the agreement providing for the reorganization, share exchange,
          merger, consolidation or asset sale, if, immediately prior to such
          Change of Control, the holder had been the record owner of the
          number of shares of Common Stock then covered by such option or
          Other Stock-Based Award.

                D. For the purposes of paragraph (iii) of Section 11.10(C), the
      "Change of Control Value" shall equal the amount determined by whichever
      of the following items is applicable:

                   (i) the per share price to be paid to shareholders of Gulf
          Island in any such merger, consolidation or other reorganization,

                   (ii) the price per share offered to shareholders of Gulf
          Island in any tender offer or exchange offer whereby a Change of
          Control takes place,

                   (iii) in all other events, the fair market value per share of
          Common Stock into which such options being converted are
          exercisable, as determined by the Committee as of the date
          determined by the Committee to be the date of conversion of such
          options, or

                   (iv) in the event that the consideration offered to
          shareholders of Gulf Island in any transaction described in this
          Section 11.10 consists of anything other than cash, the Committee
          shall determine the fair cash equivalent of the portion of the
          consideration offered that is other than cash.

          11.11 DEFINITION OF FAIR MARKET VALUE. Whenever "Fair Market Value" of
Common Stock shall be determined for purposes of this Plan, it shall be
determined as follows: (i) if the Common Stock is listed on an established stock
exchange or any automated quotation system that provides sale quotations, the
closing sale price for a share of the Common Stock on such exchange or quotation
system on the applicable date, or if no sale of the Common Stock shall have been
made on that day, on the next preceding day on which there was a sale of the
Common Stock; (ii) if the Common Stock is not listed on any exchange or
quotation system, but bid and asked prices are quoted and published, the mean
between the quoted bid and asked prices

                                      -13-
<PAGE>

on the applicable date, and if bid and asked prices are not available on such
day, on the next preceding day on which such prices were available; and (iii) if
the Common Stock is not regularly quoted, the fair market value of a share of
Common Stock on the applicable date as established by the Committee in good
faith.

          This Plan is executed effective the _____ day of _____________, 2002.

                                       GULF ISLAND FABRICATION, INC.

                                       By:
                                           -------------------------------------

                                      -14-

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