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                                                                   EXHIBIT 10.3

                               THE SHAW GROUP INC.
                    2001 EMPLOYEE INCENTIVE COMPENSATION PLAN
                 (AMENDED AND RESTATED THROUGH OCTOBER 8, 2001)

1. PURPOSE OF PLAN.

         The Shaw Group Inc. 2001 Employee Incentive Compensation Plan has been
established by the Company to (i) attract and retain persons eligible to
participate in the Plan; (ii) motivate participants, by means of appropriate
incentives, to achieve long-range goals; (iii) provide incentive compensation
opportunities that are competitive with those of other similar companies; and
(iv) further identify participants' interests with those of the Company's other
shareholders through compensation that is based on the Common Stock thereby
promoting the long-term financial interest of the Company and its Subsidiaries,
including the growth in value of the Company's equity and enhancement of
long-term shareholder return.

2. DEFINITIONS.

         Unless otherwise required by the context, the following terms when used
in the Plan shall have the meanings set forth in this Section 2:

                  (a) "Agreement": An agreement evidencing an Award in such form
         as adopted from time to time by the Committee pursuant to the Plan.

                  (b) "Award": Any award or benefit granted under the Plan,
         including without limitation, the grant of Options, SARs, Restricted
         Stock, Performance Shares or Incentive Bonuses, or any combination
         thereof, under the Plan.

                  (c) "Board of Directors": The Board of Directors of the
         Company.

                  (d) "Cause": For purposes of the Plan, whether the termination
         of a Participant's employment shall have been for Cause shall be
         determined by the Committee in its sole discretion, if said Participant
         has: (i) been convicted of, or has pleaded guilty or nolo contendere to
         a charge that he committed a felony under the laws of the United States
         or any state or a crime involving moral turpitude, including but not
         limited to fraud, theft, embezzlement or any crime that results in or
         is intended to result in personal enrichment at the expense of the
         Company or its Subsidiaries; (ii) perpetrated a fraud against, or theft
         of property of the Company or any of its Subsidiaries; (iii) committed
         acts amounting to gross negligence, intentional neglect or willful
         misconduct in carrying out his duties and responsibilities as an
         employee of the Company or one or more of its Subsidiaries; (iv)
         willfully or persistently failed to attend to his duties as an employee
         of the Company or one or more of its Subsidiaries; or (v) as a result
         of his gross negligence or willful misconduct, committed any act that
         causes, or has knowingly failed to take reasonable and appropriate
         action to prevent, any material injury to the financial condition or
         business reputation of the Company or any of its Subsidiaries.

                  (e) "Change of Control": For the purposes of the Plan, the
         term Change in Control shall mean the happening of any of the
         following:

                           (i) any "person" as defined in Section 3(a)(9) of the
                  Exchange Act, and as used in Section 13(d) and 14(d) thereof,
                  including a "group" as defined in Section 13(d) of the

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                  Exchange Act (but excluding any shareholder of record of the
                  Company as of January 1, 2000, owning 10% or more of the
                  combined voting power of the Company's securities which are
                  entitled to vote in the election of directors of the Company)
                  directly or indirectly becomes the "beneficial owner" (as
                  defined in Rule 13d-3 under the Exchange Act), of securities
                  of the Company representing 20% or more of the combined voting
                  power of the Company's then outstanding securities which are
                  entitled to vote with respect to the election of directors;

                           (ii) When, during any period of 24 consecutive
                  months, the individuals who, at the beginning of such period,
                  constitute the Board of Directors of the Company (the
                  "Incumbent Directors") cease for any reason other than death
                  or disability to constitute at least a majority thereof;
                  provided, however, that a director who was not a director at
                  the beginning of such 24-month period shall be deemed to have
                  satisfied such 24-month requirement (and be an Incumbent
                  Director) if such director was elected by, or on the
                  recommendation of or with approval of, at least two-thirds of
                  the directors who then qualified as Incumbent Directors either
                  actually (because they were directors at the beginning of such
                  24-month period) or by operation of this provision;

                           (iii) The acquisition of the Company or all or
                  substantially all of the Company's assets by an entity other
                  than the Company (or a Subsidiary) through purchase of assets,
                  or by merger, or otherwise, except in the case of a
                  transaction pursuant to which, immediately after the
                  transaction, the Company's shareholders immediately prior to
                  the transaction own immediately after the transaction at least
                  a majority of the combined voting power of the surviving
                  entity's then outstanding securities which are entitled to
                  vote with respect to the election of directors of such entity;
                  or

                           (iv) The Company files a report or proxy statement
                  with the Commission pursuant to the Exchange Act disclosing in
                  response to Form 8-K, Form 10-K or Schedule 14A (or any
                  successor schedule, form or report or item therein) that a
                  change in control of the Company has or may have occurred or
                  will or may occur in the future pursuant to any then-existing
                  contract or transaction.

                  (f) "Code": The Internal Revenue Code of 1986, as amended from
         time to time.

                  (g) "Commission": The Securities and Exchange Commission.

                  (h) "Committee": The Compensation Committee of the Board of
         Directors or such other committee appointed by the Board of Directors
         which meets the requirements set forth in Section 14.1 hereof.

                  (i) "Company": The Shaw Group Inc., a Louisiana corporation.

                  (j) "Consultant": Any professional advisor to the Company or
         its Subsidiaries as well as any employee, officer or director of a
         corporation that serves as an advisor, consultant or independent
         contractor to the Company or its Subsidiaries. The term "Consultant"
         shall not, however, include any director, officer or employee of the
         Company or its Subsidiaries.

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                  (k) "Effective Date": The date on which the Plan shall become
         effective as set forth in Section 16 hereof.

                  (l) "Exchange Act": The Securities Exchange Act of 1934, as
         amended, together with all regulations and rules issued thereunder.

                  (m) "Exercise Price": (i) In the case of an Option, the price
         per Share at which the Shares subject to such Option may be purchased
         upon exercise of such Option and (ii) in the case of an SAR, the price
         per Share which upon grant, the Committee determines shall be used in
         calculating the aggregate value which a Participant shall be entitled
         to receive upon exercise of such SAR.

                  (n) "Fair Market Value": As applied to a specific date, the
         fair market value of a Share on such date as determined in good faith
         by the Committee in the following manner:

                           (i) If the Shares are then listed on any national or
                  regional stock exchange, the Fair Market Value shall be the
                  last quoted sales price of a Share on the date in question, or
                  if there are no reported sales on such date, on the last
                  preceding date on which sales were reported;

                           (ii) If the Shares are not so listed, then the Fair
                  Market Value shall be the mean between the bid and ask prices
                  quoted by a market maker or other recognized specialist in the
                  Shares at the close of the date in question; or

                           (iii) In the absence of either of the foregoing, the
                  Fair Market Value shall be determined by the Committee in its
                  absolute discretion after giving consideration to the book
                  value, the revenues, the earnings history and the prospects of
                  the Company in light of market conditions generally.

         The Fair Market Value determined in such manner shall be final, binding
         and conclusive on all parties.

                  (o) "Incentive Bonus": An Award granted pursuant to Section 8
         of the Plan.

                  (p) "ISO": An Option intended to qualify as an "incentive
         stock option," as defined in Section 422 of the Code or any statutory
         provision that may replace such Section and designated as an incentive
         stock option by the Committee.

                  (q) "Officer": An officer of the Company or its Subsidiaries
         meeting the definition of "officer" in Rule 16a-1(f) (or any successor
         provision) promulgated by the Commission under the Exchange Act.

                  (r) "NQSO": An Option not intended to be an ISO and designated
         as a nonqualified stock option by the Committee.

                  (s) "Option": Any ISO or NQSO granted under the Plan.

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                  (t) "Participant": An officer or other employee of or
         Consultant to the Company or any of its Subsidiaries who has been
         granted an Award under the Plan.

                  (u) "Performance Measures": The Performance Measures described
         in Section 9.1 of the Plan.

                  (v) "Performance Period": For the purposes of the grant of
         Performance Shares, the time period during which the applicable
         performance goal(s) must be met.

                  (w) "Performance Shares": An Award granted pursuant to Section
         7 of the Plan.

                  (x) "Plan": This The Shaw Group Inc. 2001 Employee Incentive
         Compensation Plan, as the same may be amended from time to time.

                  (y) "Related": (i) In the case of an SAR, an SAR that is
         granted in connection with, and to the extent exercisable, in whole or
         in part, in lieu of, an Option or another SAR; and (ii) in the case of
         an Option, an Option with respect to which and to the extent an SAR is
         exercisable, in whole or in part, in lieu thereof, has been granted.

                  (z) "Restricted Stock": Shares which have been awarded to a
         Participant under Section 6 hereof.

                  (aa) "Restriction Period": The time period during which
         Restricted Stock awarded under the Plan must be held before it becomes
         fully vested, unless additional conditions have been placed upon the
         vesting thereof.

                  (bb) "SAR": A stock appreciation right awarded to a
         Participant under Section 5.3 hereto.

                  (cc) "Shares": Shares of the Company's authorized but unissued
         or reacquired no par value per share common stock, or such other class
         or kind of shares or other securities as may be applicable pursuant to
         the provisions of Section 4.4 hereof.

                  (dd) "Subsidiary": Any "subsidiary corporation" of the
         Company, as such term is defined in Section 424(f) of the Code.

3. PARTICIPATION.

         Participants shall be selected by the Committee from the officers
(whether or not they are directors), employees of the Company or its
Subsidiaries (either full or part-time) and Consultants. An Award may be granted
to an employee, in connection with hiring, retention or otherwise, prior to the
date the employee first performs services for the Company or the Subsidiaries,
provided that such Awards shall not become vested prior to the date the employee
first performs such services.

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4. SHARES SUBJECT TO PLAN.

         4.1 Shares Subject to the Plan. The maximum number of Shares that may
be delivered to Participants and their beneficiaries pursuant to the Plan shall
be equal to the sum of: (i) 2.0 million shares of Common Stock (as adjusted to
reflect a two-for-one Common Stock split distributed on December 15, 2000) and
(ii) any shares of Common Stock that are represented by awards granted under the
Company's 1993 Employee Stock Option Plan, as amended and restated, which are
forfeited, expire or are canceled without the delivery of shares of Common Stock
or which result in the forfeiture of shares of Common Stock back to the Company.
The limitations established by the preceding sentence shall be subject to
adjustment as provided in Section 4.4 of the Plan.

         4.2 Accounting for Number of Shares. For purposes of determining the
aggregate number of Shares available for delivery to Participants pursuant to
the Plan, any Shares granted under the Plan which are forfeited back to the
Company because of the failure to meet an award contingency or condition shall
again be available for delivery pursuant to new Awards granted under the Plan.
Any Shares covered by an Award (or portion of an Award) granted under the Plan,
which is forfeited or canceled, expires or is settled in cash, shall be deemed
not to have been delivered for purposes of determining the maximum number of
Shares available for delivery under the Plan. Likewise, if any Option is
exercised by tendering Shares to the Company as full or partial payment in
connection with the exercise of an Option under this Plan or the Prior Plan,
only the number of Shares issued net of the Shares tendered shall be deemed
delivered for purposes of determining the maximum number of Shares available for
delivery under the Plan. Further, Shares issued under the Plan through the
settlement, assumption or substitution of outstanding Awards or obligations to
grant future Awards as a result of acquiring another entity shall not reduce the
maximum number of Shares available for delivery under the Plan.

         4.3 Maximum Total Option and SAR Awards. Notwithstanding the provisions
of Section 4.1, over the term of the Plan, the total number of Shares that may
be issued upon exercise of all Options and SARs granted under the Plan shall not
exceed 2.0 million shares of Common Stock (as adjusted to reflect a two-for-one
Common Stock split distributed on December 15, 2000). The limitations in this
Section 4.3 shall be subject to adjustment as provided in Section 4.4 below.

         4.4 Adjustments. In the event of a corporate transaction involving the
Company (including, without limitation, any stock dividend, stock split,
extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination or exchange of shares, or other
similar transactions or award), the Committee may adjust Awards as well as the
total number of shares subject to the Plan to preserve the benefits or potential
benefits of the Awards. Action by the Committee may include: (i) adjustment of
the number and kind of Shares (or other securities or property) which may be
delivered under the Plan; (ii) adjustment of the number and kind of Shares (or
the securities or property) subject to outstanding Awards; (iii) adjustment of
the Exercise Price of outstanding Options and SARs; and (iv) any other
adjustments that the Committee determines to be equitable, in its sole
discretion.

5. AWARDS OF OPTIONS AND SARS.

         5.1 General Terms And Conditions. The Committee shall have full and
complete authority and discretion, except as expressly limited by the Plan, to
grant Options and SARs and to provide any and all terms and conditions (which
need not be identical among the Participants) thereof. In particular, the
Committee shall prescribe the following terms and conditions:

                  (a) The Exercise Price of the Option or SAR, which may not be
         less than 100% of the Fair Market Value per Share at the date of grant
         of the Option or SAR;

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                  (b) The number of Shares subject to, and the expiration date
         of, the Option or SAR;

                  (c) The manner, time and rate (cumulative or otherwise) of
         exercise of the Option or SAR; provided, however, that except as
         otherwise specified in the Plan, no Option or SAR awarded to a
         Participant who is an Officer shall expressly provide for exercise
         prior to the expiration of six months from the date of grant; and

                  (d) The restrictions or conditions (such as performance
         goals), if any, to be placed upon the Option or SAR, the exercisability
         of the Option or SAR or upon the Shares which may be issued upon
         exercise of the Option or SAR. The Committee may, as a condition of
         granting an Option or SAR, require that a Participant agree not to
         thereafter exercise one or more Options or SARs previously granted to
         such Participant.

         5.2 Maximum Award Of Options and SARs. The number of Shares that may be
allotted by the Committee pursuant to Options and SARs awarded to any individual
Participant shall not exceed, in any fiscal year, 2.0 million Shares (as
adjusted to reflect a two-for-one Common Stock split distributed on December 15,
2000) (subject to adjustment pursuant to Section 4.4 of the Plan). If an Option
is in tandem with an SAR, such that the exercise of the Option or SAR with
respect to a Share cancels the tandem SAR or Option right, respectively, with
respect to such Share, the tandem Option and SAR rights with respect to such
Share shall be counted as covering but one Share for purposes of applying the
limitations of this Section 5.2.

         5.3 SAR Awards.

                  (a) Grant of SARs. An SAR shall, upon its exercise, entitle
         the Participant to whom such SAR was granted to receive a number of
         Shares or cash or combination thereof, as the Committee in its
         discretion shall determine, the aggregate value of which (i.e., the sum
         of the amount of cash and/or Fair Market Value of such Shares on date
         of exercise) shall equal the amount by which the Fair Market Value per
         Share on the date of such exercise shall exceed the Exercise Price of
         such SAR multiplied by the number of Shares with respect of which such
         SAR shall have been exercised. An SAR may be related to an Option or
         may be granted independently of an Option, as the Committee shall from
         time to time in each case determine. A Related SAR may be granted at
         the time of grant of an Option or, in the case of an NQSO, at any time
         thereafter during the term of the NQSO.

                  (b) Related SARs. The Exercise Price of a Related SAR shall be
         the same as the Exercise Price of the Related Option. A Related SAR
         shall be exercisable only at such time or times and only to the extent
         that the Related Option is exercisable and then only when the Fair
         Market Value per Share on the date of exercise exceeds the Exercise
         Price. A Related SAR shall expire no later than the Related Option.
         Upon exercise of a Related SAR, in whole or in part, the Related Option
         shall be cancelled automatically to the extent of the number of Shares
         covered by such exercise, and such Shares shall no longer be available
         for delivery pursuant to future Awards. Conversely, if the Related
         Option is exercised, in whole or in part, the Related SAR shall be
         cancelled automatically to the extent of the number of Shares covered
         by the Option exercise.

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         5.4 Exercise of Options and SARs.

                  (a) General Exercise Rights. Except as provided in Section
         5.9, an Option or SAR ranted under the Plan shall be exercisable during
         the lifetime of the Participant to whom such Option or SAR was granted
         only by such Participant, and except as provided in Section 5.4(c) and
         Section 5.9 hereof, no Option or SAR may be exercised unless at the
         time such Participant exercises such Option or SAR, such Participant is
         an employee of and has continuously since the grant thereof been an
         employee of, the Company or an any of its Subsidiaries. Transfer of
         employment between Subsidiaries or between Subsidiary and the Company
         shall not be considered an interruption or termination of employment
         for any purpose under this Plan. Neither shall a leave of absence at
         the request, or with the approval, of the Company or Subsidiary be
         deemed an interruption or termination of employment, so long as the
         period of such leave does not exceed 90 days, or, if longer, so long as
         the Participant's right to re-employment with the Company or Subsidiary
         is guaranteed by contract. An Option or SAR also shall contain such
         conditions upon exercise (including, without limitation, conditions
         limiting the time of exercise to specified periods) as may be required
         to satisfy applicable regulatory requirements, including, without
         limitation, Rule 16b-3 (or any successor rule) promulgated by the
         Commission.

                  (b) Notice Of Exercise. An Option or SAR may not be exercised
         with respect to less than 100 Shares, unless the exercise relates to
         all Shares covered by the Option or SAR at the date of exercise. An
         Option or SAR may be exercised by delivery of a written notice to the
         Company, which shall state the election to exercise the Option or SAR
         and the number of whole Shares in respect of which it is being
         exercised, and shall be signed by the person or persons so exercising
         the Option or SAR. In the case of an exercise of an Option or SAR, such
         notice shall either: (i) if applicable, be accompanied by payment of
         the full Exercise Price and all applicable withholding taxes, in which
         event the Company shall deliver any certificate(s) representing Shares
         to which the Participant is entitled as a result of the exercise as
         soon as practicable after the notice has been received; or (ii) fix a
         date (not less than 5 nor more than 15 business days from the date such
         notice has been received by the Company) for the payment of the full
         Exercise Price and all applicable withholding taxes, against delivery
         by the Company of any certificate(s) representing Shares to which the
         Participant is entitled to receive as a result of the exercise. Payment
         of such Exercise Price and withholding taxes shall be made as provided
         in Sections 5.4(d) and 13, respectively. In the event the Option or SAR
         shall be exercised pursuant to Section 5.4(c)(i) or Section 5.9 hereof,
         by any person or persons other than the Participant, such notice shall
         be accompanied by appropriate proof of the right of such person or
         persons to exercise the Option or SAR.

                  (c) Exercise After Termination Of Employment. Except as
         otherwise determined by the Committee at the date of grant of the
         Option or SAR and as is provided in the applicable Agreement evidencing
         the Award, upon termination of a Participant's employment with the
         Company or any of its Subsidiaries, such Participant (or in the case of
         death, the person(s) to whom the Option is transferred by will or the
         laws of descent and distribution) may exercise such Option or SAR
         during the following periods of time (but in no event after the
         expiration date of such Option or SAR) to the extent that such
         Participant was entitled to exercise such Option or SAR (or portion
         thereof) at the date of such termination (i.e., the Option or SAR (or
         portion thereof) must be "vested" at the time of termination to be
         exercisable thereafter):

                           (i) In the case of termination as a result of death,
                  disability or retirement of the Participant, the Option or SAR
                  shall remain exercisable for a one-year period following such
                  termination; for this purpose, "disability" shall exist when
                  the Participant is unable to engage

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                  in any substantial, gainful activity by reason of any
                  medically determinable physical or mental impairment which can
                  be expected to result in death or which has lasted or can be
                  expected to last for a continuous period of not less than 12
                  months, as determined by the Committee in its sole discretion,
                  and "retirement" shall mean voluntary retirement at or after
                  the Participant's normal retirement date as determined by the
                  Committee in its sole discretion;

                           (ii) In the case of termination for Cause, the Option
                  shall immediately terminate and shall no longer be
                  exercisable; and

                           (iii) In the case of termination for any reason other
                  than those set forth in subparagraphs (i) and (ii) above, the
                  Option or SAR shall remain exercisable for three months after
                  the date of termination.

         To the extent the Option or SAR is not exercised within the foregoing
         periods of time, the Option or SAR shall automatically terminate at the
         end of the applicable period of time. Notwithstanding the foregoing
         provisions, failure to exercise an ISO within the periods of time
         prescribed under Sections 421 and 422 of the Code shall cause an ISO to
         cease to be treated as an "incentive stock option" for purposes of
         Section 421 of the Code.

                  (d) Payment of Option Exercise Price. Upon the exercise of an
         Option, payment of the Exercise Price shall be made either (i) in cash
         (by a certified check, bank draft or money order payable in United
         States dollars), (ii) with the consent of the Committee and subject to
         Section 5.4(e) hereof, by delivering the Participant's duly-executed
         promissory note and related documents, (iii) with the consent of the
         Committee, by delivering Shares already owned by the Participant valued
         at Fair Market Value as of the date of exercise, (iv) with the consent
         of the Committee, by irrevocably authorizing a third party to sell
         shares of Common Stock (or a sufficient portion of such shares)
         acquired upon exercise of the Option and remit to the Company a
         sufficient portion of the sales proceeds to pay the entire Exercise
         Price and any tax withholding resulting from such exercise, or (v) by a
         combination of the foregoing forms of payment.

                  (e) Payment With Loan. The Committee may, in its sole
         discretion, assist any Participant in the exercise of one or more
         Options granted to such Participant under the Plan by authorizing the
         extension of a loan to such Participant from the Company. Except as
         otherwise provided in this Section 5.4(e), the terms of any loan
         (including the interest rate and terms of repayment) shall be
         established by the Committee in its sole discretion. Any such loan by
         the Company shall be with full recourse against the Participant to whom
         the loan is granted, shall be secured in whole or in part by the Shares
         so purchased, and shall bear interest at a rate not less than the
         minimum interest rate required at the time of purchase of the Shares in
         order to avoid having imputed interest or original issue discount under
         Sections 483 or 1272 of the Code. In addition, any such loan by the
         Company shall become immediately due and payable in full, at the option
         of the Company, upon termination of the Participant's employment with
         the Company or its Subsidiaries for any reason or upon the sale of any
         Shares acquired with such loan to the extent of the cash and fair
         market value of any property received by the Participant in such sale.
         The Committee may make arrangements for the application of payroll
         deductions from compensation payable to the Participant to amounts
         owing to the Company under any such loan. Until any loan by the Company
         under this Section 5.4(e) is fully paid in cash, the Shares shall be
         pledged to the Company as security for such loan and the Company shall
         retain physical possession of the stock certificates evidencing the
         Shares

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         so purchased together with a duly executed stock power for such Shares.
         No loan shall be made hereunder unless counsel for the Company shall be
         satisfied that the loan and the issuance of Shares funded thereby will
         be in compliance with all applicable federal, state and local laws, and
         such counsel shall be consulted prior to the funding of any such loan.

         5.5 Settlement of Awards of Options and SARs. Settlement of Awards of
Options and SARs is subject to Section 10.

         5.6 Options or SARs Awarded To Consultants. Any provision of this
Section 5 to the contrary notwithstanding, (i) an Option or SAR may be exercised
at any time by a Participant who is a Consultant during the applicable period in
the manner provided in Section 5.4(b) above; provided, that in the event of the
death of a Participant who is a Consultant, the Option or SAR may be exercised
by the executors or administrators of the estate of such Consultant or by the
person or persons who shall have acquired the Option or SAR directly by bequest
or inheritance; and (ii) the Exercise Price for an Option or SAR awarded to a
Consultant must be paid in cash (by a certified check, bank draft of money
order).

         5.7 Rights As A Shareholder. A Participant shall have no rights as a
shareholder with respect to any Shares issuable on exercise of an Option or SAR
until the date of the issuance of a stock certificate to the Participant for
such Shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 4.4 hereof.

         5.8 Special Provisions for ISOs.

         Any provision of the Plan to the contrary notwithstanding, the
following special provisions shall apply to all ISOs granted under the Plan:

                  (a) The Option must be expressly designated as an ISO by the
         Committee and in the Agreement evidencing the Option;

                  (b) No ISO shall be granted more than ten years from the
         Effective Date of the Plan and no ISO shall be exercisable more than
         ten years from the date such ISO is granted;

                  (c) The Exercise Price of any ISO shall not be less than the
         Fair Market Value per Share on the date such ISO is granted;

                  (d) Any ISO shall not be transferable by the Participant to
         whom such ISO is granted other than by will or the laws of descent and
         distribution and shall be exercisable during such Participant's
         lifetime only by such Participant;

                  (e) No ISO shall be granted to any individual who, at the time
         such ISO is granted, owns stock possessing more than 10% of the total
         combined voting power of all classes of stock of the Company or any
         Subsidiary unless the Exercise Price of such ISO is at least 110% of
         the Fair Market Value per Share at the date of grant and such ISO is
         not exercisable after the expiration of five years from the date such
         ISO is granted;

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                  (f) The aggregate Fair Market Value (determined as of the time
         any ISO is granted) of any Company stock with respect to which any ISOs
         granted to a Participant are exercisable for the first time by such
         Participant during any calendar year (under this Plan and all other
         stock option plans of the Company and any of its Subsidiary and any
         predecessor of any such corporations) shall not exceed $100,000 as
         required under Section 422(d)(i) of the Code. (To the extent the
         $100,000 limit is exceeded, the $100,000 in Options, measured as
         described above, granted earliest in time will be treated as ISOs); and

                  (g) any other terms and conditions as may be required in order
         that the ISO qualifies as an "incentive stock option" under Section 422
         of the Code or successor provision.

Notwithstanding the provisions of Section 5.4(c)(i), the favorable tax treatment
available pursuant to Section 422 of the Code upon the exercise of an ISO will
not be available to a Participant who exercises any ISO more than (i) 12 months
after the date of termination of employment due to the Participant's disability
or (ii) three months after the date of termination of employment due to
retirement of the Participant.

         5.9 Limited Transferability. No Option or SAR, nor any interest
therein, may be assigned, encumbered or transferred except, in the event of the
death of a Participant, by will or the laws of descent and distribution.
Notwithstanding the foregoing, the Committee shall have the discretionary
authority to grant NQSOs and SARs (that are not Related to an ISO) that are
transferable by the Participant to the Participant's children, grandchildren,
spouse, one or more trusts for the benefit of such family members, or a
partnership in which such family members were the only partners. The holder of
an NQSO or SAR transferred pursuant to this Section 5.9 shall be bound by the
terms and conditions that govern the NQSO or SAR during the period that it was
held by the Participant; provided, however, that such transferee may not
transfer the NQSO or SAR except by will or the laws of descent and distribution.

6. RESTRICTED STOCK.

         6.1 General Terms/Conditions. The Committee may, in its discretion,
grant one or more Awards of Restricted Stock to any Participant. Each Award of
Restricted Stock shall be evidenced by an Agreement which shall specify the
number of Shares to be issued to the Participant, the date of such issuance, the
price, if any, to be paid for such Shares by the Participant, the Restriction
Period and any other conditions imposed on such Shares as the Committee, in its
discretion, shall determine. Notwithstanding the foregoing, the Committee shall
impose upon each Award of Restricted Stock made to a Participant who is an
Officer a Restriction Period expiring no earlier than six months after the date
of grant of the Restricted Stock.

         6.2 Maximum Award Of Restricted Stock. The maximum number of Shares
that may be allotted by the Committee pursuant to Restricted Stock awarded to
any individual Participant shall not exceed, in any fiscal year, 25,000 Shares.

         6.3 Restrictions And Forfeitures.

                  (a) Shares included in Restricted Stock Awards may not be
         sold, assigned, transferred, pledged or otherwise disposed of or
         encumbered, either voluntarily or involuntarily, until such Shares have
         fully vested.

                                      -10-
<PAGE>

                  (b) Participants holding shares of Restricted Stock granted
         hereunder may be granted the right to exercise full voting rights with
         respect to those Shares during the Restriction Period. During the
         Restriction Period, Participants holding shares of Restricted Stock
         granted hereunder may be credited with regular cash dividends paid with
         respect to the underlying Shares while they are so held. The Committee
         may apply any restrictions to the dividends that the Committee deems
         appropriate. Without limiting the generality of the preceding sentence,
         if the grant or vesting of Restricted Stock is designed to comply with
         one or more of the Performance Measures set forth in Section 9.1, the
         Committee may apply any restrictions it deems appropriate to the
         payment of dividends declared with respect to such Restricted Stock,
         such that the dividends and/or the Restricted Stock maintain
         eligibility under Section 162(m) of the Code.

                  (c) In the event that the Participant shall have paid any cash
         for the Restricted Stock, the Agreement shall specify whether and to
         what extent such cash shall be returned upon a forfeiture (with or
         without an earnings factor).

                  (d) The Restricted Stock shall be evidenced by a stock
         certificate registered only in the name of the Participant, which stock
         certificate shall be held by the Company until the Restricted Stock has
         fully vested.

                  (e) The occurrence of any of the following events shall cause
         the immediate vesting of the Restricted Stock:

                           (i) the death of the Participant;

                           (ii) the retirement of the Participant on or after
                  the Participant's normal retirement date;

                           (iii) the disability of the Participant.

                  For the purposes of this Subsection, the term "disability"
                  shall be defined as such term is defined in Section 5.4(c)(i).
                  Notwithstanding the foregoing, to the extent a condition(s)
                  other than a Restriction Period has been imposed by the
                  Committee upon the Restricted Stock, the occurrence of the
                  foregoing shall not cause immediate vesting unless and until
                  such condition(s) has been met.

                  (f) A Restricted Stock Award shall be entirely forfeited by
         the Participant in the event that prior to vesting, the Participant
         breaches any terms or conditions of the Plan, the Participant resigns
         from or is terminated by the Company, or any condition(s) imposed upon
         vesting are not met.

         6.4 Legend On Certificates. Each certificate evidencing a Restricted
Stock Award under the Plan shall be registered in the name of the Participant
and deposited by the Participant, together with a stock power endorsed in blank,
with the Company and shall bear the following (or a similar) legend:

                  "The transferability of this certificate and the shares of
         Common Stock represented hereby are subject to the terms and conditions
         (including forfeiture) contained in The Shaw Group Inc. 2001 Employee
         Incentive Compensation Plan and a Restricted Stock Agreement entered
         into between the registered owner and The Shaw Group Inc. Copies of
         such Plan and

                                      -11-
<PAGE>

         Agreement are on file in the offices of the Secretary of The Shaw Group
         Inc., 8545 United Plaza Boulevard, Baton Rouge, Louisiana 70809."

         6.5 Section 83(b) Elections. Within 30 days after the issuance of
shares of Restricted Stock to a Participant under the Plan, the Participant
shall decide whether or not to file an election pursuant to Section 83(b) of the
Code and Treasury Regulation Section 1.83-2 (and state law counterparts) with
respect to such Restricted Stock. If the Participant does file such an election,
the Participant shall promptly furnish the Company with a copy of such election.

7. PERFORMANCE SHARES.

         7.1 Grant of Performance Shares. Subject to the terms of the Plan,
Performance Shares may be granted to Participants in such amounts and upon such
terms, and at any time and from time to time, as shall be determined by the
Committee, provided that no more than 25,000 Shares may be subject to any
Performance Share Awards granted to any individual Participant in any fiscal
year.

         7.2 Value of Performance Shares. Each Performance Share shall have an
initial value equal to the Fair Market Value of a Share on the date of grant.
The Committee shall set performance goals in its discretion which, depending on
the extent to which they are met, will determine the number and/or value of
Performance Shares that will be paid out to the Participant.

         7.3 Earning of Performance Shares. Subject to the terms of the Plan,
after the applicable Performance Period has ended, the holder of Performance
Shares shall be entitled to receive payout on the number and value of
Performance Shares earned by the Participant over the Performance Period, to be
determined as a function of the extent to which the corresponding performance
goals have been achieved.

         7.4 Form and Timing of Payment of Performance Shares. Payment of earned
Performance Shares shall be made in a single lump sum following the close of the
applicable Performance Period. Subject to the terms of this Plan, the Committee,
in its sole discretion, may pay earned Performance Shares in the form of cash or
in Shares (or in a combination thereof) which have an aggregate Fair Market
Value equal to the value of the earned Performance Shares at the close of the
applicable Performance Period. Such Shares may be granted subject to any
restrictions deemed appropriate by the Committee. The determination of the
Committee with respect to the form of payout of such Awards shall be set forth
in the Agreement pertaining to the grant of the Award of Performance Shares.

         At the discretion of the Committee, Participants may be entitled to
receive any dividends declared with respect to Shares which have been earned in
connection with grants of Performance Shares which have been earned, but not yet
distributed to Participants (such dividends shall be subject to the same
accrual, forfeiture, and payout restrictions as apply to dividends earned with
respect to Shares of Restricted Stock, as set forth in Section 6 hereof). In
addition, Participants may, at the discretion of the Committee, be entitled to
exercise their voting rights with respect to such Shares.

         7.5 Termination of Employment Due to Death, Disability, or Retirement.
Unless determined otherwise by the Committee and set forth in the Agreement
evidencing an Award of Performance Shares, in the event the employment of a
Participant is terminated by reason of death, disability, or retirement during a
Performance Period, the Participant or his legal representative shall receive a
payout of the Performance

                                      -12-
<PAGE>

Shares which is prorated, as specified by the Committee, in its sole discretion.
For purposes of this Section 7.5, the term "disability" shall be defined as such
term is defined in Section 5.4(c)(i).

         Payment of earned Performance Shares shall be made at a time specified
by the Committee in its sole discretion and set forth in the Agreement
evidencing such Award. Notwithstanding the foregoing, with respect to
Performance Shares that have been awarded with the intention of qualifying as
"performance-based compensation" under Section 162(m) of the Code to a
Participant who retires during a Performance Period, payment shall be made
pursuant to such Performance Share Award at the same time as payments are made
to Participants who did not terminate employment during the applicable
Performance Period.

         7.6 Termination of Employment for Other Reasons. In the event that a
Participant's employment terminates for any reason other than those reasons set
forth in Section 7.5 above, all Performance Shares shall be forfeited by the
Participant to the Company unless determined otherwise by the Committee, as set
forth in the Agreement evidencing such Award.

         7.7 Non-Transferability. Except as otherwise provided in an Agreement
evidencing such Award of Performance Shares, Performance Shares may not be sold,
assigned, transferred, pledged or otherwise disposed of or encumbered, either
voluntarily or involuntarily, until such Performance Shares have fully vested.
Further, except as otherwise provided in an Agreement evidencing such Award of
Performance Shares, a Participant's rights under the Plan shall be exercisable
during the Participant's lifetime only by the Participant or the Participant's
legal representative.

8. INCENTIVE BONUSES.

         8.1 Awards of Incentive Bonuses. The Committee shall have the
discretionary authority to designate Participants to whom Incentive Bonuses are
to be paid. Incentive Bonuses shall be determined exclusively by the Committee
pursuant to procedures established by the Committee; provided, however, that for
any fiscal year, no individual Participant may receive Incentive Bonuses
aggregating more than $5 million.

         8.2 Terms and Conditions. The Committee, at the time an Incentive Bonus
is made, shall specify the terms and conditions that govern the granting
thereof. Such terms and conditions may include, by way of example and not
limitation, requirements that the Participant complete a specified period of
employment with the Company or a Subsidiary, or that the Company or Subsidiary
or the Participant attain stated objectives or goals as a prerequisite to
payment under an Incentive Bonus. The Committee, at the time the Incentive Bonus
is granted shall also specify what amount shall be payable under the Incentive
Bonus and whether amounts shall be payable in the event of the Participant's
death, disability or retirement.

         8.3 Settlement of Incentive Bonuses. Settlement of Incentive Bonuses is
subject to Section 10.

9. PERFORMANCE-BASED COMPENSATION.

         9.1 Performance Measures. The Committee may designate whether an Award
being granted to any Participant is intended to be "performance-based
compensation" as that term is used in Section 162(m) of the Code. Any such
Awards designated by the Committee to be "performance-based compensation" shall
be conditioned on the achievement of one or more Performance Measures, to the
extent required by Code

                                      -13-
<PAGE>

Section 162(m). The Performance Measures that may be used by the Committee for
such Awards shall be based on any one or more of the following, as selected by
the Committee:

                  (a) Earnings per share;

                  (b) Net income (before or after taxes);

                  (c) Return measures (including, but not limited to, return on
         assets, capital, equity or sales);

                  (d) Earnings before or after taxes;

                  (e) Share price (including, but not limited to, growth measure
         and total shareholder return);

                  (f) Gross revenues;

                  (g) Working capital measures; or

                  (h) Backlog.

For Awards under this Section 9 intended to be "performance-based compensation",
(i) the grant of the Awards and the establishment of the Performance Measures
shall be made during the period required by Section 162(m) of the Code and (ii)
the Committee shall certify in writing that the Performance Measure has been
met. The Committee shall have the discretion to define the Performance Measures
on a corporation or subsidiary or business division basis or in comparison with
peer group performance.

         9.2 Board Authority. In the event that applicable tax and/or securities
laws change to permit the Committee discretion to alter the governing
Performance Measures without obtaining shareholder approval of such changes, the
Board of Directors of the Company shall have the sole discretion to make changes
in the Performance Measures without shareholder approval.

10. SETTLEMENT OF AWARDS.

         The obligation to make payments and distributions with respect to
Awards may be satisfied through cash payments, the delivery of shares of Common
Stock, the granting of replacement Awards, or combination thereof as the
Committee shall determine, in its sole discretion. Satisfaction of any such
obligations under an Award, which is sometimes referred to as "settlement" of
the Award, may be subject to such conditions, restrictions, and contingencies as
the Committee shall determine. The Committee may permit or require the deferral
of any Award payment, subject to such rules and procedures as it may establish,
which may include provisions for the payment or crediting of interest or
dividend equivalents. Each Subsidiary shall be liable for payment of cash due
under the Plan with respect to any Participant to the extent that such benefits
are attributable to the services rendered for that Subsidiary by the
Participant. Any disputes relating to liability of a Subsidiary for cash
payments shall be resolved by the Committee.

                                      -14-
<PAGE>

11. CONSULTANTS.

         An Award made to a Consultant hereunder must be supported by bona fide
services actually rendered by the Company to the Consultant. However, in no
event shall an Award be made to a Consultant (i) for services rendered by the
Consultant in connection with the offer or sale of securities in a capital
raising transaction or (ii) who directly or indirectly promotes or maintains a
market for the Company's securities.

12. GOVERNMENT REGULATIONS.

         This Plan, the granting of Awards under this Plan and the issuance or
transfer of Shares (and/or the payment of money) pursuant thereto are subject to
all applicable federal and state laws, rules and regulations and to such
approvals by any regulatory or governmental agency (including without limitation
"no action" positions of the Commission) which may, in the opinion of counsel
for the Company, be necessary or advisable in connection therewith. Without
limiting the generality of the foregoing, no Awards may be granted under this
Plan, and no Shares shall be issued by the Company, pursuant to or in connection
with any such Award, unless and until, in each such case, all legal requirements
applicable to the issuance or payment have, in the opinion of counsel to the
Company, been complied with. In connection with any stock issuance or transfer,
the person acquiring the Shares shall, if requested by the Company, give
assurances satisfactory to counsel to the Company in respect of such matters as
the Company may deem desirable to assure compliance with all applicable legal
requirements. The Company shall not be required to deliver any Shares under the
Plan prior to (i) the admission of such Shares to listing or for quotation on
any stock exchange or automated quotation system on which Shares may then be
listed or quoted, and (ii) the completion and effectiveness of such registration
or other qualification of such Shares under any state or federal law, rule or
regulation, as the Committee shall determine to be necessary or advisable.

13. TAX WITHHOLDING.

         The Company shall have the right to withhold from amounts due
Participants, or to collect from Participants directly, the amount which the
Company deems necessary to satisfy any taxes required by law to be withheld at
any time by reason of participation in the Plan, and the obligations of the
Company under the Plan shall be conditional on payment of such taxes. The
Participant may, prior to the due date of any taxes, pay such amounts to the
Company in cash, or with the consent of the Committee, in Shares (which shall be
valued at their Fair Market Value on the date of payment). There is no
obligation under this Plan that any Participant be advised of the existence of
the tax or the amount required to be withheld. Without limiting the generality
of the foregoing, in any case where it determines that a tax is or will be
required to be withheld in connection with the issuance or transfer or vesting
of Shares under this Plan, the Company may pursuant to such rules as the
Committee may establish, reduce the number of such Shares so issued or
transferred by such number of Shares as the Company may deem appropriate in its
sole discretion to accomplish such withholding or make such other arrangements
as it deems satisfactory. Notwithstanding any other provision of this Plan, the
Committee may impose such conditions on the payment of any withholding
obligation as may be required to satisfy applicable regulatory requirements,
including, without limitation, Rule 16b-3 (or successor provision) promulgated
by the Commission.

14. ADMINISTRATION OF PLAN.

         14.1 The Committee. The Plan shall be administered by the Committee,
which shall be comprised of two or more members of the Board of Directors, each
of whom shall be a "Non-Employee Director" as defined in Rule 16b-3(b)(3) (or
any successor provision) promulgated by the Commission and each of whom shall
qualify as an "outside director" as defined in Section 162(m) of the Code.

                                      -15-
<PAGE>

         14.2 Committee Action. A majority of the members of the Committee at
the time in office shall constitute a quorum for the transaction of business,
and any determination or action may be taken at a meeting by a majority vote or
may be taken without a meeting by a written resolution signed by all members of
the Committee. All decisions and determinations of the Committee shall be final,
conclusive and binding upon all Participants and upon all other persons claiming
any rights under the Plan with respect to any Award. Members of the Board of
Directors and members of the Committee acting under the Plan shall be fully
protected in relying in good faith upon the advice of counsel and shall incur no
liability except for willful misconduct in the performance of their duties.

         14.3 Committee Authority. In amplification of the Committee's powers
and duties, but not by way of limitation, the Committee shall have full
authority and power to:

                  (a) Construe and interpret the provisions of the Plan and
         establish, amend and rescind rules and regulations relating to the Plan
         and to make all other determinations that may be necessary or advisable
         for the administration of the Plan not inconsistent with the Plan;

                  (b) Decide all questions of eligibility for Plan participation
         and for the grant of Awards;

                  (c) Determine the types of Awards and the number of Shares
         covered by the Awards, if any, to be granted to any Participant, to
         establish the terms, conditions, Performance Measures, restrictions and
         other provisions of such Awards, and (subject to the restrictions
         imposed by Section 17) to cancel or suspend Awards;

                  (d) Adopt forms of agreements and other documents consistent
         with the Plan;

                  (e) Engage agents to perform legal, accounting and other such
         professional services as it may deem proper for administering the Plan;
         and

                  (f) Take such other actions as may be reasonably required or
         appropriate to administer the Plan or to carry out the Committee
         activities contemplated by other sections of this Plan.

         14.4 Indemnification. In addition to such other rights of
indemnification as they may have as directors or as members of the Committee,
the Board of Directors and the members of the Committee shall be indemnified by
the Company against the reasonable expenses, including court costs and
reasonable attorneys' fees, actually incurred in connection with the defense of
any action, suit or proceeding, or in connection with any appeal therein, to
which they or any of them may be a party by reason of any action taken or
failure to act under or in connection with the Plan or any Award granted
hereunder, and against all amounts paid by them in settlement thereof or paid by
them in satisfaction of a judgment in any such action, suit or proceeding,
except where such indemnification is expressly prohibited by applicable law.

15. CHANGE OF CONTROL.

         Subject to the provisions of Section 4.4 (relating to the adjustment of
Shares), or except as otherwise provided in the Agreement evidencing the Award,
upon the occurrence of a Change of Control:

                  (a) all outstanding Options (regardless of whether in tandem
         with SARs) shall become fully exercisable,

                                      -16-
<PAGE>

                  (b) all outstanding SARs (regardless of whether in tandem with
         Options) shall become fully exercisable,

                  (c) all Restricted Stock and Performance Shares shall become
         fully vested, and

                  (d) All Incentive Bonuses that have been approved and accrued
         shall become fully payable.

16. EFFECTIVE DATE AND SHAREHOLDER APPROVAL.

         The Effective Date of the Plan shall be November 27, 2000 (the date the
Plan was approved by the Board of Directors) subject to receipt within one year
of such date the approval of the Plan by the holders of a majority of the total
voting power of the voting securities of the Company present in person or
represented by proxy at a meeting of shareholders at which the approval of such
Plan is considered.

17. AMENDMENT AND TERMINATION.

         17.1 The Plan

                  (a) Amendment. The Board of Directors may amend the Plan from
         time to time in its sole discretion unless the amendment would,
         pursuant to any applicable federal, state or local law or pursuant to
         the rules of the exchange upon which the Common Stock is then trading,
         require shareholder approval, in which event such approval shall be
         obtained. However, no amendment shall adversely affect the rights of
         any Participant under any Award theretofore made under the Plan,
         without the Participant's consent.

                  (b) Termination. The Plan shall terminate automatically on the
         tenth anniversary of the Effective Date, and the Board of Directors may
         suspend or terminate the Plan at any earlier time. Upon termination of
         the Plan, no additional Awards shall be granted under the Plan;
         provided, however, that the terms of the Plan shall continue in full
         force and effect with respect to outstanding Awards and Shares issued
         under the Plan.

         17.2 Awards. Subject to the terms and conditions and the limitations of
the Plan, the Committee may in the exercise of its sole discretion modify,
extend or renew the terms of outstanding Awards granted under the Plan, or
accept the surrender of outstanding Awards (to the extent not theretofore
exercised). Notwithstanding the foregoing, however, no modification of an Award
shall, without the consent of the Participant, impair any rights or obligations
under any Awards theretofore granted under the Plan. [OPEN]

18. MISCELLANEOUS.

         18.1 No Individual Rights. No person shall have any claim or right to
be granted an Award under the Plan, or having been selected as a Participant for
one Award, to be so selected again. Neither the establishment of the Plan nor
any amendments thereto, nor the granting of any Award under the Plan, shall be
construed as in any way modifying or affecting, or evidencing any intention or
understanding with respect to, the terms of the employment of any Participant
with the Company or any of its Subsidiaries.

                                      -17-
<PAGE>

         18.2 Multiple Awards. Subject to the terms and restrictions set forth
in the Plan, a Participant may hold more than one Award.

         18.3 Written Notice. As used herein, any notices required hereunder
shall be in writing and shall be given on the forms, if any, provided or
specified by the Committee. Written notice shall be effective upon actual
receipt by the person to whom such notice is to be given; provided, however,
that in the case of notices to Participants and their transferees, heirs,
legatees and legal representatives, notice shall be effective upon delivery if
delivered personally or three business days after mailing, registered first
class postage prepaid to the last known address of the person to whom notice is
given. Written notice shall be given to the Committee and the Company at the
following address or such other address as may be specified from time to time:

              The Shaw Group Inc.
              8545 United Plaza Boulevard
              Baton Rouge, Louisiana  70809
              Attention:  Secretary

         18.4 Unfunded Plan. The Plan shall be unfunded and shall not create
(and shall not be construed to create) a trust or a separate fund or funds. The
Plan shall not establish any fiduciary relationship between the Company and any
Participant. To the extent any person holds any obligation of the Company by an
Award granted under the Plan, such obligation shall merely constitute a general
unsecured liability of the Company and accordingly, shall not confer upon such
person any right, title or interest in any assets of the Company.

         18.5 Applicable Law; Severability. The Plan shall be governed by and
construed in all respects in accordance with the laws of the State of Louisiana.
If any provision of the Plan shall be held by a court of competent jurisdiction
to be invalid or unenforceable, the remaining provisions of the Plan shall
continue to be fully effective.

                                      -18-<PAGE>
                                                                    EXHIBIT 10.5

                                  AMENDMENT TO
                      AMENDED AND RESTATED CREDIT AGREEMENT

         This Amendment to Amended and Restated Credit Agreement (this
"Agreement") dated April 30, 2001, effective as of the date set forth below (the
"Amendment") is among THE SHAW GROUP, INC., a Louisiana corporation (the
"Borrower"), the Subsidiaries of the Borrower listed on the signature pages
hereto as Guarantors, the banks and other financial institutions listed on the
signature pages attached hereto (the "Lenders"), BANK ONE, NA, whose main office
is in Chicago, Illinois, individually as a Lender ("Bank One"), as Issuer and as
administrative agent for the other Lenders (in such capacity, the "Agent"),
FIRSTAR BANK, N.A., individually as a Lender and as syndication agent (the
"Syndication Agent"), CREDIT LYONNAIS NEW YORK BRANCH, individually as a Lender
and as documentation agent (the "Documentation Agent") and UNION PLANTERS BANK,
N.A., individually as a Lender and as CoAgent (the "CoAgent" and, together with
the Agent, the Documentation Agent and the Syndication Agent, the "Agents").
Capitalized terms not defined herein shall have the meaning assigned to such
terms in the Credit Agreement.

                                  INTRODUCTION

         A. The Borrower, the Lenders, the Guarantors and the Agents are parties
to that certain Amended and Restated Credit Agreement dated effective as of the
Effective Date, as therein defined (the "Credit Agreement").

         B. The Borrower has requested that the Agents and Lenders modify the
Credit Agreement and waive certain Events of Default.

         C. The Lenders and the Agents are agreeable to such requests upon the
terms and conditions herein stated.

         THEREFORE, the Borrower, the Guarantors, the Lenders and the Agents
hereby agree as follows:

                                   ARTICLE I
                                CREDIT AGREEMENT

         Section 1.1 Definitions. All capitalized terms used herein and not
otherwise defined shall have the meanings given in the Credit Agreement.

         Section 1.2 Amendment to Section 6.17. Section 6.17 is hereby deleted
in its entirety and replaced with the following:

                  6.17 Prepayment of Other Indebtedness. The Borrower will not,
                  and will not permit any Subsidiary to (i) make voluntary
                  prepayments of principal or interest on any other of the
                  Borrower's or such Subsidiary's Indebtedness except (A) as
                  expressly provided herein, (B) prepayments of principal or
                  interest secured by liens on Property sold in accordance with
                  Section 6.13 hereof, or (C) in an amount not to exceed four
                  million and no/100 dollars ($4,000,000) in the aggregate for
                  Borrower and its Subsidiaries during any fiscal year of
                  Borrower during the term

                                      -1-
<PAGE>

                  hereof; or (ii) amend or obtain or grant a waiver of any term
                  of any of such Indebtedness, without the prior written consent
                  of the Required Lenders other than in respect of inter-company
                  transfers or inter-company Indebtedness not otherwise
                  prohibited hereunder.

         Section 1.3 Amendment to Section 6.22.2. A new sentence is hereby added
to the end of Section 6.22.2, as follows:

                  Notwithstanding the foregoing, in connection with the sale of
                  the building located in Houston, Texas, which sale has been
                  approved by the Agent, payment of principal and interest on
                  the Indebtedness secured by such building at the time of such
                  sale in an amount not to exceed $20,000,000 shall not be
                  included in the calculation of the denominator as described in
                  (ii) above.

         Section 1.4 No waiver of Event of Default. The provisions hereof shall
not in any way be construed to waive, nor shall this Amendment in any way serve
as a waiver of any Default now or hereafter existing under the Credit Agreement
or other Loan Documents, except as expressly set forth herein.

                                   ARTICLE II
                           MISCELLANEOUS; RATIFICATION

         Section 2.1 Representations True; No Default. The Borrower and the
Guarantors represent and warrant, as applicable, that:

                  (a) The Borrower and the Guarantors represent and warrant that
         this Amendment has been duly authorized, executed and delivered on
         their behalf and the Credit Agreement as amended hereby, together with
         each other Loan Documents to which the Borrower and each of the
         Guarantors is a party, constitute valid and legally binding agreements
         of the Borrower and the Guarantors, enforceable in accordance with
         their terms, except as enforceability thereof may be limited by
         bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer,
         reorganization or moratorium or other similar law relating to
         creditors' rights and by general equitable principles which may limit
         the right to obtain equitable remedies (regardless of whether such
         enforceability is considered in a proceeding, in equity or at law);

                  (b) The Borrower represents and warrants that the
         representations and warranties of the Borrower contained in Article V
         of the Credit Agreement are true and correct in all material respects
         on and as of the date hereof as though made on and as of the date
         hereof, except to the extent such representations and warranties relate
         solely to an earlier date;

                  (c) The Guarantors represent and warrant that the
         representations and warranties of the Guarantors contained in the
         Guaranty are true and correct in all material respects on and as of the
         date hereof as though made on and as of the date hereof, except to the
         extent such representations and warranties relate solely to an earlier
         date; and

                                      -2-
<PAGE>

                  (d) The Borrower and the Guarantors represent and warrant that
         after giving effect to this Amendment, there has not occurred and is
         not continuing a Default or an event that with the passage of time
         would constitute a Default.

         Section 2.2 Ratification and Extension of Liens. The Credit Agreement,
the Notes and all other Loan Documents executed in connection therewith to which
the Borrower or any Guarantor is a party shall remain in full force and effect,
and all rights and powers created thereby or thereunder and under the other Loan
Documents to which the Borrower or any Guarantor is a party are in all respects
ratified and confirmed. All liens created by any Loan Document are hereby
regranted by the Borrower and the Guarantors to the Lenders as security for the
Obligations. The Borrower and the Guarantors agree that the obligations of the
Borrower and the Guarantors under the Credit Agreement, the Notes and the other
Loan Documents to which the Borrower or any Guarantor is a party are hereby
brought forward, renewed and extended.

         Section 2.3 Expenses, Additional Information. The Borrower shall pay to
the Agent all reasonable expenses incurred in connection with the negotiation
and execution of this Amendment. The Borrower and the Guarantors shall furnish
to the Agent all such other documents, consents and information relating to the
Borrower and the Guarantors as the Agent may reasonably require to accomplish
the purposes hereof.

         Section 2.4 Miscellaneous Provisions.

                  (a) From and after the execution and delivery of this
         Amendment, the Credit Agreement shall be deemed to be amended and
         modified as herein provided, but, except as so amended and modified,
         the Credit Agreement and all other Loan Documents shall continue in
         full force and effect.

                  (b) The Credit Agreement and this Amendment shall be read and
         construed as one and the same instrument.

                  (c) Any reference in any Loan Document to the Credit Agreement
         shall be a reference to the Credit Agreement, as amended by this
         Amendment.

                  (d) This Amendment may be signed in any number of counterparts
         and by different parties in separate counterparts, each of which shall
         be deemed an original but all of which together shall constitute one
         and the same instrument.

                  (e) The headings herein shall be accorded no significance in
         interpreting this Amendment.

         Section 2.5 Binding Effect. This Amendment shall be binding upon and
inure to the benefit of the Borrower, the Guarantors, Agents and Lenders and the
successors and assigns of the Agent and Lenders. The Borrower and the Guarantors
shall not have the right to assign its rights hereunder or any interest herein.

         Section 2.6 Choice of Law. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS, EXCEPT TO THE
EXTENT THAT THE LAWS OF THE UNITED STATES OF AMERICA AND ANY RULES, REGULATIONS
OR ORDERS ISSUED OR PROMULGATED THEREUNDER APPLICABLE TO THE AFFAIRS AND
TRANSACTIONS OF THE LENDERS OTHERWISE PREEMPT ILLINOIS LAW, IN WHICH EVENT SUCH
FEDERAL LAW SHALL CONTROL.

                                      -3-
<PAGE>

                  EXECUTED to be effective as of the Effective Date.

                                     THE SHAW GROUP INC.

                                     By:
                                              ----------------------------------
                                     Name:    Robert L. Belk
                                     Title:   Executive Vice President and
                                              Chief Financial Officer

                                     Address:

                                     8545 United Plaza Boulevard
                                     Baton Rouge, Louisiana 70809
                                     Attention:  Robert L. Belk
                                     Telephone: 225-932-2567
                                     Telecopy: 225-932-9146
                                     E-Mail: bob.belk@shawgrp.com

                                      -4-
<PAGE>

                                   GUARANTORS:

                                   ACL Piping, Inc.
                                   Associated Valve, Inc.
                                   B.F. Shaw, Inc.
                                   C.B.P. Engineering Corp.
                                   Eagle Industries, Inc.
                                   Gulf Coast Equipment Rental, Inc.
                                   IRM/NAPTech Joint Venture, L.L.C.
                                   Lone Star Fabricators, Inc.
                                   NAPTech PS Corporation
                                   Prospect Industries (Holdings), Inc.
                                   SAON Properties, Inc.
                                   Secorp, Inc.
                                   Shaw Alloy Piping Products, Inc.
                                   Shaw Capital, Inc.
                                   Shaw Connex, Inc.
                                   Shaw Constructors, Inc.
                                   Shaw Energy Services, Inc.
                                   Shaw Fabricators, Inc.
                                   Shaw Fronek A/DE, Inc.
                                   Shaw Fronek Company, Inc.
                                   Shaw-Fronek Fabrication, Inc.
                                   Shaw Fronek Power Services, Inc.
                                   Shaw FVF, Inc.
                                   Shaw Global Energy Services, Inc.
                                   Shaw GRP of California
                                   Shaw Industrial Supply Co., Inc.
                                   Shaw International, Inc.
                                   Shaw Maintenance, Inc.
                                   Shaw Managed Services, Inc.
                                   Shaw Manufacturing and Services, Inc.
                                   Shaw NAPTech, Inc.
                                   Shaw Pipe Shields, Inc.
                                   Shaw Power Services, Inc.
                                   Shaw Process and Industrial Group, Inc.
                                   Shaw Process Fabricators, Inc.
                                   Shaw Services Inc.
                                   Shaw Sunland Fabricators, Inc.
                                   Shaw Word Industries Fabricators, Inc.
                                   Stone & Webster Holding One, Inc.
                                   Stone & Webster Holding Two, Inc.
                                   Stone & Webster, Inc.

                                      -5-
<PAGE>

                                   SWINC Acquisition Four, Inc.
                                   SWINC Acquisition Five, L.L.C.
                                   Welding Technology and Supply Inc.
                                   Worldwide Industrial Constructors Inc.

                                   By:
                                            ------------------------------------
                                   Name:    Gary Graphia
                                   Title    Secretary

                                      -6-
<PAGE>

                                   BANK ONE, NA,
                                   as Agent, as a Lender and as Issuer

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

                                   Address:

                                   c/o Bank One Center, 910 Travis
                                   7th Floor
                                   Houston, Texas 77002
                                   Attention:
                                                --------------------------------
                                   Telephone:   713-751-
                                                        ------------------------
                                   Telecopy:    713-751-6777
                                   E-Mail:
                                                --------------------------------

                                   COMMITMENT:  $55,250,000

                                      -7-
<PAGE>

                                   CREDIT LYONNAIS NEW YORK BRANCH,
                                   as Documentation Agent and as a Lender

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

                                   COMMITMENT:  $37,500,000

                                      -8-
<PAGE>

                                   FIRSTAR BANK, N.A., as Syndication Agent and
                                   as a Lender

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

                                   COMMITMENT:  $40,000,000

                                      -9-
<PAGE>

                                   UNION PLANTERS BANK, N.A.,
                                   as Co-Agent and as a Lender

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

                                   COMMITMENT:  $35,000,000

                                      -10-
<PAGE>

                                   BNP PARIBAS HOUSTON AGENCY

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

                                   COMMITMENT:  $25,000,000

                                      -11-
<PAGE>

                                   HARRIS TRUST & SAVINGS BANK

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

                                   COMMITMENT:  $18,750,000

                                      -12-
<PAGE>

                                   WACHOVIA BANK, N.A.

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

                                   COMMITMENT:  $18,500,000

                                      -13-
<PAGE>

                                   THE BANK OF NOVA SCOTIA

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

                                   COMMITMENT:  $15,000,000

                                      -14-
<PAGE>

                                   THE MITSUBISHI TRUST & BANKING CORPORATION

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

                                   COMMITMENT:  $15,000,000

                                      -15-
<PAGE>

                                   KBC BANK N.V.

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

                                   COMMITMENT:  $15,000,000

                                      -16-
<PAGE>

                                   BANK HAPOALIM B.M., CHICAGO BRANCH

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

                                   COMMITMENT:  $10,000,000

                                      -17-
<PAGE>

                                   CHANG HWA COMMERCIAL BANK, LTD.,
                                   NEW YORK BRANCH

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

                                   COMMITMENT:  $7,500,000

                                      -18-
<PAGE>

                                   NATEXIS BANQUES POPULAIRES

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

                                   COMMITMENT:  $7,500,000

                                      -19-
<PAGE>

                                   BANC ONE CAPITAL MARKETS, INC.,
                                   as Lead Arranger and Sole Book Runner

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

                                   Address:

                                   c/o Bank One Center, 910 Travis
                                   7th Floor
                                   Houston, Texas 77002
                                   Attention:
                                                 -------------------------------
                                   Telephone:    (713) 751-
                                                           ---------------------
                                   Telecopy:     (713) 751-6777
                                   Email:
                                                 -------------------------------

                                      -20-

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