GULF ISLAND FABRICATION INC
2002 LONG-TERM INCENTIVE PLAN
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<TYPE>EX-10.6
<SEQUENCE>3
<FILENAME>d03961exv10w6.txt
<DESCRIPTION>2002 LONG-TERM INCENTIVE PLAN
<TEXT>
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                                                                    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


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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.


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             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-
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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


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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.


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      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.


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<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.


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      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.


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          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


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<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-

</TEXT>
</DOCUMENT>
