TRANSITION AGREEMENT





     This Transition Agreement (the "Agreement") is made and entered into this

20th day of August, 2001 by and among Conrad Industries, Inc., a Delaware

corporation ("Conrad") and Conrad Shipyard, L.L.C., a Louisiana limited

liability company (together, the "Company"), on the one hand, and William H.

Hidalgo ("Executive") on the other hand.



                              W I T N E S S E T H:



     WHEREAS, Executive and the Company entered into an employment agreement

(the "Employment Agreement") dated as of March 31, 1998, and amended as of March

31, 2001;



     WHEREAS, the Company and Executive deem it to be in their mutual best

interests for Executive to resign from his position with the Company as Chief

Executive Officer and President and as a Director of the Company;



     WHEREAS, the Company desires that Executive continue in his position with

the Company as Chief Executive Officer and President until the Resignation Date

(as defined below) and that his resignation as a Director of the Company be

effective as of the date hereof;



     WHEREAS, the Company wishes to accept Executive's resignation as Chief

Executive Officer and President effective at 11:59 p.m. on August 26, 2001 (the

"Resignation Date"), and to engage Executive's services as an employee with the

title of Special Advisor to the Chief Executive Officer ("Special Advisor") from

August 27, 2001 until October 31, 2001 (the "Employment Termination Date") to

provide for an orderly transfer of his responsibilities;



     WHEREAS, the Company and Executive may decide that after the Employment

Termination Date it would be mutually advantageous for Executive to serve as a

consultant to the Company for up to a four-month period, to perform such duties

and provide such counsel and assistance to the Company as the Chief Executive

Officer may request from time to time and as may be agreed to by Executive;



     WHEREAS, Executive and the Company entered into a stock option agreement

dated November 3, 1998 for the grant of a nonqualified stock option to purchase

205,518 shares of the common stock of Conrad ("Common Stock"), and stock option

agreements dated November 3, 1998 and May 26, 1999 for the grant of incentive

stock options to purchase 44,442 shares and 35,997 shares, respectively of

Common Stock (collectively "Executive's Stock Options"), all pursuant to the

Conrad Industries, Inc. 1998 Stock Plan, as amended and restated (the "Stock

Plan");



     WHEREAS, the Executive has executed a promissory note payable to the

Company in the principal amount of $233,327, due September 4, 2001 and bearing

interest at an annual rate of nine percent (the "Promissory Note");

<PAGE>



     WHEREAS, Executive and the Company believe it is in their mutual best

interests to terminate the Employment Agreement and enter into this Agreement.



     NOW, THEREFORE, in consideration of the mutual promises and respective

covenants herein contained, and intending to be legally bound hereby, the

parties agree as follows:



     1. Termination of Executive's Employment and Directorship.



     (a) Executive's employment by the Company as Chief Executive Officer and

President of the Company shall continue until 11:59 p.m. on the Resignation

Date, at which time it shall terminate. During the period from August 27, 2001

until the Employment Termination Date, Executive shall remain employed by the

Company full time as Special Advisor. Executive's employment with the Company as

Special Advisor, and in any other capacity, shall terminate as of the close of

business on the Employment Termination Date. The services to be provided by

Executive in such capacities are described in paragraph 8.



     (b) Executive's resignation from the Board of Directors of the Company and

termination of the Employment Agreement are effective on the date hereof.



     (c) Executive and the Company's new Chief Executive Officer may mutually

agree in writing to terminate Executive's employment as Special Advisor prior to

October 31, 2001, and in the event of such agreement, the date of such

termination of employment shall be the "Employment Termination Date."



     2.  Consulting Agreement.  Prior to the Employment Termination Date, the

Company and Executive may mutually agree that Executive shall be engaged as a

consultant to the Company for up to a four-month period ending February 28,

2002.  The agreement may be made on a month-to-month basis or for some other

period not to extend later than February 28, 2002. As a consultant, Executive

shall not be an employee or agent of the Company but shall be an independent

contractor.



          3.  Compensation.  Executive shall continue to draw his current annual

salary of $195,290 from the date hereof until the Employment Termination Date,

in the amounts and at the times as currently provided.  In addition, the Company

shall make the following payments to Executive, which shall be net of any

applicable withholding required by law:



          (a) If the Company and Executive mutually agree to enter into the

consulting arrangement described above, the Company shall pay Executive a

mutually agreed upon consulting fee.



          (b) On February 28, 2002, Executive shall receive to a lump sum

severance payment equal to his current annual salary as of the date hereof, of

$195,290, subject to paragraph 9(h) hereof.  Executive (or his heirs, legatees,

estate or representative) shall receive such payment in the event of Executive's

death, disability or incapacity prior to February 28, 2002.  If such severance

payment is not made by the Company on February 28, 2002, it shall



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accrue interest thereafter at the rate of seven percent per year until paid, and

Executive shall be reimbursed for any and all reasonable attorneys' fees

incurred by him in collecting any such overdue payment.



          (c) As further consideration for past services rendered, Executive's

entering into this Agreement, including but not limited to the noncompetition

and release provisions hereof, Executive's services to the Company before the

date hereof in assisting with an orderly transition, Executive's surrender of

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