Chief Operating Officer Employment Agreement

January 18, 1999


Mr. Roland H. Webb President and Chief Operating Officer Todd Pacific Shipyards Corporation 1801 16th Avenue Southwest Seattle, Washington 98134


Dear Mr. Webb:


This letter, when countersigned by you, shall serve as an employment agreement ("Agreement") between you and Todd Pacific Shipyards Corporation ("Todd"), wherein the parties agree as follows.


1. You shall continue to hold the position of President and Chief Operating Officer of Todd and perform the duties associated with that job through the term of your employment pursuant to this letter.


2. Subject to the provisions of Paragraphs 9, 10 and 11, Todd shall employ you for a period of one year ("Term") commencing the 1st day of January, 1999 (the "Effective Date").


3. You will at all times conduct yourself in Todd's best interests and will perform on a full-time basis, competently, diligently and to the best of your abilities, the duties and services commonly associated with your position, and such other duties appropriate to a senior executive position as may be assigned. Todd reserves the right to change such job description responsibilities assigned to you at any time and from time to time during the Term of this Agreement. You shall report directly to the Chief Executive Officer of the parent corporation and your principal place of employment shall be Todd's headquarters in Seattle, Washington, located at 1801 16th Ave. SW, Seattle, Washington 98134, subject to travel incident to your duties on behalf of Todd. Except as otherwise authorized by Todd, you agree to be present in the Greater Seattle Area at all times during the five-day work week.


4. In exchange for your services, Todd shall pay to you during the Term of this Agreement an annual gross salary at the rate of One Hundred Seventy-Three Thousand and 00/100 Dollars ($173,000) per annum in installments in accordance with Todd's usual payroll practices ("Base Salary"). In addition, during the Term of this Agreement, you shall be entitled to participate in such major medical, hospital, life insurance and other benefit programs, to the extent you are eligible under those plans, as Todd from time to time shall keep in effect for its senior executives (the "Benefits"). Todd reserves the right to change any one or more of such Benefits as it determines to be necessary or appropriate. You shall be entitled to reimbursement of the ordinary and necessary expenses incurred in connection with your performance of the services contemplated by this Agreement, subject to such reporting requirements as are in effect at Todd.


5. You are eligible to receive a cash bonus on July 1, 1999 for the fiscal year 1999 ("Bonus"), subject to the attainment of certain corporate fiscal objectives. The Bonus shall be in an amount equal to a percentage of your Base Salary determined by the Board of Directors of Todd, which percentage, if corporate objectives are met, shall not be less than twenty percent (20%) and not more than fifty percent (50%) ("Applicable Percentage"). The Applicable Percentages for the July 1, 1999 Bonus, for which you are eligible, shall be determined in accordance with the schedule set forth below:


If the pre-tax profit of Todd Pacific Then the Applicable Shipyards Corporation for the fiscal year Percentage of your ending March 31, 1999 is between Base Salary shall be:


$ 0 - $200,000 20% 200,000 - 400,000 23% 400,000 - 600,000 26% 600,000 - 800,000 29% 800,000 - 1,000,000 32% 1,000,000 - 1,200,000 35% 1,200,000 - 1,400,000 38% 1,400,000 - 1,600,000 41% 1,600,000 - 1,800,000 44% 1,800,000 - 2,000,000 47%
above 2,000,000 50%


The "pre-tax profit" to be used in calculating the applicable Percentage shall include appropriately accrued expenses for cash bonuses and other incentive compensation. For bonus purposes, excluded from Company "pre-tax profits" will be any settlement amounts received by Todd from the Washington State Ferry System ("WSF") pursuant to the Request for Equitable Adjustment ("REA"), as the REA settlement amounts (if any) were not included in the Company's budget; provided however that properly recognized REA revenue (if any) will be included in "pre-tax profit" for the 1999 fiscal year in an amount equal to the following formula: (a) properly recognized RE ...