EXHIBIT 10.2
 
TAX SHARING AGREEMENT
 
BY AND AMONG
 
HALLIBURTON COMPANY
 
AND ITS AFFILIATED COMPANIES
 
AND
 
KBR INC.
 
AND ITS AFFILIATED COMPANIES
 
January 1, 2006

 
 

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TABLE OF CONTENTS
 

     
 
ARTICLE I. DEFINITIONS
 
2
 
 
Section 1.01
 
 
Definitions
 
2
 
   
ARTICLE II. PREPARATION AND FILING OF TAX RETURNS PRIOR TO DECONSOLIDATION YEAR
9
 
 
Section 2.01
 
 
Manner of Filing
 
9
 
   
ARTICLE III. ALLOCATION OF TAXES PRIOR TO DECONSOLIDATION YEAR
10
 
 
Section 3.01
 
 
Liability of the ESG Group for Consolidated and Combined Taxes
 
10
 
 
Section 3.02
 
 
Liability of the KBR Group for Consolidated and Combined Taxes
 
10
 
 
Section 3.03
 
 
ESG Group Federal Income Tax Liability
 
10
 
 
Section 3.04
 
 
KBR Group Federal Income Tax Liability
 
10
 
 
Section 3.05
 
 
ESG Group Combined Tax Liability
 
11
 
 
Section 3.06
 
 
KBR Group Combined Tax Liability
 
11
 
 
Section 3.07
 
 
Preparation and Delivery of Pro Forma Tax Returns
 
11
 
 
Section 3.08
 
 
Intercompany Payables and Receivables
 
11
 
 
Section 3.09
 
 
Credit for Use of Attributes
 
12
 
 
Section 3.10
 
 
Subsequent Changes in Treatment of Tax Items
 
13
 
 
Section 3.11
 
 
Foreign Corporations
 
13
 
 
Section 3.12
 
 
KBR Holdings Not Disregarded
 
13
 
 
Section 3.13
 
 
State and Local Filings
 
13
 
 
Section 3.14
 
 
Group Relief
 
14
 
   
ARTICLE IV. PREPARATION AND FILING OF TAX RETURNS FOR AND AFTER THE
DECONSOLIDATION YEAR
16
 
 
Section 4.01
 
 
Manner of Filing
 
16
 
 
Section 4.02
 
 
Pre-Deconsolidation Tax Returns
 
16
 
 
Section 4.03
 
 
Post-Deconsolidation Tax Returns
 
16
 
 
Section 4.04
 
 
Accumulated Earnings and Profits, Initial Determination and Subsequent
Adjustments
 
17
 
 
Section 4.05
 
 
Tax Basis of Assets Transferred
 
17
 
   
ARTICLE V. ALLOCATION OF TAXES FOR AND AFTER DECONSOLIDATION YEAR; ALLOCATION OF
ADDITIONAL TAX LIABILITIES
17
 
 
Section 5.01
 
 
Liability of the ESG Group for Consolidated and Combined Taxes
 
17
 
 
Section 5.02
 
 
Liability of the KBR Group for Consolidated and Combined Taxes
 
17
 
 
Section 5.03
 
 
ESG Group Federal Income Tax Liability
 
18
 
 
Section 5.04
 
 
KBR Group Federal Income Tax Liability
 
18
 
 
Section 5.05
 
 
ESG Group Combined Tax Liability
 
19
 
 
Section 5.06
 
 
KBR Group Combined Tax Liability
 
19
 
 
Section 5.07
 
 
Preparation and Delivery of Pro Forma Tax Returns
 
19
 

 
 

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Section 5.08
 
 
HESI Intercompany Payables and Receivables; KBR Payment
 
19
 
 
Section 5.09
 
 
Credit for Use of Attributes
 
19
 
 
Section 5.10
 
 
Subsequent Changes in Treatment of Tax Items
 
20
 
 
Section 5.11
 
 
Foreign Corporations
 
21
 
 
Section 5.12
 
 
Allocation of Additional Tax Liabilities
 
21
 
 
Section 5.13
 
 
Tax Attributes of KBR Not Carried Back
 
27
 
   
ARTICLE VI. TAX DISPUTE INDEMNITY; CONTROL OF PROCEEDINGS; COOPERATION AND
EXCHANGE OF INFORMATION
27
 
 
Section 6.01
 
 
Tax Dispute Indemnity and Control of Proceedings
 
27
 
 
Section 6.02
 
 
Cooperation and Exchange of Information
 
29
 
 
Section 6.03
 
 
Reliance on Exchanged Information
 
30
 
 
Section 6.04
 
 
Payment of Tax and Indemnity
 
30
 
 
Section 6.05
 
 
Prior Tax Years
 
31
 
   
ARTICLE VII. WARRANTIES AND REPRESENTATIONS; INDEMNITY
32
 
 
Section 7.01
 
 
Warranties and Representations Relating to Actions of Halliburton and KBR
 
32
 
 
Section 7.02
 
 
Warranties and Representations Relating to the Distribution
 
32
 
 
Section 7.03
 
 
Covenants Relating to the Tax Treatment of the Distribution
 
32
 
 
Section 7.04
 
 
Spinoff Indemnification
 
36
 
 
Section 7.05
 
 
Indemnified Liability - Spinoff
 
36
 
 
Section 7.06
 
 
Amount of Indemnified Liability for Income Taxes - Spinoff
 
36
 
 
Section 7.07
 
 
Indemnity Amount - Spinoff
 
37
 
 
Section 7.08
 
 
Additional Indemnity Remedy - Spinoff
 
37
 
 
Section 7.09
 
 
Calculation of Indemnity Payments
 
37
 
 
Section 7.10
 
 
Prompt Performance
 
38
 
 
Section 7.11
 
 
Interest
 
38
 
 
Section 7.12
 
 
Tax Records
 
38
 
 
Section 7.13
 
 
KBR Representations and Covenants
 
38
 
 
Section 7.14
 
 
Halliburton Representations and Covenants
 
39
 
 
Section 7.15
 
 
Continuing Covenants
 
39
 
   
ARTICLE VIII. MISCELLANEOUS PROVISIONS
39
 
 
Section 8.01
 
 
Notice
 
39
 
 
Section 8.02
 
 
Required Payments
 
40
 
 
Section 8.03
 
 
Injunctions
 
40
 
 
Section 8.04
 
 
Further Assurances
 
40
 
 
Section 8.05
 
 
Parties in Interest
 
40
 
 
Section 8.06
 
 
Setoff
 
41
 
 
Section 8.07
 
 
Change of Law
 
41
 
 
Section 8.08
 
 
Termination and Survival
 
41
 
 
Section 8.09
 
 
Amendments; No Waivers
 
41
 
 
Section 8.10
 
 
Governing Law and Interpretation
 
41
 
 
Section 8.11
 
 
Resolution of Certain Disputes
 
41
 
 
Section 8.12
 
 
Confidentiality
 
42
 
 
Section 8.13
 
 
Costs, Expenses and Attorneys’ Fees
 
42
 
 
   
 
Section 8.14
 
 
Counterparts
 
42
 
 
Section 8.15
 
 
Severability
 
42
 
 
Section 8.16
 
 
Entire Agreement; Termination of Prior Agreements
 
43
 
 
Section 8.17
 
 
Assignment
 
43
 
 
Section 8.18
 
 
Fair Meaning
 
43
 
 
Section 8.19
 
 
Commencement
 
43
 
 
Section 8.20
 
 
Titles and Headings
 
44
 
 
Section 8.21
 
 
Construction
 
44
 
 
Section 8.22
 
 
Termination
 
44
 

 
TAX SHARING AGREEMENT
 
BY AND BETWEEN
HALLIBURTON COMPANY AND KBR, INC.
 
This Tax Sharing Agreement (the “Agreement”), dated as of this 1st day of
January, 2006, by and between HALLIBURTON COMPANY, a Delaware corporation
(“Halliburton”), KBR Holdings LLC, a Delaware limited liability company (“KBR
Holdings”), and KBR, Inc., a Delaware corporation (“KBR, Inc.”), is entered into
as of the 15th day of November, 2006.
 
RECITALS
 
WHEREAS, Halliburton is the common parent of an affiliated group of corporations
within the meaning of Section 1504(a) of the Code (as defined herein), which
currently files a consolidated federal income tax return;
 
WHEREAS, Halliburton Energy Services, Inc., a Delaware corporation (“HESI”), and
certain other entities and divisions comprise the Energy Services Group of
Halliburton (collectively, the “ESG Group”), and KBR (as defined herein) and
certain other entities and divisions comprise the Energy & Chemicals Group and
Government & Infrastructure Group of Halliburton (collectively, the “KBR
Group”);
 
WHEREAS, the ESG Group and the KBR Group each include various corporations that
join with Halliburton in the filing of a consolidated U.S. federal income tax
return, as well as limited liability companies and other entities organized
under the laws of domestic and foreign jurisdictions;
 
WHEREAS, Halliburton and KBR determined it would be appropriate and desirable,
effective as of December 31, 2005, for KBR to reorganize its operations to
separate the operations traditionally associated with KBR from the operations
traditionally associated with Halliburton (the “Restructuring”);
 
WHEREAS, Halliburton and KBR contemplate that as part of the Restructuring, KBR
may make an initial public offering (the “IPO”) of KBR common stock that would
reduce Halliburton’s ownership of KBR to not less than the amount required for
Halliburton to control KBR within the meaning of Section 368(c) of the Code with
respect to the stock of KBR and to not less than the amount required for
Halliburton to control KBR within the meaning of Section 1504(a)(2) of the Code
with respect to the stock of KBR;
 
WHEREAS, Halliburton may determine that it is in the best interests of the
Parties to cause (1) Kellogg Energy Services, Inc. to distribute the shares of
KBR common stock to DII Industries, LLC, a Delaware limited liability company
(“DII”), (2) DII in turn to distribute the shares of KBR common stock to HESI
and (3) HESI in turn to distribute the shares of KBR common stock to
Halliburton, subject to the terms and conditions of the Master Separation
Agreement or the Master Separation and Distribution Agreement (as applicable)
(collectively, the “Preliminary Distributions”);
WHEREAS, in connection with the Preliminary Distributions, Halliburton may
determine that it is in the best interests of the Parties for Halliburton to
distribute all of its shares of KBR common stock, on a pro rata basis, to the
holders of the common stock of Halliburton, subject to the terms and conditions
of the Master Separation Agreement or the Master Separation and Distribution
Agreement (as applicable) (the “Distribution”);
 
WHEREAS, the Preliminary Distributions and the Distribution are intended to
qualify as tax free distributions under Section 355 of the Code;
 
WHEREAS, upon the Deconsolidation (as defined herein), Halliburton and KBR will
cease to be members of the same affiliated group for federal income tax
purposes;
 
WHEREAS, the Parties wish to set forth the general principles under which they
will allocate and share various Taxes (as defined herein) and related
liabilities;
 
WHEREAS, in contemplation of the IPO and the Deconsolidation, Halliburton, on
behalf of itself and its present and future subsidiaries other than KBR
(“Halliburton Group”), and KBR, on behalf of itself and its present and future
subsidiaries (“KBR Group”) are entering into this Agreement to provide for the
allocation between the Halliburton Group and the KBR Group of all
responsibilities, liabilities and benefits relating to all Taxes paid or payable
by either group for all taxable periods beginning on or after the Effective Date
(as defined herein) and to provide for certain other matters;
 
WHEREAS, the Parties intend and agree that the Effective Date with respect to
the provisions of Articles II, III, VI and VIII is January 1, 2001.
 
NOW, THEREFORE, in consideration of the mutual agreements, provisions, and
covenants contained in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereby agree as follows:
 
ARTICLE I.
 
DEFINITIONS
 
Section 1.01 Definitions. The following terms shall have the following meanings
(such meanings to be equally applicable to both the singular and the plural
forms of the terms defined):
 
“Accounting Referee” is defined in Section 8.11 herein.
 
“Additional ESG Group Relief” is defined in Section 3.14(a).
 
“Additional KBR Group Relief” is defined in Section 3.14(a).
 
“Adequate Assurances” means posting a bond or providing a letter of credit
reasonably acceptable to the Indemnified Party; provided, however, if the
Indemnifying Party fails to post such bond or provide such letter of credit, the
Indemnifying Party shall provide cash equal to the Indemnity Amount to the
Indemnified Party not less than thirty (30) days prior to the date on which such
Tax would become due and payable by the Indemnified Party.
 
“Affiliate” of any person means any person, corporation, partnership or other
entity directly or indirectly controlling, controlled by or under common control
with such person.
 
“Affiliated Group” means an affiliated group of corporations within the meaning
of Section 1504(a) (excluding Section 1504(b)) of the Code for the taxable
period in question.
 
“Code” means the Internal Revenue Code of 1986, as amended, or any successor
thereto, as in effect for the taxable period in question.
 
“Combined Group” means a group of corporations or other entities that files a
Combined Return.
 
“Combined Return” means any Tax Return (other than for Federal Income Taxes)
filed on a consolidated, combined (including nexus combination, worldwide
combination, domestic combination, line of business combination or any other
form of combination), unitary or Group Relief basis that includes activities of
members of the ESG Group or the KBR Group, or both, as the case may be.
 
“Compensatory Transaction” has the meaning set forth in Section 7.03(b)(iii).
 
“Consolidated Group” means the affiliated group of corporations (as defined in
Section 1504(a) of the Code) of which Halliburton is the common parent
corporation.
 
“Consolidated Return” means a Tax Return filed with respect to Federal Income
Taxes for the Consolidated Group.
 
“Control” means stock constituting a 50% or greater interest under
Section 355(e) of the Code.
 
“Deconsolidation” means the event that reduces the amount of KBR stock owned
directly or indirectly by Halliburton to be less than the amount required for
Halliburton to control KBR within the meaning of Section 1504(a)(2) of the Code.
 
“Deconsolidation Date” means the date the Deconsolidation occurs.
 
“Deconsolidation Year” means the taxable year in which the Deconsolidation Date
occurs.
 
“Displaced ESG Tax Attribute” has the meaning set forth in Section 5.12(g) of
this Agreement.
 
“Disputed Tax Issue” is defined in Section 6.01(a) herein.
 
“Disputed Tax Issue Indemnitee” is defined in Section 6.01(a) herein.
 
“Disputed Tax Issue Indemnitor” is defined in Section 6.01(a) herein.
 
“Disqualifying Action” is defined in Section 7.03(a)(i) hereof.
 
“Distribution” has the meaning set forth in the Recitals to this Agreement.
 
“Distribution Date” is the date the Distribution occurs.
 
“Dual Consolidated Loss” has the meaning ascribed to such term in Treasury
Regulation § 1.1503-2(c)(5), Treasury Regulation § 1.1503-2A(b)(2), or any
successor regulations promulgated under section 1503 of the Code.
 
“Effective Date” is January 1, 2006, provided, however that the Effective Date
with respect to Articles II, III, VI and VIII is January 1, 2001.
 
“ESG Allocated Attributes” has the meaning set forth in Section 3.09 or
Section 5.09 of this Agreement as the case requires.
 
“ESG Group” has the meaning set forth in the Recitals to this Agreement.
 
“ESG Group Combined Tax Liability” means, with respect to any taxable period,
the ESG Group’s liability for Taxes owed with respect to Combined Returns, as
determined under Section 3.05 or Section 5.05 of this Agreement as the case
requires.
 
“ESG Group Federal Income Tax Liability” means, with respect to any taxable
period, the ESG Group’s liability for Federal Income Taxes, as determined under
Section 3.03 or Section 5.03 of this Agreement as the case requires.
 
“ESG Group Members” means those entities or divisions of entities included in
the ESG Group as set forth on Exhibit A, hereto.
 
“ESG Group Pro Forma Combined Return” means a pro forma Combined Return or other
schedule prepared pursuant to Section 3.05 or Section 5.05 of this Agreement as
the case requires.
 
“ESG Group Pro Forma Consolidated Return” means a pro forma consolidated U.S.
Federal Income Tax Return or other schedule prepared pursuant to Section 3.03 or
Section 5.03 of this Agreement as the case requires.
 
“ESG Group Relief Tax Attribute” is defined in Section 3.14(a).
 
“ESG Stand-Alone Attributes” has the meaning set forth in Section 3.09(a) or
Section 5.09(a) of this Agreement as the case requires.
 
“Federal Income Tax” means any Tax imposed under Subtitle A of the Code or any
other provision of United States Federal Income Tax law (including, without
limitation, the Taxes imposed by Sections 11, 55, 59A, and 1201(a) of the Code),
and any interest, additions to Tax or penalties applicable or related thereto.
 
“Final Determination” means the final resolution of any Tax (or other matter)
for a taxable period, including related interest or penalties, that, under
applicable law, is not subject to further appeal, review or modification through
proceedings or otherwise, including (i) by the expiration of a statute of
limitations or a period for the filing of claims for refunds, amending Tax
Returns, appealing from adverse determinations, or recovering any refund
(including by offset), (ii) by a decision, judgment, decree, or other order by a
court of competent jurisdiction, which has become final and unappealable,
(iii) by a closing agreement or an accepted offer in compromise under
Section 7121 or 7122 of the Code, or comparable agreements under laws of other
jurisdictions, (iv) by execution of an Internal Revenue Service Form 870 or
870-AD, or by a comparable form under the laws of other jurisdictions
(excluding, however, with respect to a particular Tax Item for a particular
taxable period any such form that reserves (whether by its terms or by operation
of law) the right of the taxpayer to file a claim for refund and/or the right of
the Tax Authority to assert a further deficiency with respect to such Tax Item
for such period), or (v) by any allowance of a refund or credit, but only after
the expiration of all periods during which such refund may be adjusted.
 
“Foreign Tax Credit Adjustment” has the meaning set forth in Section 5.12(f)
hereof.
 
“Group Relief” has the meaning set forth in Section 3.14(a) hereof.
 
“Halliburton Affiliated Group” means, for each taxable period, the Affiliated
Group of which Halliburton or any successor of Halliburton is the common parent.
 
“Halliburton Affiliated Group Federal Income Tax Return” means the consolidated
Federal income Tax Return of the Halliburton Affiliated Group.
 
“Halliburton Group” is defined in the Recitals to this Agreement.
 
“Indemnified Liability” has the meaning set forth in Section 7.05.
 
“Indemnified Party” has the meaning set forth in Section 7.04(b) of this
Agreement.
 
“Indemnity Amount” has the meaning set forth in Section 7.07.
 
“Indemnifying Party” has the meaning set forth in Section 7.04(b) of this
Agreement.
 
“IPO” is defined in the Recitals to this Agreement.
 
“IRS” means the United States Internal Revenue Service or any successor thereto,
including, but not limited to, its agents, representatives, and attorneys.
 
“KBR” means KBR Holdings from the Effective Date to the day immediately prior to
the earlier of (i) the Deconsolidation Date or (ii) the date of the IPO and
means KBR, Inc. from and after such date.
 
“KBR Affiliated Group” means, for each taxable period, the Affiliated Group of
which KBR or any successor of KBR is the common parent.
 
“KBR Allocated Attributes” has the meaning set forth in Section 3.09 or
Section 5.09 of this Agreement as the case requires.
 
“KBR Businesses” means the present, former and future subsidiaries, divisions
and businesses of any member of the KBR Group which are not, or are not
contemplated by the Master Separation Agreement or the Master Separation and
Distribution Agreement (as applicable) to be, part of the Halliburton Group
immediately after the Deconsolidation Date.
 
“KBR Foreign Taxes” has the meaning set forth in Section 5.12(f) of this
Agreement.
 
“KBR Group” is defined in the Recitals to this Agreement.
 
“KBR Group Combined Tax Liability” means, with respect to any taxable period,
the KBR Group’s liability for Taxes owed with respect to Combined Returns, as
determined under Section 3.06 or Section 5.06 of this Agreement as the case
requires.
 
“KBR Group Federal Income Tax Liability” means, with respect to any taxable
period, the KBR Group’s liability for U.S. Federal Income Taxes, as determined
under Section 3.04 or Section 5.04 of this Agreement as the case requires.
 
“KBR Group Members” means those entities or divisions of entities included in
the KBR Group as set forth on Exhibit B, hereto.
 
“KBR Group Pro Forma Combined Return” means a pro forma Combined Return or other
schedule prepared pursuant to Section 3.06 or Section 5.06 of this Agreement as
the case requires.
 
“KBR Group Pro Forma Consolidated Return” means a pro forma consolidated U.S.
Federal Income Tax Return or other schedule prepared pursuant to Section 3.04 or
Section 5.04 of this Agreement as the case requires.
 
“KBR Group Relief Tax Attribute” has the meaning set forth in Section 3.14(a) of
this Agreement.
 
“KBR Losses” has the meaning set forth in Section 5.12(g) of this Agreement.
 
“KBR Restructuring Issue” is defined in Section 6.01(c) herein.
 
“KBR Stand-Alone Attributes” has the meaning set forth in Section 3.09(b) or
Section 5.09(b) of this Agreement as the case requires.
 
“Loss Adjustment” has the meaning set forth in Section 5.12(g) of this
Agreement.
 
“Master Separation Agreement” means that certain Master Separation Agreement
entered into by Halliburton and KBR, dated November 20, 2006, together with that
certain Distribution Agreement entered into between Halliburton and KBR attached
as a Schedule to such Master Separation Agreement.
 
“Master Separation and Distribution Agreement” means that certain Master
Separation and Distribution Agreement entered into by Halliburton and KBR, dated
November 20, 2006.
 
“Non-Transacting Party” is defined in Section 7.03(b)(i) herein.
 
“Notice” is defined in Section 8.01 herein.
 
“Party” means each of Halliburton and KBR, and, solely for purposes of this
definition, “Halliburton” includes the Halliburton Group and “KBR” includes the
KBR Group, all as of the Deconsolidation Date. Each of Halliburton and KBR shall
cause the Halliburton Group and the KBR Group, respectively, to comply with this
Agreement.
 
“Post-Deconsolidation Period” means any period beginning after the
Deconsolidation Date.
 
“Potential Disqualifying Action” is defined in Section 7.03(a)(iii) hereof.
 
“Pre-Deconsolidation Period” means any period ending on or before the
Deconsolidation Date.
 
“Preliminary Distributions” is defined in the Recitals to this Agreement.
 
“Private Letter Ruling” means the private letter ruling issued by the IRS to
Halliburton in connection with the Spinoff.
 
“Project Constructor” means the transaction, effective December 15, 2003,
pursuant to which Halliburton separated the ESG Group, on the one hand, from the
Energy & Chemicals Group and the Government & Infrastructure Group (formerly the
Engineering & Construction Group), on the other hand, with HESI acting as the
holding company for the ESG Group and DII acting as the holding company for the
Energy & Chemicals Group and the Government & Infrastructure Group.
 
“Required Tax Attribute Carryback” is defined in Section 5.13 hereof.
 
“Restricted Period” means the period beginning two years before the Distribution
Date and ending two years after the Distribution Date.
 
“Restructuring” is defined in the Recitals to this Agreement.
 
“Restructuring Taxes” means any and all Taxes resulting from the Restructuring
or from Project Constructor, and shall include any related interest, penalties,
Tax credit recapture or other additions to Tax, including, without limitation,
any Tax imposed pursuant to, or as a result of, the application of Section 311
of the Code.
 
“Ruling Documents” means (1) the request for a ruling under Section 355 and
various other sections of the Code, that have been or will be filed with the IRS
in connection with the Spinoff, together with any supplemental filings or ruling
requests or other materials subsequently submitted on behalf of Halliburton, its
subsidiaries and shareholders to the IRS, the appendices and exhibits thereto,
and any rulings issued by the IRS to Halliburton in connection with the Spinoff
or (2) any similar filings submitted to, or rulings issued by, any other Tax
Authority in connection with the Spinoff.
 
“Section 171A” has the meaning set forth in Section 3.14(c).
 
“Spinoff” means the separation of KBR from Halliburton through the Distribution.
 
“Subsequent Ruling” has the meaning set forth in Section 7.03(a)(iii).
 
“Subsequent Opinion” has the meaning set forth in Section 7.03(a)(iii).
 
“Tainting Act” means (i) any act of omission or commission, including but not
limited to, any transaction, representation, or election which would constitute
a breach by KBR (or its successors) of the warranties, representations and
covenants of Sections 7.02 or 7.03 hereof (without regard to whether a
Subsequent Opinion had been obtained); (ii) any breach of any representation or
covenant given by KBR in connection with the Private Letter Ruling, Subsequent
Ruling, Tax Opinion or Subsequent Opinion which relates to the qualification of
the Distribution as a Tax Free Spinoff; or (iii) any transaction involving the
stock or assets of KBR (or its successors) occurring after the Deconsolidation
Date.
 
“Tax” means any of the Taxes.
 
“Tax Attribute” means one or more of the following attributes of a member of
either the ESG Group or the KBR Group: (i) with respect to the Consolidated
Return, a net operating loss, a net capital loss, an unused investment credit,
an unused foreign tax credit, an excess charitable contribution, a U.S. federal
minimum tax credit or U.S. federal general business credit (but not tax basis or
earnings and profits) and (ii) any comparable Tax Item reflected on a Combined
Return.
 
“Tax Authority” means a governmental authority (foreign or domestic) or any
subdivision, agency, commission or authority thereof or any quasi-governmental
or private body having jurisdiction over the assessment, determination,
collection or imposition of any Tax (including, without limitation, the U.S.
Internal Revenue Service).
 
“Tax Controversy” means any audit, examination, dispute, suit, action,
litigation or other judicial or administrative proceeding initiated by KBR,
Halliburton, the IRS or any other Tax Authority.
 
“Tax Free Spinoff” is defined in Section 7.02(a) hereof.
 
“Tax Item” means any item of income, gain, loss, deduction or credit, or other
item reflected on a Tax Return or any Tax Attribute.
 
“Tax Counsel” means a nationally recognized law firm selected by Halliburton and
engaged to deliver the Tax Opinion.
 
“Tax Opinion” means an opinion of Tax Counsel to the effect that the Preliminary
Distributions and the Distribution should qualify as a Tax Free Spinoff.
 
“Tax Opinion Documents” means the officer’s certificates and other documents
submitted to Tax Counsel and relied on by Tax Counsel in rendering the Tax
Opinion.
 
“Tax Return” means any return, report, certificate, form or similar statement or
document (including, any related or supporting information or schedule attached
thereto and any information return, amended Tax Return, claim for refund or
declaration of estimated tax) required to be supplied to, or filed with, a Tax
Authority in connection with the determination, assessment or collection of any
Tax or the administration of any laws, regulations or administrative
requirements relating to any Tax.
 
“Taxes” means all forms of taxation, whenever created or imposed, and whenever
imposed by a national, local, municipal, governmental, state, federation or
other body, and without limiting the generality of the foregoing, shall include
net income, alternative or add-on minimum tax, gross income, sales, use, ad
valorem, gross receipts, value added, franchise, profits, license, transfer,
recording, withholding, payroll, employment, excise, severance, stamp
occupation, premium, property, windfall profit, custom duty, or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any related interest, penalties, or other additions to tax, or
additional amounts imposed by any such Tax Authority.
 
“Transacting Party” is defined in Section 7.03(b)(i) herein.
 
Any term used but not capitalized herein that is defined in the Code or in the
Treasury Regulations thereunder, shall to the extent required by the context of
the provision at issue, have the meaning assigned to it in the Code or such
regulation.
 
ARTICLE II.
 
PREPARATION AND FILING OF TAX
RETURNS PRIOR TO DECONSOLIDATION YEAR
 
Section 2.01 Manner of Filing.
 
(a) For periods after the Effective Date and prior to the Deconsolidation Year
and except as provided in Section 2.0l(b) hereof, Halliburton shall have the
sole and exclusive responsibility for the preparation and filing of, and shall
prepare and file or cause to be prepared and filed: (1) all Consolidated Returns
and (2) all Combined Returns.
 
(b) For periods after the Effective Date and prior to the Deconsolidation Year
and except as otherwise provided in Section 2.0l(a) hereof, the ESG Group and
the KBR Group shall have the sole and exclusive responsibility for the
preparation and filing of, and shall prepare and file or cause to be prepared
and filed, all Tax Returns of the ESG Group Members and the KBR Group Members
that are not required to be filed on a consolidated or combined basis. With
respect to any Combined Return required to be filed in a foreign taxing
jurisdiction, Halliburton shall determine, in its sole discretion, whether ESG
Group Members or KBR Group Members, rather than Halliburton, shall have the
responsibility for preparing and filing such Combined Return and the manner in
which Taxes related to such Combined Return shall be allocated and paid.
 
ARTICLE III.
 
ALLOCATION OF TAXES PRIOR TO DECONSOLIDATION YEAR
 
Section 3.01 Liability of the ESG Group for Consolidated and Combined Taxes. For
each taxable year ending prior to the Deconsolidation Year and beginning on or
after the Effective Date, the ESG Group shall be liable to Halliburton for an
amount equal to the ESG Group Federal Income Tax Liability and the ESG Group
Combined Tax Liability.
 
Section 3.02 Liability of the KBR Group for Consolidated and Combined Taxes. For
each taxable year ending prior to the Deconsolidation Year and beginning on or
after the Effective Date, the KBR Group shall be liable to Halliburton for an
amount equal to the KBR Group Federal Income Tax Liability and the KBR Group
Combined Tax Liability to the extent such liabilities are paid by Halliburton or
by a member of the ESG Group.
 
Section 3.03 ESG Group Federal Income Tax Liability. With respect to each
taxable year ending prior to the Deconsolidation Year and beginning on or after
the Effective Date, the ESG Group Federal Income Tax Liability for such taxable
period shall be the Federal Income Taxes for such taxable period, as determined
on an ESG Group Pro Forma Consolidated Return prepared:
 
(a) assuming that the members of the ESG Group were not included in the
Consolidated Group and by including only Tax Items of members of the ESG Group
that are included in the Consolidated Return;
 
(b) except as provided in Section 3.03(e) hereof, using all elections,
accounting methods and conventions used on the Consolidated Return for such
period;
 
(c) applying the highest statutory marginal corporate income Tax rate in effect
for such taxable period;
 
(d) excluding any Tax Attributes for which HESI has been compensated pursuant to
Section 3.09 hereof;
 
(e) assuming that the ESG Group elects not to carry back any net operating
losses; and
 
(f) assuming that the ESG Group’s utilization of any Tax Attribute carryforward
or carryback is limited to the Tax Attributes of the ESG Group that would be
available if the ESG Group Federal Income Tax Liability for each taxable year
ending after January 1, 2001 were determined in accordance with this
Section 3.03.
 
Section 3.04 KBR Group Federal Income Tax Liability. With respect to each
taxable year ending prior to the Deconsolidation Year and beginning on or after
the Effective Date, the KBR Group Federal Income Tax Liability for such taxable
period shall be the Federal Income Taxes for such taxable period, as determined
on an KBR Group Pro Forma Consolidated Tax Return prepared:
 
(a) assuming that the members of the KBR Group were not included in the
Consolidated Group and by including only Tax Items of members of the KBR Group
that are included in the Consolidated Return;
 
(b) except as provided in Section 3.04(e) hereof, using all elections,
accounting methods and conventions used on the Consolidated Return for such
period;
 
(c) applying the highest statutory marginal corporate income Tax rate in effect
for such taxable period;
 
(d) excluding any Tax Attributes for which KBR has been compensated pursuant to
Section 3.09 hereof;
 
(e) assuming that the KBR Group elects not to carry back any net operating
losses and may elect either to deduct or take a credit for foreign Taxes paid or
deemed paid (and to carryback or carryforward any excess foreign Taxes); and
 
(f) assuming that the KBR Group’s utilization of any Tax Attribute carryforward
or carryback is limited to the Tax Attributes of the KBR Group that would be
available if the KBR Group Federal Income Tax Liability for each taxable year
ending after January 1, 2001 were determined in accordance with this
Section 3.04.
 
Section 3.05 ESG Group Combined Tax Liability. With respect to any taxable year
ending prior to the Deconsolidation Year and beginning on or after the Effective
Date, the ESG Group Combined Tax Liability shall be the sum for such taxable
period of the ESG Group’s liability for Taxes owed with respect to Combined
Returns, as determined on the ESG Group Pro Forma Combined Returns prepared in a
manner consistent with the principles and procedures set forth in Section 3.03
hereof.
 
Section 3.06 KBR Group Combined Tax Liability. With respect to any taxable year
ending prior to the Deconsolidation Year and beginning on or after the Effective
Date, the KBR Group Combined Tax Liability shall be the sum for such taxable
period of the KBR Group’s liability for Taxes owed with respect to Combined
Returns, as determined on the KBR Group Pro Forma Combined Returns prepared in a
manner consistent with the principles and procedures set forth in Section 3.04
hereof.
 
Section 3.07 Preparation and Delivery of Pro Forma Tax Returns. Not later than
ninety (90) days following the date on which the related Consolidated Return or
Combined Return, as the case may be, is filed with the appropriate Tax
Authority, Halliburton shall prepare and deliver to HESI and KBR, respectively,
pro forma Tax Returns calculating (i) the ESG Group Federal Income Tax Liability
or the ESG Group Combined Tax Liability, and (ii) the KBR Group Federal Income
Tax Liability or the KBR Group Combined Tax Liability, which is attributable to
the period covered by such filed Tax Return.
 
Section 3.08 Intercompany Payables and Receivables. The liability of the ESG
Group and the KBR Group for (i) the ESG Group Federal Income Tax Liability and
(ii) the KBR Group Federal Income Tax Liability, respectively, shall be
reflected in the intercompany accounts of Halliburton and HESI or KBR, as the
case may be.
 
Section 3.09 Credit for Use of Attributes. Not later than ninety (90) days
following the filing of the Consolidated Return for each taxable year,
Halliburton shall determine the aggregate amount of the Tax Attributes of the
Consolidated Group and all Combined Groups that are allocable to the ESG Group
(the “ESG Allocated Attributes”) and the KBR Group (the “KBR Allocated
Attributes”) as of the end of such year and shall inform HESI and KBR,
respectively, of such determination.
 
(a) If the amount of the ESG Allocated Attributes is less than the amount of Tax
Attributes (as reasonably determined by Halliburton) that would have been
available to the ESG Group at the end of such year had the ESG Group Members not
been included in the Consolidated Return and the Combined Returns (the “ESG
Stand-Alone Attributes”), the value of such shortfall, to the extent such
shortfall is attributable to the use of the ESG Group’s Tax Attributes by KBR
Group Members, shall be reflected in the intercompany accounts as an amount
payable by Halliburton to HESI. If the amount of the ESG Allocated Attributes is
greater than the ESG Stand-Alone Attributes, the value of such excess, to the
extent such excess is attributable to the use of Tax Attributes of KBR Group
Members by ESG Group Members during such year, shall be reflected in the
intercompany accounts as an amount payable by HESI to Halliburton. For this
purpose, a Tax Attribute shall be treated as used by KBR Group Members or ESG
Group Members only to the extent that such Tax Attribute is necessary to reduce
the KBR Group Federal Income Tax Liability or ESG Group Federal Income Tax
Liability (computed in accordance with Section 3.04 or 3.03) for such year. In
calculating the ESG Stand-Alone Attributes, the utilization of any Tax Attribute
carryforward by ESG Group Members shall be subject to the limitation described
in Section 3.03(f) hereof. For purposes of this section, the value of any Tax
Attribute shall be equal to the amount of Taxes (computed in accordance with
Section 3.03 hereof) that would be avoided by the payor if it had sufficient
income to fully utilize such Tax Attribute in such year.
 
(b) If the amount of the KBR Allocated Attributes is less than the amount of Tax
Attributes (as reasonably determined by Halliburton) that would have been
available to the KBR Group at the end of such year had the KBR Group Members not
been included in the Consolidated Return and the Combined Returns (the “KBR
Stand-Alone Attributes”), the value of such shortfall, to the extent such
shortfall is attributable to the use of the KBR Group’s Tax Attributes by ESG
Group Members, shall be reflected in the intercompany accounts as an amount
payable by Halliburton to KBR. If the amount of the KBR Allocated Attributes is
greater than the KBR Stand-Alone Attributes, the value of such excess, to the
extent such excess is attributable to the use of Tax Attributes of ESG Group
Members by KBR Group Members during such year, shall be reflected in the
intercompany accounts as an amount payable by KBR to Halliburton. For this
purpose, a Tax Attribute shall be treated as used by ESG Group Members or KBR
Group Members only to the extent that such Tax Attribute is necessary to reduce
the ESG Group Federal Income Tax Liability or KBR Group Federal Income Tax
Liability (computed in accordance with Section 3.03 or 3.04) for such year. In
calculating the KBR Stand-Alone Attributes, the utilization of any Tax Attribute
carryforward by KBR Group Members shall be subject to the limitation described
in Section 3.04(f) hereof. For purposes of this section, the value of any Tax
Attribute shall be equal to the amount of Taxes (computed in accordance with
Section 3.04 hereof) that would be avoided by the payor if it had sufficient
income to fully utilize such Tax Attribute in such year.
 
Section 3.10 Subsequent Changes in Treatment of Tax Items. For any taxable year
ending prior to the Deconsolidation Year and beginning on or after the Effective
Date, in the event of a change in the treatment of any Tax Item of any member of
the Consolidated Group or a Combined Group as a result of a Final Determination,
Halliburton shall calculate (i) the change to the ESG Group Federal Income Tax
Liability or ESG Group Combined Tax Liability and/or the KBR Group Federal
Income Tax Liability or the KBR Group Combined Tax Liability and (ii) any change
to the Allocated Attributes and/or the Stand-Alone Attributes of the ESG Group
and the KBR Group, and such changes shall be properly reflected in the
intercompany accounts described in Section 3.09 hereof.
 
Section 3.11 Foreign Corporations. Any Taxes associated with the filing of a
separate Tax Return in a foreign jurisdiction with respect to an ESG Group
Member or a KBR Group Member shall be allocated to and paid directly by such
member. Any Taxes and Tax Attributes associated with the filing of a separate
Tax Return in a foreign jurisdiction that includes the Tax Items of one or more
ESG Group Members and one or more KBR Group Members shall be allocated to such
members by Halliburton in a manner consistent with the principles set forth in
this Article III.
 
Section 3.12 KBR Holdings Not Disregarded. Notwithstanding KBR Holding’s
classification as an entity disregarded as an entity separate from its owner
under Treasury Regulations § 301.7701-3:
 
(a) Tax Attributes of the KBR Group shall include the income and deductions of
KBR Holdings and such income and deductions of KBR Holdings shall not be
included in the ESG Group’s Tax Attributes.
 
(b) Intercompany accounts payable between Halliburton and KBR Holdings under
Section 3.09(b) hereof shall remain intercompany accounts payable between
Halliburton and KBR Holdings and shall not be treated instead as intercompany
accounts payable between Halliburton and Kellogg Energy Services, Inc.
 
(c) Amounts payable between Halliburton and KBR Holdings under Section 5.09(b)
hereof shall remain amounts payable between Halliburton and KBR Holdings and
shall not be treated instead as amounts payable between Halliburton and Kellogg
Energy Services, Inc.
 
Section 3.13 State and Local Filings. Any Taxes associated with the filing of a
separate Tax Return in a state or local jurisdiction with respect to an ESG
Group Member or a KBR Group Member shall be allocated to and paid directly by
such member. Any Taxes and Tax Attributes associated with the filing of a
Combined Return in a state or local jurisdiction that includes the Tax Items of
one or more ESG Group Members and one or more KBR Group Members shall be
allocated to such members by Halliburton in a manner consistent with the
principles set forth in this Article III and consistent with past practices.
 
Section 3.14 Group Relief. For any accounting period ending prior to the
Deconsolidation Year and beginning on or after the Effective Date:
 
(a) Group Relief Indemnification.
 
(i) In the event a Final Determination causes Halliburton or any member of the
ESG Group to recognize additional income directly as a result of the reduction
of the amount of “Group Relief” (as defined in Section 402 et seq. of the UK
Income and Corporation Taxes Act 1988, as amended) that was surrendered by any
member of the KBR Group (a “KBR Group Relief Tax Attribute”), then KBR shall pay
to Halliburton, no later than 90 days following the date of the Final
Determination, the amount of additional Tax incurred by Halliburton or any
member of the ESG Group that is directly attributable to the loss of the KBR
Group Relief Tax Attribute. In the event a Final Determination causes
Halliburton or any member of the ESG Group to recognize less income directly as
a result of an increase in the amount of Group Relief that is surrendered by any
member of the KBR Group (the “Additional KBR Group Relief”), then Halliburton
shall pay to KBR, no later than 90 days following the date of the Final
Determination, the amount of the reduction in Tax realized by Halliburton or any
member of the ESG Group that is directly attributable to the use of the
Additional KBR Group Relief.
 
(ii) In the event a Final Determination causes KBR or any member of the KBR
Group to recognize additional income directly as a result of the reduction of
the amount of Group Relief that was surrendered by any member of the ESG Group
(an “ESG Group Relief Tax Attribute”), then Halliburton shall pay to KBR, no
later than 90 days following the date of the Final Determination, the amount of
additional Tax incurred by KBR or any member of the KBR Group that is directly
attributable to the loss of the ESG Group Relief Tax Attribute. In the event a
Final Determination causes KBR or any member of the KBR Group to recognize less
income directly as a result of an increase in the amount of Group Relief that is
surrendered by any member of the ESG Group (the “Additional ESG Group Relief”),
then KBR shall pay to Halliburton, no later than 90 days following the date of
the Final Determination, the amount of the reduction in Tax realized by KBR or
any member of the KBR Group that is directly attributable to the use of the
Additional ESG Group Relief.
 
(b) Group Relief Payment.
 
(i) No later than 90 days following the filing of any U.K. Tax Return for the
accounting period in which a Group Relief is surrendered by KBR or any member of
the KBR Group to Halliburton or any member of the ESG Group, Halliburton shall
pay to KBR an amount equal to the product of: (x) the aggregate amount of Group
Relief that was surrendered to Halliburton or any member of the ESG Group
multiplied by (y) the highest U.K. Corporation Tax rate applicable to
corporations at the time the Group Relief was surrendered by the member of the
KBR Group.
 
(ii) No later than 90 days following the filing of any U.K. Tax Return for the
accounting period in which a Group Relief is surrendered by Halliburton or any
member of the ESG Group to KBR or any member of the KBR Group, KBR shall pay to
Halliburton an amount equal to the product of: (x) the aggregate amount of Group
Relief that was surrendered to KBR or any member of the KBR Group multiplied by
(y) the highest U.K. Corporation Tax rate applicable to corporations at the time
the Group Relief was surrendered by Halliburton or any member of the ESG Group.
 
(c) Notional Asset Transfer and Indemnification.
 
(i) No later than 90 days following the filing of any U.K. Tax Return for the
accounting period in which a capital asset was notionally transferred under
Section 171A of the Taxation of Chargeable Gains Act 1992 (“Section 171A”) in
order to enable Halliburton or any member of the ESG Group to utilize a capital
loss of any member of the KBR Group, Halliburton shall pay to KBR an amount
equal to the product of: (x) the aggregate amount of the capital gain
transferred, multiplied by (y) the highest U.K. Corporation tax rate applicable
to corporations at the time the asset was notionally transferred.
 
(ii) No later than 90 days following the filing of any U.K. Tax Return for the
accounting period in which a capital asset was notionally transferred under
Section 171A in order to enable KBR or any member of the KBR Group to utilize a
capital loss of any member of the ESG Group, KBR shall pay to Halliburton an
amount equal to the product of: (x) the aggregate amount of the capital gain
transferred, multiplied by (y) the highest U.K. Corporation tax rate applicable
to corporations at the time the asset was notionally transferred.
 
(iii) In the event that either KBR or any member of the KBR Group is required to
pay Tax (whether currently or as a result of a Final Determination) as a result
of a notional capital asset transfer described in Section 3.14(c)(i) hereof,
Halliburton shall pay to KBR the amount of such Tax within 90 days following the
filing of the U.K. Tax Return for the accounting period in which such Tax is
owed or within 90 days following a Final Determination with respect to such Tax,
as the case may be.
 
(iv) In the event that either Halliburton or any member of the ESG Group is
required to pay Tax (whether currently or as a result of a Final Determination)
as a result of a notional capital asset transfer described in
Section 3.14(c)(ii) hereof, KBR shall pay to Halliburton the amount of such Tax
within 90 days following the filing of the U.K. Tax Return for the accounting
period in which such Tax is owed or within 90 days following a Final
Determination with respect to such Tax, as the case may be.
 
(v) Notwithstanding anything to the contrary in this Agreement, the parties
agree that no payment or indemnification shall be required from Halliburton, KBR
or any Affiliate thereof with respect to any notional transfer of capital asset
under Section 171A relating to the sale of European Marine Contractors, Ltd.
 
(d) The consequences of any utilization of a KBR or KBR Group member U.K. Tax
Attribute by Halliburton or any member of the ESG Group, and any utilization of
a Halliburton or ESG Group U.K. Tax Attribute by KBR or any member of the KBR
Group, that is not attributable to Group Relief or notional capital asset
transfer under Section 171A shall be determined in a manner consistent with the
principles of this Section 3.14.
 
(e) The provisions of this Section 3.14, Section 5.12(c), Section 6.01(a) and
Section 6.05 are intended to be the exclusive governing provisions with respect
to indemnification and compensation rights and obligations among the parties
relating to U.K. Group Relief and notional capital asset transfers under
Section 171A.
 
ARTICLE IV.
 
PREPARATION AND FILING OF TAX RETURNS FOR AND AFTER THE DECONSOLIDATION YEAR 
 
Section 4.01 Manner of Filing.
 
(a) Except to the extent otherwise provided herein, all Tax Returns filed with
federal and state Tax Authorities of the United States for the Deconsolidation
Year and for two taxable years following the Deconsolidation Year by Halliburton
or by KBR shall be prepared (in the absence of a controlling change in law or
circumstances or consent of Halliburton with such consent not to be unreasonably
withheld) consistent with past practices, elections, accounting methods,
conventions, and principles of taxation used for the most recent taxable periods
for which Tax Returns involving similar items have been filed prior to the
Deconsolidation Date.
 
(b) For a period of two (2) fiscal years following the Distribution Date, all
Tax Returns filed by Halliburton and KBR after the Distribution Date shall be
prepared on a basis that is consistent with the Private Letter Ruling or Tax
Opinion obtained by Halliburton in connection with the Distribution (in the
absence of a controlling change in law or circumstances), and shall be filed on
a timely basis by the Party responsible for such filing under this Agreement.
 
Section 4.02 Pre-Deconsolidation Tax Returns. Except as provided in
Section 4.03(b) hereof, all Tax Returns required to be filed for the portion of
the Deconsolidation Year ending on the Deconsolidation Date shall be filed by
the party who would bear responsibility under Section 2.01 hereof if such Tax
Returns were for periods prior to the Deconsolidation Year.
 
Section 4.03 Post-Deconsolidation Tax Returns. 
 
(a) All Tax Returns of the KBR Group for the portion of the Deconsolidation Year
beginning after the Deconsolidation Date and all periods after the
Deconsolidation Year shall be filed by KBR and all Tax Returns of the
Halliburton Group for the portion of the Deconsolidation Year beginning after
the Deconsolidation Date and all periods after the Deconsolidation Year shall be
filed by Halliburton.
 
(b) All KBR Group foreign, state or local income Tax Returns for the
Deconsolidation Year that are filed based on a complete fiscal year (i.e. there
is not a Tax year end as of the Deconsolidation Date) shall be filed by KBR.
 
(c) If Deconsolidation occurs for federal Tax purposes but not for Combined
Return purposes, i.e., there is more than 50% but less than 80% ownership of KBR
stock by Halliburton, the HESI and KBR Tax departments will develop procedures
consistent with this Agreement for handling such Combined Returns.
 
Section 4.04 Accumulated Earnings and Profits, Initial Determination and
Subsequent Adjustments. Within ninety (90) days following the Distribution Date,
Halliburton shall notify KBR of the balance of accumulated earnings and profits
on Halliburton’s Tax records as of the Distribution Date which are allocable to
the KBR Businesses, as calculated in accordance with the appropriate provisions
of the Code and the Treasury Regulations thereunder (including Section 312(h) of
the Code and Treasury Regulations § 1.312-10 or any successor regulation
thereto) by Halliburton. The notice provided by Halliburton to KBR hereunder
shall include supporting documentation which details the calculation of earnings
and profits allocated to the KBR Businesses as of the Distribution Date. Within
sixty (60) days after filing the Halliburton Affiliated Group Federal Income Tax
Return for the taxable year that includes the Distribution Date, Halliburton
shall notify KBR of any adjustments in the Halliburton earnings and profits as
of the Distribution Date and shall provide to KBR supporting documentation which
details the recalculation of Halliburton earnings and profits allocable to the
KBR Businesses as of the Distribution Date. If in subsequent Tax years, a Final
Determination results in an adjustment to the accumulated earnings and profits
on the Tax records of Halliburton as of the Distribution Date, Halliburton shall
promptly notify KBR of the adjustment within sixty (60) days after receiving
written notice of such Final Determination, and shall provide KBR with
supporting documentation which details the recalculation of Halliburton earnings
and profits allocable to the KBR Businesses as of the Distribution Date.
 
Section 4.05 Tax Basis of Assets Transferred. Within ninety (90) days following
the Distribution Date, Halliburton shall notify KBR of the Tax basis of the
stock of any controlled foreign corporations (as defined in Section 957 of the
Code) transferred to KBR in the Restructuring. In the event that a Final
Determination results in an adjustment to the basis of such stock, Halliburton
shall notify KBR within sixty (60) days of receiving written notice of such
Final Determination, of the nature and amount of the adjustments and shall
provide KBR with supporting documentation which details the calculation of such
adjustments.
 
ARTICLE V.
 
ALLOCATION OF TAXES FOR AND AFTER DECONSOLIDATION YEAR;
ALLOCATION OF ADDITIONAL TAX LIABILITIES
 
Section 5.01 Liability of the ESG Group for Consolidated and Combined Taxes. For
the Deconsolidation Year and all taxable years following the Deconsolidation
Year, the ESG Group shall be liable to Halliburton for an amount equal to the
ESG Group Federal Income Tax Liability and the ESG Group Combined Tax Liability.
 
Section 5.02 Liability of the KBR Group for Consolidated and Combined Taxes. For
the Deconsolidation Year, the KBR Group shall be liable to Halliburton for an
amount equal to the KBR Group Federal Income Tax Liability and the KBR Group
Combined Tax Liability to the extent such liability was paid by Halliburton or
by a member of the ESG Group.
 
Section 5.03 ESG Group Federal Income Tax Liability. With respect to the
Deconsolidation Year and all taxable years following the Deconsolidation Year,
the ESG Group Federal Income Tax Liability for such taxable period shall be the
Federal Income Taxes for such taxable period, as determined on an ESG Group Pro
Forma Consolidated Return prepared:
 
(a) assuming that the members of the ESG Group were not included in the
Consolidated Group and by including only Tax Items of members of the ESG Group
that are included in the Consolidated Return;
 
(b) except as provided in Section 5.03(e) hereof, using all elections,
accounting methods and conventions used on the Consolidated Return for such
period;
 
(c) applying the highest statutory marginal corporate income Tax rate in effect
for such taxable period;
 
(d) excluding any Tax Attributes for which HESI has been compensated pursuant to
Section 5.09 hereof;
 
(e) assuming that the ESG Group elects not to carry back any net operating
losses; and
 
(f) assuming that the ESG Group’s utilization of any Tax Attribute carryforward
or carryback is limited to the Tax Attributes of the ESG Group that would be
available if the ESG Group Federal Income Tax Liability for each taxable year
ending after January 1, 2001 were determined in accordance with this
Section 5.03.
 
Section 5.04 KBR Group Federal Income Tax Liability. With respect to the
Deconsolidation Year, the KBR Group Federal Income Tax Liability for such
taxable period shall be the Federal Income Taxes for such taxable period, as
determined on an KBR Group Pro Forma Consolidated Tax Return prepared:
 
(a) assuming that the members of the KBR Group were not included in the
Consolidated Group and by including only Tax Items of members of the KBR Group
that are included in the Consolidated Return;
 
(b) except as provided in Section 5.04(e) hereof, using all elections,
accounting methods and conventions used on the Consolidated Return for such
period;
 
(c) applying the highest statutory marginal corporate income Tax rate in effect
for such taxable period;
 
(d) excluding any Tax Attributes for which KBR has been compensated pursuant to
Section 5.09 hereof;
 
(e) assuming that the KBR Group elects not to carry back any net operating
losses and may elect either to deduct or take a credit for foreign Taxes paid or
deemed paid (and to carryback or carryforward any excess foreign Taxes); and
 
(f) assuming that the KBR Group’s utilization of any Tax Attribute carryforward
or carryback is limited to the Tax Attributes of the KBR Group that would be
available if the KBR Group Federal Income Tax Liability for each taxable year
ending after January 1, 2001 were determined in accordance with this
Section 5.04.
 
Section 5.05 ESG Group Combined Tax Liability. With respect to the
Deconsolidation Year and all taxable years following the Deconsolidation Year,
the ESG Group Combined Tax Liability shall be the sum for such taxable period of
the ESG Group’s liability for Taxes owed with respect to Combined Returns, as
determined on the ESG Group Pro Forma Combined Returns prepared in a manner
consistent with the principles and procedures set forth in Section 5.03 hereof,
without recalculating the state apportionment factors.
 
Section 5.06 KBR Group Combined Tax Liability. With respect to the
Deconsolidation Year, the KBR Group Combined Tax Liability shall be the sum for
such taxable period of the KBR Group’s liability for Taxes owed with respect to
Combined Returns, as determined on the KBR Group Pro Forma Combined Returns
prepared in a manner consistent with the principles and procedures set forth in
Section 5.04 hereof, without recalculating the state apportionment factors and
assuming that Tax Items of the KBR Group are not included in the Combined
Returns of the Halliburton Group following the Deconsolidation Date.
 
Section 5.07 Preparation and Delivery of Pro Forma Tax Returns. Not later than
ninety (90) days following the date on which the related Consolidated Return or
Combined Return, as the case may be, is filed with the appropriate Tax
Authority, Halliburton shall prepare and deliver to HESI and KBR, respectively,
pro forma Tax Returns calculating (i) the ESG Group Federal Income Tax Liability
or the ESG Group Combined Tax Liability, and (ii) the KBR Group Federal Income
Tax Liability or the KBR Group Combined Tax Liability, which is attributable to
the period covered by such filed Tax Return.
 
Section 5.08 HESI Intercompany Payables and Receivables; KBR Payment. The
liability of the ESG Group for the ESG Group Federal Income Tax Liability and
ESG Group Combined Tax Liability shall be reflected in the intercompany accounts
of Halliburton and HESI. For the Deconsolidation Year, KBR will pay Halliburton
for the KBR Group Federal Income Tax Liability and the KBR Group Combined Tax
Liability within sixty (60) days following the delivery to KBR by Halliburton of
a KBR Group Pro Forma Consolidated Tax Return or a KBR Group Pro Forma Combined
Return, as the case may be, to the extent such Tax liabilities are paid by
Halliburton or other person who is not a member of the KBR Group. For the
Deconsolidation Year, any payment due from KBR described in the previous
sentence shall be decreased by the cumulative amount of payments made by KBR to
Halliburton to fund Halliburton’s estimated Tax payments with respect to Taxes
for the Deconsolidation Year.
 
Section 5.09 Credit for Use of Attributes. Not later than ninety (90) days
following the filing of the Consolidated Return for the Deconsolidation Year and
all taxable years following the Deconsolidation Year, Halliburton shall
determine the aggregate amount of the Tax Attributes of the Consolidated Group
and all Combined Groups that are allocable to the ESG Group (the “ESG Allocated
Attributes”) as of the end of such year and shall inform HESI of such
determination. Not later than sixty (60) days following the filing of the
Consolidated Return for the Deconsolidation Year, Halliburton shall determine
the aggregate amount of the Tax Attributes of the Consolidated Group and all
Combined Groups that are allocable to the KBR Group (the “KBR Allocated
Attributes”) as of the end of such year and shall inform KBR of such
determination.
 
(a) If the amount of the ESG Allocated Attributes is less than the amount of Tax
Attributes (as reasonably determined by Halliburton) that would have been
available to the ESG Group at the end of such year had the ESG Group Members not
been included in the Consolidated Return and the Combined Returns (the “ESG
Stand-Alone Attributes”), the value of such shortfall, to the extent such
shortfall is attributable to the use of the ESG Group’s Tax Attributes by KBR
Group Members, shall be reflected in the intercompany accounts as an amount
payable by Halliburton to HESI. If the amount of the ESG Allocated Attributes is
greater than the ESG Stand-Alone Attributes, the value of such excess, to the
extent such excess is attributable to the use of Tax Attributes of KBR Group
Members by ESG Group Members during such year, shall be reflected in the
intercompany accounts as an amount payable by HESI to Halliburton. For this
purpose, a Tax Attribute shall be treated as used by KBR Group Members or ESG
Group Members only to the extent that such Tax Attribute is necessary to reduce
the KBR Group Federal Income Tax Liability or ESG Group Federal Income Tax
Liability (computed in accordance with Section 5.04 or 5.03) for such year. In
calculating the Stand-Alone Attributes, the utilization of any Tax Attribute
carryforward by ESG Group Members shall be subject to the limitation described
in Section 5.03(f) hereof. For purposes of this section, the value of any Tax
Attribute shall be equal to the amount of Taxes (computed in accordance with
Section 5.03 hereof) that would be avoided by the payor if it had sufficient
income to fully utilize such Tax Attribute in such year.
 
(b) If the amount of the KBR Allocated Attributes for the Pre-Deconsolidation
Period is less than the amount of Tax Attributes (as reasonably determined by
Halliburton) that would have been available to the KBR Group for the
Pre-Deconsolidation Period had the KBR Group Members not been included in the
Consolidated Return and the Combined Returns (the “KBR Stand-Alone Attributes”),
the value of such shortfall, to the extent such shortfall is attributable to the
use of the KBR Group’s Tax Attributes by ESG Group Members, shall be paid by
Halliburton to KBR within thirty (30) days of the date the KBR Allocated
Attributes are determined. If the amount of the KBR Allocated Attributes for the
Pre-Deconsolidation Period is greater than the amount of the KBR Stand-Alone
Attributes, the value of such excess, to the extent such excess is attributable
to the use of Tax Attributes of ESG Group Members by KBR Group Members during
such period, shall be paid by KBR to Halliburton within thirty (30) days of the
date the KBR Allocated Attributes are determined. For this purpose, a Tax
Attribute shall be treated as used by ESG Group Members or KBR Group Members
only to the extent that such Tax Attribute is necessary to reduce the ESG Group
Federal Income Tax Liability or KBR Group Federal Income Tax Liability (computed
in accordance with Section 5.03 or 5.04) for such year. In calculating the KBR
Stand-Alone Attributes, the utilization of any Tax Attribute carryforward by KBR
Group Members shall be subject to the limitation described in Section 5.04(f)
hereof. For purposes of this section, the value of any Tax Attribute shall be
equal to the amount of Taxes (computed in accordance with Section 5.04 hereof)
that would be avoided by the payor if it had sufficient income to fully utilize
such Tax Attribute in such year.
 
Section 5.10 Subsequent Changes in Treatment of Tax Items. For the
Deconsolidation Year and all taxable years following the Deconsolidation Year,
in the event of a change in the treatment of any Tax Item of any member of the
Consolidated Group or a Combined Group as a result of a Final Determination,
Halliburton shall calculate (i) the change to the ESG Group Federal Income Tax
Liability or ESG Group Combined Tax Liability and (ii) any change to the
Allocated Attributes and/or the Stand-Alone Attributes of the ESG Group, and
such changes shall be properly reflected in the intercompany accounts described
in Section 5.09(a) hereof. For the Deconsolidation Year, in the event of a
change in the treatment of any Tax Item of any member of the Consolidated Group
or a Combined Group as a result of a Final Determination, Halliburton shall
calculate (i) the change to the KBR Group Federal Income Tax Liability or KBR
Group Combined Tax Liability and (ii) any change to the Allocated Attributes
and/or the Stand-Alone Attributes of the KBR Group and such changes shall be
properly reflected in payments from Halliburton to KBR, or from KBR to
Halliburton, as the case may be.
 
Section 5.11 Foreign Corporations. Any Taxes associated with the filing of a
separate Tax Return in a foreign jurisdiction with respect to an ESG Group
Member or a KBR Group Member shall be allocated to and paid directly by such
member. For the Deconsolidation Year any Taxes and Tax Attributes associated
with the filing of a separate Tax Return in a foreign jurisdiction that includes
the Tax Items of one or more ESG Group Members and one or more KBR Group Members
shall be allocated to such members by Halliburton in a manner consistent with
the principles set forth in this Article V.
 
Section 5.12 Allocation of Additional Tax Liabilities.
 
(a) Restructuring Taxes. Notwithstanding that the Restructuring and Project
Constructor occurred prior to the Effective Date, notwithstanding any other
provision of this Agreement to the contrary, and except as otherwise provided in
the Master Separation Agreement or the Master Separation and Distribution
Agreement (as applicable) and Section 5.12(a)(i) hereof, Halliburton shall pay
and shall indemnify and hold harmless KBR and any member of the KBR Group from
and against any and all Restructuring Taxes, without regard to any benefit that
any member of the KBR Group might derive as a result of the payment of the
Restructuring Taxes by Halliburton. Halliburton shall also be liable for all
fees, costs and expenses, including reasonable attorneys’ fees, arising out of,
or incident to, any proceedings before any Tax Authority, or any judicial
authority, with respect to any amount for which it is liable for under
Section 5.12(a) hereof.
 
(i) In the event any Restructuring Taxes are attributable to a Tainting Act of
KBR or any member of the KBR Group, then KBR shall pay and shall indemnify and
hold harmless Halliburton from and against any and all Restructuring Taxes and
from and against any costs whatsoever connected with such Taxes, including, but
not limited to, fees, interest, penalties, and expenses, including reasonable
attorneys’ fees. For purposes of this Section 5.12(a)(i), a Restructuring Tax is
attributable to a Tainting Act if (1) such Tax would not have been imposed but
for the Tainting Act, or (2) the Tainting Act would have independently caused
the imposition of such Tax; provided, however, that in no event shall a
Restructuring Tax be considered attributable to a Tainting Act to the extent
such Tax would not have been incurred but for a breach by Halliburton of any
warranty, representation or covenant contained in Article VII hereof.
 
(ii) An indemnification payment required to be made by one Party pursuant to
Section 5.12(a) hereof shall be paid in immediately available funds within
thirty (30) days after receiving a written demand from the other Party for such
payment; however, no Party shall make a written demand for an indemnification
payment attributable to Restructuring Taxes under Section 5.12(a) hereof until
such Tax liability is established by a Final Determination. Any indemnification
payment required to be made by either Party under Section 5.12(a) hereof which
is not paid timely shall bear interest (compounded daily) at the Federal
short-term rate or rates established pursuant to Section 6621 of the Code for
the period during which such payment is due but unpaid.
 
(b) Dual Consolidated Losses.
 
(i) Notwithstanding anything else to the contrary in this Agreement (including,
without limitation, any provision of Article III or Article V hereof) other than
Section 5.12(b)(iii), KBR and each member of the KBR Affiliated Group shall not
be liable for, and Halliburton shall indemnify and hold KBR and each member of
the KBR Affiliated Group harmless against (A) any and all Tax or other loss
resulting from a recapture of a Dual Consolidated Loss resulting from the
Spinoff and (B) any loss attributable to the reduction of an ESG Allocated
Attribute otherwise available to Halliburton or any member of the Halliburton
Affiliated Group resulting from a recapture of a Dual Consolidated Loss
resulting from the Spinoff.
 
(ii) Without limiting the generality of Section 6.02(a), KBR agrees to
reasonably cooperate with Halliburton and take any action (including executing
any agreement or filing any document) or refrain from taking any action as
reasonably requested by Halliburton in order to permit the deduction of a Dual
Consolidated Loss incurred by Halliburton or any of its present or former
Affiliates prior to the Spinoff or during the Deconsolidation Year, including
but not limited to filing for relief pursuant to Section 9100 of the Code or
pursuant to any other published guidance of the Internal Revenue Service with
respect to the late filing of any documents, agreements or certifications, and
entering into a closing agreement within the meaning of Section 7121 of the Code
with the Internal Revenue Service (a “Closing Agreement”) with respect to all
Dual Consolidated Losses that Halliburton determines may be required to be
recaptured as a result of the Spinoff. Halliburton will be responsible for and
shall bear all costs relating to the preparation of any required Closing
Agreements (as defined in Treasury Regulations § 1.1503-2T(a)(2)) and for any
other filings required under Section 9100 of the Code or any other provision of
the Code or Treasury Regulations thereunder with respect to Dual Consolidated
Losses. Halliburton shall propose in writing to KBR the Dual Consolidated Losses
relating to the KBR Group for which any agreement or filing with the Internal
Revenue Service would be necessary to permit the deduction of a Dual
Consolidated Loss or avoid the recapture of the Dual Consolidated Losses that
would otherwise result from the Spinoff. The final determination of the Dual
Consolidated Losses for which such agreements or filings will be submitted shall
be subject to the written consent of KBR, which consent shall not be
unreasonably withheld.
 
(iii) Notwithstanding Section 5.12(b)(i) hereof, in the event KBR or any of its
Affiliates takes or fails to take any action following the Spinoff (including,
but not limited to, a failure to execute and deliver the Closing Agreement
contemplated by Section 5.12(b)(ii)) that results in a triggering event (as
defined in Treasury Regulations § 1.1503-2(g)(2)(iii)) with respect to a Dual
Consolidated Loss identified by Halliburton pursuant to Section 5.12(b)(ii)
which requires recapture of such Dual Consolidated Loss, KBR shall indemnify and
hold harmless Halliburton and its present and former Affiliates for any and all
Tax payable by Halliburton resulting from the recapture of the Dual Consolidated
Loss or any actual loss recognized by Halliburton attributable to the reduction
of an ESG Allocated Attribute resulting from the recapture of the Dual
Consolidated Loss. For the avoidance of doubt, neither Halliburton nor any of
its Affiliates shall be entitled to more than one recovery of any Tax or loss
resulting from the Dual Consolidated Loss recapture described in this
Section 5.12(b)(iii).
 
(iv) Notwithstanding any other provision of this Agreement to the contrary, KBR
shall not indemnify Halliburton and its present and former Affiliates with
respect to any Dual Consolidated Loss recapture attributable to Halliburton
Productos Ltd., such Dual Consolidated Loss recapture shall not be treated as an
item of income of the KBR Group for any purpose of this Agreement, and
Halliburton shall indemnify and hold harmless KBR and its Affiliates from any
Tax payable by KBR or its Affiliates as a result of such Dual Consolidated Loss
recapture.
 
(c) Group Relief. For any accounting period beginning after the accounting
periods described in Section 3.14 hereof:
 
(i) Group Relief Indemnification.
 
(1) In the event a Final Determination causes Halliburton or any member of the
ESG Group to recognize additional income directly as a result of the reduction
of the amount of a KBR Group Relief Tax Attribute, then KBR shall pay to
Halliburton, no later than 90 days following the date of the Final
Determination, the amount of additional Tax incurred by Halliburton or any
member of the ESG Group that is directly attributable to the loss of the KBR
Group Relief Tax Attribute. In the event a Final Determination causes
Halliburton or any member of the ESG Group to recognize less income directly as
a result of an increase in the amount of the Additional KBR Group Relief, then
Halliburton shall pay to KBR, no later than 90 days following the date of the
Final Determination, the amount of the reduction in Tax realized by Halliburton
or any member of the ESG Group that is directly attributable to the use of the
Additional KBR Group Relief.
 
(2) In the event a Final Determination causes KBR or any member of the KBR Group
to recognize additional income directly as a result of the reduction of the
amount of an ESG Group Relief Tax Attribute, then Halliburton shall pay to KBR,
no later than 90 days following the date of the Final Determination, the amount
of additional Tax incurred by KBR or any member of the KBR Group that is
directly attributable to the loss of the ESG Group Relief Tax Attribute. In the
event a Final Determination causes KBR or any member of the KBR Group to
recognize less income directly as a result of an increase in the amount of the
Additional ESG Group Relief, then KBR shall pay to Halliburton, no later than 90
days following the date of the Final Determination, the amount of the reduction
in Tax realized by KBR or any member of the KBR Group that is directly
attributable to the use of the Additional ESG Group Relief.
 
(ii) Group Relief Payment.
 
(1) No later than 90 days following the filing of any U.K. Tax Return, for the
accounting period in which a Group Relief is surrendered by KBR or any member of
the KBR Group to Halliburton or any member of the ESG Group, Halliburton shall
pay to KBR an amount equal to the product of: (x) the aggregate amount of Group
Relief that was surrendered to Halliburton or any member of the ESG Group
multiplied by (y) the highest U.K. Corporation Tax rate applicable to
corporations at the time the Group Relief was surrendered by the member of the
KBR Group.
 
(2) No later than 90 days following the filing of any U.K. Tax Return for the
accounting period in which a Group Relief is surrendered by Halliburton or any
member of the ESG Group to KBR or any member of the KBR Group, KBR shall pay to
Halliburton an amount equal to the product of: (x) the aggregate amount of Group
Relief that was surrendered to KBR or any member of the KBR Group multiplied by
(y) the highest U.K. Corporation Tax rate applicable to corporations at the time
the Group Relief was surrendered by Halliburton or any member of the ESG Group.
 
(iii) Notional Asset Transfer and Indemnification.
 
(1) No later than 90 days following the filing of any U.K. Tax Return for the
accounting period in which a capital asset was notionally transferred under
Section 171A in order to enable Halliburton or any member of the ESG Group to
utilize a capital loss of any member of the KBR Group, Halliburton shall pay to
KBR an amount equal to the product of: (x) the aggregate amount of the capital
gain transferred, multiplied by (y) the highest U.K. Corporation tax rate
applicable to corporations at the time the asset was notionally transferred.
 
(2) No later than 90 days following the filing of any U.K. Tax Return for the
accounting period in which a capital asset was notionally transferred under
Section 171A in order to enable KBR or any member of the KBR Group to utilize a
capital loss of any member of the ESG Group, KBR shall pay to Halliburton an
amount equal to the product of: (x) the aggregate amount of the capital gain
transferred, multiplied by (y) the highest U.K. Corporation tax rate applicable
to corporations at the time the asset was notionally transferred.
 
(3) In the event that either KBR or any member of the KBR Group is required to
pay Tax (whether currently or as a result of a Final Determination) as a result
of a notional capital asset transfer described in Section 5.12(c)(iii)(1)
hereof, Halliburton shall pay to KBR the amount of such Tax within 90 days
following the filing of the U.K. Tax Return for the accounting period in which
such Tax is owed or within 90 days following a Final Determination with respect
to such Tax, as the case may be.
 
(4) In the event that either Halliburton or any member of the ESG Group is
required to pay Tax (whether currently or as a result of a Final Determination)
as a result of a notional capital asset transfer described in
Section 5.12(c)(iii)(2) hereof, KBR shall pay to Halliburton the amount of such
Tax within 90 days following the filing of the U.K. Tax Return for the
accounting period in which such Tax is owed or within 90 days following a Final
Determination with respect to such Tax, as the case may be.
 
(5) Notwithstanding anything to the contrary in this Agreement, the parties
agree that no payment or indemnification shall be required from Halliburton, KBR
or any Affiliate thereof with respect to any notional transfer of capital asset
under Section 171A relating to the sale of European Marine Contractors, Ltd.
 
(iv) The consequences of any utilization of a KBR or KBR Group member U.K. Tax
Attribute by Halliburton or any member of the ESG Group, and any utilization of
a Halliburton or ESG Group U.K. Tax Attribute by KBR or any member of the KBR
Group, that is not attributable to Group Relief or notional capital asset
transfer under Section 171A shall be determined in a manner consistent with the
principles of this Section 5.12(c).
 
(v) The provisions of Section 3.14, this Section 5.12(c), Section 6.01(a) and
Section 6.05 are intended to be the exclusive governing provisions with respect
to indemnification and compensation rights and obligations among the parties
relating to U.K. Group Relief and notional capital asset transfers under
Section 171A.
 
(d) Refunds. Each Party shall be entitled to retain or be paid all refunds of
Tax received, whether in the form of payment, credit or otherwise, from any Tax
Authority with respect to any Tax for which such Party is responsible under this
Article V.
 
(e) Allocation of Taxable Items. Halliburton shall determine the amounts of
income, gain, loss, deduction, and credit of the KBR Group for the
Pre-Deconsolidation Period that are properly includible in the Consolidated
Return for the taxable year which includes the Deconsolidation Date. For all
relevant purposes of this Agreement, the members of the KBR Group and each KBR
Combined Group shall cease to be members of the Consolidated Group as of the end
of the Deconsolidation Date, and the KBR Group shall cause the book of account
of the KBR Group to be closed for accounting and Tax purposes as of the end of
the Deconsolidation Date in accordance with Halliburton’s direction. In
determining consolidated taxable income for the taxable period that ends on the
Deconsolidation Date, the income and other items of the KBR Group shall be
determined in good faith by Halliburton in accordance with Treasury Regulations
§§ 1.1502-76(b)(1), 1.1502-76(b)(2)(i) and 1.1502-76(b)(2)(iv) and no election
shall be made under § 1.1502-76(b)(2)(ii)(D) to ratably allocate items. However,
an allocation shall be made in good faith by Halliburton under Treasury
Regulations § 1.1502- 76(b)(2)(iii) if such allocation is determined by
Halliburton in good faith to be necessary to appropriately allocate items in the
event the Deconsolidation Date occurs on any date other than the last day of any
month.
 
(f) Foreign Tax Credit True-Up. With respect to the Deconsolidation Year, no
later than ninety (90) days following the filing of a Consolidated Return, an
amended Consolidated Return or a final settlement with the U.S. Internal Revenue
Service, Halliburton shall determine the aggregate amount of the “Foreign Tax
Credit Adjustment.” The Foreign Tax Credit Adjustment shall be equal to (x) the
aggregate amount of foreign Taxes paid or accrued by members of the KBR Group
and allowable as foreign tax credits for United States federal income tax
purposes for the period commencing January 1, 2001, and ending on the
Deconsolidation Date (the “KBR Foreign Taxes”), minus (y) the sum of (i) the
aggregate amount during such period of KBR Foreign Taxes used to reduce (either
as a deduction or credit) the KBR Group’s Federal Income Tax Liability pursuant
to Section 3.04 and Section 5.04 hereof, (ii) the aggregate amount during such
period of credit that the KBR Group received with respect to KBR Foreign Taxes
pursuant to Section 3.09 and Section 5.09 hereof, and (iii) the aggregate amount
during such period of KBR Foreign Taxes allocated to the KBR Group upon
Deconsolidation pursuant to Treasury Regulations § 1.1502-79(d). If such Foreign
Tax Credit Adjustment is a positive amount, Halliburton shall pay such amount to
the KBR Group. The payment in the preceding sentence shall be due within ninety
(90) days following the earlier of (a) the filing of the federal income Tax
Return on which Halliburton realizes a benefit for the KBR Foreign Taxes or
(b) the filing of the federal income Tax Return on which KBR could have utilized
the foreign tax credits, were KBR in possession of such foreign tax credits. For
purposes of this agreement, a benefit for KBR Foreign Taxes is considered to be
realized by Halliburton only when all available Halliburton/ESG Group foreign
tax credits (except ESG Group foreign tax credits carried back) have been
utilized. If the amount determined pursuant to this Section 5.12(f) is a
negative amount, the KBR Group shall pay such amount to Halliburton. If such
negative amount is the result of a foreign tax credit carried forward pursuant
to Treasury Regulations § 1.1502-79(d), such payment shall be due no sooner than
ninety (90) days following the filing of the federal income Tax Return on which
the KBR Group realizes the benefit associated with the foreign tax credit
carryforward.
 
(g) KBR Group Tax Losses. Notwithstanding anything to the contrary in this
Agreement, with respect to tax years beginning on or after the Effective Date
and ending prior to or on the Deconsolidation Date, no later than ninety
(90) days following the filing of a Consolidated Return, an amended Consolidated
Return or a final settlement with the IRS, Halliburton shall determine the
aggregate amount of the “Loss Adjustment.” The Loss Adjustment shall be an
amount equal to: (x) the aggregate amount of Tax Attributes of the KBR Group
reflected on the Consolidated Return that are net operating losses or net
capital losses for the period commencing on the Effective Date through the
Deconsolidation Date (the “KBR Losses”) multiplied by thirty-five percent (35%);
minus (y) the sum of: (i) the aggregate amount during such period of reduction
of the KBR Group’s U.S. federal income tax liability pursuant to Section 3.04
and Section 5.04 hereof resulting from the KBR Losses, (ii) the aggregate amount
during such period of credit that the KBR Group received with respect to the KBR
Losses pursuant to Section 3.09 and Section 5.09 hereof, and (iii) the aggregate
amount during such period of KBR Losses allocated to the KBR Group upon
Deconsolidation pursuant to Treasury Regulations §§ 1.1502-21 and 1.1502-22(b)
multiplied by thirty-five percent (35%). If the Loss Adjustment pursuant to the
preceding sentence is a positive amount, Halliburton shall pay to KBR an amount
equal to the Loss Adjustment when Halliburton realizes a tax benefit from using
the KBR Losses. Such payment shall be reduced by an amount equal to the tax
benefit that Halliburton otherwise would have realized by the use of a Tax
Attribute of a member of the ESG Group (a “Displaced ESG Tax Attribute”) that
would have been used if the KBR Losses had not been included in the Consolidated
Return or final settlement with the IRS. When a Displaced ESG Tax Attribute is
used, Halliburton shall then pay KBR an amount equal to the tax benefit realized
from the use of the Displaced ESG Tax Attribute by Halliburton. For purposes of
this Section 5.12(g), Displaced ESG Tax Attributes shall be considered used and
Halliburton shall be treated as recognizing a tax benefit from such use (i) when
they are applied to a Consolidated Return of the Halliburton Affiliated Group or
ESG Group to reduce the consolidated tax liability of the Halliburton Affiliated
Group or ESG Group; or (ii) when they are allocated to a member of the
Halliburton Affiliated Group or ESG Group that is no longer consolidated with
the Halliburton Affiliated Group or ESG Group. Payments required under this
Section 5.12(g) shall be made within 90 days of filing a Consolidated Return
where Halliburton has realized the tax benefit from using KBR Losses or a
Displaced ESG Tax Attribute.
 
Section 5.13 Tax Attributes of KBR Not Carried Back. With respect to any Tax
Attributes incurred by the KBR Group in a Post-Deconsolidation Period, KBR shall
not, and shall cause each member of the KBR Group to not, elect to carry back
Tax Attributes to a Pre-Deconsolidation Period. In the event the applicable Tax
law requires a Tax Attribute of the KBR Group arising in a Post-Deconsolidation
Period to be carried back to a Pre-Deconsolidation Period Tax Return of
Halliburton or other member of the Halliburton Group (such Tax Attribute being a
“Required Tax Attribute Carryback”), KBR shall notify Halliburton of such
Required Tax Attribute Carryback sixty (60) days prior to the date such Tax
Return must be filed and KBR shall timely provide Halliburton with all
information reasonably necessary to properly account for such Required Tax
Attribute Carryback on such Tax Return. If a Required Tax Attribute Carryback
that is reported on a Tax Return filed by Halliburton or other member of the
Halliburton Group produces an actual Tax savings to Halliburton or other member
of the Halliburton Group, Halliburton shall pay KBR an amount equal to such
savings within sixty (60) days following the filing of such Tax Return.
 
ARTICLE VI.
 
TAX DISPUTE INDEMNITY; CONTROL OF PROCEEDINGS; COOPERATION AND
EXCHANGE OF INFORMATION
 
Section 6.01 Tax Dispute Indemnity and Control of Proceedings.
 
(a) Whenever a Party becomes aware of the existence of an issue which relates to
any Tax liability of the other Party (a “Disputed Tax Issue” of such other
Party), and the rights or responsibilities under this Agreement of such Party
may be affected by the resolution of such Disputed Tax Issue, such Party (a
“Disputed Tax Issue Indemnitee”) shall promptly notify the other Party (the
“Disputed Tax Issue Indemnitor”) of the Disputed Tax Issue. The Disputed Tax
Issue Indemnitor has the right to defend, handle, settle or contest at its cost
any Disputed Tax Issue; provided, however, that Halliburton shall have the right
(but not the obligation) to defend, handle, settle or contest at KBR’s cost any
Disputed Tax Issue related to a Disqualifying Action or Potential Disqualifying
Action.
 
(b) Except as provided in this Article VI, Halliburton shall have full
responsibility and discretion in handling, settling or contesting any Tax
Controversy involving a Tax Return for which it has filing responsibility under
this Agreement. KBR shall have full responsibility and discretion in handling,
settling or contesting any Tax Controversy involving a Tax Return for which it
has filing responsibility under this Agreement. Except as otherwise provided in
Section 5.12(a)(i) hereof and in this Article VI, any costs incurred in
handling, settling or contesting any Tax Controversy shall be borne by the Party
having full responsibility and discretion thereof.
 
(c) In the event that (x) a statutory notice of deficiency (or foreign, state or
local law equivalent) is received by Halliburton from the IRS or any other Tax
Authority, (y) such notice is with respect to a Tax Return for which Halliburton
has filing responsibility under this Agreement and (z) such notice relates in
whole or in part to Restructuring Taxes for which KBR could be liable to
Halliburton pursuant to Section 5.12(a) hereof (a “KBR Restructuring Issue”)
then
 
(i) Halliburton, upon receiving a written request from KBR to file a petition
with the United States Tax Court (or equivalent foreign, state or local court)
seeking a redetermination of such deficiency, which shall be given no later than
a date reasonably necessary to permit preparation and timely filing of such
petition, shall timely file such petition; provided, however, that,
notwithstanding such request, Halliburton, with the prior written consent of
KBR, shall have the option to pay the amount of the deficiency, in which case
KBR shall either itself pay or loan to Halliburton no later than three
(3) business days before Halliburton pays such deficiency, without interest,
and, until a Final Determination of the KBR Restructuring Issue results, one
hundred (100) percent of the amount of the portion of the deficiency relating to
the KBR Restructuring Issue, and to file a claim for the refund thereof, and, if
the claim is denied, to bring an action in a court of competent jurisdiction
seeking the refund of Tax paid with respect to such deficiency; or
 
(ii) If (1) KBR does not request Halliburton to file a petition in the United
States Tax Court (or equivalent foreign, state or local court) for
redetermination of the deficiency pursuant to Section 6.01(c)(i) hereof,
(2) Halliburton does not, on its own initiative, timely file such a petition,
and (3) KBR requests that Halliburton file a claim for refund, then KBR shall
either pay the deficiency or request in writing that Halliburton pay such
deficiency, in which case KBR shall loan to Halliburton no later than three
(3) business days before Halliburton pays such deficiency, without interest,
and, until a Final Determination of the KBR Restructuring Issue results, one
hundred (100) percent of the amount of the portion of the deficiency relating to
the KBR Restructuring Issue, which loan Halliburton shall use to pay such
deficiency, and Halliburton shall file a claim for refund thereof and, if the
claim is denied, bring an action in a court of competent jurisdiction seeking
such refund.
 
(iii) In the event that a judgment of the United States Tax Court or other court
of competent jurisdiction results in an adverse determination with respect to
the KBR Restructuring Issue, and Halliburton notifies KBR that it does not
intend to appeal such KBR Restructuring Issue, then KBR shall have the right to
cause Halliburton to appeal from such adverse determination at KBR’s expense.
 
(iv) KBR and its representatives, at KBR’s expense, shall be entitled to
participate in (1) all conferences, meetings, or proceedings with any Tax
Authority, the subject matter of which is or includes the KBR Restructuring
Issue and (2) all appearances before any court, the subject matter of which
includes the KBR Restructuring Issue.
 
(d) The right to participate referred to in Section 6.01(c)(iv) hereof shall
include, with respect to the KBR Restructuring Issue, the right to participate
in the preparation and submission of documentation, protests, memoranda of fact
and law and briefs; the conduct of oral arguments or presentations; the
selection of witnesses; and the negotiation of stipulations of fact.
 
(e) Notwithstanding Sections 6.01(c)(iv) and (d) hereof, unless and until the
notice provided in Section 6.01(c)(iii) above is given, Halliburton shall
control the litigation of the KBR Restructuring Issue and have the authority to
settle in a reasonable manner and in good faith any such issue.
 
Section 6.02 Cooperation and Exchange of Information.
 
(a) Each Party shall cooperate fully at such time and to the extent reasonably
requested by the other Party in connection with the preparation and filing of
any Tax Return or claim for refund, or the conduct of any audit, dispute,
proceeding, suit or action concerning any issues or other matters considered in
this Agreement. Such cooperation shall include, without limitation, the
following: (i) forwarding promptly copies of appropriate notices and forms or
other communications received from any Tax Authority (including any IRS revenue
agent’s report or similar report, notice of proposed adjustment, or notice of
deficiency) or sent to any Tax Authority or any other administrative, judicial
or other governmental authority that relate to a Disputed Tax Issue; (ii) the
retention and provision on demand of Tax Returns, books, records (including
those concerning ownership and Tax basis of property which either Party may
possess), documentation or other information relating to the Tax Returns,
including accompanying schedules, related workpapers, and documents relating to
rulings or other determinations by Taxing Authorities, until the expiration of
the applicable statute of limitations (giving effect to any extension, waiver or
mitigation thereof) subject to the provisions of Section 6.02(e) hereof;
(iii) the provision of additional information, including an explanation of
material provided under clause (i) of Section 6.02(a) hereof, to the extent such
information is necessary or reasonably helpful in connection with the foregoing;
(iv) the execution of any document that may be necessary or reasonably helpful
in connection with the filing of a Tax Return by Halliburton or KBR or of their
respective subsidiaries, or in connection with any audit, dispute, proceeding,
suit or action; and (v) such Party’s commercially reasonable efforts to obtain
any documentation from a governmental authority or a third party that may be
necessary or reasonably helpful in connection with any of the foregoing.
 
(b) Both Parties shall use reasonable efforts to keep each other advised as to
the status of Tax audits or Tax Controversies involving a Disputed Tax Issue and
cooperate in a defense with respect to a Disputed Tax Issue in any Tax
Controversy.
 
(c) Each Party shall make its employees and facilities available on a reasonable
and mutually convenient basis in connection with any of the foregoing matters.
 
(d) If either Party fails to provide any information requested pursuant to
Section 6.02 hereof within a reasonable period, as determined in good faith by
the Party requesting the information, then the requesting Party shall have the
right to engage a public accounting firm to gather such information, provided
that thirty (30) days prior written notice is given to the unresponsive Party.
If the unresponsive Party fails to provide the requested information within
thirty (30) days of receipt of such notice, then such unresponsive Party shall
permit the requesting Party’s public accounting firm full access to all
appropriate records or other information as reasonably necessary to comply with
the requirements of Section 6.02 hereof and shall reimburse the requesting Party
or pay directly all costs connected with the requesting Party’s engagement of
the public accounting firm.
 
(e) Upon the expiration of any statute of limitations, the documentation of
Halliburton or KBR or any of their respective subsidiaries, including, without
limitation, books, records, Tax Returns and all supporting schedules and
information relating thereto, shall not be destroyed or disposed of unless
(i) the Party proposing such destruction or disposal provides sixty (60) days
prior written notice to the other Party describing in reasonable detail the
documentation to be destroyed or disposed of and (ii) the recipient of such
notice agrees in writing to such destruction or disposal. If the recipient of
such notice objects, then the Party proposing the destruction or disposal shall
promptly deliver such materials to the objecting Party at the expense of the
objecting Party.
 
Section 6.03 Reliance on Exchanged Information. If either Party supplies
information to the other Party upon such Party’s request, and an officer of the
requesting Party intends to sign a statement or other document under penalties
of perjury in reliance upon the accuracy of such information, then a duly
authorized officer of the Party supplying such information shall certify, to the
best of such Party’s knowledge, the accuracy and completeness of the information
so supplied.
 
Section 6.04 Payment of Tax and Indemnity. Except as provided in Section 7.03 of
this Agreement, Halliburton shall timely pay (or shall cause to be timely paid)
all Taxes of the Consolidated Group, of any Combined Group which includes a
member of the ESG Group and of any entity or person that is not a member of the
KBR Group and shall indemnify and hold harmless KBR for all liability for Taxes
of any member of the Consolidated Group, of any Combined Group which includes a
member of the ESG Group or of any other person or entity that is not a member of
the KBR Group assessed against any member of the KBR Group pursuant to Treasury
Regulations § 1.1502-6 or any analogous or similar law.
 
Section 6.05 Prior Tax Years. For all taxable periods beginning before the
Effective Date of this Article VI (January 1, 2001), the Parties hereby agree
that:
 
(a) KBR shall have full responsibility and discretion in handling, settling or
contesting any Tax Controversy involving a Tax Return that includes Tax Items of
a member of the KBR Group and does not include Tax Items of a member of the ESG
Group;
 
(b) Halliburton shall have full responsibility and discretion in handling,
settling or contesting any Tax Controversy involving a Tax Return that includes
Tax Items of a member of the ESG Group and does not include Tax Items of a
member of the KBR Group;
 
(c) Halliburton shall have full responsibility and discretion in handling,
settling or contesting any Tax Controversy involving any Tax Return not
described in Section 6.05(a) or (b);
 
(d) with respect to any Consolidated Return or Combined Return described in this
Section 6.05 that includes activities of members of the ESG Group and the KBR
Group, KBR shall pay to Halliburton, within ninety (90) days of a Final
Determination of any Tax, any liability for such Tax attributable to a member of
the KBR Group, as reasonably determined by Halliburton;
 
(e) with respect to any Consolidated Return or Combined Return described in this
Section 6.05 that includes activities of members of the ESG Group and the KBR
Group, Halliburton shall pay to KBR, within ninety (90) days of a Final
Determination of any Tax, any refund due with respect to such Final
Determination attributable to a member of the KBR Group, as reasonably
determined by Halliburton;
 
(f) any costs incurred in handling, settling or contesting any Tax Controversy
described in Section 6.05(a) shall be borne by KBR, any costs incurred in
handling, settling or contesting any Tax Controversy described in
Section 6.05(b) shall be borne by Halliburton and any costs incurred in
handling, settling or contesting any Tax Controversy described in
Section 6.05(c) shall be borne by the Party who would bear such costs if
Section 6.01(a) applied;
 
(g) for the purposes of this Section 6.05, Halliburton Produtos Ltda. shall be
considered a member of the KBR Group until the date it is transferred to Kellogg
Energy Services, Inc.; and
 
(h) except to the extent otherwise provided in this Section 6.05, the provisions
of Article VI shall apply to the taxable periods described in this Section 6.05.
For the avoidance of doubt, notwithstanding anything to the contrary in this
Section 6.05, the provisions of Section 6.01(a) shall apply to any Disputed Tax
Issue relating to any taxable period beginning before the Effective Date of this
Article VI.
 
ARTICLE VII.
 
WARRANTIES AND REPRESENTATIONS; INDEMNITY
 
Section 7.01 Warranties and Representations Relating to Actions of Halliburton
and KBR. Each of Halliburton and KBR warrants and represents to the other that:
 
(a) it is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite corporate power to
own, lease and operate its properties, to carry on its business as presently
conducted and to carry out the transactions contemplated by this Agreement;
 
(b) it has duly and validly taken all corporate action necessary to authorize
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby;
 
(c) this Agreement has been duly executed and delivered by it and constitutes
its legal, valid and binding obligation enforceable in accordance with its terms
subject, as to the enforcement of remedies, to (i) applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws affecting the
enforcement or creditors’ rights generally from time to time in effect and
(ii) to general principles of equity, whether enforcement is sought in a
proceeding at law or in equity; and
 
(d) the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby, or the compliance with any of the provisions
of this Agreement will not (i) conflict with or result in a breach of any
provision of its certificate of incorporation or by-laws, (ii) breach, violate
or result in a default under any of the terms of any agreement or other
instrument or obligation to which it is a party or by which it or any of its
properties or assets may be bound, or (iii) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to it or affecting any of its
properties or assets.
 
Section 7.02 Warranties and Representations Relating to the Distribution.
 
(a) In General. Each of the Parties represents that, as of the date of this
Agreement, it knows of no fact (after due inquiry) that may cause the Tax
treatment of the Distribution to be other than a distribution of KBR stock with
respect to which no gain or loss is recognized by Halliburton, KBR or their
respective stockholders pursuant to Section 355 and related provisions of the
Code and relevant Treasury regulations promulgated thereunder (such distribution
a “Tax Free Spinoff”).
 
(b) No Contrary Plan. Each of the Parties represents that it has no plan or
intent to take any action which is inconsistent with the treatment of the
Distribution as a Tax Free Spinoff.
 
Section 7.03 Covenants Relating to the Tax Treatment of the Distribution.
 
(a) In General. The Parties intend the Distribution to qualify as a Tax Free
Spinoff.
 
(i) During the Restricted Period, KBR shall not permit or take any action within
its control (including entering into any agreement, understanding or arrangement
or any negotiations with respect to any transactions or series of transactions)
that, or fail to take any action within its control the failure of which, would
cause the Distribution to fail to qualify as a Tax Free Spinoff (any such action
or failure to act, a “Disqualifying Action”).
 
(ii) For the avoidance of doubt, and without limitation, Disqualifying Actions
include (1) KBR causing or permitting to be caused a change in its Control or
(2) KBR ceasing the active conduct of a trade or business within the meaning of
Section 355(b) of the Code to the extent the existence of such trade or business
was necessary to a conclusion reached by the IRS in the Private Letter Ruling or
a conclusion reached by Tax Counsel in the Tax Opinion, unless Halliburton
consents in writing to such action, unless expressly required or permitted
pursuant to the Master Separation Agreement or Master Separation and
Distribution Agreement (as applicable), or unless, for actions after the
Distribution Date, KBR first obtains, and permits Halliburton to review, either
a supplemental ruling from the IRS or an opinion from a nationally recognized
law firm reasonably acceptable to Halliburton, in either case, to the effect
that such action or non-action referred to in this Section 7.03(a)(ii) will not
affect the qualification of the Distribution as a Tax Free Spinoff.
 
(iii) During the Restricted Period, except for transactions contemplated by the
Master Separation Agreement or Master Separation and Distribution Agreement (as
applicable), KBR shall not take any action within its control, taken alone or
together with any other action (including entering into any agreement,
understanding or arrangement or any negotiations with respect to any
transactions or series of transactions), that, or fail to take any action within
its control the failure of which, would result in a more than immaterial
possibility that the Distribution would be treated as part of a plan pursuant to
which one or more persons acquire directly or indirectly KBR stock representing
a “50-percent or greater interest” within the meaning of Section 355(e)(4) of
the Code (any such action or failure to act, a “Potential Disqualifying
Action”), unless, prior to the taking of the Potential Disqualifying Action, KBR
delivers to Halliburton either a private letter ruling from the IRS reasonably
acceptable to Halliburton (a “Subsequent Ruling”) or an opinion from a
nationally recognized law firm reasonably acceptable to Halliburton (a
“Subsequent Opinion”), in either case, to the effect that the Potential
Disqualifying Action would not cause the Distribution to cease to qualify as a
Tax Free Spinoff.
 
(iv) For the avoidance of doubt, and without limitation, each of the following
constitutes a Potential Disqualifying Action pursuant to Section 7.03(a)(iii)
hereof:
 
(1) The merger or consolidation of KBR with or into any other corporation;
 
(2) The liquidation or partial liquidation of KBR (within the meaning of such
terms as defined in Section 346 and Section 302, respectively, of the Code);
 
(3) The sale or transfer of all or substantially all of KBR’s assets (within the
meaning of Rev. Proc. 77-37, 1977-2 C.B. 568) in a single transaction or series
of related transactions;
 
(4) The redemption or other repurchase of any of KBR’s capital stock (other than
in connection with future employee benefit plans or pursuant to a future market
purchase program involving five (5) percent or less of its publicly traded
stock); or
 
(5) The change in KBR’s equity structure (including stock issuances, pursuant to
the exercise of options, the vesting of restricted stock units or otherwise,
option grants, the adoption of, or authorization of shares under a stock option
plan, grants of restricted stock or stock units, capital contributions or
acquisition); provided, however, that stock issuances pursuant to and awards
under the KBR, Inc. 2006 Stock and Incentive Plan or the Transitional Stock
Adjustment Plan related to conversions of awards made with respect to
Halliburton stock shall not be considered a change in KBR’s equity structure for
purposes of this Section 7.03(a)(iv)(5);
 
unless such action is expressly required or permitted pursuant to the Master
Separation Agreement or Master Separation and Distribution Agreement (as
applicable) or unless KBR first delivers to Halliburton a Subsequent Ruling or a
Subsequent Opinion, both reasonably acceptable to Halliburton, in either case,
to the effect that the action would not cause the Distribution to cease to
qualify as a Tax Free Spinoff.
 
(b) Notice of Events That Could Affect the Tax Treatment of the Distribution and
Right to Enjoin.
 
(i) Subject to Section 7.03(b)(iii) hereof, until the first day after the second
anniversary of the Distribution, KBR shall give Halliburton at least thirty
(30) days prior written notice of KBR’s intention to effect any transaction with
respect to KBR’s capital structure, whether through issuance, redemption or
otherwise if and to the extent there is more than an immaterial possibility that
such transaction would constitute a Disqualifying Action. Each such notice shall
set forth the necessary terms and conditions of the proposed transaction,
including, as applicable, the nature of any related action proposed to be taken,
the approximate number of shares proposed to be issued, redeemed or transferred
(directly or indirectly, in accordance with the provisions of Section 355(e) of
the Code), all with sufficient particularity to enable Halliburton to review and
comment on the effect of such transaction with respect to Section 355(e) of the
Code. Because the damages that may result to Halliburton will be difficult to
quantify, in the event Halliburton obtains an opinion from a nationally
recognized law firm that the proposed transaction described in this
Section 7.03(b)(i) would more likely than not constitute a Disqualifying Action,
Halliburton shall have the right to enjoin KBR from entering into such
transaction, and upon ten (10) business days prior written notice from
Halliburton of its desire to enjoin such transaction, KBR shall not enter into
such transaction; provided, however, that Halliburton will not waive its right
to recover damages for breach of this Agreement if KBR is not enjoined from
engaging in the proposed transaction.
 
(ii) If KBR receives a Subsequent Opinion or Subsequent Ruling, KBR shall notify
Halliburton and (if Halliburton is not otherwise provided a copy) provide
Halliburton promptly with a copy of such Subsequent Opinion or Subsequent
Ruling, but in any event with ten (10) business days after the receipt of the
Subsequent Opinion or Subsequent Ruling.
 
(iii) Notice shall not be required under Section 7.03(b)(i) hereof with respect
to the grant and/or exercise of any stock option, stock, stock-based
compensation or other employment related arrangements arising in the ordinary
course of business that have customary terms and conditions consistent with past
practice (a “Compensatory Transaction”) if the Compensatory Transaction
satisfies the requirements of Treasury Regulations § 1.355-7(d)(8), or, if in
the case of options, if (A) the exercise price is equal to or greater than the
fair market value of the stock subject to the option on the date of grant or
issuance and (B) such option does not have a readily ascertainable fair market
value within the meaning of Treasury Regulations § 1.83-7.
 
(iv) Each Party shall furnish the other with a copy of any document of
information that reasonably could be expected to affect treatment of the
Distribution as a Tax Free Spinoff.
 
(v) All information provided by any Party to the other Party pursuant to this
Section 7.03(b) shall be kept confidential pursuant to the terms and conditions
of Section 8.12 hereof.
 
(c) Cooperation Relating to the Tax Treatment of the Distribution.
 
(i) Each Party shall cooperate with the other and shall take such actions
reasonably requested by such other Party in connection with obtaining either a
Subsequent Ruling or Subsequent Opinion. Such cooperation shall include
providing any information, representations and/or covenants reasonably requested
by the requesting Party to enable such Party to obtain, or maintain the validity
of, either a Subsequent Ruling or Subsequent Opinion. From and after any date on
which a Party makes any representation or covenant to counsel for the purpose of
obtaining a Subsequent Opinion or to the IRS for the purpose of obtaining a
Subsequent Ruling and until the first day after the second anniversary (or such
later date as may be agreed upon at the time such representations and/or
covenants are made) of the date of such Subsequent Ruling or Subsequent Opinion,
the party making such representation or covenant shall take no action that would
have caused such representation to be untrue or covenant to be breached unless
Halliburton determines, in its reasonable discretion, which discretion shall be
exercised in good faith solely to ensure that the Distribution constitutes a Tax
Free Spinoff, that such action would not cause the Distribution to fail to
qualify as a Tax Free Spinoff.
 
(ii) KBR shall not file any request for a Subsequent Ruling with respect to the
treatment of the Distribution as a Tax Free Spinoff without the prior written
consent of Halliburton, which consent shall not be unreasonably withheld or
delayed, if a favorable Subsequent Ruling would be reasonably likely to have an
adverse effect on Halliburton.
 
(d) Each Party agrees that it will not take any position on a Tax Return that is
inconsistent with the treatment of the Distribution as a Tax Free Spinoff.
 
(e) Each Party agrees (i) not to take any action reasonably expected to result
in an increased Tax liability to the other Party under this Agreement and
(ii) to take any action reasonably requested by the other Party that would
reasonably be expected to result in a Tax benefit or avoid a Tax detriment to
such other Party; provided, in either such case, that the taking or refraining
to take such action does not result in any additional cost not fully compensated
for by the other Party or any other adverse effect to such Party. The Parties
hereby acknowledge that the preceding sentence is not intended to limit, and
therefore shall not apply to, the rights of the parties with respect to matters
otherwise covered by this Agreement.
 
(f) For the avoidance of doubt, notwithstanding anything in this Agreement to
the contrary (including, but not limited to, Section 7.14), KBR will be
responsible for any Taxes of a member of the Halliburton Group arising from the
change of Control of KBR even if (i) Halliburton or KBR, (ii) one or more
officers or directors acting on behalf of Halliburton or KBR, or (iii) another
person or persons with the implicit or explicit permission of one or more
officers or directors of Halliburton or KBR held discussions with third parties
for the sale of the stock of KBR prior to the Distribution.
 
(g) For the avoidance of doubt, KBR will not be responsible for any Taxes of a
member of the Halliburton Group arising from the change of Control of
Halliburton.
 
Section 7.04 Spinoff Indemnification.
 
(a) In General. Notwithstanding anything herein to the contrary, the provisions
of this Article VII shall govern all matters among the Parties hereto related to
an Indemnified Liability (as defined in Section 7.05 below) and an Indemnity
Amount (as defined in Section 7.07 below).
 
(b) Indemnification Obligation. If either Party breaches any warranty,
representation or covenant set forth in Sections 7.02, 7.03, 7.13 or 7.14 of
this Agreement and the Distribution shall fail to qualify as a Tax Free Spinoff
as a result of such breach, then such Party (the “Indemnifying Party”) shall
indemnify and hold harmless the other Party against any and all federal, state,
local and foreign Taxes, interest, penalties and additions to Tax imposed upon
or incurred by Halliburton, the Halliburton Group, KBR or the KBR Group, as the
case may be (each such party an “Indemnified Party”), as a result of the failure
of the Distribution to qualify as a Tax Free Spinoff, to the extent provided
herein.
 
Section 7.05 Indemnified Liability -Spinoff. For purposes of this Agreement, the
term “Indemnified Liability” means any liability imposed upon or incurred by
(1) Halliburton or any member of the Halliburton Group, for which Halliburton or
any other member of the Halliburton Group is indemnified and held harmless under
Section 7.04(b), or (2) KBR or any member of the KBR Group, for which KBR or any
other member of the KBR Group is indemnified and held harmless under
Section 7.04(b).
 
Section 7.06 Amount of Indemnified Liability for Income Taxes - Spinoff. The
amount of an Indemnified Liability for a federal, state, local or foreign Tax
incurred by an Indemnified Party based on or determined with reference to income
shall be deemed to be the amount of Tax computed by multiplying (i) the Tax
Authority’s highest effective Tax rate applicable to the Indemnified Party for
the character of the Tax Item subject to Tax as a result of the failure of the
Distribution to qualify as a Tax Free Spinoff for the taxable period in which
the Distribution occurs, times (ii) the gain or income of the Indemnified Party
which is subject to Tax in the Tax Authority’s jurisdiction as a result of such
failure, and (iii) in the case of a state, times the percentage representing the
extent to which such gain or income is apportioned or allocated to such state;
provided, however, that in the case of a state Tax determined as a percentage of
Federal income Tax liability, the amount of Indemnified Liability shall be
deemed to be the amount of Tax computed by multiplying (x) that state’s highest
effective rate applicable to the Indemnified Party for the character of the Tax
Item subject to Tax as a result of the failure of the Distribution to qualify as
a Tax Free Spinoff for the taxable period in which the Distribution occurs,
times (y) the gain or income of the Indemnified Party which is subject to
federal income Tax as a result of such failure, times (z) the percentage
representing the extent to which the gain or income required to be recognized on
the Distribution is apportioned to such state.
 
Section 7.07 Indemnity Amount - Spinoff. With respect to any Indemnified
Liability, the amount which the Indemnifying Party shall pay to the Indemnified
Party as indemnification (the “Indemnity Amount”) shall be the sum of (i) the
amount of the Indemnified Liability, as determined under Section 7.06, (ii) any
penalties and interest imposed with respect to the Indemnified Liability and
(iii) an amount such that when the sum of the amounts set forth in clauses (i),
(ii) and this clause (iii) of this Section 7.07 are reduced by all Taxes imposed
as a result of the receipt of such sum, (taking into account any related current
credits or deductions available to the Indemnified Party or any of its
Affiliates under any law or Tax Authority) the reduced amount is equal to the
sum of the amounts set forth in clauses (i) and (ii) of this Section 7.07.
 
Section 7.08 Additional Indemnity Remedy - Spinoff. Each of the Parties
recognizes that any failure by it to comply with its obligations under this
Article VII may result in additional Taxes which could cause irreparable harm to
Halliburton, its shareholders, the Halliburton Group, and/or KBR and the KBR
Group, and that such entities may be inadequately compensated by monetary
damages for such failure. Accordingly, if (A) (i) a Party shall fail to comply
with any obligation under this Article VII which would be reasonably foreseeable
to result in any additional Taxes and (ii) such Party shall fail to provide the
other Party with an opinion from a nationally recognized law firm, such opinion,
upon timely review being approved by the other Party (which approval shall not
be unreasonably withheld), that the failure to comply with such obligation will
not result in any increase in Taxes of Halliburton, its shareholders, any member
of the Halliburton Group, on the one hand, or KBR or any member of the KBR
Group, on the other hand, as the case may be, or if (B) it is probable in the
written legal opinion of a nationally recognized law firm that the failure by
such Party to comply with any such obligation under this Article VII will result
in an Indemnified Liability under this Agreement and the Indemnifying Party
fails to provide Adequate Assurances to the Indemnified Party of its ability to
pay the Indemnity Amount under this Agreement, then Halliburton or KBR, as the
case may be, shall be entitled to injunctive relief in the manner described in
Section 8.03 hereof, in addition to all other remedies.
 
Section 7.09 Calculation of Indemnity Payments. Except as otherwise provided
under this Agreement, to the extent that the Indemnifying Party has an
indemnification or payment obligation to the Indemnified Party pursuant to this
Agreement, the Indemnified Party shall provide the Indemnifying Party with its
calculation of the amount of such obligation. The documentation of such
calculation shall provide sufficient detail to permit the Indemnifying Party to
reasonably understand the calculation. All indemnification payments shall be
made to the Indemnified Party or to the appropriate Tax Authority as specified
by the Indemnified Party within the time prescribed for payment in this
Agreement, or if no period is prescribed, within thirty (30) days after delivery
by the Indemnified Party to the Indemnifying Party of written notice of an
indemnification obligation, or if the Tax liability giving rise to an
Indemnified Liability is contested pursuant to Section 6.01(c) of this
Agreement, within thirty (30) days of a Final Determination with respect to such
Indemnified Liability. Any disputes with respect to indemnification payments
shall be resolved in accordance with Section 8.11 below.
 
Section 7.10 Prompt Performance. All actions required to be taken by any Party
under this Agreement shall be performed within the time prescribed for
performance in this Agreement, or if no period is prescribed, such actions shall
be performed promptly.
 
Section 7.11 Interest. Payments pursuant to this Agreement that are not made
within the period prescribed in Section 7.09 shall bear interest (compounded
daily) from and including the date immediately following the last date of such
period through and including the date of payment at a rate equal to the Federal
short-term rate or rates established pursuant to Section 6621 of the Code for
the period during which such payment is due but unpaid.
 
Section 7.12 Tax Records. The Parties to this Agreement hereby agree to retain
and provide on proper demand by any Tax Authority (subject to any applicable
privileges) the books, records, documentation and other information relating to
any Tax Return until the later of (a) the expiration of the applicable statute
of limitations (giving effect to any extension, waiver or mitigation thereof),
(b) the date specified in an applicable records retention agreement entered into
with the IRS, (c) a Final Determination made with respect to such Tax Return and
(d) the final resolution of any claim made under this Agreement for which such
information is relevant. Notwithstanding the prior sentence, no Party may
destroy any such records without the approval of all other Parties to this
Agreement as described in section 6.02 hereof.
 
Section 7.13 KBR Representations and Covenants. KBR hereby represents, warrants
and covenants that:
 
(a) KBR will review the information and representations made in the Ruling
Documents and in the Tax Opinion Documents that will be submitted to the IRS,
and, KBR covenants that all of such information or representations that relate
to KBR or any member of the KBR Group, or the business or operations of each,
will be true, correct and complete to KBR’s knowledge and will identify to
Halliburton any information or representations that are incorrect or incomplete.
 
(b) KBR will not, and will cause each member of the KBR Group not to, take any
action, or fail or omit to take any action, that would cause any of the
information or representations made in the Ruling Documents and in the Tax
Opinion Documents that relate to KBR or any member of the KBR Group or the
business or operations of each, to be untrue, regardless of whether such
information or representations are included in the Private Letter Ruling (or any
supplemental ruling) or in the Tax Opinion (or any Subsequent Opinion).
 
Section 7.14 Halliburton Representations and Covenants. Halliburton hereby
represents, warrants, and covenants that:
 
(a) Halliburton will review the information and representations made in the
Ruling Documents and in the Tax Opinion Documents that will be submitted to the
IRS, and Halliburton covenants that all of such information or representations
that relate to Halliburton or any member of the Halliburton Group, or the
business or operations of each, will be true, correct and complete to
Halliburton’s knowledge and will identify to KBR any information or
representations that are incorrect or incomplete.
 
(b) Halliburton will not, and will cause each member of the Halliburton Group
not to, take any action, or fail or omit to take any action, that would cause
any of the information or representations made in the Ruling Documents and in
the Tax Opinion Documents that relate to Halliburton or any member of the
Halliburton Group, or the business or operations of each, to be untrue,
regardless of whether such information or representations are included in the
Private Letter Ruling (or any supplemental ruling) or in the Tax Opinion (or any
Subsequent Opinion).
 
Section 7.15 Continuing Covenants. Each Party agrees (1) not to take any action
reasonably expected to result in a new or changed Tax Item that is detrimental
to the other Party and (2) to take any action reasonably requested by the other
Party that would reasonably be expected to result in a new or changed Tax Item
that produces a benefit or avoids a detriment to such other Party; provided that
such action does not result in any additional cost not fully compensated for by
the requesting Party. The Parties hereby acknowledge that the preceding sentence
is not intended to limit, and therefore shall not apply to, the rights of the
Parties with respect to matters otherwise covered by this Agreement.

 
 

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ARTICLE VIII.
 
MISCELLANEOUS PROVISIONS
 
Section 8.01 Notice. Any notice, demand, claim, or other communication required
or permitted to be given under this Agreement (a “Notice”) shall be in writing
and may be personally serviced, provided a receipt is obtained therefor, or may
be sent by certified mail, return receipt requested, postage prepaid, or may be
sent by telecopier, with acknowledgment of receipt requested, to the either of
the Parties at the following addresses (or at such other address as one Party
may specify by notice to the other Party):
 

   
Halliburton at:
Halliburton Company
1401 McKinney, Suite 2400
Houston, Texas 77010-4035
Telecopier Number: (713) 839-4816
Attn: Director of Taxes
 
 
 
KBR at:
KBR, Inc.
4100 Clinton Drive, P.O. Box 3
Houston, Texas 77001-0003
Telecopier Number: (713) 753-3868
Attn: Director of Taxes
 
   
KBR Holdings at:
KBR Holdings LLC
4100 Clinton Drive, P.O. Box 3
Houston, Texas 77001-0003
Telecopier Number: (713) 753-3868
Attn: Director of Taxes
 

 
A Notice which is delivered personally shall be deemed given as of the date
specified on the written receipt therefor. A Notice mailed as provided herein
shall be deemed given on the third business day following the date so mailed. A
Notice delivered by telecopier shall be deemed given upon the date it is
transmitted. Notification of a change of address may be given by either Party to
the other in the manner provided in Section 8.01 hereof for providing a Notice.
 
Section 8.02 Required Payments. Unless otherwise provided in this Agreement, any
payment of Tax required shall be due within thirty (30) days of a Final
Determination of the amount of such Tax.
 
Section 8.03 Injunctions. The Parties acknowledge that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with its specific terms or were otherwise breached. The
Parties hereto shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions of this Agreement and to enforce specifically the terms and
provisions hereof in any court having jurisdiction, such remedy being in
addition to any other remedy to which they may be entitled at law or in equity.
 
Section 8.04 Further Assurances. Subject to the provisions hereof, the Parties
hereto shall make, execute, acknowledge and deliver such other instruments and
documents, and take all such other actions, as may be reasonably required in
order to effectuate the purposes of this Agreement and to consummate the
transactions contemplated hereby. Subject to the provisions hereof, each of the
Parties shall, in connection with entering into this Agreement, perform its
obligations hereunder and take any and all actions relating hereto, comply with
all applicable laws, regulations, orders, and decrees, obtain all required
consents and approvals and make all required filings with any governmental
agency, other regulatory or administrative agency, commission or similar
authority and promptly provide the other Party with all such information as such
Party may reasonably request in order to be able to comply with the provisions
of this sentence.
 
Section 8.05 Parties in Interest. Except as herein otherwise specifically
provided, nothing in this Agreement expressed or implied is intended to confer
any right or benefit upon any person, firm or corporation other than the Parties
and their respective successors and permitted assigns.
 
Section 8.06 Setoff. All payments to be made under this Agreement shall be made
without setoff, counterclaim or withholding, all of which are expressly waived.
 
Section 8.07 Change of Law. If, due to any change in applicable law or
regulations or the interpretation thereof by any court of law or other governing
body having jurisdiction subsequent to the date of this Agreement, performance
of any provision of this Agreement or any transaction contemplated thereby shall
become impracticable or impossible, the Parties hereto shall use their best
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such provision.
 
Section 8.08 Termination and Survival. Notwithstanding anything in this
Agreement to the contrary, this Agreement shall remain in effect and its
provisions shall survive for the full period of all applicable statutes of
limitation (giving effect to any extension, waiver or mitigation thereof) or
until otherwise agreed to in writing by Halliburton and KBR, or their
successors.
 
Section 8.09 Amendments; No Waivers.
 
(a) Any provision of this Agreement may be amended or waived if, and only if,
such amendment or waiver is in writing and signed, in the case of an amendment,
by Halliburton and KBR, or in the case of a waiver, by the Party against whom
the waiver is to be effective.
 
(b) No failure or delay by any Party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.
 
Section 8.10 Governing Law and Interpretation. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware applicable
to agreements made and to be performed in the State of Delaware.
 
Section 8.11 Resolution of Certain Disputes. Any disagreement between the
Parties with respect to any matter that is the subject of this Agreement,
including, without limitation, any disagreement with respect to any calculation
or other determinations by Halliburton hereunder, which is not resolved by
mutual agreement of the Parties, shall be resolved by a nationally recognized
independent accounting firm chosen by and mutually acceptable to the Parties
hereto (an “Accounting Referee”). Such Accounting Referee shall be chosen by the
Parties within fifteen (15) business days from the date on which one Party
serves written notice on the other Party requesting the appointment of an
Accounting Referee, provided that such notice specifically describes the
calculations to be considered and resolved by the Accounting Referee. In the
event the Parties cannot agree on the selection of an Accounting Referee, then
the Accounting Referee shall be any office or branch of the public accounting
firm of Deloitte & Touche. The Accounting Referee shall resolve any such
disagreements as specified in the notice within thirty (30) days of appointment;
provided, however, that no Party shall be required to deliver any document or
take any other action pursuant to this Section 8.11 if it determines that such
action would result in the waiver of any legal privilege or any detriment to its
business. Any resolution of an issue submitted to the Accounting Referee shall
be final and binding on the Parties hereto without further recourse. The Parties
shall share the costs and fees of the Accounting Referee equally.
 
Section 8.12 Confidentiality. Except to the extent required to protect a Party’s
interests in a Tax Controversy, each Party shall hold and shall cause its
consultants and advisors to hold in strict confidence, unless compelled to
disclose by judicial or administrative process or, in the opinion of its
counsel, by other requirements of law, all information (other than any such
information relating solely to the business or affairs of such Party) concerning
the other Party or its representatives pursuant to this Agreement (except to the
extent that such information can be shown to have been (i) previously known by
the Party to which it was furnished, (ii) in the public domain through no fault
of such Party, or (iii) later lawfully acquired from other sources by the Party
to which it was furnished), and each Party shall not release or disclose such
information to any other person, except its auditors, attorneys, financial
advisors, bankers and other consultants and advisors who shall be advised of the
provisions of this Agreement. Each Party shall be deemed to have satisfied its
obligation to hold confidential information concerning or supplied by the other
Party if it exercises the same care as it takes to preserve confidentiality for
its own similar information.
 
Section 8.13 Costs, Expenses and Attorneys’ Fees. Except as expressly set forth
in this Agreement, each Party shall bear its own costs and expenses incurred
pursuant to this Agreement. In the event either Party to this Agreement brings
an action or proceeding for the breach or enforcement of this Agreement, the
prevailing party in such action, proceeding, or appeal, whether or not such
action, proceeding or appeal proceeds to final judgment, shall be entitled to
recover as an element of its costs, and not as damages, such reasonable
attorneys’ fees as may be awarded in the action, proceeding or appeal in
addition to whatever other relief the prevailing party may be entitled. For
purposes of Section 8.13 hereof, the “prevailing party” shall be the Party who
is entitled to recover its costs; a Party not entitled to recover its costs
shall not recover attorneys’ fees. No sum for attorneys’ fees shall be counted
in calculating the amount of the judgment for purposes of determining whether a
Party is entitled to recover its costs or attorneys’ fees.
 
Section 8.14 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
 
Section 8.15 Severability. The Parties hereby agree that, if any provision of
this Agreement should be adjudicated to be invalid or unenforceable, such
provision shall be deemed deleted herefrom with respect, and only with respect,
to the operation of such provision in the particular jurisdiction in which such
adjudication was made, and only to the extent of the invalidity, and any such
invalidity or unenforceability in a particular jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction. All other
remaining provisions of this Agreement shall remain in full force and effect for
the particular jurisdiction and all other jurisdictions.
 
Section 8.16 Entire Agreement; Termination of Prior Agreements. 
 
(a) This Agreement contains the entire agreement between the Parties with
respect to the subject matter hereof and supersedes all other agreements,
whether or not written, in respect of any Tax between or among any member or
members of the Halliburton Group, on the one hand, and any member or members of
the KBR Group, on the other hand. All such other agreements, including, but not
limited to, that certain Tax Sharing Agreement by and among Halliburton Company
and its Affiliated Companies and KBR, Inc. and its Affiliated Companies, dated
October 2, 2006, and that certain Tax Sharing Agreement by and among Halliburton
Company and its Affiliated Companies and KBR, Inc. and its Affiliated Companies,
dated October 31, 2006, are hereby canceled and any rights or obligations
existing thereunder are hereby fully and finally settled without any payment by
any party thereto; provided, however, that (i) that certain letter agreement
regarding Tax indemnification for periods ending prior to January 1, 2001,
attached as Exhibit C to this Agreement, shall be cancelled as of the date of
this Agreement and any rights or obligations existing thereunder are hereby
fully and finally settled without any payment by any party thereto and (ii) that
certain Amendment to the Amended and Restated Tax Sharing and Allocation
Agreement, attached as Exhibit D to this Agreement, shall remain in effect.
 
(b) Without limiting the foregoing, the Parties acknowledge and agree that in
the event of any conflict or inconsistency between the provisions of this
Agreement and the provisions of the Master Separation Agreement or the Master
Separation and Distribution Agreement (as applicable), the provisions of this
Agreement shall take precedence and to such extent shall be deemed to supersede
such conflicting provisions under the Master Separation Agreement or the Master
Separation and Distribution Agreement (as applicable).
 
Section 8.17 Assignment. This Agreement is being entered into by Halliburton and
KBR on behalf of themselves and each member of the Halliburton Group and KBR
Group, respectively. This Agreement shall constitute a direct obligation of each
such member and shall be deemed to have been readopted and affirmed on behalf of
any corporation which becomes a member of the Halliburton Group or KBR Group in
the future. Halliburton and KBR hereby guarantee the performance of all actions,
agreements and obligations provided for under this Agreement of each member of
the Halliburton Group and KBR Group, respectively. Halliburton and KBR shall,
upon the written request of the other, cause any of their respective group
members to formally execute this Agreement. This Agreement shall be binding
upon, and shall inure to the benefit of, the successors, assigns and persons
controlling any of the corporations bound hereby for so long as such successors,
assigns or controlling persons are members of the Halliburton Group or the KBR
Group or their successors and assigns.
 
Section 8.18 Fair Meaning. This Agreement shall be construed in accordance with
its fair meaning and shall not be construed strictly against the drafter.
 
Section 8.19 Commencement. This Agreement shall commence on the date of
execution indicated below.
 
Section 8.20 Titles and Headings. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a part
or to affect the meaning or interpretation of this Agreement.
 
Section 8.21 Construction. In this Agreement, unless the context otherwise
requires the terms “herein,” “hereof,” and “hereunder” refer to this Agreement.
 
Section 8.22 Termination. This Agreement may be terminated at any time prior to
the date of the IPO, without the approval of KBR, by and in the sole discretion
of the Halliburton Board of Directors. In the event of such termination, no
Party shall have any liability to the other Party from or for the terminated
Agreement, except that expenses incurred in connection with the preparation of
this Agreement shall be paid as provided in Section 8.13 hereof; provided that
any agreement that remained in force prior to the Deconsolidation Date, as
described in Section 8.16 hereof, shall remain in force upon a termination of
this Agreement pursuant to this Section 8.22.
 
SPACE INTENTIONALLY LEFT BLANK
 

 
 

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IN WITNESS WHEREOF, the Parties hereto have executed and delivered this
Agreement as of the day and year first above written.
 

   
Halliburton Company
   
By:
/s/ C. Christopher Gaut
Name:
C. Christopher Gaut
Title:
Executive Vice President and Chief Financial Officer
 
KBR, Inc.
   
By:
/s/ William P. Utt
Name:
William P. Utt
Title:
President & CEO
 
KBR Holdings LLC
   
By:
/s/ Andrew D. Farley
Name:
Andrew D. Farley
Title:
Senior VP and General Counsel

 

 
 

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