KBR

 

PERFORMANCE AWARD AGREEMENT

 

Grant Date: _________________

 

________________________

________________________

________________________

 

 

 

Re:

Performance Unit Grant

I am pleased to inform you that KBR, Inc. (the “Company”) has granted you
Performance Units under the Company’s 2006 Stock and Incentive Plan (the “Plan”)
asfollows:

1.

Grant of Performance Units.

The number of Performance Units granted to you as a Performance Award under the
Plan is _____________________. Each Performance Unit shall have a target value
of $______. The actual value, if any, of a Performance Unit at the end of the
Performance Period will be determined based on the level of achievement during
the Performance Period of the performance objectives set forth in Exhibit A
hereto, which is made a part hereof for all purposes.

 

2.

 

(a)

Vesting. Except as otherwise provided in subparagraphs (b) and (d) below, you
will vest in the Performance Units earned (if any) for the Performance Period
only if you are an employee of the Company or a Subsidiary on the date such
earned Performance Units are paid, as provided in Paragraph 3 below.

 

(b)

Death, Disability or Retirement. If you cease to be an employee of the Company
and its Subsidiaries as a result of (i) your death, (ii) your permanent
disability (disability being defined as being physically or mentally incapable
of performing either your usual duties as an employee or any other duties as an
employee that the Company reasonably makes available and such condition is
likely to remain continuously and permanently, as determined by the Company or
employing subsidiary), or (iii) normal retirement on or after reaching age 65, a
prorata portion of your Performance Units that become “earned”, if any, as
provided in Exhibit A, will become vested. The “prorata portion” that becomes
vested shall be a fraction, the numerator of which is the number of days in the
Performance Period in which you were an employee of the Company or a Subsidiary
and the denominator of which is the total number of days in the Performance
Period. If your termination for the above reasons is after the end of the
Performance Period but before payment of the Performance Units earned, if any,
for such Performance Period, you will be fully vested in any such earned
Performance Units.

 

(c)

Other Terminations. If you terminate from the Company and its Subsidiaries for
any reason other than as provided in subparagraph (a) above, all unvested
Performance Units held by you shall be forfeited without payment immediately
upon such termination.

 

KBR

 

(d)

Corporate Change. Notwithstanding any other provision hereof, your Performance
Units shall become fully vested at the maximum earned percentage provided in
Exhibit A upon the occurrence of a Corporate Change during the Performance
Period. If a Corporate Change occurs after the end of the Performance Period and
prior to payment of the earned Performance Units, you will be 100% vested in
your Performance Units upon the Corporate Change and payment will be made in
accordance with the results achieved for the Performance Period ended as
provided in Exhibit A.

3.

Payment of Vested Performance Units. As soon as administratively practicable
after (i) the end of the Performance Period or (ii) with respect to a Corporate
Change occurring prior to the end of the Performance Period, the date of the
Corporate Change, you shall be entitled to receive from the Company a payment in
cash equal to the product of the Payout Percentage (as defined in Exhibit A) and
the sum of the target values of your vested Performance Units. Except as
provided in Exhibit A with respect to a Corporate Change, if the performance
thresholds set forth in Exhibit A are not met, no payment shall be made with
respect to the Performance Units, whether or not vested. Notwithstanding the
foregoing, in no event may the amount paid to you by the Company in any year
with respect to Performance Units earned hereunder exceed the applicable limit
under Article V of the Plan.

4.

Limitations Upon Transfer. All rights under this Agreement shall belong to you
and may not be transferred, assigned, pledged, or hypothecated in any way
(whether by operation of law or otherwise), other than by will or the laws of
descent and distribution or pursuant to a “qualified domestic relations order”
(as defined by the Code), and shall not be subject to execution, attachment, or
similar process. Upon any attempt to transfer, assign, pledge, hypothecate, or
otherwise dispose of such rights contrary to the provisions in this Agreement or
the Plan, or upon the levy of any attachment or similar process upon such
rights, such rights shall immediately become null and void.

5.

Withholding of Tax. To the extent that the vesting or payment of a Performance
Unit results in the receipt of compensation with respect to which the Company
has a tax withholding obligation, the Company shall withhold from its payment
hereunder such amount as the Company may require to meet its minimum withholding
obligations under all applicable tax laws or regulations. No payment of a
vested, earned Performance Unit shall be made pursuant to this Agreement until
all applicable minimum tax withholding requirements of the Company have been
satisfied.

6.

Binding Effect. This Agreement shall be binding upon and inure to the benefit of
any successor or successors of the Company or upon any person lawfully claiming
under you.

7.

Modification. Except to the extent permitted by the Plan, any modification of
this Agreement will be effective only if it is in writing and signed by each
party whose rights hereunder are affected thereby.

8.

Plan Controls. This grant is subject to the terms of the Plan, which are hereby
incorporated by reference. In the event of a conflict between the terms of this
Agreement and the Plan, the Plan shall be the controlling document. Capitalized
terms used herein or in Exhibit A and not otherwise defined herein or in Exhibit
A shall have the meaning ascribed to them in the Plan.

9.

Employment/Severance Agreements. If you are party to a written employment or
severance agreement with the Company or a Subsidiary and your employment or
severance agreement provides for additional rights with respect to the vesting
of awards under the Plan, then, to the extent applicable, this Agreement shall
be deemed to incorporate such additional rights provided under your employment
or severance agreement.

 

KBR

 

10.

Governing Law. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of ________.

 

By signing below, you agree that the grant of these Performance Units is under
and governed by the terms and conditions of the Plan, including the terms and
conditions set forth in this Agreement, including Exhibit A of this Agreement.
This grant shall be void and of no effect unless you execute and return this
Agreement to ______________________ within ______ days of the above grant date.
You have been provided with duplicate originals of this Agreement so that you
may retain one fully executed original Agreement for your records.

 

 

 

KBR, INC.

 

 

 

By: ______________________________________

 

Name: ___________________________________

 

Title: ____________________________________

 

 

EMPLOYEE:

 

 

 

By: ______________________________________

 

Date: ____________________________________

 

 

 

 

 

KBR

EXHIBIT A

TO PERFORMANCE AWARD AGREEMENT

 

Performance Goals

Except as otherwise provided in the Agreement, the provisions of this Exhibit A
shall determine the extent, if any, that the Performance Units become “earned”
and payable.

 

I.

Performance Period

The Performance Period shall be the period beginning ________________, and
ending ________________.

 

II.

Total Shareholder Return (“TSR”)

The payment of a Performance Unit will be determined, in part, based on the
comparison of (i) the TSR (as defined below) of the Company’s common stock at
the end of the Performance Period to (ii) the TSR of each of the common stocks
of the members of the Peer Group for the Performance Period.

“TSR” or “Total Shareholder Return” shall mean the change in the price of a
share of common stock from the beginning of the Performance Period (as measured
by the closing price of a share of such stock on the last trading day preceding
the beginning of the period) until the end of the Performance Period (as
measured by the closing price of a share of such stock on the last trading day
of the period), adjusted to reflect the reinvestment of dividends (if any)
through the purchase of common stock. Dividends per share paid other than in the
form of cash shall have a value equal to the amount of such dividends reported
by the issuer to its shareholders for purposes of Federal income taxation.

 

III.

Peer Group

The Peer Group shall consist of the following companies:

 

_______________________

_______________________

 

_______________________

_______________________

 

_______________________

_______________________

 

_______________________

_______________________

 

_______________________

_______________________

 

_______________________

_______________________

 

No company shall be added to, or removed from, the Peer Group during the
Performance Period, except that a company shall be removed from the Peer Group
if during such period (i) such company ceases to maintain publicly available
statements of operations prepared in accordance with GAAP, (ii) such company is
not the surviving entity in any merger, consolidation, or other reorganization
(or survives only as a subsidiary of an entity other than a previously wholly
owned entity of such company), or (iii) such company sells, leases, or exchanges
all or substantially all of its assets to any other person or entity (other than
a previously wholly owned entity of such company).

 

KBR

 

IV.

Return on Capital (“ROC”)

ROC shall be the weighted average of the Company’s net income from continuing
operations plus (interest expense x (1-effective tax rate)), divided by average
monthly capital from continuing operations, with monthly capital from continuing
operations equal to average monthly total assets less (average monthly
non-interest bearing liabilities plus average monthly minority interest), as
reported in the Company’s audited reported financials for (i) the period
_______________________ through _______________________ (the “_______ Period”),
annualized, (ii) _______________________, and (iii) _______________________,
with the _______________________ Period weighted ____% and the
_______________________ and _______________________ years each weighted ____%.

 

 

V.

Determination of the “Earned” Value of Performance Units

 

 

Col. A

Col. B

 

 

Performance Percentage

Weighting

<Threshold

____%

Threshold

____%

Target

____%

Maximum

____%

1

Company’s TSR Rank with Peer Group Members’ TSR

____%

<____ th

____th

____ th

____ th

2

ROC

____%

<____%

_____%

_____%

____%

 

For results (the “Performance Percentages”) between Threshold and Target and
Target and Maximum in Column B, the Performance Percentage earned shall be
determined by linear interpolation between the two applicable standards based on
the results achieved for the respective performance measures.

The “target” value of a Performance Unit is $____; its maximum value is $____
per unit if the maximum performance objectives for both performance measures of
Column B are achieved and the Performance Unit value will be zero if neither of
the threshold performance objectives for the performance measures is achieved.
The value of an “earned” Performance Unit shall be determined by multiplying its
“target” value of $____ by the Payout Percentage for the Performance Period. The
“Payout Percentage” for a Performance Unit shall be determined by separately
multiplying Column A by the Column B Performance Percentage results for the two
Performance Measures and then adding those two results.

Notwithstanding the foregoing, for purposes of determining the Payout Percentage
for payment upon a Corporate Change occurring prior to the end of the
Performance Period, the Column B results for both performance measures shall be
deemed to have been met at the maximum level (____%).

 

VI.

Adjustments to Performance Measurements for Significant Events

If, after the beginning of the Performance Period, there is change in accounting
standards required by the Financial Accounting Standards Board, the performance
results shall be adjusted by the Company’s independent accountants as
appropriate to disregard such change. In addition, the results of the Company or
a peer group company shall be adjusted to reflect any stock splits or other
events described in Article XIII of the Plan, but only if such adjustment would
not cause the performance goal to no longer satisfy the requirements of Section
162(m) of the Code.

 

VII.

Committee Certification

As soon as reasonably practical following the end of the Performance Period, but
in no event later than the ____________ following the end of the Performance
Period, the Committee shall review and determine the performance results for the
Performance Period and certify those results in writing. No Performance Units
earned and vested shall be payable prior to the Committee’s certification;
provided, however, Committee certification shall not apply in the event of a
Corporate Change.

 

KBR