ex10_3.htm


    
      

    

    Exhibit
      10.3

     

    FORM
      OF NONSTATUTORY STOCK OPTION AGREEMENT

     

     

    AGREEMENT
      by and between KBR, Inc., a Delaware corporation (the “Company”) and
      _____________ (“Employee”) made effective as of the date of the delivery of
      shares for the closing of the initial public offering of the Company (the “Grant
      Date”).

     

    To
      carry
      out the purposes of the KBR, Inc. 2006 Stock and Incentive Plan (the “Plan”), by
      affording Employee the opportunity to purchase shares of common stock of the
      Company (“Stock”), and in consideration of the mutual agreements and other
      matters set forth herein and in the Plan, the Company and Employee hereby agree
      to the following terms set forth herein.  Except as defined herein,
      capitalized terms shall have the same meanings ascribed to them under the
      Plan.

     

    1.           Grant
      of Option.  The Company hereby
      irrevocably grants to Employee the right and option (“Option”) to purchase an
      aggregate of _______ shares of Stock at the option price indicated below, on
      the
      terms and conditions set forth herein and in the Plan, which Plan is
      incorporated herein by reference as a part of this Agreement.  This
      Option shall not be treated as an incentive stock option within the meaning
      of
      Section 422(b) of the Code.

     

    2.           Option
      Price.  The purchase price of Stock to
      be paid by Employee pursuant to the exercise of this Option shall equal the
      closing sale price per share for KBR, Inc. as reported in composite transactions
      for the New York Stock Exchange, Inc. on the Grant Date (the “Exercise
      Price”).

     

    3.           Exercise
      of Option.  Subject to the earlier
      expiration of this Option as herein provided, this Option may be exercised
      by
      providing notice of exercise in the manner specified by the Company from time
      to
      time.  Exercise of this Option must occur during the regular trading
      hours in which the Stock is traded on the New York Stock Exchange or other
      principal exchange on which the Stock is then traded.  Except as
      otherwise provided below, this Option shall not be exercisable for more than
      a
      percentage of the aggregate number of shares of Stock offered by this Option
      determined by the number of full years from the Grant Date to the date of such
      exercise, in accordance with the following schedule:

     

    
      	
               

              Number
                of Full Years

            	 	
              Percentage
                of Stock

              That
                May Be Purchased

            	 
	 	 	 	 
	
              Less
                than    1
                year

            	 	 	0	%
	
               1
                year

            	 	 	331/3	%
	
               2
                years

            	 	 	67	%
	
               3
                years

            	 	 	100	%


    

     

    This
      Option is not transferable otherwise than by will or the laws of descent and
      distribution or pursuant to a “qualified domestic relations order” as defined by
      the Code and may be exercised during Employee’s lifetime only by Employee,
      Employee’s guardian or legal representative or a transferee under a qualified
      domestic relations order.  Upon any attempt to transfer, assign,
      pledge, hypothecate or otherwise dispose of this Option or of such rights
      contrary to the provisions hereof or in the Plan, or upon the levy of any
      attachment or similar process upon this Option or such rights, this Option
      and
      such rights shall immediately become null and void.  This Option may
      be exercised only while Employee remains an employee of the Company, subject
      to
      the following exceptions:

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    (a)           If
      Employee’s employment with the Company terminates by reason of disability
      (disability being defined as being physically or mentally incapable of
      performing either the Employee’s 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), this Option may be exercised in full by Employee (or
      Employee’s estate or the person who acquires this Option by will or the laws of
      descent and distribution or otherwise by reason of the death of Employee) at
      any
      time during the period ending on the earlier of the Expiration Date (as defined
      below) or the third anniversary of the date of Employee’s termination of
      employment.  Notwithstanding the foregoing, if Employee’s termination
      of employment by reason of disability occurs during the first six months
      following the Grant Date, this Option may be exercised in full at any time
      during the period ending on the earlier of the Expiration Date or the fourth
      anniversary of the date of Employee’s termination of employment.

     

    (b)           If
      Employee dies while in the employ of the Company, Employee’s estate, or the
      person who acquires this Option by will or the laws of descent and distribution
      or otherwise by reason of the death of Employee, may exercise this Option in
      full at any time during the period ending on the earlier of the Expiration
      Date
      or the third anniversary of the date of Employee’s
      death.  Notwithstanding the foregoing, if Employee dies during the
      first six months following the Grant Date, this Option may be exercised in
      full
      at any time during the period ending on the earlier of the Expiration Date
      or
      the fourth anniversary of the date of Employee’s termination of
      employment.

     

    (c)           If
      Employee’s employment with the Company terminates by reason of normal retirement
      at or after age 65, this Option may be exercised by Employee at any time during
      the period ending on the Expiration Date, but only as to the number of shares
      of
      Stock Employee was entitled to purchase on the date of such exercise in
      accordance with the schedule set forth above. In connection with the termination
      of Employee’s employment with the Company by reason of early retirement,
      applicable management of the Company and/or business unit may recommend to
      the
      Committee or its delegate, as applicable, that this Option be retained. In
      such
      event, the Committee or its delegate, as the case may be, shall consider such
      recommendation and may, in the Committee’s or such delegate’s sole discretion,
      approve the retention of this Option following such early retirement, in which
      case the Option may be exercised by Employee at any time during the period
      ending on the Expiration Date, but only as to the number of shares of Stock
      Employee was entitled to purchase on the date of such exercise in accordance
      with the schedule set forth above. If, after retirement as set forth above,
      Employee should die, this Option may be exercised in full by Employee’s estate
      (or the person who acquires this Option by will or the laws of descent and
      distribution or otherwise by reason of the death of the Employee) during the
      period ending on the earlier of the Expiration Date or the third anniversary
      of
      the date of Employee’s death.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (d)           If
      Employee’s employment with the Company terminates for any reason other than
      those set forth in subparagraphs (a) through (c) above, this Option may be
      exercised by Employee at any time during the period of 30 days following such
      termination, or by Employee’s estate (or the person who acquires this Option by
      will or the laws of descent and distribution or otherwise by reason of the
      death
      of the Employee) during a period of six months following Employee’s death if
      Employee dies during such 30-day period, but in each case only as to the number
      of shares of Stock Employee was entitled to purchase hereunder upon exercise
      of
      this Option as of the date Employee’s employment so terminates.

     

    This
      Option shall not be exercisable in any event prior to the expiration of six
      months from the date of grant hereof or after the expiration of ten years from
      the date of grant hereof (the “Expiration Date”) notwithstanding anything
      hereinabove contained. The purchase price of Stock as to which this Option
      is
      exercised shall be paid in full at the time of exercise in cash (in the form
      and
      manner prescribed by the Company).  At Employee’s request or the
      request of another person entitled to exercise this Option, and to the extent
      permitted by applicable law, the Committee in its discretion may selectively
      approve “cashless exercise” arrangements with a brokerage firm under which such
      brokerage firm, on behalf of Employee or such other person exercising the
      Option, shall pay to the Company or its designee the Exercise Price of the
      Option or of the portion being exercised, and the Company or its designee,
      pursuant to an irrevocable notice from Employee or such other person exercising
      the Option, shall promptly deliver the shares being purchased to such
      firm.  No fraction of a share of Stock shall be issued by the Company
      upon exercise of an Option or accepted by the Company in payment of the purchase
      price thereof; rather, Employee shall provide a cash payment for such amount
      as
      is necessary to effect the issuance and acceptance of only whole shares of
      Stock.  Unless and until a certificate or certificates representing
      such Stock shall have been issued by the Company to Employee, Employee (or
      the
      person permitted to exercise this Option in the event of Employee’s death) shall
      not be or have any of the rights or privileges of a shareholder of the Company
      with respect to Stock acquirable upon an exercise of this Option.

     

    4.           Withholding
      of Tax. To the extent that the exercise of this
      Option or the disposition of shares of Stock acquired by exercise of this Option
      results in compensation income to Employee for federal or state income tax
      purposes, Employee shall deliver to the Company at the time of such exercise
      or
      disposition such amount of money or shares of Stock as the Company may require
      to meet its withholding obligation under applicable tax laws or regulations,
      and, if Employee fails to do so, the Company is authorized to withhold from
      any
      cash or Stock remuneration then or thereafter payable to Employee any tax
      required to be withheld by reason of such resulting compensation
      income.  Upon an exercise of this Option, the Company is further
      authorized in its discretion to satisfy any such withholding requirement out
      of
      any cash or shares of Stock distributable to Employee upon such
      exercise.

     

    5.           Status
      of Stock.  The Company shall not be
      obligated to issue any Stock pursuant to any Option at any time, when the
      offering of the Stock covered by such Option has not been registered under
      the
      Securities Act of 1933, as amended (the “Act”) and such other country, federal
      or state laws, rules or regulations as the Company deems applicable and, in
      the
      opinion of legal counsel for the Company, there is no exemption from the
      registration.  The Company intends to use its best efforts to ensure
      that no such delay will occur. In the event exemption from registration under
      the Act is available upon an exercise of this Option, Employee (or the person
      permitted to exercise this Option in the event of Employee’s death or
      incapacity), if requested by the Company to do so, will execute and deliver
      to
      the Company in writing an agreement containing such provisions as the Company
      may require to assure compliance with applicable securities laws.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    
      Employee
        agrees that the shares of Stock which Employee may acquire by exercising
        this
        Option will not be sold or otherwise disposed of in any manner which would
        constitute a violation of any applicable securities laws, whether federal
        or
        state. Employee also agrees (i) that the certificates representing the shares
        of
        Stock purchased under this Option may bear such legend or legends as the
        Company
        deems appropriate in order to assure compliance with applicable securities
        laws,
        (ii) that the Company may refuse to register the transfer of the shares of
        Stock
        purchased under this Option on the stock transfer records of the Company
        if such
        proposed transfer would in the opinion of counsel satisfactory to the Company
        constitute a violation of any applicable securities law and (iii) that the
        Company may give related instructions to its transfer agent, if any, to stop
        registration of the transfer of the Stock purchased under this
        Option.

       

    

    6.           Employment
      Relationship.  For purposes of this
      Agreement, Employee shall be considered to be in the employment of the Company
      as long as Employee remains an employee of the Company, a Parent Corporation
      or
      Subsidiary of the Company, or a corporation or a Parent Corporation or
      subsidiary of such corporation assuming or substituting a new option for this
      Option.  Any question as to whether and when there has been a
      termination of such employment, and the cause of such termination, shall be
      determined by the Committee or its delegate, as appropriate, and such
      determination shall be final.

     

    7.           Binding
      Effect. This Agreement shall be binding upon and
      inure to the benefit of any successors to the Company and all persons lawfully
      claiming under Employee.

     

    8.           Compliance
      with Law.  Notwithstanding anything to the
      contrary herein, the Company shall not be obligated to issue any Stock pursuant
      to any Option, at any time, if the offering of the Stock covered by such Option,
      or the exercise of an Option by an Employee, violates or is not in compliance
      with any laws, rules or regulations of the United States or any state or
      country.

     

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

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the Company has caused this Agreement to be duly executed
      by
      its officer thereunto duly authorized, and Employee has executed this Agreement,
      all as of the day and year first above written.

     

    


     

    
      	 	
              KBR,
                INC.

            
	 	 	 
	 	 	 
	 	 	 
	 	
              By:

            	
               

            
	 	 	 
	 	 	 
	 	 	 
	 	  
	 	
              Employee

            
	 	 	 


    

     

     

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