Document:

exv10w5

 

Exhibit 10.5

KBR

ELECTIVE DEFERRAL PLAN

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	I. Definitions and Construction
	 	 	2	 
	1.1 Definitions
	 	 	2	 
	1.2 Number and Gender
	 	 	5	 
	1.3 Headings
	 	 	5	 
	 
	 	 	 	 
	II. Participation
	 	 	5	 
	2.1 Participation
	 	 	5	 
	2.2 Cessation of Active Participation
	 	 	5	 
	 
	 	 	 	 
	III. Deferral Account Credits; Investment Elections
	 	 	5	 
	3.1 Base Salary Deferrals
	 	 	6	 
	3.2 Bonus Compensation Deferrals
	 	 	6	 
	3.3 Long-Term Incentive Compensation Deferrals
	 	 	7	 
	3.4 Investment of Deferral Accounts
	 	 	7	 
	 
	 	 	 	 
	IV. Emergency Withdrawals
	 	 	8	 
	 
	 	 	 	 
	V. Payment of Benefits
	 	 	8	 
	5.1 Payment Election Generally
	 	 	8	 
	5.2 Subsequent Payment Elections
	 	 	9	 
	5.3 Time of Benefit Payment
	 	 	9	 
	5.4 Form of Benefit Payment
	 	 	10	 
	5.5 Total and Permanent Disability
	 	 	10	 
	5.6 Death
	 	 	10	 
	5.7 Designation of Beneficiaries
	 	 	10	 
	5.8 Other Separation from Service
	 	 	11	 
	5.9 Payment of Benefits
	 	 	11	 
	5.10 Unclaimed Benefits
	 	 	11	 
	5.11 No Acceleration of Bonus or Long-Term Incentive Compensation
	 	 	11	 
	 
	 	 	 	 
	VI. Administration of the Plan
	 	 	12	 
	6.1 Committee Powers and Duties
	 	 	12	 
	6.2 Self-Interest of Participants
	 	 	12	 
	6.3 Claims Review
	 	 	13	 
	6.4 Employer to Supply Information
	 	 	13	 
	6.5 Indemnity
	 	 	14	 
	 
	 	 	 	 
	VII. Administration of Funds
	 	 	14	 
	7.1 Payment of Expenses
	 	 	14	 
	7.2 Trust Fund Property
	 	 	14	 
	 
	 	 	 	 
	VIII. Nature of the Plan
	 	 	14	 
	 
	 	 	 	 
	IX. Participating Employers
	 	 	15	 
	 
	 	 	 	 
	X. Miscellaneous
	 	 	16	 

(i)

 

	 	 	 	 	 
	10.1 Not Contract of Employment
	 	 	16	 
	10.2 Alienation of Interest Forbidden
	 	 	16	 
	10.3 Withholding
	 	 	16	 
	10.4 Amendment and Termination
	 	 	16	 
	10.5 Severability
	 	 	16	 
	10.6 Governing Laws
	 	 	17	 
	10.7 Section 409A Compliance
	 	 	17	 
	 
	 	 	 	 
	APPENDIX A 
	 	 	19	 
	 
	 	 	 	 
	III. Grandfathered Plan Account Credits; Investment Elections
	 	 	20	 
	3.1 Base Salary Deferrals
	 	 	20	 
	3.2 Bonus Compensation Deferrals
	 	 	20	 
	3.3 Long-Term Incentive Compensation Deferrals
	 	 	20	 
	3.4 Investment of Grandfathered Plan Accounts
	 	 	20	 
	 
	 	 	 	 
	IV. Withdrawals
	 	 	21	 
	4.1 Emergency Withdrawals
	 	 	21	 
	4.2 Non-Emergency Withdrawals
	 	 	21	 
	 
	 	 	 	 
	V. Payment of Benefits
	 	 	22	 
	5.1 Payment Election Generally
	 	 	22	 
	5.2 Subsequent Payment Elections
	 	 	23	 
	5.3 Time of Benefit Payment
	 	 	23	 
	5.4 Form of Benefit Payment
	 	 	23	 
	5.5 Total and Permanent Disability
	 	 	23	 
	5.6 Death
	 	 	24	 
	5.7 Other Termination of Employment
	 	 	24	 
	5.8 Payment of Benefits
	 	 	24	 
	5.9 No Acceleration of Bonus or Long-Term Incentive Compensation
	 	 	24	 

(ii)

 

KBR ELECTIVE DEFERRAL PLAN

W I T N E S S E T H:

     WHEREAS, the Board of Directors of Halliburton Company (“Halliburton”) has previously adopted
the Halliburton Company Elective Deferral Plan, as most recently amended and restated effective May
1, 2002, for the benefit of its employees and the employees of its subsidiaries to aid such
employees in making more adequate provision for their retirement; and

     WHEREAS, Halliburton plans to take action which will result in KBR, Inc. (the “Company”) and
its subsidiaries ceasing to be a member of the Halliburton controlled group; and

     WHEREAS, Halliburton determined that it would be appropriate and desirable for Halliburton to
separate the business and assets of the Company and its subsidiaries, from the business and assets
of Halliburton and its other subsidiaries through an initial public offering of the common stock of
the Company; and

     WHEREAS, the Company desires to provide benefits for certain of its new employees including
certain current employees who had previously participated in the HAL Plan, as hereafter defined;
and

     WHEREAS, pursuant to the terms of the HAL Plan, each Employer thereunder was liable for the
benefits related to its employees, and the Company and the Employers hereunder desire to continue
to provide to such employees an opportunity to make deferrals of certain amounts, consistent with
the provisions of Section 409A of the Internal Revenue Code of 1986 as amended (the “Code”); and

     WHEREAS, the provisions of the HAL Plan, as amended through the Effective Date, will remain in
effect for all deferrals prior to the Effective Date; and

     WHEREAS, the Company desires to preserve the material terms of the HAL Plan as in effect on
December 31, 2004 (the “Grandfathered Plan”) in order that the Grandfathered Plan qualify as a
grandfathered plan for purposes of Section 409A of the Code; and

     WHEREAS, certain provisions applicable solely to the Grandfathered Plan are preserved in
Appendix A, for purposes of determining the terms applicable to amounts deferred under the
Grandfathered Plan, which provisions shall be substituted for the corresponding provisions
contained herein.

     NOW THEREFORE, the HAL Plan, including the Grandfathered Plan, is hereby continued for
Eligible Employees with the terms set forth below, and is hereby renamed the KBR Elective Deferral
Plan to read as follows, effective as of the Effective Date:

 

 

I.

Definitions and Construction

     1.1 Definitions. Where the following words and phrases appear in the Plan, they shall have
the respective meanings set forth below, unless their context clearly indicates to the contrary.

	(1)	 	Act: The Employee Retirement Income Security Act of 1974, as amended.
	 
	(2)	 	Affiliate: Any entity of which an aggregate of 50% or more of the ownership
interest is owned of record or beneficially, directly or indirectly, by the Company or any
other Affiliate.
	 
	(3)	 	Base Salary: The base rate of cash compensation paid by the Employer to or for
the benefit of a Participant for services rendered or labor performed while a Participant,
including base pay a Participant could have received in cash in lieu of (a) deferrals
pursuant to Section 3.1 and (b) contributions made on his or her behalf to any qualified
plan maintained by the Employer or to any cafeteria plan under Section 125 of the Code
maintained by the Employer.
	 
	(4)	 	Bonus Compensation: With respect to any Participant for a Plan Year,
remuneration based on calendar year performance under an annual incentive compensation plan
maintained by the Employer that is payable to the Participant in cash.
	 
	(5)	 	Credited Investment Return: The hypothetical gain or loss credited to a
Participant’s Deferral Account or Grandfathered Plan Account, as applicable, pursuant to
the applicable provisions of Section 3.4(e) hereof.
	 
	(6)	 	Code: The Internal Revenue Code of 1986, as amended.
	 
	(7)	 	Committee: The administrative committee appointed by the Compensation
Committee to administer the Plan.
	 
	(8)	 	Compensation Committee: The Compensation Committee of the Directors.
	 
	(9)	 	Company: KBR, Inc., or, only for amounts deferred under the HAL Plan and
similar purposes, Halliburton Company.
	 
	(10)	 	Deconsolidation Date: The date upon which an event reduces the amount of the
Company stock owned directly or indirectly by Halliburton Company to be less than the amount
required for Halliburton Company to control the Company within the meaning of Section
1504(a)(2) of the Code.
	 
	(11)	 	Deemed Investment Elections: The investment elections described in Section
3.4 hereof.

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	(12)	 	Deferral Account: A memorandum bookkeeping account established on the records
of the Employer for a Participant that is credited with specified deferrals, and the
Credited Investment Return determined in accordance with Section 3.4(e) of the Plan, made
and earned after December 31, 2004. A Participant shall have a 100% nonforfeitable
interest in his or her Deferral Account at all times.
	 
	(13)	 	Deferral and Investment Election Form: The form or procedure prescribed by
the Committee pursuant to which a Participant elects for a particular Plan Year (a) the
deferral of a portion of his or her Base Salary, Bonus Compensation and/or Long-Term
Incentive Compensation, and (b) one or more Deemed Investment Options into which amounts to
be allocated to his or her Deferral Account in respect of such deferrals for such Plan Year
will be deemed invested.
	 
	(14)	 	Determination Date: The date on which the amount of a Participant’s Deferral
Account or Grandfathered Plan Account is determined as provided in Section 3.4 hereof, as
applicable. The last day of each month shall be a Determination Date. As of any
Determination Date, a Participant’s aggregate benefit under the Plan shall be equal to the
amount credited to his or her Deferral Account and Grandfathered Plan Account, if
applicable, as of such date.
	 
	(15)	 	Directors: The Board of Directors of the Company.
	 
	(16)	 	Effective Date: The Deconsolidation Date.
	 
	(17)	 	Eligible Employee:

     (a) Any regular Full-Time Active Employee who participates in the HAL Plan immediately prior
to the Effective Date; or

     (b) Any Employee who is (i) a regular Full-Time Active Employee, (ii) paid in United States
dollars and subject to the income tax laws of the United States, (iii) an officer or member of a
select group of highly compensated employees of the Employer, and (iv) employed on or after the
Effective Date.

	(18)	 	Employee: Any person employed by the Employer.
	 
	(19)	 	Employer: The Company, each of the entities identified on Schedule A and each
eligible organization designated as an Employer in accordance with the provisions of
Article IX of the Plan.
	 
	(20)	 	Full-Time Active Employee: An Employee whose employment with the Employer
requires, and who regularly and actively performs, 30 or more hours of service for the
Employer each week at a usual place of business of the Employer or at a location to which
such Employee is required or permitted to travel on behalf of the Employer for which such
Employee is paid regular compensation.
	 
	(21)	 	Grandfathered Plan: The Halliburton Elective Deferral Plan as in effect on December
31, 2004, the material terms of which have not been materially

3

 

	 	 	modified (within the meaning of
Section 409A) after October 3, 2004, and are preserved and continued in the Plan as reflected
in Appendix A.
	 
	(22)	 	Grandfathered Plan Account: A memorandum bookkeeping account established on
the records of the Employer for a Participant that is credited with specified deferrals of
amounts earned and vested prior to January 1, 2005, and the Credited Investment Return on
such amounts determined in accordance with Section 3.4(e) of the Grandfathered Plan. A
Participant has a 100% non-forfeitable interest in his or her Grandfathered Plan Account at
all times.
	 
	(23)	 	HAL Plan: The Halliburton Elective Deferral Plan, as amended and restated effective
May 1, 2002 and as subsequently amended with respect to any period up to the Effective Date.
	 
	(24)	 	Investment Election Change Form: The form or procedure prescribed by the
Committee pursuant to which a Participant may make changes to his or her Deemed Investment
Elections applicable to future allocations to his or her Deferral Account or Grandfathered
Plan Account and/or to his or her current Deferral Account balance or Grandfathered Plan
Account balance.
	 
	(25)	 	Investment Options: One or more alternatives designated from time to time by
the Committee for purposes of crediting earnings or losses to Deferral Accounts and
Grandfathered Plan Accounts.
	 
	(26)	 	Long-Term Incentive Compensation: Awards, other than Bonus Compensation and
Base Salary, earned under such plans or programs as the Compensation Committee may, from
time to time, designate that are payable in cash.
	 
	(27)	 	Participant: Each individual who has been selected for participation in the
Plan and who has become a Participant pursuant to Article II.
	 
	(28)	 	Plan: The KBR Elective Deferral Plan, as amended from time to time,
constituting a continuation of the HAL Plan.
	 
	(29)	 	Plan Year: The twelve consecutive month period commencing January 1 of each
year.
	 
	(30)	 	Retirement: The date the Participant separates from service with the Employer after
attaining age 55 or after the sum of the Participant’s age and years of service is 70 or
greater.
	 
	(31)	 	Section 409A: Section 409A of the Code and applicable Treasury authorities.
	 
	(32)	 	Trust: The trust, if any, established under the Trust Agreement.
	 
	(33)	 	Trust Agreement: The agreement, if any, entered into between the Employer and
the Trustee pursuant to Article VIII.

4

 

	(34)	 	Trust Fund: The funds and properties, if any, held pursuant to the provisions
of the Trust Agreement, together with all income, profits and increments thereto.
	 
	(35)	 	Trustee: The trustee or trustees appointed by the Committee who are qualified
and acting under the Trust Agreement at any time.
	 
	(36)	 	Unforeseeable Emergency: A severe financial hardship to the Participant or
beneficiary resulting from an illness or accident of the Participant or beneficiary, the
Participant’s or beneficiary’s spouse or of a dependent (as defined in Section 152(a) of
the Code) of the Participant; loss of the Participant’s or beneficiary’s property due to
casualty (including the need to rebuild a home following damage to a home not otherwise
covered by insurance); or other similar extraordinary and unforeseeable circumstances
arising as a result of events beyond the control of the Participant or beneficiary;
provided, however, that such circumstances meet the definition of “unforeseeable emergency”
under Section 409A, related Treasury pronouncements and any successor thereto.

     1.2 Number and Gender. Wherever appropriate herein, words used in the singular shall be
considered to include the plural and words used in the plural shall be considered to include the
singular. The masculine gender, where appearing in the Plan, shall be deemed to include the
feminine gender.

     1.3 Headings. The headings of Articles and Sections herein are included solely for
convenience, and if there is any conflict between such headings and the text of the Plan, the text
shall control.

II.

Participation

     2.1 Participation. Participants are all regular Full-Time Active Employees who participate
in the HAL Plan immediately prior to the Effective Date, and
thereafter shall also include those Eligible Employees who are selected by the Committee, in its sole discretion, as Participants. The
Committee shall notify each Participant of his or her selection as a Participant. Subject to the
provisions of Section 2.2, a Participant shall remain eligible to defer Base Salary and/or Bonus
Compensation hereunder for each Plan Year following his or her initial year of participation in the
Plan.

     2.2 Cessation of Active Participation. Notwithstanding any provision herein to the
contrary, an individual who has become a Participant in the Plan shall cease to be entitled to
defer Base Salary and/or Bonus Compensation hereunder effective as of the date he or she ceases to
be an Eligible Employee or any earlier date designated by the Committee. Any such Committee action
shall be communicated to the affected individual prior to the effective date of such action.

III.

Deferral Account Credits; Investment Elections

5

 

     3.1 Base Salary Deferrals.

     (a) Any Participant may elect to defer receipt of an integral percentage of from 5% to 75% of
his or her Base Salary, in 5% increments, for any Plan Year. Notwithstanding the foregoing,
however, in no event may the deferred amount under this Section 3.1(a) exceed the percentage of the
Participant’s Base Salary remaining as of the first pay period of the Plan Year after application
of all other amounts withheld from the Participant’s Base Salary for any reason, including amounts
withheld due to tax withholding or pursuant to the Participant’s elections, as in effect on January
1 of the Plan Year, under any other plans maintained by the Employer. A Participant’s election to
defer receipt of a percentage of his or her Base Salary for any Plan Year shall be made on or
before the last day of the preceding Plan Year. Notwithstanding the foregoing, if an individual
initially becomes eligible to participate in the Plan other than on the first day of a Plan Year,
such Participant’s election to defer receipt of a percentage of his or her Base Salary for such
Plan Year may be made no later than 30 days after the date he or she becomes eligible to
participate in the Plan, but such election shall be prospective only. The reduction in a
Participant’s Base Salary pursuant to his or her election shall be effected by Base Salary
reductions as of each payroll period within the election period. Deferrals of Base Salary under
this Plan shall be made before elective deferrals or contributions of Base Salary under any other
plan maintained by the Employer. Base Salary deferrals made by a Participant shall be credited to
such Participant’s Deferral Account as of the date the Base Salary deferred would have been
received by such Participant had no deferral been made pursuant to this Section. Except as
provided in Paragraph (b) of this Section, deferral elections for a Plan Year pursuant to this
Section shall be irrevocable.

     (b) If a revocation would not result in taxation under Section 409A, a Participant shall be
permitted to revoke his or her election to defer receipt of his or her Base Salary under Section
3.1(a) for any Plan Year in the event of an Unforeseeable Emergency, as determined by the Committee
in its sole discretion. For purposes of the Plan, the decision of the Committee regarding the
existence or nonexistence of an Unforeseeable Emergency of a Participant shall be final and
binding. Further, the Committee shall have the authority to require a Participant to provide such
proof as it deems necessary to establish the existence and significant nature of the Participant’s
Unforeseeable Emergency. A Participant who is permitted to revoke his or her Base Salary deferral
election during a Plan Year shall not be permitted to resume Base Salary deferrals under the Plan
until the next following Plan Year.

     3.2 Bonus Compensation Deferrals. Any Participant may elect to defer receipt of an
integral percentage of from 5% to 75% of his or her Bonus Compensation, in 5% increments, for any
Plan Year. A Participant’s election to defer receipt of a percentage of his or her Bonus
Compensation attributable to services performed in any Plan Year shall be made on or before the
last day of the preceding Plan Year; provided, however, that to the extent Bonus Compensation
satisfies the requirements for performance-based compensation under Section 409A, the Committee may
allow a Participant to make a deferral election no later than the date that is six months before
the end of the performance period for which the Bonus Compensation is paid.

6

 

Notwithstanding the
foregoing, if any individual initially becomes eligible to participate in the Plan other than on
the first day of a Plan Year, such Participant’s election to defer receipt of a percentage of his
or her Bonus Compensation for such Plan Year may be made no later than 30 days after the date he or
she becomes eligible to participate in the Plan. Deferrals of Bonus Compensation under this Plan
shall be made before elective deferrals or contributions of Bonus Compensation under any other plan
maintained by the Employer. Bonus Compensation deferrals made by a Participant shall be credited
to such Participant’s Deferral Account as of the date the Bonus Compensation deferred would have
been received by such Participant had no deferral been made pursuant to this Section 3.2. Deferral
elections for a Plan Year pursuant to this Section shall be irrevocable.

     3.3 Long-Term Incentive Compensation Deferrals. Any Participant may elect to defer receipt
of an integral percentage of from 5% to 75% of his or her Long-Term Incentive Compensation, in 5%
increments, payable in any Plan Year. A Participant’s election to defer receipt of a percentage of
his or her Long-Term Incentive Compensation payable with respect to any performance cycle shall be
made on or before the date that is six months prior to the end of such performance cycle.
Long-Term Incentive Compensation deferrals made by a Participant shall be credited to such
Participant’s Deferral Account as of the date the Long-Term Incentive Compensation deferred would
have been received by such Participant had no deferral been made pursuant to this Section 3.3.
Deferral elections pursuant to this Section shall be irrevocable.

     3.4 Investment of Deferral Accounts.

     (a) As of any Determination Date, each Participant’s Deferral Account shall consist of the
balance of the Participant’s Deferral Account as of the immediately preceding Determination Date
adjusted for:

	 	(1)	 	additional deferrals pursuant to Sections 3.1, 3.2 and/or
3.3;
	 
	 	(2)	 	distributions (if any); and
	 
	 	(3)	 	the appropriate Credited Investment Return.

     All adjustments will be recorded to the Participants’ Deferral Accounts as of each
Determination Date.

     (b) The Committee shall designate from time to time one or more Investment Options in which
the Deferral Accounts may be deemed invested. The Committee shall have the sole discretion to
determine the number of Investment Options to be designated hereunder and the nature of the
Investment Options and may change or eliminate any of the Investment Options from time to time. In
the event of such change or elimination, the Committee shall give each Participant timely notice
and opportunity to make a new election. No such change or elimination of any Investment Options
shall be considered to be an amendment to the Plan pursuant to Section 10.4. A Participant may
request that his or her Deferral Account be allocated among the deemed Investment Options. If a

7

 

Participant fails to make an election, his or her Deferral Account shall be invested in a single
fund selected by the Committee.

     (c) A Participant shall, in connection with his or her election to defer Base Salary, Bonus
Compensation and/or Long-Term Incentive Compensation for a particular Plan Year, elect one or more
Investment Options into which amounts to be allocated to his or her Deferral Account in respect of
deferrals for such Plan Year shall be deemed invested by submitting on or before the last day of
the preceding Plan Year a Deferral and Investment Election Form in accordance with the procedures
prescribed by the Committee.

     (d) A Participant may request a change to his or her Deemed Investment Elections for future
amounts allocated to his or her Deferral Account and amounts already allocated to his or her
Deferral Account. Any such change shall be made by filing with the Committee an Investment
Election Change Form. The Committee shall establish procedures relating to changes in Deemed
Investment Elections, which may include limiting the percentage, amount and frequency of such
changes and specifying the effective date for any such changes.

     (e) Each Participant’s Deferral Account shall be credited monthly with the Credited Investment
Return attributable to his or her Deferral Account. The Credited Investment Return is the amount
that the Participant’s Deferral Account would have
earned if the amounts credited to the Deferral Account had, in fact, been invested in
accordance with the Participant’s Deemed Investment Elections.

IV.

Emergency Withdrawals

     Participants shall be permitted to make withdrawals from the Plan, without penalty, only in
the event of an Unforeseeable Emergency, as determined by the Committee in its sole discretion. No
withdrawal shall be allowed to the extent that such Unforeseeable Emergency is or may be relieved
(a) through reimbursement or compensation by insurance or otherwise, (b) by liquidation of the
Participant’s assets, to the extent the liquidation of such assets would not itself cause severe
financial hardship or (c) by cessation of Base Salary deferrals under the Plan pursuant to Section
3.1(b). Further, the Committee shall permit a Participant to withdraw only the amount it
determines, in its sole discretion, to be reasonably needed to satisfy the Unforeseeable Emergency.

V.

Payment of Benefits

     5.1 Payment Election Generally. In conjunction with each deferral election made by a
Participant pursuant to Article III for a Plan Year, such Participant shall elect,

8

 

subject to
Sections 5.5, 5.6 and 5.8, the time and the form of payment with respect to such deferral and the
Credited Investment Returns attributable thereto.

     5.2 Subsequent Payment Elections. A Participant may revise his or her election regarding
the time and form of payment of deferred amounts provided that (i) the subsequent deferral election
is made no later than twelve months prior to the date upon which the deferred amount would have
been paid had no subsequent deferral election been made, (ii) the election defers payment for a
period of not less than five years from the date such payment would otherwise have been paid had no
subsequent deferral election been made, and (iii) the requirement, under (ii) above, that the
election to defer payment for at least five years does not result in a payout date later than the
date on which the Participant attains the age of seventy (70). A subsequent deferral election
under this Section 5.2 shall not be effective until the date that is twelve months after such
subsequent deferral election is made. Subsequent deferral elections under this Section 5.2 must
comply with all applicable requirements for subsequent deferral elections under Section 409A.

     Notwithstanding anything to the contrary herein, once a Participant elects payout upon
“Retirement” any future payment election revisions are prohibited. Additionally, a participant may
not revise an existing election, under Section 5.3 below, from a specific future month and year to
“Retirement”.

     5.3 Time of Benefit Payment. With respect to each deferral election made by a
Participant pursuant to Article III, such Participant shall elect to commence payment of such
deferral, and the Credited Investment Returns attributable thereto on one of the following dates:

     (a) Retirement; or

     (b) On a specific future month and year, but not earlier than five years from the date of the
deferral if the Participant has not attained age fifty-five at the time of the deferral or one year
from the date of the deferral if the Participant has attained age fifty-five at the time of the
deferral, and not later than the first day of the year in which the Participant attains age
seventy.

          In the case of a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the
Code, any payments payable as a result of the Employee’s termination of employment (other than
death or Disability) shall not be payable before the earlier of (i) the date that is six months
after the Employee’s termination of employment, (ii) the date of the Employee’s death, or (iii) the
date that otherwise complies with the requirements of Section 409A. For purposes of the Plan, a
Participant shall be a “specified employee” for the twelve-month period beginning on April 1 of a
Plan Year if the Participant is a “key employee” as defined in Section 416(i) of the Code (without
regard to Section 416(i)(5) of the Code) as of December 31 of the preceding Plan Year.

9

 

     5.4 Form of Benefit Payment. With respect to each deferral election made by a Participant
pursuant to Article III, such Participant shall elect the form of payment with respect to such
deferral and the Credited Investment Returns attributable thereto from one of the following forms:

     (a)    A lump sum; or

     (b)    Annual installment payments for a period not to exceed ten years.

     Annual installment payments shall be paid on the first business day of January of each Plan
Year. Each installment payment shall be determined by multiplying the deferral and the Credited
Investment Returns attributable thereto at the time of the payment by a fraction, the numerator of
which is one and the denominator of which is the number of remaining installment payments to be
made to Participant.

     Notwithstanding any provision of the Plan to the contrary, in the event the amount credited to
a Participant’s Deferral Account does not exceed $100,000, the Deferral Account shall be paid only
in the form of a lump sum. The provisions of this paragraph shall only apply if and to the extent
permitted under Section 409A.

     5.5 Total and Permanent Disability. If a Participant becomes totally and permanently disabled while employed by the Employer,
payment of the amounts credited to such Participant’s Deferral Account shall commence on the first
business day of the second calendar quarter following the date the Committee makes a determination
that the Participant is totally and permanently disabled, in the form of payment determined in
accordance with Section 5.4. The above notwithstanding, if such Participant is already receiving
payments pursuant to Section 5.3(b) and Section 5.4(b), such payments shall continue. For purposes
of the Plan, a Participant shall be considered totally and permanently disabled if the Committee
determines, based on a written medical opinion (unless waived by the Committee as unnecessary),
that such Participant is disabled within the meaning of Section 409A(a)(2)(C) of the Code.

     5.6 Death. In the event of a Participant’s death at a time when amounts are credited to
such Participant’s Deferral Account, such amounts shall be paid to such Participant’s designated
beneficiary or beneficiaries in a lump sum.

     5.7 Designation of Beneficiaries.

     (a) Each Participant shall have the right to designate the beneficiary or beneficiaries to
receive payment of his or her benefit in the event of his or her death. Each such designation
shall be made by executing and submitting the beneficiary designation form prescribed by the
Committee. Any such designation may be changed at any time by execution of a new designation in
accordance with this Section.

     (b) If no such designation is on file with the Committee at the time of the death of the
Participant or such designation is not effective for any reason as determined by the Committee,
then the designated beneficiary or beneficiaries to receive such benefit shall be as follows:

10

 

	 	(1)	 	If a Participant leaves a surviving spouse, his or her
benefit shall be paid to such surviving spouse.
	 
	 	(2)	 	If a Participant leaves no surviving spouse, his or her
benefit shall be paid to such Participant’s executor or administrator, or to
his or her heirs at law if there is no administration of such Participant’s
estate.

     5.8 Other Separation from Service. Subject to the provisions of Section 5.3, if a
Participant has a separation from service within the meaning of Section 409A(a)(2)(A)(i) of the
Code before Retirement for a reason other than total and permanent disability or death, the amounts
credited to such Participant’s Deferral Account shall be paid to the Participant in a lump sum
thirty days after the Participant’s date of separation from service. For purposes of this Section,
transfers of employment between and among the Company and any of its Affiliates shall not be
considered a separation from service.

     5.9 Payment of Benefits. To the extent the Trust Fund, if any, has sufficient assets, the
Trustee shall pay benefits to Participants or their beneficiaries, except to the extent the
Employer pays the benefits directly and provides adequate evidence of such payment to the Trustee.
To the extent the Trustee does not or cannot pay benefits out of the Trust Fund, the benefits shall
be paid by the Employer. Any benefit payments made to a Participant or for his or her benefit
pursuant to any provision of the Plan shall be debited to such Participant’s Deferral Account or
Grandfathered Plan Account, as applicable. All benefit payments shall be made in cash to the
fullest extent practicable.

     5.10 Unclaimed Benefits. In the case of a benefit payable on behalf of a Participant, if
the Committee is unable to locate the Participant or beneficiary to whom such benefit is payable,
upon the Committee’s determination thereof, such benefit shall be forfeited to the Employer.
Notwithstanding the foregoing, if subsequent to any such forfeiture the Participant or beneficiary
to whom such benefit is payable makes a valid claim for such benefit, such forfeited benefit shall
be paid by the Employer or restored to the Plan by the Employer.

     5.11 No Acceleration of Bonus or Long-Term Incentive Compensation. The time of payment of
any Bonus Compensation or Long-Term Incentive Compensation that the Participant has elected to
defer but that has not yet been credited to the Participant’s Deferral Account because it is not
yet payable without regard to the deferral shall not be accelerated as a result of the provisions
of this Article. If, pursuant to the provisions of this Article, payment of such Bonus
Compensation or Long-Term Incentive Compensation would no longer be deferred at the time it becomes
payable, such Bonus Compensation or Long-Term Incentive Compensation shall be paid to the
Participant as soon as practicable following the date it would have been payable had the
Participant not made a deferral election.

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VI.

Administration of the Plan

     6.1 Committee Powers and Duties. The general administration of the Plan shall be vested in
the Committee. The Committee shall supervise the administration and enforcement of the Plan
according to the terms and provisions hereof and shall have all powers necessary to accomplish
these purposes, including, but not by way of limitation, the right, power, authority, and duty:

     (a) To make rules, regulations, procedures and bylaws for the administration of the Plan that
are not inconsistent with the terms and provisions hereof, and to enforce the terms of the Plan and the rules and regulations promulgated thereunder by the Committee;

     (b) To designate, change and eliminate Investment Options in which Deferral Accounts and
Grandfathered Plan Accounts may be deemed invested and to establish procedures relating to
elections of Investment Options by Participants;

     (c) To construe in its discretion all terms, provisions, conditions, and limitations of the
Plan;

     (d) To correct any defect or to supply any omission or to reconcile any inconsistency that may
appear in the Plan in such manner and to such extent as it shall deem in its discretion expedient
to effectuate the purposes of the Plan;

     (e) To employ and compensate such accountants, attorneys, investment advisors, and other
agents, employees, and independent contractors as the Committee may deem necessary or advisable for
the proper and efficient administration of the Plan;

     (f) To determine in its discretion all questions relating to eligibility;

     (g) To determine whether and when a Participant has incurred a separation from service with
the Employer, and the reason for such separation;

     (h) To make a determination in its discretion as to the right of any person to a benefit under
the Plan and to prescribe procedures to be followed by distributees in obtaining benefits
hereunder; and

     (i) To receive and review reports from the Trustee as to the financial condition of the Trust
Fund, if any, including its receipts and disbursements.

     6.2 Self-Interest of Participants. No member of the Committee shall have any right to vote
or decide upon any matter relating solely to himself under the Plan (including, without limitation,
Committee decisions under Article II) or to vote in any case in which his or her individual right
to claim any benefit under the Plan is particularly involved. In any case in which a Committee
member is so disqualified to act and the remaining members cannot agree, the Compensation Committee
shall appoint a

12

 

temporary substitute member to exercise all the powers of the disqualified member
concerning the matter in which he or she is disqualified.

     6.3 Claims Review. In any case in which a claim for Plan benefits of a Participant or
beneficiary is denied or modified, the Committee shall furnish written notice to the claimant
within ninety days (or within 180 days if additional information requested by the Committee
necessitates an extension of the ninety-day period), which notice shall:

     (a) State the specific reason or reasons for the denial or modification;

     (b) Provide specific reference to pertinent Plan provisions on which the denial or
modification is based;

     (c) Provide a description of any additional material or information necessary for the
Participant, his or her beneficiary, or representative to perfect the claim and an explanation of
why such material or information is necessary; and

     (d) Explain the Plan’s claim review procedure as contained herein.

In the event a claim for Plan benefits is denied or modified, if the Participant, his or her
beneficiary, or a representative of such Participant or beneficiary desires to have such denial or
modification reviewed, he or she must, within sixty days following receipt of the notice of such
denial or modification, submit a written request for review by the Committee of its initial
decision. In connection with such request, the Participant, his or her beneficiary, or the
representative of such Participant or beneficiary may review any pertinent documents upon which
such denial or modification was based and may submit issues and comments in writing. Within sixty
days following such request for review the Committee shall, after providing a full and fair review,
render its final decision in writing to the Participant, his or her beneficiary or the
representative of such Participant or beneficiary stating specific reasons for such decision and
making specific references to pertinent Plan provisions upon which the decision is based. If
special circumstances require an extension of such sixty-day period, the Committee’s decision shall
be rendered as soon as possible, but not later than 120 days after receipt of the request for
review. If an extension of time for review is required, written notice of the extension shall be
furnished to the Participant, beneficiary, or the representative of such Participant or beneficiary
prior to the commencement of the extension period.

     6.4 Employer to Supply Information. The Employer shall supply full and timely information
to the Committee, including, but not limited to, information relating to each Participant’s
compensation, age, retirement, death, or other cause of separation from service to the Employer and
such other pertinent facts as the Committee may require. The Employer shall advise the Trustee, if
any, of such of the foregoing facts as are deemed necessary for the Trustee to carry out the
Trustee’s duties under the Plan and the Trust Agreement. When making a determination in connection
with the Plan, the Committee shall be entitled to rely upon the aforesaid information furnished by
the Employer.

13

 

     6.5 Indemnity. The Company shall indemnify and hold harmless each member of the Committee
against any and all expenses and liabilities arising out of his or her administrative functions or
fiduciary responsibilities, including any expenses and liabilities that are caused by or result
from an act or omission constituting the negligence of such member in the performance of such
functions or responsibilities, but excluding expenses and liabilities that are caused by or result
from such member’s own gross negligence or
willful misconduct. Expenses against which such member shall be indemnified hereunder shall
include, without limitation, the amounts of any settlement or judgment, costs, counsel fees, and
related charges reasonably incurred in connection with a claim asserted or a proceeding brought or
settlement thereof.

VII.

Administration of Funds

     7.1 Payment of Expenses. All expenses incident to the administration of the Plan and
Trust, including but not limited to, legal, accounting, Trustee fees, and expenses of the
Committee, may be paid by the Employer and, if not paid by the Employer, shall be paid by the
Trustee from the Trust Fund, if any.

     7.2 Trust Fund Property. All income, profits, recoveries, contributions, forfeitures and
any and all moneys, securities and properties of any kind at any time received or held by the
Trustee, if any, shall be held for investment purposes as a commingled Trust Fund pursuant to the
terms of the Trust Agreement. The Committee shall maintain one or more Deferral Accounts and/or
Grandfathered Plan Accounts, as necessary, in the name of each Participant, but the maintenance of
any such account designated as the account of a Participant shall not mean that such Participant
shall have a greater or lesser interest than that due him or her by operation of the Plan and shall
not be considered as segregating any funds or property from any other funds or property contained
in the commingled fund. No Participant shall have any title to any specific asset in the Trust
Fund, if any.

VIII.

Nature of the Plan

     The Employer intends and desires by the adoption of the Plan to recognize the value to the
Employer of the past and present services of employees covered by the Plan and to encourage and
assure their continued service with the Employer by making more adequate provision for their future
retirement security. The Plan is intended to constitute an unfunded, unsecured plan of deferred
compensation for a select group of management or highly compensated employees of the Employer.
Plan benefits herein provided are to be paid out of the Employer’s general assets. The Plan
constitutes a mere promise by the Employers to make benefit payments in the future and Participants
have the status of general unsecured creditors of the Employers. Nevertheless, subject to the
terms hereof and of the Trust Agreement, if any, the Employers, or the Company on behalf of the

14

 

Employers, may transfer money or other property to the Trustee and the Trustee shall pay Plan
benefits to Participants and their beneficiaries out of the Trust Fund.

     The Committee, in its sole discretion, may establish the Trust and direct the Employers to
enter into the Trust Agreement and adopt the Trust for purposes of the Plan. In such event, the Employers shall remain the owner of all assets in the Trust Fund and the
assets shall be subject to the claims of each Employer’s creditors if such Employer ever becomes
insolvent. For purposes hereof, an Employer shall be considered “insolvent” if (a) the Employer is
unable to pay its debts as they become due, or (b) the Employer is subject to a pending proceeding
as a debtor under the United States Bankruptcy Code (or any successor federal statute). The chief
executive officer of the Employer and its board of directors shall have the duty to inform the
Trustee in writing if the Employer becomes insolvent. Such notice given under the preceding
sentence by any party shall satisfy all of the parties’ duty to give notice. When so informed, the
Trustee shall suspend payments to the Participants and hold the assets for the benefit of the
Employer’s general creditors. If the Trustee receives a written allegation that the Employer is
insolvent, the Trustee shall suspend payments to the Participants and hold the Trust Fund for the
benefit of the Employer’s general creditors, and shall determine within the period specified in the
Trust Agreement whether the Employer is insolvent. If the Trustee determines that the Employer is
not insolvent, the Trustee shall resume payments to the Participants. No Participant or
beneficiary shall have any preferred claim to, or any beneficial ownership interest in, any assets
of the Trust Fund.

IX.

Participating Employers

     The Committee may designate any entity or organization eligible by law to participate in this
Plan as an Employer by written instrument delivered to the Secretary of the Company and the
designated Employer. Such written instrument shall specify the effective date of such designated
participation, may incorporate specific provisions relating to the operation of the Plan which
apply to the designated Employer only and shall become, as to such designated Employer and its
employees, a part of the Plan. Each designated Employer shall be conclusively presumed to have
consented to its designation and to have agreed to be bound by the terms of the Plan and any and
all amendments thereto upon its submission of information to the Committee required by the terms of
or with respect to the Plan; provided, however, that the terms of the Plan may be modified so as to
increase the obligations of an Employer only with the consent of such Employer, which consent shall
be conclusively presumed to have been given by such Employer upon its submission of any information
to the Committee required by the terms of or with respect to the Plan. Except as modified by the
Committee in its written instrument, the provisions of this Plan shall be applicable with respect
to each Employer separately, and amounts payable hereunder shall be paid by the Employer which
employs the particular Participant, if not paid from the Trust Fund.

15

 

X.

Miscellaneous

     10.1 Not Contract of Employment. The adoption and maintenance of the Plan shall not be deemed to be a contract between the
Employer and any person or to be consideration for the employment of any person. Nothing herein
contained shall be deemed to give any person the right to be retained in the employ of the Employer
or to restrict the right of the Employer to discharge any person at any time nor shall the Plan be
deemed to give the Employer the right to require any person to remain in the employ of the Employer
or to restrict any person’s right to terminate his or her employment at any time.

     10.2 Alienation of Interest Forbidden. Except as hereinafter provided, the interest of a
Participant or his or her beneficiary or beneficiaries hereunder may not be sold, transferred,
assigned, or encumbered in any manner, either voluntarily or involuntarily, and any attempt so to
anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be null
and void; neither shall the benefits hereunder be liable for or subject to the debts, contracts,
liabilities, engagements or torts of any person to whom such benefits or funds are payable, nor
shall they be an asset in bankruptcy or subject to garnishment, attachment or other legal or
equitable proceedings. Plan provisions to the contrary notwithstanding, the Committee shall comply
with the terms and provisions of an order that satisfies the requirements for a “qualified domestic
relations order” as such term is defined in Section 206(d)(3)(B) of the Act, including an order
that requires distributions to an alternate payee prior to a Participant’s “earliest retirement
age” as such term is defined in Section 206(d)(3)(E)(ii) of the Act.

     10.3 Withholding. All deferrals and payments provided for hereunder shall be subject to
applicable withholding and other deductions as shall be required of the Employer under any
applicable local, state or federal law.

     10.4 Amendment and Termination. The Compensation Committee may from time to time, in its
discretion, amend, in whole or in part, any or all of the provisions of the Plan; provided,
however, that no amendment may be made that would impair the rights of a Participant with respect
to amounts already allocated to his or her Deferral Account and Grandfathered Plan Account, as
applicable. The Compensation Committee may terminate the Plan at any time. In the event that the
Plan is terminated, the balance in a Participant’s Deferral Account and Grandfathered Plan Account
shall be paid to such Participant or his or her designated beneficiary in a single lump sum payment
of cash in full satisfaction of all of such Participant’s or beneficiary’s benefits hereunder if
such distribution is permitted under Section 409A. Any such amendment to or termination of the
Plan shall be in writing and signed by a member of the Compensation Committee. Notwithstanding the
above, any action taken under this Section is subject to the limitations provided in Appendix A.

     10.5 Severability. If any provision of this Plan shall be held illegal or invalid for any reason, said illegality
or invalidity shall not affect the remaining provisions

16

 

hereof; instead, each provision shall be
fully severable and the Plan shall be construed and enforced as if said illegal or invalid
provision had never been included herein.

     10.6 Governing Laws. All provisions of the Plan shall be construed in accordance with the
laws of Texas except to the extent preempted by federal law.

     10.7 Section 409A Compliance. It is intended that the provisions of this Plan satisfy the
requirements of Section 409A and that the Plan be operated in a manner consistent with such
requirements to the extent applicable. Therefore, the Committee may make adjustments to the Plan
and may construe the provisions of the Plan in accordance with the requirements of Section 409A.

	 	 	 	 	 	 	 
	 	 	KBR, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	/s/ William P. Utt 	 	 
	 

	 	 	 	William P. Utt

President and Chief Executive Officer

	 	   

17

 

SCHEDULE A

KBR Technical Services, Inc.

18

 

APPENDIX A

     The Grandfathered Plan contains the provisions governing the deferrals of accounts earned and
vested by Eligible Employees on or before December 31, 2004. This Appendix A preserves the
material terms of the Grandfathered Plan as in effect on December 31, 2004, and is intended to
satisfy the requirements of Section 409A as to grandfathered amounts. The provisions of this
Appendix A shall apply to, and be effective only with respect to, the deferral of earned and vested
amounts under the Grandfathered Plan before January 1, 2005, and the Credited Investment Return on
such deferrals credited at any time. The Plan provides for separate accounting of such amounts
deferred, earned, and vested before January 1, 2005, and the Credited Investment Return thereon.

     No amendment to the Plan shall be deemed to amend this Appendix A and the relevant provisions
of the Plan in effect prior to such amendment unless otherwise specifically set forth therein.
Pursuant to Section 1.409A-6(a)(4) of the Proposed Treasury Regulations, a modification is material
“if a benefit or right existing as of October 3, 2004 is materially enhanced or a new material
benefit or right is added....” Section 5.8 of the Grandfathered Plan was removed because that section
does not relate to the Company or to the rights of Eligible Employees under the Plan. The removal
of Section 5.8, below, is hereunder intended to be in good faith compliance with Section 409A, and
is not intended to materially modify the benefits existing as of October 3, 2004 under the
Grandfathered Plan.

     The provisions of the Plan applicable to the Grandfathered Plan Accounts shall be administered
in a manner consistent with the Grandfathered Plan and Appendix A. Wherever the Plan has added,
changed, or otherwise altered any terms of the Grandfathered Plan that were in effect on December
31, 2004, in a manner that would constitute a material modification, as described above, such
changes will be disregarded in the administration of the Grandfathered Plan Accounts herein.

APPLICABLE GRANDFATHERED PLAN TERMS

     With respect to the deferral of amounts earned and vested prior to January 1, 2005, and the
Credited Investment Return on such deferrals credited at any time, the following definitions and
Articles in this Appendix A shall be substituted for the corresponding definitions and Articles of
the Plan:

     Retirement: The date the Participant retires in accordance with the terms of his or
her Employer’s retirement policy as in effect at that time.

     Unforeseeable Emergency: A severe financial hardship to the Participant resulting
from a sudden and unexpected illness or accident of the Participant or of a dependent (as defined
in Section 152(a) of the Code) of the Participant, loss of the Participant’s property due to
casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant. For

19

 

purposes of the Grandfathered Plan, the decision of the Committee regarding the existence or
nonexistence of an Unforeseeable Emergency of a Participant shall be final and binding. Further,
the Committee shall have the authority to require a Participant to provide such proof as it deems
necessary to establish the existence and significant nature of the Participant’s Unforeseeable
Emergency.

III.

Grandfathered Plan Account Credits; Investment Elections

     3.1 Base Salary Deferrals. Effective from and after January 1, 2005, no deferrals of Base
Salary shall be credited to a Participant’s Grandfathered Plan Account.

     3.2 Bonus Compensation Deferrals. Effective from and after January 1, 2005, no deferrals
of Bonus Compensation shall be credited to a Participant’s Grandfathered Plan Account.

     3.3 Long-Term Incentive Compensation Deferrals. Effective from and after January 1, 2005,
no deferrals of Long-Term Incentive Compensation shall be credited to a Participant’s Grandfathered
Plan Account.

     3.4 Investment of Grandfathered Plan Accounts.

     (a) As of any Determination Date, each Participant’s Grandfathered Plan Account shall consist
of the balance of the Participant’s Grandfathered Plan Account as of the immediately preceding
Determination Date adjusted for:

	 	(1)	 	distributions (if any); and
	 
	 	(2)	 	the appropriate Credited Investment Return.

     All adjustments will be recorded to the Participants’ Grandfathered Plan Accounts as of each
Determination Date.

     (b) The Committee shall designate from time to time one or more Investment Options in which
the Grandfathered Plan Accounts may be deemed invested. The Committee shall have the sole
discretion to determine the number of Investment Options to be designated hereunder and the nature
of the Investment Options and may change or eliminate any of the Investment Options from time to
time. In the event of such change or elimination, the Committee shall give each Participant timely
notice and opportunity to make a new election. No such change or elimination of any Investment
Options shall be considered to be an amendment to the Plan pursuant to Section 10.4. A Participant
may request that his or her Grandfathered Plan Account be allocated among the deemed Investment
Options. If a Participant fails to make an election, his or her Grandfathered Plan Account shall
be invested in a single fund selected by the Committee.

     (c) Except as changed under Section 3.4(d), the Participant’s Deemed Investment Elections
designated in the Participant’s initial deferral election shall remain

20

 

in effect with respect to
his or her Grandfathered Plan Account and any additional amounts credited thereto.

     (d) A Participant may request a change to his or her Deemed Investment Elections for future
amounts allocated to his or her Grandfathered Plan Account and amounts already allocated to his or
her Grandfathered Plan Account. Any such change shall be made by filing with the Committee an
Investment Election Change Form. The Committee shall establish procedures relating to changes in
Deemed Investment Elections, which may include limiting the percentage, amount and frequency of
such changes and specifying the effective date for any such changes.

     (e) Each Participant’s Grandfathered Plan Account shall be credited monthly with the Credited
Investment Return attributable to his or her Grandfathered Plan Account. The Credited Investment
Return is the amount that the Participant’s Grandfathered Plan Account would have earned if the
amounts credited to the Grandfathered Plan Account had, in fact, been invested in accordance with
the Participant’s Deemed Investment Elections.

IV.

Withdrawals

     4.1 Emergency Withdrawals. Participants shall be permitted to make withdrawals from the
Grandfathered Plan Account, without penalty, only in the event of an Unforeseeable Emergency, as
determined by the Committee in its sole discretion. No withdrawal shall be allowed to the extent
that such Unforeseeable Emergency is or may be relieved (a) through reimbursement or compensation
by insurance or otherwise or (b) by liquidation of the Participant’s assets, to the extent the
liquidation of such assets would not itself cause severe financial hardship. Further, the
Committee shall permit a Participant to withdraw only the amount it determines, in its sole
discretion, to be reasonably needed to satisfy the Unforeseeable Emergency.

     4.2 Non-Emergency Withdrawals. A Participant may make withdrawals from his or her
Grandfathered Plan Accounts at any time for reasons other than an Unforeseeable Emergency, subject
to the following:

     (a) the minimum amount that may be withdrawn is $5,000;

     (b) only one such withdrawal may be made during any Plan Year;

     (c) the withdrawal shall be in cash in a lump sum and taken from the Grandfathered Plan
Accounts and Investment Options designated by the Participant;

     (d) the withdrawal must be designated in a whole percentage or a whole dollar amount; and

21

 

     (e) upon such withdrawal, a portion of the Participant’s Grandfathered Plan Account balance
shall be forfeited based on the amount withdrawn from the Grandfathered Plan, determined as
follows:

	 	 	 	 	 
	With Respect to the Amount	 	Percentage of Amount
	Withdrawn from the Following	 	Withdrawn from the Percentile to be
	Percentiles of the Grandfathered 	 	Forfeited from the Grandfathered
	Plan 	 	Plan
	First 50%

	 	 	10	%
	Second 50%

	 	 	25	%

     The withdrawal amount shall be reduced to the extent necessary for the sum of the amount of
the withdrawal and the forfeiture not to exceed 100% of the Participant’s Grandfathered Plan
Account balance.

     Notwithstanding the foregoing, if such a withdrawal is made on or within one year following a
Corporate Change (as defined below), the amount of the Participant’s Grandfathered Plan Accounts
forfeited upon such withdrawal shall be equal to 10% of the amount of such withdrawal. A Corporate
Change means one of the following events occurs: (i) the merger, consolidation or other
reorganization of the Company in which the outstanding common stock of the the Company is converted
into or exchanged for a different class of securities of the Company, a class of securities of any
other issuer (except a direct or indirect wholly owned subsidiary of the Company), cash or other
property; (ii) the sale, lease or exchange of all or substantially all of the assets of the Company
to any other corporation or entity (except a direct or indirect wholly owned subsidiary of the
Company); (iii) the adoption of the stockholders of the Company of a plan of liquidation and
dissolution; (iv) the acquisition (other than any acquisition pursuant to any other clause of this
definition) by any person or entity, including, without limitation, a “group” as contemplated by
Section 13(d)(3) of the Securities Exchange Act of 1934, of beneficial ownership, as contemplated
by such Section, of more than twenty percent (based on voting power) of the Company’s outstanding
capital stock; or (v) as a result of or in connection with a contested election of members of the
board of directors of the Company, the persons who were directors before such election shall cease
to constitute a majority of the directors of the Company.

     Withdrawals shall be paid as soon as reasonably practicable following the Participant’s
request, which must be in such form or manner as the Company may prescribe from time to time.

V.

Payment of Benefits

     5.1 Payment Election Generally. Pursuant to Article III hereof, no additional deferrals
are allowed under the Grandfathered Plan.

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     5.2 Subsequent Payment Elections. A Participant may revise his or her election regarding
the time and form of payment of deferred amounts, but such revised election shall not be effective
until one year from the date of the revised election and shall be effective only if payment has not
been made or commenced pursuant to Section 5.2 prior to the expiration of such one-year period.

     5.3 Time of Benefit Payment. With respect to each deferral election made by a Participant
pursuant to Article III, such Participant shall elect to commence payment of such deferral and the
Credited Investment Returns attributable thereto on one of the following dates:

     (a) Retirement; or

     (b) A specific future month and year, but not earlier than five years from the date of the
deferral if the Participant has not attained age fifty-five at the time of the deferral or one year
from the date of the deferral if the Participant has attained age fifty-five at the time of the
deferral, and not later than the first day of the year in which the Participant attains age
seventy.

     5.4 Form of Benefit Payment. With respect to each deferral election made by a Participant
pursuant to Article III, such Participant shall elect the form of payment with respect to such
deferral and the Credited Investment Returns attributable thereto from one of the following forms:

     (a) A lump sum; or

     (b) Installment payments for a period not to exceed ten years.

     Installment payments shall be paid annually on the first business day of January of each Plan
Year; provided however, that not later than sixty days prior to the date payment is to commence, a
Participant may elect to have his or her installment payments paid quarterly on the first business
day of each calendar quarter. Each installment payment shall be determined by multiplying the
deferral and the Credited Investment Returns attributable thereto at the time of the payment by a
fraction, the numerator of which is one and the denominator of which is the number of remaining
installment payments to be made to Participant.

     In the event the aggregate amount credited to a Participant’s Deferral Account and
Grandfathered Plan Account does not exceed $50,000, the Committee may, in its sole discretion, pay
the Grandfathered Plan Account in the form of a lump sum.

     5.5 Total and Permanent Disability. If a Participant becomes totally and permanently
disabled while employed by the Employer, payment of the amounts credited to such Participant’s
Grandfathered Plan Account shall commence on the first business day of the second calendar quarter
following the date the Committee makes a determination that the Participant is totally and
permanently disabled, in the form of payment determined in accordance with Section 5.3. The above
notwithstanding, if such Participant is already receiving payments pursuant to Section 5.2(b) and
Section 5.3(b),

23

 

such payments shall continue. For purposes of the Plan, a Participant shall be
considered totally and permanently disabled if the Committee determines, based on a written medical
opinion (unless waived by the Committee as unnecessary), that such Participant is permanently
incapable of performing his or her job for physical or mental reasons.

     5.6 Death. In the event of a Participant’s death at a time when amounts are credited to
such Participant’s Grandfathered Plan Account, such amounts shall be paid to such Participant’s
designated beneficiary or beneficiaries in five annual installments commencing as soon as
administratively feasible after such Participant’s date of death. However, the Participant’s
designated beneficiary or beneficiaries may request a lump sum payment based upon hardship, and the
Committee, in its sole discretion, may approve such request.

     5.7 Other Termination of Employment. If a Participant terminates his or her employment
with the Employer before Retirement for a reason other than total and permanent disability or
death, the amounts credited to such Participant’s Grandfathered Plan Account shall be paid to the
Participant in a lump sum no less than thirty days and no more than one year after the
Participant’s date of termination of employment. For purposes of this Section, transfers of
employment between and among the Company and any of its Affiliates shall not be considered a
termination of employment.

     5.8 Payment of Benefits. To the extent the Trust Fund, if any, has sufficient assets, the
Trustee shall pay benefits to Participants or their beneficiaries, except to the extent the
Employer pays the benefits directly and provides adequate evidence of such payment to the Trustee.
To the extent the Trustee does not or cannot pay benefits out of the Trust Fund, the benefits shall
be paid by the Employer. Any benefit payments made to a Participant or for his or her benefit
pursuant to any provision of the Grandfathered Plan shall be debited to such Participant’s
Grandfathered Plan Account. All benefit payments shall be made in cash to the fullest extent
practicable.

     5.9 No Acceleration of Bonus or Long-Term Incentive Compensation. The time of payment of
any Bonus Compensation or Long-Term Incentive Compensation that the Participant has elected to
defer but that has not yet been credited to the Participant’s Grandfathered Plan Account because it
is not yet payable without regard to the deferral shall not be accelerated as a result of the
provisions of this Article. If, pursuant to the provisions of this Article, payment of such Bonus
Compensation or Long-Term Incentive Compensation would no longer be deferred at the time it becomes
payable, such Bonus Compensation or Long-Term Incentive Compensation shall be paid to the
Participant within 90 days of the date it would have been payable had the Participant not made a
deferral election.

24exv10w8

 

EXHIBIT 10.8

April ___, 2007

Ferris, Baker Watts, Incorporated

as Representative of the Several Underwriters

100 Light Street

Baltimore, MD 21202

     Re: China Healthcare Acquisition Corp.

Ladies and Gentlemen:

     This letter, including Schedule 1 attached hereto, will confirm the agreement of the
undersigned to purchase or cause an affiliate of the undersigned to purchase shares of common stock
(“Common Stock”) of China Healthcare Acquisition Corp. (“Company”) upon the terms and conditions
set forth herein. The attached letter on Schedule 1 is intended to constitute a “written plan for
trading securities” within the meaning of Rule 10b5-1 promulgated under the Securities Exchange Act
of 1934, as amended (“Exchange Act”).

     The undersigned agrees that this letter agreement (which may be evidenced by original or
facsimile counterpart signatures hereto) constitutes an agreement to place an irrevocable order (in
the form attached as Schedule 1 hereto) for Ferris, Baker Watts,
Incorporated or another independent broker/dealer
mutually agreed upon by Ferris, Baker Watts, Incorporated and the undersigned (in any case, the
“Broker”) to purchase for the undersigned’s account or such affiliate’s account during the period
commencing on the later of (a) ten business days after the Company files a Current Report on Form
8-K (“Signing 8-K”) announcing its execution of a definitive agreement (“Definitive Agreement”) for
a merger, capital stock exchange, stock purchase, asset acquisition or other similar business
combination with an operating business (“Business Combination”) or (b) 60 calendar days after the
end of the “restricted period” under Regulation M and ending on the business day immediately
preceding the record date for the meeting of stockholders at which such Business Combination is to
be voted upon by the Company’s stockholders (such period is hereinafter referred to as the
“Purchase Period”) up to $8,000,000 of shares of Common Stock (“Maximum Stock Purchase”). The
undersigned further agrees that the attached letter agreement on Schedule 1 constitutes an
irrevocable limit order to satisfy the Maximum Stock Purchase at prices not to exceed the per share
amount held in the Company’s trust account (less taxes payable) as reported in the Signing 8-K. The
undersigned shall deposit the funds necessary to satisfy the Maximum Stock Purchase (including
through the use of margin) in an account designated by the Broker no later than the date the
Definitive Agreement is signed and agrees to provide to Ferris, Baker Watts, Incorporated until
such time, on a monthly basis, statements confirming that the undersigned has sufficient funds
necessary to satisfy the Maximum Stock Purchase.

 

 

     The undersigned shall instruct the Broker to fill such order in such amounts and at such times
and prices, in accordance with the foregoing instructions, as it may determine, in its sole
discretion, during the Purchase Period. All bids and purchases shall be executed in the Broker’s
normal fashion and pursuant to applicable regulations of the SEC and NASD and in accordance with
applicable law. The undersigned also agrees that he will not agree to pay the Broker any fees
and/or commissions with respect to such purchase obligation.

     The undersigned agrees that it shall not sell or transfer or permit any such affiliate to sell
or transfer any shares of Common Stock purchased as contemplated herein until six months after the
Company consummates a Business Combination and in the event the Company does not consummate a
Business Combination he shall not sell such shares but is entitled to distributions from the
Company upon its dissolution with respect to such shares.

     The undersigned understands that he shall be responsible and agrees to arrange for any filings
that may be required under applicable law (e.g., Schedule 13D, and Forms 4 and 5). Accordingly, the
Broker will agree to provide copies of confirmations of transactions pursuant to the attached
Schedule 1 within 24 hours of each transaction to the undersigned and any other designated person
to facilitate the undersigned’s reporting obligations under applicable law.

     The undersigned shall instruct the Broker to make, keep and produce promptly upon request a
daily time-sequences schedule of all Common Stock purchases made pursuant to this agreement, on a
transaction-by-transaction basis, including (i) size, time of execution, price of purchase; and
(ii) the exchange, quotation system, or other facility through which the Common Stock purchase
occurred. Upon request of the Division of Market Regulation of the SEC, the undersigned and the
Company shall transmit the aforementioned schedule to the Division of Market Regulation within
thirty (30) days of such request.

     The undersigned and the Company shall be available to respond to inquires by the Division of
Market Regulation regarding any Common Stock purchase(s).

     The undersigned represents and warrants that (i) the undersigned is not presently aware of any
material nonpublic information regarding the Company or its securities, and (ii) the undersigned is
currently able to enter into this letter agreement. The undersigned covenants that the undersigned
will not discuss or otherwise disclose material nonpublic information to the Broker or its
personnel responsible for carrying out this purchase obligation during the Purchase Period.

     The Company is unaware, without any inquiry or responsibility to make any inquiry, of any
legal, contractual or regulatory restrictions applicable to the undersigned as of the date hereof
that would prohibit the undersigned from entering into this letter or making any purchase pursuant
to the instructions provided herein.

2

 

     This letter agreement shall for all purposes be deemed to be made under and shall be construed
in accordance with the laws of the State of Maryland, without giving effect to conflicts of law
principles that would result in the application of the substantive laws of another jurisdiction.
This letter agreement may be executed in one or more original or facsimile counterparts, and by the
different parties hereto in separate counterparts, each of which shall be deemed to be an original,
but all of which taken together shall constitute one and the same agreement, and shall become
effective when one or more counterparts has been signed by each of the parties hereto and delivered
to each of the other parties hereto.

	 	 	 	 	 
	 	 	Very truly yours,

 	 
	 	  	______________________
 	 
	 	 	Name:  	Jack Kang 	 
	 	 	 	 
	 

ACKNOWLEDGED AND AGREED:

CHINA HEALTHCARE ACQUISITION CORP.

			
	By:	 	__________________________

	Name:

Title:

3

 

Schedule 1

_________, 2007

[Broker]

     RE: China Healthcare Acquisition Corp.

Ladies and Gentlemen:

     This letter, delivered in accordance with the Common Stock Purchase Letter, dated ___, between
Ferris, Baker Watts, Incorporated, as Representative and the undersigned (the “Purchase Letter”),
confirms the agreement therein of the undersigned to purchase or cause an affiliate of the
undersigned to purchase (the “Purchase Commitment”) shares of common stock (the “Common Stock”) of
China Healthcare Acquisition Corp. (the “Company”) that are included in the units being sold in the
Company’s initial public offering pursuant to the Company’s registration statement on Form S-1
(File No. 333-135705), as amended and supplemented from time to time. This letter is intended to
constitute a “written plan for trading securities” within the meaning of Rule 10b5-1 promulgated
under the Securities Exchange Act of 1934, as amended. The Purchase Commitment is subject to the
terms and conditions set forth herein.

     The undersigned agrees that this letter agreement constitutes an irrevocable order (the
“Order”) for you to purchase for the undersigned’s account or such affiliate’s account if the
undersigned so directs, during the period commencing on the later of (a) 10 business days (the “8-K
Date”) after the Company files a Current Report on Form 8-K (“Signing 8-K”) announcing its
execution of a definitive agreement (“Definitive Agreement”) for a merger, capital stock exchange,
stock purchase, asset acquisition or other similar business combination with an operating business
(“Business Combination”) or (b) 60 calendar days after termination of the “restricted period” under
Regulation M, up to $8,000,000 of shares of Common Stock at prices not to exceed the per share
amount held in the Company’s trust account (less taxes payable) as reported in the Signing 8-K and
ending on the business day immediately preceding the record date for the meeting of stockholders at
which such Business Combination is to be voted upon by the Company’s stockholders. You (or such
other broker-dealer(s) as you may assign the order to) agree to fill such order in such amounts and
at such times as you may determine, in your sole discretion, during such period. You agree that all
purchases shall be executed in your normal fashion and pursuant to applicable regulation by the SEC
and NASD and in accordance with applicable law.

     You shall make, keep, and produce promptly upon request a daily time-sequenced schedule of all
purchases of Common Stock made pursuant to this agreement, on a

 

 

transaction-by-transaction basis, including (i) size, time of execution, price of purchase; and
(ii) the exchange, quotation system, or other facility through which the Common Stock purchase
occurred. You shall provide copies of confirmations of transactions pursuant to this agreement
within 24 hours of each transaction to the undersigned. Upon request of the Division of Market
Regulation (the “Division”) of the SEC, the undersigned and the Company shall transmit the
aforementioned schedule to the Division within thirty (30) days of such request.

     The undersigned represents and warrants that (i) the undersigned is not presently aware of any
material nonpublic information regarding the Company or its securities, and (ii) the undersigned is
currently able to enter into this letter agreement. The undersigned covenants that the undersigned
will not discuss or otherwise disclose material nonpublic information to the Broker or its
personnel responsible for carrying out this purchase obligation during the Purchase Period.

     This letter agreement shall be governed by and interpreted and construed in accordance with
the laws of the State of Maryland applicable to contracts formed and to be performed entirely
within the State of Maryland, without regard to the conflicts of law provisions thereof to the
extent such principles or rules would require or permit the application of the laws of another
jurisdiction.

     No term or provision of this letter agreement may be amended, changed, waived, altered or
modified except by written instrument executed and delivered by the party against whom such
amendment, change, waiver, alteration or modification is to be enforced.

	 	 	 	 	 
	 	Very truly yours,

 	 
	 	By:  	___________________________
 	 
	 	 	Jack Kang 	 
	 	 	 	 
	 

2

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