Document:

KBR-EX10.26_2012.12.31-Q4

US/INTERNATIONAL EMPLOYEE

PERFORMANCE AWARD AGREEMENT

Grant Date:____________

Re:    Performance Unit Grant

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

1.    Grant of Performance Units.

The number of Performance Units granted to you as a Performance Award under the Plan is _______.  Each Performance Unit shall have a target value of $1.00.  The actual value, if any, of a Performance Unit at the end of the Performance Period will be determined based on the level of achievement during the Performance Period of the performance objectives set forth in Exhibit A hereto, which is made a part hereof for all purposes.

2.

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

		
	(b)
	Death, Disability or Retirement.  Unless otherwise provided in an agreement pursuant to Paragraph 13, if you cease to be an employee of the Company or a Subsidiary as a result of (i) your death, (ii) your permanent disability (disability being defined as being physically or mentally incapable of performing either your usual duties as an employee or any other duties as an employee that the Company reasonably makes available and such condition is likely to remain continuously and permanently, as determined by the Company or employing Subsidiary), or (iii) normal retirement on or after reaching age 65, a prorata portion of your Performance Units that become “earned”, if any, as provided in Exhibit A, will become vested.  The “prorata portion” that becomes vested shall be a fraction, the numerator of which is the number of days in the Performance Period in which you were an employee of the Company or a Subsidiary and the denominator of which is the total number of days in the Performance Period.  If your termination for the above reasons is after the end of the Performance Period but before payment of the Performance Units earned, if any, for such Performance Period, you will be fully vested in any such earned Performance Units.  

Notwithstanding the foregoing, if the EU Employment Equality Directive (Directive 2000/78/EC) has been implemented in your country of employment or residence or if the Company receives a legal opinion that there has been a legal judgment and/or legal development in your jurisdiction that would likely result in the favorable retirement treatment that applies to Performance Awards under the Plan being deemed unlawful and/or discriminatory, the provision above regarding termination of employment related to normal retirement on or after age sixty-five shall not be applicable to you.

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

		
	(d)
	Corporate Change.  Notwithstanding any other provision hereof, unless otherwise provided in an agreement pursuant to Paragraph 13, your Performance Units shall become fully vested at the maximum earned percentage provided in Exhibit A upon the occurrence of a Corporate Change during the Performance Period.  If a Corporate Change occurs after the end of the Performance Period and prior to payment of the earned Performance Units, you will be 100% vested in your earned Performance Units upon the Corporate Change and payment will be made in accordance with the results achieved for the Performance Period ended as provided in Exhibit A.

For purposes of this Agreement, employment with the Company includes employment with a Subsidiary.

		
	3.
	Payment of Vested Performance Units.  As soon as administratively practicable after the end of the Performance Period, but no later than the March 15th following the end of the Performance Period, or with respect to a Corporate Change occurring prior to the end of the Performance Period, the date of the Corporate Change, you shall be entitled to receive from the Company a payment in cash equal to the product of the Payout Percentage (as defined in Exhibit A) and the sum of the target values of your vested Performance Units.  Except as provided in Exhibit A with respect to a Corporate Change, if the performance thresholds set forth in Exhibit A are not met, no payment shall be made with respect to the Performance Units, whether or not vested.  Notwithstanding the foregoing, in no event may the amount paid to you by the Company in any year with respect to Performance Units earned hereunder exceed the applicable limit under Article V of the Plan.

		
	4.
	Recovery of Payment of Vested Performance Units.  If you are a senior executive of the Company (defined as an employee of the Company or any employing Subsidiary of the Company who is either the Chief Executive Officer of the Company (the “CEO”) or a direct report to the CEO) and the extent to which the performance measurements were achieved during any calendar year of the Performance Period changes because of any restatement of the Company’s financial results for the same calendar year, and the value of the Performance Units earned at the end of the Performance Period is determined to be an overpayment based on such calendar year’s restated financial results, the Compensation Committee may, in its sole and absolute discretion, seek recovery of the amount of the Performance Award determined to be an overpayment or hold the overpayment as debit against future Performance Awards for up to a two-year period following the end of the Performance Period.  In addition, regardless of whether you are a senior executive officer of the Company, the Company may seek recovery of any benefits provided to you under this Agreement if such recovery is required by any clawback policy adopted by the Company, which may be amended from time to time, including, but not limited to, any clawback policy adopted to satisfy the minimum clawback requirements adopted under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the regulations thereunder or any other applicable law.

		
	5.
	Limitations Upon Transfer.  All rights under this Agreement shall belong to you and may not be transferred, assigned, pledged, or hypothecated in any way (whether by operation of law or otherwise), other than by will or the laws of descent and distribution or pursuant to a “qualified domestic relations order” (as defined by the Code), and shall not be subject to execution, attachment, or similar process.  Upon any attempt to transfer, assign, pledge, hypothecate, or otherwise dispose of such rights contrary to the provisions in this Agreement or the Plan, or upon the levy of any attachment or similar process upon such rights, such rights shall immediately become null and void.

		
	6.
	Withholding of Tax.  You acknowledge that, regardless of any action taken by the Company or, if different, your employer (the “Employer”) the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to your participation in the Plan and legally applicable to you (“Tax-Related Items”), is and remains your responsibility and may exceed the amount actually withheld by the Company or the Employer.  You further acknowledge that the Company and/or the Employer (1) do not make representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Performance Units including, but not limited to, the grant, vesting or payout of the Performance Units; and (2) do not commit to the structure of the terms of the Performance Units or any aspect of the Performance Units to reduce or eliminate your liability for Tax-Related Items or achieve any particular tax result.  Further, if you are subject to Tax-Related Items in more than one jurisdiction between the date of grant and the date of any relevant taxable event, as applicable, you acknowledge that the Company and/or Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

Prior to any relevant taxable or tax withholding event, as applicable, you agree to make adequate arrangements satisfactory to the Company and/or the Employer to satisfy all Tax-Related Items.  In this regard, you authorize the Company and/or your Employer or their respective agents, at their discretion, to satisfy the obligations with regard to all Tax-Related Items by one or a combination of the following: (a) withholding from your wages or other cash compensation paid to you by the Company and/or your Employer, or (b) withholding from the payout of the Performance Units.

Depending on the withholding method, the Company may withhold or account for Tax-Related items by considering applicable minimum statutory withholding amounts or other applicable withholding rates, including maximum applicable rates, in which case you will receive a refund of any over-withheld amount in cash and will have no entitlement to the Performance Units.  Finally, you agree to pay the Company or the Employer, including through withholding from your wages or other cash compensation paid to you by the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold or account for as a result of your participation in the Plan that cannot be satisfied by the means previously described.  The Company may refuse to deliver the cash settlement or any other form of pay-out for the Performance Units, if you fail to comply with your obligations in connection with the Tax-Related Items.

		
	7.
	Nature of Grant.  In accepting the Performance Units, you acknowledge, understand and agree that:  (a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan; (b) the grant of the Performance Units is voluntary and occasional and does not create any contractual or other right to receive future grants of Performance Units, or benefits in lieu of Performance Units, even if Performance Units have been granted in the past; (c) all decisions with respect to future Performance Units or other grants, if any, will be at the sole discretion of the Company; (d) the grant of Performance Units and your participation in the Plan shall not create a right to employment or be interpreted as forming an employment or service contract with the Company, your Employer, or any Subsidiary of the Company and shall not interfere with the ability of the Company, your Employer or any Subsidiary of the Company, as applicable to terminate your employment or service relationship (if any); (e) you are voluntarily participating in the Plan; (f) the Performance Units are not intended to replace any pension rights or compensation; (g) the Performance Units and the income and value of same, are not part of normal or expected compensation for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (h) the future value of the Performance Units is unknown, indeterminable and cannot be predicted with certainty; (i) no claim or entitlement to compensation or damages shall arise from the forfeiture of the Performance Units resulting from you ceasing to provide employment or other services to the Company or your Employer (for any reason whatsoever whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you are employed or the terms of your employment agreement, if any) and in consideration of the grant of the Performance Units to which you are otherwise not entitled, you irrevocably agree never to institute any claim against the Company, or your Employer or any Subsidiary, waive your ability, if any, to bring such claim, and release the Company and your Employer and all Subsidiaries from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, you shall be deemed irrevocably to have agreed not to pursue such claim and agree to execute any and all documents necessary to request dismissal or withdrawal of such claim; (j) in the event of involuntary termination of your active employment or other services (for any reason whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you are employed or the terms of your employment agreement, if any), unless otherwise provided in this Agreement or determined by the Company, your right to vest in the Performance Units under the Plan, if any, will terminate effective as of the date that you are no longer actively providing services and will not be extended by any notice period (e.g., active services would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where you are employed or the terms of your employment agreement, if any), except as expressly provided herein, and that the Company shall have the exclusive discretion to determine when you are no longer actively providing services for purposes of the Performance Units (including whether you may still be considered to be providing services while on an approved leave of absence; (k) unless otherwise provided in the Plan or by the Company in its discretion, the Performance Units and the benefits evidenced by this Agreement do not create any entitlement to have the Performance Units or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the shares of the Company; (l) if you are requested to make repayment under Paragraph 4, you will make repayment immediately; and (m) the following provisions apply only if you are providing services outside the United States:  (i) the Performance Units are not part of normal or expected compensation or salary for any purpose; and (ii) you acknowledge and agree that neither the Company, the Employer nor any Subsidiary of the Company shall be liable for any foreign exchange rate fluctuation between your local currency and the United States Dollar that may affect the value of the Performance Units or the subsequent payout of the Performance Units.

		
	8.
	No Advice Regarding Grant.  The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding your participation in the Plan.  You are hereby advised to consult with your own personal tax, legal and financial advisors regarding your participation in the Plan before taking any action related to the Plan.

		
	9.
	Data Privacy.  You hereby explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this document by and among, as applicable, the Employer, and the Company and its Subsidiaries, for the exclusive purpose of implementing, administering and managing your participation in the Plan.  You understand that the Company and your Employer hold certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, details of all Performance Units outstanding in your favor, for the exclusive purpose of implementing, administering and managing the Plan (“Data”).  You understand that Data may be transferred to Morgan Stanley Smith Barney LLC or such other service provider as may be selected by the Company in the future, which is assisting the Company with the implementation, administration and management of the Plan.  You understand that the recipients may be located in the United States or elsewhere, and that the recipient’s country (e.g., the United States) may have different data privacy laws and protections from your country.  You understand that if you reside outside the United States, you may request a list with the names and addresses of any potential recipients of the Data by contacting your local human resources representative.  You authorize the Company, Morgan Stanley Smith Barney LLC and any other possible recipients which may assist the Company (presently or in the future) to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan.  You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the Plan.  You understand that if you reside outside the United States, you may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing your local human resources representative.  Further, you understand that you are providing the consents herein on a purely voluntary basis.  If you do not consent, or if you later seek to revoke your consent, your employment status or service and career with the Employer will not be adversely affected; the only adverse consequence of refusing or withdrawing your consent is that the Company would not be able to grant to you Performance Units or other equity awards or administer or maintain such awards.  Therefore, you understand that refusing or withdrawing your consent may affect your ability to participate in the Plan.  For more information on the consequences of your refusal to consent or withdrawal of consent, you understand that you may contact your local human resources representative.

		
	10.
	Binding Effect.  This Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company or upon any person lawfully claiming under you.

		
	11.
	Modification.  Except to the extent permitted by the Plan, any modification of this Agreement will be effective only if it is in writing and signed by each party whose rights hereunder are affected thereby.

		
	12.
	Plan Controls.  This grant is subject to the terms of the Plan, which are hereby incorporated by reference.  In the event of a conflict between the terms of this Agreement and the Plan, the Plan shall be the controlling document.  Capitalized terms used herein or in Exhibit A and not otherwise defined herein or in Exhibit A shall have the meaning ascribed to them in the Plan.

		
	13.
	Other Agreements.  Notwithstanding anything in this Agreement to the contrary, the terms of this Agreement shall not modify and shall be subject to and governed by the terms and conditions of any employment, severance, and/or change-in-control agreement between the Company (or a Subsidiary) and you, including, but not limited to, any requirement for a double-trigger to provide for vesting in connection with a Corporate Change (as such term is defined in the Plan) rather than a single-trigger.

		
	14.
	Electronic Delivery and Acceptance.  The Company may, in its sole discretion, decide to deliver any document related to current or future participation in the Plan by electronic means.  You hereby consent to receive such documents by electronic delivery and agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company.

		
	15.
	Severability.  If one or more of the provisions of this Agreement shall be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and the invalid, illegal or unenforceable provisions shall be deemed null and void; however, to the extent permissible by law, any provisions which could be deemed null and void shall first be construed, interpreted or revised retroactively to permit this Agreement to be construed so as to foster the intent of this Agreement and the Plan.

		
	16.
	Language.  If you have received this Agreement or any other document related to the Plan translated into a language other than English and if the translated version is different from the English version, the English version will control.

		
	17.
	Governing Law and Venue.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas, U.S.A., except to the extent that it implicates matters that are the subject of the General Corporation Law of the State of Delaware, which matters shall be governed by the latter law notwithstanding any conflicts of laws principles that may be applied or invoked directing the application of the laws of another jurisdiction.  Exclusive venue for any action, lawsuit or other proceedings brought to enforce this Agreement, relating to it or arising from it, or dispute resolution proceeding arising hereunder for any claim or dispute, the parties hereby submit to and consent to the sole and exclusive jurisdiction of Houston, Harris County, Texas, notwithstanding any conflicts of laws principles that may direct the jurisdiction of any other court, venue, or forum, including the jurisdiction of the employee’s home country.  

		
	18.
	Compliance with Law.  Notwithstanding any other provision of the Plan or this Agreement, unless there is an available exemption from any registration, qualification or other legal requirement applicable to the Performance Units, the Company shall not be required to deliver any payment from the payout of the Performance Units prior to the completion of any registration or qualification of the shares under any local, state, federal or foreign securities or exchange control law or under rulings or regulations of the U.S. Securities and Exchange Commission (“SEC”) or of any other governmental regulatory body, or prior to obtaining any approval or other clearance from any local, state, federal or foreign governmental agency, which registration, qualification or approval, the Company shall, in its absolute discretion, deem necessary or advisable.  You understand that the Company is under no obligation to register or qualify the shares with the SEC or any state or foreign securities commission or to seek approval or clearance from any governmental authority for payout of the Performance Units.  Further, you agree that the Company shall have unilateral authority to amend the Plan and the Agreement without your consent to the extent necessary to comply with securities or other laws applicable to issuance of shares.

		
	19.
	Exhibit B.  Notwithstanding any provisions in this document, the Performance Units shall be subject to any special terms and conditions set forth in Exhibit B to this Agreement for your country.  Moreover, if you relocate to one of the countries included in Exhibit B, the special terms and conditions for such country will apply to you, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons.  Exhibit B constitutes part of this Agreement.

		
	20.
	Imposition of Other Requirements.  The Company reserves the right to impose other requirements on your participation in the Plan, or on the Performance Units, to the extent the Company determines it is necessary or advisable for legal or administrative reasons and to require you to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.

		
	21.
	Waiver.  You acknowledge that a waiver by the company of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by you or any other Participant.

By signing below, you agree that the grant of these Performance Units is under and governed by the terms and conditions of the Plan, including the terms and conditions set forth in this Agreement, including Exhibit A.  This grant shall be void and of no effect unless you execute this Agreement prior to the payment of your vested performance units.

KBR, INC.

By:    
Name: William P. Utt    
Title: Chairman of the Board, President, and CEO    

EMPLOYEE:

    

Date:    

EXHIBIT A

To Performance Award Agreement

Performance Goals

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

I.    Performance Period

The Performance Period shall be the period beginning January 1, 2012, and ending December 31, 2014.

II.    Total Shareholder Return (“TSR”)

The payment of a Performance Unit will be determined based on the comparison of (i) the average of the TSRs (as defined below) of the Company’s common stock measured at the end of each calendar quarter during the Performance Period, with each quarter’s TSR indexed back to the beginning of the Performance Period on January 1, 2012 to (ii) the average of the TSRs of each of the common stocks of the members of the Peer Group measured at the end of each calendar quarter during the Performance Period, with each quarter’s TSR indexed back to the beginning of the Performance Period on January 1, 2012.

“TSR” or “Total Shareholder Return” shall mean, with respect to a calendar quarter, the change in the price of a share of common stock from the beginning of the Performance Period (as measured by the closing price of a share of such stock on the last trading day preceding the beginning of the Performance Period) until the end of the applicable calendar quarter to be measured during the Performance Period (as measured by the closing price of a share of such stock on the last trading day of the calendar quarter), adjusted to reflect the reinvestment of dividends (if any) through the purchase of common stock at the closing price on the corresponding dividend payment date, which shall be the ex-dividend date, and rounded to the first decimal place.  Dividends per share paid other than in the form of cash shall have a value equal to the amount of such dividends reported by the issuer to its shareholders for purposes of Federal income taxation.

		
	A.
	Average TSR

The average TSR for a company for the Performance Period shall be the sum of the TSRs of the company measured at the end of each calendar quarter during the Performance Period, divided by 12.  The average TSR for a company during the Performance Period shall be calculated based on the following formula:

	
								
	2012 TSR Formula - Sustained Performance
	 
	 

	 
	 
	 
	 
	 
	 
	 
	 

	 
	 
	 
	q=12
	 
	 
	 
	 

	Average indexed performance =
	 
	Σ
	(xq / x)
	 
	 

	q=1
	 
	 
	 
	 

	12
	 
	 

	 
	 
	 
	 
	 
	 
	 
	 

	where:
	 
	 
	 
	 
	 

	x =
	share price at beginning of performance period (measured by closing price on the last trading day preceding the beginning of the performance period)

	xq =
	closing share price at the end of each quarter (adjusted for dividends paid, where the dividend payment date is the ex-dividend date)

	q =
	quarter number (1 through 12)

	 
	 
	 
	 
	 
	 
	 
	 

	Example 1:
	 
	 
	 
	 
	 
	 
	 

	 
	 
	Date
	Share price *
	Index
	 
	 

	 
	 
	 
	(x)
	(xq / x)
	 
	 

	 
	 
	1/1/2012
	$20.00
	 
	 
	 

	 
	 
	3/31/2012
	$22.00
	110.0
	 
	 

	 
	 
	6/30/2012
	$24.00
	120.0
	 
	 

	 
	 
	9/30/2012
	$21.00
	105.0
	 
	 

	 
	 
	12/31/2012
	$20.00
	100.0
	 
	 

	 
	 
	3/31/2013
	$18.00
	90.0
	 
	 

	 
	 
	6/30/2013
	$22.00
	110.0
	 
	 

	 
	 
	9/30/2013
	$25.00
	125.0
	 
	 

	 
	 
	12/31/2013
	$28.00
	140.0
	 
	 

	 
	 
	3/31/2014
	$31.00
	155.0
	 
	 

	 
	 
	6/30/2014
	$33.00
	165.0
	 
	 

	 
	 
	9/30/2014
	$30.00
	150.0
	 
	 

	 
	 
	12/31/2014
	$28.00
	140.0
	 
	 

	 
	 
	 
	 
	 
	 
	 
	 

	q=12
	 
	 
	 
	 
	 
	 
	 

	 
	Σ
	(xq / x)
	=
	 
	1,510.0
	 
	 

	q=1
	 
	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 
	 

	q=12
	 
	 
	 
	 
	 
	 
	 

	 
	Σ
	(xq / x)
	=
	 
	125.8
	 
	 

	q=1
	 
	 
	 
	 
	 
	 
	 

	12
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 
	 

	 
	* Share price adjusted for dividends paid in the period, where the dividend payment date is the ex-dividend date.
	 

	 
	 

	 
	 
	 

		
	B.
	Peer Group and Payout

Once the average TSR for the Company during the Performance Period is calculated, the average TSR for each company in the Peer Group shall be calculated.

The Peer Group shall consist of the following companies (including KBR, Inc.):

AECOM Technology Corp.        Chicago Bridge & Iron Co, NV
Chiyoda Corp.    Fluor Corp.
Foster Wheeler Ltd.    Jacobs Engineering Group, Inc.
JGC Corp    Saipem Spa.
Shaw Group Inc.    Technip
Quanta Services, Inc.            URS Group

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

If one or more Peer Group companies are removed from the Peer Group, then the percentiles and payouts will adjust for the change in “n” of the formula provided below.  After the average TSR is determined for the Company and each company in the Peer Group, the Company’s average TSR rank among the average TSRs for the Peer Group for the Performance Period and the Company’s applicable TSR payout percentage shall be determined by the following formula:

	
								
	Peer Group Percentile and Payout Table

	 
	 
	 
	 
	 

	Percentile
	<25%
	25%
	50%
	100%

	Payout
	0%
	25%
	100%
	200%

	 
	 
	 
	 
	 

	LTI TSR Calculation Method

	Performance
	Ranking
	Percentile *
	Payout
	100%

	Level
	Weighting

	Maximum 
	1
	100.0
	%
	200.0
	%
	200.0
	%

	 
	2
	91.7
	%
	183.4
	%
	183.4
	%

	 
	3
	83.3
	%
	166.6
	%
	166.6
	%

	 
	4
	75.0
	%
	150.0
	%
	150.0
	%

	 
	5
	66.7
	%
	133.4
	%
	133.4
	%

	 
	6
	58.3
	%
	116.6
	%
	116.6
	%

	Target
	7
	50.0
	%
	100.0
	%
	100.0
	%

	 
	8
	41.7
	%
	75.0
	%
	75.0
	%

	 
	9
	33.3
	%
	50.0
	%
	50.0
	%

	Threshold
	10
	25.0
	%
	25.0
	%
	25.0
	%

	 
	11
	16.7
	%
	0.0
	%
	0.0
	%

	 
	12
	8.3
	%
	0.0
	%
	0.0
	%

	 
	13
	0.0
	%
	0.0
	%
	0.0
	%

	* Rounded to 1 decimal place

	 
	 
	 
	 
	 

	 
	Percentile for TSR purposes
	 

	 
	Percentile  = (n - r)   *  100%
	 

	 
	 
	(n - 1)
	 
	 

	where:
	 
	 
	 
	 

	n = number of Peer Group companies (including KBR)

	r = KBR ranking in the list of companies (including KBR)

	
							
	Example 1
	 
	 
	Example 3
	 
	 
	 

	KBR ranked 8th out of 12 companies
	KBR ranked 7th out of 13 companies

	(12 - 8)  * 100%    = 36.4%
	 
	(13 - 7)  * 100%    = 50.0%
	 

	(12 - 1)
	 
	 
	(13 - 1)
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 

	Example 2
	 
	 
	Example 4
	 
	 
	 

	KBR ranked 4th out of 11 companies
	KBR ranked 9th out of 13 companies

	(11 - 4)  * 100%    = 70.0%
	 
	(13 - 9)  * 100%    = 33.3%
	 

	(11 - 1)
	 
	 
	(13 - 1)
	 
	 
	 

III.    Determination of the “Earned” Value of Performance Units

	
						
	Performance Percentage
	Column A
	Column B

	Weighting
	•<Threshold
0%
	2.    Threshold
25%
	3.    Target
100%
	4.    Maximum
200%

	Company’s Average TSR Rank with Peer Group Members’ Average TSR
	100%
	<25th
	25th
	50th
	100th

For a result (the “Performance Percentage”) between Threshold and Target or Target and Maximum in Column B, the Performance Percentage earned shall be determined by linear interpolation between the two applicable standards based on the result achieved for the Performance Measure.

The “target” value of a Performance Unit is $1.00; its maximum value is $2.00 per unit if the maximum performance objective for the Performance Measure in Column B is achieved, and the Performance Unit value will be zero if the threshold performance objective for the Performance Measure is not achieved.  The value of an “earned” Performance Unit shall be determined by multiplying its “target” value of $1.00 by the Payout Percentage for the Performance Period.  The “Payout Percentage” for a Performance Unit shall be determined by multiplying Column A by the Column B Performance Percentage result for the Performance Measure.

Notwithstanding the foregoing, unless otherwise provided in an agreement pursuant to Paragraph 13 of the Agreement, for purposes of determining the Payout Percentage for payment upon a Corporate Change occurring prior to the end of the Performance Period, the Column B result for the Performance Measure shall be deemed to have been met at the maximum level (200%).

IV.    Adjustments to Performance Measurements for Significant Events

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

V.    Committee Certification

As soon as reasonably practical following the end of the Performance Period, but in no event later than the March 15th following the end of the Performance Period, the Committee shall review and determine the performance results for the Performance Period and certify those results in writing.  No Performance Units earned and vested shall be payable prior to the Committee’s certification; provided, however, Committee certification shall not apply in the event of a Corporate Change, unless otherwise provided in an agreement pursuant to paragraph 13 of the Agreement.

EXHIBIT B

KBR, INC.

Terms and Conditions of Performance Unit Grant

SPECIAL PROVISIONS OF PERFORMANCE UNITS
IN CERTAIN COUNTRIES

This Exhibit B includes additional country-specific terms that apply to residents in countries listed below.  This Exhibit B is part of the Agreement.  Unless otherwise provided below, capitalized terms used but not defined herein shall have the same meanings assigned to them in the Plan and the Agreement.

This Exhibit B also includes information regarding exchange controls and certain other issues of which you should be aware with respect to your participation in the Plan.  The information is based on the securities, exchange control and other laws in effect in the respective countries as of February 2012.  Such laws are often complex and change frequently and certain individual exchange control reporting requirements may apply upon vesting of the Performance Units.  As a result, the Company strongly recommends that you do not rely on the information noted herein as the only source of information relating to the consequences of your participation in the Plan because the information may be out of date at the time your Performance Units vest or your Performance Units are settled under the Plan.

In addition, the information is general in nature and may not apply to your particular situation, and the Company is not in a position to assure you of any particular result.  Accordingly, you are advised to seek appropriate professional advice as to how the relevant laws in your country may apply to your situation.

Note that if you are a citizen or resident of a country other than the country in which you are working or if you transfer employment after the Performance Units are granted to you, the information contained in this Exhibit B may not be applicable to you.

ALGERIA
KBR, INC. 2006 STOCK AND INCENTIVE PLAN

Exchange Control Information.

You acknowledge that, even though you receive only a cash payment upon vesting of the Performance Units, you still may be subject to certain exchange control requirements under local laws. You are required to repatriate any cash payment you receive upon settlement of the Performance Units to Algeria. You are advised to consult with your personal legal consultant to ensure compliance with any exchange control obligations arising from your participation in the Plan.
ANGOLA
KBR, INC. 2006 STOCK AND INCENTIVE PLAN

Exchange Control Information.

You acknowledge that, even though you receive only a cash payment upon vesting of the Performance Units, you still may be subject to certain exchange control requirements under local laws. You must repatriate any cash payment you receive upon settlement of the Performance Units to Algeria. You are advised to consult with your personal legal consultant to ensure compliance with any exchange control obligations arising from your participation in the Plan.
AUSTRALIA
KBR, INC. 2006 STOCK AND INCENTIVE PLAN

Exchange Control Information.

Exchange control reporting is required for cash transactions exceeding AUD10,000 and for international fund transfers.  The Australian bank assisting with the transaction will file the report for you.  If there is no Australian bank involved in the transfer, you will have to file the report.

CANADA
KBR, INC. 2006 STOCK AND INCENTIVE PLAN

Termination of Employment.
The following provision supplements Paragraph 2 of the Agreement:
In the event of your termination of employment for any reason (whether or not in breach of local labor laws), your right to vest in the Performance Units will terminate effective as of the date that is the earlier of (1) the date you receive notice of termination of employment from the Employer, or (2) the date you are no longer actively providing service, regardless of any notice period or period of pay in lieu of such notice required under applicable laws (including, but not limited to statutory law, regulatory law and/or common law); the Company shall have the exclusive discretion to determine when you are no longer actively employed for purposes of the Performance Units.

The following provisions shall apply if you are a resident of Quebec:

Data Privacy.

This provision supplements Paragraph 9 of the Agreement:

You hereby authorize the Company and representatives of any Subsidiary or affiliate to discuss with and obtain all relevant information from all personnel, professional or not, involved in the administration and operation of the Plan.  You further authorize the Company and any Subsidiary or affiliate and the administrators of the Plan to disclose and discuss the Plan with their advisors.  You further authorize the Company and any Subsidiary or affiliate to record such information and to keep such information in your file.

Language Consent.

The parties acknowledge that it is their express wish that the Agreement, including this Exhibit, as well as all documents, notices and legal proceedings entered into, given or instituted pursuant hereto or relating directly or indirectly hereto, be drawn up in English.

Consentement relatif à la langue utilisée.  Les parties reconnaissent avoir expressément souhaité que la convention («Agreement») ainsi que cette Annexe, ainsi que tous les documents, avis et procédures judiciares, éxécutés, donnés ou intentés en vertu de, ou liés directement ou indirectement à la présente convention, soient rédigés en langue anglaise.‬

INDIA
KBR, INC. 2006 STOCK AND INCENTIVE PLAN

Exchange Control Information.

You must repatriate the proceeds from the settlement of your Performance Units and convert the proceeds into local currency within a reasonable timeframe (i.e., 90 days of receipt.  You will receive a foreign inward remittance certificate (“FIRC”) from the bank where you deposit the foreign currency.  You should maintain the FIRC received from the bank as evidence of the repatriation of the funds in the event that the Reserve Bank of India or the Employer requests proof of repatriation.

INDONESIA
KBR, INC. 2006 STOCK AND INCENTIVE PLAN

Exchange Control Information.

If you remit funds into Indonesia, the Indonesian Bank through which the transaction is made will submit a report on the transaction to the Bank of Indonesia for statistical reporting purposes.  For transactions of US$10,000 or more, a description of the transaction must be included in the report.  Although the bank through which the transaction is made is required to make the report, you must complete a “Transfer Report Form.”  The Transfer Report Form will be provided to you by the bank through which the transaction is to be made.
ITALY
KBR, INC. 2006 STOCK AND INCENTIVE PLAN

Data Privacy Notice.

This section replaces Paragraph 7 of the Agreement:

You understand that the Employer, the Company and any Subsidiary may hold certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance (to the extent permitted under Italian law) or other identification number, salary, nationality, job title, any directorships held in the Company or any Subsidiary, details of all Performance Units granted, awarded, canceled, vested, unvested or outstanding in your favor, for the exclusive purpose of implementing, managing and administering the Plan (“Data”).
You also understand that providing the Company with Data is necessary for the performance of the Plan and that your refusal to provide such Data would make it impossible for the Company to perform its contractual obligations and may affect your ability to participate in the Plan. The Controller of personal data processing is KBR Inc., with registered offices at 601 Jefferson Street, Suite 3400, Houston, Texas 77002, U.S.A, and, pursuant to Legislative Decree no. 196/2003, its representative in Italy is Kellogg Brown & Root Projects Limited, with registered offices at Deloitte & Touche, Via Tortona 25, Milan, Italy.
You understand that Data will not be publicized, but it may be transferred to banks, other financial institutions, or brokers involved in the management and administration of the Plan.  You understand that Data may also be transferred to the Company’s stock plan service provider, Morgan Stanley Smith Barney, or such other administrator that may be engaged by the Company in the future.  You further understand that the Company and/or any Subsidiary will transfer Data among themselves as necessary for the purpose of implementing, administering and managing your participation in the Plan, and that the Company and/or any Subsidiary may each further transfer Data to third parties assisting the Company in the implementation, administration, and management of the Plan.  Such recipients may receive, possess, use, retain, and transfer Data in electronic or other form, for the purposes of implementing, administering, and managing your participation in the Plan.  You understand that these recipients may be located in or outside the European Economic Area, such as in the United States or elsewhere.  Should the Company exercise its discretion in suspending all necessary legal obligations connected with the management and administration of the Plan, it will delete Data as soon as it has completed all the necessary legal obligations connected with the management and administration of the Plan.
You understand that Data-processing related to the purposes specified above shall take place under automated or non-automated conditions, anonymously when possible, that comply with the purposes for which Data is collected and with confidentiality and security provisions, as set forth by applicable laws and regulations, with specific reference to Legislative Decree no. 196/2003.
The processing activity, including communication, the transfer of Data abroad, including outside of the European Economic Area, as herein specified and pursuant to applicable laws and regulations, does not require your consent thereto as the processing is necessary to performance of contractual obligations related to implementation, administration, and management of the Plan.  You understand that, pursuant to Section 7 of the Legislative Decree no. 196/2003, you have the right to, including but not limited to, access, delete, update, correct, or terminate, for legitimate reason, the Data processing.  Furthermore, you are aware that Data will not be used for direct marketing purposes.  In addition, Data provided can be reviewed and questions or complaints can be addressed by contacting your local human resources representative.

Plan Document Acknowledgment.

In accepting the Performance Units, you acknowledge that you have received a copy of the Plan and the Agreement and have reviewed the Plan and the Agreement, including this Exhibit B, in their entirety and fully understand and accept all provisions of the Plan and the Agreement, including this Exhibit B.  You further acknowledges that you have read and specifically and expressly approve the following Paragraphs of the Agreement: Paragraph 2; Paragraph 3: Payment of Vested Performance Units; Paragraph 5: Limitations Upon Transfer; Paragraph 6: Withholding of Tax; Paragraph 7: Nature of Grant; Paragraph 14: Electronic Delivery and Acceptance; Paragraph 17: Governing Law and Venue; Paragraph 19:  Exhibit B and the Data Privacy Notice in this Exhibit B.

Additional Tax/Exchange Control Information.

Exchange control reporting is required if you transfer cash to Italy in excess of €10,000 or the equivalent amount in U.S. dollars.  If the payment is made through an authorized broker resident in Italy, the broker will comply with the reporting obligation.  In addition, you will have exchange control reporting obligations if you have any foreign investment held outside Italy in excess of €10,000.  The reporting must be done on your individual tax return.

Starting from 2011, a tax on the value of financial assets held outside of Italy by Italian residents has been introduced.  The tax will apply at an annual rate of 0.1% for fiscal years 2011 and 2012, and at an annual rate of 0.15% beginning in 2013.  The taxable amount will be the fair market value of the financial assets, assessed at the end of the calendar year.

JAPAN
KBR, INC. 2006 STOCK AND INCENTIVE PLAN

There are no country specific provisions.
KAZAKHSTAN
KBR, INC. 2006 STOCK AND INCENTIVE PLAN

There are no country specific provisions.
KOREA
KBR, INC. 2006 STOCK AND INCENTIVE PLAN
There are no country-specific provisions.

MEXICO
KBR, INC. 2006 STOCK AND INCENTIVE PLAN

Acknowledgement of the Agreement.

In accepting the award of Performance Units, you acknowledge that you have received a copy of the Plan, have reviewed the Plan and the Agreement in their entirety and fully understand and accept all provisions of the Plan and the Agreement.  You further acknowledge that you have read and specifically and expressly approve the terms and conditions of Paragraph 6 of the Agreement, in which the following is clearly described and established:

		
	(1)
	Your participation in the Plan does not constitute an acquired right.

		
	(2)
	The Plan and your participation in the Plan are offered by the Company on a wholly discretionary basis.

		
	(3)
	Your participation in the Plan is voluntary.

Labor Law Acknowledgement and Policy Statement.

In accepting the award of Performance Units, you expressly recognize that KBR, Inc., with registered offices at 601 Jefferson Street, Suite 3400, Houston, Texas 77002, U.S.A., is solely responsible for the administration of the Plan and that your participation in the Plan and receipt of Performance Units does not constitute an employment relationship between you and KBR, Inc. since you are participating in the Plan on a wholly commercial basis and your sole employer is KBR in Mexico (“KBR-Mexico”), not KBR, Inc. in the U.S.  Based on the foregoing, you expressly recognize that the Plan and the benefits that you may derive from participation in the Plan do not establish any rights between you and your Employer, KBR-Mexico, and do not form part of the employment conditions and/or benefits provided by KBR-Mexico and any modification of the Plan or its termination shall not constitute a change or impairment of the terms and conditions of your employment.

You further understand that your participation in the Plan is as a result of a unilateral and discretionary decision of KBR, Inc.; therefore, KBR, Inc. reserves the absolute right to amend and/or discontinue your participation at any time without any liability to you.

Finally, you hereby declare that you do not reserve to yourself any action or right to bring any claim against KBR, Inc. for any compensation or damages regarding any provision of the Plan or the benefits derived under the Plan, and you therefore grant a full and broad release to KBR, Inc., its Subsidiary, affiliates, branches, representation offices, its shareholders, officers, agents or legal representatives with respect to any claim that may arise.

Reconocimiento del Convenio.

Aceptando este Premio (Award), el Participante reconoce que ha recibido una copia del Plan, que lo ha revisado como así también el Convenio en el Participante totalidad, y comprende y está de acuerdo con todas las disposiciones tanto del Plan como del Convenio.  Asimismo, su reconoce que ha leído y específicamente y expresamente manifiesta la conformidad del Participante con los términos y condiciones establecidos en la cláusula 6 le dicho Convenio, en el cual se establece claramente que:

		
	(1)
	La participación del Participante en el Plan de ninguna manera constituye un derecho adquirido.

		
	(2)
	Que el Plan y la participación del Participante en el mismo es una oferta por parte de KBR, Inc. de forma completamente discrecional.

		
	(3)
	Que la participación del Participante en el Plan es voluntaria.

Reconocimiento de Ausencia de Relación Laboral y Declaración de la Política.

Aceptando este Premio, el Participante reconoce que KBR, Inc. y sus oficinas registradas en 601 Jefferson Street, Suite 3400, Houston, Texas 77002, U.S.A., es el único responsable de la administración del Plan y que la participación del Participante en el mismo y la adquisicion de Acciones no constituye de ninguna manera una relación laboral entre el Participante y KBR, Inc., toda vez que la participación del Participante en el Plan deriva únicamente de una relación comercial con KBR, Inc., reconociendo expresamente que el único empleador del Participante lo es KBR en Mexico (“KBR-Mexico”), no es KBR, Inc. en los Estados Unidos.  Derivado de lo anterior, el Participante expresamente reconoce que el Plan y los beneficios que pudieran derivar del mismo no establecen ningún derecho entre el Participante y su empleador, KBR-México, y no forman parte de las condiciones laborales y/o prestaciones otorgadas por KBR-México, y expresamente el Participante reconoce que cualquier modificación al Plan o la terminación del mismo de manera alguna podrá ser interpretada como una modificación de los  condiciones de trabajo del Participante.

Asimismo, el Participante entiende que su participación en el Plan es resultado de la decisión unilateral y discrecional de KBR, Inc., por lo tanto, KBR, Inc. se reserva el derecho absoluto para modificar y/o terminar la participación del Participante en cualquier momento, sin ninguna responsabilidad para el Participante.

Finalmente, el Participante manifiesta que no se reserva ninguna acción o derecho que origine una demanda en contra de KBR, Inc., por cualquier compensación o daño en relación con cualquier disposición del Plan o de los beneficios derivados del mismo, y en consecuencia el Participante otorga un amplio y total finiquito a KBR, Inc., sus Entidades Relacionadas, afiliadas, sucursales, oficinas de representación, sus accionistas, directores, agentes y representantes legales con respecto a cualquier demanda que pudiera surgir.
NIGERIA
KBR, INC. 2006 STOCK AND INCENTIVE PLAN

There are no country specific provisions.
QATAR
KBR, INC. 2006 STOCK AND INCENTIVE PLAN

There are no country specific provisions.
RUSSIA
KBR, INC. 2006 STOCK AND INCENTIVE PLAN

U.S. Transaction.

You understand that the Performance Units shall be valid and the Agreement shall be concluded and become effective only when the Agreement is sent and/or received by the Company in the United States.

Exchange Control Information.

You must repatriate the cash payment from the settlement of the Performance Units within a reasonably short time of receipt.  The cash payment must be initially credited to you through a foreign currency account opened in your name at an authorized bank in Russia.  After the funds are initially received in Russia, they may be further remitted to foreign banks in accordance with Russian exchange control laws.

SAUDI ARABIA
KBR, INC. 2006 STOCK AND INCENTIVE PLAN

Securities Law Information.
The Agreement may not be distributed in the Kingdom of Saudi Arabia except to such persons as are permitted under the Offers of Securities Regulations issued by the Capital Market Authority.
The Capital Market Authority does not make any representation as to the accuracy or completeness of the Agreement, and expressly disclaims any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of the Agreement.  You are hereby advised to conduct your own due diligence on the accuracy of the information relating to the Performance Units.  If you do not understand the contents of the Agreement, you should consult your own advisor or an authorized financial adviser.
SINGAPORE
KBR, INC. 2006 STOCK AND INCENTIVE PLAN

Director Notification Information.

If you are a director of a Singapore Subsidiary, you may need to notify the Singapore Subsidiary in writing within two days of your receiving an interest (e.g., Performance Units) in the Company or any Subsidiary or within two days of you becoming a director if such an interest exists at the time.  This notification requirement also applies to an associate director of the Singapore Subsidiary and to a shadow director of the Singapore Subsidiary (i.e., an individual who is not on the board of directors of the Singapore Subsidiary but who has sufficient control so that the board of directors of the Singapore Subsidiary acts in accordance with the “directions and instructions” of the individual).

SOUTH AFRICA
KBR, INC. 2006 STOCK AND INCENTIVE PLAN

Tax Withholding Notification.

By your acceptance of the Performance Units and the Agreement, you agree to notify your Employer of the amount you receive upon settlement of the Performance Units.  Once the notification is made, your Employer will obtain a directive from the South African Revenue Service as to the correct amount of tax to be withheld.  If you fail to advise your Employer of any cash settlement you receive, you may be liable for a fine.  You will be responsible for paying any difference between the actual tax liability and the amount withheld.

Exchange Control Information.

You are solely responsible for complying with applicable South African exchange control regulations.  Because the exchange control regulations change frequently and without notice, you should consult your legal advisor prior to the settlement of the Performance Units to ensure compliance with current regulations.  As noted, it is your responsibility to comply with South African exchange control laws, and neither the Company nor your Employer will be liable for any fines or penalties resulting from failure to comply with applicable laws.

SWEDEN
KBR, INC. 2006 STOCK AND INCENTIVE PLAN

There are no country specific provisions.
UNITED ARAB EMIRATES
KBR, INC. 2006 STOCK AND INCENTIVE PLAN

Securities Law Information.

The Plan is only being offered to qualified Employees and is in the nature of providing equity incentives to employees of the Company’s affiliate in the UAE.  Any documents related to the Plan, including the Plan, Plan prospectus and other grant documents (“Plan Documents”), are intended for distribution only to such Employees and must not be delivered to, or relied on by, any other person.  Prospective participants should conduct their own due diligence on the securities.  If you do not understand the contents of the Plan Documents, you should consult an authorized financial adviser.

The relevant securities authorities have no responsibility for reviewing or verifying any Plan Documents. UAE securities or financial/economic authorities have not approved the Plan Documents, nor taken steps to verify the information set out in them, and thus, are not responsible for their content.

The underlying securities to which this summary relates may be illiquid and/or subject to restrictions on their resale.  Prospective participants should conduct their own due diligence on the underlying securities.
UNITED KINGDOM
KBR, INC. 2006 STOCK AND INCENTIVE PLAN

Withholding of Taxes.

This section supplements Paragraph 5 of the Agreement:

Notwithstanding Paragraph 5 of the Agreement, you agree that if you do not pay or the Employer or the Company does not withhold from you the full amount of Tax-Related Items that you owe due to the vesting/settlement of the Performance Units, or the release or assignment of the Performance Units for consideration, or the receipt of any other benefit in connection with the Performance Units (the “Taxable Event”) within 90 days after the Taxable Event, or such other period specified in Section 222(1)(c) of the U.K. Income Tax (Earnings and Pensions) Act 2003, then the amount of income tax that should have been withheld shall constitute a loan owed by you to the Employer, effective 90 days after the Taxable Event.  You agree that the loan will bear interest at Her Majesty’s Revenue & Customs (“HMRC”) official rate and will be immediately due and repayable by you, and the Company and/or the Employer may recover it at any time thereafter by withholding the funds from salary, bonus or any other funds due to you by the Employer, or from the cash payment from the settlement of the Performance Units or by demanding cash or a cheque from you. You also authorize the Company to delay the issuance of any cash settlement to you unless and until the loan is repaid in full.

Notwithstanding the foregoing, if you are an officer or executive director (as within the meaning of Section 13(k) of the U.S. Securities and Exchange Act of 1934, as amended), the terms of the immediately foregoing provision will not apply.  In the event that you are an officer or executive director and the amount necessary to satisfy the Tax-Related Items is not collected from or paid by you within 90 days of the Taxable Event, any uncollected amounts of income tax may constitute a benefit to you on which additional income tax and national insurance contributions may be payable.  You acknowledge that the Company or the Employer may recover any such additional income tax and national insurance contributions at any time thereafter by any of the means referred to in Paragraph 5 of the Agreement.  You understand that you will be responsible for reporting any income and national insurance contributions due on this additional benefit directly to the HMRC under the self-assessment regime.

1KBR-EX10.38_2012.12.31-Q4

SEVERANCE AND CHANGE IN CONTROL AGREEMENT

THIS SEVERANCE AND CHANGE IN CONTROL AGREEMENT (“Agreement”) is made by and between KBR Technical Services, Inc., a Delaware corporation (“Employer”), KBR, Inc., a Delaware corporation and parent company of Employer (“Company”), and Roy Oelking (“Executive”).

W I T N E S S E T H:

WHEREAS, Company and Employer desire to provide Executive: (i) severance termination benefits (prior to a change in control), (ii) change in control termination (double-trigger) benefits (on or after a change in control), and (iii) death, disability and retirement benefits (prior to, on, or after a change in control) on the terms and conditions, and for the consideration, hereinafter set forth, and Executive desires to be employed by Company and Employer on such terms and conditions and for such consideration;

WHEREAS, the benefits provided to Executive under this Agreement are described in the following Articles: (i) Article 3 outlines the severance termination benefits (prior to a change in control), (ii) Article 4 outlines the double-trigger change in control termination benefits (on or after a change in control), and (iii) Article 5 outlines the death, disability, and retirement benefits; and

WHEREAS, in addition to providing the benefits outlined in Articles 3, 4 and 5 (as described above), this Agreement imposes duties and obligations and other requirements as follows: (i) Article 1 imposes a duty of loyalty on Executive, (ii) Article 2 outlines the triggers to terminate employment, as well as defines base salary and target bonus, (iii) Article 6 requires Executive to sign a release to receive benefits (other than death or disability benefits) and provides for a clawback of benefits paid if there is a subsequent determination of cause, (iv) Article 7 imposes a duty of nondisclosure on Executive, (v) Article 8 includes a one-year non-compete after termination of employment (other than post change in control), and (vi) Article 9 includes a mandatory arbitration provision, as well as other miscellaneous provisions.

NOW, THEREFORE, for and in consideration of the mutual promises, covenants and obligations contained herein, Company, Employer and Executive agree as follows:

ARTICLE 1:    EMPLOYMENT AND DUTIES (Applies to All Circumstances)

1.1    Employment; Effective Date.  Effective as of December 14, 2011 (the “Effective Date”), and continuing for the period of time set forth in Article 2 of this Agreement, Executive’s employment hereunder shall be subject to the terms and conditions of this Agreement.

1.2    Positions.  From and after the Effective Date, Company shall employ Executive in the position of Group President, Hydrocarbons and/or in such other position(s) as Company determines.

1.3    Duties and Services.  Executive agrees to serve in the position referred to in Section 1.2 and to perform diligently and to the best of his abilities the duties and services appertaining to such position, as well as such additional duties and services appropriate to such position which the parties mutually may agree upon from time to time.  Executive’s employment shall also be subject to the policies maintained and established by Company that are of general applicability to Company’s employees and/or executives, as such policies may be amended from time to time.

1.4    Other Interests.  Executive agrees, during the period of his employment by Company, to devote all of his business time, energy, and best efforts to the business and affairs of Company and its affiliates.  The foregoing notwithstanding, the parties recognize and agree that Executive may engage in personal and, subject to Section 8.1, other business activities that do not conflict with the business and affairs of Company or its affiliates or interfere with Executive’s performance of his duties hereunder.  Executive shall disclose to the Board of Directors of Company (the “Board”) all such other business activities.  All determinations with respect to whether or not such other activities conflict with or interfere with Executive’s obligations hereunder shall be made by the Compensation Committee of the Board (the “Committee”) in good faith and shall be binding on the parties.

1.5    Duty of Loyalty.  Executive acknowledges and agrees that Executive owes a fiduciary duty of loyalty to act at all times in the best interests of Company.  In keeping with such duty, Executive shall make full disclosure to Company of all business opportunities pertaining to Company’s business and shall not appropriate for Executive’s own benefit business opportunities concerning Company’s business.

ARTICLE 2:    TERM; BASE SALARY; TARGET BONUS OPPORTUNITY; TERMINATION OF EMPLOYMENT (Applies to All Circumstances)

2.1    Term.  This Agreement shall begin on the Effective Date and shall terminate automatically on the earlier of (i) Executive’s termination of employment with Company and its affiliates or (ii) the second anniversary of a Change in Control Effective Date (as defined below).  Termination of this Agreement shall not affect any rights or obligations of any party that have accrued or become vested prior to such termination.  The provisions of Articles 6, 7, 8 and 9 shall survive the termination of this Agreement.

2.2    Base Salary and Target Bonus Opportunity.  For purposes of Articles 3, 4 and 5, Base Salary and Target Bonus Opportunity shall be defined as follows:

“Base Salary” means Executive’s annual rate of base salary, excluding all other items of compensation, including supplemental base salary, bonuses, overtime, commissions, cost-of-living adjustments, special pay related to foreign assignment, and incentive compensation, as of the applicable date.

“Target Bonus Opportunity” means the annual target bonus opportunity that would have been granted to Executive with respect to the next fiscal year beginning after his date of termination, had his employment continued with Company, and assuming Executive’s target bonus in that future fiscal year was equal to his target bonus percentage for the fiscal year in which Executive’s date of termination occurs.

2.3    Company’s Right to Terminate Employment.  Company shall have the right to terminate Executive’s employment under this Agreement at any time for any of the following reasons:

(i)    “Death or Disability,” as defined in Section 5.1; or

(ii)    “Cause,” as defined in Section 3.1 for a pre-Change in Control severance termination, and in Section 4.1 for a Change in Control Termination (as defined in Section 4.2).  Determination as to whether or not Cause exists for termination of Executive’s employment will be made by the Committee, or its delegate, in good faith; or

(iii)    “Involuntary Termination,” which means for any reason whatsoever, in the sole discretion of the Committee, other than Cause, Death or Disability.

2.4    Executive’s Right to Terminate.  Executive shall have the right to terminate his employment under this Agreement for any of the following reasons:

(i)    “Good Reason,” as defined in Section 3.1 for a pre-Change in Control severance termination, and in Section 4.1 for a Change in Control Termination; provided, that the events described in the definitions of Good Reason in Sections 3.1 or 4.1, as applicable, shall constitute a Good Reason only if (i) Executive provides written notice to Company within 90 days of the initial existence of the event and (ii) Company fails to remedy such circumstance within 30 days after receipt of Executive’s written notice of the event.  If Company fails to remedy the event within that 30-day period, Executive will have until the 180th day following the initial existence of the Good Reason event (but not beyond the end of the term of this Agreement as provided in Section 2.1) to terminate his employment for Good Reason; provided, however, nothing herein shall prevent Company from terminating Executive at any time for Cause; or

(ii)    “Retirement,” as defined in Section 5.1; or

(iii)    “Voluntary Termination,” which means termination of employment at any time for any reason whatsoever, in the sole discretion of Executive, other than Good Reason or Retirement.

2.5    Notice of Termination.  If Company desires to terminate Executive’s employment hereunder, it shall do so by giving written notice to Executive that it has elected to terminate Executive’s employment hereunder and stating the effective date and reason for such termination, provided that no such action shall alter or amend any other provisions hereof or rights arising hereunder.  If Executive desires to terminate his employment hereunder, he shall do so by giving at least a 30-day written notice to Company that he has elected to terminate his employment hereunder and stating the effective date and reason for such termination, provided that no such action shall alter or amend any other provisions hereof or rights arising hereunder.

2.6    Deemed Resignations.  Any termination of Executive’s employment shall constitute an automatic resignation of Executive as an officer of Company and each affiliate of Company, and an automatic resignation of Executive from the Board (if applicable) and from the board of directors of any affiliate of Company and from the board of directors or similar governing body of any corporation, limited liability company or other entity in which Company or any affiliate holds an equity interest and with respect to which board or similar governing body Executive serves as Company’s or such affiliate’s designee or other representative.

ARTICLE 3:    SEVERANCE TERMINATION (Applies Prior to a Change in Control)

3.1    Defined Terms.  For purposes of a termination of employment prior to a Change in Control, the following terms shall have the meanings indicated:

“Cause” means any of the following (i) Executive’s gross negligence or willful misconduct in the performance of the duties and services required of Executive by Company; (ii) Executive’s conviction of, or plea other than not guilty to, a felony or a misdemeanor involving moral turpitude; (iii) a material violation of Company’s Code of Business Conduct; or (iv) Executive’s failure to perform, in a reasonably satisfactory manner, the duties and services required of Executive by Company, provided that Company gives Executive at least 10 days’ written notice to cure the failure.

“Good Reason” means a 25% or more diminution in Executive’s Base Salary, unless a similar reduction is made to the base salaries of all senior executive officers of Company.

3.2    Severance Termination Benefits.  If, prior to a Change in Control, (x) Company Involuntarily Terminates Executive’s employment for any reason other than due to Death or Disability (as defined in Section 5.1) or for Cause, or (y) Executive terminates his employment for Good Reason, then, subject to Section 6.1, Company shall provide Executive with the following benefits (collectively referred to as the “Severance Termination Benefits”):

(i) a lump sum cash payment equal to the sum of: (A) one times Executive’s Base Salary on his date of termination of employment plus (B) one times Executive’s Target Bonus Opportunity (as defined in Section 2.2);

(ii) all vested stock options and stock appreciation rights (“SARs”) of Executive may be exercised within the one-year period following his date of termination, but not later than the remaining term of the option or SARs; and

(iii) all unvested stock options, SARs, restricted stock, restricted stock units, and performance awards of Executive shall be forfeited, unless and to the extent provided otherwise by the Committee, in its discretion, with respect to non-performance awards.

Notwithstanding anything in this Agreement, a plan or grant agreement to the contrary, the following items shall be forfeited automatically by Executive on his termination prior to a Change in Control:  (i) Executive’s unearned bonus under Company’s annual cash incentive plan for the fiscal year in which Executive’s date of termination occurs; (ii) Executive’s bonus under Company’s annual cash incentive plan for the fiscal year ended on or immediately before Executive’s date of termination, to the extent not yet paid; and (iii) all unvested account balances in any supplemental and/or non-qualified retirement plans of Company and its affiliates.  Subject to Section 6.1, any lump sum cash payment due Executive pursuant to this Section 3.2 shall be paid within 70 days of Executive’s termination of employment with Company.

ARTICLE 4:    CHANGE IN CONTROL TERMINATION (DOUBLE TRIGGER)

4.1    Defined Terms.  For purposes of a termination of employment on or within two years after a Change in Control, the following terms shall have the meanings indicated:

“Cause” means any of the following (whether or not occurring before, on, or after a Change in Control): (i) Executive’s gross negligence or willful misconduct in the performance of the duties and services required of Executive by Company; (ii) Executive’s conviction of, or plea other than not guilty to, a felony or a misdemeanor involving moral turpitude; or (iii) a material violation of Company’s Code of Business Conduct.  Determinations made under Section 6.5 on or after a Change in Control shall be based on this definition of Cause.

“Change in Control” shall conclusively be deemed to have occurred on a Change in Control Effective Date if any one of the following shall have occurred: (i) any person is or becomes the beneficial owner, directly or indirectly, of securities of Company (not including in the securities beneficially owned by such person any securities acquired directly from Company or its affiliates) representing 20% or more of the combined voting power of Company’s then outstanding securities; or  (ii) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date hereof, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors of Company) whose appointment or election by the Board or nomination for election by Company’s stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended (the “Incumbent Board); provided, however, that for purposes of this paragraph, any individual becoming a director subsequent to the date hereof whose election, or nomination for election by Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board, shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or (iii) there is consummated a merger or consolidation of Company or any direct or indirect subsidiary of Company with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of Company or any subsidiary of Company, at least 50% of the combined voting power of the securities of Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (B) a merger or consolidation effected to implement a recapitalization of Company (or similar transaction) in which no person is or becomes the beneficial owner, directly or indirectly, of securities of Company (not including in the securities beneficially owned by such person any securities acquired directly from Company or any of its affiliates other than in connection with the acquisition by Company or any of its affiliates of a business) representing 20% or more of the combined voting power of Company’s then outstanding securities; or  (iv) the stockholders of Company approve a plan of complete liquidation or dissolution of Company, or there is consummated an agreement for the sale, disposition, lease or exchange by Company of all or substantially all of Company’s assets, other than a sale, disposition, lease or exchange by Company of all or substantially all of Company’s assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by stockholders of Company in substantially the same proportions as their ownership of Company immediately prior to such sale.  Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the common stock of Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of Company immediately following such transaction or series of transactions.
“Change in Control Effective Date” means: (i) the first date that the direct or indirect ownership of 20% or more combined voting power of Company’s outstanding securities results in a Change in Control as described in clause (i) of such definition above; or (ii) the date of the election of directors that results in a Change in Control as described in clause (ii) of such definition; or (iii) the date of the merger or consolidation that results in a Change in Control as described in clause (iii) of such definition; or (iv) the date of stockholder approval that results in a Change in Control as described in clause (iv) of such definition.

“Good Reason” means any of the following: (i) a material diminution in Executive’s Base Salary, (ii) a material diminution in Executive’s authority, duties, or responsibilities, or (iii) unless agreed to by Executive, the relocation of the offices at which Executive is principally employed to a location more than 50 miles away.

“Welfare Plan Costs” means an amount equal to two times the total annual cost to Executive and Company of the medical, dental, life, and disability benefits provided to Executive and Executive’s eligible dependents by Company for the year of Executive’s termination of employment.
4.2    Change in Control Termination Benefits (Double Trigger).  If both: (A) a Change in Control occurs and (B) on, or within two years after the Change in Control, Company Involuntarily Terminates Executive’s employment or Executive terminates his employment for Good Reason (“Change in Control Termination”), then, subject to Section 6.1, Company will provide Executive with the following benefits (collectively referred to as the “Change in Control Termination Benefits”):

(i) a lump sum cash payment equal to the sum of: (A) two times Executive’s Base Salary on his date of termination of employment (or, if higher, Executive’s Base Salary in effect immediately prior to the Change in Control Effective Date) plus (B) two times Executive’s Target Bonus Opportunity (as defined in Section 2.2);

(ii) Executive’s unearned bonus under Company’s annual cash incentive plan payable for the fiscal year in which Executive’s date of termination occurs, with such bonus amount determined at the end of the performance period in accordance with the plan, and then such earned amount (if any) (x) prorated to Executive’s date of termination and (y) paid to Executive in a lump sum on the normal payment date for such annual bonuses under the plan, but not later than the March 15th following the end of the performance period;

(iii) Executive’s unpaid bonus (if any) accrued under Company’s annual cash incentive plan for the fiscal year that ended on or immediately before Executive’s date of termination, which accrued bonus shall be paid to Executive in a lump sum on the normal payment date for such bonuses under the plan, but not later than 74 days following Executive’s termination of employment with Company;

(iv) all of the outstanding stock options, SARs, restricted stock and restricted stock unit awards, and other equity based awards granted by Company to Executive that are not performance awards shall become fully vested and immediately exercisable or payable in full on the effective date of the release required in Section 6.1, provided such release is timely executed by Executive following his termination of employment with Company;

(v) all performance award units other than those that are covered under Company’s annual cash incentive plan shall be prorated to the date of termination and paid on actual performance at the end of the performance period, but not later than March 15th following the end of the performance period;

(vi) all account balances in any supplemental and/or non-qualified retirement plans shall become fully vested; and

(vii) the Welfare Plan Costs.

Subject to Section 6.1, the lump sum cash payment payable to Executive pursuant to Section 4.2(i) shall be paid within 70 days after Executive’s termination of employment with Company.

4.3    Parachute Payment.  Notwithstanding anything to the contrary in this Article, if Executive is a “disqualified individual” (as defined in Section 280G(c) of the Internal Revenue Code of 1986, as amended, and all Treasury Regulations thereunder, (the “Code”)), and the benefits provided for in this Article, together with any other payments and benefits which Executive has the right to receive from Company and its affiliates, would constitute a “parachute payment” (as defined in Section 280G(b)(2) of the Code), then the benefits provided hereunder (beginning with any benefit paid in cash hereunder) shall be either (1) reduced (but not below zero) so that the present value of such total amounts and benefits received by Executive will be one dollar ($1.00) less than three times Executive’s “base amount” (as defined in Section 280G of the Code) and so no portion of such amounts and benefits received by Executive shall be subject to the excise tax imposed by Section 4999 of the Code or (2) paid in full, whichever produces the better net after-tax position to Executive (taking into account any applicable tax under Section 4999 of the Code and any other applicable taxes).  The determination as to whether any such reduction in the amount of the benefits provided hereunder is necessary shall be made solely by Company.  The specific benefits to be reduced or eliminated shall also be determined solely by Company.  If a reduced benefit is provided hereunder in accordance with clause (1) of the first sentence of this paragraph and through error or otherwise that payment, when aggregated with other payments and benefits from Company (or its affiliates) used in determining if a “parachute payment” exists, exceeds one dollar ($1.00) less than three times Executive’s base amount, then Executive shall immediately repay such excess to Company upon notification that an overpayment has been made.

ARTICLE 5:    DEATH; DISABILITY; RETIREMENT; VOLUNTARY OR FOR CAUSE TERMINATION (Applies Prior to, on, or After a Change in Control)

5.1    Defined Terms.  For purposes of a termination of employment at any time (other than a severance termination covered under Article 3 or a Change in Control Termination covered under Article 4), the following terms shall have the meanings indicated:

“Death or Disability” means the termination of Executive’s employment due to his death or Company’s termination of Executive’s employment due to Executive having become incapacitated by accident, sickness, or other circumstances which, in the opinion of a physician selected or approved by Company, has rendered him mentally or physically incapable of substantially performing the duties and services required of him hereunder, and such incapacity has continued for a period of at least 180 consecutive days.

“Retirement” means Executive resigns from employment (other than for Good Reason) on any date after Executive attains age 65 or, with the approval of the Committee, on any date (x) after reaching age 55 (with at least 10 years of service) or (y) after the sum of Executive’s age and years of service is 70 or greater.

5.2    Death and Disability Benefits.  If Executive’s employment shall be terminated by Death or Disability, then Company shall provide Executive with the following benefits (collectively referred to as the “Death and Disability Benefits”):

(i) Executive’s unearned bonus under Company’s annual cash incentive plan payable for the fiscal year in which Executive’s date of termination occurs, with such bonus amount determined at the end of the performance period in accordance with the plan, and then such earned amount (if any) (x) prorated to Executive’s date of termination and (y) paid to Executive in a lump sum on the normal payment date for such annual bonuses under the plan, but not later than the March 15th following the end of the performance period;

(ii) Executive’s unpaid bonus (if any) accrued under Company’s annual cash incentive plan for the fiscal year that ended on or immediately before Executive’s date of termination, which accrued bonus shall be paid to Executive in a lump sum on the normal payment date for such bonuses under the plan, but not later than the March 15th following the end of such prior performance period;

(iii) the restrictions on all restricted stock and restricted stock units of Executive shall lapse in full on his date of termination;

(iv) all stock options and SARs of Executive shall become fully vested and exercisable on his date of termination and may be exercised until the earlier of (a) the second anniversary of his date of termination, unless otherwise provided by the Committee, in its discretion, or (b) the remaining term of such option or SAR;

(v) all outstanding performance awards of Executive shall be prorated to his date of termination and to the extent such awards become “earned” based on actual performance results at the end of the performance period, shall be paid to Executive in a lump sum on the normal payment date for such awards under the plan, but not later than the March 15th following the end of the performance period; and

(vi) all account balances of Executive in all supplemental and/or non-qualified retirement plans of Company and its affiliates shall become fully vested on his date of termination.

5.3    Retirement Benefits.  If Executive’s employment shall be terminated by Executive for Retirement, then, subject to Section 6.1, Company shall provide Executive with the Death and Disability Benefits, except that Executive may only exercise his stock options and SARs until the earlier of (a) the first anniversary of his date of termination, unless otherwise provided by the Committee, in its discretion, or (b) the remaining term of such option or SARs (collectively, the “Retirement Benefits”).  Any lump sum cash payment payable to Executive pursuant to this Section 5.3 shall be paid within 70 days after Executive’s termination of employment with Company, provided that notwithstanding anything in this Section 5.3 or Section 6.1 to the contrary, if Executive has attained the age of 65 prior to the year in which he terminates employment, any payment due pursuant to Section 5.2(ii) shall be payable on the March 15th following the end of the performance period, but not later than 74 days following Executive’s termination of employment with Company.

5.4    Voluntary Termination (Other than for Good Reason or Retirement).  If Executive Voluntarily Terminates his employment for any reason other than Good Reason or Retirement, Executive shall not be entitled to any payments or benefits under this Agreement and Executive’s vested stock options and SARs must be exercised within 30 days of the date of his termination, but not later than the option or SAR expiration date.

5.5    Termination by Company for Cause.  If Executive’s employment is terminated by Company for Cause (as defined in Section 3.1, for terminations prior to the Change in Control Effective Date, and in Section 4.1, for terminations on or after the Change in Control Effective Date), Executive shall not be entitled to any severance payments or benefits under this Agreement.

ARTICLE 6:    RELEASE; DAMAGES; MALFEASANCE; DELAY OF PAYMENTS (Applies to All Circumstances)

6.1    Release and Full Settlement.  Anything to the contrary herein notwithstanding, as a condition to the receipt of the Severance Termination Benefits, Change in Control Termination Benefits, or the Retirement Benefits under this Agreement, Executive shall first execute a release, in the form approved by the Committee, releasing the Board, Company, and Company’s parent corporation, subsidiaries, affiliates, and their respective shareholders, partners, officers, directors, employees, attorneys and agents from any and all claims and from any and all causes of action of any kind or character including, but not limited to, all claims or causes of action arising out of Executive’s employment with Company or its affiliates or the termination of such employment, but excluding all claims to vested benefits and payments Executive may have under any incentive compensation or benefit plan, program, or arrangement.  The performance of Company’s obligations hereunder and the receipt of any Severance Termination Benefits, Change in Control Termination Benefits, or Retirement Benefits under this Agreement shall constitute full settlement of all such claims and causes of action.  The release must become effective no later than 60 days after Executive’s termination of employment in order for Executive to be entitled to any Severance Termination Benefits, Change in Control Termination Benefits, or Retirement Benefits under this Agreement.

6.2    No Duty to Mitigate Losses.  Executive shall have no duty to find new employment following his termination of employment under circumstances that require Company to pay any amount to Executive pursuant to Articles 3, 4 or 5.  Any salary or remuneration received by Executive from a third party for the providing of personal services (whether by employment or by functioning as an independent contractor) following the termination of his employment under circumstances pursuant to which Articles 3, 4 or 5 apply shall not reduce Company’s obligation to make a payment to Executive (or the amount of such payment) pursuant to the terms of Articles 3, 4 or 5.

6.3    Liquidated Damages.  In light of the difficulties in estimating the damages for an early termination of Executive’s employment under this Agreement, Company and Executive hereby agree that the payments, if any, to be received by Executive pursuant to this Article 6 shall be received by Executive as liquidated damages.

6.4    Affect on Other Benefits.  This Agreement governs the rights and obligations of Executive and Company with respect to Executive’s termination of employment during the Term.  Except as expressly provided herein, Executive’s rights and obligations both during the Term and thereafter with respect to stock options, SARs, restricted stock, restricted stock units, performance awards, incentive and deferred compensation, and other compensation and benefits under the plans and programs maintained by Company shall be governed by the separate agreements, plans and other documents and instruments governing such matters; provided, however, any severance payments or benefits received under this Agreement shall offset any payments or severance benefits otherwise payable to Executive under a severance plan or program of Company for its employees in general.

6.5    Malfeasance (Clawback).  If Company determines at any time within two years after Executive’s termination that Executive’s employment could have been terminated for Cause, Company retains the rights to recover any severance benefits provided hereunder to Executive (cash or other).  In such case, Executive agrees to promptly repay such amounts to Company.  Notwithstanding anything to the contrary in the preceding two sentences, Company shall seek recovery of any benefits provided hereunder to Executive (cash or other) if Company is required by applicable law, including, but not limited to, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the Sarbanes-Oxley Act of 2002 and any regulations promulgated thereunder, to seek recovery of the benefits provided under this Agreement.

6.6    409A Delay in Payments.  Notwithstanding anything in this Agreement to the contrary, if on the date of his separation from service Executive is a “specified employee,” as defined in Section 409A of the Code, then all or a portion of any severance payments or benefits under this Agreement that would be subject to the additional tax provided by Section 409A(a)(1)(B) of the Code if not delayed as required by Section 409A(a)(2)(B)(i) of the Code shall be delayed until the first day of the seventh month following his separation from service (or, if earlier, Executive’s date of death) and shall be paid as a lump sum (without interest) on such date.

ARTICLE 7:    OWNERSHIP AND PROTECTION OF INFORMATION; COPYRIGHTS (Applies to All Circumstances)

7.1    Disclosure to Executive.  Executive acknowledges that Company has and will in the course of his employment disclose to Executive, or place Executive in a position to have access to or develop, trade secrets or confidential information of Company and its affiliates; and/or shall entrust Executive with business opportunities of Company and its affiliates; and/or shall place Executive in a position to develop business good will on behalf of Company and its affiliates.

7.2    Property of Company.  All information, ideas, concepts, improvements, discoveries, and inventions, whether patentable or not, which are conceived, made, developed or acquired by Executive, individually or in conjunction with others, during Executive’s employment by Company (whether during business hours or otherwise and whether on Company’s premises or otherwise) which relate to the business, products or services of Company or its affiliates shall be disclosed to Company and are and shall be the sole and exclusive property of Company and its affiliates. Moreover, all documents, drawings, memoranda, notes, records, files, correspondence, manuals, models, specifications, computer programs, E-mail, voice mail, electronic databases, maps and all other writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries, and inventions are and shall be the sole and exclusive property of Company and its affiliates.  Upon Executive’s termination of employment for any reason, Executive shall deliver the same, and all copies thereof, to Company.

7.3    Patent and Copyright Assignment.  Executive agrees to assign and transfer to Company or its designee, without any separate remuneration or compensation, his entire right, title and interest in and to all Inventions and Works in the Field (as hereinafter defined), together with all United States and foreign rights with respect thereto, and at Company’s expenses to execute and deliver all appropriate patent and copyright applications for securing United States and foreign patents and copyrights on such Inventions and Works in the Field, and to perform all lawful acts, including giving testimony and executing and delivering all such instruments, that may be necessary or proper to vest all such Inventions and Works in the Field and patents and copyrights with respect thereto in Company, and to assist Company in the prosecution or defense of any interference which may be declared involving any of said patent applications or patents or copyright applications or copyrights. For purposes of this Agreement the words “Inventions and Works in the Field” shall include any discovery, process, design, development, improvement, application, technique, program or invention, whether patentable or copyrightable or not and whether reduced to practice or not, conceived or made by Executive, individually or jointly with others (whether on or off Company’s premises or during or after normal working hours) while employed by Company; provided, however, that no discovery, process, design, development, improvement, application, technique, program or invention reduced to practice or conceived by Executive off Company’s premises and after normal working hours or during hours when Executive is not performing services for Company, shall be deemed to be included in the term “Inventions and Works in the Field” unless directly or indirectly related to the business then being conducted by Company or its affiliates or any business which Company or its affiliates is then actively exploring.

7.4    No Unauthorized Use or Disclosure.  Company shall provide Executive with confidential business information that is proprietary to Company in order for Executive to perform his duties for Company.  Executive acknowledges that the business of Company and its affiliates is highly competitive and that their strategies, methods, books, records, and documents, their technical information concerning their products, equipment, services, and processes, procurement procedures and pricing techniques, the names of and other information (such as credit and financial data) concerning their customers and business affiliates, all comprise confidential business information and trade secrets which are valuable, special, and unique assets which Company and its affiliates use in their business to obtain a competitive advantage over their competitors. Executive further acknowledges that protection of such confidential business information and trade secrets against unauthorized disclosure and use is of critical importance to Company and its affiliates in maintaining their competitive position.  Executive hereby agrees that Executive will not, at any time during or after Executive’s employment by Company, make any unauthorized disclosure of any confidential business information or trade secrets of Company and its affiliates, or make any use thereof, except in the carrying out of Executive’s employment responsibilities hereunder.  Company and its affiliates shall be third party beneficiaries of Executive’s obligations under this Section.  As a result of Executive’s employment by Company, Executive may also from time to time have access to, or knowledge of, confidential business information or trade secrets of third parties, such as customers, suppliers, partners, joint venturers, and the like, of Company and its affiliates.  Executive also agrees to preserve and protect the confidentiality of such third party confidential information and trade secrets to the same extent, and on the same basis, as the confidential business information and trade secrets of Company and its affiliates.  These obligations of confidence apply irrespective of whether the information has been reduced to a tangible medium of expression (e.g., is only maintained in the minds of Company’s employees) and, if it has been reduced to a tangible medium, irrespective of the form or medium in which the information is embodied (e.g., documents, drawings, memoranda, notes, records, files, correspondence, manuals, models, specifications, computer programs, E-mail, voice mail, electronic databases, maps and all other writings or materials of any type).

7.5    Assistance by Executive.  Both during the period of Executive’s employment by Company and thereafter, Executive shall assist Company and its affiliates and their respective nominees, at any time, in the protection of Company’s and its affiliates’ worldwide rights, titles, and interests in and to information, ideas, concepts, improvements, discoveries, and inventions, and their copyrighted works, including without limitation, the execution of all formal assignment documents requested by Company and its affiliates or their respective nominees and the execution of all lawful oaths and applications for applications for patents and registration of copyright in the United States and foreign countries.

7.6    Remedies.  Executive acknowledges that money damages would not be a sufficient remedy for any breach of this Article 7 by Executive, and Company shall be entitled to enforce the provisions of this Article 7 by terminating any payments then owing to Executive under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach.  Such remedies shall not be deemed the exclusive remedies for a breach of this Article 7, but shall be in addition to all remedies available at law or in equity to Company and its affiliates, including the recovery of damages from Executive and Executive’s agents involved in such breach and remedies available to Company and its affiliates pursuant to other agreements with Executive.

ARTICLE 8:    NON-COMPETITION OBLIGATIONS (Applies Prior to a Change in Control)

8.1    Non-competition Obligations.  As part of the consideration for the compensation and benefits to be paid to Executive hereunder, to protect the trade secrets and confidential information of Company and its affiliates that will be disclosed or entrusted to Executive, the business good will of Company and its affiliates that will in the future be developed in Executive, or the business opportunities that will in the future be disclosed or entrusted to Executive by Company and its affiliates, Company and Executive agree to the provisions of this Article 8. Executive agrees that during the period of Executive’s non-competition obligations hereunder, Executive shall not, directly or indirectly for Executive or for others, in any geographic area or market where Company or its affiliates are conducting any business as of the date of termination of the employment relationship or have during the previous 12 months conducted any business:

(i)    engage in any engineering, construction, or services business supporting the energy, petrochemicals, government services or civil infrastructure sectors that is competitive with the business conducted by Company or its affiliates;

(ii)    render any advice or services to, or otherwise assist, any other person, association, or entity who is engaged, directly or indirectly, with any engineering, construction, or services business supporting the energy, petrochemicals, government services or civil infrastructure sectors that is competitive with the business conducted by Company or its affiliates;

(iii)    induce any employee of Company or its affiliates to terminate his or her employment with Company or its affiliates, or hire or assist in the hiring of any such employee by any person, association, or entity not affiliated with Company; or

(iv)    request or cause any customer of Company or its affiliates to terminate any business relationship with Company or its affiliates.

These non-competition obligations shall apply during the period that Executive is employed by Company and its affiliates and shall continue until the first anniversary of his termination of employment; provided, however, with respect to termination of employment on or after a Change in Control, the obligations under subparagraphs (i) and (ii) shall cease to apply.  Executive understands that the foregoing restrictions may limit Executive’s ability to engage in certain businesses anywhere in the world during the period provided for above, but acknowledges that Executive will receive sufficiently high remuneration and other benefits under this Agreement to justify such restriction.

8.2    Enforcement and Remedies.  Executive acknowledges that money damages would not be sufficient remedy for any breach of this Article 8 by Executive, and Company shall be entitled to enforce the provisions of this Article 8 by terminating any payments then owing to Executive under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach.  Such remedies shall not be deemed the exclusive remedies for a breach of this Article 8, but shall be in addition to all remedies available at law or in equity to Company, including, without limitation, the recovery of damages from Executive and Executive’s agents involved in such breach and remedies available to Company pursuant to other agreements with Executive.

8.3    Reformation.  It is expressly understood and agreed that Company and Executive consider the restrictions contained in this Article 8 to be reasonable and necessary to protect the proprietary information of Company and its affiliates.  Nevertheless, if any of the aforesaid restrictions are found by a court (or arbitrator) having jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions therein set forth to be modified by such court (or arbitrator) so as to be reasonable and enforceable and, as so modified by the court (or arbitrator), to be fully enforced.

ARTICLE 9:    MISCELLANEOUS (Applies to All Circumstances)

9.1    Notices.  For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to Company:
KBR, Inc.
601 Jefferson Street, Suite 3400
Houston, Texas 77002
Attention: Chairman of the Compensation Committee

If to Executive to:
the last known home address of Executive on file with Company

or to such other address as either party may furnish to the other in writing in accordance herewith, except that notices or changes of address shall be effective only upon receipt.

9.2    Applicable Law/Venue.  This Agreement is entered into under, and shall be governed for all purposes by, the laws of the State of Texas without regard to any conflicts of laws principles.  Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts in Houston, Texas for the purposes of any proceeding arising out of or under this Agreement, without regard to any conflicts of laws principles that may direct the jurisdiction of any court venue, or forum, including the jurisdiction of Executive’s home country.

9.3    No Waiver.  No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

9.4    Severability.  If a court (or an arbitrator) of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain in full force and effect.

9.5    Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.

9.6    Withholding of Taxes and Other Employee Deductions.  Company may withhold from any benefits and payments made pursuant to this Agreement all federal, state, city and other taxes as may be required pursuant to any law or governmental regulation or ruling and all other normal employee deductions made with respect to Company’s employees generally.

9.7    Headings.  The Section headings have been inserted for purposes of convenience and shall not be used for interpretive purposes.

9.8    Gender and Plurals.  Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number includes the plural and conversely.

9.9    Affiliate.  As used in this Agreement, the term “affiliate” shall mean any entity which owns or controls, is owned or controlled by, or is under common ownership or control with, Company.

9.10    Assignment.  This Agreement shall be binding upon and inure to the benefit of Company and any successor of Company, by merger or otherwise.  Except as provided in the preceding sentence, this Agreement, and the rights and obligations of the parties hereunder, are personal and neither this Agreement, nor any right, benefit, or obligation of either party hereto, shall be subject to voluntary or involuntary assignment, alienation or transfer, whether by operation of law or otherwise, without the prior written consent of the other party.

9.11    Entire Agreement.  Except as provided in any signed written agreement contemporaneously or hereafter executed by Company and Executive, this Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, and contains all the covenants, promises, representations, warranties and agreements between the parties with respect to employment of Executive by Company.  Without limiting the scope of the preceding sentence, all individual employment, severance, and change in control agreements between the parties preceding the date of execution of this Agreement and relating to the subject matter hereof are hereby null and void and of no further force and effect.  Any modification of this Agreement will be effective only if it is in writing and signed by the party to be charged.

9.12    KBR Dispute Resolution Plan.  It is the mutual intention of the parties to have any dispute concerning this Agreement resolved out of court.  Accordingly, the parties agree that any such dispute shall, as the sole and exclusive remedy, be submitted for resolution through the KBR Dispute Resolution Plan; provided, however, that Executive, on his own behalf and on behalf of any Company entities, shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any breach or the continuation of any breach of the provisions of this Agreement, and Executive hereby consents that such restraining order or injunction may be granted without the necessity of Company posting any bond.  The parties agree that the resolution of any such dispute through the KBR Dispute Resolution Plan shall be final and binding. Notwithstanding the foregoing, on or after a Change in Control, the parties will no longer be subject to the KBR Dispute Resolution Plan and may seek resolution in court, subject to Section 9.2.

9.13.    Tax Cooperation.  Except for any excess parachute payments, it is the intent of Company and Executive that compensation paid to Executive, whether pursuant to this Agreement or otherwise, be deductible by Company for federal tax purposes.  In this regard, the parties intend that bonuses and other performance-based pay of Executive will comply with the requirements of Section 162(m) of the Code.  Accordingly, if the definition of Target Bonus Opportunity would cause a bonus granted to Executive under Company’s annual incentive compensation plan to not meet the requirements of Section 162(m), such definition shall be modified or deleted, as necessary, as determined in good faith by the Committee, to comply with Section 162(m).  Executive agrees to take all actions reasonably requested by Company with respect to Company being able to deduct Executive’s compensation for federal tax purposes.  In addition, Company and Executive agree to cooperate so that, to the extent reasonably practical, no payments to Executive will be subject to the additional tax provided by Section 409A.

9.14    Employment.  As of the Effective Date, Executive is an employee of Employer and an officer of Company and the parties acknowledge that such dual status may continue.  The parties agree that the term “Company” may mean “Employer” or “affiliate” in this Agreement, as the context and facts require, all as determined in good faith by the Committee, or its delegate.  For purposes of this Agreement, a “termination of Executive’s employment” means a separation of service for purposes of Section 409A of the Code.  A transfer to an affiliate shall not be a termination of Executive’s employment.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective for all purposes as of the Effective Date.

KBR, INC.

By:     
Name:     
Title:     
“COMPANY”

KBR TECHNICAL SERVICES, INC

By:     
Name:     
Title:     
“EMPLOYER”

By:     
Name:     
Title:     
“EXECUTIVE”

1

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