Exhibit 10.3
KBR
SUPPLEMENTAL EXECUTIVE
RETIREMENT PLAN
TABLE OF CONTENTS
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ARTICLE I Purpose of the Plan
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ARTICLE II Definitions
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ARTICLE III Administration of the Plan
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ARTICLE IV Allocations Under the Plan; Participation in Plan; Selection for Awards
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ARTICLE V Non-Assignability of Awards
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ARTICLE VI Vesting
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ARTICLE VII Distribution of Awards
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ARTICLE VIII Nature of Plan
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ARTICLE IX Funding of Obligation
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ARTICLE X Amendment or Termination of Plan
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ARTICLE XI General Provisions
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ARTICLE XII Effective Date
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SCHEDULE A
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APPENDIX A
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ARTICLE XIII Allocations Under the Plan
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ARTICLE XIV Vesting
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ARTICLE XV Distribution of Awards
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(i)
KBR SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN
W I T N E S S E T H:
WHEREAS
, the Board of Directors of Halliburton Company (Halliburton) has previously adopted
the Halliburton Company Supplemental Executive Retirement Plan, as most recently amended and
restated effective December 7, 2005, for the benefit of its employees and the employees of its
subsidiaries to aid such employees in making more adequate provision for their retirement; and
WHEREAS
, Halliburton determined that it would be appropriate and desirable for Halliburton to
separate the business and assets of KBR, Inc. (the Company) and its subsidiaries, from the
business and assets of Halliburton and its other subsidiaries through an initial public offering of
the common stock of the Company; and
WHEREAS
, Halliburton plans to take action which will result in the Company and its
subsidiaries ceasing to be a member of the Halliburton controlled group; and
WHEREAS
, the Company desires to provide benefits for certain of its new employees including
certain current employees who had previously participated in the HAL Plan, as hereafter defined;
and
WHEREAS
, pursuant to the terms of the HAL Plan, each Employer thereunder was liable for the
benefits related to its employees, and the Company and the Employers hereunder desire to continue
to provide to such employees an opportunity to make deferrals of certain amounts, consistent with
the provisions of Section 409A of the Internal Revenue Code of 1986 as amended (the Code); and
WHEREAS,
the provisions of the HAL Plan, as amended through the Effective Date, will remain in
effect for all deferrals prior to the Effective Date; and
WHEREAS
, the Company desires to preserve the material terms of the HAL Plan as in effect on
December 31, 2004 (the Grandfathered Plan) in order that Grandfathered Plan qualify as a
grandfathered plan for purposes of Section 409A of the Code; and
WHEREAS
, certain provisions applicable solely to the Grandfathered Plan are preserved in
Appendix A, for purposes of determining the terms applicable to amounts deferred under the
Grandfathered Plan, which provisions shall be substituted for the corresponding provisions
contained herein.
NOW THEREFORE
, the HAL Plan, including the Grandfathered Plan, is hereby continued for Senior
Executives with the terms set forth below, and is hereby renamed the KBR Supplemental Executive
Retirement Plan to read as follows, effective as of the Effective Date:
(ii)
ARTICLE I
Purpose of the Plan
The purpose of the KBR Supplemental Executive Retirement Plan is to provide supplemental retirement
benefits to Participants in order to promote growth of the Company and provide additional means of
attracting and holding qualified competent executives.
ARTICLE II
Definitions
Where the following words and phrases appear in the Plan, they shall have the respective meanings
set forth below, unless their context clearly indicates to the contrary.
(A)
Account:
An individual account for each Participant on the books of such Participants
Employer to which is credited amounts allocated for the benefit of such Participant pursuant to the
provisions of Article IV, Paragraph (D) and interest credited pursuant to the provisions of Article
IV, Paragraph (G).
(B)
Allocation Year
: The calendar year for which an allocation is made to a Participants
Account pursuant to Article IV.
(C)
Board
: The Board of Directors of the Company.
(D)
Code
: The Internal Revenue Code of 1986, as amended.
(E)
Committee
: The administrative committee appointed by the Compensation Committee to
administer the Plan.
(F)
Compensation Committee
: The Compensation Committee of the Board.
(G)
Company
: KBR, Inc., or, only for amounts deferred under the HAL Plan and similar purposes,
Halliburton Company.
(H)
Deconsolidation Date
: The date upon which an event reduces the amount of the
Company stock owned directly or indirectly by Halliburton Company to be less than the amount
required for Halliburton Company to control the Company within the meaning of Section 1504(a)(2) of
the Code.
(I)
Effective Date
: The Deconsolidation Date.
(J)
Employee
: Any employee of an Employer. The term does not include independent contractors
or persons who are retained by an Employer as consultants only.
(K)
Employer
: The Company, each of the entities identified on Schedule A and each eligible
organization designated as an Employer in accordance with the provisions of Article III of the
Plan.
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(L)
ERISA
: The Employee Retirement Income Security Act of 1974, as amended.
(M)
Grandfathered Plan
: The Halliburton Company Supplemental Executive Retirement
Plan as in effect on December 31, 2004, the material terms of which have not been materially
modified (within the meaning of Section 409A) after October 3, 2004, and are preserved and
continued in the Plan as reflected in Appendix A.
(N)
Grandfathered Plan Account
: A memorandum bookkeeping account established on the
records of the Employer for a Participant that is credited with specified deferrals of amounts
earned and vested prior to January 1, 2005, and the amounts earned on such amounts determined in
accordance with Article XIII of the Grandfathered Plan. A Participant has a 100% non-forfeitable
interest in his or her Grandfathered Plan Account at all times.
(O)
HAL Plan
: The Halliburton Company Supplemental Executive Retirement Plan, as
amended and restated effective December 7, 2005 and as subsequently amended with respect to any
period up to the Effective Date.
(P)
Participant
: A Senior Executive who is selected as a Participant for an Allocation Year.
The Compensation Committee shall be the sole judge of who shall be eligible to be a Participant for
any Allocation Year. The selection of a Senior Executive to be a Participant for a particular
Allocation Year shall not constitute him or her a Participant for another Allocation Year unless he
or she is selected to be a Participant for such other Allocation Year by the Compensation
Committee.
(Q)
Plan
: The KBR Supplemental Executive Retirement Plan, as amended from time to time,
constituting a continuation of the HAL Plan.
(R)
Section 409A
: Section 409A of the Code and applicable Treasury authorities.
(S)
Senior Executive
: An Employee who is a senior executive, including an officer, of an
Employer (whether or not he or she is also a director thereto), who is employed by an Employer on a
full-time basis, who is compensated for such employment by a regular salary and who, in the opinion
of the Compensation Committee, is one of the key personnel of an Employer in a position to
contribute materially to its continued growth and development and to its future financial success.
(T)
Subsidiary
: At any given time, a company (whether a corporation, partnership, limited
liability company or other form of entity) in which the Company or any other of the Subsidiaries or
both owns, directly or indirectly, an aggregate equity interest of 80% or more.
(U)
Termination of Service
: Separation from service or Termination of Employment, as
defined in proposed Treasury Regulation §1.409A-1(h), with an Employer for any reason other than a
transfer between Employers.
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(V)
Trust
: Any trust created pursuant to the provisions of Article VII.
(W)
Trust Agreement
: The agreement establishing the Trust.
(X)
Trustee
: The trustee of the Trust.
(Y)
Trust Fund
: Assets under the Trust as may exist from time to time.
ARTICLE III
Administration of the Plan
(A) The Compensation Committee shall appoint a Committee to administer, construe and interpret
the Plan. Such Committee, or such successor Committee as may be duly appointed by the Compensation
Committee, shall serve at the pleasure of the Compensation Committee. Decisions of the Committee,
with respect to any matter involving the Plan, shall be final and binding on the Company, its
shareholders, each Employer and all officers and other executives of the Employers. For purposes of
ERISA, the Committee shall be the Plan administrator and shall be the named fiduciary with
respect to the general administration of the Plan.
(B) The Committee shall maintain complete and adequate records pertaining to the Plan,
including but not limited to Participants Accounts, amounts transferred to the Trust, reports from
the Trustee and all other records which shall be necessary or desirable in the proper
administration of the Plan. The Committee shall furnish the Trustee such information as is required
to be furnished by the Committee or the Company pursuant to the Trust Agreement.
(C) The Company shall indemnify and hold harmless each member of the Committee against any and
all expenses and liabilities arising out of his or her administrative functions or fiduciary
responsibilities, including any expenses and liabilities that are caused by or result from an act
or omission constituting the negligence of such member in the performance of such functions or
responsibilities, but excluding expenses and liabilities that are caused by or result from such
members own gross negligence or willful misconduct. Expenses against which such member shall be
indemnified hereunder shall include, without limitation, the amounts of any settlement or judgment,
costs, counsel fees, and related charges reasonably incurred in connection with a claim asserted or
a proceeding brought or settlement thereof.
(D) The Committee may designate any Subsidiary as an Employer by written instrument delivered
to the Secretary of the Company and the designated Employer. Such written instrument shall specify
the effective date of such designated participation, may incorporate specific provisions relating
to the operation of the Plan which apply to the designated Employer only and shall become, as to
such designated Employer and its employees, a part of the Plan. Each designated Employer shall be
conclusively presumed to have consented to its designation and to have agreed to be bound by the
terms of the Plan and any and all amendments thereto upon its submission of information to the
Committee required by the terms of or with respect to the Plan; provided, however, that the terms
of the Plan may be modified so as to increase the obligations of an Employer only with the consent
of such Employer, which consent shall be conclusively presumed to have been given by such Employer
upon its submission of any
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information to the Committee required by the terms of or with respect to
the Plan. Except as modified by the Committee in its written instrument, the provisions of this
Plan shall be applicable with respect to each Employer separately, and amounts payable hereunder
shall be paid by the Employer which employs the particular Participant, if not paid from the Trust
Fund.
(E) No member of the Committee shall have any right to vote or decide upon any matter relating
solely to himself or herself under the Plan or to vote in any case in which his or her individual
right to claim any benefit under the Plan is particularly involved. In any case in which a
Committee member is so disqualified to act and the remaining members cannot agree, the Compensation
Committee shall appoint a temporary substitute member to exercise all the powers of the
disqualified member concerning the matter in which he or she is disqualified.
ARTICLE IV
Allocations Under the Plan;
Participation in Plan; Selection for Awards
(A) Each Allocation Year the Compensation Committee shall, in its sole discretion, determine
what amounts shall be available for allocation to the Accounts of the Participants pursuant to
Paragraph (D) below.
(B) No award shall be made to any person while he or she is a voting member of the
Compensation Committee.
(C) The Compensation Committee from time to time may adopt, amend or revoke such regulations
and rules as it may deem advisable for its own purposes to guide in determining which of the Senior
Executives it shall deem to be Participants for a particular Allocation Year and the method and
manner of payment thereof to the Participants.
(D) The Compensation Committee, during the Allocation Year involved or during the next
succeeding Allocation Year, shall determine which Senior Executives it shall designate as
Participants for such Allocation Year and the amounts allocated to each Participant for such
Allocation Year. In making its determination, the Compensation Committee shall consider such
factors as the Compensation Committee may in its sole discretion deem material. The Compensation
Committee, in its sole discretion, may notify a Senior Executive at any time during a particular
Allocation Year or in the Allocation Year following the Allocation Year for which the award is made
that he or she has been selected as a Participant for all or part of such Allocation Year, and may
determine and notify him or her of the amount which shall be allocated to such Participant for such
Allocation Year. The decision of the Compensation Committee in selecting a Senior Executive to be a
Participant or in making any allocation to him or her shall be final and conclusive, and nothing
herein shall be deemed to give any Senior Executive or his or her legal representatives or assigns
any right to be a Participant for such Allocation Year or to be allocated any amount except to the
extent of the amount, if any, allocated to a Participant for a particular Allocation Year, but at
all times subject to the provisions of the Plan.
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(E) A Senior Executive whose service is terminated during the Allocation Year may be selected
as a Participant for such part of the Allocation Year prior to his or her Termination of Service
and be granted such award with respect to his or her services during such
part of the Allocation Year as the Compensation Committee, in its sole discretion and under
any rules it may promulgate, may determine.
(F) Allocations to Participants under the Plan shall be made by crediting their respective
Accounts on the books of their Employers as of the last day of the Allocation Year. Accounts of
Participants shall also be credited with interest as of the last day of each Allocation Year, at
the rate set forth in Paragraph (G) below, on the average monthly credit balance of the Account
being calculated by using the balance of each Account on the first day of each month. Prior to
Termination of Service, the annual interest shall accumulate as a part of the Account balance.
After Termination of Service, the annual interest for such Allocation Year may be paid as more
particularly set forth hereinafter in Article VII, Paragraph (C).
(G) Interest shall be credited on amounts allocated to Participants Accounts at the rate of
5% per annum for periods prior to Termination of Service and at the rate of 10% per annum for
periods subsequent to Termination of Service.
ARTICLE V
Non-Assignability of Awards
No Participant shall have any right to commute, encumber, pledge, transfer or otherwise dispose of
or alienate any present or future right or expectancy which he or she may have at any time to
receive payments of any allocations made to such Participant, all such allocations being expressly
hereby made non-assignable and non-transferable; provided, however, that nothing in this Article
shall prevent transfer (A) by will, (B) by the applicable laws of descent and distribution or (C)
pursuant to an order that satisfies the requirements for a qualified domestic relations order as
such term is defined in Section 206(d)(3)(B) of the ERISA and Section 414(p)(1)(A) of the Code,
including an order that requires distributions to an alternate payee prior to a Participants
earliest retirement age as such term is defined in Section 206(d)(3)(E)(ii) of the ERISA and
Section 414(p)(4)(B) of the Code. Attempts to transfer or assign by a Participant (other than in
accordance with the preceding sentence) shall, in the sole discretion of the Compensation Committee
after consideration of such facts as it deems pertinent, be grounds for terminating any rights of
such Participant to any awards allocated to but not previously paid over to such Participant.
ARTICLE VI
Vesting
All amounts, including interest, credited to a Participants Account prior to the 2005 Allocation
Year shall be fully vested and not subject to forfeiture for any reason, except as provided in
Article V, regardless of the number of years of participation in the Plan by such Participant. All
amounts, including interest, credited to a Participants Account, which are attributable to the
2005 Allocation Year and any subsequent Allocation Years in which such Participant may
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receive an award, shall be fully vested and not subject to forfeiture for any reason, except as
provided in Article V, when such Participant has five consecutive years of participation in the
Plan as measured from the date such Participant first became a Participant in the Plan.
ARTICLE VII
Distribution of Awards
(A) Upon Termination of Service of a Participant the Committee (i) shall certify to the
Trustee or the treasurer of the Employer, as applicable, the amount credited to the Participants
Account on the books of each Employer for which the Participant was employed at a time when he or
she earned an award hereunder, and (ii) shall determine whether the payment of the amount credited
to the Participants Account under the Plan is to be paid directly by the applicable Employer, from
the Trust Fund, if any, or by a combination of such sources (except to the extent the provisions of
the Trust Agreement if any, specify payment from the Trust Fund).
(B) Any amounts payable under Paragraph (A) above shall be paid in a single lump sum payment
upon Termination of Service. Notwithstanding the foregoing, in the case of a specified employee
within the meaning of Section 409A(a)(2)(B)(i) of the Code, any payments payable as a result of the
Employees termination of employment (other than death or Disability) shall not be payable before
the earlier of (i) the date that is six months after the Employees termination of employment, (ii)
the date of the Employees death, or (iii) the date that otherwise complies with the requirements
of Section 409A. For purposes of the Plan, a Participant shall be a specified employee for the
twelve-month period beginning on April 1 of a Plan Year if the Participant is a key employee as
defined in Section 416(i) of the Code (without regard to Section 416(i)(5) of the Code) as of
December 31 of the preceding Plan Year. The Trustee or the treasurer of the Employer, as
applicable, shall make payments of awards in the manner designated, subject to all of the other
terms and conditions of this Plan and the Trust Agreement if any. This Plan shall be deemed to
authorize the payment of all or any portion of a Participants award from the Trust Fund to the
extent such payment is required by the provisions of the Trust Agreement, if any.
(C) Interest on any payment to be paid to a specified employee under Paragraph (B) above that
is delayed because of Section 409(A) shall be paid with the final payment. In such case, the
interest is accrued on an annual basis, and the specified employee will be entitled to the
prorated portion of such annual interest, as calculated up until the actual date of payout pursuant
to this Paragraph.
(D) If a Participant shall die while in the service of an Employer, or after Termination of
Service and prior to the time when all amounts payable to him or her under the Plan have been paid
to such Participant, any remaining amounts payable to the Participant hereunder shall be payable to
the estate of the Participant. The Committee shall cause the Trustee or the treasurer of the
Employer, as applicable, to pay to the estate of the Participant all of the benefits then standing
to his or her credit in a lump sum.
(E) If the Plan is terminated pursuant to the provisions of Article VIII, the Compensation
Committee may, at its election and in its sole discretion, cause the Trustee or the
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treasurer of the Employer, as applicable, to pay to all Participants all of the awards then standing to their
credit in the form of lump sum payments, provided such distribution is in compliance with the
requirements of Section 409A.
ARTICLE VIII
Nature of Plan
This Plan constitutes a mere promise by the Employers to make benefit payments in the future and
Participants have the status of general unsecured creditors of the Employers. Further, the adoption
of this Plan and any setting aside of amounts by the Employers with which to discharge their
obligations hereunder shall not be deemed to create a trust; legal and equitable title to any funds
so set aside shall remain in the Employers, and any recipient of benefits hereunder shall have no
security or other interest in such funds. Any and all funds so set aside shall remain subject to
the claims of the general creditors of the Employers, present and future. This provision shall not
require the Employers to set aside any funds, but the Employers may set aside such funds if they
choose to do so.
ARTICLE IX
Funding of Obligation
Article VIII above to the contrary notwithstanding, the Employers may fund all or part of their
obligations hereunder by transferring assets to a domestic trust if the provisions of the trust
agreement creating the Trust require the use of the Trusts assets to satisfy claims of an
Employers general unsecured creditors in the event of such Employers insolvency and provide that
no Participant shall at any time have a prior claim to such assets. Any transfers of assets to a
trust may be made by each Employer individually or by the Company on behalf of all Employers. The
assets of the Trust shall not be deemed to be assets of this Plan.
ARTICLE X
Amendment or Termination of Plan
The Compensation Committee shall have the power and right from time to time to modify, amend,
supplement, suspend or terminate the Plan as it applies to each Employer, provided that no such
change in the Plan may deprive a Participant of the amounts allocated to his or her Account or be
retroactive in effect to the prejudice of any Participant and the interest rate applicable to
amounts credited to Participants Accounts for periods subsequent to Termination of Service shall
not be reduced below 6% per annum. Any such modification, amendment, supplement suspension or termination shall be in writing and signed by a member of the Compensation
Committee.
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ARTICLE XI
General Provisions
(A) No Participant shall have any preference over the general creditors of an Employer in the
event of such Employers insolvency.
(B) Nothing contained herein shall be construed to give any person the right to be retained in
the employ of an Employer or to interfere with the right of an Employer to terminate the employment
of any person at any time.
(C) If the Committee receives evidence satisfactory to it that any person entitled to receive
a payment hereunder is, at the time the benefit is payable, physically, mentally or legally
incompetent to receive such payment and to give a valid receipt therefor, and that an individual or
institution is then maintaining or has custody of such person and that no guardian, committee or
other representative of the estate of such person has been duly appointed, the Committee may direct
that such payment thereof be paid to such individual or institution maintaining or having custody
of such person, and the receipt of such individual or institution shall be valid and a complete
discharge for the payment of such benefit.
(D) Payments to be made hereunder may, at the written request of the Participant, be made to a
bank account designated by such Participant, provided that deposits to the credit of such
Participant in any bank or trust company shall be deemed payment into his or her hands.
(E) Wherever any words are used herein in the masculine, feminine or neuter gender, they shall
be construed as though they were also used in another gender in all cases where they would so
apply, and whenever any words are used herein in the singular or plural form, they shall be
construed as though they were also used in the other form in all cases where they would so apply.
(F) THIS PLAN SHALL BE CONSTRUED AND ENFORCED UNDER THE LAWS OF THE STATE OF TEXAS EXCEPT TO
THE EXTENT PREEMPTED BY FEDERAL LAW.
(G) It is intended that the provisions of this Plan satisfy the requirements of Section 409A
and that the Plan be operated in a manner consistent with such requirements to the extent
applicable. Therefore, the Committee may make adjustments to the Plan and may construe the
provisions of the Plan in accordance with the requirements of Section 409A.
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ARTICLE XII
Effective Date
This Plan shall be effective from the Effective Date and shall continue in force during subsequent
years unless amended or revoked by action of the Compensation Committee.
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KBR, INC.
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By
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/s/
William P. Utt
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William P. Utt
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President and Chief Executive
Officer
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SCHEDULE A
KBR Technical Services, Inc.
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APPENDIX A
Articles XIII, XIV and XV of the Plan are referred to as the Grandfathered Plan. The
Grandfathered Plan contains the provisions governing the deferrals of accounts earned and vested by
Senior Executives on or before December 31, 2004. This Appendix A preserves the material terms of
the Grandfathered Plan as in effect on December 31, 2004, and is intended to satisfy the
requirements of Section 409A as to grandfathered amounts. The provisions of this Appendix A shall
apply to, and be effective only with respect to, the deferral of earned and vested amounts under
the Grandfathered Plan before January 1, 2005, and the amounts earned on such deferrals credited at
any time. The Plan provides for separate accounting of such amounts deferred, earned, and vested
before January 1, 2005, and the Credited Investment Return thereon.
No amendment to the Plan shall be deemed to amend this Appendix A and the relevant provisions of
the Plan in effect prior to such amendment unless otherwise specifically set forth therein.
Pursuant to Section 1.409A-6(a)(4) of the Proposed Treasury Regulations, a modification is material
if a benefit or right existing as of October 3, 2004 is materially enhanced or a new material
benefit or right is added.....
The provisions of the Plan applicable to the Grandfathered Plan Accounts shall be administered in a
manner consistent with the Grandfathered Plan and Appendix A. Wherever the Plan has added,
changed, or otherwise altered any terms of the Grandfathered Plan that were in effect on December
31, 2004, in a manner that would constitute a material modification, as described above, such
changes will be disregarded in the administration of the Grandfathered Plan Accounts herein.
ARTICLE XIII
Allocations Under the Plan
Interest shall be credited on amounts allocated to Participants Accounts at the rate of 5% per
annum for periods prior to Termination of Service and at the rate of 10% per annum for periods
subsequent to Termination of Service.
ARTICLE XIV
Vesting
All amounts credited to a Participants Account shall be fully vested and not subject to forfeiture
for any reason except as provided in Article V.
ARTICLE XV
Distribution of Awards
(A) Upon Termination of Service of a Participant the Committee (i) shall certify to the
Trustee or the treasurer of the Employer, as applicable, the amount credited to the Participants
Account on the books of each Employer for which the Participant was employed at a time when he or
she earned an award hereunder, (ii) shall determine whether the payment of
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the amount credited to the Participants Account under the Plan is to be paid directly by the applicable Employer, from
the Trust Fund, if any, or by a combination of such sources (except to the extent the provisions of
the Trust Agreement if any, specify payment from the Trust Fund) and (iii) shall determine and
certify to the Trustee or the treasurer of the Employer, as applicable, the method of payment of
the amount credited to a Participants Account, selected by the Committee from among the following
alternatives:
(1) single lump sum payment upon Termination of Service;
(2) payment of one-half of the Participants balance upon Termination of
Service, with payment of the additional one-half to be made on or before the last
day of a period of one year following Termination of Service;
(3) monthly installments over a period not to exceed ten years with such
payments to commence upon Termination of Service.
The above notwithstanding, if the total amount credited to the Participants Account upon
Termination of Service is less than $50,000, such amount shall always be paid in a single lump sum
payment upon Termination of Service.
(B) Interest on the second half of a payment under Paragraph (A)(2) above shall be paid with
the final payment, while interest on payments under Paragraph (A)(3) above may be paid at each year
end or may be paid as a part of a level monthly payment computed by the Committee through the use
of such methodologies as the Committee shall select from time to time for such purpose.
(C) If a Participant shall die while in the service of an Employer, or after Termination of
Service and prior to the time when all amounts payable to him or her under the Plan have been paid
to such Participant, any remaining amounts payable to the Participant hereunder shall be payable to
the estate of the Participant. The Committee shall cause the Trustee or the treasurer of the
Employer, as applicable, to pay to the estate of the Participant all of the awards then standing to
his or her credit in a lump sum or in such other form of payment consistent with the alternative
methods of payment set forth above as the Committee shall determine after considering such facts
and circumstances relating to the Participant and his or her estate as it deems pertinent.
(D) If the Plan is terminated pursuant to the provisions of Article VIII, the Compensation
Committee may, at its election and in its sole discretion, cause the Trustee or the treasurer of
the Employer, as applicable, to pay to all Participants all of the awards then standing to their
credit in the form of lump sum payments.
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Exhibit 10.4
KBR
BENEFIT RESTORATION PLAN
TABLE OF CONTENTS
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ARTICLE I Purpose of the Plan
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ARTICLE II Definitions
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ARTICLE III Administration of the Plan
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ARTICLE IV Allocations Under the Plan; Participation in Plan; Selection for Awards
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ARTICLE V Non-Assignability of Awards
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ARTICLE VI Vesting
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ARTICLE VII Distribution of Awards
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ARTICLE VIII Nature of Plan
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ARTICLE IX Funding of Obligation
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ARTICLE X Amendment or Termination of Plan
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ARTICLE XI General Provisions
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ARTICLE XII Effective Date
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SCHEDULE A
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APPENDIX A
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ARTICLE XIII Allocations Under the Plan; Participation in the Plan; Selection for Awards
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ARTICLE XIV Distribution of Awards
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(i)
KBR
BENEFIT RESTORATION PLAN
W I T N E S S E T H:
WHEREAS
, the Board of Directors of Halliburton Company (Halliburton) has previously adopted
the Halliburton Company Benefit Restoration Plan, as most recently amended and restated effective
January 1, 2004, for the benefit of its employees and the employees of its subsidiaries to aid such
employees in making more adequate provision for their retirement; and
WHEREAS
, Halliburton determined that it would be appropriate and desirable for Halliburton to
separate the business and assets of KBR, Inc. (the Company) and its subsidiaries
,
from the
business and assets of Halliburton and its other subsidiaries through an initial public offering of
the common stock of the Company; and
WHEREAS
, Halliburton plans to take action which will result in the Company and its
subsidiaries ceasing to be a member of the Halliburton controlled group; and
WHEREAS
, the Company desires to provide benefits for certain of its new employees including
certain current employees who had previously participated in the HAL Plan, as hereafter defined;
and
WHEREAS
, pursuant to the terms of the HAL Plan, each Employer thereunder was liable for the
benefits related to its employees, and the Company and the Employers hereunder desire to continue
to provide to such employees an opportunity to make deferrals of certain amounts, consistent with
the provisions of Section 409A of the Internal Revenue Code of 1986 as amended (the Code); and
WHEREAS,
the provisions of the HAL Plan, as amended through the Effective Date, will remain in
effect for all deferrals prior to the Effective Date; and
WHEREAS
, the Company desires to preserve the material terms of the HAL Plan as in effect on
December 31, 2004 (the Grandfathered Plan) in order that the Grandfathered Plan qualify as a
grandfathered plan for purposes of Section 409A of the Code; and
WHEREAS
, certain provisions applicable solely to the Grandfathered Plan are preserved in
Appendix A, for purposes of determining the terms applicable to amounts deferred under the
Grandfathered Plan, which provisions shall be substituted for the corresponding provisions
contained herein.
NOW THEREFORE
, the HAL Plan, including the Grandfathered Plan, is hereby continued for
Participants with the terms set forth below, and is hereby renamed the KBR Benefit Restoration Plan
to read as follows, effective as of the Effective Date:
(ii)
ARTICLE I
Purpose of the Plan
The purpose of the KBR Benefit Restoration Plan is to provide a vehicle to restore qualified plan
benefits which are reduced as a result of limitations on contributions imposed under the Internal
Revenue Code or due to participation in other company sponsored plans and to defer compensation
that would otherwise be treated as excessive employee remuneration within the meaning of Section
162(m) of the Internal Revenue Code.
ARTICLE II
Definitions
Where the following words and phrases appear in the Plan, they shall have the respective meanings
set forth below, unless their context clearly indicates to the contrary.
(A)
Account
: An individual account for each Participant on the books of such
Participants Employer to which is credited amounts allocated for the benefit of such Participant
pursuant to the provisions of Article IV, Paragraphs (A) and (B), amounts transferred to the Plan
from other deferred compensation plans, and interest credited pursuant to the provisions of Article
IV, Paragraph (D).
(B)
Allocation Year
: The calendar year for which an allocation is made to a
Participants Account pursuant to Article IV.
(C)
Board
: The Board of Directors of the Company.
(D)
Code
: The Internal Revenue Code of 1986, as amended.
(E)
Committee
: The administrative committee appointed by the Compensation Committee
to administer the Plan.
(F)
Compensation Committee
: The Compensation Committee of the Board.
(G)
Company
: KBR, Inc. or, only for amounts deferred under the HAL Plan and similar
purposes, Halliburton Company.
(H)
Deconsolidation Date
: The date upon which an event reduces the amount of the
Company stock owned directly or indirectly by Halliburton Company to be less than the amount
required for Halliburton Company to control the Company within the meaning of Section 1504(a)(2) of
the Code.
(I)
Effective Date
: The Deconsolidation Date.
(J)
Employee
: Any employee of an Employer. The term does not include independent
contractors or persons who are retained by an Employer as consultants only.
1
(K)
Employer
: The Company, each of the entities identified on Schedule A and each
eligible organization designated as an Employer in accordance with the provisions of Article III of
the Plan.
(L)
ERISA
: The Employee Retirement Income Security Act of 1974, as amended.
(M)
Grandfathered Plan
: The Halliburton Company Benefit Restoration Plan as in effect
on December 31, 2004, the material terms of which have not been materially modified (within the
meaning of Section 409A) after October 3, 2004, and are preserved and continued in the Plan as
reflected in Appendix A.
(N)
Grandfathered Plan Account
: A memorandum bookkeeping account established on the
records of the Employer for a Participant that is credited with specified deferrals of amounts
earned and vested prior to January 1, 2005, and the interest on such amounts determined in
accordance with Article XIII, Paragraph (B) of the Grandfathered Plan. A Participant has a 100%
non-forfeitable interest in his or her Grandfathered Plan Account at all times.
(O)
HAL Plan
: The Halliburton Company Benefit Restoration Plan, as amended and
restated effective January 1, 2004 and as subsequently amended with respect to any period up to the
Effective Date.
(P)
Participant
: An Employee whose compensation from the Employers for an Allocation
Year is in excess of the limit set forth in Section 401 (a)(17) of the Code for such Allocation
Year or who has made elective deferrals for such Allocation Year under the KBR Elective Deferral
Plan. The foregoing notwithstanding, an Employee whose employment with an Employer is terminated
prior to the last day of an Allocation Year for any reason other than death, disability or
retirement in accordance with the terms of his or her Employers retirement policy shall not be
eligible to participate in the Plan for such Allocation Year and, accordingly, such Employees
Account shall not be credited with any allocation under Article IV, Paragraph (A) for such
Allocation Year.
(Q)
Plan
: The KBR Benefit Restoration Plan, as amended from time to time,
constituting a continuation of the HAL Plan.
(R)
Section 409A, (409A)
: Internal Revenue Code Section 409A and the applicable
proposed Department of Treasury Regulations and other Treasury guidance thereunder.
(S)
Subsidiary
: At any given time, a company (whether a corporation, partnership,
limited liability company or other form of entity) in which the Company or any other of its
Subsidiaries or both owns, directly or indirectly, an aggregate equity interest of 80% or more.
(T)
Termination of Service
: Separation from service or Termination of Employment,
as defined in proposed Treasury Regulation §1.409A-1(h), with an Employer for any reason other than
a transfer between Employers.
2
(U)
Trust
: Any trust created pursuant to the provisions of Article IX.
(V)
Trust Agreement
: The agreement establishing the Trust.
(W)
Trust Fund
: Assets under the Trust as may exist from time to time.
(X)
Trustee
: The trustee of the Trust.
ARTICLE III
Administration of the Plan
(A) The Compensation Committee shall appoint a Committee to administer, construe and interpret
the Plan. Such Committee, or such successor Committee as may be duly appointed by the
Compensation Committee, shall serve at the pleasure of the Compensation Committee. Decisions of the
Committee, with respect to any matter involving the Plan, shall be final and binding on the
Company, its shareholders, each Employer and all officers and other executives of the Employers.
For purposes of ERISA, the Committee shall be the Plan administrator and shall be the named
fiduciary with respect to the general administration of the Plan.
(B) The Committee shall maintain complete and adequate records pertaining to the Plan,
including but not limited to Participants Accounts, amounts transferred to the Trust, reports from
the Trustee and all other records which shall be necessary or desirable in the proper
administration of the Plan. The Committee shall furnish the Trustee such information as is required
to be furnished by the Committee or the Company pursuant to the Trust Agreement.
(C) The Company shall indemnify and hold harmless each member of the Committee against any and
all expenses and liabilities arising out of his or her administrative functions or fiduciary
responsibilities, including any expenses and liabilities that are caused by or result from an act
or omission constituting the negligence of such member in the performance of such functions or
responsibilities, but excluding expenses and liabilities that are caused by or result from such
members own gross negligence or willful misconduct. Expenses against which such member shall be
indemnified hereunder shall include, without limitation, the amounts of any settlement or judgment,
costs, counsel fees, and related charges reasonably incurred in connection with a claim asserted or
a proceeding brought or settlement thereof.
(D) The Committee may designate any Subsidiary as an Employer by written instrument delivered
to the Secretary of the Company and the designated Employer. Such written instrument shall specify
the effective date of such designated participation, may incorporate specific provisions relating
to the operation of the Plan which apply to the designated Employer only and shall become, as to
such designated Employer and its employees, a part of the Plan. Each designated Employer shall be
conclusively presumed to have consented to its designation and to have agreed to be bound by the
terms of the Plan and any and all amendments thereto upon its submission of information to the
Committee required by the terms of or with respect to the Plan; provided, however, that the terms
of the Plan may be modified so as to increase the obligations of an Employer only with the consent
of such Employer, which consent shall be conclusively presumed to have been given by such Employer
upon its submission of any
3
information to the Committee required by the terms of or with respect to the Plan. Except as
modified by the Committee in its written instrument, the provisions of this Plan shall be
applicable with respect to each Employer separately, and amounts payable hereunder shall be paid by
the Employer which employs the particular Participant, if not paid from the Trust Fund.
(E) No member of the Committee shall have any right to vote or decide upon any matter relating
solely to himself or herself under the Plan or to vote in any case in which his or her individual
right to claim any benefit under the Plan is particularly involved. In any case in which an
Committee member is so disqualified to act and the remaining members cannot agree, the Compensation
Committee shall appoint a temporary substitute member to exercise all the powers of the
disqualified member concerning the matter in which he or she is disqualified.
ARTICLE IV
Allocations Under the Plan;
Participation in Plan; Selection for Awards
(A) The Committee shall determine for each Allocation Year which Participants allocations of
Employer contributions (other than matching contributions) under qualified defined contribution
plans sponsored by the Employers have been reduced for such Allocation Year by reason of the
application of Section 401 (a)(17) or Section 415 of the Code, or any combination of such Sections,
or by reason of elective deferrals under the KBR Elective Deferral Plan, and shall allocate to the
credit of each such Participant under the Plan an amount equal to the amount of such reductions
applicable to such Participant. In addition, the Committee shall allocate to the credit of each
Participant under the Plan the amount of Employer matching contributions that would have been
allocated to such Participants account under Employers qualified defined contribution plan with
respect to (i) the amount of such Participants compensation (as such term is defined in
Employers qualified defined contribution plan) deferred under the KBR Elective Deferral Plan for
such Allocation Year and (ii) the amount of such compensation not so deferred that is in excess of
the compensation limit under Section 401 (a)(17) of the Code for such Allocation Year.
(B) Pursuant to proposed Treasury Regulation §1.409A-2(b)(5)(i), the Compensation Committee
will allocate to the credit of a Participant under the Plan all or any part of any remuneration
payable by the Employer to such Participant which would otherwise be treated as excessive employee
remuneration within the meaning of Section 162(m) of the Code for any Allocation Year, rather than
paying such excessive remuneration to such Participant.
(C) Allocations to Participants under the Plan shall be made by crediting their respective
Account on the books of their Employers as of the last day of the Allocation Year, except that an
allocation under Paragraph (B) shall be credited to a Participant on the date the amount would have
been paid to the Participant had it not been deferred pursuant to the provisions of Paragraph (B).
Accounts of Participants shall also be credited with interest as of the last day of each Allocation
Year, at the rate set forth in Paragraph (D) below, on the average monthly credit balance of the
Account being calculated by using the balance of each Account on the first day of each month. Prior
to Termination of Service, the annual interest shall accumulate as a part of the Account balance.
After Termination of Service, the annual interest for such
4
Allocation Year shall be paid as more particularly set forth hereinafter in Article VII,
Paragraph (D).
(D) Interest shall be credited on amounts allocated to Participants Account at the rate of
10% per annum.
ARTICLE V
Non-Assignability of Awards
No Participant shall have any right to commute, encumber, pledge, transfer or otherwise dispose of
or alienate any present or future right or expectancy which he or she may have at any time to
receive payments of any allocations made to such Participant, all such allocations being expressly
hereby made non-assignable and non-transferable; provided, however, that nothing in the Article
shall prevent transfer (A) by will, (B) by the applicable laws of descent and distribution or (C)
pursuant to an order that satisfies the requirements for a qualified domestic relations order as
such term is defined in section 206(d)(3)(B) of the ERISA and section 414(p)(1)(A) of the Code,
including an order that requires distributions to an alternate payee prior to a Participants
earliest retirement age as such term is defined in section 206(d)(3)(E)(ii) of the ERISA and
section 414(p)(4)(B) of the Code. Attempts to transfer or assign by a Participant (other than in
accordance with the preceding sentence) shall, in the sole discretion of the Compensation Committee
after consideration of such facts as it deems pertinent, be grounds for terminating any rights of
such Participant to any awards allocated to but not previously paid over to such Participant.
ARTICLE VI
Vesting
All amounts credited to a Participants Account shall be fully vested and not subject to forfeiture
for any reason except as provided in Article V.
ARTICLE VII
Distribution of Awards
(A) Upon Termination of Service of a Participant the Committee (i) shall certify to the
Trustee or the treasurer of the Employer, as applicable, the amount credited to the Participants
Account on the books of each Employer for which the Participant was employed at a time when he or
she earned an award hereunder, and (ii) shall determine whether the payment of the amount credited
to the Participants Account under the Plan is to be paid directly by the applicable Employer, from
the Trust Fund, if any, or by a combination of such sources (except to the extent the provisions of
the Trust Agreement if any, specify payment from the Trust Fund).
(B) Any amount payable under Paragraph (A) above shall be paid in a single lump sum payment
upon Termination of Service. Notwithstanding the foregoing, in the case of a specified employee
within the meaning of Section 409A(a)(2)(B)(i) of the Code, any payment payable as a result of the
Employees termination of employment (other than death or Disability)
5
shall not be payable before the earlier of (i) the date that is six months after the
Employees termination of employment, (ii) the date of the Employees death, or (iii) the date that
otherwise complies with the requirements of Section 409A. For purposes of the Plan, a Participant
shall be a specified employee for the twelve-month period beginning on April 1 of a Plan Year if
the Participant is a key employee as defined in Section 416(i) of the Code (without regard to
Section 416(i)(5) of the Code) as of December 31 of the preceding Plan Year.
(C) The Trustee or the treasurer of the Employer, as applicable, shall make payment of awards
in the manner required by Paragraph (B) above, subject to all of the other terms and conditions of
this Plan and the Trust Agreement, if any. This Plan shall be deemed to authorize the payment of
all or any portion of a Participants award from the Trust Fund, to the extent such payment is
required by the provisions of the Trust Agreement, if any.
(D) Interest on any payment to be paid to a specified employee under Paragraph (B) above that
is delayed because of Section 409A shall be paid with the final payment. In such case, the
interest is accrued on an annual basis, and the specified employee will be entitled to the
prorated portion of such annual interest, as calculated up until the actual date of payout pursuant
to this Paragraph.
(E) If a Participant shall die while in the service of an Employer, or after Termination of
Service and prior to the time when all amounts payable to him or her under the Plan have been paid
to such Participant, any remaining amounts payable to the Participant hereunder shall be payable to
the estate of the Participant. The Committee shall cause the Trustee or the treasurer of the
Employer, as applicable, to pay to the estate of the Participant all of the benefits then standing
to his or her credit in a lump sum.
(F) If the Plan is terminated pursuant to the provisions of Article X, the Compensation
Committee may, at its election and in its sole discretion, cause the Trustee or the treasurer of
the Employer, as applicable, to pay to all Participants all of the awards then standing to their
credit in the form of lump sum payments, provided such distribution is in compliance with the
requirements of Section 409A.
ARTICLE VIII
Nature of Plan
This Plan constitutes a mere promise by the Employers to make benefit payments in the future and
Participants have the status of general unsecured creditors of the Employers. Further, the adoption
of this Plan and any setting aside of amounts by the Employers with which to discharge their
obligations hereunder shall not be deemed to create a trust; legal and equitable title to any funds
so set aside shall remain in the Employers, and any recipient of benefits hereunder shall have no
security or other interest in such funds. Any and all funds so set aside shall remain subject to
the claims of the general creditors of the Employers, present and future. This provision shall not
require the Employers to set aside any funds, but the Employers may set aside such funds if they
choose to do so.
6
ARTICLE IX
Funding of Obligation
Article VIII above to the contrary notwithstanding, the Employers may fund all or part of their
obligations hereunder by transferring assets to a domestic trust if the provisions of the trust
agreement creating the Trust require the use of the Trusts assets to satisfy claims of an
Employers general unsecured creditors in the event of such Employers insolvency and provide that
no Participant shall at any time have a prior claim to such assets. Any transfers of assets to a
trust may be made by each Employer individually or by the Company on behalf of all Employers. The
assets of the Trust shall not be deemed to be assets of this Plan.
ARTICLE X
Amendment or Termination of Plan
The Compensation Committee shall have the power and right from time to time to modify, amend,
supplement, suspend or terminate the Plan as it applies to each Employer, provided that no such
change in the Plan may deprive a Participant of the amounts allocated to his or her Account or be
retroactive in effect to the prejudice of any Participant and the interest rate applicable to
amounts credited to Participants Accounts for periods subsequent to Termination of Service shall
not be reduced below 6% per annum. Any such modification, amendment, supplement, suspension or
termination shall be in writing and signed by a member of the Compensation Committee.
ARTICLE XI
General Provisions
(A) No Participant shall have any preference over the general creditors of an Employer in the
event of such Employers insolvency.
(B) Nothing contained herein shall be construed to give any person the right to be retained in
the employ of an Employer or to interfere with the right of an Employer to terminate the employment
of any person at any time.
(C) If the Committee receives evidence satisfactory to it that any person entitled to receive
a payment hereunder is, at the time the benefit is payable, physically, mentally or legally
incompetent to receive such payment and to give a valid receipt therefor, and that an individual or
institution is then maintaining or has custody of such person and that no guardian, committee or
other representative of the estate of such person has been duly appointed, the Committee may direct
that such payment thereof be paid to such individual or institution maintaining or having custody
of such person, and the receipt of such individual or institution shall be valid and a complete
discharge for the payment of such benefit.
(D) Payments to be made hereunder may, at the written request of the Participant, be made to a
bank account designated by such Participant, provided that deposits to
7
the credit of such Participant in any bank or trust company shall be deemed payment into his
or her hands.
(E) Wherever any words are used herein in the masculine, feminine or neuter gender, they shall
be construed as though they were also used in another gender in all cases where they would so
apply, and whenever any words are used herein in the singular or plural form, they shall be
construed as though they were also used in the other form in all cases where they would so apply.
(F) THIS PLAN SHALL BE CONSTRUED AND ENFORCED UNDER THE LAWS OF THE STATE OF TEXAS EXCEPT TO
THE EXTENT PREEMPTED BY FEDERAL LAW.
(G) It is intended that the provisions of this Plan satisfy the requirements of Section 409A
and that the Plan be operated in a manner consistent with such requirements to the extent
applicable. Therefore, the Committee may make adjustments to the Plan and may construe the
provisions of the Plan in accordance with the requirements of Section 409A.
ARTICLE XII
Effective Date
This Plan shall be effective from the Effective Date and shall continue in force during subsequent
years unless amended or revoked by action of the Compensation Committee.
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KBR, INC.
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By
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/s/ William P. Utt
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William P. Utt
President and Chief Executive Officer
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8
SCHEDULE A
KBR Technical Services, Inc.
9
APPENDIX A
Articles XIII and XIV of the Plan are referred to as the Grandfathered Plan. The Grandfathered
Plan contains the provisions governing the deferrals of accounts earned and vested by Participants
on or before December 31, 2004. This Appendix A preserves the material terms of the Grandfathered
Plan as in effect on December 31, 2004, and is intended to satisfy the requirements of Section 409A
as to grandfathered amounts. The provisions of this Appendix A shall apply to, and be effective
only with respect to, the deferral of earned and vested amounts under the Grandfathered Plan before
January 1, 2005, and the interest on the Trust Fund pursuant to Section (B) of Article XIII, below,
and credited at any time. The Plan provides for separate accounting of such amounts deferred,
earned, and vested before January 1, 2005, and such interest on the Trust Fund.
No amendment to the Plan shall be deemed to amend this Appendix A and the relevant provisions of
the Plan in effect prior to such amendment unless otherwise specifically set forth therein.
Pursuant to Section 1.409A-6(a)(4) of the Proposed Treasury Regulations, a modification is material
if a benefit or right existing as of October 3, 2004 is materially enhanced or a new material
benefit or right is added....
The provisions of the Plan applicable to the Grandfathered Plan Accounts shall be administered in a
manner consistent with the Grandfathered Plan and Appendix A. Wherever the Plan has added,
changed, or otherwise altered any terms of the Grandfathered Plan that were in effect on December
31, 2004, in a manner that would constitute a material modification, as described above, such
changes will be disregarded in the administration of the Grandfathered Plan Accounts herein.
ARTICLE XIII
Allocations Under the Plan;
Participation in the Plan; Selection for Awards
(A) There shall be no further allocations to any Participant under the Grandfathered Plan.
(B) Interest shall be credited on amounts allocated to Participants Account at the rate of
10% per annum.
ARTICLE XIV
Distribution of Awards
(A) Upon Termination of Service of a Participant the Committee (i) shall certify to the
Trustee or the treasurer of the Employer, as applicable, the amount credited to the Participants
Account on the books of each Employer for which the Participant was employed at a time when he or
she earned an award hereunder, and (ii) shall determine whether the payment of the amount credited
to the Participants Account under the Plan is to be paid directly by the
10
applicable Employer, from the Trust Fund, if any, or by a combination of such sources (except
to the extent the provisions of the Trust Agreement if any, specify payment from the Trust Fund)
and (iii) shall determine and certify to the Trustee or the treasurer of the Employer, as
applicable, the method of payment of the amount credited to a Participants Account, selected by
the Committee from among the following alternatives:
(1) single lump sum payment upon Termination of Service;
(2) payment of one-half of the Participants balance upon Termination of
Service, with payment of the additional one-half to be made on or before the last
day of a period of one year following Termination;
(3) in monthly installments over a period not to exceed ten years with such
payments to commence upon Termination of Service.
The above notwithstanding, if the total amount credited to the Participants Account upon
Termination of Service is less than $50,000, such amount shall always be paid in a single lump sum
payment upon Termination of Service.
(B) Interest on the second half of a payment under Paragraph (A)(2) above shall be paid with
the final payment, while interest on payments under Paragraph (A)(3) above may be paid at each year
end or may be paid as a part of a level monthly payment computed by the Committee through the use
of such methodologies as the Committee shall select from time to time for such purpose.
(C) If a Participant shall die while in the service of an Employer, or after Termination of
Service and prior to the time when all amounts payable to him or her under the Plan have been paid
to such Participant, any remaining amounts payable to the Participant hereunder shall be payable to
the estate of the Participant. The Committee shall cause the Trustee or the treasurer of the
Employer, as applicable, to pay to the estate of the Participant all of the awards then standing to
his or her credit in a lump sum or in such other form of payment consistent with the alternative
methods of payment set forth above as the Committee shall determine after considering such facts
and circumstances relating to the Participant and his or her estate as it deems pertinent.
(D) If the Plan is terminated pursuant to the provisions of Article X, the Compensation
Committee may, at its election and in its sole discretion, cause the Trustee or the treasurer of
the Employer, as applicable, to pay to all Participants all of the awards then standing to their
credit in the form of lump sum payments.
11
Exhibit 10.5
KBR
ELECTIVE DEFERRAL PLAN
TABLE OF CONTENTS
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I. Definitions and Construction
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2
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1.1 Definitions
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2
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1.2 Number and Gender
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5
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1.3 Headings
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5
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II. Participation
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5
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2.1 Participation
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5
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2.2 Cessation of Active Participation
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5
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III. Deferral Account Credits; Investment Elections
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5
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3.1 Base Salary Deferrals
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6
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3.2 Bonus Compensation Deferrals
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6
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3.3 Long-Term Incentive Compensation Deferrals
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7
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3.4 Investment of Deferral Accounts
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7
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IV. Emergency Withdrawals
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8
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V. Payment of Benefits
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8
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5.1 Payment Election Generally
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8
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5.2 Subsequent Payment Elections
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9
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5.3 Time of Benefit Payment
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9
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5.4 Form of Benefit Payment
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10
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5.5 Total and Permanent Disability
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10
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5.6 Death
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10
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5.7 Designation of Beneficiaries
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10
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5.8 Other Separation from Service
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11
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5.9 Payment of Benefits
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11
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5.10 Unclaimed Benefits
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5.11 No Acceleration of Bonus or Long-Term Incentive Compensation
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VI. Administration of the Plan
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12
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6.1 Committee Powers and Duties
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12
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6.2 Self-Interest of Participants
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12
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6.3 Claims Review
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13
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6.4 Employer to Supply Information
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13
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6.5 Indemnity
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14
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VII. Administration of Funds
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14
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7.1 Payment of Expenses
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14
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7.2 Trust Fund Property
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14
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VIII. Nature of the Plan
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14
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IX. Participating Employers
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15
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X. Miscellaneous
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16
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(i)
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10.1 Not Contract of Employment
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16
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10.2 Alienation of Interest Forbidden
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16
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10.3 Withholding
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16
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10.4 Amendment and Termination
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16
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10.5 Severability
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16
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10.6 Governing Laws
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17
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10.7 Section 409A Compliance
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17
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APPENDIX A
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19
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III. Grandfathered Plan Account Credits; Investment Elections
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20
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3.1 Base Salary Deferrals
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20
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3.2 Bonus Compensation Deferrals
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20
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3.3 Long-Term Incentive Compensation Deferrals
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20
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3.4 Investment of Grandfathered Plan Accounts
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20
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IV. Withdrawals
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21
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4.1 Emergency Withdrawals
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21
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4.2 Non-Emergency Withdrawals
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21
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V. Payment of Benefits
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22
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5.1 Payment Election Generally
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22
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5.2 Subsequent Payment Elections
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23
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5.3 Time of Benefit Payment
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23
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5.4 Form of Benefit Payment
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23
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5.5 Total and Permanent Disability
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23
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5.6 Death
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24
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5.7 Other Termination of Employment
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24
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5.8 Payment of Benefits
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24
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5.9 No Acceleration of Bonus or Long-Term Incentive Compensation
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24
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(ii)
KBR ELECTIVE DEFERRAL PLAN
W I T N E S S E T H
:
WHEREAS
, the Board of Directors of Halliburton Company (Halliburton) has previously adopted
the Halliburton Company Elective Deferral Plan, as most recently amended and restated effective May
1, 2002, for the benefit of its employees and the employees of its subsidiaries to aid such
employees in making more adequate provision for their retirement; and
WHEREAS
, Halliburton plans to take action which will result in KBR, Inc. (the Company) and
its subsidiaries ceasing to be a member of the Halliburton controlled group; and
WHEREAS
, Halliburton determined that it would be appropriate and desirable for Halliburton to
separate the business and assets of the Company and its subsidiaries
,
from the business and assets
of Halliburton and its other subsidiaries through an initial public offering of the common stock of
the Company; and
WHEREAS
, the Company desires to provide benefits for certain of its new employees including
certain current employees who had previously participated in the HAL Plan, as hereafter defined;
and
WHEREAS
, pursuant to the terms of the HAL Plan, each Employer thereunder was liable for the
benefits related to its employees, and the Company and the Employers hereunder desire to continue
to provide to such employees an opportunity to make deferrals of certain amounts, consistent with
the provisions of Section 409A of the Internal Revenue Code of 1986 as amended (the Code); and
WHEREAS,
the provisions of the HAL Plan, as amended through the Effective Date, will remain in
effect for all deferrals prior to the Effective Date; and
WHEREAS
, the Company desires to preserve the material terms of the HAL Plan as in effect on
December 31, 2004 (the Grandfathered Plan) in order that the Grandfathered Plan qualify as a
grandfathered plan for purposes of Section 409A of the Code; and
WHEREAS
, certain provisions applicable solely to the Grandfathered Plan are preserved in
Appendix A, for purposes of determining the terms applicable to amounts deferred under the
Grandfathered Plan, which provisions shall be substituted for the corresponding provisions
contained herein.
NOW THEREFORE
, the HAL Plan, including the Grandfathered Plan, is hereby continued for
Eligible Employees with the terms set forth below, and is hereby renamed the KBR Elective Deferral
Plan to read as follows, effective as of the Effective Date:
I.
Definitions and Construction
1.1
Definitions
. Where the following words and phrases appear in the Plan, they shall have
the respective meanings set forth below, unless their context clearly indicates to the contrary.
(1)
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Act
: The Employee Retirement Income Security Act of 1974, as amended.
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(2)
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Affiliate
: Any entity of which an aggregate of 50% or more of the ownership
interest is owned of record or beneficially, directly or indirectly, by the Company or any
other Affiliate.
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(3)
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Base Salary
: The base rate of cash compensation paid by the Employer to or for
the benefit of a Participant for services rendered or labor performed while a Participant,
including base pay a Participant could have received in cash in lieu of (a) deferrals
pursuant to Section 3.1 and (b) contributions made on his or her behalf to any qualified
plan maintained by the Employer or to any cafeteria plan under Section 125 of the Code
maintained by the Employer.
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(4)
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Bonus Compensation
: With respect to any Participant for a Plan Year,
remuneration based on calendar year performance under an annual incentive compensation plan
maintained by the Employer that is payable to the Participant in cash.
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(5)
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Credited Investment Return
: The hypothetical gain or loss credited to a
Participants Deferral Account or Grandfathered Plan Account, as applicable, pursuant to
the applicable provisions of Section 3.4(e) hereof.
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(6)
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Code
: The Internal Revenue Code of 1986, as amended.
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(7)
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Committee
: The administrative committee appointed by the Compensation
Committee to administer the Plan.
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(8)
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Compensation Committee
: The Compensation Committee of the Directors.
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(9)
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Company
: KBR, Inc., or, only for amounts deferred under the HAL Plan and
similar purposes, Halliburton Company.
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(10)
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Deconsolidation Date
:
The date upon which an event reduces the amount of the
Company stock owned directly or indirectly by Halliburton Company to be less than the amount
required for Halliburton Company to control the Company within the meaning of Section
1504(a)(2) of the Code.
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(11)
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Deemed Investment Elections
: The investment elections described in Section
3.4 hereof.
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2
(12)
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Deferral Account
: A memorandum bookkeeping account established on the records
of the Employer for a Participant that is credited with specified deferrals, and the
Credited Investment Return determined in accordance with Section 3.4(e) of the Plan, made
and earned after December 31, 2004. A Participant shall have a 100% nonforfeitable
interest in his or her Deferral Account at all times.
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(13)
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Deferral and Investment Election Form
: The form or procedure prescribed by
the Committee pursuant to which a Participant elects for a particular Plan Year (a) the
deferral of a portion of his or her Base Salary, Bonus Compensation and/or Long-Term
Incentive Compensation, and (b) one or more Deemed Investment Options into which amounts to
be allocated to his or her Deferral Account in respect of such deferrals for such Plan Year
will be deemed invested.
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(14)
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Determination Date
: The date on which the amount of a Participants Deferral
Account or Grandfathered Plan Account is determined as provided in Section 3.4 hereof, as
applicable. The last day of each month shall be a Determination Date. As of any
Determination Date, a Participants aggregate benefit under the Plan shall be equal to the
amount credited to his or her Deferral Account and Grandfathered Plan Account, if
applicable, as of such date.
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(15)
|
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Directors
: The Board of Directors of the Company.
|
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(16)
|
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Effective Date
: The Deconsolidation Date.
|
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(17)
|
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Eligible Employee
:
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(a) Any regular Full-Time Active Employee who participates in the HAL Plan immediately prior
to the Effective Date; or
(b) Any Employee who is (i) a regular Full-Time Active Employee, (ii) paid in United States
dollars and subject to the income tax laws of the United States, (iii) an officer or member of a
select group of highly compensated employees of the Employer, and (iv) employed on or after the
Effective Date.
(18)
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Employee
: Any person employed by the Employer.
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(19)
|
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Employer
: The Company, each of the entities identified on Schedule A and each
eligible organization designated as an Employer in accordance with the provisions of
Article IX of the Plan.
|
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(20)
|
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Full-Time Active Employee
: An Employee whose employment with the Employer
requires, and who regularly and actively performs, 30 or more hours of service for the
Employer each week at a usual place of business of the Employer or at a location to which
such Employee is required or permitted to travel on behalf of the Employer for which such
Employee is paid regular compensation.
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(21)
|
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Grandfathered Plan
: The Halliburton Elective Deferral Plan as in effect on December
31, 2004, the material terms of which have not been materially
|
3
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modified (within the meaning of
Section 409A) after October 3, 2004, and are preserved and continued in the Plan as reflected
in Appendix A.
|
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(22)
|
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Grandfathered Plan Account
: A memorandum bookkeeping account established on
the records of the Employer for a Participant that is credited with specified deferrals of
amounts earned and vested prior to January 1, 2005, and the Credited Investment Return on
such amounts determined in accordance with Section 3.4(e) of the Grandfathered Plan. A
Participant has a 100% non-forfeitable interest in his or her Grandfathered Plan Account at
all times.
|
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(23)
|
|
HAL Plan
: The Halliburton Elective Deferral Plan, as amended and restated effective
May 1, 2002 and as subsequently amended with respect to any period up to the Effective Date.
|
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(24)
|
|
Investment Election Change Form
: The form or procedure prescribed by the
Committee pursuant to which a Participant may make changes to his or her Deemed Investment
Elections applicable to future allocations to his or her Deferral Account or Grandfathered
Plan Account and/or to his or her current Deferral Account balance or Grandfathered Plan
Account balance.
|
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(25)
|
|
Investment Options
: One or more alternatives designated from time to time by
the Committee for purposes of crediting earnings or losses to Deferral Accounts and
Grandfathered Plan Accounts.
|
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(26)
|
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Long-Term Incentive Compensation
: Awards, other than Bonus Compensation and
Base Salary, earned under such plans or programs as the Compensation Committee may, from
time to time, designate that are payable in cash.
|
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(27)
|
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Participant
: Each individual who has been selected for participation in the
Plan and who has become a Participant pursuant to Article II.
|
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(28)
|
|
Plan
: The KBR Elective Deferral Plan, as amended from time to time,
constituting a continuation of the HAL Plan.
|
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(29)
|
|
Plan Year
: The twelve consecutive month period commencing January 1 of each
year.
|
|
(30)
|
|
Retirement
: The date the Participant separates from service with the Employer after
attaining age 55 or after the sum of the Participants age and years of service is 70 or
greater.
|
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(31)
|
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Section 409A
: Section 409A of the Code and applicable Treasury authorities.
|
|
(32)
|
|
Trust
: The trust, if any, established under the Trust Agreement.
|
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(33)
|
|
Trust Agreement
: The agreement, if any, entered into between the Employer and
the Trustee pursuant to Article VIII.
|
4
(34)
|
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Trust Fund
: The funds and properties, if any, held pursuant to the provisions
of the Trust Agreement, together with all income, profits and increments thereto.
|
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(35)
|
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Trustee
: The trustee or trustees appointed by the Committee who are qualified
and acting under the Trust Agreement at any time.
|
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(36)
|
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Unforeseeable Emergency
: A severe financial hardship to the Participant or
beneficiary resulting from an illness or accident of the Participant or beneficiary, the
Participants or beneficiarys spouse or of a dependent (as defined in Section 152(a) of
the Code) of the Participant; loss of the Participants or beneficiarys property due to
casualty (including the need to rebuild a home following damage to a home not otherwise
covered by insurance); or other similar extraordinary and unforeseeable circumstances
arising as a result of events beyond the control of the Participant or beneficiary;
provided, however, that such circumstances meet the definition of unforeseeable emergency
under Section 409A, related Treasury pronouncements and any successor thereto.
|
1.2
Number and Gender
. Wherever appropriate herein, words used in the singular shall be
considered to include the plural and words used in the plural shall be considered to include the
singular. The masculine gender, where appearing in the Plan, shall be deemed to include the
feminine gender.
1.3
Headings
. The headings of Articles and Sections herein are included solely for
convenience, and if there is any conflict between such headings and the text of the Plan, the text
shall control.
II.
Participation
2.1
Participation
. Participants are all regular Full-Time Active Employees who participate
in the HAL Plan immediately prior to the Effective Date, and
thereafter shall also include those Eligible Employees who are selected by the Committee, in its sole discretion, as Participants. The
Committee shall notify each Participant of his or her selection as a Participant. Subject to the
provisions of Section 2.2, a Participant shall remain eligible to defer Base Salary and/or Bonus
Compensation hereunder for each Plan Year following his or her initial year of participation in the
Plan.
2.2
Cessation of Active Participation
. Notwithstanding any provision herein to the
contrary, an individual who has become a Participant in the Plan shall cease to be entitled to
defer Base Salary and/or Bonus Compensation hereunder effective as of the date he or she ceases to
be an Eligible Employee or any earlier date designated by the Committee. Any such Committee action
shall be communicated to the affected individual prior to the effective date of such action.
III.
Deferral Account Credits; Investment Elections
5
3.1
Base Salary Deferrals
.
(a) Any Participant may elect to defer receipt of an integral percentage of from 5% to 75% of
his or her Base Salary, in 5% increments, for any Plan Year. Notwithstanding the foregoing,
however, in no event may the deferred amount under this Section 3.1(a) exceed the percentage of the
Participants Base Salary remaining as of the first pay period of the Plan Year after application
of all other amounts withheld from the Participants Base Salary for any reason, including amounts
withheld due to tax withholding or pursuant to the Participants elections, as in effect on January
1 of the Plan Year, under any other plans maintained by the Employer. A Participants election to
defer receipt of a percentage of his or her Base Salary for any Plan Year shall be made on or
before the last day of the preceding Plan Year. Notwithstanding the foregoing, if an individual
initially becomes eligible to participate in the Plan other than on the first day of a Plan Year,
such Participants election to defer receipt of a percentage of his or her Base Salary for such
Plan Year may be made no later than 30 days after the date he or she becomes eligible to
participate in the Plan, but such election shall be prospective only. The reduction in a
Participants Base Salary pursuant to his or her election shall be effected by Base Salary
reductions as of each payroll period within the election period. Deferrals of Base Salary under
this Plan shall be made before elective deferrals or contributions of Base Salary under any other
plan maintained by the Employer. Base Salary deferrals made by a Participant shall be credited to
such Participants Deferral Account as of the date the Base Salary deferred would have been
received by such Participant had no deferral been made pursuant to this Section. Except as
provided in Paragraph (b) of this Section, deferral elections for a Plan Year pursuant to this
Section shall be irrevocable.
(b) If a revocation would not result in taxation under Section 409A, a Participant shall be
permitted to revoke his or her election to defer receipt of his or her Base Salary under Section
3.1(a) for any Plan Year in the event of an Unforeseeable Emergency, as determined by the Committee
in its sole discretion. For purposes of the Plan, the decision of the Committee regarding the
existence or nonexistence of an Unforeseeable Emergency of a Participant shall be final and
binding. Further, the Committee shall have the authority to require a Participant to provide such
proof as it deems necessary to establish the existence and significant nature of the Participants
Unforeseeable Emergency. A Participant who is permitted to revoke his or her Base Salary deferral
election during a Plan Year shall not be permitted to resume Base Salary deferrals under the Plan
until the next following Plan Year.
3.2
Bonus Compensation Deferrals
. Any Participant may elect to defer receipt of an
integral percentage of from 5% to 75% of his or her Bonus Compensation, in 5% increments, for any
Plan Year. A Participants election to defer receipt of a percentage of his or her Bonus
Compensation attributable to services performed in any Plan Year shall be made on or before the
last day of the preceding Plan Year; provided, however, that to the extent Bonus Compensation
satisfies the requirements for performance-based compensation under Section 409A, the Committee may
allow a Participant to make a deferral election no later than the date that is six months before
the end of the performance period for which the Bonus Compensation is paid.
6
Notwithstanding the
foregoing, if any individual initially becomes eligible to participate in the Plan other than on
the first day of a Plan Year, such Participants election to defer receipt of a percentage of his
or her Bonus Compensation for such Plan Year may be made no later than 30 days after the date he or
she becomes eligible to participate in the Plan. Deferrals of Bonus Compensation under this Plan
shall be made before elective deferrals or contributions of Bonus Compensation under any other plan
maintained by the Employer. Bonus Compensation deferrals made by a Participant shall be credited
to such Participants Deferral Account as of the date the Bonus Compensation deferred would have
been received by such Participant had no deferral been made pursuant to this Section 3.2. Deferral
elections for a Plan Year pursuant to this Section shall be irrevocable.
3.3
Long-Term Incentive Compensation Deferrals
. Any Participant may elect to defer receipt
of an integral percentage of from 5% to 75% of his or her Long-Term Incentive Compensation, in 5%
increments, payable in any Plan Year. A Participants election to defer receipt of a percentage of
his or her Long-Term Incentive Compensation payable with respect to any performance cycle shall be
made on or before the date that is six months prior to the end of such performance cycle.
Long-Term Incentive Compensation deferrals made by a Participant shall be credited to such
Participants Deferral Account as of the date the Long-Term Incentive Compensation deferred would
have been received by such Participant had no deferral been made pursuant to this Section 3.3.
Deferral elections pursuant to this Section shall be irrevocable.
3.4
Investment of Deferral Accounts
.
(a) As of any Determination Date, each Participants Deferral Account shall consist of the
balance of the Participants Deferral Account as of the immediately preceding Determination Date
adjusted for:
|
(1)
|
|
additional deferrals pursuant to Sections 3.1, 3.2 and/or
3.3;
|
|
|
(2)
|
|
distributions (if any); and
|
|
|
(3)
|
|
the appropriate Credited Investment Return.
|
All adjustments will be recorded to the Participants Deferral Accounts as of each
Determination Date.
(b) The Committee shall designate from time to time one or more Investment Options in which
the Deferral Accounts may be deemed invested. The Committee shall have the sole discretion to
determine the number of Investment Options to be designated hereunder and the nature of the
Investment Options and may change or eliminate any of the Investment Options from time to time. In
the event of such change or elimination, the Committee shall give each Participant timely notice
and opportunity to make a new election. No such change or elimination of any Investment Options
shall be considered to be an amendment to the Plan pursuant to Section 10.4. A Participant may
request that his or her Deferral Account be allocated among the deemed Investment Options. If a
7
Participant fails to make an election, his or her Deferral Account shall be invested in a single
fund selected by the Committee.
(c) A Participant shall, in connection with his or her election to defer Base Salary, Bonus
Compensation and/or Long-Term Incentive Compensation for a particular Plan Year, elect one or more
Investment Options into which amounts to be allocated to his or her Deferral Account in respect of
deferrals for such Plan Year shall be deemed invested by submitting on or before the last day of
the preceding Plan Year a Deferral and Investment Election Form in accordance with the procedures
prescribed by the Committee.
(d) A Participant may request a change to his or her Deemed Investment Elections for future
amounts allocated to his or her Deferral Account and amounts already allocated to his or her
Deferral Account. Any such change shall be made by filing with the Committee an Investment
Election Change Form. The Committee shall establish procedures relating to changes in Deemed
Investment Elections, which may include limiting the percentage, amount and frequency of such
changes and specifying the effective date for any such changes.
(e) Each Participants Deferral Account shall be credited monthly with the Credited Investment
Return attributable to his or her Deferral Account. The Credited Investment Return is the amount
that the Participants Deferral Account would have
earned if the amounts credited to the Deferral Account had, in fact, been invested in
accordance with the Participants Deemed Investment Elections.
IV.
Emergency Withdrawals
Participants shall be permitted to make withdrawals from the Plan, without penalty, only in
the event of an Unforeseeable Emergency, as determined by the Committee in its sole discretion. No
withdrawal shall be allowed to the extent that such Unforeseeable Emergency is or may be relieved
(a) through reimbursement or compensation by insurance or otherwise, (b) by liquidation of the
Participants assets, to the extent the liquidation of such assets would not itself cause severe
financial hardship or (c) by cessation of Base Salary deferrals under the Plan pursuant to Section
3.1(b). Further, the Committee shall permit a Participant to withdraw only the amount it
determines, in its sole discretion, to be reasonably needed to satisfy the Unforeseeable Emergency.
V.
Payment of Benefits
5.1
Payment Election Generally
. In conjunction with each deferral election made by a
Participant pursuant to Article III for a Plan Year, such Participant shall elect,
8
subject to
Sections 5.5, 5.6 and 5.8, the time and the form of payment with respect to such deferral and the
Credited Investment Returns attributable thereto.
5.2
Subsequent Payment Elections
. A Participant may revise his or her election regarding
the time and form of payment of deferred amounts provided that (i) the subsequent deferral election
is made no later than twelve months prior to the date upon which the deferred amount would have
been paid had no subsequent deferral election been made, (ii) the election defers payment for a
period of not less than five years from the date such payment would otherwise have been paid had no
subsequent deferral election been made, and (iii) the requirement, under (ii) above, that the
election to defer payment for at least five years does not result in a payout date later than the
date on which the Participant attains the age of seventy (70). A subsequent deferral election
under this Section 5.2 shall not be effective until the date that is twelve months after such
subsequent deferral election is made. Subsequent deferral elections under this Section 5.2 must
comply with all applicable requirements for subsequent deferral elections under Section 409A.
Notwithstanding anything to the contrary herein, once a Participant elects payout upon
Retirement any future payment election revisions are prohibited. Additionally, a participant may
not revise an existing election, under Section 5.3 below, from a specific future month and year to
Retirement.
5.3
Time of Benefit Payment
. With respect to each deferral election made by a
Participant pursuant to Article III, such Participant shall elect to commence payment of such
deferral, and the Credited Investment Returns attributable thereto on one of the following dates:
(a) Retirement; or
(b) On a specific future month and year
,
but not earlier than five years from the date of the
deferral if the Participant has not attained age fifty-five at the time of the deferral or one year
from the date of the deferral if the Participant has attained age fifty-five at the time of the
deferral, and not later than the first day of the year in which the Participant attains age
seventy.
In the case of a specified employee within the meaning of Section 409A(a)(2)(B)(i) of the
Code, any payments payable as a result of the Employees termination of employment (other than
death or Disability) shall not be payable before the earlier of (i) the date that is six months
after the Employees termination of employment, (ii) the date of the Employees death, or (iii) the
date that otherwise complies with the requirements of Section 409A. For purposes of the Plan, a
Participant shall be a specified employee for the twelve-month period beginning on April 1 of a
Plan Year if the Participant is a key employee as defined in Section 416(i) of the Code (without
regard to Section 416(i)(5) of the Code) as of December 31 of the preceding Plan Year.
9
5.4
Form of Benefit Payment
. With respect to each deferral election made by a Participant
pursuant to Article III, such Participant shall elect the form of payment with respect to such
deferral and the Credited Investment Returns attributable thereto from one of the following forms:
(a) A lump sum; or
(b) Annual installment payments for a period not to exceed ten years.
Annual installment payments shall be paid on the first business day of January of each Plan
Year. Each installment payment shall be determined by multiplying the deferral and the Credited
Investment Returns attributable thereto at the time of the payment by a fraction, the numerator of
which is one and the denominator of which is the number of remaining installment payments to be
made to Participant.
Notwithstanding any provision of the Plan to the contrary, in the event the amount credited to
a Participants Deferral Account does not exceed $100,000, the Deferral Account shall be paid only
in the form of a lump sum. The provisions of this paragraph shall only apply if and to the extent
permitted under Section 409A.
5.5
Total and Permanent Disability
. If a Participant becomes totally and permanently disabled while employed by the Employer,
payment of the amounts credited to such Participants Deferral Account shall commence on the first
business day of the second calendar quarter following the date the Committee makes a determination
that the Participant is totally and permanently disabled, in the form of payment determined in
accordance with Section 5.4. The above notwithstanding, if such Participant is already receiving
payments pursuant to Section 5.3(b) and Section 5.4(b), such payments shall continue. For purposes
of the Plan, a Participant shall be considered totally and permanently disabled if the Committee
determines, based on a written medical opinion (unless waived by the Committee as unnecessary),
that such Participant is disabled within the meaning of Section 409A(a)(2)(C) of the Code.
5.6
Death
. In the event of a Participants death at a time when amounts are credited to
such Participants Deferral Account, such amounts shall be paid to such Participants designated
beneficiary or beneficiaries in a lump sum.
5.7
Designation of Beneficiaries
.
(a) Each Participant shall have the right to designate the beneficiary or beneficiaries to
receive payment of his or her benefit in the event of his or her death. Each such designation
shall be made by executing and submitting the beneficiary designation form prescribed by the
Committee. Any such designation may be changed at any time by execution of a new designation in
accordance with this Section.
(b) If no such designation is on file with the Committee at the time of the death of the
Participant or such designation is not effective for any reason as determined by the Committee,
then the designated beneficiary or beneficiaries to receive such benefit shall be as follows:
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(1)
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If a Participant leaves a surviving spouse, his or her
benefit shall be paid to such surviving spouse.
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(2)
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If a Participant leaves no surviving spouse, his or her
benefit shall be paid to such Participants executor or administrator, or to
his or her heirs at law if there is no administration of such Participants
estate.
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5.8
Other Separation from Service
. Subject to the provisions of Section 5.3, if a
Participant has a separation from service within the meaning of Section 409A(a)(2)(A)(i) of the
Code before Retirement for a reason other than total and permanent disability or death, the amounts
credited to such Participants Deferral Account shall be paid to the Participant in a lump sum
thirty days after the Participants date of separation from service. For purposes of this Section,
transfers of employment between and among the Company and any of its Affiliates shall not be
considered a separation from service.
5.9
Payment of Benefits
. To the extent the Trust Fund, if any, has sufficient assets, the
Trustee shall pay benefits to Participants or their beneficiaries, except to the extent the
Employer pays the benefits directly and provides adequate evidence of such payment to the Trustee.
To the extent the Trustee does not or cannot pay benefits out of the Trust Fund, the benefits shall
be paid by the Employer. Any benefit payments made to a Participant or for his or her benefit
pursuant to any provision of the Plan shall be debited to such Participants Deferral Account or
Grandfathered Plan Account, as applicable. All benefit payments shall be made in cash to the
fullest extent practicable.
5.10
Unclaimed Benefits
. In the case of a benefit payable on behalf of a Participant, if
the Committee is unable to locate the Participant or beneficiary to whom such benefit is payable,
upon the Committees determination thereof, such benefit shall be forfeited to the Employer.
Notwithstanding the foregoing, if subsequent to any such forfeiture the Participant or beneficiary
to whom such benefit is payable makes a valid claim for such benefit, such forfeited benefit shall
be paid by the Employer or restored to the Plan by the Employer.
5.11
No Acceleration of Bonus or Long-Term Incentive Compensation
. The time of payment of
any Bonus Compensation or Long-Term Incentive Compensation that the Participant has elected to
defer but that has not yet been credited to the Participants Deferral Account because it is not
yet payable without regard to the deferral shall not be accelerated as a result of the provisions
of this Article. If, pursuant to the provisions of this Article, payment of such Bonus
Compensation or Long-Term Incentive Compensation would no longer be deferred at the time it becomes
payable, such Bonus Compensation or Long-Term Incentive Compensation shall be paid to the
Participant as soon as practicable following the date it would have been payable had the
Participant not made a deferral election.
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VI.
Administration of the Plan
6.1
Committee Powers and Duties
. The general administration of the Plan shall be vested in
the Committee. The Committee shall supervise the administration and enforcement of the Plan
according to the terms and provisions hereof and shall have all powers necessary to accomplish
these purposes, including, but not by way of limitation, the right, power, authority, and duty:
(a) To make rules, regulations, procedures and bylaws for the administration of the Plan that
are not inconsistent with the terms and provisions hereof, and to enforce the terms of the Plan and the rules and regulations promulgated thereunder by the Committee;
(b) To designate, change and eliminate Investment Options in which Deferral Accounts and
Grandfathered Plan Accounts may be deemed invested and to establish procedures relating to
elections of Investment Options by Participants;
(c) To construe in its discretion all terms, provisions, conditions, and limitations of the
Plan;
(d) To correct any defect or to supply any omission or to reconcile any inconsistency that may
appear in the Plan in such manner and to such extent as it shall deem in its discretion expedient
to effectuate the purposes of the Plan;
(e) To employ and compensate such accountants, attorneys, investment advisors, and other
agents, employees, and independent contractors as the Committee may deem necessary or advisable for
the proper and efficient administration of the Plan;
(f) To determine in its discretion all questions relating to eligibility;
(g) To determine whether and when a Participant has incurred a separation from service with
the Employer, and the reason for such separation;
(h) To make a determination in its discretion as to the right of any person to a benefit under
the Plan and to prescribe procedures to be followed by distributees in obtaining benefits
hereunder; and
(i) To receive and review reports from the Trustee as to the financial condition of the Trust
Fund, if any, including its receipts and disbursements.
6.2
Self-Interest of Participants
. No member of the Committee shall have any right to vote
or decide upon any matter relating solely to himself under the Plan (including, without limitation,
Committee decisions under Article II) or to vote in any case in which his or her individual right
to claim any benefit under the Plan is particularly involved. In any case in which a Committee
member is so disqualified to act and the remaining members cannot agree, the Compensation Committee
shall appoint a
12
temporary substitute member to exercise all the powers of the disqualified member
concerning the matter in which he or she is disqualified.
6.3
Claims Review
. In any case in which a claim for Plan benefits of a Participant or
beneficiary is denied or modified, the Committee shall furnish written notice to the claimant
within ninety days (or within 180 days if additional information requested by the Committee
necessitates an extension of the ninety-day period), which notice shall:
(a) State the specific reason or reasons for the denial or modification;
(b) Provide specific reference to pertinent Plan provisions on which the denial or
modification is based;
(c) Provide a description of any additional material or information necessary for the
Participant, his or her beneficiary, or representative to perfect the claim and an explanation of
why such material or information is necessary; and
(d) Explain the Plans claim review procedure as contained herein.
In the event a claim for Plan benefits is denied or modified, if the Participant, his or her
beneficiary, or a representative of such Participant or beneficiary desires to have such denial or
modification reviewed, he or she must, within sixty days following receipt of the notice of such
denial or modification, submit a written request for review by the Committee of its initial
decision. In connection with such request, the Participant, his or her beneficiary, or the
representative of such Participant or beneficiary may review any pertinent documents upon which
such denial or modification was based and may submit issues and comments in writing. Within sixty
days following such request for review the Committee shall, after providing a full and fair review,
render its final decision in writing to the Participant, his or her beneficiary or the
representative of such Participant or beneficiary stating specific reasons for such decision and
making specific references to pertinent Plan provisions upon which the decision is based. If
special circumstances require an extension of such sixty-day period, the Committees decision shall
be rendered as soon as possible, but not later than 120 days after receipt of the request for
review. If an extension of time for review is required, written notice of the extension shall be
furnished to the Participant, beneficiary, or the representative of such Participant or beneficiary
prior to the commencement of the extension period.
6.4
Employer to Supply Information
. The Employer shall supply full and timely information
to the Committee, including, but not limited to, information relating to each Participants
compensation, age, retirement, death, or other cause of separation from service to the Employer and
such other pertinent facts as the Committee may require. The Employer shall advise the Trustee, if
any, of such of the foregoing facts as are deemed necessary for the Trustee to carry out the
Trustees duties under the Plan and the Trust Agreement. When making a determination in connection
with the Plan, the Committee shall be entitled to rely upon the aforesaid information furnished by
the Employer.
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6.5
Indemnity
. The Company shall indemnify and hold harmless each member of the Committee
against any and all expenses and liabilities arising out of his or her administrative functions or
fiduciary responsibilities, including any expenses and liabilities that are caused by or result
from an act or omission constituting the negligence of such member in the performance of such
functions or responsibilities, but excluding expenses and liabilities that are caused by or result
from such members own gross negligence or
willful misconduct. Expenses against which such member shall be indemnified hereunder shall
include, without limitation, the amounts of any settlement or judgment, costs, counsel fees, and
related charges reasonably incurred in connection with a claim asserted or a proceeding brought or
settlement thereof.
VII.
Administration of Funds
7.1
Payment of Expenses
. All expenses incident to the administration of the Plan and
Trust, including but not limited to, legal, accounting, Trustee fees, and expenses of the
Committee, may be paid by the Employer and, if not paid by the Employer, shall be paid by the
Trustee from the Trust Fund, if any.
7.2
Trust Fund Property
. All income, profits, recoveries, contributions, forfeitures and
any and all moneys, securities and properties of any kind at any time received or held by the
Trustee, if any, shall be held for investment purposes as a commingled Trust Fund pursuant to the
terms of the Trust Agreement. The Committee shall maintain one or more Deferral Accounts and/or
Grandfathered Plan Accounts, as necessary, in the name of each Participant, but the maintenance of
any such account designated as the account of a Participant shall not mean that such Participant
shall have a greater or lesser interest than that due him or her by operation of the Plan and shall
not be considered as segregating any funds or property from any other funds or property contained
in the commingled fund. No Participant shall have any title to any specific asset in the Trust
Fund, if any.
VIII.
Nature of the Plan
The Employer intends and desires by the adoption of the Plan to recognize the value to the
Employer of the past and present services of employees covered by the Plan and to encourage and
assure their continued service with the Employer by making more adequate provision for their future
retirement security. The Plan is intended to constitute an unfunded, unsecured plan of deferred
compensation for a select group of management or highly compensated employees of the Employer.
Plan benefits herein provided are to be paid out of the Employers general assets. The Plan
constitutes a mere promise by the Employers to make benefit payments in the future and Participants
have the status of general unsecured creditors of the Employers. Nevertheless, subject to the
terms hereof and of the Trust Agreement, if any, the Employers, or the Company on behalf of the
14
Employers, may transfer money or other property to the Trustee and the Trustee shall pay Plan
benefits to Participants and their beneficiaries out of the Trust Fund.
The Committee, in its sole discretion, may establish the Trust and direct the Employers to
enter into the Trust Agreement and adopt the Trust for purposes of the Plan. In such event, the Employers shall remain the owner of all assets in the Trust Fund and the
assets shall be subject to the claims of each Employers creditors if such Employer ever becomes
insolvent. For purposes hereof, an Employer shall be considered insolvent if (a) the Employer is
unable to pay its debts as they become due, or (b) the Employer is subject to a pending proceeding
as a debtor under the United States Bankruptcy Code (or any successor federal statute). The chief
executive officer of the Employer and its board of directors shall have the duty to inform the
Trustee in writing if the Employer becomes insolvent. Such notice given under the preceding
sentence by any party shall satisfy all of the parties duty to give notice. When so informed, the
Trustee shall suspend payments to the Participants and hold the assets for the benefit of the
Employers general creditors. If the Trustee receives a written allegation that the Employer is
insolvent, the Trustee shall suspend payments to the Participants and hold the Trust Fund for the
benefit of the Employers general creditors, and shall determine within the period specified in the
Trust Agreement whether the Employer is insolvent. If the Trustee determines that the Employer is
not insolvent, the Trustee shall resume payments to the Participants. No Participant or
beneficiary shall have any preferred claim to, or any beneficial ownership interest in, any assets
of the Trust Fund.
IX.
Participating Employers
The Committee may designate any entity or organization eligible by law to participate in this
Plan as an Employer by written instrument delivered to the Secretary of the Company and the
designated Employer. Such written instrument shall specify the effective date of such designated
participation, may incorporate specific provisions relating to the operation of the Plan which
apply to the designated Employer only and shall become, as to such designated Employer and its
employees, a part of the Plan. Each designated Employer shall be conclusively presumed to have
consented to its designation and to have agreed to be bound by the terms of the Plan and any and
all amendments thereto upon its submission of information to the Committee required by the terms of
or with respect to the Plan; provided, however, that the terms of the Plan may be modified so as to
increase the obligations of an Employer only with the consent of such Employer, which consent shall
be conclusively presumed to have been given by such Employer upon its submission of any information
to the Committee required by the terms of or with respect to the Plan. Except as modified by the
Committee in its written instrument, the provisions of this Plan shall be applicable with respect
to each Employer separately, and amounts payable hereunder shall be paid by the Employer which
employs the particular Participant, if not paid from the Trust Fund.
15
X.
Miscellaneous
10.1
Not Contract of Employment
. The adoption and maintenance of the Plan shall not be deemed to be a contract between the
Employer and any person or to be consideration for the employment of any person. Nothing herein
contained shall be deemed to give any person the right to be retained in the employ of the Employer
or to restrict the right of the Employer to discharge any person at any time nor shall the Plan be
deemed to give the Employer the right to require any person to remain in the employ of the Employer
or to restrict any persons right to terminate his or her employment at any time.
10.2
Alienation of Interest Forbidden
. Except as hereinafter provided, the interest of a
Participant or his or her beneficiary or beneficiaries hereunder may not be sold, transferred,
assigned, or encumbered in any manner, either voluntarily or involuntarily, and any attempt so to
anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be null
and void; neither shall the benefits hereunder be liable for or subject to the debts, contracts,
liabilities, engagements or torts of any person to whom such benefits or funds are payable, nor
shall they be an asset in bankruptcy or subject to garnishment, attachment or other legal or
equitable proceedings. Plan provisions to the contrary notwithstanding, the Committee shall comply
with the terms and provisions of an order that satisfies the requirements for a qualified domestic
relations order as such term is defined in Section 206(d)(3)(B) of the Act, including an order
that requires distributions to an alternate payee prior to a Participants earliest retirement
age as such term is defined in Section 206(d)(3)(E)(ii) of the Act.
10.3
Withholding
. All deferrals and payments provided for hereunder shall be subject to
applicable withholding and other deductions as shall be required of the Employer under any
applicable local, state or federal law.
10.4
Amendment and Termination
. The Compensation Committee may from time to time, in its
discretion, amend, in whole or in part, any or all of the provisions of the Plan; provided,
however, that no amendment may be made that would impair the rights of a Participant with respect
to amounts already allocated to his or her Deferral Account and Grandfathered Plan Account, as
applicable. The Compensation Committee may terminate the Plan at any time. In the event that the
Plan is terminated, the balance in a Participants Deferral Account and Grandfathered Plan Account
shall be paid to such Participant or his or her designated beneficiary in a single lump sum payment
of cash in full satisfaction of all of such Participants or beneficiarys benefits hereunder if
such distribution is permitted under Section 409A. Any such amendment to or termination of the
Plan shall be in writing and signed by a member of the Compensation Committee. Notwithstanding the
above, any action taken under this Section is subject to the limitations provided in Appendix A.
10.5
Severability
. If any provision of this Plan shall be held illegal or invalid for any reason, said illegality
or invalidity shall not affect the remaining provisions
16
hereof; instead, each provision shall be
fully severable and the Plan shall be construed and enforced as if said illegal or invalid
provision had never been included herein.
10.6
Governing Laws
. All provisions of the Plan shall be construed in accordance with the
laws of Texas except to the extent preempted by federal law.
10.7
Section 409A Compliance
. It is intended that the provisions of this Plan satisfy the
requirements of Section 409A and that the Plan be operated in a manner consistent with such
requirements to the extent applicable. Therefore, the Committee may make adjustments to the Plan
and may construe the provisions of the Plan in accordance with the requirements of Section 409A.
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KBR, INC.
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By
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/s/ William P. Utt
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William P. Utt
President and Chief Executive Officer
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17
SCHEDULE A
KBR Technical Services, Inc.
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APPENDIX A
The Grandfathered Plan contains the provisions governing the deferrals of accounts earned and
vested by Eligible Employees on or before December 31, 2004. This Appendix A preserves the
material terms of the Grandfathered Plan as in effect on December 31, 2004, and is intended to
satisfy the requirements of Section 409A as to grandfathered amounts. The provisions of this
Appendix A shall apply to, and be effective only with respect to, the deferral of earned and vested
amounts under the Grandfathered Plan before January 1, 2005, and the Credited Investment Return on
such deferrals credited at any time. The Plan provides for separate accounting of such amounts
deferred, earned, and vested before January 1, 2005, and the Credited Investment Return thereon.
No amendment to the Plan shall be deemed to amend this Appendix A and the relevant provisions
of the Plan in effect prior to such amendment unless otherwise specifically set forth therein.
Pursuant to Section 1.409A-6(a)(4) of the Proposed Treasury Regulations, a modification is material
if a benefit or right existing as of October 3, 2004 is materially enhanced or a new material
benefit or right is added.... Section 5.8 of the Grandfathered Plan was removed because that section
does not relate to the Company or to the rights of Eligible Employees under the Plan. The removal
of Section 5.8, below, is hereunder intended to be in good faith compliance with Section 409A, and
is not intended to materially modify the benefits existing as of October 3, 2004 under the
Grandfathered Plan.
The provisions of the Plan applicable to the Grandfathered Plan Accounts shall be administered
in a manner consistent with the Grandfathered Plan and Appendix A. Wherever the Plan has added,
changed, or otherwise altered any terms of the Grandfathered Plan that were in effect on December
31, 2004, in a manner that would constitute a material modification, as described above, such
changes will be disregarded in the administration of the Grandfathered Plan Accounts herein.
APPLICABLE GRANDFATHERED PLAN TERMS
With respect to the deferral of amounts earned and vested prior to January 1, 2005, and the
Credited Investment Return on such deferrals credited at any time, the following definitions and
Articles in this Appendix A shall be substituted for the corresponding definitions and Articles of
the Plan:
Retirement
: The date the Participant retires in accordance with the terms of his or
her Employers retirement policy as in effect at that time.
Unforeseeable Emergency
: A severe financial hardship to the Participant resulting
from a sudden and unexpected illness or accident of the Participant or of a dependent (as defined
in Section 152(a) of the Code) of the Participant, loss of the Participants property due to
casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant. For
19
purposes of the Grandfathered Plan, the decision of the Committee regarding the existence or
nonexistence of an Unforeseeable Emergency of a Participant shall be final and binding. Further,
the Committee shall have the authority to require a Participant to provide such proof as it deems
necessary to establish the existence and significant nature of the Participants Unforeseeable
Emergency.
III.
Grandfathered Plan Account Credits; Investment Elections
3.1
Base Salary Deferrals
. Effective from and after January 1, 2005, no deferrals of Base
Salary shall be credited to a Participants Grandfathered Plan Account.
3.2
Bonus Compensation Deferrals
. Effective from and after January 1, 2005, no deferrals
of Bonus Compensation shall be credited to a Participants Grandfathered Plan Account.
3.3
Long-Term Incentive Compensation Deferrals
. Effective from and after January 1, 2005,
no deferrals of Long-Term Incentive Compensation shall be credited to a Participants Grandfathered
Plan Account.
3.4
Investment of Grandfathered Plan Accounts
.
(a) As of any Determination Date, each Participants Grandfathered Plan Account shall consist
of the balance of the Participants Grandfathered Plan Account as of the immediately preceding
Determination Date adjusted for:
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(1)
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distributions (if any); and
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(2)
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the appropriate Credited Investment Return.
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All adjustments will be recorded to the Participants Grandfathered Plan Accounts as of each
Determination Date.
(b) The Committee shall designate from time to time one or more Investment Options in which
the Grandfathered Plan Accounts may be deemed invested. The Committee shall have the sole
discretion to determine the number of Investment Options to be designated hereunder and the nature
of the Investment Options and may change or eliminate any of the Investment Options from time to
time. In the event of such change or elimination, the Committee shall give each Participant timely
notice and opportunity to make a new election. No such change or elimination of any Investment
Options shall be considered to be an amendment to the Plan pursuant to Section 10.4. A Participant
may request that his or her Grandfathered Plan Account be allocated among the deemed Investment
Options. If a Participant fails to make an election, his or her Grandfathered Plan Account shall
be invested in a single fund selected by the Committee.
(c) Except as changed under Section 3.4(d), the Participants Deemed Investment Elections
designated in the Participants initial deferral election shall remain
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in effect with respect to
his or her Grandfathered Plan Account and any additional amounts credited thereto.
(d) A Participant may request a change to his or her Deemed Investment Elections for future
amounts allocated to his or her Grandfathered Plan Account and amounts already allocated to his or
her Grandfathered Plan Account. Any such change shall be made by filing with the Committee an
Investment Election Change Form. The Committee shall establish procedures relating to changes in
Deemed Investment Elections, which may include limiting the percentage, amount and frequency of
such changes and specifying the effective date for any such changes.
(e) Each Participants Grandfathered Plan Account shall be credited monthly with the Credited
Investment Return attributable to his or her Grandfathered Plan Account. The Credited Investment
Return is the amount that the Participants Grandfathered Plan Account would have earned if the
amounts credited to the Grandfathered Plan Account had, in fact, been invested in accordance with
the Participants Deemed Investment Elections.
IV.
Withdrawals
4.1
Emergency Withdrawals
. Participants shall be permitted to make withdrawals from the
Grandfathered Plan Account, without penalty, only in the event of an Unforeseeable Emergency, as
determined by the Committee in its sole discretion. No withdrawal shall be allowed to the extent
that such Unforeseeable Emergency is or may be relieved (a) through reimbursement or compensation
by insurance or otherwise or (b) by liquidation of the Participants assets, to the extent the
liquidation of such assets would not itself cause severe financial hardship. Further, the
Committee shall permit a Participant to withdraw only the amount it determines, in its sole
discretion, to be reasonably needed to satisfy the Unforeseeable Emergency.
4.2
Non-Emergency Withdrawals
. A Participant may make withdrawals from his or her
Grandfathered Plan Accounts at any time for reasons other than an Unforeseeable Emergency, subject
to the following:
(a) the minimum amount that may be withdrawn is $5,000;
(b) only one such withdrawal may be made during any Plan Year;
(c) the withdrawal shall be in cash in a lump sum and taken from the Grandfathered Plan
Accounts and Investment Options designated by the Participant;
(d) the withdrawal must be designated in a whole percentage or a whole dollar amount; and
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(e) upon such withdrawal, a portion of the Participants Grandfathered Plan Account balance
shall be forfeited based on the amount withdrawn from the Grandfathered Plan, determined as
follows:
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With Respect to the Amount
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Percentage of Amount
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Withdrawn from the Following
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Withdrawn from the Percentile to be
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Percentiles of the Grandfathered
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Forfeited from the Grandfathered
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Plan
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Plan
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First 50%
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10
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%
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Second 50%
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25
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%
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The withdrawal amount shall be reduced to the extent necessary for the sum of the amount of
the withdrawal and the forfeiture not to exceed 100% of the Participants Grandfathered Plan
Account balance.
Notwithstanding the foregoing, if such a withdrawal is made on or within one year following a
Corporate Change (as defined below), the amount of the Participants Grandfathered Plan Accounts
forfeited upon such withdrawal shall be equal to 10% of the amount of such withdrawal. A Corporate
Change means one of the following events occurs: (i) the merger, consolidation or other
reorganization of the Company in which the outstanding common stock of the the Company is converted
into or exchanged for a different class of securities of the Company, a class of securities of any
other issuer (except a direct or indirect wholly owned subsidiary of the Company), cash or other
property; (ii) the sale, lease or exchange of all or substantially all of the assets of the Company
to any other corporation or entity (except a direct or indirect wholly owned subsidiary of the
Company); (iii) the adoption of the stockholders of the Company of a plan of liquidation and
dissolution; (iv) the acquisition (other than any acquisition pursuant to any other clause of this
definition) by any person or entity, including, without limitation, a group as contemplated by
Section 13(d)(3) of the Securities Exchange Act of 1934, of beneficial ownership, as contemplated
by such Section, of more than twenty percent (based on voting power) of the Companys outstanding
capital stock; or (v) as a result of or in connection with a contested election of members of the
board of directors of the Company, the persons who were directors before such election shall cease
to constitute a majority of the directors of the Company.
Withdrawals shall be paid as soon as reasonably practicable following the Participants
request, which must be in such form or manner as the Company may prescribe from time to time.
V.
Payment of Benefits
5.1
Payment Election Generally
. Pursuant to Article III hereof, no additional deferrals
are allowed under the Grandfathered Plan.
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5.2
Subsequent Payment Elections
. A Participant may revise his or her election regarding
the time and form of payment of deferred amounts, but such revised election shall not be effective
until one year from the date of the revised election and shall be effective only if payment has not
been made or commenced pursuant to Section 5.2 prior to the expiration of such one-year period.
5.3
Time of Benefit Payment
. With respect to each deferral election made by a Participant
pursuant to Article III, such Participant shall elect to commence payment of such deferral and the
Credited Investment Returns attributable thereto on one of the following dates:
(a) Retirement; or
(b) A specific future month and year, but not earlier than five years from the date of the
deferral if the Participant has not attained age fifty-five at the time of the deferral or one year
from the date of the deferral if the Participant has attained age fifty-five at the time of the
deferral, and not later than the first day of the year in which the Participant attains age
seventy.
5.4
Form of Benefit Payment
. With respect to each deferral election made by a Participant
pursuant to Article III, such Participant shall elect the form of payment with respect to such
deferral and the Credited Investment Returns attributable thereto from one of the following forms:
(a) A lump sum; or
(b) Installment payments for a period not to exceed ten years.
Installment payments shall be paid annually on the first business day of January of each Plan
Year; provided however, that not later than sixty days prior to the date payment is to commence, a
Participant may elect to have his or her installment payments paid quarterly on the first business
day of each calendar quarter. Each installment payment shall be determined by multiplying the
deferral and the Credited Investment Returns attributable thereto at the time of the payment by a
fraction, the numerator of which is one and the denominator of which is the number of remaining
installment payments to be made to Participant.
In the event the aggregate amount credited to a Participants Deferral Account and
Grandfathered Plan Account does not exceed $50,000, the Committee may, in its sole discretion, pay
the Grandfathered Plan Account in the form of a lump sum.
5.5
Total and Permanent Disability
. If a Participant becomes totally and permanently
disabled while employed by the Employer, payment of the amounts credited to such Participants
Grandfathered Plan Account shall commence on the first business day of the second calendar quarter
following the date the Committee makes a determination that the Participant is totally and
permanently disabled, in the form of payment determined in accordance with Section 5.3. The above
notwithstanding, if such Participant is already receiving payments pursuant to Section 5.2(b) and
Section 5.3(b),
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such payments shall continue. For purposes of the Plan, a Participant shall be
considered totally and permanently disabled if the Committee determines, based on a written medical
opinion (unless waived by the Committee as unnecessary), that such Participant is permanently
incapable of performing his or her job for physical or mental reasons.
5.6
Death
. In the event of a Participants death at a time when amounts are credited to
such Participants Grandfathered Plan Account, such amounts shall be paid to such Participants
designated beneficiary or beneficiaries in five annual installments commencing as soon as
administratively feasible after such Participants date of death. However, the Participants
designated beneficiary or beneficiaries may request a lump sum payment based upon hardship, and the
Committee, in its sole discretion, may approve such request.
5.7
Other Termination of Employment
. If a Participant terminates his or her employment
with the Employer before Retirement for a reason other than total and permanent disability or
death, the amounts credited to such Participants Grandfathered Plan Account shall be paid to the
Participant in a lump sum no less than thirty days and no more than one year after the
Participants date of termination of employment. For purposes of this Section, transfers of
employment between and among the Company and any of its Affiliates shall not be considered a
termination of employment.
5.8
Payment of Benefits
. To the extent the Trust Fund, if any, has sufficient assets, the
Trustee shall pay benefits to Participants or their beneficiaries, except to the extent the
Employer pays the benefits directly and provides adequate evidence of such payment to the Trustee.
To the extent the Trustee does not or cannot pay benefits out of the Trust Fund, the benefits shall
be paid by the Employer. Any benefit payments made to a Participant or for his or her benefit
pursuant to any provision of the Grandfathered Plan shall be debited to such Participants
Grandfathered Plan Account. All benefit payments shall be made in cash to the fullest extent
practicable.
5.9
No Acceleration of Bonus or Long-Term Incentive Compensation
. The time of payment of
any Bonus Compensation or Long-Term Incentive Compensation that the Participant has elected to
defer but that has not yet been credited to the Participants Grandfathered Plan Account because it
is not yet payable without regard to the deferral shall not be accelerated as a result of the
provisions of this Article. If, pursuant to the provisions of this Article, payment of such Bonus
Compensation or Long-Term Incentive Compensation would no longer be deferred at the time it becomes
payable, such Bonus Compensation or Long-Term Incentive Compensation shall be paid to the
Participant within 90 days of the date it would have been payable had the Participant not made a
deferral election.
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