FORM OF NONSTATUTORY STOCK OPTION AGREEMENT
Exhibit
10.3
AGREEMENT
by and between KBR, Inc., a Delaware corporation (the “Company”) and
_____________ (“Employee”) made effective as of the date of the delivery of
shares for the closing of the initial public offering of the Company (the “Grant
Date”).
To
carry
out the purposes of the KBR, Inc. 2006 Stock and Incentive Plan (the “Plan”), by
affording Employee the opportunity to purchase shares of common stock of the
Company (“Stock”), and in consideration of the mutual agreements and other
matters set forth herein and in the Plan, the Company and Employee hereby agree
to the following terms set forth herein. Except as defined herein,
capitalized terms shall have the same meanings ascribed to them under the
Plan.
1. Grant
of Option. The Company hereby
irrevocably grants to Employee the right and option (“Option”) to purchase an
aggregate of _______ shares of Stock at the option price indicated below, on
the
terms and conditions set forth herein and in the Plan, which Plan is
incorporated herein by reference as a part of this Agreement. This
Option shall not be treated as an incentive stock option within the meaning
of
Section 422(b) of the Code.
2. Option
Price. The purchase price of Stock to
be paid by Employee pursuant to the exercise of this Option shall equal the
closing sale price per share for KBR, Inc. as reported in composite transactions
for the New York Stock Exchange, Inc. on the Grant Date (the “Exercise
Price”).
3. Exercise
of Option. Subject to the earlier
expiration of this Option as herein provided, this Option may be exercised
by
providing notice of exercise in the manner specified by the Company from time
to
time. Exercise of this Option must occur during the regular trading
hours in which the Stock is traded on the New York Stock Exchange or other
principal exchange on which the Stock is then traded. Except as
otherwise provided below, this Option shall not be exercisable for more than
a
percentage of the aggregate number of shares of Stock offered by this Option
determined by the number of full years from the Grant Date to the date of such
exercise, in accordance with the following schedule:
|
Number
of Full Years
|
Percentage
of Stock
That
May Be Purchased
|
|||
|
Less
than 1
year
|
0 | % | ||
|
1
year
|
331/3 | % | ||
|
2
years
|
67 | % | ||
|
3
years
|
100 | % | ||
This
Option is not transferable otherwise than by will or the laws of descent and
distribution or pursuant to a “qualified domestic relations order” as defined by
the Code and may be exercised during Employee’s lifetime only by Employee,
Employee’s guardian or legal representative or a transferee under a qualified
domestic relations order. Upon any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of this Option or of such rights
contrary to the provisions hereof or in the Plan, or upon the levy of any
attachment or similar process upon this Option or such rights, this Option
and
such rights shall immediately become null and void. This Option may
be exercised only while Employee remains an employee of the Company, subject
to
the following exceptions:
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(a) If
Employee’s employment with the Company terminates by reason of disability
(disability being defined as being physically or mentally incapable of
performing either the Employee’s usual duties as an Employee or any other duties
as an Employee that the Company reasonably makes available and such condition
is
likely to remain continuously and permanently, as determined by the Company
or
employing Subsidiary), this Option may be exercised in full by Employee (or
Employee’s estate or the person who acquires this Option by will or the laws of
descent and distribution or otherwise by reason of the death of Employee) at
any
time during the period ending on the earlier of the Expiration Date (as defined
below) or the third anniversary of the date of Employee’s termination of
employment. Notwithstanding the foregoing, if Employee’s termination
of employment by reason of disability occurs during the first six months
following the Grant Date, this Option may be exercised in full at any time
during the period ending on the earlier of the Expiration Date or the fourth
anniversary of the date of Employee’s termination of employment.
(b) If
Employee dies while in the employ of the Company, Employee’s estate, or the
person who acquires this Option by will or the laws of descent and distribution
or otherwise by reason of the death of Employee, may exercise this Option in
full at any time during the period ending on the earlier of the Expiration
Date
or the third anniversary of the date of Employee’s
death. Notwithstanding the foregoing, if Employee dies during the
first six months following the Grant Date, this Option may be exercised in
full
at any time during the period ending on the earlier of the Expiration Date
or
the fourth anniversary of the date of Employee’s termination of
employment.
(c) If
Employee’s employment with the Company terminates by reason of normal retirement
at or after age 65, this Option may be exercised by Employee at any time during
the period ending on the Expiration Date, but only as to the number of shares
of
Stock Employee was entitled to purchase on the date of such exercise in
accordance with the schedule set forth above. In connection with the termination
of Employee’s employment with the Company by reason of early retirement,
applicable management of the Company and/or business unit may recommend to
the
Committee or its delegate, as applicable, that this Option be retained. In
such
event, the Committee or its delegate, as the case may be, shall consider such
recommendation and may, in the Committee’s or such delegate’s sole discretion,
approve the retention of this Option following such early retirement, in which
case the Option may be exercised by Employee at any time during the period
ending on the Expiration Date, but only as to the number of shares of Stock
Employee was entitled to purchase on the date of such exercise in accordance
with the schedule set forth above. If, after retirement as set forth above,
Employee should die, this Option may be exercised in full by Employee’s estate
(or the person who acquires this Option by will or the laws of descent and
distribution or otherwise by reason of the death of the Employee) during the
period ending on the earlier of the Expiration Date or the third anniversary
of
the date of Employee’s death.
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(d) If
Employee’s employment with the Company terminates for any reason other than
those set forth in subparagraphs (a) through (c) above, this Option may be
exercised by Employee at any time during the period of 30 days following such
termination, or by Employee’s estate (or the person who acquires this Option by
will or the laws of descent and distribution or otherwise by reason of the
death
of the Employee) during a period of six months following Employee’s death if
Employee dies during such 30-day period, but in each case only as to the number
of shares of Stock Employee was entitled to purchase hereunder upon exercise
of
this Option as of the date Employee’s employment so terminates.
This
Option shall not be exercisable in any event prior to the expiration of six
months from the date of grant hereof or after the expiration of ten years from
the date of grant hereof (the “Expiration Date”) notwithstanding anything
hereinabove contained. The purchase price of Stock as to which this Option
is
exercised shall be paid in full at the time of exercise in cash (in the form
and
manner prescribed by the Company). At Employee’s request or the
request of another person entitled to exercise this Option, and to the extent
permitted by applicable law, the Committee in its discretion may selectively
approve “cashless exercise” arrangements with a brokerage firm under which such
brokerage firm, on behalf of Employee or such other person exercising the
Option, shall pay to the Company or its designee the Exercise Price of the
Option or of the portion being exercised, and the Company or its designee,
pursuant to an irrevocable notice from Employee or such other person exercising
the Option, shall promptly deliver the shares being purchased to such
firm. No fraction of a share of Stock shall be issued by the Company
upon exercise of an Option or accepted by the Company in payment of the purchase
price thereof; rather, Employee shall provide a cash payment for such amount
as
is necessary to effect the issuance and acceptance of only whole shares of
Stock. Unless and until a certificate or certificates representing
such Stock shall have been issued by the Company to Employee, Employee (or
the
person permitted to exercise this Option in the event of Employee’s death) shall
not be or have any of the rights or privileges of a shareholder of the Company
with respect to Stock acquirable upon an exercise of this Option.
4. Withholding
of Tax. To the extent that the exercise of this
Option or the disposition of shares of Stock acquired by exercise of this Option
results in compensation income to Employee for federal or state income tax
purposes, Employee shall deliver to the Company at the time of such exercise
or
disposition such amount of money or shares of Stock as the Company may require
to meet its withholding obligation under applicable tax laws or regulations,
and, if Employee fails to do so, the Company is authorized to withhold from
any
cash or Stock remuneration then or thereafter payable to Employee any tax
required to be withheld by reason of such resulting compensation
income. Upon an exercise of this Option, the Company is further
authorized in its discretion to satisfy any such withholding requirement out
of
any cash or shares of Stock distributable to Employee upon such
exercise.
5. Status
of Stock. The Company shall not be
obligated to issue any Stock pursuant to any Option at any time, when the
offering of the Stock covered by such Option has not been registered under
the
Securities Act of 1933, as amended (the “Act”) and such other country, federal
or state laws, rules or regulations as the Company deems applicable and, in
the
opinion of legal counsel for the Company, there is no exemption from the
registration. The Company intends to use its best efforts to ensure
that no such delay will occur. In the event exemption from registration under
the Act is available upon an exercise of this Option, Employee (or the person
permitted to exercise this Option in the event of Employee’s death or
incapacity), if requested by the Company to do so, will execute and deliver
to
the Company in writing an agreement containing such provisions as the Company
may require to assure compliance with applicable securities laws.
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Employee
agrees that the shares of Stock which Employee may acquire by exercising
this
Option will not be sold or otherwise disposed of in any manner which would
constitute a violation of any applicable securities laws, whether federal
or
state. Employee also agrees (i) that the certificates representing the shares
of
Stock purchased under this Option may bear such legend or legends as the
Company
deems appropriate in order to assure compliance with applicable securities
laws,
(ii) that the Company may refuse to register the transfer of the shares of
Stock
purchased under this Option on the stock transfer records of the Company
if such
proposed transfer would in the opinion of counsel satisfactory to the Company
constitute a violation of any applicable securities law and (iii) that the
Company may give related instructions to its transfer agent, if any, to stop
registration of the transfer of the Stock purchased under this
Option.
6. Employment
Relationship. For purposes of this
Agreement, Employee shall be considered to be in the employment of the Company
as long as Employee remains an employee of the Company, a Parent Corporation
or
Subsidiary of the Company, or a corporation or a Parent Corporation or
subsidiary of such corporation assuming or substituting a new option for this
Option. Any question as to whether and when there has been a
termination of such employment, and the cause of such termination, shall be
determined by the Committee or its delegate, as appropriate, and such
determination shall be final.
7. Binding
Effect. This Agreement shall be binding upon and
inure to the benefit of any successors to the Company and all persons lawfully
claiming under Employee.
8. Compliance
with Law. Notwithstanding anything to the
contrary herein, the Company shall not be obligated to issue any Stock pursuant
to any Option, at any time, if the offering of the Stock covered by such Option,
or the exercise of an Option by an Employee, violates or is not in compliance
with any laws, rules or regulations of the United States or any state or
country.
9. Governing
Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of
Texas.
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IN
WITNESS WHEREOF, the Company has caused this Agreement to be duly executed
by
its officer thereunto duly authorized, and Employee has executed this Agreement,
all as of the day and year first above written.
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By:
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Employee
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