SEVERANCE AND CHANGE IN CONTROL AGREEMENT

SEVERANCE AND CHANGE IN CONTROL AGREEMENT

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

W I T N E S S E T H:

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

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

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

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

1.1         Employment; Effective Date. Effective as of ____________________, 2008 (the “Effective Date”) and continuing for the period of time set forth in Article 2 of this Agreement, Executive’s employment hereunder shall be subject to the terms and conditions of this Agreement.

1.2         Positions. From and after the Effective Date, Company shall employ Executive in the positions of President and Chief Executive Officer of Company and/or in such other position(s) as Company determines. In addition, Executive currently serves as Chairman of the Board of Directors of Company (the “Board”).

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

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

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

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

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

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

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

“Target Bonus Opportunity” means the annual target bonus opportunity that would have been granted to Executive with respect to the next fiscal year beginning after

his date of termination, had his employment continued with Company, and assuming Executive’s target bonus in that future fiscal year was equal to his target bonus percentage for the fiscal year in which Executive’s date of termination occurs.

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

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

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

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

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

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

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

employment hereunder and stating the effective date and reason for such termination, provided that no such action shall alter or amend any other provisions hereof or rights arising hereunder.

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

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

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

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

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

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

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

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

(iv) the option to elect medical and prescription drug coverage for himself and his dependents under Company’s medical plan, if one exists, at full cost to Executive (based on the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) rate), until such time as Company no longer maintains a medical plan.

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

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

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

“Change in Control” shall conclusively be deemed to have occurred on a Change in Control Effective Date if any one of the following shall have occurred: (i) any person is or becomes the beneficial owner, directly or indirectly, of securities of Company (not including in the securities beneficially owned by such person any securities acquired directly from Company or its affiliates) representing 20% or more of the combined voting power of Company’s then outstanding securities ; or (ii) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date hereof, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors of Company) whose appointment or election by the Board or nomination for election by Company’s stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended (the “Incumbent Board); provided, however, that for purposes of this paragraph, any individual becoming a director subsequent to the date hereof whose election, or nomination for election by Company’s shareholders, was approved by a vote of at least a majority of the directors

then comprising the Incumbent Board, shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or (iii) there is consummated a merger or consolidation of Company or any direct or indirect subsidiary of Company with any other corporation, other than (A) a merger or consolidation which would result in the voting securities of Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of Company or any subsidiary of Company, at least 50% of the combined voting power of the securities of Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (B) a merger or consolidation effected to implement a recapitalization of Company (or similar transaction) in which no person is or becomes the beneficial owner, directly or indirectly, of securities of Company (not including in the securities beneficially owned by such person any securities acquired directly from Company or any of its affiliates other than in connection with the acquisition by Company or any of its affiliates of a business) representing 20% or more of the combined voting power of Company’s then outstanding securities; or (iv) the stockholders of Company approve a plan of complete liquidation or dissolution of Company, or there is consummated an agreement for the sale, disposition, lease or exchange by Company of all or substantially all of Company’s assets, other than a sale, disposition, lease or exchange by Company of all or substantially all of Company’s assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by stockholders of Company in substantially the same proportions as their ownership of Company immediately prior to such sale. Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the common stock of Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of Company immediately following such transaction or series of transactions.

“Change in Control Effective Date” means: (i) the first date that the direct or indirect ownership of 20% or more combined voting power of Company’s outstanding securities results in a Change in Control as described in clause (i) of such definition above; or (ii) the date of the election of directors that results in a Change in Control as described in clause (ii) of such definition; or (iii) the date of the merger or consolidation that results in a Change in Control as described in clause (iii) of such definition; or (iv) the date of stockholder approval that results in a Change in Control as described in clause (iv) of such definition.

“Good Reason” means any of the following: (i) a material diminution in Executive’s Base Salary, (ii) a material diminution in Executive’s authority, duties, or

responsibilities, or (iii) unless agreed to by Executive, the relocation of the offices at which Executive is principally employed to a location more than 50 miles away.

“Welfare Plan Costs” means an amount equal to three times the total annual cost to Executive and Company of the medical, dental, life, and disability benefits provided to Executive and Executive’s eligible dependents by Company for the year of Executive’s termination of employment.

4.2         Change in Control Termination Benefits (Double Trigger). If both: (A) a Change in Control occurs and (B) on, or within two years after the Change in Control, Company Involuntarily Terminates Executive’s employment or Executive terminates his employment for Good Reason (“Change in Control Termination”), then, subject to Section 6.1, Company will provide Executive with the following benefits (collectively referred to as the “Change in Control Termination Benefits”):

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

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

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

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

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

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

(vii) the Gross-up Payment (as defined in Section 4.3);

(viii) the Welfare Plan Costs; and

(ix) the option to elect medical and prescription drug coverage for himself and his dependents under Company’s medical plan