TRANSITION SERVICES AGREEMENT BETWEEN HALLIBURTON ENERGY SERVICES, INC

EXHIBIT 10.5

HAL as Service Provider

TRANSITION SERVICES AGREEMENT

BETWEEN

HALLIBURTON ENERGY SERVICES, INC.

and

KBR, INC.

Dated November 20, 2006

TABLE OF CONTENTS

i

Schedules

ii

TRANSITION SERVICES AGREEMENT

This TRANSITION SERVICES AGREEMENT (the " Agreement ") is entered into as of the 20th day of November, 2006 by and between Halliburton Energy Services, Inc., a Delaware corporation (" HESI "), and KBR, Inc., a Delaware corporation (" KBR ").

WHEREAS, the Board of Directors of Halliburton Company (" Halliburton ") has determined that it is in the best interests of Halliburton and its stockholders to make an initial public offering (" IPO ") of shares of KBR common stock, par value $0.001 per share;

WHEREAS, in order to effectuate the foregoing, Halliburton and KBR have entered into a Master Separation Agreement, dated as of the date hereof (the " Separation Agreement "), which provides, among other things, subject to the terms and conditions thereof, for the Separation, the IPO, and the execution and delivery of certain other agreements, including this Agreement, in order to facilitate and provide for the foregoing; and

WHEREAS, in order to ensure an orderly transition under the Separation Agreement it will be necessary for Halliburton, through its subsidiary HESI and other members of the Halliburton Group, to provide to KBR certain services described herein for a transitional period.

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements herein contained, the parties, intending to be legally bound, agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1 Definitions . Capitalized terms used herein and not otherwise defined shall have the respective meanings assigned to them in this Article I or in the Separation Agreement (as defined above):

" Additional Services " has the meaning given such term in Section 2.3.

" Agreement " has the meaning given such term in the Preamble.

" Distribution " means a tax-free distribution under Section 355 of the Internal Revenue Code of 1986, as amended, or any corresponding provision of any successor statute of all or any portion of the KBR Common Stock beneficially owned by Halliburton to Halliburton stockholders by way of a dividend, exchange or otherwise.

" Extension Period " has the meaning given such term in Section 2.3.

" Fee Memorandum " has the meaning given such term in Section 4.1.

" Force Majeure Event " has the meaning set forth in Section 10.1.

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" Halliburton " has the meaning given such term in the Preamble.

" HESI " has the meaning given such term in the Preamble.

" Initial Services " has the meaning given such term in Section 2.1.

" Invoice " has the meaning given such term in Section 4.1.

" KBR " has the meaning given such term in the Preamble.

" reasonable best efforts " means a party’s best efforts consistent with reasonable commercial practice and without the incurrence of unreasonable expense or hardship, or the requirement to engage in litigation.

" Separation Agreement " has the meaning given such term in the Recitals.

" Service Coordinator " has the meaning given such term in Section 2.2.

" Services " has the meaning given such term in Section 2.1.

" Tax " has the meaning given such term in Section 4.4.

" Tier 1 Deadline " has the meaning given such term in Article V.

" Tier 1 Services " are those Services listed on Schedules 1 - 10, together with such Additional Services as the parties may agree pursuant to Section 2.3 hereof and designate as Tier 1 Services.

" Tier 2 Services " are those Services listed on Schedules 11 - 25, together with such Additional Services as the parties may agree pursuant to Section 2.3 hereof and designate as Tier 2 Services.

ARTICLE II

SERVICES

SECTION 2.1 Services .

• (a) Subject to the terms and conditions of this Agreement, HESI, acting through its and/or its Affiliates and their respective employees, agents, contractors or independent third parties, agrees to provide or cause to be provided to the KBR Group the services set forth in Schedules 1-25 hereto (the " Initial Services ", which together with any Additional Services provided pursuant to Section 2.3 are collectively referred to herein as the " Services ").

  (b) At all times during the performance of the Services, all Persons performing such Services (including agents, temporary employees, independent third parties and consultants) shall be construed as being independent from the KBR Group and such Persons shall not be considered or deemed to be an employee of any member of the KBR Group nor entitled to any employee benefits of KBR as a result of this

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• Agreement. KBR acknowledges and agrees that, except as may be expressly set forth herein as a Service (including such agreed Additional Services to be provided pursuant to Section 2.3 below) or otherwise expressly set forth in the Separation Agreement, an Ancillary Agreement or other binding definitive agreement, no member of the Halliburton Group shall be obligated to provide, or cause to be provided, any service or goods to any member of the KBR Group.

  (c) HESI and members of the Halliburton Group shall not be required to perform Services hereunder that conflict with or violate any applicable law, contract, license, authorization, certification or permit. HESI will use reasonable best efforts to secure all necessary consents and/or approvals of vendors, lessors and licensors relating to the Services.

SECTION 2.2 Service Coordinators . Each party will nominate in writing a representative to act as the primary contact with respect to the provision of the Services and the resolution of disputes under this Agreement (each such person, a " Service Coordinator "). The initial Service Coordinators shall be the Chief Accounting Officers (or their designated delegates) for each of Halliburton and KBR. Unless HESI and KBR otherwise agree in writing, HESI and KBR agree that all notices and communications relating to this Agreement other than those day to day communications and billings relating to the actual provision of the Services shall be directed to the Service Coordinators in accordance with Section 11.2 hereof. The Service Coordinators shall meet as expeditiously as possible to resolve any dispute hereunder; any dispute that is not resolved by the Service Coordinators within forty-five (45) days shall be resolved in accordance with the dispute resolution and arbitration procedures set forth in Article VII of the Separation Agreement.

SECTION 2.3 Additional Services .

• (a) From the date hereof until ninety (90) days following the IPO Closing Date (the " Extension Period "), from time to time KBR may request additional Services from HESI by providing written notice. The cost of such additional Services shall be determined in accordance with the general principles described in Section 3.1(a). Upon the mutual written agreement as to the nature, cost, duration and scope of such additional Services, HESI and KBR shall supplement in writing the Schedules hereto to include such additional Services (such agreed services, the " Additional Services ").

  (b) HESI shall be obligated to provide to KBR and the members of the KBR Group any Additional Service inadvertently or unintentionally omitted from the list of Initial Services that was provided by the Halliburton Group to the KBR Group immediately prior to the IPO Closing Date or was included in the 2006 budget of Halliburton—KBR intercompany services. HESI, in its sole discretion, may decline to provide any Additional Service requested by KBR which does not meet the criteria of the preceding sentence.

SECTION 2.4 Third Party Services . HESI shall have the right to hire third party subcontractors to provide all or part of any Services hereunder so long as such subcontracting is consistent with past practices and the practice applied by Halliburton generally

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from time to time within its own organization. If subcontracting for a Service is not consistent with past practices and the practice applied by Halliburton generally from time to time within its own organization, then HESI shall give notice of its intent to subcontract such Service to KBR and KBR shall have sixty (60) days to determine, in its sole discretion, whether to permit such subcontracting or whether to cancel such Service in accordance with Article VI hereof.

SECTION 2.5 Standard of Performance; Limitation of Liability .

• (a) The Services to be provided hereunder shall be performed with the same general degree of care, at the same general level and at the same general degree of accuracy and responsiveness, as when performed within the Halliburton organization prior to the date of this Agreement. It is understood and agreed that HESI and the members of the Halliburton Group are not professional providers of the types of services included in the Services and that Halliburton personnel performing Services have other responsibilities, and will not be dedicated full-time to performing Services.

  (b) In the event HESI or any member of the Halliburton Group fails to provide, or cause to be provided, the Services in accordance herewith, the sole and exclusive remedy of KBR shall be to, at KBR’s sole discretion, within ninety (90) days from the date that HESI or such member of the Halliburton Group first fails to provide such Service either (i) have the Service reperformed, or (ii) not pay for such Service, or if payment has already been made, receive a refund of the payment made for such defective service; provided that in the event HESI defaults in the manner described in Section 7.1(ii) or (iii), KBR shall have the further rights set forth in Section 7.1.

  (c) EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 2.5, NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, IMPLIED OR EXPRESSED, ARE MADE BY HESI OR ANY MEMBER OF THE HALLIBURTON GROUP WITH RESPECT TO THE SERVICES UNDER THIS AGREEMENT AND ALL SUCH REPRESENTATIONS OR WARRANTIES ARE HEREBY WAIVED AND DISCLAIMED. KBR HEREBY EXPRESSLY WAIVES ANY RIGHT KBR OR ANY MEMBER OF THE KBR GROUP MAY OTHERWISE HAVE FOR ANY LOSSES, TO ENFORCE SPECIFIC PERFORMANCE OR TO PURSUE ANY OTHER REMEDY AVAILABLE IN CONTRACT, AT LAW OR IN EQUITY IN THE EVENT OF ANY NON-PERFORMANCE, INADEQUATE PERFORMANCE, FAULTY PERFORMANCE OR OTHER FAILURE OR BREACH BY HESI OR ANY MEMBER OF THE HALLIBURTON GROUP UNDER OR RELATING TO THIS AGREEMENT, NOTWITHSTANDING THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT OR ACTIVE OR PASSIVE) OF HESI OR ANY MEMBER OF THE HALLIBURTON GROUP OR ANY THIRD PARTY SERVICE PROVIDER AND WHETHER DAMAGES ARE ASSERTED IN CONTRACT OR TORT, UNDER FEDERAL, STATE OR NON U.S. LAWS OR OTHER STATUTE OR OTHERWISE; PROVIDED, HOWEVER, THAT THE FOREGOING WAIVER SHALL NOT EXTEND TO COVER, AND HESI SHALL BE RESPONSIBLE FOR, SUCH LOSSES CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF HESI, ANY MEMBER OF THE HALLIBURTON GROUP OR ANY THIRD PARTY SERVICE PROVIDER HEREUNDER.

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SECTION 2.6 Service Boundaries and Scope . Except as provided in a Schedule for a specific Service: (a) HESI shall be required to provide, or cause to be provided, the Services only at the locations such Services are being provided by any member of the Halliburton Group for any member of the KBR Group immediately prior to the IPO Closing Date; and (b) the Services shall be available only for purposes of conducting the business of the KBR Group substantially in the manner it was conducted immediately prior to the IPO Closing Date. Except as provided in a Schedule for a specific Service, in providing, or causing to be provided, the Services, HESI shall not be obligated to: (i) maintain the employment of any specific employee or hire additional employees; (ii) purchase, lease or license any additional equipment (including, without limitation, computer equipment, software, furniture, furnishings, fixtures, machinery, vehicles, tools and other tangible personal property) that it would not acquire in the ordinary course of business; (iii) make modifications to its existing systems; or (iv) pay any costs related to the transfer or conversion of data of any member of the KBR Group.

SECTION 2.7 Cooperation . HESI and KBR shall cooperate with one another and shall provide such further assistance as the other party may reasonably request in connection with the provision of Services hereunder.

SECTION 2.8 Transitional Nature of Services; Changes . The parties acknowledge the transitional nature of the Services and that HESI may make changes from time to time in the manner of performing the Services if Halliburton is making similar changes in performing similar services for members of its own Group and if HESI furnishes to KBR substantially the same notice Halliburton shall provide members of its own Group respecting such changes.

ARTICLE III

SERVICE CHARGES

SECTION 3.1 Compensation .

• (a) General Principles Relating to Charges for Services . Subject to the specific terms of this Agreement, the Services will be charged and paid for on the same general basis as has been heretofore in effect, with the intent that such charges shall approximate the fully allocated direct and indirect costs of providing and discontinuing the Services, but without any element of profit. It is the further intent of the parties that the fully allocated direct and indirect costs incurred by Halliburton and its subsidiaries in providing Services under this Agreement will be charged on a basis that allocates such costs on a fair and nondiscriminatory basis. The parties shall use good faith efforts to discuss any situation in which the actual charge for a Service is expected significantly to exceed the estimated charge set forth on a Schedule for a particular Service; provided, however, that charges incurred in excess of any such estimate shall not justify ceasing the provision of, or payment for, Services under this Agreement.

  (b) Service Fees . In consideration for the provision of a Service, each member of the KBR Group receiving Services shall pay to HESI or the member of the Halliburton Group providing such Services, as applicable, either (i) a mutually agreed fixed fee for such Service or (ii) a reimbursement for all reasonable, out-of-pocket cash

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• costs that are incurred to provide such Service, including, as applicable, one-time set-up costs for Services. The Service fees in effect from the date hereof until December 31, 2006 are set forth on the attached Schedules. The Service fees to be charged for each succeeding calendar year shall be determined annually in connection with the KBR and Halliburton annual planning process or otherwise as the parties may agree. From time to time, the Service Coordinators may, in accordance with the general principles described in Section 3.1(a), agree in writing to update, modify or amend any Service fee set forth on a Schedule or agreed in connection with the annual plannin