General Policy Regarding Laws and Business Conduct

KBR, Inc. and Subsidiary Companies
Corporate Policy

Date: November 10, 2006
Index No.: 3-0001

Purpose:

The Code of Business Conduct of KBR, Inc. contains the specific Corporate Policies adopted by the Board of Directors that relate to the legal and ethical standards of conduct of Directors, Employees and agents of the Company. The Corporate Policies listed in the index set forth in Corporate Policy 3-0000 constitute the Code of Business Conduct and govern the conduct of business by the Company.

The purpose of this General Policy Regarding Laws and Business Conduct is to provide a general statement regarding the Company's expectations as to the legal and ethical nature of conduct of the Company's Directors, Employees and agents while acting on the Company's behalf and to provide for the administration of the Company's Code of Business Conduct.

This Corporate Policy 3-0001 is intended to enhance the qualifications of the Code of Business Conduct as a program that, under the United States Sentencing Guidelines, is reasonably designed, implemented and enforced so as to be generally effective in preventing and detecting criminal conduct, and that promotes an organizational culture that encourages ethical conduct and a commitment to compliance with the law.

Moreover, this Code of Business Conduct applies to the Company's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. The Company believes that this Code of Business Conduct exceeds the requirements of the definition of a "Code of Ethics" as set forth in the regulations of the United States Securities and Exchange Commission ("SEC") issued pursuant to Section 406 of the Sarbanes-Oxley Act of 2002. However, for purposes of clarity and to ensure compliance with Section 406, this Code of Business Conduct as it applies to these listed officers is designed to deter wrongdoing and promote:

  1. honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships
  2. full, fair, accurate, timely, and understandable disclosure in reports and documents that the Company files with, or submits to, the SEC and in other public communications made by the Company
  3. compliance with applicable governmental laws, rules and regulations
  4. the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and
  5. accountability for adherence to the Code.

Definitions:

As used in the Code of Business Conduct:

"Company" means KBR, Inc., a Delaware corporation, its divisions, subsidiaries and successors.

"Director" means any Director of KBR, Inc.

"Employee" means any employee of the Company, including the Company's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.

"High Level Personnel" means individuals who have substantial control over the Company or who have a substantial role in policy-making within the Company, including Directors, executive officers and individuals in charge of a major business or functional unit of the Company, such as sales, administration or finance.

"Laws" means laws, rules and regulations of governmental agencies and authorities.

"Policy Committee" means the Policy Committee of the Company.

Policy:

A. Standards of Conduct.

It is the Company's policy to observe and comply with all Laws applicable to it or the conduct of its business wherever located. In some situations the applicable Law of the United States may conflict with the applicable Law of another country. In such cases the Company will endeavor to resolve such conflict following the guidance of its Law Department. Where such a conflict cannot be resolved, the applicable Law of the United States will be observed and complied with by the Company.

The Code of Business Conduct applies to agents of the Company as well as its Directors and Employees. However, in the case of agents whose activities are wholly outside the United States, Corporate Policy No. 3-0007 establishes the policies and procedures to be observed with respect to such agents.

The Code of Business Conduct sets forth specific Corporate Policies governing the conduct of the business of the Company. These policies were developed and are intended to be applied in good faith with reasonable business judgment to enable the Company to achieve its operating and financial goals within the framework of the Law.

It is the personal responsibility of each Director, Employee and agent of the Company to adhere to the standards and restrictions, whether imposed by Law or the Code of Business Conduct, applicable to his or her assigned duties and responsibilities and to conduct himself or herself accordingly. Such standards and restrictions require each Director, Employee and agent to avoid any activities which would involve the Company in any practice which is not in compliance with the Code of Business Conduct. Any Director, Employee or agent who does not adhere to such standards and restrictions is acting outside the scope of his or her employment, responsibilities or agency.

Beyond legal compliance, all Company Directors, Employees and agents are expected to observe high standards of business and personal ethics in the discharge of their assigned duties and responsibilities. This requires the practice of fair dealing, honesty and integrity by Directors and Employees in every aspect of dealing with other Company Employees, the public, the business community, shareholders, customers, suppliers, competitors and governmental and regulatory authorities. Directors and Employees when acting on behalf of the Company shall not take unfair advantage through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or other unfair-dealing practices.

IT IS THE POLICY OF THE COMPANY NOT TO DISCRIMINATE AGAINST EMPLOYEES, SHAREHOLDERS, DIRECTORS, CUSTOMERS OR SUPPLIERS ON ACCOUNT OF RACE, COLOR, AGE, SEX, RELIGION OR NATIONAL ORIGIN EXCEPT AS MAY BE REQUIRED BY APPLICABLE LAW. ALL OF SUCH PERSONS SHALL BE TREATED WITH DIGNITY AND RESPECT AND THEY SHALL NOT BE UNREASONABLY INTERFERED WITH IN THE CONDUCT OF THEIR DUTIES AND RESPONSIBILITIES.

B. Administration of Code of Business Conduct.

The Code of Business Conduct of the Company shall be administered as follows:

  1. Scope of Code of Business Conduct.

    The Policy Committee shall, periodically, in light of the experience of the Company, review the Code of Business Conduct, and when necessary or desirable, make recommendations to the Board of Directors (i) to ensure its continued conformance to applicable Law, (ii) to ensure that it meets or exceeds industry standards, and (iii) to ensure that any weaknesses revealed through monitoring, auditing and reporting systems are eliminated or corrected.

  2. Allocations of Responsibility.

    The Policy Committee shall be responsible for the administration of the Code of Business Conduct. The Policy Committee shall establish such procedures as it shall deem necessary or desirable in order to discharge this responsibility. Such procedures shall provide for obtaining advice of legal counsel where appropriate. In discharging these responsibilities, the Policy Committee may delegate authority to such committees, officers and other Employees and may engage such agents and advisors as it shall deem necessary or desirable.

  3. Delegation of Substantial Authority.

    No Director or Employee of the Company shall delegate substantial authority to any individual whom such Director or Employee knows, or through the exercise of due diligence should know, has engaged in illegal activities or other conduct inconsistent with an effective compliance and ethics program.

    1. For this purpose, persons with "substantial authority" include (i) High Level Personnel, (ii) individuals who exercise substantial supervisory authority, such as a plant manager or a sales manager, and (iii) any other individuals who, although not a part of the Company's management, nevertheless exercise substantial discretion when acting within the scope of their authority (for example, an individual with authority to negotiate or set price levels or an individual authorized to negotiate or approve significant contracts).

    2. The Policy Committee, in administering the Code of Business Conduct, shall consider, adopt and promulgate guidelines for background checks on individuals who are being delegated substantial authority.

  4. Communication of Policies.

    To ensure the continued dissemination and communication of the Code of Business Conduct, the Policy Committee shall take, or cause to be taken, reasonable steps to communicate effectively the standards and procedures included in the Code of Business Conduct to Directors, Employees and agents of the Company.

  5. Monitoring and Auditing.

    The Policy Committee shall take reasonable steps to monitor and audit compliance with the Code of Business Conduct, including the establishment of monitoring and auditing systems that are reasonably designed to detect conduct in violation of the Code of Business Conduct by Directors, Employees and agents of the Company.

    1. To the extent so directed by the Policy Committee, the information developed by the Company's independent accountants in performing their engagement by the Company and by its internal auditors in the performance of their assigned responsibilities shall be made available to the Policy Committee in its capacity as administrator of the Code of Business Conduct as a means of monitoring and auditing compliance with the Code of Business Conduct.

    2. To the extent so directed by the Policy Committee, the results of the periodic health, safety and environmental audits and export administration audits of the Company's facilities shall be made available to the Policy Committee in its capacity as the administrator of the Code of Business Conduct as a means to monitor and audit compliance with the Code of Business Conduct.

  6. Board Committees.

    The General Counsel shall report to the Audit Committee of the Board of Directors, at least once each year, regarding the general effectiveness of the Code of Business Conduct. The Chief Health, Safety and Environmental Officer shall report to the Health, Safety and Environment Committee of the Board of Directors at least once each year regarding the environmental, health and safety performance of the Company as it relates to the Code of Business Conduct.

  7. Reporting System.

    Directors and Employees are both encouraged and obligated to promptly report any violations of the Code of Business Conduct. The Policy Committee shall establish a reporting system that will allow violations of the Code of Business Conduct to be reported and acted upon by Directors, Officers or other Employees of the Company with sufficient authority to deal objectively with the reported matters. The existence and nature of the reporting system shall be communicated to all Employees and, to the extent appropriate, to agents of the Company. The reporting system shall include an Ethics Hotline. If in doubt about the person to contact, reports should be made to the Ethics Hotline, the General Counsel or any representative of the Law Department.

    It shall be a violation of this Corporate Policy to intimidate or impose any form of retribution on any Employee or agent who utilizes such reporting system in good faith to report suspected violations (except that appropriate action may be taken against such Employee or agent if such individual is one of the wrongdoers).

  8. Investigation of Violations.

    If, through operation of the Company's compliance monitoring and auditing systems or its violation reporting systems or otherwise, the Company receives information regarding an alleged violation of the Code of Business Conduct, the person or persons authorized by the Policy Committee to investigate alleged violations of the Code of Business Conduct shall, as appropriate, in accordance with procedures established by the Policy Committee:

    1. evaluate such information as to gravity and credibility;

    2. initiate an informal inquiry or a formal investigation with respect thereto;

    3. prepare a report of the results of such inquiry or investigation, including recommendations as to the disposition of such matter;

    4. make the results of such inquiry or investigation available to the Board of Directors or the Policy Committee for action (including disciplinary action by the Policy Committee); and

    5. recommend changes in the Code of Business Conduct necessary or desirable to prevent further similar violations. The Company may disclose the results of investigations to law enforcement agencies.

  9. Disciplinary Measures.

    Directors and Employees will be held accountable for failure to adhere to the Company's Code of Business Conduct. The Company shall promptly and consistently enforce its Code of Business Conduct through appropriate means of discipline. Pursuant to procedures adopted by it, the Policy Committee or its designee shall determine whether violations of the Code of Business Conduct have occurred. If the violation involves an Employee or agent of the Company, the Policy Committee or its designee shall determine the disciplinary measures to be taken against such Employee or agent. If the violation involves a Director, the violation will be reported to the Board of Directors and the Board of Directors shall determine the disciplinary measures to be taken against such Director.

    The disciplinary measures which may be invoked include, but are not limited to, counseling, oral or written reprimands, warnings, probation or suspension without pay, demotions, reductions in salary, termination of employment and restitution.

    Persons subject to disciplinary measures shall include, in addition to the violator, others involved in the wrongdoing such as (i) persons who fail to use reasonable care to detect a violation, (ii) persons who if requested to divulge information withhold material information regarding a violation, and (iii) supervisors who approve or condone the violations or attempt to retaliate against Employees or agents for reporting violations or violators.

  10. Waivers.

    Any waiver of the requirements of the Code of Business Conduct for Directors or executive officers of the Company may be made only by the Audit Committee of the Company. The Company will promptly disclose such waivers to its shareholders as may be required by Law.

  11. Documentation.

    Subject to the applicable document retention program, the Company shall document its compliance efforts and results to evidence its commitment to comply with the standards and procedures set forth above.

  12. Advice and Assistance.

    When in doubt about the propriety of a particular course of action, Employees are encouraged to contact the Ethics Hotline, the Law Department or any other person identified in this Code of Business Conduct for advice and assistance.

Approved: Board of Directors
November 10, 2006