International Business Relationships

KBR, Inc. and Subsidiary Companies
Corporate Policy

Date: November 10, 2006
Index No.: 3-0007

Purpose:

This Policy provides guidelines for business relationships entered into outside the United States ("International Business Relationships") as further defined below.

Policy:

  1. The selection of parties with whom the Company may join in an International Business Relationship shall be subject to careful consideration by appropriate management of the Company after an investigation, reasonable under the circumstances, with respect to such parties and the proposed arrangements with such parties.

  2. The terms and provisions of all proposed agreements with respect to International Business Relationships, including all proposed material amendments thereto, shall be subject to careful review and approval by the General Counsel, the Chief Financial Officer and Chief Executive Officer, or their designees, prior to execution and delivery of such agreements or material amendments. Such agreements will provide that the other party or parties will agree to comply with the Code of Business Conduct for International Business Relationships ("Code") as set forth in Annex A to this Policy. It is the responsibility of the management of the Business Unit, working with the Law Department, to (i) discuss the Code with such other parties to facilitate an understanding by the other parties of the requirements of such Code; and (ii) explain the Company's rationale for requiring the incorporation of the Code into agreements for International Business Relationships and the importance of compliance with the United States Laws described in paragraphs 4, 5, and 6 of such Code.

  3. The Company may find it necessary or desirable to enter into International Business Relationships to assist the Company to obtain business or promote the distribution, marketing or sales of its products and services in which the other party or parties to the International Business Relationship either: (i) is paid compensation (monetary or non-monetary, fixed fees, lump sum fees, percentage of sales fees, award or bonus fees or any other form of direct or indirect compensation) based upon sales of products or services of the Company; (ii) is granted the right to distribute Company products or services; or (iii) participates, shares or receives directly or indirectly portions of the revenue or income of the Company.

  4. International Business Relationships include the following:

    1. the employment of an agent, sales representative, sponsor or any other third party (individual, partnership, corporation or unincorporated entity) to assist the Company to obtain business or promote the distribution, marketing or sales of its products and services, including licensing agreements pursuant to which a third party or parties distributes, markets, sells or is granted a license to distribute, market or sell the services, products or technology of the Company in the name of or on the behalf of the Company. These types of International Business Relationships are referred to as "Commercial Agents";

    2. entering into a joint venture, consortium, partnership, shareholder agreement or any other

      3. similar agreement or arrangement pursuant to which a third party obtains: (i) an equity interest in an entity owned by the Company or (ii) a share of the profits from the business of a joint venture, consortium, partnership or entity owned by the Company; or

    3. entering into a contract or subcontract (including a purchase order) pursuant to which a third party or third parties will perform a majority of the work or services to be provided under the Company's contract.

  5. International Business Relationships do not include the following:

    1. agents, representatives or consultants retained to support the day-to-day operations of the Business Units, including, but not limited to, activities relating to tax advisors, statutory auditors, outside legal advisors, personnel visas, immigration, import or export licenses, customs agents or brokers, freight forwarders, facilities or real estate and other matters routinely necessary for effective operations of the business ("Non-Commercial Agents"); or

    2. subcontracts or purchase orders for goods or services in the regular course of business as may be necessary for the performance of work.

  6. While International Business Relationships are ordinarily customary means of conducting operations in a particular country, such arrangements, if not adequately subjected to a corporation's system of internal controls, may be used to disburse a corporation's assets for purposes not authorized by management. Moreover, the Company may be held accountable for actions taken by agents and others on its behalf.

  7. In carrying out the policies set forth in Policy paragraphs 1 and 2, the Company shall give consideration to such matters as the reputation of the proposed parties to an International Business Relationship, their familial or other connections with the local government, the necessity of the services to be rendered by such persons, the reasonableness of their fees or other compensation in light of those services and the fees paid to other persons in the area for similar services, any local legal requirements to utilize an agent for such services, the employment of such persons by other corporations operating in the area, the employment of such persons by affiliates of the Company, the location at which, and the currency in which, fees or other compensation is to be paid to such persons, any local legal requirements, including taxes and foreign currency exchange controls, regarding the payment of fees or other compensation to such persons, and the business and cultural environment in which such persons will render such services.

Procedure:

  1. Once the Company decides to pursue an International Business Relationship, and prior to entering into any significant negotiations, a due diligence evaluation report that has been reviewed, approved and signed by the appropriate Business, Law, Tax, Finance and Accounting managers shall be submitted to the General Counsel, Chief Financial Officer and Chief Executive Officer, or their designees. The minimum levels of due diligence, the form and substance of the due diligence evaluation reports and the review and approval levels will be determined by the General Counsel, Chief Financial Officer and Chief Executive Officer and will be consistent with the intents and purposes of this Policy. In connection with the determination of such criteria, the General Counsel, Chief Financial Officer and Chief Executive Officer will consider the differences between the operations of the Business Units and may establish different levels of due diligence and approvals based upon relevant facts and circumstances. At the discretion of the General Counsel, Chief Financial Officer and Chief Executive Officer, policies or business practices may be issued in order to establish minimum levels of due diligence, the form and substance of the due diligence evaluation reports and the approval levels. If policies or business practices are issued, they will be reviewed and revised, as appropriate, at least once every three years.

  2. The due diligence evaluation report shall describe the parties involved, the recommended relationship, the geographic location or limits, and such other factors deemed relevant, including any pertinent information relating to the factors described in Policy paragraph 7 above. Pertinent information should be obtained from the Law, Insurance, Tax, Human Resources, Accounting and Treasury Departments or outside advisors that may be retained by such departments, as appropriate.

  3. The General Counsel or his or her designee will determine if any conflicting agreement or arrangement exists, and forward the due diligence evaluation report with appropriate notations to the Chief Financial Officer and Chief Executive Officer of the Company for review and approval.

  4. If approval is granted by the General Counsel, Chief Financial Officer and Chief Executive Officer, or their designees, the business manager may proceed with negotiations, obtaining necessary input from the Law, Insurance, Tax, Human Resources, Finance, Accounting and Treasury Departments as appropriate. The approved due diligence evaluation report will be returned to the Region lawyer who signed the due diligence evaluation report.

  5. If negotiations are brought to a successful conclusion, the definitive agreement shall either be prepared by or approved by the Law Department. In preparing or reviewing the definitive agreement, emphasis will be placed upon compliance with applicable Laws and the Code of Business Conduct, including the Code of Business Conduct for International Business Relationships. If the definitive agreement reflects a material deviation from the proposed International Business Relationship approved by the General Counsel, Chief Financial Officer and Chief Executive Officer of the Company, the proposed International Business Relationship will be re-submitted to such officers for their review and approval.

  6. The requirement of this Corporate Policy that third parties agree to comply with the Code of Business Conduct for International Business Relationships may be waived where such waiver is approved by the Chief Executive Officer and the General Counsel, or their designees, because: (i) in their judgment it would be remote that such third party would engage in conduct that is contrary to this Policy and such third party has policies and practices that apply to the activities of the International Business Relationship that are consistent with the requirements of this Policy; (ii) in their judgment compliance with portions of this Corporate Policy would be contrary to the laws of the country where the activities of the International Business Relationship will occur and the third party agrees to comply with those portions of the Code of Business Conduct that are not contrary to such laws and has policies and practices that apply to the activities of the International Business Relationship that are consistent with the requirements of this Policy; or (iii) the Company either does not control the International Business Relationship or owns less than 50 percent of the International Business Relationship. In making such judgment, the character, reputation, size, location, business conduct and other relevant factors with respect to such third parties shall be taken into consideration. If the determination is made pursuant to subsection (iii) because of either ownership or control, the Company will use reasonable efforts to obtain the agreement of the other party or parties to comply with the Code of Business Conduct for International Business Relationships as set forth in Annex A to this Policy.

  7. The General Counsel shall provide written notice to the Company's Chief Financial Officer of all waivers issued pursuant to Procedure paragraph 6 above.

  8. The Law Department of each Business Unit will maintain a database of Commercial Agents. The General Counsel shall determine the scope and extent of the information that will be available in the database; the frequency of updates of the database; the reports to be generated from the database; and the scope, extent and frequency of distribution of such reports.

  9. The Chief Accounting Officer will establish criteria for a quarterly report of commissions or compensation paid to Commercial Agents. This quarterly report will be reviewed and approved by the Chief Financial Officer and distributed to the Chief Executive Officer, the General Counsel and such other officers and employees as may be designated by the Chief Financial Officer.

  10. The Policy Committee of the Company will establish criteria for a review and re-approval on or before the fifth anniversary date of an agreement with a Commercial Agent. As part of the review, there will be: (i) a determination as to whether the current or past performance of the Commercial Agent has been satisfactory; (ii) a summary of all current or past relationships, either direct or indirect, with the Company; and (iii) a summary of compensation paid, either directly or indirectly, to the third party by the Company or on the behalf of the Company.

Other References:

1. Corporate Policy No. 3-0005 (Sensitive Transactions) should be consulted.

Approved: Board of Directors
November 10, 2006

Annex A to Corporate Policy 3-0007
Code of Business Conduct for
International Business Relationships

The Company is a global company that conducts business in many countries through subsidiaries, branches, joint ventures and other business arrangements. The Company also uses agents to represent it in situations where an agent can facilitate accomplishment of business objectives.

As a responsible corporate citizen, the Company requires that all of its business operations observe certain basic standards of conduct. Also, as a public company subject to the Laws of the United States, the Company must ensure that its business relationships outside the United States ("International Business Relationships") will comply with the requirements of certain United States Laws that impose on the Company standards of conduct for its business throughout the world.

For International Business Relationships, it is the policy of the Company that the following standards of conduct and legal requirements shall be observed:

  1. Applicable Law must be complied with in the conduct of such relationships. If there is a conflict between applicable local Law and applicable United States Law, the guidance of the Company's Law Department will be sought in order to resolve such conflict. However, the United States Laws referred to in paragraphs 4, 5 and 6 below, must be complied with without exception.

  2. All dealings involving International Business Relationships will be conducted in a fair manner with honesty and integrity, observing high standards of personal and business ethics.

  3. Business books and records will be maintained in a proper, responsible and honest manner which will allow the Company to comply with applicable Laws.

  4. International Business Relationships will be conducted in compliance with the United States Foreign Corrupt Practices Act.

  5. International Business Relationships will be conducted in compliance with the Laws of the United States regarding boycotts.

  6. International Business Relationships will be conducted in compliance with the Laws of the United States regarding trade sanctions and export administration.

  7. Confidential or proprietary information will not be disclosed at any time to persons outside the International Business Relationship without proper written authorization.

  8. The International Business Relationship will be conducted in compliance with applicable antitrust and competition Laws.