Exhibit 10.4


 


12-31-97(1)


 


KIMBALL HILL HOMES


NONSTATUTORY STOCK OPTION PLAN


 


This Kimball Hill Homes Nonstatutory Stock Option Plan (“Plan”) of
Kimball Hill, Inc., an Illinois corporation, adopted effective as of December 31,
1997.


 


R E C I T A L S


 


A.                                   Kimball
Hill, Inc. (“Company”) adopted, effective as of October 31, 1995, the
Kimball Hill Homes Incentive Stock Option Plan (“Incentive Plan”) under which
options could be granted to certain designated managerial employees of the
Company to purchase shares of the Company stock. The Incentive Plan provides
for options intended to qualify as incentive stock options under Section 422
of the Internal Revenue Code (“Code”) as amended.


 


B.                                     The
Incentive Plan was amended by the Company effective as of October 31, 1996
and also as of December 31, 1997. Under the Incentive Plan as amended
through the effective date of this Plan, options to acquire an aggregate
350,000 shares of stock of the Company have been granted to such key employees
of the Company through individual Kimball Hill Homes Stock Option Agreements
entered into between the Company and the designated optionees.


 


C.                                     The
Company desires to also offer options to acquire stock of the Company to
designated members of the Board of Directors of the Company who are not also
employees of the Company, but such nonemployees of the Company are not eligible
for incentive stock options under Section 422 of the Code or under any
other provisions of the Code.


 


D.                                    Accordingly,
the Company desires through the provisions of this Plan, to make available to
designated nonemployee members of the Board of Directors and perhaps to certain
employees nonstatutory stock options under terms and conditions generally
parallel with the incentive stock options offered under the Incentive Plan
subject to differences required by the Code.


 


E.                                      The
Company desires to provide for the terms of the conditions of the nonstatutory
stock options in this Plan.


 


1.                                       Purpose
of the Plan.


 


Under this Plan adopted by the Company, options may be granted to
eligible participants to purchase shares of the Company stock. The Plan is
designed to enable the Company and its subsidiaries to afford certain
designated participants who may be employees or nonemployees, who are
expected to share in the responsibility for the continued growth of the Company
and its subsidiaries, an opportunity to acquire a


 

















 


proprietary interest in the Company and thereby enable the Company and
its subsidiaries to attract, retain and motivate such participants. The Plan
provides for options (“Options”) which are not intended to qualify as statutory
stock options under Section 422 of the Code or under any other Code
provisions. Accordingly, the Options under this Plan shall be considered
nonstatutory.


 


2.                                       Stock
Subject to Plan.


 


(a)                                  The
maximum number of shares of stock subject to this Plan and for which Options
granted under this Plan may be exercised shall initially be 15,000 shares
of the Company’s common stock subject to adjustments as elsewhere provided for
in this Plan. As of the effective date of this Plan, the Company has no other class of
stock other than such common stock. Shares of stock subject to the unexercised
portions of any Options granted under this Plan which expire or terminate or
are cancelled may again be subject to Options under the Plan.


 


(b)                                 The
Company expects to modify this Plan to offer additional Options in subsequent
years, but no commitment to do so has been made or is intended.


 


3.                                       Eligible
Participants.


 


(a)                                  The
participants (“Optionee” or “Optionees”) eligible to be considered for the
grant of Options under this Plan are persons who are (i) nonemployee
members of the Board of Directors of the Company or of any of its subsidiaries
or (ii) regularly employed by the Company or by any of its subsidiaries in
a managerial capacity on a full-time, salaried basis but who for any reason
have not been designated under the Incentive Plan to receive statutory stock
options or, if they have been so designated, are not then eligible for
additional statutory stock options.


 


(b)                                 The
initial Optionees designated by the Company under this Plan, and the number of
shares of stock of the Company to be made available to them through the Options
to be granted to them under this Plan, are as follows:


 


	
  Optionee

  	
   

  	
  Number of Shares Available by Option

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Larry H. Dale

  	
   

  	
  5,000

  	
   

  
	
  Brian Loftus

  	
   

  	
  5,000

  	
   

  
	
  John P. Toren

  	
   

  	
  5,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TOTAL:

  	
   

  	
  15,000

  	
   

  



 


(c)                                  If
all of the Optionees exercise all of their nonstatutory Options to acquire all
such stock available to them for purchase under this Plan, and if all of the


 


2

















 


optionees under the Incentive Plan exercise all of their statutory
options granted through the effective date of this Plan, and if no other stock
of the Company was sold or reacquired, the stock of the Company would then be
held as follows:


 


	
  Shareholder/Optionee

  	
   

  	
  Number of Shares If All

  Options are Exercised

  	
   

  	
  % of Issued and Outstanding

  Shares If All Options Are

  Exercised

  	
   

  
	
  David K. Hill

  	
   

  	
  2,703,955

  	
   

  	
  73.78

  	
   

  
	
  Diane G. Hill

  	
   

  	
  236,836

  	
   

  	
  6.46

  	
   

  
	
  Diane G. Hill as Trustee for David K. Hill, III

  	
   

  	
  59,209

  	
   

  	
  1.61

  	
   

  
	
  Bruce I. McPhee

  	
   

  	
  328,000

  	
   

  	
  8.95

  	
   

  
	
  Gregory A. Yakim

  	
   

  	
  160,000

  	
   

  	
  4.37

  	
   

  
	
  Hal H. Barber

  	
   

  	
  44,000

  	
   

  	
  1.20

  	
   

  
	
  Eugene K. Rowehl

  	
   

  	
  40,500

  	
   

  	
  1.10

  	
   

  
	
  Kirk T. Breitenwischer

  	
   

  	
  37,500

  	
   

  	
  1.02

  	
   

  
	
  Thomas F. Tylutki

  	
   

  	
  30,000

  	
   

  	
  .82

  	
   

  
	
  Lance Wright

  	
   

  	
  10,000

  	
   

  	
  .27

  	
   

  
	
  Larry H. Dale

  	
   

  	
  5,000

  	
   

  	
  .14

  	
   

  
	
  Brian Loftus

  	
   

  	
  5,000

  	
   

  	
  .14

  	
   

  
	
  John P. Toren

  	
   

  	
  5,000

  	
   

  	
  .14

  	
   

  
	
  TOTALS:

  	
   

  	
  3,665,000

  	
   

  	
  100

  	
  %

  



 


4.                                       Minimum
Exercise Price.


 


The exercise price for each Option granted under this Plan shall be not
less than 100% of the Fair Market Value, as defined in paragraph 14 of this
Plan, of the stock being optioned. Fair Market Value shall be determined at the
time of the grant of the Option.


 


3

















 


5.                                       Non-transferability.


 


Any option granted under this Plan shall by its terms be
non-transferable by the Optionee other than by will or the laws of descent and
distribution and shall be exercisable during the Optionee’s lifetime only by
the Optionee or by the Optionee’s guardian or legal representative.


 


6.                                       Adjustment
of Shares by Reason of Certain Transactions.


 


(a)                                  In
the event of any change in the outstanding shares of the Company through
additional options, sales of stock, merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, split-up, split-off, spin-off,
combination or exchange of shares, or other like change in capital structure of
the Company, an equitable adjustment may be made to each outstanding
Option such that each such Option shall thereafter be exercisable for such
securities, cash and/or other property as would have been received in respect
to the shares subject to such Option had such Option been exercised in full
immediately prior to such change. Such adjustment shall be made successively
each time any such change shall occur.


 


(b)                                 In
addition or instead, in the event of any such change, the Committee, as
established and otherwise provided for pursuant to the provisions of paragraph
10(a) below, may make any further adjustment as may be
appropriate to the maximum number of shares subject to the Plan and the number
of shares and price per share subject to outstanding Options as shall be
equitable to prevent dilution or enlargement of rights under such Option. The
determination of the Committee as to any such actions and matters shall be
conclusive.


 


7.                                       Maximum
Option Term.


 


The initial Options to be granted under this Plan must be exercised
within four (4) years of the grant of each such Option.


 


8.                                       Plan
Duration.


 


Options may be granted under this Plan for such period as may be
designated by the Company.


 


9.                                       Payment.


 


Payment for stock purchased upon any exercise of an Option granted
under this Plan will be made in full in cash or check with currently available
funds concurrently with such exercise, provided, however, that the contract
between the Company and any Optionee (“Nonstatutory Stock Option Agreement”)
which grants a specific Option to a specific Optionee may, at the discretion of
the Company, provide for payment terms.


 


4

















 


10.                                 Administration.


 


(a)                                  The
Plan shall be administered by a committee (“Committee”) of not less than two (2) individuals
selected by the Board of Directors (“Board”). Any member of the Committee may be
removed at any time either with or without cause by resolution adopted by the
Board, and any vacancy on the Committee may at any time be filled by
resolutions adopted by the Board. The initial Committee under this Plan shall
consist of David K. Hill and James A. Moehling.


 


(b)                                 Subject
to the express provisions of this Plan, the Committee shall have the authority
in its discretion to carry out and do the following:


 


(i)                                     To determine the
participants to whom Options shall be granted, the time when such Option shall
be granted, the number of shares which shall be subject to each Option, the
purchase price of each share will be subject to each Option, the period during
which such Option shall be exercised, and the other terms and provisions of the
respective Options, which need not be identical;


 


(ii)                                  To prepare and modify
individual Nonstatutory Stock Option Agreements for each Optionee;


 


(iii)                               To construe the Plan and
each Nonstatutory Stock Option Agreement on behalf of the Company;


 


(iv)                              To prescribe, amend and
rescind rules and regulations relating to the Plan; and


 


(v)                                 To otherwise
administer and make all other determinations necessary or advisable on behalf
of the Company under or in connection with the Plan and the Nonstatutory Stock
Option Agreements with each Optionee.


 


(c)                                  The
interpretation and construction by the Committee of any term or provision of
the Plan or of any Nonstatutory Stock Option Agreement shall be conclusive.


 


11.                                 Nonstatutory
Stock Option Agreements.


 


(a)                                  The
Nonstatutory Stock Option Agreements to be entered into by the Company and each
individual Optionee under this Plan shall contain such other terms and
provisions which are not inconsistent with this Plan as the Committee may


 


5

















 


authorize, including, without limitation, provisions for possible
forfeiture of Option rights and restrictions on transfers of stock of the
Company acquired by Optionees upon exercise of their Option rights under this
Plan.


 


(b)                                 Any
Nonstatutory Stock Option Agreement entered into with an Optionee shall at all
times be considered to adopt by reference all of the provisions of this Plan as
it may be amended or terminated.


 


(c)                                  All
Nonstatutory Stock Option Agreements are intended to be consistent with all of
the provisions of this Plan, but to the extent of any conflict between the
provisions of this Plan and the provisions of the Nonstatutory Stock Option
Agreement, the provisions of this Plan shall be deemed to be controlling.


 


12.                                 Corporate
Reorganizations.


 


Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company as a result of which the
outstanding stock of the Company then subject to Options under this Plan are
changed into or exchanged for property, including cash, rights or securities
not issued by the Company, or any combination thereof, or upon a sale of
substantially all of the assets of the Company to, or the acquisition of stock
representing more than 80% of the voting power of the stock of the Company then
outstanding by, another corporation or person, this Plan shall terminate. Upon
such termination of this Plan, all Options granted under this Plan prior to
such occurrence shall terminate unless provision is made in writing in
connection with such transaction for the continuance of the Plan and/or for the
assumption of Options granted prior to such occurrence, or the substitution for
such Options of Options covering the stock of a successor employer corporation,
or a parent or subsidiary of the successor, with appropriate adjustments in
accordance with paragraph 6 of this Plan as to the number and kind of shares
optioned and their exercise prices, in which event the Plan and Options granted
prior to such event shall continue in the manner and under the terms so
provided. The instrument evidencing any Option may also provide for the
acceleration of otherwise unexercisable portions of the Option.


 


13.                                 Limitation
of Rights of Optionees.


 


(a)                                  Optionees
shall have no interest in the Option shares or in any dividend paid on such
shares, and shall have right to vote any such shares or have any other rights
or privileges of a stockholder of the Company with respect to such shares,
until the Option has been properly exercised and the certificates for such
shares have been issued and delivered to the Optionee consistent with the
requirements of this Plan and the applicable Nonstatutory Stock Option
Agreements.


 


(b)                                 No
shares of stock issuable under the Plan shall be issued and no certificate for
such shares shall be delivered if such security causes the Company to be


 


6

















 


in violation of or to incur any liability under any federal, state or
other securities law, or any other requirement of law or of any regulatory body
having jurisdiction over the Company, or if doing same would constitute a
breach by the Company of any loan agreement or similar contract or commitment
of the Company.


 


(c)                                  The
receipt of an Option, the exercise of it, the receipt of stock by reason of
such exercise, and the fact of a Nonstatutory Stock Option Agreement with the
Company, and none of the foregoing alone, shall give any Optionee any right to
continued election to the Board of Directors of or employment by the Company or
any subsidiary of the Company for any period or for any level of compensation
or directors fee or other benefit or the right to receive any further Options. Likewise,
neither the receipt of an Option nor the exercise of it and the receipt of any
stock shall give the Company or any subsidiary any right to the continued
services of the Optionee for any period or at any particular compensation or
other benefit level.


 


(d)                                 Nothing
contained in this Plan shall constitute the granting of an Option or grant any
director or employee of the Company or any subsidiary of the Company any rights
whatsoever to any Option or any stock of the Company. An Option can be granted
only when expressly authorized by the Committee and upon execution and delivery
of a Nonstatutory Stock Option Agreement executed by the Company and by the
Optionee.


 


14.                                 Option
Price.


 


(a)                                  There
shall be no cost or consideration paid by any Optionee for the grant of an
Option itself.


 


(b)                                 The
purchase price for each share purchasable under any Option granted under the
Plan shall be such amount as the Committee shall, in its best judgment and in
good faith, determine to be not less than 100% of the fair market value (“Fair
Market Value”) per share on the date the Option is granted.


 


(c)                                  Since
no public market exists for the shares of stock of the Company as of the date
of adoption of this Plan, the Committee shall in its sole discretion, best
judgment, and in good faith determine the Fair Market Value of each share of
stock of the Company. The Committee need not obtain any appraisal of any kind
to make such determination under this Plan at any time. The determination by
the Committee of the Fair Market Value of a share at any time shall be
conclusive and binding on all parties.


 


(d)                                 As
of the date of adoption of this Plan, the exercise price has been set at $6.00
per share. The Company and the Committee have determined that such $6.00
exercise price is equal to or greater than the Fair Market Value of stock of
the Company as of the date of adoption of this Plan.


 


7

















 


(e)                                  The
cash proceeds of the sale of shares received by the Company upon the exercise
of the Options are to be added to the general funds of the Company and may be
used for its general corporate purposes as the Company shall determine.


 


15.                                 Listing
of Shares and Related Matters.


 


If at any time the Company shall determine in its discretion that the
listing, registration or qualification of the shares covered by the Plan upon
any national securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the sale or purchase of
shares under the Plan, no shares shall be issued unless and until such listing,
registration, qualification, consent or approval shall have been effected or
obtained or otherwise provided for, free of any conditions not acceptable to
the Company.


 


16.                                 Amendment
of the Plan.


 


The Committee may from time to time at its discretion amend this
Plan. However, notwithstanding anything to the contrary in this Plan, no
amendment shall be made without the approval of shareholders then holding a
majority of the voting stock of the Company if such amendment would (a) increase
the total number of shares reserved for Option under the Plan other than an
increase resulting from an adjustment provided for in this Plan, (b) reduce
the exercise price for any Option granted hereunder below the price required in
this Plan, (c) modify the provisions of this Plan relating to eligibility,
or (d) materially increase the benefits accruing to Optionees under the
Plan. The rights and obligations under any Option granted before amendment of
the Plan or any unexercised portion of such Option shall not be adversely
affected by amendment of the Plan or the Nonstatutory Stock Option Agreement
without the consent of the holder of the Option.


 


17.                                 Termination
or Suspension of Plan.


 


The Committee may at any time and for any or no reason suspend or
terminate the Plan. An Option may not be granted while the Plan is
suspended or after it is terminated. Options granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except upon the consent of the Optionee. The power of the Committee under
this Plan to construe and administer the Plan and the Nonstatutory Stock Option
Agreements granted prior to the termination or suspension of the Plan shall
continue after such termination or during such suspension.


 


18.                                 Miscellaneous.


 


(a)                                  This
Plan and all of the Nonstatutory Stock Option Agreements shall be governed by
and construed and enforced in accordance with the internal laws of the State of
Illinois. Jurisdiction and venue for any disputes under this Plan or the


 


8

















 


Nonstatutory Stock Option Agreements shall be in the Circuit Court of
Cook County, in Chicago, Illinois.


 


(b)                                 This
Plan and the Nonstatutory Stock Option Agreements constitute the entire Nonstatutory
Stock Option Plan and individual Options granted.


 


(c)                                  The
invalidity or illegality of any provision of this Plan shall not be deemed to
effect the validity of any other provision of this Plan.


 


(d)                                 The
Recitals at the beginning of this Plan are an integral part of this Plan.


 


IN WITNESS WHEREOF, the Company has established this Plan effective
commencing as of the date first indicated in this Plan.


 


	
   

  	
  Kimball Hill, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David K. Hill

  	
   

  
	
   

  	
   

  	
  David K. Hill, Chairman & CEO

  



 


12-31-98(1)


 


9

















 


 


FIRST AMENDMENT TO


KIMBALL HILL HOMES NONSTATUTORY STOCK OPTION PLAN


 


This First Amendment to Kimball Hill Homes Nonstatutory Stock Option
Plan (“Amendment”) is adopted by Kimball Hill, Inc., an Illinois
corporation (“Company”) effective as of December 31, 1998.


 


R E C I T A L S


 


A.                                   The
Company adopted, effective as of December 31, 1997, the Kimball Hill Homes
Nonstatutory Stock Option (“Plan”) under which it offered to designated members
of the Board of Directors of the Company who are not also employees of the
Company the right to subscribe to an aggregate of 15,000 shares of the Company’s
common stock which do not qualify as incentive stock options under Section 422
of the Internal Revenue Code (“Code”) as amended.


 


10

















 


B.                                     The
Company previously adopted the Kimball Hill Homes Incentive Stock Option Plan (“Incentive
Plan”) under which options were granted to certain designated managerial
employees of the Company which were intended to qualify as incentive stock
options under Section 422 of the Code.


 


C.                                     The
Company and each of the three designated members of the Board of Directors of
the Company eligible to obtain options under the Plan, i.e., Larry H. Dale, Brian Loftus and
John P. Toren (collectively the “Optionees”) each entered into a Kimball Hill
Homes Nonstatutory Stock Option Agreement with the Company under which the
Optionees confirmed the terms under which each has options to acquire
designated portions of stock of the Company under options priced at $6.00 per
share and expiring on December 31, 2001. All such options are still
outstanding; none have been exercised or forfeited.


 


D.                                    The
Company desires to make available to the Optionees additional nonstatutory
stock option rights for designated shares of stock of the Company at a price of
$7.75 per share and for an eight (8) year term commencing as of the
effective date of this Amendment.


 


E.                                      The
Company desires to provide in this Amendment for all appropriate modifications
to the Plan to carry out the foregoing intent.


 


NOW, THEREFORE, the Company hereby amends the Plan, effective as of the
date indicated above, as follows:


 


1.                                       Additional
Stock Subject to Plan.


 


(a)                                  An
additional 15,000 shares of the Company’s common stock are subject to the Plan
and may be granted as nonstatutory stock options (“Options”).


 


(b)                                 The
15,000 shares are in addition to the aggregate 15,000 shares of the Company’s
common stock originally granted by individual Nonstatutory Stock Option
Agreements with the Optionees.


 


2.                                       Eligible
Participants.


 


(a)                                  The
participants eligible for the grant of Options for the additional stock as
contemplated in this Amendment are the same Optionees who are eligible for the
initial Options provided for in the Plan. All of the Optionees are nonemployee
members of the Board of Directors of the Company.


 


11

















 


(b)                                 The
Optionees are granted Options to acquire additional stock of the Company
pursuant to the terms of this Amendment as follows:


 


	
  Optionee 

  	
   

  	
  Number of Additional

  Shares Available by Option

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Larry H. Dale

  	
   

  	
  5,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Brian Loftus

  	
   

  	
  5,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  John P. Toren

  	
   

  	
  5,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TOTAL:

  	
   

  	
  15,000

  	
   

  



 


(c)                                  If
all of the Optionees exercise all of their Options to acquire all such stock of
the Company available to them for purchase under the Plan, including the
aggregate initial 15,000 shares and the additional 15,000 shares to be offered
pursuant to the terms of this Amendment, and if no other stock of the Company
was sold or reacquired other than by exercise of options granted under the
Incentive Plan, the stock of the Company would then be held as shown on Exhibit A
attached to and made a part of this Amendment.


 


3.                                       Exercise
Price.


 


The Company has determined that the Fair Market Value as of the
effective date of this Amendment of the stock subject to the Options to be
offered pursuant to the terms of this Amendment is $7.75 per share. Accordingly,
the Option exercise price for each share of stock to be offered to each of the
Optionees shall be $7.75.


 


4.                                       Expiration
of Option.


 


All of the Options to be granted pursuant to the Plan under this
Amendment must be exercised within eight (8) years of the grant of each
such Option. Accordingly, the Options shall expire on December 31, 2006.


 


12

















 


5.                                       No
Other Modifications.


 


(a)                                  Except
to the extent expressly provided for in this Amendment, the Plan shall remain
in full force and effect.


 


(b)                                 All
of the provisions in the Plan, except to the extent expressly modified above,
shall be fully applicable to the additional Options to be made available
pursuant the terms of this Amendment.


 


6.                                       Miscellaneous.


 


(a)                                  The
Recitals at the beginning of this Amendment are an integral part of this
Amendment.


 


(b)                                 Except
to the extent expressly defined in this Amendment, all defined terms used in
this Amendment shall have the same meaning as provided for in the Plan.


 


IN WITNESS WHEREOF, the Company has modified the Plan pursuant to the
terms of this Amendment effective as of the date first indicated above.


 


	
   

  	
  KIMBALL HILL, INC. by its Nonstatutory

  
	
   

  	
  Stock Option Plan Committee:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ David K. Hill

  	
   

  
	
   

  	
  David K. Hill

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ James A. Moehling

  	
   

  
	
   

  	
  James A. Moehling

  
				



 


13

















 


11-12-99


 


SECOND AMENDMENT TO


KIMBALL HILL HOMES NONSTATUTORY STOCK OPTION PLAN


 


This SECOND Amendment to Kimball Hill Homes Nonstatutory Stock Option
Plan (“Second Amendment”) is adopted by Kimball Hill, Inc., an Illinois
corporation (“Company”) effective as of October 31, 1999.


 


R E C I T A L S


 


A.                                   The
Company adopted, effective as of December 31, 1997, the Kimball Hill Homes
Nonstatutory Stock Option (“Plan”) under which it offered to designated members
of the Board of Directors of the Company who are not also employees of the
Company the right to subscribe to an aggregate of 15,000 shares of the Company’s
common stock which do not qualify as incentive stock options under Section 422
of the Internal Revenue Code (“Code”) as amended.


 


B.                                     The
Company previously adopted the Kimball Hill Homes Incentive Stock Option Plan (“Incentive
Plan”) under which options were granted to certain designated managerial
employees of the Company which were intended to qualify as incentive stock
options under Section 422 of the Code.


 


C.                                     The
Company and each of the three original designated members of the Board of
Directors of the Company eligible to obtain options under the Plan, i.e., Larry H. Dale, Brian Loftus and
John P. Toren, each entered into a Kimball Hill Homes Nonstatutory Stock Option
Agreement with the Company under which the Optionees confirmed the terms under
which each has options to acquire designated portions of stock of the Company
under options priced at $6.00 per share and expiring on December 31, 2001.
All such options are still outstanding; none have been exercised or forfeited.


 


D.                                    The
Company modified the Plan in a First Amendment effective as of December 31,
1998 which made additional options available to such original optionees.


E.                                      The
Company desires to make available to the three original optionees and also now
to Kent Colton, who joined the Board of Directors of the Company in 1999,
additional nonstatutory stock option rights for designated shares of stock of
the Company at a price of $10.00 per share and for an eight (8) year term
commencing as of the effective date of this Second Amendment.


 


F.                                      The
Company desires to provide in this Second Amendment for all appropriate
modifications to the Plan to carry out the foregoing intent.


 


14

















 


NOW, THEREFORE, the Company hereby amends the Plan, effective as of the
date indicated above, as follows:


 


1.                                       Additional
Stock Subject to Plan.


 


(a)                                  An
additional 20,000 shares of the Company’s common stock are subject to the Plan
and may be granted as nonstatutory stock options (“Options”).


 


(b)                                 The
20,000 shares are in addition to the aggregate 30,000 shares of the Company’s
common stock previously granted by individual Nonstatutory Stock Option
Agreements.


 


2.                                       Eligible
Participants.


 


(a)                                  The
participants eligible for the grant of Options for the additional stock as
contemplated in this Second Amendment are Larry H. Dale, Brian Loftus, John P.
Toren and Kent Colton (collectively the “Optionees”). All of the Optionees are
nonemployee members of the Board of Directors of the Company.


 


(b)                                 The
Optionees are granted Options to acquire additional stock of the Company
pursuant to the terms of this Second Amendment as follows:


 


	
  Optionee

  	
   

  	
  Number of Additional

  Shares Available by Option

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Larry H. Dale

  	
   

  	
  5,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Brian Loftus

  	
   

  	
  5,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  John P. Toren

  	
   

  	
  5,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Kent Colton

  	
   

  	
  5,000 

  	
  (no previous option rights)

  
	
   

  	
   

  	
   

  	
   

  
	
  TOTAL:

  	
   

  	
  20,000

  	
   

  



 


(c)                                  If
all of the Optionees exercise all of their Options to acquire all such stock of
the Company available to them for purchase under the Plan, and if no other
stock of the Company was sold or reacquired other than by exercise of options
granted under the Incentive Plan, the stock of the Company would then be held
as shown on Exhibit A attached to and made a part of this Second
Amendment.


 


15

















 


3.                                       Exercise
Price.


 


The Company has determined that the Fair Market Value as of the
effective date of this Second Amendment of the stock subject to the Options to
be offered pursuant to the terms of this Second Amendment is $10.00 per share. Accordingly,
the Option exercise price for each share of stock to be offered to each of the
Optionees shall be $10.00.


 


4.                                       Expiration
of Option.


 


All of the Options to be granted pursuant to the Plan under this Second
Amendment must be exercised within eight (8) years of the grant of each
such Option. Accordingly, the Options shall expire on October 31, 2007.


 


5.                                       No
Other Modifications.


 


(a)                                  Except
to the extent expressly provided for in the First Amendment and this Second
Amendment, the Plan shall remain in full force and effect.


 


(b)                                 All
of the provisions in the Plan, except to the extent expressly modified above,
shall be fully applicable to the additional Options to be made available
pursuant the terms of this Second Amendment.


 


6.                                       Miscellaneous.


 


(a)                                  The
Recitals at the beginning of this Second Amendment are an integral part of
this Second Amendment.


 


(b)                                 Except
to the extent expressly defined in this Second Amendment, all defined terms
used in this Second Amendment shall have the same meaning as provided for in
the Plan.


 


IN WITNESS WHEREOF, the Company has modified the Plan pursuant to the
terms of this Second Amendment effective as of the date first indicated above.


 


	
   

  	
  KIMBALL HILL, INC. by its Nonstatutory

  
	
   

  	
  Stock Option Plan Committee:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ David K. Hill

  	
   

  
	
   

  	
  David K. Hill

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ James A. Moehling

  	
   

  
	
   

  	
  James A. Moehling

  
				



 


16

















 


EXHIBIT A


 


KIMBALL HILL HOMES


1-27-99


STOCK OPTIONS AS OF JANUARY 1, 1999


 


	
  Shareholder

  	
   

  	
  Number
  of

  Shares Owned

  As of 12-31-97

  	
   

  	
  Shares

  Available from

  10-31-95

  Statutory Stock

  Options

  	
   

  	
  Shares

  Available from

  10-31-96

  Statutory Stock

  Options

  	
   

  	
  Shares

  Available from

  12-31-97

  Statutory Stock

  Options

  	
   

  	
  Shares

  Available from

  12-31-97

  Nonstatutory

  Stock Options

  	
   

  	
  Shares

  Available from

  12-31-98

  Statutory

  Stock Options

  	
   

  	
  Shares

  Available from

  12-31-98

  Nonstatutory

  Stock Options

  	
   

  	
  Number
  of

  Shares If All Options Are Exercised% of Issued and Outstanding 

  	
   

  	
  Shares
  If All Options Are Exercised

  	
   

  
	
  David
  K. Hill

  	
   

  	
  2,703,955

  	
   

  	
  -0-

  	
   

  	
  -0-

  	
   

  	
  -0-

  	
   

  	
  -0-

  	
   

  	
  40,000

  	
   

  	
  -0-

  	
   

  	
  2,743,955

  	
   

  	
  71.19

  	
   

  
	
  Diane
  G. Hill

  	
   

  	
  236,836

  	
   

  	
  -0-

  	
   

  	
  -0-

  	
   

  	
  -0-

  	
   

  	
  -0-

  	
   

  	
  10,000

  	
   

  	
  -0-

  	
   

  	
  246,836

  	
   

  	
  6.40

  	
   

  
	
  Diane
  G. Hill as Trustee for David K. Hill, III

  	
   

  	
  59,209

  	
   

  	
  -0-

  	
   

  	
  -0-

  	
   

  	
  -0-

  	
   

  	
  -0-

  	
   

  	
  -0-

  	
   

  	
  -0-

  	
   

  	
  59,209

  	
   

  	
  1.54

  	
   

  
	
  Bruce
  I. McPhee

  	
   

  	
  300,000

  	
  *

  	
  10,000

  	
   

  	
  8,000

  	
   

  	
  10,000

  	
   

  	
  -0-

  	
   

  	
  10,000

  	
   

  	
  -0-

  	
   

  	
  338,000

  	
   

  	
  8.77

  	
   

  
	
  Gregory
  A. Yakim

  	
   

  	
  -0-

  	
   

  	
  20,000

  	
   

  	
  80,000

  	
   

  	
  60,000

  	
   

  	
  -0-

  	
   

  	
  40,000

  	
   

  	
  -0-

  	
   

  	
  200,000

  	
   

  	
  5.19

  	
   

  
	
  Hal
  H. Barber

  	
   

  	
  -0-

  	
   

  	
  10,000

  	
   

  	
  16,000

  	
   

  	
  18,000

  	
   

  	
  -0-

  	
   

  	
  18,000

  	
   

  	
  -0-

  	
   

  	
  62,000

  	
   

  	
  1.61

  	
   

  
	
  Eugene
  K. Rowehl

  	
   

  	
  -0-

  	
   

  	
  7,500

  	
   

  	
  15,000

  	
   

  	
  18,000

  	
   

  	
  -0-

  	
   

  	
  18,000

  	
   

  	
  -0-

  	
   

  	
  58,500

  	
   

  	
  1.52

  	
   

  
	
  Kirk
  T. Breitenwischer

  	
   

  	
  -0-

  	
   

  	
  7,500

  	
   

  	
  12,000

  	
   

  	
  18,000

  	
   

  	
  -0-

  	
   

  	
  18,000

  	
   

  	
  -0-

  	
   

  	
  55,500

  	
   

  	
  1.44

  	
   

  
	
  Thomas
  F. Tylutki

  	
   

  	
  -0-

  	
   

  	
  10,000

  	
   

  	
  10,000

  	
   

  	
  10,000

  	
   

  	
  -0-

  	
   

  	
  10,000

  	
   

  	
  -0-

  	
   

  	
  40,000

  	
   

  	
  1.04

  	
   

  
	
  Lance
  Wright

  	
   

  	
  -0-

  	
   

  	
  -0-

  	
   

  	
  -0-

  	
   

  	
  10,000

  	
   

  	
  -0-

  	
   

  	
  10,000

  	
   

  	
  -0-

  	
   

  	
  20,000

  	
   

  	
  .52

  	
   

  
	
  Larry
  H. Dale

  	
   

  	
  -0-

  	
   

  	
  -0-

  	
   

  	
  -0-

  	
   

  	
  -0-

  	
   

  	
  5,000

  	
   

  	
  -0-

  	
   

  	
  5,000

  	
   

  	
  10,000

  	
   

  	
  .26

  	
   

  
	
  Brian
  Loftus

  	
   

  	
  -0-

  	
   

  	
  -0-

  	
   

  	
  -0-

  	
   

  	
  -0-

  	
   

  	
  5,000

  	
   

  	
  -0-

  	
   

  	
  5,000

  	
   

  	
  10,000

  	
   

  	
  .26

  	
   

  
	
  John
  P. Toren

  	
   

  	
  -0-

  	
   

  	
  -0-

  	
   

  	
  -0-

  	
   

  	
  -0-

  	
   

  	
  5,000

  	
   

  	
  -0-

  	
   

  	
  5,000

  	
   

  	
  10,000

  	
   

  	
  .26

  	
   

  
	
  TOTALS:

  	
   

  	
  3,300,000

  	
   

  	
  65,000

  	
   

  	
  141,000

  	
   

  	
  144,000

  	
   

  	
  15,000

  	
   

  	
  174,000

  	
   

  	
  15,000

  	
   

  	
  3,854,000

  	
   

  	
  100

  	
  %

  



 






*
Co-owned by Jennifer Miller


 


17

















 


THIRD AMENDMENT TO


KIMBALL HILL HOMES NONSTATUTORY STOCK OPTION PLAN


 


This Third Amendment to Kimball Hill Homes Nonstatutory Stock Option
Plan (“Third Amendment”) is adopted by Kimball Hill, Inc., an Illinois
corporation (“Company”) effective as of December 31, 2000.


 


R E C I T A L S


 


A.                                   The
Company adopted, effective as of December 31, 1997, the Kimball Hill Homes
Nonstatutory Stock Option (“Plan”) under which it offered to designated members
of the Board of Directors of the Company who are not also employees of the
Company the right to subscribe to shares of the Company’s common stock which do
not qualify as incentive stock options under Section 422 of the Internal
Revenue Code (“Code”) as amended.


 


B.                                     The
Company previously adopted the Kimball Hill Homes Incentive Stock Option Plan (“Incentive
Plan”) under which options were granted to certain designated managerial
employees of the Company which were intended to qualify as incentive stock
options under Section 422 of the Code.


 


C.                                     The
Company and each of the designated members of the Board of Directors of the
Company eligible to obtain options under the Plan each entered into a Kimball
Hill Homes Nonstatutory Stock Option Agreement with the Company under which the
optionees confirmed the terms under which each has options to acquire
designated portions of stock of the Company under options priced at $6.00 per
share and expiring on December 31, 2001. All such options are still
outstanding; none have been exercised or forfeited.


 


D.                                    The
Company modified the Plan in a First Amendment effective as of December 31,
1998 and a Second Amendment effective as of October 31, 1999, each of
which made additional options available to its eligible optionees.


 


E.                                      The
Company desires to make available to its designated optionees, all of whom are
members of the Board of Directors, but not employees, of the Company,  additional nonstatutory stock option rights
for designated shares of stock of the Company at a price of $13.00 per share
and for a four (4) year term commencing as of the effective date of this
Third Amendment.


 


F.                                      The
Company desires to provide in this Third Amendment for all appropriate
modifications to the Plan to carry out the foregoing intent.


 


18

















 


NOW, THEREFORE, the Company hereby amends the Plan, effective as of the
date indicated above, as follows:


 


1.                                       Additional
Stock Subject to Plan.


 


(a)                                  An
additional 24,000 shares of the Company’s common stock are subject to the Plan
and may be granted as nonstatutory stock options (“Options”).


 


(b)                                 The
24,000 shares are in addition to the options for an aggregate 50,000 shares of
the Company’s common stock previously granted by individual Nonstatutory Stock
Option Agreements.


 


2.                                       Eligible
Participants.


 


(a)                                  The
participants eligible for the grant of Options for the additional stock as
contemplated in this Third Amendment are Larry H. Dale, Brian Loftus, John P.
Toren and Kent Colton (collectively the “Optionees”). All of the Optionees are
nonemployee members of the Board of Directors of the Company.


 


(b)                                 The
Optionees are granted Options to acquire additional stock of the Company
pursuant to the terms of this Third Amendment as follows:


 


	
  Optionee

  	
   

  	
  Number of Additional

  Shares Available by Option

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Larry H. Dale

  	
   

  	
  6,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Brian Loftus

  	
   

  	
  6,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  John P. Toren

  	
   

  	
  6,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Kent Colton

  	
   

  	
  6,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TOTAL:

  	
   

  	
  24,000

  	
   

  



 


(c)                                  If
all of the Optionees exercise all of their Options to acquire all such stock of
the Company available to them for purchase under the Plan, and if no other
stock of the Company was sold or reacquired other than by exercise of options
granted under the Incentive Plan, the stock of the Company would then be held
as shown on Exhibit A attached to and made a part of this Third
Amendment.


 


3.                                       Exercise
Price.


 


The Company has determined that the Fair Market Value as of the
effective date of this Third Amendment of the stock subject to the Options to
be offered


 


19

















 


pursuant to the terms of this Third Amendment is $13.00 per share. Accordingly,
the Option exercise price for each share of stock to be offered to each of the
Optionees shall be $13.00.


 


4.                                       Expiration
of Option.


 


All of the Options to be granted pursuant to the Plan under this Third
Amendment must be exercised within four (4) years of the grant of each
such Option. Accordingly, the Options shall expire on December 31, 2004.


 


5.                                       No
Other Modifications.


 


(a)                                  Except
to the extent expressly provided for in the First Amendment, the Second
Amendment, and this Third Amendment, the Plan shall remain in full force and
effect.


 


(b)                                 All
of the provisions in the Plan, except to the extent expressly modified above,
shall be fully applicable to the additional Options to be made available
pursuant the terms of this Third Amendment.


 


(c)                                  To
the extent of any inconsistency or conflict between the terms of (i) the
Plan and/or any prior amendment and (ii) this Third Amendment, the terms
of this Third Amendment shall be deemed to prevail as to the options provided
for under this Third Amendment.


 


6.                                       Miscellaneous.


 


(a)                                  The
Recitals at the beginning of this Third Amendment are an integral part of
this Third Amendment.


 


(b)                                 Except
to the extent expressly defined in this Third Amendment, all defined terms used
in this Third Amendment shall have the same meaning as provided for in the
Plan.


 


IN WITNESS WHEREOF, the Company has modified the Plan pursuant to the
terms of this Third Amendment effective as of the date first indicated above.


 


	
   

  	
  KIMBALL HILL, INC. by its Nonstatutory

  
	
   

  	
  Stock Option Plan Committee:

  
	
   

  	
   

  
	
   

  	
   

  	
  /s/ David K. Hill

  	
   

  
	
   

  	
   

  	
  David K. Hill

  



 


20

















 


	
   

  	
   

  	
  /s/ James A. Moehling

  	
   

  
	
   

  	
   

  	
  James A. Moehling

  



 


21

















 


FOURTH AMENDMENT TO


KIMBALL HILL HOMES NONSTATUTORY STOCK OPTION PLAN


 


This Fourth Amendment to Kimball Hill Homes Nonstatutory Stock Option
Plan (“Fourth Amendment”) is adopted by Kimball Hill, Inc., an Illinois
corporation (“Company”) effective as of December 31, 2001.


 


R E C I T A L S


 


A.                                   The
Company adopted, effective as of December 31, 1997, the Kimball Hill Homes
Nonstatutory Stock Option (“Plan”) under which it offered to designated members
of the Board of Directors of the Company who are not also employees of the
Company the right to subscribe to shares of the Company’s common stock which do
not qualify as incentive stock options under Section 422 of the Internal
Revenue Code (“Code”) as amended.


 


B.                                     The
Company previously adopted the Kimball Hill Homes Incentive Stock Option Plan (“Incentive
Plan”) under which options were granted to certain designated managerial
employees of the Company which were intended to qualify as incentive stock
options under Section 422 of the Code.


 


C.                                     The
Company and each of the designated members of the Board of Directors of the
Company eligible to obtain options under the Plan each entered into a Kimball
Hill Homes Nonstatutory Stock Option Agreement with the Company under which the
optionees confirmed the terms under which each has options to acquire
designated portions of stock of the Company under options priced at $6.00 per
share and expiring on December 31, 2001.


 


D.                                    The
Company modified the Plan in various amendments to the Plan, the last of which
was the Third Amendment to Kimball Hill Homes Nonstatutory Stock Option Plan
effective December 31, 2000 (“Third Amendment”), under which the optionees
acquired additional nonstatutory options for stock of the Company under options
bearing various prices.


 


E.                                      The
Company desires to make available to its designated optionees, all of whom are
members of the Board of Directors, but not employees, of the Company,  additional nonstatutory stock option rights
for designated shares of stock of the Company at a price of $17.00 per share
and for a term commencing as of the effective date of this Fourth Amendment and
expiring December 31, 2005.


 


F.                                      The
Company desires to provide in this Fourth Amendment for all appropriate
modifications to the Plan to carry out the foregoing intent.


 


22

















 


NOW, THEREFORE, the Company hereby amends the Plan, effective as of the
date indicated above, as follows:


 


1.                                       Additional
Stock Subject to Plan.


 


(a)                                  An
additional 15,000 shares of the Company’s common stock are subject to the Plan
and may be granted as nonstatutory stock options (“Options”).


 


(b)                                 The
15,000 shares are in addition to the options for an aggregate 59,000 shares of
the Company’s common stock previously granted by individual Nonstatutory Stock
Option Agreements which have not previously expired.


 


2.                                       Eligible
Participants.


 


(a)                                  The
participants eligible for the grant of Options for the additional stock as contemplated
in this Fourth Amendment are Larry H. Dale, John P. Toren and Kent Colton
(collectively the “Optionees”). All of the Optionees are nonemployee members of
the Board of Directors of the Company.


 


(b)                                 The
Optionees are granted Options to acquire additional stock of the Company
pursuant to the terms of this Fourth Amendment as follows:


 


	
  Optionee

  	
   

  	
  Number of Additional

  Shares Available by Option

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Larry H. Dale

  	
   

  	
  5,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  John P. Toren

  	
   

  	
  5,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Kent Colton

  	
   

  	
  5,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TOTAL:

  	
   

  	
  15,000

  	
   

  



 


(c)                                  If
all of the Optionees exercise all of their Options to acquire all such stock of
the Company available to them for purchase under the Plan, and if no other
stock of the Company was sold or reacquired other than by exercise of options
granted under the Incentive Plan, the stock of the Company would then be held
as shown on Exhibit A attached to and made a part of this Fourth
Amendment.


 


3.                                       Exercise
Price.


 


The Company has determined that the Fair Market Value as of the
effective date of this Fourth Amendment of the stock subject to the Options to
be offered


 


23

















 


pursuant to the terms of this Fourth Amendment is $17.00 per share. Accordingly,
the Option exercise price for each share of stock to be offered to each of the
Optionees shall be $17.00.


 


4.                                       Expiration
of Option.


 


All of the Options to be granted pursuant to the Plan under this Fourth
Amendment must be exercised by December 31, 2005.


 


5.                                       No
Other Modifications.


 


(a)                                  Except
to the extent expressly provided for in the First through Third Amendments, the
Plan shall remain in full force and effect.


 


(b)                                 All
of the provisions in the Plan, except to the extent expressly modified above,
shall be fully applicable to the additional Options to be made available
pursuant the terms of this Fourth Amendment.


 


(c)                                  To
the extent of any inconsistency or conflict between the terms of (i) the
Plan and/or any prior amendment and (ii) this Fourth Amendment, the terms
of this Fourth Amendment shall be deemed to prevail as to the options provided
for under this Fourth Amendment.


 


6.                                       Compensation
Committee Approval.


 


The members of the Compensation Committee of the Board of Directors
have approved and recommended the execution of this Fourth Amendment by the
Company.


 


7.                                       Miscellaneous.


 


(a)                                  The
Recitals at the beginning of this Fourth Amendment are an integral part of
this Fourth Amendment.


 


(b)                                 Except
to the extent expressly defined in this Fourth Amendment, all defined terms
used in this Fourth Amendment shall have the same meaning as provided for in
the Plan.


 


IN WITNESS WHEREOF, the Company has modified the Plan pursuant to the
terms of this Fourth Amendment effective as of the date first indicated above.


 


	
   

  	
  KIMBALL HILL, INC. by its Nonstatutory

  
	
   

  	
  Stock Option Committee:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  



 


24

















 


	
   

  	
  /s/ David K. Hill

  	
   

  
	
   

  	
  David K. Hill

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ James A. Moehling

  	
   

  
	
   

  	
  James A. Moehling

  
				



 


25

















 


FIFTH AMENDMENT TO


KIMBALL HILL HOMES NONSTATUTORY STOCK OPTION PLAN


 


This Fifth Amendment to Kimball Hill Homes Nonstatutory Stock Option
Plan (“Fifth Amendment”) is adopted by Kimball Hill, Inc., an Illinois
corporation (“Company”) effective as of January 1, 2003.


 


R E C I T A L S


 


A.                                   The
Company adopted, effective as of December 31, 1997, the Kimball Hill Homes
Nonstatutory Stock Option (“Plan”) under which it offered to designated members
of the Board of Directors of the Company who are not also employees of the
Company the right to subscribe to shares of the Company’s common stock which do
not qualify as incentive stock options under Section 422 of the Internal
Revenue Code (“Code”) as amended.


 


B.                                     The
Company previously adopted the Kimball Hill Homes Incentive Stock Option Plan (“Incentive
Plan”) under which options were granted to certain designated managerial
employees of the Company which were intended to qualify as incentive stock
options under Section 422 of the Code.


 


C.                                     The
Company and each of the designated members of the Board of Directors of the
Company eligible to obtain options under the Plan each entered into a Kimball
Hill Homes Nonstatutory Stock Option Agreement with the Company under which the
optionees confirmed the terms under which each had options to acquire
designated portions of stock of the Company under options priced at $6.00 per
share and expiring on December 31, 2001.


 


D.                                    The
Company modified the Plan in various amendments to the Plan, the last of which
was the Fourth Amendment effective as of December 31, 2001, each of which
made additional options available to its eligible optionees.


 


E.                                      The
Company desires to make available to its designated optionees, all of whom are
members of the Board of Directors, but not employees, of the Company,  additional nonstatutory stock option rights
for designated shares of stock of the Company at a price of $29.80 per share
and for a three (3) year term commencing as of the effective date of this
Fifth Amendment.


 


F.                                      The
Company desires to provide in this Fifth Amendment for all appropriate
modifications to the Plan to carry out the foregoing intent.


 


26

















 


NOW, THEREFORE, the Company hereby amends the Plan, effective as of the
date indicated above, as follows:


 


1.                                       Additional
Stock Subject to Plan.


 


(a)                                  An
additional 19,000 shares of the Company’s common stock are subject to the Plan
and may be granted as nonstatutory stock options (“Options”).


 


(b)                                 Inclusive
of the 19,000 shares, there are as of the effective date of this Fifth
Amendment 92,000 total shares of stock of the Company subject to unexpired
Options plus 584,000 total shares subject to incentive stock options granted
under the Incentive Plan for an aggregate of 676,000 shares available from all
stock options currently outstanding.


 


(c)                                  As
of the effective date of this Fifth Amendment, there are 3,590,467 issued and
outstanding shares of common stock of the Company. Accordingly, if all of the
optionees under all stock options of the Company exercised all of their stock
options, and if no other stock of the company was issued, sold or reacquired,
there would be 4,266,467 issued and outstanding shares of common stock of the
Company.


 


2.                                       Eligible
Participants.


 


(a)                                  The
participants eligible for the grant of Options for the additional stock as contemplated
in this Fifth Amendment are Kent Colton, Larry H. Dale, Roy Humphreys and John
P. Toren (collectively the “Optionees”). All of the Optionees are nonemployee
members of the Board of Directors of the Company.


 


(b)                                 The
Optionees are granted Options to acquire additional stock of the Company
pursuant to the terms of this Fifth Amendment as follows:


 


	
  Optionee

  	
   

  	
  Number of Additional

  Shares Available by Option

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Kent Colton

  	
   

  	
  5,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Larry H. Dale

  	
   

  	
  2,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Roy Humphreys

  	
   

  	
  10,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  John P. Toren

  	
   

  	
  2,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TOTAL:

  	
   

  	
  19,000

  	
   

  



 


27

















 


3.                                       Exercise
Price.


 


The Company has determined that the Fair Market Value as of the
effective date of this Fifth Amendment of the stock subject to the Options to
be offered pursuant to the terms of this Fifth Amendment is $29.80 per share. Accordingly,
the Option exercise price for each share of stock to be offered to each of the
Optionees shall be $29.80.


 


4.                                       Expiration
of Option.


 


All of the Options to be granted pursuant to the Plan under this Fifth
Amendment must be exercised within three (3) years of the grant of each
such Option. Accordingly, the Options shall expire on December 31, 2005.


 


5.                                       No
Other Modifications.


 


(a)                                  Except
to the extent expressly provided for in the First through the Fourth
Amendments, the Plan shall remain in full force and effect.


 


(b)                                 All
of the provisions in the Plan, except to the extent expressly modified above,
shall be fully applicable to the additional Options to be made available
pursuant the terms of this Fifth Amendment.


 


(c)                                  To
the extent of any inconsistency or conflict between the terms of (i) the
Plan and/or any prior amendment and (ii) this Fifth Amendment, the terms
of this Fifth Amendment shall be deemed to prevail as to the options provided
for under this Fifth Amendment.


 


6.                                       Compensation
Committee Approval.


 


The members of the Compensation Committee of the Board of Directors
have approved and recommended the execution of this Fifth Amendment by the
Company.


 


28

















 


7.                                       Miscellaneous.


 


(a)                                  The
Recitals at the beginning of this Fifth Amendment are an integral part of
this Fifth Amendment.


 


(b)                                 Except
to the extent expressly defined in this Fifth Amendment, all defined terms used
in this Fifth Amendment shall have the same meaning as provided for in the
Plan.


 


IN WITNESS WHEREOF, the Company has modified the Plan pursuant to the
terms of this Fifth Amendment effective as of the date first indicated above.


 


	
   

  	
  KIMBALL HILL, INC. by its Stock Plan

  
	
   

  	
  Committee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ David K. Hill

  	
   

  
	
   

  	
  David K. Hill

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ James A. Moehling

  	
   

  
	
   

  	
  James A. Moehling

  
				



 


29