Exhibit 10.6


 


KIMBALL HILL HOMES


FORM OF NONSTATUTORY STOCK OPTION AGREEMENT


 


This Kimball
Hill Homes Nonstatutory Stock Option Agreement (“Agreement”) dated effective as
of December 31, 2001 by and between Kimball Hill, Inc., an Illinois corporation
(“Company”) and
                                               
(“Optionee”).


 


R E C I T A L S


 


A.            The
Company has adopted, effective as of December 31, 1997, the Kimball Hill Homes
Nonstatutory Stock Option Plan (as amended, the “Plan”) for the purpose of giving
the Company the opportunity to designate certain nonemployee members of the
Board of Directors and certain employees of the Company or of any subsidiary of
the Company to have the opportunity to acquire common stock of the Company
through nonstatutory stock options (“Options”).


 


B.            The
Company modified the Plan effective as of December 31, 1998, October 31, 1999,
December 31, 2000 and December 31, 2001 for the purpose of, among other things,
making additional Options available to eligible participants including the
Optionee.


 


C.            The
Company has pursuant to the intent and provisions of the Plan designated the
Optionee again as an eligible and appropriate member of the Board of Directors
to be eligible for such Option rights.


 


D.            The
Company and the Optionee entered into previous Nonstatutory Stock Option
Agreements under which various Options were granted to the Optionee.


 


E.             The
Company desires to make available to the Optionee additional Options pursuant
to the Plan.


 


G.            The
Company and the Optionee desire to provide in this Agreement, which includes
the Plan, for all of the terms and conditions of the additional Options granted
to the Optionee.


 


NOW,
THEREFORE, in consideration of the mutual promises contained in this Agreement,
the parties agree as follows:


 

















 


1.             Grant
of Option.


 


(a)           The
Optionee is granted by the Company an Option to acquire stock of the Company,
commencing as of the effective date of this Agreement, as follows:


 


(i)            Number of shares
subject to Option:              


 


(ii)           Option exercise price
per share:  $17.00 


 


(iii)          Expiration of Option:   December 31, 2005 


 


(b)           This
Option is intended to be treated as a nonstatutory, nonqualified stock option.


 


2.             Date
When Option Is Exercisable.


 


This Option
may be exercised in the manner provided in this Agreement at any time from the
date of this Agreement but not after the expiration date indicated in paragraph
1 above.


 


3.             Exercise
of Option in Installments.


 


This Option
may be exercised in installments but in not less than 1,000 share increments.  Accordingly, the Optionee may at any time
exercise the Option for less than all of the Option shares as long as no single
exercise is for less than 1,000 shares or for any amounts other than in 1,000
share increments.  In any event the total
shares acquired by exercise of the Option cannot exceed the amount indicated in
paragraph 1 above.


 


4.             Termination
of Option Rights.


 


The right to
exercise this Option is subject to additional restrictions and limitations as
follows:


 


(a)           If
the Optionee’s membership on the Board of Directors or employment by the
Company or any of its subsidiaries is terminated for cause or by reason of
resignation by the Optionee, then all Option rights granted under this
Agreement shall immediately terminate. 
Termination for cause as used in this Agreement shall be determined in
the sole discretion of the Company and shall be liberally construed.  Without limiting acts or omissions which can
or may constitute


 


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cause, termination for cause
includes (i) the commission of a criminal or other act that causes or probably
will cause substantial economic damage to the Company or a subsidiary or
affiliated company or substantial injury to the business reputation of the
Company or a subsidiary or affiliated company; (ii) the commission by the
Optionee of an act of fraud in the performance of such Optionee’s duties; (iii)
the continuing failure of Optionee to perform the duties of the Optionee that
are assigned to him; (iv) a violation of Company personnel manuals or similar
or other directives; (v) a material breach by Optionee of any obligation of him
under any contract with or other commitment to the Company or any of its
subsidiaries or affiliates; (vi) any act or failure to act of or by the
Optionee which is or could be materially injurious to or not in the best
interests of the Company or a subsidiary or affiliated company; or (vii)
failure to meet goals and targets established by the Company for the Optionee
which causes material loss to the Company or which otherwise materially and
adversely affects the Company.


 


(b)           If
an Optionee’s membership on the Board of Directors or employment by the Company
or any of its subsidiaries terminates by reason of death, permanent retirement,
or permanent, total disability, then the Optionee’s Option rights under this
Agreement shall continue but shall terminate on the earlier of (i) three months
after such termination of membership on the Board of Directors or employment or
(ii) the expiration date indicated in paragraph 1 above.


 


(c)           All
Option rights of the Optionee under this Agreement shall immediately terminate
if the Optionee attempts to or does transfer any Option rights granted in
violation of the Plan or if the Optionee is otherwise in breach of any of the
terms and conditions of the Plan including this Agreement or if the Optionee
has for any reason sold stock of the Company previously acquired pursuant to
the Plan in violation of applicable securities laws or this Agreement or any
other contract between the Company and the Optionee.


 


(d)           Optionee’s
right to exercise the Option rights shall not be terminated solely because the
Company has made a public offering of any of its voting stock subject, however,
in all cases to all restrictions and limitations which may be applicable to the
public offering and to the Option rights granted under this Agreement by all
applicable securities laws.


 


5.             Exercise
of Option.


 


This Option
shall be exercised by the Optionee by giving written notice of exercise to the
Company.  Such notice shall be directed
to the President and the Chief Executive Officer of the Company with a copy to
the Chief Financial Officer of the Company and shall specify the number of
shares to be purchased.  Such notice
shall either include Optionee’s check payable to the Company representing
payment in full for all of the shares being acquired pursuant to the exercise
of such Option or with a check payable to the Company for fifty percent (50%)
of the total cost of the number of shares


 


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so being acquired by such
exercise with an acknowledgment that Optionee shall pay the balance pursuant to
the terms of the following paragraph 6. 
All notices of exercise of Options must be given by the expiration date
provided for in paragraph 1 above.


 


6.             Installment
Payments.


 


(a)           If
in Optionee’s notice of exercise of Optionee’s right to acquire stock of the
Company the Optionee requests installment payment privileges for such stock,
then the Optionee shall pay for all such stock subject to such exercise as
follows:


 


(i)            50% of the total cost
of such stock to be paid by check of the Optionee payable to the Company and
which shall be sent with Optionee’s notice of exercise of such Option shares.


 


(ii)           25% of the total cost
of such shares shall be payable not later than six (6) months from the date of
exercise of such Option.


 


(iii)          The remaining balance of
25% shall be payable not later than twelve (12) months from such date of
exercise of such Option.


 


(b)           There
shall be simple interest on the unpaid balance of the cost of such stock
payable by the Optionee for such extended payment terms.  Interest shall be at the prime rate from
time-to-time as published by The Wall Street Journal and shall be payable
when installments of the purchase price are payable as provided for in
subparagraph (a) above.


 


(c)           If
the Optionee fails to timely pay to the Company all of the installments,
including interest, due under the installment payment privileges outlined above,
then upon written demand of the Company the Optionee shall promptly retransfer
all stock acquired as a result of such Option exercise to the Company.  Upon receipt of such stock, the Company
shall, to the extent Optionee has already paid for such stock, compensate the
Optionee for such stock at a price equal to the lesser of (i) the per share
price paid by the Optionee as provided for in paragraph 1 above or (ii) the
then Fair Market Value of the stock of the Company as determined and provided
for most recently in the Plan.


 


(d)           The
Optionee may not sell or offer to sell any stock of the Company while Optionee
has any outstanding debt to the Company for the purchase of stock as permitted
under subparagraph (a) above.


 


(e)           The
Optionee may not request or pay for any of such stock on the installment basis
if Optionee is not still either a member of the Board of Directors of or


 


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employed by the Company.  If the Optionee’s membership on the Board of
Directors or employment, as applicable, with the Company terminates after the
Optionee has requested installment payment and while any such installment
payments are still due to the Company, all such installment obligations and
accrued and unpaid interest shall immediately upon written demand of the
Company be due and payable in full.


 


7.             Restrictions
and Other Provisions Regarding Transfer of Stock.


 


Upon receipt
of the stock from the Company after exercise by Optionee of the Option, such
stock shall be subject to limitations on transfer and related provisions as
follows:


 


(a)           Under
no circumstances, notwithstanding anything in this Agreement to the contrary,
may an Optionee transfer any stock, even if such transfer is otherwise
permitted under this Agreement, if in the opinion of the Company such transfer
would be in violation of or cause the Company to incur any liability under any
federal, state or other securities law, or any other requirement of law or of
any regulatory body within 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.


 


(b)           No
sale, transfer, pledge, gift, assignment, encumbrance, disposition or other
acts, either voluntary or involuntary, by express action or operation of law or
otherwise, of any stock may be made by any Optionee at any time unless
expressly permitted under the terms of this Agreement or consented to in
writing by the Company.


 


(c)           No
transfer which is otherwise expressly permitted under the terms of this
Agreement may nevertheless be made if (i) such transfer is a sham or device to
evade the provisions and intent of this Agreement or if (ii) the Company
reasonably determines that such transfer is to a transferee who is a convicted
felon or of poor financial or moral character or reputation or is a competitor,
directly or indirectly, of the Company or any of its subsidiaries, or if such
transfer or transferee reasonably could otherwise materially jeopardize the
business or operations of the Company of if (iii) Optionee’s membership on the
Board of Directors of or employment with the Company has terminated and the
Company is required to or has the right to purchase the Optionee’s stock under
any of the circumstances required or permitted in any of the following
provisions of this paragraph 7.


 


(d)           Any
stock otherwise transferable pursuant to the express provisions of this
Agreement shall, notwithstanding anything in this Agreement to the contrary,
nevertheless be subject to the Company’s right of first refusal.  If the Optionee has obtained an offer to
purchase his stock of the Company, the Optionee shall notify the Company of
such offer with a copy of such offer including the price, terms and


 


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conditions of the offer.  The Optionee shall also submit to the Company
reasonable information regarding the prospective purchaser.  The Company may, but is not required to, accept
such offer of sale.  The Company shall,
within thirty (30) days after receipt of such written offer and all other
required information, notify the Optionee as to whether or not it shall
exercise its right of first refusal by accepting such offer.  If the offer is accepted by the Company, then
the Company and the Optionee shall close the sale of such stock in accordance
with the terms and conditions of such offer from such third party.  If such offer is not accepted by the Company,
then the Optionee may sell such stock to the bona fide purchaser but strictly
and only in accordance with the offer that was made to the Company except that,
notwithstanding anything in such offer to the contrary, the closing of the
transfer of title to the stock and payment in full by such bona fide purchaser
must be completed within forty-five (45) days of the original receipt by the
Company of such offer from the Optionee even if such offer provides for a
longer time for such closing and payment. 
No such transfer may be made unless the Optionee has first paid all
advances, debt and other obligations to the Company whether due then or at any
later date.  In that event, subject to
the other terms of this Agreement, such purchaser shall be a stockholder of the
Company subject to all of the terms and conditions of this Agreement.  However, if the Optionee and such bona fide
purchaser make any material modification to the terms of that original offer,
then the Optionee must proceed again with offering the revised terms and
conditions for the stock to the Company in the same manner as provided above.  The Optionee may only offer to sell and so
sell all of the Optionee’s stock of the Company; no sale by the Optionee may be
made at any time without the written consent of the Company which constitutes a
sale of less than all of the stock owned by the Optionee.  Upon such sale of stock, Optionee’s rights to
acquire any additional stock of the Company shall thereupon terminate without
further action and notwithstanding any other provision of this Agreement to the
contrary.  If the Optionee has, pursuant
to the foregoing provisions, sold his stock of the Company, then any advances
and other debts and obligations of the Optionee to the Company shall
immediately be due and payable by acceleration.


 


(e)           Upon
termination of Optionee’s membership on the Board of Directors or employment
with the Company or any subsidiary of the Company for any reason other than as
provided for in subparagraph (f) or (g) below, the Optionee shall sell, and the
Company shall purchase, all of the stock of the Company owned by the Optionee.  The purchase price shall be the Fair Market
Value of the stock as of the termination of Optionee’s membership on the Board
of Directors or employment with the Company and as determined under the Plan as
then in force and effect.  The Company
shall pay for all such stock within six (6) months of such termination of
membership on the Board of Directors or employment.


 


(f)            Upon
termination of Optionee’s membership on the Board of Directors or employment
with the Company or any subsidiary of the Company by resignation of the
Optionee or by retirement from service on the Board of Directors or employment
with the Company prior to age 60 or before completion of 20 years of service
with the Company, the Company may, but shall not be required to, purchase all


 


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of the stock of the Optionee at
the Fair Market Value of the stock as of the termination of Optionee’s
membership on the Board of Directors or employment with the Company and as
determined under the Plan as then in force and effect.  Such option shall be exercised by the Company
within one (1) year of such termination of membership on the Board of Directors
or employment by the Optionee, and transfer of the stock to the Company and
payment by the Company for such stock shall occur within six (6) months of such
notice by the Company of its exercise of its option to reacquire such
stock.  If the Company does not exercise
its right within such time to acquire all of the stock of the Optionee, all of
the provisions of this Agreement shall continue to bind such Optionee including
the Company’s right of first refusal to acquire the stock of the Optionee as
provided for in paragraph 7(d) above.


 


(g)           Upon
termination of Optionee’s membership on the Board of Directors or employment
with the Company by reason of the Optionee’s death or permanent and total
disability, then the Optionee shall sell to the Company, and the Company shall
purchase, all of the stock of the Optionee. 
Upon termination of Optionee’s membership on the Board of Directors or
employment with the Company by reason of the Optionee’s retirement from such
service with the Company at or after age 60 or after completion of 20 years of
service with the Company, then the Optionee may elect by notice to the Company
within six (6) months of such retirement to retain such Optionee’s stock, and
if such Optionee fails to give such notice within such six (6) months then the
Optionee shall sell to the Company, and the Company shall purchase, all of the
stock of the Optionee.  The price of such
stock under any of the foregoing provisions shall be the higher of (i) the
stock’s Fair Market Value as of the termination of Optionee’s membership on the
Board of Directors or employment with the Company and as determined under the
Plan as then in force and effect or (ii) the stock’s prorata share of five
times the Company’s average net income before tax for the Company’s three
fiscal years immediately preceding termination of Optionee’s membership on the
Board of Directors or employment.  The
Company shall make payment in full for such stock within nine (9) months of
Optionee’s such termination of membership on the Board of Directors or
employment.


 


(h)           Within
ten (10) days of any event described in subparagraphs (e), (f) or (g) above
which requires the sale of the Optionee’s stock to the Company, all
certificates representing such stock shall be delivered by Optionee to the
Company with appropriate executed stock transfers conveying, representing and
warranting good title to the Company for all such stock in compliance with the
terms of this Agreement and free and clear of all liens, encumbrances or claims
of any third party.  No payments made by
the Company for Optionee’s stock as provided for in subparagraphs (e), (f) and (g)
above shall require payment by the Company of any interest on the unpaid
purchase price.  Notwithstanding anything
in this Agreement to the contrary, all repurchases of stock by the Company from
the Optionee shall be subject to any applicable restrictions contained from
time-to-time in the Company’s debt and equity financing agreements.  If any such restrictions prohibit the
repurchase of such stock which the Company is otherwise entitled or required to
make, then the time periods


 


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provided for in this Agreement
for such repurchase shall be suspended at the election of the Company, and the
Company may make such repurchases as soon as it is permitted to do so under
such restrictions.


 


(i)            Any
purchase price otherwise payable by the Company to the Optionee upon the
purchase of stock by the Company which is owned by the Optionee under any of
the circumstances provided for in this paragraph 7 shall be subject to set off
and deduction for any advances, debt or other obligations of the Optionee to
the Company by acceleration and notwithstanding any other arrangements which
Optionee may have made with the Company previously in connection with repayment
of any such obligation.


 


(j)            If
at any time the Company sells any stock of the same class of stock owned by the
Optionee which constitutes a public offering and which is registered under the
Securities Act of 1993 or any other applicable law, then, as long as any such
stock is issued and outstanding, and even if the Optionee’s stock is not so
registered, all of the foregoing definitions and references to Fair Market
Value or any other formula or determination of the stock’s value shall be
considered deleted and there shall be substituted for such provisions the market
price, at the applicable time, of the Company’s stock subject to such public
offering and registration.


 


(k)           Notwithstanding anything to the contrary, none
of the provisions of this paragraph 7 shall be applicable, and all such
restrictions and other provisions shall be considered null and void, as to any
and all stock of the Company owned by the Optionee, which is registered under
the Securities Act of 1933 or any other applicable law and a sale or other
transfer of such stock may then be lawfully made without cost or liability to
the Company as determined by it.


 


(l)            If at the time
Optionee exercises his Option the Company has elected under the Code to be
taxed as a Subchapter S corporation, then Optionee shall promptly execute any
consent as a shareholder of the Company to maintain such Subchapter S tax
status which the Company may request and shall not at any time, voluntarily or
involuntarily, make or permit any transfer of stock of the Company owned by the
Optionee which causes or permits such stock to be owned by any entity which is
not a permitted Subchapter S shareholder under the Code.


 


(m)          The Optionee may transfer title to any stock in
the Company owned by him to a grantor-type, revocable trust as a part of
Optionee’s estate planning provided that, during Optionee’s life and while he
is legally competent, Optionee is the sole trustee of such trust.  Upon the death or incompetence of Optionee,
the successor trustee of such trust shall, in the same manner as the Optionee,
be bound by all of the terms and conditions of this Agreement.  In all such cases, any permitted or required
rights and obligations of the Optionee and the Company under this Agreement
shall continue to apply, and the Optionee shall for such purposes nevertheless
be considered the owner of such stock notwithstanding such transfer of such
stock to such trust. No


 


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such
transfer to or ownership by a trust, whether before or after Optionee’s life,
shall deny or restrict any right of the Company with respect to such stock of
the Optionee.  Notwithstanding anything
in this Agreement to the contrary, such trust shall at all times constitute an
eligible and qualified Subchapter S trust under the Code.  No transfer by Optionee to such trust, and no
amendment to any such trust, shall be effective under this Agreement unless and
until the Optionee , at his or her option, either (i) submits to the Company a
true and complete copy of the trust agreement as amended and the Company
determines that the trust is an eligible and qualified Subchapter S trust and
so notifies the Optionee or (ii) obtains and delivers to the Company, at the
Optionee’s cost, an unconditional and unqualified opinion of competent legal
counsel that such trust, as amended, constitutes an eligible Subchapter S
trust.  Selection of such counsel and the
content of such opinion shall be subject to the approval of the Company
exercised in its sole discretion.  If at
any time such trust for any reason does not so qualify as an eligible
Subchapter S trust, then the Company may disregard such trust for all purposes
as an owner of the stock.


 


(n)           If and to the extent of any inconsistency
between the restrictions and other provisions regarding transfer of stock
contained in paragraph 7 of this Agreement with any such provision in any prior
Nonstatutory Stock Option Agreements entered into between the Company and the
Optionee for previous Options, the terms of paragraph 7 of this Agreement shall
control and shall be applicable to all stock of the Company acquired by the
Optionee whether acquired pursuant to the terms of this Agreement or any such
previous Nonstatutory Stock Option Agreement. 
All of the provisions of this paragraph 7 shall apply to all stock owned
by the Optionee whether acquired pursuant to any Stock Option Agreement or
otherwise unless and to the extent there is a written contract signed by the
Optionee and the Company which specifically states that it supercedes this
Agreement or exempts the stock subject to such contract from this Agreement.


 


8.             Stock
Option Plan.


 


(a)           This
Agreement has been entered into between the Company and the Optionee subject to
all of the terms and conditions of the Plan. 
Optionee expressly acknowledges that the Optionee has received and had
an opportunity to review and consider both the Plan and this Agreement.  All provisions of the Plan, as it may be
amended, are at all times considered to be adopted by reference as a part of
this Agreement.


 


(b)           The
Plan is intended to be consistent with all of the provisions of this Agreement,
but to the extent of any conflict between the provisions of this Agreement and
the provisions of the Plan, the provisions of the Plan shall be deemed to be
controlling.


 


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9.             Acknowledgments
by Optionee.


 


The Optionee
acknowledges to the Company, as a material inducement to the Company to enter
into this Agreement, the following:


 


(a)           No
guaranty or other assurances of any kind have at any time been made to the
Optionee by the Company or any officer, director, or other representative of
the Company regarding the present or possible future value of any stock of the
Company or of the business prospects of the Company or of possible terms and
conditions of any subsequent option rights or of the number of shares of common
stock or of other classes of stock which may be outstanding from
time-to-time.  There are no preemptive
rights of the Optionee.  Neither this
Agreement nor the Options gives the Optionee any rights whatsoever with respect
to any operations of the Company or any acquisitions, divestitures, corporate
reorganizations, asset transfers, liability assumptions or other activities of
the Company.


 


(b)           The
Optionee, by reason of such Optionee’s business and financial experience, has
the capacity to protect the Optionee’s own interests in connection with this
Agreement.  The Optionee has been
encouraged to consult with his own attorney, accountant, tax and financial
advisor in connection with this Agreement prior to its execution.  No guaranty or other assurances of any
particular income or other tax incidence, consequences, or amount or category
is or has ever been made by the Company.  
The Optionee acknowledges that the Company reserves the right at any
time to elect be taxed as a Subchapter S corporation under and subject to the
requirements of the Code.   All taxable consequences to the
Optionee of the grant and exercise of any Option and the ownership and sale of
any stock so acquired shall be determined by Optionee and not the Company.


 


(c)           The
Optionee has substantial other net assets and has adequate means of providing
for his current needs and possible personal contingencies and has no need for
liquidity of any investment in stock of the Company.  The Optionee can bear the economic risk of
exercising any Option and owning stock of the Company.


 


(d)           The
Optionee can bear the economic risk of losing his entire investment in the
Company and has, alone or together with a competent professional advisor, such
knowledge and experience in financial matters that such Optionee is capable of
evaluating the relative risks and merits of an investment in the stock of the
Company and had an adequate opportunity to ask questions of and receive answers
from the Company and its directors and officers concerning the terms and
conditions of such an investment.  Stock
of the Company is highly speculative and involves a high degree of financial
risk.


 


(e)           Any
stock obtained upon exercise of the Option would be acquired by the Optionee
solely for the Optionee’s account, for investment purposes only, and would not
being purchased with a view to or for the resale, distribution, subdivision or


 


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fractionization of it.  The Optionee has no present plans or
commitments to enter into any such contract, undertaking, agreement or
arrangement.


 


(f)            The
Optionee acknowledges that any stock obtained under this Agreement and which
would be issued to the Optionee would be issued without registration under the Securities
Act of 1933 or any other law, and no transfer or sale of such stock or of any
interest in it may be made except under an effective registration statement
under such act or unless made pursuant to an exemption from such registration,
including any exemption which may be required under any applicable state laws
including, without limitation, those of the State of Illinois.  No assurances of any future registration of
the stock have been made to the Optionee. 
The Optionee understands and acknowledges that no offering literature,
prospectus or investment memorandum or similar other document has been or will
be furnished in connection with any stock of the Company.


 


(g)           The
Optionee acknowledges that no governmental agency has made any finding or determination
relating to the appropriateness of the Fair Market Value of any stock of the
Company, and that no governmental agency has recommended or will recommend such
stock.


 


(h)           The
Optionee acknowledges that he is elected as a member of the Board of Directors
only for the term provided for in the By-Laws of the Company or is an “at-will”
employee of the Company or a subsidiary of the Company and is entering into
this Agreement voluntarily and not under duress of any kind.


 


(i)            The
Optionee acknowledges that this Agreement and the Plan were discussed, executed
and delivered in the State of Illinois, and that no action in connection with
any of these transactions occurred outside of the State of Illinois.


 


10.           No
Commissions or Fees.


 


The parties
acknowledge and agree that no entity is entitled to or has received or will be
paid any commission or brokers or finders fee or similar payment, contingent or
otherwise, by reason of the Options granted under this Agreement or the
acquisition of stock of the Company pursuant to exercise of the Options.


 


11.           Stock
Legend.


 


All of the
stock issued pursuant to this Agreement shall contain a legend on the
certificate stating, among other things, 
that it was issued pursuant to the terms and conditions of this
Agreement and the Plan.


 


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12.           Activities
by David K. Hill


 


The Optionee acknowledges that David K. Hill and
his family may continue to engage in residential, commercial and other real
estate development, sale, ownership and other activities through companies
other than the Company.  Neither the
Optionee nor the Company shall have any rights or claims based on such
activities whether based on alleged lost corporate opportunity of the Company
or otherwise.  The Optionee also
acknowledges that the restrictions and other provisions regarding transfer of
stock contained in paragraph 7 above shall not apply to any stock owned at any
time by or for the benefit of David K. Hill and his family whether such stock
was acquired by the exercise of Options or otherwise.


 


13.           Amendment
and Complete Agreement.


 


(a)           The
parties acknowledge that subject to the provisions of the Plan, no rights or
obligations under this Agreement may be cancelled, terminated or revoked by
either party, and this Agreement may not be amended, unless both parties
execute a written modification or consent to any such action.  This Agreement with the Plan contains the
entire understanding of the parties with respect to its subject matter and
supersedes any prior understandings the parties may have made regarding its
subject matter.


 


(b)           The
parties acknowledge that, subject to the provisions of paragraph 7(n) above,
this Agreement does not replace any previous Stock Option Agreements but rather
is in addition to them.


 


14.           Costs
and Expenses.


 


In the event a
party to this Agreement fails to perform such parties’ obligations under the
Agreement or in the event a dispute arises concerning the meaning,
interpretation or application of any provision of this Agreement, the
prevailing party in any such dispute shall be entitled to payment by the other
party or parties of all costs and expenses incurred by the prevailing party in
enforcing or establishing the prevailing parties’ rights under this Agreement,
including, without limitation, reasonable attorney’s fees, whether suit be
brought or not, and whether incurred in trial or appellate proceedings.


 


15.           Miscellaneous.


 


(a)           This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of Illinois. 
Jurisdiction and venue for any disputes regarding them shall be in the
Circuit Court of Cook County, in Chicago, Illinois.


 


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(b)           Time
is of the essence in this Agreement.  The
Company may, but is not required to, extend any deadline provided for in this
Agreement.


 


(c)           The
parties intend and believe that each provision of this Agreement complies with
all applicable federal, state and local laws and judicial decisions.  However, if any provision or portion of any
provision is found by a court of law to violate any applicable federal, state
or local law, judicial decision or public policy and such court declares such
provision illegal, invalid, unlawful, void or unenforceable as written, then it
is the intent of the parties that such portion shall be given force to the
fullest extent possible that it is legal, valid and enforceable, and the
remainder of this Agreement shall be construed as if such illegal, invalid,
unlawful, void or unenforceable portion were not contained in this
Agreement.  In such event, the rights,
obligations and interests of the parties under the remainder of this Agreement
shall continue in full force and effect.


 


(d)           This
Agreement may be executed in one or more counterparts all of which shall be
taken to be one and the same instrument and all of which shall have the force
and effect as if all of the parties have executed the same counterpart.


 


(e)           The
parties shall promptly execute and deliver all documents and provide all
information as shall be reasonable, necessary or appropriate to carry out the
purpose and intent of this Agreement.


 


(f)            This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective and applicable legal representatives, trustees, beneficiaries,
heirs, devisees, executors, administrators, successors and assigns.


 


(g)           The
Recitals at the beginning of this Agreement are an integral part of and
incorporated in this Agreement.


 


IN WITNESS
WHEREOF, the parties have executed this Agreement as of the date first
indicated above.


 


	
  COMPANY:

  	
  Kimball
  Hill, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  David K.
  Hill, Chairman and CEO

  
	
   

  	
   

  
	
  OPTIONEE:

  	
   

  
	
   

  	
   

  	
   

  
					



 


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