Exhibit 10.3


 


10-27-95


 


KIMBALL HILL HOMES


INCENTIVE STOCK OPTION PLAN


 


This Kimball
Hill Homes Incentive Stock Option Plan (“Plan”) of Kimball Hill, Inc., an
Illinois corporation, adopted this 28th day of October, 1995 and effective as
of October 31, 1995.


 


1.             Purpose
of the Plan.


 


Under this
Plan adopted by Kimball Hill, Inc. (“Company”), options may be granted to
eligible employees to purchase shares of the Company stock. The Plan is
designed to enable the Company and its subsidiaries to afford certain designated
key employees who are responsible 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 key employees. The Plan provides for options which are
intended to qualify as incentive stock options (“Options”) under Section 422 of
the Internal Revenue Code, as amended (“Code”).


 


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 65,000 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
Employees.


 


(a)           The
employees eligible to be considered for the grant of Options under this Plan
are persons regularly employed by the Company or by any of its subsidiaries in
a managerial capacity on a full-time, salaried basis (“Optionee”).


 


(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

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Hal H. Barber

  	
   

  	
  10,000

  	
   

  
	
  Kirk T. Breitenwischer

  	
   

  	
  7,500

  	
   

  
	
  Bruce I. McPhee

  	
   

  	
  10,000

  	
   

  
	
  Eugene K. Rowehl

  	
   

  	
  7,500

  	
   

  
	
  Thomas F. Tylutki

  	
   

  	
  10,000

  	
   

  
	
  Gregory A. Yakim

  	
   

  	
  20,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TOTAL:

  	
   

  	
  65,000

  	
   

  



 


(c)           If
all of the Optionees exercise all of their Options to acquire all such stock
available to them for purchase under 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

  	
   

  	
  Number of Shares Held

  	
   

  	
  % of Issued Shares Held

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  David K. Hill

  	
   

  	
  2,703,955

  	
   

  	
  82.82

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Diane G. Hill

  	
   

  	
  236,836

  	
   

  	
  7.25

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

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

  	
   

  	
  59,209

  	
   

  	
  1.81

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Bruce I. McPhee

  	
   

  	
  210,000

  	
   

  	
  6.43

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Gregory A. Yakim

  	
   

  	
  20,000

  	
   

  	
  .61

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Thomas F. Tylutki

  	
   

  	
  10,000

  	
   

  	
  .31

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hal H. Barber

  	
   

  	
  10,000

  	
   

  	
  .31

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Eugene K. Rowehl

  	
   

  	
  7,500

  	
   

  	
  .23

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Kirk T. Breitenwischer

  	
   

  	
  7,500

  	
   

  	
  .23

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL:

  	
   

  	
  3,265,000

  	
   

  	
  100

  	
  %

  



 


2

















 


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 15 of this Plan, of the stock
being optioned. Fair Market Value shall be determined at the time of the grant
of the Option.


 


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.


 


(c)           Notwithstanding
the foregoing provisions, each such adjustment with respect to an Option shall
comply with applicable rules of the Code, and in no event shall any adjustment
be made which would render any Option granted hereunder other than an “incentive
stock option” for purposes of Section 422 of the Code.


 


3

















 


7.             Maximum
Option Term.


 


No Option
granted under this Plan may be exercised in whole or in part more than ten (10)
years after its date of grant. 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
not be granted under this Plan after October 31, 2005.


 


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 (“Stock Option Agreement”) which grants a specific Option to a
specific Optionee may, at the discretion of the Company, provide for payment
terms.


 


10.          Administration.


 


(a)           The
Plan shall be administered by a committee (“Committee”) of not less than two (2)
members of the Board of Directors (“Board”) selected by the 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
employees 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 Stock Option Agreements for each Optionee;


 


4

















 


(iii)          To construe the Plan and
each 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 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 Stock Transfer Agreement shall be conclusive.


 


11.          Stock
Option Agreements.


 


(a)           The
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 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
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
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 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,


 


5

















 


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 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 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 Stock Option Agreement with the Company, and
none of the foregoing alone, shall give any Optionee any right to continued
employment by the Company or any subsidiary of the Company for any period or
for any level of compensation 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
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
Stock Option Agreement executed by the Company and by the Optionee.


 


6

















 


14.          Limitation
on Exercise of Options.


 


Except as
otherwise provided and permitted under the Code, and notwithstanding anything
in this Plan to the contrary, to the extent that the aggregate Fair Market
Value of stock with respect to which Options are exercisable for the first time
by any one (1) employee during any calendar year under all stock option plans
of the Company and any parent corporation or subsidiary corporation of the
Company exceeds $100,000.00, such Option shall be treated as a non-qualified
Option under the Code. For purposes of this limitation, (i) the Fair Market
Value of shares is determined as of the time the Option is granted and (ii) the
limitation will be applied by taking into account Options in the order in which
they were granted.


 


15.          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. Notwithstanding the
foregoing, in the case of an Option granted to a Optionee who at the time such
Option is granted owns stock of the Company or any subsidiary corporation or
parent corporation of the Company possessing more than 10% of the total
combined voting power of all classes of stock of the Company or of any
subsidiary corporation or parent corporation of the Company, the purchase price
for each share shall be such amount as the Committee shall, in its best
judgment, determine to be not less than 110% of the Fair Market Value per share
at 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 $5.00
per share. The Company and the Committee have determined that such $5.00
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.


 


16.          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.


 


17.          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 Committee is authorized to
amend the Plan and the Stock Option Agreement to permit the Options granted to
qualify as “incentive stock options” within the meaning of Section 422 of the
Code. 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 Stock Option Agreement without the
consent of the holder of the Option.


 


18.          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 Stock Option Agreements granted prior to the termination or suspension
of the Plan shall continue after such termination or during such suspension.


 


8

















 


19.          Miscellaneous.


 


(a)           This
Plan and all of the 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 Stock Option Agreements shall
be in the Circuit Court of Cook County, in Chicago, Illinois.


 


(b)           This
Plan and the Stock Option Agreements constitute the entire 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.


 


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, President

  	
   

  
						



 


9

















 


10-10-96


 


FIRST AMENDMENT TO


KIMBALL HILL HOMES INCENTIVE STOCK OPTION PLAN


 


This First
Amendment to Kimball Hill Homes Incentive Stock Option Plan (“Amendment”) is
adopted by Kimball Hill, Inc., an Illinois corporation (“Company”) effective as
of October 31, 1996.


 


R E C I T A L S


 


A.            The
Company adopted, effective as of October 31, 1995, the Kimball Hill Homes
Incentive Stock Option Plan (“Plan”) under which it offered to designated key
employees the right to subscribe to an aggregate of 65,000 shares of the
Company’s common stock.


 


B.            The
Company and each of the six (6) designated eligible employees, i.e., Hal
H. Barber, Kirk T. Breitenwischer, Bruce I. McPhee, Eugene K. Rowehl, Thomas F.
Tylutki, and Gregory A. Yakim (collectively the “Optionees”) each entered into
a 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 $5.00 per share and expiring on October
31, 1999. All such options are still outstanding; none have been exercised or
forfeited.


 


C.            The
Company desires to make available to these same Optionees, additional stock
option rights for various designated shares of stock of the Company at the same
price per share and for a four (4) year period commencing as of the effective
date of this Amendment.


 


D.            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 141,000 shares of the Company’s common stock are subject to the Plan
and may be granted as incentive stock options (“Options”) under Section 422 of
the Internal Revenue Code, as amended.


 


1

















 


(b)           The
141,000 shares are in addition to the aggregate 65,000 shares of the Company’s
common stock originally granted by individual Stock Option Agreements to each
of the Optionees.


 


2.             Eligible
Employees.


 


(a)           The
employees 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 regularly
employed by the Company or by a subsidiary of the Company in a managerial
capacity on a full-time, salaried basis.


 


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


 


	
   

  	
   

  	
  Number of Additional

  	
   

  
	
  Optionee

  	
   

  	
  Shares Available by Option

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Hal H. Barber

  	
   

  	
  16,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Kirk T. Breitenwischer

  	
   

  	
  12,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Bruce I. McPhee

  	
   

  	
  8,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Eugene K. Rowehl

  	
   

  	
  15,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Thomas F. Tylutki

  	
   

  	
  10,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Gregory A. Yakim

  	
   

  	
  80,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TOTAL:

  	
   

  	
  141,000

  	
   

  



 


(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 65,000 shares and the additional 141,000 shares to be offered
pursuant to the terms of this Amendment, and if no other stock of the Company
was sold or reacquired, the stock of the Company would then be held as follows:


 


2

















 


	
  Shareholder

  	
   

  	
  Number of Shares Held

  	
   

  	
  % of Issued Shares Held

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  David K. Hill

  	
   

  	
  2,703,955

  	
   

  	
  79.39

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Diane G. Hill

  	
   

  	
  236,836

  	
   

  	
  6.95

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

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

  	
   

  	
  59,209

  	
   

  	
  1.74

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Bruce I. McPhee

  	
   

  	
  218,000

  	
   

  	
  6.40

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Gregory A. Yakim

  	
   

  	
  100,000

  	
   

  	
  2.94

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hal H. Barber

  	
   

  	
  26,000

  	
   

  	
  .76

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Eugene Rowehl

  	
   

  	
  22,500

  	
   

  	
  .66

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Thomas F. Tylutki

  	
   

  	
  20,000

  	
   

  	
  .59

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Kirk T. Breitenwischer

  	
   

  	
  19,500

  	
   

  	
  .57

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL:

  	
   

  	
  3,406,000

  	
   

  	
  100

  	
  %

  



 


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 $5.00 per share. Accordingly, the Option exercise
price for each share of stock to be offered to each of the Optionees shall be
$5.00.


 


4.             Expiration
of Option.


 


All of the
Options to be granted pursuant to the Plan under this Amendment must be
exercised within four (4) years of the grant of each such Option. Accordingly,
the Options shall expire on October 31, 2000.


 


5.             Administration.


 


The first
sentence of paragraph 10(a) of the Plan is deleted and the following sentence
is substituted for it:


 


3

















 


The Plan shall be administered by a committee (“Committee”) of not less
than two individuals selected by the Board of Directors (“Board”) of the
Company.


 


6.             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.


 


7.             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 Stock Option

  
	
   

  	
  Plan Committee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ David K.
  Hill

  	
   

  
	
   

  	
  David K.
  Hill

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ James A.
  Moehling

  	
   

  
	
   

  	
  James A.
  Moehling

  
				



 


4

















 


12-31-97(1)


 


SECOND AMENDMENT TO


KIMBALL HILL HOMES INCENTIVE STOCK OPTION PLAN


 


This Second
Amendment to Kimball Hill Homes Incentive Stock Option Plan (“Second Amendment”)
is adopted by Kimball Hill, Inc., an Illinois corporation (“Company”) effective
as of December 31, 1997.


 


R E C I T A L S


 


A.            The
Company adopted, effective as of October 31, 1995, the Kimball Hill Homes
Incentive Stock Option Plan (“Plan”) under which it offered to designated key
employees the right to subscribe to an aggregate of 65,000 shares of the
Company’s common stock.


 


B.            The
Company and each of the six (6) designated eligible employees, i.e., Hal
H. Barber, Kirk T. Breitenwischer, Bruce I. McPhee, Eugene K. Rowehl, Thomas F.
Tylutki, and Gregory A. Yakim (collectively the “Optionees”) each entered into
a 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 $5.00 per share and expiring on October
31, 1999. All such options are still outstanding; none have been exercised or
forfeited.


 


C.            The
Company and the six Optionees entered into a First Amendment to Kimball Hill
Homes Incentive Stock Option Plan effective October 31, 1996 (“First Amendment”)
under which the Optionees collectively acquired additional options for an
aggregate additional 141,000 shares of stock of the Company under options
priced also at $5.00 per share and expiring on October 31, 2000. As with the
options granted in the original Plan effective as of October 31, 1995, all of
the options granted under the First Amendment are still outstanding; none have
been exercised or forfeited.


 


D.            The
Company desires to make available under the terms of this Second Amendment
additional stock option rights for an aggregate 144,000 shares of stock of the
Company at $6.00 per share and for a four (4) year term commencing as of the
effective date of this Second Amendment.


 


E.             The
Company also desires to make available these stock options pursuant to the
terms of this Second Amendment to the original six Optionees as well as to Lance
Wright (the original Optionees and Lance Wright collectively referred to
hereafter as the Optionees).


 


1

















 


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


 


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


 


1.             Additional
Stock Subject to Plan.


 


(a)           An
additional 144,000 shares of the Company’s common stock are subject to the Plan
and may be granted as incentive stock options (“Options”) under Section 422 of
the Internal Revenue Code, as amended.


 


(b)           The
144,000 shares are in addition to the aggregate 65,000 shares of the Company’s
common stock originally granted by individual Stock Option Agreements and the
aggregate 141,000 shares granted by the First Amendment. Accordingly, there are
now 350,000 total shares of stock of the Company subject to Options.


 


2.             Eligible
Employees.


 


(a)           The
employees eligible for the grant of Options for the additional stock as
contemplated in this Second Amendment are the Optionees as defined above. All
of the Optionees are regularly employed by the Company or by a subsidiary of
the Company in a managerial capacity on a full-time, salaried basis.


 


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


 


	
   

  	
   

  	
  Number of Additional

  	
   

  
	
  Optionee

  	
   

  	
  Shares Available by this Option

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Gregory A. Yakim

  	
   

  	
  60,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Hal H. Barber

  	
   

  	
  18,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Kirk T. Breitenwischer

  	
   

  	
  18,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Bruce I. McPhee

  	
   

  	
  10,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Eugene K. Rowehl

  	
   

  	
  18,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Thomas F. Tylutki

  	
   

  	
  10,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Lance Wright

  	
   

  	
  10,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TOTAL:

  	
   

  	
  144,000

  	
   

  



 


2

















 


(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 65,000 shares, the 141,000 shares granted by the First
Amendment, and the additional 144,000 shares to be offered pursuant to the
terms of this Second Amendment, and if no other stock of the Company was sold
or reacquired, the stock of the Company would then be held as shown on Exhibit
A attached to and made a part of this Second 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 $6.00 per share. Accordingly, the Option exercise
price for each share of stock to be offered to each of the Optionees shall be
$6.00.


 


4.             Expiration
of Option.


 


All of the
Options to be granted pursuant to the Plan under this Amendment must be
exercised within four (4) years of the grant of each such Option. Accordingly,
the Options shall expire on December 31, 2001.


 


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 in the
First Amendment and as provided for 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.


 


3

















 


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 Stock Option

  
	
   

  	
  Plan
  Committee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ David K.
  Hill

  	
   

  
	
   

  	
  David K.
  Hill

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ James A.
  Moehling

  	
   

  
	
   

  	
  James A.
  Moehling

  
				



 


1

















 


RESTATED THIRD AMENDMENT TO


KIMBALL HILL HOMES INCENTIVE STOCK OPTION PLAN


 


This Restated
Third Amendment to Kimball Hill Homes Incentive Stock Option Plan (“Third
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 October 31, 1995, the Kimball Hill Homes
Incentive Stock Option Plan (“Plan”) under which it offered to designated key
employees the right to subscribe to an aggregate of 65,000 shares of the
Company’s common stock.


 


B.            The
Company and each of six designated eligible employees each entered into a Stock
Option Agreement with the Company under which such optionees confirmed the
terms under which each has options to acquire designated portions of stock of
the Company under options priced at $5.00 per share and expiring on October 31,
1999. All such options are still outstanding; none have been exercised or
forfeited.


 


C.            The
Company and such optionees entered into a First Amendment to Kimball Hill Homes
Incentive Stock Option Plan effective October 31, 1996 (“First Amendment”)
under which the optionees collectively acquired additional options for an
aggregate additional 141,000 shares of stock of the Company under options
priced also at $5.00 per share and expiring on October 31, 2000. As with the
options granted in the original Plan effective as of October 31, 1995, all of
the options granted under the First Amendment are still outstanding; none have
been exercised or forfeited.


 


D.            The
Company and designated optionees entered into a Second Amendment to Kimball
Hill Homes Stock Option Plan effective December 31, 1997 (“Second Amendment”)
under which such designated optionees collectively acquired additional options
for a total of 144,000 shares of stock of the Company under options priced at
$6.00 per share and expiring on December 31, 2001. As with the options granted
in the original Plan and the First Amendment, all the options granted under the
Second Amendment are still outstanding; none have been exercised or forfeited.


 


E.             The
Company also entered into the Kimball Hill Homes Nonstatutory Stock Option Plan
effective as of December 31, 1997 under which it made available to certain
non-employee members of the Board of Directors of the Company stock options
which were not intended to qualify as incentive stock options under Section 422
of the Internal Revenue Code, and all such nonstatutory stock options are for
all purposes


 


1

















 


considered separate from and
not a part or modification of any incentive stock option plan of the Company.


 


F.             The
Company desires to make available under the terms of this Third Amendment
additional incentive stock option rights for an aggregate 174,000 shares of
stock of the Company at $7.75 per share and for an eight (8) year term
commencing as of the effective date of this Third Amendment. For that purpose,
the Company adopted the Third Amendment to Kimball Hill Homes Incentive Stock
Option Plan effective December 31, 1998 (“Original Third Amendment”).


 


G.            The
Company desires to supercede the Original Third Amendment by providing, only
with respect to options to be granted pursuant to it to David K. Hill and to
Diane G. Hill, an increase in the option price to be paid by them by 10% to
$8.53 and a decrease in the Option term by three (3) years to a five (5) year
term.


 


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


 


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


 


1.             Additional
Stock Subject to Plan.


 


(a)           An
additional 174,000 shares of the Company’s common stock are subject to the Plan
and may be granted as incentive stock options (“Options”) under Section 422 of
the Internal Revenue Code, as amended.


 


(b)           The
174,000 shares are in addition to the aggregate 65,000 shares of the Company’s
common stock originally granted by individual Stock Option Agreements, the
aggregate 141,000 shares granted by the First Amendment, and the aggregate
144,000 shares granted by the Second Amendment. Accordingly, there are now
524,000 total shares of stock of the Company subject to Options in addition to
any shares available through nonstatutory stock options.


 


2.             Eligible
Employees.


 


(a)           The
employees (“Optionees”) eligible for the grant of Options for the additional
stock as contemplated in this Third Amendment and the number of shares
available to each are as follows:


 


2

















 


	
  Optionee

  	
   

  	
  Number of Additional

  Shares Available by this Option

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  David K. Hill

  	
   

  	
  40,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Gregory A. Yakim

  	
   

  	
  40,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Hal H. Barber

  	
   

  	
  18,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Kirk T. Breitenwischer

  	
   

  	
  18,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Eugene K. Rowehl

  	
   

  	
  18,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Diane G. Hill

  	
   

  	
  10,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Bruce I. McPhee

  	
   

  	
  10,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Thomas F. Tylutki

  	
   

  	
  10,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Lance Wright

  	
   

  	
  10,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TOTAL:

  	
   

  	
  174,000

  	
   

  



 


(b)           All
of the Optionees are regularly employed by the Company or by a subsidiary of
the Company in a managerial capacity on a full-time, salaried basis.


 


(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 65,000 shares, the 141,000 shares granted by the First
Amendment, the 144,000 shares granted by the Second Amendment, and additional
174,000 shares to be offered pursuant to the terms of this Third Amendment, and
if no other stock of the Company was sold or reacquired other than by exercise
of nonstatutory stock options, 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 pursuant to the
terms of this Third 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. Notwithstanding the foregoing, the Option exercise price for
each share of stock to be offered to David K. Hill and to Diane G. Hill shall
be $8.53.


 


3

















 


4.             Expiration
of Option.


 


All of the
Options to be granted pursuant to the Plan under this Third Amendment must be
exercised within eight (8) years of the grant of each such Option. Accordingly,
the Options shall expire on December 31, 2006. Notwithstanding the foregoing,
the Options to be granted to David K. Hill and to Diane G. Hill must be
exercised within five (5) years of the grant of each such Option so that, for
each of them, the Options shall expire on December 31, 2003.


 


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. This Third Amendment supercedes in its entirety all of the provisions
of the Original Third Amendment.


 


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


 


4

















 


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 Stock Option

  Plan Committee:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ David K.
  Hill

  	
   

  
	
   

  	
  David K.
  Hill

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ James A.
  Moehling

  	
   

  
	
   

  	
  James A.
  Moehling

  
				



 


5

















 


2-16-00


 


FOURTH AMENDMENT TO


KIMBALL HILL HOMES INCENTIVE STOCK OPTION PLAN


 


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


 


R E C I T A L S


 


A.            The
Company adopted, effective as of October 31, 1995, the Kimball Hill Homes
Incentive Stock Option Plan (“Plan”) under which it offered to designated key
employees the right to subscribe to an aggregate of 65,000 shares of the
Company’s common stock.


 


B.            The
Company and each of six designated eligible employees each entered into a Stock
Option Agreement with the Company under which such optionees confirmed the
terms under which each has options to acquire designated portions of stock of
the Company under options priced at $5.00 per share and expiring on October 31,
1999. None of such options are still outstanding; all have either been
exercised or forfeited.


 


C.            The
Company and such optionees entered into a First Amendment to Kimball Hill Homes
Incentive Stock Option Plan effective October 31, 1996 (“First Amendment”)
under which the optionees collectively acquired additional options for an
aggregate additional 141,000 shares of stock of the Company under options
priced also at $5.00 per share and expiring on October 31, 2000. All of the
options granted under the First Amendment are still outstanding; none have been
exercised or forfeited.


 


D.            The
Company and designated optionees entered into a Second Amendment to Kimball
Hill Homes Stock Option Plan effective December 31, 1997 (“Second Amendment”)
under which such designated optionees collectively acquired additional options
for a total of 144,000 shares of stock of the Company under options priced at
$6.00 per share and expiring on December 31, 2001. All of the options granted
under the Second Amendment are still outstanding; none have been exercised or
forfeited.


 


E.             The
Company also entered into the Kimball Hill Homes Nonstatutory Stock Option Plan
effective as of December 31, 1997 under which it made available to certain
non-employee members of the Board of Directors of the Company stock options
which were not intended to qualify as incentive stock options under Section 422
of the


 


1

















 


Internal Revenue Code, and all
such nonstatutory stock options granted in 1997 and again in 1998 and 1999 are
for all purposes considered separate from and not a part or modification of any
incentive stock option plan of the Company.


 


F.             The
Company and designated optionees entered into a Third Amendment to Kimball Hill
Homes Incentive Stock Option Plan effective December 31, 1998 (“Third Amendment”)
under which such designated optionees collectively acquired additional options
for a total of 174,000 shares of stock of the Company. All Options, except
those granted to owners of ten percent (10%) or more of the voting power of all
classes of stock of the Company, were priced in the Third Amendment at $7.75
per share and expire on December 31, 2006. The Options granted under the Third
Amendment to David K. Hill and to Diane G. Hill, who are individually or by
attribution the owners of more than ten percent (10%) of the voting power of
all classes of stock of the Company, are priced at $8.525 per share and expire
on December 31, 2003 as required to be eligible to be considered as incentive
stock options. All of the Options granted under the Third Amendment are still
outstanding; none have been exercised or forfeited.


 


G.            The
Company desires to make available under the terms of this Fourth Amendment
additional incentive stock option rights for an aggregate 120,000 shares of
stock of the Company at $10.00 per share and for an eight (8) year term
commencing as of the effective date of this Fourth Amendment. Additional stock
option rights are not under this Fourth Amendment being granted to David K.
Hill or to Diane G. Hill.


 


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


 


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


 


1.             Additional
Stock Subject to Plan.


 


(a)           An
additional 120,000 shares of the Company’s common stock are subject to the Plan
and may be granted as incentive stock options (“Options”) under Section 422 of
the Internal Revenue Code, as amended.


 


(b)           Inclusive
of the 120,000 shares, there are as of the effective date of this Fourth
Amendment 579,000 total shares of stock of the Company subject to unexpired
statutory Options plus 50,000 total shares subject to nonstatutory stock
options for an aggregate of 629,000 shares available from all stock options
currently outstanding.


 


(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


 


2

















 


the Company was sold or
reacquired other than by exercise of nonstatutory stock options, the stock of
the Company would then be held as shown on Exhibit A attached to and made a
part of this Fourth Amendment.


 


2.             Eligible
Employees.


 


(a)           The
employees (“Optionees”) eligible for the grant of Options for the additional
stock as contemplated in this Fourth Amendment and the number of shares
available to each are as follows:


 


	
  Optionee

  	
   

  	
  Number of Additional

  Shares Available by this Option

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Gregory A. Yakim

  	
   

  	
  50,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Hal H. Barber

  	
   

  	
  15,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Kirk T. Breitenwischer

  	
   

  	
  15,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Eugene K. Rowehl

  	
   

  	
  15,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Bruce I. McPhee

  	
   

  	
  5,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Thomas F. Tylutki

  	
   

  	
  10,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Lance Wright

  	
   

  	
  10,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TOTAL:

  	
   

  	
  120,000

  	
   

  



 


(b)           All
of the Optionees are regularly employed by the Company or by a subsidiary of
the Company in a managerial capacity on a full-time, salaried basis.


 


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 pursuant to the
terms of this Fourth 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 Fourth Amendment must be
exercised within eight (8) years of the grant of each such Option. Accordingly,
the Options shall expire on December 31, 2007.


 


3

















 


5.             No
Other Modifications.


 


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


 


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


 


6.             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 Stock Option

  
	
   

  	
  Plan
  Committee:

  
	
   

  	
   

  
	
   

  	
  /s/ David K.
  Hill

  	
   

  
	
   

  	
  David K. Hill

  
	
   

  	
   

  
	
   

  	
  /s/ James A.
  Moehling

  	
   

  
	
   

  	
  James A.
  Moehling

  
				



 


4

















 


FIFTH AMENDMENT TO


KIMBALL HILL HOMES INCENTIVE STOCK OPTION PLAN


 


This Fifth
Amendment to Kimball Hill Homes Incentive Stock Option Plan (“Fifth 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 October 31, 1995, the Kimball Hill Homes
Incentive Stock Option Plan (“Plan”) under which it offered to designated key
employees the right to subscribe to an aggregate of 65,000 shares of the
Company’s common stock.


 


B.            The
Company and each of its designated eligible employees each entered into a Stock
Option Agreement with the Company under which such optionees confirmed the
terms under which each has options to acquire designated portions of stock of
the Company under options priced at $5.00 per share and expiring on October 31,
1999. None of such options are still outstanding; all have either been
exercised or forfeited.


 


C.            The
Company and such optionees entered into a First Amendment to Kimball Hill Homes
Incentive Stock Option Plan effective October 31, 1996 (“First Amendment”)
under which the optionees acquired additional options for stock of the Company
under options priced also at $5.00 per share and expiring on October 31, 2000. None
of the options granted under the First Amendment are still outstanding; all
have been exercised or forfeited.


 


D.            The
Company and designated optionees entered into a Second Amendment to Kimball
Hill Homes Stock Option Plan effective December 31, 1997 (“Second Amendment”)
under which such designated optionees acquired additional options for stock of
the Company under options priced at $6.00 per share and expiring on December
31, 2001. All of the options granted under the Second Amendment are still
outstanding; none have been exercised or forfeited.


 


E.             The
Company also entered into the Kimball Hill Homes Nonstatutory Stock Option Plan
effective as of December 31, 1997, and in subsequent years, under which it made
available to certain non-employee members of the Board of Directors of the
Company stock options which were not intended to qualify as incentive stock
options under Section 422 of the Internal Revenue Code, and all such
nonstatutory stock options granted in 1997 and in subsequent years are for all
purposes considered


 


1

















 


separate from and not a part or
modification of any incentive stock option plan of the Company.


 


F.             The
Company and designated optionees entered into a Third Amendment to Kimball Hill
Homes Incentive Stock Option Plan effective December 31, 1998 (“Third Amendment”)
under which such designated optionees acquired additional options for stock of
the Company. All Options, except those granted to owners of ten percent (10%)
or more of the voting power of all classes of stock of the Company, were priced
in the Third Amendment at $7.75 per share and expire on December 31, 2006. The
Options granted under the Third Amendment to David K. Hill and to Diane G.
Hill, who are individually or by attribution the owners of more than ten
percent (10%) of the voting power of all classes of stock of the Company, are
priced at $8.525 per share and expire on December 31, 2003 as required to be
eligible to be considered as incentive stock options. All of the Options
granted under the Third Amendment are still outstanding; none have been
exercised or forfeited.


 


G.            The
Company and designated eligible optionees entered into a Fourth Amendment to
Kimball Hill Homes Incentive Stock Option Plan effective December 31, 1999 (“Fourth
Amendment”) under which such designated optionees acquired additional Options
for stock of the Company under Options priced at $10.00 per share and expiring
on December 31, 2007. All of the Options granted under the Fourth Amendment are
still outstanding; none have been exercised or forfeited.


 


H.            The
Company desires to make available under the terms of this Fifth Amendment
additional incentive stock option rights for an aggregate 145,000 shares of
stock of the Company at $13.00 per share and for a four (4) year term
commencing as of the effective date of this Fifth Amendment. Additional stock
option rights are not under this Fifth Amendment being granted to David K. Hill
or to Diane G. Hill.


 


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


 


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


 


1.             Additional
Stock Subject to Plan.


 


(a)           An
additional 145,000 shares of the Company’s common stock are subject to the Plan
and may be granted as incentive stock options (“Options”) under Section 422 of
the Internal Revenue Code, as amended.


 


(b)           Inclusive
of the 145,000 shares, there are as of the effective date of this Fifth
Amendment 583,000 total shares of stock of the Company subject to


 


2

















 


unexpired incentive Options
plus 74,000 total shares subject to nonstatutory stock options for an aggregate
of 657,000 shares available from all stock options currently outstanding.


 


(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 nonstatutory stock options, the stock of the Company
would then be held as shown on Exhibit A attached to and made a part of this
Fourth Amendment.


 


2.             Eligible
Employees.


 


(a)           The
employees (“Optionees”) eligible for the grant of Options for the additional
stock as contemplated in this Fifth Amendment and the number of shares
available to each are as follows:


 


	
  Optionee

  	
   

  	
  Number of Additional

  Shares Available by this Option

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Gregory A. Yakim

  	
   

  	
  50,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Hal H. Barber

  	
   

  	
  15,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Kirk T. Breitenwischer

  	
   

  	
  15,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Eugene K. Rowehl

  	
   

  	
  15,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  William E. Long

  	
   

  	
  15,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Thomas F. Tylutki

  	
   

  	
  15,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Bruce I. McPhee

  	
   

  	
  10,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Lance Wright

  	
   

  	
  10,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TOTAL:

  	
   

  	
  145,000

  	
   

  



 


(b)           All
of the Optionees are regularly employed by the Company or by a subsidiary of
the Company in a managerial capacity on a full-time, salaried basis.


 


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 $13.00 per share. Accordingly, the


 


3

















 


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 Fifth 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, the Third Amendment, the Fourth Amendment and this Fifth Amendment,
the Plan shall remain in full force and effect.


 


(b)           All
of the provisions of the Plan, except to the extent expressly modified as
provided for 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.             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.


 


4

















 


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 Option

  
	
   

  	
  Plan
  Committee:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ David K.
  Hill

  	
   

  
	
   

  	
  David K.
  Hill

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ James A.
  Moehling

  	
   

  
	
   

  	
  James A.
  Moehling

  
				



 


5

















 


SIXTH AMENDMENT TO


KIMBALL HILL HOMES INCENTIVE STOCK OPTION PLAN


 


This Sixth
Amendment to Kimball Hill Homes Incentive Stock Option Plan (“Sixth 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 October 31, 1995, the Kimball Hill Homes
Incentive Stock Option Plan (“Plan”) under which it offered to designated key
employees the right to subscribe to an aggregate of 65,000 shares of the
Company’s common stock.


 


B.            The
Company and each of six designated eligible employees each entered into a Stock
Option Agreement with the Company under which such optionees confirmed the
terms under which each has options to acquire designated portions of stock of
the Company under options priced at $5.00 per share and expiring on October 31,
1999. None of such options are still outstanding; all have either been
exercised or forfeited.


 


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


 


D.            The
Company desires to make available under the terms of this Sixth Amendment
additional incentive stock option rights for an aggregate 120,000 shares of
stock of the Company at $17.00 per share and for a term commencing as of the
effective date of this Sixth Amendment and expiring December 31, 2005.


 


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


 


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


 


1.             Additional
Stock Subject to Plan.


 


(a)           An
additional 120,000 shares of the Company’s common stock are subject to the Plan
and may be granted as incentive stock options (“Options”) under Section 422 of
the Internal Revenue Code, as amended.


 


1

















 


(b)           Inclusive
of the 120,000 shares, there are as of the effective date of this Sixth
Amendment 559,000 total shares of stock of the Company subject to unexpired
statutory Options plus 74,000 total shares subject to nonstatutory stock
options for an aggregate of 633,000 shares available from all stock options
currently outstanding.


 


(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 nonstatutory
stock options, the stock of the Company would then be held as shown on Exhibit
A attached to and made a part of this Sixth Amendment.


 


2.             Eligible
Employees.


 


(a)           The
employees (“Optionees”) eligible for the grant of Options for the additional
stock as contemplated in this Sixth Amendment and the number of shares
available to each are as follows:


 


	
  Optionee

  	
   

  	
  Number of Additional

  Shares Available by this Option

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Gregory A. Yakim

  	
   

  	
  50,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Hal H. Barber

  	
   

  	
  5,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Kirk T. Breitenwischer

  	
   

  	
  5,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Isaac Heimbinder

  	
   

  	
  5,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Eugene K. Rowehl

  	
   

  	
  5,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Brian A. Loftus

  	
   

  	
  25,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  William E. Long

  	
   

  	
  5,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Thomas F. Tylutki

  	
   

  	
  5,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Bruce I. McPhee

  	
   

  	
  5,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Richard Lee Venable

  	
   

  	
  5,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Lance Wright

  	
   

  	
  5,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TOTAL:

  	
   

  	
  120,000

  	
   

  



 


2

















 


(b)           All
of the Optionees are regularly employed by the Company or by a subsidiary of
the Company in a managerial capacity on a full-time, salaried basis.


 


3.             Exercise
Price.


 


The Company
has determined that the Fair Market Value, as of the effective date of this
Sixth Amendment, of the stock subject to the Options to be offered pursuant to
the terms of this Sixth 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 Sixth Amendment must be
exercised by December 31, 2005.


 


5.             No
Other Modifications.


 


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


 


(b)           All
of the provisions of the Plan, except to the extent expressly modified as
provided for above, shall be fully applicable to the additional Options to be
made available pursuant the terms of this Sixth 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 Sixth Amendment, the terms of this
Sixth Amendment shall be deemed to prevail as to the options provided for under
this Sixth Amendment.


 


6.             Miscellaneous.


 


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


 


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


 


3

















 


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


 


	
   

  	
  KIMBALL
  HILL, INC. by its Statutory Stock

  
	
   

  	
  Option
  Committee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/ David K. Hill

  	
   

  
	
   

  	
  David K.
  Hill

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ James A.
  Moehling

  	
   

  
	
   

  	
  James A.
  Moehling

  
				



 


4

















 


SEVENTH AMENDMENT TO


KIMBALL HILL HOMES INCENTIVE STOCK OPTION PLAN


 


This Seventh
Amendment to Kimball Hill Homes Incentive Stock Option Plan (“Seventh 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 October 31, 1995, the Kimball Hill Homes
Incentive Stock Option Plan (“Plan”) under which it offered to designated key
employees the right to subscribe to an aggregate of 65,000 shares of the
Company’s common stock.


 


B.            The
Company and each of its designated eligible employees each entered into a Stock
Option Agreement with the Company under which such optionees confirmed the
terms under which each had options to acquire designated portions of stock of
the Company under options priced at $5.00 per share and expiring on October 31,
1999.


 


C.            The
Company modified the Plan in various amendments to the Plan, the last of which
was the Sixth Amendment to Kimball Hill Homes Incentive Stock Option Plan
effective December 31, 2001, (“First Amendment”) under which the optionees
acquired additional options for stock of the Company under options bearing
various prices.


 


D.            The
Company desires to make available under the terms of this Seventh Amendment
additional incentive stock option rights for an aggregate 25,000 shares of
stock of the Company at $29.80 per share and for a three (3) year term
commencing as of the effective date of this Seventh Amendment.


 


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


 


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


 


1.             Additional
Stock Subject to Plan.


 


(a)           An
additional 25,000 shares of the Company’s common stock are subject to the Plan
and may be granted as incentive stock options (“Options”) under Section 422 of
the Internal Revenue Code, as amended.


 


1

















 


(b)           Inclusive
of the 25,000 shares, there are as of the effective date of this Seventh
Amendment 584,000 total shares of stock of the Company subject to unexpired
incentive Options plus 92,000 total shares subject to nonstatutory stock
options for an aggregate of 676,000 shares available from all stock options
currently outstanding.


 


(c)           As of the effective date of this Seventh
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
Employees.


 


(a)           The
employee (“Optionee”) eligible for the grant of Options for the additional
stock as contemplated in this Seventh Amendment and the number of shares
available to him are as follows:


 


	
   

  	
   

  	
  Number of Additional

  	
   

  
	
  Optionee

  	
   

  	
  Shares Available by this Option

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Isaac Heimbinder

  	
   

  	
  25,000

  	
   

  



 


(b)           The
Optionee is regularly employed by the Company or by a subsidiary of the Company
in a managerial capacity on a full-time, salaried basis.


 


3.             Exercise
Price.


 


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


 


4.             Expiration
of Option.


 


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


 


2

















 


5.             No
Other Modifications.


 


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


 


(b)           All
of the provisions of the Plan, except to the extent expressly modified as
provided for above, shall be fully applicable to the additional Options to be
made available pursuant the terms of this Seventh 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 Seventh Amendment, the terms of this
Seventh Amendment shall be deemed to prevail as to the options provided for
under this Seventh Amendment.


 


6.             Compensation
Committee Approval.


 


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


 


7.             Miscellaneous.


 


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


 


(b)           Except
to the extent expressly defined in this Seventh Amendment, all defined terms
used in this Seventh 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
Seventh Amendment effective as of the date first indicated above.


 


	
   

  	
  KIMBALL
  HILL, INC. by its Statutory Stock

  
	
   

  	
  Option
  Committee

  
	
   

  	
   

  
	
   

  	
  /s/ David K.
  Hill

  	
   

  
	
   

  	
  David K.
  Hill

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ James A.
  Moehling

  	
   

  
	
   

  	
  James A.
  Moehling

  
				



 


3

















 


EIGHTH AMENDMENT TO


KIMBALL HILL HOMES INCENTIVE STOCK OPTION PLAN


 


This Eighth
Amendment to Kimball Hill Homes Incentive Stock Option Plan (“Eighth Amendment”)
is adopted by Kimball Hill, Inc., an Illinois corporation (“Company”) effective
as of April 15, 2004.


 


R E C I T A L S


 


A.            The
Company adopted, effective as of October 31, 1995, the Kimball Hill Homes
Incentive Stock Option Plan (“Plan”) under which it offered to designated key
employees the right to subscribe to an aggregate of 65,000 shares of the
Company’s common stock.


 


B.            The
Company and each of its designated eligible employees each entered into a Stock
Option Agreement with the Company under which such optionees confirmed the
terms under which each had options to acquire designated portions of stock of
the Company under options priced at $5.00 per share and expiring on October 31,
1999.


 


C.            The
Company modified the Plan in various amendments to the Plan, the last of which
was the Seventh Amendment to Kimball Hill Homes Incentive Stock Option Plan
effective January 1, 2003, (“Seventh Amendment”) under which the optionees
acquired additional options for stock of the Company under options bearing
various prices.


 


D.            The
Company desires to make available under the terms of this Eighth Amendment additional
incentive stock option rights for an aggregate 135,000 shares of stock of the
Company at $41.80 per share and for a term commencing as of the effective date
of this Eighth Amendment and expiring December 31, 2007.


 


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


 


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


 


1.             Additional
Stock Subject to Plan.


 


(a)           An
additional 135,000 shares of the Company’s common stock are subject to the Plan
and may be granted as incentive stock options (“Options”) under Section 422 of
the Internal Revenue Code, as amended.


 


1

















 


(b)           Inclusive
of the 135,000 shares, there are as of the effective date of this Eighth
Amendment 440,000 total shares of stock of the Company subject to unexpired
incentive Options plus 89,000 total shares subject to nonstatutory stock
options for an aggregate of 529,000 shares available from all stock options
currently outstanding.


 


(c)           As of the effective date of this Eighth
Amendment, there are 3,595,370 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 4,124,370 issued and
outstanding shares of common stock of the Company.


 


2.             Eligible
Employees.


 


(a)           The
employees (“Optionees”) eligible for the grant of Options for the additional
stock as contemplated in this Eighth Amendment and the number of shares
available to them are as follows:


 


	
   

  	
   

  	
  Number of Additional

  	
   

  
	
  Optionee

  	
   

  	
  Shares Available by this Option

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Isaac Heimbinder

  	
   

  	
  100,000

  	
   

  
	
  William E. Long

  	
   

  	
  20,000

  	
   

  
	
  Thomas W. Jacobs

  	
   

  	
  15,000

  	
   

  
	
  Total:

  	
   

  	
  135,000

  	
   

  



 


(b)           The
Optionees are regularly employed by the Company or by a subsidiary of the
Company in a managerial capacity on a full-time, salaried basis.


 


3.             Exercise
Price.


 


The Company
has determined that the Fair Market Value, as of the effective date of this
Eighth Amendment, of the stock subject to the Options to be offered pursuant to
the terms of this Eighth Amendment is $41.80 per share. Accordingly, the Option
exercise price for each share of stock to be offered to the Optionees shall be
$41.80.


 


4.             Expiration
of Option.


 


All of the
Options to be granted pursuant to the Plan under this Eighth Amendment must be
exercised by December 31, 2007.


 


2

















 


5.             No
Other Modifications.


 


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


 


(b)           All
of the provisions of the Plan, except to the extent expressly modified as
provided for above, shall be fully applicable to the additional Options to be
made available pursuant the terms of this Eighth 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 Eighth Amendment, the terms of this
Eighth Amendment shall be deemed to prevail as to the options provided for
under this Eighth Amendment.


 


6.             Compensation
Committee Approval.


 


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


 


7.             Miscellaneous.


 


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


 


(b)           Except
to the extent expressly defined in this Eighth Amendment, all defined terms
used in this Eighth 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 Eighth
Amendment effective as of the date first indicated above.


 


	
   

  	
  KIMBALL
  HILL, INC. by its Statutory Stock

  Option Committee:

  
	
   

  	
   

  
	
   

  	
  /s/ David K.
  Hill

  	
   

  
	
   

  	
  David K.
  Hill

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ James A.
  Moehling

  	
   

  
	
   

  	
  James A.
  Moehling

  
				



 


3