exv10w42






EXHIBIT 10.42




AMENDED AND RESTATED KB HOME 1999 INCENTIVE PLAN



STOCK APPRECIATION RIGHTS AGREEMENT



(FISCAL YEAR 2009)




     This Stock Appreciation Rights Agreement (this “Agreement”) is made on October 2, 2008 (the
“Grant Date”) between KB Home, a Delaware corporation (the “Company”), and [NAME] (the
“Participant”). Capitalized terms used in this Agreement and not defined herein have the respective
meanings given them in the Amended and Restated KB Home 1999 Incentive Plan, as amended on October
2, 2008 (the “Plan”).



     WHEREAS, the Company desires to grant the Participant cash-settled Stock Appreciation Rights
(the “Award”) pursuant to Section 8 of the Plan;



     WHEREAS, the Award is intended, if the Participant is a Covered Employee, to constitute
Qualified Performance-Based Compensation and a Performance-Based Award granted pursuant to Section
11 of the Plan; and



     WHEREAS, the Award is intended to constitute a “stock appreciation right” not providing for
the deferral of compensation under, and is therefore exempt from, Section 409A of the Code.



     NOW, THEREFORE, in consideration of the foregoing, the Company and the Participant enter into
this Agreement as follows:



A G R E E M E N T




     1. Grant. Subject to the terms of the Plan and this Agreement, the Company hereby
grants to the Participant an Award calculated by reference to an aggregate of [# RIGHTS] stock
appreciation rights (the “Rights”). Subject to the limitations set forth in Section 5, each Right
entitles the Participant to receive the positive difference, if any, between the grant price of
$19.90 (the “Grant Price”) and the Fair Market Value of a share of common stock, $1.00 par value
per share, of the Company (“Common Stock”) on the date of exercise (the “Spread”). The Award is
intended to constitute Qualified Performance-Based Compensation, a “stock appreciation right” under
Section 409A, and, if the Participant is a Covered Employee, a Performance-Based Award. The Rights
may be exercised, and the Award may be paid, only as provided under this Agreement.



     2. Rights Vesting and Forfeiture.




	 	(a)	 	Normal Rights Vesting. Subject to the limitations set forth in
Section 5, the Rights granted under this Agreement will vest and may be exercised in
accordance with the following vesting schedule if the Participant is employed by the
Company or its Subsidiaries on the respective dates indicated below:





	 	 	 	 	 
	On or After	 	 	 	Rights Subject to Exercise
	October 2, 2009
	 	 	 	33-1/3% of Rights
	October 4, 2010
	 	an additional
	 	33-1/3% of Rights
	October 3, 2011
	 	an additional
	 	33-1/3% of Rights







	 	(b)	 	Forfeiture. Except as provided in Section 3 below with respect to the
Participant’s Retirement and subject to Section 2(a) above and Section 4 below, the
Participant will immediately forfeit all rights, title and interests in and to any
portion of the Rights that have not vested on the date the Participant’s employment
with the Company or its Subsidiaries is terminated.




 









 







     3. Accelerated Rights Vesting. Notwithstanding Section 2 above, subject to the
limitations set forth in Section 5, 100% of the Rights granted hereunder will vest and become
immediately exercisable upon a Change of Ownership of the Company, as provided under the applicable
terms of the Plan, or upon the Participant’s Retirement. “Retirement” means severance from
employment with the Company or its Subsidiaries for any reason other than a leave of absence,
termination for cause, death or disability, at such time as the sum of the Participant’s age and
years of service with the Company or its Subsidiaries equals at least 65 or more, provided that the
Participant is then at least 55 years of age. The Company will have the sole right to determine
whether the Participant’s severance from employment constitutes a Retirement.



     4. Rights Termination. Vested Rights will cease to be exercisable and will expire and
terminate to the extent not exercised upon the date (the “Expiration Date”) that is the earlier of
(i) the close of business on the tenth anniversary of the Grant Date and (ii) the dates set forth
below in this Section 4.




	 	(a)	 	Employment Termination Other Than For Cause or Retirement. If the
Participant’s employment with the Company or its Subsidiaries is terminated for any
reason other than for cause or Retirement (in each case, as determined by the Company),
the date that is 90 calendar days after the date of such termination.
	 
	 	(b)	 	Employment Termination for Cause. If the Participant’s employment with
the Company or its Subsidiaries is terminated for cause (as determined by the Company),
the date that is 5 calendar days after the date of such termination.
	 
	 	(c)	 	Death. In the event of the Participant’s death (i) while the
Participant is employed by the Company or its Subsidiaries, (ii) within 90 days of the
date the Participant’s employment with the Company or its Subsidiaries is terminated
for any reason other than for cause or Retirement (in each case, as determined by the
Company) or (iii) in the event of the Participant’s Retirement (as determined by the
Company) prior to the date set forth in clause (i) of the first sentence of this
Section 4, the first anniversary of the date of death.





     5. Rights Exercise and Payment. To exercise any number of the Rights that have vested,
and to be entitled to payment of any portion of the Award, the Company must receive written notice
of exercise specifying the number of Rights to be exercised. The Rights will be deemed exercised
upon receipt of the exercise notice attached as Exhibit A (the “Exercise Notice”). Upon exercise of
any number of the Rights that have vested, the Spread will be determined by the Fair Market Value
per share of the Common Stock on the date the Exercise Notice is received by the Company and will
be paid in cash as soon as reasonably practicable following such receipt; provided however, that in
the event that the aggregate amount of cash payable to the Participant in respect of any and all
Award(s) under the Plan (including, but not limited to, any phantom stock awards) in any fiscal
year of the Company would exceed (i) $5,000,000 if the Participant is the Chief Executive Officer
at the time of such payment or (ii) $3,000,000 if the Participant is not described in clause (i) of
this Section 5, the Rights shall not be exercisable with respect to such excess amount until such
time that such portion of the Rights could be exercised without exceeding the applicable limit,
subject to the provisions of Section 4. The Company has the authority to deduct or withhold an
amount sufficient to satisfy applicable federal, state, local and foreign taxes (including the
Participant’s FICA obligation) required by law to be withheld with respect to any taxable event
arising from the exercise of any vested Rights or payment of any portion of the Award.



     6. No Stockholder Rights. The Participant, and any Permitted Transferee (as defined in
Section 10 hereof), will not be deemed to be a holder of or possess any stockholder rights with
respect to any shares of Common Stock based on the Rights granted hereunder.



     7. Adjustments. In the event of any of the transactions described in Section 13(a) of
the Plan, the Committee shall adjust or revise the Award in accordance with the terms of the Plan;
provided that such an adjustment of the Award shall be made only to the extent that such adjustment
will not cause a violation of Section 409A.



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     8. California Law. This Agreement will be construed, administered and enforced in
accordance with the laws of the State of California.



     9. Entire Agreement. This Agreement sets forth the entire agreement and understanding
of the parties with respect to the subject matter of this Agreement, and supersedes all prior and
contemporaneous oral and written agreements and understandings relating to such subject matter.
THE PARTICIPANT ACKNOWLEDGES AND AGREES TO BE BOUND TO, AND THAT THE AWARD AND THE RIGHTS ARE
GRANTED SUBJECT TO, ALL OF THE TERMS AND CONDITIONS OF THE PLAN, INCLUDING ANY TERMS, RULES OR
DETERMINATIONS MADE BY THE COMMITTEE PURSUANT TO ITS ADMINISTRATIVE AUTHORITY UNDER THE PLAN, AND
THAT IN THE EVENT OF ANY CONFLICT BETWEEN THIS AGREEMENT AND THE PLAN, THE PLAN WILL PREVAIL.



     10. Non-Transferability. None of this Agreement, the Award or the Rights may be
assigned by the Participant by operation of law or otherwise, except that vested Rights may be
transferred upon death by will or by the laws of descent and distribution to members of the
Participant’s family or to trusts or other entities whose beneficiaries are members of the
Participant’s family. Any purported assignment by the Participant that is not permitted hereunder
shall be null and void. This Agreement shall, however, be binding upon the successors and assigns
of the Company.



     11. No Obligation. Neither the execution and delivery hereof nor the granting of the
Award or the Rights will constitute or be evidence of any agreement or understanding, express or
implied, on the part of the Company or any of its Subsidiaries to employ or continue the employment
of the Participant for any period or in any capacity.



     12. Notice. Any notice given hereunder to the Company will be addressed to the
Company, attention: Senior Vice President, Human Resources, or a designee or successor thereof, and
any notice given hereunder to the Participant will be addressed to the Participant at his or her
address as shown on the records of the Company.



     13. Section 409A. The Award and the Rights thereunder are intended to constitute
“stock appreciation rights” that do not constitute “nonqualified deferred compensation” within the
meaning of Section 409A and are therefore exempt from Section 409A. This Agreement shall be
interpreted in accordance with Section 409A, to the extent applicable, including without limitation
any Treasury Regulations or other Department of Treasury guidance that may be issued or amended
after the date hereof. In the event that, following the date hereof, the Committee determines that
the Award or the Rights may be subject to Section 409A, including such Department of Treasury
guidance as may be issued after the date hereof, the Committee may, in its discretion, adopt such
amendments to the Plan or this Agreement or adopt such other policies and procedures (including
amendments, policies and procedures with retroactive effect), or take any other actions, as the
Committee determines are necessary or appropriate to (i) exempt the Award and the Rights from
Section 409A and/or preserve the intended tax treatment of the benefits provided with respect to
the Award and the Rights, or (ii) comply with the requirements of Section 409A; provided that no
such amendment may change the Performance Goal with respect to any person who is a Covered
Employee.



     14. Rescission. This Agreement, the Award and the Rights will be subject to
rescission by the Company if an original of this Agreement executed by the Participant is not
received by the Company within four weeks of the Grant Date.



[Continued on the next page]




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     IN WITNESS WHEREOF, the Company, by its duly authorized officer, and the Participant have
executed this Agreement as of the day and year first above written.



	 	 	 	 	 
	 	KB HOME


 	 
	 	By:  	Jeffrey T. Mezger
 	 
	 	 	Chief Executive Officer and President 	 
	 	 	 	 
	 
	 	PARTICIPANT:


 	 
	 	By:  	
 	 
	 	 	[NAME] 	 
	 	 	 	 
	 



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EXHIBIT A




EXERCISE NOTICE



STOCK APPRECIATION RIGHTS




KB Home




Attn: Senior Vice President, Human Resources





     Please be advised that I elect to exercise _________ vested Rights granted to me by KB Home
under and subject to the terms and provisions of Amended and Restated KB Home 1999 Incentive Plan
and the Stock Appreciation Rights Agreement dated _______________, 200[___].



Name:







Address:

 



 




Social Security #:




Date:




Signature:




Received by KB Home this ___day of _______________, ______.




	 	 	 	 	 
	 	 	 
	 	By:  	
 	 
	 
	 	Its:  	
 	 
	 




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