Document:

Exhibit
10.2

 

CONFIDENTIAL
RETIREMENT AND CONSULTING AGREEMENT

 

This Confidential
Retirement and Consulting Agreement (“Agreement”) is entered into as of December 20,
2007 between KIMBALL HILL, INC. (“Company”) and
William E. Long (“Long”).

 

In consideration of the
mutual promises and agreements set forth in this Agreement, Company and Long
agree as follows:

 

1.                                       Employment Separation. 
Effective January 31, 2008 (“Retirement Date”), Long will retire
and resign from employment and all offices and positions with Company and
Company’s parents, subsidiaries and affiliates, including but not limited to
the positions of member of the Management Committee and President and Chief
Executive Officer of KH Financial, L.P. and Director and President of KH
Financial Holding Company.  Long shall
have no further rights, duties and authorities as an employee and shall not be
entitled to any further compensation or non-vested benefits, except as provided
in this Agreement.  Upon Company’s
request made from time to time, Long shall execute written resignations of his
positions with Company and Company’s parents, subsidiaries and affiliates.

 

2.                                       Consideration for Release. 
In exchange for Long’s Covenants in Section 6, Long’s Waiver and
Release of Claims in Section 7, and Long’s Covenant Not To Sue in Section 8,
and subject to the terms and conditions of this Agreement, Company shall retain
and pay Long as a consultant after the Retirement Date in accordance with the
provisions of Section 4 of this Agreement (the “Consulting Payments”).  These Consulting Payments are made in lieu of
payments otherwise provided for under any Company policies, including without
limitation Company’s Severance Pay Policy, and Long acknowledges that the
Consulting Payments are good and valuable consideration to which Long is not
otherwise entitled. If Long does not sign this Agreement or, after signing,
cancels this Agreement, he shall receive only those benefits and payments
required by law.

 

3.                                       Other Benefits and
Compensation.

 

(a)                                  Vacation Pay. 
Company will pay Long for any accrued and unused vacation days and
floating holidays earned by Long as of the Retirement Date, except that if Long
has taken unearned vacation days, Long’s final regular paycheck will be reduced
to reflect the cost of such vacation days.

 

(b)                                 Continuing Health
Benefits.  Company will continue to provide Long,
through the group health benefits plans maintained by Company, with individual
or family dental and vision coverage on substantially the same basis as active
employees of Company until the earlier of the Consulting Termination Date (as
hereinafter defined) or the last day of the month in which Long commences
employment with another employer or the last day of the month in which Long
ceases to pay for this coverage (the “Coverage Period”).  The Coverage Period shall not be taken into
account as a period of continuation coverage for purposes of Part 6 of
Title I of the

 

	
  December 20, 2007

  	
   

  	
  /s/ William E. Long

  
	
  Date

  	
   

  	
  William E. Long

  

 

1

 

Employee Retirement Income Security Act of 1974 (also
known as the Consolidated Omnibus Budget Reconciliation Act or COBRA) or for
purposes of any other obligation of Company to provide any continued coverage
to Long (or, if applicable, to Long’s family) under any group health benefits
plan maintained by Company. 
Notwithstanding any provision in this Agreement to the contrary, Company
reserves the right to amend, modify or terminate any group health benefit plan
maintained by Company) and any such amendment, modification, or termination
will apply to Long during the Coverage Period to the same extent that it
applies to active employees of Company.

 

(c)                                  Withholding. 
Company will withhold from the compensation and benefits payable to Long
under this Agreement all appropriate deductions for employee benefits, if
applicable, and all amounts necessary for Company to satisfy its withholding
obligations under applicable tax laws.

 

4.                                       Consulting Agreement.

 

(a)                                  Effective as of February 1, 2008,
Company will retain William E. Long as a non-exclusive consultant for the
period February 1, 2008 through September 30, 2008 (the “Consulting
Period”).  During the Consulting Period,
Long will perform such services as may be requested from time to time by
Company on an as-needed and part-time basis (not exceeding an average of 40
hours per month during the Consulting Period); provided that Long shall not be
required to perform services for more than 60 hours during any calendar month
without additional compensation to be agreed upon by Company and Long. Long
will report to Company’s President and Chief Executive Officer. This Consulting
Agreement shall terminate on September 30, 2008 (the “Consulting
Termination Date”) and thereafter may be renewed only upon the written agreement
of both parties.

 

(b)                                 Consulting Fees and Expense
Reimbursements.

 

(1)                                  Company agrees to pay Long for the
consulting services as follows:  (a) a
monthly fee at the rate of $37,087.50 per month; and (b) a bonus fee in an
amount equal to $148,350 multiplied by the Average Management Bonus Percentage,
which shall be the percentage calculated by dividing the total amount of
bonuses payable to members of Company’s senior managers (excluding the
Executive Chairman and the President and Chief Executive Officer) by the total
amount of target bonuses of those senior managers, as reasonably determined by
Company as of the end of Company’s 2008 fiscal year ending September 30,
2008. Company will pay the bonus fee to Long contemporaneously with Company’s
payment of 2008 fiscal year bonuses to Company’s senior managers, but in any
event no later than January 31, 2009.

 

(2)                                  Company agrees to reimburse Long for all
reasonable travel expenses (not including travel expenses for travel to and
from Company’s offices in Rolling Meadows, Illinois) incurred on Company’s
behalf that are necessary and incidental to the performance of the consulting
services, provided that Long obtains the express prior written approval of
Company for all such travel. The travel expenses for which Company will pay
Long will be the actual, 

 

2

 

reasonable expenses of
transportation, lodging and meals. Long agrees that extraordinary expenses
shall not be incurred or reimbursed without the express prior written consent
of Company.

 

(3)                                  Long agrees to submit an invoice to
Company at the end of each month for the monthly fee due for such month.  Each invoice shall summarize the services
performed by Long during such month. Long shall also submit a travel expense
statement (including receipts) at the end of each month which details all
reasonable travel expenses incurred by Long during that month.

 

(4)                                  Company will pay Long’s invoices net 10
days from date of receipt of invoice. Long agrees to pay and to be solely
responsible for any and all taxes and insurance required by federal, state, or
local laws, including but not limited to income taxes, social security taxes,
property taxes, excise taxes, sales taxes, use taxes, retailers’ occupation
taxes, service occupation taxes, workers’ compensation insurance, unemployment
compensation insurance, and any other employment related or other taxes or
insurance incurred or due as a result of the performance of the consultant
services by Long under this Agreement or Company’s payment of monthly fees and
the bonus fee to Long, including all obligations, reports and timely
notifications relating to such matters. Company shall have no obligation to pay
or withhold any sums for any such taxes or insurance on any amounts due or paid
to Long for his consulting services.

 

(c)                                  Long shall perform the consulting
services only as an independent contractor. Long acknowledges that Company does
not control the method or manner in which Long performs his consulting services
for Company. Under no circumstances shall Long be construed to be an employee
or agent of Company, and he shall not be entitled to participate in any of
Company’s employee benefit programs except as specifically provided otherwise
in this Agreement. Company shall not be liable to pay wages, withhold any
taxes, provide any insurance or other employee benefits, or otherwise be
obligated to Long as an employer. Nothing in this Agreement shall be construed
as creating a joint venture, partnership, or agency relationship between the
parties.

 

5.                                       Stock Purchase.

 

(a)                                  Long agrees to sell, and Company agrees
to purchase, effective as of the Retirement Date, all shares of common stock of
the Company owned as of the date of this Agreement by Long, as Trustee of the
William E. Long Revocable Trust, as amended (the “Trustee”), for an amount (the
“Purchase Price”) equal to 14,984 multiplied by the per share Fair Market Value
as of the Retirement Date determined in accordance with the provisions of this Section 5.

 

(b)                                 The Trustee currently owns 14,984 shares
of common stock of Company, represented by Certificate No. 103 dated
12/29/2005 (5,000 shares), Certificate No. 113 dated 7/1/2006 (2,984
shares), Certificate No. 114 dated 7/1/2006 (2,000 shares), and
Certificate No. 119 dated 9/28/2006 (5,000 shares) (collectively, the “Company
Stock”). Long, jointly and severally in his individual capacity and as the
Trustee, represents and warrants that the Trustee is the lawful 

 

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owner of, and has the
complete right, title, and interest in and to the Company Stock, free and clear
of any and all liens, encumbrances, or rights of third parties, that the
Trustee has not sold, transferred, pledged or assigned the Company Stock, and
that the Trustee has full power to sell, transfer and assign the Company Stock
to Company in accordance with the terms of this Agreement.

 

(c)                                  Company and Long, individually and in his
capacity as the Trustee, agree that the per share Fair Market Value of Company
Stock as of the Retirement Date will be the value determined by Company’s Stock
Option Committee (the “Committee”) organized pursuant to the Company’s
Incentive Stock Option Plan (the “Plan”). The parties understand that the
Trustee of the Company’s Employee Stock Ownership Plan (the “ESOP”) will make a
determination of the per share fair market value of the Company’s common stock
as of December 31, 2007 for purposes of the ESOP (the “ESOP Valuation”).
Long, individually and in his capacity as the Trustee, agrees that the
Committee may determine, in its discretion, that the per share Fair Market
Value as of the Retirement Date is the per share fair market value of the
Company’s common stock as of December 31, 2007 determined by the Trustee
of the ESOP, and further agrees to accept the Committee’s determination for all
purposes of this Agreement. Company and Long anticipate that the Trustee of the
ESOP will notify Company of the ESOP Valuation in February, 2008 and that the
Committee will make its determination of Fair Market Value thereafter.  Within one week after the Committee’s
determination of Fair Market Value as of the Retirement Date, Company will
notify Long of (1) the ESOP Valuation as determined by the Trustee of the
ESOP and (2) the Fair Market Value as determined by the Committee.

 

(d)                                 Long, individually and in his capacity as
the Trustee, agrees to deliver to Company the following documents not later
than one week after his receipt of the notification of the ESOP Valuation as
determined by the ESOP Trustee and the Fair Market Value as determined by the
Committee:

 

(1)                                  Certificate No. 103 dated
12/29/2005, Certificate No. 113 dated 7/1/2006, Certificate No. 114
dated 7/1/2006, and Certificate No. 119 dated 9/28/2006  (collectively, the “Certificates”); and

 

(2)                                  Executed Stock Powers for all the
aforesaid stock certificates in substantially the form of Exhibit A to
this Agreement.

 

Long, individually and in
his capacity as the Trustee, will deliver the Certificates and the executed
Stock Powers to Company on the Retirement Date, provided that Long has not
cancelled this Agreement pursuant to Section 7 of this Agreement. Title to
the Company Stock will vest in Company immediately upon Long’s delivery of the
Certificates and the executed Stock Powers to Company. If Long has cancelled
this Agreement pursuant to Section 7 of this Agreement, then Long,
individually and in his capacity as the Trustee, will have no obligation under
this Section 5 to deliver the Certificates and the Stock Powers to
Company.

 

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(e)                                  Payment of Purchase Price.

 

(1)                                  Long, individually and in his capacity as
the Trustee, acknowledges that the Company’s loan and financing agreements,
including the Trust Indenture (the “Trust Indenture”) with respect to the $203
million in principal amount of 101⁄2% senior subordinated notes due 2012 that
subsequently were registered with the Securities and Exchange Commission and
the Credit Agreement (the “Credit Agreement”) with respect to the Company’s
$500 million revolving credit facility, as they may be amended, modified,
refinanced, or replaced in the future, place various limitations, restrictions
and constraints upon the Company’s ability to redeem shares from its
shareholders.

 

(2)                                  Provided that Long, individually and in
his capacity as the Trustee, has delivered the Certificates and the executed
Stock Powers to Company in accordance with this Section 5, within two
weeks after Company’s receipt of the Certificates and executed Stock Powers,
Company will pay the Purchase Price in full to Trustee, so long as Company is
otherwise permitted to do so under the various limitations, restrictions and
constraints contained in the Company’s loan and financing agreements, including
without limitation the Trust Indenture and the Credit Agreement.

 

(3)                                  Notwithstanding anything in this
Agreement to the contrary, under no circumstances will Company be obligated to
make any payment of the Purchase Price if, in the reasonable opinion of
Company, the payment is prohibited (a) by any restrictions which are
contained in any loan agreement, any debt instrument, any equity financing
agreement, or any similar agreement or commitment (including without limitation
the Trust Indenture and the Credit Agreement), or (b) by any federal,
state, or other securities law, or any other requirement of law or of any
regulatory body with jurisdiction over the Company. If, in the Company’s
reasonable opinion, a payment is prohibited by any such restrictions or laws,
then the time periods provided for in this Agreement for making that payment
shall be suspended at the election of the Company, and the Company shall make
such payment as soon as, in Company’s reasonable opinion, it is permitted to do
so under any such restrictions or laws. In addition, if Long has cancelled this
Agreement pursuant to Section 7 of this Agreement, then Company will have
no obligation to pay Trustee any portion of the Purchase Price for the Company
Stock.

 

(4)                                  All payments of the Purchase Price shall
be made, in Company’s discretion, either by wire transfer to a United States
bank account designated by the Trustee or by check payable to the Trustee and
mailed to the following address:

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

The check shall be mailed
first class mail, postage prepaid, and each payment shall be considered made as
of the date of mailing.

 

5

 

(5)                                  Long agrees to allow to expire and to not
exercise any remaining stock options granted to him under the Stock Option
Agreement between Company and Long dated April 15, 2004, as amended by the
Agreement and Amendment dated September 30, 2005 and the Amendment to
Stock Option Agreements dated August 1, 2006, respectively.

 

(6)                                  Long acknowledges and agrees that Company
has made no representations to Long regarding any tax consequences to Long
resulting from or relating to this Agreement, and Long agrees that any tax
consequences to Long resulting from or relating to this Agreement shall be
borne solely by Long.

 

6.                                       Long’s Covenants. 
In order to protect the business, good will, confidential information,
relationships and other proprietary rights of Company, Long agrees to the
following:

 

(a)                                  Return of Company Property. 
No later than one week after the Consulting Termination Date, Long will
return to Company all Company property, including but not limited to:  identification cards; files; computer
hardware, software, equipment and disks; cell phones; keys; Company owned or
leased vehicles; credit cards; and financial records, customer lists, vendor
information, and all other Confidential Information (as defined below) in Long’s
possession.

 

(b)                                 Nondisclosure of Company’s
Confidential Information.  Long acknowledges that he
performed services for the Company that required the Company to disclose to him
confidential business information and trade secrets (“Confidential Information”).
Long further acknowledges that Company will continue to provide Long access to
Confidential Information during the Consulting Period. Long agrees that he will
keep all Confidential Information received from Company at any time strictly
and absolutely confidential and that he will not directly or indirectly use or
disclose to any person outside the Company, any Confidential Information of
Company, or any Confidential Information received from or about third parties
by Company. Long will use reasonable and prudent care to safeguard and prevent
the unauthorized use or disclosure of Confidential Information. Long
acknowledges and agrees that Confidential Information is any information relating
to the Company and its employees, customers, trade partners, and development
partners that is not generally available to the public, and includes
information relating to the Company’s actual or anticipated business
operations, including, but not limited to, information about the Company’s
products, homebuilding designs and specifications, credit agreements, debt
instruments, equity financing agreements, financial performance, projected
financial performance, financial data, financial strategy, assets, liabilities,
pricing, margins, loan origination practices, business systems, business plans,
marketing plans, customer strategy, land acquisition strategy, land acquisition
terms, land development strategy, the identity of Company’s subcontractors,
vendors, suppliers, and partners, resources, technical analyses, and recruiting
and compensation practices.

 

Long acknowledges and
agrees that the Confidential Information is valuable and that breach of his
confidentiality obligations will cause Company irreparable injury and damage
that cannot be reasonably or adequately compensated by money damages. Long
expressly agrees that Company shall be entitled to injunctive or other
equitable relief in order to prevent a breach of his 

 

6

 

confidentiality
obligations, in addition to any other remedies legally available to Company.
Long expressly waives the claim that Company has an adequate remedy at law for
breach of Long’s obligations under this Section 6.

 

(c)                                  Nonsolicitation of Employees. Long shall not, at any time prior to
Consulting Termination Date or during the twelve (12) month period
thereafter, solicit or participate in or promote the solicitation of any person
who was employed by Company on the Consulting Termination Date to leave the
employ of Company or, on behalf of himself or any other person, hire, employ,
or engage any such person, or otherwise interfere with the performance of any
person’s duties for the Company.  Long
further agrees that, during such time, if a Company employee contacts Long
about prospective employment, Long will inform such employee that he cannot
discuss the matter further.

 

7.                                       Long’s Waiver and Release
of Claims.  As a material inducement to Company to enter
into this Agreement, and in consideration of Company’s promise to retain Long
as a consultant and to make the Consulting Payments, Long knowingly and
voluntarily releases and forever discharges Company, and all of its past,
present, and future affiliates, parents, subsidiaries and related entities, and
all of their past, present and future officers, directors, shareholders,
employees, agents, attorneys and assigns (collectively, the “Releasees”), from
any federal, state or local claims, demands, actions, liabilities, suits or
causes of action, at law or equity or otherwise, and any and all rights to or
claims for attorneys’ fees or damages (including back pay, compensatory,
punitive, or liquidated damages) or equitable relief, which he has or may have
against any or all of the Releasees, whether such claims are known or unknown,
arising up until the Retirement Date, out of Long’s employment with Company or
any of its affiliates or the termination of Long’s employment with Company or
any of its affiliates except that Long does not waive any claims for workers’
compensation benefits or unemployment benefits.

 

This release includes, but is not limited to, rights
and claims arising under the Age Discrimination in Employment Act of 1967, as
amended by the Older Workers Benefit Protection Act of 1990 (“ADEA”), Title VII
of the Civil Rights Act of 1964, as amended, the Americans with Disabilities
Act, ERISA, the Fair Labor Standards Act, any state or local human rights
statute or ordinance, any claims or rights of action relating to breach of contract,
breach of an employment agreement, breach of a bonus agreement, violation of
personnel policies or handbooks, public policy, personal or emotional injury,
defamation, libel, slander, additional compensation, or fringe benefits.  Long specifically waives the benefit of any
statute or rule of law which, if applied to this Agreement, would
otherwise exclude from its binding effect any claims not now known by Long to
exist. This release is not intended to waive or release any claim for failure
to provide vested benefits under a Company-sponsored employee benefit plan to
which Long is legally entitled. Nor does this release waive claims arising
after the date of this Agreement or claims that otherwise cannot be released by
law.

 

YOU UNDERSTAND THAT THIS
SEPARATION AND RELEASE AGREEMENT INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN
CLAIMS YOU MAY HAVE AGAINST COMPANY AS OF THE DATE OF THIS AGREEMENT.

 

7

 

This Agreement is presented to Long on or before December 20,
2007.  Long acknowledges that he has
reviewed this Agreement in its entirety. 
Long acknowledges that he has been granted at least twenty-one (21) days
within which to consider this Agreement. 
Long has, by this Agreement, been advised in writing to consult with
legal counsel prior to executing this Agreement.  Long acknowledges that if he executes this
Agreement prior to the expiration of twenty-one (21) days, or chooses not to
consult legal counsel, he does so freely and knowingly, and waives any and all
claims that such action or inaction would affect the validity of this
Agreement.  Long further acknowledges
that any changes to this Agreement, whether material or immaterial, do not
restart the twenty-one (21) day period.

 

Long understands that he may cancel this Agreement at
any time on or before the seventh day following the date on which he signs the
Agreement.  To be effective, the decision
to cancel must be in writing and delivered to Company, personally or by
facsimile, on or before the seventh day after Long signs this Agreement, to the
attention of:

 

JoAnn M. Peterson

Vice President, Human
Resources

Kimball Hill Homes

5999 New Wilke Road

Rolling Meadows, IL  60008

Fax No.: (866) 556-1819

 

No Consulting Payments
will be made until fifteen (15) days have elapsed after the date on which
Company has received this Agreement signed by Long.  No payments will be due and
owing under this Agreement and Company will not be obligated to purchase any
shares of common stock owned by the Trustee if Long cancels this Agreement as
provided in this Section 7.  All
Consulting Payments shall be made by either personal delivery to Long or first class mail, postage prepaid, to Long at the
following address and shall be considered paid as of the date of personal delivery
or mailing, as the case may be:

 

	
   

  	
  William E. Long

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

8.                                       Long’s Covenant Not to
Sue.  A “covenant not to sue” is a legal term which
means you promise not to file a lawsuit in court or an arbitration. It is
different from the Waiver and Release of Claims contained in Section 7
above. Besides waiving and releasing the claims covered by Section 7
above, Long further covenants and agrees not to sue the Company or any other
Releasee based on any claim released by Long under Section 7 of this
Agreement, except that this Agreement does not limit Long’s right to file a
charge of discrimination against the Company under ADEA or other civil rights
statute or to participate in an investigation or proceeding conducted by the
Equal Employment Opportunity Commission or other administrative agency or to
bring a lawsuit against the Company to challenge the validity of this 

 

8

 

Agreement under the ADEA.  This Agreement does, however, waive and
release Long’s right to recover money or other individual relief under ADEA or
any other statute.

 

9.                                       Long’s Acknowledgments. 
Long acknowledges and agrees that (i) Long has been paid for all
hours worked, including overtime and vacation pay; (ii) Long has not
suffered any on-the-job injury for which he has not already filed a claim; and (iii) this
Agreement states fully all agreements, understandings, promises, and
commitments as between Long and Company relating to the termination of Long’s
employment and (iv) in deciding to sign this Agreement, Long has not
relied on any representations, statements, agreements, understandings,
promises, or commitments that are not expressly set forth in this Agreement.

 

10.                                 Agreement Not to Seek
Future Employment.  Long agrees he will not apply
for employment or otherwise request to be considered for employment with the
Company or any other Releasee. Violation of this provision alone shall be a
lawful basis for denying reemployment in the event Long does seek such
reemployment. In the event the Company or any of the Releasees hires Long, Long
understands and agrees that the Company or the Releasees will have automatic
cause to terminate Long’s employment and that the termination of Long’s
employment shall not constitute a violation of any federal, state, or local
law, judicial decision, order, or regulation. Long further agrees and
acknowledges that he hereby voluntarily waives, releases, discharges and
acquits any such cause of action, if any.

 

11.                                 Arbitration.

 

(a)                                  Excepting only the claims identified in
Subparagraph (b) below, any and all disputes and claims arising out of or
relating to Long’s employment by the Company or Long’s consulting relationship
with the Company, including any disputes or claims relating to this Agreement,
that are not resolved by negotiation between the parties shall be submitted to
mediation administered by the American Arbitration Association (the “AAA”) by
one mediator under its Employment Arbitration Rules and Mediation
Procedures in effect at the time of filing of the demand for mediation. If the
dispute or claim is not resolved through mediation, then it shall be submitted
exclusively to final and binding arbitration administered by the AAA under its
Employment Arbitration Rules and Mediation Procedures in effect at the
time of filing of the demand for arbitration.

 

(b)                                 This arbitration agreement excludes only
the following matters:  (i) a claim
for workers’ compensation benefits; (ii) a claim for unemployment
benefits; (iii) the right to file a charge of discrimination with an
administrative agency (except that any subsequent claim brought by Long against
the Company for individual relief pursuant to a right-to-sue letter is covered
by this agreement and must be arbitrated); and (iv) the right to file a
charge alleging any unfair labor practice under the NLRA. All other disputes
and claims between Long and the Company shall be arbitrated. In addition, any
action by Company to obtain injunctive relief for breach of Long’s
confidentiality obligations under Section 6 of this Agreement may be
maintained in a court of competent jurisdiction.

 

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(c)                                  A request for arbitration shall be filed
in writing with the AAA and a copy shall be provided to the other party. All
questions regarding the arbitrability of a dispute or claim (including all
claims that fraud or misrepresentation induced either party to sign this
arbitration agreement) will be resolved by the arbitrator. Unless the parties
agree otherwise in writing, there shall be one arbitrator. Arbitration shall be
held in Chicago, Illinois or such other place as the parties may mutually
agree. The arbitrator may grant any remedy or relief that a court of competent
jurisdiction would be authorized to award under applicable law. The decision or
award of the arbitrator shall be in writing and shall include the reasons for
the arbitrator’s decision. The decision of the arbitrator shall be final and
binding on both parties, and judgment upon the arbitral award may be entered in
any court of competent jurisdiction.

 

(d)                                 Unless otherwise provided by law, each
party shall pay its own expenses, including without limitation attorneys’ fees
and costs (including the cost of experts), except that the Company shall pay
all of the AAA filing and administrative fees and all of the fees of the
arbitrator assigned by the AAA to resolve the dispute or claim.

 

(e)                                  In the event that either party files, and
is allowed by the courts to prosecute, a court action on any dispute or claim,
then you and the Company also agree to waive the right to request a jury trial,
and we both understand and acknowledge that by signing this agreement, we are
both giving up any right to have any disputes or claims relating to your
employment decided in a trial by jury.

 

12.                                 Non-Assignment. 
This Agreement is personal to Long, and Long may not assign, transfer,
or pledge this Agreement or any rights or payments arising under this
Agreement.

 

13.                                 Governing Law. 
This Agreement shall be governed by the laws of the State of Illinois,
excluding its choice of laws rules.

 

14.                                 Severability. 
If any provision of this Agreement is found by a tribunal of competent
jurisdiction to be invalid or unenforceable, in whole or in part, then that
provision shall be deemed to be modified or restricted in the manner necessary
to render it valid and enforceable, and this Agreement shall be construed and
enforced to the maximum extent permitted by law.

 

15.                                 Entire Agreement. 
This Agreement is a complete agreement and states fully all agreements,
commitments, promises, and understandings between Long and Company as to the
separation of Long from employment by Company. This Agreement supersedes any
and all prior agreements, whether oral or written, between Long and Company.
Except as expressly provided in this Agreement, Long is not entitled to any
other or further compensation or remuneration from Company.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement effective as of December 20, 2007.

 

	
  William E. Long

  	
  Company

  
	
   

  	
   

  
	
   /s/ William E. Long

  	
   

  	
  By:

  	
   /s/ C. Kenneth Love

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
  Chief Executive Officer

  
	
   

  	
   

  
	
  Date:

  	
  December 20, 2007

  	
   

  	
  Date:

  	
  December  20, 2007

  	
   

  
								

 

William E. Long, Trustee of the
William E. Long Revocable Trust, as amended (the “Trust”), hereby accepts and agrees to all
provisions of this Agreement applicable to the Trust, including without
limitation the provisions of Section 4 of this Agreement, on and as of the
day and year set forth below:

 

	
   

  	
   

  
	
  William E. Long

  
	
  Trustee of the William E. Long
  Revocable Trust, as amended

  
	
   

  
	
  Date:

  	
  December 20, 2007

  	
   

  
				

 

11Exhibit 10.3

 

AMENDMENT TO

CONFIDENTIAL RETIREMENT AND CONSULTING AGREEMENT

 

This Amendment to
Confidential Retirement and Consulting Agreement (this “Amendment”) is entered
into as of February 11, 2008 between KIMBALL HILL, INC. (“Company”)
and William E. Long (“Long”).

 

Company and Long are
parties to the Confidential Retirement and Consulting Agreement dated as of December 20,
2007 (the “Retirement Agreement”).  Section 5
of the Retirement Agreement provides for Long to sell and Company to purchase
all shares of common stock of the Company owned by Long, as Trustee of the
William E. Long Revocable Trust, as amended (the “Trustee”), on the terms and
conditions set forth in Section 5. 
Long, individually and in his capacity as Trustee, has expressed the wish
to retain ownership of all common stock of the Company owned by Long as Trustee
and it is in the best interests of the Company to permit Long to do so.  Accordingly, the parties wish to amend the
Retirement Agreement to delete and eliminate Section 5 of the Retirement
Agreement and to set forth Long’s agreement that he will not take any action to
sell to the Company, or to require the Company to purchase, any shares of
common stock of the Company owned by Long, individually or in his capacity as
Trustee.

 

NOW, THEREFORE, In
consideration of the mutual promises and agreements set forth in this
Agreement, Company and Long agree as follows:

 

1.             Effective
immediately, Section 5 of the Retirement Agreement in its entirety,
including all subsections thereof, is deleted and removed from the Retirement
Agreement and all rights, duties, liabilities and obligations of, respectively,
the Company and Long, individually and in his capacity as Trustee, under Section 5
of the Retirement Agreement are terminated and shall cease to have any force or
effect.

 

2.             Long
represents and warrants that all stock options granted to him under the Stock
Option Agreement between Company and Long dated April 15, 2004, as amended
by the Agreement and Amendment dated September 30, 2005 and the Amendment
to Stock Option Agreements dated August 1, 2006, respectively
(collectively, the “Stock Option Agreement”) that had not been exercised prior
to the date of the Retirement Agreement have expired and have not been
exercised by Long and that Long has no right or option to purchase any
additional shares of common stock of the Company.

 

3.             Long, individually and in his
capacity as Trustee, hereby waives any rights or options that he may have to
sell to the Company or to require the Company to purchase any shares of common
stock of the Company that he, individually or in his capacity as Trustee, may
now or hereafter own or possess.  Without
limiting the generality of the foregoing, Long, individually and in his
capacity as Trustee, hereby waives any rights that he may have under the Stock
Option Agreement to require the Company to purchase any shares of common stock
of the Company that he, individually or in his capacity as Trustee, may own or
possess and agrees that he, individually or in his capacity as Trustee, shall
not take any action to require the Company to purchase any shares of common
stock of the Company that he, individually or in his capacity as Trustee, may
own or possess.

 

 

4.             Long
acknowledges and agrees that, in deciding to enter into this Amendment, Long
has consulted with his financial and legal advisors and has not relied on any
representations, statements, agreements, understandings, promises, or
commitments of or from the Company that are not expressly set forth in this
Agreement.

 

5.             Except
as amended as set forth in this Amendment, the provisions of the Retirement
Agreement shall continue in full force and effect.

 

 

IN WITNESS WHEREOF, the parties hereto have executed this
Amendment to Confidential Retirement and Consulting Agreement effective as of February 11,
2008.

 

	
  William
  E. Long

  	
   

  	
  Company

  
	
   

  	
   

  	
   

  	
   

  
	
   /s/ William E. Long

  	
   

  	
  By:

  	
   /s/ C. Kenneth Love

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
  Chief
  Executive Officer

  
	
   

  	
   

  	
   

  	
   

  
	
  Date:
  February 13, 2008

  	
   

  	
  Date:
  February 11, 2008

  

 

 

William
E. Long, Trustee of the William E. Long Revocable Trust, as amended (the
“Trust”), hereby accepts and agrees to all provisions of this
Amendment to Confidential Retirement and Consulting Agreement applicable to the
Trust on and as of the day and year set forth below:

 

 

 

 

	
   /s/ William E. Long

  	
   

  	
   

  	
   

  
	
  William
  E. Long

  	
   

  	
   

  	
   

  
	
  Trustee
  of the William E. Long Revocable Trust, as amended

  
	
   

  
	
  Date:
  February 13, 2008

  	
   

  	
   

  	
   

  

 

-2-

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