(as amended and restated on
October 2, 2008)
SECTION
1. Purpose . The purpose of the 1986 Stock Option Plan (the
“Plan”) is to promote the success of KB Home (the
“Company”) by providing a method whereby key employees
of the Company and its subsidiaries may be encouraged to invest in
the Common Stock of the Company (“Common Stock”) and
thereby increase their proprietary interest in its business,
encourage them to remain in the employ of the Company or its
subsidiaries, and increase their personal interest in the continued
success and progress of the Company.
SECTION
2. Administration . (a) The Board of Directors of the
Company shall designate a committee of not less than three
Directors (the “Committee”). No individual shall become
a member of the Committee if he shall have been eligible to receive
options to acquire shares of capital stock of the Company or any
subsidiary at any time during the 12-month period prior to his
becoming a member and no member of the Committee shall be eligible
to receive options. The Committee shall have full power and
authority, subject to such orders or resolutions not inconsistent
with the provisions of the Plan as may from time to time be issued
or adopted by the Board of Directors, to grant to eligible persons
options to purchase shares of Common Stock pursuant to the
provisions of the Plan, to fix the exercise price of such options,
to interpret the provisions of the Plan and any option agreements
issued under the Plan, and to supervise the administration of the
Plan.
(b) All
decisions made by the Committee pursuant to the provisions of the
Plan and related orders or resolutions of the Board of Directors
shall be final, conclusive and binding on all persons, including
the Company, stockholders, employees and optionees.
SECTION
3. Stock Options . (a) Grant of Options. Stock options
on shares of Common Stock may be granted to participants by the
Committee from time to time at its sole discretion. Each option
shall be evidenced by an option agreement which shall contain such
terms and conditions as may be approved by the Committee and shall
be signed by an officer of the Company and the optionee. Neither
the execution of any option agreement nor the granting of any
option evidenced thereby shall constitute or be evidence of any
agreement or other understanding, express or implied, on the part
of the Company or any Subsidiary to employ an individual for any
specific period.
(b) Shares
Subject to the Plan. (1) The shares to be delivered upon
exercise of options granted under the Plan may be made available
from the authorized but unissued shares of the Company or from
shares reacquired by the Company, including shares purchased in the
open market or in private transactions.
(2) Subject
to adjustments made pursuant to the provisions of paragraph
(3) of this Section 3(b), (i) the aggregate number of
shares to be delivered upon exercise of all options which may be
granted under the Plan shall not exceed 2,000,000 shares of Common
Stock, $1.00 par value, of the Company. If an option granted under
the Plan shall expire or terminate for any
reason, the
shares subject to, but not delivered under, such option shall be
available for other options to the same employee or other
employees.
(3) In
the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate
structure affecting the Common Stock of the Company, the Committee
shall make appropriate proportional adjustments to any or all of
the aggregate number of shares which may be delivered under the
Plan and the number and option price of shares subject to the
outstanding options granted under the Plan (provided that the
number of shares subject to any option shall always be a whole
number). Any adjustment under this Section 3(b)(3) shall be
made only to the extent that such adjustment will not cause a
violation of the requirements of Section 409A of the Internal
Revenue Code.
SECTION
4. Eligibility and Extent of Participation . (a) The
employees eligible to receive options under the Plan shall consist
of key employees of the Company and its subsidiaries. For the
purpose of the Plan, the term “subsidiary” means a
corporation 50% or more of the voting power of which is owned by
the Company directly or indirectly through one or more
subsidiaries.
(b) Subject
to the limitations of the Plan, the Committee shall, after such
consultation with and consideration of the recommendations of
management as the Committee considers desirable, select from
eligible employees those to be granted options and determine the
time when each option shall be granted and the number of shares
subject to each option. Subject to the provisions of paragraph
(b) of Section 3, more than one option may be granted to
the same person.
SECTION
5. Option Price . The price at which shares may be purchased
upon exercise of a particular option shall be as specified by the
Committee, in its sole discretion, at the time such option is
granted and shall be set forth in the applicable option
agreement.
SECTION
6. Exercise of Options . (a) Subject to the provisions
of the Plan with respect to death, retirement and termination of
employment, the period during which each option may be exercised
shall be fixed by the Committee in its sole discretion at the time
such option is granted, but in no event shall such period expire
later than fifteen years from the date the option is
granted.
(b) No
option granted under the Plan may be exercised until the expiration
of one year of continued employment by the Company or any of its
subsidiaries or affiliates immediately following the date the
option is granted and, except as provided in Section 9, only
during the continuance of the optionee’s employment with the
Company or any of its subsidiaries or affiliates. Subject to the
foregoing limitations and unless cancelled prior to exercise, each
option shall be exercisable in installments on a cumulative basis
pursuant to the following schedule, subject to such different or
additional terms and conditions as the Committee may, in its sole
discretion, specify in the applicable option agreement or
thereafter:
(1) 20% on and
after the first anniversary of the grant of the option,
(2) an additional
20% on and after the second anniversary of the grant of the
option,
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(3) an additional
20% on and after the third anniversary of the grant of the
option,
(4) an additional
20% on and after the fourth anniversary of the grant of the option,
and
(5) the remaining
20% on and after the fifth anniversary of the grant of the
option.
(c) The
Committee may impose such other conditions with respect to the
exercise of options, including without limitation any conditions
relating to
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