<DOCUMENT>
<TYPE>EX-10.22
<SEQUENCE>4
<FILENAME>v77506ex10-22.txt
<DESCRIPTION>EXHIBIT 10.22
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.22
 
 
                                    KB HOME
 
                            2001 STOCK INCENTIVE PLAN
 
        SECTION 1. PURPOSE. The purpose of the 2001 Stock Incentive Plan (the
"Plan") is to promote the success of KB HOME (the "Company") by providing a
method whereby employees of the Company and its subsidiaries and other eligible
participants may be encouraged to invest in the Common Stock, $1.00 par value,
of the Company ("Common Stock"), increase their proprietary interest in its
business, remain in the employ of the Company or its subsidiaries, and increase
their personal interests in the continued success and progress of the Company.
The Plan provides for the grant of Options that satisfy the requirements for
treatment as Incentive Stock Options ("ISOs") as defined under Section 422 of
the Code or that are not intended to satisfy such requirements ("Non-qualified
Options"), as well as for certain other "Awards," as defined below.
 
        SECTION 2. DEFINITIONS. As used in this Plan, the following terms shall
have the indicated meanings:
 
        (a) Award: An award under this Plan of a Performance Stock Award,
Restricted Stock Award, or Stock Unit Award.
 
        (b) Board: The board of directors of KB HOME.
 
        (c) Code: The Internal Revenue Code of 1986, as amended.
 
        (d) Committee: The Committee specified in Section 3(a) of this Plan.
 
        (e) Company: KB HOME and its Subsidiaries.
 
        (f) Exchange Act: The Securities Exchange Act of 1934, as amended.
 
        (g) Limited Stock Appreciation Right: A right granted pursuant to
Section 6(b) to receive cash in certain circumstances with respect to a related
Option.
 
        (h) Option: An Option is a right granted under Section 6(a) to purchase
a number of shares of Common Stock at such exercise price, at such times, and on
such other terms and conditions as are specified in or determined pursuant to
the document(s) evidencing the Award.
 
        (i) Participant: An individual eligible under Section 5(a) to
participate in this Plan.
 
 
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<PAGE>
 
        (j) Performance Objectives: With reference to a particular Option or
Award, the objectives established by the Committee under various criteria, the
satisfaction of which may result in the grant, issuance, retention and/or
vesting of an Option, a Performance Stock Award or Stock Unit Award, or which
may accelerate the release of shares of Common Stock from the restrictions of a
Restricted Stock Award. The Performance Objectives may differ from Participant
to Participant and from Award to Award, as determined by the Committee and
specified in the applicable Award. For purposes of an Award that is intended to
qualify as "performance-based compensation" under Code Section 162(m), the term
"Performance Objective" shall mean any one or more of the following performance
criteria, either individually, alternatively or in any combination, applied to
either the Company as a whole or to a business unit or subsidiary, either
individually, alternatively or in any combination, and measured either annually
or cumulatively over a period of years, on an absolute basis or relative to a
pre-established target, to previous years' results or to a designated comparison
group, in each case as specified by the Committee in the Award: (i) pre-tax
income, (ii) after-tax income, (iii) cash flow, (iv) return on equity, (v)
return on capital, (vi) earnings per share (including earnings before interest,
taxes, depreciation and amortization), (vii) unit volume, (viii) net sales, (ix)
service quality or (v) total shareholder return, in each case as determined in
accordance with Generally Accepted Accounting Principles, if applicable.
 
        (k) Performance Stock Award: Performance Stock is an award of shares of
Common Stock made under Section 7(a), the grant, issuance, retention and/or
vesting of which is subject to such performance and other conditions as are
expressed in the document(s) evidencing the Award.
 
        (l) Plan: The KB HOME 2001 Stock Incentive Plan, as it may be amended
from time to time.
 
        (m) Restricted Stock Award: Restricted Stock is a right granted under
Section 7(b) to shares of Common Stock issued or issuable under the Plan but
subject during specified periods of time to such conditions on vesting,
restrictions on transferability and/or repurchase rights as are expressed in the
document(s) evidencing the Award.
 
        (n) Stock Unit Award: An award granted under Section 8 of this Plan.
 
        (o) Subsidiary: Any corporation of which the Corporation owns, directly
or indirectly, fifty percent (50%) or more of the voting or capital stock, or
any partnership or other entity of which the Company owns, directly or
indirectly, a fifty percent (50%) or more participating interest or the general
partner of which is a Subsidiary.
 
        (p) Tax Date: The date on which taxes of any kind are required by law to
be withheld with respect to shares of Common Stock subject to an Option or
Award.
 
 
                                       2
 
<PAGE>
 
        SECTION 3. ADMINISTRATION.
 
        (a) The Plan shall be administered by the Board and/or by a committee of
the Board, as appointed from time to time by the Board (the "Committee"). The
Board shall fill vacancies on, and from time to time may remove or add members
to, the Committee. The Committee shall act pursuant to a majority vote or
unanimous written consent. Notwithstanding the foregoing, with respect to any
Award that is not intended to satisfy the conditions of Rule 16b-3 under the
Exchange Act or Section 162(m)(4)(C) of the Code, the Committee may appoint one
or more separate committees (any such committee, a "Subcommittee") composed of
one or more directors of the Corporation (who may but need not be members of the
Committee) and may delegate to any such Subcommittee(s) the authority to grant
Options, Limited Stock Appreciation Rights and/or Awards under the Plan, to
determine all terms of such Options, Limited Stock Appreciation Rights and/or
Awards, and to administer the Plan or any aspect of it. Any action by any such
Subcommittee shall be deemed for all purposes to have been taken by the
Committee. The Committee may designate the Secretary of the Corporation or other
Company employees to assist the Committee in the administration of the Plan, and
may grant authority to such persons to issue and/or execute agreements or other
documents under this Plan on behalf of the Committee or the Company.
 
        (b) 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, to grant to eligible
persons Options, Limited Stock Appreciation Rights and Awards pursuant to the
provisions of the Plan, to fix the exercise price and other terms of Options, to
fix the terms of any Performance Stock Award and/or Restricted Stock Award in a
manner consistent with the terms of Section 7, to fix the terms of any Stock
Unit Award in a manner consistent with the terms of Section 8, to prescribe,
amend and rescind rules and regulations, if any, relating to the Plan, to
interpret the provisions of the Plan, Options, Limited Stock Appreciation Rights
and Awards issued under the Plan, to amend such Options, Limited Stock
Appreciation Rights and Awards from time to time subject to the provisions of
the Plan, and to supervise the administration of the Plan. All decisions made by
the Committee pursuant to the provisions of the Plan and related orders or
resolutions of the Board shall be final, conclusive and binding on all persons,
including the Company, stockholders, employees and optionees.
 
        (c) Each person who is or shall have been a member of the Committee or
of the Board shall be indemnified and held harmless by the Company from any
loss, cost, liability or expense that may be imposed upon or reasonably incurred
by him or her in connection with any claim, action, suit or proceeding to which
he or she may be a party by reason of any action taken or any failure to act
under the Plan. The foregoing right of indemnification shall not be exclusive of
any other rights of indemnification to which
 
 
                                       3
 
<PAGE>
such persons may be entitled under the Company's Articles of Incorporation or
Bylaws, or as a matter of law, or otherwise, or any power that the Company may
have to indemnify them or hold them harmless.
 
        SECTION 4. SHARES SUBJECT TO THE PLAN.
 
        (a) The shares to be delivered upon exercise of Options or Limited Stock
Appreciation Rights granted under the Plan or pursuant to Awards, 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.
 
        (b) Subject to adjustments made pursuant to the provisions of Section
4(d) and this Section 4(b), the aggregate number of shares reserved for issuance
upon the exercise of Options and pursuant to Awards which may be granted under
the Plan shall not exceed 4,200,000 shares of Common Stock. The aggregate number
of shares of Common Stock issued under this Plan shall equal only the number of
shares actually issued upon exercise or settlement of an Option or vesting or
settlement of any Award and not returned to the Company upon cancellation,
expiration or forfeiture of Options and Awards or delivered (either actually or
by attestation) in payment or satisfaction of the exercise price, purchase price
or tax obligation of Options and Awards.
 
        (c) The aggregate number of shares of Common Stock issued and issuable
pursuant to ISOs may not exceed 4,200,000 shares. The maximum number of shares
of Common Stock subject to Options granted during any calendar year to any one
Participant shall not exceed 1,000,000. The maximum number of shares of Common
Stock subject to Awards (other than Stock Units issued or issuable upon exercise
of Options) that may be granted during any calendar year to any one Participant
shall not exceed 500,000 in the aggregate.
 
        (d) In the event that the Committee shall determine that any stock
dividend, extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, exchange of shares, warrants or
rights offering to purchase Common Stock at a price substantially below fair
market value, or other similar corporate event affects the Common Stock such
that an adjustment is required in order to preserve the benefits or potential
benefits intended to be made available to Participants under this Plan, then the
Committee may, in its sole discretion and in such manner as the Committee may
deem equitable, adjust any or all of (1) the number and kind of shares which
thereafter may be awarded or optioned and sold or made the subject of Limited
Stock Appreciation Rights under the Plan, (2) the number and kind of shares
subject to outstanding Options and Awards, and Limited Stock Appreciation
Rights, and (3) the option price with respect to any of the foregoing and/or, if
deemed
 
 
                                       4
 
<PAGE>
appropriate, make provision for a cash payment to a Participant, including to
reflect such an event occurring prior to an Option or Award, the grant of which
was intentionally deferred in anticipation of such event; provided, however,
that the number of shares subject to any Option or Award shall always be a whole
number.
 
        SECTION 5. ELIGIBILITY AND EXTENT OF PARTICIPATION.
 
        (a) The persons eligible to receive Awards, Options and associated
Limited Stock Appreciation Rights under the Plan shall consist of employees or
prospective employees of the Company and consultants or advisors of the Company
who, in the Committee's judgment, can make substantial contributions to the
Company's long-term profitability and value. For purposes of the administration
of previously granted Options and Awards, the term "Participant" shall also
include a former Participant and any permitted transferee (including any trust,
partnership or estate) of a Participant or former Participant.
 
        (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 persons those
Participants to be granted Options and Awards and determine the time when each
Option and Award shall be granted, the number of shares subject to each Option
and Award and whether Limited Stock Appreciation Rights should be granted in
connection with such Option, the number of shares for each Award and the
restrictions associated with such Award. Subject to the provisions of Section 4,
both Options and Awards may be granted to the same Participant.
 
        SECTION 6. GRANTS OF OPTIONS AND LIMITED STOCK APPRECIATION RIGHTS.
 
        (a) Grant of Options. Options on shares of Common Stock may be granted
to Participants by the Committee from time to time at its sole discretion.
Options intended to qualify as ISOs pursuant to Code Section 422 and
Non-Qualified Options which are not intended to qualify as ISOs may be granted
as the Committee in its sole discretion shall determine. Each Option grant shall
contain such terms and conditions as may be approved by the Committee. Subject
to the terms of the Plan, the Committee may establish provisions regarding (1)
the number of shares of Common Stock which may be issued upon exercise of the
Option, (2) the purchase price of the shares of Common Stock and the means of
payment for the shares of Common Stock, (3) the term of the Option, (4) such
terms and conditions of exercisability as may be determined from time to time by
the Committee, (5) restrictions on the transfer of the Option and forfeiture
provisions, and (6) such further terms and conditions, in each case not
inconsistent with the Plan as may be determined from time to time by the
Committee. The grant of an Option shall not constitute or be evidence of any
agreement or other understanding,
 
                                       5
 
<PAGE>
express or implied, on the part of the Company or any Subsidiary to employ an
individual for any specific period.
 
        (b) Grant of Limited Stock Appreciation Rights in the Event of Change of
Ownership. If deemed by the Committee to be in the best interests of the
Company, any Option granted on or after the effective date of the Plan may
include a Limited Stock Appreciation Right at the time of grant of the Option;
also, the Committee may grant a Limited Stock Appreciation Right with respect to
any unexercised Option at any time after granting such Option prior to the end
of its term, provided such Option was granted after the effective date of the
Plan. Unless otherwise specified, any reference in this Plan to an Option or
Options shall include any associated Limited Stock Appreciation Right. Such
Limited Stock Appreciation Rights shall be subject to such terms and conditions
not inconsistent with the Plan as the Committee shall impose, provided that:
 
        (1) A Limited Stock Appreciation Right shall be exercisable only during
            the ninety-one (91) day period specified in the last sentence of
            Section 9(a), provided, however, that except in connection with a
            Change of Ownership, no Limited Stock Appreciation Right granted to
            a Participant who is subject to Section 16 of the Exchange Act shall
            be exercisable within six (6) months of the date of its grant; and
 
        (2) A Limited Stock Appreciation Right shall, upon its exercise, entitle
            the optionee to whom such Limited Stock Appreciation Right was
            granted to receive an amount of cash equal to the amount by which
            the "Offer Price per Share" (as such term is hereinafter defined)
            shall exceed the exercise price of the associated Option, multiplied
            by the number of shares of Common Stock with respect to which such
            Limited Stock Appreciation Right shall have been exercised. Upon the
            exercise of a Limited Stock Appreciation Right, any associated
            Option shall cease to be exercisable to the extent of the shares of
            Common Stock with respect to which such Limited Stock Appreciation
            Right was exercised. Upon the exercise or termination of an
            associated Option, any related Limited Stock Appreciation Right
            shall terminate to the extent of the shares of Common Stock with
            respect to which such associated Option was exercised or terminated.
 
            The term "Offer Price per Share" as used in this Section 6(b) shall
            mean with respect to a Limited Stock Appreciation Right the higher
            of (i) the fair market value per share of Common Stock on the date
            of exercise of such Limited Stock Appreciation Right or (ii) the
            highest price per share for Common Stock paid or to be paid in the
            transaction, if any, giving rise to
 
                                       6
 
<PAGE>
 
            the event specified in clauses (1) or (2) (as the case may be) of
            Section 9(a) which triggered the exercisability of such Limited
            Stock Appreciation Right. For purposes of clause (ii) above, any
            securities or property which are part of the consideration paid or
            to be paid in such transactions shall be valued in determining the
            Offer Price per Share at the highest of (A) the valuation placed on
            such securities or property by the company, person or other entity
            engaging in such transaction, or (B) the valuation placed on such
            securities or property by the Committee.
 
        (c) Option Price.
 
        (1) The price at which each share of Common Stock may be purchased upon
            exercise of a particular Option shall be as specified by the
            Committee, in its sole discretion, but in no event shall the
            exercise price be less than 100% of the fair market value of a share
            of Common Stock at the time such Option is granted, except that (i)
            in the event that an optionee is required to make a payment or to
            forego the receipt of other compensation pursuant to paragraph
            (c)(3) below prior to receiving such Option, the exercise price per
            share of Common Stock of such Option shall not be less than 100% of
            the fair market value of a share of Common Stock at the time such
            Option is granted less the purchase price per share of Common Stock
            of such Option, and (ii) the Committee may specifically provide that
            the exercise price of an Option may be higher or lower in the case
            of an Option granted to employees of a company acquired by the
            Company in assumption and substitution of options held by such
            employees at the time such company is acquired.
 
        (2) Unless approved by shareholders and subject to adjustment pursuant
            to Section 4(d), the exercise price of any Option previously awarded
            under the Plan may not be adjusted downward, whether through
            amendment, cancellation or replacement grants, or by any other
            means.
 
        (3) If the Committee, in its discretion, shall deem it desirable, the
            grant of an Option may be made conditional upon the receipt of a
            payment therefor by the optionee or upon the optionee agreeing to
            forego receipt of an amount of other compensation. Such condition
            and the terms and conditions as to its satisfaction may also provide
            for the reimbursement to the optionee of any part or all of such
            payment under such circumstances as the Committee may specify.
 
 
 
                                       7
 
<PAGE>
 
        (d) Exercise.
 
        (1) Each Option shall be exercisable at such times and subject to such
            terms and conditions as the Committee may, in its sole discretion,
            specify, provided, however, that except in connection with a Change
            of Ownership, (i) Options granted to Participants who are subject to
            Section 16 of the Exchange Act shall not become exercisable within
            six (6) months from the date of grant and (ii) in no event may any
            Option granted hereunder be exercisable after the expiration of 15
            years from the date of such grant. Subject to the foregoing, each
            Option grant shall specify the effect thereon of the death,
            retirement or other termination of employment of the optionee. In
            addition, the Committee may impose such other conditions with
            respect to the exercise of Options, including without limitation,
            any relating to the application of Federal or state securities laws,
            as it may deem necessary or advisable.
 
        (2) No shares shall be delivered pursuant to any exercise of an Option
            until the Participant has made payment in full of the option price
            therefor or provision for such payment satisfactory to the
            Committee. The exercise price of an Option may be paid in cash or
            certified or cashiers' check or by delivery (either actually or by
            attestation) of shares of Common Stock that have been acquired or
            held by the Participant in such manner as to not result in an
            accounting charge. To the extent authorized by the Committee, either
            at the time of grant or at the time of exercise of an Option, the
            exercise price of an Option also may be paid through one of more of
            the following: (i) shares of capital stock of the Corporation, (ii)
            other property deemed acceptable by the Committee, (iii) a reduction
            in the number of shares or other property otherwise issuable
            pursuant to such Option, (iv) a promissory note of or other
            commitment to pay by the Participant or of a third party, the terms
            and conditions of which shall be determined by the Committee, or
            (vi) any combination of the foregoing. No optionee or the legal
            representative, legatee or distributee of an optionee shall be
            deemed to be a holder of any shares subject to any Option prior to
            the issuance of such shares upon exercise of such Option.
 
        (e) Transferability of Options. Unless the documents evidencing the
grant of an Option (or an amendment thereto authorized by the Committee)
expressly states that the Option is transferable as provided hereunder, no
Option granted under the Plan may be sold, assigned, conveyed, gifted, pledged,
hypothecated or otherwise transferred in any manner, other than by will or the
laws of descent and distribution. The Committee may in its sole discretion grant
an Option or amend an outstanding Option to provide that the Option is
transferable or assignable to a member or members
 
 
                                       8
 
<PAGE>
 
of the Participant's "immediate family," as such term is defined under Exchange
Act Rule 16a-1(e), or to a trust for the benefit solely of a member or members
of the Participant's immediate family, or to a partnership or other entity whose
only owners are members of the Participant's family, provided that (1) no
consideration is given in connection with the transfer of such Option, and (2)
following any such transfer or assignment the Option will remain subject to
substantially the same terms applicable to the Option while held by the
Participant, as modified as the Committee in its sole discretion shall determine
appropriate, and the transferee shall agree to be bound by such terms.
 
        SECTION 7. PERFORMANCE STOCK AWARDS AND RESTRICTED STOCK AWARDS.
 
         (a) Performance Stock Awards. Subject to the terms of this Plan,
Performance Stock Awards may be granted to Participants by the Committee from
time to time at its sole discretion. Performance Stock Awards shall consist of
an award of shares of Common Stock, the grant, issuance, retention and/or
vesting of which shall be subject to such Performance Objectives, and to such
further terms and conditions as the Committee deems appropriate. Each
Performance Stock Award shall contain provisions regarding (1) the number of
shares of Common Stock subject to such Award or a formula for determining such,
(2) the performance criteria and level of achievement versus these criteria
which shall determine the number of shares of Common Stock granted, issued,
retainable and/or vested, (3) the period as to which performance shall be
measured for determining achievement of such performance criteria (a
"Performance Period"), (4) forfeiture provisions, and (5) such further terms and
conditions, in each case not inconsistent with the Plan as may be determined
from time to time by the Committee. The grant, issuance, retention and/or
vesting of each Performance Stock Award shall be subject to such performance
criteria and level of achievement versus these criteria as the Committee shall
determine, which criteria may be based on financial performance and/or personal
performance evaluations. Notwithstanding anything to the contrary herein, the
performance criteria for any Performance Stock that is intended by the Committee
to satisfy the requirements for "performance-based compensation" under Code
Section 162(m) shall be a measure based on one or more Performance Objectives
selected by the Committee and specified at the time the Performance Stock Award
is granted. Notwithstanding anything in this Plan to the contrary, Performance
Stock Awards may provide that upon satisfaction of Performance Objectives the
shares subject to the Award are subject to such further holding periods and/or
restrictions on transferability as the Committee may provide.
 
        (b) Restricted Stock Awards. Subject to the terms of this Plan,
Restricted Stock Awards may be granted to Participants by the Committee from
time to time at its sole discretion. Restricted Stock consists of shares of
Common Stock which are registered or are issuable by the Company in the name of
a Participant in exchange for such cash or
 
 
 
                                       9
 
<PAGE>
other consideration, if any, as determined by the Committee. Restricted Stock
shall be subject during specified periods of time to such conditions to vesting,
to restrictions on their sale or other transfer by the Participant and/or to
repurchase rights as may be determined by the Committee, consistent with the
terms of the Plan. The transfer and sale of shares of Common Stock pursuant to
Restricted Stock Awards shall be subject to the following terms and conditions:
 
        (1) The number of shares of Common Stock to be transferred or sold by
            the Company to a Participant pursuant to a Restricted Stock award
            shall be determined by the Committee.
 
        (2) Subject to the requirements of applicable law, the Committee shall
            determine the price, if any, at which shares of Restricted Stock
            shall be sold or awarded to a Participant, which may vary from time
            to time and among Participants and which may be below the fair
            market value of such Shares at the date of grant or issuance.
 
        (3) All shares of Common Stock transferred or sold as Restricted Stock
            hereunder shall be subject to such restrictions or conditions as the
            Committee may determine, including, without limitation any or all of
            the following: (i) a prohibition against the sale, transfer, pledge
            or other encumbrance of the Shares, such prohibition to lapse at
            such time or times as the Committee shall determine (whether in
            annual or more frequent installments, at the time of the death,
            disability or retirement of the holder of such Shares, or
            otherwise); (ii) a requirement that the holder of shares of Common
            Stock forfeit or resell back to the Company at a price specified by
            the Committee (which price may be more than the price, if any, paid
            by the Participant for such Shares) all or part of such shares of
            Common Stock in the event of termination of employment during any
            period in which such shares of Common Stock are subject to
            conditions; (iii) such other conditions or restrictions as the
            Committee may deem advisable; and (iv) any applicable Performance
            Objectives which, if achieved, shall cause acceleration of the
            lapsing of restrictions imposed upon all or part of the shares
            covered by the Restricted Stock Award.
 
Notwithstanding anything else in this Plan to the contrary, the restrictions set
forth in Section 7(b)(3) shall not lapse with respect to a Restricted Stock
Award before the second anniversary of the date of grant of such Restricted
Stock Award, provided, however, that the Committee, in its sole discretion, may
designate that such restrictions shall lapse upon the achievement of Performance
Objectives. Subject to the preceding sentence, once established, Performance
Objectives and the terms under which the lapsing of restrictions may be
accelerated may be changed, adjusted or amended by the
 
                                       10
 
<PAGE>
 Committee in its sole discretion. Notwithstanding anything in this Plan to the
contrary, Restricted Stock Awards may provide that upon the lapsing of
restrictions set forth above, the shares subject to the Award may be subject to
such further holding periods and/or restrictions on transferability as the
Committee may provide.
 
        (c) Rights with Respect to Shares. Unless the terms of the Award provide
otherwise, unless and until forfeited pursuant to the terms of this Plan or the
Award, a Participant shall have the right to vote and to receive dividends and
other distributions on shares subject to a Performance Stock Award or Restricted
Stock Award, subject, however, to the terms, conditions and restrictions
described in this Plan and the Award.
 
        (d) Escrow. Shares of Common Stock issued pursuant to a Performance
Stock Award or Restricted Stock Award may be held in escrow by the Company until
such time as the Committee shall have determined that the restrictions set forth
in Section 7 have lapsed or until the shares subject to such Performance Stock
Award or Restricted Stock Award are forfeited pursuant to their terms.
 
        (e) Restrictive Legends. Certificates for shares of Common Stock
delivered pursuant to Performance Stock Awards or Restricted Stock Awards may
bear an appropriate legend referring to the terms, conditions and restrictions
described in this Plan and in the applicable Award. Any attempt to dispose of
any such shares of Common Stock in contravention of the terms, conditions and
restrictions described in this Plan or in the applicable Award shall be
ineffective. Any shares of Common Stock of the Company or other property,
including cash, received by a Participant as a dividend or as a result of any
stock split, combination, exchange of shares, reorganization, merger,
consolidation or similar event with respect to shares of Common Stock received
pursuant to a Performance Stock Award or Restrictive Stock Award shall have the
same status and bear the same legend and be held in escrow pursuant to Section
7(d) as the shares received pursuant to the Performance Stock Award or
Restricted Stock Award unless otherwise determined by the Committee at the time
of such event.
 
        (f) Designation of Beneficiaries. A Participant may designate a
beneficiary or beneficiaries to receive such Participant's Common Stock
hereunder in the event of such Participant's death, and may, at any time and
from time to time, change any such beneficiary designation. All beneficiary
designations and changes therein shall be in writing and shall be effective if
and when delivered to the Committee during the lifetime of the Participant.
 
        (g) Discretionary Adjustments. Notwithstanding satisfaction of any
Performance Objectives, the number of shares of Common Stock granted, issued,
retainable and/or vested under a Performance Stock Award on account of either
financial performance or
 
 
                                       11
 
<PAGE>
 
personal performance evaluations may be reduced by the Committee on the basis of
such further considerations as the Committee in its sole discretion shall
determine. The Committee may make adjustments or modifications, and its
determination thereof shall be conclusive, in any applicable Performance
Objectives to give effect to the intent of this Plan in connection with any
event affecting the performance criteria established as the Performance
Objectives, including without limitation, any reorganization, recapitalization,
merger, consolidation, offering of additional shares of Common Stock or other
change in the Company's shareholders' equity by means other than earnings, or
any similar event. The grant of an Award shall not 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.
 
        SECTION 8. STOCK UNIT AWARDS.
 
        (a) Grant of Stock Unit Awards. The Committee shall have authority to
grant to Participants Stock Unit Awards, the value of which is based, in whole
or in part, on the value of Common Stock. Each "Stock Unit" shall consist of a
bookkeeping entry representing an amount equivalent to the fair market value of
one share of Common Stock. Such Stock Units represent an unfunded and unsecured
obligation of the Company, except as otherwise provided for by the Committee.
Stock Units may be granted as additional compensation or in lieu of any other
compensation, as specified by the Committee, or may be issued upon exercise of
Options, or in lieu of a Performance Stock Award or Restricted Stock Award,
provided that for any Common Stock to be purchased in connection with a Stock
Unit Award other than upon exercise of an Option or in settlement of a
Performance Stock Award or Restricted Stock Award, the purchase price or the
amount of consideration paid or of other compensation foregone shall be equal to
at least 100% of the fair market value of such Common Stock on the date such
Award is granted. Subject to the provisions of the Plan, Stock Unit Awards shall
be subject to such terms, restrictions, conditions, vesting requirements and
payment rules as the Committee may determine in its sole discretion.
 
        (b) Transferability of Stock Units. Unless the Stock Unit Award (or an
amendment thereto authorized by the Committee) expressly states otherwise, any
shares of Common Stock which are part of a Stock Unit Award shall not be
assigned, sold transferred, pledged or otherwise encumbered before the date on
which the shares are issued.
 
        (c) Settlement of Stock Units. Unless provided otherwise by the
Committee at the time of grant, settlement of Stock Units shall be made by
issuance of Common Stock and shall occur within 60 days after a Participant's
termination of employment for any reason. The Committee may provide in the terms
of the Stock Unit Award for Stock Units to be settled in cash (at the election
of the Company or the Participant, as
 
                                       12
 
<PAGE>
 
specified by the Committee) and to be made at such other times as it determines
appropriate or as it permits a Participant to choose. The amount of shares of
Common Stock, or other settlement medium, to be so distributed may be increased
by an interest factor or by dividend equivalents, which may be valued as if
reinvested in Common Stock. Until a Stock Unit is settled, the number of shares
of Common Stock represented by a Stock Unit shall be subject to adjustment
pursuant to Section 4(d).
 
 
                                       13
 
<PAGE>
 
        SECTION 9. SPECIAL RULES.
 
        (a) Notwithstanding anything to the contrary in this Plan, unless
otherwise specifically determined by the Committee at the time of grant, all
Options theretofore granted and not fully exercisable shall become exercisable
in full and the restrictions on all outstanding Awards shall lapse upon the
occurrence of a Change of Ownership. A "Change of Ownership" shall be deemed to
have occurred if either (1) individuals who, as of the effective date of this
Plan, constitute the Board of Directors of the Company (the "Board of Directors"
generally and as of the date hereof the "Incumbent Board") cease for any reason
to constitute at least a majority of the directors constituting the Board of
Directors, provided that any person becoming a director subsequent to the
effective date of this Plan whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least three-quarters (3/4)
of the then directors who are members of the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is
(i) in connection with the acquisition by a third person, including a "group" as
such term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "Act"), of beneficial ownership, directly or indirectly, of 20% or
more of the combined voting securities ordinarily having the right to vote for
the election of directors of the Company (unless such acquisition of beneficial
ownership was approved by a majority of the Board of Directors who are members
of the Incumbent Board), or (ii) in connection with an actual or threatened
election contest relating to the election of the directors of the Company, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Act)
shall be, for purposes of this Plan, considered as though such person were a
member of the Incumbent Board, or (2) the Board of Directors (a majority of
which shall consist of directors who are members of the Incumbent Board) has
determined that a Change of Ownership triggering the exercisability of Options
and the lapse of restrictions on Awards as described in this Section 10 shall
have occurred. Options which become fully exercisable by reason of events
specified in clauses (1) or (2) shall remain exercisable for 90 days following
the date on which they become so exercisable, after which they will revert to
being exercisable in accordance with their original terms, provided, however,
that no Option which has previously been exercised or has expired or otherwise
terminated shall become exercisable by virtue of this Section nor shall this
Section permit exercise of any option during the portion, if any, of such 90 day
period which follows the termination or expiration of any such Option.
 
        (b) For purposes of this Plan and any Option or Award hereunder,
termination of employment shall not be deemed to occur upon the transfer of any
optionee from the employ of the Company to the employ of any Subsidiary or
affiliate. For purposes of
 
 
                                       14
 
<PAGE>
 
this Plan, "affiliate" means (1) any entity 50% or more of the voting interest
in which is owned, directly or indirectly, by an entity which owns, directly or
indirectly, 50% or more of the voting interest in the Company and (2) any entity
which owns, directly or indirectly, 50% or more of the voting interest in the
Company.
 
        (c) Either at the time an Award is granted or by subsequent action, the
Committee may impose such restrictions, conditions or limitations as it
determines appropriate as to the timing and manner of any resales by a
Participant or other subsequent transfers by a Participant of any shares issued
under an Award, including without limitation (i) restrictions under an insider
trading policy, (ii) restrictions designed to delay and/or coordinate the timing
and manner of sales by Participants, and (iii) restrictions as to the use of a
specified brokerage firm for such resales or other transfers.
 
        (d) The existence of outstanding Awards (including any Options) shall
not affect in any way the right or power of the Company or its stockholders to
make or authorize any or all adjustments, recapitalizations, reorganizations,
exchanges, or other changes in the Company's capital structure or its business,
or any merger or consolidation of the Company, or any issuance of shares or
other securities or subscription rights thereto, or any issuance of bonds,
debentures, preferred or prior preference stock ahead of or affecting the shares
or the rights thereof, or the dissolution or liquidation of the Company, or any
sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise.
Further, except as herein expressly provided, (i) the issuance by the Company of
shares of stock or any class of securities convertible into shares of stock of
any class, for cash, property, labor or services, upon direct sale, upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities, (ii) the payment of a dividend in property other than Common Stock,
or (iii) the occurrence of any similar transaction, and in any case whether or
not for fair value, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number of shares subject to Options theretofore
granted or the purchase price per share, unless the Committee shall determine in
its sole discretion that an adjustment is necessary to provide equitable
treatment to Participant.
 
        SECTION 10. DELIVERY OF SHARES. No shares of Common Stock shall be
delivered pursuant to an Award or any exercise of an Option until the
requirements of such laws and regulations as may be deemed by the Committee to
be applicable thereto are satisfied.
 
 
 
                                       15
 
<PAGE>
        SECTION 11. FINANCING AND WITHHOLDING.
 
        (a) Withholding of Taxes. As a condition to the making of an Award, to
the lapse of the restrictions pertaining to an Award, to the transfer of shares
issued under an Award or to the delivery of shares in connection with the
exercise of an Option, the Company may require the Participant to pay to the
Company, or make arrangements satisfactory to the Committee regarding payment
of, any taxes of any kind required by law to be withheld with respect to such
shares of Common Stock.
 
        (b) Financing. If requested by a Participant who exercises an Option or
who has received shares of Common Stock pursuant to an Award, the Committee may
in its discretion provide financing to the Participant in a principal amount
sufficient for the purchase of shares of Common Stock pursuant to such Option
exercise or under such Award, and/or to pay the amount of taxes required by law
to be withheld with respect to such Option exercise or such receipt of shares of
Common Stock. Any such loan shall be subject to all legal requirements, and
restrictions pertinent thereto, including if applicable, Regulation G
promulgated by the Federal Reserve Board. The grant of an Option or Award shall
in no way obligate the Company or the Committee to provide any financing
whatsoever upon the lapse of restrictions on shares or the exercise of such
Option.
 
        (c) Withholding of Shares.
 
        (1) If requested by a Participant who acquires shares of Common Stock
            upon the exercise of an Option or who has received Common Stock
            pursuant to an Award with respect to which the restrictions shall
            have lapsed, the Committee may in its discretion permit the
            Participant to satisfy any tax withholding obligations, in whole or
            in part, by having the Company withhold a portion of such shares
            with a value equal to the amount of taxes required by law to be
            withheld.
 
        (2) Requests by a Participant to have shares of Common Stock withheld
            shall be (i) made prior to the Tax Date and (ii) irrevocable.
 
        SECTION 12. AMENDMENTS, SUSPENSION OR DISCONTINUANCE. The Board of
Directors may amend, suspend or discontinue the Plan or any Option or Award
granted under the Plan. Notwithstanding the foregoing, except as permitted by
Section 4(c), the Board may not, without prior approval of the shareholders of
the Company, make any amendment which operates (a) to reduce the exercise price
of outstanding Options or amend the provisions of Section 6(c)(2) relating to
repricing Options, (b) to materially increase the total number of shares of
Common Stock which may be delivered in respect of Awards or on exercise of
Options granted under the Plan, (c) to
 
 
 
                                       16
 
<PAGE>
extend the maximum option period or the period which Options or Awards may be
granted under the Plan or (d) to reduce the minimum permissible Option exercise
price.
 
        SECTION 13. TERM OF PLAN. The Plan shall become effective on the date it
is approved and adopted by the Board, subject to its subsequent approval by
shareholders of the Company. No Option or Award shall be granted under the Plan
after the date that is ten (10) years after the date on which the Plan is
approved by the Company's shareholders or after such earlier date as the
Committee may decide, in its sole discretion.
 
        SECTION 14. OPTION GRANTS BY SUBSIDIARIES. In the case of a grant of an
option to any Participant by a Subsidiary, such grant may, if the Committee so
directs, be implemented by the Corporation issuing any subject shares to the
Subsidiary, for such lawful consideration as the Committee may determine, upon
the condition or understanding that the Subsidiary will transfer the shares to
the optionholder in accordance with the terms of the option specified by the
Committee pursuant to the provisions of the Plan. Notwithstanding any other
provision hereof, such option may be issued by and in the name of the Subsidiary
and shall be deemed granted on such date as the Committee shall determine.
 
        SECTION 15. LIABILITY OF COMPANY. The Company and any Affiliate which is
in existence or hereafter comes into existence shall not be liable to a
Participant, an Eligible Person or other persons as to:
 
        (a) The Non-Issuance of Shares. The non-issuance or sale of shares as to
which the Company has been unable to obtain from any regulatory body having
jurisdiction the authority deemed by the Company's counsel to be necessary to
the lawful issuance and sale of any shares hereunder; and
 
        (b) Tax Consequences. Any tax consequence expected, but not realized, by
any Participant, Eligible Person or other person due to the receipt, exercise or
settlement of any option or other Award granted hereunder.
 
        SECTION 16. NON-EXCLUSIVITY OF THE PLAN. Neither the adoption of the
Plan by the Board nor the submission of the Plan to the shareholders of the
Company for approval shall be construed as creating any limitations on the power
of the Board or the Committee to adopt such other incentive arrangements as it
or they may deem desirable, including without limitation, the granting of
restricted stock or stock options otherwise than under the Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.
 
 
                                       17
 
</TEXT>
</DOCUMENT>
 
 
 
 
 
 
KAUFMAN AND BROAD HOME CORPORATION
 
                               1999 INCENTIVE PLAN
 
     SECTION 1. PURPOSE. The purpose of the 1999 Incentive Plan (the "Plan") is
to promote the success of Kaufman and Broad Home Corporation (the "Company") by
providing a method whereby a broad category of non-executive employees of the
Company and its subsidiaries and other eligible participants may be encouraged
to invest in the Common Stock, $1.00 par value, of the Company ("Common Stock"),
increase their proprietary interest in its business, remain in the employ of the
Company or its subsidiaries, and increase their personal interests in the
continued success and progress of the Company. The Plan provides for the grant
of Options that are not intended to satisfy the requirements for treatment as
Incentive Stock Options as defined under Section 422 of the Code, as well as for
certain other "Awards," as defined below.
 
     SECTION 2. DEFINITIONS. As used in this Plan, the following terms shall
have the indicated meanings:
 
     (a)  AWARD: An award under this Plan of a Performance Stock Award,
Restricted Stock Award, or Stock Unit Award.
 
     (b)  BOARD: The board of directors of Kaufman and Broad Home Corporation.
 
     (c)  CODE: The Internal Revenue Code of 1986, as amended.
 
     (d)  COMMITTEE: The Committee specified in Section 3(a) of this Plan.
 
     (e)  COMPANY: Kaufman and Broad Home Corporation and its Subsidiaries.
 
     (f)  EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
 
     (g)  LIMITED STOCK APPRECIATION RIGHT: A right granted pursuant to Section
6(b) to receive cash in certain circumstances with respect to a related Option.
 
     (h)  OPTION: An Option is a right granted under Section 6(a) to purchase a
number of shares of Common Stock at such exercise price, at such times, and on
such other terms and conditions as are specified in or determined pursuant to
the document(s) evidencing the Award.
 
     (i)  PARTICIPANT: An individual eligible under Section 5(a) to participate
in this Plan.
 
 
 
<PAGE>   2
     (j)  PERFORMANCE OBJECTIVES: With reference to a particular Option or
Award, the objectives established by the Committee under various criteria, the
satisfaction of which may result in the grant, issuance, retention and/or
vesting of an Option, a Performance Stock Award or Stock Unit Award, or which
may accelerate the release of shares of Common Stock from the restrictions of a
Restricted Stock Award. The Performance Objectives may differ from Participant
to Participant and from Award to Award, as determined by the Committee and
specified in the applicable Award, and may include any one or more of the
following performance criteria, either individually, alternatively or in any
combination, applied to either the Company as a whole or to a business unit or
subsidiary, either individually, alternatively or in any combination, and
measured either annually or cumulatively over a period of years, on an absolute
basis or relative to a pre-established target, to previous years' results or to
a designated comparison group, in each case as specified by the Committee in the
Award: (i) pre-tax income, (ii) after-tax income, (iii) cash flow, (iv) return
on equity, (v) return on capital, (vi) earnings per share (including earnings
before interest, taxes, depreciation and amortization), (vii) unit volume,
(viii) net sales, (ix) service quality or (v) total shareholder return, in each
case as determined in accordance with Generally Accepted Accounting Principles,
if applicable.
 
     (k)  PERFORMANCE STOCK AWARD: Performance Stock is an award of shares of
Common Stock made under Section 7(a), the grant, issuance, retention and/or
vesting of which is subject to such performance and other conditions as are
expressed in the document(s) evidencing the Award.
 
     (l)  PLAN: The Kaufman and Broad Home Corporation 1999 Incentive Plan, as
it may be amended from time to time.
 
     (m)  RESTRICTED STOCK AWARD: Restricted Stock is a right granted under
Section 7(b) to shares of Common Stock issued or issuable under the Plan but
subject during specified periods of time to such conditions on vesting,
restrictions on transferability and/or repurchase rights as are expressed in the
document(s) evidencing the Award.
 
     (n)  STOCK UNIT AWARD: An award granted under Section 8 of this Plan.
 
     (o)  SUBSIDIARY: Any corporation of which the Corporation owns, directly or
indirectly, fifty percent (50%) or more of the voting or capital stock, or any
partnership or other entity of which the Company owns, directly or indirectly, a
fifty percent (50%) or more participating interest or the general partner of
which is a Subsidiary.
 
     (p)  TAX DATE: The date on which taxes of any kind are required by law to
be withheld with respect to shares of Common Stock subject to an Option or
Award.
 
                                       2
 
 
<PAGE>   3
     SECTION 3.  ADMINISTRATION.
 
     (a)  The Plan shall be administered by the Board and/or by a committee of
the Board, as appointed from time to time by the Board (the "Committee").
The Board shall fill vacancies on, and from time to time may remove or add
members to, the Committee. The Committee shall act pursuant to a majority vote
or unanimous written consent. Notwithstanding the foregoing, the Committee may
appoint one or more separate committees (any such committee, a "Subcommittee")
composed of one or more directors of the Corporation (who may but need not be
members of the Committee) and may delegate to any such Subcommittee(s) the
authority to grant Options, Limited Stock Appreciation Rights and/or Awards
under the Plan, to determine all terms of such Options, Limited Stock
Appreciation Rights and/or Awards, and to administer the Plan or any aspect of
it. Any action by any such Subcommittee shall be deemed for all purposes to have
been taken by the Committee. The Committee may designate the Secretary of the
Corporation or other Company employees to assist the Committee in the
administration of the Plan, and may grant authority to such persons to issue
and/or execute agreements or other documents under this Plan on behalf of the
Committee or the Company.
 
     (b)  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, to grant to eligible
persons Options, Limited Stock Appreciation Rights and Awards pursuant to the
provisions of the Plan, to fix the exercise price and other terms of Options, to
fix the terms of any Performance Stock Award and/or Restricted Stock Award in a
manner consistent with the terms of Section 7, to fix the terms of any Stock
Unit Award in a manner consistent with the terms of Section 8, to prescribe,
amend and rescind rules and regulations, if any, relating to the Plan, to
interpret the provisions of the Plan, Options, Limited Stock Appreciation Rights
and Awards issued under the Plan, to amend such Options, Limited Stock
Appreciation Rights and Awards from time to time subject to the provisions of
the Plan, and to supervise the administration of the Plan. All decisions made by
the Committee pursuant to the provisions of the Plan and related orders or
resolutions of the Board shall be final, conclusive and binding on all persons,
including the Company, stockholders, employees and optionees.
 
     (c)  Each person who is or shall have been a member of the Committee or of
the Board shall be indemnified and held harmless by the Company from any loss,
cost, liability or expense that may be imposed upon or reasonably incurred by
him or her in connection with any claim, action, suit or proceeding to which
he or she may be a party by reason of any action taken or any failure to act
under the Plan. The foregoing right of indemnification shall not be exclusive of
any other rights of indemnification to which
 
                                       3
 
<PAGE>   4
such persons may be entitled under the Company's Articles of Incorporation or
Bylaws, or as a matter of law, or otherwise, or any power that the Company may
have to indemnify them or hold them harmless.
 
     SECTION 4.  SHARES SUBJECT TO THE PLAN.
 
     (a)  The shares to be delivered upon exercise of Options or Limited Stock
Appreciation Rights granted under the Plan or pursuant to Awards, 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.
 
     (b)  Subject to adjustments made pursuant to the provisions of Section 4(c)
and this Section 4(b), the aggregate number of shares reserved for issuance upon
the exercise of Options and pursuant to Awards which may be granted under the
Plan shall not exceed 2,000,000 shares of Common Stock. The aggregate number of
shares of Common Stock issued under this Plan shall equal only the number of
shares actually issued upon exercise or settlement of an Option or vesting or
settlement of any Award and not returned to the Company upon cancellation,
expiration or forfeiture of Options and Awards or delivered (either actually or
by attestation) in payment or satisfaction of the exercise price, purchase price
or tax obligation of Options and Awards.
 
     (c)  In the event that the Committee shall determine that any stock
dividend, extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, exchange of shares, warrants or
rights offering to purchase Common Stock at a price substantially below fair
market value, or other similar corporate event affects the Common Stock such
that an adjustment is required in order to preserve the benefits or potential
benefits intended to be made available to Participants under this Plan, then the
Committee shall, in its sole discretion, subject to approval by the Board, and
in such manner as the Committee may deem equitable, adjust any or all of (1) the
number and kind of shares which thereafter may be awarded or optioned and sold
or made the subject of Limited Stock Appreciation Rights under the Plan, (2) the
number and kind of shares subject to outstanding Options and Awards, and Limited
Stock Appreciation Rights, and (3) the option price with respect to any of the
foregoing and/or, if deemed appropriate, make provision for a cash payment to a
Participant, including to reflect such an event occurring prior to an Option or
Award, the grant of which was intentionally deferred in anticipation of such
event; provided, however, that the number of shares subject to any Option or
Award shall always be a whole number.
 
                                       4
 
<PAGE>   5
     SECTION 5.  ELIGIBILITY AND EXTENT OF PARTICIPATION.
 
     (a)  The persons eligible to receive Awards, Options and associated Limited
Stock Appreciation Rights under the Plan shall consist of employees or
prospective employees of the Company and consultants or advisors of the Company,
other than any person who is an "executive" of the Company within the meaning of
Rule 312 under the New York Stock Exchange Listed Company Manual. For purposes
of the administration of previously granted Options and Awards, the term
"Participant" shall also include a former Participant and any permitted
transferee (including any trust, partnership or estate) of a Participant or
former Participant.
 
     (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 persons those
Participants to be granted Options and Awards and determine the time when each
Option and Award shall be granted, the number of shares subject to each Option
and Award and whether Limited Stock Appreciation Rights should be granted in
connection with such Option, the number of shares for each Award and the
restrictions associated with such Award. Subject to the provisions of Section 4,
both Options and Awards may be granted to the same Participant.
 
     SECTION 6.  GRANTS OF OPTIONS AND LIMITED STOCK APPRECIATION RIGHTS.
 
     (a)  GRANT OF OPTIONS. Options on shares of Common Stock may be granted to
Participants by the Committee from time to time at its sole discretion. Each
Option grant shall contain such terms and conditions as may be approved by the
Committee. Subject to the terms of the Plan, the Committee may establish
provisions regarding (1) the number of shares of Common Stock which may be
issued upon exercise of the Option, (2) the purchase price of the shares of
Common Stock and the means of payment for the shares of Common Stock, (3) the
term of the Option, (4) such terms and conditions of exercisability as may be
determined from time to time by the Committee, (5) restrictions on the transfer
of the Option and forfeiture provisions, and (6) such further terms and
conditions, in each case not inconsistent with the Plan as may be determined
from time to time by the Committee. The grant of an Option shall not 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)  GRANT OF LIMITED STOCK APPRECIATION RIGHTS IN THE EVENT OF CHANGE OF
OWNERSHIP. If deemed by the Committee to be in the best interests of the
Company, any Option granted on or after the effective date of the Plan may
include a Limited Stock
 
                                       5
<PAGE>   6
Appreciation Right at the time of grant of the Option; also, the Committee may
grant a Limited Stock Appreciation Right with respect to any unexercised Option
at any time after granting such Option prior to the end of its term, provided
such Option was granted after the effective date of the Plan. Unless otherwise
specified, any reference in this Plan to an Option or Options shall include any
associated Limited Stock Appreciation Right. Such Limited Stock Appreciation
Rights shall be subject to such terms and conditions not inconsistent with the
Plan as the Committee shall impose, provided that:
 
     (1)  A Limited Stock Appreciation Right shall be exercisable only during
          the ninety-one (91) day period specified in the last sentence of
          Section 9(a); and
 
     (2)  A Limited Stock Appreciation Right shall, upon its exercise, entitle
          the optionee to whom such Limited Stock Appreciation Right was granted
          to receive an amount of cash equal to the amount by which the "Offer
          Price per Share" (as such term is hereinafter defined) shall exceed
          the exercise price of the associated Option, multiplied by the number
          of shares of Common Stock with respect to which such Limited Stock
          Appreciation Right shall have been exercised. Upon the exercise of a
          Limited Stock Appreciation Right, any associated Option shall cease to
          be exercisable to the extent of the shares of Common Stock with
          respect to which such Limited Stock Appreciation Right was exercised.
          Upon the exercise or termination of an associated Option, any related
          Limited Stock Appreciation Right shall terminate to the extent of the
          shares of Common Stock with respect to which such associated Option
          was exercised or terminated.
 
          The term "Offer Price per Share" as used in this Section 6(b) shall
          mean with respect to a Limited Stock Appreciation Right the higher of
          (i) the fair market value per share of Common Stock on the date of
          exercise of such Limited Stock Appreciation Right or (ii) the highest
          price per share for Common Stock paid or to be paid in the
          transaction, if any, giving rise to the event specified in clauses (1)
          or (2) (as the case may be) of Section 9(a) which triggered the
          exercisability of such Limited Stock Appreciation Right. For purposes
          of clause (ii) above, any securities or property which are part of the
          consideration paid or to be paid in such transactions shall be valued
          in determining the Offer Price per Share at the highest of (A) the
          valuation placed on such securities or property by the company, person
          or other entity engaging in such transaction, or (B) the valuation
          placed on such securities or property by the Committee.
 
 
                                       6
<PAGE>   7
     (c)  OPTION PRICE.
 
     (1)  The price at which each share of Common Stock may be purchased upon
          exercise of a particular Option shall be as specified by the
          Committee, in its sole discretion, but in no event shall the exercise
          price be less than 100% of the fair market value of a share of Common
          Stock at the time such Option is granted, except that (i) in the event
          that an optionee is required to make a payment or to forego the
          receipt of other compensation pursuant to paragraph (c)(3) below prior
          to receiving such Option, the exercise price per share of Common Stock
          of such Option shall not be less than 100% of the fair market value of
          a share of Common Stock at the time such Option is granted less the
          purchase price per share of Common Stock of such Option, and (ii) the
          Committee may specifically provide that the exercise price of an
          Option may be higher or lower in the case of an Option granted to
          employees of a company acquired by the Company in assumption and
          substitution of options held by such employees at the time such
          company is acquired.
 
     (2)  Unless approved by shareholders and subject to adjustment pursuant to
          Section 4(c), the exercise price of any Option previously awarded
          under the Plan may not be adjusted downward, whether through
          amendment, cancellation or replacement grants, or by any other means.
 
     (d)  EXERCISE.
 
     (1)  Each Option shall be exercisable at such times and subject to such
          terms and conditions as the Committee may, in its sole discretion,
          specify, provided, however, that in no event may any Option granted
          hereunder be exercisable after the expiration of 15 years from the
          date of such grant. Subject to the foregoing, each Option grant shall
          specify the effect thereon of the death, retirement or other
          termination of employment of the optionee. In addition, the Committee
          may impose such other conditions with respect to the exercise of
          Options, including without limitation, any relating to the application
          of Federal or state securities laws, as it may deem necessary or
          advisable.
 
     (2)  No shares shall be delivered pursuant to any exercise of an Option
          until the Participant has made payment in full of the option price
          therefor or provision for such payment satisfactory to the Committee.
          The exercise price of an Option may be paid in cash or certified or
          cashiers' check or by delivery (either actually or by attestation) of
          shares of Common Stock that
 
                                       7
<PAGE>   8
          have been acquired or held by the Participant in such manner as to not
          result in an accounting charge. To the extent authorized by the
          Committee, either at the time of grant or at the time of exercise of
          an Option, the exercise price of an Option also may be paid through
          one of more of the following: (i) shares of capital stock of the
          Corporation, (ii) other property deemed acceptable by the Committee,
          (iii) a reduction in the number of shares or other property otherwise
          issuable pursuant to such Option, (iv) a promissory note of or other
          commitment to pay by the Participant or of a third party, the terms
          and conditions of which shall be determined by the Committee, or (vi)
          any combination of the foregoing. No optionee or the legal
          representative, legatee or distributee of an optionee shall be deemed
          to be a holder of any shares subject to any Option prior to the
          issuance of such shares upon exercise of such Option.
 
     (e)  TRANSFERABILITY OF OPTIONS. Unless the documents evidencing the grant
of an Option (or an amendment thereto authorized by the Committee) expressly
states that the Option is transferable, no Option granted under the Plan may be
sold, assigned, conveyed, gifted, pledged, hypothecated or otherwise transferred
in any manner, other than by will or the laws of descent and distribution.
 
     SECTION 7.  PERFORMANCE STOCK AWARDS AND RESTRICTED STOCK AWARDS.
 
     (a)  PERFORMANCE STOCK AWARDS. Subject to the terms of this Plan,
Performance Stock Awards may be granted to Participants by the Committee from
time to time at its sole discretion. Performance Stock Awards shall consist of
an award of shares of Common Stock, the grant, issuance, retention and/or
vesting of which shall be subject to such Performance Objectives, and to such
further terms and conditions as the Committee deems appropriate. Each
Performance Stock Award shall contain provisions regarding (1) the number of
shares of Common Stock subject to such Award or a formula for determining such,
(2) the performance criteria and level of achievement versus these criteria
which shall determine the number of shares of Common Stock granted, issued,
retainable and/or vested, (3) the period as to which performance shall be
measured for determining achievement of such performance criteria (a
"Performance Period"), (4) forfeiture provisions, and (5) such further terms and
conditions, in each case not inconsistent with the Plan as may be determined
from time to time by the Committee. The grant, issuance, retention and/or
vesting of each Performance Stock Award shall be subject to such performance
criteria and level of achievement versus these criteria as the Committee shall
determine, which criteria may be based on financial performance and/or personal
performance evaluations. Notwithstanding anything in this Plan to the contrary,
Performance Stock Awards may provide that upon satisfaction of Performance
Objectives the shares subject to the Award are subject to such further holding
periods and/or restrictions on transferability as the Committee may provide.
 
                                       8
<PAGE>   9
     (b)  RESTRICTED STOCK AWARDS. Subject to the terms of this Plan, Restricted
Stock Awards may be granted to Participants by the Committee from time to time
at its sole discretion. Restricted Stock consists of shares of Common Stock
which are registered or are issuable by the Company in the name of a Participant
in exchange for such cash or other consideration, if any, as determined by the
Committee. Restricted Stock shall be subject during specified periods of time to
such conditions to vesting, to restrictions on their sale or other transfer by
the Participant and/or to repurchase rights as may be determined by the
Committee, consistent with the terms of the Plan. The transfer and sale of
shares of Common Stock pursuant to Restricted Stock Awards shall be subject to
the following terms and conditions:
 
     (1)  The number of shares of Common Stock to be transferred or sold by the
          Company to a Participant pursuant to a Restricted Stock award shall be
          determined by the Committee.
 
     (2)  Subject to the requirements of applicable law, the Committee shall
          determine the price, if any, at which shares of Restricted Stock shall
          be sold or awarded to a Participant, which may vary from time to time
          and among Participants and which may be below the fair market value of
          such Shares at the date of grant or issuance.
 
     (3)  All shares of Common Stock transferred or sold as Restricted Stock
          hereunder shall be subject to such restrictions or conditions as the
          Committee may determine, including, without limitation any or all of
          the following: (i) a prohibition against the sale, transfer, pledge or
          other encumbrance of the Shares, such prohibition to lapse at such
          time or times as the Committee shall determine (whether in annual or
          more frequent installments, at the time of the death, disability or
          retirement of the holder of such Shares, or otherwise); (ii) a
          requirement that the holder of shares of Common Stock forfeit or
          resell back to the Company at a price specified by the Committee
          (which price may be more than the price, if any, paid by the
          Participant for such Shares) all or part of such shares of Common
          Stock in the event of termination of employment during any period in
          which such shares of Common Stock are subject to conditions; (iii)
          such other conditions or restrictions as the Committee may deem
          advisable; and (iv) any applicable Performance Objectives which, if
          achieved, shall cause acceleration of the lapsing of restrictions
          imposed upon all or part of the shares covered by the Restricted Stock
          Award.
 
Once established, Performance Objectives and the terms under which the lapsing
of restrictions may be accelerated may be changed, adjusted or amended by the
Committee in its sole discretion. Notwithstanding anything in this Plan to the
contrary,
 
                                       9
<PAGE>   10
Restricted Stock Awards may provide that upon the lapsing of restrictions set
forth above, the shares subject to the Award may be subject to such further
holding periods and/or restrictions on transferability as the Committee may
provide.
 
     (c)  RIGHTS WITH RESPECT TO SHARES. Unless the terms of the Award provide
otherwise, unless and until forfeited pursuant to the terms of this Plan or the
Award, a Participant shall have the right to vote and to receive dividends and
other distributions on shares subject to a Performance Stock Award or Restricted
Stock Award, subject, however, to the terms, conditions and restrictions
described in this Plan and the Award.
 
     (d)  ESCROW. Shares of Common Stock issued pursuant to a Performance Stock
Award or Restricted Stock Award may be held in escrow by the Company until such
time as the Committee shall have determined that the restrictions set forth in
Section 7 have lapsed or until the shares subject to such Performance Stock
Award or Restricted Stock Award are forfeited pursuant to their terms.
 
     (e)  RESTRICTIVE LEGENDS. Certificates for shares of Common Stock delivered
pursuant to Performance Stock Awards or Restricted Stock Awards may bear an
appropriate legend referring to the terms, conditions and restrictions described
in this Plan and in the applicable Award. Any attempt to dispose of any such
shares of Common Stock in contravention of the terms, conditions and
restrictions described in this Plan or in the applicable Award shall be
ineffective. Any shares of Common Stock of the Company or other property,
including cash, received by a Participant as a dividend or as a result of any
stock split, combination, exchange of shares, reorganization, merger,
consolidation or similar event with respect to shares of Common Stock received
pursuant to a Performance Stock Award or Restrictive Stock Award shall have the
same status and bear the same legend and be held in escrow pursuant to Section
7(d) as the shares received pursuant to the Performance Stock Award or
Restricted Stock Award unless otherwise determined by the Committee at the time
of such event.
 
     (f)  DESIGNATION OF BENEFICIARIES. A Participant may designate a
beneficiary or beneficiaries to receive such Participant's Common Stock
hereunder in the event of such Participant's death, and may, at any time and
from time to time, change any such beneficiary designation. All beneficiary
designations and changes therein shall be in writing and shall be effective if
and when delivered to the Committee during the lifetime of the Participant.
 
     (g)  DISCRETIONARY ADJUSTMENTS. Notwithstanding satisfaction of any
Performance Objectives, the number of shares of Common Stock granted, issued,
retainable and/or vested under a Performance Stock Award on account of either
financial performance or personal performance evaluations may be reduced by the
Committee on the basis of
 
                                       10
 
<PAGE>   11
such further considerations as the Committee in its sole discretion shall
determine. The Committee may make adjustments or modifications, and its
determination thereof shall be conclusive, in any applicable Performance
Objectives to give effect to the intent of this Plan in connection with any
event affecting the performance criteria established as the Performance
Objectives, including without limitation, any reorganization, recapitalization,
merger, consolidation, offering of additional shares of Common Stock or other
change in the Company's shareholders' equity by means other than earnings, or
any similar event. The grant of an Award shall not 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.
 
     SECTION 8.  STOCK UNIT AWARDS.
 
     (a)  GRANT OF STOCK UNIT AWARDS. The Committee shall have authority to
grant to Participants Stock Unit Awards, the value of which is based, in whole
or in part, on the value of Common Stock. Each "Stock Unit" shall consist of a
bookkeeping entry representing an amount equivalent to the fair market value of
one share of Common Stock. Such Stock Units represent an unfunded and unsecured
obligation of the Company, except as otherwise provided for by the Committee.
Stock Units may be granted as additional compensation or in lieu of any other
compensation, as specified by the Committee, or may be issued upon exercise of
Options, or in lieu of a Performance Stock Award or Restricted Stock Award,
provided that for any Common Stock to be purchased in connection with a Stock
Unit Award other than upon exercise of an Option or in settlement of a
Performance Stock Award or Restricted Stock Award, the purchase price or the
amount of consideration paid or of other compensation foregone shall be equal to
at least 100% of the fair market value of such Common Stock on the date such
Award is granted. Subject to the provisions of the Plan, Stock Unit Awards shall
be subject to such terms, restrictions, conditions, vesting requirements and
payment rules as the Committee may determine in its sole discretion.
 
     (b)  TRANSFERABILITY OF STOCK UNITS. Unless the Stock Unit Award (or an
amendment thereto authorized by the Committee) expressly states otherwise, any
shares of Common Stock which are part of a Stock Unit Award shall not be
assigned, sold transferred, pledged or otherwise encumbered before the date on
which the shares are issued.
 
     (c)  SETTLEMENT OF STOCK UNITS. Unless provided otherwise by the Committee,
settlement of Stock Units shall be made by issuance of Common Stock and shall
occur within 60 days after a Participant's termination of employment for any
reason. The Committee may provide for Stock Units to be settled in cash (at the
election of the Company or the Participant, as specified by the Committee) and
to be made at such other times as it determines appropriate or as it permits a
Participant to choose. The
 
                                       11
 
 
 
<PAGE>   12
amount of shares of Common Stock, or other settlement medium, to be so
distributed may be increased by an interest factor or by dividend equivalents,
which may be valued as if reinvested in Common Stock. Until a Stock Unit is
settled, the number of shares of Common Stock represented by a Stock Unit shall
be subject to adjustment pursuant to Section 4(d).
 
     SECTION 9.  SPECIAL RULES.
 
     (a)  Notwithstanding anything to the contrary in this Plan, unless
otherwise specifically determined by the Committee (regardless of whether at the
time of grant, at the time of a possible Change of Ownership, or otherwise) all
Options theretofore granted and not fully exercisable shall become exercisable
in full and the restrictions on all outstanding Awards shall lapse upon the
occurrence of a Change of Ownership. A "Change of Ownership" shall be deemed to
have occurred if either (1) individuals who, as of the effective date of this
Plan, constitute the Board of Directors of the Company (the "Board of Directors"
generally and as of the date hereof the "Incumbent Board") cease for any reason
to constitute at least a majority of the directors constituting the Board of
Directors, provided that any person becoming a director subsequent to the
effective date of this Plan whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least three-quarters (3/4)
of the then directors who are members of the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is
(i) in connection with the acquisition by a third person, including a "group" as
such term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "Act"), of beneficial ownership, directly or indirectly, of 20% or
more of the combined voting securities ordinarily having the right to vote for
the election of directors of the Company (unless such acquisition of beneficial
ownership was approved by a majority of the Board of Directors who are members
of the Incumbent Board), or (ii) in connection with an actual or threatened
election contest relating to the election of the directors of the Company, as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Act)
shall be, for purposes of this Plan, considered as though such person were a
member of the Incumbent Board, or (2) the Board of Directors (a majority of
which shall consist of directors who are members of the Incumbent Board) has
determined that a Change of Ownership triggering the exercisability of Options
and the lapse of restrictions on Awards as described in this Section 10 shall
have occurred. Options which become fully exercisable by reason of events
specified in clauses (1) or (2) shall remain exercisable for 90 days following
the date on which they become so exercisable, after which they will revert to
being exercisable in accordance with their original terms, provided, however,
that no Option which has previously been exercised or has expired or otherwise
terminated shall become exercisable by virtue of this Section nor shall this
Section
 
                                       12
<PAGE>   13
permit exercise of any option during the portion, if any, of such 90 day period
which follows the termination or expiration of any such Option.
 
     (b)  For purposes of this Plan and any Option or Award hereunder,
termination of employment shall not be deemed to occur upon the transfer of any
optionee from the employ of the Company to the employ of any Subsidiary or
affiliate. For purposes of this Plan, "affiliate" means (1) any entity 50% or
more of the voting interest in which is owned, directly or indirectly, by an
entity which owns, directly or indirectly, 50% or more of the voting interest in
the Company and (2) any entity which owns, directly or indirectly, 50% or more
of the voting interest in the Company.
 
     SECTION 10.  DELIVERY OF SHARES. No shares of Common Stock shall be
 delivered pursuant to an Award or any exercise of an Option until the
requirements of such laws and regulations as may be deemed by the Committee
to be applicable thereto are satisfied.
 
     SECTION 11.  TAX WITHHOLDING.
 
     (a)  WITHHOLDING OF TAXES. As a condition to the making of an Award, to the
lapse of the restrictions pertaining to an Award, or to the delivery of shares
in connection with the exercise of an Option, the Company may require the
Participant to pay to the Company, or make arrangements satisfactory to the
Committee regarding payment of, any taxes of any kind required by law to be
withheld with respect to such shares of Common Stock.
 
     (b)  WITHHOLDING OF SHARES.
 
     (1) If requested by a Participant who acquires shares of Common Stock upon
         the exercise of an Option or who has received Common Stock pursuant to
         an Award with respect to which the restrictions shall have lapsed, the
         Committee may in its discretion permit the Participant to satisfy any
         tax withholding obligations, in whole or in part, by having the
         Company withhold a portion of such shares with a value equal to the
         amount of taxes required by law to be withheld.
 
     (2) Requests by a Participant to have shares of Common Stock withheld shall
         be (i) made prior to the Tax Date and (ii) irrevocable.
 
     SECTION 12.  AMENDMENTS, SUSPENSION OR DISCONTINUANCE.  The Board of
Directors or the Committee may amend, suspend or discontinue the Plan or any
Option or Award granted under the Plan.
 
     SECTION 13.  TERM OF PLAN. The Plan shall become effective on the date it
is approved and adopted by the Board. No Option or Award shall be granted under
the Plan after the date that is ten (10) years after the date on which the Plan
is approved and adopted by the Board or after such earlier date as the Committee
may decide, in its sole discretion.
 
     SECTION 14.  OPTION GRANTS BY SUBSIDIARIES. In the case of a grant of an
option to any Participant by a Subsidiary, such grant may, if the Committee so
directs, be implemented by the Corporation issuing any subject shares to the
Subsidiary, for such lawful consideration as the Committee may determine, upon
the condition or understanding that the Subsidiary will transfer the shares
to the optionholder in accordance with the terms of the option specified by the
Committee pursuant to the provisions of the Plan. Notwithstanding any other
provision hereof, such option may be issued by and in the name of the Subsidiary
and shall be deemed granted on such date as the Committee shall determine.
 
     SECTION 15.  NON-EXCLUSIVITY OF THE PLAN. The adoption of the Plan by the
Board shall not be construed as creating any limitations on the power of the
Board or the Committee to adopt such other incentive arrangements as it or they
may deem desirable, including without limitation, the granting of restricted
stock or stock options otherwise than under the Plan, and such arrangements
may be either generally applicable or applicable only in specific cases.
    
 
  KAUFMAN AND BROAD HOME CORPORATION
 
             PERFORMANCE-BASED INCENTIVE PLAN FOR SENIOR MANAGEMENT
 
 
                 SECTION 1.  Purpose.  The purposes of the Kaufman and Broad
Home Corporation Performance-Based Incentive Plan for Senior Management are to
promote the interests of  Kaufman and Broad Home Corporation (the "Company")
and its stockholders by (i) attracting and retaining exceptional executive
personnel and other key employees of the Company and its Affiliates, as defined
below; (ii) motivating such employees by means of performance-related
incentives to achieve long-range performance goals; (iii) enabling such
employees to participate in the long-term growth and financial success of the
Company; and (iv) qualifying compensation paid under the Plan for deductibility
under Section 162(m) of the Internal Revenue Code.
 
                 SECTION 2.  Definitions.  As used in the Plan, the following
terms shall have the meanings set forth below:
 
                 "Affiliate" shall mean (i) any entity that, directly or
indirectly, is controlled by the Company and (ii) any entity in which the
Company has a significant equity interest, in either case as determined by the
Committee.
 
                 "Award" shall mean any Performance-Based Bonus opportunity
granted under the Plan, as well as any Option, Stock Appreciation Right, award
of Restricted Stock, Restricted Stock Units or Other Stock-Based Award granted
under the Plan or granted in payment or settlement of a Performance-Based
Bonus.
 
                 "Award Agreement" shall mean any written agreement, contract,
or other instrument or document (which may include, if so designated by the
Committee, an Employment Agreement, as defined herein) evidencing any Award,
which may, but need not, be executed or acknowledged by a Participant.
 
                 "Board" shall mean the Board of Directors of the Company.
 
                 "Change of Ownership" shall be deemed to have occurred if
either (1) individuals who, as of the effective date of this Plan, constitute
the Board of the Company (as of the date hereof, the "Incumbent Board") cease
for any reason to constitute at least a majority of the directors constituting
the Board, provided that any person becoming a director subsequent to the
effective date of this Plan whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least three-quarters (3/4)
of the then directors who are members of the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is
(A) in connection with the acquisition by a third person, including a "group"
as such term is used in Section 13(d)(3) of the Exchange Act, of beneficial
ownership, directly or indirectly, of 20% or more of the combined voting
securities ordinarily having the right to vote for the election of directors of
the Company (unless such acquisition of beneficial ownership was approved by a
majority of the Board who are members of the Incumbent Board), or (B) in
connection with an actual or threatened election contest relating to the
election of the directors of the Company, as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of
this Plan, considered as though such person were a member of the Incumbent
Board, or (2) the Board (a majority of which shall consist of directors who are
members of the Incumbent Board) has determined that a Change of Ownership, for
purposes of this Plan, shall have occurred.  If any of the events enumerated in
clauses (1) or (2) occur, the Board shall determine the effective date of the
Change of Ownership resulting therefrom, for purposes of the Plan.
 
                 "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
 
                 "Committee" shall mean a committee of the Board designated by
the Board to administer the Plan and composed of not less than the minimum
number of persons from time to time required by Rule 16b-3, each of whom (i) to
the extent necessary to comply with Rule 16b-3 only, is a "disinterested
person" within the
<PAGE>   2
meaning of Rule 16b-3 and (ii) to the extent necessary to comply with Section
162(m) only, is an "outside director" within the meaning of Section 162(m).
Until otherwise determined by the Board, the Compensation Committee designated
by the Board shall be the Committee under the Plan.
 
                 "Company" shall mean Kaufman and Broad Home Corporation,
together with any successor thereto.
 
                 "Employment Agreement" shall mean (i) with respect to Awards
relating to performance in fiscal year 1995, an agreement between the Company
and a Participant, the effectiveness or continuing effectiveness of which is
contingent upon approval, or approval of the Plan, by the Company's
stockholders, which approval shall satisfy all applicable requirements of
Section 162(m) and (ii) with respect to Awards relating to performance in any
fiscal year of the Company after fiscal year 1995, an agreement between the
Company and a Participant entered into prior to the end of the first fiscal
quarter of such fiscal year.
 
                 "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
 
                 "Fair Market Value" shall mean the fair market value of the
property or other item being valued, as determined by the Committee in its sole
discretion.
 
                 "Incentive Stock Option" shall mean a right to purchase Shares
from the Company that is granted under Section 7 of the Plan and that is
intended to meet the requirements of Section 422 of the Code or any successor
provision thereto.
 
                 "Non-Qualified Stock Option" shall mean a right to purchase
Shares from the Company that is granted under Section 7 of the Plan and that is
not intended to be an Incentive Stock Option.
 
                 "Officer" shall mean, at any time, an individual who is an
officer of the Company or any of its subsidiaries.
 
                 "Option" shall mean an Incentive Stock Option or a
Non-Qualified Stock Option and shall include a Restoration Option.
 
                 "Other Stock-Based Award" shall mean any right granted under
Section 10 of the Plan.
 
                 "Participant" shall mean any Officer selected by the Committee
to receive an Award under the Plan.
 
                 "Performance-Based Bonus" shall mean a bonus opportunity
awarded in accordance with Section 6 of the Plan.
 
                 "Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization,
government or political subdivision thereof or other entity.
 
                 "Plan" shall mean this Kaufman and Broad Home Corporation
Performance-Based Incentive Plan for Senior Management.
 
                 "QDRO" shall mean a qualified domestic relations order meeting
such requirements as the Committee shall determine, in its sole discretion.
 
                 "Restoration Option" shall mean an Option granted pursuant to
Section 7(e) of the Plan.
 
                 "Restricted Stock" shall mean any Share granted under Section
9 of the Plan.
 
                 "Restricted Stock Unit" shall mean any unit granted under
Section 9 of the Plan.
 
                 "Rule 16b-3" shall mean Rule 16b-3 as promulgated and
interpreted by the SEC under the Exchange Act, or any successor rule or
regulation thereto as in effect from time to time.
<PAGE>   3
                 "Section 162(m)" shall mean Section 162(m) of the Code and the
rules and other authorities thereunder promulgated by the Internal Revenue
Service of the Department of the Treasury.
 
                 "SEC" shall mean the Securities and Exchange Commission or any
successor thereto and shall include the Staff thereof.
 
                 "Shares" shall mean shares of the Common Stock, $1 par value,
of the Company, or such other securities of the Company as may be designated by
the Committee from time to time.
 
                 "Stock Appreciation Right" shall mean any right granted under
Section 8 of the Plan.
 
                 "Substitute Awards" shall mean Awards granted in assumption
of, or in substitution for, outstanding awards previously granted by a company
acquired by the Company or with which the Company combines.
 
                 SECTION 3.  Administration.
 
                 (a)  Authority of Committee.  The Plan shall be administered
by the Committee.  Subject to the terms of the Plan and applicable law, and in
addition to other express powers and authorizations conferred on the Committee
by the Plan, the Committee shall have full power and authority to:  (i)
designate Participants; (ii) determine the type or types of Awards to be
granted to an eligible Officer; (iii) determine the number of Shares to be
covered by, or with respect to which payments, rights, or other matters are to
be calculated in connection with, Awards; (iv) determine the terms and
conditions of any Award; (v) determine whether, to what extent, and under what
circumstances Awards may be settled or exercised in cash, Shares, other
securities, other Awards or other property, or canceled, forfeited, or
suspended and the method or methods by which Awards may be settled, exercised,
canceled, forfeited, or suspended; (vi) determine whether, to what extent, and
under what circumstances cash, Shares, other securities, other Awards, other
property, and other amounts payable with respect to an Award shall be deferred
either automatically or at the election of the holder thereof or of the
Committee; (vii) interpret and administer the Plan and any instrument or
agreement relating to, or Award made under, the Plan; (viii) recommend to the
Board any amendment, alteration, suspension, discontinuance or termination of
the Plan, and subject to the shareholder approval requirement set forth in
Section 11(a) to take any such action not required by applicable law to be
taken by the Board, (ix) establish, amend, suspend, or waive such rules and
regulations and appoint such agents as it shall deem appropriate for the proper
administration of the Plan; and (x) make any other determination and take any
other action that the Committee deems necessary or desirable for the
administration of the Plan.
 
                 (b)  Committee Discretion Binding.  Unless otherwise expressly
provided in the Plan, all designations, determinations, interpretations, and
other decisions under or with respect to the Plan or any Award shall be within
the sole discretion of the Committee, may be made at any time and shall be
final, conclusive, and binding upon all Persons, including the Company, any
Affiliate, any Participant, any holder or beneficiary of any Award, any
stockholder and any Officer.
<PAGE>   4
                 SECTION 4.  Award Limits.
 
                 (a)  Plan Shares.  Subject to adjustment as provided in
Section 4(c), the number of Shares with respect to which Awards may be granted
under the Plan shall be 1,000,000.  If, after the effective date of the Plan,
any Shares covered by an Award denominated in Shares granted under the Plan, or
to which such an Award relates, are forfeited, or if such an Award is settled
for cash or otherwise terminates or is canceled without the delivery of Shares,
then the Shares covered by such Award, or to which such Award relates, or the
number of Shares otherwise counted against the aggregate number of Shares with
respect to which Awards may be granted, to the extent of any such settlement,
forfeiture, termination or cancellation, shall again become Shares with respect
to which Awards may be granted.  In the event that any Option or other Award
granted hereunder is exercised through the delivery of Shares or in the event
that withholding tax liabilities arising from such Award are satisfied by the
withholding of Shares by the Company, the number of Shares available for Awards
under the Plan shall be increased by the number of Shares so surrendered or
withheld.
 
                 (b)      Individual Stock-Based Awards.  Subject to adjustment
as provided in Section 4(c), no Participant may receive stock-based Awards
under the Plan in any calendar year that relate to more than 100,000 Shares
(which number shall not be subject to reduction by any Restoration Options
granted to such Participant during such calendar year); provided, however, that
such number may be increased with respect to any Participant by any Shares
available for grant to such Participant in accordance with this Paragraph 4(b)
in any prior years that were not granted in such prior years.  No provision of
this Paragraph 4(b) shall be construed as limiting the amount of any cash-based
Award which may be granted to any Participant.
 
                 (c)  Adjustments.  In the event that the Committee determines
that any dividend or other distribution (whether in the form of cash, Shares,
other securities, or other property), recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of Shares or other securities of the
Company, issuance of warrants or other rights to purchase Shares or other
securities of the Company, or other similar corporate transaction or event
affects the Shares such that an adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust any or all of
(i) the number of Shares or other securities of the Company (or number and kind
of other securities or property) with respect to which Awards may be granted,
(ii) the number of Shares or other securities of the Company (or number and
kind of other securities or property) subject to outstanding Awards, and (iii)
the grant or exercise price with respect to any Award, or, if deemed
appropriate, make provision for a cash payment to the holder of an outstanding
Award; provided, in each case, that (A) with respect to Awards of Incentive
Stock Options no such adjustment shall be authorized to the extent that such
authority would cause the Plan to fail to qualify under Section 422(b)(1) of
the Code, as from time to time amended and (B) with respect to any Award no
such adjustment shall be authorized to the extent that such authority would be
inconsistent with the Plan's meeting the requirements of Section 162(m) of the
Code, as from time to time amended.
 
                 (d)  Substitute Awards.  Any Shares underlying Substitute
Awards shall not, except in the case of Shares with respect to which Substitute
Awards are granted to individuals who are officers or directors of the Company
for purposes of Section 16 of the Exchange Act or any successor section
thereto, be counted against the Shares available for Awards under the Plan.
 
                 (e)  Sources of Shares Deliverable Under Awards.  Any Shares
delivered pursuant to an Award may consist, in whole or in part, of authorized
and unissued Shares or of Shares acquired by the Company on the open market or
otherwise.
 
                 (f)      Cash Award Limits.  (i) Any Participant who is the
Chief Executive Officer at the time of payment of an Award (other than a
stock-based Award) shall be eligible to be paid in any calendar year an amount
not in excess of $3,000,000 in respect of any such cash Award under the Plan,
(ii) no Participant other than a Participant described in clause (i) of this
Paragraph 4(f) shall be eligible to be paid in any calendar year more than
$2,000,000 in respect of any such cash Award.  No provision of this Paragraph
4(f) shall be construed as limiting the number of stock-based Awards that a
Participant may receive.
<PAGE>   5
                 SECTION 5.  Eligibility.  Any Officer, including any Officer
who is a director of the Company or any Affiliate, who is not a member of the
Committee, shall be eligible to be designated a Participant.
 
                 SECTION 6.  Performance-Based Bonuses.
 
                 (a)      At such times and in such manner as may be prescribed
by Section 162(m), the Committee may select Participants and award to such
Participants the opportunity to earn a Performance-Based Bonus, which will be
contingent upon the Company's attainment of performance goals selected by the
Committee.
 
                 (b)  Performance goals which may be employed by the Committee
for purposes of a Performance-Based Bonus awarded under Paragraph (a) will
include pre-tax income, after-tax income, cash flow, return on equity, return
on capital, earnings per share, unit volume, net sales or service quality, as
determined in accordance with GAAP, if applicable, which goals may relate to
the Company as a whole or, if applicable, to the performance of one or more
specific divisions or Affiliates.
 
                 (c)      Notwithstanding Paragraphs (a) and (b), the formula
for determining a Performance-Based Bonus to any Participant may, if so
determined by the Committee, be governed by the terms of an Employment
Agreement applicable to such Participant.
 
                 (d)      Performance-Based Bonuses awarded under Paragraph (a)
may be paid in cash, other Awards or any combination thereof, and the form of
payment may be governed, as to any Participant, by an Employment Agreement
applicable to such Participant.
 
                 SECTION 7.  Stock Options.
 
                 (a)   Grant.  Subject to the provisions of the Plan, the
Committee shall have sole and complete authority to determine the Officers to
whom Options shall be granted, the number of Shares to be covered by each
Option, the option price therefor and the conditions and limitations applicable
to the exercise of the Option.  The Committee shall have the authority to grant
Incentive Stock Options, or to grant Non-Qualified Stock Options, or to grant
both types of options.  In the case of Incentive Stock Options, the terms and
conditions of such grants shall be subject to and comply with such rules as may
be prescribed by Section 422 of the Code, as from time to time amended, and any
regulations implementing such statute.
 
                 (b)  Exercise Price.  The Committee in its sole discretion
shall establish the exercise price at the time each Option is granted, which
exercise price shall be not less than the Fair Market Value of the Shares
subject to the Option on the date of grant of the Option.
 
                 (c)  Exercise.  Each Option shall be exercisable at such times
and subject to such terms and conditions as the Committee may, in its sole
discretion, specify in the applicable Award Agreement or thereafter.  The
Committee may impose such conditions with respect to the exercise of Options,
including without limitation, any relating to the application of federal or
state securities laws, as it may deem necessary or advisable.
 
                 (d)  Payment.  No Shares shall be delivered pursuant to any
exercise of an Option until payment in full of the option price therefor is
received by the Company.  Such payment may be made in cash, or its equivalent,
or, if and to the extent permitted by the Committee, by exchanging Shares owned
by the Participant (which are not the subject of any pledge or other security
interest), or by a combination of the foregoing, provided that the combined
value of all cash and cash equivalents and the Fair Market Value of any such
Shares so tendered to the Company as of the date of such tender is at least
equal to such option price plus the related amount of any taxes required to be
withheld by the Company in connection with such exercise, to the extent such
withholding taxes are then ascertainable.  If the amount of such taxes is not
ascertainable at the time of the notice of exercise, such amount shall be
tendered by you to the Company as soon as the same shall become ascertainable
and shall be communicated to you by the Company.
<PAGE>   6
                 (e)  Restoration Options.  In the event that any Participant
delivers Shares in payment of the exercise price of any Option granted
hereunder in accordance with Section 7(d), or in the event that the withholding
tax liability arising upon exercise of any Option by a Participant is satisfied
through the withholding by the Company of Shares otherwise deliverable upon
exercise of the Option, the Committee shall have the authority to grant or
provide for the automatic grant of a Restoration Option to such Participant.
The grant of a Restoration Option shall be subject to the satisfaction of such
conditions or criteria as the Committee in its sole discretion shall establish
from time to time.  A Restoration Option shall entitle the holder thereof to
purchase a number of Shares equal to the number of such Shares so delivered or
withheld upon exercise of the original Option, in the discretion of the
Committee.  A Restoration Option shall have a per share exercise price of not
less than the Fair Market Value of the Shares subject to such Restoration
Option on the date of grant thereof and such other terms and conditions as the
Committee in its sole discretion shall determine.
 
                 SECTION 8.  Stock Appreciation Rights.
 
                 (a)  Grant.  Subject to the provisions of the Plan, the
Committee shall have sole and complete authority to determine the Officers to
whom Stock Appreciation Rights shall be granted, the number of Shares to be
covered by each Stock Appreciation Right Award, the grant price thereof and the
conditions and limitations applicable to the exercise thereof.  Stock
Appreciation Rights may be granted in tandem with another Award, in addition to
another Award, or freestanding and unrelated to another Award.  Stock
Appreciation Rights granted in tandem with or in addition to an Award may be
granted either at the same time as the Award or at a later time.
 
                 (b)  Exercise and Payment.  A Stock Appreciation Right shall
entitle the Participant to receive an amount equal to the excess of the Fair
Market Value of a Share on the date of exercise of the Stock Appreciation Right
over the grant price thereof, provided that the Committee may for
administrative convenience determine that, with respect to any Stock
Appreciation Right which is not related to an Incentive Stock Option and which
can only be exercised for cash during limited periods of time in order to
satisfy the conditions of Rule 16b-3, the exercise of such Stock Appreciation
Right for cash during such limited period shall be deemed to occur for all
purposes hereunder on the day during such limited period on which the Fair
Market Value of the Shares is the highest.  Any such determination by the
Committee may be changed by the Committee from time to time and may govern the
exercise of Stock Appreciation Rights granted prior to such determination as
well as Stock Appreciation Rights thereafter granted.  The Committee shall
determine whether a Stock Appreciation Right shall be settled in cash, Shares
or a combination of cash and Shares.
 
                 (c)  Other Terms and Conditions.  Subject to the terms of the
Plan and any applicable Award Agreement, the Committee shall determine, at or
after the grant of a Stock Appreciation Right, the term, methods of exercise,
methods and form of settlement, and any other terms and conditions of any Stock
Appreciation Right.  Any such determination by the Committee may be changed by
the Committee from time to time and may govern the exercise of Stock
Appreciation Rights granted or exercised prior to such determination as well as
Stock Appreciation Rights granted or exercised thereafter.  The Committee may
impose such conditions or restrictions on the exercise of any Stock
Appreciation Right as it shall deem appropriate.
 
                 SECTION 9.  Restricted Stock.
 
                 (a)  Grant.  Subject to the provisions of the Plan, the
Committee shall have sole and complete authority to determine the Officers to
whom Shares of Restricted Stock shall be granted, the number of Shares of
Restricted Stock to be granted to each Participant, the duration of the period
during which, and the conditions under which, the Restricted Stock may be
forfeited to the Company, and the other terms and conditions of such Awards.
Notwithstanding any other provision of this Plan to the contrary, the period
during which such Awards may be forfeited to the Company shall not terminate
prior to the third anniversary of the date of grant of such Award; provided,
however, that the Committee may determine to have such period terminate after
the first anniversary of the date of grant of any such Award if the Committee
has established conditions for the earning of such Award that relate to
performance of the Company or one or more divisions or units thereof.  Subject
to the preceding sentence, once established, such performance vesting criteria
may be changed, adjusted or amended during the term of an Award.
<PAGE>   7
                 (b)  Transfer Restrictions.  Shares of Restricted Stock may
not be sold, assigned, transferred, pledged or otherwise encumbered, except as
provided in the Plan or the applicable Award Agreements.  Certificates issued
in respect of Shares of Restricted Stock shall be registered in the name of the
Participant and deposited by such Participant, together with a stock power
endorsed in blank, with the Company.  Upon the lapse of the restrictions
applicable to such Shares of Restricted Stock, the Company shall deliver such
certificates to the Participant or the Participant's legal representative.
 
                 (c)  Dividends and Distributions.  Dividends and other
distributions paid on or in respect of any Shares of Restricted Stock may be
paid directly to the Participant, or may be reinvested in additional Shares of
Restricted Stock, as determined by the Committee in its sole discretion.
 
                 SECTION 10.  Change of Ownership.  Notwithstanding anything to
the contrary in this Plan, unless otherwise specifically determined by the
Committee at the time of grant, all Options theretofore granted and not fully
exercisable shall become exercisable in full and the restrictions on any other
outstanding Awards shall lapse upon the occurrence of a Change of Ownership.
 
                 SECTION 11.  Other Stock-Based Awards.  The Committee shall
have authority to grant to any Officer an "Other Stock-Based Award", which
shall consist of any right which is (i) not an Award described in Sections 6
through 9 above and (ii) an Award of Shares or an Award denominated or payable
in, valued in whole or in part by reference to, or otherwise based on or
related to, Shares (including, without limitation, securities convertible into
Shares), as deemed by the Committee to be consistent with the purposes of the
Plan; provided that any such rights must comply, to the extent deemed desirable
by the Committee, with Rule 16b-3 and applicable law.  Subject to the terms of
the Plan and any applicable Award Agreement, the Committee shall determine the
terms and conditions of any such Other Stock-Based Award.
 
                 SECTION 12.  Amendment and Termination.
 
                 (a)  Amendments to the Plan.  Subject to the authority of the
Committee as set forth in Section 3, the Board may amend, alter, suspend,
discontinue, or terminate the Plan or any portion thereof at any time; provided
that no such amendment, alteration, suspension, discontinuation or termination
shall be made without shareholder approval if such approval is necessary to
comply with any tax or regulatory requirement, including for these purposes any
approval requirement which is a prerequisite for exemptive relief from Section
16(b) of the Exchange Act, for which or with which the Board deems it necessary
or desirable to qualify or comply.  Notwithstanding anything to the contrary
herein, the Committee may amend the Plan in such manner as may be necessary so
as to have the Plan conform with local rules and regulations in any
jurisdiction outside the United States.
 
                 (b)  Amendments to Awards.  The Committee may waive any
conditions or rights under, amend any terms of, or alter, suspend, discontinue,
cancel or terminate, any Award theretofore granted, prospectively or
retroactively; provided that any such waiver, amendment, alteration,
suspension, discontinuance, cancellation or termination that would adversely
affect the rights of any Participant or any holder or beneficiary of any Award
theretofore granted shall not to that extent be effective without the consent
of the affected Participant, holder or beneficiary; and provided further that
no outstanding Option may be amended to decrease the per Share exercise price
thereof, except in accordance with Section 4(c).
 
                 (c)  Adjustment of Awards Upon the Occurrence of Certain
Unusual or Nonrecurring Events.  The Committee is hereby authorized to make
adjustments in the terms and conditions of, and the criteria included in,
Awards in recognition of unusual or nonrecurring events (including, without
limitation, the events described in Section 4(c) hereof) affecting the Company,
any Affiliate, or the financial statements of the Company or any Affiliate, or
of changes in applicable laws, regulations, or accounting principles, whenever
the Committee determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan; provided that no such adjustment shall be
authorized to the extent that such authority would be inconsistent with the
Plan's meeting the requirements of Section 162(m) of the Code, as from time to
time amended.
<PAGE>   8
                 (d)  Cancellation.  Any provision of this Plan or any Award
Agreement to the contrary notwithstanding, the Committee may cause any Award
granted hereunder to be canceled in consideration of a cash payment or
alternative Award made to the holder of such canceled Award equal in value to
the Fair Market Value of such canceled Award.
 
                 SECTION 13.  General Provisions.
 
                 (a)  Dividend Equivalents.  In the sole and complete
discretion of the Committee, an Award, whether made as an Other Stock-Based
Award under Section 10 or as an Award granted pursuant to Sections 6 through 9
hereof, may provide the Participant with dividends or dividend equivalents,
payable in cash, Shares, other securities or other property on a current or
deferred basis.
 
                 (b)  Nontransferability.  No Award shall be assigned,
alienated, pledged, attached, sold or otherwise transferred or encumbered by a
Participant, except by will or the laws of descent and distribution, provided,
however, that an Award may be transferable, to the extent set forth in the
applicable Award Agreement, (i) if such Award Agreement provisions do not
disqualify such Award for exemption under Rule 16b-3, or (ii) if such Award is
not intended to qualify for exemption under such rule.
 
                 (c)  No Rights to Awards.  Except as may be provided in an
Employment Agreement, no Officer, Participant or other Person shall have any
claim to be granted any Award, and there is no obligation for uniformity of
treatment of Employees, Participants, or holders or beneficiaries of Awards.
The terms and conditions of Awards need not be the same with respect to each
recipient.
 
                 (d)  Share Certificates.  All certificates for Shares or other
securities of the Company or any Affiliate delivered under the Plan pursuant to
any Award or the exercise thereof shall be subject to such stop transfer orders
and other restrictions as the Committee may deem advisable under the Plan or
the rules, regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which such Shares or other securities are
then listed, and any applicable Federal or state laws, and the Committee may
cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions.
 
                 (e)  Delegation.  Subject to the terms of the Plan and
applicable law, the Committee may delegate to one or more officers or managers
of the Company or any Affiliate, or to a committee of such officers or
managers, the authority, subject to such terms and limitations as the Committee
shall determine, to grant Awards to, or to cancel, modify or waive rights with
respect to, or to alter, discontinue, suspend, or terminate Awards held by,
Officers who are not officers or directors of the Company for purposes of
Section 16 of the Exchange Act, or any successor section thereto, or who are
otherwise not subject to such Section.
 
                 (f)  Withholding.  A Participant may be required to pay to the
Company or any Affiliate and the Company or any Affiliate shall have the right
and is hereby authorized to withhold from any Award, from any payment due or
transfer made under any Award or under the Plan or from any compensation or
other amount owing to a Participant the amount (in cash, Shares, other
securities, other Awards or other property) of any applicable withholding taxes
in respect of an Award, its exercise, or any payment or transfer under an Award
or under the Plan and to take such other action as may be necessary in the
opinion of the Company to satisfy all obligations for the payment of such
taxes.  The Committee may provide for additional cash payments to holders of
Awards to defray or offset any tax arising from the grant, vesting, exercise or
payments of any Award.
<PAGE>   9
                 (g)  Award Agreements.  Each Award hereunder shall be
evidenced by an Award Agreement which shall be delivered to the Participant and
shall specify the terms and conditions of the Award and any rules applicable
thereto, including but not limited to the effect on such Award of the death,
retirement or other termination of employment of a Participant.
 
                 (h)  No Limit on Other Compensation Arrangements.  Nothing
contained in the Plan shall prevent the Company or any Affiliate from adopting
or continuing in effect other compensation arrangements, which may, but need
not, provide for the grant of bonuses, options, restricted stock, Shares and
other types of Awards provided for hereunder (subject to shareholder approval
if such approval is required), and such arrangements may be either generally
applicable or applicable only in specific cases.
 
                 (i)  No Right to Employment.  The grant of an Award shall not
be construed as giving a Participant the right to be retained in the employ of
the Company or any Affiliate.  Further, the Company or an Affiliate may at any
time dismiss a Participant from employment, free from any liability or any
claim under the Plan, unless otherwise expressly provided in the Plan or in any
Award Agreement.
 
                 (j)  No Rights as Stockholder.  Subject to the provisions of
the applicable Award, no Participant or holder or beneficiary of any Award
shall have any rights as a stockholder with respect to any Shares to be
distributed under the Plan until he or she has become the holder of such
Shares.  Notwithstanding the foregoing, in connection with each grant of
Restricted Stock hereunder, the applicable Award shall specify if and to what
extent the Participant shall not be entitled to the rights of a stockholder in
respect of such Restricted Stock.
 
                 (k)  Governing Law.  The validity, construction, and effect of
the Plan and any rules and regulations relating to the Plan and any Award
Agreement shall be determined in accordance with the laws of the State of
California, except to the extent that the General Corporation Law of the State
of Delaware shall be applicable to the Company.
 
                 (l)  Severability.  If any provision of the Plan or any Award
is or becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction or as to any Person or Award, or would disqualify the Plan or any
Award under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended to conform the applicable laws, or if it cannot be
construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan or the Award, such provision shall
be stricken as to such jurisdiction, Person or Award and the remainder of the
Plan and any such Award shall remain in full force and effect.
 
                 (m)  Other Laws.  The Committee may refuse to issue or
transfer any Shares or other consideration under an Award if, acting in its
sole discretion, it determines that the issuance or transfer of such Shares or
such other consideration might violate any applicable law or regulation or
entitle the Company to recover the same under Section 16(b) of the Exchange
Act, and any payment tendered to the Company by a Participant, other holder or
beneficiary in connection with the exercise of such Award shall be promptly
refunded to the relevant Participant, holder or beneficiary.  Without limiting
the generality of the foregoing, no Award granted hereunder shall be construed
as an offer to sell securities of the Company, and no such offer shall be
outstanding, unless and until the Committee in its sole discretion has
determined that any such offer, if made, would be in compliance with all
applicable requirements of the U.S. federal securities laws and any other laws
to which such offer, if made, would be subject.
 
                 (n)  No Trust or Fund Created.  Neither the Plan nor any Award
shall create or be construed to create a trust or separate fund of any kind or
a fiduciary relationship between the Company or any Affiliate and a Participant
or any other Person.  To the extent that any Person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Award, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate.
 
                 (o)  No Fractional Shares.  No fractional Shares shall be
issued or delivered pursuant to the Plan or any Award, and the Committee shall
determine whether cash, other securities, or other property shall be paid or
transferred in lieu of any fractional Shares or whether such fractional Shares
or any rights thereto shall be canceled,
<PAGE>   10
terminated, or otherwise eliminated.
 
                 (p)      Headings.  Headings are given to the Sections and
subsections of the Plan solely as a convenience to facilitate reference.  Such
headings shall not be deemed in any way material or relevant to the
construction or interpretation of the Plan or any provision thereof.
 
                 SECTION 13.  Term of the Plan.
 
                 (a)  Effective Date.  The Plan shall be effective as of
December 1, 1994, subject to approval by the shareholders of the Company within
one year thereafter.
 
                 (b)  Expiration Date.  No Incentive Stock Option shall be
granted under the Plan after November 30, 2004.   Unless otherwise expressly
provided in the Plan or in an applicable Award Agreement, any Award granted
hereunder may, and the authority of the Board or the Committee to amend, alter,
adjust, suspend, discontinue, or terminate any such Award or to waive any
conditions or rights under any such Award shall, continue after the authority
for grant of new Awards hereunder has been exhausted.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.19
<SEQUENCE>3
<DESCRIPTION>EXHIBIT 10.19
<TEXT>