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•	We report our political contributions to the Nominating/Governance Committee and in our public Sustainability Report.

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(a)	Dr. Gilligan was appointed to the Audit Committee on July 18, 2012, the date on which he was elected to the Board, and served on the Audit Committee for the remainder of our 2012 fiscal year.

(b)	Mr. Johnson served on the Audit Committee during our 2012 fiscal year until April 12, 2012. He was appointed to the Nominating/Governance Committee on April 12, 2012.

(c)	Mr. McCaffery served on the Audit Committee during our 2012 fiscal year until April 12, 2012.

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•	any transaction in which the total amount involved is equal to or less than $120,000;

•	the employment and compensation (a) of a director or executive officer if the individual’s compensation is reported in our annual proxy statement, or (b) of any other executive officer who is not an immediate family member of one of the foregoing individuals or a director nominee if such executive officer’s compensation was approved, or recommended for approval, by the Compensation Committee;

•	any transaction that would not (a) need to be reported under federal securities laws, (b) be deemed to impair a director’s independence under our Corporate Governance Principles or (c) be deemed to be a conflict of interest under our Ethics Policy; and

•	any transaction where an individual’s interest therein arises solely from ownership of our common stock and all holders of our common stock received the same benefit on a pro-rata basis.

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(a)

Fees Earned or Paid in Cash. These amounts represent the total stock unit dividend equivalent payments made during our 2012 fiscal year and payments of annual and Committee-related retainers based on the elections of non-employee directors to receive such retainers in cash rather than in Director Plan stock units. Non-employee directors with larger stock unit holdings based on their tenure and compensation elections received greater dividend equivalent payments. The amount shown for Mr. Bollenbach also includes his Non-Executive Chairman of the Board retainer.

(b)

Stock Awards and Option Awards. These amounts represent the aggregate grant-date fair value of the Director Plan stock unit and stock option awards granted to our non-employee directors during our 2012 fiscal year, computed in accordance with Accounting Standards Codification Topic No. 718, “Compensation – Stock Compensation” (“ASC 718”). Dr. Gilligan was granted a pro-rated amount of stock units and stock options on the date of his election to the Board. Below are the amounts of Director Plan stock options and stock units granted to each non-employee director during our 2012 fiscal year based on each director’s compensation elections and Board Committee service.

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(c)

All Other Compensation. These amounts represent the premium payments we paid for the life insurance policies we maintain to fund charitable donations under the Directors’ Legacy Program, which is described below. In our 2012 fiscal year, we paid a total of $42,739 in life insurance premiums, including for policies maintained with respect to participants who are former directors. Some of the life insurance policies we maintain for the program did not require premium payments to be made in our 2012 fiscal year. Premium payments, where required, vary depending on participants’ respective ages and other factors. The total dollar amount payable under the program at November 30, 2012, with all participating directors having vested in the full donation amount, was $15.6 million.

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(a)	In addition to the common stock ownership shown in the above table, our non-employee directors hold Director Plan stock units, which have a value equivalent to the value of a share of our common stock, as discussed above under the heading “Director Compensation.” Their respective holdings are as follows:

(b)	Included are the following shares of common stock that can be acquired within 60 days of February 14, 2013 through the exercise of stock options: Mr. Mezger 4,026,116; Mr. Kaminski 150,345; Mr. Praw 56,000; Mr. Woram 167,019; and Mr. Hollinger 446,316; and all current executive officers as a group 4,880,269.

(c)	Included are shares of restricted common stock in the following amounts: Mr. Mezger 0; Mr. Kaminski 21,140; Mr. Praw 14,479; Mr. Woram 26,247; and Mr. Hollinger 7,702; and all current executive officers as a group 81,274.

(d)	Ms. Alexander holds 26,000 shares of our common stock in a trust in which she and her spouse are trustees and sole beneficiaries and over which they jointly exercise voting and investment power.

(e)	Ms. Lora holds 2,043 shares of our common stock in a trust in which she and her spouse are trustees and sole beneficiaries and over which they jointly exercise voting and investment power.

*	Indicates less than one percent ownership.

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(a)

The stock holding information is based solely on an amendment to Schedule 13G dated January 9, 2013 that BlackRock, Inc., a parent holding company, filed with the SEC to report its beneficial ownership as of December 31, 2012. Of the amount reported as beneficially owned, BlackRock, Inc. subsidiaries, collectively, had sole voting power as to 9,412,634 shares of our common stock and had sole dispositive power as to 9,412,634 shares, and one such subsidiary, BlackRock Advisors, LLC, beneficially owned more than 5% of our outstanding common stock.

(b)	The percent of class figures are from the respective Schedule 13G filings by BlackRock, Inc., FMR LLC and Edward C. Johnson 3d, and The Vanguard Group, Inc., and reflect the filers’ respective determinations as of December 31, 2012.

(c)

The stock holding information is based solely on an amendment to Schedule 13G dated February 13, 2013 that FMR LLC, a parent holding company, filed with the SEC to report the beneficial ownership of FMR LLC and Mr. Edward C. Johnson 3d, FMR LLC’s chairman, at December 31, 2012. Of the amount reported as beneficially owned, Fidelity Management & Research Company (“Fidelity”), an investment advisor to various investment companies and a wholly-owned subsidiary of FMR LLC, beneficially owns 9,787,908 shares of our common stock. Each of Edward C. Johnson 3d and FMR LLC, through its control of Fidelity and the various investment companies, has sole power to dispose of the 9,787,908 shares. Neither FMR LLC nor Edward C. Johnson 3d has the sole power to vote or to direct the voting of these shares. Fidelity carries out the voting of these shares under written guidelines established by such investment companies’ Boards of Trustees. Pyramis Global Advisors Trust Company (“Pyramis”), an indirect wholly-owned subsidiary of FMR LLC and a bank, is the beneficial owner of 8,300 shares as a result of its serving as investment manager of institutional accounts owning such shares. Edward C. Johnson 3d and FMR LLC, through its control of Pyramis, each has sole dispositive power over, and sole power to vote or to direct the voting of, the 8,300 shares.

(d)

The GSOT holds all of the shares of our common stock shown above pursuant to a trust agreement, with Wells Fargo Bank, N.A. as trustee. Both the GSOT and the trustee disclaim beneficial ownership of the shares reported. Under the trust agreement, our employees who hold unexercised common stock options under our employee equity compensation plans will determine how the GSOT shares are voted. The number of GSOT shares as to which any one employee can direct the vote depends on how many eligible employees submit voting instructions to the trustee. Employees who are also directors cannot vote GSOT shares; therefore, Mr. Mezger cannot direct the vote of any GSOT shares. If all eligible employees submit voting instructions, our other NEOs can direct the vote of the following amounts of GSOT shares: Mr. Kaminski 699,565; Mr. Praw 378,909; Mr. Woram 754,245; and Mr. Hollinger 1,229,793; and all current executive officers as a group (excluding Mr. Mezger) 3,656,310.

(e)

The stock holding information is based solely on a Schedule 13G dated February 7, 2013 that The Vanguard Group, Inc., an investment advisor to various investment companies, filed with the SEC to report its beneficial ownership as of December 31, 2012. Of the amount reported as beneficially owned, The Vanguard Group, Inc. had sole voting power as to 118,186 shares of our common stock, had sole dispositive power as to 3,818,508 shares, and had shared dispositive power as to 114,986 shares. Vanguard Fiduciary Trust Company and Vanguard Investments Australia, Ltd., each wholly-owned subsidiaries of The Vanguard Group, Inc., beneficially own 114,986 shares of our common stock and 3,200 shares of our common stock, respectively.

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(a)	Salary. 2010 salaries for Messrs. Kaminski and Woram reflect pro-rated amounts, as each joined us during that year. Mr. Praw’s 2011 salary reflects a pro-rated amount, as he re-joined us as a full-time employee during that year.

(b)	Bonus. Mr. Woram received a hiring bonus when he joined us in 2010 and a guaranteed bonus for our 2010 fiscal year.

(c)

Stock Awards and Option Awards. These amounts represent the aggregate grant-date fair value of stock awards (consisting of restricted stock and PSUs) and option awards (consisting of stock options) computed in accordance with ASC 718. They do not represent realized compensation. The 2012 stock awards represent the grant-date fair value of restricted stock and the target and probable award of shares of our common stock corresponding to the PSUs granted. The maximum number of shares of common stock that can be awarded through PSUs, assuming that the highest level of performance conditions will be achieved, is 200% of the target number of shares granted.

(d)	Non-Equity Incentive Plan Compensation. These amounts are the annual incentive compensation payouts to the NEOs.

(e)

Change in Pension Value and Nonqualified Deferred Compensation Earnings. These amounts do not represent realized compensation; rather, they represent an increase in the present value of accumulated benefits under our Retirement Plan based on an actuarial adjustment related to a decrease in the discount rate. Future changes in discount rates will result in a change in pension value. If the year-over-year discount rate increases, the present value of the Retirement Plan benefits will generally decrease. If the year-over-year discount rate decreases, the present value of the Retirement Plan benefits will generally increase. See below under the heading “Pension Benefits During Fiscal Year 2012.” We do not provide above-market or preferential earnings under our Deferred Compensation Plan.

(f)	All Other Compensation. The amounts shown consist of the following items:

•	Matching 401(k) Savings Plan and Supplemental Deferred Compensation Plan Contributions. We provide a dollar-for-dollar match of Deferred Compensation Plan and 401(k) Savings Plan contributions on up to an aggregate amount of 6% of a participant’s base salary. The respective aggregate 2012, 2011 and 2010 fiscal year matching contributions we made

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•

Premium Payments. We paid premiums on supplemental medical expense reimbursement plans and life insurance policies for the benefit of participating executives. These plans and policies are described above under the heading “Other Benefits.” The respective aggregate premiums we paid for our NEOs in our 2012, 2011 and 2010 fiscal years were as follows: Mr. Mezger $11,856, $8,971 and $11,818; Mr. Kaminski $10,426, $9,446 and $4,076; Mr. Praw $9,888, $1,620 and $0; Mr. Woram $10,426, $9,446 and $3,184; and Mr. Hollinger $7,241, $6,446 and $7,046.

•

Relocation Assistance. In connection with Mr. Kaminski’s hiring and relocation from Detroit to Los Angeles in May 2010, and Mr. Woram’s hiring and relocation from Dallas to Los Angeles in July 2010, we agreed in each case to pay for certain relocation expenses, including temporary housing for up to six months, and for any personal income tax liability associated with such relocation-related payments. Under their respective arrangements, in our 2011 and 2010 fiscal years, Mr. Kaminski received $93,461 and $47,594, respectively, and Mr. Woram received $31,833 and $69,515, respectively.

•	Consulting Arrangement. For the first nine months of our 2011 fiscal year, Mr. Praw served as an outside consultant and received a total of $683,333 during that time under his consulting arrangement with us.

(a)	Grant Date. The date shown for each award is the date the Compensation Committee approved the award.

(b)	Grant Date Fair Value of Stock and Option Awards. The grant-date fair value for each award is computed in accordance with ASC 718.

(c)	The actual amount paid out under these performance cash awards may be more or less than the target amount depending on our annual operating income over a three-year period ending on November 30, 2015 relative to performance goals set by the Compensation Committee for each year of the three-year period. These awards are further described above under the heading “Performance Cash Awards.”

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(a)	Number of Securities Underlying Unexercised Options-Unexercisable. Stock option awards generally vest in equal installment amounts over a three-year period.

(b)	Market Value of Shares That Have Not Vested. The market value shown is based on the price of our common stock on November 30, 2012, which was $14.36.

(c)	Equity Incentive Plan Awards: Number and Market Value of Unearned Units. The awards shown are the PSUs granted to our NEOs in 2012, reflecting target award amounts. The market value shown is based on the price of our common stock on November 30, 2012, which was $14.36.

(d)	As a result of an internal review of our employee stock option grant practices in 2006, we adjusted the exercise prices of certain of our employee stock options in order to comply with Section 409A of the Code. The exercise price for a certain portion of the stock option grant made on October 24, 2003 was not adjusted.

(e)	The expiration date for these stock options is set under Mr. Mezger’s Employment Agreement.

(f)

Through participation in two exchange offers that we conducted in our 2010 fiscal year, these common stock options replaced cash-settled stock appreciation rights (“SARs”) that had been previously granted to the NEO as long-term incentives. Each common stock option has an exercise price equal to the replaced SAR’s exercise price, and the same number of underlying shares, vesting schedule and expiration date as each such SAR. The exchange offers did not include a re-pricing or any other changes impacting the value of the awards to the NEO, no additional grants or awards were made to the NEO, and the issuance of the common stock options did not result in any incremental fair value to the NEO.

(g)	These are performance options that the Compensation Committee determined vested on January 24, 2013, and therefore one-third (or 121,667 options) of these options vested on that date. The remaining two-thirds (or 243,333 options) will vest ratably over the next two years on the anniversary of the October 6 grant date.

(a)	Number of Shares Acquired on Vesting. The shares reported in this column represent restricted stock that vested in our 2012 fiscal year.

(b)	Value Realized on Vesting. The amount shown is the total gross dollar value realized upon the vesting of the restricted stock described above in footnote (a) to this table. Due to tax withholding obligations, however, Mr. Hollinger actually realized a lower total value.

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(a)	Number of Years of Credited Service. These are as of the valuation date. As of November 30, 2012, each participating NEO is fully vested in his respective Retirement Plan benefit.

(b)

Present Value of Accumulated Benefit. These amounts represent the actuarial present value of the total retirement benefit that would be payable to each respective NEO under the Retirement Plan as of November 30, 2012. The following key actuarial assumptions and methodologies were used to calculate this present value: the base benefit for each participant is assumed to begin as of the earliest possible date for each participant (generally the later of age 55 or the tenth anniversary of the commencement of participation); the base benefit is adjusted by past and future cost of living adjustments including a 1.7% increase for the fiscal year ending November 30, 2013 and an assumed 2.5% increase thereafter, until the last benefits are paid for each participant. The discount rate used to calculate the present value of the accumulated benefit shown in table was 3.3%, reflecting a year-over-year reduction in prevailing market interest rates. The discount rate used for the 2011 calculation was 4.4%. The lower discount rate resulted in a year-over-year increase in 2012 in the present value of accumulated benefit; however this does not result in any increase in the benefits payable to participants under the Retirement Plan.

*	Messrs. Kaminski, Praw and Woram are not participants in the Retirement Plan.

(a)	Executive Contributions in Last Fiscal Year. These amounts reflect compensation the NEOs earned in our 2012 fiscal year that they have voluntarily deferred and are included in the Summary Compensation Table.

(b)	Registrant Contributions in Last Fiscal Year. These amounts are matching contributions we made to the NEOs’ voluntary contributions to our Deferred Compensation Plan and are included in the Summary Compensation Table.

(c)	Aggregate Earnings in Last Fiscal Year. These amounts do not include any above-market or preferential earnings. Accordingly, these amounts are not reported in the Summary Compensation Table.

(d)

Aggregate Balance at Last Fiscal Year End. These amounts reflect compensation the NEOs earned in our 2012 fiscal year or in prior years, but which they voluntarily elected to defer receipt, adjusted for changes in the value of their investments and distributions, if any. Messrs. Mezger and Hollinger are vested in the full amount of their respective balances. Mr. Kaminski is vested in $19,610 and Mr. Woram is vested in $60,161 of each of their aggregate balances.

*	Mr. Praw did not make any Deferred Compensation Plan contributions in our 2012 fiscal year.

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•	a lump sum cash payment equal to 2.0 times the sum of his annual salary plus average annual bonus earned for the prior three years, with the total payment capped at $6,000,000;

•	under certain circumstances, a pro-rated bonus for the year in which his employment terminates;

•	health coverage that we pay for up to two years;

•	with respect to equity compensation granted to him on or after February 28, 2007, (a) two years of additional service credited to compute equity vesting plus full vesting for any equity issued to him in lieu of cash bonuses, and (b) the earlier of 36 months and the original term duration of each equity grant to exercise any such outstanding equity; and

•	performance shares paid as if the performance period closed on the termination date if the performance period would otherwise close in the next 24 months.

•	full vesting of unvested equity granted to him on or after February 28, 2007, with earlier equity awards governed by their respective terms and conditions;

•	performance shares paid as earned with the applicable performance period closing as of the date of the change in control;

•	full vesting and lump sum cash payment of deferred compensation, retirement or other employee benefits per the relevant arrangements, provided that lump sum payments subject to Section 409A of the Code are permitted only as provided by the specific terms of those arrangements;

•

if his employment is involuntarily terminated in connection with a change in control (generally, during the period starting three months before and ending twelve months after a change in control), payment of the same severance as provided above in the event of an involuntary termination of employment, except the applicable multiple is 3.0 times the sum of his annual salary and average bonus rather than 2.0 times and the total payment is capped at $12,000,000; and

•	additional “gross-up” payment to compensate for any excise taxes under Section 280G of the Code (“Section 280G”).

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•	the average of the annual cash bonuses, if any, paid to the participant for the three most recent completed fiscal years prior to the termination of the participant’s employment (or such shorter time as the participant has been employed).

•	(i) 3.0 times base salary for participants entitled to a severance of 2.0 times the sum of base salary and average bonus, (ii) 2.5 times base salary for participants entitled to a severance of 1.5 times the sum of base salary and average bonus, and (iii) 2.0 times base salary for participants entitled to a severance of 1.0 times the sum of base salary and average bonus.

•	if in the 18 month period following the change in control his employment is terminated other than for cause or disability, or he terminates his employment for good reason, a severance benefit equal to 2.0 times the sum of his average base salary and average actual annual cash bonus for the three fiscal years prior to the year in which the change in control occurs;

•	accelerated vesting of any options and the lapse of any restricted period with respect to any restricted stock or other equity awards awarded to him; and

•	full vesting in any benefits under our Death Benefit Only Plan (which is described below under the heading “Other Change in Control and Employment Termination Provisions”) if he participates in that plan.

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(a)

As described above under the headings “Change in Control Severance Plan” and “CEO Employment Agreement,” if payments due in connection with a change in control are subject to excise taxes under Section 280G of the Code, we will pay Mr. Mezger an additional “gross up” amount so that his after-tax benefits are the same as though no excise tax had been applied. We determined, however, that we would not need to pay any such “gross up” amount to Mr. Mezger if we experienced a change in control for purposes of the CIC Plan and his Employment Agreement on November 30, 2012 based on the following major assumptions: (i) stock options assumed paid out based on an assumed value of $14.36 less applicable exercise prices, and other equity awards valued assuming a fair market value of $14.36; (ii) payments for accelerated vesting of time-based equity valued using Treas. Reg. Section 1.280G-1 Q&A 24(c); and (iii) accelerated payment of Retirement Plan benefits valued using Treas. Reg. Section 1.280G-1 Q&A 24(b).

(b)	Severance based on a multiple of 2.0 times current annual base salary plus average annual bonus earned for fiscal years ending November 30, 2011, November 30, 2010, and November 30, 2009, with benefit capped at $6,000,000, as provided by Mr. Mezger’s Employment Agreement.

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(c)	Severance based on a multiple of 3.0 times current annual base salary plus average annual bonus earned for fiscal years ending November 30, 2011, November 30, 2010, and November 30, 2009, with benefit capped at $12,000,000, as provided by Mr. Mezger’s Employment Agreement.

(d)	Equity awards valued using the price of our common stock as of November 30, 2012, which was $14.36. Assumes the PSUs granted to Mr. Mezger in 2012 would have no value as the applicable performance period would not have started by November 30, 2012.

(e)	Assumes under these scenarios that Mr. Mezger’s termination would be considered a retirement under the terms of his outstanding stock option agreements. Therefore, his awards would vest and become immediately exercisable.

(f)	Reflects present values of accrued benefit as of November 30, 2012 using an annual discount rate of 3.29% (consistent with Accounting Standards Codification Topic No. 715, “Compensation — Retirement Benefits” (“ASC 715”) valuations). Benefits are assumed to commence in the first quarter following earliest benefit commencement date.

(g)	Assumes lump sum payout of accrued benefit upon a change in control or death using a 2.40% Applicable Federal Rate (“AFR”) discount rate as provided in the Retirement Plan.

(h)	In addition to our matching contributions, deferred compensation balances include Mr. Mezger’s deferrals and earnings on those deferrals in the amount of $451,283.

(i)

Mr. Mezger’s designated beneficiaries would be entitled to receive an estimated death benefit of $1,774,465 ($1,000,000 benefit plus $774,465 “gross-up” for income taxes) upon his death. The present value of the benefit as of November 30, 2012 is approximately $703,909 based on a 3.98% discount factor and the 2013 IRS Mortality Optional Combined (male/female) tables for life expectancy (consistent with rates and mortality tables used for ASC 715 valuations).

(j)	Values are estimated based on cash surrender values of life insurance policies as of December 6, 2012 of $466,972 and income tax “gross-up” of $383,537.

(k)	Assumes we pay 24 months of medical, dental and vision benefits using current COBRA rates of approximately $2,374 per month.

(l)	Assumes payout of 160 hours of vacation benefits as Mr. Mezger is credited with this number of vacation hours during his employment with us, regardless of actual vacation time taken.

(m)	If we delay any payments due to Mr. Mezger to comply with Section 409A of the Code, his Employment Agreement entitles him to receive such payments with accrued interest at the annualized short-term AFR specified therein. The amounts shown exclude interest.

(a)	Severance based on a multiple of 2.0 times current annual base salary plus annual bonus paid for fiscal years ending November 30, 2011 and November 30, 2010, as provided by the Executive Severance Plan.

(b)	Severance based on a multiple of 2.0 times annualized base salary plus annual bonus paid for fiscal years ending November 30, 2011 and November 30, 2010, as provided by the CIC Plan.

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(c)	Equity awards valued using the price of our common stock as of November 30, 2012, which was $14.36. Assumes the PSUs granted to Mr. Kaminski in 2012 would have no value as the applicable performance period would not have started by November 30, 2012.

(d)	Mr. Kaminski will fully vest in his unvested matching contribution of $11,766 upon a change in control, or his death or disability. The amounts would not be paid out until his termination of employment.

(e)	In addition to our matching contributions, deferred compensation balances include Mr. Kaminski’s deferrals and earnings on those deferrals in the amount of $15,688.

(f)	Assumes we make monthly contributions for medical and dental benefits in the amount of approximately $2,243 per month for 24 months.

(a)	Severance based on a multiple of 2.0 times current annual base salary plus annual bonus paid for fiscal year ended November 30, 2011, as provided by the Executive Severance Plan. Mr. Praw’s bonus includes his consulting bonus of $233,333 and a pro-rated bonus for service as an officer of $100,000.

(b)	Severance based on a multiple of 2.0 times annualized base salary plus annual bonus paid for fiscal year ending November 30, 2011, as provided by the CIC Plan. Mr. Praw’s bonus includes his consulting bonus of $233,333 and a pro-rated bonus for service as an officer of $100,000.

(c)	Equity awards valued using the price of our common stock as of November 30, 2012, which was $14.36. Assumes the PSUs granted to Mr. Praw in 2012 would have no value as the applicable performance period would not have started by November 30, 2012.

(d)

Mr. Praw’s designated beneficiaries would be entitled to receive an estimated death benefit of $1,774,465 ($1,000,000 benefit plus $774,465 “gross-up” for income taxes) upon his death. The present value of the benefit as of November 30, 2012 is approximately $890,258 based on a 3.98% discount factor and the 2013 IRS Mortality Optional Combined (male/female) tables for life expectancy (consistent with rates and mortality tables used for ASC 715 valuations).

(e)	Values are estimated based on cash surrender values of life insurance policies as of December 6, 2012 of $571,684 and income tax “gross-up” of $469,540.

(f)	Assumes we make monthly contributions for medical and dental benefits in the amount of approximately $1,880 per month for 24 months.

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(a)	Severance based on a multiple of 2.0 times current annual base salary plus annual bonus paid for fiscal years ending November 30, 2011 and November 30, 2010, as provided by the Executive Severance Plan.

(b)	Severance based on a multiple of 2.0 times annualized base salary plus annual bonus paid for fiscal years ending November 30, 2011 and November 30, 2010, as provided by the CIC Plan.

(c)	Equity awards valued using the price of our common stock as of November 30, 2012, which was $14.36. Assumes the PSUs granted to Mr. Woram in 2012 would have no value as the applicable performance period would not have started by November 30, 2012.

(d)	Mr. Woram will fully vest in his unvested matching contribution of $12,775 upon a change in control, or his death or disability. The amounts would not be paid out until the termination of his employment with us.

(e)	In addition to matching contributions, deferred compensation balances include Mr. Woram’s deferrals and earnings on those deferrals in the amount of $56,230.

(f)	Assumes we make monthly contributions for medical and dental benefits in the amount of approximately $2,111 per month for 24 months.

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(a)

As described above under the heading “Change in Control Severance Plan,” under the CIC Plan, if payments due in connection with a change in control are subject to excise taxes under Section 280G of the Code, we will pay Mr. Hollinger an additional “gross up” amount so that his after-tax benefits are the same as though no excise tax had been applied. We determined, however, that we would not need to pay any such “gross up” amount to Mr. Hollinger if we experienced a change in control for purposes of the CIC Plan on November 30, 2012 based on the following major assumptions: (i) stock options assumed paid out based on an assumed value of $14.36 less applicable exercise prices, and other equity awards valued assuming a fair market value of $14.36; (ii) payments for accelerated vesting of time-based equity valued using Treas. Reg. Section 1.280G-1 Q&A 24(c); and (iii) accelerated payment of Retirement Plan benefits valued using Treas. Reg. Section 1.280G-1 Q&A 24(b).

(b)	Severance based on a multiple of 1.5 times current annual base salary plus average annual bonus paid for fiscal years ending November 30, 2011, November 30, 2010, and November 30, 2009, as provided by the Executive Severance Plan.

(c)	Severance based on a multiple of 2.0 times average annual base salary plus average annual bonus paid for fiscal years ending November 30, 2011, November 30, 2010, and November 30, 2009, as provided by the CIC Plan.

(d)	Equity awards valued using the price of our common stock as of November 30, 2012, which was $14.36. Assumes the PSUs granted to Mr. Hollinger in 2012 would have no value as the applicable performance period would not have started by November 30, 2012.

(e)	Reflects present values of accrued benefit as of November 30, 2012 using an annual discount rate of 3.29% (consistent with ASC 715 valuations). Benefits are assumed to commence in the first quarter following earliest benefit commencement date.

(f)	Assumes lump sum payout of accrued benefit paid upon a change in control or death using a 2.40% AFR discount rate as provided in the Retirement Plan.

(g)	In addition to our matching contributions, deferred compensation balances include Mr. Hollinger’s deferrals and earnings on those deferrals in the amount of $1,542,908.

(h)

Mr. Hollinger’s designated beneficiaries would be entitled to receive an estimated death benefit of $1,774,465 ($1,000,000 benefit plus $774,465 “gross-up” for income taxes) upon his death. The present value of the benefits as of November 30, 2012 is approximately $641,591 based on a 3.98% discount rate and the 2013 IRS Mortality Optional Combined (male/female) tables for life expectancy (consistent with rates and mortality tables used for ASC 715 valuations).

(i)	Values are estimated based on cash surrender values of life insurance policies as of December 6, 2012 of $441,291 and income tax “gross-up” of $362,445.

(j)	Assumes we make monthly contributions for medical and dental benefits in the amount of approximately $1,130 per month for 18 months.

•	Adopted and applied Guidelines that specifically detailed how the achievement of various levels of absolute and relative performance would drive potential maximum 2012 annual incentive payouts to our NEOs and affect ultimate payout determinations;

•	Made a grant of 100% performance-based long-term incentives to our CEO with specific and challenging performance conditions versus the use of time-vested only incentives; and

•	Designed our fiscal 2013 annual incentive program so that payouts are largely formula-driven, based on achievement of specific performance conditions. As a result of its decision to adopt this more structured approach for annual incentive payouts, the Compensation Committee anticipates that it will have less of a need to exercise discretion in its business

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•	If you are a stockholder of record: A copy of a form of proxy or voting instruction form or a Notice showing your name and address. If you are appointing an authorized proxy representative, also include the representative’s name, mailing address and contact telephone number and a copy of the signed legal proxy.

•	If you are a beneficial stockholder: A copy of a brokerage account voting instruction form showing your name and address, or a broker letter verifying record date ownership and a copy of a brokerage account statement showing your KB Home stock ownership on the record date.

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