Employment Agreement - Kaufman and Broad Home Corp. and Lisa Kalmbach


October 5, 1996


Lisa Kalmbach
5295 Harbord Dr.
Oakland, CA 94618

Dear Lisa:

Sincere congratulations on your recent promotion to Senior Vice President,
Regional General Manager. I am extremely excited about the future of our Company
with this new structure. With your talent, skills and energy I am confident that
we will not only meet, but exceed our future goals!

In light of your promotion, I am pleased to confirm the following changes in
your compensation which will became effective September 1, 1996.

Title/Position:   Senior Vice President, Regional General Manager
                  North Region
                  President, South Bay Division

Base Salary:      $250,000

Auto Allowance:   $500 per month and gasoline credit card for business use.

Auto Insurance:   Up to $1,000 reimbursement per year for your primary business
                  vehicle.

Fiscal Year 1997 Incentive Compensation:

For fiscal year 1997, subject to the provisions below, you will be eligible to
receive 25% of Kaufman and Broad of South Bay, Inc.'s, incentive compensation
pool. The Division's pool will be generated by 7.5% of pre-tax profits
(including KBMC pre-tax) for fiscal year ending November 30, 1997. In addition,
an 'ROI Modifier' will be applied to the incentive pool based on the division's
ROI pre-tax performance. As you know, a Customer Satisfaction rating will also
effect the incentive compensation pool. In addition, you will be eligible to
receive 5% of your Region's incentive compensation pool. The Region's pool will
be generated based on 7.5% of the total pretax of all divisions within the
region including KBMC pre-tax. Kaufman and Broad of South Bay, Inc.'s pre-tax
will be excluded from the Region's incentive pool. An 'ROI Modifier' will 





be applied to the incentive compensation pool based on each Division's ROI
pre-tax performance.

The incentive award(s) described above shall only be earned in a lump sum after
your continuous employment with the Company through the expected payment date in
January, 1998. Earning of this incentive award is contingent upon such
continuous employment with the Company through the January, 1998 payment date.
If you leave the Company or if your employment is terminated for any reason
before such date, you will not have earned any portion of the incentive award.

Restricted Stock: Should your TOTAL cash compensation (1997 base and earned
incentive) exceed $750,000, any amounts over $750,000 will be received in the
form of restricted stock. The stock will (cliff vest) two years from the award
date.

If additional incentive compensation is earned via the ROI modifier, the amount
earned over target performance will also be paid in the form of restricted
stock. The stock will (cliff vest) two years from the award date.

Stock Options: You have been granted 25,000 shares of stock options as of
September 26, 1997 at a price of $13.13. These options will vest over a three
year period, and become fully vested on September 26, 2000.

Benefits Program: You will continue to be covered under the Comprehensive
Executive Benefits Program. If you have any questions regarding any of these
benefits please contact Kathy Knoblauch in Human Resources.

Executive Commitment:

a.       During the performance of your duties on behalf of the Company, you
         will receive and be entrusted with certain confidential and/or secret
         information of a proprietary nature. You agree not to disclose or use,
         during your employment or anytime thereafter, any such information
         which is not otherwise publicly available.

b.       Accordingly, you will not make any public statements concerning Kaufman
         and Broad Home Corporation or any of their affiliates or subsidiaries
         regarding your employment, unless previously approved by the Company.

c.       You agree that in the event of your termination, you will not for a
         period of one year thereafter employ nor seek to employ any person
         employed by Kaufman and Broad Home Corporation or any of their
         affiliates or subsidiaries.

d.       You agree that during the term of your employment you will not engage,
         as owner, part owner, stockholder (other than passive), director, joint
         venturer, or otherwise, in any business competitive with Kaufman and
         Broad Home Corporation or any of their affiliates or subsidiaries.
         Nothing in this paragraph d. shall prevent you from 





         obtaining normal employment (after the termination of your employment
         with the Company), in general industry, or housing industry as long as
         you comply with the provisions of this letter.

Employment at Will; Termination: Nothing in this letter shall be construed as an
employment contract obligating the Company (expressly or implicitly) to employ
you for any specified period of time. Either party has the right to terminate
the employment relationship at any time with or without cause.

Limitation: The compensation described in the preceding paragraphs represents
our entire obligation to you during the term of your employment. Kaufman and
Broad shall have no obligation to pay any compensation (in any form or any kind)
to you in excess of the above described compensation unless our Human Resources
Department has verified such increased compensation and processed a personnel
change notice reflecting such increase.

Entire Agreement: This letter together with the documents referenced herein
contain all of the agreements and understandings regarding your employment and
the obligations of Kaufman and Broad in connection with employment. Kaufman and
Broad has not made, nor are you relying upon any oral or written promises or
statements made by Kaufman and Broad or any agent of Kaufman and Broad except as
expressly set forth herein. This letter supersedes any and all prior agreements
and understandings between you and Kaufman and Broad and alone expresses the
agreement of the parties. This letter containing all of the agreements and
understandings regarding your employment cannot be amended other than in writing
by Kaufman and Broad.

Lisa, again I am delighted to have you on the Executive Committee team in a
heightened leadership role. I look forward to working more closely with you and
to the success we can all achieve!

Best regards,



Bruce Karatz
Chairman, President & CEO


Agreed to and Acknowledged by:


/s/ LISA KALMBACH               10/6/96
---------------------------------------
Lisa Kalmbach                      Date