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Representation, Warranty and Indemnity Agreement - Kaufman and Broad Home Corp., Cosmic Construction of Nevada Inc., South Star Development of Nevada Corp., South Star Development Corp., Hillside Construction Co. Inc. and Orchard Construction Co. Inc.

                            REPRESENTATION, WARRANTY
                             AND INDEMNITY AGREEMENT

        This Representation, Warranty and Indemnity Agreement is entered into as
of January 7, 1999 (this 'Agreement'), among Kaufman and Broad Home Corporation,
a Delaware Corporation ('Buyer'), and the corporations identified on the
signature page of this Agreement (individually an 'Entity' and collectively, the

        WHEREAS, Buyer has entered into a Purchase Agreement, dated as of
January 7, 1999 (the 'Purchase Agreement'), with the Sellers and Corporations
identified in the Purchase Agreement;

        WHEREAS, the Entities are former partners of one or more of the Parent
Partnerships (as defined in the Purchase Agreement); and

        WHEREAS, each of Buyer and the Entities desire to make certain
representations, warranties and agreements with respect to the Purchase

        NOW, THEREFORE, in consideration of the mutual promises contained herein
and intending to be legally bound, the parties agree as follows:

        1. The Entities shall be deemed to be Corporations (as that term is used
in the Purchase Agreement) for all purposes under the Purchase Agreement,
including but not limited to, for purposes of Articles II, III, VI, and IX and
Section 10.10 and all ancillary agreements and closing documents delivered in
connection therewith, as if the Entities had executed and delivered the Purchase
Agreement as Corporations; provided, however, that references in Section 3.3 of
the Purchase Agreement to 'this Agreement' shall be deemed to refer to this
Representation, Warranty and Indemnity Agreement and not the Purchase Agreement.

        2. This Agreement may be amended only by agreement in writing of all
parties. No waiver of any provision nor consent to any exception to the terms of
this Agreement shall be effective unless in writing and signed by the party to
be bound and then only to the specific purpose, extent and instance so provided.

        3. This Agreement constitutes the entire agreement among the parties
pertaining to the subject matter hereof and supersedes all prior agreements and
understandings of the parties in connection therewith.

        4. This Agreement, the legal relations between the parties and any
Action (as defined in the Purchase Agreement), whether contractual or
non-contractual, instituted by any party with respect to matters arising under
or growing out of or in connection with or in respect of this Agreement,
including but not limited to the negotiation, execution, interpretation,
coverage, scope, performance, breach, termination, validity, or enforceability
of this Agreement, shall be governed by and construed in accordance with the
laws of the State of California

applicable to contracts made and performed in such State and without regard to
conflicts of law doctrines.

        5. Neither this Agreement nor any rights or obligations under it are
assignable, except that Buyer may assign its rights hereunder to any Affiliates
(as defined in the Purchase Agreement) of Buyer, in which event Buyer shall
remain liable to the Corporations for all obligations of Buyer hereunder
notwithstanding a permitted assignment.

        6. This Agreement may be executed in any number of identical
counterparts, each of which when executed and delivered shall be an original,
but all such counterparts shall constitute but one and the same instrument. Any
signature page of this instrument may be detached from any counterpart without
impairing the legal effect of any signatures thereof, and may be attached to
another counterpart, identical in form thereto, but having attached to it one or
more additional signature pages. Delivery by any party or its respective
representatives of telecopied (counterpart) signature pages shall be as binding
an execution and delivery of this Agreement by such party as if the other party
had received the actual physical copy of the entire Agreement with an ink
signature from such party.

        7. All information disclosed by any party (or its representatives)
whether before or after the date hereof, in connection with the transactions
contemplated by, or the discussions and negotiations preceding, this Agreement
to any other party (or its representatives) shall be kept confidential by such
other party and its representatives and shall not be used by any such Persons
(as defined in the Purchase Agreement) other than as contemplated by this
Agreement, except to the extent that such information (i) was known by the
recipient when received, (ii) it is or hereafter becomes lawfully obtainable
from other sources, (iii) is necessary or appropriate to disclose to a
Governmental Entity (as defined in the Purchase Agreement) having jurisdiction
over the parties, (iv) as may otherwise be required by law or (v) to the extent
such duty as to confidentiality is waived in writing by the other party;
provided, however, that following the Closing Date (as defined in the Purchase
Agreement) nothing in this section shall apply to or restrict the use of
information by Buyer or the Homebuilding Entities (as defined in the Purchase
Agreement) in their businesses.

        8. In the event of any dispute or disagreement between the Entities and
Buyer as to the interpretation of any provision of this Agreement or the
Purchase Agreement, or the performance of obligations hereunder, the matter
shall be determined in the manner provided in Section 10.10 of the Purchase
Agreement and, if an Arbitration (as defined in the Purchase Agreement) has been
requested or instituted, shall be determined as part of that Arbitration with
the Entities participating to the same extent as the Corporations could

        9. Any notice or other communication hereunder must be given in writing
and delivered in person or sent by telecopy, by a nationally-recognized
overnight courier service or by certified or registered mail, postage prepaid,
receipt requested, addressed as follows:


               IF TO BUYER, ADDRESSED TO:

               Kaufman and Broad Home Corporation
               10990 Wilshire Boulevard
               Los Angeles, California  90024
               Attention:  Michael F. Henn
                           Chief Financial Officer
                           Barton P. Pachino
                           General Counsel
               Fax No.:   (310) 231-4280

               with a copy to

               Munger, Tolles & Olson LLP
               355 South Grand Avenue
               Los Angeles, California  90071
               Attention:  R. Gregory Morgan, Esq.
               Fax No.: (213) 687-3702


               John M. Goodman
               Lewis Operating Corp.
               1156 N. Mountain Avenue
               Upland, California  91785
               Fax No.: (909) 912-6770

               with a copy to:

               O'Melveny & Myers LLP
               400 S. Hope Street
               Los Angeles, California  90071
               Attention:  Richard A. Boehmer, Esq.
               Fax No.: (213) 430-6407

or to such other address or to such other person as any party shall have last
designated by such notice to the other party. Each such notice or other
communication shall be effective (i) if given by telecommunication, when
transmitted to the applicable number so specified in (or pursuant to) this
Section 9 and an appropriate answer back is received, (ii) if given by overnight
courier, one business day following delivery by sender to such overnight
courier, (iii) if given by mail, three days after such communication is
deposited in the mails with first class postage prepaid, addressed as aforesaid
or (iv) if given by any other means, when actually received at such address.

        10. The Entities and Buyer shall each pay their own expenses incident to
the negotiation, preparation and performance of this Agreement and the
transactions contemplated


hereby, including but not limited to the fees, expenses and disbursements of
their respective investment bankers, accountants and counsel. Any such expenses
of the Homebuilding Entities (as defined in the Purchase Agreement), or any
expenses paid by the Homebuilding Entities on behalf of the Entities, shall be
paid by the Entities prior to or concurrently with the Closing (as defined in
the Purchase Agreement).

        11. To the extent permitted by Law (as defined in the Purchase
Agreement), all rights and remedies existing under this Agreement are cumulative
to and not exclusive of, any rights or remedies otherwise available under
applicable Law. No failure on the part of any party to exercise or delay in
exercising any right hereunder shall be deemed a waiver thereof, nor shall any
single or partial exercise preclude any further or other exercise of such or any
other right.

        12. In the event of any Action by any party arising under or out of, in
connection with or in respect of, this Agreement or the transactions
contemplated hereby, the prevailing party shall be entitled to reasonable
attorney's fees, costs and expenses incurred in such Action. Attorney's fees
incurred in enforcing any judgment in respect of this Agreement are recoverable
as a separate item. The parties intend that the preceding sentence be severable
from the other provisions of this Agreement, survive any judgment, and to the
maximum extent permitted by Law, not be deemed merged into such judgment.

        13. The Entities and Buyer each acknowledge that each party to this
Agreement has been represented by counsel in connection with this agreement and
the transactions contemplated by this Agreement. Accordingly, any rule of Law,
including but not limited to Section 1654 of the California Civil Code, or any
legal decision that would require interpretation of any claimed ambiguities in
this Agreement against the party that drafted it has no application and is
expressly waived. The provisions of this Agreement shall be interpreted in a
reasonable manner to effect the intent of Buyer and the Entities.

        14. If any provision of this Agreement or the Purchase Agreement as it
would apply to the Entities is determined to be invalid, illegal or
unenforceable by any Governmental Entity, the remaining provisions of this
Agreement or the Purchase Agreement, as applicable, shall remain in force and
effect provided that the economic and legal substance of the transactions
contemplated is not affected in any manner materially adverse to any party. In
the event of any such determination, the parties agree to negotiate in good
faith to modify this Agreement to fulfill as closely as possible the original
intents and purposes hereof. To the extent permitted by Law, the parties hereby
to the same extent waive any provision of Law that renders any provision hereof
prohibited or unenforceable in any respect.


        IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by its duly authorized officers as of the day and year first
above written.


                                        KAUFMAN AND BROAD HOME CORPORATION

                                        By: /s/ MICHAEL F. HENN
                                        Its: Senior Vice President & Chief Financial Officer


                                        COSMIC CONSTRUCTION OF NEVADA, INC.

                                        By: /s/ ROGER G. LEWIS
                                            Name: Roger G. Lewis

                                        SOUTH STAR DEVELOPMENT OF NEVADA, CORP.

                                        By: /s/ ROBERT E. LEWIS
                                            Name: Robert E. Lewis
                                            Title: President

                                        SOUTH STAR DEVELOPMENT CORP.

                                        By: /s/ RICHARD A. LEWIS
                                            Name: Richard A. Lewis
                                            Title: President


                                        HILLSIDE CONSTRUCTION CO., INC.

                                        By: /s/ RICHARD A. LEWIS
                                            Name: Richard A. Lewis
                                            Title: President

                                        ORCHARD CONSTRUCTION CO., INC.

                                        By: /s/ ROGER G. LEWIS
                                            Name: Roger G. Lewis
                                            Title: President


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