**Exhibit 10.1**

**EMPLOYMENT AGREEMENT**

THIS AGREEMENT (“Agreement”), dated as ofAugust 10, 2007 (“Agreement Date”), is made between Kimball Hill, Inc.,an Illinois corporation having its principal place of business in RollingMeadows, Illinois (“Company”), and David K. Hill, an individual residentof Illinois (“Executive”).

***RECITALS***

A.            For many years Executive has served the Company invarious capacities, including service as Chairman, Chief Executive Officer andPresident, and as of the Agreement Date Executive is the Chairman and ChiefExecutive Officer of the Company.

B.            Executive has had primary responsibility for the growthand success of the Company since its founding and has done so without anyemployment contract.

C.            During many of his years of service to the Company,Executive’s total compensation (including his salary and bonus) has been lowerthan the compensation earned by chief executive officers of other comparablehomebuilding companies, and at times Executive’s total compensation has beenlower than the compensation earned by officers of the Company serving under theExecutive.

D.            In December 2005, the Company issued $203 million inprincipal amount of 101⁄2% senior subordinated notes due 2012 that subsequentlywere registered with the Securities and Exchange Commission (the “SeniorSubordinated Notes”), and the Company successfully completed thenegotiation of a $500 million revolving credit facility (the “CreditFacility”).  Subsequently, inSeptember 2006, the Company sold 952,380 newly-issued shares of common stock toEquity Investments III, LLC, representing approximately 21% of the then issuedand outstanding shares of common stock of the Company, for $110 million.

E.             Executive’s stature and reputation in the homebuildingindustry and his active involvement in management of the Company as itsChairman and Chief Executive Officer were significant factors in the Company’ssuccessful completion of the above-described financings and equity issuance.

F.             The Company wishes to enter into this Agreement withExecutive in order to continue to enjoy the benefits of Executive’s reputation,management skills and abilities, experience and contacts in the homebuildingindustry.  The Company also desires toprovide Executive with compensation commensurate with his position andresponsibilities in light of the size and complexity of the Company’s businessoperations, with due recognition of Executive’s many contributions to thegrowth and success of the Company and appropriate consideration of providingequity to Executive for his willingness in past years to accept compensationthat was lower than what would have been equitable at the time.

G.            This Agreement has been submitted to and approved by theCompany’s Board of Directors.

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NOW, THEREFORE, in consideration of the mutualpromises contained in this Agreement, the Company and Executive agree asfollows:

# ARTICLEIPOSITION, DUTIES, COMPENSATION AND BENEFITS

## 1.1.                  Agreement Term.The employment term of this Agreement (“Agreement Term”) shall be theperiod beginning on October 1, 2006 (the “Employment Date”) and endingon the fifth anniversary of the Employment Date or, if later, the date to whichthe Agreement Term is extended under the following sentence.  Beginning on the fifth anniversary of theEmployment Date, and on each subsequent anniversary of the Employment Date(unless sooner terminated) the Agreement Term shall automatically be extendedon such date by one year unless, not less than ninety days prior to suchanniversary, the Company delivers a written notice to Executive or Executivedelivers written notice to the Company (either such notice a “NonrenewalNotice”) that the Agreement Term shall expire on such anniversary; providedthat the Company’s Nonrenewal Notice has been specifically authorized by a resolutionduly adopted by the Board of Directors (the “Board”) of the Company.

## 1.2.                  Positions and Duties.

### (a)                   InitialPosition.  During the first year ofthe Agreement Term, ending on September 30, 2007, Executive shall be employedby the Company and shall be elected to and serve as the Chairman and ChiefExecutive Officer (“CEO”) of the Company.  Executive shall report exclusively to theBoard.

### (b)                   SubsequentPositions.   Commencing October 1,2007 and during the balance of the Agreement Term, the Executive shall beemployed by the Company and shall be elected to and serve as the ExecutiveChairman (“Executive Chairman”) and Chairman of the Executive Committeeof the Company (“Chairman of the Executive Committee”).  Executive shall report exclusively to the Board.

### (c)                   Duties,Powers and Responsibilities.  As CEO,Executive shall have such duties, powers and responsibilities as are customaryfor a chief executive officer and such other duties as may be assigned to himfrom time to time by the Board.  AsExecutive Chairman, Executive shall have such duties, powers andresponsibilities as are customary for a chairman of the board of directors whois actively involved in the business of the Company and such other duties andresponsibilities as may be assigned to him from time to time by the Board.  As Chairman of the Executive Committee,Executive shall have such duties, powers and responsibility as are customaryfor a chairman of an executive committee of a board of directors.  During the Agreement Term (other than anyperiods of vacation or sick leave to which the Executive is entitled),Executive shall devote sufficient time and attention to the business andaffairs of the Company to discharge the duties assigned to him under thisAgreement.  Executive’s services shall beperformed principally at the Company’s corporate offices in Rolling Meadows,Illinois, but also may be performed, at Executive’s discretion, from hisresidence (whether principal or secondary). 

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### Notwithstandingthe foregoing provisions, during the Agreement Term:  (1) Executive may serve on corporate, civic,educational and charitable boards or committees, deliver lectures, fulfillspeaking engagements, teach at educational institutions, and manage his personalinvestments and business affairs, so long as the aforesaid activities do notmaterially interfere or conflict with the performance of his duties under thisAgreement; and (2) Executive may continue to remain active in real estateventures and companies, including without limitation Kimball Hill DevelopmentCompany and its subsidiaries and affiliates, and Executive may devote such timeand attention to such activities as is not materially inconsistent with hispast practices.

### (d)                   BoardService.  Executive currently servesas a member of the Board, and during the Agreement Term the Company andExecutive shall take all necessary and appropriate action to continue to electExecutive as a member of the Board, Executive Chairman and Chairman of theExecutive Committee.

## 1.3.                  Salary and Bonus.

### (a)                   Salary.  During the Agreement Term Executive shallearn a base salary (“Salary”) at the rate of $1,500,000 per annum.  Executive’s Salary shall be payable inaccordance with the Company’s executive payroll policy.  Such Salary shall be subject to review and increase(but not decrease) by the Company not less frequently than annually.  In no event shall the amount of Executive’sSalary (as may be increased from time to time) be reduced during the AgreementTerm.

### (b)                   Bonus.During the Agreement Term, the Executive shall also earn an annual bonus (“Bonus”)for each fiscal year of the Company that shall be equal to the following: (i)if the Company and Executive achieve target performance goals for such fiscalyear, not less than 120% of the annual amount of Salary in effect on the lastday of such fiscal year (“Target Bonus”); (ii) if the Company andExecutive achieve or exceed maximum performance goals, an amount equal to 160%of the annual amount of Salary in effect on the last day of such fiscal year;and (iii) if the Company and Executive exceed more than the target performancebut less than the maximum performance, an amount determined by linearinterpolation between the amounts determined under clauses (i) and (ii) of thissentence based on the percentage of performance achieved.  Reasonable and objective target performancegoals shall be established by mutual agreement of the Board and Executive.  In addition, from time to time during theAgreement Term, the Board in its discretion may award an additional Bonus toExecutive based upon such factors as the Board deems appropriate.

#### Executive’sBonus for each fiscal year during the Agreement Term shall be payable in cashnot later than three and one-half months following the end of such fiscalyear.  Executive’s Bonus will bepro-rated for partial years of employment.

### (c)                   OtherBenefits.  During the AgreementTerm:  (1) Executive shall be eligible toparticipate in all other incentive plans or arrangements (not including annualbonus), savings and retirement plans, welfare benefit plans (including withoutlimitation medical, prescription, dental, disability, salary continuance, individual life, group life,dependent life, accidental death 

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### andtravel accident insurance plans) and fringe benefit plans provided by theCompany from time to time applicable to the most senior executives of theCompany generally, in accordance with the terms of such plans; (2) Executiveshall be entitled to reimbursement of all reasonable employment-relatedexpenses incurred by Executive upon the Company’s receipt of accountings inaccordance with the terms of the policies applicable to the most seniorexecutives of the Company generally; (3) Executive shall be entitled to anoffice or offices of a size and with furnishings and other appointments and tosecretarial and other assistance provided by the Company from time to time inaccordance with the policies applicable to the most senior executives of theCompany generally and consistent with the Company’s past practice with respectto Executive; and (4) Executive shall be entitled to paid vacation provided bythe Company from time to time in accordance with the policies applicable to themost senior executives of the Company generally, but in no event less than tenweeks per year.

# ARTICLEIITERMINATION OF EMPLOYMENT

## 2.1.                  Disability.  Executive’s employment shall terminateautomatically upon Executive’s Disability during the Agreement Term.  For purposes of this Agreement “Disability”means that Executive is unable to engage in any substantial gainful activity byreason of any medically determinable physical or mental impairment which can beexpected to result in death or permanent inability to engage in substantialgainful activity.  Executive’s Disabilityshall be certified by a physician jointly selected by the Company or itsinsurers and Executive or Executive’s legal representatives after Executive hasbeen unable to engage in any substantial gainful activity for twelvemonths.  The date of termination (“TerminationDate”) by reason of Executive’s Disability shall be the date on which suchDisability is certified to by such jointly selected physician.

## 2.2.                  Death.  Executive’s employment shall terminateautomatically upon the Executive’s death during the Agreement Term.  The Termination Date by reason of Executive’sdeath shall be the date of Executive’s death.

## 2.3.                  Cause.  During the Agreement Term, the Company mayterminate Executive’s employment for Cause. For purposes of this Agreement “Cause” means Executive’sconviction of a felony, or conviction of a misdemeanor involving fraud,dishonesty or moral turpitude, or Executive’s willful or intentional materialbreach of this Agreement, *provided, however*,that Cause shall not include any one or more of the following:  (i) bad judgment or negligence of theExecutive; (ii) any act or omission believed by the Executive in good faith tohave been in or not opposed to the interests of the Company; or (iii) any actor omission of which the President, the Board or a majority of the members ofthe Board who are not parties to such act or omission has or have had actualknowledge.  Any termination of employmentby the Company for Cause shall be communicated to the Executive by a writtennotice (“Notice of Termination”‘) which sets forth (a) the specifictermination provision in this Agreement relied upon by the Company, and (b) inreasonable detail the facts and circumstances claimed to provide a basis fortermination of Executive’s employment under such termination provision.

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## 2.4.                  Good Reason.During the Agreement Term, Executive may terminate his employment for GoodReason.  For purposes of this Agreement “GoodReason” means any of the following:  (a)any material breach of the Agreement by the Company or its successors orassigns; or (b) the Company’s failure to take appropriate action to electExecutive as CEO or Executive Chairman, as the case may be.

## Any termination of employment by Executive for Good Reason shall becommunicated to the Company by Notice of Termination, and the Termination Dateshall be the date of delivery of the Notice of Termination unless the Notice ofTermination specifies a later Termination Date, which shall not be later thanfifteen days after delivery of the Notice of Termination.  Prior to resigning for Good Reason, Executiveshall give written notice of the facts and circumstances claimed to provide abasis for such resignation not more than sixty days after he has actualknowledge of such facts and circumstances, and if the Company has cured suchfacts and circumstances within thirty days after receipt of such notice,Executive shall not be entitled to resign for Good Reason.

# ARTICLEIIIOBLIGATIONS OF THE COMPANY UPON TERMINATION OF EMPLOYMENT

## 3.1.                  If by Executive forGood Reason, or by the Company Other Than for Cause, or upon Disability orDeath.  During the Agreement Term, ifExecutive shall terminate employment for Good Reason, or if the Company shallterminate Executive’s employment (including termination by reason of a Nonrenewal Notice) other than for Cause,or if Executive’s employment is terminated by reason of Executive’s Disabilityor death, the Company’s obligations to Executive shall be as follows:

### (a)                   The Companyshall immediately pay Executive a cash amount equal to the sum of all unpaidamounts of Salary and Bonus and all unpaid vacation previously accrued to thebenefit of Executive and any rights Executive may have under the terms ofapplicable welfare and fringe benefit plans and applicable law (“AccruedObligations”).

### (b)                   For a periodending three years after the Termination Date, the Company shall pay Executive,on each normal payroll date (not less frequently than monthly), an amount equalto the sum of Executive’s Salary in effect on the Termination Date plus TargetBonus in an amount equal to 120% of Executive’s Salary, divided by the numberof payroll periods in each respective 12-month period during such three-yearperiod.

### Notwithstanding the foregoing, if on the Termination Date the Companyor any other entity that is aggregated with the Company under Section 414(b) or(c) of the Internal Revenue Code of 1986, as amended (the “Code”), hasany outstanding stock that is publicly traded on an established securitiesmarket or otherwise, then, in order to satisfy the requirements of Section 409Aof the Code, the following shall apply:

### (1)  The payment to be made oneach payroll date shall be treated as a separate payment for purposes ofSection 409A.

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### (2)  The aggregate amount of allpayments, if any, payable after March 15 of the year following the year thatincludes the Termination Date (or, if later, the fifteenth day of the thirdmonth after the end of the Company’s fiscal year that includes the TerminationDate) but before the date that is six months after the Termination Date(increased by any other amounts of taxable compensation paid to the Executiveduring such period that would not have been paid but for the termination,including any taxable fringe benefits to which the Executive is entitled underSection 3.1(c) to the extent the total amount of such fringe benefits exceedsthe limit in effect under Section 402(g) of the Code in the year oftermination, but not including any medical, disability or life insurancebenefits) shall not exceed two times the lesser of (i) the Salary on the lastday of the year immediately preceding the Termination Date, or (ii) the limitin effect under Section 401(a)(17) of the Code during the year that includesthe Termination Date.

### (3)  To the extent the paymentspayable during the period described in Subsection 3.1(b)(2) would otherwiseexceed the limit of that subsection, such payments shall be reduced, in reverseorder of payment, to the extent necessary to satisfy Subsection 3.1(b)(2) andthe amount by which the payments are reduced will be paid to Executive in a lumpsum, without interest, six months after the Termination Date.  However, if Executive dies during suchperiod, the limits of Subsection 3.1(b)(2) shall not apply to payments to theExecutive’s Beneficiary, and the amount by which any payments to the Executivewere reduced shall be paid to the Beneficiary as soon as practical afterExecutive’s death.

### (c)                   For a period endingthree years after the Termination Date, the Company shall continue to provideto the Executive and the Executive’s spouse and children welfare benefits(including, without limitation, medical, prescription, dental, disability,salary continuance, individual life, group life, accidental death and travelaccident insurance plans andprograms and fringe benefits), which are at least as favorable as the plansprovided from time to time by the Company applicable to the most seniorexecutives and their spouses and children generally and in accordance with theterms of such plans.  Executive’srights under this Section 3.1(c) shall be in satisfaction of anypost-termination continuation coverage or conversion rights that Executive mayhave pursuant to applicable law, including without limitation, continuationcoverage required by Section 4980B of the Code (“COBRA”).  If the medical benefits (including dental andprescription) are provided under a self-insured medical plan, then theExecutive shall recognize as taxable income for each month during such periodan amount equal to the difference between the COBRA premium for such coverageand the amount of premium paid by the Executive, and any applicable taxes shallbe withheld from amounts payable under Section 3.1(a), and to the extent theExecutive pays any medical expenses for which he is entitled to be reimbursedunder such plan he shall be reimbursed not later than the last day of the yearfollowing the year in which he pays such expense.

## 3.2.                  If by the Companyfor Cause.  During the AgreementTerm, if the Company shall terminate Executive’s employment for Cause, theCompany’s sole obligation to Executive shall be to pay Executive in cash allAccrued Obligations.

## 3.3.                  If by ExecutiveOther Than for Good Reason, Disability or Death.  During the Agreement Term, if Executive shallterminate employment other than for Good Reason, 

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## Disability or death, the Company’s sole obligation to Executive shallbe to pay Executive in cash all Accrued Obligations.

## 3.4.                  Tax Considerations.

## (a)           Reduced Amount.  If it is determined that any benefit receivedor deemed received by the Executive from the Company pursuant to this Agreement(collectively, “Payments”) is or will become subject to any excise taxunder Section 4999 of the Code or any similar tax payable under any UnitedStates federal, state, local or other law, but not including any tax payableunder Section 409A of the Code (such excise tax and all such similar taxescollectively, “Excise Taxes”), then the amount of such Payments shall bereduced to the extent necessary to avoid the imposition of Excise Taxes (theamount to which the Payments are reduced is hereinafter called the “ReducedAmount”), unless the portion of the Reduced Amount that the Executive wouldretain after the application of all applicable income and other taxes exclusiveof Excise Taxes (hereinafter called the “Applicable Taxes”), would beless than the portion of the unreduced amount of the Payments that theExecutive would retain after application of Excise Taxes and all ApplicableTaxes.

## (b)                   Gross-upPayment.  Notwithstanding Section3.4(a), if the portion of the Reduced Amount that the Executive would retainafter the application of all Applicable Taxes, would be less than the portionof the unreduced amount of the Payments that the Executive would retain afterapplication of Excise Taxes and all Applicable Taxes, then, in lieu of the reductiondescribed in Section 3.4(a), the Company shall pay the Executive an amount (“Gross-upPayment”) equal to the product of (i)      theamount of such Excise Taxes multiplied by (ii) the Gross-up Multiple (asdefined below).

The “Gross-up Multiple” shall equal a fraction, the numerator ofwhich is one (1.0), and the denominator of which is one (1.0) minus the sum,expressed as a decimal fraction, of the effective rates of all Applicable Taxesand any Excise Taxes applicable to the Gross-up Payment.  The Gross-up Payment is intended tocompensate the Executive for the Excise Taxes and any federal, state, local orother income or excise taxes or other taxes payable by the Executive withrespect to the Gross-up Payment.  For allpurposes of this Section 3.4, all amounts payable to the Executive shall bedeemed to be subject to the highest effective marginal rates of federal, state,local or other income or other taxes. The Gross-up Payment shall be paid to Executive not later than the endof the calendar year following the year in which the Executive remits theExcise Taxes to the Internal Revenue Service. The preceding sentence is intended to satisfy the requirements ofTreasury Regulation Section 1.409A-3(i)(1)(v) and shall be so construed.

ARTICLE IVEQUITY OWNERSHIP PROVISIONS

### 4.1                   Purchaseof Stock upon Executive’s Death or Disability.  Executive, as Trustee of the David K. HillTrust dated March 4, 2004 (the “Trust”), is the owner of 2,818,655shares of common stock of the Company. As used in this Agreement, the term “Trustee” means the Trusteefrom time to time of the Trust.  IfExecutive’s employment is terminated by reason of Executive’s death orDisability during the Agreement Term, Trustee shall have the right, but not 

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### the obligation, exercisable at any time and from time to time duringthe period ending five years after the Termination Date, to put up to 500,000shares of common stock of the Company (“Shares”) at the price and in themanner provided hereinafter.

### 4.2                   Proceduresto Exercise Put Right.

### (a)                   Trustee’sput right may be exercised at any time after the Termination Date ininstallments of no less than 1,000 Shares. If Trustee wishes to exercise his put right, Trustee shall give writtennotice of Trustee’s intention to do so (“Trustee’s Notice of Intent”),setting forth the number of Shares that Trustee wishes to sell to the Companyat that time.

### (b)                   Executiveacknowledges that the Company’s loan and financing agreements, including theTrust Indenture (the “Trust Indenture”) with respect to the Senior SubordinatedNotes and the Credit Agreement (the “Credit Agreement”) with respect to theCredit Facility, as they may be amended, modified, refinanced or replaced inthe future, place various limitations, restrictions and constraints upon theCompany’s ability and willingness to redeem Shares from its shareholders.  Executive further acknowledges that theCompany has the right and need to maintain a certain level of financialavailability to make “Restricted Payments” as defined in the aforesaid TrustIndenture and to avoid the possibility of a default or failure to comply withany of its covenants and agreements made in the Trust Indenture and the CreditAgreement.  Accordingly, within thirtydays after receipt of Trustee’s Notice of Intent, the Company shall notifyTrustee in writing (“Company’s Notice of Willingness”) of the maximumnumber of Shares that the Company, in its sole discretion, reasonablydetermines that the Company is willing to purchase in light of the Company’sfinancial condition and prospects and the limitations, restrictions andconstraints in its loan and financing agreements, including the Trust Indentureand the Credit Agreement, as in force and effect at that time.  Company’s Notice of Willingness also shallset forth in reasonable detail the basis and business reasons for the Company’sdetermination.  Within thirty days afterreceipt of Company’s Notice of Willingness, Trustee shall give written notice (“Trustee’sPut Notice”) to the Company of the number of Shares that Trustee wishes tosell to the Company (the “Put Shares”), provided that the number of PutShares may not exceed the maximum number of Shares that the Company is willingto purchase as stated in Company’s Notice of Willingness.

### (c)                   The purchaseprice of the Put Shares shall be the “ESOP Value”, which shall be theper share valuation of Shares owned by the Company’s employee stock ownershipplan (the “ESOP”) as determined by the most recent appraisal prior tothe date of Company’s receipt of Trustee’s Put Notice made by an independentappraiser pursuant to Section 409(e) or 4975 of the Internal Revenue Code, asamended.  If the Company does notmaintain an ESOP, the ESOP Value shall be the fair market value of the PutShares as determined reasonably and in good faith by the Board.

### (d)                   Withinthirty days after the Company’s receipt of the Trustee’s Put Notice, Trusteeshall deliver to the Company one or more stock certificates representing thePut Shares, with appropriate executed stock powers conveying title to the PutShares and representing and warranting good title free and clear of liens,encumbrances and claims of others, and the Company shall purchase and pay forthe Put Shares in a single cash payment.

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# ARTICLE VNON-COMPETE AND NON-SOLICITATION

### 5.1                   Non-Compete.  Executive agrees that, during the AgreementTerm and for the period of three years after the Termination Date (the “NoncompetePeriod”), Executive shall not directly or indirectly, either for himself orfor any other person, partnership, corporation, company or other entity, ownany interest in, manage, control, participate in, consult with, render servicesfor, or in any other manner engage in any business or enterprise whichmanufactures homes within the United States (any of the foregoing, a “CompetitiveActivity”); provided, however, that during the Noncompete Period Executivemay engage in any activity that is permitted by Section 1.2(c) and Executiveshall not be prohibited from the passive ownership (viz. Executive doesnot directly or indirectly participate in the business or management of theapplicable entity) of less than 2% of the stock of a publicly-held corporationwhose stock is traded on a national securities exchange. Executive agrees thatthe aforementioned covenant is reasonable with respect to its duration,geographical area and scope. In particular, Executive acknowledges and agreesthat the geographic scope of this restriction is necessary to protect thegoodwill of the Company.

### 5.2                   Non-Solicitation.  During the Noncompete Period, Executive shallnot directly or indirectly through another person or entity (i) induce orattempt to induce any employee of the Company or any of its subsidiaries oraffiliated entities to leave his employer, (ii) hire any person who was anemployee of the Company or any of its subsidiaries or affiliated entitiesduring the twelve months preceding such hiring, (iii) induce or attempt toinduce any customer, supplier, licensee, licensor, franchisee or other businessrelation of the Company or any of its subsidiaries or affiliated entities tocease doing business with the Company or such subsidiary or affiliated entity,or (iv) in any way interfere with the relationship between any such customer,supplier, licensee or business relation and the Company or any of itssubsidiaries or affiliated entities.

### 5.3                   JudicialAction and Authority.  Executiveacknowledges that the restrictions contained in this Article V arereasonable.  However, if, at the time ofenforcement of any of the provisions of this Article V, a court shall hold thatthe duration, scope or area restrictions stated herein are unreasonable undercircumstances then existing, the parties agree that the maximum duration, scopeor area reasonable under such circumstances shall be substituted for the statedduration, scope or area and that the court shall be allowed to revise therestrictions contained herein to cover the maximum period, scope and areapermitted by law.  In addition, Executiveacknowledges and agrees that in the event of the breach or a threatened breachby Executive of any of the provisions of this Article V, the Company wouldsuffer irreparable harm, and in addition and supplementary to other rights andremedies existing in its favor, the Company shall be entitled to specificperformance and/or injunctive or other equitable relief from a court ofcompetent jurisdiction in order to enforce or prevent any violations of theprovisions hereof (without posting a bond or other security).  In addition, in the event of a breach orviolation by Executive of this Article V, the Noncompete Period shall be tolleduntil such breach or violation has been duly cured.

## 5.4                   Survival.  The provisions of this Article V shallsurvive and continue in full force in accordance with their termsnotwithstanding the termination of the Agreement Term.

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ARTICLE VISET-OFF AND MITIGATION

## 6.1                   NoSet-off by Company.  The Executive’sright to receive when due the payments and other benefits provided for underand in accordance with the terms of this Agreement is absolute, unconditionaland shall not be subject to set-off, counterclaim or legal or equitabledefense. Time is of the essence in performance by the Company of itsobligations under this Agreement.

## 6.2                   NoMitigation. The Executive shall not have any duty to mitigate the amountspayable by the Company under this Agreement upon any termination of employmentby seeking new employment following termination. Except as specificallyotherwise provided in this Agreement, all amounts payable pursuant to thisAgreement shall be paid without reduction regardless of any amounts of salary,compensation or other amounts which may be paid or payable to the Executive asthe result of the Executive’s employment by another employer orself-employment.

ARTICLE VIIMISCELLANEOUS

7.1                   Legal Fees.  The Company will reimburse Executive forExecutive’s legal fees and expenses incurred in negotiating this Agreement, toa maximum of $35,000.

7.2                   Submission to Jurisdiction.  Executive and the Company agree that any andall claims and disputes arising out of or relating to this Agreement or anybreach hereof shall be resolved solely and exclusively by lawsuit or otherjudicial action filed in the federal or state courts sitting in Chicago,Illinois.  Each party waives anyobjection to personal jurisdiction (provided that process is properly served)or venue in such courts, and any defense of *forum non conveniens*or any similar doctrine.

## 7.3                   NoAssignability.  This Agreement ispersonal to Executive and without the prior written consent of the Company shallnot be assignable by Executiveotherwise than by will or the laws of descent and distribution.  This Agreement shall inure to the benefit ofand be enforceable by Executive’s legal representatives.

## 7.4                   Successors.  This Agreement shall inure to the benefit ofand be binding upon the Company and its successors and assigns.  The Company shall require any successor(whether direct or indirect, by purchase, merger, consolidation or otherwise)to all or substantially all of the business or assets of the Company to assumeexpressly and agree to perform this Agreement in the same manner and to thesame extent that the Company would be required to perform it if no suchsuccession had taken place.  Anysuccessor to the business and/or assets of the Company which assumes or agreesto perform this Agreement by operation of law, contract or otherwise shall bejointly and severally liable with the Company under this Agreement as if suchsuccessor were the Company.

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## 7.5                   Paymentsto Beneficiary.  If Executive diesbefore receiving amounts to which Executive is entitled under this Agreement,such amounts shall be paid to the beneficiary designated in writing byExecutive, or if none is so designated, to Executive’s estate.

## 7.6                   Severability.  If any one or more Articles, Sections orother portions of this Agreement are declared by any court or governmentalauthority to be unlawful or invalid, such unlawfulness or invalidity shall notserve to invalidate any Article, Section or other portion not so declared to beunlawful or invalid as long as the general intent of the parties as indicatedin the Agreement can still be carried out. Any Article, Section or other portion so declared to be unlawful orinvalid shall be construed so as to effectuate the terms of such Article, Sectionor other portion to the fullest extent possible while remaining lawful andvalid.

## 7.7                   EntireAgreement; Amendments.  ThisAgreement contains the entire understanding of the Company and Executive withrespect to its subject matter.  ThisAgreement shall not be altered, amended or modified except by writteninstrument executed by the Company and Executive.

## 7.8                   Notices.  All notices and other communications underthis Agreement shall be in writing and delivered by hand, by nationallyrecognized delivery service that promises overnight delivery, or by first classregistered or certified mail, return receipt requested, postage prepaid,addressed as follows:

| If to the Executive: |   | David K. Hill                               |
|----------------------|--------|---------------------------------------------|
|                 |   | 2008 Abbotsford  Drive                      |
|                 |   | Barrington, IL  60010                       |
|                 |   |                                        |
| with a copy to:      |   | James A. Moehling                           |
|                 |   | Holland &  Knight LLP                   |
|                 |   | 131 South  Dearborn Street, 30th Floor |
|                 |   | Chicago,  Illinois 60603                    |
|                 |   |                                        |
| If to the  Company:  |   | Kimball Hill, Inc.                          |
|                 |   | 5999 New Wilke  Road, Suite 504             |
|                 |   | Rolling Meadows,  Illinois 60008            |
|                 |   | Attention:  President                       |
|                 |   |                                        |
| with a copy to:      |   | Kimball Hill, Inc.                          |
|                 |   | 5999 New Wilke  Road, Suite 504             |
|                 |   | Rolling Meadows,  Illinois 60008            |
|                 |   | Attention: General Counsel             |

 

or to such other address as either party shall havefurnished to the other in writing. Notice and communications shall be effectivewhen actually received by the addressee.

## 7.9                   LiabilityInsurance Coverage.  During theAgreement Term, and for a period of not less than six years after theTermination Date, Executive shall be covered by any directors and 

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## officers, errors and omissions or other suitable insurance maintainedby the Company on a basis not less favorable than such insurance protection, ifany, provided from time to time to other most senior executive officers ormember of the Board, in connection with claims arising in connection withExecutive’s services to the Company or any corporation, business, person, trustor other entity which Executive is or was serving at the request of theCompany.

## 7.10                 Survivalof Executive’s Rights.  Except asprovided in Article III respecting rights terminated under that Article, all ofExecutive’s rights hereunder, including without limitation his rights tocompensation, benefits and reimbursement of fees and expenses, shall surviveany termination of the relationship of Executive with the Company, includingexpiration of the Agreement Term or termination of this Agreement, and shall bebinding on the successors and assigns of the Company and shall inure to the benefit of thesuccessors, assigns, heirs and personal representatives of Executive.

## 7.11                 GoverningLaw.  This Agreement shall beinterpreted and construed in accordance with the laws of the State of Illinois,without regard to its conflict of laws principles.

## 7.12                 TaxWithholding.  The Company may withholdfrom any amounts payable under this Agreement any federal, state or local taxesthat are required to be withheld pursuant to any applicable law or regulation.

## 7.13                 No Waiver.  Failure by the Company or Executive to insistupon strict compliance with any provision of this Agreement shall not be deemeda waiver of such provision or any other provision of this Agreement.  A waiver of any provision of this Agreementshall not be deemed a waiver of any other provision, and any waiver of anydefault in any such provision shall not be deemed a waiver of any later defaultthereof or of any other provision.

## 7.14                 Grammar.  Except where the context required otherwise,as used in this Agreement, the masculine gender includes the feminine andneuter genders and the singular includes the plural.

IN WITNESS WHEREOF,Executive and the Company have signed this Agreement as of the date first abovewritten.
|        | KIMBALL HILL,  INC. |
|--------|---------------------|
|   |                |   |
|   |                |   |
|   | By:                 | /s/ C. Kenneth  Love |
|   |                | C. Kenneth Love,  President |
|   |                |   |
|   |                |   |
|   | /s/ David K.  Hill  |
|   | David K. Hill       |

 

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