Document:

<PAGE>   1

                                                                   EXHIBIT 10.21

                                    EXECUTION

                       ----------------------------------

                            2000 TERM LOAN AGREEMENT

                           Dated as of October 3, 2000

                                      among

                       KAUFMAN AND BROAD HOME CORPORATION
                                   as Borrower

                             THE BANKS PARTY HERETO

                             BANK OF AMERICA, N.A.,
                             as Administrative Agent

                       CREDIT LYONNAIS LOS ANGELES BRANCH,
                              as Syndication Agent

                                  BANK ONE, NA,
                             as Documentation Agent

                                       and

                         BANC OF AMERICA SECURITIES LLC,
                     as Lead Arranger and Sole Book Manager

                       ----------------------------------

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                            Page
                                                                                            ----
<S>     <C>                                                                                 <C>
RECITALS ...................................................................................   1

Article 1 DEFINITIONS AND ACCOUNTING TERMS .................................................   1

        1.1 Defined Terms ..................................................................   1
        1.2 Use of Defined Terms ...........................................................  24
        1.3 Accounting Terms ...............................................................  24
        1.4 Rounding .......................................................................  24
        1.5 Miscellaneous Terms ............................................................  24
        1.6 Exhibits and Schedules .........................................................  24
        1.7 References to "Borrower and its Subsidiaries" ..................................  24

Article 2 LOANS ............................................................................  25

        2.1 Loans-General ..................................................................  25
        2.2 Prime Rate Loans ...............................................................  26
        2.3 LIBOR Loans ....................................................................  26
        2.4 Initial Request for Loan .......................................................  26
        2.5 Administrative Agent's Right to Assume Funds Available .........................  26
        2.6 Optional Increase to Commitment ................................................  27

Article 3 PAYMENTS AND FEES ................................................................  29

        3.1 Principal and Interest .........................................................  29
        3.2 Upfront Fee ....................................................................  30
        3.3 Agency Fee .....................................................................  30
        3.4 Capital Adequacy ...............................................................  30
        3.5 LIBOR Fees and Costs ...........................................................  32
        3.6 Late Payments/Default Interest .................................................  34
        3.7 Computation of Interest and Fees ...............................................  34
        3.8 Holidays .......................................................................  34
        3.9 Payment Free of Taxes ..........................................................  35
        3.10 Funding Sources ...............................................................  35
        3.11 Failure to Charge or Making of Payment Not Subsequent Waiver ..................  35
        3.12 Time and Place of Payments; Evidence of Payments; Application of Payments .....  36
        3.13 Administrative Agent's Right to Assume Payments Will be Made ..................  36
        3.14 Survivability .................................................................  36
        3.15 Bank Calculation Certificate ..................................................  36
        3.16 Transition ....................................................................  36

Article 4 REPRESENTATIONS AND WARRANTIES ...................................................  38

        4.1 Existence and Qualification; Power; Compliance with Law ........................  38
        4.2 Authority; Compliance with Other Instruments and Government Regulations ........  38
</TABLE>

                                      - i -
<PAGE>   3

<TABLE>
<S>     <C>                                                                   <C>
        4.3 No Governmental Approvals Required .............................  39
        4.4 Subsidiaries ...................................................  39
        4.5 Financial Statements ...........................................  40
        4.6 No Other Liabilities; No Material Adverse Effect ...............  40
        4.7 Title to Assets ................................................  40
        4.8 Intangible Assets ..............................................  40
        4.9 Existing Indebtedness and Contingent Guaranty Obligations ......  40
        4.10 Governmental Regulation .......................................  41
        4.11 Litigation ....................................................  41
        4.12 Binding Obligations ...........................................  41
        4.13 No Default ....................................................  41
        4.14 Pension Plans .................................................  41
        4.15 Tax Liability .................................................  41
        4.16 Regulation U ..................................................  41
        4.17 Environmental Matters .........................................  41
        4.18 Disclosure ....................................................  42
        4.19 Projections ...................................................  42

Article 5 AFFIRMATIVE COVENANTS
          (OTHER THAN INFORMATION AND REPORTING REQUIREMENTS) ..............  43
        5.1 Payment of Taxes and Other Potential Liens .....................  43
        5.2 Preservation of Existence ......................................  43
        5.3 Maintenance of Properties ......................................  43
        5.4 Maintenance of Insurance .......................................  43
        5.5 Compliance with Laws ...........................................  43
        5.6 Inspection Rights ..............................................  44
        5.7 Keeping of Records and Books of Account ........................  44
        5.8 Use of Proceeds ................................................  44
        5.9 Subsidiary Guaranty ............................................  44

Article 6 NEGATIVE COVENANTS ...............................................  45

        6.1 Payment or Prepayment of Subordinated Obligations ..............  45
        6.2 [Intentionally Omitted] ........................................  45
        6.3 Mergers and Sale of Assets .....................................  45
        6.4 Investments and Acquisitions ...................................  45
        6.5 ERISA Compliance ...............................................  46
        6.6 Change in Business .............................................  47
        6.7 Liens and Negative Pledges .....................................  47
        6.8 Transactions with Affiliates ...................................  48
        6.9 Consolidated Tangible Net Worth ................................  48
        6.10 Consolidated Leverage Ratio ...................................  49
        6.11 Consolidated Interest Coverage Ratio ..........................  50
        6.12 Distributions .................................................  50
        6.13 Amendments ....................................................  50
        6.14 Hostile Tender Offers .........................................  50
        6.15 Inventory .....................................................  50
        6.16 Investment in Subsidiaries and Joint Ventures .................  50
</TABLE>

                                     - ii -
<PAGE>   4

<TABLE>
<S>     <C>                                                                            <C>
        6.17 Money Market Indebtedness ..............................................  50
        6.18 Domestic Standing Inventory ............................................  51

Article 7 INFORMATION AND REPORTING REQUIREMENTS ....................................  52

        7.1 Financial and Business Information of Borrower and Its Subsidiaries .....  52
        7.2 Compliance Certificate ..................................................  54

Article 8 CONDITIONS ................................................................  55

        8.1 Initial Advances ........................................................  55

Article 9 EVENTS OF DEFAULT AND REMEDIES UPON EVENTS OF DEFAULT .....................  57

        9.1 Events of Default .......................................................  57
        9.2 Remedies Upon Event of Default ..........................................  58

Article 10 THE ADMINISTRATIVE AGENT .................................................  60

        10.1 Appointment and Authorization ..........................................  60
        10.2 Administrative Agent and Affiliates ....................................  60
        10.3 Banks' Credit Decisions ................................................  60
        10.4 Action by Administrative Agent .........................................  60
        10.5 Liability of Administrative Agent ......................................  61
        10.6 Indemnification ........................................................  62
        10.7 Successor Administrative Agent .........................................  62
        10.8 No Obligations of Borrower .............................................  63
        10.9 Defaulting Banks .......................................................  63

Article 11 MISCELLANEOUS ............................................................  64

        11.1 Cumulative Remedies; No Waiver .........................................  64
        11.2 Amendments; Consents ...................................................  64
        11.3 Costs, Expenses and Taxes ..............................................  64
        11.4 Nature of Banks' Obligations ...........................................  65
        11.5 Representations and Warranties .........................................  66
        11.6 Notices ................................................................  66
        11.7 Execution in Counterparts ..............................................  66
        11.8 Binding Effect; Assignment .............................................  66
        11.9 Sharing of Setoffs .....................................................  68
        11.10 Indemnity by Borrower .................................................  69
        11.11 Nonliability of Banks .................................................  70
        11.12 Confidentiality .......................................................  70
        11.13 No Third Parties Benefited ............................................  70
        11.14 Other Dealings ........................................................  71
        11.15 Right of Setoff - Deposit Accounts ....................................  71
        11.16 Further Assurances ....................................................  71
        11.17 Integration ...........................................................  71
        11.18 Governing Law .........................................................  71
</TABLE>

                                     - iii -
<PAGE>   5

<TABLE>
<S>     <C>                                                                            <C>
        11.19 Severability of Provisions ............................................  71
        11.20 Headings ..............................................................  71
        11.21 Conflict in Loan Documents ............................................  71
        11.22 Waiver Of Jury Trial ..................................................  71
        11.23 Purported Oral Amendments .............................................  72
        11.24 Hazardous Materials Indemnity .........................................  73
</TABLE>

                                     - iv -
<PAGE>   6

<TABLE>
<CAPTION>
Exhibits
<S>     <C>
A       - Commitment Assignment and Acceptance
B       - Compliance Certificate
C       - Note
D-1     - Opinion of Counsel
D-2     - Opinion of Counsel
E       - Subsidiary Guaranty
F       - Quarterly Report - Sales
G       - Quarterly Report - Inventory
</TABLE>

<TABLE>
<CAPTION>
Schedules
<S>     <C>
1.1     Pro Rata Shares
4.4     Subsidiaries
4.7     Existing Liens and Rights of Others
4.9     Existing Indebtedness and Contingent Obligations
6.4     Investments
</TABLE>

                                     - v -
<PAGE>   7

                            2000 TERM LOAN AGREEMENT

                          Dated as of October 3, 2000

            This 2000 Term Loan Agreement ("Agreement") is entered into by and
among Kaufman and Broad Home Corporation, a Delaware corporation ("Borrower"),
each bank set forth on the signature pages of this Agreement or which from time
to time becomes party hereto (collectively, the "Banks" and individually, a
"Bank") and Bank of America, N.A., as Administrative Agent, Credit Lyonnais Los
Angeles Branch, as Syndication Agent, Bank One, NA, as Documentation Agent, and
Banc of America Securities LLC as Lead Arranger and Sole Book Manager.

                                    RECITALS

            This Agreement establishes a new credit facility replacing that
certain Term Loan Agreement dated as of January 7, 1999 by and among Borrower,
the banks named therein, Bank of America National Trust and Savings Association,
as Administrative Agent and various other banks in various agent capacities, as
amended (the "Prior Term Loan Agreement"). Subject to the transition provisions
of Section 3.16, and as contemplated by Section 8.1(a)(viii), the terms and
provisions of this Agreement shall become effective, and the Prior Term Loan
Agreement shall terminate, as of the 2000 Closing Date.

            WHEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto covenant and agree as follows:

                                   Article 1
                        DEFINITIONS AND ACCOUNTING TERMS

            1.1 Defined Terms. As used in this Agreement, the following terms
shall have the meanings set forth below:

               "2000 Closing Date" means the time and Banking Day on which the
        conditions set forth in Section 8.1 are satisfied or waived pursuant to
        Section 11.2, as evidenced by the return of one or more of the
        promissory notes under the Prior Loan Agreements by the Administrative
        Agent to Borrower.

               "2000 Revolving Loan Agreement" means the 2000 Revolving Loan
        Agreement dated as of October 3, 2000 among Borrower, Bank of America,
        as administrative agent, and the banks party thereto, and as the same
        may from time to time be amended, modified, refinanced or replaced.

               "Acquisition" means any transaction, or any series of related
        transactions, consummated after the 2000 Closing Date, by which Borrower
        and/or any of its Subsidiaries directly or indirectly (a) acquires any
        ongoing business or all or substantially all of the assets of any firm,
        corporation or division thereof, whether through purchase of assets,
        merger or otherwise, (b) acquires control of securities of a corporation
        representing 50% or more of the ordinary voting power for the election
        of directors or (c) acquires control of a 50% or more ownership interest
        in any partnership, joint venture or other business entity.

                                      -1-
<PAGE>   8

               "Administrative Agent" means Bank of America or any successor
        administrative agent.

               "Administrative Agent's Office" means Bank of America, N.A., 5
        Park Plaza, Suite 500, Irvine, California 92614, or such other office as
        the Administrative Agent may designate in writing to Borrower and the
        Banks.

               "Advance" means an advance made or to be made to Borrower by a
        Bank pursuant to Article 2.

               "Affiliate" means, with respect to any Person, any other Person
        which directly or indirectly controls, or is under common control with,
        or is controlled by, such Person. As used in this definition, "control"
        (including its correlative meanings, "controlled by" and "under common
        control with") shall mean possession, directly or indirectly, of power
        to direct or cause the direction of management or policies (whether
        through ownership of securities or partnership or other ownership
        interests, by contract or otherwise); provided that, in any event, any
        Person which owns directly or indirectly 10% or more of the securities
        having ordinary voting power for the election of directors or other
        governing body of a corporation that has more than 100 record holders of
        such securities or 10% or more of the partnership or other ownership
        interests of any other Person that has more than 100 record holders of
        such interests will be deemed to control such corporation or other
        Person.

               "Agents" mean the Administrative Agent, the Syndication Agent,
        the Documentation Agent, and the Lead Arranger and Sole Book Manager.

               "Agreement" means this 2000 Term Loan Agreement, either as
        originally executed or as it may from time to time be supplemented,
        modified, amended, renewed, extended or supplanted.

               "Applicable LIBOR Spread" means, as of any date of determination,
        the interest rate spread set forth below opposite the Applicable Pricing
        Level as of such date:

<TABLE>
<CAPTION>
                    Applicable                Applicable
                  Pricing Level              LIBOR Spread
                  -------------              ------------
<S>                                          <C>
                       I                        1.400%
                       II                       1.625%
                       III                      1.750%
                       IV                       1.950%
                       V                        2.200%
</TABLE>

               "Applicable Minimum Hold Requirement" means, in the case of any
        Bank, the amount of the Pro Rata Share of the Commitment held by that
        Bank plus the amount, if any, of the Pro Rata Share (as defined in the
        2000 Revolving Loan Agreement) of the Commitment (as defined in the 2000
        Revolving Loan Agreement) held by that Bank, as reduced by (a) the
        amount of any assignment of a portion thereof made by that Bank to an
        Eligible Assignee that is not an Affiliate of that Bank and (b) the
        amount of any participation therein granted by that Bank to a
        participant that is not an Affiliate of that Bank, which net amount,
        after giving effect to clauses (a) and (b), shall not be less than
        $20,000,000 (unless approved in writing by the

                                      -2-
<PAGE>   9

        Administrative Agent or unless an Event of Default has occurred and is
        continuing), but subject to the provisions of Section 11.8(b) and (e).

               "Applicable Pricing Level" means, Pricing Level "I" for any day
        on which Borrower holds an Investment Grade Credit Rating and, for any
        day during a Pricing Period on which Borrower does not hold an
        Investment Grade Credit Rating, means the following:

                                   Consolidated Leverage Ratio
Applicable Pricing Level           Applicable to Pricing Period
------------------------           ----------------------------
        II                         Consolidated Leverage Ratio of less than or
                                   equal to 1.25 to 1.00

        III                        Consolidated Leverage Ratio of greater than
                                   1.25 to 1.00, but less than or equal to 1.80
                                   to 1.00

        IV                         Consolidated Leverage Ratio of greater than
                                   1.80 to 1.00, but less than or equal to 2.25
                                   to 1.00

        V                          Consolidated Leverage Ratio of greater than
                                   2.25 to 1.00.

        Borrower is responsible pursuant to Section 7.1(k) to provide the
        Administrative Agent with notice of each change in the Applicable
        Pricing Level that is due to the inception or cessation of an Investment
        Grade Credit Rating.

               "Applicable Prime Rate Spread" means, as of any date of
        determination, the interest rate spread set forth below opposite the
        Applicable Pricing Level as of such date:

<TABLE>
<CAPTION>
                                                Applicable
               Applicable                       Prime Rate
             Pricing Level                       Spread
             -------------                      ----------
<S>                                             <C>
                   I                              0.00%
                   II                             0.00%
                   III                            0.00%
                   IV                             0.00%
                   V                              0.25%
</TABLE>

               "Associate" shall have the meaning ascribed to such term in Rule
        12b-2 of the General Rules and Regulations under the Exchange Act, as in
        effect on the date hereof.

               "Authorizations" has the meaning set forth for that term in
        Section 4.1.

               "Bank" means each bank whose name is set forth in the signature
        pages of this Agreement and each lender which may hereafter become a
        party to this Agreement pursuant to Section 11.8.

                                      -3-
<PAGE>   10

               "Bank of America" means Bank of America, N.A., formerly known as
        Bank of America National Trust and Savings Association.

               "Banking Day" means any Monday, Tuesday, Wednesday, Thursday or
        Friday other than a day on which banks are authorized or required to be
        closed in California or New York.

               "Bond Facility" means any bond facility pursuant to which a
        municipality, or a community facilities district formed by a
        municipality, has or will issue bonds to finance a portion of the costs
        of acquisition of and/or improvements to real property located in such
        municipality (or district) owned by Borrower, one of its Subsidiaries or
        by another Person acquired by Borrower or one of its Subsidiaries (or to
        pay development or "impact" fees in lieu thereof), and with respect to
        which Borrower or one of its Subsidiaries will provide a letter of
        credit or other reimbursement support. The real property that is the
        subject of any such bond facility will be subject to a Lien for special
        taxes to repay the Indebtedness evidenced by such bonds.

               "Borrower" means Kaufman and Broad Home Corporation, a Delaware
        corporation, and its successors and permitted assigns.

               "Bridge Loan Agreement" means the 2000 Bridge Loan Agreement
        dated as of May 10, 2000 by and among Borrower, the banks named therein,
        Bank of America, as administrative agent, and various other banks in
        various agent capacities.

               "Capital Lease" means, with respect to any Person, a lease of
        any Property by that Person as lessee that is, or should be in
        accordance with Financial Accounting Standards Board Statement No. 13,
        recorded as a "capital lease" on a balance sheet of that Person prepared
        in accordance with Generally Accepted Accounting Principles.

               "Cash" means all monetary items (including currency, coin and
        bank demand deposits) that are treated as cash under Generally Accepted
        Accounting Principles.

               "Cash Equivalents" means, with respect to any Person, that
        Person's Investments in:

                   (a) Government Securities due within one year of the making
               of the Investment;

                   (b) readily marketable direct obligations of any State of the
               United States of America or any political subdivision of any such
               State or any public agency or instrumentality thereof given on
               the date of such Investment a credit rating of at least Aa3 by
               Moody's or AA- by S&P, in each case due within one year from the
               making of the Investment;

                   (c) certificates of deposit issued by, deposits in,
               eurodollar deposits through, bankers' acceptances of, and
               repurchase agreements covering Government Securities executed by,
               (i) any Bank or (ii) any bank and/or savings and loan association
               doing business in and incorporated under the Laws of the United
               States of America, any state thereof or the District of Columbia
               and having on the date of such Investment combined capital,
               surplus and undivided profits of at least $500,000,000 and which
               carries on the date of such Investment a credit rating of P-1 or
               higher by

                                      -4-
<PAGE>   11

               Moody's or A-1 or higher by S&P, in each case due within one year
               after the date of the making of the Investment;

                   (d) certificates of deposit issued by, bank deposits in,
               eurodollar deposits through, bankers' acceptances of, and
               repurchase agreements covering Government Securities executed by
               any branch or office located in the United States of America of a
               bank incorporated under the Laws of any jurisdiction outside the
               United States of America having on the date of such Investment
               combined capital, surplus and undivided profits of at least
               $500,000,000 and which carries on the date of such Investment a
               credit rating of P-1 or higher by Moody's or A-1 or higher by
               S&P, in each case due within one year after the date of the
               making of the Investment;

                   (e) readily marketable commercial paper or other debt
               securities of (i) any Bank that is a Bank as of the 2000 Closing
               Date, (ii) corporations, commercial banks or financial
               institutions doing business in and incorporated under the Laws of
               the United States of America or any state thereof or the District
               of Columbia or (iii) a holding company for a bank described in
               clause (c) or (d) above, given on the date of such Investment a
               credit rating of P-1 or higher by Moody's, of A-1 or higher by
               S&P, or F-1 or higher by Fitch, in each case due within one year
               of the making of the Investment;

                   (f) repurchase agreements covering Government Securities
               executed by a broker or dealer registered under Section 15(b) of
               the Exchange Act, having on the date of the Investment capital of
               at least $50,000,000, due within 90 days after the date of the
               making of the Investment; provided, that the maker of the
               Investment receives written confirmation of the transfer to it of
               record ownership of the Government Securities on the books of a
               "primary dealer" in such government Securities or on the books of
               such registered broker or dealer, as soon as practicable after
               the making of the Investment;

                   (g) "money market preferred stock" issued by a corporation
               incorporated under the Laws of the United States of America or
               any State thereof (i) given on the date of such Investment a
               credit rating of at least Aa3 by Moody's and AA- by S&P, in each
               case having an investment period not exceeding 50 days or (ii) to
               the extent that investors therein have the benefit of a standby
               letter of credit issued by a Bank or a bank described in clauses
               (c) or (d) above; provided, that (y) the amount of all such
               Investments issued by the same issuer does not exceed $10,000,000
               and (z) the aggregate amount of all such Investments does not
               exceed $25,000,000;

                   (h) a readily redeemable "money market mutual fund" sponsored
               by a bank described in clause (c) or (d) hereof, or a registered
               broker or dealer described in clause (f) hereof, that has and
               maintains an investment policy limiting its investments primarily
               to instruments of the types described in clauses (a) through (g)
               hereof and given on the date of such Investment a credit rating
               of at least Aa3 by Moody's and AA- by S&P; and

                   (i) corporate notes or bonds having an original term to
               maturity of not more than one year issued by a corporation
               incorporated under the Laws of the United States of America or
               any state thereof, or a participation interest therein; provided,
               that

                                      -5-
<PAGE>   12

               (i) commercial paper issued by such corporation is given on the
               date of such Investment a credit rating of at least Aa3 by
               Moody's and AA- by S&P, (ii) the amount of all such Investments
               issued by the same issuer does not exceed $10,000,000 and (iii)
               the aggregate amount of all such Investments does not exceed
               $25,000,000.

               "Change in Control" means, and shall be deemed to have occurred
        at such time as any of the following events shall occur:

                   (a) there shall be consummated any consolidation or merger of
               Borrower in which Borrower is not the continuing or surviving
               corporation or pursuant to which the Voting Stock would be
               converted into Cash, securities or other property, other than a
               merger or consolidation of Borrower where the Borrower is not the
               continuing or surviving corporation and in which the holders of
               Voting Stock immediately prior to the merger have 75% ownership,
               directly or indirectly, of the Voting Stock of the surviving
               corporation immediately after such merger or consolidation; or

                   (b) there is a report filed by any person, including its
               Affiliates and Associates, on Schedule 13D or 14D-1 (or any
               successor schedule, form or report) pursuant to the Exchange Act,
               disclosing that such person (for the purposes of the definition
               of Change in Control only, the term "person" is used as defined
               in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act or
               any successor provision to either of the foregoing) has become
               the beneficial owner (as the term "beneficial owner" is defined
               under Rule 13d-3 or any successor rule or regulation promulgated
               under the Exchange Act) of 50% or more of the voting power of
               Borrower's Voting Stock then outstanding; provided, however, that
               a person shall not be deemed beneficial owner of, or to own
               beneficially (1) any Securities tendered pursuant to a tender or
               exchange offer made by or on behalf of such person or any of such
               person's Affiliates or Associates until such tendered Securities
               are accepted for purchase or exchange thereunder, or (2) any
               Securities if such beneficial ownership (a) arises solely as a
               result of a revocable proxy delivered in response to a proxy or
               consent solicitation made pursuant to, and in accordance with,
               the applicable rules and regulations under the Exchange Act, and
               (b) is not also then reportable on Schedule 13D (or any successor
               schedule) under the Exchange Act; or

                   (c) a "Change in Control" (or analogous term) as defined in
               one or more indentures or agreements governing any Subordinated
               Obligations occur and $25,000,000 of Subordinated Obligations
               thereupon become due and payable by Borrower or its Subsidiaries.

        Notwithstanding the foregoing, a Change in Control shall not be deemed
        to have occurred if at any time Borrower, any Subsidiary of Borrower,
        any employee stock ownership plan or any other employee benefit plan,
        including any Pension Plan of Borrower or any Subsidiary of Borrower, or
        any person holding Voting Stock for or pursuant to the terms of such
        employee benefit plan, files or becomes obligated to file a report under
        or in response to Schedule 13D or Schedule 14D-1 (or any successor
        schedule, form or report) under the Exchange Act disclosing beneficial
        ownership by it of shares of Voting Stock, whether in excess of 50% or
        otherwise.

               "Code" means the Internal Revenue Code of 1986, as amended or
        replaced and as in effect from time to time.

                                      -6-
<PAGE>   13

               "Commission" means the Securities and Exchange Commission and any
        successor commission.

               "Commitment" means, subject to Section 2.6, $160,950,000. The
        Pro Rata Shares of the Banks with respect to the Commitment are set
        forth in Schedule 1.1.

               "Commitment Assignment and Acceptance" means a commitment
        assignment and acceptance substantially in the form of Exhibit A.

               "Common Stock" means the $1.00 par value common stock and special
        common stock of Borrower.

               "Compliance Certificate" means a compliance certificate in the
        form of Exhibit B signed, on behalf of Borrower, by a Senior Officer of
        Borrower.

               "Consolidated Adjusted EBITDA" means, for any fiscal period,
        Consolidated EBITDA for that fiscal period plus (a) the amount of
        capitalized interest that was included in cost of sales in determining
        Consolidated Net Income for that fiscal period plus (b) all non-Cash Net
        Realizable Value Adjustments made during that fiscal period.

               "Consolidated EBITDA" means, for any fiscal period, the sum of
        (a) Consolidated Net Income for that period, plus (b) any extraordinary
        loss reflected in such Consolidated Net Income, minus (c) any
        extraordinary gain reflected in such Consolidated Net Income, plus (d)
        Consolidated Interest Expense for that period plus (e) the aggregate
        amount of federal and state taxes on or measured by income for that
        period (whether or not payable during that period), plus (f)
        depreciation, amortization and all other non-cash expenses for that
        period, in each case as determined in accordance with Generally Accepted
        Accounting Principles, in the case of items (d), (e) and (f), only to
        the extent deducted in the determination of Consolidated Net Income for
        that period.

               "Consolidated Interest Coverage Ratio" means, with respect to any
        Fiscal Quarter of Borrower and its Consolidated Subsidiaries, the ratio
        of (a) Consolidated Adjusted EBITDA for the twelve month period ending
        on the last day of such Fiscal Quarter to (b) the sum of (i)
        Consolidated Interest Expense (including any non-cash items included in
        Consolidated Interest Expense) plus (ii) to the extent not included in
        Consolidated Interest Expense, any charge to Consolidated Net Income
        which reflects the distribution paid or accrued to or for the holders of
        the Trust Preferred Capital Securities (including any such charge
        denominated "minority interest in net income of consolidated
        subsidiaries") plus (iii) all dividends (other than dividends paid in
        the same class of stock) paid on any preferred stock of Borrower, in
        each case for the twelve month period ending on the last day of such
        Fiscal Quarter.

               "Consolidated Interest Expense" means, with respect to any
        fiscal period of Borrower and its Consolidated Subsidiaries, the
        aggregate amount of interest, fees, charges and related expenses paid or
        payable to a lender in connection with borrowed money that is treated as
        interest (including accretion of original issue discount on long-term
        debt existing during such fiscal period) and the interest portion of any
        capitalized lease payment of Borrower and its Consolidated Subsidiaries
        (other than any such items properly attributable to Financial
        Subsidiaries).

                                      -7-
<PAGE>   14

               "Consolidated Joint Venture" means, as of any date of
        determination, a Joint Venture that is consolidated in the consolidated
        financial statements of Borrower and its Subsidiaries as of such date.

               "Consolidated Leverage Ratio" means, as of any date of
        determination, the ratio of (a) Consolidated Total Indebtedness on that
        date to (b) [Consolidated Tangible Net Worth on that date minus the
        amount, if any, by which the portion of Shareholders' Equity of Borrower
        and its Consolidated Subsidiaries attributable to Borrower's equity
        interest in the Shareholders' Equity of all Joint Ventures (other than
        any Consolidated Joint Venture) exceeds $30,000,000].

               "Consolidated Net Income" means, with respect to any fiscal
        period, the consolidated net income of Borrower and its Consolidated
        Subsidiaries for that period, determined in accordance with Generally
        Accepted Accounting Principles, consistently applied.

               "Consolidated Subsidiaries" means, with respect to Borrower, all
        of the Subsidiaries of Borrower whose financial statements are
        consolidated with the consolidated financial statements of Borrower
        under Generally Accepted Accounting Principles.

               "Consolidated Tangible Net Worth" means, as of any date of
        determination, the Shareholders' Equity of Borrower and its Consolidated
        Subsidiaries on a consolidated basis on that date plus, if that date is
        on or prior to the Settlement Date with respect to an issuance of
        securities treated as Trust Preferred Capital Securities, an amount
        equal to 100% of the aggregate book value of such Trust Preferred
        Capital Securities outstanding on that date minus the aggregate book
        value on that date of any Intangible Assets consisting of goodwill
        arising from Acquisitions completed after November 30, 1996, provided
        that any cumulative positive or negative adjustment to Consolidated
        Tangible Net Worth attributable to foreign currency translations shall
        be ignored.

               "Consolidated Total Indebtedness" means, as of any date of
        determination, all Indebtedness and Contingent Guaranty Obligations of
        Borrower and its Subsidiaries on that date (without duplication for any
        guaranty by Borrower of a Subsidiary's Indebtedness or any guaranty by a
        Subsidiary of either Borrower's or another Subsidiary's Indebtedness)
        plus (a) if that date is after the Settlement Date with respect to an
        issuance of securities treated as Trust Preferred Capital Securities, an
        amount equal to 100% of the aggregate book value of such Trust Preferred
        Capital Securities outstanding on that date, minus (b) all Indebtedness
        and Contingent Guaranty Obligations of the Financial Subsidiaries on
        that date, and minus (c) the amount, if any, by which the aggregate Cash
        and Cash Equivalents of Borrower and its Subsidiaries (other than the
        Financial Subsidiaries) on that date are in excess of $15,000,000.

               "Contingent Guaranty Obligation" means, as to any Person, any
        (a) direct or indirect guarantee of Indebtedness of, or other obligation
        performable by, any other Person (other than a performance obligation
        undertaken in the ordinary and usual course of business), including any
        endorsement (other than for collection or deposit in the ordinary course
        of business), co-making or sale with recourse of the obligations of any
        other Person or (b) assurance given to an obligee with respect to the
        performance of an obligation (other than a performance obligation
        undertaken in the ordinary and usual course of business) by, or the
        financial condition of, any other Person, whether direct, indirect or
        contingent, including any purchase or repurchase agreement covering such
        obligation or any collateral security therefor, any agreement to provide
        funds (by means of loans, capital contributions or otherwise) to such
        other Person, any

                                      -8-
<PAGE>   15

        agreement to support the solvency or level of any balance sheet item of
        such other Person, or any "keep-well", "take-or-pay", "through put" or
        other arrangement of whatever nature having the effect of assuring or
        holding harmless any obligee against loss with respect to any obligation
        of such other Person. The amount of any Contingent Guaranty Obligation
        shall be deemed to be an amount equal to the stated or determinable
        amount of the related primary obligation (unless the Contingent Guaranty
        Obligation is limited by its terms to a lesser amount, in which case to
        the extent of such amount) or, if not stated or determinable, the
        maximum reasonably anticipated liability in respect thereof as
        determined by the Person in good faith.

               "Contractual Obligation" means, as to any Person, any provision
        of any outstanding Securities issued by that Person or of any material
        agreement, instrument or undertaking to which that Person is a party or
        by which it or any of its Property is bound, other than, in the case of
        Borrower and its Subsidiaries, any of the Loan Documents.

               "Debtor Relief Laws" means the Bankruptcy Code of the United
        States of America, as amended from time to time, and all other
        applicable liquidation, conservatorship, insolvency, reorganization, or
        similar debtor relief Laws from time to time in effect affecting the
        rights of creditors generally.

               "Default" means any event that, with the giving of any notice or
        passage of time, or both, would be an Event of Default.

               "Default Rate" means the interest rate described in Section 3.6.

               "Designated Deposit Account" means a demand deposit account to be
        maintained by Borrower with Bank of America, as from time to time
        designated by Borrower by written notification to the Administrative
        Agent.

               "Distribution" means, with respect to any shares of capital
        stock or any warrant or right to acquire shares of capital stock or any
        other equity security issued by a Person, (a) the retirement,
        redemption, purchase, or other acquisition for value (other than for
        capital stock of the same type of such Person) by such Person of any
        such security, (b) the declaration or payment by such Person of any
        dividend in Cash or in Property (other than in capital stock of the same
        type of such Person) on or with respect to any such security, and (c)
        any Investment by such Person in any holder of 5% or more of the capital
        stock (or other equity securities) of such Person, if a purpose of such
        Investment is to avoid the characterization of the transaction between
        such Person and such holder as a Distribution under clause (a) or (b)
        above. In addition, to the extent any loan or advance by Borrower to one
        of its Subsidiaries is deemed to be an "Investment" for purposes of this
        Agreement, then any principal payment made by such Subsidiary in respect
        of such loan or advance shall be considered a Distribution for purposes
        of Section 6.16.

               "Documentation Agent" means Bank One, NA, so long as such bank
        is a Bank hereunder. The Documentation Agent shall have no duties under
        the Loan Documents beyond those of a Bank.

               "Dollars" means the national currency of the United States of
        America.

                                      -9-
<PAGE>   16

               "Domestic Lending Office" means, with respect to each Bank, its
        office, branch or affiliate identified on the signature pages hereof as
        its Domestic Lending Office or such other office, branch or affiliate as
        such Bank may hereafter designate as its Domestic Lending Office by
        notice to the Borrower and the Administrative Agent.

               "Domestic Standing Inventory" means, as of any date of
        determination, the number of items of unsold housing inventory (other
        than Model Homes) of Borrower and its Domestic Subsidiaries with respect
        to which either (a) 90% of the then reasonably anticipated direct
        construction costs have been incurred on such date or (b) at least 12
        months have elapsed from the date its construction was commenced through
        and including such date. Construction for purposes of this definition
        shall be deemed to have commenced upon the pouring of foundation
        concrete.

               "Domestic Subsidiary" means, with respect to any Person and as
        of any date of determination, a Subsidiary of such Person (a) that is
        organized under the Laws of the United States of America or any state
        thereof and (b) the majority of the assets of which (as reflected on a
        balance sheet of such Subsidiary prepared in accordance with Generally
        Accepted Accounting Principles) is located in the United States of
        America; provided that Kaufman and Broad International, Inc., a
        California corporation, shall in no event be considered a Domestic
        Subsidiary of Borrower.

               "Domestic Unimproved Land" means, as of any date of
        determination, real Property located in the United States of America
        that is: (a) owned by Borrower or any of its Subsidiaries if on that
        date there has been expended by Borrower and its Subsidiaries less than
        50% of the physical construction costs reasonably estimated by Borrower
        (in accordance with its past practices as of the 2000 Closing Date) to
        bring such real Property to "finished lot" status; or (b) owned by
        Persons other than Borrower or any of its Subsidiaries but which, if
        owned by Borrower or any of its Subsidiaries on that date, would have
        satisfied the requirement set forth in clause (a) and if on that date
        Borrower or any of its Domestic Subsidiaries holds an option to purchase
        such real Property for which it has paid an amount equal to 33% or more
        of the purchase price provided for in such option to purchase, provided,
        that in the event an option to purchase land covers more than one
        parcel, phase or lot, any deposit paid by Borrower or any of its
        Subsidiaries shall be allocated to each parcel, phase or lot pro rata in
        accordance with the purchase price of the parcels, phases or lots. The
        "book value" with respect to Domestic Unimproved Land referred to in
        Section 6.15 shall be calculated as if the option to purchase had been
        exercised as of the date of determination, and otherwise in accordance
        with Generally Accepted Accounting Principles, consistently applied.

               "Eligible Assignee" means (a) another Bank, (b) any commercial
        bank, savings bank, savings and loan association or similar financial
        institution which, (i) has total assets of $5,000,000,000 or more, (ii)
        is "well capitalized" within the meaning of such term under the Federal
        Depository Institutions Control Act, (iii) is engaged in the business of
        lending money and extending credit under credit facilities substantially
        similar to those extended under this Agreement and (iv) is operationally
        and procedurally able to meet the obligations of a Bank hereunder to the
        same degree as a commercial bank, (c) any insurance company engaged in
        the business of writing insurance which (i) has total assets of
        $5,000,000,000 or more, (ii) is "best capitalized" under applicable
        regulations of the National Association of Insurance Commissioners, and
        (iii) meets the requirements set forth in subclauses (iii) and (iv) of
        clause (b) above and (d) any other financial institution having total
        assets of $5,000,000,000 or more

                                      -10-
<PAGE>   17

        (including a mutual fund or other fund under management of an investment
        manager having under its management total assets of $5,000,000,000 or
        more) which meets the requirements set forth in subclauses (iii) and
        (iv) of clause (b) above; provided that each Eligible Assignee must (A)
        be organized under the Laws of the United States of America, any state
        thereof or the District of Columbia or (B) if a commercial bank, be
        organized under the Laws set forth in clause (A) or under the Laws of
        the Cayman Islands or any country which is a member of the Organization
        for Economic Cooperation and Development, or a political subdivision of
        such a country, and (C) act under the Loan Documents through a branch,
        agency or funding office located in the United States of America and (D)
        be exempt from withholding of tax on interest and deliver the documents
        related thereto pursuant to the Code.

               "ERISA" means, at any date, the Employee Retirement Income
        Security Act of 1974 and the regulations thereunder, all as the same
        shall be in effect at such date.

               "ERISA Affiliate" means, with respect to any Person, any other
        Person (or any trade or business, whether or not incorporated) that is
        under common control with that Person within the meaning of Section 414
        of the Code.

               "Event of Default" has the meaning provided in Section 9.1.

               "Exchange Act" means the Securities Exchange Act of 1934, as
        amended.

               "Exposure" means for any Bank, as of any date of determination,
        the product obtained by multiplying that Bank's then effective Pro Rata
        Share by the then effective Commitment.

               "Federal Funds Rate" means, for any day, the rate set forth in
        the weekly statistical release designated as H.15(519), or any successor
        publication, published by the Federal Reserve Bank of New York
        (including any such successor, "H.15(519)") on the preceding Banking Day
        opposite the caption "Federal funds (effective)"; or, if for any
        relevant day such rate is not so published on any such preceding Banking
        Day, the rate for such day will be the arithmetic mean as determined by
        the Administrative Agent of the rates for the last transaction in
        overnight Federal funds arranged prior to 9:00 a.m. (New York City time)
        on that day by each of three leading brokers of Federal funds
        transactions in New York City selected by the Administrative Agent.

               "Financial Subsidiary" means (a) the Mortgage Company and its
        Subsidiaries, so long as such entities continue to engage in the
        mortgage banking business, (b) a Trust Issuer, so long as it engages in
        no activities other than those incident to the Trust Preferred Capital
        Securities, (c) any Subsidiary of Borrower that is organized and
        operates solely to issue (i) collateralized mortgage obligations or (ii)
        other similar asset-backed obligations, and (d) any other Subsidiary of
        Borrower that (i) is engaged primarily in the business of origination,
        marketing, and servicing of residential mortgage loans, the sale of
        servicing rights, or the financing of long term residential mortgage
        loans, (ii) holds not less than 95% of its total assets in the form of
        Cash, Cash Equivalents, notes and mortgages receivable, Cash held by a
        trustee for the benefit of such Subsidiary or other financial
        instruments and (iii) is the subject of an Officer's Certificate of
        Borrower delivered to the Administrative Agent stating that such
        Subsidiary is a Financial Subsidiary within the meaning hereof. As of
        the 2000 Closing Date, the Financial Subsidiaries are International
        Mortgage Acceptance Corporation, KBASW Mortgage Acceptance Corporation,
        KBI/Mortgage Acceptance Corporation, KBRAC IV Mortgage Acceptance

                                      -11-
<PAGE>   18

        Corporation, Kaufman and Broad Mortgage Company, rateOne Home Loans,
        LLC, Rate One Associates, Inc. and Rate One Holdings, Inc.

               "Fiscal Quarter" means each of the fiscal quarters of Borrower
        ending on each February 28 (or 29, if a leap year), May 31, August 31
        and November 30.

               "Fiscal Year" means each of the fiscal years of Borrower ending
        on each November 30 or as otherwise changed by the Borrower upon advance
        written notice to the Administrative Agent, but subject to the
        requirements of Section 1.3.

               "Fitch" means Fitch and its successors.

               "Foreign Subsidiary" means, with respect to any Person, a
        Subsidiary of that Person which is not a Domestic Subsidiary and with
        respect to Borrower, includes Kaufman and Broad International, Inc., a
        California corporation.

               "Generally Accepted Accounting Principles" means, as of any date
        of determination, accounting principles set forth as "generally
        accepted" in then currently effective Statements of the Auditing
        Standards Board of the American Institute of Certified Public
        Accountants, or, if such Statements are not then in effect, accounting
        principles that are then approved by a significant segment of the
        accounting profession in the United States of America. The term
        "consistently applied," as used in connection therewith, means that the
        accounting principles applied to financial statements of a Person as of
        any date or for any period are consistent in all material respects
        (subject to Section 1.3) to those applied to financial statements of
        that Person as of recent prior dates and for recent prior periods.

               "Government Securities" means (a) readily marketable direct full
        faith and credit obligations of the United States of America or
        obligations unconditionally guaranteed by the full faith and credit of
        the United States of America and (b) obligations of an agency or
        instrumentality of, or corporation owned, controlled or sponsored by,
        the United States of America that are generally considered in the
        securities industry to be implicit obligations of the United States of
        America.

               "Governmental Agency" means (a) any federal, state, county or
        municipal government, or political subdivision thereof, (b) any
        governmental or quasi-governmental agency, authority, board, bureau,
        commission, department, instrumentality, or public body, (c) any court
        or administrative tribunal, or (d) any arbitration tribunal or other
        non-governmental authority to whose jurisdiction a Person has consented,
        in each case whether of the United States of America or any other
        nation.

               "Guarantor Subsidiary" means (a) any Domestic Subsidiary which
        is a Significant Subsidiary, other than any Financial Subsidiary and (b)
        any other Domestic Subsidiary, other than any Financial Subsidiary, that
        is designated in writing by Borrower as a Guarantor Subsidiary.

               "Hazardous Materials" means substances defined as "hazardous
        substances" pursuant to the Comprehensive Environmental Response,
        Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et seq.,
        or as "hazardous", "toxic" or "pollutant" substances or as "solid waste"
        pursuant to the Hazardous Materials Transportation Act, 49 U.S.C.
        Section 1801, et seq., the

                                      -12-
<PAGE>   19

        Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq.,
        or as "friable asbestos" pursuant to the Toxic Substances Control Act,
        15 U.S.C. Section 2601 et seq. or any other applicable Hazardous
        Materials Law, in each case as such Laws are amended from time to time.

               "Hazardous Materials Laws" means all Laws governing the
        treatment, transportation or disposal of Hazardous Materials applicable
        to any real Property of Borrower or its Subsidiaries.

               "Indebtedness" means, with respect to any Person, (a) all
        indebtedness of such Person for borrowed money, (b) that portion of the
        obligations of such Person under Capital Leases which should properly be
        recorded as a liability on a balance sheet of that Person prepared in
        accordance with Generally Accepted Accounting Principles, (c) any
        obligation of such Person that is evidenced by a promissory note or
        other instrument representing an extension of credit to such Person,
        whether or not for borrowed money, (d) any obligation of such Person for
        the deferred purchase price of Property or services (other than trade or
        other accounts payable in the ordinary course of business in accordance
        with customary industry terms), (e) any obligation of the types referred
        to in clauses (a) through (d) above that is secured by a Lien (other
        than a Permitted Encumbrance) on assets of such Person, whether or not
        that Person has assumed such obligation or whether or not such
        obligation is non-recourse to the credit of such Person, but only to the
        extent of the fair market value of the assets so subject to the Lien,
        (f) obligations of such Person arising under acceptance facilities or
        under facilities for the discount of accounts receivable of such Person
        and (g) any obligation of such Person under letters of credit issued for
        the account of such Person and that is not otherwise a Contingent
        Guaranty Obligation.

               "Intangible Assets" means assets that are considered intangible
        assets under Generally Accepted Accounting Principles, including (a)
        customer lists, goodwill, computer software, unamortized deferred
        charges, unamortized debt discount, capitalized research and development
        costs and other intangible assets and (b) any write-up in book value of
        any asset subsequent to its acquisition, but excluding any existing
        write-up in book value of any asset acquired by Borrower or any of its
        Subsidiaries prior to the 2000 Closing Date, as such write-up may
        decrease (but not increase) from time to time.

               "Interest Period" means, as to each LIBOR Loan, a period of one,
        two, three or six months, as designated by Borrower; provided that (a)
        the first day of each Interest Period must be a LIBOR Market Day, (b)
        any Interest Period that would otherwise end on a day that is not a
        LIBOR Market Day shall be extended to the next succeeding LIBOR Market
        Day, unless such LIBOR Market Day falls in the next calendar month, in
        which case the Interest Period shall end on the next preceding LIBOR
        Market Day, and (c) no Interest Period may extend beyond the Maturity
        Date.

               "Investment" means, with respect to any Person, any investment
        by that Person, whether by means of purchase or other acquisition of
        capital stock or other Securities of any other Person or by means of
        loan, advance, capital contribution, or other debt or equity
        participation or interest in any other Person, including any partnership
        or joint venture interest in any other Person; provided that an
        Investment of a Person shall not include any trade or account receivable
        arising in the ordinary course of the business of such Person, whether
        or not evidenced by a note or other writing. The amount of any
        Investment shall be the amount

                                      -13-
<PAGE>   20
        actually invested, less any return of capital, without adjustment for
        subsequent increases or decreases in the market value of such
        Investment.

               "Investment Grade Credit Rating" means, as of any date of
        determination, that at least two (2) Rating Agencies have as of that
        date issued credit ratings for Borrower's long-term senior unsecured
        debt of (a) at least BBB- in the case of S&P, (b) at least Baa3 in the
        case of Moody's and (c) at least BBB- in the case of Fitch.

               "Joint Venture" means any Person, other than a Subsidiary, (a)
        in which Borrower or any Subsidiary of Borrower holds an equity
        Investment which entitles Borrower or such Subsidiary to more than 10%
        of (i) the ordinary voting power for the election of the board of
        directors or other governing body of such Person or (ii) the
        partnership, membership or other ownership interest in such Person, and
        (b) which has at least one holder of its equity interests that is not an
        Affiliate of Borrower or any Subsidiary of Borrower. Notwithstanding the
        foregoing, for the purposes of Section 6.16, the term "Joint Venture"
        will not include any equity Investment in any Person if the dollar
        amount of that investment is less than $1,000,000, computed in
        accordance with Generally Accepted Accounting Principles, but only to
        the extent that the aggregate dollar amount of such equity Investments
        is less than $25,000,000.

               "Laws" means, collectively, all foreign, federal, state and local
        statutes, treaties, codes, ordinances, rules, regulations and
        controlling precedents of any Governmental Agency.

               "Lead Arranger and Sole Book Manager" means Banc of America
        Securities LLC.

               "Lewis Homes Stock Repurchase" means the purchase of up to 4
        million shares of Borrower's common stock issued in connection with the
        acquisition of the Lewis Homes group of companies for $26.00 per share
        payable in cash or by promissory note.

               "LIBOR" means, for each LIBOR Loan, that rate per annum,
        determined solely by the Administrative Agent, pursuant to the following
        formula (with each component expressed as a decimal and rounded upward
        to the nearest 1/100 of 1%):

               London Interbank Offered Rate for that LIBOR Loan
               -------------------------------------------------
                           1.00 - Reserve Percentage

               "LIBOR Advance" means an Advance made by a Bank to fund its Pro
        Rata Share of a LIBOR Loan.

               "LIBOR Lending Office" means, with respect to each Bank, its
        office, branch or affiliate identified on the signature page hereof as
        its LIBOR Lending Office or such other office, branch or affiliate as
        such Bank may hereafter designate as its LIBOR Lending Office by notice
        to Borrower and the Administrative Agent.

               "LIBOR Loan" means a Loan made hereunder and designated or
        redesignated as a LIBOR Loan in accordance with Article 2.

               "LIBOR Market" means the London, England market established by
        and among banks for the solicitation, offer and acceptance of Dollar
        deposits in such banks.

                                      -14-
<PAGE>   21
               "LIBOR Market Day" means any Banking Day on which commercial
        banks are open for international business (including dealing in Dollar
        deposits) in London, England.

               "Lien" means any mortgage, deed of trust, pledge, hypothecation,
        assignment for security, security interest, encumbrance, lien or charge
        of any kind, whether voluntarily incurred or arising by operation of Law
        or otherwise, affecting any Property, including any agreement to grant
        any of the foregoing (other than an agreement which gives to a Person
        the right to become equally and ratably secured with any other Person to
        whom a Lien is granted on any item of Property) any conditional sale or
        other title retention agreement, any lease in the nature of a security
        interest, and/or the filing of or agreement to give any financing
        statement (other than a precautionary financing statement with respect
        to a lease that is not in the nature of a security interest) under the
        Uniform Commercial Code or comparable Law of any jurisdiction with
        respect to any Property.

               "Loan" means the aggregate of the Advances made at any one time
        by the Banks pursuant to Article 2.

               "Loan Documents" means, collectively, this Agreement, the Notes,
        the Subsidiary Guaranty, any Request for Loan, any Compliance
        Certificate and any other instruments, documents or agreements of any
        type or nature hereafter executed and delivered by Borrower or any of
        its Subsidiaries or Affiliates to the Administrative Agent or any other
        Bank in any way relating to or in furtherance of this Agreement, in each
        case either as originally executed or as the same may from time to time
        be supplemented, modified, amended, restated, extended or supplanted.

               "London Interbank Offered Rate" means, for each LIBOR Loan, the
        per annum rate (rounded upward to the nearest 1/100 of 1%) determined by
        the Administrative Agent as the rate for deposits in Dollars for a
        period equal to the applicable Interest Period which appears on the
        Telerate Page 3750 as of 11:00 a.m., London time, on the date that is 2
        LIBOR Market Days prior to the commencement of such Interest Period. If
        such rate does not appear on the Telerate Page 3750, the rate for that
        Interest Period will be determined by the Administrative Agent and will
        be equal to the rate at which deposits in Dollars are offered by the
        Administrative Agent to prime banks in the LIBOR Market at or about
        11:00 a.m., London time, on the date that is 2 LIBOR Market Days prior
        to the commencement of such Interest Period in an aggregate amount
        approximately equal to the amount of the Advance to be made by the
        Administrative Agent (as a Bank) with respect to such LIBOR Loan and for
        a period of time comparable to the number of days in the applicable
        Interest Period.

               "Majority Banks" means (a) as of any date of determination if
        the Commitment is then in effect, Banks having in the aggregate in
        excess of 50% of the Commitment then in effect and (b) as of any date of
        determination if the Commitment has then been terminated or suspended
        and there is then any Indebtedness evidenced by the Notes, Banks holding
        in the aggregate in excess of 50% the aggregate Indebtedness then
        evidenced by the Notes.

               "Material Adverse Effect" means any circumstance or event, or
        any set of circumstances or events which, individually or when
        aggregated with any other circumstances or events, (a) has or is
        reasonably likely to have any material adverse effect upon the validity
        or enforceability of any Loan Document, (b) is or is reasonably likely
        to be material and adverse to the condition (financial or otherwise) or
        operations of Borrower and its Subsidiaries, taken as

                                      -15-
<PAGE>   22

        a whole, or (c) materially impairs or is reasonably likely to materially
        impair the ability of Borrower and its Subsidiaries, taken as a whole,
        to perform the Obligations.

              "Material Amount of Assets" means, as of any date of
        determination, more than 10% of the consolidated total assets (other
        than assets of Financial Subsidiaries) of Borrower and its Subsidiaries
        as of such date.

              "Maturity Date" means October 6, 2005.

              "Model Homes" means housing units which have been completed,
        furnished and landscaped and are used in the marketing efforts with
        respect to a residential home community, provided that the total number
        of units considered as Model Homes at any time shall not exceed an
        amount equal to (a) the number of domestic residential home communities
        open for sale at such time, times (b) four (4).

              "Money Market Facility" means any unsecured credit facility the
        advances under which have a maturity of not in excess of 180 days and
        which have been extended to Borrower from time to time other than under
        this Agreement, either by a Bank or by any other financial institution.

              "Moody's" means Moody's Investor's Service, Inc. and its
        successors.

              "Mortgage Company" means Kaufman and Broad Mortgage Company, an
        Illinois corporation and a wholly owned Financial Subsidiary of
        Borrower.

              "Mortgage Warehousing Agreements" mean that certain Amended and
        Restated Mortgage Loan Warehousing Agreement dated as of February 18,
        2000 among Mortgage Company, rateOne, the banks party thereto and Bank
        of America, N.A., as administrative agent, and Bank One Texas, N.A., as
        managing agent, and that certain Master Loan and Security Agreement
        dated as of May 25, 1999 between Mortgage Company and Morgan Stanley
        Mortgage Capital, Inc., as lender, as amended by Amendment No. 1 to
        Master Loan and Security Agreement, dated as of May 19, 2000, among
        Mortgage Company, rateOne and Morgan Stanley Mortgage Capital, Inc., as
        the foregoing may from time to time be amended, modified, refinanced or
        replaced, and substantially similar loan or credit agreements or
        arrangements entered into from time to time by Mortgage Company for
        loans to be used for the purpose of funding the origination of
        residential mortgage loans, secured by a pledge of such mortgage loans.

              "Multiemployer Plan" means any employee benefit plan of a type
        described in Section 4001(a)(3) of ERISA.

              "Net Orders" means, as of any date of determination, the number
        of items of housing inventory that are in the process of being sold and
        with respect to which a purchase contract has been signed, as reported
        in Borrower's filings with the Commission.

              "Net Realizable Value Adjustment" means the adjustment required
        pursuant to Generally Accepted Accounting Principles (including FAS 121
        issued by the Financial Accounting Standards Board) to reflect a
        decrease in the book value of assets below their historical costs.

                                      -16-
<PAGE>   23

               "New Bank" has the meaning set forth in Section 2.6(a).

               "Non-Recourse Indebtedness" means Indebtedness incurred in
        connection with the purchase or improvement of Property (a) that is
        secured solely by the Property purchased or improved, (b) with respect
        to which the holder of such Indebtedness has recourse only to such
        Property, and (c) that is otherwise non-recourse (whether by contract or
        under applicable Law) to any Person.

               "Note" means each promissory note made by Borrower to a Bank
        evidencing the Advances under that Bank's Pro Rata Share of the
        Commitment, substantially in the form of Exhibit C, either as originally
        executed or as the same may from time to time be supplemented, modified,
        amended, renewed, extended or supplanted.

               "Obligations" means all present and future obligations of every
        kind or nature of Borrower or any Party at any time and from time to
        time owed to the Administrative Agent or the Banks or any one or more of
        them under any one or more of the Loan Documents, whether due or to
        become due, matured or unmatured, liquidated or unliquidated, or
        contingent or noncontingent, including obligations of performance as
        well as obligations of payment, and including interest that accrues to
        the extent permitted by applicable Law after the commencement of any
        proceeding under any Debtor Relief Law by or against Borrower.

               "Officer's Certificate" means, when used with reference to any
        Person, a certificate signed by a Senior Officer of such Person.

               "Operating Loss" means, for any Fiscal Quarter, that the sum of
        (a) Consolidated Net Income for that Fiscal Quarter plus (b) all taxes
        on or measured by income payable by Borrower with respect to such
        Consolidated Net Income plus (c) all non-Cash Net Realizable Value
        Adjustments made during that Fiscal Quarter is less than zero; provided
        that each amount described in clauses (a), (b) and (c) shall be
        adjusted to eliminate any portion thereof, or effect thereon,
        attributable to a Financial Subsidiary.

               "Opinions of Counsel" means the favorable written legal opinions
        of (a) Munger, Tolles & Olson LLP, special counsel to Borrower, and (b)
        Barton P. Pachino, Senior Vice President and General Counsel of Borrower
        substantially in the form of Exhibits D-1 and D-2, respectively,
        together with copies of all factual certificates and legal opinions upon
        which such counsel has relied.

               "Party" means any Person other than the Banks or the Agents
        which now or hereafter is a party to any of the Loan Documents.

               "PBGC" means the Pension Benefit Guaranty Corporation or any
        successor thereto established under ERISA.

               "Pension Plan" means any "employee pension benefit plan" (as
        such term is defined in ERISA) which is subject to Title IV of ERISA and
        which is maintained for employees of Borrower or any of its ERISA
        Affiliates.

               "Permitted Encumbrances" means:

                                      -17-
<PAGE>   24

               (a) inchoate Liens incident to construction or maintenance of
        real property; or Liens incident to construction or maintenance of real
        property now or hereafter filed of record for which adequate reserves
        have been set aside and which are being contested in good faith by
        appropriate proceedings and have not proceeded to judgment, provided
        that, by reason of nonpayment of the obligations secured by such Liens,
        no material property is subject to a material risk of loss or
        forfeiture;

               (b) Liens for taxes and assessments on real property which are
        not yet past due; or Liens for taxes and assessments on real property
        for which adequate reserves have been set aside and are being contested
        in good faith by appropriate proceedings and have not proceeded to
        judgment, provided that, by reason of nonpayment of the obligations
        secured by such Liens, no material property is subject to a material
        risk of loss or forfeiture;

               (c) minor defects and irregularities in title to any real
        property which in the aggregate do not materially impair the fair market
        value or use of the real property for the purposes for which it is or
        may reasonably be expected to be held;

               (d) easements, exceptions, reservations, or other agreements for
        the purpose of pipelines, conduits, cables, wire communication lines,
        power lines and substations, streets, trails, walkways, drainage,
        irrigation, water, utilities, and sewerage purposes, dikes, canals,
        ditches, the removal of oil, gas, coal, or other minerals, and other
        like purposes affecting real property, facilities, or equipment which in
        the aggregate do not materially burden or impair the fair market value
        or use of such property for the purposes for which it is or may
        reasonably be expected to be held;

               (e) easements, exceptions, reservations, or other agreements for
        the purpose of facilitating the joint or common use of property
        affecting real property which in the aggregate do not materially burden
        or impair the fair market value or use of such property for the purposes
        for which it is or may reasonably be expected to be held;

               (f) rights reserved to or vested in any Governmental Agency to
        control or regulate the use of any real property;

               (g) any obligations or duties affecting any real property to any
        Governmental Agency with respect to any right, power, franchise, grant,
        license, or permit;

               (h) present or future zoning laws and ordinances or other laws
        and ordinances restricting the occupancy, use, or enjoyment of real
        property;

               (i) statutory Liens, including warehouseman's liens, other than
        those described in clauses (a) or (b) above, arising in the ordinary
        course of business with respect to obligations which are not delinquent
        or are being contested in good faith, provided that, if delinquent,
        adequate reserves have been set aside with respect thereto and, by
        reason of nonpayment, no material property is subject to a material risk
        of loss or forfeiture;

               (j) covenants, conditions, and restrictions affecting the use of
        real property which in the aggregate do not materially impair the fair
        market value or use of the real property for the purposes for which it
        is or may reasonably be expected to be held;

                                      -18-
<PAGE>   25

               (k) rights of tenants under leases and rental agreements covering
        real property entered into in the ordinary course of business of the
        Person owning such real property;

               (l) Liens consisting of pledges or deposits to secure obligations
        under workers' compensation laws or similar legislation, including Liens
        of judgments thereunder which are not currently dischargeable;

               (m) Liens consisting of pledges or deposits of property to secure
        performance in connection with operating leases made in the ordinary
        course of business to which the Borrower or a Subsidiary is a party as
        lessee, provided the aggregate value of all such pledges and deposits in
        connection with any such lease does not at any time exceed 25% of the
        annual fixed rentals payable under such lease;

               (n) Liens consisting of deposits of property to secure statutory
        obligations of the Borrower or a Subsidiary of Borrower in the ordinary
        course of its business; and

               (o) Liens consisting of deposits of property to secure (or in
        lieu of) surety, appeal or customs bonds in proceedings to which
        Borrower or a Subsidiary of Borrower is a party in the ordinary course
        of its business.

               "Permitted Right of Others" means a Right of Others consisting
        of (a) an interest (other than a legal or equitable co-ownership
        interest, an option or right to acquire a legal or equitable
        co-ownership interest and any interest of a ground lessor under a ground
        lease), that does not materially impair the value or use of property for
        the purposes for which it is or may reasonably be expected to be held,
        (b) an option or right to acquire a Lien that would be a Permitted
        Encumbrance or (c) the reversionary interest of a landlord under a lease
        of Property.

               "Person" means an individual, trustee, corporation, general
        partnership, limited partnership, limited liability company, joint stock
        company, trust, estate, unincorporated organization, union, tribe,
        business association or firm, joint venture, Governmental Agency, or
        other entity.

               "Pricing Period" means the 3 calendar month periods of (a) May 1
        through July 31, (b) August 1 through October 31, (c) November 1 through
        January 31, and (d) February 1 through April 30, and the Consolidated
        Leverage Ratio applicable to any Pricing Period shall be the one that is
        calculated as of the Fiscal Quarter end that falls approximately 60 days
        prior to the beginning of such Pricing Period.

               "Prime Rate" means, on any day, the rate of interest per annum
        then most recently established by the Administrative Agent as its "prime
        rate." Any such rate is a general reference rate of interest, may not be
        related to any other rate, and may not be the lowest or best rate
        actually charged by the Administrative Agent to any customer or a
        favored rate and may not correspond with future increases or decreases
        in interest rates charged by other lenders or market rates in general,
        and that the Administrative Agent may make various business or other
        loans at rates of interest having no relationship to such rate. If the
        Administrative Agent ceases to exist or to establish or publish a prime
        rate from which the Prime Rate is then determined, the applicable
        variable rate from which the Prime Rate is determined thereafter shall
        be instead the prime rate reported in The Wall Street Journal (or the
        average prime rate if a high and a low

                                      -19-
<PAGE>   26

        prime rate are therein reported), and the Prime Rate shall change
        without notice with each change in such prime rate as of the date such
        change is reported. If The Wall Street Journal does not then or ceases
        to report such a prime rate, the Prime Rate shall thereafter be
        determined by such alternate method as may be reasonably selected by the
        Administrative Agent.

               "Prime Rate Advance" means an Advance made by a Bank to fund its
        Pro Rata Share of a Prime Rate Loan.

               "Prime Rate Loan" means a Loan made hereunder and designated or
        redesignated as a Prime Rate Loan in accordance with Article 2, or
        converted to a Prime Rate Loan in accordance with Article 3.

               "Prior Loan Agreements" means the Bridge Loan Agreement, the
        Prior Revolving Loan Agreement and the Prior Term Loan Agreement.

               "Prior Revolving Loan Agreement" means the 1997 Revolving Loan
        Agreement dated as of April 21, 1997, as amended, by and among Borrower,
        the Banks named therein, and Bank of America, as Administrative Agent
        and various other Banks in various agent capacities.

               "Prior Term Loan Agreement" has the meaning set forth for that
        term in the Recitals hereto.

               "Pro Rata Share" of a Bank, as pertains to the Commitment, means
        the applicable percentage set forth opposite the name of that Bank on
        Schedule 1.1 to this Agreement.

               "Projections" means the financial projections of Borrower
        delivered to the Banks and dated as of August 24, 2000.

               "Property" means any interest in any kind of property or asset,
        whether real, personal or mixed, or tangible or intangible.

               "rateOne" means rateOne Home Loan, LLC, a Delaware limited
        liability company and a Subsidiary of Mortgage Company.

               "Rating Agencies" means S&P, Moody's and Fitch.

               "Regulation D" means Regulation D, as at any time amended, of
        the Board of Governors of the Federal Reserve System or any other
        regulation in substance substituted therefor.

               "Regulatory Development" means (a) any change in the Laws, (b)
        change in the application of any existing Laws or the interpretation
        thereof by any Governmental Agency or central bank or comparable
        authority (whether or not having the force of Law), or (c) compliance by
        any Bank with any request or directive (whether or not having the force
        of Law) of any Governmental Agency or central bank or comparable
        authority.

               "Request for Loan" means a request for a Loan signed by a
        Responsible Official of Borrower, in a form reasonably designated from
        time to time by the Administrative Agent.

                                      -20-
<PAGE>   27

               "Request for Redesignation" means a written request for
        redesignation of Loans signed by a Responsible Official of Borrower, in
        a form reasonably designated from time to time by the Administrative
        Agent.

               "Requirement of Law" means, as to any Person, any Law or any
        judgment, award, decree, writ or determination of, or any consent or
        similar agreement with, a Governmental Agency, in each case applicable
        to or binding upon such Person or any of its Property or to which such
        Person or any of its Property is subject.

               "Reserve Percentage" means, for each LIBOR Loan, the total of the
        maximum reserve percentages for determining the reserves to be
        maintained by member banks of the Federal Reserve System for
        Eurocurrency Liabilities, as defined in Regulation D. The Reserve
        Percentage shall be expressed in decimal form and rounded upward, if
        necessary, to the nearest 1/100th of one percent, and shall include
        marginal, emergency, supplemental, special and other reserve
        percentages. The Reserve Percentage shall be determined solely by the
        Administrative Agent, which determination shall be conclusive absent
        manifest error.

               "Responsible Official" means (a) when used with reference to a
        Person other than an individual, any corporate officer of such Person,
        general partner of such Person, corporate officer of a corporate general
        partner of such Person, or corporate officer of a corporate general
        partner of a partnership that is a general partner of such Person, or
        any other responsible official thereof duly acting on behalf thereof,
        and (b) when used with reference to a Person who is an individual, such
        Person. Any document or certificate hereunder that is signed or executed
        by a Responsible Official of a Person shall be conclusively presumed to
        have been authorized by all necessary corporate, partnership and/or
        other action on the part of that Person.

               "Revolving Loan Commitment Increases" means the aggregate of
        increases to the Commitment requested under Section 2.8 of the 2000
        Revolving Loan Agreement.

               "Revolving Loan Exposure" means for any Bank, as of any date of
        determination, the product obtained by multiplying that Bank's then
        effective Pro Rata Share under the 2000 Revolving Loan Agreement by the
        then effective Commitment under the 2000 Revolving Loan Agreement.

               "Right of Others" means, with respect to any Property in which a
        Person has an interest, (a) any legal or equitable claim or other
        interest (other than a Lien) in or with respect to that Property held by
        any other Person, and (b) any option or right held by any other Person
        to acquire any such claim or other interest (including a Lien).

               "S&P" means Standard & Poor's Rating Group (a division of
        McGraw-Hill, Inc.) and its successors.

               "Securities" means any capital stock, share, voting trust
        certificate, bonds, debentures, notes or other evidences of
        indebtedness, limited partnership interests, or any warrant, option or
        other right to purchase or acquire any of the foregoing.

               "Senior Officer" means the (a) chief executive officer, (b) chief
        operating officer, (c) chief financial officer, (d) vice president and
        controller, or (e) treasurer, in each case whatever the title
        nomenclature may be, of the Person designated.

                                      -21-
<PAGE>   28

               "Settlement Date" means the settlement date specified in the
        forward contract for the sale and purchase of Common Stock which is a
        component of any Trust Preferred Capital Securities. The Settlement Date
        for the Trust Preferred Capital Securities referred to in clause (a) of
        the definition thereof is August 16, 2001.

               "Shareholders' Equity" means, as of any date of determination,
        shareholders' equity as of that date determined in accordance with
        Generally Accepted Accounting Principles; provided that there shall be
        excluded from Shareholders' Equity any amount attributable to capital
        stock that is, directly or indirectly, required to be redeemed or
        repurchased by the issuer thereof prior to the date which is one year
        after the Maturity Date or upon the occurrence of specified events or at
        the election of the holder thereof.

               "Significant Subsidiary" means, as of May 31 2000, those
        Subsidiaries of Borrower identified as such in Schedule 4.4 and, as of
        any other date of determination, any Subsidiary of Borrower (other than
        a Joint Venture) with respect to which any of the following conditions
        is met:

               (a) the aggregate book value of all Investments of Borrower and
        its Subsidiaries in such Subsidiary exceeds 5% of the consolidated total
        assets (other than assets of Financial Subsidiaries) of Borrower and its
        Subsidiaries as of such date; or

               (b) the proportionate share of Borrower and its Subsidiaries in
        the total assets of such Subsidiary (after intercompany eliminations)
        exceeds 5% of the consolidated total assets (other than assets of
        Financial Subsidiaries) of Borrower and its Subsidiaries as of such
        date; or

               (c) the equity of Borrower and its Subsidiaries in the net income
        of such Subsidiary (before income taxes, extraordinary items and
        cumulative effect of a change in accounting principles) as of the end of
        the most recently ended fiscal year of such Subsidiary exceeds the
        greater of (i) an amount equal to 5% of the consolidated net income of
        Borrower and its Subsidiaries (computed as aforesaid) as of the end of
        the most recent Fiscal Year ended prior to such date or (ii) $3,000,000.

               "Subordinated Obligations" means, collectively, all obligations
        of Borrower or any of its Subsidiaries that (a) do not provide for any
        payment of principal, any sinking fund payment or any scheduled
        redemption prior to the Maturity Date, (b) are expressly subordinated to
        the Obligations by a written instrument containing subordination and
        related provisions (including interest payment blockage, standstill and
        related provisions) not materially less favorable to the Banks in any
        respect whatsoever from those applicable to Borrower's 9-5/8% Senior
        Subordinated Notes due 2006 (the "Subordinated Notes") (or such other
        subordination and related provisions as may be approved in writing by
        the Majority Banks), (c) are subject to financial covenants not
        materially more burdensome to Borrower taken as a whole than those
        applicable to the Subordinated Notes, except such covenants as may be
        approved in writing by the Majority Banks and (d) are subject to other
        covenants (other than the covenant to pay interest) and events of
        default which in the aggregate are not materially more burdensome to
        Borrower than those applicable to the Subordinated Notes, except such
        covenants or events of default as may be approved in writing by the
        Majority Banks.

               "Subsidiary" means, with respect to any Person, any corporation,
        limited liability company, partnership or joint venture whether now
        existing or hereafter organized or acquired:

                                      -22-
<PAGE>   29

        (a) in the case of a corporation or limited liability company, of which
        securities having a majority of the ordinary voting power for the
        election of the board of directors (other than securities having such
        power only by reason of the happening of a contingency) are at the time
        owned by such Person and/or one or more Subsidiaries of such Person or
        (b) in the case of a partnership, joint venture or other business
        entity, in which such Person or a Subsidiary of such Person is a general
        partner.

               "Subsidiary Guaranty" means the guaranty of the Indebtedness of
        Borrower under this Agreement executed by each Guarantor Subsidiary of
        Borrower substantially in the form of Exhibit E, either as originally
        executed or as the same may from time to time be supplemented, modified,
        amended, renewed, extended or supplanted.

               "Syndication Agent" means Credit Lyonnais Los Angeles Branch, so
        long as such bank is a Bank hereunder. The Syndication Agent shall have
        no duties under the Loan Documents beyond those of a Bank.

               "Termination Event" means (a) a "reportable event" as defined in
        Section 4043 of ERISA (other than a "reportable event" that is not
        subject to the provision for 30 day notice to the PBGC), (b) the
        withdrawal of Borrower or any of its ERISA Affiliates from a Pension
        Plan during any plan year in which it was a "substantial employer" as
        defined in Section 4001(a)(2) of ERISA, (c) the filing of a notice of
        intent to terminate a Pension Plan or the treatment of an amendment to a
        Pension Plan as a termination thereof pursuant to Section 4041 of ERISA,
        other than pursuant to Section 4041(b) of ERISA, (d) the institution of
        proceedings to terminate a Pension Plan by the PBGC or (e) any other
        event or condition which might reasonably be expected to constitute
        grounds under ERISA for the termination of, or the appointment of a
        trustee to administer, any Pension Plan.

               "to the best knowledge of" means, when modifying a
        representation, warranty or other statement of any Person, that such
        representation, warranty or statement is a representation, warranty or
        statement that (a) the Person making it has no actual knowledge of the
        inaccuracy of the matters therein stated and (b) assuming the exercise
        by the Person making it of reasonable due diligence under the
        circumstances (in accordance with the standard of what a reasonable
        Person would have done under similar circumstances), the Person making
        it would have no actual knowledge of the inaccuracy of the matters
        therein stated. Where the Person making the representation, warranty or
        statement is not a natural Person, the aforesaid actual or constructive
        knowledge shall be that of any Senior Officer of that Person.

               "Trust Issuer" means a business trust formed by Borrower as a
        special purpose grantor trust for the purpose of facilitating the
        issuance of Trust Preferred Capital Securities, and which engages in no
        activities other than those incident to the Trust Preferred Capital
        Securities.

               "Trust Preferred Capital Securities" means the securities issued
        by Borrower and a Trust Issuer (a) covered by Borrower's Prospectus
        dated June 30, 1998 filed with the Commission and (b) such other similar
        securities as may from time to time be issued by Borrower after being
        approved in writing by the Majority Banks in their sole and absolute
        discretion to be treated as Trust Preferred Capital Securities.

                                      -23-
<PAGE>   30

               "Voting Stock" means, with respect to any Person, the capital
        stock of such Person having general voting power under ordinary
        circumstances to elect at least a majority of the board of directors,
        managers or trustees of such Person (irrespective of whether or not at
        the time capital stock of any other class or classes shall have or might
        have voting power by reason of the happening of any contingency).

            1.2 Use of Defined Terms. Any defined term used in the plural
preceded by the definite article shall be taken to encompass all members of the
relevant class. Any defined term used in the singular preceded by "any" shall be
taken to indicate any number of the members of the relevant class.

            1.3 Accounting Terms. All accounting terms not specifically defined
in this Agreement shall be construed in conformity with, and all financial data
required to be submitted by this Agreement shall be prepared in conformity with,
Generally Accepted Accounting Principles, consistently applied, except as
otherwise specifically prescribed herein. In the event that Generally Accepted
Accounting Principles change during the term of this Agreement such that the
financial covenants contained in Sections 6.9, 6.10 or 6.11 would then be
calculated in a different manner or with different components or would render
the same not meaningful criteria for evaluating Borrower's financial condition,
(a) Borrower and the Banks agree to amend this Agreement in such respects as are
necessary to conform those covenants as criteria for evaluating Borrower's
financial condition to substantially the same criteria as were effective prior
to such change in Generally Accepted Accounting Principles and (b) Borrower
shall be deemed to be in compliance with the financial covenants contained in
such Sections during the 90 day period following such change in Generally
Accepted Accounting Principles if and to the extent that Borrower would have
been in compliance therewith under Generally Accepted Accounting Principles as
in effect immediately prior to such change. In the event that the Borrower
changes its Fiscal Year during the term of this Agreement, Borrower and the
Banks agree to amend this Agreement and the other Loan Documents in such
respects as are necessary to conform the definitions, the financial covenants,
the reporting requirements and the other provisions thereof to fairly reflect
such change in the Borrower's Fiscal Year.

            1.4 Rounding. Any financial ratios required to be maintained by
Borrower pursuant to this Agreement shall be calculated by dividing the
appropriate component by the other component, carrying the result to one place
more than the number of places by which such ratio is expressed in this
Agreement and rounding the result up or down to the nearest number (with a
round-up if there is no nearest number) to the number of places by which such
ratio is expressed in this Agreement.

            1.5 Miscellaneous Terms. The term "or" is disjunctive; the term
"and" is conjunctive. The term "shall" is mandatory; the term "may" is
permissive. Masculine terms also apply to females; feminine terms also apply to
males. The term "including" is by way of example and not limitation.

            1.6 Exhibits and Schedules. All Exhibits and Schedules to this
Agreement, either as originally existing or as the same may from time to time be
supplemented, modified, or amended, are incorporated herein by reference. A
matter disclosed on any Schedule shall be deemed disclosed on all Schedules.

            1.7 References to "Borrower and its Subsidiaries". Any reference
herein to "Borrower and its Subsidiaries" or the like shall refer solely to
Borrower during such times, if any, as Borrower shall have no Subsidiaries.

                                      -24-
<PAGE>   31

                                   Article 2
                                     LOANS

               2.1 Loans-General.

               (a) Subject to the terms and conditions set forth in this
        Agreement, on the 2000 Closing Date, each Bank shall, pro rata according
        to that Bank's Pro Rata Share of the Commitment, make Advances, to
        Borrower under the Commitment in such amounts as Borrower may request in
        one or more Request(s) for Loan(s); provided that after giving effect to
        such Advance(s), the aggregate outstanding principal evidenced by the
        Notes shall equal but not exceed the Commitment. Borrower may not borrow
        under this Section 2.1(a) subsequent to the 2000 Closing Date, or repay
        and reborrow under this Section 2.1(a).

               (b) Subject to the next sentence, each Loan shall be made
        pursuant to a Request for Loan which shall be in a form and shall
        contain information specified from time to time by the Administrative
        Agent and which shall specify the requested (i) date of such Loan, (ii)
        type of Loan, (iii) amount of such Loan and (iv) in the case of a LIBOR
        Loan, Interest Period for such Loan. Unless the Administrative Agent, in
        its sole and absolute discretion, has notified Borrower to the contrary,
        each Loan may be requested by telephone (promptly confirmed in writing)
        or telecopier by a Responsible Official of Borrower, and Borrower shall
        confirm such request by promptly mailing a Request for Loan conforming
        to the preceding sentence to the Administrative Agent.

               (c) Promptly following receipt of a Request for Loan, the
        Administrative Agent shall notify each Bank by telephone, telecopier or
        telex of the date and type of the Loan, the applicable Interest Period
        in the case of a LIBOR Loan, and that Bank's Pro Rata Share of the Loan.
        Not later than 11:00 a.m., California time, on the date specified for
        any Loan, each Bank shall make its Pro Rata Share of the Loan in
        immediately available funds available to the Administrative Agent at the
        Administrative Agent's Office. Upon fulfillment of the applicable
        conditions set forth in Article 8, all Advances shall be credited in
        immediately available funds to the Designated Deposit Account.

               (d) The principal amount of each Loan shall be an integral
        multiple of $1,000,000 and shall be in an amount not less than (i)
        $1,000,000 if such Loan is a Prime Rate Loan and (ii) $5,000,000 if such
        Loan is a LIBOR Loan.

               (e) A Request for Loan shall be irrevocable upon the
        Administrative Agent's first notification thereof. The obligation of
        each Bank to make any Advance is several, and not joint or joint and
        several, and is not conditioned upon the performance by any other Bank
        of its obligation to make Advances. The failure by any Bank to perform
        its obligation to make any Advance will not increase the obligation of
        any other Bank to make Advances.

               (f) Borrower may redesignate a Prime Rate Loan as a LIBOR Loan,
        or a LIBOR Loan as a Prime Rate Loan or a LIBOR Loan with a new Interest
        Period, by delivering a Request for Redesignation to the Administrative
        Agent, within the time periods and pursuant to the conditions set forth
        in Section 2.1(b), 2.2 or 2.3, as applicable, and elsewhere in this
        Agreement. If no Request for Redesignation (or telephonic or other
        request referred to in the second sentence of Section 2.1(b), if
        applicable) has been made prior to the last day of the Interest Period
        for an outstanding LIBOR Loan within the requisite notice periods set
        forth in

                                      -25-
<PAGE>   32

        Section 2.3, then Borrower shall be deemed to have requested that such
        LIBOR Loan be redesignated as a Prime Rate Loan.

               (g) The Advances made by each Bank on the 2000 Closing Date shall
        be evidenced by that Bank's Note.

            2.2 Prime Rate Loans. Each request by Borrower for a Prime Rate Loan
shall be made pursuant to a Request for Loan (or telephonic or other request for
loan referred to in the second sentence of Section 2.1(b), if applicable)
received by the Administrative Agent, at the Administrative Agent's Office, not
later than 9:00 a.m., California time, on the Banking Day on which the requested
Prime Rate Loan is to be made. The Administrative Agent shall notify each Bank
of a request for a Prime Rate Loan as soon as practicable after receipt of the
same. All Loans shall constitute Prime Rate Loans unless properly designated as
LIBOR Loans pursuant to Section 2.3.

            2.3 LIBOR Loans.

               (a) Each request by Borrower for a LIBOR Loan shall be made
        pursuant to a Request for Loan (or telephonic or other request for loan
        referred to in the second sentence of Section 2.1(b), if applicable)
        received by the Administrative Agent, at the Administrative Agent's
        Office, not later than 9:00 a.m., California time, at least 3 LIBOR
        Market Days before the first day of the applicable Interest Period,
        provided that such advance notice period may be reduced by the
        Administrative Agent in its discretion with respect to any LIBOR Loan
        made on the 2000 Closing Date. The Administrative Agent shall notify
        each Bank of a request for a LIBOR Loan as soon as practicable after
        receipt of the same.

               (b) At or about 10:00 a.m., California time, 2 LIBOR Market Days
        before the first day of the applicable Interest Period, the
        Administrative Agent shall determine the applicable LIBOR (which
        determination shall be conclusive in the absence of manifest error) and
        promptly shall give notice of the same to Borrower and the Banks by
        telephone, telecopier or, in the case of Banks, telex.

               (c) No more than 10 LIBOR Loans may be outstanding at any
        particular time.

               (d) Unless the Majority Banks otherwise consent, no LIBOR Loan
        may be requested during the continuance of an Event of Default.

               2.4 Initial Request for Loan.

            The Borrower's initial Request(s) for Loan on the 2000 Closing Date
shall be in an aggregate amount equal to the full amount of the Commitment.

            2.5 Administrative Agent's Right to Assume Funds Available. Unless
the Administrative Agent shall have been notified by any Bank at least two hours
prior to the funding by the Administrative Agent of each Loan that such Bank
does not intend to make available to the Administrative Agent such Bank's Pro
Rata Share of such Loan, the Administrative Agent may, in its discretion (but
shall not be so obligated), assume that such Bank has made such amount available
to the Administrative Agent on the date of the Loan and the Administrative Agent
may, in reliance upon such assumption, make available to Borrower a
corresponding amount. If such corresponding amount is not in fact made available
to the Administrative Agent by such Bank, the Administrative Agent shall be

                                      -26-
<PAGE>   33

entitled to recover such corresponding amount on demand from such Bank, which
demand shall be made in a reasonably prompt manner. If such Bank does not pay
such corresponding amount forthwith upon the Administrative Agent's demand
therefor, the Administrative Agent promptly shall notify Borrower and Borrower
shall pay such corresponding amount to the Administrative Agent. The
Administrative Agent shall also be entitled to recover from such Bank interest
on such corresponding amount in respect of each day from the date such
corresponding amount was made available by the Administrative Agent to Borrower
to the date such corresponding amount is recovered by the Administrative Agent,
at a rate per annum equal to the Federal Funds Rate as notified by the
Administrative Agent to such Bank or the Borrower, as the case may be. Nothing
herein shall be deemed to relieve any Bank from its obligation to fulfill its
Pro Rata Share of the Commitment hereunder or to prejudice any rights which the
Administrative Agent or Borrower may have against any Bank as a result of any
default by such Bank hereunder.

               2.6 Optional Increase to Commitment.

               (a) Subject to the limitations set forth in this Section, during
        the period beginning on the 2000 Closing Date and ending 6 months prior
        to the Maturity Date, if no Default or Event of Default then exists,
        Borrower may from time to time request in writing that the Commitment be
        increased to an aggregate amount that is not greater than $175,000,000
        less Revolving Loan Commitment Increases. Any such increase shall be
        accomplished by (i) the addition of new Banks who qualify as Eligible
        Assignees that are reasonably acceptable to the Administrative Agent
        (each, a "New Bank") or (ii) one or more of the existing Banks
        increasing its Exposure in accordance with the provisions of this
        Section. Each such increase shall be effective, if at all, not later
        than 6 months prior to the Maturity Date.

               (b) Any request under this Section shall be submitted by the
        Borrower to the Administrative Agent, shall specify the proposed
        effective date and amount of such increase and be accompanied by (i) a
        certificate signed by a Responsible Official of the Borrower, stating
        that no Default or Event of Default exists as of the date of the request
        or will result from the requested increase and (ii) a written consent to
        the increase in the amount of the Commitment executed by each Guarantor
        Subsidiary. No consent of the Banks shall be required for an increase in
        the amount of the Commitment pursuant to this Section. The
        Administrative Agent shall prepare and circulate to the Borrower and
        Banks a new Schedule 1.1 after each increase in the Commitment.

               (c) No Bank shall be obligated to increase the amount of its
        Exposure, nor shall any Bank have the right to do so unless designated
        by the Borrower.

               (d) Each New Bank designated by the Borrower and reasonably
        acceptable to the Administrative Agent shall become an additional party
        hereto as a New Bank concurrently with the effectiveness of the proposed
        increase in the Commitment upon its execution of an instrument of
        joinder to this Agreement which is in form and substance acceptable to
        the Administrative Agent and which, in any event, contains the
        representations, warranties, indemnities and other protections afforded
        to the Administrative Agent and the other Banks which would be granted
        or made by an Eligible Assignee by means of the execution of an
        Assignment and Acceptance.

                                      -27-
<PAGE>   34

               (e) Subject to the foregoing, any increase to the Commitment
        requested under this Section shall be effective as of the effective date
        proposed by the Borrower (but not later than 6 months prior to the
        Maturity Date) and shall be in the principal amount equal to (i) the
        amount that consenting Banks have agreed to assume as increases to the
        amount of their respective Exposures plus (ii) the amount that any New
        Banks have agreed to be the amount of their respective Exposures.

               (f) Concurrently with the effectiveness of any increase to the
        Commitment under this Section, each New Bank and each existing Bank
        which has increased its Exposure shall make additional Advances
        available to the Administrative Agent (the proceeds of which shall be
        paid to the other Banks or used in part to refinance expiring LIBOR
        Loans) in the amount required to result in the aggregate outstanding
        Advances of each Bank being equal to its Pro Rata Share of the
        Commitment, as so increased.

               (g) The Borrower confirms (i) its obligation pursuant to Section
        3.5(d) to repay any breakage fees resulting from the prepayment of any
        LIBOR Loans resulting under this Section, and (ii) that unless the
        initial Loans being made by each New Bank and each Bank increasing its
        Exposure under this Section are LIBOR Loans being made by all of the
        Banks in accordance with their respective Pro Rata Shares, then the
        initial Loans by the New Banks and by each increasing Bank shall be
        Prime Rate Loans.

               (h) No amount borrowed by the Borrower pursuant to this Section
        2.6 may be repaid and reborrowed.

               (i) Notwithstanding any other provision of this Agreement or the
        2000 Revolving Loan Agreement, the Borrower agrees that it will not
        exercise its rights under this Section 2.6 unless and until the sum
        (such sum being referred to as "Collective Exposure") of Bank of
        America's Exposure and its "Exposure" (as defined in the 2000 Revolving
        Loan Agreement) is reduced to $200,000,000 or less. Thus, Bank of
        America must first assign or grant participations in at least
        $43,000,000 of its Collective Exposure before the Borrower may exercise
        its rights under this Section 2.6. Bank of America agrees to waive any
        LIBOR breakage fees that may be owing to it (but not to any other Bank)
        with respect to any assignment or participation by it of the first
        $43,000,000 of its Collective Exposure. Bank of America may from time to
        time, in its sole and absolute discretion, waive the application of this
        Section 2.6(i) with respect to a particular increase in the Commitment
        pursuant to this Section 2.6, but any such waiver(s) shall not affect
        the continuing enforceability of this Section 2.6(i).

                                      -28-
<PAGE>   35

                                   Article 3
                               PAYMENTS AND FEES

               3.1 Principal and Interest

               (a) Interest shall be payable on the outstanding daily unpaid
        principal amount of each Advance from the date of such Advance until
        payment in full and shall accrue and be payable at the rates set forth
        herein, to the extent permitted by applicable Laws, before and after
        default, before and after maturity, before and after any judgment, and
        before and after the commencement of any proceeding under any Debtor
        Relief Law, with interest on overdue interest to bear interest at the
        Default Rate.

               (b) Interest accrued on each Prime Rate Loan shall be due and
        payable on the last day of each calendar month. Except as otherwise
        provided in Section 3.6, the unpaid principal amount of any Prime Rate
        Loan shall bear interest at a fluctuating rate per annum equal to the
        sum of the Prime Rate plus the Applicable Prime Rate Spread. Each change
        in the interest rate hereunder shall take effect simultaneously with the
        corresponding change in the Prime Rate. Each change in the Prime Rate
        shall be effective as of the Banking Day on which the change in the
        Prime Rate is announced, unless otherwise specified in such
        announcement, in which case the change shall be effective as so
        specified.

               (c) Interest accrued on each LIBOR Loan with an Interest Period
        of one month shall be due and payable on the last day of the related
        Interest Period. Interest accrued on each LIBOR Loan with an Interest
        Period in excess of one month shall be due and payable on the last day
        of each calendar month and on the last day of the related Interest
        Period. Except as otherwise provided in Section 3.6, the unpaid
        principal amount of any LIBOR Loan shall bear interest at a rate per
        annum equal to the sum of LIBOR for that LIBOR Loan plus the Applicable
        LIBOR Spread.

               (d) If not sooner paid, the principal Indebtedness evidenced by
        the Notes shall be immediately payable in Cash on the Maturity Date.

               (e) The Notes may, at any time and from time to time, voluntarily
        be prepaid at the election of Borrower in whole or in part without
        premium or penalty; provided that: (i) any partial prepayment shall be
        in integral multiples of $1,000,000, (ii) any partial prepayment shall
        be in an amount not less than $1,000,000 on a Prime Rate Loan, and not
        less than $5,000,000 on a LIBOR Loan, (iii) the Administrative Agent
        must have received written notice (or telephonic notice confirmed
        promptly in writing) of any prepayment at least three Banking Days
        before the date of prepayment in the case of a LIBOR Loan and by 10:00
        a.m., California time, on the date of prepayment in the case of a Prime
        Rate Loan, (iv) each prepayment of principal, except for partial
        prepayments on Prime Rate Loans, shall be accompanied by prepayment of
        interest accrued to the date of payment on the amount of principal paid
        and (v) in the case of any prepayment of any LIBOR Loan, Borrower shall
        promptly upon demand reimburse each Bank for any loss or cost directly
        or indirectly resulting from the prepayment, determined as set forth in
        Section 3.5.

                                      -29-
<PAGE>   36

               (f) Change in Control.

                   (i) If a Change in Control shall have occurred, at the option
               of the Majority Banks, Borrower shall repay in Cash the entire
               principal Indebtedness evidenced by the Notes, together with
               interest thereon and all other amounts due in connection with the
               Notes and this Agreement (the "Change in Control Repayment"), on
               the date that is no more than 27 Banking Days after the
               occurrence of the Change in Control (the "Change in Control
               Payment Date"), subject to receipt by Borrower of a Change in
               Control Payment Notice as set forth in Section 3.1(f)(iii). On
               the Change in Control Payment Date, the Commitment shall
               automatically terminate.

                   (ii) Within 15 Banking Days after the occurrence of a Change
               in Control, Borrower shall provide written notice of the Change
               in Control to the Administrative Agent and each Bank. The notice
               shall state:

                   (A) the events causing a Change in Control and the date of
               such Change in Control;

                   (B) the date by which the Change in Control Payment Notice
               (as defined in Section 3.1(f)(iii)) must be given; and

                   (C) the Change in Control Payment Date.

                   (iii) At the direction of the Majority Banks, the
               Administrative Agent shall, on behalf of the Banks, exercise the
               rights specified in Section 3.1(f)(i) by delivery of a written
               notice (a "Change in Control Payment Notice") to Borrower at any
               time prior to or on the Change in Control Payment Date, stating
               that the Notes shall be prepaid on the Change in Control Payment
               Date. On the Change in Control Payment Date, Borrower shall make
               the Change in Control Repayment to the Administrative Agent for
               the benefit of the Banks.

            3.2 Upfront Fee. In addition to fees specified in the letter
referred in Section 3.3, on the 2000 Closing Date, Borrower shall pay to the
Administrative Agent, for the account of each Bank, an upfront fee as set forth
in the letter agreement between the Borrower and the Administrative Agent.

            3.3 Agency Fee. Borrower shall pay to the Administrative Agent an
agency fee in such amounts and at such times as heretofore agreed upon by letter
agreement between Borrower and the Administrative Agent.

            3.4 Capital Adequacy.

               (a) If any Bank (an "Affected Bank") determines that compliance
        with any Law or regulation or with any guideline or request from any
        central bank or other Governmental Agency (whether or not having the
        force of Law) enacted or issued after the 2000 Closing Date relating to
        the capital adequacy of banks or corporations in control of banks has or
        would have the effect of reducing the rate of return on the capital of
        such Affected Bank or any corporation controlling such Affected Bank as
        a consequence of, or with reference to, such Affected Bank's

                                      -30-
<PAGE>   37

        Pro Rata Share of the Commitment below the rate which the Bank or such
        other corporation could have achieved but for such compliance (taking
        into account the policies of such Bank or corporation with regard to
        capital adequacy), then Borrower shall from time to time, upon demand by
        such Affected Bank in accordance with this Section 3.4 (with a copy of
        such demand to the Administrative Agent), within 15 days after demand
        pay to such Affected Bank additional amounts sufficient to compensate
        such Affected Bank or other corporation for such reduction.

               (b) An Affected Bank may not seek compensation under Section
        3.4(a) unless the demand for such compensation is delivered to Borrower
        within six months following the date of enactment or issuance of the
        Law, regulation, guideline or request giving rise to such demand for
        compensation.

               (c) A certificate as to any amounts for which an Affected Bank is
        seeking compensation under Section 3.4(a), submitted to Borrower and the
        Administrative Agent by such Affected Bank, shall be conclusive and
        binding for all purposes, absent manifest error. Each Affected Bank
        shall calculate such amounts in a manner which is consistent with the
        manner in which it makes calculations for comparable claims with respect
        to similarly situated borrowers from such Affected Bank, will not
        allocate to Borrower a proportionately greater amount of such
        compensation than it allocates to each of its other commitments to lend
        or other loans with respect to which it is entitled to demand comparable
        compensation, and will not include amounts already factored into the
        rates of interest or fees already provided for herein. Each Bank agrees
        promptly to notify Borrower and the Administrative Agent of any
        circumstances that would cause Borrower to pay additional amounts
        pursuant to this Section, provided that the failure to give such notice
        shall not affect Borrower's obligation to pay such additional amounts
        hereunder.

               (d) Without limiting its obligation to reimburse an Affected Bank
        for compensation theretofore claimed by an Affected Bank pursuant to
        Section 3.4(a), Borrower may, within 60 days following any demand by an
        Affected Bank, request that one or more Persons that are Eligible
        Assignees and that are acceptable to Borrower and approved by the
        Administrative Agent (which approval shall not be unreasonably withheld)
        purchase all (but not part) of the Affected Bank's then outstanding
        Advances, its Note, and assume its Pro Rata Share of the Commitment and
        its obligations hereunder. If one or more such Banks or banks so agree
        in writing (each, an "Assuming Bank" and collectively, the "Assuming
        Banks"), the Affected Bank shall assign its Pro Rata Share of the
        Commitment, together with the Indebtedness then evidenced by its Note,
        to the Assuming Bank or Assuming Banks in accordance with Section 11.8.
        On the date of any such assignment, the Affected Bank which is being so
        replaced shall cease to be a "Bank" for all purposes of this Agreement
        and shall receive (x) from the Assuming Bank or Assuming Banks the
        principal amount of its Advances then outstanding and (y) from Borrower
        all interest and fees accrued and then unpaid with respect to such
        Advances, together with any other amounts then payable to such Bank by
        Borrower.

                                      -31-
<PAGE>   38

               3.5 LIBOR Fees and Costs.

               (a) If the occurrence of any Regulatory Development after the
        2000 Closing Date:

                   (i) shall subject any Bank or its LIBOR Lending Office to any
               tax, duty or other charge or cost with respect to any LIBOR
               Advance or its obligation to make LIBOR Advances, or shall change
               the basis of taxation of payments to any Bank of the principal of
               or interest on any LIBOR Advance or any other amounts due under
               this Agreement in respect of any LIBOR Advance or its obligation
               to make LIBOR Advances (except for changes in any tax on the
               overall net income, gross income or gross receipts of such Bank
               or its LIBOR Lending Office);

                   (ii) shall impose, modify or deem applicable any reserve
               (including, without limitation, any reserve imposed by the Board
               of Governors of the Federal Reserve System), special deposit or
               similar requirements (excluding any such requirement included in
               any applicable Reserve Percentage) against assets of, deposits
               with or for the account of, or credit extended by, any Bank or
               its LIBOR Lending Office; or

                   (iii) shall impose on any Bank or its LIBOR Lending Office or
               the LIBOR Market any other condition affecting any LIBOR Advance
               or its obligation to make LIBOR Advances, or shall otherwise
               affect any of the same;

        and the result of any of the foregoing, as determined by such Bank,
        increases the cost to such Bank or its LIBOR Lending Office of making or
        maintaining any LIBOR Advance or in respect of any LIBOR Advance or its
        obligation to make LIBOR Advances or reduces the amount of any sum
        received or receivable by such Bank or its LIBOR Lending Office with
        respect to any LIBOR Advance or its obligation to make LIBOR Advances
        (assuming such Bank's LIBOR Lending Office had funded 100% of its LIBOR
        Advance in the LIBOR Market), then, within 15 days after demand by such
        Bank (with a copy to the Administrative Agent), Borrower shall pay to
        such Bank such additional amount or amounts as will compensate such Bank
        for such increased cost or reduction (determined as though such Bank's
        LIBOR Lending Office had funded 100% of its LIBOR Advance in the LIBOR
        Market); provided that Borrower shall not be liable to any Bank for any
        such increased cost or reduction pursuant to this Section in respect of
        any period which is more than six months prior to such Bank's demand for
        such compensation. A statement of any Bank claiming compensation under
        this subsection and setting forth the additional amount or amounts to be
        paid to it hereunder shall be conclusive in the absence of manifest
        error. Each Bank agrees to endeavor promptly to notify Borrower of any
        event of which it has actual knowledge which will entitle such Bank to
        compensation pursuant to this Section, and agrees to designate a
        different LIBOR Lending Office if such designation will avoid the need
        for or reduce the amount of such compensation and will not, in the
        judgment of such Bank, otherwise be disadvantageous to such Bank. If any
        Bank claims compensation under this Section, Borrower may at any time,
        upon at least four (4) LIBOR Market Days' prior notice to the
        Administrative Agent and such Bank and upon payment in full of the
        amounts provided for in this Section through the date of such payment
        plus any prepayment fee required by Section 3.5(d), pay in full the
        affected LIBOR Advances of such Bank or request that such LIBOR Advances
        be converted to Prime Rate Advances.

                                      -32-
<PAGE>   39

               (b) If after the 2000 Closing Date the occurrence of any
        Regulatory Development shall, in the opinion of any Bank, make it
        unlawful or impossible for such Bank or its LIBOR Lending Office to
        make, maintain or fund its portion of any LIBOR Loan, or to take
        deposits of, dollars in the LIBOR Market, or to determine or charge
        interest rates based upon the LIBOR, and such Bank shall so notify the
        Administrative Agent, then such Bank's obligation to make LIBOR Advances
        shall be suspended for the duration of such illegality or impossibility
        and the Administrative Agent forthwith shall give notice thereof to the
        other Banks and Borrower. Before giving any notice to the Administrative
        Agent pursuant to this Section, such Bank shall designate a different
        Lending Office if such designation will avoid the need for giving such
        notice and will not, in the judgment of such Bank, be otherwise
        disadvantageous to such Bank. Upon receipt of such notice, the
        outstanding principal amount of such Bank's LIBOR Advances, together
        with accrued interest thereon, automatically shall be converted to Prime
        Rate Advances with Interest Periods corresponding to the LIBOR Loans of
        which such LIBOR Advances were a part on either (1) the last day of the
        Interest Period(s) applicable to such LIBOR Advances if such Bank may
        lawfully continue to maintain and fund such LIBOR Advances to such
        day(s) or (2) immediately if such Bank may not lawfully continue to fund
        and maintain such LIBOR Advances to such day(s), provided that in such
        event the conversion shall not be subject to payment of a prepayment fee
        under Section 3.5(d). In the event that any Bank is unable, for the
        reasons set forth above, to make, maintain or fund its portion of any
        LIBOR Loan, such Bank shall fund such amount as a Prime Rate Advance for
        the same period of time, and such amount shall be treated in all
        respects as a Prime Rate Advance.

               (c) If, with respect to any proposed LIBOR Loan:

                   (i) the Administrative Agent reasonably determines that, by
               reason of circumstances affecting the LIBOR Market generally that
               are beyond the reasonable control of the Banks, deposits in
               dollars (in the applicable amounts) are not being offered to each
               of the Banks in the LIBOR Market for the applicable Interest
               Period; or

                   (ii) the Majority Banks advise the Administrative Agent that
               the LIBOR as determined by the Administrative Agent will not
               adequately and fairly reflect the cost to such Banks of making
               the applicable LIBOR Advances;

        then the Administrative Agent forthwith shall give notice thereof to
        Borrower and the Banks, whereupon until the Administrative Agent
        notifies Borrower that the circumstances giving rise to such suspension
        no longer exist, the obligation of the Banks to make any future LIBOR
        Advances shall be suspended. If at the time of such notice there is then
        pending a Request for Loan that specifies a LIBOR Loan, such Request for
        Loan shall be deemed to specify a Prime Rate Loan.

               (d) Upon payment or prepayment of any LIBOR Advance (other than
        as the result of a conversion required under Section 3.5(b)) on a day
        other than the last day in the applicable Interest Period (whether
        voluntarily, involuntarily, by reason of acceleration, or otherwise), or
        upon the failure of Borrower to borrow on the date or in the amount
        specified for a LIBOR Loan in any Request for Loan, Borrower shall pay
        to each Bank an amount equal to the sum of

                   (i) $250; plus

                                      -33-
<PAGE>   40

                   (ii) the amount, if any, by which (x) the additional interest
               that would have accrued (without any Applicable LIBOR Spread) on
               the principal amount prepaid on account of the LIBOR Advance had
               it remained outstanding until the last day of the applicable
               Interest Period, exceeds (y) the interest that Bank could recover
               by placing funds in the amount of the prepayment on deposit in
               the LIBOR Market selected by that Bank for a period beginning on
               the date of the prepayment and ending on the last day of the
               applicable Interest Period, or for a comparable period for which
               an appropriate rate quote may be obtained; plus

                   (iii) an amount equal to all costs and expenses which that
               Bank incurred or reasonably expects to incur in liquidating and
               reinvesting the prepayment.

        Each Bank's determination of the amount of any prepayment fee or failure
        to borrow fee payable under this Section 3.5(d) shall be conclusive in
        the absence of manifest error.

               (e) Any statement or certificate given by a Bank under this
        Section 3.5 shall satisfy the requirements set forth in Section 3.5(c)
        with respect to requests for reimbursement under Section 3.5(a).

               (f) Should any Bank demand payment under the provisions of
        Section 3.5(a) or should any Bank's LIBOR Advances be suspended under
        the provisions of Section 3.5(b), then without limiting its obligation
        to reimburse any Bank for compensation claimed by such Bank pursuant to
        this Section 3.5, Borrower may, within 60 days following such
        occurrence, treat that Bank as an "Affected Bank" under Section 3.4(d),
        and exercise the remedies set forth in such Section 3.4(d).

            3.6 Late Payments/Default Interest. If any installment of principal
or interest under the Notes or any other amount payable to the Banks under any
Loan Document is not paid when due, it shall thereafter bear interest at a
fluctuating interest rate per annum at all times equal to the sum of the Prime
Rate plus the Applicable Prime Rate Spread plus 2%, to the extent permitted by
applicable Law, until paid in full (whether before or after judgment). Upon and
during the continuance of any Event of Default, the Indebtedness evidenced by
the Notes shall, at the election of the Majority Banks and upon notice to
Borrower (and in lieu of interest provided for in the preceding sentence), bear
interest at a fluctuating interest rate per annum at all times equal to the sum
of the Prime Rate plus the Applicable Prime Rate Spread plus 2%, to the extent
permitted by applicable Law, until no Event of Default exists (whether before or
after judgment). Notwithstanding the preceding sentence, after the occurrence of
any Event of Default under Sections 6.7, 6.10 or 6.16, the Indebtedness
evidenced by the Notes may not bear interest at the increased rate provided for
in the preceding sentence until such Event of Default has continued for at least
15 days, in the case of Section 6.7, or 30 days, in the case of Sections 6.10
or 6.16.

            3.7 Computation of Interest and Fees. All computations of interest
and fees hereunder shall be calculated on the basis of a year of 360 days and
paid for the actual number of days elapsed (including the first day and
excluding the last day), which results in greater interest than if a year of 365
days were used. Any Loan that is repaid on the same day on which it is made
shall bear interest for one day.

            3.8 Holidays. If any principal payment to be made by Borrower on a
Prime Rate Loan shall come due on a day other than a Banking Day, payment shall
be made on the next succeeding

                                      -34-
<PAGE>   41

Banking Day and the extension of time shall be reflected in computing interest.
If any principal payment to be made by Borrower on a LIBOR Loan shall come due
on a day other than a LIBOR Market Day, payment shall be made on the next
preceding or succeeding LIBOR Market Day as determined by the Administrative
Agent in accordance with the then current banking practice in the LIBOR Market
and the adjustment shall be reflected in computing interest.

               3.9 Payment Free of Taxes.

               (a) Any payments made by any Party under the Loan Documents shall
        be made free and clear of, and without reduction by reason of, any tax,
        assessment or other charge imposed by any Governmental Agency, central
        bank or comparable authority (other than taxes on income or gross
        receipts generally applicable to banks). To the extent that Borrower is
        obligated by applicable Laws to make any deduction or withholding on
        account of taxes, assessments or other charges imposed by any
        Governmental Agency from any amount payable to any Bank under this
        Agreement, Borrower shall (a) make such deduction or withholding and pay
        the same to the relevant Governmental Agency and (b) pay such additional
        amount to that Bank as is necessary to result in that Bank's receiving a
        net after-tax (or after-assessment or after-charge) amount equal to the
        amount to which that Bank would have been entitled under this Agreement
        absent such deduction or withholding. If and when receipt of such
        payment results in an excess payment or credit to that Bank on account
        of such taxes, assessments or other charges, that Bank shall refund such
        excess to Borrower. Each Bank that is incorporated under the Laws of a
        jurisdiction other than the United States of America or any state
        thereof shall deliver to Borrower, with a copy to the Administrative
        Agent, within twenty days after the 2000 Closing Date (or such later
        date on which such Bank becomes a "Bank" hereunder), a certificate
        signed by a Responsible Official of that Bank to the effect that such
        Bank is entitled to receive payments of interest and other amounts
        payable under this Agreement without deduction or withholding on account
        of United States of America federal income taxes, which certificate
        shall be accompanied by two copies of Internal Revenue Service Form 1001
        or Form 4224, as applicable, also executed by a Responsible Official of
        that Bank. Each such Bank agrees (i) promptly to notify the
        Administrative Agent and Borrower if any fact set forth in such
        certificate ceases to be true and correct and (ii) to take such steps as
        may be reasonably necessary to avoid any requirement of applicable Laws
        that Borrower make any deduction or withholding for taxes from amounts
        payable to that Bank under this Agreement.

               (b) Without limiting its obligation to pay any additional amount
        to a Bank pursuant to Section 3.9(a), Borrower may, within 60 days
        following any such payment by that Bank, treat that Bank as an "Affected
        Bank" under Section 3.4(d), and exercise the remedies set forth in such
        Section 3.4(d).

            3.10 Funding Sources. Nothing in this Agreement shall be deemed to
obligate any Bank to obtain the funds for its share of any Loan in any
particular place or manner or to constitute a representation by any Bank that it
has obtained or will obtain the funds for its share of any Loan in any
particular place or manner.

            3.11 Failure to Charge or Making of Payment Not Subsequent Waiver.
Any decision by any Bank not to require payment of any fee or costs, or to
reduce the amount of the payment required for any fee or costs, or to calculate
any fee or any cost in any particular manner, shall not limit or be deemed a
waiver of any Bank's right to require full payment of any fee or costs, or to
calculate any fee or any costs in any other manner. Any decision by Borrower to
pay any fee or costs shall not

                                      -35-
<PAGE>   42

limit or be deemed a waiver of any right of Borrower to protest or dispute the
payment amount of such fee or costs.

            3.12 Time and Place of Payments; Evidence of Payments; Application
of Payments. The amount of each payment hereunder, under the Notes or under any
Loan Document shall be made to the Administrative Agent at the Administrative
Agent's Office, for the account of each of the Banks or the Administrative
Agent, as the case may be, in lawful money of the United States of America
without deduction, offset or counterclaim and in immediately available funds on
the day of payment (which must be a Banking Day). All payments of principal
received after 10:00 a.m., California time, on any Banking Day, shall be deemed
received on the next succeeding Banking Day for purposes of calculating interest
thereon. The amount of all payments received by the Administrative Agent for the
account of a Bank shall be promptly paid by the Administrative Agent to that
Bank in immediately available funds. Each Bank shall keep a record of Advances
made by it and payments of principal with respect to each Note, and such record
shall be presumptive evidence of the principal amount owing under such Note;
provided that failure to keep such record shall in no way affect the Obligations
of Borrower hereunder. Prior to the Maturity Date or an acceleration of the
maturity of the Loans, payments under the Loan Documents shall be applied first
to amounts owing thereunder other than the outstanding principal balance under
the Notes and second to the outstanding principal balance under the Notes in a
manner designated by Borrower or, if no such designation is made prior to
payment or, if an Event of Default shall have occurred and be continuing, as may
be designated by the Majority Banks. Following the Maturity Date or an
acceleration of the maturity of the Loans, payments and recoveries under the
Loan Documents shall be applied in a manner designated in Section 9.2(d).

            3.13 Administrative Agent's Right to Assume Payments Will be Made.
Unless the Administrative Agent shall have been notified by Borrower prior to
the date on which any payment to be made by Borrower hereunder is due that
Borrower does not intend to remit such payment, the Administrative Agent may, in
its discretion (but shall not be so obligated), assume that Borrower has
remitted such payment when so due and the Administrative Agent may, in its
discretion and in reliance upon such assumption, make available to each Bank on
such payment date an amount equal to such Bank's Pro Rata Share of such assumed
payment. If Borrower has not in fact remitted such payment to the Administrative
Agent, each Bank shall forthwith on demand repay to the Administrative Agent the
amount of such assumed payment made available to such Bank, together with
interest thereon in respect of each day from and including the date such amount
was made available by the Administrative Agent to such Bank to but excluding the
date such amount is repaid to the Administrative Agent at a rate per annum equal
to the actual cost to the Administrative Agent of funding such amount as
notified by the Administrative Agent to such Bank.

            3.14 Survivability. All of Borrower's obligations under this
Article 3 shall survive for 3 months following the date on which all Loans
hereunder are fully paid.

            3.15 Bank Calculation Certificate. Any request for compensation
pursuant to Section 3.4 or 3.5 shall be accompanied by a statement of an officer
of the Bank requesting such compensation and describing the methodology used by
such Bank in calculating the amount of such compensation, which methodology (i)
may consist of any reasonable averaging and attribution methods and (ii) in the
case of Section 3.4 hereof shall be consistent with the methodology used by such
Bank in making similar calculations in respect of loans or commitments to other
borrowers.

            3.16 Transition. Borrower warrants and covenants that as of the
2000 Closing Date there will be no loans of any nature outstanding under the
Prior Loan Agreements. The parties hereto

                                      -36-
<PAGE>   43

agree that as of the 2000 Closing Date all commitments to extend credit under
the Prior Loan Agreements shall terminate.

                                      -37-
<PAGE>   44

                                   Article 4
                         REPRESENTATIONS AND WARRANTIES

        Borrower represents and warrants to the Banks that:

            4.1 Existence and Qualification; Power; Compliance with Law.
Borrower is a corporation duly organized, validly existing and in good standing
under the Laws of Delaware, and its certificate of incorporation does not
provide for the termination of its existence. Borrower is duly qualified or
registered to transact business as a foreign corporation in the State of
California, and in each other jurisdiction in which the conduct of its business
or the ownership of its properties makes such qualification or registration
necessary, except where the failure so to qualify or register would not
constitute a Material Adverse Effect. Borrower has all requisite corporate power
and authority to conduct its business, to own and lease its Properties and to
execute, deliver and perform all of its obligations under the Loan Documents.
All outstanding shares of capital stock of Borrower are duly authorized, validly
issued, fully paid, non-assessable, and were issued in compliance with all
applicable state and federal securities Laws, except where the failure to so
comply would not constitute a Material Adverse Effect. Borrower is in
substantial compliance with all Laws and other legal requirements applicable to
its business, has obtained all authorizations, consents, approvals, orders,
licenses and permits (collectively, "Authorizations") from, and has accomplished
all filings, registrations and qualifications with, or obtained exemptions from
any of the foregoing from, any Governmental Agency that are necessary for the
transaction of its business, except where the failure so to obtain
Authorizations, comply, file, register, qualify or obtain exemptions does not
constitute a Material Adverse Effect.

            4.2 Authority; Compliance with Other Instruments and Government
Regulations. The execution, delivery, and performance by Borrower, and by each
Guarantor Subsidiary of Borrower, of the Loan Documents to which it is a Party,
have been duly authorized by all necessary corporate action, and do not:

               (a) require any consent or approval not heretofore obtained of
        any stockholder, partner, security holder, or creditor of such Party;

               (b) violate or conflict with any provision of such Party's
        charter, certificate or articles of incorporation, bylaws, certificate
        or articles of organization, operating agreement, partnership agreement
        or other organizational or governing documents of such Party;

               (c) result in or require the creation or imposition of any Lien
        or Right of Others upon or with respect to any Property now owned or
        leased or hereafter acquired by such Party;

               (d) constitute a "transfer of an interest" or an "obligation
        incurred" that is avoidable by a trustee under Section 548 of the
        Bankruptcy Code of 1978, as amended, or constitute a "fraudulent
        transfer" or "fraudulent obligation" within the meaning of the Uniform
        Fraudulent Transfer Act as enacted in any jurisdiction or any analogous
        Law;

               (e) violate any Requirement of Law applicable to such Party; or

               (f) result in a breach of or constitute a default under, or cause
        or permit the acceleration of any obligation owed under, any indenture
        or loan or credit agreement or any other Contractual Obligation to which
        such Party or any of its Property is bound or affected;

                                      -38-
<PAGE>   45

        and neither Borrower nor any Subsidiary of Borrower is in violation of,
        or default under, any Requirement of Law or Contractual Obligation, or
        any indenture, loan or credit agreement described in Section 4.2(f) in
        any respect that would constitute a Material Adverse Effect.

            4.3 No Governmental Approvals Required. Except such as have
heretofore been obtained, no authorization, consent, approval, order, license or
permit from, or filing, registration, or qualification with, or exemption from
any of the foregoing from, any Governmental Agency is or will be required to
authorize or permit the execution, delivery and performance by Borrower or any
Significant Subsidiary of Borrower of the Loan Documents to which it is a Party.

            4.4 Subsidiaries.

               (a) Schedule 4.4 correctly sets forth the names, the form of
        legal entity and jurisdictions of organization of all Subsidiaries of
        Borrower as of the 2000 Closing Date and identifies each such Subsidiary
        that is a Consolidated Subsidiary, a Significant Subsidiary, a Guarantor
        Subsidiary, a Foreign Subsidiary and a Financial Subsidiary. As of the
        2000 Closing Date, unless otherwise indicated in Schedule 4.4, all of
        the outstanding shares of capital stock, or all of the units of equity
        interest, as the case may be, of each Subsidiary indicated thereon are
        owned of record and beneficially by Borrower or one of such
        Subsidiaries, and all such shares or equity interests so owned were
        issued in compliance with all state and federal securities Laws and are
        duly authorized, validly issued, fully paid and non-assessable (other
        than with respect to required capital contributions to any joint venture
        in accordance with customary terms and provisions of the related joint
        venture agreement), except where the failure to so comply would not
        constitute a Material Adverse Effect, and are free and clear of all
        Liens and Rights of Others, except for Permitted Encumbrances and
        Permitted Rights of Others.

               (b) Each Significant Subsidiary is as of the date of this
        Agreement, and will be as of the 2000 Closing Date, a legal entity of
        the form described for that Subsidiary in Schedule 4.4, and is duly
        organized, validly existing and in good standing under the Laws of its
        jurisdiction of organization, is duly qualified to do business as a
        foreign organization and is in good standing as such in each
        jurisdiction in which the conduct of its business or the ownership or
        leasing of its Properties makes such qualification necessary (except
        where the failure to be so duly qualified and in good standing does not
        constitute a Material Adverse Effect) and has all requisite power and
        authority to conduct its business, to own and lease its Properties and
        to execute, deliver and perform the Loan Documents to which it is a
        Party.

               (c) Each Significant Subsidiary is in substantial compliance with
        all Laws and other requirements applicable to its business and has
        obtained all Authorizations from, and each such Significant Subsidiary
        has accomplished all filings, registrations, and qualifications with, or
        obtained exemptions from any of the foregoing from, any Governmental
        Agency that are necessary for the transaction of its business, except
        where the failure so to obtain Authorizations, comply, file, register,
        qualify or obtain exemptions does not constitute a Material Adverse
        Effect.

                                      -39-
<PAGE>   46

            4.5 Financial Statements. Borrower has furnished to each Bank the
following financial statements:

               (a) the audited consolidated financial statements of Borrower and
        its Consolidated Subsidiaries as at November 30, 1999 and for the Fiscal
        Year then ended; and

               (b) the unaudited consolidating financial statements of Borrower
        and its Consolidated Subsidiaries as at May 31, 2000 for the Fiscal
        Quarter then ended and for the portion of the Fiscal Year ended with
        such Fiscal Quarter.

The audited financial statements described in clause (a) are in accordance with
the books and records of Borrower and its Consolidated Subsidiaries, were
prepared in accordance with Generally Accepted Accounting Principles and fairly
present in accordance with Generally Accepted Accounting Principles consistently
applied the consolidated financial condition and results of operations of
Borrower and its Consolidated Subsidiaries as at the date and for the period
covered thereby. The unaudited financial statements described in clause (b), are
in accordance with the books and records of Borrower and its Consolidated
Subsidiaries, were prepared in accordance with Generally Accepted Accounting
Principles and fairly present in accordance with Generally Accepted Accounting
Principles consistently applied the consolidating financial condition and
results of operation of Borrower and its Consolidated Subsidiaries as at the
date and for the period covered thereby.

            4.6 No Other Liabilities; No Material Adverse Effect. Borrower and
its Consolidated Subsidiaries do not have any material liability or material
contingent liability not reflected or disclosed in the financial statements or
in the notes to the financial statements described in Section 4.5, other than
liabilities and contingent liabilities arising in the ordinary course of
business subsequent to November 30, 1999. Since November 30, 1999, no event or
circumstance has occurred that constitutes a Material Adverse Effect with
respect to Borrower and its Subsidiaries.

            4.7 Title to Assets. As of the 2000 Closing Date, Borrower and its
Consolidated Subsidiaries have good and valid title to all of the assets
reflected in the financial statements described in Section 4.5 owned by them or
any of them (other than assets disposed of in the ordinary course of business)
and all other assets owned on the date of this Agreement, free and clear of all
Liens and Rights of Others other than (a) those reflected or disclosed in the
notes to the financial statements described in Section 4.5, (b) immaterial Liens
or Rights of Others not required under Generally Accepted Accounting Principles
to be so reflected or disclosed, (c) Liens permitted pursuant to Section 6.7,
(d) Permitted Rights of Others, and (e) such existing Liens or Rights of Others
as are described on Schedule 4.7 hereto.

            4.8 Intangible Assets. Borrower and its Subsidiaries own, or
possess the unrestricted right to use, all trademarks, trade names, copyrights,
patents, patent rights, licenses and other intangible assets that are necessary
in the conduct of their businesses as operated, and no such intangible asset, to
the best knowledge of Borrower, conflicts with the valid trademark, trade name,
copyright, patent, patent right or intangible asset of any other Person to the
extent that such conflict would constitute a Material Adverse Effect.

            4.9 Existing Indebtedness and Contingent Guaranty Obligations. As
of the 2000 Closing Date, except as set forth in Schedule 4.9, neither Borrower
nor any of its Subsidiaries has (a) any Indebtedness owed to any Person or (b)
outstanding any Contingent Guaranty Obligation with respect to obligations of
another Person that is not a Subsidiary of Borrower.

                                      -40-
<PAGE>   47

            4.10 Governmental Regulation. Neither Borrower nor any of its
Subsidiaries is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act, the Interstate Commerce Act or the
Investment Company Act of 1940.

            4.11 Litigation. There are no actions, suits, or proceedings pending
or, to the best knowledge of Borrower, threatened against or affecting Borrower
or any of its Subsidiaries or any Property of any of them before any
Governmental Agency which would constitute a Material Adverse Effect.

            4.12 Binding Obligations. Each of the Loan Documents to which
Borrower or any Guarantor Subsidiary of Borrower is a Party will, when executed
and delivered by Borrower or the Guarantor Subsidiary, as the case may be,
constitute the legal, valid and binding obligation of Borrower or the Guarantor
Subsidiary, as the case may be, enforceable against Borrower or the Guarantor
Subsidiary, as the case may be, in accordance with its terms, except as
enforcement may be limited by Debtor Relief Laws or by equitable principles
relating to the granting of specific performance and other equitable remedies as
a matter of judicial discretion.

            4.13 No Default. No event has occurred and is continuing that is a
Default or an Event of Default.

            4.14 Pension Plans. As of the 2000 Closing Date, all contributions
required to be made under any Pension Plan maintained by Borrower or any of its
ERISA Affiliates (or to which Borrower or any ERISA Affiliate contributes or is
required to contribute) have been made or accrued in the balance sheet of
Borrower and its Consolidated Subsidiaries as at November 30, 1999. There is no
"accumulated funding deficiency" within the meaning of Section 302 of ERISA or
any liability to the PBGC (other than for premiums) with respect to any such
Pension Plan other than a Multiemployer Plan.

            4.15 Tax Liability. Borrower and its Subsidiaries have filed all tax
returns which are required to be filed, and have paid, or made provision for the
payment of, all taxes which have become due pursuant to said returns or pursuant
to any assessment received by Borrower or any Subsidiary, except (a) such taxes,
if any, as are being contested in good faith by appropriate proceedings (and
with respect to which Borrower or its Subsidiary has established adequate
reserves for the payment of the same), and (b) such taxes the failure of which
to pay will not constitute a Material Adverse Effect.

            4.16 Regulation U. Neither Borrower nor any of its Subsidiaries is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" within the meanings of Regulation U of the Board of Governors of the
Federal Reserve System, and no Loan hereunder will be used to purchase or carry
any such margin stock in violation of Regulation U.

            4.17 Environmental Matters. To the best knowledge of Borrower,
Borrower and its Subsidiaries are in substantial compliance with all applicable
Laws relating to environmental protection where the failure to comply would
constitute a Material Adverse Effect. To Borrower's best knowledge, neither
Borrower nor any of its Subsidiaries has received any notice from any
Governmental Agency respecting the alleged violation by Borrower or any
Subsidiary of such Laws which would constitute a Material Adverse Effect and
which has not been or is not being corrected.

                                      -41-
<PAGE>   48

            4.18 Disclosure. The information provided by Borrower to the Banks
in connection with this Agreement or any Loan, taken as a whole, has not
contained any untrue statement of a material fact and has not omitted a material
fact necessary to make the statements contained therein, taken as a whole, not
misleading under the totality of the circumstances existing at the date such
information was provided and in the context in which it was provided.

            4.19 Projections. Except with respect to the effect of the Lewis
Homes Stock Repurchase, which is not reflected in the Projections, as of the
2000 Closing Date, the assumptions upon which the Projections are based are
reasonable and consistent with each other assumption and with all facts known to
Borrower and that the Projections are reasonably based on those assumptions.
Nothing in this Section 4.19 shall be construed as a representation or warranty
as of any date other than the 2000 Closing Date or that the Projections will in
fact be achieved by Borrower.

                                      -42-
<PAGE>   49

                                   Article 5
                             AFFIRMATIVE COVENANTS
                          (OTHER THAN INFORMATION AND
                            REPORTING REQUIREMENTS)

        As long as any Loan remains unpaid, or any other Obligation remains
unpaid, or any portion of the Commitment remains outstanding, Borrower shall,
and shall cause each of its Subsidiaries to, unless the Administrative Agent
(with the approval of the Majority Banks) otherwise consents in writing:

            5.1 Payment of Taxes and Other Potential Liens. Pay and discharge
promptly, all taxes, assessments, and governmental charges or levies imposed
upon Borrower or any of its Subsidiaries, upon their respective Property or any
part thereof, upon their respective income or profits or any part thereof,
except any tax, assessment, charge, or levy that is not yet past due, or is
being contested in good faith by appropriate proceedings, as long as Borrower or
its Subsidiary has established and maintains adequate reserves for the payment
of the same and by reason of such nonpayment no material Property of Borrower or
its Subsidiaries is subject to a risk of loss or forfeiture.

            5.2 Preservation of Existence. Preserve and maintain their
respective existence, licenses, rights, franchises, and privileges in the
jurisdiction of their formation and all authorizations, consents, approvals,
orders, licenses, permits, or exemptions from, or registrations with, any
Governmental Agency that are necessary for the transaction of their respective
business, and qualify and remain qualified to transact business in each
jurisdiction in which such qualification is necessary in view of their
respective business or the ownership or leasing of their respective Properties;
provided that (a) the failure to preserve and maintain any particular right,
franchise, privilege, authorization, consent, approval, order, license, permit,
exemption, or registration, or to qualify or remain qualified in any
jurisdiction, that does not constitute a Material Adverse Effect will not
constitute a violation of this covenant, and (b) nothing in this Section 5.2
shall prevent any consolidation or merger or disposition of assets permitted by
Section 6.3 or shall prevent the termination of the business or existence
(corporate or otherwise) of any Subsidiary of Borrower which in the reasonable
judgment of the management of Borrower is no longer necessary or desirable.

            5.3 Maintenance of Properties. Maintain, preserve and protect all
of their respective real Properties in good order and condition, subject to wear
and tear in the ordinary course of business and damage caused by the natural
elements, and not permit any waste of their respective real Properties, except
that the failure to so maintain, preserve or protect any particular real
Property, or the permitting of waste on any particular real Property, where such
failure or waste with respect to all real Properties of Borrower and its
Subsidiaries, in the aggregate, would not constitute a Material Adverse Effect
will not constitute a violation of this covenant.

            5.4 Maintenance of Insurance. Maintain insurance with responsible
insurance companies in such amounts and against such risks as in Borrower's
reasonable business judgment is adequate in light of Borrower's and its
Subsidiaries' size, business, assets and location of operations.

            5.5 Compliance with Laws. Comply with all Requirements of Laws
noncompliance with which would constitute a Material Adverse Effect, except that
Borrower and its Subsidiaries need not comply with a Requirement of Law then
being contested by any of them in good faith by appropriate procedures, so long
as such contest (or a bond or surety posted in connection

                                      -43-
<PAGE>   50

therewith) operates as a stay of enforcement of any penalty that would otherwise
apply as a result of such failure to comply.

            5.6 Inspection Rights. At any time during regular business hours
and as often as reasonably requested (and, in any event, upon 24 hours' prior
notice), permit any Bank or any appropriately designated employee, agent or
representative thereof at the expense of such Bank to examine, audit and make
copies and abstracts from the records and books of account of, and to visit and
inspect the Properties of Borrower and its Subsidiaries, and to discuss the
affairs, finances and accounts of Borrower and its Subsidiaries with any of
their officers or employees; provided that none of the foregoing unreasonably
interferes with the normal business operations of Borrower or any of its
Subsidiaries and that the Banks shall engage in any such inspections on a
cooperative basis, if there has been no Default or Event of Default.

            5.7 Keeping of Records and Books of Account. Keep adequate records
and books of account fairly reflecting all financial transactions in conformity
with Generally Accepted Accounting Principles applied on a consistent basis
(except for changes concurred with by Borrower's independent certified public
accountants) and all applicable requirements of any Governmental Agency having
jurisdiction over Borrower or any of its Subsidiaries.

            5.8 Use of Proceeds. Use the proceeds of all Loans solely for
working capital, Acquisitions permitted hereunder and other general corporate
purposes of Borrower and its Subsidiaries.

            5.9 Subsidiary Guaranty. Cause each of its Guarantor Subsidiaries
hereafter formed, acquired or qualifying as a Guarantor Subsidiary, to execute
and deliver a joinder of the Subsidiary Guaranty promptly following such
formation, acquisition or qualification.

                                      -44-
<PAGE>   51

                                   Article 6
                               NEGATIVE COVENANTS

        As long as any Loan remains unpaid, or any other Obligation remains
unpaid, or any portion of the Commitment remains outstanding, Borrower shall
not, and shall not permit any of its Subsidiaries to, unless the Administrative
Agent (with the approval of the Majority Banks) otherwise consents in writing:

            6.1 Payment or Prepayment of Subordinated Obligations. Make an
optional or unscheduled payment or prepayment of any principal (including an
optional or unscheduled sinking fund payment), interest or any other amount with
respect to any Subordinated Obligation, or make a purchase or redemption of any
Subordinated Obligation, or make any payment with respect to any Subordinated
Obligation in violation of the subordination provisions in the instruments
governing such Subordinated Obligation if a Default or Event of Default then
exists or would result therefrom. Notwithstanding the preceding sentence, if no
Default or Event of Default then exists or would result therefrom, Borrower may
refinance the entire outstanding amount of a Subordinated Obligation, provided
the new obligation constitutes a Subordinated Obligation with a maturity date no
earlier than and an interest rate no higher than those of the Subordinated
Obligation being refinanced.

            6.2 [Intentionally Omitted]

            6.3 Mergers and Sale of Assets. Merge or consolidate with or into
any Person, or sell a Material Amount of Assets to any Person, except, subject
to Section 6.6;

               (a) a merger of Borrower into a wholly-owned Subsidiary of
        Borrower that has nominal assets and liabilities, the primary purpose of
        which is to effect the reincorporation of Borrower in another state;

               (b) mergers or consolidations of a Subsidiary of Borrower into
        Borrower (with Borrower as the surviving corporation) or into any other
        Subsidiary of Borrower, provided that (i) the reduction in the
        proportionate share of Borrower and its Subsidiaries in the total assets
        of such resulting Subsidiary (after intercompany eliminations) does not
        constitute a Material Amount of Assets and (ii) immediately after giving
        effect to such transaction, no Default or Event of Default shall have
        occurred and be continuing;

               (c) mergers, consolidations, liquidations, or sales of all or
        substantially all of the assets of a Subsidiary; provided that (i) any
        such transaction does not involve a transfer by Borrower or its
        Subsidiaries of a Material Amount of Assets and (ii) immediately after
        giving effect to such transaction, no Default or Event of Default shall
        have occurred and be continuing; or

               (d) a merger or consolidation of Borrower with another Person if
        (i) no Change of Control results therefrom, (ii) Borrower does not
        transfer a Material Amount of Assets to one or more Persons in
        connection with the merger or consolidation and (iii) immediately after
        giving effect to such merger, no Default or Event of Default shall have
        occurred and be continuing.

            6.4 Investments and Acquisitions. Make any Acquisition, or enter
into an agreement to make any Acquisition, or make or suffer to exist any
Investment, other than:

                                      -45-
<PAGE>   52

               (a) Investments consisting of Cash or Cash Equivalents;

               (b) advances to officers, directors and employees of Borrower or
        its Subsidiaries for travel, entertainment, housing expenses,
        relocation, stock option plans, or otherwise in connection with their
        employment or the business of Borrower or any of its Subsidiaries;

               (c) Investments of Borrower in any of its wholly-owned
        Subsidiaries and Investments of any Subsidiary of Borrower in Borrower
        or any of Borrower's wholly-owned Subsidiaries;

               (d) Acquisitions of or Investments in Persons engaged in the same
        businesses as Borrower and its Subsidiaries, or in a business reasonably
        related to such businesses, including electronic commerce and similar
        activities related to real estate;

               (e) Acquisitions and Investments by the Mortgage Company
        permitted under the Mortgage Warehousing Agreements;

               (f) Acquisitions of or Investments in Persons engaged primarily
        in businesses in addition to those permitted by Sections 6.4(d),
        provided that the aggregate cost of all such Acquisitions and
        Investments made in any fiscal year does not exceed $25,000,000;

               (g) Investments in a Trust Issuer and Investments by a Trust
        Issuer in Borrower;

               (h) Investments in Subsidiaries in existence on the 2000 Closing
        Date or as otherwise disclosed on Schedule 6.4;

               (i) Investments received in connection with the settlement of a
        bona fide dispute with another Person;

               (j) Investments consisting of readily marketable securities
        actively traded on a public exchange, provided that the aggregate amount
        of any such Investments at any one time do not exceed $25,000,000; and

               (k) Investments consisting of the extension of credit to
        suppliers in the ordinary course of business and any Investments
        received in satisfaction or partial satisfaction thereof, provided that
        the aggregate amount of any such Investments at any one time do not
        exceed $25,000,000;

        but in all events, subject to the restrictions of Section 6.16.

            6.5 ERISA Compliance. Permit any Pension Plan maintained by Borrower
or any of its ERISA Affiliates (or to which Borrower or any ERISA Affiliate
contributes or is required to contribute), other than a Multiemployer Plan, to
incur any material "accumulated funding deficiency," as such term is defined in
Section 302 of ERISA, unless waived, or permit any Pension Plan maintained by
any of them to suffer a Termination Event or incur withdrawal liability under
any Multiemployer Plan if any of such events would result in a liability of
Borrower or any ERISA affiliate exceeding in the aggregate $25,000,000.

                                      -46-
<PAGE>   53

            6.6 Change in Business. Engage in any business other than the
businesses as now conducted by Borrower or its Subsidiaries, and any business
the Board of Directors of Borrower determine in good faith is reasonably related
to such businesses, other than:

               (a) businesses in which Borrower and its Subsidiaries have
        invested no more than $25,000,000 in any Fiscal Year; and

               (b) as permitted pursuant to Section 6.4(f).

            6.7 Liens and Negative Pledges. Create, incur, assume, or suffer to
exist, any Lien of any nature upon or with respect to any of their respective
Properties, whether now owned or hereafter acquired, or enter or suffer to exist
any Contractual Obligation wherein Borrower or any of its Subsidiaries agrees
not to grant any Lien on any of their Properties, except:

               (a) Liens and Contractual Obligations existing on the date hereof
        and described in Schedule 4.7, provided that the obligations secured by
        such Liens are not increased and that no such Lien extends to any
        Property of Borrower or any Subsidiary other than the Property subject
        to such Lien on the 2000 Closing Date;

               (b) Liens on Property of any Financial Subsidiary or Foreign
        Subsidiary securing Indebtedness of that Financial Subsidiary or Foreign
        Subsidiary;

               (c) Liens on Property securing Indebtedness of Borrower or any of
        its Subsidiaries provided that (i) aggregate Indebtedness secured by all
        such Liens shall at no time exceed $100,000,000 and (ii) the aggregate
        book value of the Property so encumbered shall at no time exceed 3 times
        the aggregate amount of Indebtedness so secured;

               (d) Liens that may exist from time to time under the Loan
        Documents;

               (e) Liens consisting of a Capital Lease covering personal
        Property;

               (f) Permitted Encumbrances;

               (g) attachment, judgment and other similar Liens arising in
        connection with court proceedings; provided that the execution or
        enforcement of such Lien is effectively stayed and the claims secured
        thereby do not in the aggregate exceed $25,000,000 and are being
        contested in good faith by appropriate proceedings timely commenced and
        diligently prosecuted;

               (h) Liens existing on any asset of any Person at the time such
        Person becomes a Subsidiary and not created in contemplation of such
        event;

               (i) Liens on any asset of any Person existing at the time such
        Person is merged or consolidated with or into Borrower or any of its
        Subsidiaries and not created in contemplation of such event;

               (j) Liens existing on any asset prior to the acquisition thereof
        by Borrower or any of its Subsidiaries and not created in contemplation
        of such acquisition;

                                      -47-
<PAGE>   54

               (k) Liens arising out of the refinancing, extension, renewal or
        refunding of any Indebtedness secured by any Lien permitted by any of
        the foregoing clauses of this Section, provided that such Indebtedness
        is not increased and is not secured by additional assets;

               (l) Liens arising in the ordinary course of business which (i) do
        not secure Indebtedness, (ii) do not secure any obligation in an amount
        exceeding $500,000 individually, or $2,000,000 in the aggregate, and
        (iii) do not in the aggregate materially detract from the value of the
        assets covered by such Liens or materially impair the use thereof in the
        operation of Borrower's business;

               (m) Liens not otherwise permitted by the foregoing clauses of
        this Section which secure Indebtedness not exceeding $2,000,000 in the
        aggregate;

               (n) Liens referred to in the last sentence of the definition of
        "Bond Facility" encumbering (i) real property owned by Borrower or one
        of its Subsidiaries on November 30, 1999 or (ii) other real property of
        Borrower or one of its Subsidiaries provided that the aggregate
        obligations secured by such Liens does not at any time exceed
        $25,000,000 plus the amount by which aggregate Indebtedness then secured
        by Liens described in Section 6.7(c) is less than $100,000,000;

               (o) a Contractual Obligation wherein Borrower or any of its
        Subsidiaries agrees not to a grant any Lien on any of their Properties,
        if such Contractual Obligation does not, by its terms, prohibit the
        grant of a Lien in favor of the Administrative Agent and the Banks with
        respect to the Obligations (and Borrower shall, as soon as reasonably
        possible, provide to the Banks a copy of such Contractual Obligation);
        and

               (p) Liens on Property of a Joint Venture.

            6.8 Transactions with Affiliates. Enter into any transaction of any
kind with any Affiliate of Borrower other than (a) a transaction that results in
Subordinated Obligations, (b) a transaction between or among Borrower and its
wholly-owned Subsidiaries, (c) a transaction that has been authorized by the
board of directors of Borrower with the favorable vote of a majority of the
directors who have no financial or other interest in the transaction or by the
vote of a majority of the outstanding shares of capital stock of Borrower, (d) a
transaction entered into on terms and under conditions not less favorable to
Borrower or any of its Subsidiaries than could be obtained from a Person that is
not an Affiliate of Borrower, (e) salary, bonus, employee stock options and
other compensation arrangements and indemnification arrangements with directors
or officers, (f) transactions permitted by Sections 6.4 or 6.16, or (g) the
Lewis Homes Stock Repurchase.

            6.9 Consolidated Tangible Net Worth. Permit Consolidated Tangible
Net Worth to be, at the end of any Fiscal Quarter, less than an amount equal to
(a) $575,000,000, plus (b) an amount equal to 50% of aggregate of Consolidated
Net Income for each Fiscal Quarter contained in the fiscal period commencing on
June 1, 2000 and ending as of the last day of such Fiscal Quarter (provided that
there shall be no reduction hereunder in the event of a consolidated net loss in
any such Fiscal Quarter), plus (c) an amount equal to 50% of the cumulative net
proceeds received by Borrower from the issuance of its capital stock subsequent
to the 2000 Closing Date, plus (d) an amount equal to 50% of the cumulative net
proceeds received by Borrower from the issuance of the Trust Preferred Capital
Securities subsequent to the 2000 Closing Date, minus (e) the cumulative cost to
Borrower for the repurchase, if any, of its capital stock (provided that such
deduction shall have an aggregate cap of

                                      -48-
<PAGE>   55

$70,000,000 for the measurement at the end of the Fiscal Quarter ending on
August 31, 2000, a cumulative aggregate $50,000,000 cap for the measurements at
the end of the Fiscal Quarters ending on November 30, 2000 and February 28,
2001, and an aggregate $20,000,000 cap for the measurement at the end of any
Fiscal Quarter thereafter).

            6.10 Consolidated Leverage Ratio. Permit the Consolidated Leverage
Ratio to be, at the end of any Fiscal Quarter, greater than 2.25 to 1.00;
provided that:

               (a) in the event that $30,000,000 or more is used to finance an
        Acquisition by Borrower or its Subsidiaries, the foregoing maximum
        permitted ratio may, upon the request of Borrower to the Administrative
        Agent, be increased to 2.65 to 1.00 for up to 3 consecutive Fiscal
        Quarters next ending after such Acquisition is consummated, provided
        that: (i) an increase under this clause (a) has not been in effect with
        respect to any of the 4 Fiscal Quarters prior to the first Fiscal
        Quarter for which an adjustment is to be made; (ii) Borrower's request
        is accompanied by 12-month cash flow, balance sheet and income statement
        projections, reasonably acceptable to the Administrative Agent and for
        delivery to the Banks, demonstrating that, giving effect to the
        Acquisition and to Borrower's election under this Section, Borrower will
        be in compliance with Sections 6.9, 6.10 and 6.11 for at least the next
        ending 4 Fiscal Quarters; (iii) Borrower must remain in compliance with
        Section 6.11 (without giving effect to any adjustment permitted
        thereunder) during each Fiscal Quarter for which an adjustment is
        applicable under this Section 6.10(a); and (iv) Borrower must elect on
        or before 60 days after the end of the first, second and third of such
        Fiscal Quarters next ending after the consummation of an Acquisition
        whether the 2.65 to 1.00 maximum Consolidated Leverage Ratio is to be in
        effect for the Pricing Period related to that Fiscal Quarter, it being
        understood and agreed that (a) the Borrower may only make such an
        election for the second and third of such Fiscal Quarters if Borrower
        made a similar election for the prior Fiscal Quarter and (b) if Borrower
        makes such an election, Applicable Pricing Level V shall be in effect
        for the entire Pricing Period regardless of the actual Consolidated
        Leverage Ratio.

               (b) if an election under Section 6.10(a) is not then in effect,
        the foregoing ratio shall, if needed, be increased to 2.50 to 1.00 for a
        period of up to 2 consecutive Fiscal Quarters, provided that: (i) this
        clause (b) has not been in effect with respect to any of the 4 Fiscal
        Quarters prior to the first Fiscal Quarter for which an adjustment is
        needed; (ii) no other Default or Event of Default then exists; (iii)
        Borrower furnishes to the Administrative Agent no later than 60 days
        after the end of the first Fiscal Quarter for which such adjustment is
        needed, 12-month cash flow, balance sheet and income statement
        projections, reasonably acceptable to the Administrative Agent and for
        delivery to the Banks, demonstrating that Borrower will be in compliance
        with Sections 6.9, 6.10 and 6.11 for at least the next ending 2 Fiscal
        Quarters; (iv) as of the end of each Fiscal Quarter for which such
        adjustment is applicable, the Consolidated Interest Coverage Ratio is
        not less than 2.50 to 1.00; and (v) Borrower has not incurred Operating
        Losses for the first Fiscal Quarter for which such adjustment is needed
        and the immediately preceding Fiscal Quarter; and

               (c) notwithstanding Section 6.10(a) or 6.10(b), the foregoing
        ratio shall automatically be reduced to 1.75 to 1.00 as of the end of
        any Fiscal Quarter if Borrower has incurred an Operating Loss for that
        Fiscal Quarter and the immediately preceding Fiscal Quarter and shall
        remain at 1.75 to 1.00 until the first Fiscal Quarter thereafter for
        which there is no Operating Loss.

                                      -49-
<PAGE>   56

            6.11 Consolidated Interest Coverage Ratio. Permit the Consolidated
Interest Coverage Ratio to be, at the end of any Fiscal Quarter, less than 2.25
to 1.00; provided that the foregoing ratio shall, upon the request of Borrower
to the Administrative Agent, be decreased for a period of 2 Fiscal Quarters
provided that (a) an adjustment under this Section 6.11 has not been in effect
with respect to any of the 4 Fiscal Quarters prior to the first Fiscal Quarter
for which an adjustment is to be made, (b) no Default or Event of Default then
exists and (c) Borrower furnishes to the Administrative Agent 12-month cash
flow, balance sheet and income statement projections, reasonably acceptable to
the Administrative Agent, demonstrating that Borrower will be in compliance with
Sections 6.9, 6.10 and 6.11 for at least the next ending 4 Fiscal Quarters.
Subject to satisfaction of the foregoing conditions, the decrease in the ratio
for the first Fiscal Quarter shall be to 1.75 to 1.00 and the decrease for the
second Fiscal Quarter shall be to a level (in no event higher than 2.25:1.00)
that is 0.25 higher than the actual Consolidated Interest Coverage Ratio for
such first Fiscal Quarter (e.g., from 1.80 to 1.00 improving to at least 2.05 to
1.00).

            6.12 Distributions. Make any Distribution (other than a Distribution
made to Borrower or to a Guarantor Subsidiary) if an Event of Default then
exists or if an Event of Default or Default would result therefrom.

            6.13 Amendments. Amend, waive or terminate any provision in any
instrument or agreement governing Subordinated Obligations unless such
amendment, waiver or termination would not be materially adverse to the
interests of the Banks under this Agreement.

            6.14 Hostile Tender Offers. Make any offer to the shareholders of a
publicly held corporation or business entity to purchase or acquire, or
consummate such a purchase or acquisition of, more than 5% of the shares of
capital stock or analogous ownership interests in such a corporation or business
entity if the board of directors or analogous body of such corporation or
business entity has notified Borrower that it opposes such offer or purchase,
except for consideration which consists solely of shares of capital stock or
other equity securities of Borrower or any of its Subsidiaries.

            6.15 Inventory. Permit, as of the end of any Fiscal Quarter, the
book value of Domestic Unimproved Land to exceed an amount equal to 100% of
Consolidated Tangible Net Worth.

            6.16 Investment in Subsidiaries and Joint Ventures. Permit, as of
the last day of any Fiscal Quarter, Borrower's equity interest, computed in
accordance with Generally Accepted Accounting Principles, in all Subsidiaries of
Borrower (other than Guarantor Subsidiaries), Financial Subsidiaries, Foreign
Subsidiaries, all Joint Ventures and all other entities with financial
statements not consolidated with those of Borrower under with Generally Accepted
Accounting Principles to exceed: (a) 35% of Consolidated Tangible Net Worth for
the Fiscal Quarter ending on November 30, 2000; (b) 25% of Consolidated Tangible
Net Worth for Fiscal Quarters ending after November 30, 2000 but on or before
November 30, 2002; and (c) 20% of Consolidated Tangible Net Worth for Fiscal
Quarters ending after November 30, 2002.

            6.17 Money Market Indebtedness. So long as any Advance (as defined
in the 2000 Revolving Loan Agreement) remains unpaid or any other Obligation (as
defined in the 2000 Revolving Loan Agreement) remains unpaid, or any portion of
the Commitment (as defined in the 2000 Revolving Loan Agreement) remains in
force, permit, for any consecutive period of more than one (1) Banking Day, at
any time the sum of the aggregate outstanding principal amount of the Loans (as
such term is defined in the Revolving Loan Agreement) plus the Letter of Credit
Usage (as such term is defined in the Revolving Loan Agreement) plus the Money
Market Outstandings (as such term is defined in the

                                      -50-
<PAGE>   57

Revolving Loan Agreement) plus the Swing Line Outstandings (as such term is
defined in the Revolving Loan Agreement) to exceed the Commitment (as such term
is defined in the 2000 Revolving Loan Agreement).

            6.18 Domestic Standing Inventory. Permit, as of the last day of any
Fiscal Quarter that immediately follows a Fiscal Quarter on the last day of
which the Consolidated Leverage Ratio was in excess of 2.25:1.00, Domestic
Standing Inventory to exceed an amount equal to 15% of Net Orders received
during the four most recently ended Fiscal Quarters.

                                      -51-
<PAGE>   58

                                   Article 7
                     INFORMATION AND REPORTING REQUIREMENTS

            7.1 Financial and Business Information of Borrower and Its
Subsidiaries. As long as any Loan remains unpaid or any other Obligation remains
unpaid, or any portion of the Commitment remains outstanding, Borrower shall,
unless the Administrative Agent (with the approval of the Majority Banks)
otherwise consents in writing, deliver to the Administrative Agent and each of
the Banks (except as otherwise provided below) at its own expense:

               (a) As soon as reasonably possible, and in any event within 60
        days after the close of each Fiscal Quarter of Borrower (other than the
        fourth Fiscal Quarter), (i) the consolidated and consolidating balance
        sheet of Borrower and its Consolidated Subsidiaries as of the end of
        such Fiscal Quarter, setting forth in comparative form the corresponding
        figures for the corresponding Fiscal Quarter of the preceding Fiscal
        Year, if available, and (ii) the consolidated and consolidating
        statements of profit and loss and the consolidated statements of cash
        flows of Borrower and its Consolidated Subsidiaries for such Fiscal
        Quarter and for the portion of the Fiscal Year ended with such Fiscal
        Quarter, setting forth in comparative form the corresponding periods of
        the preceding Fiscal Year. Such consolidated and consolidating balance
        sheets and statements shall be prepared in reasonable detail in
        accordance with Generally Accepted Accounting Principles (other than
        those which require footnote disclosure of certain matters) consistently
        applied, and shall be certified by the principal financial officer of
        Borrower, subject to normal year-end accruals and audit adjustments;

               (b) As soon as reasonably possible, and in any event within 90
        days after the close of each Fiscal Year of Borrower, (i) the
        consolidated and consolidating (in accordance with past practices of
        Borrower) balance sheets of Borrower and its Consolidated Subsidiaries
        as at the end of such Fiscal Year, setting forth in comparative form the
        corresponding figures at the end of the preceding Fiscal Year and (ii)
        the consolidated and consolidating (in accordance with past practices of
        Borrower) statements of profit and loss and the consolidated statements
        of cash flows of Borrower and its Consolidated Subsidiaries for such
        Fiscal Year, setting forth in comparative form the corresponding figures
        for the previous Fiscal Year. Such consolidated and consolidating
        balance sheet and statements shall be prepared in reasonable detail in
        accordance with Generally Accepted Accounting Principles consistently
        applied. Such consolidated balance sheet and statements shall be
        accompanied by a report and opinion of Ernst & Young or other
        independent certified public accountants of recognized national standing
        selected by Borrower (i.e., a "big five" firm), which report and
        opinion shall state that the examination of such consolidated financial
        statements by such accountants was made in accordance with generally
        accepted auditing standards and that such consolidated financial
        statements fairly present the financial condition, results of operations
        and of cash flows of Borrower and its Subsidiaries subject to no
        exceptions as to scope of audit and subject to no other exceptions or
        qualifications (other than changes in accounting principles in which the
        auditors concur) unless such other exceptions or qualifications are
        approved by the Majority Banks in their reasonable discretion. Such
        accountants' report and opinion shall be accompanied by a certificate
        stating that, in conducting the audit examination of books and records
        necessary for the certification of such financial statements, such
        accountants have obtained no knowledge of any Default or Event of
        Default hereunder or, if in the opinion of such accountants, any such
        Default or Event of Default shall exist, stating the nature and status
        of such event, and setting forth the applicable calculations under
        Sections 6.9, 6.10, 6.11, 6.15 (without requiring any physical count of
        inventory) and 6.16, as of the date of the balance sheet.

                                      -52-
<PAGE>   59

        Such consolidating balance sheet and statements shall be certified by
        the principal financial officer of Borrower;

               (c) Promptly after the receipt thereof by Borrower, copies of any
        audit or management reports submitted to it by independent accountants
        in connection with any audit or interim audit submitted to the board of
        directors of Borrower or any of its Subsidiaries;

               (d) Promptly after the same are available, copies of each annual
        report, proxy or financial statement or other report or communication
        sent to its stockholders, and copies of all annual, regular, periodic
        and special reports and registration statements which Borrower may file
        or be required to file with the Commission or any similar or
        corresponding Governmental Agency or with any securities exchange;

               (e) Promptly upon a Senior Officer of Borrower becoming aware,
        and in any event within ten Banking Days after becoming aware, of the
        occurrence of any (i) "reportable event" (as such term is defined in
        Section 4043 of ERISA) other than any such event as to which the PBGC
        has by regulation waived the requirement of 30 days' notice or (ii)
        "prohibited transaction" (as such term is defined in Section 406 of
        ERISA or Section 4975 of the Code) in connection with any Pension Plan,
        other than a Multiemployer Plan, or any trust created thereunder, a
        written notice specifying the nature thereof, what action Borrower and
        any of its Subsidiaries is taking or proposes to take with respect
        thereto, and, when known, any action taken by the Internal Revenue
        Service with respect thereto;

               (f) Promptly upon a Senior Officer of Borrower becoming aware,
        and in any event within five Banking Days after becoming aware, of the
        existence of a Default or an Event of Default, a written notice
        specifying the nature and period of existence thereof and what action
        Borrower is taking or proposes to take with respect thereto;

               (g) Promptly upon a Senior Officer of Borrower becoming aware,
        and in any event within five Banking Days after becoming aware, that the
        holder of any evidence of Indebtedness (in a principal amount in excess
        of $15,000,000) of Borrower or any of its Subsidiaries has given notice
        or taken any other action with respect to a default or event of default,
        a written notice specifying the notice given or action taken by such
        holder and the nature of such default or event of default and what
        action Borrower or its Subsidiary is taking or proposes to take with
        respect thereto;

               (h) Promptly upon a Senior Officer of Borrower becoming aware,
        and in any event within five Banking Days after becoming aware, of the
        existence of any pending or threatened litigation or any investigation
        by any Governmental Agency that would constitute a Material Adverse
        Effect (provided, that no failure of a Senior Officer to provide notice
        of any such event shall be the sole basis for any Default or Event of
        Default hereunder);

               (i) As soon as possible, and in any event within 60 days after
        the close of each Fiscal Quarter of Borrower (except 90 days after the
        close of the Fiscal Year of Borrower), (i) a sales report by
        geographical region, in the form of Exhibit F hereto, certified by a
        Senior Officer of Borrower, setting forth the number of homes or other
        units sold and delivered during such period and in backlog at the end of
        such period, (ii) an inventory report for such Fiscal Quarter
        summarizing such inventory by type and geographical region, in the form
        of Exhibit G hereto and (iii) a report of any change, as of the last day
        of such Fiscal Quarter, in the listing of

                                      -53-
<PAGE>   60

        Subsidiaries set forth in Schedule 4.4 (as the same may have been
        revised by previous reports under this clause (i)(iii));

               (j) As soon as reasonably possible, and in any event prior to the
        date that is 60 days after the commencement of each Fiscal Year, deliver
        to the Administrative Agent the business plan of Borrower and its
        Subsidiaries for that Fiscal Year, together with projections (in
        substantially the same format as the Projections) covering the next 2
        Fiscal Years;

               (k) Promptly following obtaining knowledge thereof by a Senior
        Officer of Borrower, written notice to the Administrative Agent of the
        inception or cessation of the Investment Grade Credit Rating; and

               (l) Such other data and information as from time to time may be
        reasonably requested by any of the Banks.

            7.2 Compliance Certificate. Not later than 60 days after the close
of each Fiscal Quarter and 90 days after the close of each Fiscal Year, a
Compliance Certificate dated as of the last day of the Fiscal Quarter or Fiscal
Year, as the case may be, (a) setting forth computations showing, in detail
reasonably satisfactory to the Administrative Agent, whether Borrower and its
Subsidiaries were in compliance with their obligations to the Banks pursuant to
Sections 6.9, 6.10, 6.11, 6.15, 6.16, and 6.18, (b) setting forth a list of the
Guarantor Subsidiaries of Borrower, based upon the most current financial
statements then available, (c) either (i) stating that to the best knowledge of
the certifying officer as of the date of such certificate there is no Default or
Event of Default, or (ii) if there is a Default or Event of Default as of the
date of such certificate, specifying all such Defaults or Events of Default and
their nature and status and (d) stating, to the best knowledge of the certifying
officer, whether any event or circumstance constituting a Material Adverse
Effect (other than a Material Adverse Effect which is not particular to the
Borrower and which is generally known) has occurred since the date of the most
recent Compliance Certificate delivered under this Section and, if so,
describing such Material Adverse Effect in reasonable detail. No failure of the
certifying officer to describe the existence of an event or circumstance
constituting a Material Adverse Effect shall be the sole basis for any Default
or Event of Default hereunder.

                                      -54-
<PAGE>   61

                                   Article 8
                                   CONDITIONS

            8.1 Initial Advances, Etc. The obligation of each Bank to make the
Advance to be made by it is subject to the following conditions precedent, each
of which shall be satisfied prior to the making of the initial Advances (unless
all of the Banks, in their sole and absolute discretion, shall agree otherwise):

               (a) The Administrative Agent shall have received all of the
        following, each dated as of the 2000 Closing Date (unless otherwise
        specified or unless the Administrative Agent otherwise agrees) and all
        in form and substance satisfactory to the Administrative Agent and legal
        counsel for the Administrative Agent:

                   (i) executed counterparts of this Agreement, sufficient in
               number for distribution to the Banks and Borrower;

                   (ii) a Note executed by Borrower in favor of each Bank, each
               in a principal amount equal to that Bank's Pro Rata Share of the
               Commitment. Promptly following the 2000 Closing Date, the
               promissory notes delivered to the Banks pursuant to the Prior
               Loan Agreements shall be canceled and promptly returned to
               Borrower;

                   (iii) the Subsidiary Guaranty executed by each Subsidiary
               which is a Guarantor Subsidiary as of the 2000 Closing Date;

                   (iv) with respect to Borrower and each Subsidiary which is a
               Guarantor Subsidiary as of the 2000 Closing Date, such
               documentation as the Administrative Agent may reasonably require
               to establish the due organization, valid existence and good
               standing of Borrower and each such Subsidiary, its qualification
               to engage in business in each jurisdiction in which it is
               required to be so qualified, its authority to execute, deliver
               and perform any Loan Documents to which it is a Party, and the
               identity, authority and capacity of each Responsible Official
               thereof authorized to act on its behalf, including, without
               limitation, certified copies of articles of incorporation and
               amendments thereto, bylaws and amendments thereto, certificates
               of good standing and/or qualification to engage in business, tax
               clearance certificates, certificates of corporate resolutions,
               incumbency certificates, and the like;

                   (v) the Opinions of Counsel;

                   (vi) an Officer's Certificate of Borrower affirming, to the
               best knowledge of the certifying Senior Officer, that the
               conditions set forth in Sections 8.1(c) and 8.1(d) have been
               satisfied;

                   (vii) a side letter executed by each "Bank" under the Prior
               Revolving Loan Agreement that is not a "Bank" hereunder
               acknowledging a termination of the "Commitments" under the Prior
               Revolving Loan Agreement without charge to Borrower (except for
               LIBOR breakage fees, if any) and agreeing to the other matters
               specified in Section 3.16;

                                      -55-
<PAGE>   62

                   (viii) a side letter executed by each "Bank" under the Prior
               Term Loan Agreement that is not a "Bank" hereunder acknowledging
               a termination of the "Commitment" under the Prior Term Loan
               Agreement without charge to Borrower (except for LIBOR breakage
               fees, if any) and agreeing to the other matters specified in
               Section 3.16;

                   (ix) a side letter executed by each "Bank" under the Bridge
               Loan Agreement that is not a "Bank" hereunder acknowledging a
               termination of the "Commitment" under the Bridge Loan Agreement
               without charge to Borrower (except for LIBOR breakage fees, if
               any) and agreeing to the other matters specified in Section 3.16;
               and

                   (x) such other assurances, certificates, documents, consents
               or opinions relevant hereto as the Administrative Agent may
               reasonably require.

               (b) The upfront fee payable pursuant to Section 3.2 shall have
        been paid and any fees then payable under the letter agreement referred
        to in Section 3.3 shall have been paid.

               (c) The representations and warranties of Borrower contained in
        Article 4 shall be true and correct in all material respects on and as
        of the 2000 Closing Date.

               (d) Borrower and its Subsidiaries and any other Parties shall be
        in compliance with all the terms and provisions of the Loan Documents,
        and after giving effect to the initial Advance, no Default or Event of
        Default shall have occurred and be continuing.

               (e) The Banks shall have received the written legal opinion of
        Sheppard, Mullin, Richter & Hampton LLP, legal counsel to the
        Administrative Agent, to the effect that the Opinions of Counsel are
        acceptable and such other matters relating to the Loan Documents as the
        Administrative Agent may request.

                                      -56-
<PAGE>   63

                                   Article 9
             EVENTS OF DEFAULT AND REMEDIES UPON EVENTS OF DEFAULT

            9.1 Events of Default. There will be a default hereunder if any one
or more of the following events ("Events of Default") occurs and is continuing,
whatever the reason therefor:

               (a) failure to pay any installment of principal on any of the
        Notes on the date when due; or

               (b) failure to pay any installment of interest on any of the
        Notes, or to pay any fee or other amounts due the Administrative Agent
        or any Bank hereunder, within 5 Banking Days after the date when due; or

               (c) any failure to comply with Sections 6.1, 6.3, 6.4 (with
        respect to Acquisitions), 6.7, 6.10, 6.11, 6.14, 6.17 or 7.1(f); or

               (d) any failure to comply with Sections 5.8, 5.9, 6.4 (with
        respect to Investments), 6.8, 6.9, 6.15, 6.16, or 6.18 that remains
        unremedied for a period of 15 calendar days after notice by the
        Administrative Agent of such Default or 20 calendar days after a Senior
        Officer becomes aware of such Default, whichever occurs first; or

               (e) Borrower or any other Party fails to perform or observe any
        other term, covenant, or agreement contained in any Loan Document on its
        part to be performed or observed within 30 calendar days after notice by
        the Administrative Agent of such Default; or

               (f) any representation or warranty in any Loan Document or in any
        certificate, agreement, instrument, or other document made or delivered,
        on or after the 2000 Closing Date, pursuant to or in connection with any
        Loan Document proves to have been incorrect when made in any respect
        material to the ability of Borrower to duly and punctually perform all
        of the Obligations; or

               (g) Any failure to pay any interest or principal when due
        (following any applicable cure period) under the Mortgage Warehousing
        Agreement to which Administrative Agent is a party or under any Money
        Market Facility; or

               (h) Borrower or any of its Significant Subsidiaries (i) fails to
        pay the principal, or any principal installment, of any present or
        future Indebtedness (other than Non-Recourse Indebtedness, and in the
        case of the Mortgage Company, arising under the Mortgage Warehousing
        Agreements), or any guaranty of present or future Indebtedness (other
        than Non-Recourse Indebtedness) on its part to be paid, when due (or
        within any stated grace period), whether at the stated maturity, upon
        acceleration, by reason of required prepayment or otherwise in excess of
        $25,000,000 individually or $50,000,000 in the aggregate or (ii) fails
        to perform or observe any other material term, covenant, or agreement on
        its part to be performed or observed, or suffers to exist any condition,
        in connection with any present or future Indebtedness (other than
        Non-Recourse Indebtedness, and in the case of the Mortgage Company,
        arising under the Mortgage Warehousing Agreements) or any guaranty of
        present or future Indebtedness (other than Non-Recourse Indebtedness),
        in excess of $25,000,000 individually or $50,000,000 in the aggregate,
        if as a result of such failure or such condition any

                                      -57-
<PAGE>   64

        holder or holders thereof (or an agent or trustee on its or their
        behalf) has the right to declare it due before the date on which it
        otherwise would become due; or

               (i) any Loan Document, at any time after its execution and
        delivery and for any reason other than the agreement of all the Banks or
        satisfaction in full of all the Obligations, ceases to be in full force
        and effect or is declared by a court of competent jurisdiction to be
        null and void, invalid, or unenforceable in any respect which is, in the
        reasonable opinion of the Majority Banks, materially adverse to the
        interest of the Banks; or

               (j) a final judgment (or judgments) against Borrower or any of
        its Significant Subsidiaries is entered for the payment of money in
        excess of $25,000,000 individually or $50,000,000 in the aggregate over
        the amount of any insurance proceeds reasonably expected to be received
        and remains unsatisfied without procurement of a stay of execution
        within thirty (30) calendar days after the issuance of any writ of
        execution or similar legal process or the date of entry of judgment,
        whichever is earlier, or in any event at least 5 calendar days prior to
        the sale of any assets pursuant to such legal process; or

               (k) Borrower or any Significant Subsidiary of Borrower institutes
        or consents to any proceeding under a Debtor Relief Law relating to it
        or to all or any part of its Property, or fails generally to pay its
        debts as they mature, or makes a general assignment for the benefit of
        creditors; or applies for or consents to the appointment of any
        receiver, trustee, custodian, conservator, liquidator, rehabilitator, or
        similar officer for it or for all or any part of its property; or any
        receiver, trustee, custodian, conservator, liquidator, rehabilitator, or
        similar officer is appointed without the application or consent of that
        Person and the appointment continues undischarged or unstayed for 60
        calendar days; or any proceeding under any Debtor Relief Law relating to
        any such Person or to all or any part of its Property is instituted
        without the consent of that Person, and continues undismissed or
        unstayed for 60 calendar days; or

               (l) the occurrence of a Termination Event with respect to any
        Pension Plan if the aggregate liability of Borrower and its ERISA
        Affiliates under ERISA as a result thereof exceeds $25,000,000; or the
        complete or partial withdrawal by Borrower or any of its ERISA
        Affiliates from any Multiemployer Plan if the aggregate liability of
        Borrower and its ERISA Affiliates as a result thereof exceeds
        $25,000,000; or

               (m) any determination is made by a court of competent
        jurisdiction that payment of principal or interest or both is due to the
        holder of any Subordinated Obligations which would not be permitted by
        Section 6.1 or that any Subordinated Obligation is not subordinated in
        accordance with its terms to the Obligations; or

               (n) the occurrence of an Event of Default (as defined in the 2000
        Revolving Loan Agreement), so long as any Advance (as defined in the
        2000 Revolving Loan Agreement) remains unpaid or any other Obligation
        (as defined in the 2000 Revolving Loan Agreement) remains unpaid, or any
        portion of the Commitment (as defined in the 2000 Revolving Loan
        Agreement) remains in force.

            9.2 Remedies Upon Event of Default. Without limiting any other
rights or remedies of the Administrative Agent or the Banks provided for
elsewhere in this Agreement or the Loan Documents, or by applicable Law or in
equity, or otherwise:

                                      -58-
<PAGE>   65

               (a) Upon the occurrence of any Event of Default, and so long as
        any such Event of Default shall be continuing (other than an Event of
        Default described in Section 9.1(k) with respect to Borrower or a
        Guarantor Subsidiary), the Majority Banks may request the Administrative
        Agent to, and the Administrative Agent thereupon shall, declare the
        unpaid principal of all Obligations due to the Banks hereunder and under
        the Notes, all interest accrued and unpaid thereon, and all other
        amounts payable to the Banks under the Loan Documents to be forthwith
        due and payable, whereupon the same shall become and be forthwith due
        and payable, without protest, presentment, notice of dishonor, demand,
        or further notice of any kind, all of which are expressly waived by
        Borrower; provided that the Administrative Agent shall notify Borrower
        (by telecopy and, if practicable, by telephone) substantially
        concurrently with any such acceleration (but the failure of Borrower to
        receive such notice shall not affect such acceleration).

               (b) Upon the occurrence of any Event of Default described in
        Section 9.1(k) with respect to Borrower or a Guarantor Subsidiary, the
        unpaid principal of all Obligations due to the Banks hereunder and under
        the Notes and all interest accrued and unpaid on such Obligations, and
        all other amounts payable under the Loan Documents shall be forthwith
        due and payable, without protest, presentment, notice of dishonor,
        demand, or further notice of any kind, all of which are expressly waived
        by Borrower.

               (c) Upon the occurrence of an Event of Default, the Banks and the
        Administrative Agent, or any of them, may proceed to protect, exercise,
        and enforce their rights and remedies under the Loan Documents against
        Borrower or any other Party and such other rights and remedies as are
        provided by Law or equity, without notice to or demand upon Borrower
        (which are expressly waived by Borrower) except to the extent required
        by applicable Laws. The order and manner in which the rights and
        remedies of the Banks under the Loan Documents and otherwise are
        exercised shall be determined by the Majority Banks.

               (d) All payments received by the Administrative Agent and the
        Banks, or any of them, after the acceleration of the maturity of the
        Loans shall be applied first to the costs and expenses (including
        attorneys' fees and disbursements) of the Administrative Agent, acting
        as Administrative Agent, and of the Banks and thereafter paid pro rata
        to the Banks in the same proportion that the aggregate of the unpaid
        principal amount owing on the Obligations of Borrower to each Bank, plus
        accrued and unpaid interest thereon, bears to the aggregate of the
        unpaid principal amount owing on all the Obligations, plus accrued and
        unpaid interest thereon. Regardless of how each Bank may treat the
        payments for the purpose of its own accounting, for the purpose of
        computing Borrower's Obligations, the payments shall be applied first,
        to the costs and expenses of the Administrative Agent, acting as
        Administrative Agent, and the Banks as set forth above, second, to the
        payment of accrued and unpaid fees hereunder and interest on all
        Obligations to the Banks, to and including the date of such application
        (ratably according to the accrued and unpaid interest on the Loans),
        third, to the ratable payment of the unpaid principal of all Obligations
        to the Banks, and fourth, to the payment of all other amounts then owing
        to the Administrative Agent or the Banks under the Loan Documents.
        Subject to Section 9.2(a), no application of the payments will cure any
        Event of Default or prevent acceleration, or continued acceleration, of
        amounts payable under the Loan Documents or prevent the exercise, or
        continued exercise, of rights or remedies of the Banks hereunder or
        under applicable Law unless all amounts then due (whether by
        acceleration or otherwise) have been paid in full.

                                      -59-
<PAGE>   66

                                   Article 10
                            THE ADMINISTRATIVE AGENT

            10.1 Appointment and Authorization. Subject to Section 10.7, each
Bank hereby irrevocably appoints and authorizes the Administrative Agent to take
such action as agent on its behalf and to exercise such powers under the Loan
Documents as are delegated to the Administrative Agent by the terms thereof or
are reasonably incidental, as determined by the Administrative Agent, thereto.
This appointment and authorization does not constitute appointment of the
Administrative Agent as trustee for any Bank and, except as specifically set
forth herein to the contrary, the Administrative Agent shall take such action
and exercise such powers only in an administrative and ministerial capacity.

            10.2 Administrative Agent and Affiliates. Bank of America (and each
successor Administrative Agent) has the same rights and powers under the Loan
Documents as any other Bank and may exercise the same as though it were not the
Administrative Agent; and the term "Bank" or "Banks" includes Bank of America in
its individual capacity. Bank of America (and each successor Administrative
Agent) and its respective Affiliates may accept deposits from, lend money to,
and generally engage in any kind of banking, trust or other business with
Borrower and any Affiliate of Borrower, as if it were not the Administrative
Agent and without any duty to account therefor to the Banks. Bank of America
(and each successor Administrative Agent) need not account to any other Bank for
any monies received by it for reimbursement of its costs and expenses as
Administrative Agent hereunder, or for any monies received by it in its capacity
as a Bank hereunder, except as otherwise provided herein.

            10.3 Banks' Credit Decisions. Each Bank agrees that it has,
independently and without reliance upon the Administrative Agent, any other
Bank, or the directors, officers, agents, or employees of the Administrative
Agent or of any other Bank, and instead in reliance upon information supplied to
it by or on behalf of Borrower and its Subsidiaries and upon such other
information as it has deemed appropriate, made its own independent credit
analysis and decision to enter into this Agreement. Each Bank also agrees that
it shall, independently and without reliance upon the Administrative Agent, any
other Bank, or the directors, officers, agents, or employees of the
Administrative Agent or of any other Bank, continue to make its own independent
credit analyses and decisions in acting or not acting under the Loan Documents.

            10.4 Action by Administrative Agent.

               (a) The Administrative Agent may assume that no Default or Event
        of Default has occurred and is continuing, unless the Administrative
        Agent has actual knowledge of the Default or Event of Default, has
        received notice from Borrower stating the nature of the Default or Event
        of Default, or has received notice from a Bank stating the nature of the
        Default or Event of Default and that Bank considers the Default or Event
        of Default to have occurred and to be continuing.

               (b) The Administrative Agent has only those obligations under the
        Loan Documents that are expressly set forth therein. Without limitation
        on the foregoing, the Administrative Agent shall have no duty to inspect
        any property of Borrower or any of its Subsidiaries, although the
        Administrative Agent may in its discretion periodically inspect any
        property from time to time.

                                      -60-
<PAGE>   67

               (c) Except for any obligation expressly set forth in the Loan
        Documents and as long as the Administrative Agent may assume that no
        Event of Default has occurred and is continuing, the Administrative
        Agent may, but shall not be required to, exercise its discretion to act
        or not act, except that the Administrative Agent shall be required to
        act or not act upon the instructions of the Majority Banks (or of all
        the Banks, to the extent required by Section 11.2) and those
        instructions shall be binding upon the Administrative Agent and all the
        Banks, provided that the Administrative Agent shall not be required to
        act or not act if to do so would, in the reasonable judgment of the
        Administrative Agent, expose the Administrative Agent to significant
        liability or would be contrary to any Loan Document or to applicable
        law.

               (d) If the Administrative Agent has received a notice specified
        in clause (a), the Administrative Agent shall give notice thereof to the
        Banks and shall act or not act upon the instructions of the Majority
        Banks (or of all the Banks, to the extent required by Section 11.2). If
        the Majority Banks fail for three (3) Banking Days after the receipt of
        notice from the Administrative Agent, to instruct the Administrative
        Agent, then the Administrative Agent, in its sole discretion, may act or
        not act as it deems advisable for the protection of the interests of the
        Banks.

               (e) The Administrative Agent shall have no liability to any Bank
        for acting, or not acting, as instructed by the Majority Banks (or all
        the Banks, if required under Section 11.2), notwithstanding any other
        provision hereof.

            10.5 Liability of Administrative Agent. Neither the Administrative
Agent, the Lead Arranger and Sole Book Manager or any of their Affiliates nor
any of its respective directors, officers, agents, or employees shall be liable
to any Bank for any action taken or not taken by them under or in connection
with the Loan Documents, except for their own gross negligence or willful
misconduct. Without limitation on the foregoing, the Administrative Agent and
its respective directors, officers, agents, and employees:

               (a) may treat the payee of any Note as the holder thereof until
        the Administrative Agent receives notice of the assignment or transfer
        thereof in form satisfactory to the Administrative Agent, signed by the
        payee and may treat each Bank as the owner of that Bank's interest in
        the obligations due to Banks for all purposes of this Agreement until
        the Administrative Agent receives notice of the assignment or transfer
        thereof, in form satisfactory to the Administrative Agent, signed by
        that Bank;

               (b) may consult with legal counsel, in-house legal counsel,
        independent public accountants, in-house accountants and other
        professionals, or other experts selected by it, or with legal counsel,
        independent public accountants, or other experts for Borrower, and shall
        not be liable to any Bank for any action taken or not taken by it or
        them in good faith in accordance with the advice of such legal counsel,
        independent public accountants, or experts;

               (c) will not be responsible to any Bank for any statement,
        warranty, or representation made in any of the Loan Documents or in any
        notice, certificate, report, request, or other statement (written or
        oral) in connection with any of the Loan Documents;

               (d) except to the extent expressly set forth in the Loan
        Documents, will have no duty to ascertain or inquire as to the
        performance or observance by Borrower or any other

                                      -61-
<PAGE>   68

        Person of any of the terms, conditions, or covenants of any of the Loan
        Documents or to inspect the property, books, or records of Borrower or
        any of its Subsidiaries or other Person;

               (e) will not be responsible to any Bank for the due execution,
        legality, validity, enforceability, genuineness, effectiveness,
        sufficiency, or value of any Loan Document, any other instrument or
        writing furnished pursuant thereto or in connection therewith;

               (f) will not incur any liability to any Bank by acting or not
        acting in reliance upon any Loan Document, notice, consent, certificate,
        statement, or other instrument or writing believed by it or them to be
        genuine and signed or sent by the proper party or parties; and

               (g) will not incur any liability for any arithmetical error in
        computing any amount payable to or receivable from any Bank hereunder,
        including without limitation payment of principal and interest on the
        Notes, payment of commitment fees, Loans, and other amounts; provided
        that promptly upon discovery of such an error in computation, the
        Administrative Agent, the Banks, and (to the extent applicable) Borrower
        shall make such adjustments as are necessary to correct such error and
        to restore the parties to the position that they would have occupied had
        the error not occurred.

            10.6 Indemnification. Each Bank shall, ratably in accordance with
its respective Pro Rata Share of the Commitment, indemnify and hold the
Administrative Agent, the Lead Arranger and Sole Book Manager and their
Affiliates and their respective directors, officers, agents, and employees
harmless against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses, or disbursements of any
kind or nature whatsoever (including, without limitation, attorney's fees and
disbursements) that may be imposed on, incurred by, or asserted against it or
them in any way relating to or arising out of this Agreement (other than losses
incurred by reason of the failure by Borrower to pay the obligations due to the
Administrative Agent under a Note) or any action taken or not taken by it as
Administrative Agent thereunder, except for the Administrative Agent's gross
negligence or willful misconduct. Without limitation on the foregoing, each Bank
shall reimburse the Administrative Agent upon demand for that Bank's ratable
share of any cost or expense incurred by the Administrative Agent in connection
with the negotiation, preparation, execution, delivery, administration,
amendment, waiver, refinancing, restructuring, reorganization (including a
bankruptcy reorganization), or enforcement of the Loan Documents, to the extent
that Borrower is required by Section 11.3 to pay that cost or expense but fails
to do so upon demand. Any such reimbursement shall not relieve Borrower of its
obligations under Section 11.3.

            10.7 Successor Administrative Agent. The Administrative Agent may
resign as such at any time by written notice to Borrower and the Banks, to be
effective upon a successor's acceptance of appointment as Administrative Agent.
The Majority Banks may at any time remove the Administrative Agent by written
notice to that effect to be effective on such date as the Majority Banks
designate. In either event, the Majority Banks shall appoint a successor
Administrative Agent or Agents, who must be from among the Banks and who shall
be subject to the prior approval of Borrower, which approval shall not be
unreasonably withheld or delayed, provided, that the Administrative Agent shall
be entitled to appoint a successor Administrative Agent from among the Banks,
subject to acceptance of appointment by that successor Administrative Agent, if
the Majority Banks have not appointed a successor Administrative Agent within
thirty (30) days after the date the Administrative Agent gave notice of
resignation or was removed. Upon a successor's acceptance of appointment as
Administrative Agent, the successor will thereupon succeed to and become vested
with all the rights, powers, privileges, and duties of the Administrative Agent
under the Loan Documents,

                                      -62-
<PAGE>   69

and the resigning or removed Administrative Agent will thereupon be discharged
from its duties and obligations thereafter arising under the Loan Documents.
After any retiring Administrative Agent's resignation or removal hereunder as
Administrative Agent, the provisions of this Article 10 and Sections 11.3 and
11.10 shall inure to its benefit as to any action taken or omitted to be taken
by it while it was Administrative Agent under this Agreement.

            10.8 No Obligations of Borrower. Nothing contained in this Article
10 shall be deemed to impose upon Borrower any obligation in respect of the due
and punctual performance by the Administrative Agent of its obligations to the
Banks under any provision of this Agreement, and Borrower shall have no
liability to the Administrative Agent or any of the Banks in respect of any
failure by the Administrative Agent or any Bank to perform any of its
obligations to the Administrative Agent or the Banks under this Agreement.
Without limiting the generality of the foregoing, where any provision of this
Agreement relating to the payment of any amounts due and owing under the Loan
Documents provides that such payments shall be made by Borrower to the
Administrative Agent for the account of the Banks, Borrower's obligations to the
Banks in respect of such payments shall be deemed to be satisfied upon the
making of such payments to the Administrative Agent in the manner provided by
this Agreement.

            10.9 Defaulting Banks. If for any reason any Bank wrongfully (in
violation of this Agreement) fails or refuses to timely make any Advance
required of it, or otherwise defaults on any of its material obligations under
this Agreement, and fails to cure its default within 5 Banking Days of receiving
notice of its failure to perform (such Bank being a "Defaulting Bank"), then in
addition to the rights and remedies that may be available to the Administrative
Agent and the Banks at law or in equity, the Defaulting Bank's right to
participate in the Loan and the Agreement will be suspended during the pendency
of the Defaulting Bank's uncured default, and (without limiting the foregoing)
the Administrative Agent may (or at the direction of the Majority Banks, shall)
withhold from the Defaulting Bank any interest payments, fees, principal
payments or other sums otherwise payable to such Defaulting Bank under the Loan
Documents until such default of such Defaulting Bank has been cured. Each
non-defaulting Bank will have the right, but not the obligation, in its sole
discretion, to acquire at par a proportionate share (based on the ratio of its
Pro Rata Share of the Commitment to the aggregate amount of the Pro Rata Shares
of the Commitments of all of the non-defaulting Banks that elect to acquire a
share of the Defaulting Bank's Pro Rata Share of the Commitment) of the
Defaulting Bank's Pro Rata Share of the Commitment, including without limitation
its proportionate share in the outstanding principal balance of the Loans. The
Defaulting Bank will pay and protect, defend and indemnify Administrative Agent
and each of the other Banks against, and hold Administrative Agent, and each of
the other Banks harmless from, all claims, actions, proceedings, liabilities,
damages, losses, and expenses (including without limitation attorneys' fees and
costs, and interest at the Prime Rate plus 2.0% per annum for the funds advanced
by Administrative Agent or any Banks on account of the Defaulting Bank) they may
sustain or incur by reason of or in consequence of the Defaulting Bank's failure
or refusal to perform its obligations under the Loan Documents. Administrative
Agent may set off against payments due to the Defaulting Bank for the claims of
Administrative Agent and the other Banks against the Defaulting Bank. The
exercise of these remedies will not reduce, diminish or liquidate the Defaulting
Bank's Pro Rata Share of the Commitment (except to the extent that part or all
of such Pro Rata Share of the Commitment is acquired by the other Banks as
specified above) or its obligations to share losses and reimbursement for costs,
liabilities and expenses under this Agreement. This indemnification will survive
the payment and satisfaction of all of the Borrower's obligations and
liabilities to the Banks. The foregoing provisions of this Section 10.9 are
solely for the benefit of the Administrative Agent and the Banks, and may not be
enforced or relied upon by the Borrower.

                                      -63-
<PAGE>   70

                                   Article 11
                                 MISCELLANEOUS

            11.1 Cumulative Remedies; No Waiver. The rights, powers, and
remedies of the Administrative Agent or any Bank provided herein or in any Note
or other Loan Document are cumulative and not exclusive of any right, power, or
remedy provided by law or equity. No failure or delay on the part of the
Administrative Agent or any Bank in exercising any right, power, or remedy may
be, or may be deemed to be, a waiver thereof; nor may any single or partial
exercise of any right, power, or remedy preclude any other or further exercise
of any other right, power, or remedy. The terms and conditions of Section 8.1
hereof are inserted for the sole benefit of the Banks and the Administrative
Agent may (with the approval of the Majority Banks) waive them in whole or in
part with or without terms or conditions in respect of any Loan, without
prejudicing the Banks' rights to assert them in whole or in part in respect of
any other Loans.

            11.2 Amendments; Consents. No amendment, modification, supplement,
termination, or waiver of any provision of this Agreement or any other Loan
Document, and no consent to any departure by Borrower or any other Party
therefrom, may in any event be effective unless in writing signed by the
Administrative Agent with the approval of the Majority Banks and Borrower, and
then only in the specific instance and for the specific purpose given; and
without the approval in writing of all the Banks, no amendment, modification,
supplement, termination, waiver, or consent may be effective:

               (a) to amend or modify the principal of, or the amount of
        principal or principal prepayments, payable on any Obligation or the
        amount of the Commitment or to decrease the rate of any interest or fee
        payable to any Bank;

               (b) to postpone any date fixed for any payment of principal of,
        prepayment of principal of, or any installment of interest on, any
        Obligation or any installment of any fee or to extend the term of the
        Commitment;

               (c) to amend or modify the provisions of the definition in
        Section 1.1 of "Majority Banks" or of Sections 11.2, 11.9, 11.10, or
        11.11;

               (d) release any Guarantor Subsidiary from liability under the
        Subsidiary Guaranty (except as provided below); or

               (e) to amend or modify any provision of this Agreement or the
        Loan Documents that expressly requires the consent or approval of all
        the Banks.

Any amendment, modification, supplement, termination, waiver or consent pursuant
to this Section 11.2 shall apply equally to, and shall be binding upon, all the
Banks and the Agents. Any amendment, modification, supplement, termination,
waiver or consent pursuant to this Section 11.2 that permits the sale or other
transfer of the capital stock of (or all or substantially all of the assets of)
a Guarantor Subsidiary shall automatically release the Guarantor Subsidiary
effective concurrently with such sale or other transfer.

            11.3 Costs, Expenses and Taxes. Borrower shall pay within 30 days
after demand (which demand shall be accompanied by an invoice in reasonable
detail) the reasonable actual out-of-pocket costs and expenses of the
Administrative Agent and Lead Arranger and Sole Book

                                      -64-
<PAGE>   71

Manager in connection with (a) the negotiation, preparation, execution,
delivery, arrangement, syndication and closing of the Loan Documents, provided
that such costs and expenses do not exceed the amounts referred to in a letter
agreement between Borrower and the Administrative Agent and Lead Arranger and
Sole Book Manager, (b) administration of the Loan Documents, provided that such
costs and expenses do not exceed the amounts set forth in a letter agreement
between Borrower and the Administrative Agent and Lead Arranger and Sole Book
Manager and (c) any amendment, waiver or modification of the Loan Documents.
Borrower shall pay within 30 days after demand the reasonable actual
out-of-pocket costs and expenses of the Administrative Agent and each of the
Banks in connection with the enforcement of any Loan Documents following the
occurrence of a Default or an Event of Default, including in connection with any
refinancing, restructuring, reorganization (including a bankruptcy
reorganization, if such payment is approved by the bankruptcy court or any
similar proceeding). The costs and expenses referred to in the first sentence
above (for which Borrower shall be liable solely with respect to costs and
expenses of the Administrative Agent and Lead Arranger and Sole Book Manager)
and the second sentence above (which shall apply to costs and expenses of the
Administrative Agent and the Banks) shall include filing fees, recording fees,
title insurance fees, appraisal fees, search fees, and other out-of-pocket
expenses and the reasonable actual fees and out-of-pocket expenses of any legal
counsel retained by the Administrative Agent and Lead Arranger and Sole Book
Manager or any of the Banks (including the allocated costs of in-house counsel),
as the case may be, or independent public accountants and other outside experts
retained by the Administrative Agent and Lead Arranger and Sole Book Manager
(provided that (i) Borrower shall not be liable under this Section 11.3 for fees
and expenses of more than one firm of independent public accountants, or more
than one expert with respect to a specific subject matter, at any one time and
(ii) with respect to the costs and expenses referred to in the second sentence
above (pertaining to enforcement matters), Borrower shall not be liable for the
fees and expenses of more than one firm of outside legal counsel retained to
represent the Administrative Agent and the Banks, but if any of such parties
does not consent to such joint representation, Borrower shall be liable for the
fees and expenses of not more than one firm of outside legal counsel retained to
represent the Administrative Agent and also for not more than one additional
firm of outside legal counsel retained to otherwise represent one or more of the
Banks). Nothing herein shall obligate Borrower to pay any costs and expenses in
connection with an assignment of or participation in a Bank's Pro-Rata Share of
a Commitment. Borrower shall pay any and all documentary and transfer taxes,
assessments or charges made by any Governmental Agency and all reasonable actual
costs, expenses, fees, and charges of Persons (other than the Administrative
Agent and Lead Arranger and Sole Book Manager or the Banks) payable or
determined to be payable in connection with the execution, delivery, filing or
recording of this Agreement, any other Loan Document, or any other instrument or
writing to be delivered hereunder or thereunder, and shall reimburse, hold
harmless, and indemnify the Administrative Agent and Lead Arranger and Sole Book
Manager and each Bank from and against any and all loss, liability, or legal or
other expense with respect to or resulting from any delay in paying or failure
to pay any such tax, cost, expense, fee, or charge or that any of them may
suffer or incur by reason of the failure of Borrower to perform any of its
Obligations. Any amount payable to the Administrative Agent and Lead Arranger
and Sole Book Manager or any Bank under this Section shall bear interest from
the date which is 30 days after Borrower's receipt of demand (together with
reasonable supporting documentation) for payment at the rate then in effect for
Prime Rate Loans.

            11.4 Nature of Banks' Obligations. Nothing contained in this
Agreement or any other Loan Document and no action taken by the Administrative
Agent or the Banks or any of them pursuant hereto or thereto may, or may be
deemed to, make the Banks a partnership, an association, a joint venture, or
other entity, either among themselves or with Borrower. Each Bank's obligation
to make any Advance pursuant hereto is several and not joint or joint and
several, and is not conditioned

                                      -65-
<PAGE>   72

upon the performance by any other Bank of its obligation to make Advances. A
default by any Bank will not increase the Pro Rata Share of the Commitment of
any other Bank. Any Bank not in default may, if it desires, assume in such
proportion as the nondefaulting Banks agree the obligations of any Bank in
default, but is not obligated to do so.

            11.5 Representations and Warranties. All representations and
warranties of Borrower and any other Party contained herein or in any other Loan
Document (including, for this purpose, all representations and warranties
contained in any certificate or other writing required to be delivered by or on
behalf of Borrower or such Party pursuant to any Loan Document) will survive the
making of the loans hereunder and the execution and delivery of the Notes, and,
in the absence of actual knowledge by the Administrative Agent or a Bank of the
untruth of any representation or warranty, have been or will be relied upon by
the Administrative Agent and that Bank, notwithstanding any investigation made
by the Administrative Agent or that Bank or on their behalf.

            11.6 Notices. Except as otherwise provided in any Loan Document, all
notices, requests, demands, directions, and other communications provided for
hereunder and under any other Loan Document must be in writing and must be
mailed (provided that communications related to any Default or Event of Default
or proposed action under Section 11.2 shall not be sent solely by mail),
telegraphed, delivered, or sent by telex, telecopier or cable to the appropriate
party at the address set forth on the signature pages of this Agreement or, as
to any Party, at any other address as may be designated by it in the applicable
Loan Document or in a written notice sent to the Administrative Agent and
Borrower in accordance with this Section. Except as otherwise provided in any
Loan Document if any notice, request, demand, direction, or other communication
is given by mail it will be effective on the earlier of actual receipt or the
third Banking Day after deposited in the United States mails with first class or
airmail postage prepaid; if given by telegraph or cable, when delivered to the
telegraph company with charges prepaid; if given by telecopier, when sent; if
given by telex, when confirmed by answerback; or if given by personal delivery,
when delivered. The Administrative Agent will endeavor to forward to Borrower a
list of the contact persons and addresses of each of the Banks on a quarterly
basis, but the Administrative Agent's failure to do so will not relieve Borrower
from any notice or other requirements set forth in this Agreement.

            11.7 Execution in Counterparts. This Agreement and any other Loan
Document to which Borrower is a Party may be executed in any number of
counterparts and any party hereto or thereto may execute any counterpart, each
of which when executed and delivered will be deemed to be an original and all of
which counterparts of this Agreement or any other Loan Document, as the case may
be, taken together will be deemed to be but one and the same instrument. Such
counterparts may be sent by telecopy, with the original counterparts to follow
by mail or courier. The execution of this Agreement or any other Loan Document
by any party hereto or thereto will not become effective until executed
counterparts hereof or thereof (or other evidence of execution satisfactory to
the Administrative Agent and Borrower) have been delivered to the Administrative
Agent and Borrower.

            11.8 Binding Effect; Assignment.

               (a) This Agreement and the other Loan Documents to which Borrower
        is a Party will be binding upon and inure to the benefit of Borrower,
        the Agents, each of the Banks, and their respective successors and
        assigns, except that except as permitted in Section 6.3, Borrower may
        not assign its rights hereunder or thereunder or any interest herein or
        therein without the prior written consent of all the Banks. Any Bank may
        at any time pledge its Notes or any other instrument evidencing its
        rights as a Bank hereunder to a Federal Reserve Bank,

                                      -66-
<PAGE>   73
        but no such pledge shall release that Bank from its obligations
        hereunder or grant to such Federal Reserve Bank the rights of a Bank
        hereunder absent foreclosure of such pledge.

               (b) From time to time following the 2000 Closing Date, each Bank
        may assign to one or more Eligible Assignee all or any portion of its
        Pro Rata Share of the Commitment; provided that (i) such Eligible
        Assignee, if not then a Bank, shall be approved by each of the
        Administrative Agent (which approval shall not be unreasonably withheld)
        and by Borrower (which approval shall not be unreasonably withheld and
        which approval shall not be necessary after an Event of Default has
        occurred and is continuing), (ii) such assignment shall be evidenced by
        a Commitment Assignment and Acceptance, a copy of which shall be
        furnished to the Administrative Agent as hereinbelow provided; (iii)
        except in the case of an assignment to an Affiliate of the assigning
        Bank, to another Bank or of the entire remaining Commitment of the
        assigning Bank, the assignment shall not assign a Pro Rata Share of the
        Commitment equivalent to less than $20,000,000 and that is not an
        integral multiple of $5,000,000 (which restrictions shall not apply
        while an Event of Default has occurred and is continuing), (iv) except
        in the case of an assignment of the entire remaining Commitment of the
        assigning Bank, giving effect to the assignment, the assigning Bank will
        not be in violation of its Applicable Minimum Hold Requirement (unless
        an Event of Default has occurred and is continuing) and (v) the
        effective date of any such assignment shall be as specified in the
        Commitment Assignment and Acceptance, but not earlier than the date
        which is 5 Banking Days after the date the Administrative Agent has
        received the Commitment Assignment and Acceptance. Upon the effective
        date of such Commitment Assignment and Acceptance, the Eligible Assignee
        named therein shall be a Bank for all purposes of this Agreement with
        the Pro Rata Shares of the Commitment therein set forth and, to the
        extent of such Pro Rata Shares, the assigning Bank shall be released
        from its further obligations under this Agreement. Borrower agrees that
        it shall execute and deliver (against delivery by the assigning Bank to
        Borrower of its Notes under this Agreement) to such assignee Bank, Notes
        evidencing that assignee Bank's Pro Rata Share, and to the assigning
        Bank, Notes evidencing the remaining balance Pro Rata Share retained by
        the assigning Bank.

               (c) By executing and delivering a Commitment Assignment and
        Acceptance, the Eligible Assignee thereunder acknowledges and agrees
        that: (i) other than the representation and warranty that it is the
        legal and beneficial owner of the Pro Rata Shares of the Commitment
        being assigned thereby free and clear of any adverse claim, the
        assigning Bank has made no representation or warranty and assumes no
        responsibility with respect to any statements, warranties or
        representations made in or in connection with this Agreement or the
        execution, legality, validity, enforceability, genuineness or
        sufficiency of this Agreement or any other Loan Document; (ii) the
        assigning Bank has made no representation or warranty and assumes no
        responsibility with respect to the financial condition of Borrower or
        the performance by Borrower of its obligations under this Agreement;
        (iii) it has received a copy of this Agreement, together with copies of
        the most recent financial statements delivered pursuant to this
        Agreement and such other documents and information as it has deemed
        appropriate to make its own credit analysis and decision to enter into
        such Commitment Assignment and Acceptance; (iv) it will, independently
        and without reliance upon the Administrative Agent, or any Bank and
        based on such documents and information as it shall deem appropriate at
        the time, continue to make its own credit decisions in taking or not
        taking action under this Agreement; (v) it appoints and authorizes the
        Administrative Agent to take such action and to exercise such powers as
        are delegated to the Administrative Agent by this Agreement; and (vi) it
        will perform

                                      -67-
<PAGE>   74

        in accordance with their terms all of the obligations which by the terms
        of this Agreement are required to be performed by it as a Bank.

               (d) After receipt of a completed Commitment Assignment and
        Acceptance executed by any Bank and an Eligible Assignee, and receipt of
        an assignment fee of $5,000 from such Eligible Assignee, the
        Administrative Agent shall, at least one Banking Day prior to the
        effective date thereof, provide to Borrower and the Banks a revised
        Schedule 1.1 giving effect thereto.

               (e) Each Bank may from time to time grant participations to one
        or more banks or other financial institutions (including another Bank)
        in its Pro Rata Share of the Commitment; provided, however, that (i)
        such participant, if not an Affiliate of the granting Bank, shall be
        approved by Borrower (which approval shall not be unreasonably withheld
        and which approval shall not be necessary after an Event of Default has
        occurred and is continuing), (ii) such Bank's obligations under this
        Agreement shall remain unchanged, (iii) such Bank shall remain solely
        responsible to the other parties hereto and thereto for the performance
        of such obligations, (iv) the participating bank or other financial
        institution shall not be a Bank hereunder for any purpose except, if
        the participation agreement so provides, for the purposes of recovery of
        eurodollar costs or capital adequacy expenses or indemnifications
        provided to the Banks under this Agreement but only to the extent that
        the cost of such benefits to Borrower does not exceed the cost which
        Borrower would have incurred in respect of such Bank absent the
        participation, (v) the participating bank or other financial institution
        shall be prohibited from transferring, encumbering or granting any
        sub-participation interest in the participation interest, (vi) Borrower,
        the Administrative Agent, and the other Banks shall continue to deal
        solely and directly with such Bank in connection with such Bank's rights
        and obligations under this Agreement, (vii) the participation interest
        granted shall not be with respect to a Pro Rata Share of the Commitment
        equivalent to less than $20,000,000 (which restriction shall not apply
        while an Event of Default has occurred and is continuing), (viii) giving
        effect to the participation, the granting Bank will not be in violation
        of its Applicable Minimum Hold Requirement (unless an Event of Default
        has occurred and is continuing), (ix) the consent of the holder of such
        participation interest shall not be required for amendments or waivers
        of provisions of the Loan Documents other than those which (A) extend
        the maturity dates or any other date upon which any payment of money is
        due to the Banks, (B) reduce the rate of interest, any fee or any other
        monetary amount payable to the Banks, (C) reduce the amount of any
        installment of principal due to the Banks thereunder, (D) release any
        Guarantor Subsidiary from its obligations under the Subsidiary Guaranty
        (except as provided in Section 11.2), or (E) release any material
        portion of any collateral securing any of the obligations of Borrowers
        to the Banks and (x) to the extent that the holder of the participation
        interest is granted consent rights with respect to the matters described
        in clause (ix), such rights must be subject to a voting procedure
        whereby the holders of the entire Pro Rata Share of the Commitment held
        by the participating Bank shall act in such matters in accordance with
        the vote of a majority-in-interest of such Pro Rata Share of the
        Commitment.

            11.9 Sharing of Setoffs. Each Bank severally agrees that if it,
through the exercise of the right of setoff, banker's lien, or counterclaim
against Borrower or otherwise, receives payment of the Obligations due it
hereunder and under the Notes that is ratably more than that to which it is
entitled hereunder pursuant to Section 3.12 or 9.2(d), then: (a) the Bank
exercising the right of setoff, banker's lien, or counterclaim or otherwise
receiving such payment shall purchase, and shall be deemed to have
simultaneously purchased, from the other Bank a participation in the Obligations
held by the other Bank

                                      -68-
<PAGE>   75

and shall pay to the other Bank a purchase price in an amount so that the share
of the Obligations held by each Bank after the exercise of the right of setoff,
banker's lien, or counterclaim or receipt of payment shall be in the same
proportion that existed prior to the exercise of the right of setoff, banker's
lien, or counterclaim or receipt of payment, and (b) such other adjustments and
purchases of participations shall be made from time to time as shall be
equitable to ensure that all of the Banks share any payment obtained in respect
of the Obligations ratably in accordance with the provisions of Section 3.12 and
9.2(d), provided that, if all or any portion of a disproportionate payment
obtained as a result of the exercise of the right of setoff, banker's lien,
counterclaim or otherwise is thereafter recovered from the purchasing Bank by
Borrower or any Person claiming through or succeeding to the rights of Borrower,
the purchase of a participation shall be rescinded and the purchase price
thereof shall be restored to the extent of the recovery, but without interest.
Each Bank that purchases a participation in the Obligations pursuant to this
Section shall from and after the purchase have the right to give all notices,
requests, demands, directions and other communications under this Agreement with
respect to the portion of the Obligations purchased to the same extent as though
the purchasing Bank were the original owner of the Obligations purchased.
Borrower expressly consents to the foregoing arrangements and agrees that, to
the extent permitted by Law, any Bank holding a participation in an Obligation
so purchased may exercise any and all rights of setoff, banker's lien or
counterclaim with respect to the participation as fully as if the Bank were the
original owner of the Obligation purchased.

            11.10 Indemnity by Borrower. Borrower agrees to indemnify, save,
and hold harmless the Administrative Agent and Lead Arranger and Sole Book
Manager and each Bank and their directors, officers, agents, attorneys, and
employees (collectively, the "indemnitees") from and against: (i) any and all
claims, demands, actions or causes of action that are asserted against any
indemnitee (other than by Borrower or by any other indemnitee) if the claim,
demand, action or cause of action arises out of or relates to a Commitment, the
use of proceeds of any Loans, any transaction contemplated pursuant to this
Agreement, or any relationship or alleged relationship of any indemnitee to
Borrower related to this Agreement; (ii) any administrative or investigative
proceeding by any Governmental Agency arising out of or related to a claim,
demand, action or cause of action described in clause (i) above; and (iii) any
and all liabilities, losses, costs, or expenses (including reasonable attorneys'
fees and disbursements (including the allocated cost of in-house counsel)) that
any indemnitee suffers or incurs as a result of any of the foregoing; provided,
that Borrower shall have no obligation under this Section to any indemnitee with
respect to any of the foregoing arising out of the gross negligence or willful
misconduct of that indemnitee or the breach by the indemnitee of this Agreement
or from the transfer or disposition of any Note by any Bank. If any claim,
demand, action or cause of action is asserted against any indemnitee, such
indemnitee shall promptly notify Borrower, but the failure to so promptly notify
Borrower shall not affect Borrower's obligations under this Section unless such
failure materially prejudices Borrower's right to participate in the contest of
such claim, demand, action or cause of action, as hereinafter provided. If
requested by Borrower in writing and so long as no Default or Event of Default
shall have occurred and be continuing, such indemnitee shall in good faith
contest the validity, applicability and amount of such claim, demand, action or
cause of action, shall permit Borrower to participate in such contest and shall
cooperate with Borrower to the extent their interests are aligned. Any
indemnitee that proposes to settle or compromise any claim or proceeding for
which Borrower may be liable for payment of indemnity hereunder shall give
Borrower written notice of the terms of such proposed settlement or compromise
reasonably in advance of settling or compromising such claim or proceeding and
shall not so settle or compromise without Borrower's written approval thereof,
which approval may be withheld in Borrower's sole discretion. Any voluntary
settlement by an indemnitee of such a claim or proceeding without Borrower's
written approval shall relieve Borrower of its obligation to indemnify that
indemnitee with respect to such claim or proceeding. In any legal action
involving more than one indemnitee, all indemnitees shall be represented by a
single legal counsel unless

                                      -69-
<PAGE>   76

such legal counsel determines that a defense or counterclaim is available to an
indemnitee that is not available to all indemnitees and that to assert such a
defense or counterclaim would create a conflict of interest, or a potential
conflict of interest, in which case such indemnitee shall be entitled to
separate legal counsel. Any obligation or liability of Borrower to any
indemnitee under this Section shall survive the expiration or termination of
this Agreement and the repayment of all Loans and all other Obligations owed to
the Banks.

            11.11 Nonliability of Banks. The relationship between Borrower and
the Banks is, and shall at all times remain, solely that of borrower and
lenders, and the Banks and the Administrative Agent neither undertake nor assume
any responsibility or duty to Borrower to review, inspect, supervise, pass
judgment upon, or inform Borrower of any matter in connection with any phase of
Borrower's business, operations, or condition, financial or otherwise. Borrower
shall rely entirely upon its own judgment with respect to such matters, and any
review, inspection, supervision, exercise of judgment, or information supplied
to Borrower by any Bank or the Agents in connection with any such matter is for
the protection of the Banks and the Agents, and neither Borrower nor any third
party is entitled to rely thereon.

            11.12 Confidentiality. Each Bank agrees that it and its employees
shall use any confidential information that such Bank may receive, directly or
indirectly, from Borrower pursuant to this Agreement only for the purposes of
this Agreement and shall hold such confidential information in confidence,
except for disclosure: to Affiliates of the Bank (provided that any such
Affiliate who is a "person" described in Rule 100(b)(1) of Regulation FD of the
Commission expressly agrees to maintain the disclosed information in confidence
or otherwise falls within the exceptions to Rule 100(a) of Regulation FD set
forth in Rule 100(b)(2) of Regulation FD); to other Banks; to legal counsel,
accountants and other professional advisors to that Bank; to regulatory
officials having jurisdiction over that Bank; as required by Law or legal
process (provided that the Bank shall, to the extent possible give sufficient
notice to Borrower of such legal process to enable Borrower to oppose such legal
process, and in any event, give written notice to Borrower of such legal process
as soon as practicable) or in connection with any legal proceeding to which that
Bank and Borrower are adverse parties; and to another financial institution in
connection with a disposition or proposed disposition to that financial
institution of all or part of that Bank's interests hereunder or a participation
interest in its Notes (provided that such disclosure is made subject to an
appropriate confidentiality agreement by such institution on terms substantially
similar to this Section). For purposes of the foregoing, "confidential
information" shall mean any information respecting Borrower or its Subsidiaries
reasonably considered by Borrower to be confidential, other than (a) information
previously filed with any Governmental Agency and available to the public, (b)
information previously published in any public medium from a source other than,
directly or indirectly, the Agents or any Bank, and (c) information previously
disclosed by Borrower to any Person not associated with Borrower without any
reasonable expectation of confidentiality. Nothing in this Section shall be
construed to create or give rise to any fiduciary duty on the part of the Agents
or the Banks to Borrower.

            11.13 No Third Parties Benefited. This Agreement is made for the
purpose of defining and setting forth certain obligations, rights and duties of
Borrower, the Agents and the Banks in connection with the Commitment, and is
made for the sole benefit of Borrower, the Administrative Agent and the Banks,
and the Administrative Agent's and the Banks' successors and assigns. Except as
provided in Sections 11.8 and 11.10, no other Person shall have any rights of
any nature hereunder or by reason hereof.

                                      -70-
<PAGE>   77
            11.14 Other Dealings. Any Bank may, without liability to account to
the other Banks, accept deposits from, lend money or provide credit facilities
to and generally engage in any kind of banking or other business with Borrower
and its Subsidiaries.

            11.15 Right of Setoff - Deposit Accounts. Upon the occurrence of an
Event of Default and the acceleration of maturity of the principal indebtedness
under any of the Notes pursuant to Section 9.2, Borrower hereby specifically
authorizes each Bank in which Borrower maintains a deposit account (whether a
general or special deposit account, other than trust accounts) or a certificate
of deposit to setoff any Obligations owed to the Banks against such deposit
account or certificate of deposit without prior notice to Borrower (which notice
is hereby waived) whether or not such deposit account or certificate of deposit
has then matured. Nothing in this Section shall limit or restrict the exercise
by a Bank of any right to setoff or banker's lien under applicable Law, subject
to the approval of the Majority Banks.

            11.16 Further Assurances. Borrower shall, at its expense and without
expense to the Banks or the Administrative Agent, do, execute, and deliver such
further acts and documents as any Bank or the Administrative Agent from time to
time reasonably requires for the assuring and confirming unto the Banks or the
Administrative Agent the rights hereby created or intended now or hereafter so
to be, or for carrying out the intention or facilitating the performance of the
terms of any Loan Document; provided that this Section 11.16 is not intended to
create any affirmative obligation on the part of Borrower to provide collateral
security, additional guarantors or other credit enhancement with respect to the
Obligations.

            11.17 Integration. This Agreement, together with the other Loan
Documents, comprises the complete and integrated agreement of the parties on the
subject matter hereof and supersedes all prior agreements, written or oral, on
the subject matter hereof except as expressly provided herein to the contrary;
provided that the foregoing is subject to Section 4.18 hereof. The Loan
Documents were drafted with the joint participation of Borrower and the Banks
and shall be construed neither against nor in favor of either, but rather in
accordance with the fair meaning thereof.

            11.18 Governing Law. The Loan Documents shall be governed by, and
construed and enforced in accordance with, the Laws of California.

            11.19 Severability of Provisions. Any provision in any Loan
Document that is held to be inoperative, unenforceable, or invalid in any
jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or
invalid without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are declared
to be severable.

            11.20 Headings. Article and section headings in this Agreement and
the other Loan Documents are included for convenience of reference only and are
not part of this Agreement or the other Loan Documents for any other purpose.

            11.21 Conflict in Loan Documents. To the extent there is any actual
irreconcilable conflict between the provisions of this Agreement and any other
Loan Document, the provisions of this Agreement shall prevail.

            11.22 Waiver Of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR

                                      -71-
<PAGE>   78

PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, THE NOTES, ANY
OTHER LOAN DOCUMENT OR UNDER ANY AMENDMENT, INSTRUMENT OR DOCUMENT DELIVERED OR
WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY
BANKING OR OTHER RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, THE
NOTES OR ANY OTHER LOAN DOCUMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. ANY PARTY TO THIS AGREEMENT
MAY FILE AN ORIGINAL COUNTERPART OR COPY OF THIS SECTION WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.

            11.23 Purported Oral Amendments. BORROWER EXPRESSLY ACKNOWLEDGES
THAT THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY ONLY BE AMENDED OR
MODIFIED, OR THE PROVISIONS HEREOF OR THEREOF WAIVED OR SUPPLEMENTED, BY AN
INSTRUMENT IN WRITING THAT COMPLIES WITH SECTION 11.2. BORROWER AGREES THAT IT
WILL NOT RELY ON ANY COURSE OF DEALING, COURSE OF PERFORMANCE, OR ORAL OR
WRITTEN STATEMENTS BY ANY REPRESENTATIVE OF ANY AGENT OR ANY BANK THAT DOES NOT
COMPLY WITH SECTION 11.2 TO EFFECT AN AMENDMENT, MODIFICATION, WAIVER OR
SUPPLEMENT TO THE AGREEMENT OR THE OTHER LOAN DOCUMENTS.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                      -72-
<PAGE>   79

            11.24 Hazardous Materials Indemnity. Without limiting any other
indemnity provided for in the Loan Documents, Borrower agrees to indemnify the
Administrative Agent, the Lead Arranger and Sole Book Manager and each Bank and
their directors, officers, agents, attorneys, and employees (collectively, the
"indemnities") from any claim, liability, loss, cost or expense (including
reasonable attorneys' fees (including the allocated cost of in-house counsel))
directly or indirectly arising out of the use, generation, manufacture,
production, storage, release, threatened release, discharge, disposal or
presence of any Hazardous Materials if such Hazardous Materials are on, under,
about or relate to Borrower's Property or operations, so long as such claim,
liability, loss, cost or expense arises out of or relates to a Commitment, the
use of proceeds of any Loans, any transaction contemplated pursuant to this
Agreement, or any relationship or alleged relationship of any indemnitee to
Borrower related to this Agreement.

            IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.

                         KAUFMAN AND BROAD HOME CORPORATION

                         By /s/ BRYAN A. BINYON
                            --------------------------------------
                                        Bryan A. Binyon
                                  Vice President and Treasurer

                         10990 Wilshire Boulevard
                         Los Angeles, California 90024

                         Attention:   Bryan A. Binyon
                                      Vice President and Treasurer

                         Telecopier:  310.231.4140
                         Telephone:   310.231.4025

<PAGE>   80

                         BANK OF AMERICA, N.A., as Administrative Agent and a
                         Bank

                         By: /s/ KELLY M. ALLRED
                            --------------------------------------
                                      Kelly M. Allred
                                         Principal

                         Domestic Lending Office

                         Bank of America, N.A.
                         5 Park Plaza, Suite 500
                         Irvine, California 92614

                         Attention:   Kelly M. Allred
                                      Principal

                         Telecopier:  949.260.5639
                         Telephone:   949.260.5654

                         LIBOR Lending Office

                         Bank of America, N.A.
                         5 Park Plaza, Suite 500
                         Irvine, California 92614

                         Attention:   Jean Ashley

                         Telecopier:  949.260.5637
                         Telephone:   949.260.5682

<PAGE>   81

                         CREDIT LYONNAIS LOS ANGELES BRANCH

                         By: /s/ DIANNE M. SCOTT
                            -----------------------------------------
                            DIANNE M. SCOTT
                            FIRST VICE PRESIDENT AND MANAGER
                            -----------------------------------------
                                      Printed Name and Title

                         Address:

                         Credit Lyonnais Los Angeles Branch
                         515 South Flower Street, 22nd Floor
                         Suite 2200
                         Los Angeles, California 90071
                         Attn:        Frank Herrera
                                      Vice President

                         Telephone:   213.362.5957
                         Telecopier:  213.623.3437

<PAGE>   82

                         BANK ONE, NA

                         By: /s/ KENNETH S. NELSON
                            -----------------------------------------
                                      KENNETH S. NELSON
                                    SENIOR VICE PRESIDENT
                            -----------------------------------------
                                      Printed Name and Title

                         Address:

                         Bank One, NA
                         One Bank One Plaza
                         Chicago, Illinois 60670
                         Attn: F. Pat Schiewitz

                         Telephone:   312.732.1148
                         Telecopier:  312.732.1117

<PAGE>   83

                         BANK UNITED

                         By: /s/ THOMAS S. GRIFFIN
                            -----------------------------------------
                                      THOMAS S. GRIFFIN, SVP
                            -----------------------------------------
                                      Printed Name and Title

                         Address:

                         Bank United
                         3200 South West Fwy.
                         Houston, Texas 77027
                         Attn:        Tom Griffin
                                      Senior Vice President

                         Telephone:   760.804.8595
                         Telecopier:  760.804.8590

<PAGE>   84

                         PNC BANK, N.A.

                         By: /s/ DOUGLAS G. PAUL
                            -----------------------------------------
                                 DOUGLAS G. PAUL, SR. VICE PRESIDENT
                            -----------------------------------------
                                      Printed Name and Title

                         Address:

                         PNC Bank, N.A.
                         Two Tower Center, 18th Floor
                         East Brunswick, New Jersey 08816
                         Attn: Douglas G. Paul

                         Telephone:   732.220.3566
                         Telecopier:  732.220.3744

<PAGE>   85

                         COMERICA BANK

                         By: /s/ SAM MEEHAN
                            -----------------------------------------
                                      SAM MEEHAN ASSISTANT V.P.
                            -----------------------------------------
                                      Printed Name and Title

                         Address:

                         Comerica Bank
                         One Detroit Center - MC3256
                         500 Woodward Avenue, 7th Floor
                         Detroit, Michigan 48226-3256
                         Attn: Sam Meehan

                         Telephone:   313.222.5461
                         Telecopier:  313.222.3295

<PAGE>   86

                         SUNTRUST BANK

                         By: /s/ DONALD L. GAUDETTE
                            -----------------------------------------
                                    DONALD L. GAUDETTE DIRECTOR
                            -----------------------------------------
                                      Printed Name and Title

                         Address:

                         SunTrust Bank
                         303 Peachtree Street MC1931
                         Atlanta, Georgia 30308
                         Attn: Don Gaudette

                         Telephone:   404.658.4925
                         Telecopier:  404.827.6270

<PAGE>   87

                         GUARANTY FEDERAL BANK, F.S.B.

                         By: /s/ JENNIFER E. RAY
                            -----------------------------------------
                                      JENNIFER E. RAY, VICE PRESIDENT
                            -----------------------------------------
                                      Printed Name and Title

                         Address:

                         Guaranty Federal Bank, F.S.B.
                         8333 Douglas Avenue
                         Dallas, Texas 75225
                         Attn: Jenny Ray

                         Telephone:   214.360.2837
                         Telecopier:  214.360.1661

<PAGE>   88

                         KBC BANK N.V.

                         By: /s/ ROBERT SNAUFFER
                            -----------------------------------------
                                      ROBERT SNAUFFER
                                      FIRST VICE PRESIDENT
                            -----------------------------------------
                                      Printed Name and Title

                         By: /s/ KENNETH D. CONNOR
                            -----------------------------------------
                                      KENNETH D. CONNOR
                                      VICE PRESIDENT
                                      REAL ESTATE
                            -----------------------------------------
                                      Printed Name and Title

                         Address:

                         KBC Bank N.V.
                         515 South Figueroa Street, Suite 1920
                         Los Angeles, California 90071
                         Attn: Kevin McKenna
                         Vice President

                         Telephone:   213.996.7529
                         Telecopier:  213.629.5801

<PAGE>   89

                         THE INDUSTRIAL BANK OF JAPAN, LIMITED

                         By: /s/ VICENTE L. TIMIRAOS
                            -----------------------------------------
                                      VICENTE L. TIMIRAOS
                                      JOINT GENERAL MANAGER
                            -----------------------------------------
                                      Printed Name and Title

                         Address:

                         The Industrial Bank of Japan, Limited
                         Los Angeles Agency
                         350 South Grand Avenue, Suite 1500
                         Los Angeles, California 90071
                         Attn: Mr. Takeshi Kubo
                         Vice President

                         Telephone:   213.893.6447
                         Telecopier:  213.488.9840

<PAGE>   90

                         CITICORP USA, INC.

                         By: /s/ JAMES M. BUCHANAN
                            -----------------------------------------
                                 JAMES M. BUCHANAN, VICE PRESIDENT
                            -----------------------------------------
                                      Printed Name and Title

                         Address:

                         Citicorp USA, Inc.
                         c/o Salomon Smith Barney, Inc.
                         390 Greenwich Street
                         New York, New York 10013
                         Attn: Suzanne Crymes
                               Vice President

                         Telephone:   212.723.6532
                         Telecopier:  212.723.8547

<PAGE>   91

                                   EXHIBIT A

                      COMMITMENT ASSIGNMENT AND ACCEPTANCE

              THIS COMMITMENT ASSIGNMENT AND ACCEPTANCE ("Agreement") dated as
of _________ is made with reference to that certain 2000 Term Loan Agreement,
dated as of October 3, 2000 (the "Loan Agreement") among KBHC, the Banks party
thereto, Credit Lyonnais Los Angeles Branch, as Syndication Agent, Bank One, NA,
as Documentation Agent, and Bank of America, N.A. as Administrative Agent, and
is entered into between the "Assignor" described below, in its capacity as a
Bank under the Loan Agreement, and the "Assignee" described below. Assignor and
Assignee hereby represent, warrant and agree as follows:

       1. Definitions. Capitalized terms defined in the Loan Agreement are used
herein with the meanings set forth for such terms in the Loan Agreement. As used
in this Agreement, the following capitalized terms shall have the meanings set
forth below:

              "Assignee" means ____________________________.

              "Assigned Pro Rata Share" means ______% of the Commitment of the
Banks under the Loan Agreement, being equal to the following dollar amount:
$________.

              "Assignor" or" means ____________________________.

              "Effective Date" means ____________, the effective date of this
Agreement determined in accordance with Section 11.8 of the Loan Agreement.

              "KBHC" means Kaufman and Broad Home Corporation, a Delaware
corporation, and its successors.

       2. Representations and Warranties of the Assignor. The Assignor
represents and warrants, as of the date hereof, as follows:

              (a) The Pro Rata Share of the Assignor is ______% of the
Commitment (without giving effect to assignments thereof which have not yet
become effective). The Assignor is the legal and beneficial owner of the
Assigned Pro Rata Share and the Assigned Pro Rata Share is free and clear of any
adverse claim.

              (b) The outstanding principal balance of Advances made by Assignor
under the Commitment is $_________.

              (c) The Assignor has full power and authority, and has taken all
action necessary to execute and deliver this Agreement and any and all other
documents required or permitted to be executed or delivered by it in connection
with this Agreement and to fulfill its obligations under, and to consummate the
transactions contemplated by, this Agreement, and no governmental authorizations
or other authorizations are required in connection therewith.

              (d) This Agreement constitutes the legal, valid and binding
obligation of the Assignor.

                            (Exhibit A, Page 1 of 7)
<PAGE>   92

Assignor makes no representation or warranty and assumes no responsibility with
respect to the financial condition of KBHC or the performance by KBHC of its
obligations under the Loan Agreement, and assumes no responsibility with respect
to any statements, warranties or representations made or in connection with the
Loan Agreement or the execution, legality, validity, enforceability, genuineness
or sufficiency of the Loan Agreement or any Loan Document other than as
expressly set forth above.

       3. Representations and Warranties of the Assignee. The Assignee hereby
represents and warrants to the Assignor as follows:

              (a) The Assignee is an Eligible Assignee;

              (b) The Assignee has full power and authority, and has taken all
action necessary to execute and deliver this Agreement, and any and all other
documents required or permitted to be executed or delivered by it in connection
with this Agreement and to fulfill its obligations under, and to consummate the
transactions contemplated by, this Agreement, and no governmental authorizations
or other authorizations are required in connection therewith;

              (c) This Agreement constitutes the legal, valid and binding
obligation of the Assignee;

              (d) The Assignee has independently and without reliance upon the
Assignor and based on such information as the Assignee has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement. Assignee
will, independently and without reliance upon the Administrative Agent or any
Bank, and based upon such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Loan Agreement;

              (e) The Assignee has received copies of the Loan Agreement and
such of the Loan Documents as it has requested, together with copies of the most
recent financial statements delivered pursuant to the Loan Agreement; and

              (f) If Assignee is organized under the Laws of a jurisdiction
outside the United States of America, attached hereto are the forms prescribed
by the Code and the Loan Agreement certifying Assignee's exemption from United
States withholding taxes with respect to all payments to be made to Assignee
under the Loan Agreement.

       4. Assignment. On the terms set forth herein, Assignor, as of the
Effective Date, hereby irrevocably sells, assigns and transfers to the Assignee
all of the rights and obligations of the Assignor under the Loan Agreement and
the other Loan Documents, in each case to the extent of the Assigned Pro Rata
Share, and the Assignee irrevocably accepts such assignment of rights and
assumes such obligations from the Assignor on such terms and as of the Effective
Date. As of the Effective Date, Assignee shall have the rights and obligations
of a "Bank" (as defined in the Loan Agreement) under the Loan Documents, except
to the extent of any arrangements with respect to payments referred to in
Section 5 hereof. Assignee hereby appoints and authorizes the Administrative
Agent to take such action and to exercise such powers as are delegated to the
Administrative Agent by the Loan Agreement.

       5. Payment. On the Effective Date, Assignee shall pay to the Assignor, in
immediately available funds, an amount equal to the purchase price, as agreed
between the Assignor and the Assignee, of the Assigned Pro Rata Share. The
Assignor and the Assignee have entered into a letter

                            (Exhibit A, Page 2 of 7)
<PAGE>   93

agreement, of even date herewith, which sets forth their agreement with respect
to the amount of interest, fees, and other payments with respect to the Assigned
Pro Rata Share which are to be retained by the Assignor.

              The Assignor and the Assignee hereby agree that if either receives
any payment of interest, principal, fees or any other amount under the Loan
Agreement, their respective Notes and other Loan Documents which is for the
account of the other, it shall hold the same in trust for such party to the
extent of such party's interest therein and shall promptly pay the same to such
party.

       6. Principal. Interest. Fees, etc. Any principal that would be payable
and any interest, fees and other amounts that would accrue from and after the
Effective Date to or for the account of the Assignor pursuant to the Loan
Agreement and the Notes shall be payable to or for the account of the Assignor
and the Assignee, in accordance with their respective interests as adjusted
pursuant to this Agreement.

       7. Notes. The Assignor and Assignee shall make appropriate arrangements
with KBHC concurrently with the execution and delivery hereof so that a
replacement Note is issued to the Assignor, if necessary, and a new Note is
issued to the Assignee in principal amounts reflecting their Pro Rata Shares of
the Commitment or their outstanding Advances (as adjusted pursuant to this
Agreement). As of the Effective Date, the Pro Rata Shares of Assignor and
Assignee to be reflected on Schedule 1.1 to the Loan Agreement shall be:

<TABLE>
<CAPTION>
                              Pro Rata Share of
                              Commitment
                              -----------------
<S>                           <C>
Assignor                      __% ($ ________)

Assignee                      __% ($ ________)
</TABLE>

       8. Further Assurances. Concurrently with the execution of this Agreement,
Assignor shall execute four counterpart original Requests for Registration, in
the form of Exhibit A to this Agreement, to be forwarded to the Administrative
Agent. The Assignor and the Assignee further agree to execute and deliver such
other instruments, and take such other action, as either party may reasonably
request in connection with the transactions contemplated by this Agreement, and
Assignor specifically agrees to cause the delivery of (i) four original
counterparts of this Agreement and (ii) the Requests for Registration, to the
Administrative Agent for the purpose of registration of Assignee as a "Bank"
pursuant to the Loan Agreement.

       9. GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACTUAL
OBLIGATION UNDER, AND SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA.

       10. Notices. All communications among the parties or notices in
connection herewith shall be in writing, hand delivered or sent by registered
airmail, postage prepaid, or by telex, telegram or cable, addressed to the
appropriate party at its address set forth on the signature pages hereof. All
such communications and notices shall be effective upon receipt.

                            (Exhibit A, Page 3 of 7)
<PAGE>   94

       11. Binding Effect. This Agreement shall become effective upon the
execution of the Request for Registration in the form of Exhibit A to this
Agreement by KBHC and the execution of the Consent in the form of Exhibit B to
this Agreement by the Administrative Agent, and shall be binding upon and inure
to the benefit of the parties and their respective successors and assigns;
provided, however, that Assignee shall not assign its rights or obligations
without the prior written consent of the Assignor and any purported assignment,
absent such consent, shall be void.

       12. Interpretation. The headings of the various sections hereof are for
convenience of reference only and shall not affect the meaning or construction
of any provision hereof.

              IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officials, officers or agents
thereunto duly authorized as of the date first above written.

                                   "Assignor"

                                   ---------------------------------------------

                                   By:
                                      ------------------------------------------

                                      ------------------------------------------
                                               Printed Name and Title

                                   Address:

                                              ----------------------------------

                                              ----------------------------------

                                              ----------------------------------
                                              Attn:
                                                   -----------------------------

                                   "Assignee"

                                   ---------------------------------------------

                                   By:
                                      ------------------------------------------

                                      ------------------------------------------
                                                Printed Name and Title

                                   Address:

                                              ----------------------------------

                                              ----------------------------------

                                              ----------------------------------
                                              Attn:
                                                   -----------------------------

                            (Exhibit A, Page 4 of 7)
<PAGE>   95

                Exhibit A to Commitment Assignment and Acceptance

                            REQUEST FOR REGISTRATION

TO:    BANK OF AMERICA, N.A., as Administrative Agent

              THIS REQUEST FOR REGISTRATION OF ASSIGNEE is made as of the date
of the enclosed Commitment Assignment and Acceptance with reference to that
certain 2000 Term Loan Agreement dated as of October 3, 2000 among KBHC, the
Banks who are parties thereto, Bank of America, N.A., as Administrative Agent,
Credit Lyonnais Los Angeles Branch, as Syndication Agent, and Bank One, NA, as
Documentation Agent.

              Assignor and Assignee hereby request that the Administrative Agent
approve of Assignee as a Bank, and that the Administrative Agent register
Assignee as a Bank pursuant to the Loan Agreement effective as of the Effective
Date described in the enclosed Commitment Assignment and Acceptance and, in
connection with this request certify to the Administrative Agent that the
enclosed Commitment Assignment and Acceptance sets forth the correct Commitment
and the Assigned Pro Rata Share of the Assignee.

              Enclosed with this Request are four counterpart originals of the
Commitment Assignment and Acceptance as well as the original Note issued to
Assignor.

              IN WITNESS WHEREOF, Assignor and Assignee have executed this
Request for Registration by their duly authorized officers as of ___________.

                                   "Assignor"

                                   ---------------------------------------------

                                   By:
                                      ------------------------------------------

                                      ------------------------------------------
                                               Printed Name and Title

                                    Exhibit A
                                   Page 1 of 2
                            (Exhibit A, Page 5 of 7)
<PAGE>   96

                                   "Assignee"

                                   ---------------------------------------------

                                   By:
                                      ------------------------------------------

                                      ------------------------------------------
                                               Printed Name and Title

THE UNDERSIGNED HEREBY CONSENTS
TO THE ABOVE ASSIGNMENT:

KAUFMAN AND BROAD HOME CORPORATION,
a Delaware corporation

By:
   -----------------------------

   -----------------------------
      Printed Name and Title

                                    Exhibit A
                                   Page 2 of 2
                            (Exhibit A, Page 6 of 7)
<PAGE>   97

                Exhibit B to Commitment Assignment and Acceptance

                                     CONSENT

TO:    THE ASSIGNOR AND ASSIGNEE REFERRED TO IN THE ABOVE REQUEST FOR
       REGISTRATION

       When countersigned by the Administrative Agent below, this document shall
certify that:

       1. The Administrative Agent has consented, pursuant to the terms of the
Loan Documents, to the assignment by Assignor to Assignee of the Assigned Pro
Rata Share.

       2. The Administrative Agent has registered Assignee as a Bank under the
Loan Agreement, effective as of the Effective Date described above, with a Pro
Rata Share of the Commitment corresponding to the Assigned Pro Rata Share and
has adjusted the registered Pro Rata Share of the Commitment of Assignor to
reflect the assignment of the Assigned Pro Rata Share.

                                 BANK OF AMERICA, N.A., as Administrative Agent

                                 By:
                                    --------------------------------------------

                                    --------------------------------------------
                                              Printed Name and Title

                                    Exhibit B
                                  Page 1 of 1
                            (Exhibit A, Page 7 of 7)
<PAGE>   98
                                                                       EXHIBIT B

           COMPLIANCE CERTIFICATE AS REQUIRED BY ARTICLE 7, SECTION 2

ARTICLE 6.9 - CONSOLIDATED TANGIBLE NET WORTH

<TABLE>
<CAPTION>

                                 11/30/1999A  2/28/00A  5/31/00A   8/31/00E  11/30/00E  2/28/01E  5/31/01E  8/31/01E  11/30/01E
                                -----------------------------------------------------------------------------------------------
<S>                              <C>          <C>       <C>         <C>      <C>         <C>       <C>       <C>      <C>
                                    $000         $000      $000       $000      $000        $000      $000      $000     $000
Consolidated Net Income
 (commencing 06/01/00)
50% cumulative Consolidated
 Net Income

proceeds from issuance
 capital stock (after 10/06/00)
50% cumulative proceeds
 issuance capital stock

6.9  MINIMUM CONSOLIDATED
     TANGIBLE NET WORTH
=============================

(a) Base Amount                      575          575       575        575       575         575       575       575       575
(b) Plus 50% of cumulative
     Consolidated Net Income
(c) Plus - 50% cumulative
     proceeds from issuance
     of capital stock
(d) Plus - 50% of proceeds
     Feline Prides after
     10/6/00
(e) <Less> Stock Repurchase
            Stepdown
           Stock Repurchase
            Cap
           Actual Stock
            Repurchase
            Stepdown                                                   (70)      (50)        (50)      (20)      (20)      (20)
                                ------------------------------------------------------------------------------------------------
MINIMUM CONSOLIDATED
  TANGIBLE NET WORTH                 575          575       575        575       575         575       575       575       575
                                ------------------------------------------------------------------------------------------------

1.1 "CONSOLIDATED TANGIBLE
    NET WORTH"
=============================

     Consolidated Share-
      holder's Equity
     Plus - Feline Prides
     <Less> book value
      goodwill since
      11/30/96
     <Less>/Plus any
      cumulative foreign
      currency translation
      adjustment
                                ------------------------------------------------------------------------------------------------
CONSOLIDATED TANGIBLE
NET WORTH                              0            0         0          0         0           0         0         0         0
                                ------------------------------------------------------------------------------------------------
CTNW <Less> Min CTNW                (575)        (575)     (575)      (575)     (575)       (575)     (575)     (575)     (575)
                                ================================================================================================
</TABLE>

Kaufman & Broad Confidential                                              Page 1
                                   10/5/2000

<PAGE>   99

                                    EXHIBIT C

                                      NOTE

$_______________                                               October ___, 2000
                                                         Los Angeles, California

              FOR VALUE RECEIVED, the undersigned promises to pay to the order
of ___________________________________("the Bank") the principal amount of
__________________________DOLLARS ($__________), or such lesser aggregate amount
of Advances as may be made pursuant to the Bank's Pro Rata Share of the
Commitment under the 2000 Revolving Loan Agreement hereinafter described,
payable as hereinafter set forth. The undersigned promises to pay interest on
the principal amount of each Advance made hereunder and remaining unpaid from
time to time from the date of each such Advance until the date of payment in
full, payable as hereinafter set forth.

              Reference is made to the 2000 Revolving Loan Agreement dated as of
October 3, 2000 among the undersigned, as Borrower, the Banks that are parties
thereto, Bank of America, N.A., as Administrative Agent, Credit Lyonnais Los
Angeles Branch, as Syndication Agent, and Bank One, NA, as Documentation Agent
(as amended from time to time, the "Loan Agreement"). Terms defined in the Loan
Agreement and not otherwise defined herein are used herein with the meanings
defined for those terms in the Loan Agreement. This is one of the Notes referred
to in the Loan Agreement, and any holder hereof is entitled to all of the
rights, remedies, benefits and privileges provided for in the Loan Agreement as
originally executed or as it may from time to time be supplemented, modified,
amended, renewed, extended or supplanted. The Loan Agreement, among other
things, contains provisions for acceleration of the maturity hereof upon the
happening of certain stated events upon the terms and conditions therein
specified.

              The principal indebtedness evidenced by this Note shall be payable
as provided in the Loan Agreement and in any event on the Maturity Date.

              Interest shall be payable on the outstanding daily unpaid
principal amount of each Advance hereunder from the date thereof until payment
in full and shall accrue and be payable at the rates and on the dates set forth
in the Loan Agreement to the fullest extent permitted by applicable Law, before
and after default, before and after maturity and before and after any judgment,
with interest on overdue interest to bear interest at the rate set forth in
Section 3.8 of the Loan Agreement.

              The amount of each payment hereunder shall be made to the
Administrative Agent at the Administrative Agent's Office, for the account of
the Bank, in lawful money of the United States of America, without deduction,
offset or counterclaim and in immediately available funds on the day of payment
(which must be a Banking Day). All payments of principal received after 10:00
a.m., Los Angeles time, on any Banking Day, shall be deemed received on the next
succeeding Banking Day for purposes of calculating interest thereon. The Bank
shall use its best efforts to keep a record of

                            (Exhibit C, Page 1 of 4)
<PAGE>   100

Advances made by it and payments of principal with respect to this Note, and
such record shall be presumptive evidence of the principal amount owing under
this Note.

              The undersigned hereby promises to pay, within thirty (30) days
after demand, the reasonable costs and expenses of any holder hereof incurred in
collecting the undersigned's obligations hereunder or in enforcing or attempting
to enforce any of any holder's rights hereunder, including attorneys' fees and
disbursements, whether or not an action is filed in connection therewith, in
accordance with Section 11.3 of the Loan Agreement.

              The undersigned hereby waives presentment, demand for payment,
dishonor, notice of dishonor, protest, notice of protest and any other notice or
formality, to the fullest extent permitted by applicable Laws.

              This Note shall be delivered to and accepted by the Bank in the
State of California, and shall be governed by, and construed and enforced in
accordance with, the local Laws thereof.

                                   KAUFMAN AND BROAD HOME CORPORATION,
                                   a Delaware corporation

                                   By
                                     -------------------------------------------
                                                  Bryan A. Binyon
                                           Vice President and Treasurer

                            (Exhibit C, Page 2 of 4)
<PAGE>   101

                       ADVANCES AND PAYMENTS OF PRINCIPAL
                               (Prime Rate Loans)

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
              Amount of Loan or     Amount of Principal
              of Redesignation      Paid or Redesignated
              From Another Type     Into Another Type of        Unpaid Principal         Notation
Date          of Loan               Loan                        Balance                  Made By
<S>           <C>                   <C>                         <C>                      <C>

-------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------
</TABLE>

                            (Exhibit C, Page 3 of 4)
<PAGE>   102

                       ADVANCES AND PAYMENTS OF PRINCIPAL
                                  (LIBOR Loans)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
                   Amount of Loan or         Amount of Principal
                   of Redesignation          Paid or Redesignated
                   From Another Type         Into Another Type of               Unpaid Principal         Notation
Date               of Loan                   Loan                               Balance                  Made By
<S>                <C>                       <C>                                <C>                      <C>

-----------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------
</TABLE>

                            (Exhibit C, Page 4 of 4)
<PAGE>   103

                                   EXHIBIT D-1
                             [KAUFMAN & BROAD LOGO]

                                 October 6, 2000

To:     Bank of America, N.A.,
                as Administrative Agent
        The Banks That Are Party to the Term Loan Agreement
                Referred to Below

                Re: Kaufman and Broad Home Corporation

Ladies and Gentlemen:

              I am Senior Vice President and General Counsel of Kaufman and
Broad Home Corporation, a Delaware corporation ("Borrower"). I have acted as
such in connection with the 2000 Term Loan Agreement (the "Term Loan Agreement")
dated as of October 3, 2000, by and among Borrower; the Banks which are parties
thereto; Bank of America, N.A., as Administrative Agent; Credit Lyonnais Los
Angeles Branch, as Syndication Agent; Bank One, NA, as Documentation Agent; and
Banc of America Securities LLC as Lead Arranger and Sole Book Manager (all such
parties other than Borrower are collectively referred to herein as "Bank
Parties").

              This Opinion is furnished to you pursuant to Section 8.1(a)(v) of
the Term Loan Agreement. Capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Term Loan Agreement.

              For the purposes of this opinion, I have examined originals, or
copies identified to my satisfaction as being true copies, of the following
documents:

              (a)    the Term Loan Agreement;

<PAGE>   104

Page 2

              (b)    the Notes of even date herewith;

              (c)    the Subsidiary Guaranty; and

              (d) the letters executed and delivered between the Administrative
Agent and Borrower, dated as of October 3, 2000, which concern agency fees and,
upfront fees.

              The documents described in (a) through (d) above are sometimes
referred to herein as the "Loan Documents".

              I have also made such investigations of fact and law, obtained
such certificates from public officials, Responsible Officials of Borrower and
certain of its Subsidiaries, reviewed incorporation and partnership
documentation, resolutions, secretary's certificates, good standing certificates
and other documents as appropriate of and for the Borrower and the Guarantor
Subsidiaries, as applicable, and done such other things as I have deemed
necessary for the purpose of this Opinion.

              I have assumed (i) that all natural persons have legal capacity,
(ii) the genuineness of all signatures of all parties other than Borrower and
its Guarantor Subsidiaries, (iii) the conformity to authentic original documents
of all documents submitted to me as copies and the authenticity of all documents
submitted to me as originals, (iv) as to all parties other than Borrower and its
Guarantor Subsidiaries, the due authorization, execution and delivery of the
Loan Documents, (v) that each of the Bank Parties has full power, authority and
legal right, under its charter and other governing documents and laws applicable
to it to perform its respective obligations thereunder, (vi) that all parties to
any Loan Document have filed all required franchise tax returns, if any, and
paid all required taxes, if any, under the California Revenue & Taxation Code
and under the laws of the State of Delaware and the respective states of
incorporation or formation of the Guarantor Subsidiaries, (vii) that each of the
Bank Parties has the requisite power and authority, has obtained all necessary
consents, licenses and permits, has taken all necessary action and has complied
with any and all applicable laws with which such Bank Party is required to
comply, in each case relating to or affecting the matters and actions
contemplated by the Loan Documents, (viii) that each of the Bank Parties (other
than Banc of America Securities LLC) is a national bank, state bank or similar
financial institution and is an exempt lender under Article XV of the California
Constitution or statutes enacted pursuant thereto and (ix) that the Loan
Documents have not been modified, amended, terminated or revoked in any respect,
and remain in full force and effect as of the date hereof.

       With respect to those opinions expressed below to be to "knowledge" or
"to the knowledge of the undersigned," or similar such wording, I am referring
solely to my individual, actual knowledge. Except as expressly set forth herein,
I did not undertake a review or examination of the activities or business
records of Borrower or any Subsidiaries specifically for the purpose of
rendering this opinion or to determine the existence or absence of such facts.
As Senior Vice President and General Counsel of Borrower, however, material
information respecting the matters covered by such opinions is brought to my
attention on a regular basis as a matter of internal policy and I intend the
phrase "to the knowledge of the undersigned" to mean

<PAGE>   105

 Page 3

that, in reviewing such information, nothing has come to my attention which
caused or should have caused me not to render such opinions.

              On the basis of the foregoing, and relying thereon, and with the
qualifications herein set forth, I am of the opinion that:

              1. Borrower is a corporation duly organized, validly existing and
in good standing under the Laws of the State of Delaware, and its certificate of
incorporation does not provide for the termination of its existence. Borrower is
duly qualified or registered to transact business and is in good standing as a
foreign corporation in the State of California and each other jurisdiction in
which the conduct of its business or the ownership of its Properties makes such
qualifications or registration necessary, except where the failure so to qualify
or register and to be in good standing would not constitute a Material Adverse
Effect.

              2. Borrower has all requisite corporate power and authority to
conduct its business, to own and lease its Properties and to execute, deliver
and perform all of its Obligations under the Loan Documents to which it is a
Party.

              3. To the knowledge of the undersigned, Borrower is in substantial
compliance with all Laws and other legal requirements applicable to its
business, has obtained all authorizations, consents, approvals, orders, licenses
and permits from, and has accomplished all filings, registrations and
qualifications with, or obtained exemptions from any of the foregoing from, any
Government Agency that are necessary for the transaction of its business, except
where the failure so to comply, file, register, qualify, or obtain exemptions
would not constitute a Material Adverse Effect.

              4. The execution, delivery and performance by Borrower and by each
Guarantor Subsidiary of each of the Loan Documents to which they are a Party
have been duly authorized by all necessary corporate action, and do not:

                     a. require under the charter documents of Borrower or any
              Guarantor Subsidiary any consent or approval not heretofore
              obtained of any partner, director, stockholder, security holder,
              or creditor of such Party;

                     b. violate or conflict with the Party's charter,
              certificate or articles of incorporation, or bylaws;

                     c. to the knowledge of the undersigned, result in or
              require the creation or imposition of any Lien or Right of Others
              (other than as provided under the Loan Documents) upon or with
              respect to any Property now owned or leased by such Party;

                     d. violate any Requirement of Law known to the undersigned
              to be applicable to such Party; or

<PAGE>   106

Page 4

                     e. result in a breach of or constitute a default under, or
              cause or permit the acceleration of any obligation owed under, any
              indenture or loan or credit agreement known to the undersigned or
              any other Contractual Obligation known to the undersigned to which
              such Party is a party or by which such Party or any of its
              Property is bound or affected;

and, to the knowledge of the undersigned, neither Borrower nor any Subsidiary of
Borrower is in violation of, or default under, any Requirement of Law or
contractual obligation, or any indenture, loan, or credit agreement described in
subparagraph (e) above in any respect that would constitute a Material Adverse
Effect.

              5. The Loan Documents to which either Borrower or any Guarantor
Subsidiary is Party have each been validly executed and delivered to the
Administrative Agent by Borrower or such Guarantor Subsidiary, as the case may
be, and constitute the legal, valid and binding obligation of Borrower or such
Guarantor Subsidiary, as the case may be, enforceable against such Borrower or
such Guarantor Subsidiary, as the case may be, in accordance with its terms.

              6. Except as have heretofore been obtained, no authorization,
consent, approval, order, license or permit from, or filing, registration or
qualification with, or exemption from any of the foregoing from, any
Governmental Agency under any Requirement of Law imposed on Borrower or any
Guarantor Subsidiary by the laws of the United States of America or the State of
California, in each case as the same exists on the date hereof, is or will be
required to authorize or permit the execution, delivery and performance by
Borrower or by any Significant Subsidiary of the Loan Documents to which it is a
Party.

              7. Each Significant Subsidiary which is a Domestic Subsidiary is a
legal entity of the form described for that Subsidiary in Schedule 4.4 to the
Agreement, duly organized, validly existing and in good standing under the Laws
of its jurisdiction of formation, is duly qualified or registered to do business
as a foreign organization (if applicable) and is in good standing as such in
each jurisdiction in which the conduct of its business or the ownership or
leasing of its Properties makes such qualifications or registration necessary
(except where the failure to be so qualified or registered and in good standing
does not constitute a Material Adverse Effect) and has all requisite power and
authority to conduct its business and to own and lease its Properties and to
execute, deliver and perform the obligations under the Loan Documents to which
it is a Party.

              8. To the knowledge of the undersigned, each Significant
Subsidiary is in substantial compliance with all Laws and other requirements
applicable to its business, has obtained all authorizations, consents,
approvals, orders, licenses and permits from and has accomplished all filings,
registrations and qualifications with, or obtained exemptions from any of the
foregoing from, any Governmental Agency that are necessary for the transaction
of its business, except where the failure so to comply, file, register, qualify
or obtain exemptions does not constitute a Material Adverse Effect.

<PAGE>   107

Page 5

              9. Neither Borrower nor any of its Subsidiaries is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, or the Investment Company Act of 1940.

              10. To the knowledge of the undersigned, there are no actions,
suits or proceedings pending or threatened against or affecting Borrower or any
of its Subsidiaries or any Property of any of them in any court of Law or before
any Governmental Agency in which there is a reasonable probability of a decision
that would constitute a Material Adverse Effect.

              11. Neither Borrower nor any of its Subsidiaries is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" or
"margin security" within the meanings of Regulation U of the Board of Governors
of the Federal Reserve System, and no loan under the Agreement will be used to
purchase or carry any such margin stock in violation of Regulation U.

              12. To the knowledge of the undersigned, Borrower and its
Subsidiaries are in substantial compliance with all applicable Laws relating to
environmental protection where the failure to comply would constitute a Material
Adverse Effect and have not received any notice from any Governmental Agency
respecting the alleged violation by Borrower or any Subsidiary of such Laws
which would constitute a Material Adverse Effect which has not been or is not
being corrected.

              In addition to any assumptions, qualifications and other matters
set forth elsewhere herein, the opinions set forth above are subject to the
following:

              (a) My opinion with respect to the legality, validity, binding
effect and enforceability of any Loan Document, agreement, or provision is
subject to the effect of any applicable bankruptcy, insolvency, fraudulent
conveyance, fraudulent transfer and equitable subordination, reorganization,
moratorium, or similar law affecting creditors' rights generally and to the
effect of general principles of equity, including (without limitation) concepts
of materiality, reasonableness, estoppel, good faith and fair dealing
(regardless of whether considered in a proceeding in equity or at law). I
express no opinion as to the availability of equitable remedies. In applying
such equitable principles, a court, among other things, might not allow a
creditor to accelerate the maturity of a debt or enforce a guaranty thereof upon
the occurrence of a default deemed immaterial or for non-credit reasons or might
decline to order a debtor to perform covenants. Such principles applied by a
court might also include a requirement that a creditor act with reasonableness
and in good faith.

              (b) Certain rights, remedies and waivers of the Loan Documents may
be unenforceable in whole or in part, but the inclusion of such provisions does
not affect the validity of the Loan Documents taken as a whole and, except as
set forth in subparagraph (a) above, the Loan Documents taken as a whole contain
adequate provisions for enforcing payment of the Obligations; however, the
unenforceability of such provisions may result in delays in or limitations on
the enforcement of the parties' rights and remedies under the Loan Documents
(and I express no opinion as to the economic consequences, if any, of such
delays or limitations).

<PAGE>   108

Page 6

              (c) I call your attention to the following matters on which I
express no opinion:

                     (i) the agreements in the Loan Documents to indemnify the
       Bank Parties against costs or expenses or liability notwithstanding such
       parties' acts of negligence or willful misconduct;

                     (ii) provisions in the Loan Documents for payment or
       reimbursement of costs, fees and expenses or indemnification for claims,
       losses, or liabilities to the extent any such provision may be determined
       by a court or other tribunal to be in an unreasonable amount, to
       constitute a penalty, or to be contrary to public policy;

                     (iii) the agreements in the Loan Documents to the
       jurisdiction or venue of a particular court, to the waiver of the right
       to jury trial, or to be served with process by service upon a designated
       third party;

                     (iv) any of the waivers or remedies contained in the Loan
       Documents, whether or not any Loan Document deems any such waiver or
       remedy commercially reasonable, if such waivers or remedies are
       determined (1) not to be commercially reasonable under applicable law,
       (2) to conflict with mandatory provisions of applicable law, (3) to be
       taken in a manner determined to be unreasonable or not performed in good
       faith or with fair dealing or with honesty in fact, or (4) to be broadly
       or vaguely stated or not to describe the right or duty purportedly waived
       with reasonable specificity;

                     (v) provisions in the Loan Documents which may be construed
       as imposing penalties or forfeitures, late payment charges, or an
       increase in interest rate, upon delinquency in payment or the occurrence
       of a default;

                     (vi) any power of attorney granted under the Loan
       Documents;

                     (vii) provisions in the Loan Documents to the effect that
       rights or remedies are not exclusive, that every right or remedy is
       cumulative and may be exercised in addition to any other right or remedy,
       that the election of some particular remedy does not preclude recourse to
       one or more others, or that failure to exercise or a delay in exercising
       rights or remedies will not operate as a waiver of any such right or
       remedy;

                     (viii) provisions in the Loan Documents which expressly or
       by implication waive or limit the benefits of statutory, regulatory, or

<PAGE>   109

Page 7

       constitutional rights, unless and to the extent the statute, regulation,
       or constitution explicitly allow such waiver or other limitation;

                     (ix) the effect of Section 1698 of the California Civil
       Code which, among other matters, provides that a written contract may be
       modified by an oral agreement to the extent such agreement is performed
       by the parties;

                     (x) the effect of Section 1670.5 of the California Civil
       Code which provides that a court may not enforce or may limit the
       application of a contract or portions thereof which it finds as a matter
       of law to have been unconscionable at the time the contract was made;

                     (xi) the effect of any Bank Party's compliance or
       noncompliance with any state or federal laws or regulations applicable to
       it or applicable to the transactions contemplated by the Loan Documents
       due to the nature of such Bank Party's business;

                     (xii) the effect of (1) any modification or alteration of
       the Loan Documents or other agreements with Borrower affecting the
       obligations of Borrower, (2) an election of remedies by the Bank Parties,
       or (3) any other action by the Bank Parties that materially prejudices
       any Guarantor Subsidiary if such modification, election, or action occurs
       without notice to the Guarantor Subsidiaries and without giving the
       Guarantor Subsidiaries an opportunity to cure any default by Borrower;

                     (xiii) the enforceability of any provision in the Loan
       Documents which provide that such Loan Documents may only be modified in
       writing; and

                     (xiv) the validity and enforceability of covenants set
       forth in the Loan Documents which purport to survive the repayment of the
       indebtedness evidenced therein.

              My opinions expressed herein are limited to the laws of the State
of California, the General Corporation Law of the State of Delaware and the
federal laws of the United States of America, and I do not express any opinion
herein concerning any other law, including, but not limited to, ordinances,
regulations or practices of any county, city, or other government agency or body
within the State of California.

              This Opinion is being provided in connection with the transaction
referred to above and may not be relied upon (x) by any person other than the
Bank Parties, an Eligible Assignee, or any successor in interest of any Bank
Party or (y) by the Bank Parties, an Eligible Assignee, or any successor in
interest of any Bank Party in any other context. This Opinion is being provided
in connection with the transaction referred to above and may not be relied upon

<PAGE>   110

Page 8

by any person other than the Bank Parties or by the Bank Parties in any other
context. Copies hereof may be furnished (a) to your independent auditors and
attorneys, (b) to any governmental agency or authority having regulatory
jurisdiction over you, (c) pursuant to an order of legal process of any court or
of any governmental agency or authority, or (d) in connection with any legal
action to which you are a party arising out of the transaction referred to
above. This opinion is rendered as of the date hereof, and I hereby disclaim any
obligation to advise any person entitled to rely hereon of any change in the
matters stated herein.

                                     Very truly yours,

                                     /s/ BARTON P. PACHINO

                                     Barton P. Pachino
                                     Senior Vice President and General Counsel
                                     Kaufman and Broad Home Corporation

<PAGE>   111

                                   EXHIBIT D-2

                     [MUNGER, TOLLES & OLSON LLP LETTERHEAD]

                                 October 6, 2000            WRITER'S DIRECT LINE

To: Bank of America, N.A.,
                as Administrative Agent

    The Banks That Are Party to the Term Loan Agreement
                Referred to Below

                Re:  Kaufman and Broad Home Corporation

Ladies and Gentlemen:

              We have acted as counsel to Kaufman and Broad Home Corporation, a
Delaware corporation (the "Borrower"), in connection with the 2000 Term Loan
Agreement (the "Term Loan Agreement") dated as of October 3, 2000, by and among
Borrower; the Banks which are parties thereto; Bank of America, N.A., as
Administrative Agent; Credit Lyonnais Los Angeles Branch, as Syndication Agent;
Bank One, NA, as Documentation Agent; and Banc of America Securities LLC, as
Lead Arranger and Sole Book Manager (all such parties other than Borrower are
collectively referred to herein as "Bank Parties").

              This Opinion is furnished to you pursuant to Section 8.1(a)(v) of
the Term Loan Agreement. Capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Term Loan Agreement.

              For the purposes of this opinion, we have examined originals, or
copies identified to our satisfaction as being true copies, of the following
documents:

              (a)    the Term Loan Agreement;

<PAGE>   112

MUNGER, TOLLES & OLSON LLP

Bank of America, N.A.
October 6, 2000
Page 2

              (b) the Notes of even date herewith;

              (c) the Subsidiary Guaranty; and

              (d) the letters executed and delivered between the Administrative
Agent and Borrower, dated as of October 3, 2000, which concern agency fees and
upfront fees.

              The documents described in (a) through (d) above are sometimes
referred to herein as the "Loan Documents".

              We have also examined such other corporate documents and records,
and other certificates, opinions and instruments and have conducted such
investigations as we have deemed necessary as a basis for the opinions expressed
below. As to factual matters relevant to our opinions expressed below, we have,
without independent investigation, relied upon certificates from public
officials and from Borrower's officers and upon public records, and have further
assumed and relied upon, without independent investigation, the truth and
accuracy of all factual representations and warranties of all parties to the
Loan Documents.

              We have assumed (i) that all natural persons have legal capacity,
(ii) the genuineness of all signatures of all parties other than Borrower, (iii)
the conformity to authentic original documents of all documents submitted to us
as copies and the authenticity of all documents submitted to us as originals,
(iv) that each of the Guarantor Subsidiaries is duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation or
organization and in each other jurisdiction where the conduct of its business or
the ownership of its Properties makes qualification or registration to transact
business necessary, (v) as to all parties other than Borrower, the due
authorization, execution and delivery of the Loan Documents, (vi) the validity
and enforceability of the Loan Documents against all parties thereto other than
Borrower and the Guarantor Subsidiaries, (vii) that each of the Bank Parties has
the requisite power and authority, has obtained all necessary consents, licenses
and permits, has taken all necessary action and has complied with any and all
applicable laws with which such Bank Party is required to comply, in each case
relating to or affecting the matters and actions contemplated by the Loan
Documents, (viii) that each of the Bank Parties (other than Banc of America
Securities LLC) is a national bank, state bank or similar financial institution
and is an exempt lender under Article XV of the California Constitution or
statutes enacted pursuant thereto, (ix) that the Loan Documents have not been
modified, amended, terminated or revoked in any respect, and remain in full
force and effect as of the date hereof and (x) that the parties to the Loan
Documents are not subject to any special laws, regulations or restrictions that
are not generally applicable to parties participating in transactions of the
type contemplated by the Loan Documents and that would affect the validity,
binding effect or enforceability of the Loan Documents or the performance by
such parties of their obligations thereunder.

              On the basis of the foregoing, and relying thereon, and with the
qualifications herein set forth, we are of the opinion that:

<PAGE>   113

MUNGER, TOLLES & OLSON LLP

Bank of America, N.A.
October 6, 2000
Page 3

              1. Borrower is a corporation duly incorporated, validly existing
and in good standing under the General Corporation Law of the State of Delaware,
and its certificate of incorporation does not limit the term of its existence.

              2. Borrower has all requisite corporate power and authority to
conduct its business, to own and lease its Properties and to execute, deliver
and perform all of its obligations under the Loan Documents to which it is a
party.

              3. The execution, delivery and performance by Borrower of the Loan
Documents to which it is a party have been duly authorized by all necessary
corporate action.

              4. The execution, delivery and performance of the Loan Documents
by Borrower do not violate any provision of Borrower's certificate of
incorporation or bylaws, and the execution, delivery and performance by Borrower
and each Guarantor Subsidiary of the Loan Documents to which it is a party do
not violate any Requirement of Law applicable to Borrower or such Guarantor
Subsidiary imposed by the laws of the United States of America or the State of
California that, in our experience, is normally applicable to general business
entities in relation to transactions of the type contemplated by the Loan
Documents.

              5. Except as have heretofore been obtained, no authorization,
consent, approval, order, license, or permit from, or filing, registration, or
qualification with, or exemption from any of the foregoing from any Governmental
Agency under any Requirement of Law imposed on Borrower or any Guarantor
Subsidiary by the laws of the United States of America or the State of
California, in each case as such Requirements of Law exist on the date hereof,
is or will be required to authorize or permit the execution, delivery and
performance by Borrower or any Guarantor Subsidiary of the Loan Documents to
which it is a party.

              6. Each of the Loan Documents to which Borrower or any Guarantor
Subsidiary is a party will, when executed and delivered by Borrower or such
Guarantor Subsidiary, as the case may be, constitute the legal, valid and
binding obligation of Borrower or such Guarantor Subsidiary, as the case may be,
enforceable against Borrower or such Guarantor Subsidiary, as the case maybe, in
accordance with its terms.

              In addition to any assumptions, qualifications and other matters
set forth elsewhere herein, the opinions set forth above are subject to the
following:

              (a) Our opinion with respect to the legality, validity, binding
effect and enforceability of any Loan Document, agreement, or provision is
subject to the effect of any applicable bankruptcy, insolvency, fraudulent
conveyance, fraudulent transfer and equitable subordination, reorganization,
moratorium, or similar law affecting creditors' rights generally and to the
effect of general principles of equity, including (without limitation) concepts
of materiality, reasonableness, estoppel, good faith and fair dealing
(regardless of whether considered in a proceeding in equity or at law). We
express no opinion as to the availability of equitable remedies. In applying
such equitable principles, a court, among other things, might not allow a
creditor to accelerate the maturity of a debt or enforce a guaranty thereof upon
the

<PAGE>   114

MUNGER, TOLLES & OLSON LLP

Bank of America, N.A.
October 6, 2000
Page 4

occurrence of a default deemed immaterial or for non-credit reasons or might
decline to order a debtor to perform covenants. Such principles applied by a
court might also include a requirement that a creditor act with reasonableness
and in good faith.

              (b) Certain rights, remedies and waivers of the Loan Documents may
be unenforceable in whole or in part, but the inclusion of such provisions does
not affect the validity of the Loan Documents taken as a whole and, except as
set forth in subparagraph (a) above, the Loan Documents taken as a whole contain
adequate provisions for enforcing payment of the Obligations; however, the
unenforceability of such provisions may result in delays in or limitations on
the enforcement of the parties' rights and remedies under the Loan Documents
(and we express no opinion as to the economic consequences, if any, of such
delays or limitations).

              (c) We call your attention to the following matters on which we
express no opinion:

                     (i) the agreements in the Loan Documents to indemnify the
       Bank Parties against costs or expenses or liability notwithstanding such
       parties' acts of negligence or willful misconduct;

                     (ii) provisions in the Loan Documents for payment or
       reimbursement of costs, fees and expenses or indemnification for claims,
       losses, or liabilities to the extent any such provision may be determined
       by a court or other tribunal to be in an unreasonable amount, to
       constitute a penalty, or to be contrary to public policy;

                     (iii) the agreements in the Loan Documents to the
       jurisdiction or venue of a particular court, to the waiver of the right
       to jury trial, or to be served with process by service upon a designated
       third party;

                     (iv) any of the waivers or remedies contained in the Loan
       Documents, whether or not any Loan Document deems any such waiver or
       remedy commercially reasonable, if such waivers or remedies are
       determined (1) not to be commercially reasonable under applicable law,
       (2) to conflict with mandatory provisions of applicable law, (3) to be
       taken in a manner determined to be unreasonable or not performed in good
       faith or with fair dealing or with honesty in fact, or (4) to be broadly
       or vaguely stated or not to describe the right or duty purportedly waived
       with reasonable specificity;

                     (v) provisions in the Loan Documents which may be construed
       as imposing penalties or forfeitures, late payment charges, or an
       increase in interest rate, upon delinquency in payment or the occurrence
       of a default;

<PAGE>   115

MUNGER, TOLLES & OLSON LLP

Bank of America, N.A.
October 6, 2000
Page 5

                     (vi) any power of attorney granted under the Loan
       Documents;

                     (vii) provisions in the Loan Documents to the effect that
       rights or remedies are not exclusive, that every right or remedy is
       cumulative and may be exercised in addition to any other right or remedy,
       that the election of some particular remedy does not preclude recourse to
       one or more others, or that failure to exercise or a delay in exercising
       rights or remedies will not operate as a waiver of any such right or
       remedy;

                     (viii) provisions in the Loan Documents which expressly or
       by implication waive or limit the benefits of statutory, regulatory, or
       constitutional rights, unless and to the extent the statute, regulation,
       or constitution explicitly allow such waiver or other limitation;

                     (ix) the effect of Section 1698 of the California Civil
       Code which, among other matters, provides that a written contract may be
       modified by an oral agreement to the extent such agreement is performed
       by the parties;

                     (x) the effect of Section 1670.5 of the California Civil
       Code which provides that a court may not enforce or may limit the
       application of a contract or portions thereof which it finds as a matter
       of law to have been unconscionable at the time the contract was made;

                     (xi) the effect of any Bank Party's compliance or
       noncompliance with any state or federal laws or regulations applicable to
       it or applicable to the transactions contemplated by the Loan Documents
       due to the nature of such Bank Party's business;

                     (xii) the effect of (1) any modification or alteration of
       the Loan Documents or other agreements with Borrower affecting the
       obligations of Borrower, (2) an election of remedies by the Bank Parties,
       or (3) any other action by the Bank Parties that materially prejudices
       any Guarantor Subsidiary if such modification, election, or action occurs
       without notice to the Guarantor Subsidiaries and without giving the
       Guarantor Subsidiaries an opportunity to cure any default by Borrower;

                     (xiii) the enforceability of any provision in the Loan
       Documents which provide that such Loan Documents may only be modified in
       writing; and

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MUNGER, TOLLES & OLSON LLP

Bank of America, N.A.
October 6, 2000
Page 6

                     (xiv) the validity and enforceability of covenants set
       forth in the Loan Documents which purport to survive the repayment of the
       indebtedness evidenced therein.

              Our opinions expressed herein are limited to the laws of the State
of California, the General Corporation Law of the State of Delaware and the
federal laws of the United States of America, and we do not express any opinion
herein concerning any other law, including, but not limited to, ordinances,
regulations or practices of any county, city, or other government agency or body
within the State of California.

              This Opinion is being provided at the specific request of our
client, is rendered to you in connection with the transaction referred to above
and may not be relied upon (x) by any person other than the Bank Parties, an
Eligible Assignee, or any successor in interest of any Bank Party or (y) by the
Bank Parties, an Eligible Assignee, or any successor in interest of any Bank
Party in any other context. Copies hereof may be furnished (a) to your
independent auditors and attorneys, (b) to any governmental agency or authority
having regulatory jurisdiction over you, (c) pursuant to an order of legal
process of any court or of any governmental agency or authority, or (d) in
connection with any legal action to which you are a party arising out of the
transaction referred to above. This opinion is rendered as of the date hereof,
and we hereby disclaim any obligation to advise any person entitled to rely
hereon of any change in the matters stated herein.

                                        Very truly yours,

                                        /s/ MUNGER, TOLLES & OLSON LLP

<PAGE>   117

                                   EXHIBIT E

BORROWER: KAUFMAN AND BROAD HOME CORPORATION,
           a Delaware corporation

GUARANTORS: See Schedule 1 hereto

TO:    BANK OF AMERICA, N.A., for itself and as Administrative Agent

                               SUBSIDIARY GUARANTY

              THIS SUBSIDIARY GUARANTY ("Guaranty") dated as of October 3, 2000,
is made by each of the parties listed on Schedule 1 hereto, together with each
other person who may become a party hereto pursuant to Section 10 of this
Guaranty (each, a "Guarantor" and collectively, "Guarantors"), jointly and
severally, in favor of Bank of America, N.A., as Administrative Agent, the
Syndication Agent, the Documentation Agent and the Banks (as those terms are
defined in the below referenced Loan Agreement), with reference to the following
facts:

                                    RECITALS

              A. Pursuant to the 2000 Term Loan Agreement of even date herewith
entered into by and among Kaufman and Broad Home Corporation, a Delaware
corporation ("Borrower"), the Banks signatory thereto, Bank of America, N.A., as
Administrative Agent, Credit Lyonnais Los Angeles Branch, as Syndication Agent,
and Bank One, NA, as Documentation Agent (as the same may be amended from time
to time, the "Loan Agreement"), the Banks are making a credit facility available
to Borrower.

              B. As a condition of the availability of such credit facility,
Guarantors are required to enter into this Guaranty.

              C. Guarantors expect to realize direct and indirect benefits as
the result of the availability of the aforementioned credit facility, and as the
result of the execution of this Guaranty.

                                    AGREEMENT

              NOW, THEREFORE, in order to induce the Banks to extend the
aforementioned credit facility, and for other good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, each Guarantor hereby
represents, warrants, covenants, agrees and guaranties as follows:

              (1) Terms used in this Guaranty but not defined herein shall have
the meanings defined for them in the Loan Agreement.

              (2) Guarantors unconditionally guarantee and promise to pay to
Bank of America, N.A. as the Administrative Agent for the Banks, on demand, in
lawful money of the United States, any

                            (Exhibit E, Page 1 of 9)
<PAGE>   118

and all Indebtedness of Borrower then due to the Banks. The word "Indebtedness"
means any and all advances, debts, obligations and liabilities of Borrower
heretofore, now, or hereafter made, incurred or created under the Loan Agreement
and under the Loan Documents, and whether Borrower may be liable individually or
jointly with others, or whether such Indebtedness may be or hereafter becomes
otherwise unenforceable.

              (3) This Guaranty is irrevocable in nature, is a guaranty of
prompt and punctual payment and performance of all Indebtedness of Borrower, and
is not merely a guaranty of collection. The Indebtedness guaranteed hereunder
includes that arising under successive transactions which shall either continue
the Indebtedness from time to time or renew it after it has been satisfied.
Anything in this Guaranty to the contrary notwithstanding, the maximum liability
of any Guarantor hereunder shall be limited to the extent required for the
obligation of such Guarantor to be valid, binding and enforceable and not
otherwise voidable or avoidable.

              (4) The obligations hereunder are joint and several, and
independent of the obligations of Borrower and any of its other Subsidiaries.
Separate action or actions may be brought and prosecuted against any Guarantor
whether action is brought against the Borrower or any of its other Subsidiaries,
including any other Guarantor, or whether Borrower or any of its other
Subsidiaries, including any other Guarantor, may be joined in any such action or
actions.

              (5) Each Guarantor authorizes the Banks, without notice or demand
and without affecting its liability hereunder, from time to time to (a) renew,
compromise, extend, accelerate or otherwise change the time for payment of, or
otherwise change the terms of the Indebtedness or any part thereof, including
increase or decrease of the rate of interest thereon; (b) take and hold security
for the payment of this Guaranty or the Indebtedness guaranteed, and exchange,
enforce, waive and release any such security; (c) apply such security and direct
the order or manner of sale thereof as the Administrative Agent or any Bank in
its discretion may determine; and (d) release or substitute any one or more of
the endorsers or guarantors.

              (6) Each Guarantor waives, to the fullest extent permitted by
applicable law, any right to require any Bank to (a) proceed against Borrower or
any of its other Subsidiaries, including any other Guarantor; (b) proceed
against or exhaust any security held from Borrower or any of its Subsidiaries;
or (c) pursue any other remedy in the Banks' power whatsoever. Each Guarantor
waives any defense arising by reason of any disability or other defense of
Borrower or by reason of the cessation from any cause whatsoever of the
liability of Borrower, other than payment in full of the Indebtedness. Until all
Indebtedness of Borrower to the Banks shall have been paid in full, each
Guarantor waives any right to enforce any remedy which the Banks now have or may
hereafter have against Borrower or any of its other Subsidiaries, and waives any
benefit of, and any right to participate in, any security now or hereafter held
by the Banks. Guarantors waive all rights and defenses arising out of an
election of remedies by the creditor, even though that election of remedies,
such as a nonjudicial foreclosure with respect to security for a guaranteed
obligation, has destroyed the guarantor's rights of subrogation and
reimbursement against the principal by the operation of Section 580d of the Code
of Civil Procedure or otherwise. Guarantors expressly waive to the fullest
extent permitted by applicable Law all other suretyship defenses they otherwise
might or would have under any Law. Each Guarantor waives any right of
subrogation that it may have in respect to the obligations of Borrower to the
Banks. Each Guarantor waives all presentments, demands for performance, notices
of nonperformance, protests, notices of protest, notices of dishonor, and
notices of acceptance of this Guaranty and of the existence, creation, or
incurring of new or additional Indebtedness.

                            (Exhibit E, Page 2 of 9)
<PAGE>   119

              (7) After demand upon the Guarantors for payment under this
Guaranty, each Guarantor hereby specifically authorizes each Bank (subject to
the approval of the Majority Banks) in which such Guarantor maintains a deposit
account (whether a general or special deposit account, other than trust
accounts) or a certificate of deposit to setoff any Obligations owed to the
Banks against such deposit account or certificate of deposit without prior
notice to any Guarantor (which notice is hereby waived) whether or not such
deposit account or certificate of deposit has then matured. Nothing in this
paragraph shall limit or restrict the exercise by a Bank of any right to setoff
or banker's lien under applicable Law, subject to the approval of the Majority
Banks.

              (8) Each Guarantor represents and warrants to the Banks that it
has established adequate means of obtaining from Borrower and its Subsidiaries,
on a continuing basis, financial and other information pertaining to the
businesses, operations and condition (financial and otherwise) of Borrower and
its Subsidiaries, and that Guarantor now is and hereafter will be completely
familiar with the businesses, operations and condition (financial and otherwise)
of Borrower and its Subsidiaries. Each Guarantor hereby expressly waives and
relinquishes any duty on the part of the Banks (should any such duty exist) to
disclose to any Guarantor any matter, fact or thing related to the businesses,
operations or condition (financial or otherwise) of Borrower or its
Subsidiaries, whether now known or hereafter known by the Banks during the life
of this Guaranty.

              (9) Guarantors agree to pay, within 30 days after demand, the
reasonable out-of-pocket costs and expenses of the Administrative Agent and each
of the Banks in connection with the enforcement of this Guaranty, including
without limitation the reasonable fees and out-of-pocket expenses of any legal
counsel retained by the Administrative Agent or any of the Banks.

              (10) Any other Person may become a Guarantor under, and become
bound by the terms and conditions of, this Guaranty by executing and delivering
to the Administrative Agent an Instrument of Joinder substantially in the form
attached hereto as Exhibit A.

              (11) This Guaranty shall be governed by and construed according to
the laws of the State of California, to the jurisdiction of which the parties
hereto submit.

                                   "GUARANTORS"

                                   KAUFMAN AND BROAD OF ARIZONA, INC., an
                                   Arizona corporation

                                   By:
                                      ------------------------------------------
                                      William R. Hollinger
                                      Vice President and Assistant Secretary

                                   KAUFMAN AND BROAD - CENTRAL VALLEY,
                                   INC., a California corporation

                                   By:
                                      ------------------------------------------
                                      William R. Hollinger
                                      Vice President and Assistant Secretary

                            (Exhibit E, Page 3 of 9)

<PAGE>   120

                                   KAUFMAN AND BROAD COASTAL, INC., a
                                   California corporation

                                   By:
                                      ------------------------------------------
                                      William R. Hollinger
                                      Vice President and Assistant Secretary

                                   KAUFMAN AND BROAD OF NORTHERN
                                   CALIFORNIA, INC., a California corporation

                                   By:
                                      ------------------------------------------
                                      William R. Hollinger, Assistant Secretary

                                   KAUFMAN AND BROAD OF SACRAMENTO, INC.,
                                   a California corporation

                                   By:
                                      ------------------------------------------
                                      William R. Hollinger
                                      Vice President, Chief Financial Officer
                                      and Assistant Secretary

                                   KAUFMAN AND BROAD - SOUTH BAY,
                                   INC., a California corporation

                                   By:
                                      ------------------------------------------
                                      William R. Hollinger, Assistant Secretary

                                   KAUFMAN AND BROAD OF SOUTHERN
                                   CALIFORNIA, INC., a California corporation

                                   By:
                                      ------------------------------------------

                                      William R. Hollinger, Chief Financial
                                      Officer, Treasurer and Assistant Secretary

                            (Exhibit E, Page 4 of 9)
<PAGE>   121

                                   KB HOLDINGS ONE, INC., a California
                                   corporation

                                   By:
                                      ------------------------------------------
                                      William R. Hollinger
                                      Vice President, Treasurer, Chief Financial
                                      Officer and Assistant Secretary

                                   KAUFMAN AND BROAD OF COLORADO, INC.,
                                   a Colorado corporation

                                   By:
                                      ------------------------------------------
                                      William R. Hollinger,
                                      Vice President and Assistant Secretary

                                   KAUFMAN AND BROAD OF NEVADA, INC.,
                                   a Nevada corporation

                                   By:
                                      ------------------------------------------
                                      William R. Hollinger
                                      Vice President, Treasurer and Assistant
                                      Secretary

                                   KAUFMAN AND BROAD OF TEXAS, LTD., a Texas
                                   limited partnership

                                   By:   KBSA, Inc., a Texas corporation,
                                         Its general partner

                                         By:
                                            ------------------------------------
                                            William R. Hollinger,
                                            Treasurer and Assistant Secretary

                            (Exhibit E, Page 5 of 9)
<PAGE>   122

                                   KAUFMAN AND BROAD DEVELOPMENT OF TEXAS, L.P.,
                                   a Texas limited partnership

                                   By:   KBSA, Inc., a Texas corporation,
                                         Its general partner

                                         By:
                                            ------------------------------------
                                            William R. Hollinger,
                                            Treasurer and Assistant Secretary

                                   KAUFMAN AND BROAD LONE STAR, L.P.,
                                   a Texas limited partnership

                                   By:   KBSA, Inc., a Texas corporation,
                                         Its general partner

                                         By:
                                            ------------------------------------
                                            William R. Hollinger,
                                            Treasurer and Assistant Secretary

                            (Exhibit E, Page 6 of 9)
<PAGE>   123

                                   SCHEDULE 1
                                  TO GUARANTY

                               List of Guarantors

Kaufman and Broad of Arizona, Inc.

Kaufman and Broad - Central Valley, Inc.

Kaufman and Broad Coastal, Inc.

Kaufinan and Broad of Northern California, Inc.

Kaufinan and Broad of Sacramento, Inc.

Kaufinan and Broad - South Bay, Inc.

Kaufman and Broad of Southern California, Inc.

KB Holdings One, Inc.

Kaufman and Broad of Colorado, Inc.

Kaufinan and Broad of Nevada, Inc.

Kaufman and Broad of Texas, Ltd.

Kaufman and Broad Development of Texas, L.P.

Kaufman and Broad Lone Star, L.P.

                            (Exhibit E, Page 7 of 9)
<PAGE>   124

                              INSTRUMENT OF JOINDER

              THIS INSTRUMENT OF JOINDER ("Joinder") is executed as of
_____________________, by ___________________________
__________________________________, a ______________________________("Joining
Party"), and delivered to the Administrative Agent pursuant to the Subsidiary
Guaranty dated as of October 3, 2000 (the "Guaranty"). Terms used but not
defined in this Joinder shall have the meanings defined for those terms in the
Guaranty.

                                    RECITALS

              A. The Guaranty was made by the Guarantors in favor of the Banks
that are parties to that certain 2000 Term Loan Agreement, dated as of October
3, 2000 (the "Loan Agreement") among Kaufman and Broad Home Corporation, as
Borrower, the Banks signatory thereto, Bank of America, N.A., as Administrative
Agent, Credit Lyonnais Los Angeles Branch, as Syndication Agent, and Bank One,
NA, as Documentation Agent.

              B. Joining Party has become a Significant Subsidiary (as defined
in the Loan Agreement) or has been designated by Borrower as a Guarantor
Subsidiary (as defined in the Loan Agreement), and as such is required pursuant
to Section 5.9 of the Loan Agreement to become a Guarantor.

              C. Joining Party expects to realize direct and indirect benefits
as a result of the availability to Borrower of a credit facility pursuant to the
Loan Agreement, and as a result of becoming a party to the Guaranty.

              NOW THEREFORE, Joining Party agrees as follows:

                                    AGREEMENT

              1. By this Joinder, Joining Party becomes a "Guarantor" under and
pursuant to Section 10 of the Guaranty. Joining Party agrees that, upon its
execution hereof, it will become a Guarantor under the Guaranty with respect to
all Indebtedness of Borrower heretofore or hereafter incurred under the Loan
Agreement, and will be bound by all terms, conditions, and duties applicable to
a Guarantor under the Guaranty.

                                   Page 1 of 2
                            (Exhibit E, Page 8 of 9)
<PAGE>   125

              2. The effective date of this Joinder is ________________.

"Joining Party"

-------------------------------------------
a
 ------------------------------------------

By:
   ----------------------------------------

   ----------------------------------------
            Printed Name and Title

ACKNOWLEDGED:

BANK OF AMERICA, N.A., as Administrative Agent

By:
   ----------------------------------------

   ----------------------------------------
           Printed Name and Title

KAUFMAN AND BROAD HOME CORPORATION

By:
   ----------------------------------------

   ----------------------------------------
            Printed Name and Title

                                   Page 2 of 2
                            (Exhibit E, Page 9 of 9)

<PAGE>   126
                                                                       EXHIBIT F

<TABLE>
<CAPTION>
                                               31-Aug-00                                          31-Aug-99
                            -------------------------------------------------   -------------------------------------------------
                            Deliveries   Sales   Backlog  Avg. Price  Backlog   Deliveries   Sales   Backlog  Avg. Price  Backlog
     Division                 Quarter   Quarter   Units    (000's)     Value     Quarter    Quarter   Units    (000's)     Value
--------------------------- ----------  -------  -------  ----------  -------   ----------  -------  -------  ----------  -------
<S>                         <C>         <C>      <C>      <C>         <C>       <C>         <C>      <C>      <C>         <C>
Greater LA.................      0         0       0         $0         $0          0          0        0         $0         $0
Orange County..............      0         0       0          0          0          0          0        0          0          0
San Diego..................      0         0       0          0          0          0          0        0          0          0
Northbay...................      0         0       0          0          0          0          0        0          0          0
Southbay...................      0         0       0          0          0          0          0        0          0          0
Monterey Bay...............      0         0       0          0          0          0          0        0          0          0
                                 -         -       -         --         --          -          -        -         --         --
  Total California.........      0         0       0          0          0          0          0        0          0          0
                                 -         -       -         --         --          -          -        -         --         --

Las Vegas*.................      0         0       0          0          0          0          0        0          0          0
Reno.......................      0         0       0          0          0          0          0        0          0          0
Phoenix....................      0         0       0          0          0          0          0        0          0          0
Tucson.....................      0         0       0          0          0          0          0        0          0          0
New Mexico.................      0         0       0          0          0          0          0        0          0          0
Dallas.....................      0         0       0          0          0          0          0        0          0          0
Houston....................      0         0       0          0          0          0          0        0          0          0
San Antonio................      0         0       0          0          0          0          0        0          0          0
Austin.....................      0         0       0          0          0          0          0        0          0          0
Colorado...................      0         0       0          0          0          0          0        0          0          0
Utah.......................      0         0       0          0          0          0          0        0          0          0
                                 -         -       -         --         --          -          -        -         --         --
  Total Other US...........      0         0       0          0          0          0          0        0          0          0
                                 -         -       -         --         --          -          -        -         --         --
  Total United States......      0         0       0          0          0          0          0        0          0          0

Maisons Individuelles......      0         0       0          0          0          0          0        0          0          0
KBD........................      0         0       0          0          0          0          0        0          0          0
                                 -         -       -         --         --          -          -        -         --         --
  Total France.............      0         0       0          0          0          0          0        0          0          0

Mexico.....................      0         0       0          0          0          0          0        0          0          0
                                 -         -       -         --         --          -          -        -         --         --
  Total....................      0         0       0         $0         $0          0          0        0         $0         $0
                                 =         =       =         ==         ==          =          =        =         ==         ==
* Includes unconsolidated
  Monaco joint venture.....      0         0       0         $0         $0          0          0        0         $0         $0
                                 =         =       =         ==         ==          =          =        =         ==         ==

California.................      0%        0%      0%                    0%         0%         0%       0%                    0%
Other US...................      0%        0%      0%                    0%         0%         0%       0%                    0%
  Total United States......      0%        0%      0%                    0%         0%         0%       0%                    0%

France.....................      0%        0%      0%                    0%         0%         0%       0%                    0%
Mexico.....................      0%        0%      0%                    0%         0%         0%       0%                    0%

  Total....................      0%        0%      0%                    0%         0%         0%       0%                    0%
</TABLE>

<TABLE>
<CAPTION>
                                               Difference
                            -------------------------------------------------
                            Deliveries   Sales   Backlog  Avg. Price  Backlog
     Division                 Quarter   Quarter   Units    (000's)     Value
--------------------------- ----------  -------  -------  ----------  -------
<S>                         <C>         <C>      <C>      <C>         <C>
Greater LA.................      0         0       0         $0         $0
Orange County..............      0         0       0          0          0
San Diego..................      0         0       0          0          0
Northbay...................      0         0       0          0          0
Southbay...................      0         0       0          0          0
Monterey Bay...............      0         0       0          0          0
                                 -         -       -         --         --
  Total California.........      0         0       0          0          0
                                 -         -       -         --         --

Las Vegas*.................      0         0       0          0          0
Reno.......................      0         0       0          0          0
Phoenix....................      0         0       0          0          0
Tucson.....................      0         0       0          0          0
New Mexico.................      0         0       0          0          0
Dallas.....................      0         0       0          0          0
Houston....................      0         0       0          0          0
San Antonio................      0         0       0          0          0
Austin.....................      0         0       0          0          0
Colorado...................      0         0       0          0          0
Utah.......................      0         0       0          0          0
                                 -         -       -         --         --
  Total Other US...........      0         0       0          0          0
                                 -         -       -         --         --
  Total United States......      0         0       0          0          0

Maisons Individuelles......      0         0       0          0          0
KBD........................      0         0       0          0          0
                                 -         -       -         --         --
  Total France.............      0         0       0          0          0

Mexico.....................      0         0       0          0          0
                                 -         -       -         --         --
  Total....................      0         0       0         $0         $0
                                 =         =       =         ==         ==
* Includes unconsolidated
  Monaco joint venture.....      0         0       0         $0         $0
                                 =         =       =         ==         ==
</TABLE>
<PAGE>   127
                                                                       EXHIBIT G

                       KAUFMAN AND BROAD HOME CORPORATION
                              SUMMARY OF INVENTORY
                               AS OF MAY 31, 2000

<TABLE>
<CAPTION>
                                                                                        Site of Project (Lots/Acres)
                            Inventory Book Value (Thousands)            --------------------------------------------------------
                            --------------------------------                          Land in Production  Land Under Development
                                       Home/Lots  Land Under   Secured  Total  Total  ------------------  ----------------------
                              Total     in Prod   Development    Debt    Lots  Acres   W/Homes   WO/Homes     Lots       Acres
                            ---------  ---------  -----------  -------  -----  -----  --------  --------  ----------  ----------
<S>                         <C>        <C>        <C>          <C>      <C>    <C>      <C>       <C>       <C>         <C>
California
  Greater LA..............
  Orange County...........
  San Diego...............
  Northbay................
  Southbay................
                            ---------  ---------  -----------  -------  -------  -------  --------  --------  ----------  ----------
    Total California......         --         --           --       --       --       --        --        --          --          --
                            ---------  ---------  -----------  -------  -------  -------  --------  --------  ----------  ----------

Other US
  Las Vegas...............
  Reno....................
  Phoenix.................
  Tucson..................
  New Mexico..............
  Dallas..................
  Houston.................
  San Antonio.............
  Austin..................
  Colorado................
  Utah....................
                            ---------  ---------  -----------  -------  -------  -------  --------  --------  ----------  ----------
    Total Other US........         --         --           --       --       --       --        --        --          --          --
                            ---------  ---------  -----------  -------  -------  -------  --------  --------  ----------  ----------
    Total United States...         --         --           --       --       --       --        --        --          --          --

France
  Maisons Individuelles...
  KBD.....................  ---------  ---------  -----------  -------  -------  -------  --------  --------  ----------  ----------
    Total France..........         --         --           --       --       --       --        --        --          --          --
                            ---------  ---------  -----------  -------  -------  -------  --------  --------  ----------  ----------
Mexico
Other Properties.........                                                                                          #REF1
                            ---------  ---------  -----------  -------  -------  -------  --------  --------  ----------  ----------
Total Inventory...........  $      --  $      --  $        --  $    --       --       --        --        --       #REF1          --
                            =========  =========  ===========  =======  =======  =======  ========  ========  ==========  ==========

                                                                                ----------------------------------------------------
                                                                                Key
                                                                                SFD Single Family Detached     OPT Option
                                                                                SFA Single Family Attached     OFF Office Buildings
                                                                                APP Apartments                 IND Industrial
                                                                                MPC Master Planned Community   COM Commercial
                                                                                CON Condominium                REN Renovation
                                                                                ----------------------------------------------------
</TABLE>
<PAGE>   128
                                  SCHEDULE 1.1
                  KAUFMAN & BROAD HOME CORP. NEW 2000 REVOLVER
                                  COMMITMENTS

<TABLE>
<CAPTION>
                               PRORATA SHARE AS OF
                          -------------------------------
                            PERCENT               DOLLARS
BANK                       COMMITMENT           COMMITMENTS
----                       ----------           -----------
<S>                       <C>                 <C>
BANK OF AMERICA           33.516532222%       $189,050,000.00

CREDIT LYONNAIS           13.793103448%       $ 77,800,000.00

BANK ONE                  13.793103448%       $ 77,800,000.00

GUARANTY FEDERAL           6.896551724%       $ 38,900,000.00

BANK UNITED                8.275862069%       $ 46,680,000.00

SUN TRUST                  6.896551724%       $ 38,900,000.00

IBJ                        2.758620690%       $ 15,560,000.00

COMERICA                   4.137931034%       $ 23,340,000.00

KBC                        1.655881571%       $  9,340,000.00

PNC BANK                   4.827586207%       $ 27,230,000.00

CITICORP USA, INC.         3.448275862%       $ 19,450,000.00

             TOTAL              100.00%       $564,050,000.00
</TABLE>
<PAGE>   129

                                  SCHEDULE 4.4

                     KAUFMAN AND BROAD HOME CORPORATION AND
                            CONSOLIDATED SUBSIDIARIES

                                 KEY TO "TYPES"

                           S = SIGNIFICANT SUBSIDIARY
                           G = GUARANTOR SUBSIDIARY
                           Fo = FOREIGN SUBSIDIARY
                           Fi = FINANCIAL SUBSIDIARY
                           (NOTE: ALL GUARANTOR SUBSIDIARIES ARE
                                  ALSO SIGNIFICANT SUBSIDIARIES)

<TABLE>
<CAPTION>
ARIZONA CORPORATIONS                                        %            TYPE(S)
--------------------                                       ---           -------
<S>                                                        <C>           <C>
Kaufman and Broad of Arizona, Inc.                         100            S/G
Kaufman and Broad Home Sales of Arizona, Inc.              100
Kaufman and Broad of Tucson, Inc.                          100
Kaufman and Broad Home Sales of Tucson, Inc.               100

CALIFORNIA CORPORATIONS
-----------------------

BPP Holdings, Inc.                                         100
Branching Tree Corp.                                       100
Cable Associates, Inc.                                     100
Custom Decor, Inc.                                         100
First Northern Builders Servicing, Inc.                    100
KBASW Mortgage Acceptance Corporation                      100             Fi
KBI/Mortgage Acceptance Corporation                        100             Fi
KBRAC IV Mortgage Acceptance Corporation                   100             Fi
Kaufman and Broad Architecture, Inc.                       100
Kaufman and Broad - Central Valley, Inc.                   100            S/G
Kaufman and Broad Coastal, Inc.                            100            S/G
Kaufman and Broad Communities, Inc.                        100
Kaufman and Broad Development Group                        100
Kaufman and Broad Embarcadero, Inc.                        100
Kaufman and Broad Holdings, Inc.                           100
Kaufman and Broad Home Sales, Inc.                         100
Kaufman and Broad Home Sales of Northern California, Inc.  100
Kaufman and Broad Insurance Agency, Inc.                   100
Kaufman and Broad International, Inc.                      100
Kaufman and Broad Land Company                             100
Kaufman and Broad Land Development Venture, Inc.           100
Kaufman and Broad - Monterey Bay, Inc.                     100
Kaufman and Broad - Moreno/Perris Valleys, Inc.            100
Kaufman and Broad Multi-Family, Inc.                       100
Kaufman and Broad of Northern California, Inc.             100            S/G
Kaufman and Broad Patterson, Inc.                          100
Kaufman and Broad Properties                               100
</TABLE>

<PAGE>   130

<TABLE>
<S>                                                         <C>            <C>
Kaufman and Broad of Sacramento, Inc.                        100           S/G
Kaufman and Broad of San Diego, Inc.                         100
Kaufman and Broad - South Bay, Inc.                          100           S/G
Kaufman and Broad of Southern California, Inc.               100           S/G
Kaufman and Broad of Utah, Inc.                              100
KB Holdings One, Inc.                                        100           S/G
Kent Land Company                                            100
Kingsbay Escrow Company                                      100
Lewis Homes Management Corp.                                 100
Mather Housing Company, LLC                                  100

CANADIAN CORPORATIONS
---------------------

Margreen Investments, Inc.                                   100            Fo
3238865 Canada Inc.                                          100            Fo

COLORADO CORPORATION
--------------------

Kaufman and Broad of Colorado, Inc.                          100           S/G

DELAWARE CORPORATIONS/LLCs
--------------------------

Eden Land Development Corp.                                  100
e.KB, Inc.                                                   100
Estes Homebuilding Co.                                       100
General Homes Corporation                                    100
General Homes of Arizona                                     100
General Homes of Dallas                                      100
General Homes of Florida                                     100
General Homes of Houston                                     100
General Homes Development LLC                                100
GH Homebuilding Holdings, Inc.                               100
HomeSafe Escrow Company                                      100
KB City Ranch, Inc.                                          100
International Mortgage Acceptance Corporation                100            Fi
Kaufman and Broad Development Company                        100
Kaufman and Broad Limited                                    100
KBHC Financing I                                               3
LHE Arctic LLC                                               100
LHN Arctic LLC                                               100
LDC Arctic LLC                                               100
LP Arctic LLC                                                100
LHC Arctic LLC                                               100
rateOne Home Loans, LLC                                      100            Fi
Rate One Associates, Inc.                                    100            Fi
Rate One Holdings, Inc.                                      100            Fi
</TABLE>

<PAGE>   131

<TABLE>
<S>                                                         <C>            <C>
FRENCH CORPORATIONS
-------------------

Kaufman and Broad Developpement SA.                         57.47          Fo/S
Kaufman and Broad SA.                                       57.47          Fo/S
Kaufman and Broad Promotion Maisons Individuelles SA.       57.47          Fo
Kaufman and Broad Renovation S.A.R.L.                       57.47          Fo
SMCI Developpement. SA.                                     57.47          Fo
Gie KB                                                      57.47          Fo
Park SA                                                     57.46          Fo
Millet, S. A. R. L.                                         57.47          Fo
LMP Chancy S. A. R. L.                                      57.47          Fo

ILLINOIS CORPORATIONS
---------------------

Kaufman and Broad of Illinois, Inc.                         100
Kaufman and Broad Mortgage Company                          100            Fi/S

MASSACHUSETTS CORPORATION
-------------------------

Kaufman and Broad Homes, Inc.                               100

MEXICAN CORPORATIONS
--------------------

Kaufman y Broad de Mexico                                   100            Fo
Kaufman y Broad Asesoria Administrativa                     100            Fo
Operadora Los Robles                                        100            Fo
Desarrollos Los Robles                                      100            Fo

MICHIGAN CORPORATION
--------------------

Keywick, Inc.                                               100

MINNESOTA CORPORATION
---------------------

Kaufman and Broad Custom Homes, Inc.                        100

NEVADA CORPORATION
------------------

Desert Inn Development, LLC                                 100
Kaufman and Broad Home Sales of Nevada, Inc.                100
Kaufman and Broad of Nevada, Inc.                           100            S/G
Kaufman and Broad Home Sales of Reno, Inc.                  100
Kaufman and Broad of Reno, Inc.                             100
Lewis Homes - Carlyle Venture L. L. C.                       50
</TABLE>

<PAGE>   132

<TABLE>
<S>                                                         <C>            <C>
NEW MEXICO CORPORATIONS
-----------------------

Kaufman and Broad Home Sales of New Mexico, Inc.            100
Kaufman and Broad of New Mexico, Inc.                       100

NEW YORK CORPORATION
--------------------

Kaufman and Broad Homes of Long Island, Inc.                100

TEXAS CORPORATIONS AND PARTNERSHIPS
-----------------------------------

Eden Corporation                                            100
Envirographic, Inc.                                         100
FGMC, Inc.                                                  100
Hallmark Residential Group, Inc.                            100
Kaufman and Broad Insurance Agency of Texas Holdings, Inc.  100
Kaufman and Broad of Texas, Ltd.                            100            S/G
Kaufman and Broad Development of Texas, L. P.               100            S/G
Kaufman and Broad Lone Star, LP                             100            S/G
KBSA Inc.                                                   100
Rayco Land Development, Inc.                                100
San Antonio Title Co.                                       100
SATEX Properties, Inc.                                      100
Quoin Investments, Inc.                                     100
</TABLE>

<PAGE>   133

                                  Schedule 4.7

                       Existing Liens or Rights of Others
                              As of August 31, 2000

                                      NONE

                          (Schedule 4.7 - Page 1 of 1)
<PAGE>   134

                                  SCHEDULE 4.9

           Existing Indebtedness and Contingent Guaranty Obligations
                             as of August 31, 2000

<TABLE>
<CAPTION>
                                                                   Amount           Total
                                                                   ------           -----
<S>                                                              <C>             <C>
                                                                   $(000)            $(000)
DEBT:
KBHC SECURED DEBT:
        California                                                12,007
        Other U.S.                                                 6,671
        International                                              8,659
                                                                                    27,337
KBMC SECURED DEBT:
        Commercial Paper                                         305,895
        Mortgage Warehouse Facility                               31,245
                                                                                   337,140
UNSECURED DEBT:
        Senior Debt 7-3/4%                                       175,000
        Senior Sub Debt 9-3/8%                                   174,491
        Senior Sub Debt 9-5/8%                                   124,568
        Revolving Credit Line                                    397,000
        Other Unsecured                                           94,848
                                                                                   965,907
                                                                                 ---------
TOTAL DEBT                                                                       1,330,384
                                                                                 =========

CONTINGENT GUARANTEE OBLIGATIONS:
        KBHC

        Letters of Credit                                                           37,445
        Simpson Housing                                                             45,146

TOTAL CONTINGENT GUARANTEE OBLIGATIONS                                              82,591
                                                                                 =========
TOTAL DEBT AND CONTINGENT
    CONTINGENT GUARANTEE OBLIGATIONS                                             1,412,975
                                                                                 =========
</TABLE>

<PAGE>   135
                                  SCHEDULE 6.4

                                       G
                 INVESTMENTS IN AND ADVANCES TO JOINT VENTURES
                              FYE 11-30-00 (000'S)

<TABLE>
<CAPTION>
                                      11-30-99    2-29-00    5-31-00    8-31-00     11-30-00
                                      ------------------------------------------------------
<S>                                   <C>         <C>        <C>        <C>         <C>
Construction
------------

Greater LA

City Ranch                             15,906     16,469      16,431     16,451         -
                                      ------------------------------------------------------
  Total                                15,906     16,469      16,431     16,451         -
                                      ------------------------------------------------------

Las Vegas

Carlyle                                   907      1,872       1,848      2,398         -
                                      ------------------------------------------------------
  Total                                   907      1,872       1,848      2,398         -
                                      ------------------------------------------------------

New Mexico

Paradise Green                              2          2           2          2         -
Las Ventanas                              251        252         301        301         -
                                      ------------------------------------------------------
  Total                                   253        254         303        303
                                      ------------------------------------------------------

Houston

Southwyck Management                       35         35         -          -           -
Performance Mortgage Partners, Ltd.        25         25         -          -           -
                                      ------------------------------------------------------
  Total                                    60         60         -          -           -
                                      ------------------------------------------------------

Maison Individuelles

Villabe Les Heurts                         (8)        (8)        (10)        (9)        -
                                      ------------------------------------------------------
  Total                                    (8)        (8)        (10)        (9)        -
                                      ------------------------------------------------------

KBD

Issy Guynemer                            (104)        (1)         (1)        (1)        -
Des Pepinieres                            (26)         3           2          2         -
Emile Meunier                              62         61          57         55         -
Haussmann                               1,302      1,248       1,213      1,113         -
Hoche Monceau                              24         11          11         10         -
Meudon Les Montalets                       (2)        (2)         (2)        (2)        -
Villa D'Auteuil                         2,409      2,306       2,240      2,121         -
Terrasse De Chatillon                    (134)      (127)        (94)      (118)        -
Domaine De Verneuil                       558        537         100         64         -
Park D'Alembert                          (102)       (25)          2          1         -
Sari Samlou                               185        503         550        737         -
Rouselle                                  -            1           2         14         -
Quai de la Marne                          -           87           4          4         -
Archeveche                                -          -            (1)        (1)        -
Ave du Maine                              -          376           4         39         -
Quadrilatere                              -         (360)         (2)       (27)        -
Dohomey                                   -           (2)        -          -           -
Illot Paille                              -          (82)        (19)       204         -
Briand                                    -           80         328         34         -
                                      ------------------------------------------------------
  Total                                 4,172      4,614       4,395      4,249
                                      ------------------------------------------------------

  TOTAL                                21,290     23,261      22,967     23,392         -
                                      ======================================================
</TABLE><PAGE>   1

                                                                   EXHIBIT 10.22

                       [FORM OF OPERATING AGREEMENT UNDER

                       THE E.KB EQUITY INCENTIVE PROGRAM]

                               OPERATING AGREEMENT

                                       OF

                               _____________, LLC

MEMBERSHIP INTERESTS IN _____________, LLC, A DELAWARE LIMITED LIABILITY
COMPANY, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND ARE BEING OFFERED AND
SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND SUCH LAWS. THE INTERESTS MAY NOT BE TRANSFERRED OR RESOLD
WITHOUT (A) REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, UNLESS AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
AND SUCH LAWS IS THEN AVAILABLE, AND (B) COMPLIANCE WITH ALL OTHER RESTRICTIONS
ON TRANSFER CONTAINED IN THIS OPERATING AGREEMENT. PROSPECTIVE MEMBERS SHOULD BE
AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT
FOR AN INDEFINITE PERIOD OF TIME. IN MAKING AN INVESTMENT DECISION, PROSPECTIVE
MEMBERS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE
OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED.

THE INTERESTS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE
MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THE OPERATING AGREEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                          PAGE
<S>                                                                                       <C>
ARTICLE 1         DEFINITIONS...............................................................1

ARTICLE 2         ORGANIZATIONAL MATTERS....................................................9
        2.1    Formation....................................................................9
        2.2    Name........................................................................10
        2.3    Principal Place of Business; Other Places of Business.......................10
        2.4    Business Purpose............................................................10
        2.5    Certificate of Formation; Filing............................................10
        2.6    Designated Agent for Service of Process.....................................10
        2.7    Term........................................................................10

ARTICLE 3         CAPITAL CONTRIBUTIONS; ADDITIONAL INTERESTS; CAPITAL ACCOUNTS............10
        3.1    Capital Contributions.......................................................10
        3.2    Additional Interests........................................................11
        3.3    Capital Accounts............................................................11
        3.4    Member Capital..............................................................11
        3.5    Member Loans................................................................11
        3.6    Loans by Third Parties......................................................11
        3.7    Limited Liability of the Members............................................11

ARTICLE 4         DISTRIBUTIONS............................................................11
        4.1    Distributions Generally.....................................................11
        4.2    Withholding.................................................................12
        4.3    Minimum Distribution........................................................12
        4.4    Distributions In Kind.......................................................13

ARTICLE 5         ALLOCATIONS OF NET INCOME AND NET LOSSES.................................13
        5.1    Net Losses..................................................................13
               5.1.1  General..............................................................13
               5.1.2  Loss Limitation......................................................13
        5.2    Net Income..................................................................13
        5.3    Special Allocations.........................................................13
               5.3.1  Minimum Gain Chargeback..............................................13
               5.3.2  Member Minimum Gain Chargeback.......................................14
               5.3.3  Qualified Income Offset..............................................14
               5.3.4  Gross Income Allocation..............................................14
               5.3.5  Section 754 Adjustment...............................................14
               5.3.6  Nonrecourse Deductions and Member Nonrecourse Deductions.............15
               5.3.7  Curative Allocations.................................................15
        5.4    Tax Allocations.............................................................15
        5.5    Other Provisions............................................................16
</TABLE>

                                      -i-
<PAGE>   3

                                TABLE OF CONTENTS
                                   (CONTINUED)

<TABLE>
<CAPTION>
                                                                                         PAGE
<S>                                                                                       <C>
ARTICLE 6         VOTING AND MANAGEMENT....................................................16
        6.1    Manager Powers..............................................................16
        6.2    Officers; Delegation of Authority...........................................18
        6.3    Duties and Obligations; Liability...........................................18
               6.3.1  Continuation of Existence............................................18
               6.3.2  Limitation of Liability..............................................18
        6.4    Reimbursements..............................................................19
        6.5    Indemnification.............................................................19
               6.5.1  Indemnification - Actions other than by the Company..................19
               6.5.2  Indemnification - Actions by the Company.............................19
               6.5.3  Expenses Payable in Advance..........................................20
               6.5.4  Nonexclusivity of Indemnification and Advancement of Expenses........20
               6.5.5  Insurance............................................................20
               6.5.6  Survival of Indemnification and Advancement of Expenses..............20
               6.5.7  Indemnification of Officers, Employees and Agents....................20
        6.6    Lack of Authority...........................................................20
        6.7    Member Voting...............................................................21

ARTICLE 7         BOOKS AND RECORDS; ACCOUNTING; TAX ELECTIONS.............................21
        7.1    Books and Records...........................................................21
        7.2    Delivery of Records.........................................................21
        7.3    Inspection..................................................................22
        7.4    Reports to the Members......................................................22
        7.5    Company Tax Elections, Tax Controversies....................................22
        7.6    Confidentiality of Information..............................................22

ARTICLE 8         TRANSFERS OF INTERESTS...................................................22
        8.1    Member Transfers............................................................22
        8.2    Further Restrictions........................................................23
        8.3    Effect of Transfer..........................................................24
        8.4    Admissions, Withdrawals and Removals........................................24
        8.5    Admission of Transferee as Substitute Member................................24
        8.6    Vesting of Interests........................................................25
               8.6.1  Vesting Schedule.....................................................25
               8.6.2  Accelerated Vesting..................................................25
        8.7    Repurchase Rights...........................................................25
               8.7.1  Right to Repurchase..................................................25
               8.7.2  Repurchase Price.....................................................25
               8.7.3  Repurchase by the K&B Member.........................................25
               8.7.4  Repurchase by the Company............................................25
               8.7.5  Notice to the Holder of the Member's Interest........................25
               8.7.6  Repurchase Closing...................................................26
               8.7.7  Certain Restrictions.................................................26
</TABLE>

                                      -ii-
<PAGE>   4

                                TABLE OF CONTENTS
                                   (CONTINUED)

<TABLE>
<CAPTION>
                                                                                         PAGE
<S>                                                                                       <C>

ARTICLE 9         DISSOLUTION AND TERMINATION OF THE COMPANY...............................27
        9.1    Limitations.................................................................27
        9.2    Exclusive Causes............................................................27
        9.3    Effect of Dissolution.......................................................28
        9.4    Liquidation and Final Distribution Proceeds.................................28
        9.5    Restoration of Deficit Capital Account Balances.............................28

ARTICLE 10        REPRESENTATIONS AND WARRANTIES...........................................29
        10.1   Representations and Warranties of the Members...............................29

ARTICLE 11        MISCELLANEOUS............................................................30
        11.1   Appointment of Company as Attorney-in-Fact..................................30
        11.2   Amendments..................................................................31
        11.3   Entire Agreement............................................................31
        11.4   Further Assurances..........................................................31
        11.5   Notices.....................................................................31
        11.6   Governing Law...............................................................32
        11.7   Binding Effect..............................................................32
        11.8   Severability................................................................32
        11.9   Confidentiality.............................................................32
        11.10  Counterparts................................................................32
        11.11  Waivers.....................................................................32
        11.12  Preservation of Intent......................................................33
        11.13  Certain Rules of Construction...............................................33
        11.14  Company Advisers............................................................33
        11.15  Arbitration.................................................................33
        11.16  Determinations by the Manager...............................................34
</TABLE>

                                     -iii-
<PAGE>   5

                               OPERATING AGREEMENT

                                       OF

                               _____________, LLC

       THIS OPERATING AGREEMENT (this "Agreement") of _____________, LLC (the
"Company"), is entered into by and among the Persons (each a "Member") listed in
Exhibit A hereto as of _________ __, 20__.

                                    RECITALS

       WHEREAS, the Members have caused the Company to be formed as a limited
liability company in accordance with the Delaware Limited Liability Company Act,
6 Del. C. Section 18-101, et seq.;

       WHEREAS, the Members wish to adopt an operating agreement for the Company
to provide for (i) management of the Company by the Manager and (ii) various
other matters, all as more particularly described herein;

       NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

       As used herein, the following terms have the meaning set forth below:

       AAA Rules -- has the meaning specified in Section 11.15.

       Acceleration Event -- means a Change in Control, a liquidation of the
Company pursuant to Section 9.2, sale of substantially all of the assets of the
Company for cash or, with respect to a particular Member, such Member's death or
Disability. In the event that the Company sells some but less than substantially
all of its assets for cash, an Acceleration Event shall be deemed to have
occurred with respect to a proportionate amount of a given Member's Interests.
For example, if the Company sells 50% of its assets for cash, 50% of each
Member's unvested Interest shall vest.

       Act -- means the Delaware Limited Liability Company Act, 6 Del. C.
Section 18-101, et seq., in effect on the date hereof and as it may be amended
hereafter from time to time, and any successor statute thereto.

       Additional Member -- means any Person admitted to the Company as a Member
pursuant to Section 3.2.

                                     - 1 -
<PAGE>   6

       Adjusted Capital Account Deficit -- means, with respect to any Member,
the deficit balance, if any, in such Member's Capital Account as of the end of
the relevant Fiscal Year, after giving effect to the following adjustments:

              (a) decrease such deficit by any amounts which such Member is
       obligated to restore pursuant to this Agreement or is deemed to be
       obligated to restore pursuant to Regulation Section 1.704-1(b)(2)(ii)(c)
       or the penultimate sentence of each of Regulation Sections 1.704-2(i)(5)
       and 1.704-2(g)(1); and

              (b) increase such deficit by the items described in Regulation
       Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Regulation Section 1.704-1(b)(2)(ii)(d) and shall
be interpreted consistently therewith.

       Affiliate -- means, with respect to a specified Person, (a) any Person
that, directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person, (b) any
Person that is an executive officer, general partner, manager or trustee of, or
serves in a similar capacity with respect to, such specified Person, or for
which such specified Person is an executive officer, general partner, manager or
trustee, or serves in a similar capacity, or (c) any member of the immediate
family of such specified Person.

       Agreement -- has the meaning specified in the preamble hereto.

       Available Securities -- has the meaning specified in Section 8.7.4.

       Bankruptcy -- means the occurrence of any event specified in Section
18-304 of the Act.

       Business Day -- means any weekday excluding any legal holiday observed
pursuant to federal or California state law or regulation.

       Capital Account -- means the Capital Account maintained for each Member
on the Company's books and records as reasonably determined by the Manager
consistent with the following provisions:

              (a) To each Member's Capital Account there shall be added (i) such
       Member's Capital Contributions, (ii) such Member's allocable share of Net
       Income and any items in the nature of income or gain that are specially
       allocated to such Member pursuant to Article 5 or other provisions of
       this Agreement, and (iii) the amount of any Company liabilities assumed
       by such Member or which are secured by any property distributed to such
       Member.

              (b) From each Member's Capital Account there shall be subtracted
       (i) the amount of (A) cash and (B) the Gross Asset Value of any Company
       Assets (other than cash) distributed to such Member (other than any
       payment of principal and/or interest to such Member pursuant to the terms
       of a loan made by the Member to the Company) pursuant to any provision of
       this Agreement, (ii) such Member's allocable share of Net

                                     - 2 -
<PAGE>   7

       Losses and any other items in the nature of expenses or losses that are
       specially allocated to such Member pursuant to Article 5 or other
       provisions of this Agreement, and (iii) liabilities of such Member
       assumed by the Company or which are secured by any property contributed
       by such Member to the Company.

              (c) In the event any Interest is Transferred in accordance with
       the terms of this Agreement, the transferee shall succeed to the Capital
       Account of the transferor to the extent it relates to the Transferred
       Interest.

              (d) In determining the amount of any liability for purposes of
       clauses (a) and (b) above, there shall be taken into account Code Section
       752(c) and any other applicable provisions of the Code and Regulations.

              (e) The foregoing provisions and the other provisions of this
       Agreement relating to the maintenance of Capital Accounts are intended to
       comply with Regulations Sections 1.704-1(b) and 1.704-2 and shall be
       interpreted and applied in a manner consistent with such Regulations. In
       the event that the Manager shall reasonably determine that it is prudent
       to modify the manner in which the Capital Accounts, or any additions or
       subtractions thereto, are computed in order to comply with such
       Regulations, the Manager may cause the Company to make such modification.
       The Manager shall also cause the Company to make (i) any adjustments that
       are necessary or appropriate to maintain equality between the Capital
       Accounts of the Members and the amount of Company capital reflected on
       the Company's balance sheet, as computed for book purposes, in accordance
       with Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) any appropriate
       modifications in the event that unanticipated events might otherwise
       cause this Agreement not to comply with Regulations Sections 1.704-1(b)
       and 1.704-2.

       Capital Contribution -- means, with respect to any Member at any time,
the aggregate amount of cash and the initial Gross Asset Value of any property
(other than cash) contributed to the Company by such Member as of such time.

       Cash Available for Distribution -- means cash of the Company available
for distribution to Members as determined in the sole and absolute discretion of
the Manager.

       Certificate -- means the certificate of formation filed with the
Secretary of State of the State of Delaware pursuant to the Act to form the
Company, as originally executed and amended, modified, supplemented or restated
from time to time, as the context requires.

       Certificate of Cancellation -- means a certificate filed in accordance
with 6 Del. C. Section 18-203.

       Change in Control -- means either (1) individuals who, as of the
effective date of this Agreement, constitute the Board of Directors of Parent
(the "Board of Directors" generally and as of the date hereof the "Incumbent
Board") cease for any reason to constitute at least a majority of the directors
constituting the Board of Directors, provided that any person becoming a
director subsequent to the effective date of this Agreement whose election, or
nomination for election by Parent's shareholders, was approved by a vote of at
least three-quarters (3/4) of the then directors who are members of the
Incumbent Board (other than an election or nomination of an individual

                                     - 3 -
<PAGE>   8

whose initial assumption of office is (i) in connection with the acquisition by
a third person, including a "group" as such term is used in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended (the "Securities Exchange Act"),
of beneficial ownership, directly or indirectly, of 20% or more of the combined
voting securities ordinarily having the right to vote for the election of
directors of Parent (unless such acquisition of beneficial ownership was
approved by a majority of the Board of Directors who are members of the
Incumbent Board), or (ii) in connection with an actual or threatened election
contest relating to the election of the directors of Parent, as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange
Act) shall be, for purposes of this Agreement, considered as though such person
were a member of the Incumbent Board, or (2) the Board of Directors (a majority
of which shall consist of directors who are members of the Incumbent Board) has
determined that a Change in Control has occurred for purposes of this Agreement.

       Code -- means the Internal Revenue Code of 1986, as previously or
hereafter amended.

       Company Assets -- means all direct and indirect interests in real and
personal property owned by the Company from time to time, and shall include both
tangible and intangible property (including cash).

       Company Minimum Gain -- has the same meaning as the term "Partnership
minimum gain" in Regulation Section 1.704-2(b)(2), and the amount of Company
Minimum Gain, as well as any net increase or decrease in Company Minimum Gain,
for a Fiscal Year shall be determined in accordance with the rules of Regulation
Section 1.704-2(d).

       Depreciation -- means, for each Fiscal Year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Fiscal Year, except that if the Gross Asset Value
of an asset differs from its adjusted basis for federal income tax purposes at
the beginning of such Fiscal Year, Depreciation shall be an amount which bears
the same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such Fiscal
Year bears to such beginning adjusted tax basis; provided, however, that if the
adjusted basis for federal income tax purposes of an asset at the beginning of
such Fiscal Year is zero, Depreciation shall be determined with reference to
such beginning Gross Asset Value using any reasonable method selected by the
Manager.

       Disability -- means, in the case of a Member who has an employment
agreement with the Company or the K&B Group that includes a definition of
"Disability," the definition therein. Otherwise, Disability means, with respect
to an individual, any mental or physical illness or disability that renders such
individual unable to hold full-time employment for a period of 180 consecutive
days.

       e.kb, inc. -- means e.kb, inc., a Delaware corporation.

       Effective Date -- means the date first set forth hereof.

       Encumbrance -- means a pledge, alienation, mortgage, hypothecation,
encumbrance or similar collateral assignment by any other means, whether for
value or no value and whether

                                     - 4 -
<PAGE>   9

voluntary or involuntary (including, without limitation, by operation of law or
by judgment, levy, attachment, garnishment, bankruptcy or other legal or
equitable proceedings).

       ERISA -- means Title I of the Employee Retirement Income Security Act of
1974, as previously or hereafter amended.

       Fair Market Value --

              (f) With respect to a specific Company asset, means the amount
       that the Manager determines the Company would receive in an all-cash sale
       of such asset in an arms-length transaction with an unaffiliated third
       party consummated on the day immediately preceding the date on which the
       event occurred which necessitated the determination of the Fair Market
       Value (and after giving effect to any transfer taxes payable in
       connection with such sale).

              (g) With respect to the Company, means the amount that the Manager
       determines the Company would receive in an all-cash sale of all of its
       assets and businesses as a going concern in an arms-length transaction
       with an unaffiliated third party consummated on the day immediately
       preceding the date on which the event occurred which necessitated the
       determination of the Fair Market Value.

              (h) After the Manager determines the Fair Market Value of the
       Company as provided above, the Manager will determine the Fair Market
       Value of an Interest by making a calculation reflecting the cash
       distributions which would be made to the Members in accordance with this
       Agreement if the Company were deemed to have received such Fair Market
       Value in cash and then distributed the same to the Members in accordance
       with the terms of this Agreement incident to the liquidation of the
       Company after payment to all of the Company's creditors from such cash
       receipts.

              (d) Notwithstanding paragraph (c) above, unless substantially all
       of the Company's assets are marketable securities, a Manager's
       determination of Fair Market Value of an Interest in connection with a
       repurchase of such Interest pursuant to Section 8.7 shall be made in good
       faith based on a valuation of such Interest by Merrill Lynch or a
       comparable firm (a "Valuation Firm") in accordance with this paragraph
       (d). In performing its valuation, the Valuation Firm shall first
       determine the amount the Company would receive in an all-cash sale of all
       of its assets and businesses as a going concern in an arms-length
       transaction with an unaffiliated third party consummated on the day
       immediately preceding the date on which the event occurred which
       necessitated the determination of the Fair Market Value. The Valuation
       Firm shall then determine the Fair Market Value of an Interest by making
       a calculation reflecting the cash distributions which would be made to
       the Member that holds the Interest being valued in accordance with this
       Agreement if the Company were deemed to have received such Fair Market
       Value in cash and then distributed the same to the Members in accordance
       with the terms of this Agreement incident to the liquidation of the
       Company after payment to all of the Company's creditors from such cash
       receipts. If substantially all of the Company's assets are marketable
       securities, a Manager's determination of Fair Market Value of an Interest
       in connection with a repurchase of such Interest pursuant to Section 8.7
       shall be made in

                                     - 5 -
<PAGE>   10

       good faith based on the average of the closing prices of the sales of
       such securities on all securities exchanges that such securities are
       listed over the twenty business days preceding the date on which the
       event occurred which necessitated the determination of the Fair Market
       Value.

       Fiscal Quarter -- means each calendar quarter ending February 28
(February 29 in the case of a leap year), May 31, August 31 and November 30.

       Fiscal Year -- means (i) the period commencing on the Effective Date and
ending on November 30, 2000, (ii) any subsequent twelve-month period commencing
on December 1 and ending on November 30, and (iii) the period commencing on the
immediately preceding December 1 and ending on the date on which all Company
Assets are distributed to the Members pursuant to Article 9 hereof.

       Gross Asset Value -- means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:

              (i) The initial Gross Asset Value of any asset contributed by a
       Member to the Company shall be the gross fair market value of such asset,
       as determined by the Manager and the contributing Member.

              (j) The Gross Asset Values of all Company Assets immediately prior
       to the occurrence of any event described in subsections (i) through (iv)
       hereof shall be adjusted to equal their respective gross fair market
       values, as determined by the Manager using such method of valuation as it
       may adopt in its reasonable discretion as of the following times:

                     (i) the acquisition of an interest in the Company by a new
              or existing Member, if the Manager determines that such adjustment
              is necessary or appropriate to reflect the relative economic
              interests of the Members in the Company;

                     (ii) the distribution by the Company to a Member of more
              than a de minimis amount of Company Assets as consideration for an
              interest in the Company, if the Manager determines that such
              adjustment is necessary or appropriate to reflect the relative
              economic interests of the Members in the Company;

                     (iii) the liquidation of the Company within the meaning of
              Regulation Section 1.704-1(b)(2)(ii)(g); and

                     (iv) at such other times as the Manager shall determine
              necessary or advisable in order to comply with Regulation Sections
              1.704-1(b) and 1.704-2, or otherwise.

              (k) The Gross Asset Value of any Company Asset distributed to a
       Member shall be the gross fair market value of such asset on the date of
       distribution as determined by the Manager.

                                     - 6 -
<PAGE>   11

              (l) The Gross Asset Values of Company Assets shall be increased
       (or decreased) to reflect any adjustments to the adjusted basis of such
       assets pursuant to Code Section 734(b) or Code Section 743(b), but only
       to the extent that such adjustments are taken into account in determining
       Capital Accounts pursuant to Regulation Section 1.704-1(b)(2)(iv)(m);
       provided, however, that Gross Asset Values shall not be adjusted pursuant
       to this subparagraph (d) to the extent that the Manager determines that
       an adjustment pursuant to subparagraph (b) is necessary or appropriate in
       connection with a transaction that would otherwise result in an
       adjustment pursuant to this subparagraph (d).

       If the Gross Asset Value of an asset has been determined or adjusted
pursuant to subparagraph (b) or (d), such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such asset, for
purposes of computing Net Income and Net Losses.

       Incapacity -- means the entry of an order of incompetence or of insanity,
or the death, dissolution, Bankruptcy or termination (other than by merger or
consolidation) of any Person.

       Investment Advisers Act -- means the Investment Advisers Act of 1940, as
previously or hereafter amended.

       Investment Company Act -- means the Investment Company Act of 1940, as
previously or hereafter amended.

       K&B Group -- means Parent and its Affiliates.

       K&B Member -- means __________

       K&B Member Election -- has the meaning specified in Section 8.7.3.

       Majority in Interest -- means, at any time, Members whose combined
Percentage Interest is greater than fifty percent (50%) or, in the case of a
particular class of Members, Members of such class whose combined Percentage
Interest is greater than fifty percent (50%) of the Percentage Interests held by
all Members of such class.

       Manager -- means e.kb, inc. or any successor Manager selected in
accordance with this Agreement.

       Member -- has the meaning specified in the preamble hereto.

       Member Nonrecourse Debt -- has the same meaning as the term "Partner
nonrecourse debt" in Section 1.704-2(b)(4) of the Regulations.

       Member Nonrecourse Debt Minimum Gain -- means an amount, with respect to
each Member Nonrecourse Debt, equal to the Company Minimum Gain that would
result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Section 1.704-2(i)(3) of the Regulations.

                                     - 7 -
<PAGE>   12

       Member Nonrecourse Deductions -- has the same meaning as the term
"Partner nonrecourse deductions" in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of
the Regulations.

       Membership Interest or Interest -- means the entire ownership interest of
a Member in the Company at any particular time, including without limitation,
such Member's right to share in Net Income, Net Loss, or similar items of, and
to receive distributions from, the Company, any and all rights to vote, and the
rights to any and all benefits to which such Member is entitled as provided in
this Agreement, together with the obligations of such Member to comply with all
of the terms and provisions of this Agreement.

       Net Income or Net Loss -- means, for each Fiscal Year or other period, an
amount equal to the Company's taxable income or loss for such Fiscal Year,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:

              (m) Any income of the Company that is exempt from federal income
       tax and not otherwise taken into account in computing Net Income or Net
       Loss pursuant to this definition of Net Income or Net Loss shall be added
       to such taxable income or loss;

              (n) Any expenditures of the Company described in Code Section
       705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
       pursuant to Regulation Section 1.704-1(b)(2)(iv)(i), and not otherwise
       taken into account in computing Net Income or Net Loss pursuant to this
       definition of Net Income or Net Loss shall be subtracted from such
       taxable income or loss;

              (o) In the event the Gross Asset Value of any Company Asset is
       adjusted pursuant to the definition of Gross Asset Value, the amount of
       such adjustment shall be taken into account as gain or loss from the
       disposition of such asset for purposes of computing Net Income or Net
       Loss;

              (p) Gain or loss resulting from any disposition of property with
       respect to which gain or loss is recognized for federal income tax
       purposes shall be computed by reference to the Gross Asset Value of the
       property disposed of, notwithstanding that the adjusted tax basis of such
       property differs from its Gross Asset Value;

              (q) In lieu of the depreciation, amortization, and other cost
       recovery deductions taken into account in computing such taxable income
       or loss, there shall be taken into account Depreciation for such Fiscal
       Year, computed in accordance with the definition of Depreciation;

              (r) To the extent an adjustment to the adjusted tax basis of any
       Company Asset pursuant to Code Section 734(b) or Code Section 743(b) is
       required pursuant to Regulation Section 1.704-1(b)(2)(iv)(m)(4) to be
       taken into account in determining Capital Accounts as a result of a
       distribution other than in liquidation of a Member's interest in the
       Company, the amount of such adjustment shall be treated as an item of
       gain (if the adjustment increases the basis of the asset) or loss (if the
       adjustment

                                     - 8 -
<PAGE>   13

       decreases the basis of the asset) from the disposition of the asset and
       shall be taken into account for purposes of computing Net Income or Net
       Loss; and

              (s) Notwithstanding any other provision of this definition of Net
       Income or Net Loss, any items which are specially allocated pursuant to
       Section 5.3 hereof shall not be taken into account in computing Net
       Income or Net Loss. The amounts of the items of Company income, gain,
       loss or deduction available to be specially allocated pursuant to Section
       5.3 hereof shall be determined by applying rules analogous to those set
       forth in this definition of Net Income or Net Loss.

       Nonrecourse Deductions -- has the meaning set forth in Regulation
Sections 1.704-2(b)(1) and 1.704-2(c).

       Nonrecourse Liability -- has the meaning set forth in Regulation Sections
1.704-2(b)(3) and 1.752-1(a)(2).

       Parent -- means KB HOME, a Delaware corporation.

       Percentage Interest -- means, with respect to any Member, the Percentage
Interest listed for such Member on Exhibit A hereto, as such Percentage Interest
may be adjusted from time to time pursuant to this Agreement. The aggregate
Percentage Interests of the Members shall at all times total to one hundred
percent (100%).

       Person -- means and includes an individual, a partnership, a limited
liability company, a joint venture, a corporation, a trust, an unincorporated
organization, a government or any department or agency thereof or any entity
similar to any of the foregoing.

       Prime Rate -- means the prime rate listed from time to time in The Wall
Street Journal (which listing appears as of the date hereof under the caption
"Money Rates") or, if such listing is no longer published, then the reference
rate offered at such time by Bankers Trust New York Corporation.

       Records -- has the meaning specified in Section 7.1.

       Regulations -- means temporary and final regulations promulgated under
the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).

       Regulatory Allocations -- has the meaning specified in Section 5.3.7.

       Repurchase Closing -- has the meaning specified in Section 8.7.5.

       Repurchase Notice -- has the meaning specified in Section 8.7.5.

       Repurchase Option -- has the meaning specified in Section 8.7.1.

       Securities Act -- has the meaning specified in Section 10.1(c).

                                     - 9 -
<PAGE>   14

       Subordinated Note -- has the meaning specified in Section 8.7.7.

       Substitute Member -- means any Person (a) to whom a Member (or Transferee
thereof) Transfers all or any part of its Interest, and (b) which has been
admitted to the Company as a Substitute Member pursuant to Section 8.5 of this
Agreement.

       Transfer -- means, with respect to any Interest in the Company, a sale,
transfer, assignment, gift, bequest or disposition by any other means (other
than an Encumbrance), whether for value or no value and whether voluntary or
involuntary (including, without limitation, by realization upon any Encumbrance
or by operation of law or by judgment, levy, attachment, garnishment, bankruptcy
or other legal or equitable proceedings), whether accomplished directly or in a
series of steps designed to achieve such result indirectly.

       Transferee -- means a recipient of an Interest in the Company by way of
Transfer.

       Unreturned Capital -- means, with respect to a Member, an amount equal to
the excess, if any, of (a) the aggregate amount of Capital Contributions made by
or for such Member, over (b) the aggregate amount of prior distributions made by
the Company to such Member that constitute a return of such Capital
Contributions pursuant to Section 4.1(a), Section 4.3 or Section 9.4(b).

                                    ARTICLE 2
                             ORGANIZATIONAL MATTERS

       2.1 Formation. The Members have formed the Company as a limited liability
company under the Act and for the purposes and upon the terms and conditions
hereinafter set forth. The rights and liabilities of the Members shall be as
provided in the Act, except as otherwise expressly provided herein. In the event
of any inconsistency between any terms and conditions contained in this
Agreement and any nonmandatory provisions of the Act, the terms and conditions
contained in this Agreement shall govern.

       2.2 Name. The name of the Company is _____________, LLC. The Company may
also conduct business at the same time under one or more fictitious names if the
Manager determines that it is in the best interests of the Company to do so. The
Manager may change the name of the Company from time to time, in accordance with
applicable law.

       2.3 Principal Place of Business; Other Places of Business. The principal
place of business of the Company is located at
___________________________________________, or such other place within or
outside the State of Delaware as the Manager may from time to time designate.
The Company may maintain offices and places of business at such other place or
places within or outside the State of Delaware as the Manager deems advisable.

       2.4 Business Purpose. The Company is being formed for the purpose of
engaging in any lawful business determined by the Manager and permitted by the
Act.

       2.5 Certificate of Formation; Filing. The Members have caused the
Certificate to be filed in the Office of the Secretary of State of the State of
Delaware as required by the Act. The Manager may approve and cause to be
executed and filed any duly authorized amendments to the

                                     - 10 -
<PAGE>   15

Certificate from time to time in a form prescribed by the Act. The Manager shall
also cause to be made, on behalf of the Company, such additional filings and
recordings as the Manager shall deem necessary or advisable.

       2.6 Designated Agent for Service of Process. So long as is required by
the Act, the Company shall continuously maintain a registered office and a
designated and duly qualified agent for service of process on the Company in the
State of Delaware. As of the date of this Agreement, the name and address of the
Company's designated agent and registered office in the State of Delaware is
[Corporation Service Company, 1013 Centre Road, Wilmington, Delaware 19805.]

       2.7 Term. The Company commenced on the date that the Certificate was
filed with the Office of the Secretary of State of the State of Delaware, and
shall continue until the first to occur of any of the events enumerated in
Section 9.2.

                                    ARTICLE 3
          CAPITAL CONTRIBUTIONS; ADDITIONAL INTERESTS; CAPITAL ACCOUNTS

       3.1 Capital Contributions. The Capital Contributions of the Members and
the Percentage Interests of the Members are set forth on Exhibit A hereto, and
shall be reflected in a register maintained by the Company. The Company shall
update such register to reflect the admission of Additional Members pursuant to
Section 3.2, and Substitute Members pursuant to Section 8.5, as well as to
reflect the issuance of other Interests or any changes in the Members'
respective Interests pursuant to the terms of this Agreement. Any reduction in a
Member's Interest initially issued in a compensatory transaction, whether
pursuant to a redemption, withdrawal or otherwise, shall increase the Interest
of the Member or Members initially diluted by the issuance of such Interest, as
determined by the Manager. Except as otherwise required by law or pursuant to
Section 3.1, no Member shall be required or, except as determined by the Manager
in its sole and absolute discretion, be permitted, to make any additional
Capital Contributions to the Company.

       3.2 Additional Interests. Except as otherwise provided in this Agreement
(and subject to Section 11.2 relating to amendments of this Agreement), the
Company may issue additional Interests with such characteristics, at such times,
on such terms, and to such Persons as the Manager determines to be in the best
interests of the Company without obtaining the consent of any other Member, and
any such additional issuance will dilute only the K&B Member. The Company shall
admit the recipient(s) of any such additional Interests as additional Members
("Additional Members") of the Company.

       3.3 Capital Accounts. A single Capital Account shall be established and
maintained for each Member in accordance with the terms of this Agreement.

       3.4 Member Capital. Except as otherwise provided in this Agreement: (a)
no Member shall demand or be entitled to receive a return of or interest on its
Capital Contributions or Capital Account and (b) no Member shall withdraw any
portion of its Capital Contributions or be entitled to receive any distributions
from the Company as a return of capital on account of such Capital
Contributions.

                                     - 11 -
<PAGE>   16

       3.5 Member Loans. No Member shall be required or, except with the consent
of the Manager, be permitted to make any loans or otherwise lend any funds to
the Company. Notwithstanding the foregoing, any Member shall be permitted (but
not required) to make loans to, act as surety or endorser for, assume one or
more specific obligations of, provide collateral for, or enter into other
similar credit, guarantee, financing or refinancing arrangements with, the
Company for any purpose, to the extent the Manager reasonably determines that
such loans are necessary or advisable for the business of the Company, provided
that any loans made to the Company by a Member shall be on terms no less
favorable to the Company than can be received from third parties under similar
circumstances. No loans made by any Member to the Company shall have any effect
on such Member's Percentage Interest, such loans representing a debt of the
Company payable or collectible solely from the assets of the Company in
accordance with the terms and conditions upon which such loans were made.

       3.6 Loans by Third Parties. Without limiting Article 6, the Company, and
the Manager on behalf of the Company, may borrow funds or enter into other
similar credit, guarantee, financing or refinancing arrangements for any
purpose.

       3.7 Limited Liability of the Members. Notwithstanding anything to the
contrary contained in this Agreement and except as otherwise required by law
(including, without limitation, Section 18-607 of the Act), the liability of a
Member for any losses of the Company in no event shall exceed, in the aggregate:
(i) the amount of its Capital Contribution and (ii) its share of undistributed
assets and profits of the Company.

                                    ARTICLE 4
                                  DISTRIBUTIONS

       4.1 Distributions Generally. Subject to Section 4.3, the timing and
amount of any distribution shall be in the sole and absolute discretion of the
Manager. Except as otherwise provided in Article 9 hereof relating to
liquidating distributions, any such distribution shall be distributed to the
Members in the following order of priority:

              (a) First, to the Members pro rata in proportion to their
       Unreturned Capital until the Unreturned Capital of each Member has been
       reduced to zero;

              (b) Second, the balance, if any, to the Members in accordance with
       their Percentage Interests.

       4.2 Withholding. The Company may withhold distributions or portions
thereof if it is required to do so by any applicable rule, regulation, or law.
Each Member hereby authorizes the Company to withhold from or pay on behalf of
or with respect to such Member any amount of federal, state, local or foreign
taxes that the Manager determines that the Company is required to withhold or
pay with respect to any amount distributable to such Member pursuant to this
Agreement, or upon the exercise of any option issued by the Company with respect
to Membership Interests. Any amounts so withheld or paid on behalf of or with
respect to a Member pursuant to this Section 4.2 shall be deemed to have been
distributed to such Member. To the extent that the cumulative amount of such
withholding for any period exceeds the distributions to which such Member is
entitled for such period, the amount of such excess shall

                                     - 12 -
<PAGE>   17

be considered a loan from the Company to such Member, with interest at the Prime
Rate, until discharged by such Member by repayment, which may, at the option of
the Manager, be satisfied (i) out of distributions to which such Member would
otherwise be subsequently entitled, or (ii) by the immediate payment in cash to
the Company of such excess amount. The Manager, on behalf of the Company, shall
be entitled to take any other action it determines to be necessary or
appropriate in connection with any obligation or possible obligation to impose
withholding pursuant to any tax law or to pay any tax with respect to a Member.
Each Member hereby unconditionally and irrevocably grants to the Company a
security interest in such Member's Interest to secure such Member's obligation
to pay to the Company any amounts required to be paid pursuant to this Section
4.2. Each Member shall take such actions as the Company shall request in order
to perfect or enforce the security interest created hereunder. Each Member's
obligations hereunder shall survive the dissolution, liquidation or winding up
of the Company.

       4.3 Minimum Distribution. To the extent of Cash Available for
Distribution, the Company shall distribute to each Member, within ninety (90)
days after the close of each Fiscal Year, pursuant to Section 4.1 and/or this
Section 4.3, at least an amount equal to forty percent (40%) of the excess, if
any, of the federal taxable income and gain allocated to such Member for such
Fiscal Year over the losses and deductions allocated to such Member for such
Fiscal Year, in each case pursuant to Article 5; provided, however, that the
minimum distribution required to be made to a Member pursuant to this Section
4.3 shall not exceed on a cumulative basis, forty percent (40%) of the excess,
if any, of the federal taxable income and gain allocated to such Member for such
Fiscal Year and all prior Fiscal Years, over the losses and deductions allocated
to such Member for such Fiscal Year and all prior Fiscal Years, in each case
pursuant to Article 5; provided, further, that the Manager may increase or
decrease the forty percent (40%) rate applied for purposes of this Section 4.3,
to the extent that it reasonably determines that an increased or decreased rate
is appropriate, including without limitation as a result of any change in
prevailing federal income tax rates.

       4.4 Distributions In Kind. In the event that the Manager determines in
its sole and absolute discretion to distribute property in kind, such property
shall be deemed to be an amount of cash in an amount equal to the Fair Market
Value of such property and shall be distributed in accordance with Section 4.1.

                                    ARTICLE 5
                    ALLOCATIONS OF NET INCOME AND NET LOSSES

       It is the overriding intent of this Article 5 that Net Profits, Net
Losses and other items of Company income, gain, loss and deduction shall be
allocated to the Members' Capital Accounts in such a manner that all cash or
other assets distributed by the Company to the Members, including without
limitation any cash or other assets distributable to the Members upon the
liquidation of the Company in accordance with the Members' positive Capital
Account balances, shall be distributed in accordance with the priority for cash
distributions described in Section 4.1 of this Agreement. All provisions of this
Article 5 shall be interpreted, and if necessary shall be modified by the
Manager, to achieve this result.

       5.1 Net Losses.

                                     - 13 -
<PAGE>   18

              5.1.1 General. After giving effect to the special allocations set
       forth in Section 5.3, and subject to the loss limitation set forth in
       Section 5.1.2, Net Losses for any Fiscal Year shall be allocated to the
       Members pro rata in accordance with their Percentage Interests.

              5.1.2 Loss Limitation. Notwithstanding Sections 5.1.1 and 5.3.7
       hereof, no Net Losses or items of loss or deduction shall be allocated to
       a Member to the extent that such allocation would create or increase an
       Adjusted Capital Account Deficit with respect to such Member, and such
       Net Losses or items of loss or deduction shall instead be allocated to
       the other Members pro rata in proportion to their Percentage Interests,
       subject to the limitations of this Section 5.1.2.

       5.2 Net Income. After giving effect to the special allocations set forth
in Section 5.3, Net Income for any Fiscal Year shall be allocated as follows:

              (a) First, to each Member until the aggregate Net Income allocated
       to the Member pursuant to this Section 5.2(a) for such Fiscal Year and
       all prior Fiscal Years is equal to the aggregate Net Losses allocated to
       the Member pursuant to Section 5.1.2 for all prior Fiscal Years; and

              (b) The balance, if any, to the Members pro rata in accordance
       with their Percentage Interests.

       5.3 Special Allocations. Notwithstanding the foregoing provisions of this
Article 5, the following special allocations shall be made in the following
order of priority:

              5.3.1 Minimum Gain Chargeback. If there is a net decrease in
       Company Minimum Gain during a Fiscal Year, then each Member shall be
       allocated items of Company income and gain for such Fiscal Year (and, if
       necessary, for subsequent years) in an amount equal to such Member's
       share of the net decrease in Company Minimum Gain, determined in
       accordance with Regulations Section 1.704-2(g)(2). This Section 5.3.1 is
       intended to comply with the minimum gain chargeback requirement of
       Regulations Section 1.704-2(f) and shall be interpreted consistently
       therewith.

              5.3.2 Member Minimum Gain Chargeback. If there is a net decrease
       in Member Minimum Gain attributable to a Member Nonrecourse Debt during
       any Fiscal Year, each Member who has a share of the Member Minimum Gain
       attributable to such Member Nonrecourse Debt, determined in accordance
       with Regulations Section 1.704-2(i)(5), shall be specially allocated
       items of Company income and gain for such Fiscal Year (and, if necessary,
       subsequent years) in an amount equal to such Member's share of the net
       decrease in Member Minimum Gain attributable to such Member Nonrecourse
       Debt, determined in a manner consistent with the provisions of
       Regulations Section 1.704-2(g)(2). This Section 5.3.2 is intended to
       comply with the partner nonrecourse debt minimum gain chargeback
       requirement of Regulations Section 1.704-2(i)(4) and shall be interpreted
       consistently therewith.

              5.3.3 Qualified Income Offset. If any Member unexpectedly receives
       an adjustment, allocation, or distribution of the type contemplated by
       Regulations Section

                                     - 14 -
<PAGE>   19

       1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of income and gain shall be
       allocated to all such Members (in proportion to the amounts of their
       respective Adjusted Capital Account Deficits) in an amount and manner
       sufficient to eliminate the Adjusted Capital Account Deficit of such
       Member as quickly as possible. It is intended that this Section 5.3.3
       qualify and be construed as a "qualified income offset" within the
       meaning of Regulations Section 1.704-1(b)(2)(ii)(d).

              5.3.4 Gross Income Allocation. In the event any Member has a
       deficit Capital Account at the end of any Allocation Year which is in
       excess of the sum of (i) the amount such Member is obligated to restore
       pursuant to the penultimate sentences of Regulations Sections
       1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall be specially
       allocated items of Company income and gain in the amount of such excess
       as quickly as possible, provided that an allocation pursuant to this
       Section 5.3.4 shall be made only if and to the extent that such Member
       would have a deficit Capital Account in excess of such sum after all
       other allocations provided for in this Article 5 have been made as if
       Section 5.3.3 and this Section 5.3.4 were not in the Agreement.

              5.3.5 Section 754 Adjustment. To the extent that an adjustment to
       the adjusted tax basis of any Company Asset pursuant to Code Section
       734(b) or Code Section 743(b) is required, pursuant to Regulations
       Section 1.704-1(b)(2)(iv)(m)(2) or Regulations Section
       1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital
       Accounts as the result of a distribution to a Member in complete
       liquidation of its Interest in the Company, the amount of such adjustment
       to the Capital Accounts shall be treated as an item of gain (if the
       adjustment increases the basis of the asset) or loss (if the adjustment
       decreases such basis), and such gain or loss shall be specially allocated
       to the Members in accordance with their interests in the Company in the
       event that Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the
       Members to whom such distribution was made in the event that Regulations
       Section 1.704-1(b)(2)(iv)(m)(4) applies.

              5.3.6 Nonrecourse Deductions and Member Nonrecourse Deductions.
       The Nonrecourse Deductions for each Fiscal Year shall be allocated to the
       Members pro rata in proportion to their Percentage Interests. The Member
       Nonrecourse Deductions for each Fiscal Year shall be allocated to the
       Member that bears the economic risk of loss (within the meaning of
       Regulations Section 1.752-2) for the Member Nonrecourse Debt to which
       such Member Nonrecourse Deductions are attributable.

              5.3.7 Curative Allocations. The allocations set forth in Sections
       5.3.1, 5.3.2, 5.3.3, 5.3.4, 5.3.5 and 5.3.6 (the "Regulatory
       Allocations") are intended to comply with certain requirements of the
       Regulations. It is the intent of the Members that, to the extent
       possible, all Regulatory Allocations shall be offset either with other
       Regulatory Allocations or with special allocations of other items of
       Company income, gain, loss or deduction pursuant to this Section 5.3.7.
       Therefore, notwithstanding any other provision of this Article 5 (other
       than the Regulatory Allocations), the Manager shall make such offsetting
       special allocations of Company income, gain, loss or deduction in
       whatever manner it determines appropriate so that, after such offsetting
       allocations are made, each Member's Capital Account balance is, to the
       extent possible, equal to the Capital Account balance such Member would
       have had if the Regulatory Allocations were not

                                     - 15 -
<PAGE>   20

       part of the Agreement. In making its determination of the appropriate
       offsetting allocations, the Manager shall take into account future
       Regulatory Allocations under Sections 5.3.1 and 5.3.2 that, although not
       yet made, are likely to offset other Regulatory Allocations previously
       made under Section 5.3.6.

       5.4 Tax Allocations.

              5.4.1 Except as provided in Section 5.4.2 hereof, for federal,
       state and local income tax purposes, each Company item of income, gain,
       loss and deduction shall be allocated among the Members as its
       correlative item of "book" income, gain, loss or deduction is allocated
       pursuant to this Article 5.

              5.4.2 Tax items with respect to Company Assets that are
       contributed to the Company with a Gross Asset Value that varies from its
       basis in the hands of the contributing Member immediately preceding the
       date of contribution shall be allocated between the Members for income
       tax purposes pursuant to Regulations promulgated under Code Section
       704(c) so as to take into account such variation. The Company shall
       account for such variation under any method approved under Code Section
       704(c) and the applicable Regulations as chosen by the Manager,
       including, without limitation, the "traditional method" as described in
       Regulations Section 1.704-3(b). If the Gross Asset Value of any Company
       Asset is adjusted pursuant to the definition of "Gross Asset Value,"
       subsequent allocations of income, gain, loss and deduction with respect
       to such Company Asset shall take account of any variation between the
       adjusted basis of such Company Asset for federal income tax purposes and
       its Gross Asset Value in the same manner as under Code Section 704(c) and
       the Regulations promulgated thereunder under any method approved under
       Code Section 704(c) and the applicable Regulations as chosen by the
       Manager. Allocations pursuant to this Section 5.4.2 are solely for
       purposes of federal, state and local taxes and shall not affect, or in
       any way be taken into account in computing, any Member's Capital Account
       or share of Net Income, Net Losses and any other items or distributions
       pursuant to any provision of this Agreement.

       5.5 Other Provisions.

              5.5.1 For any Fiscal Year during which a Membership Interest (or
       any part thereof) is Transferred between the Members or to another
       Person, the portion of the Net Income, Net Losses and other items of
       income, gain, loss, deduction and credit that are allocable with respect
       to such Membership Interest (or part thereof) shall be apportioned
       between the transferor and the transferee under any method allowed
       pursuant to Section 706 of the Code and the applicable Regulations as
       determined by the Manager.

              5.5.2 In the event the Manager determines that the Code or any
       Regulations require allocations of items of income, gain, loss, deduction
       or credit different from those set forth in this Article 5, the Manager
       is hereby authorized to make new allocations in reliance on the Code and
       such Regulations (provided that such allocations shall require the
       consent of any Member whose right to receive distributions pursuant to
       Article 4 is likely to be materially and adversely affected), and no such
       new allocation shall give rise to any claim or cause of action by any
       Member.

                                     - 16 -
<PAGE>   21

              5.5.3 The Company's "excess nonrecourse liabilities" within the
       meaning of Regulations Section 1.752-3(a)(3) shall be allocated to the
       Members pro rata in proportion to their Percentage Interests.

              5.5.4 The Members acknowledge and are aware of the income tax
       consequences of the allocations made by this Article 5 and hereby agree
       to be bound by the provisions of this Article 5 in reporting their shares
       of Net Income, Net Losses, and other items of income, gain, loss,
       deduction, and credit for federal, state, and local income tax purposes.

                                    ARTICLE 6
                              VOTING AND MANAGEMENT

       6.1 Manager Powers. Except as otherwise expressly provided in this
Agreement, all powers to control and manage the business and affairs of the
Company shall be exclusively vested in the Manager and the Manager may exercise
all powers of the Company and do all such lawful acts as are not by statute, the
Certificate or this Agreement directed or required to be exercised or done by
the Members and in so doing shall have the right and authority to take all
actions which the Manager deems necessary, useful or appropriate for the
management and conduct of the Company's business, including, without limitation,
the following specific rights and powers:

              (a) Conduct its business, carry on its operations and have and
       exercise the powers granted by the Act in any state, territory, district
       or possession of the United States, or in any foreign country which may
       be necessary or convenient to effect any or all of the purposes for which
       it is organized;

              (b) Acquire by purchase, lease, or otherwise any real or personal
       property which may be necessary, convenient, or incidental to the
       accomplishment of the purposes of the Company;

              (c) Operate, maintain, finance, improve, construct, own, grant
       operations with respect to, sell, convey, assign, mortgage, and lease any
       real estate and any personal property necessary, convenient, or
       incidental to the accomplishment of the purposes of the Company;

              (d) Execute any and all agreements, contracts, documents,
       certifications, and instruments necessary or convenient in connection
       with the management, maintenance, and operation of the Company's
       business, or in connection with managing the affairs of the Company,
       including, executing amendments to this Agreement and the Certificate in
       accordance with the terms of this Agreement, both as the Manager and, if
       required, as attorney-in-fact for the Members pursuant to any power of
       attorney granted by the Members to the Manager;

               (e) Borrow money and issue evidences of indebtedness necessary,
        convenient, or incidental to the accomplishment of the purposes of the
        Company, and secure the same by mortgage, pledge, or other lien on any
        Company Assets;

                                     - 17 -
<PAGE>   22

              (f) Execute, in furtherance of any or all of the purposes of the
       Company, any deed, lease, mortgage, deed of trust, mortgage note,
       promissory note, bill of sale, contract, or other instrument purporting
       to convey or encumber any or all of the Company Assets;

              (g) Prepay in whole or in part, refinance, recast, increase,
       modify, or extend any liabilities affecting the assets of the Company and
       in connection therewith execute any extensions or renewals of
       encumbrances on any or all of such assets;

              (h) Care for and distribute funds to the Members by way of cash
       income, return of capital, or otherwise, all in accordance with the
       provisions of this Agreement, and perform all matters in furtherance of
       the objectives of the Company or this Agreement;

              (i) Contract on behalf of the Company for the employment and
       services or employees and/or independent contractors, such as lawyers and
       accountants, and delegate to such Persons the duty to manage or supervise
       any of the assets or operations of the Company;

              (j) Engage in any kind of activity and perform and carry out
       contracts of any kind (including contracts of insurance covering risks to
       Company Assets and liability of the Manager) necessary or incidental to,
       or in connection with, the accomplishment of the purposes of the Company,
       as may be lawfully carried on or performed by a limited liability company
       under the laws of each state in which the Company is then formed or
       qualified;

              (k) Take, or refrain from taking, all actions, not expressly
       proscribed or limited by this Agreement, as may be necessary or
       appropriate to accomplish the purposes of the Company;

              (l) Institute, prosecute, defend, settle, compromise, and dismiss
       lawsuits or other judicial or administrative proceedings brought on or in
       behalf of, or against, the Company, the Members or the Manager in
       connection with activities arising out of, connected with, or incidental
       to this Agreement, and to engage counsel or others in connection
       therewith;

              (m) Adopt appropriate management incentive plans and employee
       benefit plans.

              (n) Purchase, take, receive, subscribe for or otherwise acquire,
       own, hold, vote, use, employ, sell, mortgage, lend, pledge, or otherwise
       dispose of, and otherwise use and deal in and with, shares or other
       interests in or obligations of domestic or foreign corporations,
       associations, general or limited companies, other limited liability
       companies, or individuals or direct or indirect obligations of the United
       States or of any government, state, territory, government district or
       municipality or of any instrumentality of any of them.

                                     - 18 -
<PAGE>   23

       6.2 Officers; Delegation of Authority. The Manager shall be entitled to
appoint the officers of the Company. The Manager shall have the power to
delegate authority to such officers, employees, agents and representatives of
the Company as it may from time to time deem appropriate. Any delegation of
authority to take any action must be approved in the same manner as would be
required for the Manager to approve such action directly.

       6.3 Duties and Obligations; Liability.

              6.3.1 Continuation of Existence. The Manager shall take all
       actions which may be necessary or appropriate (i) for the continuation of
       the Company's valid existence as a limited liability company under the
       laws of the State of Delaware and of each other jurisdiction in which
       such existence is necessary to protect the limited liability of the
       Members or to enable the Company to conduct the business in which it is
       engaged and (ii) for the accomplishment of the Company's purposes,
       including the acquisition, development, maintenance, preservation, and
       operation of the Company Assets in accordance with the provisions of this
       Agreement and applicable laws and regulations.

              6.3.2 Limitation of Liability. No Member or Manager shall be
       liable under a judgment, decree or order of court, or in any other
       manner, for a debt, obligation or liability of the Company. No Member or
       Manager or officer of the Company shall be personally liable to the
       Company or to any Member for monetary damages for breach of fiduciary
       duty as a Member or Manager or officer of the Company; provided, however,
       that this section shall not eliminate or limit the liability of the
       Manager (i) for any breach of the Manager's duty of loyalty to the
       Company or its Members; (ii) for acts or omissions not in good faith or
       which involve intentional misconduct or knowing violation of law; or
       (iii) for any transaction from which the Manager derived an improper
       personal benefit.

       6.4 Reimbursements. The Company shall reimburse the Members and the
Manager for all expenses incurred and paid by any of them in the organization of
the Company and as authorized by the Company, in the conduct of the Company's
business, including, but not limited to, expenses of maintaining an office,
telephones, travel, office equipment and secretarial and other personnel as may
reasonably be attributable to the Company. Such expenses shall not include any
expenses incurred in connection with a Member's exercise of its rights as a
Member apart from the authorized conduct of the Company's business. Such
reimbursement shall be treated as expenses of the Company and shall not be
deemed to constitute distributions to any Member of profit, loss or capital of
the Company.

       6.5 Indemnification.

              6.5.1 Indemnification - Actions other than by the Company. The
       Company shall indemnify any person who was or is a party or is threatened
       to be made a party to any threatened, pending or completed action, suit
       or proceeding, whether civil, criminal, administrative or investigative
       (other than an action by or in the right of the Company) by reason of the
       fact that the person is or was the Manager or a Member of the Company, or
       is or was the Manager or a Member of the Company serving at the request
       of the Company as a director, officer, manager, employee or agent of
       another corporation,

                                     - 19 -
<PAGE>   24

       partnership, joint venture, limited liability company or other
       enterprise, against expenses (including attorneys' fees), judgments,
       fines and amounts paid in settlement actually and reasonably incurred by
       the person in connection with such action, suit or proceeding if the
       person acted in good faith and in a manner the person reasonably believed
       to be in or not opposed to the best interests of the Company and, with
       respect to any criminal action or proceeding, had no reasonable cause to
       believe the person's conduct was unlawful. The termination of any action,
       suit or proceeding by judgment, order, settlement, conviction, or upon a
       plea of nolo contendere or its equivalent, shall not, of itself, create a
       presumption that the person did not act in good faith and in a manner
       which the person reasonably believed to be in or not opposed to the best
       interests of the Company and, with respect to any criminal action or
       proceeding, had reasonable cause to believe that his conduct was
       unlawful.

              6.5.2 Indemnification - Actions by the Company. The Company shall
       indemnify any person who was or is a party or is threatened to be made a
       party to any threatened, pending or completed action or suit by or in the
       right of the Company to procure a judgment in its favor by reason of the
       fact that the person is or was the Manager or a Member of the Company, or
       is or was serving at the request of the Company as a director, officer,
       manager, employee or agent of another corporation, partnership, joint
       venture, limited liability company or other enterprise against expenses
       (including attorneys' fees) actually and reasonably incurred by the
       person in connection with the defense or settlement of such action or
       suit if the person acted in good faith and in a manner the person
       reasonably believed to be in or not opposed to the best interests of the
       Company, except that no indemnification shall be made in respect of any
       claim, issue or matter as to which such person shall have been adjudged
       to be liable to the Company unless and only to the extent that the Court
       of Chancery or the court in which such action or suit was brought shall
       determine upon application that, despite the adjudication of liability
       but in view of all the circumstances of the case, such person is fairly
       and reasonably entitled to indemnity for such expenses which the Court of
       Chancery or such other court shall deem proper.

              6.5.3 Expenses Payable in Advance. Expenses incurred by the
       Manager or a Member in defending or investigating a threatened or pending
       action, suit or proceeding shall be paid by the Company in advance of the
       final disposition of such action, suit or proceeding upon receipt of an
       undertaking by or on behalf of the Manager or such Member to repay such
       amount if it shall ultimately be determined that he is not entitled to be
       indemnified by the Company pursuant to this Section 6.5.

              6.5.4 Nonexclusivity of Indemnification and Advancement of
       Expenses. The indemnification and advancement of expenses provided by or
       granted pursuant to this Section 6.5 shall not be deemed exclusive of any
       other rights to which those seeking indemnification or advancement of
       expenses may be entitled under any agreement, contract, action of the
       Manager or pursuant to the direction (howsoever embodied) of any court of
       competent jurisdiction or otherwise, both as to action in his official
       capacity and as to action in another capacity while holding such office.
       The provisions of this Section 6.5 shall not be deemed to preclude the
       indemnification of any person who is not

                                     - 20 -
<PAGE>   25

       specified in Section 6.5.1 but whom the Company has the power or
       obligation to indemnify under the provisions of the Act or otherwise.

              6.5.5 Insurance. The Company may purchase and maintain insurance
       on behalf of any person who is or was a Member of the Company, or is or
       was serving as Manager of the Company or at the request of the Company as
       a director, officer, manager, employee or agent of another corporation,
       partnership, limited liability company, joint venture or other enterprise
       against any liability asserted against him and incurred by him in any
       such capacity, or arising out of his status as such, whether or not the
       Company would have the power or the obligation to indemnify him against
       such liability under the provisions of this Section 6.5.

              6.5.6 Survival of Indemnification and Advancement of Expenses. The
       indemnification and advancement of expenses provided by, or granted
       pursuant to, this Section 6.5 shall continue as to a person who has
       ceased to be the Manager or a Member and shall inure to the benefit of
       the heirs, executors and administrators of such a person.

              6.5.7 Indemnification of Officers, Employees and Agents. The
       Company may, to the extent authorized from time to time by the Manager,
       provide rights to indemnification and to the advancement of expenses to
       officers, employees and agents of the Company similar to those conferred
       in this Section 6.5 to the Manager and Members of the Company.

       6.6 Lack of Authority. Except as otherwise provided herein, no Member
(other than the Member that is the Manager), in its capacity as such, shall (i)
participate in the management of the Company or have any control over the
Company business or (ii) have any right or authority to act for or to bind the
Company or to vote on or consent to any other matter, act, decision or document
involving the Company or its business.

       6.7 Member Voting. For situations for which the approval of the Members
is required by applicable law or under this Agreement, the Members shall act
through meetings and written consents as described in this Section 6.7, and each
Member shall be entitled to vote based on such Member's Percentage Interest. The
actions by the Members permitted hereunder may be taken at a meeting called by
the Manager on at least five (5) days' prior written notice to the other
Members, which notice shall state the purpose or purposes for which such meeting
is being called. Alternatively, the actions by the Members permitted hereunder
may be taken by written consent (without a meeting and without a vote) so long
as such consent is signed by the Members representing a sufficient amount of
Percentage Interests that would be necessary to authorize or take such action at
a meeting at which all Members entitled to vote thereon were present and voted.
Prompt notice of the action so taken without a meeting shall be given to those
Members entitled to vote or consent who have not consented in writing. Any
action taken pursuant to such written consent of the Members shall have the same
force and effect as if taken by the Members at a meeting thereof.

                                     - 21 -
<PAGE>   26

                                    ARTICLE 7
                  BOOKS AND RECORDS; ACCOUNTING; TAX ELECTIONS

       7.1 Books and Records. The Company shall keep, at its principal place of
business, or at such other location as the Manager shall deem appropriate,
ledgers, other books of account, and financial records of receipts and
disbursements, other financial activities, and the internal affairs of the
Company for at least the current and past four Fiscal Years (collectively, the
"Records"). Except as otherwise expressly set forth herein, all decisions as to
accounting matters shall be made by the Manager in its sole judgment and
discretion.

       7.2 Delivery of Records. Upon the written request of a Member for any
purpose reasonably related to the Member's Membership Interest, the Company,
subject to such reasonable standards as may be established from time to time by
the Manager, shall deliver to such requesting Member (or, to the extent so
directed, to its agent or attorney), at such requesting Member's cost and
expense, a copy of the following information, to the extent requested:

              (a) a copy of the Company's federal, state and local income tax or
       information returns for each Fiscal Year;

              (b) a copy of this Agreement, as amended, and any Certificates,
       together with executed copies of any written powers of attorney pursuant
       to which this Agreement, as amended, and any Certificate have been
       executed;

              (c) such other information as the Company shall be required to
       provide to the Members pursuant to applicable law (including, without
       limitation, the Act);

              (d) such additional information as a Member may reasonably request
       in order to comply with the requirements of any applicable laws, rules or
       regulations; and

              (e) a list of the names and addresses of all then-current Members.

       7.3 Inspection. Members (personally or through an authorized
representative) may, for purposes reasonably related to their Interests, examine
and copy (at their own cost and expense) the Records of the Company at all
reasonable business hours upon ten (10) days prior written notice to the
Company. Such inspection shall not occur more than once in any twelve (12) month
period without the consent of the Manager.

       7.4 Reports to the Members.

              (a) Within ninety (90) days after the end of each Fiscal Year or
       as soon as practicable thereafter, the Company shall send to each Person
       who was a Member at any time during such year financial statements of the
       Company for such year prepared in accordance with generally accepted
       accounting principles. The Manager may, but shall not be required to,
       cause such annual financial statements to be audited by and reported upon
       by independent public accountants.

                                     - 22 -
<PAGE>   27

              (b) Within ninety (90) days after the end of each Fiscal Year or
       as soon as practicable thereafter, the Company shall send to each Member
       the calculation of any allocations under Article 5 (to the extent not set
       forth in the annual financial statements).

              (c) Within ninety (90) days following the end of each Fiscal Year
       of the Company or as soon as practicable thereafter, the Company shall
       send to each Member a report that shall include all necessary information
       required by the Members for preparation of their federal, state and local
       income or franchise tax or information returns, including each Member's
       pro rata share of Net Income, Net Loss and any other items of income,
       gain, loss and deduction for such Fiscal Year.

       7.5 Company Tax Elections, Tax Controversies. The Manager shall have the
right in its sole and absolute discretion to make all elections for the Company
provided for in the Code, the Regulations or otherwise, including, but not
limited to, the elections provided for in Section 754 of the Code. The K&B
Member, or such other Member as may be designated by the Manager from time to
time, is hereby designated as the "Tax Matters Partner" pursuant to the
requirements of Section 6231(a)(7) of the Code and in such capacity shall
represent the Company in any disputes, controversies or proceedings with the
Internal Revenue Service or any other taxing authority. Except to the extent
prohibited by law, each Member hereby waives the right to participate in any
administrative or similar proceedings relating to the determination of
partnership tax items at the Company level.

       7.6 Confidentiality of Information. Except as permitted by the Manager or
required by applicable law, each Member shall keep confidential from all Persons
(except other Members or the Member's representatives on a need-to-know basis,
which Persons shall be bound by this Section 7.6 as if they were Members) all of
the information, documents or reports described in this Article 7.

                                    ARTICLE 8
                             TRANSFERS OF INTERESTS

       8.1 Member Transfers. No Member shall Transfer any Interest without first
obtaining the prior written consent of the Manager, which consent may be
withheld in the Manager's sole and absolute discretion. Prior to Transferring
any Interest to any Person, a Transferor shall (i) cause the prospective
Transferee to execute a counterpart to this Agreement pursuant to which such
Transferee shall agree to be bound by the provisions of this Agreement and (ii)
deliver an opinion of counsel which (to the Company's reasonable satisfaction)
is knowledgeable in securities law matters to the effect that such Transfer of
such Interest may be effected without registration of such Interest under the
Securities Act, and is otherwise in compliance with all state and federal laws.

       8.2 Further Restrictions. Notwithstanding any contrary provision in this
Agreement, unless expressly waived in writing by the Company, which waiver may
be given or withheld in the Manager's sole and absolute discretion, any
otherwise permitted Transfer shall be null and void if:

                                     - 23 -
<PAGE>   28

              (a) such Transfer would cause a termination of the Company for
       federal or state, if applicable, income tax purposes;

              (b) such Transfer would, in the opinion of counsel to the Company,
       cause the Company to cease to be classified as a partnership for federal
       or state income tax purposes;

              (c) such Transfer requires the registration of such Transferred
       Interest pursuant to any applicable federal or state securities laws;

              (d) such Transfer would cause the Company to become a "Publicly
       Traded Partnership," as such term is defined in Sections 469(k)(2) or
       7704(b) of the Code;

              (e) such Transfer would cause the Company to have more than one
       hundred (100) members (for purposes of this Section 8.2(e), the term
       "members" includes those Persons indirectly owning an Interest through a
       partnership, limited liability company, "S" corporation or grantor trust
       (each such entity, a "flow-through entity"), but only if substantially
       all of the value of such Person's interest in the flow-through entity is
       attributable to the flow-through entity's Interest (direct or indirect)
       in the Company);

              (f) such Transfer involves Interests being traded on an
       "established securities market" or a "secondary market or the substantial
       equivalent thereof" as those terms are defined in Regulation Section
       1.7704-1 (in addition, such Transfers shall not be "recognized" (as that
       term is defined in Regulation Section 1.7704-1(d)(2)) by the Company);

              (g) such Transfer subjects the Company to regulation under the
       Investment Company Act, the Investment Advisers Act or ERISA, each as
       amended;

              (h) such Transfer results in a violation of applicable laws;

              (i) such Transfer is made to any Person who lacks the legal right,
       power or capacity to own such Interest; or

              (j) the Company does not receive written instruments (including,
       without limitation, copies of any instruments of Transfer accompanied by
       representations and warranties of the Transferee substantially identical
       to those contained in Article 10 and such Transferee's consent to be
       bound by this Agreement) that are in a form satisfactory to the Company
       (as determined in the Manager's sole and absolute discretion).

       8.3 Effect of Transfer.

              8.3.1 Any Member who shall transfer any Interest in the Company
       shall cease to be a Member of the Company with respect to such Interest
       and shall no longer have any rights or privileges of a Member with
       respect to such Interest.

              8.3.2 Any Person who acquires in any manner whatsoever any
       Interest in the Company, irrespective of whether such Person has executed
       a counterpart to this

                                     - 24 -
<PAGE>   29

       Agreement, shall be deemed by the acceptance of the benefits of the
       acquisition thereof to have agreed to be subject to and bound by all of
       the terms and conditions of this Agreement that any predecessor in such
       Interest in the Company was subject to or by which such predecessor was
       bound.

       8.4 Admissions, Withdrawals and Removals. No Person shall be admitted to
the Company as a Member, except in accordance with Section 3.2 (with respect to
Persons receiving Interests directly from the Company) and Section 8.5 (with
respect to Persons receiving Interests from a Member). No Member shall be
entitled to withdraw from being a Member of the Company except with the written
consent of the Manager. Except as otherwise provided in Section 9.2(c), no
admission, withdrawal or removal of a Member shall cause the dissolution of the
Company. Any purported admission, withdrawal or removal which is not in
accordance with this Agreement shall be null and void.

       8.5 Admission of Transferee as Substitute Member. Upon the Transfer by a
Member of a Membership Interest to a Transferee, such Transferee shall be
admitted as a Member (a "Substitute Member") only if and when each of the
following conditions in clauses (a) through (d) below are satisfied.

              (a) the Company consents in writing to such admission, which
       consent may be given or withheld, or made subject to such conditions as
       are determined by the Manager, in the Manager's sole and absolute
       discretion;

              (b) the Company receives written instruments (including, without
       limitation, copies of any instruments of Transfer and such Transferee's
       consent to be bound by this Agreement as a Substitute Member) that are in
       a form satisfactory to the Manager (as determined in its sole and
       absolute discretion);

              (c) the Company receives an opinion of counsel, which opinion and
       counsel shall be reasonably acceptable to the Manager, to the effect that
       such Transfer is in compliance with this Agreement and all applicable
       laws; and

              (d) the parties to the Transfer, or any one of them, pays all of
       the Company's reasonable expenses connected with such Transfer
       (including, but not limited to, the reasonable legal and accounting fees
       of the Company).

       8.6 Vesting of Interests.

              8.6.1 Vesting Schedule. Except as otherwise determined by the
       Manager, the Interests of each Member other than the Interests held by
       the K&B Member shall vest 100% on the date of the third anniversary of
       the admission of the Member holding such interest. Until such date, all
       the Member's Interest shall be unvested. Upon a Member's ceasing to
       provide services to a member of the K&B Group, such Member's unvested
       Interests (whether held by the Member or one or more of the Member's
       transferees) and any payments due thereon shall be automatically
       forfeited.

              8.6.2 Accelerated Vesting. Upon an Acceleration Event, any
       unvested Interests of a Member shall be deemed to have vested in full
       immediately prior to such

                                     - 25 -
<PAGE>   30

       Acceleration Event. The Manager may elect in it sole discretion to
       accelerate the vesting of an Interest.

       8.7 Repurchase Rights.

              8.7.1 Right to Repurchase. Upon a Member's death or Disability or
       ceasing to provide services to a member of the KB Group, that Member's
       vested Interest (whether held by the Member or one or more of the
       Member's transferees) shall be subject to repurchase first by the KB
       Member and second by the Company pursuant to the terms and conditions set
       forth in this Section 8.7 (the "Repurchase Option"). The Repurchase
       Option will continue until the liquidation of the Company pursuant to
       Section 9.2.

              8.7.2 Repurchase Price. With regard to vested Interests, the
       Repurchase Price shall be the Fair Market Value of such Interest on the
       date of the Repurchase Notice (defined below).

              8.7.3 Repurchase by the K&B Member. The KB Member may elect to
       purchase all or any portion of the Interest subject to repurchase by
       delivering written notice (the "KB Member Election") to the Company. The
       KB Member Election shall set forth the amount of the Interest (measured
       by Percentage Interest) to be acquired from the Member.

              8.7.4 Repurchase by the Company. If for any reason the KB Member
       does not elect to purchase all of the Interest pursuant to the Repurchase
       Option, the Company shall be entitled to exercise the Repurchase Option
       for all or a portion of the Interest the KB Member has not elected to
       purchase (the "Available Securities").

              8.7.5 Notice to the Holder of the Member's Interest. The Company
       shall notify each holder of Member's Interest as to the amount of the
       Interest being purchased from such holder by the KB Member and/or the
       Company (the "Repurchase Notice"). The Repurchase Notice shall set forth
       the amount of the Interest (measured by Percentage Interest) to be
       acquired from the Member, the aggregate consideration to be paid for such
       Interest, and the time and place for the closing of the transaction (the
       "Repurchase Closing"). Upon delivery of the Repurchase Notice, the
       Member's Interest to be repurchased shall automatically represent solely
       the right to receive the applicable repurchase price and such Member's
       Interest shall no longer be deemed to be outstanding.

              8.7.6 Repurchase Closing. Subject to Section 8.7.7, the closing of
       the purchase of the Member's Interest pursuant to the Repurchase Option
       shall take place on the date designated in the Repurchase Notice. Subject
       to Section 8.7.7, the K&B Member and/or the Company shall pay for the
       Member's Interest to be purchased pursuant to the Repurchase Option by
       delivery of a check or wire transfer of funds (except that the K&B Member
       and the Company shall be permitted to reduce the payments to the Member
       hereunder by the aggregate of all bona fide debts to the K&B Member
       and/or the Company, respectively, by the Member). The purchasers of the
       Member's Interest hereunder shall be entitled to receive customary
       representations and warranties from the

                                     - 26 -
<PAGE>   31

       sellers regarding such sale of securities (including representations and
       warranties regarding good title to such securities, free and clear of any
       liens or encumbrances) and to require that signatures be guaranteed by a
       national bank or reputable securities broker.

              8.7.7 Certain Restrictions. Notwithstanding anything to the
       contrary contained in this Agreement, all repurchases of a Member's
       Interest by the KB Member and/or the Company shall be subject to
       applicable restrictions contained in the Act. If any such restrictions
       prohibit the repurchase of Member's Interest hereunder which the KB
       Member and/or the Company is otherwise entitled or required to make, the
       time periods provided in this Section 8.7 shall be suspended, and the KB
       Member and/or the Company may make such repurchases as soon as it is
       permitted to do so under such restrictions. In addition, if any such
       restrictions prohibit the repurchase of Member's Interest hereunder with
       a check or wire transfer of funds or if the K&B Member and/or the Company
       otherwise do not have sufficient available cash, then the KB Member
       and/or the Company may make such repurchases with a five-year subordinate
       note bearing interest (payable at maturity) at a rate per annum equal to
       the Prime Rate (a "Subordinated Note"). Any notes issued by the Company
       pursuant to this Section 8.7.7 shall be subject to any restrictive
       covenants to which the Company is subject at the time of such purchase
       and any subordination provisions required by the Company's lenders.

                                    ARTICLE 9
                   DISSOLUTION AND TERMINATION OF THE COMPANY

       9.1 Limitations. The Company may be dissolved, liquidated, and terminated
and have its affairs wound up only pursuant to the provisions of this Article 9,
and the Members hereto do hereby irrevocably waive any and all other rights they
may have to cause a dissolution of the Company or a sale or partition of any or
all of the Company Assets.

       9.2 Exclusive Causes. The following and only the following events shall
cause the Company to be dissolved, liquidated, and terminated:

              (a) A determination be the Manager to dissolve the Company;

              (b) The Incapacity of the sole remaining Member; or

              (c) A judicial dissolution.

Any dissolution of the Company other than as provided in this Section 9.2 shall
be a dissolution in contravention of this Agreement.

       9.3 Effect of Dissolution. The dissolution of the Company shall be
effective on the day on which the event occurs giving rise to the dissolution,
but the Company shall not terminate until it has been wound up, its assets have
been distributed as provided in Section 9.4 and its Certificate of Cancellation
has been filed in accordance with the Act. Notwithstanding the dissolution of
the Company, prior to the termination of the Company, the business of the
Company and the affairs of the Members, as such, shall continue to be governed
by this Agreement. Nothing in this section is intended to limit the survival of
provisions of this Agreement that expressly survive the dissolution and
termination of the Company.

                                     - 27 -
<PAGE>   32

       9.4 Liquidation and Final Distribution Proceeds. Upon the dissolution of
the Company pursuant to Section 9.2, the Company shall thereafter engage in no
further business other than that which is necessary to wind up the business and
the Manager, after the establishment of appropriate reserves, shall liquidate
all Company Assets and distribute the cash proceeds therefrom. The cash proceeds
from the liquidation of the Company Assets shall be applied or distributed by
the Company in the following order:

              (a) First, to the payment and discharge of all of the Company's
       debts and other liabilities to creditors (including Members that are
       creditors); and

              (b) The balance, if any, to the Members in proportion to their
       positive Capital Account balances, after giving effect to all
       contributions, distributions and allocations for all periods.

Notwithstanding the foregoing, in the event that the Manager determines that an
immediate sale of all or any portion of the Company Assets would cause undue
loss to the Members, the Manager, in order to avoid such loss, may, to the
extent not then prohibited by the Act, either defer liquidation of and withhold
from distribution for a reasonable time any Company Assets except those
necessary to satisfy the Company's debts and obligations, or distribute such
Company Assets to the Members in kind, provided that, with respect to
distributions in kind of Company Assets other than marketable securities, the
Manager shall give advance written notice of any such in-kind distribution and,
if after receiving such notice a Member shall determine that there is a
reasonable likelihood that any such distribution in kind would cause such Member
to be in violation of any applicable law, regulation or order, such Member shall
give written notice thereof to the Manager within five (5) Business Days
following its receipt of the notice of distribution, and the Member and the
Manager shall each use its best efforts to make alternative arrangements.

       9.5 Restoration of Deficit Capital Account Balances. If any Member has a
deficit balance in its Capital Account (after giving effect to all
contributions, distributions and allocations for all Fiscal Years, including the
year during which the liquidation occurs), then such Member shall have no
obligation to make any Capital Contribution with respect to such deficit, and
such deficit shall not be considered a debt owed to the Company or to any other
Person for any purpose whatsoever.

                                   ARTICLE 10
                         REPRESENTATIONS AND WARRANTIES

       10.1 Representations and Warranties of the Members. Each Member hereby
makes the following representations and warranties to the Company and each other
Member:

              (a) This Agreement constitutes a valid and binding obligation of
       such Member, and is enforceable against such Member in accordance with
       its terms.

              (b) The execution and delivery of this Agreement and the
       consummation of the transactions contemplated herein will not conflict
       with or result in any violation of or default under any material
       agreement or other instrument to which such Member is a party or by which
       such Member, or any of its property is bound, or any permit, franchise,

                                     - 28 -
<PAGE>   33

       judgment, decree, statute, order, writ, rule or regulation applicable to
       such Member or its business or property.

              (c) Such Member is acquiring its Membership Interest solely for
       investment, for its account and not with a view to, or for resale in
       connection with, the distribution or other disposition thereof, except
       for such distributions and dispositions which are (A) explicitly
       permitted or contemplated under the terms of this Agreement as well as
       (B) effected in compliance with the Securities Act of 1933, as amended
       (the "Securities Act"), the rules and regulations of the Securities and
       Exchange Commission promulgated thereunder and all applicable state
       securities and "blue sky" laws.

              (d) Such Member understands that the purchase of Membership
       Interests is a speculative investment which involves a high degree of
       risk of loss of its investment therein, there are substantial
       restrictions on the transferability of the Membership Interests under the
       provisions of this Agreement and the Securities Act, and there will never
       be a public market for the Membership Interests and, accordingly, it may
       not be possible to liquidate its investment in the Company prior to the
       dissolution and liquidation of the Company.

              (e) Such Member's financial situation is such that it can afford
       to bear the economic risk of holding the Membership Interests for an
       indefinite period of time and can afford to suffer a complete loss of its
       investment in the Company.

              (f) Such Member's knowledge and experience in financial and
       business matters are such that it is capable of evaluating the merits and
       risks of its acquisition of its Membership Interests.

              (g) No representations or warranties have been made to such Member
       or its representatives concerning the Membership Interests or the
       Company, their prospects or other matters except as set forth in this
       Agreement.

              (h) Such Member is an "accredited investor" as defined in Rule
       501(a) of Regulation D promulgated under the Securities Act.

              The foregoing representations and warranties shall survive the
       expiration or termination of this Agreement. Each Member agrees to
       indemnify, defend, protect, and hold harmless the Company against any and
       all loss, liability, claim, damage and expense whatsoever (including, but
       not limited to, any and all expenses whatsoever reasonably incurred in
       investigating, preparing or defending against any litigation commenced or
       threatened or any claim whatsoever) arising out of or based upon any
       false representation or warranty made by the Member herein.

                                   ARTICLE 11
                                  MISCELLANEOUS

       11.1 Appointment of Company as Attorney-in-Fact.

                                     - 29 -
<PAGE>   34

              11.1.1 Each Member, including each Additional Member, by its
       execution of this Agreement, irrevocably constitutes and appoints the
       Company as its true and lawful attorney-in-fact with full power and
       authority in its name, place and stead to execute, acknowledge, deliver,
       swear to, file and record at the appropriate public offices such
       documents as may be necessary or appropriate to carry out the provisions
       of this Agreement, including but not limited to:

                     (a) All Certificates and other instruments (including
              counterparts of this Agreement), and all amendments thereto, which
              the Manager deems appropriate to form, qualify, continue or
              otherwise operate the Company as a limited liability company (or
              other entity in which the Members will have limited liability
              comparable to that provided in the Act) in accordance with this
              Agreement, in the State of Delaware and the jurisdictions in which
              the Company may conduct business or in which such formation,
              qualification or continuation is, in the opinion of the Manager,
              necessary or desirable to protect the limited liability of the
              Members.

                     (b) All amendments to this Agreement adopted in accordance
              with the terms hereof, and all instruments which the Manager deems
              appropriate to reflect a change or modification of the Company in
              accordance with the terms of this Agreement.

                     (c) All conveyances of Company Assets, and other
              instruments which the Manager reasonably and in good faith deems
              necessary for the orderly conduct of the Company's business.

              11.1.2 The appointment by all Members of the Company as
       attorney-in-fact shall be deemed to be a power coupled with an interest,
       in recognition of the fact that each of the Members under this Agreement
       will be relying upon the power of the Company to act as contemplated by
       this Agreement in any filing and other action by it and shall survive the
       disability or Incapacity of any Person hereby giving such power, and the
       transfer or assignment of all or any portion of the Interest of such
       Person in the Company.

       11.2 Amendments.

              11.2.1 Amendments to this Agreement may be made from time to time
       as determined by the Manager, provided, however, except as otherwise
       contemplated by other provisions of this Agreement, no amendment may be
       made that diminishes the rights or increases the obligations of a Member
       without the consent of such Member. If any Member withholds consent to an
       amendment that diminishes the rights or increases the obligations of such
       Member, the amendment may nonetheless be made upon a vote of a majority
       of the Members in accordance with Section 6.7, except that each Member
       shall have one vote without regard to Percentage Interest.

              11.2.2 In addition to other amendments authorized herein,
       amendments may be made to this Agreement from time to time by the
       Company, at the direction of the Manager, without the consent of any
       Member: (a) to cure any ambiguity, to correct or

                                     - 30 -
<PAGE>   35

       supplement any provision herein which may be inconsistent with any other
       provision herein, or to make any other provisions with respect to matters
       or questions arising under this Agreement that are not inconsistent with
       the provisions of this Agreement; (b) to delete or add any provision of
       this Agreement required to be so deleted or added by any federal or state
       official, which addition or deletion is deemed by such official to be for
       the benefit or protection of all of the Members; (c) to take such actions
       as may be necessary (if any) to ensure that the Company will be treated
       as a partnership for federal income tax purposes; and (d) to amend this
       Agreement, pursuant to the power of attorney granted to the Company, to
       reflect the admission of any Additional Member or the issuance of
       additional Interests. The Company shall provide prompt written notice of
       any such amendments to the Members.

              11.2.3 In making any amendments, there shall be prepared and filed
       by, or for, the Company, such documents and certificates as may be
       required under the Act and under the laws of any other jurisdiction
       applicable to the Company.

       11.3 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto pertaining to the subject matter hereof and fully
supersedes any and all prior or contemporaneous agreements or understandings
between the parties hereto pertaining to the subject matter hereof.

       11.4 Further Assurances. Each of the parties hereto does hereby covenant
and agree on behalf of itself, its successors, and its assigns, without further
consideration, to prepare, execute, acknowledge, file, record, publish, and
deliver such other instruments, documents and statements, and to take such other
action as may be required by law or reasonably necessary to effectively carry
out the purposes of this Agreement.

       11.5 Notices. Any notice, consent, payment, demand, or communication
required or permitted to be given by any provision of this Agreement shall be in
writing and shall be (a) delivered personally to the Person or to an officer of
the Person (as designated by such Person to receive any such notice or, in the
absence of such designation, any officer of such Person) to whom the same is
directed, or (b) sent by facsimile, recognized overnight courier service or
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows: if to the Company, to the Company at the address set forth
in Section 2.3 hereof, or to such other address as the Company may from time to
time specify by notice to the Members; if to a Member, to such Member at the
address set forth in Exhibit A, or to such other address as such Member may from
time to time specify by notice to the Company. Any such notice shall be deemed
to be delivered, given and received for all purposes as of: (i) the date so
delivered, if delivered personally, (ii) upon receipt, if sent by facsimile or
courier service, or (iii) on the date of receipt or refusal indicated on the
return receipt, if sent by registered or certified mail, return receipt
requested, postage and charges prepaid and properly addressed.

       11.6 Governing Law. This Agreement, including its existence, validity,
construction, and operating effect, and the rights of each of the parties
hereto, shall be governed by and construed in accordance with the laws of the
State of Delaware without regard to otherwise governing principles of conflicts
of law.

                                     - 31 -
<PAGE>   36

       11.7 Binding Effect. Except as otherwise expressly provided herein, this
Agreement shall be binding on and inure to the benefit of the parties hereto,
their heirs, executors, administrators, successors and all other Persons
hereafter holding, having or receiving an interest in the Company, whether as
assignees, Transferees, Substitute Members or otherwise.

       11.8 Severability. In the event that any provision of this Agreement as
applied to any party or to any circumstance, shall be adjudged by a court to be
void, unenforceable or inoperative as a matter of law, then the same shall in no
way affect any other provision in this Agreement, the application of such
provision in any other circumstance or with respect to any other party, or the
validity or enforceability of the Agreement as a whole.

       11.9 Confidentiality. Without limiting the provisions of Section 7.6,
each party hereto agrees that the provisions of this Agreement, all
understandings, agreements and other arrangements between and among the parties,
and all other non-public information received from, or otherwise relating to,
the Company or any Member, shall be confidential, and that such parties shall
not disclose or otherwise release to any other Person (other than another party
hereto) such matters, without the written consent of the Company, as determined
by the Manager. The obligations of the parties hereunder shall not apply: (a) to
information already known to the general public other than as a result of a
breach of this covenant, or (b) to any party to the extent that the disclosure
by such party of such confidential information is required by applicable law or
by any federal, state or local regulatory body with jurisdiction over such
party, but only that portion of such confidential information which, in the
written opinion of counsel for such Member, is required or would be required to
be furnished to avoid liability for contempt or the suffering of other material
judicial or governmental penalty or censure, provided that, prior to disclosing
such confidential information, a party shall, to the extent practicable, notify
the Company thereof, which notice shall include the basis upon which such party
believes the information is required to be disclosed.

       11.10 Counterparts. This Agreement may be executed in any number of
multiple counterparts, each of which shall be deemed to be an original copy and
all of which shall constitute one agreement, binding on all parties hereto.

       11.11 Waivers. No waiver by any Member of any default with respect to any
provision, condition or requirement hereof shall be deemed to be a waiver of any
other provision, condition or requirement hereof, nor shall any delay or
omission of any Member to exercise any right hereunder in any manner impair the
exercise of any such right accruing to it thereafter.

       11.12 Preservation of Intent. If any provision of this Agreement is
determined by an arbitrator or any court having jurisdiction to be illegal or in
conflict with any laws of any state or jurisdiction, then the Members agree that
such provision shall be modified to the extent legally possible so that the
intent of this Agreement may be legally carried out. If any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect or for any reason, then
the validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected, it being intended that all of the Members' rights and privileges
shall be enforceable to the fullest extent permitted by law.

                                     - 32 -
<PAGE>   37

       11.13 Certain Rules of Construction. Any ambiguities shall be resolved
without reference to which party may have drafted this Agreement. All Article or
Section titles or other captions in this Agreement are for convenience only, and
they shall not be deemed part of this Agreement and in no way define, limit,
extend or describe the scope or intent of any provisions hereof. Unless the
context otherwise requires: (a) a term has the meaning assigned to it; (b) an
accounting term not otherwise defined has the meaning assigned to it in
accordance with generally accepted accounting principles; (c) "or" is not
exclusive; (d) words in the singular include the plural, and words in the plural
include the singular; (e) provisions apply to successive events and
transactions; (f) "herein," "hereof" and other words of similar import refer to
this Agreement as a whole and not to any particular Article, Section or other
subdivision; (g) all references to "clauses," "Sections" or "Articles" refer to
clauses, Sections or Articles of this Agreement; and (h) any pronoun used in
this Agreement shall include the corresponding masculine, feminine or neuter
forms.

       11.14 Company Advisers. THE COMPANY AND THE MANAGER ARE NOT REPRESENTED
BY SEPARATE COUNSEL. THE ATTORNEYS WHO PERFORM SERVICES FOR THE COMPANY ALSO
PERFORM SERVICES FOR THE MANAGER. IT IS CONTEMPLATED THAT SUCH DUAL
REPRESENTATION WILL CONTINUE. TO THE EXTENT THAT THE FOREGOING REPRESENTATION
CONSTITUTES A CONFLICT OF INTEREST, THE COMPANY, THE MANAGER AND THE MEMBERS
HEREBY EXPRESSLY WAIVE ANY SUCH CONFLICT OF INTEREST. THE MEMBERS ACKNOWLEDGE
THAT (i) COUNSEL FOR THE COMPANY AND THE MANAGER ARE NOT REPRESENTING THE
MEMBERS (OTHER THAN THE KB MEMBER) IN CONNECTION WITH THE COMPANY OR THIS
AGREEMENT AND (ii) THE CONTINUED REPRESENTATION OF THE COMPANY AND THE MANAGER
BY SUCH COUNSEL WILL NOT BE DEEMED TO BE THE REPRESENTATION BY SUCH COUNSEL OF
ANY MEMBER (OTHER THAN THE KB MEMBER).

       11.15 Arbitration. All claims, disputes and other matters in question
arising out of, or relating to this Agreement or the performance thereof,
including without limitation questions as to whether a matter is governed by
this arbitration clause, shall be subject to arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association (the "AAA
Rules") then pertaining, insofar as the AAA Rules are not inconsistent with the
provisions expressly set forth in this Agreement, unless the parties mutually
agree otherwise, and pursuant to the following procedures: (i) the arbitration
shall take place in Los Angeles, California; (ii) each party shall select an
arbitrator to agree on a single neutral arbitrator having at least ten (10)
years experience in complex commercial arbitration involving corporate,
partnership or limited liability company issues; (iii) each party will, upon the
written request of the other party, provide the other with copies of documents
relevant to the issues raised by any claim or counterclaim; (iv) each party
shall have the right to take the deposition of one individual and any expert
witness(es) designated by the other party; (v) other discovery may be ordered by
the arbitrator to the extent the arbitrator deems additional discovery
appropriate, and any dispute regarding discovery, including disputes as to the
need therefor or the relevance or the scope thereof, shall be determined by the
arbitrator, which determination shall be conclusive; (vi) the arbitrator shall
have sixty (60) days following their appointment in which to resolve the
question at issue, unless the parties agree in writing to extend such period;
(vii) the award rendered by the arbitrator may grant any remedy or relief that
the arbitrator deems just and equitable within the scope of this

                                     - 33 -
<PAGE>   38

Agreement, including without limitation damages, specific performance or
injunctive relief, but may not include punitive damages or any remedy or relief
that a court having jurisdiction thereof would not have the power to grant;
(viii) judgment on the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof; (ix) all reasonable out of pocket costs and
reasonable legal fees incurred by the prevailing party shall be paid by the
nonprevailing party, except in the event that a non-arbitrated settlement is
reached, in which case each party shall pay its own respective costs and fees
incurred thereby; (x) subject to Section 11.15(ix), each party shall pay
one-half of the costs and fees charged by the arbitrator with regard to the
submitted dispute; and (xi) the parties shall be entitled to seek preliminary
injunctive relief or other extraordinary remedies in any court having
jurisdiction thereof, to preserve the status quo pending the outcome of
arbitration.

       11.16 Determinations by the Manager. Unless otherwise expressly specified
in the Agreement, any determinations, decisions, consent, vote or judgment of,
or exercise of discretion by, or action taken or omitted to be taken by the
Manager under this Agreement shall be made, given, exercised, taken or omitted
as the Manager shall determine in its sole and absolute discretion. In
connection with the foregoing, the Manager shall be entitled to consider such
interests and factors as the Manager deems appropriate, including its own
interests and/or the interests of the KB Group to the exclusion of all other
considerations.

THE SIGNATURES OF THE MEMBERS ARE SET FORTH ON THE ATTACHED COUNTERPART
SIGNATURE PAGES.

                                     - 34 -
<PAGE>   39

                               OPERATING AGREEMENT

                                       OF

                               _____________, LLC

        IN WITNESS WHEREOF, the undersigned Member has caused this counterpart
signature page to the Operating Agreement of _____________, LLC, to be duly
executed on the date set forth below, to be effective as of the date first above
written.

Date:                                        By:
     --------------------                       --------------------------------

                                             Name:
                                                  ------------------------------

                                     - 35 -
<PAGE>   40

                                    EXHIBIT A

                               SCHEDULE OF MEMBERS

<TABLE>
<CAPTION>
                                                                 Capital           Percentage
Name                          Address                            Contribution      Interest
-------------------------------------------------------------------------------------------------
<S>                           <C>                                <C>               <C>

</TABLE>

                                      A-1

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