<PAGE>


                               THIRD AMENDMENT TO
                  SECOND AMENDED AND RESTATED CREDIT AGREEMENT

     THIS AMENDMENT ("Amendment"), dated July 22, 1999, and effective as of
July 22, 1999, is made by and among (i) SCHULER HOMES, INC., a Delaware
corporation (the "Company"); (ii) SCHULER HOMES OF CALIFORNIA, INC., a
California corporation ("Schuler/California"), SCHULER HOMES OF OREGON, INC.,
an Oregon corporation, SCHULER HOMES OF WASHINGTON, INC., a Washington
corporation, MELODY HOMES, INC., a Delaware corporation, SCHULER REALTY/MAUI,
INC., a Hawaii corporation, SCHULER REALTY/OAHU, INC., a Hawaii corporation,
LOKELANI CONSTRUCTION CORPORATION, a Delaware corporation, MELODY MORTGAGE
CO., a Colorado corporation, and SHLR OF WASHINGTON, INC., a Washington
corporation ("SHLR/Washington"), SHLR OF UTAH, INC., a Utah corporation, SHLR
OF COLORADO, INC., a Colorado corporation, and SSHI LLC, a Delaware limited
liability company ("SSHI") (collectively referred to as the "Original
Guarantors"), (iii) SHLR OF NEVADA, INC., a Nevada corporation
("SHLR/Nevada") and SRHI LLC, a Delaware limited liability company ("SRHI"),
(iv) the banks from time to time party to this Agreement (collectively
referred to as the "Banks", and individually referred to as a "Bank"), (v)
FIRST HAWAIIAN BANK, a Hawaii corporation, as administrative and
co-syndication agent for the Banks (the "Administrative Agent"), and (vi)
BANK OF AMERICA NT&SA, a national banking association, as documentation and
co-syndication agent for the Banks (the "Documentation Agent", the
Administrative Agent and the Documentation Agent are collectively referred to
as the "Agents").

                          W I T N E S S E T H  T H A T:

         WHEREAS, the Company, the Banks and the Administrative Agent entered
into that certain Credit Agreement dated as of March 29, 1996 (the "Original
Credit Agreement"), relating to the establishment of a revolving credit facility
(the "Credit Facility") in the principal amount of US$110,000,000.00 (the
"Original Commitment") made available to the Company by the Banks; and

         WHEREAS, in connection therewith, the Company, the Banks and the
Administrative Agent executed certain Loan Documents (as defined in the Original
Credit Agreement); and

         WHEREAS, the Company, the Banks and the Administrative Agent entered
into that certain Supplement No. 1 to Credit Agreement effective as of January
8, 1997 (the "Supplement"), relating to the use of certain proceeds of Advances
(as defined in the Original Credit Agreement) during the Waiver Period (as
defined in the Supplement); and

         WHEREAS, the Company, the Guarantors, the Banks and the Agents
entered into that certain Amended and Restated Credit Agreement dated March
27, 1997 (the "Amended Credit Agreement"), which amended the terms of the
Original Credit Agreement by, among other things, increasing the Original
Commitment to US $137,600,000.00; and

         WHEREAS, the Company, the Guarantors, the Banks and the Agents entered
into that certain Second Amendment to Loan Documents dated April 29, 1998, which
among other things, provided for the consent to the Company's issuance of
"Senior Notes", as defined therein, which would be PARI PASSU with the Credit
Facility and changed the status of the Guarantors from that of "co-borrowers" to
"guarantors" of the Credit Facility; and


                                     - 1 -

<PAGE>

         WHEREAS, the Company, the Banks and the Agents entered into that
certain Second Amended and Restated Credit Agreement dated September 30, 1998
(the "Second Amended Credit Agreement"), which further amended the terms of the
Original Credit Agreement by, among other things, decreasing the Aggregate
Commitment to $90,000,000.00 and extending the Termination Date to July 1, 2001;
and

         WHEREAS, the Company, the Banks and the Agents entered into that
certain First Amendment to Second Amended and Restated Credit Agreement dated
January 21, 1999, which permitted the Company, through SHLR/Washington, to
acquire the majority interest in SSHI LLC; and

         WHEREAS, the Company, the Banks and the Agents entered into that
certain Second Amendment to Second Amended and Restated Credit Agreement
dated July 2, 1999, which (i) increased the Aggregate Commitment to
$120,000,000.00, (ii) extended the Termination Date to July 1, 2002, (iii)
increased the sublimit for the issuance of Letters of Credit from $10,000,000
to $15,000,000, and (iv) permitted the issuance of "Senior Debt", and
"Subordinated Debt", as such terms are defined therein; and

         WHEREAS, the Company has requested that the Banks and the Agents
further amend the terms of the Second Amended Credit Agreement by permitting the
Company, through Schuler/California, SHLR/Nevada and SRHI, to acquire interests
in Rielly Homes Madison, LLC, Rielly Carlsbad, LLC, Venturanza Del Verde, LLC,
Fairway Farms, LLC and PH-Rielly Orange Groves, LLC, and to consent to the
Company's expansion of business into Arizona; and

         WHEREAS, the Banks and the Agents are willing to comply with such
request, upon and subject to the terms and conditions hereinafter set forth; and

         NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties hereto hereby agree as follows:

         1. DEFINITIONS. All capitalized terms used herein, unless otherwise
defined herein, shall have the same meanings as those ascribed to them in the
Second Amended Credit Agreement.

         2. REPRESENTATIONS AND WARRANTIES. As an essential inducement to the
Banks and the Agents to execute this Amendment, the Company hereby repeats,
reaffirms and incorporates herein by reference all of the representations and
warranties contained in Section 5 of the Second Amended Credit Agreement.

         3. AMENDMENT OF LOAN DOCUMENTS. The Loan Documents are hereby amended
as follows:

              (a) All references in the Loan Documents to "Guarantor" or
"Guarantors" shall include SHLR/Nevada and SRHI.

              (b) All references in the Loan Documents to "Guaranty" shall
include all agreements in form and substance satisfactory to the Banks and
the Agents, duly executed by the

                                     - 2 -

<PAGE>

Guarantors, including SHLR/Nevada and SRHI, jointly and severally
guaranteeing the due and punctual payment of the Note, and the observance and
performance of the Borrower's obligations under the Loan Documents.

              (c) The definition of "Authorized States" in the Amended
Credit Agreement shall include the state of Arizona.

              (d) Section 1.01 "Permitted Investment" is amended to replace
subsection (f) and to include a new subsection (g) as follows:

                     (f)      the investment (including advances and
                              guaranties) in unconsolidated Subsidiaries of
                              the Borrower or joint ventures (in which the
                              Borrower is a joint venture partner) whichare
                              involved in home building in the principal
                              markets of the Borrower or its Subsidiaries,
                              provided such investment shall not exceed
                              $10,000,000 in the aggregate subsequent to
                              December 31, 1997, which shall include the
                              acquisition of a 49% interest in Reilly Homes
                              Madison, LLC, a Delaware limited liability
                              company, a 49% interest in Reilly Carlsbad,
                              LLC, a Delaware limited liability company, a
                              24.5% interest in Venturanza Del Verde, LLC,
                              a Delaware limited liability company, a 50%
                              interest in Fairway Farms, LLC, a Delaware
                              limited liability company and a 50% interest
                              in PH-Reilly Orange Groves, LLC, a
                              Delaware limited liability company.

                     (g)      Loan receivable from Rielly Homes, Inc.
                              Thomas Rielly or Bruce Rielly in amounts not
                              to exceed $8.0 million.

              (e) Section 7.07(a) ("Additional Investments and Acquisitions")
is amended to replace the existing table with the following new table:

<TABLE>
<CAPTION>

               STATE                  PEAK NET INVESTMENT      TOTAL PROJECT INVESTMENT
               -----                  -------------------      ------------------------
               <S>                    <C>                       <C>
               Hawaii............        $50,000,000                 $75,000,000
               Colorado..........        $30,000,000                 $75,000,000
               California........        $30,000,000                 $75,000,000
               Washington........        $20,000,000                 $50,000,000
               Oregon............        $20,000,000                 $50,000,000
               Utah..............        $20,000,000                 $50,000,000

</TABLE>
                                     - 3 -

<PAGE>

<TABLE>
<CAPTION>

               STATE                  PEAK NET INVESTMENT      TOTAL PROJECT INVESTMENT
               -----                  -------------------      ------------------------
               <S>                    <C>                       <C>
               Arizona...........        $30,000,000                 $75,000,000

</TABLE>

               (f) The definition of "Indebtedness" in Section 1.01 is
amended in its entirety as follows:

                    "INDEBTEDNESS" of any Person means, without duplication,
               (a) all indebtedness for borrowed money (including
               Subordinated Debt); (b) all obligations issued, undertaken or
               assumed as the deferred purchase price of property or services
               (other than accounts payable and accrued expenses as set forth
               in the consolidated financial statements of the Borrower and
               its Subsidiaries entered into in the ordinary course of
               business pursuant to ordinary terms); (c) all non-contingent
               reimbursement or payment obligations with respect to Surety
               Instruments; (d) all obligations evidenced by notes, bonds,
               debentures or similar instruments, including obligations so
               evidenced incurred in connection with the acquisition of
               property, assets or businesses; (e) all indebtedness created
               or arising under any conditional sale or other title retention
               agreement, or incurred as financing, in either case with
               respect to property acquired by such Person (even though the
               rights and remedies of the seller under such agreement in the
               event of default are limited to repossession or sale of such
               property); (f) all capital lease obligations; (g) all net
               obligations with respect to Rate Contracts; (h) any
               indebtedness which is guaranteed, directly or indirectly, by
               such Person; and (i) all indebtedness referred to in clauses
               (a) through (h) above secured by (or for which the holder of
               such Indebtedness has an existing right, contingent or
               otherwise, to be secured by) any lien upon or in property
               (including accounts and contracts rights) owned by such
               Person, even though such Person has not assumed or become
               liable for the payment of such Indebtedness, but does not
               include any indebtedness referred to in clauses (a) through
               (g) above incurred by a Person as a joint venture partner of
               any Joint Venture unless such indebtedness is guaranteed,
               directly or indirectly (including general partner liability),
               by such Person as a joint venture partner, or such
               indebtedness owed by one member of the Borrower's consolidated
               group to another member of such consolidated group.

         4. DELIVERY OF RELATED DOCUMENTS. If requested by the Lender, the
Company shall deliver to the Administrative Agent on or before July 22, 1999
the following documents, all of which shall be in form and substance
satisfactory to the Banks and the Agents:

               (a) The Guaranty executed by the Guarantors, SHLR/Nevada and
SRHI;

               (b) Properly certified resolutions of the respective Boards of
Directors or other governing body, as applicable, of the Company, the
Guarantors, SHLR/Nevada and SRHI, duly

                                     - 4 -

<PAGE>

authorizing the execution and delivery of this Amendment and the Guaranty by
such applicable party.

               (c) A certificate of good standing of SHLR/Nevada and SRHI
issued by the applicable state agency, a copy of the Articles of
Incorporation, Articles of Organization or Certificate of Formation, as
applicable, of SHLR/Nevada and SRHI, certified as true and exact by the
applicable state agency, a copy of the Bylaws or Operating Agreement, as
applicable, of SHLR/Nevada and SRHI, and such authenticated copies of such
other corporate documents as the Administrative Agent may reasonably request.

               (d) An opinion from counsel to the Company stating that after
the execution and delivery of this Amendment by the Company, the Loan
Documents will continue to be enforceable in accordance with their terms and
will continue to constitute the valid and legally binding obligations of the
Company.

               (e) An opinion from counsel to the Guarantors, SHLR/Nevada and
SRHI stating that after the execution and delivery of this Amendment and the
Guaranty by the Guarantors, including SHLR/Nevada and SRHI, the Loan
Documents, including the Guaranty, will continue to be enforceable in
accordance with their terms and the Guaranty will constitute the valid and
legally binding obligations of the Guarantors, including SHLR/Nevada and SRHI.

         5. CONFORMANCE. The Loan Documents are hereby amended to conform
with this Amendment, but in all other respects such provisions are to be and
continue in full force and effect.

         6. CONTINUANCE OF SECURITY. The performance of the obligations of
the Company under the Loan Documents, as herein amended, shall be fully
secured by and entitled to the benefits of the Guaranty and the other Loan
Documents, and any modifications, extensions, renewals or replacements
thereof.

         7. NO OFFSETS. As of the date hereof, the Company has no claims,
defenses or offsets against the Banks or the Agents, or against the Company's
obligations under the "Loan Documents", as herein amended, whether in connection
with the negotiations for or closing of the Credit Facility, of any prior
amendments, of this Amendment, or otherwise, and if any such claims, defenses or
offsets exist, they are hereby irrevocably waived and released. As of the date
hereof, the Guarantors, including SHLR/Nevada and SRHI, have no claims, defenses
or offsets against the Banks or the Agents, or against the Guarantors'
(including SHLR/Nevada and SRHI) obligations under the Guaranty, whether in
connection with the negotiations for or closing of the Credit Facility, of any
prior amendments, of this Amendment, or otherwise, and if any such claims,
defenses or offsets exist, they are hereby irrevocably waived and released.

         8. NO WAIVER. This Amendment is made on the express condition that
nothing herein contained shall in any way be construed as affecting, impairing
or waiving any rights of the Banks or the Agents under any of the Loan
Documents, as herein amended.

                                     - 5 -

<PAGE>

         9. ENTIRE AGREEMENT. This Amendment incorporates all of the
agreements between the parties relating to the amendment of the Loan
Documents and supersedes all other prior or concurrent oral or written
letters, agreements or understandings relating to such amendment.

         10. HEADINGS. The headings of paragraphs and subparagraphs herein
are inserted only for convenience and reference, and shall in no way define,
limit or describe the scope or intent of any provisions of this Amendment.

         11. GOVERNING LAW; SEVERABILITY. This Amendment is executed and
delivered, and shall be construed and enforced, in accordance with and
governed by the laws of the State of Hawaii. If any provision of this
Amendment is held to be invalid or unenforceable, the validity or
enforceability of the other provisions of this Amendment shall remain
unaffected.

         12. SUBMISSION TO JURISDICTION. The Company and the Guarantors
hereby irrevocably and unconditionally submit, but only for the purposes of
any action or proceeding which the Banks and/or the Agents may bring to
enforce any of the Loan Documents, as amended herein, to the jurisdiction of
the courts of the State of Hawaii and the United States District Court for
the District of Hawaii. Such submission to such jurisdiction shall not
prevent the Banks and the Agents from commencing any such action or
proceeding in any other court having jurisdiction.

         13. COUNTERPARTS. This Amendment may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same instrument, and in making proof of
this Amendment, it shall not be necessary to produce or account for more than
one such counterpart.

         14. EXPENSES. The Company shall pay all reasonable expenses incurred
by the Administrative Agent in negotiations for and documentation of this
Amendment and the satisfaction of the conditions thereof, including, but not
limited to, fees and expenses of legal counsel for the Administrative Agent,
and any other costs incurred by the Administrative Agent in connection with
any of the matters described in this Amendment.

         15. BINDING EFFECT. This Amendment shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that the Company shall not assign this Amendment or any of
the rights, duties or obligations of the Company hereunder without the prior
written consent of the Banks and the Agents.

                                      - 6 -

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this Amendment
the day and year first above written.

                                         SCHULER HOMES, INC.


                                         By /S/ Douglas M. Tonokawa
                                            --------------------------------
                                            Name:  Douglas M. Tonokawa
                                            Title: Vice President of Finance
                                                                   "Company"


                                         SCHULER HOMES OF CALIFORNIA, INC.


                                         By /S/ Douglas M. Tonokawa
                                            --------------------------------
                                            Name:  Douglas M. Tonokawa
                                            Title: Vice President of Finance

                                         SCHULER HOMES OF OREGON, INC.


                                         By /S/ Douglas M. Tonokawa
                                            --------------------------------
                                            Name:  Douglas M. Tonokawa
                                            Title: Vice President of Finance

                                         SCHULER HOMES OF WASHINGTON, INC.


                                         By /S/ Douglas M. Tonokawa
                                            --------------------------------
                                            Name:  Douglas M. Tonokawa
                                            Title: Vice President of Finance

                                         MELODY HOMES, INC.


                                         By /S/ Douglas M. Tonokawa
                                            --------------------------------
                                            Name:  Douglas M. Tonokawa
                                            Title: Vice President of Finance


                                     - 7 -

<PAGE>

                                         SCHULER REALTY/MAUI, INC.


                                         By /S/ Douglas M. Tonokawa
                                            --------------------------------
                                            Name:  Douglas M. Tonokawa
                                            Title: Vice President of Finance

                                         SCHULER REALTY/OAHU, INC.


                                         By /S/ Douglas M. Tonokawa
                                            --------------------------------
                                            Name:  Douglas M. Tonokawa
                                            Title: Vice President of Finance

                                         LOKELANI CONSTRUCTION CORPORATION


                                         By /S/ Douglas M. Tonokawa
                                            --------------------------------
                                            Name:  Douglas M. Tonokawa
                                            Title: Vice President of Finance

                                         MELODY MORTGAGE CO.


                                         By /S/ Douglas M. Tonokawa
                                            --------------------------------
                                            Name:  Douglas M. Tonokawa
                                            Title: Vice President of Finance

                                         SHLR OF WASHINGTON, INC.


                                         By /S/ Douglas M. Tonokawa
                                            --------------------------------
                                            Name:  Douglas M. Tonokawa
                                            Title: Vice President of Finance

                                         SHLR OF UTAH, INC.


                                         By /S/ Douglas M. Tonokawa
                                            --------------------------------
                                            Name:  Douglas M. Tonokawa
                                            Title: Vice President of Finance


                                           - 8 -

<PAGE>

                                          SHLR OF COLORADO, INC.


                                          By /S/ Douglas M. Tonokawa
                                            --------------------------------
                                            Name:  Douglas M. Tonokawa
                                            Title: Vice President of Finance

                                          SSHI LLC

                                          By SHLR of Washington, Inc.
                                              Its Member


                                          By /S/ Douglas M. Tonokawa
                                            --------------------------------
                                            Name:  Douglas M. Tonokawa
                                            Title: Vice President of Finance
                                                                "Guarantors"

                                          SHLR OF NEVADA, INC.

                                          By /S/ Douglas M. Tonokawa
                                            --------------------------------
                                            Name:  Douglas M. Tonokawa
                                            Title: Vice President of Finance
                                                               "SHLR/NEVADA"

                                          SRHI LLC

                                          By SHLR of Nevada, Inc.
                                            --------------------------------
                                              Its Managing Member

                                          By /S/ Douglas M. Tonokawa
                                            --------------------------------
                                            Name:  Douglas M. Tonokawa
                                            Title: Vice President of Finance
                                                                      "SRHI"


                                     - 9 -

<PAGE>

                                         FIRST HAWAIIAN BANK, as Administrative
                                         Agent and Co-Syndication Agent


                                         By /S/ Russell A. Loo
                                            --------------------------------
                                            Name:   Russell A. Loo
                                            Title:  Assistant Vice President
                                                      "Administrative Agent"


                                         BANK OF AMERICA NT&SA, as Documentation
                                         Agent and Co-Syndication Agent


                                         By /S/ Cynthia K. Hamilton
                                            --------------------------------
                                            Name:   Cynthia K. Hamilton
                                            Title:  Vice President
                                                       "Documentation Agent"


                                         FIRST HAWAIIAN BANK, as a Bank


                                         By /S/ Russell A. Loo
                                            --------------------------------
                                            Name:   /S/ Russell A. Loo
                                            Title:  Assistant Vice President

                                         BANK OF AMERICA NT&SA, as a Bank


                                         By /S/ Cynthia K. Hamilton
                                            --------------------------------
                                            Name:   Cynthia K. Hamilton
                                            Title:  Vice President

                                         BANK ONE, ARIZONA, NA


                                         By /S/ Scott Stovall
                                            --------------------------------
                                            Name:   Scott Stovall
                                            Title:  Corporate Officer

                                     - 10 -

<PAGE>

                                          BANK BOSTON, NA


                                         By /S/ Nicholas Whiting
                                            --------------------------------
                                            Name:   Nicholas Whiting
                                            Title:  Vice President

                                          BANK OF HAWAII


                                         By /S/ Joyce Y. Sakai
                                            --------------------------------
                                            Name:   Joyce Y. Sakai
                                            Title:  Vice President
                                                                     "Banks"


                                     - 11 -