<PAGE>


                                CREDIT AGREEMENT

                                      among
                           THE ROTTLUND COMPANY, INC.
                                       and
                        THE FIRST NATIONAL BANK OF BOSTON

                                       and
                          OTHER BANKS WHICH MAY BECOME
                            PARTIES TO THIS AGREEMENT

                                       and
                        THE FIRST NATIONAL BANK OF BOSTON
                                    AS AGENT

                                   dated as of

                                October 23, 1996

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

<PAGE>


                                TABLE OF CONTENTS




Section 1   DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .   1
            Section 1.1    RULES OF INTERPRETATION . . . . . . . . . . . . .  11

Section 2.  REVOLVING CREDIT LOAN. . . . . . . . . . . . . . . . . . . . . .  12
            Section 2.1.   COMMITMENT TO LEND AND BORROWER'S 
                    PROMISE TO PAY . . . . . . . . . . . . . . . . . . . . .  12
            Section 2.2.   TERMINATION OF COMMITMENT . . . . . . . . . . . .  13
            Section 2.3.   THE REVOLVING CREDIT NOTE(S). . . . . . . . . . .  13
            Section 2.4.   CERTAIN PREPAYMENTS . . . . . . . . . . . . . . .  13
            Section 2.5.   REQUESTS FOR ADVANCES UNDER THE 
                    REVOLVING CREDIT LOAN. . . . . . . . . . . . . . . . . .  14
            Section 2.6.   INTEREST. . . . . . . . . . . . . . . . . . . . .  14
            Section 2.7.   INTEREST ON OVERDUE AMOUNTS . . . . . . . . . . .  14
            Section 2.8.   FUNDS FOR REVOLVING CREDIT LOANS. . . . . . . . .  15
            Section 2.9.   LETTERS OF CREDIT . . . . . . . . . . . . . . . .  16
            Section 2.10.  CONVERSION DATE AND EXTENSIONS. . . . . . . . . .  17

Section 3.  FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
            Section 3.1.   ORIGINATION FEE AND FEE AGREEMENT . . . . . . . .  17
            Section 3.2.   LETTER OF CREDIT FEES . . . . . . . . . . . . . .  18
            Section 3.3.   UNUSED COMMITMENT FEE . . . . . . . . . . . . . .  18
            Section 3.4.   ADDITIONAL AMOUNTS PAYABLE ON ACCOUNT OF 
                    CREDIT FACILITIES. . . . . . . . . . . . . . . . . . . .  18
            Section 3.5.   ADDITIONAL COSTS AND EXPENSES; RESERVE 
                    REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . .  19

Section 4.  PAYMENTS; MASTER ACCOUNT; COMPUTATIONS; AND 
            INTEREST LIMITATION. . . . . . . . . . . . . . . . . . . . . . .  20
            Section 4.1.   PAYMENTS. . . . . . . . . . . . . . . . . . . . .  20
            Section 4.2.   MASTER ACCOUNT. . . . . . . . . . . . . . . . . .  21
            Section 4.3.   COMPUTATIONS. . . . . . . . . . . . . . . . . . .  21
            Section 4.4.   INTEREST LIMITATION . . . . . . . . . . . . . . .  21

<PAGE>

Section 5.  REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . .  21
            Section 5.1.   EXISTENCE ETC.. . . . . . . . . . . . . . . . . .  22
            Section 5.2.   BUSINESS ACTIVITY; CAPITALIZATION . . . . . . . .  23
            Section 5.3.   AUTHORITY, ETC. . . . . . . . . . . . . . . . . .  23
            Section 5.4.   BINDING EFFECT OF DOCUMENTS, ETC. . . . . . . . .  23
            Section 5.5.   NO EVENTS OF DEFAULT, ETC.. . . . . . . . . . . .  24
            Section 5.6.   CHIEF EXECUTIVE OFFICE. . . . . . . . . . . . . .  24
            Section 5.7.   FINANCIAL STATEMENTS; SOLVENCY. . . . . . . . . .  24
            Section 5.8.   CHANGES; NONE ADVERSE . . . . . . . . . . . . . .  25
            Section 5.9.   OWNERSHIP . . . . . . . . . . . . . . . . . . . .  25
            Section 5.10.  MORTGAGES AND LIENS . . . . . . . . . . . . . . .  25
            Section 5.11.  INTELLECTUAL PROPERTY . . . . . . . . . . . . . .  25
            Section 5.12.  INDEBTEDNESS. . . . . . . . . . . . . . . . . . .  25
            Section 5.13.  LITIGATION. . . . . . . . . . . . . . . . . . . .  26
            Section 5.14.  NO DEFAULT. . . . . . . . . . . . . . . . . . . .  26
            Section 5.15.  TAXES . . . . . . . . . . . . . . . . . . . . . .  26
            Section 5.16.  COMPLIANCE OF PROPERTIES WITH LAW . . . . . . . .  26
            Section 5.17.  ERISA COMPLIANCE; SEVERANCE OBLIGATIONS . . . . .  26
            Section 5.18.  OTHER REPRESENTATIONS . . . . . . . . . . . . . .  27
            Section 5.19.  DISCLOSURE. . . . . . . . . . . . . . . . . . . .  27
            Section 5.20.  LOANS AS SENIOR INDEBTEDNESS. . . . . . . . . . .  28
            Section 5.21.  HOLDING COMPANY AND INVESTMENT COMPANY ACTS . . .  28
            Section 5.22.  REGULATIONS U AND X . . . . . . . . . . . . . . .  28
            Section 5.23.  FISCAL YEAR . . . . . . . . . . . . . . . . . . .  28
            Section 5.24.  COMPLIANCE WITH CERTAIN ENVIRONMENTAL 
                    LAWS AND LAWS PERTAINING TO LAND SALES . . . . . . . . .  28
            Section 5.25.  INSURANCE . . . . . . . . . . . . . . . . . . . .  30

Section 6.  CONDITIONS AND EFFECTIVENESS . . . . . . . . . . . . . . . . . .  30
            Section 6.1.   LOAN DOCUMENTS, ETC.. . . . . . . . . . . . . . .  30
            Section 6.2.   LEGALITY OF TRANSACTIONS. . . . . . . . . . . . .  30
            Section 6.3.   REPRESENTATIONS AND WARRANTIES. . . . . . . . . .  31
            Section 6.4.   PERFORMANCE, ETC. . . . . . . . . . . . . . . . .  31
            Section 6.5.   CERTIFIED COPIES OF CERTAIN DOCUMENTS . . . . . .  31
            Section 6.6.   PROOF OF ACTION BY BORROWER . . . . . . . . . . .  31
            Section 6.7.   INCUMBENCY CERTIFICATE. . . . . . . . . . . . . .  31
            Section 6.8.   PROCEEDINGS AND DOCUMENTS . . . . . . . . . . . .  32

<PAGE>

            Section 6.9.   FEES. . . . . . . . . . . . . . . . . . . . . . .  32
            Section 6.10.  LEGAL OPINIONS. . . . . . . . . . . . . . . . . .  32
            Section 6.11.  BORROWING BASE REPORT . . . . . . . . . . . . . .  32
            Section 6.12.  EVIDENCE OF INSURANCE . . . . . . . . . . . . . .  32

Section 7.  CONDITIONS TO SUBSEQUENT LOAN ADVANCES . . . . . . . . . . . . .  32
            Section 7.1.   LEGALITY OF TRANSACTIONS. . . . . . . . . . . . .  32
            Section 7.2.   REPRESENTATIONS AND WARRANTIES. . . . . . . . . .  33
            Section 7.3.   PERFORMANCE, ETC. . . . . . . . . . . . . . . . .  33
            Section 7.4.   PROCEEDINGS AND DOCUMENTS . . . . . . . . . . . .  33
            Section 7.5.   LIMITATIONS ON BORROWING. . . . . . . . . . . . .  33

Section 8.  AFFIRMATIVE COVENANTS OF THE BORROWER. . . . . . . . . . . . . .  34
            Section 8.1.   PUNCTUAL PAYMENT. . . . . . . . . . . . . . . . .  34
            Section 8.2.   LEGAL EXISTENCE, ETC. . . . . . . . . . . . . . .  34
            Section 8.3.   RESERVES. . . . . . . . . . . . . . . . . . . . .  34
            Section 8.4.   CHANGE OF CORPORATE NAME. . . . . . . . . . . . .  34
            Section 8.5.   FINANCIAL STATEMENTS AND OTHER REPORTS. . . . . .  34
            Section 8.6.   USE OF LOAN PROCEEDS. . . . . . . . . . . . . . .  37
            Section 8.7.   MAINTENANCE AND ALTERATIONS . . . . . . . . . . .  37
            Section 8.8.   CERTAIN ENVIRONMENTAL MATTERS . . . . . . . . . .  37
            Section 8.9.   NOTICE OF LITIGATION AND JUDGMENT . . . . . . . .  38
            Section 8.10.  NOTICE OF DEFAULTS. . . . . . . . . . . . . . . .  38
            Section 8.11.  BOOKS AND RECORDS . . . . . . . . . . . . . . . .  38
            Section 8.12.  INSURANCE . . . . . . . . . . . . . . . . . . . .  38
            Section 8.13.  TAXES AND MECHANIC'S LIENS. . . . . . . . . . . .  39
            Section 8.14.  CONDUCT OF BUSINESS . . . . . . . . . . . . . . .  39
            Section 8.15.  COMPLIANCE WITH LAW . . . . . . . . . . . . . . .  39
            Section 8.16.  ACCESS. . . . . . . . . . . . . . . . . . . . . .  40
            Section 8.17.  FURTHER ASSURANCES. . . . . . . . . . . . . . . .  40
            Section 8.18.  MATERIAL ADVERSE CHANGES. . . . . . . . . . . . .  40

Section 9.  NEGATIVE COVENANTS OF THE BORROWER . . . . . . . . . . . . . . .  40
            Section 9.1.   INVESTMENTS . . . . . . . . . . . . . . . . . . .  41
            Section 9.2.   SECURITY INTERESTS AND LIENS. . . . . . . . . . .  41
            Section 9.3.   INDEBTEDNESS. . . . . . . . . . . . . . . . . . .  42
            Section 9.4.   DISTRIBUTIONS . . . . . . . . . . . . . . . . . .  43
            Section 9.5.   MAXIMUM COMMITMENT AMOUNT . . . . . . . . . . . .  43

<PAGE>

            Section 9.6.   MERGER AND CONSOLIDATION. . . . . . . . . . . . .  44
            Section 9.7.   ACQUISITION OF ASSETS . . . . . . . . . . . . . .  44
            Section 9.8.   DISPOSITION OF ASSETS . . . . . . . . . . . . . .  44
            Section 9.9.   SALE AND LEASEBACK. . . . . . . . . . . . . . . .  45
            Section 9.10.  TRANSACTIONS WITH AFFILIATED PERSONS. . . . . . .  45
            Section 9.11.  ERISA COMPLIANCE. . . . . . . . . . . . . . . . .  45
            Section 9.12.  EXISTING SENIOR INDEBTEDNESS. . . . . . . . . . .  45
            Section 9.13.  CHANGE OF CONTROL . . . . . . . . . . . . . . . .  45

Section 10. FINANCIAL COVENANTS OF THE BORROWER. . . . . . . . . . . . . . .  46
            Section 10.1.  MINIMUM TANGIBLE NET WORTH. . . . . . . . . . . .  46
            Section 10.2.  TOTAL LIABILITIES TO TANGIBLE NET WORTH RATIO . .  46
            Section 10.3.  EBITDA TO INTEREST EXPENSE. . . . . . . . . . . .  46
            Section 10.4.  INVENTORY . . . . . . . . . . . . . . . . . . . .  46

Section 11. EVENTS OF DEFAULT; ACCELERATION; REMEDIES. . . . . . . . . . . .  47
            Section 11.1.  EVENTS OF DEFAULT; ACCELERATION . . . . . . . . .  47
            Section 11.2.  REMEDIES. . . . . . . . . . . . . . . . . . . . .  49
            Section 11.3.  ADVANCES. . . . . . . . . . . . . . . . . . . . .  49
            Section 11.4.  PROCEEDS. . . . . . . . . . . . . . . . . . . . .  49

Section 12. SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  50

Section 13. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . .  50

Section 14. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . .  51

Section 15. SURVIVAL OF COVENANTS ETC. . . . . . . . . . . . . . . . . . . .  52

Section 16. THE AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . . .  52
            Section 16.1.  AUTHORIZATION . . . . . . . . . . . . . . . . . .  52
            Section 16.3   NO LIABILITY. . . . . . . . . . . . . . . . . . .  52
            Section 16.4.  NO REPRESENTATIONS. . . . . . . . . . . . . . . .  53
            Section 16.5.  PAYMENTS. . . . . . . . . . . . . . . . . . . . .  53
            Section 16.6.  HOLDERS OF NOTES. . . . . . . . . . . . . . . . .  54
            Section 16.7.  INDEMNITY . . . . . . . . . . . . . . . . . . . .  54
            Section 16.8.  AGENT AS BANK . . . . . . . . . . . . . . . . . .  54

<PAGE>

            Section 16.9.  RESIGNATION . . . . . . . . . . . . . . . . . . .  54
            Section 16.10. NOTIFICATION OF WAIVERS, AMENDMENTS, 
                    DEFAULTS AND EVENTS OF DEFAULT, LITIGATION 
                    AND JUDGMENT . . . . . . . . . . . . . . . . . . . . . .  55
            Section 16.11. DUTIES IN THE CASE OF ENFORCEMENT . . . . . . . .  55
            Section 16.12. BANKRUPTCY PROCEEDINGS. . . . . . . . . . . . . .  55
            Section 16.13. NOTICES, INFORMATION AND EXERCISE OF 
                    RIGHTS OF INSPECTION . . . . . . . . . . . . . . . . . .  56

Section 17. ASSIGNMENT AND PARTICIPATION . . . . . . . . . . . . . . . . . .  56
            Section 17.1.  CONDITIONS TO ASSIGNMENT BY BANKS . . . . . . . .  56
            Section 17.2.  CERTAIN REPRESENTATIONS AND WARRANTIES; 
                    LIMITATIONS; COVENANTS . . . . . . . . . . . . . . . . .  56
            Section 17.3.  REGISTER. . . . . . . . . . . . . . . . . . . . .  57
            Section 17.4.  NEW NOTES . . . . . . . . . . . . . . . . . . . .  57
            Section 17.5.  PLEDGE BY BANK. . . . . . . . . . . . . . . . . .  58
            Section 17.6.  NO ASSIGNMENT BY BORROWER . . . . . . . . . . . .  58
            Section 17.8.  WITHHOLDING TAX . . . . . . . . . . . . . . . . .  59

Section 18. NOTICES, ETC.. . . . . . . . . . . . . . . . . . . . . . . . . .  60

Section 19. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . .  61

Section 20. ENTIRE AGREEMENT, ETC. . . . . . . . . . . . . . . . . . . . . .  61

Section 21. CONSENTS, AMENDMENTS, WAIVERS, ETC.. . . . . . . . . . . . . . .  61

Section 22. CONSENT TO SERVICE . . . . . . . . . . . . . . . . . . . . . . .  63

Section 23. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . .  63

Section 24. WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  63

Section 25. RIGHTS OF THIRD PARTIES. . . . . . . . . . . . . . . . . . . . .  63

Section 26. RELATIONSHIP . . . . . . . . . . . . . . . . . . . . . . . . . .  64

<PAGE>

                               CREDIT AGREEMENT

     This CREDIT AGREEMENT is made as of the       day of October, 1996, by and
among (i) THE ROTTLUND COMPANY, INC., a Minnesota corporation ("Borrower),
(ii) THE FIRST NATIONAL BANK OF BOSTON, a national banking association having
its principal place of business at 100 Federal Street, Boston, Massachusetts
02110, (iii) the other lending institutions which are listed on Schedule I and
other lending institutions which may become parties hereto pursuant to Section
17 (FNBB and such lending institutions are collectively referred to herein as
the "Banks") and (iv) THE FIRST NATIONAL BANK OF BOSTON, as Agent for itself and
the other Banks (the "Agent").

                                R E C I T A L S

     A.   The Agent and the Banks are committing to advance credit to the
Borrower of an amount up to $18,000,000.00 pursuant to the terms of this
Agreement, which advance of credit is evidenced by that certain revolving credit
promissory note in the amount of $18,000,000.00 (the "Revolving Credit Note").

     B.   FNBB may in the future enter into certain agreements with other
banking institutions whereby FNBB will assign to such other banking institutions
certain portions of the Loan (as hereinafter defined) made hereunder.

     Section 1 DEFINITIONS.  The following terms shall have the meanings set
forth in this Section 1 or elsewhere in the provisions of this Agreement
referred to below:

     ADVANCE.  Any disbursement of the proceeds of the Revolving Credit Loan
made or to be made by the Banks pursuant to the terms of this Agreement.

     AGENT.  The First National Bank of Boston acting as agent for the Banks.

     AGENT'S HEAD OFFICE.  The Agent's head office located at 100 Federal
Street, Boston, Massachusetts 02110, or at such other location as the Agent may
designate from time to time.

     AGREEMENT.  This Credit Agreement, including the Schedules and Exhibits
hereto, as originally executed, or if this Agreement is amended, varied or
supplemented from time to time, as so amended, varied or supplemented.

<PAGE>

     AMENITIES.  All golf courses, clubhouses, swimming, tennis and other
recreational facilities owned and operated by the Borrower or its Subsidiaries.

     ASSIGNMENT AND ACCEPTANCE.  See Section 17.

     BALANCE SHEET DATE.  See Section 5.7(a).

     BANK.  See preamble.

     BANKS.  FNBB and the other lending institutions listed on Schedule 1 hereto
and any other Person who becomes an assignee of any rights of a Bank pursuant to
Section 17.

     BASE RATE.  The higher of (a) the annual rate of interest announced from
time to time by FNBB at its head office in Boston, Massachusetts as its "base
rate" and (b) one-half of one percent (0.5 %) plus the overnight federal funds
effective rate, as published by the Board of Governors of the Federal Reserve
System, as in effect from time to time.

     BORROWER.  See preamble.

     BORROWING BASE.  At any time of determination, the lesser of:

     (A) the sum of:

          (i)  60% of Lot Book Value of Developed Lots for the period from the
Effective Date through October 31, 1997 and thereafter 50% of Lot Book Value of
Developed Lots; PLUS

          (ii) 90% of the Unit Costs of Sold Units; PLUS

          (iii)     80% of the Unit Costs of Unsold Units; PLUS

          (iv) 40% of the Lot Development Costs with respect to Developable
Land; PLUS OR MINUS

          (v)  the amount of the Working Capital of the Borrower.

The Borrower shall receive no credit for any amounts under this Borrowing Base
for any of the following:

                                       2

<PAGE>

               (1)  Real Estate which is subject to any encumbrance of any
nature other than ad valorem taxes and mechanics liens for undisputed amounts
not yet due and payable;

               (2)  The value of any Amenities located on any Real Estate; and

               (3)  The value of any receivables held by the Borrower with
respect to the sale of any Real Estate;

     or (B) the amount of the borrowing base calculated in accordance with the
Note Agreements, on a singular and not a cumulative basis.

For purposes of this Borrowing Base, a Unit shall not qualify as an Unsold Unit
on and after that date which is one (1) year from the date of the issuance of a
certificate of occupancy with respect to such Unit.

     BORROWING BASE REPORT.  A report with respect to the Borrowing Base in the
form attached hereto as Exhibit A.

     BULK SALES.  Any sale of Developable Land other than pursuant to a Housing
Purchase Contract.

     BUSINESS DAY.  Any day on which banking institutions in Boston,
Massachusetts are open for the transaction of banking business.

     CHANGE OF CONTROL.  Any Person or group (within the meaning of Section 
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the 
" 1934 Act")), other than David Rotter, Bernard Rotter and Persons related to 
either such Person by blood, adoption or marriage, and trusts created and 
controlled by them or for their benefit, becomes the "beneficial owner" (as 
defined in Rule 13d-3 under the 1934 Act) of such number of shares of the 
issued and outstanding voting stock of the Borrower sufficient to elect or 
appoint a majority of the members of the Board of Directors of the Borrower, 
or by contract or otherwise acquires the power, direct or indirect, to direct 
the management or policies of the Borrower.

     CODE.  The Internal Revenue Code of 1986, as amended and in effect from 
time to time.  To the extent that reference is made to any particular Section 
of the Code, such reference shall be, where the context so admits, to any 
corresponding provisions of any succeeding law.

                                       3

<PAGE>

     COMMITMENT AMOUNT.  The sum of the commitments for the Loan by the Banks in
an amount not to exceed $18,000,000.

     COMMITMENT.  With respect to each Bank, the amount set forth on Schedule 1
hereto as the amount of such Bank's Commitment to make Loans to the Borrower, as
the same may be reduced from time to time.

     COMMITMENT PERCENTAGE.  With respect to each Bank, the percentage set forth
on Schedule 1 hereto as such Bank's percentage of the aggregate Commitments of
all of the Banks.

     CONSTRUCTION LETTERS OF CREDIT.  Any Letter of Credit issued for the
purpose of serving in lieu of a bond or as security for the performance by the
Borrower or a Subsidiary of obligations to a third party for the construction of
horizontal improvements on either Real Estate or property of such third party.

     CONVERSION DATE.  The earlier to occur of (i)                        ,
1998; or (ii) a Change in Control.

     DEFAULT.  Any event which but for the giving of notice or the lapse of time
or both would constitute an Event of Default under this Agreement or under the
instrument or agreement of reference.

     DEPOSITORY ACCOUNT.  See Section 4.2.

     DEVELOPABLE LAND.  All land owned by the Borrower (a) on which Units may be
constructed under applicable laws and regulations and described as "Land for
Development", or (b) currently zoned to permit development of Units,
specifically excluding, however, (a) Developed Lots, (b) Sold Units, (c) Unsold
Units and (d) any land on which the Agent determines that development is
restricted under federal or state wetlands protection or other environmental
statutes.

     DEVELOPED LOTS.  Each of the plotted subdivided lots and the horizontal 
improvements thereon which, under applicable laws and regulations and taking 
into account other factors affecting the possible use of such property, may 
be utilized as the site for a Unit, including specifically those lots that 
are ready for construction of a Unit and for which a building permit would 
then be issued to the Borrower if applied for but excluding (a) lots with 
construction of 

                                       4

<PAGE>

Units underway thereon or (b) lots with fully constructed Units situated
thereon, and (c) lots under development that are not yet ready for construction
of Units thereon.

     DEVELOPED LOT INVENTORY.  At any time of determination, an amount equal to
the aggregate number of Developed Lots then existing and not yet under contract
for sale.

     DISTRIBUTION.  Any of the following: (a) the payment by any Person of 
any distributions or other payments to its shareholders or partners as such; 
(b) the declaration or payment of any dividend on or in respect of shares of 
any class of capital stock of, or partnership interest in, any Person; (c) 
the purchase or other retirement of any shares of any class of capital stock 
of, or partnership interest in, any Person, directly or indirectly through a 
Subsidiary or otherwise; (d) the return of capital by any Person to its 
shareholders or partners as such; or (e) any other distribution on or in 
respect of any shares of any class of capital stock of, or partnership 
interest in, any Person.

     DRAWDOWN DATE.  The date on which any Advance is made available to the
Borrower pursuant to the provisions hereof.

     EBITDA.  For any period, on a consolidated basis for the Borrower and 
its Subsidiaries, the sum of the amounts for such period of (i) net income, 
plus (ii) charges against income for foreign, federal state and local taxes, 
plus (iii) Interest Expense, plus (iv) depreciation, plus (v) amortization 
expense, including, without limitation, amortization of goodwill and other 
intangible assets and amortization of deferred compensation expense, plus 
(vi) extraordinary losses, minus (vii) interest income, minus (viii) 
extraordinary gains.

     EFFECTIVE DATE.  The date upon which this Agreement shall become 
effective pursuant to Section 6.

     ELIGIBLE ASSIGNEE.  Any of (a) a commercial bank organized under the 
laws of the United States, or any State thereof or the District of Columbia, 
and having total assets in excess of $1,000,000,000.00; (b) a savings and 
loan association or savings bank organized under the laws of the United 
States, or any State thereof or the District of Columbia, and having a net 
worth of at least $100,000,000.00, calculated in accordance with Generally 
Accepted Accounting Principles; (c) a commercial bank organized under the 
laws of any other country which is a member of the Organization for Economic 
Cooperation and Development (the "OECD"), or a political subdivision of any 
such country, and having total assets in excess of $1,000,000,000.00, 
provided that such bank has a branch or agency in the United States and is 
acting through a branch or agency located in the country in which it is 
organized or 

                                       5

<PAGE>

another country which is also a member of the OECD; and (d) the central bank 
of any country which is a member of the OECD.

     ENVIRONMENTAL LAWS.  See Section 5.24.

     ERISA.  The Employee Retirement Income Security Act of 1974, as amended
from time to time.

     EVENT OF DEFAULT.  See Section 11.1.

     EXISTING SENIOR INDEBTEDNESS.  The portion of the Indebtedness by the
Borrower evidenced by the Note Agreements.

     EXISTING SENIOR INDEBTEDNESS DOCUMENTS.  All instruments and documents
given to secure or evidence the Existing Senior Indebtedness.

     FAIR MARKET VALUE.  The price a willing buyer would pay to a willing seller
in an arm's length transaction with neither party being under a compulsion to
act.

     FEE AND EXPENSE AGREEMENT.  See Section 3.1.

     FEES.  All fees payable under Section 3 and the Fee and Expense Agreement.

     FINANCIAL STATEMENTS.  See Section 8.5(a).

     FNBB.  The First National Bank of Boston, a national banking association,
in its individual capacity.

     GUARANTORS.  The parties executing and delivering the Subsidiary Guaranty.

     GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.  In general, principles which 
are (A) consistent with the principles promulgated or adopted by the 
Financial Accounting Standards Board and its predecessors (or successor 
organizations), and (B) such that certified public accountants would, insofar 
as the use of accounting principles is pertinent, be in a position to deliver 
an unqualified opinion as to the financial statements in which such 
principles have been properly applied; provided that if any changes in 
Generally Accepted Accounting Principles with which the independent certified 
accountants of the Borrower concur result in a change in the method of 
calculating of any of the financial covenants, standards or terms contained 
in this Agreement, the Borrower and the Agent agree to amend such provisions 
to reflect such 

                                       6

<PAGE>

changes in Generally Accepted Accounting Principles so that the criteria for 
evaluating the financial condition of the Borrower shall be the same after 
such changes as if such changes had not been made.

     HAZARDOUS SUBSTANCES.  See Section 5.24.

     HOUSING PURCHASE CONTRACT.  Any legal, valid, binding and enforceable
written agreement for the sale of individual Units to any bona-fide unaffiliated
purchaser entered into by the Borrower or a Subsidiary in the ordinary course of
its business with customary terms and conditions and that provides for a cash
down payment of not less than the greater of $500.00 or that is customary in the
local market.

     INDEBTEDNESS.  All obligations which in accordance with Generally Accepted
Accounting Principles should be classified, upon the obligor's balance sheet as
liabilities or to which reference should be made by the footnotes thereto and,
including in any event and whether or not so classified all of the following:
(i) all debt for borrowed money and similar monetary obligations, whether direct
or indirect; (ii) all liabilities secured by any mortgage, pledge, security
interest, lien, charge, or other encumbrance existing on property owned or
acquired subject thereto, whether or not the liability secured thereby shall
have been assumed; and (iii) all guaranties, endorsements and other contingent
obligations whether direct or indirect in respect of liabilities of any other
Person of the type described in (i) and (ii) hereof, including any obligation to
supply funds to or in any manner to invest in, directly or indirectly, such
other Person, to purchase such liabilities, or to assure the owner of any such
liabilities against loss, through an agreement to purchase goods, supplies, or
services for the purpose of enabling such other Person to make payment of any
such liabilities held by such owner or otherwise, and the obligations to
reimburse the issuer of any letters of credit.

     INTEREST EXPENSE.  For any period, the total interest expense of the
Borrower and its Subsidiaries, whether paid directly or amortized through costs
of sales (including the interest component of any capital leases).

     INTEREST INCURRED.  For any period, the total interest paid or accrued by
Borrower and its Subsidiaries (including the interest component of any capital
leases).

     INVESTMENTS.  All expenditures made and all liabilities incurred by any
Person (contingently or otherwise) for the acquisition of stock or Indebtedness
of, or for loans, advances, or capital contributions to, or in respect of any
guaranties of Indebtedness (or other commitments as described under
Indebtedness), or obligations in the nature of Indebtedness or securities of,
any other Person.

                                       7

<PAGE>

     LETTERS OF CREDIT.  Any and all letters of credit issued or that may be 
issued from time to time by the Agent with respect to certain undertakings by 
the Borrower, as further described in Section 2.9 of this Agreement.

     LETTER OF CREDIT FEES.  See Section 3.2.

     LOAN.  The loan made or to be made to the Borrower contemplated by this
Agreement.

     LOAN DOCUMENTS.  Collectively, this Agreement, the Revolving Credit Note(s)
and any and all other agreements, instruments or documents now or hereafter
evidencing, or relating to the Obligations.

     LOT BOOK VALUE.  The cost of each Developed Lot, determined in accordance
with Generally Accepted Accounting Principles by allocating the acquisition cost
and land development costs of the Properties in each Project among the
Properties in the Project regardless of time of ownership.

     LOT DEVELOPMENT COSTS.  The amount of actual out-of-pocket costs incurred
by the Borrower or a Subsidiary in connection with the development of
Developable Land and Developed Lots for which the Borrower, upon request by the
Agent, provides to the Agent invoices, work orders and other documentation
reasonably satisfactory to the Agent and which have otherwise been properly
accounted for by the Borrower in the Borrowing Base Reports submitted to the
Agent in accordance with Section 8.5 hereof, but excluding therefrom: (i) costs
incurred for the construction of Units; and (ii) general administrative costs of
the Borrower and other costs not directly attributable to design, site
improvement, and construction of infrastructure on Developable Land and
Developed Lots.

     MAJORITY BANKS.  As of any date, the Banks holding at least fifty-one
percent (51%) of the Outstanding principal amount of the Notes on such date; and
if no such principal is outstanding, the Banks whose aggregate Commitment
Percentages total at least fifty-one percent (51%) of the Total Commitment, in
each case including FNBB in its capacity as a Bank.

     MATURITY DATE.  See Section 2.1.

     MAXIMUM COMMITMENT AMOUNT.  See Section 9.5.

                                       8

<PAGE>

     MAXIMUM DRAWING AMOUNT.  The maximum aggregate amount from time to time
which the beneficiaries may draw under outstanding Letters of Credit, as the
same may be reduced from time to time pursuant to the terms of the Letters of
Credit.

     MAXIMUM REVOLVER AMOUNT.  The Maximum Revolver Amount shall be equal to the
lesser of (i) the Borrowing Base minus Existing Senior Indebtedness and
Permitted Third Party Letters of Credit or (ii) the sum of the several
Commitments of the Banks as shown on Schedule 1 hereto, such sum not to exceed
$18,000,000.

     NET INCOME.  The net income (or net deficit) of the Borrower, determined in
accordance with Generally Accepted Accounting Principles.

     NET WORTH.  The excess of Total Assets over Total Liabilities.

     NOTE AGREEMENTS.  The Note Agreement dated February 15, 1996 by the
Borrower in favor of certain purchasers designated therein with respect to the
issuance of $10,000,000 aggregate principal amount of promissory notes, and Note
Agreement dated December 2, 1994 by the Borrower in favor of certain purchasers
designated therein with respect to the issuance of $24,000,000 aggregate
principal amount of promissory notes, the foregoing Note Agreements being one of
the Existing Senior Indebtedness Documents.

     NOTES.  The Revolving Credit Note(s).

     OBLIGATIONS.  All Indebtedness, obligations and liabilities of the Borrower
to any of the Banks and the Agent, individually or collectively, existing on the
date of this Agreement or arising hereafter, direct or indirect, joint or
several, absolute or contingent, matured or unmatured, liquidated or
unliquidated, secured or unsecured, now or hereafter owing or incurred, arising
under or in connection with this Agreement, the other Loan Documents or in
respect of Loans made or the Letters of Credit or other instruments at any time
evidencing any of the foregoing, including, without limitation, any obligation
to provide any cash collateral for a Letter of Credit under Section 2.9 hereof,
and any obligation to pay Fees and amounts due under Section 3.1, Section 3.2,
Section 3.3 and Section 13 hereof end any other fees due and payable by the
Borrower to the Agent.

     ORIGINATION FEE.  See Section 3.1.

     OUTSTANDING.  With respect to the Loan, the unpaid principal thereof as of
any date of determination.

                                       9

<PAGE>

     PENSION PLAN.  See Section 5.17.

     PERMITTED DISTRIBUTIONS.  Distributions permitted under Section 9.4 hereof.

     PERMITTED LIENS.  Mortgages, pledges, security interests and other liens
and encumbrances permitted to exist on the property of the Borrower pursuant to
Section 9.2.

     PERMITTED THIRD PARTY LETTERS OF CREDIT.  Letters of credit issued by third
parties as permitted under Section 9.3(f).

     PERSON.  Any individual, corporation, limited liability company,
association, partnership, trust, unincorporated association, business, or other
legal entity, and any government or any governmental agency or political
subdivision thereof.

     PROJECT(S).  One or more of the residential communities being developed by
the Borrower or a Subsidiary.

     PROPERTIES.  The land with improvements situated thereon (including,
without limitation, all Developable Land, Developed Lots and Units).

     RCRA.  See Section 5.24

     REAL ESTATE.  All real property at any time owned or leased (as lessee or
sub-lessee) by the Borrower or any of its Subsidiaries.

     REIMBURSEMENT AGREEMENTS.  The applications made and agreements entered
into between the Agent and the Borrower, on the Agent's customary form, relating
to the Letters of Credit.

     REQUIRED BANKS.  As of any date, the Banks holding at least sixty-six and
two-thirds percent (66-2/3%) of the Outstanding principal amount of the Notes on
such date; and if no such principal is outstanding, the Banks whose aggregate
Commitment Percentages constitute at least sixty-six and two-thirds percent
(66-2/3%) of the Total Commitment, in each case including FNBB in its capacity
as a Bank.

     REVOLVING CREDIT COMMITMENT.  The obligation of any of the Banks to make
Advances under the Revolving Credit Loan to the Borrower under Section 2.1 of
this Agreement.

                                      10

<PAGE>

     REVOLVING CREDIT LOAN.  The revolving credit loan made or to be made to the
Borrower as contemplated by Section 2 hereof.

     REVOLVING CREDIT NOTE(S).  The Revolving Credit Note(s) dated of even date
herewith, each made by the Borrower to the order of each of the Banks, such
notes to be in form set forth on Exhibit "B".

     RISK AMOUNT.  The aggregate amount of the following calculation as to each
Construction Letter of Credit. The higher of: (i) fifty (50) percent of the face
amount of the Construction Letter of Credit; or (ii) the dollar amount required
to complete the construction of the improvements for which the Construction
Letter of Credit was issued as determined and certified to the Agent by the
Borrower and approved by the Agent.

     SENIOR INDEBTEDNESS.  The indebtedness from time to time outstanding
hereunder (including Letters of Credit issued but undrawn) together with
Existing Senior Indebtedness and Permitted Third Party Letters of Credit.

     SOLD UNITS.  Units completed or under construction on Developed Lots for
which the Borrower has entered into a Housing Purchase Contract.

     SUBSIDIARY.  With respect to any Person, any corporation, limited liability
company, association, trust, or other business entity, a majority (by number of
votes) of the outstanding voting power of which is at the time owned or
controlled directly or indirectly by such Person.

     SUBSIDIARY GUARANTY.  That certain unconditional guaranty of payment dated
or to be dated on or prior to the Effective Date, made by the Subsidiaries of
Borrower in favor of the Agent and the Banks, pursuant to which the Borrower's
Subsidiaries guarantee to the Agent and the Banks the payment of the
Obligations.  Such Subsidiary Guaranty shall be in form and substance
satisfactory to the Agent and the Banks.

     TANGIBLE NET WORTH.  The Net Worth of the Borrower less the net book value
(after deducting reserves applicable thereto) of all of the Borrower's
intangible assets (intangible assets shall be determined in accordance with
Generally Accepted Accounting Principles including (i) goodwill, including,
without limitation, the excess of cost over book value of any asset, (ii)
organization and experimental expenses, (iii) unamortized debt discount and
expense, (iv) patents, trademarks, tradenames and copyrights, (v) treasury
stock, (vi) deferred taxes and deferred charges (reduced by, but not below zero,
the amount of any deferred tax), (vii) franchises, licenses and permits, and
(viii) other assets which are deemed intangible assets under Generally Accepted
Accounting Principles).

                                      11

<PAGE>

     TOTAL ASSETS.  All assets of Borrower and its Subsidiaries on a
consolidated basis.

     TOTAL LIABILITIES.  All liabilities of the Borrower and its Subsidiaries
which are properly accounted for as such in accordance with Generally Accepted
Accounting Principles.

     UNIT COSTS.  The Lot Book Value of Developed Lots on which Units (completed
or under construction) are situated plus the amount of actual out of pocket
costs incurred by the Borrower or a Subsidiary in connection with the
construction of Units for which the Borrower, upon request by the Agent,
provides to the Agent invoices, work orders and other documentation reasonably
satisfactory to the Agent and which have otherwise been properly accounted for
by the Borrower in the Borrowing Base Reports submitted to the Agent in
accordance with Section 8.5 hereof.

     UNITS.  The attached and detached single-family residences, or duplex
residences whether completed or under construction, held by the Borrower for
sale in the ordinary course of its business, and in which the rights of
ownership and occupancy are to be sold other than on a time-sharing or periodic
basis and which Borrower has ownership of the Developed Lot and improvements
thereon.

     UNSOLD UNIT.  A Unit owned by Borrower with respect to which construction
has begun (measured by the commencement of the laying of a foundation for such
Unit) and for which a Housing Purchase Contract has not been entered into.

     WELFARE PLAN.  See Section 5.17.

     WORKING CAPITAL.  At any date, an amount equal to (i) cash and cash
equivalents; plus (ii) accounts and notes receivable; plus (iii) refundable
deposits; less (iv) accounts payable; and less (v) customer deposits, in each
case determined in accordance with generally accepted accounting principals.

     Section 1.1    RULES OF INTERPRETATION. (a) A reference to any agreement,
budget, document or schedule shall include such agreement, budget, document or
schedule as revised, amended, modified or supplemented from time to time in
accordance with its terms and the terms of this Agreement.

               (b)  The singular includes the plural and the plural includes the
singular.

                                      12

<PAGE>

               (c)  A reference to any law includes any amendment or
modification to such law.

               (d)  A reference to any Person includes its permitted successors
and permitted assigns.

               (e)  Accounting terms not otherwise defined herein have the
meanings assigned to them by Generally Accepted Accounting Principles applied on
a consistent basis by the accounting entity to which they refer.

               (f)  The words "include", "includes" and "including" are not
limiting.

               (g)  The words "approval" and "approved", as the context so
determines, means an approval in writing given to the party seeking approval
after full and fair disclosure to the party giving approval of all material
facts necessary in order to determine whether approval should be granted.

               (h)  Reference to a particular "Section " refers to that section
of this Agreement unless otherwise indicated.

               (i)  The words "herein", "hereof", "hereunder" and words of like
import shall refer to this Agreement as a whole and not to any particular
section or subdivision of this Agreement.

               (j)  All terms not specifically defined herein which are defined
in the Uniform Commercial Code as in effect in the Commonwealth of Massachusetts
and shall have the same meanings herein as therein.

                                      13

<PAGE>

     Section 2.     REVOLVING CREDIT LOAN.

     Section 2.1.   COMMITMENT TO LEND AND BORROWER'S PROMISE TO PAY.  The 
Banks hereby commit to extend credit in the amount of $18,000,000.00, 
provided however, that the Senior Indebtedness at any one time outstanding 
(calculated in the manner set forth at Section 7.5) shall not exceed the 
Borrowing Base. The Loan has been accomplished by the execution and delivery 
on even date of the Revolving Credit Note in the original principal amount of 
$18,000,000.00 representing the Maximum Commitment Amount.  Subject to the 
terms and conditions set forth in this Agreement, each of the Banks severally 
agrees to lend to the Borrower and the Borrower may borrow, repay, and 
re-borrow from time to time between the Effective Date and the Conversion 
Date, upon notice to the Agent given in accordance with Section 2.5 hereof, 
such amounts as may be requested by the Borrower; provided, however, that the 
maximum aggregate principal amount of the Revolving Credit Loan (after giving 
effect to the amounts requested) shall not at any one time exceed an amount 
equal to the Maximum Revolver Amount minus the Maximum Drawing Amount.  The 
Advances with respect to the Revolving Credit Loan shall be made pro rata in 
accordance with each Bank's Commitment Percentage.  Each request for an 
Advance hereunder shall constitute a representation by the Borrower that the 
applicable conditions set forth in Sections 6 and 7 hereof have been 
satisfied on the date of such request.  The Revolving Credit Commitment shall 
terminate on the Conversion Date, and the Revolving Credit Loan shall mature 
and become due and payable on the third anniversary hereof, or on such 
earlier date on which the Borrower terminates the Banks' Commitments 
hereunder or on which the maturity thereof is accelerated pursuant to the 
provisions of Section 11.1 hereof (the "Maturity Date") and the Borrower 
hereby promises to pay on such date all amounts then outstanding hereunder.

     Section 2.2.   TERMINATION OF COMMITMENT.  The Borrower may, at its 
option, upon three (3) Business Days advance notice to the Agent, repay all 
amounts Outstanding on the Revolving Credit Loan and cause to be terminated 
all Letters of Credit issued by the Banks hereunder and concurrently 
terminate the Commitments of the Banks hereunder.  Upon the Effective Date of 
any such termination, the Borrower agrees to pay to the Agent, for the 
accounts of the Banks, the full amount of any Commitment Fee then accrued on 
the Commitment Amount.

     Section 2.3.   THE REVOLVING CREDIT NOTE(S).  The Revolving Credit Loan 
shall be evidenced by separate promissory notes of the Borrower in 
substantially the form of Exhibit "D" hereto (each a "Revolving Credit 
Note"), dated as of the Effective Date. One Revolving Credit Note shall be 
payable to the order of each Bank in a principal amount equal to such Bank's 
Commitment, or, if less, the outstanding amount of all Advances with respect 
to the Revolving Credit Loan made by such Bank, plus interest accrued 
thereon, as set forth below.  

                                      14

<PAGE>

If in the event a Revolving Credit Note is lost, destroyed or mutilated at 
any time prior to payment in full of the indebtedness evidenced thereby, the 
Borrower shall execute a new note substantially in the form of such Revolving 
Credit Note.  The replacement Revolving Credit Note shall recite the 
circumstances of the reissue of the Revolving Credit Note and shall state 
that it is a replacement promissory note.  If the Revolving Credit Note is 
lost or otherwise unavailable, the payee Bank shall also deliver to the 
Borrower a lost instruments bond in the face amount of the lost Revolving 
Credit Note.  The Revolving Credit Notes shall not be necessary to establish 
the indebtedness of the Borrower to the Banks on account of the Revolving 
Credit Loan made pursuant to this Agreement.

     Section 2.4.   CERTAIN PREPAYMENTS.  The Borrower shall have the right at
any time to prepay the Revolving Credit Loan made to the Borrower hereunder as a
whole or in part, without premium or penalty at any time upon written,
telegraphic or telephonic notice to the Agent prior to 1:00 p.m. local Boston,
Massachusetts time on the day of the proposed prepayment.  Subject to the
conditions of Section 2.1 hereof, amounts so prepaid may be re-borrowed.

     If at any time the outstanding principal amount of the Revolving Credit
Loan shall exceed an amount equal to the Maximum Revolver Amount minus the
Maximum Drawing Amount, whether as a result of reductions in the Maximum
Revolver Amount or otherwise, the Borrower shall immediately pay to the Agent
for the account of the Banks the amount of such excess.

     Section 2.5.   REQUESTS FOR ADVANCES UNDER THE REVOLVING CREDIT LOAN. 
Whenever the Borrower desires to receive a Advance under the Revolving Credit
Loan, the Borrower shall give notice to the Agent by telephone or telecopy, in
each case confirmed in writing by the Borrower, in the other preceding method,
delivered to the Agent's head office at 100 Federal Street, Boston,
Massachusetts 02110, Attention: Commercial Loan Services, Mail Stop: 05-02-00-A,
not later than 11:00 a.m. (Boston time) on the proposed Drawdown Date, or by
such other standard procedures agreed upon by the Borrower and the Agent.  The
Agent shall provide a copy of the notice to the Banks on or before 12:00 a.m.
(Boston time) on the date of receipt of the notice.

     Each such notice delivered by the Borrower shall specify the aggregate
principal amount of the Advances under the Revolving Credit Loan requested. 
Each such notice shall obligate the Borrower to accept the Advances under the
Revolving Credit Loan requested from the Banks on the proposed Drawdown Date
therefor.  Whenever there is an Obligation due and payable, the Agent may (but
shall not be required to) make a Advance under the Revolving Credit Loan in the
amount of such Obligation and apply the proceeds of the Advance under the

                                      15

<PAGE>

Revolving Credit Loan to the payment of the Obligation, provided that the 
Agent shall promptly notify the Borrower of such Advance and the application 
of proceeds thereof.  Borrower hereby irrevocably authorized an Advance on 
the Effective Date to pay FNBB the outstanding principal and all accrued 
interest under that certain Revolving Credit Note in the amount of 
$2,000,000.00 dated October 10, 1996.

     Section 2.6.   INTEREST.  Except as otherwise provided in Section 2.7
hereof, the principal balance of the Advances under the Revolving Credit Loan
outstanding from time to time shall bear interest from the Drawdown Date thereof
until repaid in full at the annual rate equal to one-half percent (.5%) plus the
Base Rate. Interest on the Advances under the Revolving Credit Loan shall be
payable monthly in arrears on the first Business Day of each month for the
immediately preceding month, commencing on the first such date subsequent to the
Effective Date, with a final payment on the Maturity Date of the Revolving
Credit Loan.  The Borrower hereby promises to pay interest on the Revolving
Credit Loan in the amount and at the times set forth herein.

     Section 2.7.   INTEREST ON OVERDUE AMOUNTS.  Overdue principal and (to the
extent permitted by applicable law) interest on the Revolving Credit Loan and
all other overdue amounts payable hereunder shall bear interest at a rate per
annum equal to six percent (6%) plus the Base Rate, compounded daily and payable
on demand, to accrue from and after ten (10) days from the due date thereof
until the obligation of the Borrower with respect to the payment thereof shall
be discharged, whether before or after Judgment.

     Section 2.8.   FUNDS FOR REVOLVING CREDIT LOANS.

               (a)  Not later than 3:00 p.m. (Boston time) on the proposed
Drawdown Date of any Advances under the Revolving Credit Loan, each of the Banks
will make available to the Agent, at its Head Office, in immediately available
funds, the amount of such Bank's Commitment Percentage of the amount of the
requested Advances under the Revolving Credit Loan. Upon receipt from each Bank
of such amount, and upon receipt of the documents required by Sections 6 and 7
and the satisfaction of the other conditions set forth therein, to the extent
applicable, the Agent will make available to the Borrower the aggregate amount
of such Advances under the Revolving Credit Loan made available to the Agent by
the Banks.  The failure or refusal of any Bank to make available to the Agent at
the aforesaid time and place on any Drawdown Date the amount of its Commitment
Percentage of the requested Advances under the Revolving Credit Loan shall not
relieve any other Bank from its several obligation hereunder to make available
to the Agent the amount of such other Bank's Commitment Percentage of any
requested Advances under the Revolving Credit Loan.

                                      16

<PAGE>

               (b)  The Agent may, unless notified to the contrary by any Bank
prior to a Drawdown Date, assume that such Bank has made available to the Agent
on such Drawdown Date the amount of such Bank's Commitment Percentage of the
Advances under the Revolving Credit Loan to be made on such Drawdown Date, and
the Agent may (but it shall not be required to), in reliance upon such
assumption, make available to the Borrower a corresponding amount.  If any Bank
makes available to the Agent such amount on a date after such Drawdown Date,
such Bank shall pay to the Agent on demand an amount equal to the product of (i)
the average computed for the period referred to in clause (iii) below, of the
weighted average interest rate paid by the Agent for federal funds acquired by
the Agent during each day included in such period, times (ii) the amount of such
Bank's Commitment Percentage of such Advances under the Revolving Credit Loan,
times (iii) a fraction, the numerator of which is the number of days that elapse
from and including such Drawdown Date to the date on which the amount of such
Bank's Commitment Percentage of such Advances under the Revolving Credit Loan
shall become immediately available to the Agent, and the denominator of which is
360.  A statement of the Agent submitted to such Bank with respect to any
amounts owing under this paragraph shall be prima facie evidence of the amount
due and owing to the Agent by such Bank.  If the amount of such Bank's
Commitment Percentage of such Advances under the Revolving Credit Loan is not
made available to the Agent by such Bank within three (3) Business Days
following such Drawdown Date, the Agent shall be entitled to recover such amount
from the Borrower on demand, with interest thereon at the rate per annum
applicable to the Advances under the Revolving Credit Loan made on such Drawdown
Date.

                                      17

<PAGE>

     Section 2.9.   LETTERS OF CREDIT.

          (a)  ISSUANCE OF LETTERS OF CREDIT.  Subject to the terms and 
conditions set forth in this Agreement and the applicable Reimbursement 
Agreement, upon the written request of the Borrower to the Agent and the 
execution and delivery of a Reimbursement Agreement by the Borrower to the 
Agent, the Agent, on behalf of the Banks agrees to issue with pro rata 
participation by the Banks, on the Effective Date or on any Business Day 
thereafter but prior to the Maturity Date, one or more irrevocable stand-by 
Letters of Credit in such form as may be agreed upon by the Borrower and the 
Agent; provided, however, that (i) the aggregate Maximum Drawing Amount of 
all Letters of Credit shall not exceed $5,000,000.00 at any one time 
outstanding and (ii) the sum of (x) the Maximum Drawing Amount and (y) 
Outstanding Advances under the Revolving Credit Loan shall not at any time 
exceed the Maximum Revolver Amount.  Each written request for the issuance of 
a Letter of Credit hereunder shall be received by the Agent at least three 
Business Days prior to the proposed date of issuance.  The expiration dates, 
amounts and beneficiaries of the Letters of Credit will be as agreed by the 
Borrower and the Agent, and each Letter of Credit shall be in a form 
acceptable to the Agent.  No Letter of Credit shall have an expiration date 
later than the earlier of (i) the date one year after the date of issuance of 
such Letter of Credit (which may be subject to renewal for a single renewal 
period ending not later than the date one year after the original expiration 
date) or (ii) the Maturity Date. Each Letter of Credit shall be issued 
pursuant to a Reimbursement Agreement to be entered into between the Borrower 
and the Agent (for the accounts of the Banks); provided, however, that to the 
extent that the terms and conditions of any Reimbursement Agreement are in 
conflict with or are inconsistent with the terms and conditions of this 
Agreement, the obligations of the Banks and the Borrower with respect to 
Letters of Credit shall be governed by the terms and conditions of this 
Agreement.

          (b)  NON-RENEWAL; CASH COLLATERAL.  The Agent may, at its option, 
elect not to renew any Letter of Credit by giving written notice of 
non-renewal to the Borrower at least 30 days prior to the expiration date of 
such Letter of Credit.  The Agent may, in its discretion at any time and from 
time to time while there exists any Default or Event of Default hereunder, 
make a Advance under the Revolving Credit Loan in an amount equal to all or 
any portion of the Maximum Drawing Amount of any outstanding Letters of 
Credit hereunder, and hold the proceeds thereof in an interest bearing 
account as collateral security for such Obligations (and such account shall 
be subject to the Agent's right to set off against such amounts under Section 
12 hereof), provided that the Agent shall promptly notify the Borrower of 
such Advance and application of the proceeds thereof and further provided 
that all interest earned on proceeds so held shall be applied as and when 
available to reduce any Obligations outstanding hereunder or, if there are no 
Obligations outstanding, shall be paid over to the Borrower.

                                      18

<PAGE>

          (c)  EFFECTS OF DRAWINGS.  Upon each drawing under a Letter of Credit
and each termination of a Letter of Credit pursuant to its terms, the
un-reimbursed amount of the drawing shall automatically be converted into an
Advance under the Revolving Credit Loan, made on the date of such drawing or
such termination.  The liability of the Borrower under this Agreement to repay
the Banks in respect of drawings under Letters of Credit shall be Obligations
and such shall rank pari passu with the obligations of the Borrower to repay all
other Advances under the Revolving Credit Loan hereunder.

     Section 2.10.  CONVERSION DATE AND EXTENSIONS.  Upon the occurrence of the
Conversion Date the Borrower shall not be entitled to seek any additional
advances under the Revolving Credit Loan or obtain any additional Letter of
Credit and the entire outstanding balance of the indebtedness created hereunder
shall be due and payable in eleven equal monthly installments of principal equal
to the outstanding principal balance on the Conversion Date divided by twelve,
plus all accrued and unpaid interest thereon being due and payable on the first
day of each month during this period of the Loan together with a final
installment of the entire outstanding balance of the indebtedness created
hereunder together with all accrued and unpaid interest being due and payable on
the Maturity Date.  The principal portions of the principal plus interest
installments from and after the Conversion Date shall be automatically increased
by the quotient equal to the amount of any draws under any Letter of Credit
issued hereunder divided by the then remaining installments from and after the
Conversion Date.

     The Borrower shall have the right to notify the Agent of its desire to
extend the term of the Revolving Credit Loan for an additional one year and to
extend the Conversion Date on or before sixty (60) days prior to each one year
anniversary of the Loan (if extended) as such date may be extended pursuant to
the terms hereof.  The Agent (subject to the provisions of Section 21) shall
determine in its sole discretion if any extension of the term of the Revolving
Credit Loan is appropriate.

     Section 3.     FEES.

     Section 3.1.   ORIGINATION FEE AND FEE AGREEMENT.  The Borrower agrees and
is obligated as of the date hereof to pay to the Agent, an origination fee in an
amount equal to $90,000.00, which is payable with respect to the advance of
credit by the Banks to the Borrower pursuant to the Revolving Credit Note, and
which shall be paid to the Agent on the Effective Date.  The Borrower also
agrees and is obligated as of the date hereof to pay to FNBB the fees in
accordance with the separate Fee and Expense Agreement ("Fee and Expense
Agreement") between FNBB and the Borrower of even date.

                                      19

<PAGE>

     Section 3.2.   LETTER OF CREDIT FEES.  The Borrower shall pay to the 
Agent an annual fee (the "Letter of Credit Fee") for each Letter of Credit 
issued pursuant to this Agreement to be calculated at the rate of one and 
five-eighths percent (1.625%) per annum on the Maximum Drawing Amount 
attributable to such Letter of Credit, plus the Agent's customary issuance 
fee, payable in accordance with the Agent's standard fee schedule.  The 
Letter of Credit Fee shall be payable in advance on the date of issuance for 
the stated term of such Letter of Credit and upon the date of renewal for the 
renewal term of any Letter of Credit. Upon receipt of such Letter of Credit 
Fee (but not such issuance fee), the Agent shall remit to each Bank a portion 
of such fee in the amount of 1 3/8% of its portion of the Letter of Credit.  
Upon the cancellation of a Letter of Credit in accordance with its terms or 
any reduction of the Maximum Drawing Amount attributable to a Letter of 
Credit during any quarter, the Agent shall reimburse the Borrower for the pro 
rata portion of the Letter of Credit Fee attributable to such Letter of 
Credit for the balance of the stated term thereof, and the Banks that 
received part of such Letter of Credit Fee shall refund, pro rata, an 
identical portion of such amount so received to the Agent.

     Section 3.3.   UNUSED COMMITMENT FEE.  The Borrower shall pay to the 
Agent on behalf of the Banks quarterly in arrears the amount equal to .5% of 
the difference between: (i) $18,000,000; and (ii) the average outstanding 
principal balance of the indebtedness created hereby plus the average of 
Letters of Credit issued and outstanding during the preceding quarter.

     Section 3.4.   ADDITIONAL AMOUNTS PAYABLE ON ACCOUNT OF CREDIT 
FACILITIES. If any Bank or the Agent shall have determined that any present 
or future applicable law enacted by the United States, any federal agency, 
any state or political subdivision thereof, which expression, as used herein, 
includes any rule, regulation, guideline, directive or request (whether or 
not having force of law) regarding capital requirements for banks or bank 
holding companies or subsidiaries of bank holding companies, or any change 
therein or in the interpretation or administration thereof by any 
governmental authority, central bank or comparable agency in the United 
States charged with the interpretation or administration thereof, or 
compliance by the Bank or the Agent with any of the foregoing, imposes or 
increases a requirement by any Bank or the Agent to allocate capital 
resources to the commitment of such Bank to make or issue, or to the 
maintenance by such Bank or the Agent of, Loans or Letters of Credit 
hereunder, which such Bank or Agent has determined in good faith would have 
the effect of reducing the return on the capital of such Bank or the Agent to 
a level below that which such Bank or the Agent could have achieved (taking 
into consideration the then existing policies of such Bank or the Agent with 
respect to capital adequacy and assuming full utilization of the capital of 
such Bank or the Agent) but for such applicability, change, interpretation, 
administration or compliance, by any amount deemed in good faith by such Bank 
or the Agent 

                                      20

<PAGE>

to be material, and which is not reflected in an increase in the Base Rate, 
such Bank or the Agent shall promptly after its determination of such 
occurrence give written notice thereof to the Borrower.  The Borrower and 
such Bank or as the case may be, the Agent shall thereafter attempt to 
negotiate in good faith an adjustment to the compensation payable hereunder 
which will adequately compensate such Bank or the Agent for such reduction.  
If the Borrower and such Bank or the Agent are unable to agree to such 
adjustment within thirty (30) days of the day on which the Borrower shall 
receive such written notice, then commencing on the date of such notice (but 
not earlier than the effective date of any such applicability, change, 
interpretation, administration or compliance), the fees payable hereunder 
shall increase by an amount which will, in the reasonable determination of 
such Bank or the Agent, as the case may be, compensate such Bank or the Agent 
for such reduction.  In determining such amount, such Bank or the Agent may 
use any reasonable and equitable methods of averaging, allocating or 
attributing such reduction among its customers.

     A certificate demonstrating the calculation of the amount of such increased
fees shall be submitted to the Borrower by such Bank or the Agent. The Borrower
shall be required to pay such amount within fifteen (15) days after its receipt
of such certificate.

     Section 3.5.   ADDITIONAL COSTS AND EXPENSES; RESERVE REQUIREMENTS.  In 
addition to any amounts payable under Section 3.4 hereof and the Fee and 
Expense Agreement, if any present or future applicable law enacted by the 
United States, any federal agency, any state, or political subdivision 
thereof, which expression, as used herein, includes statutes, rules and 
regulations thereunder and interpretations thereof by any court of competent 
jurisdiction or by any governmental or other regulatory body or official 
charged with the administration or the interpretation thereof and requests, 
directives, instructions and notices at any time or from time to time 
hereafter made upon or otherwise issued to any Bank or the Agent by any 
central bank or other fiscal, monetary or other authority in the United 
States (whether or not having the force of law), shall:

               (a)  subject any Bank or the Agent to any tax, levy, impost,
duty, charge, fee, deduction or withholding of any nature with respect to the
Loan or Letters of Credit or deposits obtained to fund Loans; or

               (b)  materially change the basis of taxation of payments to any
Bank of the principal of or the interest on the Loan or Letters of Credit or any
other amounts payable to any Bank hereunder (other than changes relating to
taxes based on the net income of such Bank or the Agent), or

                                      21

<PAGE>

               (c)  impose or render applicable any special deposit or reserve
or similar requirement (whether or not having the force of law) against the
Loan, the Letters of Credit or loans of the type contemplated hereby made by the
Banks or Letter of Credit of the type contemplated hereby issued by the Banks;
or

               (d)  impose on any Bank or the Agent any other conditions or
requirements with respect to the Loan or any class of loans of which the Loan
form a part or the Letters of Credit, and the result of any of the foregoing is
to increase the cost to any Bank of making Loans, Advances or issuing Letters of
Credit, or to reduce the amount of principal, interest, Letters of Credit Fees
or other amount payable to such Bank or the Agent hereunder, or to require such
Bank or the Agent to make any payment or to forego any interest or other sum
payable hereunder, and which is not reflected in an increase in the Base Rate,
the amount of which payment or foregone interest or other sum is calculated by
reference to the gross amount of any sum receivable or deemed received by such
Bank or the Agent from the Borrower hereunder, then, such Bank or the Agent will
notify the Borrower of such event, and the Borrower and such Bank or the Agent
shall thereafter attempt to negotiate in good faith an adjustment to the
compensation payable hereunder which will adequately compensate such Bank or the
Agent for such reduction or payment. If the Bank (or the Agent) and the Borrower
are unable to agree to such adjustment within thirty (30) days of the date of
such notice, the Borrower will, upon written demand made by such Bank or (as the
case may be) the Agent at any time and from time to time thereafter, pay to such
Bank or the Agent such additional amounts as will be sufficient in the good
faith opinion of such Bank or the Agent to compensate the Bank or the Agent for
such additional cost, reduction, payment or foregone interest or other sum. In
determining the amount of such compensation, such Bank or the Agent may use any
reasonable and equitable methods of averaging, allocating or attributing such
amounts to its customers.

     A certificate demonstrating the calculation of the amount of such increased
payment shall be submitted to the Borrower by such Bank.  The Borrower shall be
required to pay such amount within fifteen (15) days after its receipt of such
certificate.

                                      22

<PAGE>

     Section 4.     PAYMENTS; MASTER ACCOUNT; COMPUTATIONS; AND INTEREST
LIMITATION.

     Section 4.1.   PAYMENTS.  All payments of principal and interest on the
Loan and the Fees payable under Section 3, and any other amounts due hereunder
shall be made by the Borrower to the Agent, for the respective accounts of the
Banks and the Agent, in immediately available funds at the Agent's head office
at 100 Federal Street, Boston, Massachusetts 02110 Attn: Commercial Loan
Services, Mail Stop: 05-02-00-A.  As provided in Section 2.5 hereof, whenever
any such Obligation is due and payable, the Agent may (but shall not be required
to) make a Advance under the Revolving Credit Loan in the amount of such
Obligation and apply the proceeds of the Advance under the Revolving Credit Loan
to the payment of the Obligation, provided that the Agent shall promptly notify
the Borrower of any such Advance and the application of the proceeds thereof.
Upon receipt by the Agent of any such payment of principal, interest or fees
(other than fees or expenses to be retained by Agent pursuant to the terms
thereof), the Agent shall remit to each other Bank, its applicable pro rata
share of such payment.

     Section 4.2.   MASTER ACCOUNT.  Within thirty (30) days from the Effective
Date, the Borrower shall establish with the Agent a special deposit account in
the name of and for the benefit of the Agent from which withdrawals may be made
only by the Agent ("Depository Account"). Unless otherwise directed by the
Agent, at the close of each Business Day, the Borrower shall promptly deposit
all excess cash, checks and other payments or proceeds received by it from the
operation of its business or the Properties directly into the Depository
Account.  The Agent shall credit the proceeds of the Depository Account as
follows:

                    (i)    if a Default or Event of Default then exists, the
amounts received by the Agent shall be applied to all costs or other amounts due
and payable to the Agent hereunder in the manner that the Agent in its
discretion deems appropriate including the payment of all legal fees and other
costs of collection, default rate interest, accrued and unpaid interest and the
principal balance of the Loan.

                    (ii)   If no Default or Event of Default exists hereunder,
then to the then outstanding accrued and unpaid interest hereunder and then to
the outstanding principal balance hereof.

     Section 4.3.   COMPUTATIONS.  All computations of interest on the Loans,
the Fees payable under Section 3, and any other amount due hereunder shall be
based on a 360-day year and paid for the actual number of days elapsed. 
Whenever a payment hereunder becomes due on a day 

                                      23

<PAGE>

which is not a Business Day, the due date for such payment shall be extended 
to the next succeeding Business Day, and interest shall accrue during such 
extension.

     Section 4.4.   INTEREST LIMITATION.  Notwithstanding any other term of 
this Agreement or any other document referred to herein or therein, the 
maximum amount of interest which may be charged to or collected from any 
person liable hereunder by the Agent shall be absolutely limited to, and 
shall in no event exceed, the maximum amount of interest which could lawfully 
be charged or collected under applicable law, so that the maximum of all 
amounts constituting interest under applicable law, howsoever computed, shall 
never exceed as to any person liable therefor such lawful maximum, and any 
term of this Agreement or any other document referred to herein or therein 
which could be construed as providing for interest in excess of such lawful 
maximum shall be and hereby is made expressly subject to and modified by the 
provisions of this paragraph.

     Section 5.     REPRESENTATIONS AND WARRANTIES.  The Borrower hereby 
represents and warrants to the Banks and the Agent, as follows:

     Section 5.1.   EXISTENCE ETC.

               (a)  The Borrower is a corporation duly organized, existing 
and in good standing under the laws of the State of Minnesota and is 
qualified to do business and in good standing under the laws of all states 
where the Borrower is doing business. The Borrower has taken all actions 
which, by reason of its ownership of property or carrying on of business, are 
required to be taken by it under the laws of any jurisdiction wherein it owns 
property or carries on business and which the failure to do so would have a 
material adverse affect on its business.

               (b)  The Borrower has all requisite power and authority and 
has full legal right to enter into each of the Loan Documents to which it is 
or is to become a party, to perform, observe and comply with all of its 
agreements and obligations under each of such documents.  The Borrower has 
all requisite power and authority and full legal right to make all of the 
borrowing and obtain the extensions of credit contemplated by this Agreement.

               (c)  Schedule 5.1 attached hereto correctly sets forth with 
respect to each Borrower Subsidiary existing on the date hereof (i) its full 
and correct legal name, (ii) its jurisdiction of incorporation or formation, 
as the case may be, and (iii) the percentage of its voting stock or 
partnership interests, as the case may be, owned, respectively, by the 
Borrower or by another Subsidiary. Each of the Borrower and its Subsidiaries 
has good and marketable title to all of the shares of stock of or partnership 

                                      24

<PAGE>

interests in, as the case may be, Subsidiaries it purports to own. All such 
shares have been duly issued and are fully paid and non-assessable.  No 
Person other than the Borrower or a Subsidiary holds or otherwise possesses 
any warrant, right or option to purchase or otherwise acquire stock or other 
securities convertible into stock of its Subsidiaries.

               (d)  The Guarantors are corporations duly organized, existing and
in good standing under the laws of the State of each of their incorporation and
are qualified to do business and in good standing under the laws of each of the
States where each of them are doing business.  The Guarantors have taken all
actions which, by reason of their ownership of property or carrying on of
business, are required to be taken by them under the laws of any Jurisdiction
wherein they own property or carry on business and which the failure to do so
would have a material adverse affect on its business.

               (e)  The Guarantors have all requisite power and authority and
have full legal right to enter into each of the Loan Documents to which they are
or are to become a party, to perform, observe and comply with all of their
agreements and obligations under each of such documents.

     Section 5.2.   BUSINESS ACTIVITY; CAPITALIZATION.

               (a)  Since the Balance Sheet Date, the Borrower has conducted its
business in the ordinary course.

               (b)  The Borrower does not own or hold of record and/or
beneficially (whether directly or indirectly) any shares of any class in the
capital of any corporations nor any legal and/or beneficial interests in any
partnership, limited liability company, business trust or joint venture or in
any other unincorporated trade or business enterprise, except for the Borrower's
Subsidiaries and partnership interests listed in Schedule 5.1 annexed hereto,
all of which are wholly owned by the Borrower.

     Section 5.3.   AUTHORITY, ETC.  The execution and delivery by the Borrower
of each of the Loan Documents, the performance by Borrower of all of its
agreements and obligations under each of such documents, and the making by the
Borrower of all of the borrowing contemplated by this Agreement, are within the
corporate authority of the Borrower, has been duly authorized by all necessary
corporate action and does not and will not, with respect to the Borrower, (i)
contravene any provisions of Borrower's certificate of incorporation (or other
charter documents), by-laws or any stock provisions, or any amendment thereof,
or (ii) conflict with, or result in a breach of any material term, condition or
provision of, or constitute a default under or result in the creation of any
mortgage, lien, pledge, charge, 

                                      25

<PAGE>

security interest or other encumbrance upon any of its properties under any 
agreement, trust deed, indenture, mortgage or other instrument to which it is 
a party or by which its properties are bound or affected, or (iii) violate or 
contravene any provision of any law, regulation, order, ruling or 
interpretation thereunder or any decree, order or judgment of any court or 
governmental or regulatory authority, agency or official or (iv) require any 
waiver, consent or approval by any of the creditors or stockholders of the 
Borrower which has not been obtained or (v) require any approval, consent, 
order, authorization or license by, or giving notice to, or taking any other 
action with respect to, any governmental or regulatory authority or agency 
under any provision of any law applicable to the Borrower.

     Section 5.4.   BINDING EFFECT OF DOCUMENTS, ETC.  The Borrower has duly 
executed and delivered each of the Loan Documents and each of such documents 
is in full force and effect.  The agreements and obligations of the Borrower 
contained in each of the Loan Documents constitute legal, valid and binding 
obligations of the Borrower, enforceable against the Borrower in accordance 
with their respective terms except as enforceability is limited by 
bankruptcy, insolvency, reorganization, moratorium or other laws relating to 
or affecting generally the enforcement of creditors' rights and by general 
principles of equity regardless of whether enforcement of such obligations is 
sought in a proceeding in equity or at law.

     Section 5.5.   NO EVENTS OF DEFAULT, ETC.

               (a)  No Default or Event of Default has occurred and is
continuing.

               (b)  The Borrower is not in default under any provision of its 
charter, by-laws, stock provisions or under any indenture or agreement by 
which it is bound, or in violation of any applicable law, order, regulation, 
ruling or requirement of any court or public body or authority by which the 
Borrower or its properties are bound, which default or violation would have a 
material adverse affect on its business, assets, operations or financial 
condition.

     Section 5.6.   CHIEF EXECUTIVE OFFICE.  The chief executive office of 
the Borrower is located at the address set forth in Schedule 5.6 annexed 
hereto. The Borrower shall not change the location of its chief executive 
office without prior written notice to the Agent.  All records are and shall 
be kept, only at the addresses set forth in Schedule 5.6. The Borrower hereby 
agrees to afford to the Agent access to each of the locations where the Loan 
Documents are kept for such purpose and for the purpose of examining the Loan 
Documents and all records.

                                      26

<PAGE>

     Section 5.7.   FINANCIAL STATEMENTS; SOLVENCY.

               (a)  There has been furnished to the Banks the audited balance
sheet of the Borrower and its Subsidiaries as of March 31, 1996 (the "Balance
Sheet Date"), and the statements of income, retained earnings and cash flows of
the Borrower for the year then ended, certified by Arthur Andersen LLP.  Such
financial statements have been prepared in accordance with Generally Accepted
Accounting Principles and fairly present the financial condition of the Borrower
as of the Balance Sheet Date and the results of operations for the fiscal year
then ended.  There are no contingent liabilities of any of the Borrower as of
the Balance Sheet Date which were required to be disclosed in accordance with
Generally Accepted Accounting Principles and which were not disclosed in such
balance sheets and the notes related thereto.

               (b)  The Borrower on a consolidated basis (after giving effect to
the transactions contemplated hereby), is solvent, has assets having a fair
value in excess of the amount required to pay its probable liabilities on its
existing debts as they become absolute and matured, and has, and will have,
access to adequate capital for the conduct of its business and the ability to
pay its debts from time to time incurred in connection therewith as such debts
mature.

     Section 5.8.   CHANGES; NONE ADVERSE.  Since the Balance Sheet Date, there
has not been any materially adverse change in the financial condition, assets,
or results of operations of the Borrower or any of its Subsidiaries.  Since the
Balance Sheet Date, neither the Borrower nor any of its Subsidiaries has made
any Distribution. The Borrower is not a party to any contract or agreement that
could reasonably be expected to have a material adverse affect on its business
and which is not shown on the balance sheets of the Borrower delivered to the
Banks pursuant to Section 5.7(a).

     Section 5.9.   OWNERSHIP.  The Borrower and each Subsidiary have title to
all of their respective properties and assets, real and personal, including the
properties and assets reflected on the financial statements referred to in
Section 5.7 (other than any properties or assets disposed of in the ordinary
course of business).  The Borrower is and shall become the owner of each
Developed Lot and Unit the value of which is to be included in the Borrowing
Base and shall neither create nor suffer to exist any lien or encumbrance
thereon or security interest therein (other than Permitted Liens), nor sell,
assign, transfer or create or suffer to exist any lien or encumbrance on or
security interest (other than Permitted Liens), Housing Purchase Contracts or
other right constituting proceeds thereof to or in favor of any other Person,
other than the Agent on behalf of the Banks.

                                      27

<PAGE>

     Section 5.10.  MORTGAGES AND LIENS.  To the best knowledge and belief of
the Borrower and its Subsidiaries, none of the property assets, income or
revenues of any character of the Borrower is subject to any mortgage, lien,
pledge, charge, security interest, defect or other encumbrance of any kind,
other than mortgages, liens, pledges, charges, security interests, defects and
other encumbrances expressly permitted by the provisions contained in Section
9.2 of this Agreement.

     Section 5.11.  INTELLECTUAL PROPERTY.  The Borrower and each of its
Subsidiaries owns, or is licensed to use, all trademarks, tradenames,
copyrights, technology, know-how and processes necessary for the conduct of its
business as currently conducted (the "Intellectual Property").  No claim has
been asserted or is pending by any Person challenging or questioning the use of
any such Intellectual Property or the validity or effectiveness of any such
Intellectual Property.  To the best knowledge and belief of the Borrower and its
Subsidiaries, the use of such Intellectual Property by the Borrower and its
Subsidiaries does not infringe on the rights of any Person.

     Section 5.12.  INDEBTEDNESS.  The Borrower has no Indebtedness other than
Indebtedness expressly permitted by the provisions contained in Section 9.3 of
this Agreement.  There exists no Indebtedness between the Borrower and the
Borrower's Subsidiaries other than amounts advanced in the ordinary course of
business.

     Section 5.13.  LITIGATION.  Except as disclosed on Schedule 5.13 and except
for claims, actions and proceedings fully covered by insurance, there is no
pending or threatened action, suit, or proceeding before any court, governmental
or regulatory authority, agency, commission, or board of arbitration against the
Borrower which if determined against it could materially and adversely affect
its financial condition, assets or operations.

     Section 5.14.  NO DEFAULT.  The Borrower is not in default in any respect
under any contract, agreement or instrument to which it is a party or by which
it or any of its property is bound, the consequence of which default could
materially and adversely affect its respective financial condition, assets,
business or operations.

     Section 5.15.  TAXES.  Each of the Borrower and its Subsidiaries has filed
all federal, state and local tax returns required to be filed by it and has
paid, or has made reasonable provision for payment of, all taxes (if any) which
have or are reasonably likely to become due and payable pursuant to any of the
said returns or pursuant to any matters raised by audits or for other reasons
known to it, except for taxes the amount, applicability, or validity of which
are currently being contested by it in good faith by appropriate proceedings and
with respect to which it has set aside on its books adequate reserves.

                                      28

<PAGE>

     Section 5.16.  COMPLIANCE OF PROPERTIES WITH LAW.  The location,
construction, occupancy, development, operation and use of the Properties comply
in all material respects with the terms of all encumbrances constituting
Permitted Liens, all applicable restrictive covenants and deed restrictions, all
applicable zoning and subdivision ordinances and building codes, all applicable
health and environmental laws and regulations, and all other applicable laws,
statutes, ordinances, rules, regulations, orders or determinations of any
governmental authority, and the Borrower has obtained all necessary
certificates, licenses, authorizations, registrations, permits and/or approvals
necessary for the use and operation of the Properties or any part thereof as
currently developed in accordance with all applicable laws for which the failure
to obtain would materially and adversely affect the business of the Borrower.

     Section 5.17.  ERISA COMPLIANCE; SEVERANCE OBLIGATIONS.

               (a)  Each pension plan (as defined in section 3(2) of ERISA)
established or assumed or maintained, or to which contributions are made by the
Borrower or any Person which is a member of the same controlled group, or under
common control (within the meaning of section 414(b) or (c) of the Code or
Section 4001(b) (l) of ERISA), with any of the foregoing is referred to herein
as a "Pension Plan". No such Pension Plan is a multi-employer plan (as defined
in Section 4001(a)(3) of ERISA) and each Pension Plan is, and has at all times
been, in compliance in all material respects with the applicable provisions of
ERISA and the Code, including without limitation any minimum funding
requirements applicable with respect to such Pension Plan.  Each Pension Plan is
a defined contribution plan and not a "defined benefit plan" (as defined in
Section 3(35) of ERISA).  There have been no reportable events within the
meaning of Section 4043 of ERISA and the regulations promulgated thereunder with
respect to any Pension Plan.

               (b)  Each welfare plan (as defined in section 3(a) of ERISA)
established or assumed or maintained, or to which contributions are made, by the
Borrower is referred to herein as a "Welfare Plan."  No such Welfare Plan is a
multi-employer plan and each Welfare Plan is, and has at all times been, in
compliance in all material respects with the applicable provisions of ERISA and
the Code.  The Borrower has no liability for post-retirement benefits provided
or to be provided to employees under any Welfare Plan, except to make available
continuous coverage as and to the extent required by the provisions regarding
employee benefit plans set forth in the Consolidated Omnibus Budget
Reconciliation Act of 1986.

               (c)  Except for the Pension Plans and the Welfare Plans, the
Borrower has not established or assumed or maintains or makes contributions to
any employee 

                                      29

<PAGE>

benefit plan (as defined in section 3(3) of ERISA).  There is no unfulfilled 
obligation on the part of the Borrower to make any contribution with respect 
to either the Pension Plans or the Welfare Plans.

               (d)  The execution and delivery of the Loan Documents and the
consummation of the transactions contemplated thereby will not involve any
prohibited transaction within the meaning of ERISA.

               (e)  Except as disclosed in writing to the Agent prior to the
Effective Date, the Borrower has no Obligation to make severance payments or
provide post-employment benefits pursuant to any contract or other arrangement
with any of its employees, officers or directors (excluding the Pension Plans
and Welfare Plans).

     Section 5.18.  OTHER REPRESENTATIONS.  Each of the representations and
warranties made by the Borrower in any of the Loan Documents to which the
Borrower is a party was true and correct in all material respects when made and
continues to be true and correct in all material respects on the Effective Date,
except to the extent that any of such representations and warranties have been
affected by the consummation of the transactions contemplated and permitted or
required by the Loan Documents and except that the foregoing shall not apply to
warranties and representations of any financial projections or forward looking
statements.

     Section 5.19.  DISCLOSURE.  No representation or warranty made by the
Borrower in this Agreement or in any agreement, instrument, document,
certificate, statement or letter furnished to the Agent or the Banks by or on
behalf of the Borrower in connection with any of the transactions contemplated
by any of the Loan Documents contains any untrue statement of a material fact.

     Section 5.20.  LOANS AS SENIOR INDEBTEDNESS.  All Obligations of the
Borrower to the Banks will constitute "Senior Indebtedness" and will rank pari
pasu with the Existing Senior Indebtedness.  The Borrower has delivered to the
Agent true and exact and complete copies of the Existing Senior Indebtedness
Documents.  The current outstanding principal balance of the Existing Senior
Indebtedness is set forth in Schedule 5.20 annexed hereto.  No default exists
under the Existing Senior Indebtedness Documents.

     Section 5.21.  HOLDING COMPANY AND INVESTMENT COMPANY ACTS.  The Borrower
is neither a "holding company", nor a "subsidiary company" of a "holding
company", nor an "affiliate" of a "holding company", as such terms are defined
in the Public Utility Holding Company Act of 1935; nor is it a "registered
investment company", nor an "affiliated company" nor a 

                                      30

<PAGE>

"principal underwriter" of a ''registered investment company", as such terms 
are defined in the Investment Company Act of 1940, as amended.

     Section 5.22.  REGULATIONS U AND X.  The proceeds of the Loans shall be
used by the Borrower solely for the purposes specified herein.  No portion of
any Loan is to be used for the purpose of purchasing or carrying any "margin
security" or "margin stock" as such terms are used in Regulations U and X of the
Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.

     Section 5.23.  FISCAL YEAR.  The Borrower has a fiscal year ending March 31
of each year.

     Section 5.24.  COMPLIANCE WITH CERTAIN ENVIRONMENTAL LAWS AND LAWS
PERTAINING TO LAND SALES.

               (a)  To the best knowledge and belief of the Borrower and its
Subsidiaries, neither the Borrower nor any operator of the Real Estate or any
operations thereon is in violation, or alleged violation, of any judgment,
decree, order, law, license, rule or regulation pertaining to environmental
matters, including without limitation, those arising under the Resource
Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), as amended by the
Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the Federal Clean
Water Act, the Toxic Substances Control Act, the Federal Clean Air Act, the Safe
Drinking Water Act, the Flood Disaster Protection Act of 1973, or any state or
local statute, regulation, ordinance, order or decree relating to health, safety
or the environment (collectively, hereinafter "Environmental Laws"), which
violation would have a material adverse affect on the business, assets or
financial condition of the Borrower.

               (b)  The Borrower has not received notice from any third party
including, without limitation, any federal, state or local governmental
authority: (i) that it has been identified by the United States Environmental
Protection Agency as a potentially responsible party under CERCLA with respect
to a site listed on the National Priorities List, 40 C.F.R. Pan 300 Appendix B
(1986); (ii) that any hazardous waste, as defined by 42 U.S.C. Section 9601(5),
any hazardous substances, as defined by 42 U.S.C. Section 9601(14), any
pollutant or contaminant, as defined by 42 U.S.C. Section 9601(33), or any toxic
substances, oil or hazardous materials or other chemicals or substances
regulated by any Environmental Law ("Hazardous Substances") which the Borrower
has generated, transported or disposed of has been found at any site at which a
federal, state or local agency or other third party has conducted or has ordered
that the Borrower conduct a remedial investigation, removal or other response
action pursuant to any Environmental Law; or (iii) that the Borrower is or shall
be a named party to 

                                      31

<PAGE>

any claim, action, cause of action, complaint, or legal or administrative 
proceeding (in each case, contingent or otherwise) arising out of any third 
party's incurrence of costs, expenses, losses or damages of any kind 
whatsoever in connection with the release of Hazardous Substances.

               (c)  Except as previously disclosed to the Agent in writing 
prior to the Effective Date: (i) no portion of the Real Estate has been used 
for the handling, processing, storage or disposal of Hazardous Substances 
except in accordance with applicable Environmental Laws; and no underground 
tank or other underground storage receptacle for Hazardous Substances is 
located on any portion of the Real Estate except for underground tanks for 
fuel maintained in accordance with applicable Environmental Laws; (ii) in the 
course of any activities conducted by the Borrower, or operators of its 
properties, no Hazardous Substances have been generated or are being used on 
the Real Estate except in accordance with applicable Environmental Laws; 
(iii) there have been no releases (i.e. any past or present releasing, 
spilling, leaking, pumping, pouring, emitting, emptying, discharging, 
injecting, escaping, disposing or dumping) or threatened releases of 
Hazardous Substances on, upon, into or from any properties of the Borrower, 
which releases would have a material adverse affect on the value of any of 
the Real Estate or adjacent properties or the environment; (iv) to the best 
knowledge of the Borrower, there have been no releases on, upon, from or into 
any real property in the vicinity of any of the Real Estate which, through 
soil or groundwater contamination, may have come to be located on, and which 
would have a material adverse affect on the value of, the Real Estate; and 
(v) in addition, any Hazardous Substances that have been generated on any of 
the Real Estate have been transported offsite only by carriers having an 
identification number issued by the EPA, treated or disposed of only by 
treatment or disposal facilities maintaining valid permits as required under 
applicable Environmental Laws, which transporters and facilities have been 
and are, to the best knowledge of the Borrower, operating in compliance with 
such permits and applicable Environmental Laws.

               (d)  None of the Real Estate is or shall be subject to any 
applicable environmental clean-up responsibility law or environmental 
restrictive transfer law or regulation, by virtue of the transactions set 
forth herein and contemplated hereby.

               (e)  The Borrower is not now, nor at any time in the past has 
the Borrower been given notice that it was, in violation of the Interstate 
Land Sales Full Disclosure Act (the "Interstate Land Sales Act"), the Florida 
Land Sales Practices Law (the "Florida Land Sales Law") or similar laws 
pertaining to land sales (including, without limitation, any laws pertaining 
to the sale of interests in timeshare units) in any state in which the 
Borrower sells, transfers, manages, operates, develops or otherwise disposes 
of property, 

                                      32

<PAGE>

which violation could have a materially adverse affect on the assets, 
business, operations, or financial condition of the Borrower.

               (f)  The Borrower is not now, nor at any time in the past has 
the Borrower been given notice that it was, in violation of (i) any federal 
or state securities laws, (ii) the federal Truth in Lending Act (including 
regulations written under such Act by the Board of Governors of the Federal 
Reserve System) or any similar state statute, (iii) the federal Equal Credit 
Opportunity Act (including regulations written under such Act by the Board of 
Governors of the Federal Reserve System) or any similar state statute, or 
(iv) any judgment, decree, order, law, license, rule or regulation arising 
under such statutes or with respect to the matters covered thereby, which 
violation could materially adversely affect the assets, business, operations, 
or financial condition of the Borrower.

     Section 5.25.  INSURANCE.  The policies of insurance or certificates of 
insurance furnished to the Agent with respect to the business and properties 
of the Borrower are in full force and effect and no notice of cancellation or 
non-renewal has been received with respect thereto.

     Section 6.     CONDITIONS AND EFFECTIVENESS.  This Agreement shall become
effective when each of the following conditions precedent has been fulfilled,
except to the extent waived by the Agent.

     Section 6.1.   LOAN DOCUMENTS, ETC.  Each of the Loan Documents shall have
been duly and properly authorized, executed and delivered by the respective
party or parties thereto and shall be in full force and effect and executed
original counterparts of each of the Loan Documents shall have been furnished to
the Agent.

     Section 6.2.   LEGALITY OF TRANSACTIONS.  No change in applicable law shall
have occurred as a consequence of which it shall have become and continue to be
unlawful (a) for any of the Banks or the Agent to perform any of its agreements
or obligations under any of the Loan Documents to which any of them is a party
on the Effective Date or (b) for any Person (other than the Agent or the Banks)
to perform any of their respective agreements or obligations under any of the
Loan Documents.

     Section 6.3.   REPRESENTATIONS AND WARRANTIES.  Each of the representations
and warranties made by or on behalf of the Borrower to the Banks and the Agent
in this Agreement or the other Loan Documents shall be true and correct in all
material respects when made, shall, for all purposes of this Agreement, be
deemed to be repeated on and as of the Effective Date, and shall be true and
correct in all material respects on and as of such date, except, in each case,

                                      33

<PAGE>

as necessarily affected by the consummation of the transactions contemplated 
by the Loan Documents.

     Section 6.4.   PERFORMANCE, ETC.  The Borrower shall have duly and properly
performed, complied with and observed each of its covenants, agreements and
obligations contained in any of the Loan Documents to which it is a party or by
which it is bound which are required to be performed on or prior to the
Effective Date.  No event shall have occurred and be continuing on the Effective
Date, and no condition shall exist on the Effective Date, which constitutes an
Event of Default or which would, with notice or the lapse of time, or both,
constitute an Event of Default or a Default.

     Section 6.5.   CERTIFIED COPIES OF CERTAIN DOCUMENTS.  The Agent shall have
received from the Borrower copies, certified by the corporate secretary of the
Borrower to be true and complete on the Effective Date, of the Certificate of
Incorporation and By-laws of the Borrower and each of its Subsidiaries.

     Section 6.6.   PROOF OF ACTION BY BORROWER.  The Agent shall have received
copies, certified by the corporate secretary of the Borrower and each of its
Subsidiaries to be true and complete on the Effective Date, of the records of
all actions taken by each of their directors and shareholders as may be required
to authorize (a) its execution and delivery of each of the Loan Documents to
which any of them are a party, (b) performance of all of its agreements and
obligations under each of such documents, and (c) the borrowings and other
transactions contemplated by this Agreement.

     Section 6.7.   INCUMBENCY CERTIFICATE.  The Agent shall have received from
the Borrower an incumbency certificate, dated the Effective Date, signed by its
corporate secretary and the corporate secretary of each Subsidiary and giving
the name and bearing a specimen signature of each individual who shall be
authorized: (i) to sign on its behalf each of the Loan Documents to which it is
or is to become a party; (ii) in the case of the Borrower only, to make
application for the Loans; and (iii) to give notices and to take any other
action on its behalf under the Loan Documents.

     Section 6.8.   PROCEEDINGS AND DOCUMENTS.  All corporate, governmental and
other proceedings in connection with the transactions contemplated by the Loan
Documents and all instruments and documents incidental thereto, shall be in form
and substance reasonably satisfactory to the Agent and the Agent shall have
received all such counterpart originals or certified or other copies of all such
instruments and documents as the Agent shall have reasonably requested.  With
respect to Letters of Credit issued on the Effective Date, if any, 

                                      34

<PAGE>

the Borrower shall have duly authorized, executed and delivered to the Agent 
a Reimbursement Agreement.

     Section 6.9.   FEES.  The Borrower shall have complied with its obligation
to pay the Fees due and payable under Section 3, and the fees and costs of the
Agent incurred in closing upon the Loan evidenced by this Agreement.

     Section 6.10.  LEGAL OPINIONS.  The Agent shall have received a favorable
written opinion, in form and substance satisfactory to the Agent in its
discretion, addressed to the Agent and the Banks, dated the Effective Date from
counsel to the Borrower.

     Section 6.11.  BORROWING BASE REPORT.  The Agent shall have received from
the Borrower, at least five Business Days prior to the Effective Date, a
Borrowing Base Report dated as of the most recent month then ended; provided,
however, that the Borrower shall notify the Agent in writing on the Effective
Date of any material deviation from the values reflected on the Borrowing Base
Report and shall provide the Agent with such supplementary documentation as the
Agent may reasonably request.

     Section 6.12.  EVIDENCE OF INSURANCE.  The Borrower shall have delivered to
the Agent certificates of casualty, liability, flood and builders risk insurance
or other evidence of its insurance coverage on the Properties satisfactory to
the Agent.

     Section 7.     CONDITIONS TO SUBSEQUENT LOAN ADVANCES.  The obligation of
each Bank to make any Advances under the Revolving Credit Loan subsequent to the
Effective Date and to issue any Letter of Credit to be issued subsequent to the
Effective Date pursuant to Section 2.9 shall be subject to the satisfaction of
the following conditions precedent:

     Section 7.1.   LEGALITY OF TRANSACTIONS.  It shall not be unlawful (a) for
the Agent or any Bank to perform any of its agreements or obligations under any
of the Loan Documents to which the Agent or such Bank is a party on the Drawdown
Date of such Advance or the date of issuance of such Letter of Credit, or (b)
for any Person other than the Agent and the Banks to perform any of their
respective agreements or obligations under any of the Loan Documents to which
any of them is a party on such date.

     Section 7.2.   REPRESENTATIONS AND WARRANTIES.  Each of the 
representations and warranties made by or on behalf of the Borrower to the 
Agent and the Banks in this Agreement or any other Loan Documents shall be 
true and correct in all material respects when made and shall, for all 
purposes of this Agreement, be deemed to be repeated on and as of the date of 
the Borrower's notice of borrowing for such Advance or request for the 
issuance of such Letter of 

                                      35

<PAGE>

Credit and on and as of the Drawdown Date of such Advance or the date of the 
issuance of such Letter of Credit, and shall be true and correct in all 
material respects on and as of each of such dates, except, in each case, as 
affected by the consummation of the transactions contemplated by the Loan 
Documents.

     Section 7.3.   PERFORMANCE, ETC.  The Borrower shall have duly and properly
performed, complied with and observed in all material respects each of its
covenants, agreements and obligations contained in Sections 8, 9 and 10 hereof,
and shall have duly and properly performed, complied with and observed in all
material respects its covenants, agreements, and obligations in all other
articles of this Agreement and any of the other Loan Documents to which it is a
party or by which it is bound on the Drawdown Date of such Advance or the date
of the issuance of such Letter of Credit.  No event shall have occurred on or
prior to such date and be continuing, and no condition shall exist on such date,
which constitutes an Event of Default or which would, with notice or the lapse
of time or both, constitute an Event of Default or a Default.

     Section 7.4.   PROCEEDINGS AND DOCUMENTS.  Any corporate, governmental and
other proceedings which are undertaken in connection with the transactions
contemplated by such Advance or Letter of Credit and any instruments and
documents incidental to such Advance or Letter of Credit shall be in form and
substance reasonably satisfactory to the Agent, and the Agent shall have
received all such counterpart originals or certified or other copies of all such
instruments and documents as the Agent shall have reasonably requested.  With
respect to each Letter of Credit, the Borrower shall have duly authorized,
executed and delivered to the Agent a Reimbursement Agreement.

     Section 7.5.   LIMITATIONS ON BORROWING.  The amount of the Senior
Indebtedness, including the requested Advance, shall not exceed the amount of
the Borrowing Base.  For purposes of making the calculation of the amount of
Senior Indebtedness in this Section 7.5, the amount of the Obligations included
with respect to Construction Letters of Credit shall be the Risk Amount. 
Borrower hereby acknowledges that the Note Agreement imposes certain mandatory
principal prepayments more particularly set forth at Section 2.2 and the
establishment of an Escrow Account ("Escrow Account") to facilitate such
prepayments in accordance with Section 5.17 thereof.  In no event shall the
Borrower be entitled to any Advances under the Loan including issuance of any
Letters of Credit if the Advance would cause the imposition of the Escrow
Account procedures or require a mandatory principal prepayment under the Note
Agreement or during the pendency of any mandatory payments into the Escrow
Account each as provided in the Note Agreement.  The amount of any proposed
Advance or issuance of a Letter of Credit as provided herein shall be
automatically reduced to the amount that would avoid the imposition of the
Escrow Account or the 

                                      36

<PAGE>

requirement of a mandatory principal prepayment under the Note Agreement.  
Borrower shall immediately make a principal prepayment under the Note 
Agreement in an amount necessary to permit additional borrowing hereunder in 
the event that prepayments are required or in the event that the Escrow 
Agreement would otherwise be required under the Note Agreement.

     Section 8.     AFFIRMATIVE COVENANTS OF THE BORROWER.  The Borrower 
covenants and agrees that, so long as any Loan or Letter of Credit is 
Outstanding or the Banks have any obligation to make Advances or issue 
Letters of Credit hereunder, unless the Agent otherwise agrees in writing:

     Section 8.1.   PUNCTUAL PAYMENT.  Notwithstanding the Banks' right to 
make Advances under the Revolving Credit Loan in the amount of any Obligation 
due hereunder, the Borrower will duly and punctually pay or cause to be paid 
the principal and interest on the Loans, and Letter of Credit Fees, and all 
other fees and other amounts due and payable hereunder, all in accordance 
with the terms of this Agreement and any applicable Loan Document.

     Section 8.2.   LEGAL EXISTENCE, ETC.  The Borrower and Guarantors will 
maintain its legal existence and good standing under the laws of the state of 
its incorporation, will maintain its qualification to do business in the 
states where each conducts business and in each other state in which the 
failure to do so would have a material adverse effect on its condition, 
financial or otherwise, and will maintain all of its rights and franchises, 
except where the failure to maintain such right or franchise would not have a 
material adverse effect on the conduct of its business.

     Section 8.3.   RESERVES.  The Borrower will maintain appropriate 
reserves for depreciation, taxes and any other expenses or liabilities in 
accordance with Generally Accepted Accounting Principles.

     Section 8.4.   CHANGE OF CORPORATE NAME.  The Borrower shall notify the 
Agent within five (5) days of any change in its corporate name or any other 
name under which it conducts its business.

     Section 8.5.   FINANCIAL STATEMENTS AND OTHER REPORTS.  The Borrower 
will furnish or cause to be furnished financial statements on a consolidated 
basis and other monthly, quarterly or other periodic reports to the Agent and 
each of the Banks as follows:

               (a)  within one hundred five (105) days after the close of each
fiscal year:

                                      37

<PAGE>

                    (1)    the balance sheets and statements of income, 
retained earnings and cash flows (the "financial statements") for such year, 
in reasonable detail, and, setting forth in comparative form the 
corresponding figures for the preceding year, prepared in accordance with 
Generally Accepted Accounting Principles consistently applied, accompanied by 
a report and unqualified opinion of an independent certified public 
accountant selected by the Borrower and approved by the Agent;

                    (2)    comprehensive inventory breakdown of the Borrower 
and its Subsidiaries delineating the inventory on the same terms as set forth 
on the Borrowing Base by Project and on both a dollar and Unit basis; and

                    (3)    a sales report and profit margin analysis by 
Project; and

                    (4)    a one year budget, income statement and balance 
sheet and three year projection for revenue and income for the Borrower on a 
consolidated basis.

               (b)  within thirty (30) days after the end of each calendar 
month of each fiscal year:

                    (1)    the unaudited balance sheet and income statement 
similar to those required by clause (a) above (but without a requirement as 
to comparison with the prior year) as of the end of such month and for such 
month then ended and for the month from the beginning of the current fiscal 
year to the end of such month prepared in accordance with Generally Accepted 
Accounting Principles consistently applied and certified as to preparation in 
accordance with Generally Accepted Accounting Principles and that such 
statements fairly present the financial condition of the Borrower at the 
dates thereof and for the periods then ended, on behalf of the Borrower by 
its chief financial officer, subject only to changes resulting from audit and 
normal year-end adjustments. The foregoing monthly reports shall be reported 
on a division and cumulative basis.

                    (2)    a schedule of land purchases during that month and 
a schedule of all projected and contracted for land purchases pending for the 
Borrower or any of its Subsidiaries;

                    (3)    a sales report on a Project basis setting forth 
the Unit sales and prices for the Units sold in the Project during the 
preceding month; and

                                      38

<PAGE>

                    (4)    a Certificate by the Chief Financial Officer of the
Borrower certifying that:

                           (i)The Borrower and the Guarantors are in compliance
with all terms and conditions of this Agreement including all covenants set
forth in Sections 8, 9 and 10 and after review of the terms hereof, that no
Default exists hereunder or otherwise specify such Default in detail;

                           (ii)The Borrowing Base and all Borrowing Base Reports
submitted during the preceding month are true, correct and complete in all
respects and do not contain an omission of a material fact or condition.

               (c)  promptly upon receipt thereof, copies of all management 
letters which are submitted to Borrower by its independent accountants in 
connection with any annual or interim audit of Borrower's books made by such 
accountants;

               (d)  information with such specificity as the Agent shall from 
time to time require in the form of Exhibit "A" hereto (the "Borrowing Base 
Report"), or in such other form and substance, and at such times as may be 
reasonably requested by the Agent including, also on a monthly basis, a 
certificate signed by an authorized officer of the Borrower showing a 
calculation of the Borrowing Base, the amount of Unit Costs and Lot 
Development Costs used in such Borrowing Base calculation (attaching all 
documentation used in such calculations) and setting forth the appraised 
value of Developable Land, Developed Lots and the list prices of Units not 
covered by a Housing Purchase Contract. The Borrower shall also provide a 
report with respect to the Borrowing Base required under the Existing Senior 
Indebtedness.  The Agent shall have the right, to be exercised from time to 
time, but not more frequently than quarterly to have the Borrowing Base 
Report audited by auditors acceptable to the Agent, at the Borrower's expense;

               (e)  a compliance certificate in the form of Exhibit "C."  The 
Agent shall have the right, to be exercised from time to time, but not more 
frequently than annually to have the Borrowing Base Report audited by 
auditors acceptable to the Agent, at the Borrower's expense;

               (f)  copies of all financial statements, reports, notices and 
proxy statements sent or made available generally by the Borrower to its 
stockholders, or by any Subsidiary of the Borrower to its stockholders (other 
than the Borrower), of all regular and periodic reports and all registration 
statements (excluding exhibits thereto and Registration Statements on Form 
S-8) and prospectuses, if any, filed by the Borrower or any of its 

                                      39

<PAGE>

Subsidiaries with any securities exchange or with the Securities and Exchange 
Commission or any successor or analogous governmental authority; and all of 
press releases and other statements made available generally by the Borrower 
or any of its Subsidiaries to the public concerning material developments in 
the business of the Borrower and any of its Subsidiaries;

               (g)  the additional reports, budgets and inventories as may be
requested by the Agent; and

               (h)  such other periodic reports, financial statements, and 
other information as the Agent from time to time reasonably requests, on a 
monthly, quarterly or other periodic basis, including, without limitation, 
periodic reports of financial information, construction progress, inventory, 
marketing and sales results, and compliance with financial, environmental or 
other covenants.  Reports required on an annual basis will be furnished by 
the Borrower within one hundred five (105) days after the end of the 
applicable reporting period, reports required on a quarterly or monthly basis 
will be furnished within thirty (30) days after the end of the applicable 
reporting period. Annual budgets, marketing plans and other reports or 
statements providing projected figures for a fiscal year will be furnished by 
the Borrower on or before April 1 of the year for which such projections are 
made.

     Section 8.6.   USE OF LOAN PROCEEDS.  The Borrower shall use the 
proceeds of the Loans solely to provide working capital needs of the Borrower 
in a manner consistent with the provisions of this Agreement.

     Section 8.7.   MAINTENANCE AND ALTERATIONS.  The Borrower shall preserve 
and maintain the Properties in good order, repair and condition, damage from 
casualty or condemnation, which condemnation could have a material adverse 
affect on its business operations or financial condition expressly not 
excepted, and shall not permit or commit waste on the Properties and shall 
cause each and every part of the Properties to comply with all applicable 
Federal, State and local laws and governmental regulations, and any lawful 
private restrictions or other requirements or provisions relating to the 
maintenance or use of the Properties, including, without limitation, the 
terms and provisions of any mortgages or other agreements or instruments 
constituting Permitted Liens.

     Section 8.8.   CERTAIN ENVIRONMENTAL MATTERS.  The Borrower will (i) 
comply with all applicable requirements of any Environmental Law; (ii) 
provide the Agent with written notice immediately upon obtaining knowledge of 
any potential or known release, or threat of release, of any Hazardous 
Substances or oil at or from the properties or upon receiving notice from any 
federal, state or other environmental agency or authority in connection with 
the foregoing matters, including the assessment, containment or removal of 
any Hazardous Substance from 

                                      40

<PAGE>

its properties.  The Agent may, in its discretion, from time to time, by or 
through any of its authorized officers, agents or professional consultants, 
visit, inspect and conduct tests, (including a Phase I environmental audit, 
and if recommended, further tests) or otherwise examine the Properties and 
the records maintained with respect thereto to verify compliance with such 
requirements to its satisfaction, all at the cost and expense of the Borrower.

     Section 8.9.   NOTICE OF LITIGATION AND JUDGMENT.  The Borrower will 
give notice in writing, in form and detail satisfactory to the Agent, within 
five (5) Business Days of becoming aware of any litigation or proceedings in 
an amount in excess of $100,000 threatened in writing or any pending 
litigation and proceedings to which Borrower is or becomes a party involving 
an uninsured claim against it or any litigation or proceeding against Persons 
with which it has a business relationship, which, if adversely determined 
could materially and adversely affect Borrower's financial condition, assets 
or operations and stating the nature and status of such litigation or 
proceedings.  The Borrower will give notice, in writing, in form and detail 
satisfactory to the Agent, within five (5) Business Days of any judgment, 
final or otherwise, against it in an amount in excess of $250,000.00.

     Section 8.10.  NOTICE OF DEFAULTS.  The Borrower will give notice in 
writing to the Agent immediately upon becoming aware of the occurrence of any 
Default or Event of Default under this Agreement.

     Section 8.11.  BOOKS AND RECORDS.  The books and records relating to the 
financial affairs of the Borrower shall at all times be maintained in 
accordance with, and all financial statements provided for herein, shall be 
prepared in accordance with Generally Accepted Accounting Principles 
consistently applied, subject only to changes resulting from audit and normal 
year-end adjustments. Such books and records shall be kept by the Borrower at 
2681 Long Lake Road, Roseville, Minnesota 55113, or at such other location as 
the Borrower shall specify by prior written notice given to the Agent.

     Section 8.12.  INSURANCE.  The Borrower and each Guarantor will maintain 
with financially sound and reputable insurers insurance with respect to its 
properties and business against such casualties and contingencies and as 
shall be in accordance with the general practices of businesses engaged in 
similar activities in the State of Minnesota, and in amounts, containing such 
terms, in such forms and for such periods as may be reasonable and prudent in 
accordance with sound business practices.  All such insurance shall be in 
such amount, such form, for such periods and written by such companies as may 
be reasonably satisfactory to the Agent.  All policies of insurance shall 
provide for a minimum ten (10) days prior written minimum cancellation notice 
to the Agent and shall name the Agent as additional insured party.  
Certificates of insurance (or, if requested by the Agent, certified copies of 
policies) 

                                      41

<PAGE>

with respect to all renewals or replacements of such insurance from 
time to time in force together with evidence of payment of premiums thereon 
satisfactory to the Agent shall be delivered to the Agent at least ten (10) 
days before the expiration date of then current insurance.  No settlement on 
account of any loss covered by such insurance shall be made without the 
consent of the Agent.  In the event of failure to provide and maintain 
insurance as herein provided, the Agent may, at its option, after giving 
notice to the Borrower, as applicable, provide such insurance and charge the 
amount thereof to the Borrower (including, without limitation, by making an 
Advance therefor). The Borrower shall furnish to the Agent certificates or 
other evidence satisfactory to the Agent of compliance with the foregoing 
insurance provision.  Without limiting the foregoing, the Borrower will (i) 
keep all of its physical property insured against fire and extended coverage 
risks in amounts and with deductibles and with endorsements, all in form and 
content acceptable to the Agent, (ii) maintain all such workers' compensation 
or similar insurance as may be required by law, and (iii) maintain, in 
amounts and with deductibles and with endorsements, all in form and content 
acceptable to the Agent, general public liability insurance against claims 
for bodily injury, death or property damage occurring on, in or about the 
properties of the Borrower and business interruption insurance, and (iv) in 
the event the Properties or any portion thereof is located in a flood hazard 
area identified by the Secretary of Housing and Urban Development as an area 
having special flood hazards and in which flood insurance has been made 
available under the National Flood Insurance Act of 1968, as amended by the 
Flood Disaster Act of 1973 (and any successor Act thereto), maintain a flood 
insurance policy as required by the Flood Disaster Act of 1973. The Borrower 
shall at all times comply with and conform to all provisions of each such 
insurance policy and to all requirements of the insurers thereunder 
applicable to Borrower, the Properties or to the use, occupation, possession, 
operation, maintenance or repair of all or any portion of the Properties.

     Section 8.13.  TAXES AND MECHANIC'S LIENS.  The Borrower will duly pay 
and discharge, or cause to be paid and discharged, before the same shall 
become overdue, all taxes, assessments and other governmental charges imposed 
upon Borrower and its real properties, sales and activities, or any part 
thereof, or upon the income or profits therefrom, as well as all claims for 
labor, materials or supplies that if unpaid might by law become a lien or 
charge upon any of its property; provided that any such tax, assessment, 
charge, levy or claim need not be paid if the validity or amount thereof 
shall currently be contested in good faith by appropriate proceedings and if 
the Borrower shall have set aside on its books adequate reserves with respect 
thereto; and provided further that the Borrower will pay all such taxes, 
assessments, charges, levies or claims forthwith upon the commencement of 
proceedings to foreclose any lien that may have attached as security therefor.

                                      42

<PAGE>

     Section 8.14.  CONDUCT OF BUSINESS.  The Borrower will continue and shall
cause each Guarantor to continue to engage in a business of the same general
type and in the same manner as conducted by it on the date of this Agreement.

     Section 8.15.  COMPLIANCE WITH LAW.  The Borrower will and shall cause 
each Guarantor to (i) comply with all laws, rules, regulations, orders, 
writs, judgments, injunctions, decrees or awards, and any lawful private 
restrictions and other encumbrances constituting Permitted Liens whether now 
existing or hereafter arising, to which Borrower or the Properties may be or 
become subject, and (ii) promptly obtain, maintain, apply for renewal, and 
not allow to lapse, any authorization, consent, approval, license or order, 
and accomplish any filing or registration with, any court or Judicial, 
administrative or governmental authority which may be or may become necessary 
in order that Borrower or Guarantor performs all of its obligations under 
this Agreement or the other Loan Documents and in order that the same may be 
valid and binding and effective in accordance with their terms.

     Section 8.16.  ACCESS.  Except as otherwise required by applicable law 
or regulation, the Borrower and its Subsidiaries will permit the Agent, by 
its representatives and agents, to inspect, during normal business hours, any 
of the Properties, to examine and make copies of its books of accounts and 
other financial records, and to discuss its affairs, finances and accounts 
with, and to be advised as to the same by, its officers at such reasonable 
times and intervals as the Agent may designate, all at the cost and expense 
of the Borrower. The Borrower hereby authorizes the Agent and the Banks to 
disclose information obtained pursuant to this Agreement to any participant 
or potential participant in the Loan made hereunder and, whenever required or 
requested by governmental or regulatory authorities, to such authorities.  
The Borrower will permit a potential purchaser of all or a portion of the 
Loan, which purchaser is designated by the Agent, to inspect, in the presence 
of an authorized representative of the Borrower, during normal business 
hours, any of the Properties, to examine and make copies of its accounts and 
other financial records, and to discuss its affairs, finances and accounts 
with such potential purchaser at such reasonable times and intervals as the 
Agent may request without charge to the Agent or such potential purchaser.

     Section 8.17.  FURTHER ASSURANCES.  The Borrower shall, at any time and 
from time to time, execute and deliver such further instruments and take such 
further action as may reasonably be requested by the Agent, in each case 
further and more perfectly to effect the purposes of this Agreement and the 
other Loan Documents.

     Section 8.18.  MATERIAL ADVERSE CHANGES.  The Borrower shall disclose in 
writing to the Agent, immediately upon becoming aware of it, any fact that 
materially and adversely affects Borrower's or any of its Subsidiaries' 
financial position on a consolidated basis, business or 

                                      43

<PAGE>

operations and, within five Business Days of such time as Borrower provides 
such disclosure to the Agent, Borrower shall also deliver to the Agent in 
writing its proposal for addressing such material adverse affect.

     8.19.     GUARANTY FROM FUTURE SUBSIDIARIES.  The Borrower will promptly
secure the execution and delivery of the Subsidiary Guaranty to the Agent from
each Subsidiary formed and organized after the Effective Date.

     Section 9.     NEGATIVE COVENANTS OF THE BORROWER.  The Borrower, 
covenants and agrees that so long as any Loan or Letter of Credit is 
outstanding or the Banks have any obligation to make Advances or issue 
Letters of Credit hereunder, unless the Agent otherwise agrees in writing.

     Section 9.1.   INVESTMENTS.  Neither the Borrower nor any of its 
Subsidiaries will make or permit to exist to remain outstanding any 
Investment except Investments in:

               (a)  marketable direct or guaranteed obligations of the United 
States of America that mature within one (1) year from the date of purchase;

               (b)  demand deposits, certificates of deposit, bankers 
acceptances and time deposits of banks organized under the laws of the United 
States of America or any state thereof having total assets in excess of 
$500,000,000.00;

               (c)  securities commonly known as "commercial paper" issued by 
a corporation organized and existing under the laws of the United States of 
America or any state thereof that at the time of purchase have been rated and 
the ratings for which are not less that "P-1" if rated by Moody's Investors 
Services, Inc., and not less than "A-1" if rated by Standard and Poor's;

               (d)  repurchase agreements secured by any one or more of the 
Investments permitted under paragraphs (a), (b) or (c) above; and

               (e)  additional wholly owned subsidiaries subject to the 
provisions of Section 8.19.

     Section 9.2.   SECURITY INTERESTS AND LIENS.  Neither the Borrower nor 
any of its Subsidiaries will create or permit to exist any mortgage, pledge, 
security interest, recorded or unrecorded leases or other lien or encumbrance 
on any of its property, except for the following ("Permitted Liens"):

                                      44

<PAGE>

               (a)  liens and other encumbrances arising from attachments or 
similar proceedings, pending litigation, judgments or taxes or assessments or 
government charges in any such event whose validity or amount is being 
contested in good faith by appropriate proceedings and for which adequate 
reserves have been established and are maintained in accordance with 
Generally Accepted Accounting Principles, or taxes and assessments which are 
not due and delinquent;

               (b)  liens of carriers, warehousemen, mechanics and 
materialmen and other like liens and liens imposed by law, created in the 
ordinary course of business, for amounts not yet due or which are being 
contested in good faith by appropriate proceedings and as to which adequate 
reserves or other appropriate provisions are being maintained in accordance 
with Generally Accepted Accounting Principles;

               (c)  pledges or deposits made in connection with workmen's 
compensation, employee benefit plans, unemployment or other insurance, old 
age pensions, or other Social Security benefits; and

               (d)  security interests on Developed Land or Developed Lots 
excluding Developed Lots containing Units, securing indebtedness issued in 
accordance with Section 9.3(e).

     Section 9.3.   INDEBTEDNESS.  Neither the Borrower nor any of its 
Subsidiaries will incur or permit to exist or remain outstanding any 
Indebtedness to any Person, provided, however, that the Borrower may incur or 
permit to exist or remain outstanding:

               (a)  Indebtedness of the Borrower arising under this Agreement 
or the other Loan Documents;

               (b)  Indebtedness in the respect of taxes, assessments, 
governmental charges, and claims for labor, materials or supplies, to the 
extent that payment thereof is not yet due or is being contested in good 
faith by appropriate proceedings and a adequate reserve has been established 
therefor and is maintained in accordance with Generally Accepted Accounting 
Principles;

               (c)  The Existing Senior Indebtedness, including the following 
modifications upon the prior notification of the Agent with copies of all 
modification documents to be promptly provided to the Agent:

                                      45

<PAGE>

                    (i)    refinance of the Existing Senior Indebtedness 
provided that no more than 20% of the principal balance of the Existing 
Senior Indebtedness shall either mature or require mandatory principal 
installments which would cause payment of such amounts prior to the Maturity 
Date of the Loan;

                    (ii)   modifications to permit covenants which are no more
restrictive on the Borrower than those provided in the Existing Senior
Indebtedness Documents.

               (d)  Indebtedness arising in the ordinary course of their
respective business not incurred through the borrowing of money or the obtaining
of credit or the leasing of property (except that credit on an open account
basis customarily extended in connection with the purchase of goods and services
shall be permitted) to the extent that payment thereof is not yet due or is
being contested in good faith by appropriate proceedings and an adequate reserve
has been established therefor and is maintained in accordance with Generally
Accepted Accounting Principles;

               (e)  Non-recourse indebtedness in the total outstanding principal
amount of $8,000,000 secured as provided in Section 9.2(d) for the purpose of
acquiring or developing land; and

               (f)  letters of credit issued by third parties in maximum
aggregate drawing amounts of $5,000,000. Undrawn amounts shall be included in
the calculation of the total amount under this subsection. 

     Without limitation of the foregoing, neither the Borrower nor its
Subsidiaries shall execute any guaranty of any indebtedness except as permitted
under this Section.

                                      46

<PAGE>

     Section 9.4.   DISTRIBUTIONS.  Except as expressly set forth in this 
Section 9.4, the Borrower shall not make any Distributions.  The Borrower 
may: (A) pay dividends on a new issue of preferred stock in an amount of up 
to $20,000,000.00 to parties unrelated to Borrower or its principals, 
provided, however, that such dividends shall not exceed per annum the lesser 
of (i) ten percent (10%) of the value of the issued stock; or (ii) 
$2,000,000.00, subject to and in accordance with the conditions set forth 
herein; and (B) declare a dividend on its common stock to achieve a stock 
split.  No such Distributions shall be made if, at the time such Distribution 
is to be made, any Default or Event of Default hereunder then exists or would 
result from such Distribution.

     At least thirty (30) days prior to any such Distribution pursuant to 
this Section 9.4, the Borrower shall provide to the Agent a pro forma 
calculation for the proposed Distribution based upon the methods set forth in 
the preceding paragraphs.  The Agent may, upon notice given to the Borrower 
prior to the proposed payment date of any Distribution pursuant to this 
Section 9.4, disapprove any such Distribution in its reasonable discretion if 
it determines such information and calculations furnished to it to be 
incomplete or incorrect in any respect. No Distribution shall be made unless 
and until compliance with Section 9.4 and the information and calculations 
upon which it is based are verified to the Agent's reasonable satisfaction. 
The Agent shall promptly notify the Borrower of its objections to any 
Distribution or the information or calculations furnished to the Agent.

     Section 9.5.   MAXIMUM COMMITMENT AMOUNT.  The Borrower will not cause 
or permit the sum of the (a) Outstanding Advances under the Revolving Credit 
Loan and (b) the Maximum Drawing Amount, to exceed the Maximum Revolver 
Amount.

     Section 9.6.   MERGER AND CONSOLIDATION.  The Borrower will not at any 
time merge or consolidate with or into any Person.  The provisions of this 
Section 9.6 shall not be applicable, however, to the merger or consolidation 
of acquired entities permitted under Section 9.7.

     Section 9.7.   ACQUISITION OF ASSETS.  Other than wholly owned 
Subsidiaries, the Borrower shall not acquire or enter into a commitment to 
acquire without the prior written approval of the Agent, any stock or other 
ownership interest in or the substantial assets of any other Person in excess 
of $5,000,000.  The Borrower shall not acquire or enter into a commitment to 
acquire any land for the development of a Project for the single price in 
excess of $3,000,000 without the prior written approval of the Agent.  Any 
entity acquired pursuant to this section shall constitute a Subsidiary and, 
accordingly shall be subject to the obligation and condition contained in 
Section 8.19 which requires all Subsidiaries to promptly execute and deliver 
a Guaranty of the Obligations in favor of the Agent and the Banks.  
Furthermore, any such acquired entity shall immediately upon acquisition by 
the Borrower pay in full all 

                                      47

<PAGE>

Indebtedness not permitted to exist under Section 9.3 hereof.  The 
acquisition of the entity shall be further conditioned upon the following:  
(i) no Event of Default exists hereunder and no Default would occur or exist 
after the consummation of such acquisition; (ii) the Obligations and this 
Agreement shall remain in full force and effect after such acquisition; (iii) 
the Tangible Net Worth of the Borrower shall not be decreased by the 
acquisition; and (iv) the Borrower shall at all times be the surviving entity 
after such acquisition.

     Section 9.8.   DISPOSITION OF ASSETS.  The Borrower will not at any time,
without the prior written approval of the Agent, which may be withheld in the
Agent's discretion, sell or lease or otherwise dispose of any assets; provided,
however, that, so long as there is no Default or Event of Default in existence
at the time or would be created as a result of any such action, the Borrower
may:

               (a)  sell or dispose of Developed Lots, Units and assets other
than land, in the ordinary course of its business for which it receives cash
and/or a receivable equal to their Fair Market Value, and

               (b)  consummate any Bulk Sales of land for which it receives net
proceeds in cash equal to the Fair Market Value of such land (but not less than
the book value of such land) if all such net proceeds are used to repay the
Loans hereunder and other BuLk Sales of land on terms and conditions approved by
the Agent in its sole discretion in writing.

     The Borrower shall provide to the Agent prior to any such sale, a copy of
the sale contract.  All net proceeds on such sale shall be applied toward
payment of the principal balance of the Revolving Credit Loan, to the extent
such principal balance is not paid in full.

     Section 9.9.   SALE AND LEASEBACK.  The Borrower will not enter into any
sale and leaseback transactions as seller-lessee without the prior written
consent of the Agent, except that the Borrower may enter into sale and leaseback
transactions of Units which are used as model homes for display to potential
purchasers of Units provided that the Borrower has entered into a bona fide
lease of such Units and has no obligation to repurchase such Units.

     Section 9.10.  TRANSACTIONS WITH AFFILIATED PERSONS.  The Borrower shall
not pay or enter into any agreement to pay any fees, wages, salary, bonus,
commission, contributions to benefit plans or any other compensation for goods
or services to or for the benefit of any Person who is a director or officer of
the Borrower or who has, or any of whose affiliates has, a beneficial interest
in the capital stock of the Borrower, unless such compensation is not in excess
of the fair market value of such services.

                                      48

<PAGE>

     Section 9.11.  ERISA COMPLIANCE.  Except for the Pension Plans and 
Welfare Plans in effect on the Effective Date, the Borrower will not, without 
giving prior notice to the Agent, establish, assume, maintain or contribute 
to any employee benefit plan (as that term is defined in Section 3(3) of 
ERISA).  The Borrower will not permit any Pension Plan or Welfare Plan to (i) 
engage in a "prohibited transaction" as such term is defined in Section 4975 
of the Code which would result in a liability for it; (ii) incur any 
"accumulated funding deficiency", as such term is defined in Section 302 of 
ERISA, whether or not waived; or (iii) be terminated in a manner which would 
result in the imposition of a lien or encumbrance on its assets pursuant to 
Section 4068 of ERISA.

     Section 9.12.  EXISTING SENIOR INDEBTEDNESS.  The Borrower shall not 
modify any term or condition of the Existing Senior Indebtedness Documents 
without the prior consent of the Agent other than as provided in Section 
9.3(c).

     Section 10.    FINANCIAL COVENANTS OF THE BORROWER.  The Borrower 
covenants and agrees that, so long as any Loan or Letter of Credit is 
Outstanding or the Banks have any obligation to make Advances or issue 
Letters of Credit hereunder, unless the Agent otherwise agrees in writing.

     Section 10.1.  MINIMUM TANGIBLE NET WORTH.  The Borrower shall on the 
Effective Date have a minimum Tangible Net Worth of at least $25,380,150.00 
and shall maintain, on the last day of each fiscal quarter from and after the 
Effective Date, a minimum Tangible Net Worth of at least $25,380,150.00 plus 
seventy percent (70%) of the cumulative positive Net Income of the Borrower 
and one hundred percent (100%) of equity proceeds of the Borrower since June 
30, 1996 determined quarterly, subject to such audit adjustments as shall be 
acceptable to the Agent.

     Section 10.2.  TOTAL LIABILITIES TO TANGIBLE NET WORTH RATIO.  The 
Borrower will not permit the ratio of (a) Total Liabilities to (b) Tangible 
Net Worth, determined on a date described in the table set forth below to 
exceed the ratio set forth below:

Period                                     Permitted Ratio
------                                     ---------------

Effective Date to March 31, 1997                    2.75:1
April 1, 1997 to March 31, 1998                     2.50:1
April 1, 1998 to Maturity Date                      2.25:1

                                      49

<PAGE>

     Section 10.3.  EBITDA TO INTEREST EXPENSE.  The Borrower will not permit 
the ratio of (a) EBITDA for any period of four consecutive fiscal quarters to 
(b) Interest Incurred for such period, to be less than 2.0:1

     Section 10.4.  INVENTORY.  The Borrower will not permit:

          (a)  Unsold Developable Land and Developed Lots shall not exceed 150%
of Tangible Net Worth at any quarter end through March 31, 1997 and thereafter
130% of Tangible Net Worth;

          (b)  Unit Costs of Unsold Units shall not exceed 70% of Tangible Net
Worth for the period from and after the Effective Date through October 31, 1997
and thereafter Unit Costs of Unsold Units shall not exceed 60% of Tangible Net
Worth;

          (c)  the number of Unsold Units shall not exceed 25% of the last
twelve months of Units closed and delivered to buyers.

     All of the foregoing calculations shall be made at and as of the end of
each quarter end.

     Section 11.    EVENTS OF DEFAULT; ACCELERATION; REMEDIES.

     Section 11.1.  EVENTS OF DEFAULT; ACCELERATION.  If any of the following
events (an "Event of Default") shall occur and be continuing:

          (a)  if the Borrower shall fail to pay any principal of or interest on
the Loans or fees payable under Section 3 within five (5) days when the same
shall become due and payable and the receipt by the Borrower of notice of non-
payment, whether at the stated date of maturity or any accelerated date of
maturity or at any other date fixed for payment, provided that the foregoing ten
(10) day grace period shall automatically terminate if payments are made on a
date other than the due date thereof more frequently than three times in any
year;

          (b)  if the Borrower shall fail to comply with any of its covenants
contained in Sections 8.2, 8.3, 8.6, 8.16, 8.17, 8.19, Sections 9.1 through
Section 9.4, Section 9.6, Section 9.7 through 9.10, Section 9.12 or Section 10.1
through 10.4;

          (c)  if the Borrower shall fail to comply with any of its covenants
contained in Section 8.4, Section 8.5, Section 8.9, Section 8.10, Section 8.12,
or Section 9.5 and such failure shall continue for ten (10) days after written
notice of such failure has been given to the Borrower by the Agent;

                                      50

<PAGE>

          (d)  if the Borrower shall fail to comply with any of its covenants
contained in the following Sections from and after thirty (30) days after the
date of the occurrence of the Default with respect to such Section : Section
8.3, Section 8.7, Section 8.8, Section 8.11, Section 8.13, Section 8.14, Section
8.15, Section 8.18 and Section 9.11;

          (e)  if the Borrower shall fail to perform any term, covenant or
agreement contained herein (other than those specified in subsections (a)
through (d) above) and such failure shall continue for thirty (30) days after
written notice of such failure has been given to the Borrower by the Agent;

          (f)  if any representation or warranty of the Borrower in any Loan
Document or in any document or instrument delivered pursuant to or in connection
with this Agreement shall prove to have been false in any material respect upon
the date when made;

          (g)  if the Borrower shall fail to make payment or otherwise shall
fail to observe or perform when due or within any applicable period of grace any
term, covenant or agreement contained in any agreement by which the Borrower is
bound, evidencing or securing borrowed money in a principal amount greater than
$500,000.00 as would permit the holder or holders thereof or of any such
obligations to accelerate the maturity thereof;

          (h)  if the Borrower shall be involved in financial difficulties as
evidenced:

               (i)  by its commencement of a voluntary case under Title 11 of
the United States Code as from time to time in effect, or by its authorizing, by
appropriate proceedings of its board of directors, managing partner or other
governing body, the commencement of such a voluntary case;

               (ii) by its filing an answer or other pleading admitting or
failing to deny the material allegations of a petition filed against it
commencing an involuntary case under said Title 11, or seeking, consenting to or
acquiescing in the relief therein provided, or by its failing to controvert
timely the material allegations of any such petition;

               (iii) by the entry of an order for relief against it in any 
involuntary case commenced under said Title 11;

               (iv) by its seeking relief as a debtor under any applicable law,
other than said Title 11, of any jurisdiction relating to the liquidation or
reorganization of 

                                      51

<PAGE>

debtors or to the modification or alteration of the rights of creditors, or 
by its consenting to or acquiescing in such relief:

               (v)  by entry of an order by a court of competent jurisdiction 
(A) finding it to be bankrupt or insolvent or (B) ordering or approving its 
liquidation, reorganization or any modification or alteration of the rights 
of its creditors which remains undischarged and unstayed for more than thirty 
(30) days;

               (vi) by the entry of an order by a court of competent 
jurisdiction assuming custody for, or appointing a receiver or other 
custodian for, all or a substantial part of its property which remains 
undischarged and unstayed for more than thirty (30) days; or

               (vii) by its making an assignment for the benefit of, or 
entering into a composition with, its creditors, or appointing or consenting 
to the appointment of a receiver or other custodian for all or a substantial 
part of its property;

          (i)  if there shall remain in force, undischarged, unsatisfied, 
unstayed and unbonded, for more than thirty (30) days, whether or not 
consecutive, any final judgment against the Borrower which, with other 
outstanding final judgments, undischarged, unsatisfied, unstayed and unbonded 
for more than thirty (30) days against such Person(s) exceeds $250,000.00;

          (j)  An Event of Default occurs under the Existing Senior 
Indebtedness Documents; or

          (k)  any determination by a court of competent jurisdiction is made 
that any portion of the Existing Senior Indebtedness is superior to any of 
the obligations.

     Section 11.2.  REMEDIES.  No remedy herein conferred upon any Bank or 
the Agent or the holder of any promissory note hereunder is intended to be 
exclusive of any other remedy and each and every remedy shall be cumulative 
and shall be in addition to every other remedy given hereunder or now or 
hereafter existing at law or in equity or by statute or any other provision 
of law.

     Section 11.3.  ADVANCES.  If the Agent shall elect to advance sums for 
any reason permitted or provided by any of the terms of this Agreement or any 
other instrument or document executed by the Borrower in favor of the Agent 
in connection with the Obligations, then such sums shall be payable upon 
demand of the Agent and shall bear interest, 

                                      52

<PAGE>

commencing on the date advanced and continuing until repaid, at the 
applicable rate(s) of interest set forth in this Agreement applicable to a 
period when a Default exists hereunder.

     Section 11.4.  PROCEEDS.  In the event that, following the occurrence or
during the continuance of any Default or Event of Default, the Agent or any
Bank, as the case may be, receives any monies in connection with the enforcement
of any the Loan Documents, such monies shall be distributed for application as
follows:

          (a)  First, to the payment of, or (as the case may be) the
reimbursement of the Agent for or in respect of all reasonable costs, expenses,
disbursements and losses which shall have been incurred or sustained by the
Agent in connection with the collection of such monies by the Agent, for the
exercise, protection or enforcement by the Agent of all or any of the rights,
remedies, powers and privileges of the Agent under this Agreement or any of the
other Loan Documents or in support of any provision of adequate indemnity to the
Agent against any taxes or liens which by law shall have, or may have, priority
over the rights of the Agent to such monies;

          (b)  Second, to all other Obligations in such order or preference as
the Majority Banks may determine; provided, however, that distributions in
respect of such Obligations shall be made (i) pari passu among Obligations with
respect to the Agent's fee payable pursuant to Section 3 and all other
Obligations and (ii) Obligations owing to the Banks with respect to each type of
Obligation such as interest, principal, fees and expenses, shall be made among
the Banks pro rata; and provided, further that the Agent may in its discretion
make proper allowance to take into account any Obligations not then due and
payable; and

          (d)  Third, the excess, if any, shall be returned to the Borrower or
to such other Persons as are entitled thereto.

     Section 12.    SETOFF.  Regardless of the adequacy of any deposits or other
sums credited by or due from any of the Banks to the Borrower and any securities
or other property of the Borrower in the possession of such Bank may, upon the
consent of the Majority Banks, be applied to or set off against the payment of
Obligations of the Borrower hereunder and under the other Loan Documents and any
and all other liabilities, direct, or indirect, absolute or contingent, due or
to become due, now existing or hereafter arising, of the Borrower to such Bank
at any time after the occurrence and during the continuance of any Event of
Default.  Each of the Banks agrees with each other Bank that (a) if an amount to
be set off is to be applied to Indebtedness of the Borrower to such Bank, other
than Indebtedness evidenced by the Notes held by such Bank, such amount shall be
applied ratably to such other Indebtedness and to the Indebtedness evidenced by
all such Notes held by such Bank, and (b) 

                                      53

<PAGE>

if such Bank shall receive from the Borrower, whether by voluntary payment, 
exercise of the right of setoff, counterclaim, cross-action, enforcement of 
the claim evidenced by the Notes held by such Bank by proceedings against the 
Borrower at law or in equity or by proof thereof in bankruptcy, 
reorganization, liquidation, receivership or similar proceedings or 
otherwise, and shall retain and apply to the payment of the Note or Notes 
held by such Bank any amount in excess of its ratable portion of the payments 
received by all of the Banks with respect to the Notes held by all of the 
Banks, such Bank will make such disposition and arrangements with the other 
Banks with respect to such excess, either by way of distribution, pro tanto, 
assignment of claims, subrogation, or otherwise as shall result in each Bank 
receiving in respect of the Notes held by it its proportionate payment as 
contemplated by this Agreement; provided that if all or any part of such 
excess payment is thereafter recovered from such Bank, such disposition and 
arrangements shall be rescinded and the amount restored to the extent of such 
recovery, but without interest.

     Section 13.    EXPENSES.  The Borrower agrees to pay (a) the reasonable 
costs of producing and reproducing this Agreement, the other Loan Documents 
and the agreements and instruments mentioned herein and delivered pursuant to 
the foregoing, (b) any taxes (including any interest and penalties in respect 
thereto) payable by the Agent or any of the Banks (other than taxes based 
upon the Agent's or any Bank's net income) on or with respect to the 
transactions contemplated by this Agreement (the Borrower hereby agreeing to 
indemnify the Agent and each Bank with respect thereto), (c) the reasonable 
fees, expenses and disbursements of the Agent and the Agent's legal counsel 
incurred in connection with the preparation or interpretation of the Loan 
Documents and other instruments mentioned herein, and amendments, 
modifications, approvals, consents or waivers hereto or hereunder, and the 
administration of the Loans, which shall include but shall not be limited to 
all syndication costs and the cost to organize, plan, hold and attend 
periodic meetings of the Banks; and (d) all reasonable out-of-pocket expenses 
(including reasonable attorneys' fees and costs, which attorneys may be 
employees of any Bank or the Agent) incurred by any Bank or the Agent in 
connection with (i) the enforcement of or preservation of rights under any of 
the Loan Documents against the Borrower or the administration thereof after 
the occurrence of a Default or Event of Default and (ii) any litigation, 
proceeding or dispute whether arising hereunder or otherwise, in any way 
related to the Agent's or any Bank's relationship with the Borrower or any of 
the Borrower Subsidiaries.  The Borrower shall not be charged any fees or 
costs, other than the fees described herein and in the Fee and Expense 
Agreement for the normal day to day administration of the Loan by the Agent 
(which shall include only services performed by the Agent's in house 
employees), including the exchange of information between the Agent and the 
Banks.  The covenants of this Section 13 shall survive payment or 
satisfaction of payment of amounts owing with respect to the Obligations.

                                      54

<PAGE>

     Section 14.    INDEMNIFICATION.  Except for liability arising 
exclusively from the gross negligence or willful misconduct of the Agent, the 
Borrower agrees to indemnify and hold harmless the Agent and the Banks from 
and against any and all claims, actions and suits whether groundless or 
otherwise, and from and against any and all liabilities, losses, damages and 
expenses of every nature and character arising out of this Agreement or any 
of the other Loan Documents or the transactions contemplated hereby 
including, without limitation, (a) any actual or proposed use by the Borrower 
of the proceeds of any of the Loans, (b) any actual or alleged infringement 
of any patent, copyright, trademark, service mark or similar right of the 
Borrower, (c) the Borrower entering into or performing this Agreement or any 
of the other Loan Documents, (d) with respect to the Borrower and its 
properties and assets, the violation of any Environmental Laws, the presence, 
disposal, escape, seepage, leakage, spillage, discharge, emission, release or 
threatened release of any Hazardous Substances or any action, suit, 
proceeding or investigation brought or threatened with respect to any 
Hazardous Substances (including, but not limited to, claims with respect to 
wrongful death, personal injury or damage to property), or (e) any claim that 
any of the Existing Senior Indebtedness is senior in priority to the 
Indebtedness, in each case including, without limitation, the reasonable fees 
and disbursements of counsel and allocated costs of internal counsel incurred 
in connection with any such investigation, litigation or other proceeding. In 
litigation, or the preparation therefor, the Banks and the Agent shall be 
entitled to select their own counsel and, in addition to the foregoing 
indemnity, the Borrower agrees to pay promptly the reasonable fees and 
expenses of such counsel.  If, and to the extent that the obligations of the 
Borrower under this Section 14 are unenforceable for any reason, the Borrower 
hereby agrees to make the maximum contribution to the payment in satisfaction 
of such obligations which is permissible under applicable law.  There shall 
be specifically excluded from the foregoing indemnification any claims, 
actions, suits, liabilities, losses, damages and expenses arising from 
disputes among the Banks with respect to the Loan or the Loan Documents.  In 
the event that any such claims, actions, suits, liabilities, losses, damages 
and expenses involve both a dispute among the Banks and other matters covered 
by this indemnification provision, the Agent shall make a reasonable good 
faith allocation of all losses, damages and expenses incurred between the 
Banks' dispute and the other matters covered by this indemnification 
provision, which allocation by the Agent shall be final and binding upon the 
parties hereto.

     Section 15.    SURVIVAL OF COVENANTS ETC.  All covenants, agreements, 
representations and warranties made herein, in any of the Loan Documents or 
in any documents or other papers delivered by or on behalf of the Borrower 
pursuant hereto and thereto shall be deemed to have been relied upon by the 
Banks and the Agent, notwithstanding any investigation heretofore or 
hereafter made by any of them, and shall survive the making by the Banks of 
any of the Loans hereunder and the issuance by the Banks of the Letters of 
Credit, as herein contemplated, and shall continue in full force and effect 
so long as any 

                                      55

<PAGE>

amount due under this Agreement remains outstanding and unpaid or any Bank 
has any obligation to make any Advances or issue Letters of Credit hereunder.

     Section 16.    THE AGENT.

     Section 16.1.  AUTHORIZATION.  The Agent is authorized to take such action
on behalf of each of the Banks and to exercise all such powers as are hereunder
and under any of the other Loan Documents and any related documents delegated to
the Agent, together with such powers as are reasonably incident thereto,
provided that no duties or responsibilities not expressly assumed herein or
therein shall be implied to have been assumed by the Agent. The relationship
between the Agent and the Banks is and shall be that of agent and principal
only, and nothing contained in this Agreement or any of the other Loan Documents
shall be construed to constitute the Agent as a trustee for any Bank.

     Section 16.2.  EMPLOYEES AND AGENTS.  The Agent may exercise its powers and
execute its duties by or through employees or agents and shall be entitled to
take, and to rely on, advice of counsel concerning all matters pertaining to its
rights and duties under this Agreement and the other Loan Documents.  The Agent
may utilize the services of such Persons as the Agent in its sole discretion may
reasonably determine, and all reasonable fees and expenses of any such Persons
shall be paid by the Borrower in accordance with and subject to the limitations
of Section 13.

     Section 16.3   NO LIABILITY.  Neither the Agent nor any of its
shareholders, directors, officers or employees nor any other Person assisting
them in their duties nor any agent or employee thereof, shall be liable for any
waiver, consent or approval given or any action taken, or omitted to be taken,
in good faith by it or them hereunder or under any of the other Loan Documents,
or in connection herewith or therewith, or be responsible for the consequences
of any oversight or error of judgment whatsoever, except that the Agent or such
other Person, as the case may be, may be liable for losses due to its willful
misconduct or gross negligence.

     Section 16.4.  NO REPRESENTATIONS.  The Agent shall not be responsible for
the execution or validity or enforceability of this Agreement, the Notes, any of
the other Loan Documents or any instrument at any time constituting, or intended
to constitute, or for the validity, enforceability or collectibility of any such
amounts owing with respect to the Notes, or for any recitals or statements,
warranties or representations made herein or in any of the other Loan Documents
or in any certificate or instrument hereafter furnished to it by or on behalf of
the Borrower, or be bound to ascertain or inquire as to the performance or
observance of any of the terms, conditions, covenants or agreements herein.  The
Agent shall not be bound to 

                                      56

<PAGE>

ascertain whether any notice, consent, waiver or request delivered to it by 
the Borrower or any holder of any of the Notes shall have been duly 
authorized or is true, accurate and complete.  The Agent has not made nor 
does it now make any representations or warranties, express or implied, nor 
does it assume any liability to the Banks, with respect to the credit 
worthiness or financial condition of the Borrower.  Each Bank acknowledges 
that it has, independently and without reliance upon the Agent or any other 
Bank, and based upon such information and documents as it has deemed 
appropriate, made its own credit analysis and decision to enter into this 
Agreement.

     Section 16.5.  PAYMENTS.

          (a)  A payment by the Borrower to the Agent hereunder or any of the
other Loan Documents for the account of any Bank shall constitute a payment to
such Bank.  The Agent agrees promptly to distribute to each Bank such Bank's pro
rata share of payments received by the Agent for the account of the Banks except
as otherwise expressly provided herein or in any of the other Loan Documents

          (b)  If in the opinion of the Agent the distribution of any amount
received by it in such capacity hereunder, under the Notes or under any of the
other Loan Documents might involve it in liability, it may refrain from making
distribution until its right to make distribution shall have been adjudicated by
a court of competent jurisdiction. If a court of competent jurisdiction shall
adjudge that any amount received and distributed by the Agent is to be repaid,
each Person to whom any such distribution shall have been made shall either
repay to the Agent its proportionate share of the amount so adjudged to be
repaid or shall pay over the same in such manner and to such Persons as shall be
determined by such court.

          (c)  Notwithstanding anything to the contrary contained in this 
Agreement or any of the other Loan Documents, any Bank that fails (i) to make 
available to the Agent its pro rata share of any Loan or Advance or (ii) to 
comply with the provisions herein with respect to making dispositions and 
arrangements with the other Banks, where such Bank's share of any payment 
received, whether by setoff or otherwise, is in excess of its pro rata share 
of such payments due and payable to all of the Banks, in each case as, when 
and to the full extent required by the provisions of this Agreement, shall be 
deemed delinquent (a "Delinquent Bank") and shall be deemed a Delinquent Bank 
until such time as such delinquency is satisfied.  A Delinquent Bank shall be 
deemed to have assigned any and all payments due to it from the Borrower, 
whether on account of Outstanding Loans, unpaid reimbursement Obligations, 
interest, fees or otherwise, to the remaining nondelinquent Banks for 
application to, and reduction of, their respective pro rata shares of all 
outstanding Loans.  The Delinquent Bank hereby authorizes the Agent to 
distribute such payments to the

                                      57

<PAGE>

nondelinquent Banks in proportion to their respective pro rata shares of all 
outstanding Loans.  A Delinquent Bank shall be deemed to have satisfied in 
full a delinquency when and if, as a result of application of the assigned 
payments to all outstanding Loans of the nondelinquent Banks, the Banks' 
respective pro rata shares of all outstanding Loans have returned to those in 
effect immediately prior to such delinquency and without giving effect to the 
nonpayment causing such delinquency.

     Section 16.6.  HOLDERS OF NOTES.  The Agent may deem and treat the payee 
of any Note as the absolute owner or purchaser thereof for all purposes 
hereof until it shall have been furnished in writing with a different name by 
such payee or by a subsequent holder, assignee or transferee.

     Section 16.7.  INDEMNITY.  The Banks ratably agree hereby to indemnify 
and hold harmless the Agent from and against any and all claims, actions and 
suits (whether groundless or otherwise), losses, damages, costs, expenses 
(including any expenses for which the Agent has not been reimbursed by the 
Borrower as required by Section 13), and liabilities of every nature and 
character arising out of or related to this Agreement, the Notes, or any of 
the other Loan Documents or the transactions contemplated or evidenced hereby 
or thereby, or the Agent's actions taken hereunder or thereunder, except to 
the extent that any of the same shall be directly caused by the Agent's 
willful misconduct or gross negligence.

     Section 16.8.  AGENT AS BANK.  In its individual capacity, FNBB shall 
have the same obligations and the same rights, powers and privileges in 
respect to its Commitment and the Loans made by it, and as the holder of any 
of the Notes as it would have were it not also the Agent.

     Section 16.9.  RESIGNATION.  The Agent may resign at any time by giving 
sixty (60) days' prior written notice thereof to the Banks and the Borrower. 
Upon any such resignation, the Majority Banks shall have the right to appoint 
a successor Agent.  Provided no Event of Default exists, the appointment of a 
successor Agent that is not a Bank shall be subject to the prior approval of 
the Borrower which shall not be unreasonably withheld or delayed.  Unless a 
Default or Event of Default shall have occurred and be continuing for a 
period of at least thirty (30) days after written notice thereof from the 
Agent to the Borrower, such successor Agent shall be reasonably acceptable to 
the Borrower (such notice and time to cure will be provided by the Agent only 
in the event of a pending appointment of successor Agent, and applies only 
for the purposes of this Section 16.9).  If no successor Agent shall have 
been so appointed by the Majority Banks and shall have accepted such 
appointment within thirty (30) days after the retiring Agent's giving of 
notice of resignation, then the retiring Agent may, on behalf of the Banks, 
appoint a successor Agent, which shall be a financial institution having a 
rating of not 

                                      58

<PAGE>

less than A-2 or its equivalent by Standard & Poor's Corporation.  Upon the 
acceptance of any appointment as Agent hereunder by a successor Agent, such 
successor Agent shall thereupon succeed to and become vested with all the 
rights, powers, privileges and duties of the retiring Agent, and the retiring 
Agent shall be discharged from its duties and obligations hereunder. After 
any retiring Agent's resignation, the provisions of this Agreement and the 
other Loan Documents shall continue in effect for its benefit in respect of 
any actions taken or omitted to be taken by it while it was acting as Agent.

     Section 16.10. NOTIFICATION OF WAIVERS, AMENDMENTS, DEFAULTS AND EVENTS 
OF DEFAULT, LITIGATION AND JUDGMENT.  Each Bank hereby agrees that, upon 
learning of the existence of a Default or an Event of Default, it shall 
promptly notify the Agent thereof.  The Agent hereby agrees that upon receipt 
of any notice under this Section 16.10 it shall promptly notify the other 
Banks of the existence of such Default or Event of Default. The Agent hereby 
agrees it shall promptly notify the other Banks of any waiver or amendment of 
any material term of this Agreement approved or granted by Agent.  The Agent 
shall also provide notice to the Banks of any pending litigation or 
judgements affecting the Borrower or any of its properties.

     Section 16.11. DUTIES IN THE CASE OF ENFORCEMENT.  In case one or more 
Events of Default have occurred and shall be continuing, and whether or not 
acceleration of the Obligations shall have occurred, the Agent shall, if (a) 
so requested by the Required Banks and (b) the Banks have provided to the 
Agent such additional indemnities and assurances against expenses and 
liabilities as the Agent may reasonably request and exercise all or any such 
other legal and equitable and other rights or remedies as it may have. The 
Required Banks may direct the Agent in writing as to the method and the 
extent of any such sale or other disposition, the Banks hereby agreeing to 
indemnify and hold the Agent harmless from all liabilities incurred in 
respect of all actions taken or omitted in accordance with such directions, 
provided that the Agent need not comply with any such direction to the extent 
that the Agent reasonably believes the Agent's compliance with such direction 
to be unlawful or commercially unreasonable in any applicable jurisdiction. 
Agent may, in its discretion, but without obligation, in the absence of 
direction from the Required Banks, take such interim actions as it believes 
necessary. Such actions may include, but shall not be limited to, petitioning 
a court for injunctive relief, appointment of a receiver or sequestration of 
proceeds from the Properties.

     Section 16.12. BANKRUPTCY PROCEEDINGS.  In the event a bankruptcy or 
other insolvency proceeding is commenced by or against Borrower, Agent shall 
have the sole right to file and pursue a joint proof of claim on behalf of 
all the Banks. Each Bank irrevocably waives its right to file and pursue a 
separate proof of claim in any such proceedings.

                                      59

<PAGE>

     Section 16.13. NOTICES, INFORMATION AND EXERCISE OF RIGHTS OF 
INSPECTION. The Agent shall provide to the Banks copies of all material 
information that the Banks may from time to time request of the Agent.  The 
Banks agree to coordinate the exercise of any inspections rights or requests 
for information with the Agent in order to permit the Agent to efficiently 
perform its functions hereunder.

     Section 17.    ASSIGNMENT AND PARTICIPATION.

     Section 17.1.  CONDITIONS TO ASSIGNMENT BY BANKS.  Except as provided 
herein, each Bank may assign to one or more Eligible Assignees all or a 
portion of its interests, rights and obligations under this Agreement 
(including all or a portion of its Commitment Percentage and Commitment and 
the same portion of the Loans at the time owing to it, and the Notes held by 
it; provided that (a) the Agent shall have given its prior written consent to 
such assignment, (b) each such assignment shall be of a constant, and not a 
varying, percentage of all the assigning Bank's rights and obligations under 
this Agreement, (c) each assignment shall be in an amount that is at least 
$5,000,000.00 and is a whole multiple of $1,000,000, (d) each Bank which is a 
Bank on the date hereof shall retain, free of any such assignment, an amount 
of its Commitment of not less than $5,000,000.00, (e) the parties to such 
assignment shall execute and deliver to the Agent, for recording in the 
Register (as hereinafter defined), an Assignment and Acceptance, in form and 
substance as established by the Agent (an "Assignment and Acceptance"), 
together with any Notes subject to such assignment, and (f) as to assignments 
to Eligible Assignees that are not Banks, and provided no Event of Default 
exists, then with the prior approval of the Borrower, which approval shall 
not be unreasonably withheld or delayed.  Upon such execution, delivery, 
acceptance and recording, from and after the effective date specified in each 
Assignment and Acceptance, which effective date shall be at least five (5) 
Business Days after the execution thereof, (i) the assignee thereunder shall 
be a party hereto and, to the extent provided in such Assignment and 
Acceptance, have the rights and obligations of a Bank hereunder, and (ii) the 
assigning Bank shall, to the extent provided in such assignment and upon 
payment to the Agent of the registration fee referred to in Section 17.3, be 
released from its further obligations under this Agreement to the extent of 
the interest assigned.

     Section 17.2.  CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS; 
COVENANTS.  By executing and delivering an Assignment and Acceptance, the 
parties to the assignment thereunder confirm to and agree with each other and 
the other parties hereto as follows: (a) other than the representation and 
warranty that it is the legal and beneficial owner of the interest being 
assigned thereby free and clear of any adverse claim, the assigning Bank 
makes 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, 

                                      60

<PAGE>

legality, validity, enforceability, genuineness, sufficiency or value of this 
Agreement, the other Loan Documents or any other instrument or document 
furnished pursuant hereto; (b) the assigning Bank makes no representation or 
warranty and assumes no responsibility with respect to the financial 
condition of the Borrower or any other Person primarily or secondarily liable 
in respect of any of the Obligations, or the performance or observance by the 
Borrower or any other Person primarily or secondarily liable in respect of 
any of the Obligations or any of their obligations under this Agreement or 
any of the other Loan Documents or any other instrument or document furnished 
pursuant hereto or thereto; (c) such assignee confirms that it has received a 
copy of this Agreement, together with copies of the most recent financial 
statements referred to in Section 5.7 and Section 8.5 and such other 
documents and information as it has deemed appropriate to make its own credit 
analysis and decision to enter into such Assignment and Acceptance; (d) such 
assignee will, independently and without reliance upon the assigning Bank, 
the Agent or any other 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; (e) such assignee 
represents and warrants that it is an Eligible Assignee; (f) such assignee 
appoints and authorizes the Agent to take such action as agent on its behalf 
and to exercise such powers under this Agreement and the other Loan Documents 
as are delegated to the Agent by the terms hereof or thereof, together with 
such powers as are reasonably incidental thereto; (g) such assignee agrees 
that it will perform in accordance with their terms all of the obligations 
that by the terms of this Agreement are required to be performed by it as a 
Bank; and (h) such assignee represents and warrants that it is legally 
authorized to enter into such Assignment and Acceptance.

     Section 17.3.  REGISTER.  The Agent shall maintain a copy of each 
Assignment and Acceptance delivered to it and a register or similar list (the 
"Register") for the recordation of the names and addresses of the Banks and 
the Commitment Percentages of, and principal amount of the Loans owing to the 
Banks from time to time.  The entries in the Register shall constitute a 
rebuttable presumption in the absence of manifest error, and the Borrower, 
the Agent and the Banks may treat each Person whose name is recorded in the 
Register as a Bank hereunder for all purposes of this Agreement.  The 
Register shall be available for inspection by the Borrower and the Banks at 
any reasonable time and from time to time upon reasonable prior notice. Upon 
each such recordation, (i) the assigning Bank agrees to pay to the Agent a 
registration fee in the sum of $5,000.00; and (ii) the Agent will deliver a 
copy of the Register to the Borrower.

     Section 17.4.  NEW NOTES.  Upon its receipt of an Assignment and 
Acceptance executed by the parties to such assignment, together with each 
Note subject to such assignment, the Agent shall (a) record the information 
contained therein in the Register, and (b) give prompt notice thereof to the 
Borrower and the Banks (other than the assigning Bank). Within five (5) 

                                      61

<PAGE>

Business Days after receipt of such notice, the Borrower, at its own expense, 
shall execute and deliver to the Agent, in exchange for each surrendered 
Note, a new Note to the order of such Eligible Assignee in an amount equal to 
the amount assumed by such Eligible Assignee pursuant to such Assignment and 
Acceptance and, if the assigning Bank has maintained some portion of its 
obligations hereunder, a new Note to the order of the assigning Bank in an 
amount equal to the amount retained by it hereunder.  Such new Notes shall 
provide that they are replacements for the surrendered Notes, shall be in an 
aggregate principal amount equal to the aggregate principal amount of the 
surrendered Notes, shall be dated the effective date of such Assignment and 
Acceptance and shall otherwise be in substantially the form of the Notes 
delivered at the time of execution of this Agreement.  Within five (5) days 
of issuance of any new Notes pursuant to this Section 17.4, the Borrower 
shall deliver an opinion of counsel, addressed and acceptable to the Banks 
and the Agent, relating to the due authorization, execution and delivery of 
such new Notes and the legality, validity, enforceability and binding effect 
thereof.  The surrendered Notes shall be cancelled and returned to the 
Borrower.

     Section 17.5.  PLEDGE BY BANK.  Any Bank may at any time pledge all or 
any portion of its interest and rights under this Agreement (including all or 
any portion of its Note) to any of the twelve Federal Reserve Banks organized 
under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such 
pledge or the enforcement thereof shall release the pledgor Bank for its 
obligations hereunder or under any of the other Loan Documents.

     Section 17.6.  NO ASSIGNMENT BY BORROWER.  The Borrower shall not assign 
or transfer any of its rights or obligations under any of the Loan Documents 
without the prior written consent of each of the Banks.

     Section 17.7   DISCLOSURE.  Each Bank agrees to take normal and 
reasonable precautions and exercise due care to maintain the confidentiality 
of all information identified as "confidential" or "secret" by the Borrower 
and provided to it by the Borrower, or by the Agent on Borrower's behalf, 
under this Agreement or any other Loan Document, and neither it nor any of 
its affiliates shall use any such information other than in connection with 
or in enforcement of this Agreement and the other Loan Documents; except to 
the extent such information (i) was or becomes generally available to the 
public other than as a result of disclosure by the Bank, or (ii) was or 
becomes available on a non-confidential basis from a source other than the 
Borrower, provided that such source is not bound by a confidentiality 
agreement with the Borrower known to the Bank; provided, however, that any 
Bank may disclose such information (A) at the request or pursuant to any 
requirement of any governmental authority to which the Bank is subject or in 
connection with an examination of such Bank by any such authority; (B) 
pursuant to subpoena or other court process; (C) when required to do so in 
accordance with the provisions of any applicable requirement of law; (D) 

                                      62

<PAGE>

to the extent reasonably required in connection with any litigation or 
proceeding to which the Agent, any Bank or their respective affiliates may be 
party; (E) to the extent reasonably required in connection with the exercise 
of any remedy hereunder or under any other Loan Document; (F) to such Bank's 
independent auditors and other professional advisors; (G) to any participant 
or assignee, actual or potential, provided that such Person agrees in writing 
to keep such information confidential to the same extent required of the 
Banks hereunder, and (H) as to any Bank, as expressly permitted under the 
terms of any other document or agreement regarding confidentiality to which 
the Borrower is party or is deemed party with such Bank.

     Section 17.8.  WITHHOLDING TAX.

          (a)  If any Bank is a "foreign corporation, partnership or trust" 
within the meaning of the Code and such Bank claims exemption from, or a 
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the Code, 
such Bank agrees with and in favor of the Agent, to deliver to the Agent:

               (i)  if such Bank claims an exemption from, or a reduction of, 
withholding tax under a United States tax treaty, properly completed IRS 
Forms 1001 and W-8 before the payment of any interest in the first calendar 
year and before the payment of any interest in each third succeeding calendar 
year during which interest may be paid under this Agreement;

               (ii) if such Bank claims that interest paid under this 
Agreement is exempt from United States withholding tax because it is 
effectively connected with a United States trade or business of such Bank, 
two properly completed and executed copies of IRS Form 4224 before the 
payment of any interest is due in the first taxable year of such Bank and in 
each succeeding taxable year of such Bank during which interest may be paid 
under this Agreement, and IRS Form W-9; and

               (iii)       such other form or forms as may be required under 
the Code or other laws of the United States as a condition to exemption from, 
or reduction of, United States withholding tax.

     Such Bank agrees to promptly notify the Agent of any change in 
circumstances which would modify or render invalid any claimed exemption or 
reduction.

          (b)  If any Bank claims exemption from, or reduction of, 
withholding tax under a United States tax treaty by providing IRS Form 1001 
and such Bank sells, assigns, grants a participation in, or otherwise 
transfers all or part of the Obligations of the Borrower 

                                      63

<PAGE>

to such Bank, such Bank agrees to notify the Agent of the percentage amount 
in which it is no longer the beneficial owner of Obligations of the Borrower 
to such Bank.  To the extent of such percentage amount, the Agent will treat 
such Bank's IRS Form 1001 as no longer valid.

          (c)  If any Bank claiming exemption from United States withholding tax
by filing IRS Form 4224 with the Agent sells, assigns, grants a participation
in, or otherwise transfers all or part of the Obligations of the Borrower to
such Bank, such Bank agrees to undertake sole responsibility for complying with
the withholding tax requirements imposed by Sections 1441 and 1442 of the Code.

          (d)  If any Bank is entitled to a reduction in the applicable
withholding tax, the Agent may withhold from any interest payment to such Bank
an amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by subsection (a)
of this Section are not delivered to the Agent, then the Agent may withhold from
any interest payment to such Bank not providing such forms or other
documentation an amount equivalent to the applicable withholding tax.

          (e)  If the IRS or any other governmental authority of the United 
States or other jurisdiction asserts a claim that the Agent did not properly 
withhold tax from amounts paid to or for the account of any Bank (because the 
appropriate form was not delivered, was not properly executed, or because 
such Bank failed to notify the Agent of a change in circumstances which 
rendered the exemption from, or reduction of, withholding tax ineffective, or 
for any other reason) such Bank shall indemnify the Agent fully for all 
amounts paid, directly or indirectly, by the Agent as tax or otherwise, 
including penalties and interest, and including any taxes imposed by any 
jurisdiction on the amounts payable to the Agent under this Section 17.9, 
together with all costs and expenses (including reasonable attorney's fees 
and legal expenses). The obligation of the Banks under this subsection shall 
survive the payment of all Obligations and the resignation or replacement of 
the Agent.

     Section 18.    NOTICES, ETC.  Except as otherwise expressly provided in 
this Agreement, all notices and other communications made or required to be 
given pursuant to this Agreement or the other Loan Documents shall be in 
writing and shall be (i) delivered in hand, (ii) mailed by United States 
registered or certified first-class mail, postage prepaid, or (iii) sent by 
telegraph or telex and confirmed by letter mailed on the same Business Day, 
addressed as follows:

               (a)  if to the Borrower, at 2681 Long Lake Road, Roseville, 
Minnesota 55113, Attention: Lawrence B. Shapiro, or at such other address for 
notice as such 

                                      64

<PAGE>

party shall last have furnished in writing to the person giving the notice 
with a copy to Joseph Kinning, Esq., Briggs & Morgan, 2400 IDS Center, 
Minneapolis, Minnesota 55402; or

               (b)  if to the Agent, at 115 Perimeter Center Place, Suite 
500, Atlanta, Georgia 30346, Attention: Kevin C. Hake, with a copy to Paul, 
Hastings, Janofsky & Walker, 600 Peachtree Street N.E., Suite 2400, Atlanta, 
Georgia 30308, Attention: Charles T. Sharbaugh, or such other address for 
notice as the Agent shall last have furnished in writing to the person giving 
the notice; and

               (c)  if to any Bank, at such Bank's address set forth on 
Schedule 1 hereto, or such other address for notice as such Bank shall have 
last furnished in writing to the Person giving the notice.

     Any such notice or demand shall be deemed to have been duly given or 
made and to have become effective (a) if delivered by hand to a responsible 
officer of the party to which it is directed, at the time of the receipt 
thereof by such officer, (b) if sent by registered or certified first-class 
mail, postage prepaid, upon the earlier of the date of receipt or five (5) 
Business Days after the posting thereof, and (c) if sent by telex or cable, 
on the Business Day such telex or cable is dispatched.

     Section 19.    MISCELLANEOUS.  Except as otherwise required by the laws 
of any jurisdiction in which any Property is located, the Loan Documents 
shall be deemed to be contracts under the laws of the Commonwealth of 
Massachusetts and shall for all purposes be construed in accordance with and 
governed by the internal laws of said Commonwealth, without reference to 
principles of conflicts of law.  The rights and remedies herein expressed are 
cumulative and not exclusive of any other rights which the parties would 
otherwise have. The captions in this Agreement are for convenience of 
reference only and shall not define or limit the provisions hereof.  This 
Agreement and any amendment hereof may be executed in several counterparts 
and by each party on a separate counterpart, each of which when so executed 
and delivered shall be an original, but all of which together shall 
constitute one instrument. In proving this Agreement it shall not be 
necessary to produce or account for more than one such counterpart signed by 
the party against whom enforcement is sought. Time is of the essence of this 
Agreement.

     Section 20.    ENTIRE AGREEMENT, ETC.  This Agreement, together with the 
other Loan Documents and any other documents executed in connection herewith 
or therewith, express the entire understanding of the parties with respect to 
the transactions contemplated hereby.  Neither this Agreement nor any term 
hereof may be changed, waived, discharged or terminated orally or in writing, 
except as provided in Section 21.

                                      65

<PAGE>

     Section 21.    CONSENTS, AMENDMENTS, WAIVERS, ETC.  The following may 
occur with, but only with, the written consent of the Borrower (unless the 
Borrower is the party requesting such action) and the written consent of the 
Agent and the Majority Banks:

          (a)  any consent or approval required or permitted by this 
Agreement to be given by the Banks;

          (b)  the amendment of any term of this Agreement, the other Loan 
Documents or any other instrument related hereto or mentioned herein; and

          (c)  the waiver of the performance or observance by the Borrower of 
any terms of this Agreement, the other Loan Documents or such other 
instrument or the continuance of any Default or Event of Default (either 
generally or in a particular instance and either retroactively or 
prospectively).  Any request by the Borrower for consent, approval, waiver or 
amendment which requires the approval of the Majority Banks may be made to 
the Agent on behalf of the Majority Banks.

     Notwithstanding the foregoing, the following matters require the 
consents of the parties as set forth below:

          (a)  The rate of interest on and the term of the Notes, the 
payments of interest or principal required under the Notes and the Maturity 
Date, and the amount of the Commitments of the Banks hereunder may not be 
changed without the written consent of the Borrower and the written consent 
of each Bank affected thereby.

          (c)  The definition of Majority Banks or Required Banks may not be 
amended, without the written consent of all of the Banks.

          (d)  The amount of the Fees payable for the Agent's account and 
Section 16 may not be amended without the written consent of the Agent.

          (e)  The provisions of Section 3.1, Section 3.2 and Section 3.3 may 
not be amended without the written consent of FNBB.

          (f)  The modification of the following covenants set forth in 
Sections 10.1, 10.2, 10.3 and 10.4 and the modification of the advance rates 
as to the categories in Borrowing Base shall require the approval of the 
Required Banks.

                                      66

<PAGE>

     No waiver shall extend to or affect any obligation not expressly waived 
or impair any right consequent thereon.  No course of dealing or delay or 
omission on the part of the Agent or any Bank in exercising any right shall 
operate as a waiver thereof or otherwise be prejudicial thereto.  No notice 
to or demand upon the Borrower shall entitle the Borrower to other or further 
notice or demand in similar or other circumstances.

     Section 22.    CONSENT TO SERVICE.

          (a)  The Borrower hereby irrevocably consents to the service of the 
summons and complaint and any other process in any action or proceeding on 
behalf of Borrower or its property by the hand delivery or mailing of copies 
of such process to Borrower at its address specified in Section 18 hereof.

          (b)  Nothing in this Section 22 shall affect the right of the Agent 
or the Banks to serve legal process in any other manner permitted by law or 
affect the right of the Agent or any of the Banks to bring any action or 
proceeding against the Borrower or its properties in the courts of any other 
jurisdictions.

          (c)  The Borrower hereby expressly waives, to the fullest extent 
not prohibited by law, any right it may have now or hereafter to a jury trial 
in any suit, action or proceeding arising out of or relating to this 
Agreement or any of the other Loan Documents.

     Section 23.    SEVERABILITY.  In the event any provision of this 
Agreement shall for any reason be held to be invalid, illegal or 
unenforceable in any respect, such invalidity, illegality or unenforceability 
shall not effect any other term or provision hereof, and this Agreement shall 
be interpreted and construed as if such provision to the extent the same 
shall have been invalid, illegal or unenforceable had never been contained 
herein. The parties hereto agree that they will negotiate in good faith to 
replace any provision hereof so held invalid, illegal or unenforceable with a 
valid provision which is as similar as possible in substance to the invalid, 
illegal or unenforceable provision.

     Section 24.    WAIVER.  The Borrower, the Agent and the Banks hereby 
mutually knowingly, voluntarily, and intentionally waive any right any of 
them may have to a trial by jury in respect of any litigation (including, but 
not limited to, any claims, cross-claims, or third party claims) arising out 
of, under or in connection with the Agreement, the Note, the other Loan 
Documents, or the transactions contemplated therein or herein.  The Borrower, 
the Agent and the Banks certify to each other party that no representative or 
agent of any party hereto nor counsel of any such party has represented, 
expressly or otherwise, that such party 

                                      67

<PAGE>

would not, in the event of such litigation' seek to enforce this waiver of 
right to jury trial provision.

     Section 25.    RIGHTS OF THIRD PARTIES.  All conditions to the 
performance of the obligations of the Agent and the Banks under this 
Agreement, including the obligation to make Advances, are imposed solely and 
exclusively for the benefit of the Agent and the Banks and no other Person 
shall have standing to require satisfaction of such conditions in accordance 
with their terms or be entitled to assume that the Agent and the Banks will 
refuse to make Advances in the absence of strict compliance with any or all 
thereof and no other Person shall, under any circumstances, be deemed to be a 
beneficiary of such conditions, any and all of which may be freely waived in 
whole or in part by the Agent and the Banks at any time if in their sole 
discretion it deems it desirable to do so.  In particular, the Agent and the 
Banks make no representations and assume no obligations as to third parties 
concerning the quality of the construction by the Borrower of the Projects or 
the absence therefrom of defects.

     Section 26.    RELATIONSHIP.  The relationship between the Banks and the 
Borrower is solely that of a lender and borrower, and nothing contained 
herein or in any of the other Loan Documents shall in any manner be construed 
as making the parties hereto partners, joint venturers or any other 
relationship other than lender and borrower.

                                      68

<PAGE>

      IN WITNESS WHEREOF, the undersigned have duly executed this Agreement 
under seal as of the date first set forth above.

                                          BORROWER

                                          THE ROTTLUND COMPANY, INC.,
                                          a Minnesota corporation


                                          By: /s/ Lawrence B. Shapiro
                                             ________________________________



                                          AGENT

                                          THE FIRST NATIONAL BANK OF BOSTON,
                                          a national banking association


                                          By: /s/ Kevin C. Hake
                                             ________________________________
                                             Kevin C. Hake, Vice President



                                          BANKS

                                          THE FIRST NATIONAL BANK OF BOSTON,
                                          a national banking association


                                          By: /s/ Kevin C. Hake
                                             ________________________________
                                             Kevin C. Hake, Vice President


                                      69