<PAGE>


                            THIRD MODIFICATION
                                    OF
                             CREDIT AGREEMENT


     This Third Modification of Credit Agreement ("Agreement") is made this 
____ day of January, 1997, among THE ROTTLUND COMPANY, INC., a Minnesota 
corporation ("Borrower"), THE FIRST NATIONAL BANK OF BOSTON, a national 
banking association having its principal place of business at 100 Federal 
Street, Boston, Massachusetts 02110, ("FNBB") and THE FIRST NATIONAL BANK OF 
BOSTON, as Agent (the "Agent") for itself and the other lending institutions 
which are or may become parties to the Credit Agreement (as hereinafter 
defined).

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

     IN CONSIDERATION OF TEN AND NO/100 DOLLARS ($10.00) and other good and 
valuable consideration, the receipt and sufficiency of which is hereby 
acknowledged, the undersigned Borrower and FNBB hereby covenant and agree as 
follows:

     .    RECITALS.  The following Recitals are true and correct as of the 
date of this Agreement:

          ()   The Borrower, FNBB and the Agent entered into that certain 
Credit Agreement dated as of October 23, 1996, and that certain First 
Modification of Credit Agreement dated November 19 1996, and Second 
Modification of Credit Agreement dated December 24, 1996 (the foregoing 
Credit Agreement, as modified, is referred to herein as "Credit Agreement").

          ()   The parties to the Credit Agreement wish to further amend and 
modify the Credit Agreement. 

          ()   All terms not otherwise defined herein shall have the same 
meaning as in the Credit Agreement.

     .    The Credit Agreement is hereby modified as follows:

          ()   By adding the following after "(iii) Interest Expense" in the 
definition of EBITDA in Section 1 "or Interest Incurred (without double 
counting), to the extent that Interest Expense cannot be accurately 
determined because of the inability of the Borrower to determine the interest 
component of cost of sales for any period for reasons other than the 
Borrower's negligence";

          (b)  By deleting the provisions of (vi) in its entirety from the 
definition of TANGIBLE NET WORTH and by substituting in lieu thereof "(vi) 
deferred charges";

          (c)  By substituting $24,800,000" for "$25,380,150" in Section 
10.1; and

          (d)  By substituting "1.75" for "2" in Section 10.3.


<PAGE>

     3.   The Effective Date of this Third Amendment shall be as of October 23,
1996 so that, without limitation, compliance with all covenants contained 
in the Credit Agreement shall be determined from modifications contained 
herein.                                                                       

     4.   Except as modified hereby, the terms and conditions of the Credit 
Agreement shall remain in full force and effect and the Borrower hereby 
ratifies the terms and conditions thereof.

     5.   This Agreement may be executed in any number of counterparts each 
of which shall be deemed an original.

     IN WITNESS WHEREOF, the undersigned Borrower and Agent have hereunto 
caused this instrument to be executed by their duly authorized corporate 
officers and their seal to be affixed hereto as of the day and year first 
above written.

                         THE ROTTLUND COMPANY, INC., a Minnesota
                         corporation



                                     THE ROTTLUND COMPANY, INC., a Minnesota
                                     corporation


                                     By:
                                        ------------------------------------
                                     Title:
                                           ---------------------------------


                                     THE FIRST NATIONAL BANK OF BOSTON,
                                     a national banking association


 
                                     By:
                                        ------------------------------------
                                             KEVIN C. HAKE, Director


     The undersigned guarantors hereby agree to all modifications of the 
Credit Agreement and hereby ratify and reaffirm their respective Subsidiary 
Guaranty dated as of October 23, 1996.


                                     NORTHCOAST MORTGAGE, INC.


                                     By:
                                        ------------------------------------
                                     Its:
                                         -----------------------------------


                                     ROTTLUND HOMES OF FLORIDA, INC.


                                     By:
                                        ------------------------------------
                                     Its:
                                         -----------------------------------

<PAGE>


                                     ROTTLUND HOMES OF INDIANA, INC.


                                     By:
                                        ------------------------------------
                                     Its:
                                         -----------------------------------


                                     ROTTLUND HOMES OF INDIANA LIMITED
                                     PARTNERSHIP


                                     By:
                                        ------------------------------------
                                     Its:
                                         -----------------------------------


                                     ROTTLUND HOMES OF IOWA, INC.


                                     By:
                                        ------------------------------------
                                     Its:
                                         -----------------------------------


                                     ROTTLUND HOMES OF NEW JERSEY


                                     By:
                                        ------------------------------------
                                     Its:
                                         -----------------------------------