<PAGE>   1
                                                                   Exhibit 10.11


                          $72,500,000 REVOLVING CREDIT
                             $15,000,000 TERM LOAN


                  SECOND AMENDED AND RESTATED CREDIT AGREEMENT


                                  by and among


                               ZARING HOMES, INC.

                                      and

                             ZARING HOLDINGS, INC.

                                      and

               HEARTHSIDE HOMES, LLC, as Borrowers and Guarantors

                                      and

                          ZARING NATIONAL CORPORATION

                                      and

                        ZARING HOMES OF INDIANA, L.L.C.

                                      and

                   ZARING HOMES KENTUCKY, LLC, as Guarantors

                                      and

                             THE BANKS PARTY HERETO

                                      and

                    PNC BANK, NATIONAL ASSOCIATION, as Agent

                                      and


<PAGE>   2


                             BANK OF AMERICA NT&SA

                                      and

                        BANK ONE, MICHIGAN, as Co-Agents




                           Dated as of June 28, 1999









                                     - 2 -
<PAGE>   3


                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                               ----
<C>      <S>      <C>                                                                                          <C>
1.       CERTAIN DEFINITIONS......................................................................................2
         1.1.     Certain Definitions.............................................................................2
         1.2.     Construction...................................................................................20
         1.3.     Accounting Principles..........................................................................21

2.       REVOLVING CREDIT AND SWING LOAN FACILITIES..............................................................21
         2.1.     The Commitments................................................................................21
                  (a)      Revolving Credit Commitments..........................................................21
                  (b)      Swing Loan Commitment.................................................................21
         2.2.     Nature of the Banks' and the Borrowers' Obligations............................................22
         2.3.     Certain Fees...................................................................................22
                  (a)      Facility Fees; Extension Fee..........................................................22
                  (b)      Commitment Fee........................................................................22
         2.4.     Permanent Reductions of Commitments............................................................23
                  (a)      Voluntary Reductions..................................................................23
                  (b)      Effect of Reductions..................................................................23
         2.5.     Loan Requests..................................................................................23
                  (a)      Revolving Credit Loan Requests........................................................23
                  (b)      Swing Loan Requests...................................................................24
         2.6.     Making Loans...................................................................................24
                  (a)      Revolving Credit Loans................................................................24
                  (b)      Swing Loans...........................................................................25
         2.7.     Borrowings to Repay Swing Loans................................................................25
         2.8.     Notes..........................................................................................26
                  (a)      Revolving Credit Notes................................................................26
                  (b)      Swing Note............................................................................26
         2.9.     Letter of Credit Subfacility...................................................................26
                  (a)      Issuance of Letters of Credit.........................................................26
                  (b)      Participations........................................................................27
                  (c)      Letter of Credit Fees.................................................................27
                  (d)      Disbursements, Reimbursement..........................................................27
                  (e)      Documentation.........................................................................28
                  (f)      Determinations to Honor Drawing Requests..............................................28
                  (g)      Nature of Participation and Reimbursement Obligations.................................28
                  (h)      Indemnity.............................................................................29
                  (i)      Liability for Acts and Omissions......................................................30
         2.10.    Extension by Banks of the Revolving Credit Expiration Date.....................................30
         2.11.    Use of Proceeds................................................................................31

3.       TERM LOANS..............................................................................................31
         3.1.     Term Loan Commitments..........................................................................31
         3.2.     Nature of Banks' Obligations With Respect to Term Loans........................................31
         3.3.     Term Loan Facility Fee.........................................................................31
         3.4.     Term Loan Notes................................................................................31
         3.5.     Use of Proceeds................................................................................31

4.       INTEREST RATES..........................................................................................32
</TABLE>



                                     - 3 -
<PAGE>   4


<TABLE>
<C>      <S>      <C>                                                                                          <C>
         4.1.     Interest Rate Options..........................................................................32
                  (a)      Revolving Credit Interest Rate Options................................................32
                  (b)      Term Loan Interest Rate Options.......................................................33
                  (c)      Interest Rate Margins.................................................................33
                  (d)      Rate Quotations.......................................................................34
         4.2.     Euro-Rate Interest Periods.....................................................................34
         4.3.     Interest After Default.........................................................................35
         4.4.     Euro-Rate Unascertainable......................................................................36
         4.5.     Selection of Interest Rate Options.............................................................37

5.       PAYMENTS................................................................................................37
         5.1.     Payments.......................................................................................37
         5.2.     Pro Rata Treatment of the Banks................................................................38
         5.3.     Interest Payment Dates.........................................................................38
         5.4.     Prepayments....................................................................................38
         5.5.     Additional Compensation in Certain Circumstances...............................................40
                  (a)      Increased Costs or Reduced Return Resulting From Taxes, Reserves, Capital Adequacy
                           Requirements, Expenses, Etc...........................................................40
                  (b)      Indemnity.............................................................................41
         5.6.     Settlement Date Procedures.....................................................................42

6.       REPRESENTATIONS AND WARRANTIES..........................................................................42
         6.1.     Representations and Warranties.................................................................42
                  (a)      Organization and Qualification........................................................42
                  (b)      Capitalization and Ownership..........................................................42
                  (c)      Subsidiaries..........................................................................43
                  (d)      Power and Authority...................................................................43
                  (e)      Validity and Binding Effect...........................................................43
                  (f)      No Conflict...........................................................................44
                  (g)      Litigation............................................................................44
                  (h)      Title to Properties...................................................................44
                  (i)      Financial Statements..................................................................44
                  (j)      Margin Stock..........................................................................45
                  (k)      Full Disclosure.......................................................................45
                  (l)      Taxes.................................................................................45
                  (m)      Consents and Approvals................................................................46
                  (n)      No Event of Default; Compliance With Instruments......................................46
                  (o)      Patents, Trademarks, Copyrights, Licenses, Etc........................................46
                  (p)      Insurance.............................................................................46
                  (q)      Compliance With Laws..................................................................46
                  (r)      Material Contracts....................................................................47
                  (s)      Investment Companies..................................................................47
                  (t)      Plans and Benefit Arrangements........................................................47
                  (u)      Employment Matters....................................................................48
                  (v)      Environmental Matters.................................................................48
                  (w)      Senior Debt Status....................................................................50
                  (x)      Restricted Transactions...............................................................50
         6.2.     Updates to Schedules...........................................................................50

7.       CONDITIONS OF LENDING...................................................................................50
</TABLE>



                                     - 4 -
<PAGE>   5


<TABLE>
<C>      <S>      <C>                                                                                          <C>
         7.1.     Loans After the Closing Date...................................................................50
         7.2.     Each Additional Loan...........................................................................53

8.       COVENANTS...............................................................................................53
         8.1.     Affirmative Covenants..........................................................................53
                  (a)      Preservation of Existence, Etc........................................................53
                  (b)      Payment of Liabilities, Including Taxes, Etc..........................................53
                  (c)      Maintenance of Insurance..............................................................54
                  (d)      Maintenance of Properties and Leases..................................................55
                  (e)      Maintenance of Patents, Trademarks, Etc...............................................55
                  (f)      Visitation Rights.....................................................................55
                  (g)      Keeping of Records and Books of Account...............................................55
                  (h)      Plans and Benefit Arrangements........................................................56
                  (i)      Compliance With Laws..................................................................56
                  (j)      Use of Proceeds.......................................................................56
                  (k)      Subordination of Intercompany Loans, Other Loans and Advances to the Borrowers........56
         8.2.     Negative Covenants.............................................................................56
                  (a)      Indebtedness..........................................................................56
                  (b)      Liens.................................................................................57
                  (c)      Guaranties............................................................................57
                  (d)      Loans and Investments; Certain Dividends and Distributions............................57
                  (e)      Changes in the Senior Notes...........................................................58
                  (f)      Liquidations, Mergers, Consolidations, Acquisitions...................................58
                  (g)      Dispositions of Assets or Subsidiaries................................................59
                  (h)      Affiliate Transactions................................................................59
                  (i)      Subsidiary, Partnerships and Joint Ventures...........................................59
                  (j)      Continuation of or Change in Business; Geographic Expansion...........................59
                  (k)      Plans and Benefit Arrangements........................................................60
                  (l)      Fiscal Year...........................................................................61
                  (m)      Changes in Organizational Documents...................................................61
                  (n)      Minimum Fixed Charge Coverage Ratio...................................................61
                  (o)      Minimum Tangible Net Worth............................................................61
                  (p)      Maximum Leverage Ratio................................................................61
                  (q)      Speculative Units.....................................................................62
                  (r)      Model Units...........................................................................62
                  (s)      Land Ownership or Acquisition.........................................................62
                  (t)      Zaring National Leverage Ratio........................................................62
                  (u)      Zaring National Fixed Charge Coverage Ratio...........................................62
                  (v)      Off Balance Sheet Financing...........................................................63
                  (w)      Limitation on Interest Rate...........................................................63
         8.3.     Reporting Requirements.........................................................................63
                  (a)      Monthly Financial Statements and Reports..............................................63
                  (b)      Quarterly Financial Statements........................................................64
                  (c)      Annual Financial Statements...........................................................64
                  (d)      Quarterly Compliance Certificate of the Loan Parties; Updates to Schedules............64
                  (e)      Borrowing Base Certificate............................................................65
                  (f)      Notice of Default.....................................................................65
                  (g)      Notice of Litigation..................................................................65
                  (h)      Budgets, Forecasts, Deliveries Under the Senior Notes, Other Reports and Information..65
</TABLE>



                                     - 5 -
<PAGE>   6


<TABLE>
<C>      <S>      <C>                                                                                          <C>
                  (i)      Notices Regarding Plans and Benefit Arrangements......................................66

9.       DEFAULT.................................................................................................67
         9.1.     Events of Default..............................................................................67
         9.2.     Consequences of Event of Default...............................................................70

10.      THE AGENT...............................................................................................72
         10.1.    Appointment....................................................................................72
         10.2.    Delegation of Duties...........................................................................72
         10.3.    Nature of Duties; Independent Credit Investigation.............................................72
         10.4.    Actions in Discretion of Agent; Instructions From the Banks....................................73
         10.5.    Reimbursement and Indemnification of Agent by the Borrowers....................................73
         10.6.    Exculpatory Provisions.........................................................................74
         10.7.    Reimbursement and Indemnification of Agent by Banks............................................74
         10.8.    Reliance by Agent..............................................................................74
         10.9.    Notice of Default..............................................................................75
         10.10.   Notices........................................................................................75
         10.11.   Banks in Their Individual Capacities...........................................................75
         10.12.   Holders of Notes...............................................................................75
         10.13.   Equalization of Banks..........................................................................75
         10.14.   Successor Agent................................................................................76
         10.15.   Agent's Fee....................................................................................76
         10.16.   Availability of Funds..........................................................................76
         10.17.   Calculations...................................................................................77
         10.18.   Beneficiaries..................................................................................77

11.      MISCELLANEOUS...........................................................................................77
         11.1.    Modifications, Amendments or Waivers...........................................................77
         11.2.    No Implied Waivers; Cumulative Remedies; Writing Required......................................78
         11.3.    Reimbursement and Indemnification of Banks by the Borrowers; Taxes.............................78
         11.4.    Holidays.......................................................................................79
         11.5.    Funding by Branch, Subsidiary or Affiliate.....................................................79
                  (a)      Notional Funding......................................................................79
                  (b)      Actual Funding........................................................................79
         11.6.    Notices........................................................................................80
         11.7.    Severability...................................................................................80
         11.8.    Governing Law..................................................................................80
         11.9.    Prior Understanding............................................................................81
         11.10.   Duration; Survival.............................................................................81
         11.11.   Successors and Assigns.........................................................................81
         11.12.   Confidentiality................................................................................82
         11.13.   Counterparts...................................................................................82
         11.14.   Agent's or Bank's Consent......................................................................82
         11.15.   Exceptions.....................................................................................83
         11.16.   Consent to Forum; Waiver of Jury Trial.........................................................83
         11.17.   Tax Withholding Clause.........................................................................83
         11.18.   Joinder of Guarantors..........................................................................84
         11.19.   Limitation of Liability........................................................................84
         11.20.   Co-Agents......................................................................................84
</TABLE>




                                     - 6 -
<PAGE>   7


                         LIST OF SCHEDULES AND EXHIBITS

SCHEDULES


SCHEDULE 1.1(B)          -     COMMITMENT OF BANKS
SCHEDULE 2.9(a)          -     ROLLOVER LCS
SCHEDULE 6.1(a)          -     QUALIFICATIONS TO DO BUSINESS
SCHEDULE 6.1(b)          -     CAPITALIZATION AND OWNERSHIP
SCHEDULE 6.1(c)          -     SUBSIDIARIES
SCHEDULE 6.1(m)          -     CONSENTS AND APPROVALS
SCHEDULE 6.1(o)          -     PATENTS, TRADEMARKS, COPYRIGHTS, LICENSES, ETC.
SCHEDULE 6.1(p)          -     INSURANCE POLICIES
SCHEDULE 6.1(v)          -     ENVIRONMENTAL DISCLOSURES
SCHEDULE 6.1(x)          -     RESTRICTED TRANSACTIONS

EXHIBITS

EXHIBIT 1.1(A)           -     FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT 1.1(G)(1)        -     FORM OF GUARANTOR JOINDER
EXHIBIT 1.1(G)(2)        -     FORM OF GUARANTY AGREEMENT
EXHIBIT 1.1(I)(1)        -     FORM OF INTERCOMPANY SUBORDINATION AGREEMENT
EXHIBIT 1.1(I)(2)        -     FORM OF INTERCOMPANY SUBORDINATION JOINDER
EXHIBIT 1.1(R)           -     FORM OF REVOLVING CREDIT NOTE
EXHIBIT 1.1(S)           -     FORM OF SWING NOTE
EXHIBIT 1.1(T)           -     FORM OF TERM NOTE
EXHIBIT 2.5(a)           -     FORM OF REVOLVING CREDIT OR TERM LOAN REQUEST
EXHIBIT 2.5(b)           -     FORM OF SWING LOAN REQUEST
EXHIBIT 7.1(d)           -     REQUIREMENTS OF OPINION OF COUNSEL
EXHIBIT 8.3(d)           -     FORM OF QUARTERLY COMPLIANCE CERTIFICATE
EXHIBIT 8.3(e)           -     FORM OF BORROWING BASE CERTIFICATE






                                     - 7 -
<PAGE>   8


                  SECOND AMENDED AND RESTATED CREDIT AGREEMENT


                  THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT is dated as
of June 28, 1999, and is made by and among ZARING HOMES, INC., an Ohio
corporation ("Zaring Homes"), ZARING HOLDINGS, INC., an Ohio corporation
("Zaring Holdings"), HEARTHSIDE HOMES, LLC, an Indiana limited liability company
("Hearthside," and together with Zaring Homes and Zaring Holdings, collectively,
the "Borrowers"), ZARING NATIONAL CORPORATION, an Ohio corporation ("Zaring
National"), ZARING HOMES OF INDIANA, L.L.C., an Indiana limited liability
company ("Zaring Indiana"), ZARING HOMES KENTUCKY, LLC, a Kentucky limited
liability company ("Zaring Homes Kentucky"), the BANKS (as hereinafter defined),
PNC BANK, NATIONAL ASSOCIATION, successor by merger to PNC Bank, Ohio, National
Association, in its capacity as agent for the Banks under this Agreement
(hereinafter referred to in such capacity as the "Agent"), and BANK OF AMERICA
NT&SA (formerly NationsBank, N.A.) and BANK ONE, MICHIGAN (formerly The First
National Bank of Chicago), as co-agents (hereinafter referred to in such
capacity, collectively, as the "Co-Agents").

                                  WITNESSETH:

                  WHEREAS, Zaring Homes, as borrower, Zaring Holdings, Zaring
Indiana and Zaring Homes Kentucky, as guarantors, the Banks, the Agent and the
Co-Agents are parties to that Credit Agreement (the "Original Credit Agreement")
dated as of May 13, 1996 pursuant to which the Banks provided to Zaring Homes a
revolving credit facility in an aggregate principal amount not to exceed
$72,500,000 and a term loan facility in an aggregate principal amount not to
exceed $15,000,000, with outstanding indebtedness under the term facility as of
the date hereof in an aggregate amount of $6,000,000; and

                  WHEREAS, the Original Credit Agreement was amended and
restated pursuant to that certain Amended and Restated Credit Agreement dated as
of February 23, 1998 (the "Amended and Restated Credit Agreement") by and among
Zaring Homes, Zaring Holdings and Hearthside, as Borrowers and Guarantors,
Zaring National, Zaring Indiana and Zaring Homes Kentucky, as Guarantors, PNC,
as Agent, and the Co-Agents and the Banks set forth therein;

                  WHEREAS, the revolving credit facility shall be used for
general corporate purposes and the term loan facility was used to refinance
existing indebtedness; and

                  WHEREAS, the parties hereto wish to amend and restate the
Amended and Restated Credit Agreement upon the terms and conditions hereinafter
set forth.

                  NOW, THEREFORE, the parties hereto, in consideration of their
mutual covenants and agreements hereinafter set forth and intending to be
legally bound hereby, covenant and agree to amend and restate the Amended and
Restated Credit Agreement as follows:



                                     - 8 -
<PAGE>   9


                             1. CERTAIN DEFINITIONS

1.1.     Certain Definitions.

                           In addition to words and terms defined elsewhere in
         this Agreement, the following words and terms shall have the following
         meanings, respectively, unless the context hereof clearly requires
         otherwise:

                           Accounts Payable shall mean, as of any date of
         determination, the accounts payable of the Loan Parties determined and
         consolidated in accordance with GAAP.

                           Active Community shall mean, as of any date of
         determination, any community of geographically contiguous residential
         housing units which any Loan Party is developing for sale or has sold
         to buyers; provided that (A) such Loan Party has acquired or has an
         option to acquire in fee simple the lots comprising such community (or
         the lots comprising the applicable phase of the Loan Party's planned
         development of such community if such Loan Party is developing such
         lots in separate phases), and either (i) the site improvements have
         been completed on all such lots, or (ii) such Loan Party has, (a) to
         the extent required, posted bonds and provided any other security
         required in connection with the completion of such site improvements
         and (b) received Regulatory Approval for the construction of at least
         one residential unit within such Active Community (such Regulatory
         Approval may be subject in some instances to completion of certain
         improvements which are a condition to the issuance of a building permit
         with respect to such unit) on such date; and (B) such Loan Party is
         then actively soliciting for sale (or has sold all of) such lots or the
         residential units on such lots with delivery to the buyer or buyers of
         such units or lots contemplated within nine (9) months of the contract
         date.

                           Active Unit shall mean any residential building owned
         in fee simple by a Loan Party which is under development or completed
         by a Loan Party in an Active Community with respect to which (i)
         construction has progressed beyond completion of the foundation and
         (ii) only one residential unit is or shall be contained therein after
         completion of such building.

                           Affiliate, as to any person, shall mean any other
         person (i) which directly or indirectly controls, is controlled by or
         is under common control with any Loan Party, (ii) which beneficially
         owns or holds 10% or more of any class of the voting stock of any Loan
         Party, or (iii) 10% or more of the voting stock (or in the case of a
         person which is not a corporation, 10% or more of the equity interest)
         of which is beneficially owned or held, directly or indirectly, by any
         Loan Party. "Control," as used herein, shall mean the possession,
         directly or indirectly, of the power to direct or cause the direction
         of the management or policies of a person, whether through the
         ownership of voting securities, by contract or otherwise, including the
         power to elect a majority of the directors or trustees of a corporation
         or trust, as the case may be.

                           Agent shall mean PNC Bank, National Association and
         its successors.

                           Agent's Fee shall have the meaning assigned to that
         term in Section 10.15 hereof.


                                     - 9 -
<PAGE>   10


                           Agreement shall mean this Credit Agreement, as the
         same may be supplemented, amended, restated or modified from time to
         time, including all schedules and exhibits hereto.

                           Agreement of Sale shall mean a written agreement with
         a person, which is not an Affiliate or Subsidiary of any Co-Borrower,
         for the sale of a residential housing unit to such person, fully
         executed by all parties to such agreement, which shall be in form and
         substance satisfactory to the Agent, which shall be accompanied by a
         cash deposit equal to the lesser of (x) the customary percentage in any
         geographic area (but in no event less than two percent (2%)) of the
         purchase price of the unit sold or (y) the difference between the
         purchase price set forth in such agreement and the amount of the
         mortgage contingency set forth in such agreement, and which shall
         provide that (i) the purchase price shall be paid in cash or by title
         company check, certified or bank check or attorney trust account check
         at or before the closing of the sale, the date of which shall be set
         forth in the agreement, and (ii) the deposit may not be refunded except
         upon a breach by the seller. The Co-Borrowers shall deliver to the
         Agent the form of Agreement of Sale which they propose to use for
         Agent's review prior to the Closing Date and from time to time
         thereafter upon Agent's request. The Co-Borrowers shall not modify such
         form in any material and adverse respect without the Agent's prior
         approval. The Agent may at any time request to review executed
         Agreements of Sale. The Co-Borrowers shall promptly deliver to the
         Agent copies of such Agreements of Sale or make such Agreements of Sale
         available to the Banks for their review, as the Agent may elect.

                           Approved Developed Lots Inventory shall mean, on any
         date of determination, the aggregate book value, determined in
         accordance with GAAP, of the acquisition and development costs of
         parcels of land which are owned in fee simple by the Loan Parties
         (excluding the acquisition and development costs of lots under Active
         Units), provided that with respect to each such parcel the applicable
         Loan Party has received Regulatory Approval, has completed construction
         relating to any sewers, streets, water and other utilities, and each
         such parcel satisfies the requirements for the issuance of a building
         permit, but no home construction has been commenced. Any asset which is
         either Sold Inventory, Model Inventory, Approved Land Under Development
         Inventory or Approved Land Inventory is excluded from Approved
         Developed Lots Inventory.

                           Approved Land Inventory shall mean, on any date of
         determination, the aggregate book value, determined in accordance with
         GAAP, of the acquisition and development costs of parcels of land which
         are owned in fee simple by the Loan Parties (excluding the acquisition
         and development costs of lots under Active Units), provided that with
         respect to each such parcel, the applicable Loan Party has received
         Regulatory Approval, provided further, parcels of land not owned in fee
         simple but for which purchase price deposits in amounts not exceeding
         $1,500,000 in the aggregate have been made ("Permitted Land Deposits")
         but which otherwise fit within this definition may also be included as
         Approved Land Inventory and provided further, parcels of land, which
         have not received Regulatory Approval but which otherwise fit within
         this definition which together with Permitted Land Deposits, do not
         exceed $2,000,000 in the aggregate at any time, may also be included as
         Approved Land Inventory. Any asset which is either Sold Inventory,
         Model Inventory, Unsold Building Inventory, Approved



                                     - 10 -
<PAGE>   11


         Land Under Development Inventory or Approved Developed Lots Inventory
         is excluded from Approved Land Inventory.

                           Approved Land Under Development Inventory shall mean,
         on any date of determination, the aggregate book value determined in
         accordance with GAAP, of the acquisition and development costs of
         parcels of land which are owned in fee simple by the Loan Parties
         (excluding the acquisition and development costs of lots under Active
         Units), provided that with respect to each such parcel, the applicable
         Loan Party has received Regulatory Approval and has entered into a
         contract for the construction of sewers, streets, water or utilities.
         Any asset which is either Sold Inventory, Model Inventory, Unsold
         Building Inventory, Approved Developed Lots Inventory or Approved Land
         Inventory is excluded from Approved Land Under Development Inventory.

                           Assignment and Assumption Agreement shall mean an
         Assignment and Assumption Agreement by and among a Purchasing Bank, the
         Transferor Bank and the Agent, as Agent and on behalf of the remaining
         Banks, substantially in the form of Exhibit 1.1(A).

                           Authorized Officer shall mean those persons,
         designated by written notice to the Agent from the Borrowers,
         authorized on behalf of the Borrowers to execute notices, reports and
         other documents required hereunder. The Borrowers may amend such list
         of persons from time to time, provided that the Borrowers give written
         notice of such amendment to the Agent.

                           Banks shall mean the financial institutions named on
         Schedule 1.1(B) and their respective successors and assigns as
         permitted hereunder, each of which is referred to herein as a Bank.

                           Base Net Worth shall mean the sum of (i) $40,000,000
         plus (ii) 75% of net income of the Borrowers and their Subsidiaries
         determined and consolidated in accordance with GAAP for each fiscal
         quarter in which net income is earned (as opposed to a net loss) after
         December 31, 1995 through (and including) the date of determination
         plus (iii) 75% of the net cash proceeds received from the sale of
         shares of capital stock of any Borrower or any of its Subsidiaries
         during the period from December 31, 1995 through (and including) the
         date of determination minus (iv) goodwill resulting from any
         acquisition or acquisitions permitted pursuant to Section 8.2(f)(ii),
         not to exceed $5,000,000 in the aggregate, minus (v) 100% of any
         dividends paid with respect to any Borrower's preferred stock to the
         extent such dividends are actually paid in cash, provided in no event
         shall Base Net Worth in any fiscal quarter for which net income is
         earned (as opposed to a net loss) be increased by less than 60% of such
         net income as a result of any deduction under this clause (v).

                           Base Rate shall mean the greater of (i) the interest
         rate per annum announced from time to time by the Agent at its
         Principal Office as its then prime rate, which rate may not be the
         lowest rate then being charged commercial borrowers by the Agent, or
         (ii) the Federal Funds Effective Rate plus one-half of one percent
         (1/2%) per annum.

                           Base Rate Option shall mean the Revolving Credit Base
         Rate Option or



                                     - 11 -
<PAGE>   12


         the Term Loan Base Rate Option.

                           Benefit Arrangement shall mean at any time an
         "employee benefit plan," within the meaning of Section 3(3) of ERISA,
         which is neither a Plan nor a Multiemployer Plan and which is
         maintained, sponsored or otherwise contributed to by any member of the
         ERISA Group.

                           Borrowers shall mean the Co-Borrowers, with respect
         to the Revolving Credit Loans, and Zaring Homes, with respect to the
         Term Loans.

                           Borrowing Base shall be determined based on the most
         recent Borrowing Base Certificate delivered pursuant to Section 8.3(e)
         and shall mean the sum of clauses (A) through (F) minus the sum of
         clauses (G) through (H), as follows:

                           (A)      100% of Sold Inventory; plus

                           (B)      80% of Model Inventory; plus

                           (C)      70% of Unsold Building Inventory; plus

                           (D)      55% of Approved Developed Lots Inventory;
                                    plus

                           (E)      55% of Approved Land Under Development
                                    Inventory; plus

                           (F)      50% of the Approved Land Inventory; minus

                           (G)      the principal amount outstanding of the Term
                                    Loans; minus

                           (H)      the principal amount outstanding of the
                                    Senior Notes;

         provided, in no event shall the sum of clauses (D) - (F) exceed 45% of
         the sum of clauses (A)-(F); and provided, further, that no property
         subject to a Nonrecourse Purchase Money Security Interest shall be
         included in clauses (A)- (F) above; and provided, further, any "reserve
         to complete" is expressly excluded as an asset in calculating the
         Borrowing Base. Notwithstanding any other provision to the contrary,
         the parties expressly acknowledge that, for purposes of calculating the
         Borrowing Base, clauses (A)- (F) include only such inventory owned by
         the Loan Parties expressly excluding Zaring National from the
         definition of Loan Parties.

                           Borrowing Base Certificate shall have the meaning
         given to such term in Section 8.3(e).

                           Borrowing Date shall mean, with respect to any Loan,
         the date for the making thereof or the renewal or conversion thereof to
         the same or a different Interest Rate Option, which shall be a Business
         Day.

                           Borrowing Tranche shall mean specified portions of
         Loans outstanding as follows: (i) with respect to outstanding Loans to
         which the Euro-Rate Option applies, each



                                     - 12 -
<PAGE>   13


         portion of such Loans which becomes subject to such option under the
         same election by any Borrower and which has the same Euro-Rate Interest
         Period shall constitute one Borrowing Tranche, and (ii) all Loans to
         which the Base Rate Option applies shall constitute one Borrowing
         Tranche.

                           Business Day shall mean, (i) with respect to matters
         relating to the Euro-Rate Option, a day on which banks in the London
         interbank market are dealing in U.S. Dollar deposits and on which
         commercial banks are open for domestic and international business in
         Cincinnati, Ohio and, (ii) with respect to any other matter, a day on
         which commercial banks are open for business in Cincinnati, Ohio.

                           Change of Control shall mean any transaction or group
         of transactions after which (i) Allen G. Zaring, III and Anne M. Zaring
         (together with their respective executors, administrators or heirs in
         the event of the death of either of them) shall directly or indirectly
         own less than twenty-five percent (25%) of Zaring National's issued and
         outstanding common stock, (ii) another partnership, limited
         partnership, syndicate or other group which is deemed a "person" within
         the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934
         owns more of Zaring National's issued and outstanding common stock than
         is owned directly or indirectly in the aggregate by Allen G. Zaring,
         III and Anne M. Zaring (together with their executors, administrators
         or heirs in the event of the death of either of them), or (iii) Zaring
         National, by itself or together with one or more of the Co-Borrowers,
         ceases to own all of the issued and outstanding capital stock and have
         full voting control of Zaring Homes, Zaring Holdings and Hearthside.

                           Closing Date shall mean June 30, 1999.

                           Co-Agents shall mean Bank of America NT&SA and Bank
         One, Michigan and their respective successors.

                           Co-Borrowers shall mean Zaring Homes, Zaring Holdings
         and Hearthside, which are jointly and severally liable with respect to
         the Revolving Credit Loans.

                           Commitment Fee shall have the meaning assigned to
         that term in Section 2.3(b).

                           Commitments shall mean collectively the Revolving
         Credit Commitments, the Swing Loan Commitment and the Term Loan
         Commitments.

                           Consolidated Cash Flow From Operations shall mean,
         for any period of determination, the following with respect to the
         Borrowers and their Subsidiaries for each item for such period
         determined and consolidated in accordance with GAAP: (i) the sum of net
         income, depreciation, amortization, other noncash charges to net
         income, interest expense and income tax expense minus (ii) noncash
         credits to net income.

                           Consolidated Fixed Charges shall mean, for any period
         of determination, the sum of interest incurred (capitalized and
         expensed) plus scheduled principal installments of



                                     - 13 -
<PAGE>   14


         Indebtedness plus dividends (to the extend paid in cash), in each case
         of the Borrowers and their Subsidiaries for such period determined and
         consolidated in accordance with GAAP.

                           Consolidated Tangible Net Worth shall mean, as of any
         date of determination, total stockholders' equity minus intangible
         assets, in each case of the Borrowers and their Subsidiaries as of such
         date determined and consolidated in accordance with GAAP.

                           Consolidated Total Liabilities shall mean, for any
         fiscal quarter for the fiscal quarter then ended, the sum of (i) all
         Indebtedness and, without duplication, all other liabilities of the
         Borrowers and their Subsidiaries, determined and consolidated in
         accordance with GAAP, excluding Indebtedness secured by Nonrecourse
         Purchase Money Security Interests not to exceed, in the aggregate at
         any time, 15% of Consolidated Tangible Net Worth minus (ii) Eligible
         Development Costs.

                           Dollar, Dollars, U.S. Dollars and the symbol $ shall
         mean lawful money of the United States of America.

                           Eligible Development Costs shall mean expenses, to
         the extent paid in cash for site development costs which are included
         in Approved Land Inventory, Approved Developed Lots Inventory or
         Approved Land Under Development Inventory, in connection with sites for
         which undrawn Letters of Credit are outstanding to support such site
         development costs.

                           Environmental Complaint shall mean any written
         complaint setting forth a cause of action for personal or property
         damage or natural resource damage or equitable relief, order, notice of
         violation, citation, request for information issued pursuant to any
         Environmental Laws by an Official Body, subpoena or other written
         notice of any type relating to, arising out of or issued pursuant to
         any Environmental Laws or any Environmental Conditions, as the case may
         be.

                           Environmental Conditions shall mean any conditions of
         the environment, including, without limitation, the workplace, the
         ocean, natural resources (including flora or fauna), soil, surface
         water, groundwater, any actual drinking water supply sources or water
         sources which could reasonably be expected to be used to supply
         drinking water, substrata or the ambient air, relating to, or arising
         out of or caused by the use, handling, storage, treatment, recycling,
         generation, transportation, release, spilling, leaking, pumping,
         emptying, discharging, injecting, escaping, leaching, disposal,
         dumping, threatened release or other management or mismanagement of
         Regulated Substances resulting from the use of, or operations on, the
         Property.

                           Environmental Laws shall mean all federal, state,
         local and foreign Laws and regulations, including, without limitation,
         permits, licenses, authorizations, bonds, orders, judgments and consent
         decrees issued or entered into pursuant thereto, relating to pollution
         or protection of human health or the environment or employee safety in
         the workplace or the operation of the activities of the Borrowers and
         their Subsidiaries.

                           ERISA shall mean the Employee Retirement Income
         Security Act of 1974,



                                     - 14 -
<PAGE>   15


         as the same may be amended or supplemented from time to time, and any
         successor statute of similar import, and the rules and regulations
         thereunder, as from time to time in effect.

                           ERISA Group shall mean, at any time, the Borrowers
         and all members of a controlled group of corporations and all trades or
         businesses (whether or not incorporated) under common control and all
         other entities which, together with the Borrower, are treated as a
         single employer under Section 414 of the Internal Revenue Code.

                           Euro-Rate shall mean, with respect to the Loans
         comprising any Borrowing Tranche to which the Euro-Rate Option applies
         for any Euro-Rate Interest Period, the interest rate per annum
         determined by the Agent by dividing (the resulting quotient rounded
         upward to the nearest 1/16 of 1% per annum) (i) the rate of interest
         determined by the Agent in accordance with its usual procedures (which
         determination shall be conclusive absent manifest error) to be the
         average of the rates of interest per annum for deposits in U.S. Dollars
         offered by banks in the London interbank market to major money center
         banks at approximately 11:00 a.m., London time, two (2) Business Days
         prior to the first day of such Euro-Rate Interest Period for delivery
         on the first day of such Euro-Rate Interest Period in amounts
         comparable to such Borrowing Tranche and having maturities comparable
         to such Euro-Rate Interest Period by (ii) a number equal to 1.00 minus
         the Euro-Rate Reserve Percentage. The Euro-Rate may also be expressed
         by the following formula:

                                     average of rates offered to major money
                  Euro-Rate   =      center banks in the London interbank market
                                     as determined by Agent
                                     -------------------------------------------
                                     1.00 - Euro-Rate Reserve Percentage

         The Euro-Rate shall be adjusted with respect to any Euro-Rate Option
         outstanding on the effective date of any change in the Euro-Rate
         Reserve Percentage as of such effective date. The Agent shall give
         prompt notice to the Borrowers of the Euro-Rate as determined or
         adjusted in accordance herewith, which determination shall be
         conclusive absent manifest error.

                           Euro-Rate Interest Periods shall have the meaning
         assigned to that term in Section 4.2.

                           Euro-Rate Option shall mean the Revolving Credit
         Euro-Rate Option or the Term Loan Euro-Rate Option.

                           Euro-Rate Portion shall mean, collectively, the
         Revolving Credit Euro-Rate Portion and the Term Loan Euro-Rate Portion.

                           Euro-Rate Reserve Percentage shall mean the maximum
         percentage (expressed as a decimal rounded upward to the nearest 1/16
         of 1%) as determined by the Agent (which determination shall be
         conclusive absent manifest error) which is in effect during any
         relevant period, as prescribed by the Board of Governors of the Federal
         Reserve System (or any successor) for determining the reserve
         requirements (including, without limitation, supplemental, marginal and
         emergency reserve requirements) with respect to eurocurrency funding
         (currently



                                     - 15 -
<PAGE>   16


         referred to as "Eurocurrency Liabilities") of a member bank in such
         System.

                           Event of Default shall mean any of the Events of
         Default described in Section 9.1.

                           Facility Fees shall mean the fees referred to in
         Sections 2.3(a) and 3.3.

                           Federal Funds Effective Rate for any day shall mean
         the rate per annum (based on a year of 360 days and actual days elapsed
         and rounded upward to the nearest 1/100 of 1%) announced by the Federal
         Reserve Bank of New York (or any successor) on such day as being the
         weighted average of the rates on overnight federal funds transactions
         arranged by federal funds brokers on the previous trading day, as
         computed and announced by such Federal Reserve Bank (or any successor)
         in substantially the same manner as such Federal Reserve Bank computes
         and announces the weighted average it refers to as the "Federal Funds
         Effective Rate" as of the date of this Agreement; provided, if such
         Federal Reserve Bank (or its successor) does not announce such rate on
         any day, the "Federal Funds Effective Rate" for such day shall be the
         Federal Funds Effective Rate for the last day for which such rate was
         announced.

                           GAAP shall mean generally accepted accounting
         principles as are in effect from time to time, subject to the
         provisions of Section 1.3 hereof, and applied on a consistent basis
         (except for changes in application in which the Borrowers' independent
         certified public accountants concur) both as to classification of items
         and amounts.

                           Governmental Acts shall have the meaning given to
         such term in Section 2.9(h).

                           Guarantor shall mean each of the parties to this
         Agreement which is designated as a "Guarantor" on the signature page
         hereof and each other Person which joins this Agreement as a Guarantor
         after the date hereof pursuant to Section 11.18.

                           Guarantor Joinder shall mean a joinder by a person as
         a Guarantor under this Agreement, the Guaranty Agreement and the other
         Loan Documents in the form of Exhibit 1.1(G)(1).

                           Guaranty of any person shall mean any obligation of
         such person guaranteeing or in effect guaranteeing any liability or
         obligation of any other person in any manner, whether directly or
         indirectly, including, without limiting the generality of the
         foregoing, any agreement to indemnify or hold harmless any other
         person, any performance bond or other suretyship arrangement and any
         other form of assurance against loss, except endorsement of negotiable
         or other instruments for deposit or collection in the ordinary course
         of business.

                           Guaranty Agreement shall mean the Guaranty and
         Suretyship Agreement in substantially the form attached hereto as
         Exhibit 1.1(G)(2) executed and delivered by the Guarantors to the Agent
         for the benefit of the Banks.


                                     - 16 -
<PAGE>   17


                           Hearthside shall mean, Hearthside Homes, LLC, a
         limited liability company organized and existing under the laws of the
         State of Indiana.

                           Indebtedness shall mean, as to any person at any
         time, any and all indebtedness, obligations or liabilities (whether
         matured or unmatured, liquidated or unliquidated, direct or indirect,
         absolute or contingent, or joint or several) of such person for or in
         respect of: (i) borrowed money, (ii) amounts raised under or
         liabilities in respect of any note purchase or acceptance credit
         facility, (iii) reimbursement obligations under any letter of credit,
         currency swap agreement, interest rate swap, cap, collar or floor
         agreement or other interest rate management device, (iv) any other
         transaction (including without limitation forward sale or purchase
         agreements, capitalized leases, conditional sales agreements and
         undrawn and outstanding letters of credit) having the commercial effect
         of a borrowing of money entered into by such person to finance its
         operations or capital requirements (but not including trade payables
         and accrued expenses incurred in the ordinary course of business which
         are not represented by a promissory note or other evidence of
         indebtedness and which are not more than thirty (30) days past due), or
         (v) any Guaranty of any of the foregoing.

                           Intercompany Subordination Agreement shall mean an
         Intercompany Subordination Agreement among the Loan Parties in the form
         attached hereto as Exhibit 1.1(I)(1).

                           Intercompany Subordination Joinder shall mean a
         joinder to the Intercompany Subordination Agreement by each Person who
         becomes a Guarantor under this Agreement after the date hereof, such
         joinder to be substantially in the form of Exhibit 1.1(I)(2).

                           Interest Payment Date shall mean each date specified
         for the payment of interest in Section 5.3.

                           Interest Rate Option shall mean a Euro-Rate Option or
         a Base Rate Option.

                           Internal Revenue Code shall mean the Internal Revenue
         Code of 1986, as the same may be amended or supplemented from time to
         time, and any successor statute of similar import, and the rules and
         regulations thereunder, as from time to time in effect.

                           Issuing Letter of Credit Bank shall mean, with
         respect to a Letter of Credit, the Bank which issued that Letter of
         Credit pursuant to Section 2.9.

                           Labor Contracts shall have the meaning assigned to
         that term in Section 6.1(r).

                           Law or law shall mean any law (including common law),
         constitution, statute, treaty, regulation, rule, ordinance, opinion,
         release, ruling, order, injunction, writ, decree or award of any
         Official Body.

                           Letter of Credit shall have the meaning assigned to
         that term in



                                     - 17 -
<PAGE>   18


         Section 2.9(a).

                           Letter of Credit Fee shall have the meaning assigned
         to that term in Section 2.9(c).

                           Letter of Credit Outstandings shall mean at any time
         the sum of (i) the aggregate undrawn face amount of outstanding Letters
         of Credit and (ii) the aggregate amount of all unpaid and outstanding
         Reimbursement Obligations.

                           Leverage Ratio shall mean the ratio of Consolidated
         Total Liabilities to Consolidated Tangible Net Worth.

                           Lien shall mean any mortgage, deed of trust, pledge,
         lien, security interest, charge or other encumbrance or security
         arrangement of any nature whatsoever, whether voluntarily or
         involuntarily given, including but not limited to any conditional sale
         or title retention arrangement, and any assignment, deposit arrangement
         or lease intended as, or having the effect of, security and any filed
         financing statement or other notice of any of the foregoing (whether or
         not a lien or other encumbrance is created or exists at the time of the
         filing).

                           Loan Documents shall mean this Agreement, the Notes,
         the Guaranty Agreement, the Intercompany Subordination Agreement and
         any other instruments, certificates, agreements or documents delivered
         or contemplated to be delivered hereunder or thereunder or in
         connection herewith or therewith, as the same may be supplemented,
         amended or restated from time to time in accordance herewith or
         therewith, and Loan Document shall mean any of the Loan Documents.

                           Loan Parties shall mean the Borrowers and the
         Guarantors; provided, however, with respect to Section 8.2 and as used
         in the definition of Restricted Transactions and in calculating the
         Borrowing Base, Zaring National Corporation is expressly excluded from
         the definition of "Loan Parties."

                           Loan Request shall mean a request for a Revolving
         Credit Loan, Swing Loan or Term Loan made in accordance with Section
         2.5(a) or 2.5(b) or, with respect to a Revolving Credit Loan or Term
         Loan, a request to select, convert to or renew a Euro-Rate Option in
         accordance with Section 4.2.

                           Loans shall mean collectively, and Loan shall mean
         separately, all Revolving Credit Loans, Swing Loans and Term Loans or
         any Revolving Credit Loan, Swing Loan or Term Loan.

                           Material Adverse Change shall mean any set of
         circumstances or events which (a) has or could reasonably be expected
         to have any material adverse effect whatsoever upon the validity or
         enforceability of this Agreement or any other Loan Document, (b) is or
         could reasonably be expected to be material and adverse to the
         business, properties, assets, financial condition, results of
         operations or prospects of the Borrowers and their Subsidiaries taken
         as a whole, (c) impairs materially or could reasonably be expected to
         impair materially the



                                     - 18 -
<PAGE>   19


         ability of the Borrowers and their Subsidiaries taken as a whole to
         duly and punctually pay or perform their Indebtedness, or (d) impairs
         materially or could reasonably be expected to impair materially the
         ability of the Agent or any of the Banks, to the extent permitted, to
         enforce their legal remedies against the Loan Parties pursuant to this
         Agreement or any other Loan Document.

                           Model Inventory shall mean, on any date of
         determination, the aggregate book value, determined in accordance with
         GAAP (excluding capitalized interest), of Model Units. Any asset which
         is Sold Inventory, Unsold Building Inventory, Approved Developed Lots
         Inventory, Approved Land Under Development or Approved Land Inventory
         is excluded from Model Inventory.

                           Model Unit shall mean an Active Unit on which
         construction has been completed which is not subject to an Agreement of
         Sale and which a Loan Party has designated and is using or plans to use
         as a model for exhibition.

                           Money Management Arrangements shall mean the various
         deposit accounts, sweep accounts and other accounts and arrangements
         between any of the Loan Parties, their Subsidiaries and the Agent
         relating to the management and investment of any of the Loan Parties'
         and their Subsidiaries' cash assets.

                           Multiemployer Plan shall mean any employee benefit
         plan which is a "multiemployer plan" within the meaning of Section
         4001(a)(3) of ERISA and to which the Borrowers or any member of the
         ERISA Group is then making or accruing an obligation to make
         contributions or, within the preceding five plan years, has made or had
         an obligation to make such contributions.

                           Multiple Employer Plan shall mean a Plan which has
         two or more contributing sponsors (including the Borrowers or any
         member of the ERISA Group), at least two of whom are not under common
         control, as such a Plan is described in Sections 4063 and 4064 of
         ERISA.

                           Nonrecourse Purchase Money Security Interest shall
         mean Liens upon property securing loans to a Loan Party or deferred
         payments by a Loan Party for the purchase of such property, provided
         that the recourse of the creditor for repayment is limited to such
         property and does not extend to any Loan Party.

                           Notes shall mean collectively, and Note shall mean
         separately, the Revolving Credit Notes, the Swing Note and the Term
         Notes or any Revolving Credit Note, Swing Note or Term Note.

                           Official Body shall mean any national, federal,
         state, local or other government or political subdivision or any
         agency, authority, bureau, central bank, commission, department or
         instrumentality of either, or any court, tribunal, grand jury or
         arbitrator, in each case whether foreign or domestic.

                           Original Closing Date shall mean the Business Day on
         which the first



                                     - 19 -
<PAGE>   20


         Loan was made, which was May 17, 1996.

                           PBGC shall mean the Pension Benefit Guaranty
         Corporation established pursuant to Subtitle A of Title IV of ERISA or
         any successor.

                           Partnership Interests shall have the meaning given to
         such term in Section 6.1(c).

                           Permitted Investments shall mean:

                                    (i) direct obligations of the United States
         of America or any agency or instrumentality thereof or obligations
         backed by the full faith and credit of the United States of America
         maturing in twelve months or less from the date of acquisition;

                                    (ii) commercial paper maturing in 180 days
         or less rated not lower than A-1 by Standard & Poor's Corporation or
         P-1 by Moody's Investors Service on the date of acquisition;

                                    (iii) demand deposits, time deposits or
         certificates of deposit maturing within one year in commercial banks
         whose obligations are rated A-1, A or the equivalent or better by
         Standard & Poor's Corporation or Moody's Investors Service on the date
         of acquisition; and

                                    (iv) capital stock of publicly traded
         companies not to exceed $100,000 in the aggregate on a cost basis.

                           Permitted Liens shall mean:

                                    (i) Liens for taxes, assessments or similar
         charges incurred in the ordinary course of business and which are not
         yet due and payable;

                                    (ii) Pledges or deposits made in the
         ordinary course of business to secure payment of workmen's
         compensation, or to participate in any fund in connection with
         workmen's compensation, unemployment insurance, old-age pensions or
         other social security programs;

                                    (iii) Liens of mechanics, materialmen,
         warehousemen or carriers, or other like Liens, securing obligations
         incurred in the ordinary course of business that are not yet due and
         payable and Liens of landlords securing obligations to pay lease
         payments that are not yet due and payable or in default;

                                    (iv) Good-faith pledges or deposits made in
         the ordinary course of business to secure performance of bids, tenders,
         contracts (other than for the repayment of borrowed money) or leases,
         not in excess of the aggregate amount due thereunder, or to secure
         statutory obligations or surety, appeal, indemnity, performance or
         other similar bonds required in the ordinary course of business;

                                     - 20 -
<PAGE>   21


                                    (v) Encumbrances consisting of zoning
         restrictions, easements or other restrictions on the use of real
         property, none of which materially impairs the use of such property for
         the purpose contemplated by the Loan Party or the value thereof, and
         none of which is violated in any material respect by existing
         structures or land use;

                                    (vi) Liens in favor of lessors or sellers on
         personal property being leased or sold under leases or agreements of
         sale as and to the extent permitted in Section 8.2(a)(iii);

                                    (vii) Nonrecourse Purchase Money Security
         Interests, provided that the aggregate amount of loans and deferred
         payments secured by such Nonrecourse Purchase Money Security Interests
         shall not exceed 15% of Consolidated Tangible Net Worth; and

                                    (viii) The following, if the validity or
         amount thereof is being contested in good faith by appropriate and
         lawful proceedings diligently conducted so long as either no action to
         levy or execute thereon has been commenced or, if such action has
         commenced, it has been stayed and shall continue to be stayed:

                           (1) Claims or Liens for taxes, assessments or charges
                  due and payable and subject to interest or penalty, provided
                  that the applicable Loan Party maintains such reserves or
                  other appropriate provisions as shall be required by GAAP and
                  pays all such taxes, assessments or charges forthwith upon the
                  commencement of proceedings to foreclose any such Lien;

                           (2) Claims, Liens or encumbrances upon, and defects
                  of title to, real or personal property, including any
                  attachment of personal or real property or other legal process
                  prior to adjudication of a dispute on the merits; or

                           (3) Claims or Liens of mechanics, materialmen,
                  warehousemen or carriers, or other statutory nonconsensual
                  Liens.

                           Person or person shall mean any individual,
         corporation, partnership, association, joint-stock company, trust,
         unincorporated organization, joint venture, government or political
         subdivision or agency thereof, or any other entity.

                           Plan shall mean at any time an employee pension
         benefit plan (including a Multiple Employer Plan but not a
         Multiemployer Plan) which is covered by Title IV of ERISA or is subject
         to the minimum funding standards under Section 412 of the Internal
         Revenue Code and either (i) is maintained by any member of the ERISA
         Group for employees of any member of the ERISA Group or (ii) has at any
         time within the preceding five years been maintained by any entity
         which was at such time a member of the ERISA Group for employees of any
         entity which was at such time a member of the ERISA Group.

                           PNC shall mean PNC Bank, National Association, its
         successors and assigns.


                                     - 21 -
<PAGE>   22


                           Potential Default shall mean any event or condition
         which with notice, passage of time or a determination by the Agent or
         the Required Banks, or any combination of the foregoing, would
         constitute an Event of Default.

                           Principal Office shall mean the main banking office
         of the Agent in Cincinnati, Ohio.

                           Prohibited Transaction shall mean any prohibited
         transaction as defined in Section 4975 of the Internal Revenue Code or
         Section 406 of ERISA for which neither an individual nor a class
         exemption has been issued by the United States Department of Labor.

                           Property shall mean all real property, both owned and
         leased, of the Loan Parties.

                           Provident Guaranty shall mean that certain
         Unconditional Guaranty dated March 31, 1999 by Zaring Homes in favor of
         The Provident Bank issued in connection with Provident Loan Agreement.

                           Provident Loan Agreement shall mean that certain Loan
         and Security Agreement dated as of March 31, 1999 between The Provident
         Bank and Zaring National.

                           Purchasing Bank shall mean a Bank which becomes a
         party to this Agreement by executing an Assignment and Assumption
         Agreement.

                           Quarterly Compliance Certificate shall have the
         meaning given to such term in Section 8.3(d).

                           Ratable Share shall mean the proportion that a Bank's
         Commitment bears to the Commitments of all of the Banks.

                           Regulated Substances shall mean any substance,
         including without limitation any solid, liquid, semisolid, gaseous,
         thermal, thoriated or radioactive material, refuse, garbage, wastes,
         chemicals, petroleum products, byproducts, coproducts, impurities,
         dust, scrap, heavy metals, any substance defined as a "hazardous
         substance," "pollutant," "pollution," "contaminant," "hazardous or
         toxic substance," "extremely hazardous substance," "toxic chemical,"
         "toxic waste," "hazardous waste," "industrial waste," "residual waste,"
         "solid waste," "municipal waste," "mixed waste," "infectious waste,"
         "chemotherapeutic waste," "medical waste," "regulated substance" or any
         related materials, substances or wastes as now or hereafter defined
         pursuant to any Environmental Laws, ordinances, rules, regulations or
         other directives of any Official Body, the generation, manufacture,
         extraction, processing, distribution, treatment, storage, disposal,
         transport, recycling, reclamation, use, reuse, spilling, leaking,
         dumping, injection, pumping, leaching, emptying, discharge, escape,
         release or other management or mismanagement of which is regulated by
         the Environmental Laws.

                           Regulation U shall mean Regulation U, T, G or X as
         promulgated by the Board of Governors of the Federal Reserve System, as
         amended from time to time.


                                     - 22 -
<PAGE>   23


                           Regulatory Approval shall mean with respect to any
         land held by a Loan Party that all preliminary approvals, permits,
         licenses or other authorizations under applicable Laws, including those
         which relate to zoning, developmental restrictions and Environmental
         Laws, from required state and local governmental authorities and
         agencies or otherwise under Law with respect to the Loan Party's
         development plan have been obtained such that there is vested in such
         Loan Party the right to develop such real estate for primarily
         residential purposes in accordance with the intentions of such Loan
         Party, subject only to nonsubstantive conditions which may remain for
         final approval of such development.

                           Reimbursement Obligations shall have the meaning
         assigned to such term in Section 2.9(d).

                           Reportable Event means a reportable event described
         in Section 4043 of ERISA and regulations thereunder with respect to a
         Plan or Multiemployer Plan.

                           Required Banks shall mean (i) if there are no Loans
         outstanding, Banks whose Commitments aggregate at least 66-2/3% of the
         Commitments of all of the Banks; or (ii) if there are Loans
         outstanding, Banks whose Loans outstanding aggregate at least 66-2/3%
         of the total principal amount of the Loans outstanding hereunder.

                           Restricted Transactions shall mean all of the
         following with respect to the Loan Parties in an aggregate amount not
         to exceed, at any time during which the Provident Guaranty is in
         existence, five percent (5%) of Consolidated Tangible Net Worth and, at
         any time after the Provident Guaranty has been terminated and released,
         twenty percent (20%) of Consolidated Tangible Net Worth: (i) loans by
         any of the Loan Parties directly or indirectly to any other person
         (excluding any other Loan Party); (ii) guaranties by any of the Loan
         Parties directly or indirectly of the obligations of any other person
         (including any other Loan Party); (iii) investments, contributions,
         dividends or other distributions by any of the Loan Parties directly or
         indirectly in or to the capital of, or other payments directly or
         indirectly to or for the benefit of, any other person (excluding any
         other Loan Party), provided, acquisitions permitted pursuant to Section
         8.2(f)(ii) shall not constitute Restricted Transactions; or (iv) other
         obligations, contingent or otherwise, of any of the Loan Parties to or
         for the benefit of any other person (including any other Loan Party).
         The definition of Loan Party and Loan Parties, as used in this
         definition of Restricted Transactions, expressly does not include
         Zaring National and it is expressly acknowledged that the Zaring Homes
         Receivable is not a Restricted Transaction.

                           Revolving Credit Base Rate Margin shall have the
         meaning assigned to that term in Section 4.1(c).

                           Revolving Credit Base Rate Option shall mean the
         option of the Co-Borrowers to have Revolving Credit Loans bear interest
         at the rate and under the terms and conditions set forth in Section
         4.1(a)(i).

                           Revolving Credit Base Rate Portion shall mean the
         portion of the Revolving Credit Loans bearing interest at any time
         under the Revolving Credit Base Rate Option.


                                     - 23 -
<PAGE>   24


                           Revolving Credit Commitment shall mean, as to any
         Bank at any time, the amount initially set forth opposite its name on
         Schedule 1.1(B) in the column labeled "Amount of Commitment for
         Revolving Credit Loans," and thereafter on Schedule I to the most
         recent Assignment and Assumption Agreement, and Revolving Credit
         Commitments shall mean the aggregate Revolving Credit Commitments of
         all of the Banks.

                           Revolving Credit Euro-Rate Margin shall have the
         meaning specified in Section 4.1(c).

                           Revolving Credit Euro-Rate Option shall mean the
         option of the Co-Borrowers to have Revolving Credit Loans bear interest
         at the rate and under the terms and conditions set forth in Section
         4.1(a)(ii).

                           Revolving Credit Euro-Rate Portion shall mean the
         portion of the Revolving Credit Loans bearing interest at any time
         under the Revolving Credit Euro-Rate Option.

                           Revolving Credit Expiration Date shall mean, with
         respect to the Revolving Credit Commitments, July 1, 2001.

                           Revolving Credit Loans shall mean collectively, and
         Revolving Credit Loan shall mean separately, all Revolving Credit Loans
         or any Revolving Credit Loan made by the Banks or one of the Banks to
         the Co-Borrowers pursuant to Section 2.1(a) and Section 2.6(a).

                           Revolving Credit Notes shall mean collectively, and
         Revolving Credit Note shall mean separately, all the Revolving Credit
         Notes of the Co-Borrowers in the form of Exhibit 1.1(R) evidencing the
         Revolving Credit Loans, together with all amendments, extensions,
         renewals, replacements, refinancings or refundings thereof in whole or
         in part.

                           Revolving Facility Usage shall mean at any time the
         sum of the Revolving Credit Loans and Swing Loans outstanding and the
         Letter of Credit Outstandings.

                           Rollover LCs shall mean those letters of credit
         identified on Schedule 2.9(a) which were issued by an Issuing Letter of
         Credit Bank prior to the date of the Original Credit Agreement upon the
         application of Zaring Homes.

                           Senior Notes shall mean those three (3) term notes,
         each bearing interest at the rate of 7.95% per annum and each dated May
         18, 1994, issued by Zaring Homes in favor of PNC, The Fifth Third Bank
         and The Provident Bank, respectively, in the respective principal
         amounts of $2,097,956, $1,400,386 and $1,746,548.

                           Settlement Date shall mean the Thursday of each week
         (if such day is a Business Day, and if not, the next succeeding
         Business Day) and any other Business Day on which the Agent elects to
         effect settlement pursuant to Section 5.6.

                           Side Letters shall mean that certain letter dated
         February 6, 1996 between



                                     - 24 -
<PAGE>   25


         PNC Securities Corp. and Zaring Homes, that certain letter dated
         February 4, 1998 between PNC and Zaring Homes and that certain letter
         between PNC and Zaring Homes dated June 11, 1999.

                           Sold Inventory shall mean, on any date of
         determination, the aggregate book value, determined in accordance with
         GAAP (excluding capitalized interest), of all Active Units which are
         subject to an Agreement of Sale and the lots (and related site
         improvements and development costs) under such Active Units to be sold
         therewith, provided that with respect to each such Active Unit and
         related parcel of land, if any, the applicable Loan Party has received
         Regulatory Approval. Any asset which is Model Inventory, Unsold
         Building Inventory, Approved Developed Lots Inventory, Approved Land
         Under Development Inventory or Approved Land Inventory is excluded from
         Sold Inventory.

                           Speculative Unit shall mean any Active Unit which is
         (i) not subject to an Agreement of Sale and (ii) not a Model Unit.

                           Subsidiary of any person at any time shall mean (i)
         any corporation or trust of which more than 50% (by number of shares or
         number of votes) of the outstanding capital stock or shares of
         beneficial interest normally entitled to vote for the election of one
         or more directors or trustees (regardless of any contingency which does
         or may suspend or dilute the voting rights) is at such time owned
         directly or indirectly by such person or one or more of such person's
         Subsidiaries, or any partnership of which such person is a general
         partner, or of which more than 50% of the partnership interests are at
         the time directly or indirectly owned by such person or one or more of
         such person's Subsidiaries, and (ii) any corporation, trust,
         partnership or other entity which is controlled or capable of being
         controlled by such person or one or more of such person's Subsidiaries.

                           Subsidiary Shares shall have the meaning assigned to
         such term in Section 6.1(c).

                           Swing Loan Commitment shall mean PNC's commitment to
         make Swing Loans to the Co-Borrowers pursuant to Section 2.1(b) in an
         aggregate principal amount up to $5,000,000.

                           Swing Loan Request shall mean a request for Swing
         Loans made in accordance with Section 2.5(b).

                           Swing Loans shall mean collectively, and Swing Loan
         shall mean separately, all swing loans or any swing loan made by PNC to
         the Co-Borrowers pursuant to Sections 2.1(b) and 2.6(b).

                           Swing Note shall mean the Swing Note of the
         Co-Borrowers in the form of Exhibit 1.1(S) evidencing the Swing Loans,
         together with all amendments, extensions, renewals, restatements,
         refinancings or refundings thereof in whole or in part.

                           Term Loan Base Rate Margin shall have the meaning
         specified in Section 4.1(c).


                                     - 25 -
<PAGE>   26

                           Term Loan Base Rate Option shall mean the option of
         Zaring Homes to have Term Loans bear interest at the rate and under the
         terms and conditions set forth in Section 4.1(b)(i).

                           Term Loan Base Rate Portion shall mean the portion of
         the Term Loans bearing interest at any time under the Term Loan Base
         Rate Option.

                           Term Loan Commitment shall mean, as to any Bank at
         any time, the amount initially set forth opposite its name on Schedule
         1.1(B) in the column labeled "Amount of Commitment for Term Loans," and
         thereafter on Schedule I to the most recent Assignment and Assumption
         Agreement, and Term Loan Commitments shall mean the aggregate Term Loan
         Commitments of all of the Banks.

                           Term Loan Euro-Rate Option shall mean the option of
         Zaring Homes to have Term Loans bear interest at the rate and under the
         terms and conditions set forth in Section 4.1(b)(ii).

                           Term Loan Euro-Rate Portion shall mean the portion of
         the Term Loans bearing interest at any time under the Term Loan
         Euro-Rate Option.

                           Term Loan Maturity Date shall mean April 1, 2001.

                           Term Loans shall mean collectively, and Term Loan
         shall mean separately, all term loans or any term loan made by the
         Banks or one of the Banks to Zaring Homes pursuant to Section 3.1.

                           Term Notes shall mean collectively, and Term Note
         shall mean separately, all of the Term Notes of Zaring Homes in the
         form of Exhibit 1.1(T) evidencing the Term Loans, together with all
         amendments, extensions, renewals, restatements, replacements,
         refinancings or refunds thereof in whole or in part.

                           Transferor Bank shall mean the selling Bank pursuant
         to an Assignment and Assumption Agreement.

                           Unsold Building Inventory shall mean, on any date of
         determination, the aggregate book value, determined in accordance with
         GAAP (excluding capitalized interest) of all Active Units which are not
         subject to an Agreement of Sale and the lots (and related site
         improvements and development costs) under such Active Units to be sold
         therewith, provided that with respect to each such Active Unit, the
         applicable Loan Party has received Regulatory Approval. Any asset which
         is Sold Inventory, Model Inventory, Approved Developed Lots Inventory,
         Approved Land Under Development Inventory or Approved Land Inventory is
         excluded from Unsold Building Inventory.

                           Zaring Holdings shall mean Zaring Holdings, Inc., a
         corporation organized and existing under the laws of the State of Ohio.


                                     - 26 -
<PAGE>   27


                           Zaring Homes shall mean Zaring Homes, Inc., a
         corporation organized and existing under the laws of the State of Ohio.

                           Zaring Homes Receivable shall have the meaning set
         forth in Section 8.2(d)(vi).

                           Zaring Indiana shall mean Zaring Homes of Indiana,
         L.L.C., a limited liability company organized and existing under the
         laws of the State of Indiana.

                           Zaring Kentucky shall mean Zaring Homes Kentucky,
         LLC, a limited liability company organized and existing under the laws
         of the Commonwealth of Kentucky.

                           Zaring National shall mean Zaring National
         Corporation, a corporation organized and existing under the laws of the
         State of Ohio.

                           Zaring National Cash Flow From Operations shall mean,
         for any period of determination, the following with respect to Zaring
         National and its Subsidiaries for each item for such period determined
         and consolidated in accordance with GAAP: (i) the sum of net income,
         depreciation, amortization, other noncash charges to net income,
         interest expense and income tax expense minus (ii) noncash credits to
         net income.

                           Zaring National Fixed Charges shall mean, for any
         period of determination, the sum of interest incurred (capitalized and
         expensed) plus scheduled principal installments of Indebtedness plus
         dividends (to the extent paid in cash), in each case of Zaring National
         and its Subsidiaries and First Cincinnati Land LLC and First Cincinnati
         Leasing LLC, for such period determined and consolidated in accordance
         with GAAP.

                           Zaring National Tangible Net Worth shall mean, as of
         any date of determination, total stockholders' equity minus intangible
         assets, in each case of Zaring National and its Subsidiaries as of such
         date determined and consolidated in accordance with GAAP (excluding
         First Cincinnati Land LLC and First Cincinnati Leasing LLC).

                           Zaring National Total Liabilities shall mean, for the
         fiscal quarter then ended, all Indebtedness and, without duplication,
         all other liabilities including minority interests of Zaring National
         and its Subsidiaries, determined and consolidated in accordance with
         GAAP (excluding First Cincinnati Land LLC and First Cincinnati Leasing
         LLC).

1.2.     Construction.

                  Unless the context of this Agreement otherwise clearly
         requires, references to the plural include the singular, the singular
         the plural, and the part the whole, "or" has the inclusive meaning
         represented by the phrase "and/or," and "including" has the meaning
         represented by the phrase "including without limitation." References in
         this Agreement to "determination" of or by the Agent or the Banks shall
         be deemed to include good-faith estimates by the Agent or the Banks (in
         the case of quantitative determinations) and good-faith beliefs by the
         Agent or the Banks (in the case of qualitative determinations).
         Whenever the Agent or the Banks are granted



                                     - 27 -
<PAGE>   28


         the right herein to act in its or their sole discretion, or to grant or
         withhold consent, such right shall be exercised in good faith. The
         words "hereof," "herein," "hereunder" and similar terms in this
         Agreement refer to this Agreement as a whole and not to any particular
         provision of this Agreement. The section and other headings contained
         in this Agreement and the Table of Contents preceding this Agreement
         are for reference purposes only and shall not control or affect the
         construction of this Agreement or the interpretation thereof in any
         respect. Section, subsection, schedule and exhibit references are to
         this Agreement unless otherwise specified.

1.3.     Accounting Principles.

                  Except as otherwise provided in this Agreement, all
         computations and determinations as to accounting or financial matters
         and all financial statements to be delivered pursuant to this Agreement
         shall be made and prepared in accordance with GAAP (including
         principles of consolidation where appropriate), and all accounting or
         financial terms shall have the meanings ascribed to such terms by GAAP.

                 2. REVOLVING CREDIT AND SWING LOAN FACILITIES

2.1.     The Commitments.

(a)      Revolving Credit Commitments.

                           Subject to the terms and conditions hereof and
         relying upon the representations and warranties herein set forth, each
         Bank severally agrees to make Revolving Credit Loans to the
         Co-Borrowers at any time or from time to time on or after the date
         hereof to, but not including, the Revolving Credit Expiration Date;
         provided that, after giving effect to such Revolving Credit Loans, (i)
         the aggregate principal amount of each Bank's Revolving Credit Loans
         outstanding hereunder shall not exceed, at any one time, such Bank's
         Revolving Credit Commitment minus such Bank's Ratable Share of the
         Letter of Credit Outstandings, and (ii) the aggregate of the Revolving
         Facility Usage minus Eligible Development Costs shall not exceed the
         Borrowing Base. Within such limits of time and amount and subject to
         the other provisions of this Agreement, the Co-Borrowers may borrow,
         repay and reborrow pursuant to this Section 2.1(a).

(b)      Swing Loan Commitment.

                           Subject to the terms and conditions hereof and
         relying upon the representations and warranties herein set forth, and
         in order to facilitate loans and repayments between Settlement Dates,
         PNC may make, at its option, cancelable at any time for any reason
         whatsoever, swing loans (the "Swing Loans") to the Co-Borrowers at any
         time or from time to time after the date hereof to, but not including,
         the Revolving Credit Expiration Date in an aggregate principal amount
         up to $5,000,000 (the "Swing Loan Commitment"), provided that the
         aggregate principal amount of PNC's Swing Loans and the Revolving
         Credit Loans of all the Banks at any one time outstanding shall not
         exceed the Revolving Credit Commitments of all the Banks. Within such
         limits of time and amount and subject to the other provisions of this



                                     - 28 -
<PAGE>   29


         Agreement, the Co-Borrowers may borrow, repay and reborrow pursuant to
         this Section 2.1(b).

2.2.     Nature of the Banks' and the Borrowers' Obligations.

                  Each Bank shall be obligated to participate in each request
         for Revolving Credit Loans pursuant to Section 2.6 in accordance with
         its Ratable Share. The aggregate of each Bank's Revolving Credit Loans
         outstanding hereunder to the Co-Borrowers at any time shall never
         exceed its Revolving Credit Commitment minus its Ratable Share of the
         Letter of Credit Outstandings at such time. The obligations of each
         Bank hereunder are several. The failure of any Bank to perform its
         obligations hereunder shall not affect the obligations of the
         Co-Borrowers to any other party, nor shall any other party be liable
         for the failure of such Bank to perform its obligations hereunder. The
         Banks shall have no obligation to make Revolving Credit Loans hereunder
         on or after the Revolving Credit Expiration Date.

2.3.     Certain Fees.

(a)      Facility Fees; Extension Fee.

                           As consideration for each Bank's Revolving Credit
         Commitment, a nonrefundable facility fee equal to 0.125% of such Bank's
         Revolving Credit Commitment was paid to the Agent for the account of
         each Bank on the Original Closing Date. The Co-Borrowers paid to the
         Agent for the account of each Bank, as consideration for the extension
         of the Revolving Credit Expiration Date pursuant to the Amended and
         Restated Credit Agreement, a nonrefundable facility fee equal to 0.03%
         of each Bank's Revolving Credit Commitment on the closing date for the
         Amended and Restated Credit Agreement. The Co-Borrowers hereby agree to
         pay to the Agent for the account of each Bank, as consideration for the
         extension of the Revolving Credit Expiration Date pursuant to this
         Agreement, a nonrefundable facility fee equal to 0.25% of each Bank's
         Revolving Credit Commitment on the Closing Date.

(b)      Commitment Fee.

                           Accruing from the Original Closing Date until the
         Revolving Credit Expiration Date, the Co-Borrowers agree to pay to the
         Agent for the account of each Bank, as consideration for such Bank's
         Revolving Credit Commitment hereunder, a commitment fee (the
         "Commitment Fee") equal to a percentage per annum (computed on the
         basis of a year of 365 or 366 days, as the case may be, and actual days
         elapsed) which shall be based upon the Leverage Ratio for the
         immediately preceding fiscal quarter, as shown on the Co-Borrowers'
         most recently delivered financial statements pursuant to Section 8.3(0)
         or 8.3(c), as follows, and subject to adjustment as set forth in
         Section 4.1(c)(ii), on the average daily unborrowed amount of such
         Bank's Revolving Credit Commitment as the same may be constituted from
         time to time (for purposes of this computation, PNC's Swing Loans shall
         be deemed to be borrowed amounts under its Revolving Credit Commitment,
         Letter of Credit Outstandings shall be deemed to be borrowed amounts
         under each Bank's Revolving Credit Commitments in accordance with its
         Ratable Share, and the amount of any Revolving Credit Loans that any
         Bank wrongfully fails to fund shall not be deemed to be an unborrowed
         amount under such Bank's Revolving Credit Commitment):



                                     - 29 -
<PAGE>   30


<TABLE>
<CAPTION>
                                    Leverage Ratio                                           Commitment Fee
                                    --------------                                           --------------
         <S>                                                                                 <C>
         Equal to or greater than 2.00 to 1.00                                                   .40%
         Less than 1.99 to 1.00 but greater than or equal to 1.75 to 1.00                        .35%
         Less than 1.74 to 1.00 but greater than 1.50 to 1.00                                    .30%
         Less than 1.49 to 1.00 but greater than 1.25                                            .25%
         Equal to or less than 1.24 to 1.00                                                      .20%
</TABLE>

         All Commitment Fees shall be payable in arrears on the first Business
         Day of each July, October, January and April after the date hereof, on
         the Revolving Credit Expiration Date and upon any acceleration of the
         Notes.

2.4.     Permanent Reductions of Commitments.

(a)      Voluntary Reductions.

                           The Co-Borrowers shall be permitted, without premium
         or penalty, at any time upon five (5) Business Days' notice to the
         Agent, to reduce permanently the Revolving Credit Commitments in an
         aggregate amount of not less than $1,000,000 and in integral multiples
         thereof for amounts in excess of $1,000,000, and each Bank's Revolving
         Credit Commitments shall be reduced in accordance with its Ratable
         Share; provided, however, the principal amount of all Revolving Credit
         Loans outstanding at any time shall not be permitted to exceed the
         Revolving Credit Commitments of all the Banks at such time.

(b)      Effect of Reductions.

                           After each such reduction, the Commitment Fee shall
         be calculated upon the Revolving Credit Commitments of the Banks as so
         reduced, and the amount of the reduction of the Revolving Credit
         Commitments may not be reinstated.

2.5.     Loan Requests.

(a)      Revolving Credit Loan Requests.

                           Except as otherwise provided herein, the Co-Borrowers
         may from time to time prior to the Revolving Credit Expiration Date
         request the Banks to make Revolving Credit Loans, or renew or convert
         the Interest Rate Option applicable to existing Revolving Credit Loans,
         by the delivery to the Agent, not later than 2:00 p.m., Cincinnati
         time, (i) three (3) Business Days prior to the proposed Borrowing Date
         with respect to the making of Revolving Credit Loans to which the
         Euro-Rate Option applies or the conversion to or the renewal of the
         Euro-Rate Option for any Revolving Credit Loans, and (ii) not later
         than 11:00 a.m., Cincinnati time, on the proposed Borrowing Date with
         respect to the making of a Revolving Credit Loan to which the Base Rate
         Option applies or the last day of the preceding Euro-Rate Interest
         Period



                                     - 30 -
<PAGE>   31


         with respect to the conversion to the Base Rate Option for any
         Revolving Credit Loan, of a duly completed request therefor
         substantially in the form of Exhibit 2.5(a) or a request by telephone
         immediately confirmed in writing by letter, facsimile or telex (each, a
         "Revolving Credit Loan Request" or "Loan Request"), it being understood
         that the Agent may rely on the authority of any person making such a
         telephonic request without the necessity of receipt of such written
         confirmation. Each Revolving Credit Loan Request shall be irrevocable
         and shall specify (i) the proposed Borrowing Date; (ii) the aggregate
         principal amount of the proposed Revolving Credit Loans comprising the
         Borrowing Tranche, which shall be in integral multiples of $250,000 and
         not less than $750,000 for Revolving Credit Loans to which the
         Euro-Rate Option applies and not less than the lesser of $500,000 or
         the maximum amount available under the Revolving Credit Commitments for
         Revolving Credit Loans to which the Base Rate Option applies; (iii)
         whether the Euro-Rate Option or the Base Rate Option shall apply to the
         proposed Revolving Credit Loans comprising the Borrowing Tranche; and
         (iv) in the case of Revolving Credit Loans to which the Euro-Rate
         Option applies, an appropriate Euro-Rate Interest Period for the
         proposed Revolving Credit Loans comprising the Borrowing Tranche. If no
         such notice is given at least three (3) Business Days prior to the
         expiration of any Euro-Rate Interest Period for any Revolving Credit
         Loan or portion thereof, the Co-Borrowers shall be deemed to have
         converted such Revolving Credit Loan or portion thereof to the Base
         Rate Option commencing upon the last day of that Euro-Rate Interest
         Period.

(b)      Swing Loan Requests.

                           Except as otherwise provided herein, the Co-Borrowers
         may from time to time prior to the Revolving Credit Expiration Date
         request PNC to make Swing Loans by delivery to PNC, not later than
         11:00 a.m., Cincinnati time, on the proposed Borrowing Date, of a duly
         completed request therefor substantially in the form of Exhibit 2.5(b)
         or a request by telephone immediately confirmed in writing by letter,
         facsimile or telex (each, a "Swing Loan Request" or "Loan Request"), it
         being understood that the Agent may rely on the authority of any person
         making such a telephonic request without the necessity of receipt of
         such written confirmation. Each Swing Loan Request shall be irrevocable
         and shall specify the proposed Borrowing Date and the principal amount
         of such Swing Loan, which shall not be less than $100,000.

2.6.     Making Loans.

(a)      Revolving Credit Loans.

                           The Agent shall, promptly after receipt by it of a
         Revolving Credit Loan Request pursuant to Section 2.5(a), notify the
         Banks of its receipt of such Revolving Credit Loan Request, specifying:
         (i) the proposed Borrowing Date and the time and method of disbursement
         of such Revolving Credit Loan; (ii) the amount and type of such
         Revolving Credit Loan and the applicable Euro-Rate Interest Period (if
         any); and (iii) the apportionment among the Banks of the Revolving
         Credit Loans as determined by the Agent in accordance with Section 2.2.
         Each Bank shall remit the principal amount of each Revolving Credit
         Loan to the Agent such that the Agent is able to, and the Agent shall,
         to the extent the Banks have made funds available to it for such



                                     - 31 -
<PAGE>   32


         purpose, fund such Revolving Credit Loan to the Co-Borrowers in U.S.
         Dollars and immediately available funds at the Principal Office prior
         to 3:00 p.m., Cincinnati time, on the Borrowing Date; provided that if
         any Bank fails to remit such funds to the Agent in a timely manner, the
         Agent may elect in its sole discretion to fund with its own funds the
         Revolving Credit Loan of such Bank on the Borrowing Date; and provided,
         further, that such funding by the Agent shall not be deemed to increase
         the Revolving Credit Commitment of the Agent or to reduce the Revolving
         Credit Commitment of such Bank.

(b)      Swing Loans.

                           (i) Swing Loans Pursuant to Swing Loan Requests. So
         long as PNC elects to make Swing Loans, PNC shall, after receipt by it
         of a Swing Loan Request pursuant to Section 2.5(b), fund such Swing
         Loan to the Co-Borrowers in U.S. Dollars and immediately available
         funds at the Principal Office prior to 5:00 p.m., Cincinnati time, on
         the Borrowing Date; provided that after PNC receives notice of default
         as set forth in Section 10.9, PNC shall not make any Swing Loans under
         Section 2.6(b)(i) or (ii).

                           (ii) Swing Loans Pursuant to Money Management
         Arrangements. So long as PNC elects to make Swing Loans, on any
         Business Day in which there is an aggregate negative balance in respect
         of the accounts relating to the Money Management Arrangements, PNC
         shall, on behalf of the Co-Borrowers and without the requirement that
         the Co-Borrowers deliver a Swing Loan Request pursuant to Section
         2.5(b), make a Swing Loan to the Co-Borrowers in an amount equal to the
         lesser of (a) the amount of the negative balance or (b) $2,500,000, but
         in no event more than the amount, if any, available under the Swing
         Loan Commitment, which amount shall be deposited in an account related
         to the Money Management Arrangements.

2.7.     Borrowings to Repay Swing Loans.

                  Any aggregate positive balance in the accounts related to the
         Money Management Arrangements shall, to the extent available at the end
         of a Business Day, be automatically applied to the repayment of the
         outstanding balance of the Swing Loans. In addition, PNC may, at its
         option, exercisable at any time for any reason whatsoever, demand
         repayment of the Swing Loans, and each Bank shall make a Revolving
         Credit Loan in an amount equal to such Bank's Ratable Share of the
         aggregate principal amount of the outstanding Swing Loans, plus, if PNC
         so requests, accrued interest thereon, provided that no Bank shall be
         obligated in any event to make Revolving Credit Loans in excess of its
         Revolving Credit Commitment. Revolving Credit Loans made pursuant to
         the preceding sentence shall bear interest at the Base Rate Option and
         shall be deemed to have been properly requested in accordance with
         Section 2.5(a) without regard to any of the requirements of that
         provision. PNC shall provide notice to the Banks (which may be
         telephonic or written notice by letter, facsimile or telex) that such
         Revolving Credit Loans are to be made under this Section 2.7 and of the
         apportionment among the Banks, and the Banks shall be unconditionally
         obligated to fund such Revolving Credit Loans (whether or not the
         conditions specified in Section 7.2 are then satisfied) by the time PNC
         so requests, which shall not be earlier than 3:00 p.m., Cincinnati
         time, on the Business Day next succeeding the date the Banks receive



                                     - 32 -
<PAGE>   33


         such notice from PNC.

2.8.     Notes.

(a)      Revolving Credit Notes.

                           The obligation of the Co-Borrowers to repay the
         aggregate unpaid principal amount of the Revolving Credit Loans made to
         it by each Bank, together with interest thereon, shall be evidenced by
         a promissory note of the Co-Borrowers dated the date hereof in the form
         of Exhibit 1.1(R) payable to the order of each Bank in a face amount
         equal to the Revolving Credit Commitment of such Bank. The Revolving
         Credit Notes shall be payable in full on the Revolving Credit
         Expiration Date or earlier acceleration of the Notes.

(b)      Swing Note.

                           The obligation of the Co-Borrowers to repay the
         unpaid principal amount of the Swing Loans made to it by PNC, together
         with interest thereon, shall be evidenced by a demand promissory note
         of the Co-Borrowers dated the date hereof in the form of Exhibit 1.1(S)
         payable to the order of PNC in a face amount equal to the Swing Loan
         Commitment.

2.9.     Letter of Credit Subfacility.

(a)      Issuance of Letters of Credit.

                           The Co-Borrowers may request the issuance of a letter
         of credit (each a "Letter of Credit") on behalf of any Co-Borrower or a
         Guarantor by delivering to the applicable Issuing Letter of Credit Bank
         with a copy to the Agent a completed application and agreement for
         letters of credit in such form as the applicable Issuing Letter of
         Credit Bank may specify from time to time by no later than 11:00 a.m.,
         Cincinnati time, at least three (3) Business Days, or such shorter
         period as may be agreed to by the applicable Issuing Letter of Credit
         Bank, in advance of the proposed date of issuance. Subject to the terms
         and conditions hereof and in reliance on the agreements of the other
         Banks set forth in this Section 2.9, such Issuing Letter of Credit Bank
         will issue a Letter of Credit; provided that each Letter of Credit
         shall (A) have a maximum maturity of twenty-four (24) months from the
         date of issuance and (B) in no event expire later than five (5)
         Business Days prior to the Revolving Credit Expiration Date; and
         provided, further, that in no event shall (i) the Letter of Credit
         Outstandings exceed, at any one time, $15,000,000, (ii) the Revolving
         Facility Usage exceed, at any one time, the Revolving Credit
         Commitments, or (iii) the Revolving Facility Usage exceed the Borrowing
         Base. Each of the Rollover LCs listed on Schedule 2.9(a) has been
         deemed to have been issued hereunder on the Original Closing Date by
         the applicable Issuing Letter of Credit Bank and shall be deemed to be
         a Letter of Credit for all purposes of this Agreement.

(b)      Participations.

                           Immediately upon issuance of each Letter of Credit,
         and without further action, each Bank shall be deemed to, and hereby
         agrees that it shall, have irrevocably purchased



                                     - 33 -
<PAGE>   34


         for such Bank's own account and risk from the applicable Issuing Letter
         of Credit Bank an individual participation interest in such Letter of
         Credit and drawings thereunder in an amount equal to such Bank's
         Ratable Share of the maximum amount which is or at any time may become
         available to be drawn thereunder, and each such Bank shall be
         responsible to reimburse such Issuing Letter of Credit Bank immediately
         for its Ratable Share of any disbursement under any Letter of Credit
         which has not been reimbursed by the Co-Borrowers in accordance with
         Section 2.9(d).

(c)      Letter of Credit Fees.

                           The Co-Borrowers shall pay to the Agent for the
         ratable account of the Banks a fee (the "Letter of Credit Fee") equal
         to one and one-eighth percent (1-1/8%) per annum (computed on the basis
         of a year of 360 days and actual days elapsed), which fee shall be
         computed on the daily average Letter of Credit Outstandings. The Letter
         of Credit Fee shall be payable quarterly in arrears commencing with the
         first Business Day of each July, October, January and April following
         issuance of each Letter of Credit and on the Revolving Credit
         Expiration Date and any earlier acceleration of the Notes. The
         Co-Borrowers shall pay to the applicable Issuing Letter of Credit Bank
         for its own account a fronting fee as determined by such Issuing Letter
         of Credit Bank and the Co-Borrowers. The Co-Borrowers shall also pay to
         the applicable Issuing Letter of Credit Bank for its sole account the
         Issuing Letter of Credit Bank's then-in-effect customary fees and
         administrative expenses payable with respect to the Letters of Credit
         as such Issuing Letter of Credit Bank may generally charge or incur
         from time to time in connection with the issuance, maintenance,
         modification (if any), assignment or transfer (if any), negotiation and
         administration of Letters of Credit.

(d)      Disbursements, Reimbursement.

                           The Co-Borrowers shall be obligated immediately to
         reimburse the applicable Issuing Letter of Credit Bank for all amounts
         which such Issuing Letter of Credit Bank is required to advance
         pursuant to the Letters of Credit (collectively, the "Reimbursement
         Obligations"). The applicable Issuing Letter of Credit Bank will
         promptly notify (A) the Co-Borrowers of each demand or presentment for
         payment or other drawing under each Letter of Credit issued by such
         Issuing Letter of Credit Bank, and (B) the Agent of the amount required
         to be paid by such Issuing Letter of Credit Bank pursuant to each such
         Letter of Credit. The Agent shall promptly notify each Bank of the
         amount required to be paid by such Bank as a result of a drawing upon
         such Letter of Credit if the applicable Issuing Letter of Credit Bank
         shall have notified the Agent that the Co-Borrowers have not timely
         reimbursed such Issuing Letter of Credit Bank for such draw. If such
         notice is received by a Bank before 10:00 a.m., Cincinnati time, such
         Bank shall deliver such Bank's Ratable Share of such payment in
         immediately available funds to the Agent on that Business Day. If such
         notice is received by a Bank after 10:00 a.m., Cincinnati time, such
         Bank shall, before 10:00 a.m., Cincinnati time, on the next succeeding
         Business Day, deliver to the Agent such Bank's Ratable Share of such
         payment as a Revolving Credit Loan from such Bank in immediately
         available funds. Upon receipt of each Bank's Ratable Share of such
         payment, the Agent shall immediately deliver such Bank's Ratable Share
         of such payment to the applicable Issuing Letter of Credit Bank. Such
         amounts advanced



                                     - 34 -
<PAGE>   35


         shall become, at the time the amounts are advanced, Revolving Credit
         Loans from the Banks. Such Revolving Credit Loans shall bear interest
         at the rate applicable under the Base Rate Option unless the
         Co-Borrowers elect to have a different Interest Rate Option apply to
         such Revolving Credit Loans pursuant to and in accordance with the
         provisions contained in Section 4.1.

(e)      Documentation.

                           The Co-Borrowers agree to be bound by the terms of
         each Issuing Letter of Credit Bank's application and agreement for
         Letters of Credit and each Issuing Letter of Credit Bank's written
         regulations and customary practices relating to Letters of Credit,
         though such interpretation may be different from the Co-Borrowers' own.
         In the event of a conflict between such application or agreement and
         this Agreement, this Agreement shall govern. It is understood and
         agreed that, except in the case of gross negligence or willful
         misconduct, the Issuing Letter of Credit Bank shall not be liable for
         any error, negligence and/or mistakes, whether of omission or
         commission, in following the Co-Borrowers' instructions or those
         contained in the Letters of Credit or any modifications, amendments or
         supplements thereto.

(f)      Determinations to Honor Drawing Requests.

                           In determining whether to honor any request for
         drawing under any Letter of Credit by the beneficiary thereof, the
         applicable Issuing Letter of Credit Bank shall be responsible only to
         determine that the documents and certificates required to be delivered
         under such Letter of Credit have been delivered and that they comply on
         their face with the requirements of such Letter of Credit.

(g)      Nature of Participation and Reimbursement Obligations.

                           The obligation of the Banks to participate in Letters
         of Credit pursuant to Section 2.9(b), the obligation of the Banks
         pursuant to Section 2.9(d) to fund Revolving Credit Loans upon a draw
         under a Letter of Credit and the obligation of the Co-Borrowers to
         reimburse the applicable Issuing Letter of Credit Bank upon a draw
         under a Letter of Credit pursuant to Section 2.9(d) shall be absolute,
         unconditional and irrevocable and shall be performed strictly in
         accordance with the terms of such Sections under all circumstances,
         including the following circumstances:

                                    (i) the failure of the Co-Borrowers or any
         other Person to comply with the conditions set forth in Section 2.1,
         2.5, 2.6 or 7.2 or as otherwise set forth in this Agreement for the
         making of a Revolving Credit Loan, it being acknowledged that such
         conditions are not required for the making of a Revolving Credit Loan
         under Section 2.9(d);

                                    (ii) any lack of validity or enforceability
         of any Letter of Credit;

                                    (iii) the existence of any claim, set-off,
         defense or other right which the Co-Borrowers, any other Loan Party or
         any Bank may have at any time against a beneficiary or any transferee
         of any Letter of Credit (or any Person for whom any such transferee may
         be acting), the Agent or other Bank or any other Person or, whether in
         connection with this



                                     - 35 -
<PAGE>   36


         Agreement, the transactions contemplated herein or any unrelated
         transaction (including any underlying transaction between the
         Co-Borrowers or Subsidiaries of the Co-Borrowers and the beneficiary
         for which any Letter of Credit was procured);

                                    (iv) any draft, demand, certificate or other
         document presented under any Letter of Credit proving to be forged,
         fraudulent, invalid or insufficient in any respect or any statement
         therein being untrue or inaccurate in any respect;

                                    (v) payment by the applicable Issuing Letter
         of Credit Bank under any Letter of Credit against presentation of a
         demand, draft or certificate or other document which does not comply
         with the terms of such Letter of Credit;

                                    (vi) any adverse change in the business,
         operations, properties, assets, condition (financial or otherwise) or
         prospects of the Co-Borrowers or Subsidiaries of the Co-Borrowers;

                                    (vii) any breach of this Agreement or any
         other Loan Document by any party thereto;

                                    (viii) any other circumstance or happening
         whatsoever, whether or not similar to any of the foregoing;

                                    (ix) the fact that an Event of Default or a
         Potential Default shall have occurred and be continuing; or

                                    (x) the Revolving Credit Expiration Date
         shall have passed or this Agreement or the Revolving Credit Commitments
         hereunder shall have been terminated.

(h)      Indemnity.

                           In addition to amounts payable as provided in Section
         10.5, the Co-Borrowers hereby agree to protect, indemnify, pay and save
         harmless each Issuing Letter of Credit Bank from and against any and
         all claims, demands, liabilities, damages, losses, costs, charges and
         expenses (including reasonable fees, expenses and disbursements of
         counsel and allocated costs of internal counsel) which such Issuing
         Letter of Credit Bank may incur or be subject to as a consequence,
         direct or indirect, of (i) the issuance of any Letter of Credit, other
         than as a result of (A) the gross negligence or willful misconduct of
         such Issuing Letter of Credit Bank as determined by a final judgment of
         a court of competent jurisdiction, or (B) subject to the following
         clause (ii), the wrongful dishonor by such Issuing Letter of Credit
         Bank of a proper demand for payment made under any Letter of Credit; or
         (ii) the failure of such Issuing Letter of Credit Bank to honor a
         drawing under any such Letter of Credit as a result of any act or
         omission, whether rightful or wrongful, of any present or future de
         jure or de facto government or governmental authority (all such acts or
         omissions herein called "Governmental Acts").

(i)      Liability for Acts and Omissions.


                                     - 36 -
<PAGE>   37


                           As between any Loan Party and each Issuing Letter of
         Credit Bank, the Co-Borrowers assume all risks of the acts and
         omissions of, or misuse of the Letters of Credit by, the respective
         beneficiaries of such Letters of Credit. In furtherance and not in
         limitation of the foregoing, the applicable Issuing Letter of Credit
         Bank shall not be responsible for: (i) the form, validity, sufficiency,
         accuracy, genuineness or legal effect of any document submitted by any
         party in connection with the application for an issuance of any such
         Letter of Credit, even if it should in fact prove to be in any or all
         respects invalid, insufficient, inaccurate, fraudulent or forged; (ii)
         the validity or sufficiency of any instrument transferring or assigning
         or purporting to transfer or assign any such Letter of Credit or the
         rights or benefits thereunder or proceeds thereof, in whole or in part,
         which may prove to be invalid or ineffective for any reason; (iii)
         failure of the beneficiary of any such Letter of Credit to comply fully
         with any conditions required in order to draw upon such Letter of
         Credit; (iv) errors, omissions, interruptions or delays in transmission
         or delivery of any messages, by mail, cable, telegraph, telex or
         otherwise, whether or not they be in cipher; (v) errors in
         interpretation of technical terms; (vi) any loss or delay in the
         transmission or otherwise of any document required in order to make a
         drawing under any such Letter of Credit or of the proceeds thereof;
         (vii) the misapplication by the beneficiary of any such Letter of
         Credit; or (viii) any consequences arising from causes beyond the
         control of such Issuing Letter of Credit Bank, including any
         Governmental Acts, and none of the above shall affect or impair, or
         prevent the vesting of, any of such Issuing Letter of Credit Bank's
         rights or powers hereunder.

                           In furtherance and extension, and not in limitation,
         of the specific provisions set forth above, any action taken or omitted
         by the applicable Issuing Letter of Credit Bank under or in connection
         with the Letters of Credit issued by it or any documents and
         certificates delivered thereunder, if taken or omitted in good faith,
         shall not put such Issuing Letter of Credit Bank under any resulting
         liability to the Co-Borrowers.

                           The Banks and any Loan Party may not commence a
         proceeding against any Issuing Letter of Credit Bank for wrongful
         disbursement under a Letter of Credit as a result of acts or omissions
         constituting gross negligence or willful misconduct of such Issuing
         Letter of Credit Bank until the Banks have made and the Co-Borrowers
         have repaid the Revolving Credit Loans described in Section 2.9(d).

2.10.    Extension by Banks of the Revolving Credit Expiration Date.

                  Upon or promptly after delivery by the Co-Borrowers of the
         annual financial statements to be provided under Section 8.3(c) for the
         fiscal year ending December 31, 1997 or any subsequent fiscal year, the
         Co-Borrowers may request a one-year extension of the Revolving Credit
         Expiration Date by written notice to the Banks, and the Banks agree to
         respond to the Co-Borrowers' request for an extension within sixty (60)
         days following receipt of the request; provided, however, that all the
         Banks must consent to any extension of the Revolving Credit Expiration
         Date, and the failure of the Banks to respond within such time period
         shall not in any manner constitute an extension of the Revolving Credit
         Expiration Date.

2.11.    Use of Proceeds.



                                     - 37 -
<PAGE>   38


                  The proceeds of the Revolving Credit Loans shall be used for
         lawful purposes in accordance with the second recital clause above.

                                 3. TERM LOANS

3.1.     Term Loan Commitments.

                  Subject to the terms and conditions hereof and relying upon
         the representations and warranties herein set forth, each Bank made a
         term loan (the "Term Loan") to Zaring Homes on the Original Closing
         Date in the principal amount of such Bank's Term Loan Commitment.

3.2.     Nature of Banks' Obligations With Respect to Term Loans.

                  The Banks shall have no obligation to make Term Loans
         hereunder after the Original Closing Date. The Term Loan Commitments
         are not revolving credit commitments, and Zaring Homes shall not have
         the right to borrow, repay or reborrow under Section 3.1.

3.3.     Term Loan Facility Fee.

                  As consideration for such Bank's Term Loan Commitment, a
         nonrefundable facility fee equal to 0.125% of such Bank's Term Loan
         Commitment was paid to the Agent for the account of each Bank by Zaring
         Homes on the Original Closing Date.

3.4.     Term Loan Notes.

                  The obligation of Zaring Homes to repay the unpaid principal
         amount of the Term Loans made to it by each Bank, together with
         interest thereon, shall be evidenced by a Term Note dated the Original
         Closing Date in the form of Exhibit 1.1(T) payable to the order of each
         Bank in a face amount equal to the Term Loan Commitment of such Bank.
         The principal amount as provided therein of the Term Notes shall be
         payable quarterly in arrears on the first Business Day of each July,
         October, January and April after the date hereof in twenty (20) equal
         quarterly installments of $750,000, beginning on July 1, 1996, with a
         final installment on the Term Loan Maturity Date, or in full upon the
         earlier acceleration of the Notes.

3.5.     Use of Proceeds.

                  The proceeds of the Term Loans shall be used for lawful
         purposes in accordance with the second recital clause above.

                               4. INTEREST RATES

4.1.     Interest Rate Options.

                  The Borrowers shall pay interest in respect of the outstanding
         unpaid principal amount of the Loans as selected by them from the Base
         Rate Option or Euro-Rate Option set



                                     - 38 -
<PAGE>   39


         forth below applicable to the Loans, it being understood that, subject
         to the provisions of this Agreement, the Borrowers may select different
         Interest Rate Options and different Euro-Rate Interest Periods to apply
         simultaneously to the Loans comprising different Borrowing Tranches and
         may convert to or renew one or more Interest Rate Options with respect
         to all or any portion of the Loans comprising any Borrowing Tranche;
         provided that there shall not be at any one time outstanding more than
         six (6) Borrowing Tranches in the aggregate among all the Loans
         accruing interest at the Euro-Rate Option, and provided, further, that
         only the Revolving Credit Base Rate Option shall be applicable with
         respect to the Swing Loans. The Agent's determination of a rate of
         interest and any change therein shall, in the absence of manifest
         error, be conclusive and binding upon all parties hereto. If at any
         time the designated rate applicable to any Loan made by the Bank
         exceeds such Bank's highest lawful rate, the rate of interest on such
         Bank's Loan shall be limited to such Bank's highest lawful rate;
         provided, that the portion of interest which exceeds the amount such
         Bank can lawfully receive and, thus, is not paid to such Bank shall be
         due and payable upon the following Interest Payment Date(s) to the
         extent lawfully permissible.

(a)      Revolving Credit Interest Rate Options.

                           The Co-Borrowers shall have the right to select from
         the following Interest Rate Options applicable to the Revolving Credit
         Loans:

                                    (i) Revolving Credit Base Rate Option: A
         fluctuating rate per annum (computed on the basis of a year of (i) 365
         or 366 days, as the case may be, and actual days elapsed for Revolving
         Credit Loans based on the Agent's prime rate or (ii) 360 days and
         actual days elapsed for Revolving Credit Loans based on the Federal
         Funds Effective Rate) equal to the Base Rate plus the Revolving Credit
         Base Rate Margin (as set forth in Section 4.1(c)), such interest rate
         to change automatically from time to time effective as of the effective
         date of each change in the Base Rate or the Revolving Credit Base Rate
         Margin.

                                    (ii) Revolving Credit Euro-Rate Option: A
         rate per annum (computed on a basis of a year of 360 days and actual
         days elapsed) equal to the Euro-Rate plus the Revolving Credit
         Euro-Rate Margin (as set forth in Section 4.1(c)). The Euro-Rate shall
         be adjusted automatically with respect to any Euro-Rate Portion
         outstanding on the effective date of any change in the Euro-Rate
         Reserve Percentage notwithstanding that such effective date occurs
         during a Euro-Rate Interest Period. The Agent shall give prompt notice
         to the Co-Borrowers of the Euro-Rate as determined or adjusted in
         accordance herewith, which determination shall be conclusive.

(b)      Term Loan Interest Rate Options.

                           Zaring Homes shall have the right to select from the
         following Interest Rate Options applicable to the Term Loans:

                                    (i) Term Loan Base Rate Option: A
         fluctuating rate per annum (computed on the basis of a year of (i) 365
         or 366 days, as the case may be, and actual days elapsed for Term Loans
         based on the Agent's prime rate or (ii) 360 days and actual days
         elapsed for Term Loans based on the Federal Funds Effective Rate) equal
         to the Base Rate plus the Term


                                     - 39 -
<PAGE>   40


         Loan Base Rate Margin (as set forth in Section 4.1(c)), such interest
         rate to change automatically from time to time effective as of the
         effective date of each change in the Base Rate or the Term Loan Base
         Rate Margin.

                                    (ii) Term Loan Euro-Rate Option: A rate per
         annum (computed on a basis of a year of 360 days and actual days
         elapsed) equal to the Euro-Rate plus the Term Loan Euro-Rate Margin (as
         set forth in Section 4.1(c)). The Euro-Rate shall be adjusted
         automatically with respect to any Euro-Rate Portion outstanding on the
         effective date of any change in the Euro-Rate Reserve Percentage
         notwithstanding that such effective date occurs during a Euro-Rate
         Interest Period. The Agent shall give prompt notice to Zaring Homes of
         the Euro-Rate as determined or adjusted in accordance herewith, which
         determination shall be conclusive.

(c)      Interest Rate Margins.

                                    (i) The base rate margin applicable to
         Revolving Credit Loans (the "Revolving Credit Base Rate Margin") on the
         Closing Date shall equal one hundred twenty-five thousandths percent
         (0.125%). The base rate margin applicable to Term Loans (the "Term Loan
         Base Rate Margin") on the Closing Date shall equal one hundred
         twenty-five thousandths percent (0.125%). The Euro-Rate margin
         applicable to Revolving Credit Loans (the "Revolving Credit Euro-Rate
         Margin") on the Closing Date shall equal two and thirty hundredths
         percent (2.30%). The Euro-Rate margin applicable to Term Loans (the
         "Term Loan Euro-Rate Margin") on the Closing Date shall equal two and
         thirty hundredths percent (2.30%). After the Closing Date, the
         Revolving Credit and Term Loan Base Rate Margins and the Revolving
         Credit and Term Loan Euro-Rate Margins shall be based upon the Leverage
         Ratio for the Borrower's immediately preceding fiscal quarter, as shown
         on the Borrowers' most recently delivered financial statements pursuant
         to Section 8.3(b) or 8.3(c), as follows:

<TABLE>
<CAPTION>
                                                             Revolving         Term Loan        Revolving        Term Loan
                                                               Credit          Euro-Rate       Credit Base       Base Rate
                      Leverage Ratio                      Euro-Rate Margin      Margin         Rate Margin         Margin
                      --------------                      ----------------      ------         -----------         ------
         <S>                                              <C>                  <C>             <C>               <C>
         Equal to or greater than 2.00 to 1.00                 2.30%             2.30%            0.125%           0.125%
         Less than 1.99 to 1.00 but greater than
              or equal to 1.75 to 1.00                         2.10%             2.10%              0%               0%
         Less than 1.74 to 1.00 but greater than               1.90%             1.90%              0%               0%
              1.50 to 1.00
         Less than 1.49 to 1.00 but greater than 1.25          1.70%             1.70%              0%               0%
         Equal to or less than 1.24 to 1.00                    1.50%             1.50%              0%               0%
</TABLE>

                                    (ii) Except as noted above, in the event the
         Leverage Ratio has changed such that a different rate is applicable,
         the rate shall be effective as of the first



                                     - 40 -
<PAGE>   41


         Settlement Date following receipt by the Agent of the financial
         statements, notwithstanding that such effective date occurs during a
         Euro-Rate Interest Period. In the event the financial statements of the
         Borrowers with respect to any fiscal quarter or fiscal year are not
         delivered as required under Sections 8.3(b) and 8.3(c), any rate
         reduction then in effect shall continue until the first Settlement Date
         following receipt by the Agent of financial statements reflecting that
         a different Base Rate Margin, Euro-Rate Margin or Commitment Fee is
         applicable as a result of a change in the Leverage Ratio; provided,
         that if such financial statements indicate that the Euro-Rate Margin,
         Base Rate Margin or Commitment Fee should have been higher than the
         margins or fee which was in effect, as a result of the Borrowers'
         failure to deliver such financial statements in a timely manner, the
         Euro-Rate Margin, the Base Rate Margin and Commitment Fee shall be
         retroactively adjusted, and the Borrowers shall immediately, upon
         written notice from the Agent, pay to the Agent, for the ratable
         benefit of the Banks, the additional interest to which the Banks are
         entitled.

(d)      Rate Quotations.

                           The Borrowers may call the Agent on or before the
         date on which a Loan Request is to be delivered to receive an
         indication of the rates then in effect, but it is acknowledged that
         such indication shall not be binding on the Agent or the Banks or
         affect the rate of interest which thereafter is actually in effect when
         the election is made.

4.2.     Euro-Rate Interest Periods.

                  At any time when the Borrowers shall select, convert to or
         renew the Euro-Rate Option to apply to any Revolving Credit Loan or
         Term Loan, the Borrowers shall notify the Agent thereof at least three
         (3) Business Days prior to the effective date of such Euro-Rate Option
         by delivering a Loan Request. The notice shall select a Euro-Rate
         interest period during which such Interest Rate Option shall apply,
         such periods to be one (1), two (2), three (3) or six (6) months (the
         "Euro-Rate Interest Periods"); provided that:

(a)      any Euro-Rate Interest Period which would otherwise end on a date which
         is not a Business Day shall be extended to the next succeeding Business
         Day, unless such Business Day falls in the next calendar month, in
         which case such Euro-Rate Interest Period shall end on the next
         preceding Business Day;

(b)      any Euro-Rate Interest Period which begins on the last Business Day of
         a calendar month for which there is no numerically corresponding
         Business Day in the subsequent calendar month during which such
         Interest Period is to end shall end on the last Business Day of such
         subsequent month;

(c)      the Euro-Rate Portion for each Euro-Rate Interest Period shall be in
         integral multiples of $250,000 and not less than $750,000;

(d)      the Borrowers shall not select, convert to or renew a Euro-Rate
         Interest Period for any portion of the Revolving Credit Loans that
         would end after the Revolving Credit Expiration Date or any portion of
         the Term Loans that would end after the Term Loan Maturity Date; and


                                     - 41 -
<PAGE>   42


(e)      in the case of the renewal of the Euro-Rate Option at the end of a
         Euro-Rate Interest Period, the first day of the new Euro-Rate Interest
         Period shall be the last day of the preceding Euro-Rate Interest
         Period, without duplication in payment of interest for such day.

4.3.     Interest After Default.

                  To the extent permitted by Law, upon the occurrence and during
         the continuance of an Event of Default, and after expiration of any
         applicable grace period, (a) the Letter of Credit Fee applicable
         pursuant to Section 2.9(c) shall be increased by 2% per annum until
         paid in full (before and after judgment), (b) each Loan shall
         thereafter bear interest at a rate per annum equal to 2% above the
         applicable Base Rate Option until paid in full (before and after
         judgment), and (c) each other obligation hereunder, if not paid when
         due, shall bear interest at a rate per annum equal to the sum of the
         rate of interest applicable under the Revolving Credit Base Rate Option
         plus an additional 2% per annum from the time such obligation becomes
         due and payable until paid in full (before and after judgment), payable
         on demand. The Borrowers acknowledge that such increased interest rate
         reflects, among other things, the fact that such Loans or other amounts
         have become a substantially greater risk given their default status and
         that the Banks are entitled to additional compensation for such risk.

4.4.     Euro-Rate Unascertainable.

                  If:

(a)      on any date on which a Euro-Rate would otherwise be determined, the
         Agent shall have determined (which determination shall be conclusive
         absent manifest error) that:

                           (i) adequate and reasonable means do not exist for
         ascertaining such Euro-Rate, or

                           (ii) a contingency has occurred which materially and
         adversely affects the London interbank market; or

(b)      at any time any Bank shall have determined (which determination shall
         be conclusive absent manifest error) that:

                           (i) the making, maintenance or funding of any Loan to
         which the Euro-Rate Option applies has been made impracticable or
         unlawful by compliance by such Bank in good faith with any Law or any
         interpretation or application thereof by any Official Body or with any
         request or directive of any such Official Body (whether or not having
         the force of Law), or

                           (ii) the Euro-Rate Option will not adequately and
         fairly reflect the cost to such Bank of the establishment or
         maintenance of any Loan, or if any Bank determines after making all
         reasonable efforts that deposits of the relevant amount in Dollars for
         the relevant Euro-Rate Interest Period for a Loan to which the
         Euro-Rate Option applies are not available to such Bank in the London
         interbank market,



                                     - 42 -
<PAGE>   43


         then, in the case of any event specified in subsection (a) above, the
         Agent shall promptly so notify the Banks and the Borrowers thereof; and
         in the case of an event specified in subsection (b) above, such Bank
         shall promptly so notify the Agent and attach a certificate to such
         notice as to the specific circumstances of such notice, and the Agent
         shall promptly send copies of such notice and certificate to the other
         Banks and the Borrowers. Upon such date as shall be specified in such
         notice (which shall not be earlier than the date such notice is given),
         the obligation of (A) the Banks, in the case of such notice given by
         the Agent, or (B) such Bank, in the case of such notice given by such
         Bank, to allow the Borrowers to select, convert to or renew the
         Euro-Rate Option shall be suspended until the Agent shall have later
         notified the Borrowers, or such Bank shall have later notified the
         Agent, of the Agent's or such Bank's, as the case may be, determination
         (which determination shall be conclusive absent manifest error) that
         the circumstances giving rise to such previous determination no longer
         exist. If at any time the Agent makes a determination under subsection
         (a) of this Section 4.4 or any Bank notifies the Agent of a
         determination under subsection (b) of this Section 4.4 and, in either
         case, the Borrowers have previously notified the Agent of their
         selection of, conversion to or renewal of the Euro-Rate Option and such
         Euro-Rate Option has not yet gone into effect, such notification shall
         be deemed to provide for selection of, conversion to or renewal of the
         Base Rate Option otherwise available with respect to such Loans. If any
         Bank notifies the Agent of a determination under subsection (b) of this
         Section 4.4, the Borrowers shall, subject to the Borrowers'
         indemnification obligations under Section 5.5(b), as to any Loan of the
         Bank to which the Euro-Rate Option applies, on the date specified in
         such notice either convert such Loan to the Base Rate Option otherwise
         available with respect to such Loan or prepay such Loan in accordance
         with Section 5.4. Absent due notice from the Borrowers of conversion or
         prepayment, such Loan shall automatically be converted to the Base Rate
         Option otherwise available with respect to such Loan upon such
         specified date.

4.5.     Selection of Interest Rate Options

                  If the Borrowers fail to select a Euro-Rate Interest Period in
         accordance with the provisions of Section 4.2 in the case of renewal of
         the Euro-Rate Portion, the Borrowers shall be deemed to have converted
         such Loan or option thereof to the Base Rate Option otherwise available
         with respect to such Loans, commencing upon the last day of that
         Euro-Rate Interest Period. If an Event of Default shall occur and be
         continuing, the Agent shall limit the Borrowers to the Base Rate Option
         hereunder; provided, however, that, unless the Loans have been
         accelerated hereunder, such limitation with respect to the Euro-Rate
         Portion shall not be effective until the expiration of any applicable
         Euro-Rate Interest Period.

                                  5. PAYMENTS

5.1.     Payments.

                  All payments and prepayments to be made in respect of
         principal, interest, Commitment Fees, Letter of Credit Fees, Agent's
         Fees or other amounts due from the Borrowers hereunder (other than the
         fees and expenses referenced in Section 2.9(c) which are to be paid to
         the Issuing Letter of Credit Bank as provided in such Section) shall be
         payable prior to



                                     - 43 -
<PAGE>   44


         11:00 a.m., Cincinnati time (or 3:00 p.m., Cincinnati time, in the
         event payments are to be made using the proceeds of Loans to be made on
         such date), on the date when due without presentment, demand, protest
         or notice of any kind, all of which are hereby expressly waived by the
         Borrowers, and without set-off, counterclaim or other deduction of any
         nature, and an action therefor shall immediately accrue. Such payments
         shall be made to the Agent at the Principal Office for the account of
         PNC with respect to the Swing Loans and the ratable accounts of the
         Banks with respect to the Revolving Credit Loans and Term Loans in U.S.
         Dollars and in immediately available funds, and the Agent shall
         promptly distribute such amounts to the Banks in immediately available
         funds, subject to the provisions of Section 5.6; provided that in the
         event payments are received by 11:00 a.m., Cincinnati time, by the
         Agent with respect to the Revolving Credit Loans on the Settlement Date
         and such payments are not distributed to the Banks on the same day
         received by the Agent, the Agent shall pay the Banks the Federal Funds
         Effective Rate with respect to the amount of such payments for each day
         held by the Agent and not distributed to the Banks. The Agent's and
         each Bank's statement of account, ledger or other relevant record
         shall, in the absence of manifest error, be conclusive as the statement
         of the amount of principal of and interest on the Loans and other
         amounts owing under this Agreement and shall be deemed an "account
         stated."

                  The Loan Parties hereby authorize the Agent to charge any
         account designated by the Loan Parties related to the Money Management
         Arrangements or any deposit account maintained by the Loan Parties,
         individually or jointly with others, with PNC for any payment when due
         under this Agreement or the other Loan Documents. Payments received
         will be applied to charges, fees and expenses (including attorneys'
         fees), accrued interest and principal in such order as the Agent may
         elect in its sole discretion. In the event there are insufficient
         balances in the designated accounts related to the Money Management
         Arrangements to pay any charges, fees and expenses (including
         attorneys' fees), accrued interest and principal, as any of the same
         shall become due, PNC may advance funds as provided in Section
         2.6(b)(ii) to the extent there is availability under the Swing Loan
         Commitment. Otherwise, any such amounts shall be immediately due and
         payable by the Borrowers.

5.2.     Pro Rata Treatment of the Banks.

                  Each borrowing, and each selection of, conversion to or
         renewal of any Interest Rate Option and each payment or prepayment by
         the Borrowers with respect to principal, interest, Commitment Fees,
         Letter of Credit Fees or other fees (except for the Agent's Fees or any
         Issuing Letter of Credit Bank's fees) or amounts due from the Borrowers
         hereunder to the Banks with respect to the Revolving Credit Loans and
         Term Loans, shall (except as provided in Section 4.4(b), 5.4 or 5.5) be
         made in proportion to the Revolving Credit Loans and Term Loans
         outstanding from each Bank and, if no Revolving Credit Loans or Term
         Loans are then outstanding, in proportion to the Ratable Share of each
         Bank.

5.3.     Interest Payment Dates.

                  Interest on Loans to which the Base Rate Option applies shall
         be due and payable in arrears on the first Business Day of each July,
         October, January and April after the date hereof,



                                     - 44 -
<PAGE>   45


         on the Revolving Credit Expiration Date (with respect to Revolving
         Credit Loans and Swing Loans), on the Term Loan Maturity Date (with
         respect to Term Loans) and upon any earlier acceleration of the Notes.
         Interest on the Euro-Rate Portion shall be due and payable on the last
         day of each Euro-Rate Interest Period and, if any such Euro-Rate
         Interest Period is longer than three (3) months, also on the ninetieth
         (90th) day of such Euro-Rate Interest Period, on the Revolving Credit
         Expiration Date (with respect to Revolving Credit Loans), on the Term
         Loan Maturity Date (with respect to Term Loans) and upon any earlier
         acceleration of the Notes.

5.4.     Prepayments.

(a)      The Borrowers shall have the right at their option from time to time to
         prepay the Loans in whole or part without premium or penalty (except as
         provided in subsection (b) below or in Section 5.5):

                           (i) at any time with respect to any Swing Loan or any
         other Loan to which the Base Rate Option applies;

                           (ii) on the last day of the applicable Euro-Rate
         Interest Period with respect to Revolving Credit Loans or Term Loans to
         which the Euro-Rate Option applies; and

                           (iii) on the date specified in a notice by any Bank
         pursuant to Section 4.4(b) with respect to any Revolving Credit Loan or
         Term Loan to which the Euro-Rate Option applies.

                  Whenever the Borrowers desire to prepay any part of the Loans,
         they shall provide a prepayment notice to the Agent, at least one (1)
         Business Day prior to the date of prepayment of Revolving Credit Loans
         or Term Loans or no later than 3:00 p.m., Cincinnati time, on the date
         of prepayment of Swing Loans, setting forth the following information:

                                    (x)     the date, which shall be a Business
                                            Day, on which the proposed
                                            prepayment is to be made; and

                                    (y)     the total principal amount of such
                                            prepayment, which shall not be less
                                            than $100,000 for any Swing Loan or
                                            $1,000,000 for any Revolving Credit
                                            Loan or Term Loan.

                  All prepayment notices shall be irrevocable. The principal
         amount of the Loans to which the Euro-Rate Option applies for which a
         prepayment notice is given, together with interest on such principal
         amount and any related fees, shall be due and payable on the date
         specified in such prepayment notice as the date on which the proposed
         prepayment is to be made. The principal amount of the Loans to which
         the Base Rate Option applies for which a prepayment notice is given
         shall be due and payable on the date specified in such prepayment
         notice as the date on which the proposed prepayment is made; but
         interest on such principal amount and any related fees shall be due and
         payable on the next scheduled Interest Payment Date. All prepayments
         permitted pursuant to this Section 5.4(a) shall be applied to the
         unpaid installments of principal of the Loans in the inverse order of
         scheduled maturities. Unless



                                     - 45 -
<PAGE>   46


         otherwise specified by the Borrowers with respect to prepayments of the
         Euro-Rate Portion permitted under this Section 5.4(a)(ii) or (iii)
         above, all prepayments shall be applied first to the Base Rate Portion
         and then to the Euro-Rate Portion, subject to Section 5.5(b).

(b)      In the event any Bank (i) gives notice under Section 4.4(b) or Section
         5.5(a), (ii) does not fund Loans because the making of such Loans would
         contravene any Law applicable to such Bank pursuant to Section 7.2, or
         (iii) becomes subject to the control of an Official Body (other than
         normal and customary supervision), then the Borrowers shall have the
         right at their option, with the consent of the Agent, which shall not
         be unreasonably withheld, to prepay the Loans of such Bank in whole,
         together with all interest accrued thereon, within ninety (90) days
         after (w) receipt of such Bank's notice under Section 4.4(b) or 5.5(a),
         (x) the date such Bank has failed to fund Loans pursuant to Section 7.2
         because the making of such Loans would contravene Law applicable to
         such Bank, (y) the date of obtaining the consent which such Bank has
         not approved, or (z) the date such Bank became subject to the control
         of an Official Body, as applicable; provided that the Borrowers shall
         also pay to such Bank at the time of such prepayment any amounts
         required under Section 5.4(a) and Section 5.5 and any accrued interest
         due on such amount and any related fees; provided, however, that the
         Revolving Credit Commitment of such Bank shall be provided by one or
         more of the remaining Banks or a replacement bank acceptable to the
         Agent and the Borrowers in the exercise of their reasonable discretion;
         and provided, further, the remaining Banks shall have no obligation
         hereunder to increase their Revolving Credit Commitments.
         Notwithstanding the foregoing, the Agent may be replaced only in
         accordance with Section 10.14, and the Agent must at all times be a
         Bank hereunder.

(c)      Whenever the Revolving Facility Usage minus the Eligible Development
         Costs exceeds the Borrowing Base, the Co-Borrowers shall make, within
         three (3) Business Days after the Co-Borrowers learn of such excess and
         whether or not the Agent has given notice to such effect, a mandatory
         prepayment of principal equal to the excess of the Revolving Facility
         Usage minus the Eligible Development Costs over the Borrowing Base,
         together with accrued interest on such principal amount at the default
         rate set forth in Section 4.3.

5.5.     Additional Compensation in Certain Circumstances.

(a)      Increased Costs or Reduced Return Resulting From Taxes, Reserves,
         Capital Adequacy Requirements, Expenses, Etc.

                           If any Law, guideline or interpretation, or any
         change in any Law, guideline or interpretation or the application
         thereof by any Official Body charged with the interpretation or
         administration thereof, or compliance with any request or directive
         (whether or not having the force of Law) of any central bank or other
         Official Body:

                                    (i) subjects any Bank to any tax or changes
         the basis of taxation with respect to this Agreement, the Notes, the
         Loans or payments by the Borrowers of principal, interest, Commitment
         Fees, Letter of Credit Fees, Agent's Fees or other amounts due from the
         Borrowers hereunder or under the Notes (except for taxes on the overall
         net income of such Bank),


                                     - 46 -
<PAGE>   47


                                    (ii) imposes, modifies or deems applicable
         any reserve, special deposit or similar requirement against credits or
         commitments to extend credit extended by, or assets (funded or
         contingent) of, deposits with or for the account of, or other
         acquisitions of funds by, any Bank, or

                                    (iii) imposes, modifies or deems applicable
         any capital adequacy or similar requirement (A) against assets (funded
         or contingent) of, or credits or commitments to extend credit extended
         by, any Bank, or (B) otherwise applicable to the obligations of any
         Bank under this Agreement,

         and the result of any of the foregoing is to increase the cost to,
         reduce the income receivable by or impose any expense (including loss
         of margin) upon any Bank with respect to this Agreement, the Notes or
         the making, maintenance or funding of any part of the Loans (or, in the
         case of any capital adequacy or similar requirement, to have the effect
         of reducing the rate of return on the capital of such Bank or such
         Bank's parent, taking into consideration the customary policies of such
         Bank or such Bank's parent with respect to capital adequacy) by an
         amount which such Bank in its sole discretion deems to be material,
         such Bank shall from time to time notify in writing the Borrowers and
         the Agent of the amount determined in good faith (using any averaging
         and attribution methods employed in good faith) by such Bank (which
         determination shall be conclusive absent manifest error) to be
         necessary to compensate such Bank for such increase in cost, reduction
         of income or additional expense, provided that a Bank shall not give
         the Borrowers notice hereunder unless the Bank is generally imposing
         such increased costs on its similarly situated customers. Such notice
         shall set forth in reasonable detail the basis for such determination.
         Such amount shall be due and payable by the Borrowers to such Bank
         within thirty (30) calendar days after such notice is given.

(b)      Indemnity.

                           In addition to the compensation required by
         subsection (a) of this Section 5.5, the Borrowers shall indemnify each
         Bank against all liabilities, losses or expenses (including loss of
         margin and any loss or expense incurred in liquidating or employing
         deposits from third parties, including any loss or expense incurred in
         connection with funds acquired by a Bank to fund or maintain Loans
         subject to the Euro-Rate Option) which such Bank sustains or incurs
         hereunder as a result of any:

                                    (i) payment, prepayment, conversion or
         renewal of any Loan to which the Euro-Rate Option applies on a day
         other than the last day of the corresponding Euro-Rate Interest Period
         (whether or not such payment, prepayment, conversion or renewal is
         mandatory, voluntary or automatic and whether or not such payment or
         prepayment is then due);

                                    (ii) attempt by the Borrowers to revoke
         (expressly, by later inconsistent notices or otherwise) in whole or
         part any notice relating to Loan Requests under Section 2.5 or
         voluntary prepayments under Section 5.4; or

                                    (iii) default by the Borrowers in the
         performance or observance of any covenant or condition contained in
         this Agreement or any other Loan Document, including any



                                     - 47 -
<PAGE>   48


         failure of the Borrowers to pay when due (by acceleration or otherwise)
         any principal, interest, Commitment Fees, Letter of Credit Fees,
         Agent's Fees or any other amount due hereunder.

                  Notwithstanding the foregoing, nothing in the foregoing
         Section 5.5(b)(i), (ii) or (iii) shall be construed to permit the
         Borrowers to engage in any action otherwise prohibited hereunder. If
         any Bank sustains or incurs any such loss or expense, it shall from
         time to time notify the Borrowers of the amount determined in good
         faith by such Bank (which determination shall be conclusive absent
         manifest error and may include such assumptions, allocations of costs
         and expenses and averaging or attribution methods as such Bank shall
         deem reasonable) to be necessary to indemnify such Bank for such loss
         or expense. Such notice shall set forth in writing in reasonable detail
         the basis for such determination. Such amount shall be due and payable
         by the Borrowers to such Bank ten (10) Business Days after such notice
         is given.

5.6.     Settlement Date Procedures.

                  In order to minimize the transfer of funds between the Banks
         and the Agent, the Co-Borrowers may borrow, repay and reborrow Swing
         Loans, and PNC may make Swing Loans, as provided in Section 2.1(b)
         during the period between Settlement Dates. Not later than noon,
         Cincinnati time, on each Settlement Date, the Agent shall notify each
         Bank of its Ratable Share of the Loans (including both the Swing Loans
         made by the Agent and the Revolving Credit Loans made by the Banks).
         Prior to 3:00 p.m., Cincinnati time, on such Settlement Date, each Bank
         shall pay to the Agent the amount equal to the positive difference, if
         any, between its Ratable Share of the Revolving Credit Loans and Swing
         Loans and its Revolving Credit Loans, and the Agent shall pay to each
         Bank its Ratable Share of all payments made by the Co-Borrowers to the
         Agent with respect to the Revolving Credit Loans. The Agent shall also
         effect settlement in accordance with the foregoing sentence on the
         proposed Borrowing Dates for Revolving Credit Loans and may at its
         option effect settlement on any other Business Day. These settlement
         procedures are established solely as a matter of administrative
         convenience, and nothing contained in this Section 5.6 shall relieve
         the Banks of their obligation to fund Revolving Credit Loans on dates
         other than a Settlement Date pursuant to Section 2.7. The Agent may at
         any time at its option, for any reason whatsoever, require each Bank to
         pay immediately to the Agent such Bank's Ratable Share of the
         outstanding Revolving Credit Loans and Swing Loans (provided the
         principal amount of such Bank's Revolving Credit Loans shall not exceed
         its Revolving Credit Commitment), and each Bank may at any time require
         the Agent to pay immediately to such Bank its Ratable Share of all
         payments made by the Co-Borrowers to the Agent with respect to the
         Revolving Credit Loans.

                       6. REPRESENTATIONS AND WARRANTIES

6.1.     Representations and Warranties.

                  The Loan Parties jointly and severally represent and warrant
         to the Agent and each of the Banks as follows:

(a)      Organization and Qualification.



                                     - 48 -
<PAGE>   49


                           Each of the Loan Parties is a corporation or
         partnership duly organized, validly existing and in good standing under
         the laws of its jurisdiction of organization. Each Loan Party has the
         lawful power to own or lease its properties and to engage in the
         business it presently conducts or proposes to conduct. Each Loan Party
         is duly licensed or qualified and in good standing in each jurisdiction
         listed on Schedule 6.1(a) hereto. Schedule 6.1(a) lists all of the
         jurisdictions where the property owned or leased by it or the nature of
         the business transacted by it or both make such licensing or
         qualification necessary.

(b)      Capitalization and Ownership.

                           The authorized capital stock of Zaring Homes consists
         of 18,000,000 shares of common stock, 1,000,000 shares of voting
         preferred stock and 1,000,000 shares of nonvoting preferred stock. As
         of the date hereof, the number of issued and outstanding shares of
         preferred stock is set forth on Schedule 6.1(b). The authorized capital
         stock of Zaring Holdings consists of 850 shares of common stock. As of
         the date hereof, the number of issued and outstanding shares of common
         and preferred stock is set forth on Schedule 6.1(b). As of the date
         hereof, Hearthside has 100 units outstanding; 99 units are owned by
         Zaring National and 1 unit is owned by Zaring Holding. All of the
         issued and outstanding capital stock of Zaring Homes and Zaring
         Holdings is owned by Zaring National. Allen G. Zaring, III and Anne M.
         Zaring, directly or indirectly, own the issued and outstanding shares
         of common stock of Zaring National set forth on Schedule 6.1(b). There
         are no options, warrants or other rights outstanding to purchase any
         such shares except as indicated on Schedule 6.1(b).

(c)      Subsidiaries.

                           Schedule 6.1(c) states the name of each of the
         Borrowers' Subsidiaries, its jurisdiction of incorporation, its
         authorized capital stock, the issued and outstanding shares (referred
         to herein as the "Subsidiary Shares") and the owners thereof if it is a
         corporation and its outstanding partnership interests (the "Partnership
         Interests") if it is a partnership. Each Borrower and each Subsidiary
         of each Borrower has good and marketable title to all of the Subsidiary
         Shares and Partnership Interests it purports to own, free and clear in
         each case of any Lien. All Subsidiary Shares and Partnership Interests
         have been validly issued, and all Subsidiary Shares are fully paid and
         nonassessable. All capital contributions in connection with the
         issuance of the Partnership Interests have been made or paid, as the
         case may be. There are no options, warrants or other rights outstanding
         to purchase any such Subsidiary Shares or Partnership Interests except
         as indicated on Schedule 6.1(c).

(d)      Power and Authority.

                           Each Loan Party has full corporate or partnership or
         other power to enter into, execute, deliver and carry out this
         Agreement and the other Loan Documents to which it is a party, to incur
         the Indebtedness contemplated by the Loan Documents and to perform its
         obligations under the Loan Documents to which it is a party, and all
         such actions have been duly authorized by all necessary proceedings on
         its part.

(e)      Validity and Binding Effect.


                                     - 49 -
<PAGE>   50


                           This Agreement on the date hereof has been, and each
         other Loan Document to which it is a party on the date on which it is
         required to be executed and delivered pursuant hereto shall have been,
         duly and validly executed and delivered by each of the Loan Parties.
         This Agreement and each of the other Loan Documents delivered by the
         Loan Parties pursuant to the provisions hereof will constitute legal,
         valid and binding obligations of each of the Loan Parties, enforceable
         against each of the Loan Parties in accordance with their respective
         terms, except to the extent that enforceability of any of the foregoing
         Loan Documents may be limited by bankruptcy, insolvency,
         reorganization, moratorium or other similar laws affecting the
         enforceability of creditors' rights generally or limiting the right of
         specific performance.

(f)      No Conflict.

                           Neither the execution and delivery of this Agreement
         or the other Loan Documents by the Loan Parties nor the consummation of
         the transactions herein or therein contemplated or compliance with the
         terms and provisions hereof or thereof by them will conflict with,
         constitute a default under or result in any breach of (i) the terms and
         conditions of the certificate of incorporation, bylaws or other
         organizational documents of any of the Loan Parties or (ii) any Law or
         any material agreement or instrument or order, writ, judgment,
         injunction or decree to which any of the Loan Parties is a party or by
         which it is bound or to which it is subject, or result in the creation
         or enforcement of any Lien, charge or encumbrance whatsoever upon any
         property (now or hereafter acquired) of any of the Loan Parties.

(g)      Litigation.

                           There are no actions, suits, proceedings or
         investigations pending or, to the knowledge of any of the Loan Parties,
         threatened against any of the Loan Parties at law or equity before any
         Official Body which individually or in the aggregate could reasonably
         be expected to result in any Material Adverse Change. None of the Loan
         Parties is in violation of any order, writ, injunction or decree of any
         Official Body which may result in any Material Adverse Change.

(h)      Title to Properties.

                           Each of the Loan Parties has good and marketable
         title to or valid leasehold interest in all properties, assets and
         other rights which it purports to own or lease or which are reflected
         as owned or leased on its books and records, free and clear of all
         Liens and encumbrances except Permitted Liens, and subject to the terms
         and conditions of the applicable leases. All leases of property are in
         full force and effect. Promptly upon request by the Agent, the
         Borrowers will provide to the Agent and the Banks a list of all real
         property owned or leased by each of the Loan Parties.

(i)      Financial Statements.

                                    (A) Historical Statements. Zaring Homes has
         delivered to the Agent copies of its audited year-end financial
         statements for and as of the end of the three (3) fiscal years ended
         December 31, 1994 - 1996 and Zaring National has delivered to the Agent



                                     - 50 -
<PAGE>   51


         copies of its audited year-end financial statements for and as of the
         end of the two (2) fiscal years ended December 31, 1997 - 1998
         (collectively, the "Historical Statements"). The Historical Statements
         were compiled from the books and records maintained by Zaring Homes' or
         Zaring National's, as applicable, management, are correct and complete
         in all material respects and fairly represent the consolidated
         financial condition of Zaring Homes or Zaring National, as applicable,
         as of their dates and the results of operations for the fiscal periods
         then ended, and have been prepared in accordance with GAAP consistently
         applied.

                                    (B) Financial Projections. The Co-Borrowers
         (with respect to the Co-Borrowers and their Subsidiaries) have
         delivered to the Agent financial projections for the fiscal year ending
         December 31, 1999 derived from assumptions of the Co-Borrowers'
         management (collectively, the "Financial Projections"). The Financial
         Projections represent a reasonable range of possible results (predicted
         to be within such range and not at an exact numerical level) in light
         of the history of the business, present and foreseeable conditions and
         the intentions of the Co-Borrowers' management. The Financial
         Projections with respect to the Co-Borrowers accurately reflect the
         liabilities of the Co-Borrowers upon the consummation of the
         transactions contemplated hereby as of the Closing Date.

                                    (C) Accuracy of Financial Statements.
         Neither Zaring Homes nor Zaring National has any material liabilities,
         contingent or otherwise, or forward or long-term material commitments
         that are not disclosed in the Historical Statements or in the notes
         thereto, and except as disclosed therein, there are no unrealized or
         anticipated losses from any commitments of Zaring Homes or Zaring
         National which may cause a Material Adverse Change. Since December 31,
         1998, no Material Adverse Change has occurred.

(j)      Margin Stock.

                           None of the Loan Parties engages or intends to engage
         principally, or as one of its important activities, in the business of
         extending credit for the purpose, immediately, incidentally or
         ultimately, of purchasing or carrying margin stock (within the meaning
         of Regulation U). No part of the proceeds of any Loan has been or will
         be used, immediately, incidentally or ultimately, to purchase or carry
         any margin stock or to extend credit to others for the purpose of
         purchasing or carrying any margin stock or to refund Indebtedness
         originally incurred for such purpose, or for any purpose which entails
         a violation of or which is inconsistent with the provisions of the
         regulations of the Board of Governors of the Federal Reserve System.
         None of the Loan Parties holds or intends to hold margin stock in such
         amounts that more than 25% of the reasonable value of the assets of
         such Loan Party are or will be represented by margin stock.

(k)      Full Disclosure.

                           Neither this Agreement nor any other Loan Document,
         nor any certificate, statement, agreement or other document furnished
         to the Agent or any Bank by the Loan Parties in connection herewith or
         therewith, contains any untrue statement of a material fact or omits to
         state a material fact necessary in order to make the statements of the
         Loan Parties contained herein and therein, in light of the
         circumstances under which they were made, not misleading.


                                     - 51 -
<PAGE>   52


(l)      Taxes.

                           All federal, state, local and other tax returns
         required to have been filed with respect to each Loan Party have been
         filed, and payment or adequate provision for the payment of all taxes,
         fees, assessments and other governmental charges which have or may
         become due pursuant to said returns or to assessments received has been
         made, except to the extent that such taxes, fees, assessments and other
         charges are being contested in good faith by appropriate proceedings
         diligently conducted and for which such reserves or other appropriate
         provisions, if any, as shall be required by GAAP shall have been made.
         There are no agreements or waivers extending the statutory period of
         limitations applicable to any federal income tax return of any Loan
         Party for any period.

(m)      Consents and Approvals.

                           No consent, approval, exemption, order or
         authorization of, or a registration or filing with, any Official Body
         or any other person is required by any Law or any agreement in
         connection with, the execution, delivery and carrying out of this
         Agreement and the other Loan Documents by the Loan Parties, except as
         listed on Schedule 6.1(m) attached hereto, all of which shall have been
         obtained or made on or prior to the Closing Date.

(n)      No Event of Default; Compliance With Instruments.

                           No event has occurred and is continuing and no
         condition exists or will exist after giving effect to the borrowings to
         be made on the Closing Date under the Loan Documents which constitutes
         an Event of Default or Potential Default. None of the Loan Parties is
         in violation of (i) any term of its certificate of incorporation,
         bylaws or other organizational documents or (ii) any material agreement
         or instrument to which it is a party or by which it or any of its
         properties may be subject or bound where such violation would
         constitute a Material Adverse Change.

(o)      Patents, Trademarks, Copyrights, Licenses, Etc.

                           Each Loan Party owns or possesses all the material
         patents, trademarks, service marks, trade names, copyrights, licenses,
         registrations, franchises, permits and rights necessary to own and
         operate its properties and to carry on its business as presently
         conducted and planned to be conducted by such Loan Party, without known
         conflict with the rights of others. All material patents, trademarks,
         service marks, trade names, copyrights, licenses, registrations,
         franchises and permits of each Loan Party are listed and described on
         Schedule 6.1(o) hereto.

(p)      Insurance.

                           Schedule 6.1(p) hereto lists all insurance policies
         and other bonds to which any of the Loan Parties is a party, all of
         which are valid and in full force and effect. No notice has been given
         or claim made and no grounds exist to cancel or avoid any of such
         policies or bonds or to reduce the coverage provided thereby. Such
         policies and bonds provide coverage in



                                     - 52 -
<PAGE>   53


         amounts sufficient to insure the assets and risks of each of the Loan
         Parties in accordance with prudent business practice in the industry of
         such Loan Parties.

(q)      Compliance With Laws.

                           Each of the Loan Parties is in compliance in all
         material respects with all applicable Laws (other than Environmental
         Laws, which are specifically addressed in subsection (v)) in all
         jurisdictions in which such Loan Party is presently or will be doing
         business, except where the failure to do so would not constitute a
         Material Adverse Change.

(r)      Material Contracts.

                           Promptly upon request by the Agent, the Borrowers
         will provide to the Agent and the Banks a list of all material
         contracts relating to the business operations of the Loan Parties,
         including, without limitation, all employee benefit plans, employment
         agreements, collective bargaining agreements and labor contracts (the
         "Labor Contracts"). Each material contract to which a Loan Party is a
         party is valid, binding and enforceable upon each of the Loan Parties
         and other persons which is a party thereto in accordance with its
         respective terms, and there is no default thereunder, to any of the
         Loan Parties' knowledge, with respect to parties other than the Loan
         Parties, except to the extent that any such default does not impair the
         practical realization by the Loan Parties of the benefits from such
         contract.

(s)      Investment Companies.

                           None of the Loan Parties is an "investment company"
         registered or required to be registered under the Investment Company
         Act of 1940, as such term is defined in the Investment Company Act of
         1940, and shall not become such an "investment company."

(t)      Plans and Benefit Arrangements.

                                    (i) The Borrowers and each member of the
         ERISA Group are in compliance in all material respects with any
         applicable provisions of ERISA with respect to all Benefit
         Arrangements, Plans and Multiemployer Plans. There has been no
         Prohibited Transaction with respect to any Benefit Arrangement or any
         Plan or, to the best knowledge of the Borrowers, with respect to any
         Multiemployer Plan or Multiple Employer Plan which could result in any
         material liability of the Borrowers or any other member of the ERISA
         Group. The Borrowers and all members of the ERISA Group have made when
         due any and all payments required to be made under any agreement
         relating to a Multiemployer Plan or a Multiple Employer Plan or any Law
         pertaining thereto. With respect to each Plan and Multiemployer Plan,
         the Borrowers and each member of the ERISA Group (i) have fulfilled in
         all material respects their obligations under the minimum funding
         standards of ERISA, (ii) have not incurred any liability to the PBGC,
         and (iii) have not had asserted against them any penalty for failure to
         fulfill the minimum funding requirements of ERISA.

                                    (ii) To the best of each Borrower's
         knowledge, each Multiemployer Plan and Multiple Employer Plan is able
         to pay benefits thereunder when due.


                                     - 53 -
<PAGE>   54


                                    (iii) No Borrower or any other member of the
         ERISA Group has instituted or intends to institute proceedings to
         terminate any Plan.

                                    (iv) No event requiring notice to the PBGC
         under Section 302(f)(4)(A) of ERISA has occurred or is reasonably
         expected to occur with respect to any Plan, and no amendment with
         respect to which security is required under Section 307 of ERISA has
         been made or is reasonably expected to be made to any Plan.

                                    (v) The aggregate actuarial present value of
         all benefit liabilities (whether or not vested) under each Plan,
         determined on a plan termination basis, as disclosed in, and as of the
         date of, the most recent actuarial report for such Plan, does not
         exceed the aggregate fair market value of the assets of such Plan.

                                    (vi) No Borrower or any other member of the
         ERISA Group has incurred or reasonably expects to incur any material
         withdrawal liability under ERISA with respect to any Multiemployer Plan
         or Multiple Employer Plan. No Borrower or any other member of the ERISA
         Group has been notified by any Multiemployer Plan or Multiple Employer
         Plan that such Multiemployer Plan or Multiple Employer Plan has been
         terminated, within the meaning of Title IV of ERISA, and to the best
         knowledge of each Borrower, no Multiemployer Plan or Multiple Employer
         Plan is reasonably expected to be reorganized or terminated, within the
         meaning of Title IV of ERISA.

                                    (vii) To the extent that any Benefit
         Arrangement is insured, the Borrowers and all members of the ERISA
         Group have paid when due all premiums required to be paid for all
         periods through and including the Closing Date. To the extent that any
         Benefit Arrangement is funded other than with insurance, the Borrowers
         and all members of the ERISA Group have made when due all contributions
         required to be paid for all periods through and including the Closing
         Date.

                                    (viii) All Plans, Benefit Arrangements and
         Multiemployer Plans have been administered in accordance with their
         terms and applicable Law in all material respects.

(u)      Employment Matters.

                           Each of the Loan Parties is in compliance with the
         Labor Contracts and all applicable federal, state and local labor and
         employment Laws, including, but not limited to, those related to equal
         employment opportunity and affirmative action, labor relations, minimum
         wage, overtime, child labor, medical insurance continuation, worker
         adjustment and relocation notices, immigration controls and worker and
         unemployment compensation, where the failure to comply would constitute
         a Material Adverse Change. There are no outstanding grievances,
         arbitration awards or appeals therefrom arising out of the Labor
         Contracts or current or threatened strikes, picketing, handbilling or
         other work stoppages or slowdowns at facilities of any Loan Party which
         in any case would constitute a Material Adverse Change. The Borrowers
         have delivered to the Agent true and correct copies of each of the
         Labor Contracts.

(v)      Environmental Matters.


                                     - 54 -
<PAGE>   55


                           Except as disclosed on Schedule 6.1(v) hereto:

                                    (i) None of the Loan Parties has received
         any Environmental Complaint from any Official Body or private person
         alleging that any Loan Party or any prior or subsequent owner of the
         Property is a potentially responsible party under the Comprehensive
         Environmental Response, Cleanup, and Liability Act, 42 U.S.C. Section
         9601 et seq., and each Loan Party has no reason to believe that such an
         Environmental Complaint might be received. There are no pending or, to
         any Loan Party's knowledge, threatened Environmental Complaints
         relating to any Loan Party or, to any Loan Party's knowledge, any prior
         or subsequent owner of the Property pertaining to, or arising out of,
         any Environmental Conditions, except for Environmental Complaints which
         are not reasonably likely to result in a Material Adverse Change.

                                    (ii) Except for conditions, violations or
         failures which individually or in the aggregate are not reasonably
         likely to result in a Material Adverse Change, to the knowledge of the
         Loan Parties, there are no circumstances at, on or under the Property
         that constitute a breach of or noncompliance with any of the
         Environmental Laws, and there are no past or present Environmental
         Conditions at, on or under the Property or, to any Loan Party's
         knowledge, at, on or under adjacent property that prevent compliance
         with the Environmental Laws at the Property.

                                    (iii) Neither the Property nor any
         structures, improvements, equipment, fixtures, activities or facilities
         thereon or thereunder contain or use Regulated Substances except in
         compliance with Environmental Laws. There are no processes, facilities,
         operations, equipment or any other activities at, on or under the
         Property or, to any Loan Party's knowledge, at, on or under adjacent
         property that currently result in the release or threatened release of
         Regulated Substances onto the Property, except to the extent that such
         releases or threatened releases are not a breach of or otherwise not a
         violation of the Environmental Laws or are not likely to result in a
         Material Adverse Change.

                                    (iv) There are no aboveground storage tanks,
         underground storage tanks or underground piping associated with such
         tanks used for the management of Regulated Substances at, on or under
         the Property that (a) do not have, to the extent required by
         Environmental Laws, a full operational secondary containment system in
         place and (b) are not otherwise in compliance with all Environmental
         Laws. There are no abandoned underground storage tanks or underground
         piping associated with such tanks previously used for the management of
         Regulated Substances at, on or under the Property that have not either
         been closed in place in accordance with Environmental Laws or removed
         in compliance with all applicable Environmental Laws, and no
         contamination associated with the use of such tanks exists on the
         Property that is not in compliance with Environmental Laws.

                                    (v) Each Loan Party has all material
         permits, licenses, authorizations, plans and approvals necessary under
         the Environmental Laws for the conduct of the business of such Loan
         Party as presently conducted. Each Loan Party has submitted all
         material notices, reports and other filings required by the
         Environmental Laws to be submitted to an Official Body



                                     - 55 -
<PAGE>   56


         which pertain to past and current operations on the Property.

                                    (vi) Except for violations which
         individually or in the aggregate are not likely to result in a Material
         Adverse Change, all present and, to the knowledge of the Loan Parties,
         past on-site generation, storage, processing, treatment, recycling,
         reclamation, disposal or other use or management of Regulated
         Substances at, on or, to the knowledge of the Loan Parties, under the
         Property and all off-site transportation, storage, processing,
         treatment, recycling, reclamation, disposal or other use or management
         of Regulated Substances has been done in accordance with the
         Environmental Laws.

(w)      Senior Debt Status.

                           The obligations of each Loan Party under this
         Agreement, the Notes and the Guaranty Agreement, as applicable, to the
         Banks or Agent do rank and will rank at least pari passu in priority of
         payment and all other rights to all other Indebtedness of such Loan
         Party, except Indebtedness of any Loan Party secured by Permitted
         Liens. There is no lien upon or with respect to any of the properties
         or income of any Loan Party which secures Indebtedness or other
         obligations of any Person except for Permitted Liens.

(x)      Restricted Transactions.

                           Schedule 6.1(x) sets forth, as of the Closing Date,
         all Restricted Transactions, including a brief description and the
         amount of each Restricted Transaction.

6.2.     Updates to Schedules.

                  Should any of the information or disclosures provided on any
         of the Schedules attached hereto become outdated or incorrect in any
         material respect, the Borrowers shall promptly provide the Agent in
         writing with such revisions or updates to such Schedule as may be
         necessary or appropriate to update or correct the same; provided,
         unless any such Schedules have become outdated or incorrect in any
         material and adverse respect, the Borrowers may provide such revisions
         or updates on a quarterly basis at the same time as the Borrowers
         deliver their quarterly compliance certificate in accordance with
         Section 8.3(d); and provided, further, that no Schedule that has become
         outdated or incorrect in any material and adverse respect shall be
         deemed to have been amended, modified or superseded by any such
         correction or update, nor shall any breach of warranty or
         representation resulting from the inaccuracy or incompleteness of any
         such Schedule be deemed to have been cured thereby.

                            7. CONDITIONS OF LENDING

                  The obligation of the Agent and each Bank to make Loans or
         issue Letters of Credit hereunder on and after the Closing Date is
         subject to the performance by each of the Loan Parties of its
         obligations to be performed hereunder at or prior to the making of any
         such Loans and to the satisfaction of the following further conditions:


                                     - 56 -
<PAGE>   57


7.1.     Loans After the Closing Date.

                  On the Closing Date:

(a)      The representations and warranties of each of the Loan Parties
         contained in Article 6 hereof shall be true and accurate on and as of
         the Closing Date with the same effect as though such representations
         and warranties had been made on and as of such date (except
         representations and warranties which relate solely to an earlier date
         or time, which representations and warranties shall be true and correct
         on and as of the specific dates or times referred to therein), and each
         of the Loan Parties shall have performed and complied with all
         covenants and conditions hereof; no Event of Default or Potential
         Default under this Agreement shall have occurred and be continuing or
         shall exist; and there shall be delivered to the Agent for the benefit
         of each Bank a certificate of the Loan Parties, dated the Closing Date
         and signed by the Chief Executive Officer, President or Chief Financial
         Officer of each of the Loan Parties, to each such effect.

(b)      There shall be delivered to the Agent for the benefit of each Bank a
         certificate dated the Closing Date and signed by the Secretary or an
         Assistant Secretary of each of the Loan Parties, certifying as
         appropriate as to:

                           (i) all corporate or partnership action taken by such
         Loan Party in connection with this Agreement and the other Loan
         Documents;

                           (ii) the names of the officer or officers authorized
         to sign this Agreement and the other Loan Documents and the true
         signatures of such officer or officers, and specifying the Authorized
         Officers permitted to act on behalf of each Loan Party for purposes of
         this Agreement and the true signatures of such officers, on which the
         Agent and each Bank may conclusively rely; and

                           (iii) copies of its organizational documents,
         including its certificate of incorporation, bylaws or certificate of
         partnership or partnership agreement, as applicable, as in effect on
         the Closing Date certified by the appropriate state official where such
         documents are filed in a state office, together with certificates from
         the appropriate state officials as to the continued existence and good
         standing of each Loan Party in each state where organized or qualified
         to do business.

(c)      The Notes, the Guaranty Agreement and the Intercompany Subordination
         Agreement shall have been duly executed and delivered to the Agent for
         the benefit of the Banks. The parties expressly acknowledge that the
         Term Notes, the Revolving Credit Notes, the Guaranty Agreement and the
         Intercompany Subordination Agreement were executed and delivered in
         connection with the Original Credit Agreement (in the case of the Term
         Notes) or the Amended and Restated Credit Agreement (in the case of the
         Revolving Credit Notes, the Guaranty Agreement and the Intercompany
         Subordination Agreement) and that all such agreements remain in full
         force and effect without modification. On and after the Closing Date,
         without the need for any further actions or amendments, all references
         in the Term Notes, the Revolving Credit Notes, the Guaranty Agreement
         and the Intercompany Subordination Agreement to the Credit Agreement
         shall be deemed to refer to this Agreement, as it may be further
         amended, restated, supplemented



                                     - 57 -
<PAGE>   58


         or modified from time to time.

(d)      There shall be delivered to the Agent for the benefit of each Bank a
         written opinion of Frost & Jacobs, counsel for the Loan Parties (who
         may rely on the opinions of such other counsel as may be acceptable to
         the Agent), dated the Closing Date and in form and substance
         satisfactory to the Agent and its counsel:

                           (i) as to the matters set forth in Exhibit 7.1(d)
         hereto; and

                           (ii) as to such other matters incident to the
         transactions contemplated herein as the Agent may reasonably request.

(e)      All legal details and proceedings in connection with the transactions
         contemplated by the Agreement and the other Loan Documents shall be in
         form and substance satisfactory to the Agent and counsel for the Agent,
         and the Agent shall have received all such other counterpart originals
         or certified or other copies of such documents and proceedings in
         connection with such transactions, in form and substance reasonably
         satisfactory to the Agent and said counsel, as the Agent or said
         counsel may reasonably request.

(f)      The Borrowers shall pay, or cause to be paid, to the Agent for itself
         or for the account of the Banks, as applicable, to the extent not
         previously paid, the Facility Fees, any other fees payable on or before
         the Closing Date, as set forth in the Side Letters, and all other costs
         and expenses accrued through the Closing Date for which the Agent and
         the Banks are entitled to be reimbursed.

(g)      All material consents, including without limitation the consent of the
         holders of the Senior Notes, required to effectuate the transactions
         contemplated hereby as set forth on Schedule 6.1(m) shall have been
         obtained.

(h)      There shall be no Material Adverse Change in the Historical Statements
         or the Financial Projections (as defined in Section 6.1(i)) since their
         respective dates; since December 31, 1998, no Material Adverse Change
         in any of the Loan Parties shall have occurred; prior to the Closing
         Date, there shall be no material change in the management of the Loan
         Parties; and there shall be delivered, to the Agent for the benefit of
         each Bank, a certificate dated the Closing Date and signed by the Chief
         Executive Officer, President or Chief Financial Officer of the Loan
         Parties to each such effect.

(i)      The making of the Loans shall not contravene any Law applicable to the
         Loan Parties or any of the Banks.

(j)      No action, proceeding, investigation, regulation or legislation shall
         have been instituted, threatened or proposed before any court,
         governmental agency or legislative body to enjoin, restrain or
         prohibit, or to obtain damages in respect of, this Agreement or the
         consummation of the transactions contemplated hereby.

(k)      The Loan Parties shall deliver evidence acceptable to the Agent that
         adequate insurance in



                                     - 58 -
<PAGE>   59


         compliance with Section 8.1(c) is in full force and effect and that all
         premiums then due thereon have been paid, with additional insured and
         lender loss payable endorsements in form and substance satisfactory to
         the Agent and its counsel naming the Agent as additional insured and
         lender loss payee.

(l)      The Borrowers shall have delivered to the Agent for the benefit of the
         Banks a Borrowing Base Certificate for the calendar month of May and a
         Quarterly Compliance Certificate for the calendar quarter ending March
         31, 1999, certified by the Chief Executive Officer, President or Chief
         Financial Officer of the Borrowers in a form acceptable to the Agent.

7.2.     Each Additional Loan.

                  At the time of making any Loans or issuing any Letters of
         Credit other than Loans made or Letters of Credit issued on the Closing
         Date hereunder and after giving effect to the proposed borrowings: the
         representations and warranties of the Loan Parties contained in Article
         6 hereof shall be true on and as of the date of such additional Loan or
         Letter of Credit with the same effect as though such representations
         and warranties had been made on and as of such date (except
         representations and warranties which expressly relate solely to an
         earlier date or time, which representations and warranties shall be
         true and correct on and as of the specific dates or times referred to
         therein), and the Loan Parties shall have performed and complied with
         all covenants and conditions hereof; no Event of Default or Potential
         Default shall have occurred and be continuing or shall exist; the
         making of such Loan or the issuance of such Letter of Credit shall not
         contravene any Law applicable to the Loan Parties or any of the Banks;
         and the Borrowers shall have delivered to the Agent and, if applicable,
         the Issuing Letter of Credit Bank a duly executed and completed Loan
         Request or request for Letters of Credit, as applicable.

                                  8. COVENANTS

8.1.     Affirmative Covenants.

                  The Loan Parties, jointly and severally, covenant and agree
         that until payment in full of the Loans and interest thereon,
         termination or expiration of all of the Letters of Credit, satisfaction
         of all of the Loan Parties' other obligations hereunder and termination
         of the Revolving Credit Commitments, the Loan Parties shall comply at
         all times with the following affirmative covenants:

(a)      Preservation of Existence, Etc.

                           Each of the Loan Parties shall maintain its corporate
         or partnership existence and its license or qualification and good
         standing in each jurisdiction in which its ownership or lease of
         property or the nature of its business makes such license or
         qualification necessary.

(b)      Payment of Liabilities, Including Taxes, Etc.




                                     - 59 -
<PAGE>   60


                           Each of the Loan Parties shall duly pay and discharge
         all liabilities to which it is subject or which are asserted against
         it, promptly as and when the same shall become due and payable,
         including all taxes, assessments and governmental charges upon it or
         any of its properties, assets, income or profits, prior to the date on
         which penalties attach thereto, except to the extent that such
         liabilities, including taxes, assessments or charges, are being
         contested in good faith and by appropriate and lawful proceedings
         diligently conducted and for which such reserve or other appropriate
         provisions, if any, as shall be required by GAAP shall have been made,
         but only to the extent that failure to discharge any such liabilities
         would not result in any additional liability which would adversely
         affect to a material extent the financial condition of any Loan Party,
         provided that each Loan Party will pay all such liabilities forthwith
         upon the commencement of proceedings to foreclose any Lien which may
         have attached as security therefor.

(c)      Maintenance of Insurance.

                           Each Loan Party shall insure its properties and
         assets against loss or damage by fire and such other insurable hazards
         against which such assets are commonly insured (including fire,
         extended coverage, property damage, worker's compensation, public
         liability and business interruption insurance) and against other risks
         (including errors and omissions) in such amounts as similar properties
         and assets are insured by prudent companies in similar circumstances
         carrying on similar businesses, and with reputable and financially
         sound insurers, including self-insurance to the extent customary, all
         as reasonably determined by the Agent. At the request of the Agent, the
         Loan Parties shall deliver (x) on the Closing Date and annually
         thereafter an original certificate of insurance signed by the Loan
         Parties' independent insurance broker describing and certifying as to
         the existence of the insurance on the Collateral required to be
         maintained by this Agreement and the other Loan Documents, together
         with a copy of the endorsement described in the next sentence attached
         to such certificate, and (y) from time to time a summary schedule
         indicating all insurance then in force with respect to each of the Loan
         Parties. Such policies of insurance shall contain special endorsements,
         in form and substance acceptable to the Agent, which shall (i) specify
         the Agent as an additional insured and lender loss payee as its
         interests may appear, with the understanding that any obligation
         imposed upon the insured (including the liability to pay premiums)
         shall be the sole obligation of the applicable Loan Parties and not
         that of the insured, (ii) provide that the interest of the Banks shall
         be insured regardless of any breach or violation by the applicable Loan
         Parties of any warranties, declarations or conditions contained in such
         policies or any action or inaction of the applicable Loan Parties or
         others insured under such policies, (iii) provide a waiver of any right
         of the insurers to set-off or counterclaim or any other deduction,
         whether by attachment or otherwise, (iv) provide that any and all
         rights of subrogation which the insurers may have or acquire shall be,
         at all times and in all respects, junior and subordinate to the prior
         payment in full of the Indebtedness hereunder and that no insurer shall
         exercise or assert any right of subrogation until such time as the
         Indebtedness hereunder has been paid in full and the Revolving Credit
         Commitments have terminated, (v) provide, except in the case of public
         liability insurance and workmen's compensation insurance, that all
         insurance proceeds for losses of less than $2,000,000 shall be adjusted
         with and payable to the applicable Loan Parties and that all insurance
         proceeds for losses of $2,000,000 or more shall be adjusted with and
         payable to the Agent, (vi) include



                                     - 60 -
<PAGE>   61


         effective waivers by the insurer of all claims for insurance premiums
         against the Agent, (vii) provide that no cancellation of such policies
         for any reason (including nonpayment of premium) or any change therein
         shall be effective until at least thirty (30) days after receipt by the
         Agent of written notice of such cancellation or change, (viii) be
         primary without right of contribution of any other insurance carried by
         or on behalf of any additional insureds, and (ix) provide that inasmuch
         as the policy covers more than one insured, all terms, conditions,
         insuring agreements and endorsements (except limits of liability) shall
         operate as if there were a separate policy covering each insured. The
         applicable Loan Parties shall notify the Agent promptly of any
         occurrence causing a material loss or decline in value of its
         properties and the estimated (or actual, if available) amount of such
         loss or decline. Any monies received by the Agent constituting
         insurance proceeds may, at the option of the Agent, (i) be applied by
         the Agent to the payment of the Loans in such manner as the Agent may
         reasonably determine or (ii) be disbursed to the applicable Loan
         Parties on such terms as are deemed appropriate by the Agent for the
         repair, restoration and/or replacement of property in respect of which
         such proceeds were received.

(d)      Maintenance of Properties and Leases.

                           Each Loan Party shall maintain in good repair,
         working order and condition (ordinary wear and tear excepted), in
         accordance with the general practice of other businesses of similar
         character and size, all of those properties useful or necessary to its
         business, and from time to time, such Loan Party will make or cause to
         be made all appropriate repairs, renewals or replacements thereof.

(e)      Maintenance of Patents, Trademarks, Etc.

                           Each Loan Party shall maintain in full force and
         effect all patents, trademarks, trade names, copyrights, licenses,
         franchises, permits and other authorizations necessary for the
         ownership and operation of its properties and business if the failure
         so to maintain the same would constitute a Material Adverse Change.

(f)      Visitation Rights.

                           Each Loan Party shall permit any of the officers or
         authorized employees or representatives of the Agent or any of the
         Banks to visit and inspect any of its properties and to examine and
         make excerpts from its books and records and discuss its business
         affairs, finances and accounts with its officers, all in such detail
         and at such times and as often as any of the Banks may reasonably
         request, provided that each Bank shall provide the Borrowers and the
         Agent with reasonable notice prior to any visit or inspection.

(g)      Keeping of Records and Books of Account.

                           Each Loan Party shall maintain and keep proper books
         of record and account which enable the Loan Parties to issue financial
         statements in accordance with GAAP and as otherwise required by
         applicable Laws of any Official Body having jurisdiction over the Loan
         Parties, and in which full, true and correct entries shall be made in
         all material respects of



                                     - 61 -
<PAGE>   62


         all its dealings and business and financial affairs.

(h)      Plans and Benefit Arrangements.

                           The Borrowers shall, and shall cause each member of
         the ERISA Group to, comply with ERISA, the Internal Revenue Code and
         other applicable Laws applicable to Plans and Benefit Arrangements,
         except where such failure, alone or in conjunction with any other
         failure, would not result in a Material Adverse Change. Without
         limiting the generality of the foregoing, the Borrowers shall cause all
         of their Plans and all Plans maintained by any member of the ERISA
         Group to be funded in accordance with the minimum funding requirements
         of ERISA and shall make, and cause each member of the ERISA Group to
         make, in a timely manner, all contributions due to Plans, Benefit
         Arrangements and Multiemployer Plans.

(i)      Compliance With Laws.

                           Each Loan Party shall comply with all applicable
         Laws, including all Environmental Laws, in all respects, provided that
         it shall not be deemed to be a violation of this Section 8.1(i) if any
         failure to comply with any Law would not result in fines, penalties,
         remediation costs, other similar liabilities or injunctive relief which
         in the aggregate would constitute a Material Adverse Change.

(j)      Use of Proceeds.

                           The Borrowers will use the proceeds of the Loans only
         for lawful purposes in accordance with Sections 2.11 and 3.5 hereof, as
         applicable, and such uses shall not contravene any applicable Law or
         any other provision hereof.

(k)      Subordination of Intercompany Loans, Other Loans and Advances to the
         Borrowers.

                           The Loan Parties shall cause any intercompany
         Indebtedness, loans or advances owed by any of the Loan Parties to any
         other Loan Party to be subordinated pursuant to the terms of the
         Intercompany Subordination Agreement.

8.2.     Negative Covenants.

                  The Loan Parties, jointly and severally, covenant and agree
         that until payment in full of the Loans and interest thereon,
         termination or expiration of all of the Letters of Credit, satisfaction
         of all of the Loan Parties' other obligations hereunder and termination
         of the Revolving Credit Commitments, the Loan Parties shall comply with
         the following negative covenants:

(a)      Indebtedness.

                           Each of the Loan Parties shall not at any time
         create, incur, assume or suffer to exist any Indebtedness, except:

                                    (i) Indebtedness under the Loan Documents;


                                     - 62 -
<PAGE>   63


                                    (ii) Unsecured leases of equipment in the
         ordinary course of business;

                                    (iii) Indebtedness under capitalized leases
         or secured by purchase money security interests (other than Nonrecourse
         Purchase Money Security Interests) which shall not exceed 2% of
         Consolidated Tangible Net Worth in the aggregate at any time;

                                    (iv) Indebtedness secured by Nonrecourse
         Purchase Money Security Interests not exceeding 15% of Consolidated
         Tangible Net Worth in the aggregate at any time;

                                    (v) Indebtedness under the Senior Notes;

                                    (vi) Indebtedness constituting a Restricted
         Transaction;

                                    (vii) Indebtedness of a Loan Party to
         another Loan Party;

                                    (viii) the Provident Guaranty in an amount
         not to exceed $10,000,000 in principal in the aggregate; and

                                    (ix) Indebtedness not included in clauses
         (i) - (viii) above in an amount not to exceed $500,000 in the aggregate
         at any time.

(b)      Liens.

                           Each of the Loan Parties shall not at any time
         create, incur, assume or suffer to exist any Lien on any of its
         property or assets, tangible or intangible, now owned or hereafter
         acquired, or agree or become liable to do so, except Permitted Liens.

(c)      Guaranties.

                           Each of the Loan Parties shall not at any time,
         directly or indirectly, become or be liable in respect of any Guaranty,
         or assume, guarantee, become surety for, endorse or otherwise agree,
         become or remain directly or contingently liable upon or with respect
         to any obligation or liability of any other person, except for
         Guaranties under the Loan Documents, Guaranties constituting a
         Restricted Transaction or Guaranties permitted under Section
         8.2(a)(viii).

(d)      Loans and Investments; Certain Dividends and Distributions.

                           Each of the Loan Parties shall not at any time make
         or suffer to remain outstanding any loan or advance to, or purchase,
         acquire or own any stock, bonds, notes or securities of, or any
         partnership interest (whether general or limited) in or any other
         investment or interest in, or make any capital contribution to, any
         other person, or agree, become or remain liable to do any of the
         foregoing, or to make or pay, or agree to become liable to make or pay,
         any dividend or other distribution of any nature (whether in cash,
         property, securities or otherwise) on account of or in respect of its
         shares of capital stock, partnership interests or limited liability
         company interests on account of the purchase, redemption, retirement or
         acquisition of its shares of capital stock (or warrants, options or
         rights therefor), partnership



                                     - 63 -
<PAGE>   64


         interests or limited liability company interests (except dividends or
         other distributions payable to another Loan Party), except:

                                    (i) trade credit extended on usual and
         customary terms in the ordinary course of business;

                                    (ii) advances to employees to meet expenses
         incurred by such employees in the ordinary course of business;

                                    (iii) Permitted Investments;

                                    (iv) loans, advances, investments, dividends
         or distributions constituting a Restricted Transaction;

                                    (v) loans, advances and investments in other
         Loan Parties; and

                                    (vi) the net intercompany receivable owing
         from Zaring National to Zaring Homes in an amount not greater than
         $16,000,000 as of the date hereof, in an amount not greater than
         $14,500,000 at September 30, 1999 and in an amount not greater than
         $13,000,000 at December 31, 1999, as further reduced from time to time
         as a result of any payments but in no event increased (the "Zaring
         Homes Receivable").

(e)      Changes in the Senior Notes.

                           Zaring Homes shall not amend or modify any provisions
         of the Senior Notes or any related documents without the consent of the
         Required Banks.

(f)      Liquidations, Mergers, Consolidations, Acquisitions.

                           Each of the Loan Parties shall not dissolve,
         liquidate or wind up its affairs, or become a party to any merger or
         consolidation, or acquire by purchase, lease or otherwise all or
         substantially all of the assets or capital stock of any other person;
         provided that (i) any Loan Party other than the Borrowers may
         consolidate or merge into another Loan Party, and (ii) the Loan Parties
         may acquire all or substantially all of the assets or all of the
         capital stock of other persons engaged in the same business as the
         business of the Loan Parties, so long as after giving effect to such
         acquisition, no Event of Default or Potential Default shall exist or be
         continuing, and prior to the consummation of such acquisition, the
         Borrowers shall have provided to the Agent and the Banks pro forma
         financial statements for the Borrowers and their Subsidiaries, after
         giving effect to such acquisition, demonstrating such compliance;
         provided, that the purchase price (including liabilities assumed) for
         any such acquisition shall not exceed $6,000,000 for any single
         transaction or $12,000,000 in the aggregate during the term of this
         Agreement.

(g)      Dispositions of Assets or Subsidiaries.

                           Each of the Loan Parties shall not sell, convey,
         assign, lease, abandon or otherwise transfer or dispose of, voluntarily
         or involuntarily, any of its properties or assets,



                                     - 64 -
<PAGE>   65


         tangible or intangible (including but not limited to sale, assignment,
         discount or other disposition of accounts, contract rights, chattel
         paper, equipment or general intangibles, with or without recourse, or
         of capital stock, shares of beneficial interest or partnership
         interests of a Subsidiary), except:

                                    (i) transactions involving the sale of land
         and building inventory in the ordinary course of business;

                                    (ii) any sale, transfer, lease, abandonment
         or other disposition of assets in the ordinary course of business which
         are no longer necessary or required in the conduct of the Loan Party's
         business; and

                                    (iii) any sale, transfer or lease of assets
         in the ordinary course of business which are replaced by substitute
         assets acquired.

(h)      Affiliate Transactions.

                           Each of the Loan Parties shall not enter into or
         carry out any transaction (including, without limitation, purchasing
         property or services from or selling property or services to any
         Affiliate or other person) unless such transaction is not otherwise
         prohibited by this Agreement, is entered into in the ordinary course of
         business upon fair and reasonable arm's length terms and conditions
         which are fully disclosed to the Agent and is in accordance with all
         applicable Law.

(i)      Subsidiary, Partnerships and Joint Ventures.

                           Each of the Loan Parties shall not own or create,
         directly or indirectly, any Subsidiaries other than Subsidiaries which
         join this Agreement as Guarantors pursuant to Section 11.18. None of
         the Loan Parties shall become or agree to become a general or limited
         partner in any general or limited partnership or a joint venturer in
         any joint venture except for limited partnerships and joint ventures
         which constitute Restricted Transactions; provided if any Loan Party
         makes a loan or advance in excess of $500,000 to any such limited
         partnership or joint venture, then such limited partnership or joint
         venture shall join this Agreement as a Guarantor pursuant to Section
         11.18.

(j)      Continuation of or Change in Business; Geographic Expansion.

                           Each of the Loan Parties shall not engage in any
         business other than the development of residential homes, the provision
         of title insurance and the ownership of commercial real estate
         incidental to residential real estate development (to the extent such
         ownership is permitted hereunder), in each instance as such business
         has been conducted and operated by the Loan Parties during the present
         fiscal year, and the Borrowers shall not permit any material change in
         such business. The Loan Parties shall not, without the consent of the
         Required Banks, which consent shall not be unreasonably withheld,
         acquire land, develop homes or conduct business in any states other
         than Ohio, Kentucky, Indiana, Tennessee, North Carolina and South
         Carolina.



                                     - 65 -
<PAGE>   66


(k)      Plans and Benefit Arrangements.

                           Each of the Loan Parties shall not:

                                    (i) fail to satisfy the minimum funding
         requirements of ERISA and the Internal Revenue Code with respect to any
         Plan;

                                    (ii) request a minimum funding waiver from
         the Internal Revenue Service with respect to any Plan;

                                    (iii) engage in a Prohibited Transaction
         with any Plan, Benefit Arrangement or Multiemployer Plan which, alone
         or in conjunction with any other circumstances or set of circumstances
         resulting in liability under ERISA, would constitute a Material Adverse
         Change;

                                    (iv) permit the aggregate actuarial present
         value of all benefit liabilities (whether or not vested) under each
         Plan, determined on a plan termination basis, as disclosed in the most
         recent actuarial report completed with respect to such Plan, to exceed,
         as of any actuarial valuation date, the fair market value of the assets
         of such Plan;

                                    (v) fail to make when due any contribution
         to any Multiemployer Plan that the Borrowers or any member of the ERISA
         Group may be required to make under any agreement relating to such
         Multiemployer Plan or any Law pertaining thereto;

                                    (vi) withdraw (completely or partially) from
         any Multiemployer Plan or withdraw (or be deemed under Section 4062(e)
         of ERISA to withdraw) from any Multiple Employer Plan, where any such
         withdrawal is likely to result in a material liability of Borrowers or
         any member of the ERISA Group;

                                    (vii) terminate, or institute proceedings to
         terminate, any Plan, where such termination is likely to result in a
         material liability to the Borrowers or any member of the ERISA Group;

                                    (viii) make any amendment to any Plan with
         respect to which security is required under Section 307 of ERISA; or

                                    (ix) fail to give any and all notices or
         make all disclosures and governmental filings required under ERISA or
         the Internal Revenue Code, where such failure is likely to result in a
         Material Adverse Change.

(l)      Fiscal Year.

                           None of the Loan Parties shall change its fiscal year
         from the twelve-month period beginning January 1 and ending December
         31.

(m)      Changes in Organizational Documents.



                                     - 66 -
<PAGE>   67


                           Each of the Loan Parties shall not amend in any
         respect its certificate of incorporation (including any provisions or
         resolutions relating to capital stock) without providing at least
         fifteen (15) calendar days' prior written notice to the Agent and the
         Banks and, in the event such change would be adverse to the Banks as
         determined by the Agent in its sole discretion, obtaining the prior
         written consent of the Required Banks.

(n)      Minimum Fixed Charge Coverage Ratio.

                           The Loan Parties shall not permit the ratio of
         Consolidated Cash Flow From Operations to Consolidated Fixed Charges,
         calculated as of the end of each fiscal quarter for the four (4) fiscal
         quarters then ending, to be less than the ratio set forth below for the
         periods specified below:

<TABLE>
<CAPTION>
                                          Period                                                    Ratio
                                          ------                                                    -----
         <S>                                                                                     <C>
         Fiscal quarters ending 3/31/99, 6/30/99 and 9/30/99                                     1.10 to 1.0

         Fiscal quarters ending 12/31/99 and thereafter                                          1.20 to 1.0
</TABLE>

(o)      Minimum Tangible Net Worth.

                           The Loan Parties shall not at any time permit
         Consolidated Tangible Net Worth to be less than the Base Net Worth.

(p)      Maximum Leverage Ratio.

                           The Loan Parties shall not permit the Leverage Ratio,
         for each fiscal quarter for the quarter then ending, to exceed the
         ratio set forth below for the periods specified below:

<TABLE>
<CAPTION>
                                          Period                                                    Ratio
                                          ------                                                    -----
         <S>                                                                                     <C>
         Fiscal quarters ending 3/31/99, 6/30/99 and 9/30/99                                     2.50 to 1.0

         Fiscal quarters ending 12/31/99 and thereafter                                          2.25 to 1.0
</TABLE>

(q)      Speculative Units.

                           The Loan Parties shall not at any time permit (i) the
         number of Speculative Units in any Active Community to exceed eight (8)
         or (ii) the number of Speculative Units in all Active Communities to
         exceed 30% of the aggregate number of Active Units sold during the
         previous twelve (12) month period.

(r)      Model Units.



                                     - 67 -
<PAGE>   68


                           The Loan Parties shall not at any time permit the
         number of Model Units owned or leased including without limitation
         Model Units leased from First Cincinnati Leasing, LLC (i) in any Active
         Community to exceed four (4) in each distinctive price point, as
         determined by the Borrowers and acceptable to the Agent, but in no
         event more than eight (8) in the aggregate, or (ii) in all Active
         Communities of a Loan Party to exceed one hundred fifty percent (150%)
         of the number of such Active Communities.

(s)      Land Ownership or Acquisition.

                           The Loan Parties shall not acquire, own, purchase,
         lease or otherwise invest in, directly or indirectly, any land or other
         real estate other than:

                                    (i) real estate held or acquired by a Loan
         Party for construction and sale of Active Units, provided that
         Regulatory Approval has been received therefor; and

                                    (ii) real estate which does not fall under
         clause (i) above in an amount not to exceed $2,000,000 in the aggregate
         at any time.

(t)      Zaring National Leverage Ratio.

                           Zaring National shall not at any time permit the
         ratio of Zaring National Total Liabilities to Zaring National Tangible
         Net Worth, for each fiscal quarter for the quarter then ending, to
         exceed the ratio set forth below for the periods specified below:

<TABLE>
<CAPTION>
                                          Period                                                    Ratio
                                          ------                                                    -----
         <S>                                                                                     <C>
         Fiscal quarters ending 3/31/99, 6/30/99 and 9/30/99                                     3.50 to 1.0

         Fiscal quarters ending 12/31/99 and thereafter                                          3.00 to 1.0
</TABLE>

(u)      Zaring National Fixed Charge Coverage Ratio.

                           Beginning with the fiscal quarter ending December 31,
         1999, Zaring National shall not permit the ratio of Zaring National
         Cash Flow From Operations to Zaring National Fixed Charges to be less
         than 1.50 to 1.0 as of the end of each fiscal quarter for the four (4)
         fiscal quarters then ended.

(v)      Off Balance Sheet Financing.

                           Each of the Loan Parties shall not permit the
         aggregate amount of off balance sheet financing provided by or to
         parties under common control with Zaring National, any Loan Party or
         any Affiliate of any Loan Parties (including without limitation First
         Cincinnati Land, LLC and First Cincinnati Leasing, LLC) related to
         Model Units and Approved Land Inventory to exceed $30,000,000.

(w)      Limitation on Interest Rate.



                                     - 68 -
<PAGE>   69


                           Zaring National shall not charge any of its
         Subsidiaries or Affiliates (including without limitation any Loan
         Party, First Cincinnati Land, LLC and First Cincinnati Leasing, LLC) in
         excess of the Base Rate plus one percent (1%) for the use of its
         investment capital.

8.3.     Reporting Requirements.

                  The Loan Parties jointly and severally covenant and agree that
         until payment in full of the Loans and interest thereon, termination or
         expiration of all Letters of Credit, satisfaction of all of the Loan
         Parties' other obligations hereunder and termination of the Revolving
         Credit Commitments, the Loan Parties will furnish or cause to be
         furnished to the Agent and each of the Banks:

(a)      Monthly Financial Statements and Reports.

                                    (i) As soon as available and in any event
         within thirty (30) calendar days after the end of each calendar month,
         the Borrowers' combining balance sheet as of the end of such month and
         combining income statement for the month then ended and for the year to
         date, all in reasonable detail (and in similar format to the December
         31, 1998 financial statements) and certified (subject to normal
         year-end audit adjustments) by the Chief Executive Officer, President
         or Chief Financial Officer of the Borrowers as having been prepared in
         accordance with GAAP, consistently applied.

                                    (ii) As soon as available and in any event
         within thirty (30) calendar days after the end of each calendar month,
         Zaring National's consolidating balance sheet as of the end of such
         month and consolidating income statement for the month then ended and
         for the year to date, all in reasonable detail and certified (subject
         to normal year-end audit adjustments) by the Chief Executive Officer,
         President or Chief Financial Officer of Zaring National as having been
         prepared in accordance with GAAP, consistently applied.

                                    (iii) As soon as available and in any event
         within thirty (30) calendar days after the end of each calendar month,
         a reconciliation of balances presented in the financial statements
         delivered pursuant to Sections 8.3(a)(i) and (ii).

                                    (iv) As soon as available and in any event
         within fifteen (15) calendar days after the end of each calendar month,
         the Borrowers' sales and closing reports as of the end of such month in
         form and in such detail as is reasonably acceptable to the Agent.

(b)      Quarterly Financial Statements.

                           As soon as available and in any event within
         forty-five (45) calendar days after the end of each of the first three
         (3) fiscal quarters in each fiscal year, financial statements of Zaring
         National and its Subsidiaries, consisting of (i) a consolidated balance
         sheet as of the end of such fiscal quarter; (ii) related consolidated
         statements of income together with comparisons to the prior year for
         the fiscal quarter then ended and the fiscal year through that date;
         and (iii) the consolidated statements of retained earnings and cash
         flow (in comparative



                                     - 69 -
<PAGE>   70


         form) for the fiscal year through that date, all in reasonable detail
         and certified (subject to normal year-end audit adjustments) by the
         Chief Executive Officer, President or Chief Financial Officer of Zaring
         National as having been prepared in accordance with GAAP, consistently
         applied, and setting forth in comparative form the respective financial
         statements for the corresponding date and period in the previous fiscal
         year. As soon as available and in any event within forty-five (45)
         calendar days after the end of each of the first three (3) fiscal
         quarters in each fiscal year, Form 10-Q filed by Zaring National with
         the Securities and Exchange Commission.

(c)      Annual Financial Statements.

                           As soon as available and in any event within ninety
         (90) days after the end of each fiscal year of Zaring National,
         financial statements of Zaring National and its Subsidiaries,
         consisting of a consolidating and consolidated balance sheet as of the
         end of such fiscal year and related consolidating and consolidated
         statements of income, retained earnings and cash flows for the fiscal
         year then ended, all in reasonable detail and setting forth in
         comparative form the financial statements as of the end of and for the
         preceding fiscal year, and certified by independent certified public
         accountants of nationally recognized standing satisfactory to the
         Agent. The certificate or report of accountants shall be free of
         qualifications (other than any consistency qualification that may
         result from a change in the method used to prepare the financial
         statements as to which such accountants concur) and shall not indicate
         the occurrence or existence of any event, condition or contingency
         which would materially impair the prospect of payment or performance of
         any covenant, agreement or duty of any Loan Party under any of the Loan
         Documents.

(d)      Quarterly Compliance Certificate of the Loan Parties; Updates to
         Schedules.

                           Concurrently with the financial statements of Zaring
         National and the Borrowers furnished to the Agent and to the Banks
         pursuant to Sections 8.3(b) and 8.3(c) hereof, a certificate of the
         Loan Parties signed by the Chief Executive Officer, President or Chief
         Financial Officer of the Loan Parties and independent certified public
         accountants of nationally recognized standing satisfactory to the
         Agent, in the form of Exhibit 8.3(d) hereto (the "Quarterly Compliance
         Certificate"), to the effect that, except as described pursuant to
         Section 8.3(f) below, (i) the representations and warranties of the
         Loan Parties contained in Article 6 hereof are true on and as of the
         date of such certificate with the same effect as though such
         representations and warranties had been made on and as of such date
         (except representations and warranties which expressly relate solely to
         an earlier date or time), and the Loan Parties have performed and
         complied with all covenants and conditions hereof, (ii) no Event of
         Default or Potential Default exists and is continuing on the date of
         such certificate, and (iii) containing calculations in sufficient
         detail to demonstrate compliance as of the date of the financial
         statements with all financial covenants contained in Section 8.2 hereof
         and reconciliation with the monthly and quarterly financial statements
         provided pursuant to Sections 8.3(a)(i) and 8.3(b). The Loan Parties
         shall deliver together with such Quarterly Compliance Certificate the
         updated Schedules to the Agreement referred to in Section 6.2.

(e)      Borrowing Base Certificate.



                                     - 70 -
<PAGE>   71


                           Within twenty (20) calendar days after the end of
         each calendar month, a certificate computing the Borrowing Base and
         demonstrating compliance with the covenants set forth in Sections
         8.2(q), (r) and (s) as of the end of the preceding calendar month in
         the form of Exhibit 8.3(e) (the "Borrowing Base Certificate"),
         appropriately completed, executed and delivered by an Authorized
         Officer together with reconciliation with the monthly financial
         statements provided pursuant to Section 8.3(a)(i) any supporting
         information which the Agent may from time to time request.

(f)      Notice of Default.

                           Promptly after any officer of any of the Loan Parties
         has learned of the occurrence of an Event of Default or Potential
         Default, a certificate signed by the Chief Executive Officer, President
         or Chief Financial Officer of such Loan Party setting forth the details
         of such Event of Default or Potential Default and the action which the
         Loan Party proposes to take with respect thereto.

(g)      Notice of Litigation.

                           Promptly after the commencement thereof, notice of
         all actions, suits, proceedings or investigations before or by any
         Official Body or any other person against any of the Loan Parties
         (other than proceedings in the ordinary course of business in
         connection with obtaining Regulatory Approval, provided that the
         conduct of those proceedings does not otherwise violate the provisions
         of this Agreement) involving a claim or series of claims in excess of
         $500,000 or which if adversely determined would constitute a Material
         Adverse Change with respect to any of the Loan Parties.

(h)      Budgets, Forecasts, Deliveries Under the Senior Notes, Other Reports
         and Information.

                           Promptly upon their becoming available to the
         applicable Loan Party:

                                    (i) the annual budget and any forecasts or
         projections of such Loan Party, to be supplied not later than ninety
         (90) days after the commencement of such fiscal year,

                                    (ii) any reports, including management
         letters submitted to such Loan Party by independent accountants in
         connection with any annual, interim or special audit,

                                    (iii) any reports, notices or proxy
         statements generally distributed by such Loan Party to its
         stockholders, on a date no later than the date supplied to the
         stockholders,

                                    (iv) regular or periodic reports, including
         Forms 10-K, 10-Q and 8-K, registration statements and prospectuses,
         filed by such Loan Party with the Securities and Exchange Commission,

                                    (v) copies of notices, reports and other
         information sent by any of the Loan Parties to the holders of the
         Senior Notes under the Senior Notes or any related documents, at the
         same time such Loan Party sends the same to such holders,



                                     - 71 -
<PAGE>   72


                                    (vi) a copy of any order in any proceeding
         to which any Loan Party is a party issued by any Official Body which
         could result in a Material Adverse Change, and

                                    (vii) such other reports and information as
         the Banks may from time to time reasonably request.

(i)      Notices Regarding Plans and Benefit Arrangements.

                                    (i) Promptly upon becoming aware of the
         occurrence thereof, notice (including the nature of the event and, when
         known, any action taken or threatened by the Internal Revenue Service
         or the PBGC with respect thereto) of:

                                             (A) any Reportable Event with
         respect to the Borrowers or any member of the ERISA Group (regardless
         of whether the obligation to report said Reportable Event to the PBGC
         has been waived),

                                             (B) any Prohibited Transaction
         which could subject the Borrowers or any member of the ERISA Group to a
         civil penalty assessed pursuant to Section 502(i) of ERISA or a tax
         imposed by Section 4975 of the Internal Revenue Code in connection with
         any Plan, Benefit Arrangement or any trust created thereunder,

                                             (C) any assertion of material
         withdrawal liability with respect to any Multiemployer Plan,

                                             (D) any partial or complete
         withdrawal from a Multiemployer Plan by the Borrowers or any member of
         the ERISA Group under Title IV of ERISA (or assertion thereof), where
         such withdrawal is likely to result in material withdrawal liability,

                                             (E) any cessation of operations (by
         the Borrowers or any member of the ERISA Group) at a facility in the
         circumstances described in Section 4063(e) of ERISA,

                                             (F) withdrawal by the Borrowers or
         any member of the ERISA Group from a Multiple Employer Plan,

                                             (G) a failure by the Borrowers or
         any member of the ERISA Group to make a payment to a Plan required to
         avoid imposition of a lien under Section 302(f) of ERISA,

                                             (H) the adoption of an amendment to
         a Plan requiring the provision of security to such Plan pursuant to
         Section 307 of ERISA, or

                                             (I) any change in the actuarial
         assumptions or funding methods used for any Plan, where the effect of
         such change is to materially increase or materially reduce the unfunded
         benefit liability or obligation to make periodic contributions.

                                    (ii) Promptly after receipt thereof, copies
         of (a) all notices received by



                                     - 72 -
<PAGE>   73


         the Borrowers or any member of the ERISA Group of the PBGC's intent to
         terminate any Plan administered or maintained by the Borrowers or any
         member of the ERISA Group, or to have a trustee appointed to administer
         any such Plan; and (b) at the request of the Agent or any Bank, each
         annual report (IRS Form 5500 series) and all accompanying schedules,
         the most recent actuarial reports, the most recent financial
         information concerning the financial status of each Plan administered
         or maintained by the Borrowers or any member of the ERISA Group, and
         schedules showing the amounts contributed to each such Plan by or on
         behalf of the Borrowers or any member of the ERISA Group in which any
         of their personnel participate or from which such personnel may derive
         a benefit, and each Schedule B (Actuarial Information) to the annual
         report filed by the Borrowers or any member of the ERISA Group with the
         Internal Revenue Service with respect to each such Plan.

                                    (iii) Promptly upon the filing thereof,
         copies of any Form 5310, or any successor or equivalent form to Form
         5310, filed with the PBGC in connection with the termination of any
         Plan.

                                   9. DEFAULT

9.1.     Events of Default.

                  An Event of Default shall mean the occurrence or existence of
         any one or more of the following events or conditions (whatever the
         reason therefor and whether voluntary, involuntary or effected by
         operation of Law):

(a)      The Borrowers shall fail to pay any principal of any Loan (including
         scheduled installments, mandatory prepayments or payment due at
         maturity) or shall fail to pay any interest on any Loan or any other
         amount owing hereunder or under the other Loan Documents after such
         principal, interest or other amount becomes due in accordance with the
         terms hereof or thereof;

(b)      Any representation or warranty made at any time by any of the Loan
         Parties herein or by any of the Loan Parties in any other Loan Document
         or in any certificate, other instrument or statement furnished pursuant
         to the provisions hereof or thereof shall prove to have been false or
         misleading in any material respect as of the time it was made or
         furnished;

(c)      Any of the Loan Parties shall default in the observance or performance
         of any covenant contained in Section 8.1(f) or Section 8.2, and with
         respect to a default under Section 8.2(q), such default shall continue
         unremedied for a period of thirty (30) days;

(d)      Any of the Loan Parties shall default in the observance or performance
         of any other covenant, condition or provision hereof or of any other
         Loan Document, and such default shall continue unremedied for a period
         of ten (10) Business Days after any officer of any Loan Party becomes
         aware of the occurrence thereof (such grace period to be applicable
         only in the event such default can be remedied by corrective action of
         the Loan Parties as determined by the Agent in its reasonable
         discretion);



                                     - 73 -
<PAGE>   74


(e)      A default or event of default shall occur at any time under the Senior
         Notes or any related documents or under the terms of any other
         agreement involving borrowed money or the extension of credit or any
         other Indebtedness under which any Loan Party may be obligated as
         borrower or guarantor (except for nonrecourse Indebtedness secured by
         Nonrecourse Purchase Money Security Interests permitted hereunder) in
         excess of $500,000 in the aggregate outstanding at any time, and such
         breach, default or event of default consists of the failure to pay
         (beyond any period of grace permitted with respect thereto, whether
         waived or not) any Indebtedness when due (whether at stated maturity,
         by acceleration or otherwise) or if such breach or default permits or
         causes the acceleration of any Indebtedness (whether or not such right
         shall have been waived) or the termination of any commitment to lend;

(f)      Any final judgments or orders for the payment of money (not adequately
         covered by insurance) in excess of $500,000 in the aggregate
         outstanding at any time shall be entered against any Loan Party by a
         court having jurisdiction in the premises, which judgment is not paid
         or discharged, vacated, bonded or stayed pending appeal within a period
         of thirty (30) days from the date of entry;

(g)      Any of the Loan Documents shall cease to be a legal, valid and binding
         agreement enforceable against the Loan Parties in accordance with the
         respective terms thereof or shall in any way be terminated (except in
         accordance with its terms) or become or be declared ineffective or
         inoperative or shall in any way be challenged or contested or cease to
         give or provide the respective rights, titles, interests, remedies,
         powers or privileges intended to be created thereby;

(h)      There shall occur any material uninsured damage to or loss, theft or
         destruction of any assets of the Loan Parties, or any of the Loan
         Parties' assets are attached, seized, levied upon or subjected to a
         writ or distress warrant, or such come within the possession of any
         receiver, trustee, custodian or assignee for the benefit of creditors
         and the same is not cured within thirty (30) days thereafter;

(i)      A notice of lien or assessment in excess of $500,000 is filed of record
         with respect to all or any part of any of the Loan Parties' assets by
         the United States, or any department, agency or instrumentality
         thereof, or by any state, county, municipal or other governmental
         agency, including, without limitation, the Pension Benefit Guaranty
         Corporation, or if any taxes or debts owing at any time or times
         hereafter to any one of these become payable and the same are not paid
         within thirty (30) days after the same become payable;

(j)      Any Loan Party ceases to be solvent or admits in writing its inability
         to pay its debts as they mature;

(k)      Any of the following occurs: (i) any Reportable Event, which the Agent
         determines in good faith constitutes grounds for the termination of any
         Plan by the PBGC or the appointment of a trustee to administer or
         liquidate any Plan, shall have occurred and be continuing; (ii)
         proceedings shall have been instituted or other action taken to
         terminate any Plan, or a termination notice shall have been filed with
         respect to any Plan; (iii) a trustee shall be appointed to administer
         or liquidate any Plan; (iv) the PBGC shall give notice of its intent to
         institute proceedings to terminate any Plan or Plans or to appoint a
         trustee to administer or liquidate any Plan; and, in the



                                     - 74 -
<PAGE>   75


         case of the occurrence of (i), (ii), (iii) or (iv) above, the Agent
         determines in good faith that the amount of Borrowers' liability is
         likely to exceed 10% of their Consolidated Tangible Net Worth; (v) the
         Borrowers or any member of the ERISA Group shall fail to make any
         contributions when due to a Plan or a Multiemployer Plan; (vi) the
         Borrowers or any member of the ERISA Group shall make any amendment to
         a Plan with respect to which security is required under Section 307 of
         ERISA; (vii) the Borrowers or any member of the ERISA Group shall
         withdraw completely or partially from a Multiemployer Plan; (viii) the
         Borrowers or any member of the ERISA Group shall withdraw (or shall be
         deemed under Section 4062(e) of ERISA to withdraw) from a Multiple
         Employer Plan; or (ix) any applicable Law is adopted, changed or
         interpreted by any Official Body with respect to or otherwise affecting
         one or more Plans, Multiemployer Plans or Benefit Arrangements; and,
         with respect to any of the events specified in (v), (vi), (vii), (viii)
         or (ix), the Agent determines in good faith that any such occurrence
         would be reasonably likely to result in a Material Adverse Change;

(l)      Any Loan Party ceases to conduct its business as contemplated or is
         enjoined, restrained or in any way prevented by court order from
         conducting all or any material part of its business, and such
         injunction, restraint or other preventive order is not dismissed within
         thirty (30) days after the entry thereof;

(m)      A Change of Control occurs;

(n)      A proceeding shall have been instituted in a court having jurisdiction
         in the premises seeking a decree or order for relief in respect of any
         Loan Party in an involuntary case under any applicable bankruptcy,
         insolvency, reorganization or other similar Law now or hereafter in
         effect, or a receiver, liquidator, assignee, custodian, trustee,
         sequestrator or conservator (or similar official) of any Loan Party for
         any substantial part of its property, or for the winding-up or
         liquidation of its affairs, and such proceeding shall remain
         undismissed or unstayed and in effect for a period of thirty (30)
         consecutive days or such court shall enter a decree or order granting
         any of the relief sought in such proceeding; or

(o)      Any Loan Party shall commence a voluntary case under any applicable
         bankruptcy, insolvency, reorganization or other similar Law now or
         hereafter in effect, shall consent to the entry of an order for relief
         in an involuntary case under any such Law, or shall consent to the
         appointment of or taking possession by a receiver, liquidator,
         assignee, custodian, trustee, sequestrator or conservator (or other
         similar official) of itself or for any substantial part of its property
         or shall make a general assignment for the benefit of creditors, or
         shall fail generally to pay its debts as they become due or shall take
         any action in furtherance of any of the foregoing.

9.2.     Consequences of Event of Default.

(a)      If an Event of Default specified under subsections (a) through (m) of
         Section 9.1 hereof shall occur and be continuing, the Agent and the
         Banks shall be under no further obligation to make Loans or issue
         Letters of Credit hereunder, and the Agent may, and upon the request of
         the Required Banks shall, (i) by written notice to the Borrowers,
         declare the unpaid principal amount of the Notes then outstanding and
         all interest accrued thereon, any unpaid fees and all other
         Indebtedness of the Borrowers to the Banks hereunder and thereunder to
         be forthwith due and



                                     - 75 -
<PAGE>   76


         payable, and the same shall thereupon become and be immediately due and
         payable to the Agent for the benefit of each Bank without presentment,
         demand, protest or any other notice of any kind, all of which are
         hereby expressly waived, and (ii) require the Co-Borrowers to, and the
         Co-Borrowers shall thereupon, deposit in a non-interest-bearing account
         with the Agent, as cash collateral for its obligations under the Loan
         Documents, an amount equal to the maximum amount currently or at any
         time thereafter available to be drawn on all outstanding Letters of
         Credit, and the Co-Borrowers hereby pledge to the Agent and the Banks,
         and grant to the Agent and the Banks a security interest in, all such
         cash as security for such obligations. Upon the curing of all existing
         Events of Default to the satisfaction of the Required Banks, the Agent
         shall return such cash collateral to the Co-Borrowers; and

(b)      If an Event of Default specified under subsections (n) or (o) of
         Section 9.1 hereof shall occur, the Banks shall be under no further
         obligation to make Loans hereunder, and the unpaid principal amount of
         the Notes then outstanding and all interest accrued thereon, any unpaid
         fees and all other Indebtedness of the Borrowers to the Banks hereunder
         and thereunder shall be immediately due and payable without
         presentment, demand, protest or notice of any kind, all of which are
         hereby expressly waived; and the Agent may, and upon the request of the
         Required Banks shall, require the Co-Borrowers to provide cash
         collateral as set forth in Section 9.2(a)(ii); and

(c)      If an Event of Default shall occur and be continuing, any Bank to whom
         any obligation is owed by any Loan Party hereunder or under any other
         Loan Document or any participant of such Bank which has agreed in
         writing to be bound by the provisions of Section 10.13 hereof, and any
         branch, subsidiary or affiliate of such Bank or participant anywhere in
         the world, shall have the right, in addition to all other rights and
         remedies available to it, without notice to Borrowers or such Loan
         Party, to set off against and apply to the then unpaid balance of all
         the Loans and all other obligations of the Borrowers and the other Loan
         Parties hereunder or under any other Loan Document any debt owing to,
         and any other funds held in any manner for the account of, the
         Borrowers or such other Loan Party by such Bank or participant or by
         such branch, subsidiary or affiliate, including, without limitation,
         all funds in all deposit accounts (whether time or demand, general or
         special, provisionally credited or finally credited, or otherwise) now
         or hereafter maintained by the Borrowers or such other Loan Party for
         its own account (but not including funds held in custodian or trust
         accounts or payroll withholding tax accounts) with such Bank or
         participant or such branch, subsidiary or affiliate. Such right shall
         exist whether or not any Bank or the Agent shall have made any demand
         under this Agreement or any other Loan Document, whether or not such
         debt owing to or funds held for the account of the Borrowers or such
         other Loan Party is or are matured or unmatured and regardless of the
         existence or adequacy of any security, right or remedy available to any
         Bank or the Agent; and

(d)      If an Event of Default shall occur and be continuing, and whether or
         not the Agent shall have accelerated the maturity of Loans of the
         Borrowers pursuant to any of the foregoing provisions of this Section
         9.2, the Agent or any Bank, if owed any amount with respect to the
         Notes, may proceed to protect and enforce its rights by suit in equity,
         action at law and/or other appropriate proceeding, whether for the
         specific performance of any covenant or agreement contained in this
         Agreement or the Notes, including as permitted by applicable Law the
         obtaining of the ex parte appointment of a receiver, and, if such
         amount shall have become due, by declaration or



                                     - 76 -
<PAGE>   77


         otherwise, proceed to enforce the payment thereof or any other legal or
         equitable right of the Agent or such Bank; and

(e)      From and after the date on which the Agent has taken any action
         pursuant to this Section 9.2 and until all obligations of the Loan
         Parties have been paid in full, any and all proceeds received by the
         Agent, or any part thereof, or the exercise of any other remedy by the
         Agent, shall be applied as follows:

                                    (i) first, to reimburse the Agent and the
         Banks for out-of-pocket costs, expenses and disbursements, including
         without limitation reasonable attorneys' fees and legal expenses,
         incurred by the Agent or the Banks in connection with collection of any
         obligations of any of the Loan Parties under any of the Loan Documents;

                                    (ii) second, to the repayment of all
         Indebtedness then due and unpaid of the Loan Parties to the Banks
         incurred under this Agreement or any of the Loan Documents, whether of
         principal, interest, fees, expenses or otherwise, in such manner as the
         Agent may determine in its discretion; and

                                    (iii) the balance, if any, as required by
         Law.

(f)      In addition to all of the rights and remedies contained in this
         Agreement or in any of the other Loan Documents, the Agent shall have
         all of the rights and remedies under applicable Law, all of which
         rights and remedies shall be cumulative and nonexclusive, to the extent
         permitted by Law. The Agent may, and upon the request of the Required
         Banks shall, exercise all post-default rights granted to the Agent and
         the Banks under the Loan Documents or applicable Law.

                                 10. THE AGENT

10.1.    Appointment.

                  Each Bank hereby irrevocably designates, appoints and
         authorizes PNC to act as Agent for such Bank under this Agreement to
         execute and deliver or accept on behalf of each of the Banks the other
         Loan Documents. Each Bank hereby irrevocably authorizes, and each
         holder of any Note by the acceptance of a Note shall be deemed
         irrevocably to authorize, the Agent to take such action on its behalf
         under the provisions of this Agreement and the other Loan Documents and
         any other instruments and agreements referred to herein, and to
         exercise such powers and to perform such duties hereunder, as are
         specifically delegated to or required of the Agent by the terms hereof,
         together with such powers as are reasonably incidental thereto. PNC
         agrees to act as the Agent on behalf of the Banks to the extent
         provided in this Agreement.

10.2.    Delegation of Duties.

                  The Agent may perform any of its duties hereunder by or
         through agents or employees (provided such delegation does not
         constitute a relinquishment of its duties as Agent) and, subject to
         Sections 10.5 and 10.6 hereof, shall be entitled to engage and pay for
         the advice



                                     - 77 -
<PAGE>   78


         or services of any attorneys, accountants or other experts concerning
         all matters pertaining to its duties hereunder and to rely upon any
         advice so obtained.

10.3.    Nature of Duties; Independent Credit Investigation.

                  The Agent shall have no duties or responsibilities except
         those expressly set forth in this Agreement, and no implied covenants,
         functions, responsibilities, duties, obligations or liabilities shall
         be read into this Agreement or otherwise exist. The duties of the Agent
         shall be mechanical and administrative in nature; the Agent shall not
         have, by reason of this Agreement, a fiduciary or trust relationship in
         respect of any Bank; and nothing in this Agreement, expressed or
         implied, is intended to or shall be so construed as to impose upon the
         Agent any obligations in respect of this Agreement except as expressly
         set forth herein. Each Bank expressly acknowledges (i) that the Agent
         has not made any representations or warranties to it and that no act by
         the Agent hereafter taken, including any review of the affairs of any
         of the Loan Parties, shall be deemed to constitute any representation
         or warranty by the Agent to any Bank; (ii) that it has made and will
         continue to make, without reliance upon the Agent, its own independent
         investigation of the financial condition and affairs and its own
         appraisal of the creditworthiness of each of the Loan Parties in
         connection with this Agreement and the making and continuance of the
         Loans hereunder; and (iii) except as expressly provided herein, that
         the Agent shall have no duty or responsibility, either initially or on
         a continuing basis, to provide any Bank with any credit or other
         information with respect thereto, whether coming into its possession
         before the making of any Loan or at any time or times thereafter.

10.4.    Actions in Discretion of Agent; Instructions From the Banks.

                  The Agent agrees, upon the written request of the Required
         Banks, to take or refrain from taking any action of the type specified
         as being within the Agent's rights, powers or discretion herein,
         provided that the Agent shall not be required to take any action which
         exposes the Agent to personal liability or which is contrary to this
         Agreement or any other Loan Document or applicable Law. In the absence
         of a request by the Required Banks, the Agent shall have authority, in
         its sole discretion, to take or not to take any such action, unless
         this Agreement specifically requires the consent of the Required Banks
         or all of the Banks. Any action taken or failure to act pursuant to
         such instructions or discretion shall be binding on the Banks, subject
         to Section 10.6 hereof. Subject to the provisions of Section 10.6, no
         Bank shall have any right of action whatsoever against the Agent as a
         result of the Agent acting or refraining from acting hereunder in
         accordance with the instructions of the Required Banks or, in the
         absence of such instructions, in the absolute discretion of the Agent.

10.5.    Reimbursement and Indemnification of Agent by the Borrowers.

                  The Borrowers unconditionally agree to pay or reimburse the
         Agent and save the Agent harmless against (a) liability for the payment
         of all reasonable out-of-pocket costs, expenses and disbursements,
         including but not limited to fees and expenses of counsel (subject to
         the letter dated June 11, 1999 from PNC to Zaring Homes with respect to
         the fees and expenses of the Agent's counsel in connection with the
         initial closing under this Agreement), appraisers and environmental
         consultants, incurred by the Agent (i) in connection with the
         development,



                                     - 78 -
<PAGE>   79


         negotiation, preparation, printing, execution, administration,
         syndication, interpretation and performance of this Agreement and the
         other Loan Documents, (ii) relating to any requested amendments,
         waivers or consents pursuant to the provisions hereof, (iii) in
         connection with the enforcement of this Agreement or any other Loan
         Document or collection of amounts due hereunder or thereunder or the
         proof and allowability of any claim arising under this Agreement or any
         other Loan Document, whether in bankruptcy or receivership proceedings
         or otherwise, and (iv) in any workout, restructuring or in connection
         with the protection, preservation, exercise or enforcement of any of
         the terms hereof or of any rights hereunder or under any other Loan
         Document or in connection with any foreclosure, collection or
         bankruptcy proceedings; and (b) all liabilities, obligations, losses,
         damages, penalties, actions, judgments, suits, costs, expenses or
         disbursements of any kind or nature whatsoever which may be imposed on,
         incurred by or asserted against the Agent, in its capacity as such, in
         any way relating to or arising out of this Agreement or any other Loan
         Document or any action taken or omitted by the Agent hereunder or
         thereunder, provided that the Borrowers shall not be liable for any
         portion of such liabilities, obligations, losses, damages, penalties,
         actions, judgments, suits, costs, expenses or disbursements if the same
         result from the Agent's gross negligence or willful misconduct, or if
         the Borrowers were not given notice of the subject claim and the
         opportunity to participate in the defense thereof, at their expense, or
         if the same result from a compromise or settlement agreement entered
         into without the consent of the Borrowers. In addition, the Borrowers
         agree to reimburse and pay all reasonable out-of-pocket expenses of the
         Agent's regular employees and agents engaged periodically to perform
         audits of the Loan Parties' books, records and business properties.

10.6.    Exculpatory Provisions.

                  Neither the Agent nor any of its directors, officers,
         employees, agents, attorneys or affiliates shall (a) be liable to any
         Bank or any Loan Party for any action taken or omitted to be taken by
         it or them hereunder, or in connection herewith, including without
         limitation pursuant to any Loan Document, unless caused by its or their
         own gross negligence or willful misconduct, (b) be responsible in any
         manner to any of the Banks for the effectiveness, enforceability,
         genuineness, validity or due execution of this Agreement or any other
         Loan Document or for any recital, representation, warranty, document,
         certificate, report or statement herein or made or furnished under or
         in connection with this Agreement or any other Loan Document, or (c) be
         under any obligation to any of the Banks to ascertain or to inquire as
         to the performance or observance of any of the terms, covenants or
         conditions hereof or thereof on the part of the Loan Parties, or the
         financial condition of the Loan Parties, or the existence or possible
         existence of any Event of Default or Potential Default. Neither the
         Agent nor any Bank nor any of their respective directors, officers,
         employees, agents, attorneys or affiliates shall be liable to any of
         the Loan Parties for consequential damages resulting from any breach of
         contract, tort or other wrong in connection with the negotiation,
         documentation, administration or collection of the Loans or any of the
         Loan Documents.

10.7.    Reimbursement and Indemnification of Agent by Banks.

                  Each Bank agrees to reimburse and indemnify the Agent (to the
         extent not



                                     - 79 -
<PAGE>   80


         reimbursed by the Borrowers and without limiting the obligation of the
         Borrowers to do so) in proportion to its Ratable Share from and against
         all liabilities, obligations, losses, damages, penalties, actions,
         judgments, suits, costs, expenses or disbursements of any kind or
         nature whatsoever which may be imposed on, incurred by or asserted
         against the Agent, in its capacity as such, in any way relating to or
         arising out of this Agreement or any other Loan Document or any action
         taken or omitted by the Agent hereunder or thereunder, provided that no
         Bank shall be liable for any portion of such liabilities, obligations,
         losses, damages, penalties, actions, judgments, suits, costs, expenses
         or disbursements (a) if the same result from the Agent's gross
         negligence or willful misconduct, or (b) if such Bank was not given
         notice of the subject claim and the opportunity to participate in the
         defense thereof, at its expense, or (c) if the same result from a
         compromise and settlement agreement entered into without the consent of
         such Bank.

10.8.    Reliance by Agent.

                  The Agent shall be entitled to rely upon any writing,
         telegram, telex or teletype message, resolution, notice, consent,
         certificate, letter, cablegram, statement, order or other document or
         conversation by telephone or otherwise believed by it to be genuine and
         correct and to have been signed, sent or made by the proper person or
         persons, and upon the advice and opinions of counsel and other
         professional advisors selected by the Agent. The Agent shall be fully
         justified in failing or refusing to take any action hereunder unless it
         shall first be indemnified to its satisfaction by the Banks against any
         and all liability and expense which may be incurred by it by reason of
         taking or continuing to take any such action.

10.9.    Notice of Default.

                  The Agent shall not be deemed to have knowledge or notice of
         the occurrence of any Potential Default or Event of Default unless the
         Agent has received written notice from a Bank or the Borrowers
         referring to this Agreement, describing such Potential Default or Event
         of Default and stating that such notice is a "notice of default."

10.10.   Notices.

                  The Agent shall promptly send to each Bank a copy of all
         notices received from the Borrowers pursuant to the provisions of this
         Agreement or the other Loan Documents promptly upon receipt thereof.
         The Agent shall promptly notify the Borrowers and the other Banks of
         each change in the Base Rate and the effective date thereof.

10.11.   Banks in Their Individual Capacities.

                  With respect to its Revolving Credit Commitments, the Letters
         of Credit and advances in respect of drawings thereunder and the
         Revolving Credit Loans made by it, the Agent shall have the same rights
         and powers hereunder as any other Bank and may exercise the same as
         though it were not the Agent, and the term "Banks" shall, unless the
         context otherwise indicates, include the Agent in its individual
         capacity. PNC and its affiliates and each of the Banks and their
         respective affiliates may, without liability to account, except as
         prohibited herein, make loans to, accept deposits from, discount drafts
         for, act as trustee under indentures of



                                     - 80 -
<PAGE>   81


         and generally engage in any kind of banking or trust business with the
         Borrowers and their Affiliates, in the case of the Agent, as though it
         were not acting as Agent hereunder and, in the case of each Bank, as
         though such Bank were not a Bank hereunder.

10.12.   Holders of Notes.

                  The Agent may deem and treat any payee of any Note as the
         owner thereof for all purposes hereof unless and until written notice
         of the assignment or transfer thereof shall have been filed with the
         Agent. Any request, authority or consent of any person who, at the time
         of making such request or giving such authority or consent, is the
         holder of any Note shall be conclusive and binding on any subsequent
         holder, transferee or assignee of such Note or of any Note or Notes
         issued in exchange therefor.

10.13.   Equalization of Banks.

                  The Banks and the holders of any participations in any Notes
         agree among themselves that, with respect to all amounts received by
         any Bank or any such holder for application on any obligation hereunder
         or under any Note or under any such participation, whether received by
         voluntary payment, by realization upon security, by the exercise of the
         right of set-off or banker's lien, by counterclaim or by any other
         non-pro rata source, equitable adjustment will be made in the manner
         stated in the following sentence, so that, in effect, all such excess
         amounts will be shared ratably among the Banks and such holders in
         proportion to their interests in payments under the Notes, except as
         otherwise provided in Section 4.4(b), 5.4(b) or 5.5 hereof. The Banks,
         or any such holder receiving any such amount, shall purchase for cash
         from each of the other Banks an interest in such Bank's Loans in such
         amount as shall result in a ratable participation by the Banks and each
         such holder in the aggregate unpaid amount under the Notes; provided
         that if all or any portion of such excess amount is thereafter
         recovered from the Bank or the holder making such purchase, such
         purchase shall be rescinded and the purchase price restored to the
         extent of such recovery, together with interest or other amounts, if
         any, required by Law (including court order) to be paid by the Bank or
         the holder making such purchase.

10.14.   Successor Agent.

                  The Agent may resign as Agent upon not less than thirty (30)
         days' prior written notice to the Borrowers and the Banks. If the Agent
         shall resign under this Agreement, then either (a) the Required Banks
         shall appoint from among the Banks a successor agent for the Banks, and
         such successor shall be subject to the consent of the Borrowers, which
         shall not be unreasonably withheld, or (b) if a successor agent shall
         not be so appointed and approved within the thirty (30) day period
         following the Agent's notice to the Banks of its resignation, then the
         Agent shall appoint, with the consent of the Borrowers, such consent
         not to be unreasonably withheld, a successor agent who shall serve as
         Agent until such time as the Required Banks appoint a successor agent.
         Upon its appointment pursuant to either clause (a) or (b) above, such
         successor agent shall succeed to the rights, powers and duties of the
         Agent, and the term "Agent" shall mean such successor agent, effective
         upon its appointment; and the former Agent's rights, powers and duties
         as Agent shall be terminated without any other or further act or deed
         on the

                                     - 81 -
<PAGE>   82


         part of such former Agent or any of the parties to this Agreement.
         After the resignation of any Agent hereunder, the provisions of this
         Article 10 shall inure to the benefit of such former Agent, and such
         former Agent shall not by reason of such resignation be deemed to be
         released from liability for any actions taken or not taken by it while
         it was an Agent under this Agreement.

10.15.   Agent's Fee.

                  Zaring Homes shall pay to the Agent a nonrefundable fee (the
         "Agent's Fee") as set forth in the Side Letters.

10.16.   Availability of Funds.

                  Unless the Agent shall have been notified by a Bank prior to
         the date upon which a Loan is to be made that such Bank does not intend
         to make available to the Agent such Bank's portion of such Loan, the
         Agent may assume that such Bank has made or will make such proceeds
         available to the Agent on such date, and the Agent may, in reliance
         upon such assumption (but shall not be required to), make available to
         the Borrowers a corresponding amount. If such corresponding amount is
         not in fact made available to the Agent by such Bank, the Agent shall
         be entitled to recover such amount on demand from such Bank (or, if
         such Bank fails to pay such amount forthwith, upon such demand from the
         Borrowers) together with interest thereon, in respect of each day
         during the period commencing on the date such amount was made available
         to the Borrowers and ending on the date the Agent recovers such amount,
         at a rate per annum equal to the Federal Funds Effective Rate.

10.17.   Calculations.

                  In the absence of gross negligence or willful misconduct, the
         Agent shall not be liable for any error in computing the amount payable
         to any Bank, whether in respect of the Loans, fees or any other amounts
         due to the Banks under this Agreement. In the event an error in
         computing any amount payable to any Bank is made, the Agent, the
         Borrowers and each affected Bank shall, forthwith upon discovery of
         such error, make such adjustments as shall be required to correct such
         error, and any compensation therefor will be calculated at the Federal
         Funds Effective Rate.

10.18.   Beneficiaries.

                  Except as expressly provided herein, the provisions of this
         Article 10 are solely for the benefit of the Agent and the Banks, and
         the Loan Parties shall not have any rights to rely on or enforce any of
         the provisions hereof. In performing its functions and duties under
         this Agreement, the Agent shall act solely as agent of the Banks and
         does not assume and shall not be deemed to have assumed any obligation
         toward or relationship of agency or trust with or for any of the Loan
         Parties.

                               11. MISCELLANEOUS


                                     - 82 -
<PAGE>   83


11.1.    Modifications, Amendments or Waivers.

                  With the written consent of the Required Banks, the Agent,
         acting on behalf of all the Banks, and the Borrowers, on behalf of the
         Loan Parties, may from time to time enter into written agreements
         amending or changing any provision of this Agreement or any other Loan
         Document or the rights of the Banks or the Loan Parties hereunder or
         thereunder, or may grant written waivers or consents to a departure
         from the due performance of the obligations of the Loan Parties
         hereunder or thereunder. Any such agreement, waiver or consent made
         with such written consent shall be effective to bind all the Banks and
         the Loan Parties; provided that, without the written consent of all the
         Banks, no such agreement, waiver or consent may be made which will:

(a)      Reduce the amount of the Commitment Fee or any other fees payable to
         any Bank hereunder, or amend Sections 5.2 [Pro Rata Treatment of
         Banks], 10.6 [Exculpatory Provisions], 10.13 [Equalization of Banks] or
         11.19 [Limitation of Liability] hereof;

(b)      Whether or not any Loans are outstanding, extend the time for payment
         of principal or interest of any Loan or any fees, or reduce the
         principal amount of or the rate of interest borne by any Loan or the
         amount of any fees, or otherwise affect the terms of payment of the
         principal of or interest on any Loan or any fees or increase the amount
         of the commitments or extend the Revolving Credit Expiration Date;

(c)      Release any Guarantor from its obligations under the Guaranty
         Agreement; or

(d)      Amend this Section 11.1, change the definition of Required Banks or
         change any requirement providing for the Banks or the Required Banks to
         authorize the taking of any action hereunder.

11.2.    No Implied Waivers; Cumulative Remedies; Writing Required.

                  No course of dealing and no delay or failure of the Agent or
         any Bank in exercising any right, power, remedy or privilege under this
         Agreement or any other Loan Document shall affect any other or future
         exercise thereof or operate as a waiver thereof, nor shall any single
         or partial exercise thereof or any abandonment or discontinuance of
         steps to enforce such a right, power, remedy or privilege preclude any
         further exercise thereof or of any other right, power, remedy or
         privilege. The rights and remedies of the Agent and the Banks under
         this Agreement and any other Loan Document are cumulative and not
         exclusive of any rights or remedies which they would otherwise have.
         Any waiver, permit, consent or approval of any kind or character on the
         part of any Bank of any breach or default under this Agreement or any
         such waiver of any provision or condition of this Agreement must be in
         writing and shall be effective only to the extent specifically set
         forth in such writing.

11.3.    Reimbursement and Indemnification of Banks by the Borrowers; Taxes.

                  The Borrowers jointly and severally agree unconditionally upon
         demand to pay or reimburse to each Bank (other than the Agent, as to
         which the Borrowers' obligations are set forth in Section 10.5) and to
         save such Bank harmless against (i) liability for the payment of all


                                     - 83 -
<PAGE>   84


         reasonable out-of-pocket costs, expenses and disbursements (including
         fees and expenses of counsel for each Bank except with respect to (a)
         and (b) below) incurred by such Bank (a) in connection with the
         administration and interpretation of this Agreement and other
         instruments and documents to be delivered hereunder, (b) relating to
         any amendments, waivers or consents pursuant to the provisions hereof,
         (c) in connection with the enforcement of this Agreement or any other
         Loan Document, or collection of amounts due hereunder or thereunder, or
         the proof and allowability of any claim arising under this Agreement or
         any other Loan Document, whether in bankruptcy or receivership
         proceedings or otherwise, and (d) in any workout, restructuring or in
         connection with the protection, preservation, exercise or enforcement
         of any of the terms hereof or of any rights hereunder or under any
         other Loan Document, or in connection with any foreclosure, collection
         or bankruptcy proceedings; or (ii) all liabilities, obligations,
         losses, damages, penalties, actions, judgments, suits, costs, expenses
         or disbursements of any kind or nature whatsoever which may be imposed
         on, incurred by or asserted against such Bank, in its capacity as such,
         in any way relating to or arising out of this Agreement or any other
         Loan Document or any action taken or omitted by such Bank hereunder or
         thereunder, provided that the Borrowers shall not be liable for any
         portion of such liabilities, obligations, losses, damages, penalties,
         actions, judgments, suits, costs, expenses or disbursements to the
         extent such portion resulted from (A) such Bank's gross negligence or
         willful misconduct, or (B) the failure to provide the Borrowers with
         notice of the subject claim and the opportunity to participate in the
         defense thereof, at their expense, or (C) a compromise or settlement
         agreement entered into without the consent of the Borrowers. The Banks
         will attempt to minimize the fees and expenses of legal counsel for the
         Banks which are subject to reimbursement by the Borrowers hereunder by
         considering the usage of one law firm to represent the Banks and the
         Agent if appropriate under the circumstances. The Borrowers jointly and
         severally agree unconditionally to pay all stamp, document, transfer,
         recording or filing taxes or fees and similar impositions now or
         hereafter determined by the Agent or any Bank to be payable in
         connection with this Agreement or any other Loan Document, and the
         Borrowers jointly and severally agree unconditionally to save the Agent
         and the Banks harmless from and against any and all present or future
         claims, liabilities or losses with respect to or resulting from any
         omission to pay or delay in paying any such taxes, fees or impositions.

11.4.    Holidays.

                  Whenever any payment or action to be made or taken hereunder
         shall be stated to be due on a day which is not a Business Day, such
         payment or action shall be made or taken on the next following Business
         Day (except as provided in Section 4.2 with respect to Euro-Rate
         Interest Periods), and such extension of time shall be included in
         computing interest or fees, if any, in connection with such payment or
         action.

11.5.    Funding by Branch, Subsidiary or Affiliate.

(a)      Notional Funding.

                           Each Bank shall have the right from time to time,
         without notice to the Borrowers, to deem any branch, subsidiary or
         affiliate (which for the purposes of this



                                     - 84 -
<PAGE>   85


         Section 11.5 shall mean any corporation or association which is
         directly or indirectly controlled by or is under direct or indirect
         common control with any corporation or association which directly or
         indirectly controls such Bank) of such Bank to have made, maintained or
         funded any Loan to which the Euro-Rate Option applies at any time,
         provided that immediately following (on the assumption that a payment
         were then due from the Borrowers to such other office) and as a result
         of such change, the Borrowers would not be under any greater obligation
         pursuant to Section 5.5 hereof than they would have been in the absence
         of such change. Notional funding offices may be selected by each Bank
         without regard to the Bank's actual methods of making, maintaining or
         funding the Loans or any sources of funding actually used by or
         available to such Bank.

(b)      Actual Funding.

                           Each Bank shall have the right from time to time to
         make or maintain any Loan by arranging for a branch, subsidiary or
         affiliate of such Bank to make or maintain such Loan, subject to the
         last sentence of this Section 11.5(b). If any Bank causes a branch,
         subsidiary or affiliate to make or maintain any part of the Loans
         hereunder, all terms and conditions of this Agreement shall, except
         where the context clearly requires otherwise, be applicable to such
         part of the Loans to the same extent as if such Loans were made or
         maintained by such Bank, but in no event shall any Bank's use of such a
         branch, subsidiary or affiliate to make or maintain any part of the
         Loans hereunder cause such Bank or such branch, subsidiary or affiliate
         to incur any cost or expenses payable by the Borrowers hereunder or
         require the Borrowers to pay any other compensation to any Bank
         (including, without limitation, any expenses incurred or payable
         pursuant to Section 5.5 hereof) which would otherwise not be incurred.

11.6.    Notices.

                  All notices, requests, demands, directions and other
         communications (collectively "notices") given to or made upon any party
         hereto under the provisions of this Agreement shall be by telephone in
         person (as opposed to voice mail or answering machine message) or in
         writing (including telex or facsimile communication, provided receipt
         of such telex or facsimile communication is confirmed within
         twenty-four (24) hours of receipt) unless otherwise expressly permitted
         hereunder and shall be delivered or sent by telex or facsimile to the
         respective parties at the addresses and numbers set forth under their
         respective names on the signature pages hereof or in accordance with
         any subsequent unrevoked written direction from any party to the
         others. All notices shall, except as otherwise expressly herein
         provided, be effective (a) in the case of telex or facsimile, when
         received, (b) in the case of hand-delivered notice, when hand
         delivered, (c) in the case of telephone, when telephoned, provided,
         however, that in order to be effective, telephonic notices must be
         confirmed in writing no later than the next day by letter, facsimile or
         telex, (d) if given by mail, four (4) days after such communication is
         deposited in the mail with first-class postage prepaid, return receipt
         requested, and (e) if given by any other means (including by air
         courier), when delivered; provided, that notices to the Agent shall not
         be effective until received. Any Bank giving any notice to any Loan
         Party shall simultaneously send a copy thereof to the Agent, and the
         Agent shall promptly notify the other Banks of the receipt by it of any
         such notice.



                                     - 85 -
<PAGE>   86


11.7.    Severability.

                  The provisions of this Agreement are intended to be severable.
         If any provision of this Agreement shall be held invalid or
         unenforceable in whole or in part in any jurisdiction, such provision
         shall, as to such jurisdiction, be ineffective to the extent of such
         invalidity or unenforceability without in any manner affecting the
         validity or enforceability thereof in any other jurisdiction or the
         remaining provisions hereof in any jurisdiction.

11.8.    Governing Law.

                  This Agreement shall be deemed to be a contract under the laws
         of the State of Ohio and for all purposes shall be governed by and
         construed and enforced in accordance with the laws of the State of Ohio
         without regard to its conflict of laws principles.

11.9.    Prior Understanding.

                  This Agreement supersedes all prior understandings and
         agreements, whether written or oral, between the parties hereto and
         thereto relating to the transactions provided for herein and therein,
         including any prior confidentiality agreements and commitments, except
         the Side Letters, which remain in force and effect.

11.10.   Duration; Survival.

                  All representations and warranties of the Loan Parties
         contained herein or made in connection herewith shall survive the
         making of Loans and shall not be waived by the execution and delivery
         of this Agreement, any investigation by the Agent or the Banks, the
         making of Loans or payment in full of the Loans. All covenants and
         agreements of the Loan Parties contained herein shall continue in full
         force and effect from and after the date hereof, so long as the
         Borrowers may borrow hereunder and until termination of the Revolving
         Credit Commitments, payment in full of the Loans and termination or
         expiration of all Letters of Credit. All covenants and agreements of
         the Borrowers contained herein relating to the payment of principal,
         interest, premiums, additional compensation or expenses and
         indemnification, including those set forth in the Notes, Article 5 and
         Sections 10.5, 10.7, and 11.3 hereof, shall survive payment in full of
         the Loans, termination of the Revolving Credit Commitments and
         termination or expiration of all Letters of Credit.

11.11.   Successors and Assigns.

                  This Agreement shall be binding upon and shall inure to the
         benefit of the Banks, the Agent, the Borrowers and their respective
         successors and assigns, except that the Borrowers may not assign or
         transfer any of their rights and obligations hereunder or any interest
         herein. Each Bank may, at its own cost and without the Borrowers'
         consent, sell participations in all or any part of its Commitments and
         the Loans made by it. Each Bank may, at its own cost, make assignments
         of all or any part of its Commitment and the Loans made by it, provided
         that each of the following conditions is met: (i) the Commitments and
         Loans that are assigned to any assignee, in the aggregate, must equal
         or exceed $10,000,000, and (ii) the Agent and, except



                                     - 86 -
<PAGE>   87


         during the continuance of an Event of Default, the Borrowers shall
         consent to the assignee, such consent not to be unreasonably withheld.

                           In the case of an assignment, upon receipt by the
         Agent of the Assignment and Assumption Agreement, the assignee shall
         have, to the extent of such assignment (unless otherwise provided
         therein), the same rights, benefits and obligations as it would have if
         it had been a signatory Bank hereunder, the Commitments in Section 2.1
         shall be adjusted accordingly, and upon surrender of any Note subject
         to such assignment, the Borrowers shall execute and deliver new Notes
         to the assignee in an amount equal to the amount of the Commitments
         assumed by it and new Notes to the assigning Bank in an amount equal to
         the Commitments retained by it hereunder. The assigning Bank shall pay
         to the Agent a service fee in the amount of $2,000 for each assignment.

                           In the case of a participation, the participant shall
         have only the rights specified in Section 9.2(c) (the participant's
         rights against such Bank in respect of such participation to be those
         set forth in the agreement executed by such Bank in favor of the
         participant relating thereto and not to include any voting rights
         except with respect to changes of the type referenced in clauses (a),
         (b) or (c) under Section 11.1 hereof), all of such Bank's obligations
         under this Agreement or any other Loan Document shall remain unchanged,
         and all amounts payable by any of the Loan Parties hereunder or
         thereunder shall be determined as if such Bank had not sold such
         participation. Each Bank may furnish any publicly available information
         concerning any of the Loan Parties and any other information concerning
         any of the Loan Parties in the possession of such Bank from time to
         time to assignees and participants (including prospective assignees or
         participants), provided such assignees and participants agree to be
         bound by the provisions of Section 11.12 hereof.

11.12.   Confidentiality.

                  The Agent and the Banks each agree to keep confidential all
         information obtained from the Borrowers which is nonpublic and
         confidential or proprietary in nature (including any information the
         Borrowers specifically designate as confidential), except as provided
         below, and to use such information only in connection with their
         respective capacities under this Agreement and for the purposes
         contemplated hereby. The Agent and the Banks shall be permitted to
         disclose such information (i) to affiliates of the Agent and the Banks
         and to outside legal counsel, accountants and other professional
         advisors who need to know such information in connection with the
         administration and enforcement of this Agreement, subject to agreement
         of such persons to maintain the confidentiality, (ii) to assignees and
         participants as contemplated by Section 11.11, (iii) to the extent
         requested by any bank regulatory authority or, with notice to the
         Borrowers, as otherwise required by applicable Law or by any subpoena
         or similar legal process, or in connection with any investigation or
         proceeding arising out of the transactions contemplated by this
         Agreement, (iv) if it becomes publicly available other than as a result
         of a breach of this Agreement or becomes available from a source not
         subject to confidentiality restrictions, or (v) if the Borrowers shall
         have consented to such disclosure.

11.13.   Counterparts.



                                     - 87 -
<PAGE>   88


                  This Agreement may be executed by different parties hereto on
         any number of separate counterparts, each of which, when so executed
         and delivered, shall be an original, and all such counterparts shall
         together constitute one and the same instrument.

11.14.   Agent's or Bank's Consent.

                  Whenever the Agent's or any Bank's consent is required to be
         obtained under this Agreement or any of the other Loan Documents as a
         condition to any action, inaction, condition or event, the Agent and
         each Bank shall be authorized to give or withhold such consent in its
         sole and absolute discretion and to condition its consent upon the
         giving of additional collateral, the payment of money or any other
         matter.

11.15.   Exceptions.

                  The representations, warranties and covenants contained herein
         shall be independent of each other, and no exception to any
         representation, warranty or covenant shall be deemed to be an exception
         to any other representation, warranty or covenant contained herein
         unless expressly provided, nor shall any such exceptions be deemed to
         permit any action or omission that would be in contravention of
         applicable Law.

11.16.   Consent to Forum; Waiver of Jury Trial.

                  Each of the Loan Parties hereby irrevocably consents to the
         nonexclusive jurisdiction of the Court of Common Pleas of Hamilton
         County, Ohio and the United States District Court for the Southern
         District of Ohio, and waives personal service of any and all process
         upon it and consents that all such service of process be made by
         certified or registered mail directed to such Loan Party at the
         addresses provided for in Section 11.6 hereof and service so made shall
         be deemed to be completed upon actual receipt thereof. Each Loan Party
         waives any objection to jurisdiction and venue of any action instituted
         against it as provided herein and agrees not to assert any defense
         based on lack of jurisdiction or venue. Each Loan Party, the Agent and
         the Banks hereby waive trial by jury in any action, suit, proceeding or
         counterclaim of any kind arising out of or related to this Agreement or
         any other Loan Document to the full extent permitted by Law.

11.17.   Tax Withholding Clause.

                  At least five (5) Business Days prior to the first date on
         which interest or fees are payable hereunder for the account of any
         Bank, each Bank that is not incorporated under the laws of the United
         States of America or a state thereof agrees that it will deliver to
         each of the Borrowers and the Agent two (2) duly completed copies of
         (i) Internal Revenue Service Form W-9, 4224 or 1001, or other
         applicable form prescribed by the Internal Revenue Service, certifying
         in either case that such Bank is entitled to receive payments under
         this Agreement and the other Loan Documents without deduction or
         withholding of any United States federal income taxes or is subject to
         such tax at a reduced rate under an applicable tax treaty, or (ii) Form
         W-8 or other applicable form or a certificate of the Bank indicating
         that no such exemption or reduced rate is allowable with respect to
         such payments. Each Bank which so delivers a Form W-8, W-9,



                                     - 88 -
<PAGE>   89


         4224 or 1001 further undertakes to deliver to each of the Borrowers and
         the Agent two (2) additional copies of such form (or a successor form)
         on or before the date that such form expires or becomes obsolete or
         after the occurrence of any event requiring a change in the most recent
         form so delivered by it, and such amendments thereto or extensions or
         renewals thereof as may be reasonably requested by the Borrowers or the
         Agent, either certifying that such Bank is entitled to receive payments
         under this Agreement and the other Loan Documents without deduction or
         withholding of any United States federal income taxes or is subject to
         such tax at a reduced rate under an applicable tax treaty or stating
         that no such exemption or reduced rate is allowable. The Agent shall be
         entitled to withhold United States federal income taxes at the full
         withholding rate unless the Bank establishes an exemption or at the
         applicable reduced rate as established pursuant to the above
         provisions.

11.18.   Joinder of Guarantors.

(a)      Any Subsidiary of the Borrowers which is required to join this
         Agreement pursuant to Section 8.2(i) must execute and deliver to Agent
         (i) a Guarantor Joinder attached hereto as Exhibit 1.1(G)(1), (ii) an
         Intercompany Subordination Joinder attached hereto as Exhibit
         1.1(I)(2), and (iii) documents in the forms described in Section 7.1,
         modified as appropriate to relate to such Subsidiary. The Loan Parties
         shall deliver the foregoing documents specified in the preceding
         clauses (i)-(iii) to the Agent within fourteen (14) Business Days after
         the date of the filing of the articles of incorporation or certificate
         of limited partnership or other equivalent effective date of the
         organization of such Subsidiary if such Subsidiary is not a limited
         partnership or corporation. Upon execution and delivery of such
         documents, a Subsidiary shall be a party hereto and an obligor under
         the Guaranty and one of the Loan Parties and Guarantors hereunder and
         under each of the other Loan Documents for all purposes.

11.19.   Limitation of Liability.

                  TO THE FULLEST EXTENT PERMITTED BY LAW, NO CLAIM MAY BE MADE
         BY THE BORROWERS OR ANY OTHER LOAN PARTY OR ANY OTHER PERSON AGAINST
         THE AGENT AND THE BANKS, OR ANY OF THEM, OR ANY AFFILIATE, DIRECTOR,
         OFFICER, EMPLOYEE, ATTORNEY OR AGENT OF THE AGENT OR THE BANKS FOR ANY
         SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY
         CLAIM ARISING FROM OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN
         DOCUMENT OR ANY STATEMENT, COURSE OF CONDUCT, ACT, OMISSION OR EVENT
         OCCURRING IN CONNECTION HEREWITH OR THEREWITH (WHETHER FOR BREACH OF
         CONTRACT, TORT OR ANY OTHER THEORY OF LIABILITY); AND THE BORROWERS
         HEREBY WAIVE, RELEASE AND AGREE NOT TO SUE UPON ANY CLAIM FOR ANY SUCH
         DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED
         TO EXIST IN THEIR FAVOR.

11.20.   Co-Agents.

                  The Co-Agents shall have no rights, obligations or duties
         under this Agreement


                                     - 89 -
<PAGE>   90


         other than in their respective capacities as Banks hereunder.



                            [SIGNATURE PAGE FOLLOWS]









                                     - 90 -
<PAGE>   91


                  [SIGNATURE PAGE 1 OF 6 OF CREDIT AGREEMENT]


                  IN WITNESS WHEREOF, the parties hereto, by their officers
thereunto duly authorized, have executed this Agreement as of the day and year
first above written.

                                             BORROWERS AND GUARANTORS:

ATTEST:                                      ZARING HOMES, INC.


_______________________________              By:
[Seal]                                       Name: Ronald G. Gratz
                                             Title:Vice President and Chief
                                                   Financial Officer


                                             Address for Notices:

                                             Zaring Homes, Inc.
                                             11300 Cornell Park Drive, Suite 500
                                             Cincinnati, OH  45242-1825
                                             Attention:  Ronald G. Gratz

                                             Telecopier No.: (513) 247-2667
                                             Telephone No.: (513) 489-8849

ATTEST:                                      ZARING HOLDINGS, INC.


_______________________________              By:
[Seal]                                       Name: Ronald G. Gratz
                                             Title:Treasurer

                                             Address for Notices:

                                             Zaring Holdings, Inc.
                                             11300 Cornell Park Drive, Suite 500
                                             Cincinnati, OH  45242-1825
                                             Attention:  Ronald G. Gratz

                                             Telecopier No.: (513) 247-2667
                                             Telephone No.: (513) 489-8849






                                     - 91 -
<PAGE>   92


                   [SIGNATURE PAGE 2 OF 6 OF CREDIT AGREEMENT]


                                             HEARTHSIDE HOMES, LLC
                                               By:  Zaring National Corporation,
                                                    as member


_______________________________              By:
[Seal]                                       Name:  Ronald G. Gratz
                                             Title: Secretary/Treasurer

                                             Address for Notices:


                                             11300 Cornell Park Drive, Suite 500
                                             Cincinnati, OH  45242-1825
                                             Attention:  Ronald G. Gratz

                                             Telecopier No.: (513) 247-2667
                                             Telephone No.: (513) 489-8849


                                             GUARANTORS:

                                             ZARING NATIONAL CORPORATION


_______________________________              By:
[Seal]                                       Name:  Ronald G. Gratz
                                             Title: Secretary/Treasurer

                                             Address for Notices:


                                             11300 Cornell Park Drive, Suite 500
                                             Cincinnati, OH  45242-1825
                                             Attention:  Ronald G. Gratz

                                             Telecopier No.: (513) 247-2667
                                             Telephone No.: (513) 489-8849



                                     - 92 -
<PAGE>   93


                   [SIGNATURE PAGE 3 OF 6 OF CREDIT AGREEMENT]


ATTEST:                                     ZARING HOMES OF INDIANA, L.L.C.
                                              By:  Zaring Homes, Inc., as member

_______________________________             By:
[Seal]                                      Name:  Ronald G. Gratz
                                            Title: Vice President and Chief
                                                   Financial Officer

                                            Address for Notices:

                                            Zaring Homes of Indiana, L.L.C.
                                            11300 Cornell Park Drive, Suite 300
                                            Cincinnati, OH  45242-1825
                                            Attention:  Ronald G. Gratz

                                            Telecopier No.: (513) 247-2667
                                            Telephone No.: (513) 489-8849


ATTEST:                                     ZARING HOMES KENTUCKY, LLC,
                                              By:  Zaring Holdings, Inc.,
                                                   as manager

_______________________________             By:
[Seal]                                      Name:  Ronald G. Gratz
                                            Title: Treasurer

                                            Address for Notices:

                                            Zaring Homes Kentucky, LLC
                                            11300 Cornell Park Drive, Suite 300
                                            Cincinnati, OH  45242-1825
                                            Attention:  Ronald G. Gratz

                                            Telecopier No.: (513) 247-2667
                                            Telephone No.: (513) 489-8849






                                     - 93 -
<PAGE>   94


                   [SIGNATURE PAGE 4 OF 6 OF CREDIT AGREEMENT]


                                            AGENT:

                                            PNC BANK, NATIONAL ASSOCIATION,
                                            as Agent and as a Bank


                                            By:
                                            Name:  James A. Harmann,
                                            Title: Vice President


                                            Address for Notices:

                                            PNC Bank, National Association
                                            201 East Fifth Street, 8th Floor
                                            Cincinnati, OH 45202
                                            Attention:  Commercial Real Estate

                                            Telecopier No. (513) 651-8931
                                            Telephone No. (513) 651-8988


                                            With a copy to:

                                            PNC Bank, National Association
                                            One PNC Plaza - Fourth Floor Annex
                                            Fifth Avenue and Wood Street
                                            Pittsburgh, PA 15265
                                            Attention:  Multi-Bank Loan
                                                        Administration

                                            Telecopier No. (412) 762-8672
                                            Telephone No. (412) 762-3627



                                     - 94 -
<PAGE>   95


                   [SIGNATURE PAGE 5 OF 6 OF CREDIT AGREEMENT]


                                            CO-AGENTS:

ATTEST:                                     BANK OF AMERICA NT&SA
                                            (formerly NationsBank, N.A.),
                                            as a Co-Agent and as a Bank


_______________________________             By:
[Seal]                                      Name:  Michael V. Atkins
                                            Title: Vice President

                                            Address for Notices:

                                            Homebuilding Division
                                            5 Park Plaza, Suite 500
                                            Irvine, CA 92614
                                            Attention:  Michael V. Atkins

                                            Telecopier No.: (949) 260-5639
                                            Telephone No.: (949) 260-5694


ATTEST:                                     BANK ONE, MICHIGAN
                                            (formerly The First National Bank of
                                            Chicago),
                                            as a Co-Agent and as a Bank


_______________________________             By:
[Seal]                                      Name:  Steven J. Mahr
                                            Title: First Vice President

                                            Address for Notices:

                                            611 Woodward Avenue
                                            Mail Suite 0315
                                            Detroit, MI 48226
                                            Attention:  Steven J. Mahr

                                            Telecopier No.: (313) 226-0857
                                            Telephone No.: (313) 225-3499




                                     - 95 -
<PAGE>   96


                   [SIGNATURE PAGE 6 OF 6 OF CREDIT AGREEMENT]


                                            OTHER BANKS:

ATTEST:                                     COMERICA BANK,


_______________________________             By:
[Seal]                                      Name:  Charles L. Weddell
                                            Title: Vice President

                                            Address for Notices:


                                            Commercial Real Estate II
                                            500 Woodward Avenue
                                            Mail Code 3256
                                            Detroit, MI 48226
                                            Attention:  Charles L. Weddell

                                            Telecopier No.: (313) 222-9295
                                            Telephone No.: (313) 222-3323


ATTEST:                                     THE FIFTH THIRD BANK


_______________________________             By:
[Seal]                                      Name:  Brian L. Rogg
                                            Title: Vice President

                                            Address for Notices:


                                            38 Fountain Square Plaza
                                            Mail Drop 109051
                                            Cincinnati, OH 45202
                                            Attention:  Brian L. Rogg

                                            Telecopier No.: (513) 744-7717
                                            Telephone No.: (513) 579-5377





                                     - 96 -
<PAGE>   97

                                 SCHEDULE 1.1(B)
                              COMMITMENTS OF BANKS


<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
                                              Amount of Commitment       Amount of          Amount of          Ratable
                                              for Revolving Credit    Commitment for     Outstanding Term     Share (%)
                                                   Loans ($US)       Term Loans ($US)      Loans ($US)
-----------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>                <C>               <C>                  <C>
PNC Bank, National Association                      $18,639,800        $ 3,860,200       $1,544,492.50         25.71%
-----------------------------------------------------------------------------------------------------------------------

Bank of America NT&SA                               $16,573,500        $ 3,426,500       $1,370,600.00         22.86%
-----------------------------------------------------------------------------------------------------------------------

Bank One, Michigan                                  $16,573,500        $ 3,426,500       $1,370,600.00         22.86%
-----------------------------------------------------------------------------------------------------------------------

Comerica Bank                                       $12,426,500        $ 2,573,500       $1,029,400.00         17.14%
-----------------------------------------------------------------------------------------------------------------------

The Fifth Third Bank                                $ 8,286,700        $ 1,713,300       $  684,907.50         11.43%
                                                    -----------        -----------       -------------        ------
-----------------------------------------------------------------------------------------------------------------------

                           TOTAL                    $72,500,000        $15,000,000       $   6,000,000        100.00%
                                                    ===========        ===========       =============        =======
----------------------------------------------------------------------------------------------------------------------
</TABLE>









                                     - 97 -