HOMEGOLD FINANCIAL INC
AMENDED AND RESTATED CREDIT AGREEMENT
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>warehousecreditagr.txt
<DESCRIPTION>AMENDED AND RESTATED CREDIT AGREEMENT
<TEXT>





                                   $40,000,000

                              AMENDED AND RESTATED
                                WAREHOUSING LINE
                           REVOLVING CREDIT AGREEMENT

                                 BY AND BETWEEN

                                 HOMEGOLD, INC.

                                       AND

                  HOUSEHOLD COMMERCIAL FINANCIAL SERVICES, INC.


                            DATED AS OF JUNE 11, 2001





================================================================================



<PAGE>
<TABLE>
<CAPTION>
                                TABLE OF CONTENTS

                                                                                                               Page

<S>               <C>                                                                                          <C>
SECTION 1.        DEFINITIONS; INTERPRETATION.....................................................................1

     Section 1.1  Definitions.....................................................................................1
     Section 1.2  Interpretation.................................................................................10

SECTION 2.        THE CREDIT.....................................................................................10

     Section 2.1  The Revolving Credit...........................................................................10
     Section 2.2  Applicable Interest Rates......................................................................11
     Section 2.3  Minimum Borrowing Amounts......................................................................11
     Section 2.4  Borrowing Procedures...........................................................................11
     Section 2.5  Prepayments....................................................................................12
     Section 2.6  The Note.......................................................................................13
     Section 2.7  Commitment Terminations........................................................................14

SECTION 3.        FEES AND PAYMENTS..............................................................................14

     Section 3.1  Transaction, Processing and Custodial Fees.....................................................14
     Section 3.2  Audit Fees.....................................................................................15
     Section 3.3  Place and Application of Payments..............................................................15

SECTION 4.        THE COLLATERAL.................................................................................16

     Section 4.1  The Collateral.................................................................................16
     Section 4.2  Further Assurances.............................................................................16
     Section 4.3  Guaranties.....................................................................................16

SECTION 5.        REPRESENTATIONS AND WARRANTIES.................................................................16

     Section 5.1  Organization and Qualification.................................................................16
     Section 5.2  Subsidiaries...................................................................................16
     Section 5.3  Corporate Authority and Validity of Obligations................................................17
     Section 5.4  Use of Proceeds................................................................................17
     Section 5.5  Financial Reports..............................................................................17
     Section 5.6  No Material Adverse Change.....................................................................18
     Section 5.7  Full Disclosure................................................................................18
     Section 5.8  Good Title.....................................................................................18
     Section 5.9  Investment Company.............................................................................18
     Section 5.10 Litigation and Other Controversies.............................................................18
     Section 5.11 Taxes..........................................................................................18
     Section 5.12 Approvals......................................................................................19
     Section 5.13 Affiliate Transactions.........................................................................19
     Section 5.14 ERISA..........................................................................................19
     Section 5.15 Compliance with Laws...........................................................................19
     Section 5.16 Other Agreements...............................................................................20
     Section 5.17 No Defaults....................................................................................20

                                       i
<PAGE>
SECTION 6.        CONDITIONS PRECEDENT...........................................................................20

     Section 6.1  Initial Loan...................................................................................20
     Section 6.2  All Loans......................................................................................21

SECTION 7.        COVENANTS......................................................................................22

     Section 7.1  Maintenance of Business........................................................................22
     Section 7.2  Maintenance of Property........................................................................22
     Section 7.3  Taxes and Assessments..........................................................................22
     Section 7.4  Insurance......................................................................................22
     Section 7.5  Financial Reports..............................................................................22
     Section 7.6  Indebtedness for Borrowed Money................................................................24
     Section 7.7  Liens..........................................................................................24
     Section 7.8  Mergers, Consolidations and Sales..............................................................26
     Section 7.9  ERISA..........................................................................................26
     Section 7.10 Compliance with Laws...........................................................................26
     Section 7.11 Burdensome Contracts with Affiliates...........................................................26
     Section 7.12 Maintenance of Subsidiaries....................................................................27
     Section 7.13 Change in the Nature of Business...............................................................27
     Section 7.14 [INTENTIONALLY OMITTED]........................................................................27
     Section 7.15 INTENTIONALLYOMITTED]..........................................................................27
     Section 7.16 Net Income.....................................................................................27
     Section 7.17 Dividends and Certain Other Restricted Payments................................................27

SECTION 8.        EVENTS OF DEFAULT AND REMEDIES.................................................................27

     Section 8.1  Events of Default..............................................................................27
     Section 8.2  Remedies - Certain Events of Default...........................................................29
     Section 8.3  Remedies - Other Events of Default.............................................................30
     Section 8.4  Expenses.......................................................................................30

SECTION 9.        MISCELLANEOUS..................................................................................30

     Section 9.1  No Waiver of Rights............................................................................30
     Section 9.2  Non-Business Day...............................................................................30
     Section 9.3  Documentary Taxes..............................................................................30
     Section 9.4  Survival of Representations....................................................................30
     Section 9.5  Survival of Indemnities........................................................................30
     Section 9.6  Notices........................................................................................30
     Section 9.7  Counterparts...................................................................................31
     Section 9.8  Successors and Assigns.........................................................................31
     Section 9.9  Amendments.....................................................................................31
     Section 9.10 Fees and Indemnification.......................................................................32
     Section 9.11 Assignments....................................................................................32
     Section 9.12 Governing Law..................................................................................33
     Section 9.13 Headings.......................................................................................33
     Section 9.14 Entire Agreement...............................................................................33
     Section 9.15 Terms of Collateral Documents Not Superseded...................................................33
     Section 9.16 Construction...................................................................................33
</TABLE>

                                       ii
<PAGE>

EXHIBITS AND SCHEDULES

Exhibit A        --        Revolving Credit Note
Exhibit B        --        States In Which Borrower Qualified to do Business
Exhibit C        --        Required Documents
Exhibit C-1      --        Funding Request Form
Exhibit C-2      --        Closing Agent Approval Package
Exhibit D        --        Subsidiaries
Exhibit E        --        Borrowing Base Certificate
Exhibit F        --        Compliance Certificate
Exhibit G        --        Pending Litigation
Exhibit H        --        Missing Collateral Fees
Exhibit I        --        Aged Loan Processing Fees
Exhibit J        --        Closing Agent Agreement
Schedule 7.6     --        Existing Indebtedness and Liens












                                      iii
<PAGE>


                              AMENDED AND RESTATED
                                CREDIT AGREEMENT
                                ----------------


         THIS AMENDED AND RESTATED CREDIT AGREEMENT (this  "Agreement") dated as
of this  1st day of May,  2001 by and  between  HOUSEHOLD  COMMERCIAL  FINANCIAL
SERVICES,  INC., a Delaware  corporation  with its corporate office at 700 North
Wood  Dale  Road,  Building  3A,  Wood  Dale,  Illinois  60191  (said  Household
Commercial  Financial  Services,  Inc.  together with any of its  Affiliates and
their successors and assigns being hereinafter  referred to as the "Lender") and
HOMEGOLD, INC., a South Carolina corporation (the "Borrower").

                                    RECITALS

         WHEREAS,  the Borrower and Lender are currently parties to that certain
Credit  Agreement  dated as of May 2, 2000 as  heretofore  amended  (such Credit
Agreement as so amended being  hereinafter  referred to as the "Original  Credit
Agreement");

         WHEREAS, the Borrower and Lender wish to make certain amendments to the
terms and conditions applicable to the Revolving Credit made available by Lender
to Borrower under the Original Credit Agreement and, for the sake of convenience
and clarity, amend and restate the Original Credit Agreement in its entirety;

         WHEREAS,   all   Collateral   currently   securing  the   indebtedness,
obligations and liabilities of Borrower to Lender,  including the Obligations of
Borrower  under  the  Original  Credit  Agreement,  pursuant  to the  Collateral
Documents  is  to  continue  as  collateral   security  for  the   indebtedness,
obligations and  liabilities of Borrower under the Original Credit  Agreement as
amended and restated  hereby and all  obligations  of the  Guarantors  under the
Guaranties (as such terms are defined in the Original  Credit  Agreement) are to
continue in full force and effect with respect to, inter alia, the indebtedness,
obligations and liabilities of the Borrower under the Original Credit  Agreement
as amended and restated hereby;

         NOW THEREFORE,  in  consideration  of the premises and of the covenants
and  agreements  hereinafter  contained,  the parties  hereto agree to amend and
restate the Original Credit Agreement in its entirety to read as follows:

SECTION 1.        DEFINITIONS; INTERPRETATION

Section 1.1       Definitions.    The following  terms when used herein have the
                  following meanings:

         "Additional Required Documents" shall mean with respect to any Mortgage
Loan, those instruments and documents identified as such on Exhibit C hereto.

         "Affiliate"  means any Person,  directly or indirectly  controlling  or
controlled by, or under direct or indirect common control with,  another Person.
A Person  shall be deemed to control  another  Person for the  purposes  of this
definition  if such  Person  possesses,  directly  or  indirectly,  the power to

<PAGE>

direct,  or cause the  direction  of, the  management  and policies of the other
Person,  whether through the ownership of voting  securities,  common directors,
trustees or officers, by contract or otherwise.

         "Applicable Advance Rate" means, initially,  97% as such percentage may
from time to time be reduced by the Lender in its sole  discretion  upon  verbal
notice to the  Borrower,  it being  acknowledged  and  agreed  that the  initial
Applicable  Advance Rate has been  determined by the Lender,  in part based upon
current returns for sales of mortgaged loans in the secondary  market and in the
event  the  Lender  determines  in its sole  discretion  that  there has been an
adverse change in such market it intends to reduce the  Applicable  Advance Rate
hereunder.

         "Average  Monthly Loan  Balance"  means,  for any calendar  month,  the
quotient obtained by dividing (a) the sum of the unpaid principal balance of all
Loans  outstanding  for each day during  such month by (b) the number of days in
such month.

         "Borrowing  Base"  means,  as of any  time it is to be  determined  the
lesser of (a) the  Applicable  Advance  Rate times the then  outstanding  unpaid
principal  amount of Eligible  Mortgage Loans or (b) market value (as determined
by the Lender in its sole discretion) of Eligible Mortgage Loans.

         "Business  Day" means any day other than a Saturday  or Sunday on which
banks are not authorized or required to close in Chicago, Illinois.

         "Capital  Lease" means any lease of Property  which in accordance  with
GAAP is required to be capitalized on the balance sheet of the lessee.

         "Capitalized  Lease Obligation" means the amount of the liability shown
on the balance  sheet of any Person in respect of a Capital  Lease as determined
in accordance with GAAP.

         "Closing Agent" means any title company or other Person,  in each case,
approved in writing by the Lender.

         "Closing Agent  Agreement"  means an agreement  between a Closing Agent
and the Lender in such form as is identified on Exhibit J hereto.

         "Code" means the Internal  Revenue  code of 1986,  as amended,  and any
successor statute thereto.

         "Collateral"  means all  properties,  rights,  interests and privileges
from time to time  subject to the Liens  granted to the Lender  pursuant  to the
Collateral Documents.

         "Collateral  Documents" means the Security Agreement,  the Mortgage and
all other security agreements, financing statements and other documents as shall
from time to time  secure  the Note or any  other  obligations  of the  Borrower
hereunder or in connection herewith.

         "Commitment" is defined in Section 2.1 hereof.

         "Committed Loans" is defined in Section 2.1 hereof.

                                       2
<PAGE>
         "Controlled   Group"  means  all  members  of  a  controlled  group  of
corporations and all trades and businesses  (whether or not incorporated)  under
common control which, together with the Borrower or any of its Subsidiaries, are
treated as a single employer under Section 414 of the Code.

         "Corporate Guaranty" shall mean that certain Guaranty dated May 2, 2000
as amended or modified from time to time from the Corporate  Guarantors in favor
of the Lender.

         "Corporate Guarantors" means the Parent, the Affiliates of the Borrower
signatories to the Corporate Guaranty and all Subsidiaries of the Borrower other
than   special   purpose   Subsidiaries   formed   in   connection   with   loan
securitizations.

         "Credit  Package" shall mean with respect to any Mortgage  Loan,  those
items designated as such on Exhibit C hereto.

         "Default" means any event or condition,  the occurrence of which would,
with the passage of time or the giving of notice,  or both,  constitute an Event
of Default.

         "Discretionary Loans" is defined in Section 2.1 hereof.

         "Domestic Rate" means for any day the rate per annum then most recently
announced by Bank One, N.A., a national  banking  association,  as its corporate
base rate at Chicago,  Illinois (or if such rate is not being  quoted,  the rate
which is the successor to such rate,  and if no successor is being  quoted,  the
rate  conceptually  equivalent to such rate which the domestic  commercial  bank
having the highest combined capital and surplus of any bank having its principal
office in Chicago,  Illinois is quoting).  The Domestic Rate is a reference rate
and does not necessarily  represent the lowest or best rate actually  charged to
any customer.  Bank One, N.A. and the Lender may make commercial  loans or other
loans at rates of interest at, above or below the Domestic Rate.

         "Eligible Mortgage Loan" shall mean any Mortgage Loan having all of the
following characteristics:

                  (i)  is the  legal, valid and binding obligation  of the maker
         thereof  in full force and effect and is enforceable in accordance with
         its terms;

                  (ii) is either a first or second  Mortgage Loan which comports
         in all respects with General  Underwriting  Guidelines,  subject to any
         exceptions  or additional  programs or products  which HFS, in its sole
         and  absolute  discretion  has made  available  to  Borrower,  it being
         understood and agreed that nothing herein  contained shall be construed
         as creating any obligation on Lender to make such exceptions,  programs
         or products  available to Borrower,  whether or not Lender has made the
         same available to other  borrowers with similar credit  facilities from
         Lender;

                  (iii) was made or  acquired by the  Borrower  in the  ordinary
         course  of the  Borrower's  business  in  accordance  with the  General
         Underwriting  Guidelines,  was in an original  principal  amount of not
         less than $10,000 and not more than  $500,000,  such  Mortgage Loan was

                                       3
<PAGE>
         fully funded and the Borrower holds good and indefeasible sole title to
         such Mortgage Loan subject to no claims, liens, charges or other rights
         of any other Person;

                  (iv) no payment  under such  Mortgage Loan is more than thirty
         (30) days past the due date set forth in the underlying promissory note
         and mortgage (or deed of trust);

                  (v) the Lender has a perfected  Lien and security  interest in
         such  Mortgage  Loan free and clear of any Liens or claims of any other
         Person except,  in the case of a second  Mortgage Loan, the holder of a
         Permitted First Mortgage Lien;

                  (vi) such   Mortgage  Loan  has   not  been  included  in  the
         Borrowing  Base  for  more  than forty-five (45) days;

                  (vii) such Mortgage Loan contains the entire  agreement of the
         parties thereto with respect to the subject matter thereof and is not a
         Rewritten Mortgage Loan;

                  (viii) such Mortgage Loan is secured by a valid and subsisting
         first or  second,  as the case may be,  mortgage  lien of record on the
         Property  covered by the related mortgage or deed of trust subject only
         to (1) the Lien of current real property taxes and  assessments not yet
         due and payable; (2) covenants, conditions and restrictions,  rights of
         way, easements and other matters of the public records,  as of the date
         of  recording,   being  acceptable  to  mortgage  lending  institutions
         generally and  specifically  referred to in a lender's title  insurance
         policy  delivered  to the  originator  of said  Mortgage  Loan  and (i)
         referred  to or  otherwise  considered  in the  appraisal  made for the
         originator  of  said  Mortgage  Loan or (ii)  which  do not  materially
         adversely  affect the  appraised  value of the Property as set forth in
         such appraisal; (3) other matters to which like properties are commonly
         subject  which do not  materially  interfere  with the  benefits of the
         security  intended  to be provided  by said  Mortgage  Loan or the use,
         enjoyment,  value or marketability of the related  Property;  or (4) in
         the case of a second Mortgage Loan, a Permitted First Mortgage Lien;

                  (ix) subject to paragraph  (iv) above,  such  Mortgage Loan is
         free of any  default of any party  thereto  (including  the  Borrower),
         offsets, defenses or counterclaims to such Mortgage Loan, including the
         obligation  of the  related  obligor  to pay the unpaid  principal  and
         interest  on  the  underlying   promissory   note  and  free  from  any
         rescission,  cancellation  or avoidance  whether by operation of law or
         otherwise;

                  (x) a lender's  title  insurance  policy,  issued in  standard
         American Land Title  Association  form, or such other form satisfactory
         to the Lender by, or procured  by, the  applicable  Closing  Agent,  in
         favor of the Borrower and such  Borrower's  successors  and assigns (or
         the original  lender and such  lender's  successors  and assigns) in an
         amount at least equal to the original principal amount of such Mortgage
         Loan insuring the mortgagee's  interest under the related Mortgage Loan
         as the holder of a valid first or second mortgage lien of record on the
         related Property subject only to exceptions  described in clause (viii)

                                       4
<PAGE>
         above, was effective on the date of the origination or acquisition,  as
         the case may be, of such Mortgage Loan,  and, such policy will be valid
         and thereafter such policy shall continue in full force and effect;

                  (xi)  the Property  subject to such Mortgage Loan is  Property
         which is zoned and suitable for residential purposes;

                  (xii) there is no  proceeding  pending or  threatened  for the
         total or partial  condemnation of the Property subject to such Mortgage
         Loan, nor is such a proceeding currently  occurring,  and each Property
         is  undamaged  by waste,  fire,  earthquake,  earth  movement  or other
         casualty;

                  (xiii) no improvements on adjoining property encroach upon the
         Property  subject to such  Mortgage  Loan,  except as are stated in the
         title  insurance  policy and  affirmatively  insured and such  Property
         constitutes a legally subdivided parcel separate from any real property
         not covered by the  mortgage or deed of trust  securing  such  Mortgage
         Loan;

                  (xiv) with respect to each  Mortgage Loan secured by a deed of
         trust, a trustee, duly qualified under applicable law to serve as such,
         has been  properly  designated  and currently so serves and is named in
         such deed of trust,  and no fees or expenses are or will become payable
         by the  owners  to the  trustee  under  the deed of  trust,  except  in
         connection   with  a  trustee's  sale  after  default  by  the  related
         mortgagor;

                  (xv) the mortgage (or deed of trust)  securing  such  Mortgage
         Loan contains  customary and  enforceable  provisions  which render the
         rights and remedies of the holder thereof  adequate for the realization
         against the related Property of the benefits of the security, including
         (A) in the case of a deed of trust, by trustee's sale and (B) otherwise
         by judicial  foreclosure  and the Borrower is duly  licensed to conduct
         business, or is exempt from such licensing,  and is in good standing in
         the  state  in which  the  related  Property  is  located.  There is no
         homestead or other exemption available which could materially interfere
         with the right to sell the related  Property at a trustee's sale or the
         right to foreclose the related mortgage;

                  (xvi) an   appraisal   satisfying  the  General   Underwriting
         Guidelines was performed with respect to each Mortgage Loan;

                  (xvii) the Borrower  has no knowledge  that there exist on the
         Property  subject  to  such  Mortgage  Loan  any  hazardous  materials,
         regulated substances,  hazardous substances,  hazardous wastes or solid
         wastes,  as such terms are defined in the  Comprehensive  Environmental
         Response  Compensation and Liability Act, the Resource Conservation and
         Recovery Act of 1976, or other  federal,  state or local  environmental
         legislation;

                  (xviii) such Mortgage Loan shall not be due from an Affiliate,
         subsidiary, officer or employee of any Borrower, from the United States
         or any agency or  department  thereof;  or from any  foreign  debtor or
         borrower;

                                       5
<PAGE>
                  (xix)    such Mortgage Loan is and shall be  evidenced by only
         one original mortgage note;

                  (xx)     each  mortgage (or deed  of  trust) or an  assignment
         thereof  relating to such  Mortgage Loan shall  identify  the Borrower,
         as the mortgagee;

                  (xxi) the Initial  Required  Documents  for said Mortgage Loan
         were delivered to the Lender or to the  applicable  Closing Agent which
         has  agreed to send  such  Initial  Required  Documents  to the  Lender
         immediately  (by next day overnight  mail) following the funding of the
         Loan  related  to  said  Mortgage  Loan  pursuant  to a  Closing  Agent
         Agreement  satisfactory  to the Lender  prior to the  inclusion of said
         Mortgage  Loan  in the  Borrowing  Base  and  the  Additional  Required
         Documents  were also  delivered to the Lender within three (3) Business
         Days of disbursement of the related Loan proceeds;

                  (xxii) said Mortgage Loan was or previously had been closed or
         fully  disbursed  and  recorded  on  the  date  first  included  in the
         Borrowing Base; and

                  (xxiii)   Lender  shall  have   received   such  evidence  and
         documentation  as it shall require to verify that the matters set forth
         in clauses (i) through (xxii) above are true and correct.

         "ERISA" means the Employee  Retirement  Income Security Act of 1974, as
amended, and any successor statute.

         "Event of Default"  means any event or  condition  specified in Section
8.1 hereof.

         "GAAP" means generally  acceptable  accounting  principles as in effect
from time to time,  applied  by the  Borrower  and its  Subsidiaries  as a basis
consistent  with  the  preparation  of  the  Borrower's  most  recent  financial
statements furnished to the Lender pursuant to Section 5.5 hereof.

         "General   Underwriting   Guidelines"   shall  mean  the  HFS   general
underwriting  guidelines as in effect from time to time that apply  generally to
the sale of mortgage loans to HFS, the Lender hereby representing that a copy of
the General  Underwriting  Guidelines  as in effect on the date hereof have been
furnished to Borrower  and Lender  agrees to give  Borrower  notice from time to
time of any changes  thereto but Lender's  failure to give such notice shall not
result in such changes being ineffective for purposes of this definition.

         "Guaranties" means the Corporate Guaranty and the Sheppard Guaranty and
each of them  singly,  unless  the  context  in which  such  term is used  shall
otherwise require.

         "Guarantors" means the Corporate  Guarantors and Sheppard,  and each of
them  singly,  unless the  context  in which  such term is used shall  otherwise
require.

         "HFS" means, collectively, Household Financial Services, Inc., and each
of its Affiliates.

                                       6
<PAGE>
         "Indebtedness  for  Borrowed  Money"  means  for  any  Person  (without
duplication) (i) all indebtedness created,  assumed or incurred in any manner by
such Person  representing  money  borrowed  (including  by the  issuance of debt
securities),  (ii) all indebtedness for the deferred  purchase price of property
or services (other than trade accounts payable arising in the ordinary course of
business),  (iii) all  indebtedness  secured by any Lien upon  Property  of such
Person, whether or not such Person has assumed or becomes liable for the payment
of such indebtedness,  (iv) all Capitalized Lease Obligations of such Person and
(v) all  obligations  of such  Person on or with  respect  to letters of credit,
bankers'  acceptances and other extensions of credit whether or not representing
obligations  for  borrowed  money in each case if and to the  extent  any of the
foregoing  would  appear  as a  liability  upon a balance  sheet of such  Person
prepared in accordance  with GAAP.  Notwithstanding  any other  provision of the
foregoing definition,  Indebtedness for Borrowed Money shall not include (i) any
liability  for  federal,  state,  local or other taxes,  (ii) any trade  payable
arising from the purchase of goods or materials or for services  obtained in the
ordinary  course of business which are not overdue or which are being  contested
in good faith and (iii) any securities  issued in a securitization  by a special
purpose  owner  trust  or  other  Person,   including  without   limitation  any
securitization trust formed by or on behalf of a Person and to which receivables
have been sold or  otherwise  transferred  by or on behalf of such Person or its
Subsidiaries,  shall not be treated as  Indebtedness  for Borrowed Money of such
Person or its Subsidiaries, regardless of whether such securities are treated as
indebtedness for tax purposes.

         "Initial Required  Documents" means, with respect to any Mortgage Loan,
those instruments and documents identified as such on Exhibit C hereto.

         "Lien" means any mortgage,  lien, security interest,  pledge, charge or
encumbrance of any kind in respect of any Property, including the interests of a
vendor or lessor  under  any  conditional  sale,  capital  lease or other  title
retention arrangement.

         "Loans"  means and includes the Committed  Loans and the  Discretionary
Loans and each of them  singly,  unless  the  context in which such term is used
shall otherwise require.

         "Loan Documents" means this Agreement, the Note, the Guaranties and the
Collateral Documents.

         "Material Plan" is defined in Section 8.1(h) hereof.

         "Mortgage"  means that certain  Mortgage and Security  Agreement  dated
April 19, 2001 from Carolina  Investors,  Inc., in favor of the Lender  covering
the property therein described located in Greenville, South Carolina.

         "Mortgage  Loan" shall mean a loan secured by  residential  real estate
including  without  limitation:  (i) a promissory note and related  mortgage (or
deed of trust) and any other security documents,  (ii) all reserves,  guaranties
and insurance  policies,  including without  limitation,  all mortgage and title
insurance  policies  and  rights of the owner of such loan to retain  all or any
part of such reserves or to return premiums or payments with respect thereto and
(iii) all right,  title and interest of the owner of such  Mortgage  Loan in the
Property covered by said mortgage (or deed of trust).

                                       7
<PAGE>
         "Net Income" means,  with  reference to any period,  the net income (or
net loss) of the Borrower and its  Subsidiaries for such period as computed on a
consolidated basis in accordance with GAAP.

         "Note" is defined in Section 2.6 hereof.

         "Obligations"  means all unpaid  principal  of and  accrued  and unpaid
interest on the Note,  all accrued and unpaid fees and all other  obligations of
the  Borrower  to the  Lender  arising  under the Loan  Documents,  in each case
whether  now  existing or  hereafter  arising,  due or to become due,  direct or
indirect, absolute or contingent, and howsoever evidenced, held or acquired.

         "Parent" means Homegold Financial, Inc., a South Carolina corporation.

         "PBGC" means the Pension  Benefit  Guaranty  Corporation  or any Person
succeeding to any or all of its functions under ERISA.

         "Permitted First Mortgage Lien" means any first mortgage lien permitted
under General Underwriting Guidelines.

         "Person" means an individual,  partnership,  corporation,  association,
trust,   unincorporated  organization  or  any  other  entity  or  organization,
including a government or agency or political subdivision thereof.

         "Plan"  means any  employee  pension  benefit  plan which is covered by
Title IV of ERISA or subject to the minimum funding  standards under Section 412
of the Code and either (i) is maintained by a member of the Controlled Group for
employees of a member of the Controlled Group, (ii) is maintained  pursuant to a
collective  bargaining  agreement or any other arrangement under which more than
one employer makes  contributions  and to which a member of the Controlled Group
is then making or accruing an obligation to make contributions or has within the
preceding five plan years made  contributions,  or (iii) under which a member of
the  Controlled  Group has any  liability,  including any liability by reason of
having been a substantial  employer  within the meaning of Section 4063 of ERISA
at any time  during  the  preceding  five  years or by reason of being  deemed a
contributing sponsor under Section 4064 of ERISA.

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

         "Remittance  Account" means that certain  account  number  019-004-7827
maintained  with  Household  Bank FSB in the name of the  Lender  under the sole
control of the Lender as well as any other account from time to time  designated
by the Lender to be the "remittance  account" for purposes of this Agreement and
the other Loan  Documents  regardless  of  whether  or not  Lender has  notified
Borrower of such designation.

         "Required Documents" means  the  Initial  Required  Documents  and  the
Additional Required Documents.

         "Revolving Credit" is defined in Section 2.1 hereof.

                                       8
<PAGE>
         "Rewritten  Mortgage  Loan" means any Mortgage Loan in respect of which
(i) the original terms have been rewritten,  restructured or otherwise  modified
or (ii)  forbearance  has been  granted;  provided,  however,  that a  Rewritten
Mortgage  Loan shall not include a Mortgage  Loan as to which the  Borrower  has
permitted an  assumption  or granted a partial  release in  accordance  with its
prior practices and consistent with General Underwriting Guidelines.

         "Security Agreement" means that certain Security Agreement dated May 2,
2000 among the Borrower,  the Corporate  Guarantors and the Lender,  as the same
may from time to time be amended.

         "Settlement Date" is defined in Section 2.5 hereof.

         "Settlement Period" is defined in Section 2.5 hereof.

         "Sheppard" means Ronald J. Sheppard, an individual.

         "Sheppard  Guaranty"  means the  Guaranty  dated  October 25, 2000 from
Sheppard in favor of the Lender, as amended or modified from time to time.

         "Subsidiary"  means any  corporation or other entity of which more than
fifty  percent  (50%)  of the  outstanding  voting  stock or  comparable  equity
interests (including interests as a limited partner in a limited partnership) is
at the time directly or indirectly owned by the Borrower,  by one or more of its
Subsidiaries, or by the Borrower and one or more of its Subsidiaries.

         "Tangible  Net  Worth"  means,  as  of  any  time  the  same  is  to be
determined,  the total shareholders' equity (including capital stock, additional
paid-in-capital  and retained  earnings  after  deducting  treasury  stock,  but
excluding  minority interest in Subsidiaries)  which would appear on the balance
sheet of the Borrower and its Subsidiaries determined on a consolidated basis in
accordance  with GAAP minus the sum of (i) all assets which would be  classified
as  intangible  assets  under GAAP,  including,  without  limitation,  goodwill,
patents, trademarks,  tradenames,  copyrights,  franchisees and deferred charges
(including,   without   limitation,   unamortized  debt  discount  and  expense,
organization  costs and deferred  research and development  expense) and similar
assets and (ii) the write-up of assets above cost.

         "Termination  Date"  shall mean May 31,  2002 or such  earlier  date on
which the Commitment is terminated in whole pursuant to Sections 2.7, 8.2 or 8.3
hereof.

         "Total Liabilities" means, as of any time the same is to be determined,
the aggregate of all indebtedness,  obligations,  liabilities,  reserves and any
other  items  which  would be listed as a  liability  on a balance  sheet of the
Borrower and its Subsidiaries  determined on a consolidated  basis in accordance
with GAAP.

         "Unfunded Vested  Liabilities"  means,  with respect to any Plan at any
time,   the  amount  (if  any)  by  which  the  present   value  of  all  vested
nonforfeitable accrued benefits under such Plan exceeds the fair market value of
all Plan assets  allocable to such benefits,  all determined as of the then most
recent  valuation  date for such Plan,  but only to the extent  that such excess

                                       9
<PAGE>
represents a potential liability of a member of the Controlled Group to the PBGC
or the Plan under Title IV of ERISA.

         "Welfare  Plan" means a "welfare  plan," as defined in Section  3(1) of
ERISA.

         "Wholly-Owned"  means a  Subsidiary  of  which  all of the  issued  and
outstanding shares of stock (other than directors' qualifying shares as required
by law) or other  comparable  equity  interests  shall be owned by the Borrower,
Parent and/or one or more of their Wholly-Owned Subsidiaries.

     Section  1.2   Interpretation.   The  foregoing   definitions  are  equally
applicable  to both the  singular  and plural  forms of the terms  defined.  All
references  to times of day herein are  references  to  Chicago,  Illinois  time
unless  otherwise  specifically  provided.  Where the character or amount of any
asset or liability or item of income or expense is required to be  determined or
any consolidation or other accounting computation is required to be made for the
purposes  of this  Agreement,  the same  shall be done in  accordance  with GAAP
except where such principles are  inconsistent  with the specific  provisions of
this Agreement.

SECTION 2.        THE CREDIT
                  ----------

     Section 2.1 The Revolving Credit. (a) Committed Loans. Subject to the terms
and  conditions  hereof,  the Lender  agrees to extend a  revolving  credit (the
"Revolving  Credit") to the Borrower in an aggregate principal amount at any one
time  outstanding  not to exceed the lesser of (i) the  difference  between  (x)
$40,000,000 (the  "Commitment")  (subject to any reductions  thereof pursuant to
the  terms  hereof)  and (y)  the  aggregate  outstanding  principal  amount  of
Discretionary  Loans or (ii) the Borrowing Base as then determined and computed,
which may be availed of by the Borrower in its discretion  from time to time, be
repaid and used again,  to and including  the  Termination  Date.  The Revolving
Credit will be available  to the  Borrower in the form of Loans (the  "Committed
Loans"), it being understood and agreed that the aggregate outstanding principal
amount of Committed Loans and  Discretionary  Loans shall not at any time exceed
the Commitment (subject to reductions as aforesaid).

     (b)  Discretionary  Loans.  The Revolving Credit may also, at Lender's sole
and  absolute  discretion,  be utilized  in the form of Loans to Borrower  which
either represent new Loans or a conversion of outstanding  Committed Loans which
are no longer supported by Eligible Mortgage Loans, in each case, without regard
to the  Borrowing  Base  limitations  contained  herein  (such  Loans so made or
converted  being  hereinafter  referred to  collectively  as the  "Discretionary
Loans"  and  individually  as a  "Discretionary  Loan").  Except  in the case of
Discretionary  Loans which  represent  a  conversion  of  Committed  Loans,  the
proceeds of the  Discretionary  Loans will be used by the Borrower solely to pay
the purchase  price owing by the Borrower to HFS for  Borrower's  repurchase  of
Mortgage  Loans from HFS.  The amount of any such  Discretionary  Loan shall not
exceed  20% (or such other  percentage  to which  Lender in its sole  discretion
shall agree) of such purchase  price,  and Borrower hereby  unconditionally  and
irrevocably authorizes the Lender in its sole discretion,  to make Discretionary
Loans to Borrower hereunder without the necessity of prior notice to, or request
by, Borrower to satisfy any delinquent repurchase obligations of Borrower to HFS

                                       10
<PAGE>

in their  entirety.  The Borrower  hereby  authorizes  and directs the Lender to
disburse  the  proceeds  of new  Discretionary  Loans  directly  to HFS  for the
purposes  herein  described.  The  Discretionary  Loans shall be subject to such
additional  terms  and  conditions  as may be from time to time  agreed  upon in
writing by the Borrower and the Lender.

     (c) Maturity.  All Loans and all other unpaid  Obligations shall mature and
be payable in full by the Borrower on the Termination Date.

     (d) All Monetary  Obligations are Advances.  All Monetary Obligations shall
be  considered  and  treated  as  advances  hereunder  or under the  other  Loan
Documents from the Lender to the party owing the Obligations.

     Section 2.2 Applicable Interest Rates. (a) Pre-Default Rate. Each Loan made
by the Lender shall bear interest (computed on the basis of a year of 365 or 366
days as the case may be for actual days elapsed) on the unpaid  principal amount
thereof from the date such Loan is made until maturity  (whether by acceleration
or otherwise) at a rate per annum determined by adding one fourth of one percent
(.25%) to the  Domestic  Rate from time to time in effect,  payable on the dates
provided  in Section  2.5 hereof and at maturity  (whether  by  acceleration  or
otherwise).

     (b) Default Rate. If any payment  (including  any required  prepayment)  of
principal on any Loan is not made when due (whether by acceleration, pursuant to
Section 2.5(b) as a result of Lender's  determination  that any Mortgage Loan is
no longer an Eligible  Mortgage  Loan since such  Mortgage  Loan was  originally
included in the  Borrowing  Base, or  otherwise),  such Loan shall bear interest
(computed  on the  basis of a year of 365 or 366 as the  case may be for  actual
days elapsed) from the date such payment was due until paid in full,  payable on
demand,  at a rate per  annum  equal  to the sum of six  percent  (6%)  plus the
Domestic Rate from time to time in effect.

     Section 2.3 Minimum Borrowing Amounts.  Each Loan shall be in an amount not
less than $10,000.

     Section 2.4  Borrowing  Procedures.  (a) Notice to the  Lender.  Subject to
Section 2.1(b) hereof,  the Borrower shall give telecopy or other written notice
to the Lender  (which notice shall be  irrevocable  once given) by no later than
3:30 p.m.  (Chicago  time) one Business  Day prior to the date of any  requested
Loan.  Each such notice shall (i) specify the date of the requested  Loan (which
shall  be a  Business  Day) and the  amount  of the  requested  Loan and (ii) be
accompanied  by a complete  Credit  Package for the  Eligible  Mortgage  Loan(s)
supporting  such Loan. The Borrower  agrees that the Lender may rely on any such
notice given by any person the Lender in good faith  believes is  authorized  to
request  Loans on behalf of the Borrower  without the  necessity of  independent
investigation  and,  in any event,  such notice  shall  govern if the Lender has
acted in reliance thereon.

     (b)  Disbursement  of Loans.  Subject to Sections 6 and 2.1(b) hereof,  the
Lender  shall  make the  proceeds  of each Loan  available  to the  Borrower  by
crediting  the same to the  Remittance  Account  not  later  than  the  close of
business on the date of such  borrowing  and,  Borrower  hereby directs Lender ,
unless the Lender in its sole discretion agrees otherwise, to wire transfer such

                                       11
<PAGE>
proceeds  directly to the Closing Agent in accordance with the relevant  Closing
Agent Agreement. The Lender and the Borrower acknowledge and agree that Borrower
may from time to time make  deposits  from its own funds  ("Additional  Borrower
Deposits")  into the  Remittance  Account  which  shall be held,  subject to the
security  interest  in favor of the  Lender  therein  pursuant  to the  Security
Agreement,  for the account of the Borrower and the Lender  agrees that it will,
so long as no Default or Event of Default shall have occurred and be continuing,
in  connection  with any wire  transfer of Loan proceeds to a Closing Agent also
include in such wire  transfer  an amount of  Additional  Borrower  Deposits  as
Borrower shall designate to cover costs and fees owing by Borrower in connection
with the  funding or  purchase  of the  related  Mortgage  Loans.  The  Borrower
acknowledges that the Remittance  Account is a non-interest  bearing account and
accordingly,  it shall  not be  entitled  to any  interest  or other  additional
amounts on account of Additional Borrower Deposits.

     Section 2.5  Prepayments.  (a)  Voluntary.  The  Borrower may prepay on any
Business  Day  without  premium or penalty  and in whole or in part (but,  if in
part,  then in an  amount  not less than  $10,000)  any Loans at any time on one
Business  Day's prior  notice to the Lender by no later than 5:00 p.m.  (Chicago
time),  such prepayment to be made by the payment of the principal  amount to be
prepaid  together  with  accrued  interest  thereon  and any  expenses  owing in
connection therewith.

     (b)      Mandatory.
              ---------

          (i) Concurrently  with each reduction or termination of the Commitment
     (whether  voluntarily  pursuant to Section 2.7 or  otherwise)  the Borrower
     shall  prepay  the  Note by the  amount,  if  any,  necessary  so that  the
     aggregate  outstanding  principal  balance of the Note shall not exceed the
     Commitment as so reduced, each such prepayment to be made by the payment of
     the principal  amount to be prepaid plus accrued  interest  thereon and any
     expenses owing in connection therewith.

          (ii) The  Borrower  covenants  and  agrees  that in the event that the
     aggregate  outstanding principal amount of the Committed Loans shall at any
     time and for any reason exceed the Borrowing  Base as then  determined  and
     computed,  the Borrower shall immediately without notice or demand pay over
     the amount of the excess to the Lender as and for a mandatory prepayment on
     the Note plus accrued interest, fees and expenses owing with respect to the
     amount so prepaid.

          (iii) The Borrower  covenants  and agrees to prepay the  Discretionary
     Loans  from  time to time in an  amount  equal to (x) the  greater  of (aa)
     Minimum  Monthly  Amount per month or (bb) in the event  Borrower  has sold
     mortgage  loans to HFS, then in an amount  (determined  separately for each
     loan sale) of no less than Minimum  Monthly  Amount out of premium for each
     loan sale, or (y) the outstanding  principal  balance of the  Discretionary
     Loans as the last day of each month,  whichever is less.  Prepayments under
     this Section 2.5b)(iii) shall be due and payable monthly on the last day of
     each  month  commencing  the first of such dates  occurring  after the date

                                       12
<PAGE>
     hereof.  The Borrower hereby directs HFS to disburse such premium  directly
     to Lender.  For purposes  hereof,  "Minimum  Monthly Amount" shall mean the
     amount specified from time to time by the Lender pursuant to written notice
     to the Borrower.

          (iv)  With  respect  to  Mortgage  Loans  which  are  either  included
     identified for inclusion in the Borrowing Base or with respect to which the
     Lender has made a Loan,  Borrower  shall cause (x) all proceeds  (including
     without limitation all amounts payable with respect to principal,  interest
     and premium) from sales of Mortgage Loans,  (y) any payment on any Mortgage
     Loan which  exceeds 2% of the original  principal  amount of such  Mortgage
     Loan and (z) five (5) Business Days from and after  written  request by the
     Lender to do so,  all  Collateral  Payments  (as  defined  in the  Security
     Agreement) in respect of the Mortgage  Loans to be deposited  directly into
     the Remittance Account. From time to time on such dates as the Lender shall
     determine  but no less  frequently  than on the 5th and 20th of each  month
     (each  such  date,  a  "Settlement  Date"),  all  amounts on deposit in the
     Remittance  Account shall,  so long as no Default or Event of Default shall
     have occurred and be continuing, be applied as follows:

               (aa) first to the  payment  of all fees,  expenses  and  interest
          owing in respect of the  Loan(s)  made  hereunder  in  reliance on the
          Mortgage  Loan(s) sold during the period  commencing  the  immediately
          preceding  Settlement  Date and ending on the Business Day immediately
          preceding  the  relevant  Settlement  Date or in the case of the first
          Settlement Date occurring after the date hereof, the period commencing
          the date hereof and ending on the Business Day  immediately  preceding
          such Settlement Date (a "Settlement Period");

               (bb) second, to any other Obligations owing hereunder;

               (cc) third,  to the payment of all principal  owing in respect of
          the Loans made  hereunder  in reliance on the  Mortgage  Loan(s)  sold
          during the relevant Settlement Period; and

               (dd) fourth, to the Borrower or to whomever the Lender determines
          to be lawfully entitled thereto.

     (c) Reborrowings.  Any amount paid or prepaid on the Loans on or before the
Termination Date may, subject to the terms and conditions of this Agreement,  be
borrowed, repaid and borrowed again.

     Section  2.6 The Note.  (a) All Loans  made to the  Borrower  by the Lender
shall continue to be evidenced by that certain Replacement Revolving Credit Note
of the  Borrower  dated May 30,  2000  payable to the order of the Lender in the
face principal  amount of $100,000,000  (such Revolving Credit Note, as the same
may  from  time to  time  be  amended,  together  with  any  notes  executed  in
replacement thereof are hereinafter referred to as the "Note").  Such Note shall
be dated the date of issuance  thereof and be payable to the order of the Lender
in the principal amount of its Commitment.

                                       13
<PAGE>
     (b) The Lender shall record on its books or records or on a schedule to the
Note the amount of each Loan made by it to the  Borrower,  and all  payments  of
principal and interest and the principal  balance from time to time  outstanding
thereon;  provided that prior to the transfer of any Note all such amounts shall
be recorded on a schedule to such Note.  The record  thereof,  whether  shown on
such books or records of the Lender or on a schedule to any Note, shall be prima
facie evidence as to all such amounts;  provided,  however,  that the failure of
the Lender to record any of the  foregoing or any error in any such record shall
not limit or otherwise  affect the obligation of the Borrower to repay all Loans
made to it hereunder together with accrued interest thereon.

     Section 2.7 Commitment Terminations.  (a) Borrower. The Borrower shall have
the right at any time and from time to time, upon three (3) Business Days' prior
written notice to the Lender to terminate  without premium or penalty,  in whole
but not in part, the Commitment.  Any termination of Commitment pursuant to this
Section 2.7 may not be reinstated and  concurrently  with any such  termination,
the  Borrower  shall pay to the  Lender  all  outstanding  Obligations  owing to
Lender.

     (b) Lender.  The Lender shall have the right in its sole  discretion at any
time  after  July 15,  2001 upon  thirty  (30)  days'  prior  written  notice to
Borrower,  to terminate the  Commitment  in whole but not in part.  Concurrently
with any such termination,  the Borrower shall pay to the Lender all outstanding
Obligations owing to Lender. The Lender's right of termination contained in this
Section  2.7(b)  shall be in addition to its rights  under  Sections 8.2 and 8.3
hereof.

SECTION 3.        FEES AND PAYMENTS
                  -----------------

Section 3.1       Transaction, Processing and Custodial Fees.

     (a) The Borrower  shall pay to the Lender wire  transfer  fees in an amount
equal to $15.00 per wire transfer  together with such  processing fees and other
charges as the Lender from time to time  customarily  imposes in connection with
the disbursement and administration of Loans hereunder,  such fees to be paid in
accordance with Section 2.5 hereof.

     (b) The  Borrower  shall also pay to the Lender a custody fee in the amount
of $285 for each Mortgage Loan pledged to secure Loans made hereunder,  such fee
to be due and payable on the earlier of (i) the Settlement Date following either
the date such  Mortgage  Loan is purchased by a third party or the date the Loan
made against such Mortgage Loan is otherwise  repaid, as the case may be or (ii)
the  Termination  Date,  provided  however,  Lender  agrees to waive $250 of the
custody fee payable in respect of each  Mortgage  Loan that has been sold by the
Borrower to HFS prior to the occurrence of an Event of Default hereunder.

     (c)  Without  waiving any other right  Lender may have  hereunder,  whether
under Sections 2.2(b), 2.5(b), 8.2 or 8.3 or otherwise,  Borrower shall also pay
Lender the fees set forth on Exhibit H attached hereto in the event Lender shall
have not received a complete  Credit Package and all Required  Documents for any
Mortgage  Loan  supporting  a Loan  made  hereunder  within  seven  (7)  days of
disbursement of such Loan, such fees to be due and payable on the earlier of (i)
the Settlement Date following either the date such Mortgage Loan is purchased by

                                       14
<PAGE>
a third party or the date the Loan made against such  Mortgage Loan is otherwise
repaid, as the case may be, or (ii) the Termination Date.

     (d)  Without  waiving any other right  Lender may have  hereunder,  whether
under Sections 2.2(b), 2.5(b), 8.2 or 8.3 or otherwise,  Borrower shall also pay
Lender  the fees set  forth on  Exhibit  I hereto  in the  event a Loan has been
outstanding  for more than sixty (60) days since the  Mortgage  Loan  supporting
such Loan was originally included in the Borrowing Base, such fees to be due and
payable on the earlier of (i) the Settlement Date following either the date such
Mortgage  Loan is  purchased  by a third party or the date the Loan made against
such  Mortgage  Loan  is  otherwise  repaid,  as the  case  may be or  (ii)  the
Termination Date.

     Section 3.2 Audit Fees.  The Borrower  shall pay to the Lender the Lender's
costs and expenses in connection with audits of the Collateral  performed by the
Lender or its agents or representatives;  provided, however, that in the absence
of any  Default or Event of  Default,  the  Borrower  shall not be  required  to
reimburse the Lender for more than two (2) such audit(s) per calendar year.

     Section 3.3 Place and  Application  of Payments.  All payments of principal
and interest on the Loans and all payments of fees and all other amounts payable
under  this  Agreement  shall  be made by wire  transfer  or  other  immediately
available funds at the place of payment to the Lender by no later than 1:00 p.m.
(Chicago time) at the principal office of the Lender in Wood Dale,  Illinois (or
such other location as the Lender may designate to the  Borrower).  Any payments
received  after such time shall be deemed to have been received by the Lender on
the next Business  Day. All such  payments  shall be made in lawful money of the
United  States  of  America,  in  immediately  available  funds at the  place of
payment, without setoff or counterclaim.

         Anything contained herein to the contrary notwithstanding, all payments
and collections  received in respect of the  indebtedness  evidenced by the Note
and all proceeds of Collateral received,  in each instance,  by the Lender after
the occurrence of an Event of Default shall be applied as follows:

     (a) first to the payment of any outstanding  costs and expenses incurred by
the Lender in  monitoring,  verifying,  protecting,  preserving or enforcing any
liens  on the  Collateral  or in  protecting,  preserving  or  enforcing  rights
hereunder or under any other Loan Document, and in any event including all costs
and expenses of a character  which the Borrower has agreed to pay under  Section
9.10 hereof;

     (b) second to the  payment  of any  outstanding  interest  or other fees or
amounts due hereunder,  under the Note or any other Loan Document other than for
principal;

     (c) third to the payment of principal owing on the Note; and

     (d)  fourth to the  Borrower  or  whomever  the  Lender  determines  may be
lawfully entitled thereto.

                                       15
<PAGE>

SECTION 4.        THE COLLATERAL
                  --------------

     Section  4.1 The  Collateral.  The Note and the  other  Obligations  of the
Borrower  hereunder and under the other Loan Documents shall be secured by valid
and perfected  first priority  Liens  pursuant to (i) the Security  Agreement in
favor of the Lender on all of the Borrower's now existing and hereafter  arising
or acquired Mortgage Loans which are included,  or identified for inclusion,  in
the Borrowing  Base or which are  transferred  to the custody and control of the
Lender and all accounts, general intangibles,  instruments,  documents,  records
and other rights and  properties  related to such Mortgage  Loans (as more fully
described in the Security Agreement) together with all proceeds relating thereto
and (ii) the Mortgage in favor of Lender on the real property  owned by Carolina
Investors,  Inc.  located  in  Greenville,  South  Carolina,  together  with the
improvements  thereon and other rights and property  described in the  Mortgage.
The Borrower  hereby  repeats and  reaffirms the grant of the liens and security
interests  provided  for  in  the  Security  Agreement  in  their  entirety  and
acknowledges  and agrees that such liens and security  interests  remain in full
force and effect for the benefit of the  Obligations and shall not in any manner
be affected, impaired or discharged hereby.

     Section 4.2 Further  Assurances.  The Borrower covenants and agrees that it
will comply with all terms and  conditions of each of the  Collateral  Documents
and that it will, at any time, and from time to time as requested by the Lender,
execute and deliver such further instruments and agreements and do such acts and
things as or the Lender may deem  necessary  or  appropriate  to provide  for or
protect or perfect the lien of the Lender in the Collateral.

     Section 4.3 Guaranties.  The Obligations and all other  indebtedness of the
Borrower  to the  Lender  shall at all  times be  guarantied  by the  Guarantors
pursuant to the Guaranties.

SECTION 5.        REPRESENTATIONS AND WARRANTIES
                  ------------------------------

     The Borrower represents and warrants to the Lender as follows:

     Section 5.1 Organization and Qualification. The Borrower and each Corporate
Guarantor is a corporation duly organized, validly existing and in good standing
under  the  laws of the  state  of its  incorporation,  has  full  and  adequate
corporate  power  to own  its  Property  and to  carry  on its  business  as now
conducted,  and is duly  licensed  or  qualified  and in good  standing  in each
jurisdiction  in which the nature of its business  conducted by it or the nature
of the  Property  owned or leased by it makes such  licensing  or  qualification
necessary,  including without limitation,  the states listed on Exhibit B hereto
except as  otherwise  disclosed  in  writing  to the Lender and except for those
jurisdictions  in which the  failure  to so  qualify  would not have a  material
adverse  effect on the operations of the Borrower,  such Corporate  Guarantor or
their Subsidiaries  unless such failure would affect the ability of the Borrower
or any  Corporate  Guarantor to enforce  payment of any part of the  Collateral.
Exhibit B contains a listing of all states in which the Borrower  and  Corporate
Guarantors are duly  qualified and licensed to do business,  or exempt from such
qualification and/or licensing, as of the date hereof.

     Section 5.2  Subsidiaries.  Each  Subsidiary  of Parent,  Borrower  and the
Corporate  Guarantors is duly organized,  validly  existing and in good standing
under the laws of the jurisdiction in which it was incorporated or organized, as

                                       16
<PAGE>
the case may be, has full and  adequate  power to own its  Property and carry on
its  business  as  conducted,  and is duly  licensed  or  qualified  and in good
standing  in each  jurisdiction  in which  the  nature  of its  business  as now
conducted or proposed to be conducted by it or the nature of the Property  owned
or leased by it makes such licensing or qualification necessary except for those
jurisdictions  in which the  failure  to so  qualify  would not have a  material
adverse effect on the operations of the Borrower or its Subsidiaries  taken as a
whole  unless such  failure  would affect the ability of the Borrower to enforce
payment  of any  part  of the  Collateral.  Exhibit  D  hereto  identifies  each
Subsidiary,  the jurisdiction of its incorporation or organization,  as the case
may be, the  percentage  of issued and  outstanding  shares of each class of its
capital stock or other equity interests owned by the Parent,  the Borrower,  the
Corporate  Guarantors and the  Subsidiaries  and, if such percentage is not 100%
(excluding  directors'  qualifying  shares as required by law), a description of
each class of its  authorized  capital stock and other equity  interests and the
number of shares of each  class  issued and  outstanding.  All of the issued and
outstanding  shares  of  capital  stock  and  other  equity  interests  of  each
Subsidiary are validly issued and outstanding  and fully paid and  nonassessable
and all such shares and other equity  interests  indicated on Exhibit D as owned
by the Parent, the Borrower, the Corporate Guarantors or a Subsidiary are owned,
beneficially and of record,  by the Borrower or such Subsidiary,  free and clear
of  all  Liens  except  as  otherwise  indicated  on  Exhibit  D.  There  are no
outstanding  commitments or other obligations of any Subsidiary to issue, and no
options,  warrants or other  rights of any Person to acquire,  any shares of any
class of capital stock or other equity interests of any Subsidiary.

     Section 5.3 Corporate  Authority and Validity of Obligations.  The Borrower
and each Guarantor has full right and authority to enter into the Loan Documents
to make the  borrowings  herein  provided  for, to grant to the Lender the Liens
described in the Collateral  Documents,  to issue its Note and to perform all of
its obligations hereunder and under the other Loan Documents. The Loan Documents
have been duly  authorized,  executed  and  delivered  by the  Borrower and each
Guarantor and constitute valid and binding  obligations of the Borrower and each
Guarantor enforceable in accordance with their terms, subject to bankruptcy laws
and general  principles of equity,  and the Loan  Documents do not, nor does the
performance or observance by the Borrower or any Guarantor of any of the matters
or things herein or therein provided for, contravene any provision of law or any
judgment, injunction, order or decree binding upon the Borrower or any Guarantor
or any  Subsidiary  or any charter or by-law  provision  of the  Borrower or any
Guarantor  or any  Subsidiary  or any  covenant,  indenture  or  agreement of or
affecting  the  Borrower  or any  Guarantor  or any  Subsidiary  or any of their
respective  Properties,  or result in the creation or  imposition of any Lien on
any Property of the Borrower or any Guarantor or any Subsidiary  except pursuant
to the Loan Documents.

     Section 5.4 Use of Proceeds. The Committed Loans hereunder shall be used by
the  Borrower  solely for the  purchase  or funding by it of  Eligible  Mortgage
Loans.  The  Discretionary  Loans hereunder shall be used by the Borrower solely
for the purposes set forth in Section 2.1(b) hereof.

     Section 5.5  Financial  Reports.  The balance  sheet of the  Borrower as of
December 31, 2000, and the related consolidated  statements of income,  retained
earnings  and cash  flows of the  Borrower  for the  fiscal  year then ended and
accompanying  notes thereto,  which financial  statements are accompanied by the

                                       17
<PAGE>
report of Elliott,  Davis & Company,  independent  public  accountants,  and the
unaudited  balance  sheet of the Borrower as at March 31, 2001,  and the related
consolidated  statements  of  income,  retained  earnings  and cash flows of the
Borrower and its  Subsidiaries  for the three (3) months then ended,  heretofore
furnished to the Lender,  fairly present the financial condition of the Borrower
as at such  dates  and the  results  of its  operations  and cash  flows for the
periods then ended in conformity with generally accepted  accounting  principles
applied on a consistent basis;  provided that the unaudited financial statements
remain subject to normal year end adjustments.

     Section 5.6 No Material  Adverse Change.  Since May 1, 2001, there has been
no change in the  condition,  financial  or  otherwise,  of the  Borrower or any
Guarantor,  taken as a whole, except changes in the ordinary course of business,
none of which individually or in the aggregate have been materially adverse.

     Section 5.7 Full  Disclosure.  The statements and information  furnished to
the  Lender  in  connection  with  the  negotiation  of this  Agreement  and the
commitment  by the Lender to provide the  financing  contemplated  hereby do not
contain  any  untrue  statements  of a  material  fact or omit a  material  fact
necessary  to make the  material  statements  contained  therein  or herein  not
misleading, the Lender acknowledging that as to any projections furnished to the
Lender,  the Borrower does not warrant their accuracy,  but only represents that
the same were  prepared on the basis of  information  and estimates the Borrower
believed to be reasonable at the time such projections were prepared.

     Section 5.8 Good Title.  The Borrower,  Guarantors  and their  Subsidiaries
have good and defensible  title to their  respective  assets as reflected on the
most recent  financial  statements  of the  Borrower  and  Guarantors  and their
Subsidiaries furnished to the Lender (except for sales of assets by the Borrower
and Guarantors in the ordinary course of their respective  businesses),  subject
to no Liens other than such thereof as are permitted by Section 7.7 hereof or as
disclosed on Exhibit D hereto.

     Section  5.9  Investment  Company.  Neither  the  Borrower,  any  Corporate
Guarantor  nor  any  Subsidiary  is  an   "investment   company"  or  a  company
"controlled"  by an  "investment  company"  within the meaning of the Investment
Company Act of 1940, as amended.

     Section 5.10  Litigation  and Other  Controversies.  Except as set forth on
Exhibit  G,  there  is  no  litigation  or  governmental   proceeding  or  labor
controversy pending,  nor to the knowledge of the Borrower  threatened,  against
the Borrower or any  Guarantor  which either (a) involves a claim for $10,000 or
more  or  (b)  if  adversely   determined  would  (i)  impair  the  validity  or
enforceability  of, or impair  the  ability of the  Borrower  or  Guarantors  to
perform  their  respective  obligations  under this  Agreement or any other Loan
Document  or  (ii)  result  in any  material  adverse  change  in the  financial
condition or Property,  business or  operations of the Borrower or any Guarantor
or (iii) have an adverse affect on the Collateral.

     Section 5.11 Taxes.  All tax returns  required to be filed by the Borrower,
the Guarantors or any Subsidiary in any jurisdiction  have, in fact, been filed,
and all  taxes,  assessments,  fees  and  other  governmental  charges  upon the
Borrower,  the  Guarantors  or any  Subsidiary  or upon any of their  respective

                                       18
<PAGE>
Properties,  income or franchises, which are shown to be due and payable in such
returns  have been paid except as  otherwise  disclosed in writing to the Lender
and except where such taxes are being  contested  in good faith and  appropriate
reserves  have been  established  therefor.  The  Borrower  does not know of any
proposed  additional tax assessment  against it, any Guarantor or any Subsidiary
for which  adequate  provision in accordance  with GAAP has not been made on its
accounts  except as  otherwise  disclosed  in  writing to the  Lender.  Adequate
provisions in accordance with GAAP for taxes on the books of the Borrower,  each
Guarantor  and each  Subsidiary  have been made for all open years,  and for its
current fiscal period.

     Section 5.12 Approvals.  No  authorization,  consent,  license,  exemption,
filing (except for the filing of financing statements as herein contemplated) or
registration   with   any   court  or   governmental   department,   agency   or
instrumentality,  nor  any  approval  or  consent  of  the  stockholders  of the
Borrower,  any Corporate  Guarantor or any other Person, is or will be necessary
to the valid execution, delivery or performance by the Borrower or any Guarantor
of this Agreement or any other Loan Document.

     Section 5.13 Affiliate  Transactions.  Neither the Borrower,  any Guarantor
nor any  Subsidiary is a party to any  contracts or  agreements  with any of its
Affiliates (other than with  Wholly-Owned  Subsidiaries) on terms and conditions
which are less favorable to the Borrower, such Guarantor or such Subsidiary than
would be usual and customary in similar contracts or agreements  between Persons
not affiliated with each other.

     Section 5.14 ERISA.  Except as disclosed on Schedule  5.14,  the  Borrower,
each Corporate  Guarantor and each  Subsidiary are in compliance in all material
respects with ERISA to the extent applicable to them and have received no notice
to the contrary from the PBGC or any other governmental entity or agency. Except
as disclosed on Schedule  5.14, as of May 1, 2001,  the Borrower,  the Corporate
Guarantors and their Subsidiaries would have had no liability to PBGC in respect
of Unfunded Vested  Liabilities if all employee pension benefit plans maintained
by the Borrower,  the Corporate  Guarantors and Subsidiaries had been terminated
as of such date.  Except as disclosed on Schedule  5.14, no condition  exists or
event  or  transaction  has  occurred  with  respect  to any  Plan  which  could
reasonably  be  expected  to  result  in the  incurrence  by the  Borrower,  the
Corporate  Guarantors  or any  Subsidiary  of any  material  liability,  fine or
penalty  under  ERISA or the Code or in  connection  with any  Plan.  Except  as
disclosed on Schedule 5.14,  neither the Borrower,  any Corporate  Guarantor nor
any Subsidiary has any contingent  liability with respect to any post-retirement
benefits under a Welfare Plan,  other than liability for  continuation  coverage
described  in Part 6 of  Title I of  ERISA  and  liability  for  post-retirement
medical and life insurance benefits.

     Section 5.15 Compliance  with Laws. The Borrower,  each Guarantor and their
Subsidiaries are in compliance in all material respects with the requirements of
all  federal,  state and local  laws,  rules and  regulations  applicable  to or
pertaining  to the  Properties  or  business  operations  of the  Borrower,  the
Guarantors  or  any  Subsidiary  (including,  without  limitation,  the  Federal
Truth-in-Lending  Act, the Equal Credit Opportunity Act, the Fair Credit Billing
Act, the Fair Credit Reporting Act, the Fair Debt Collection  Practices Act, the
Federal  Trade  Commission  Act,  the  Magnuson-Moss  Warranty  Act, the Federal
Reserve Board's Regulations "B" and "Z", the Soldiers' and Sailors' Civil Relief
Act of 1940, and any other  federal,  state and local laws relating to interest,
usury,  consumer  credit,  equal  credit  opportunity,  fair  credit  reporting,
privacy, consumer protection, false or deceptive trade practices and disclosure,

                                       19
<PAGE>
the Occupational  Safety and Health Act of 1970, the Americans with Disabilities
Act of  1990,  and  laws  and  regulations  establishing  quality  criteria  and
standards for air,  water,  land and toxic or hazardous  wastes or  substances),
non-compliance with which could have a material adverse effect on either (a) the
financial  condition,  Properties,  business or operations of the Borrower,  any
Guarantor or their Subsidiaries or (b) the Collateral. Neither the Borrower, any
Guarantor  or their  Subsidiaries  has  received  notice to the effect  that its
operations  are not in  compliance  with any of the  requirements  of applicable
federal,   state  or  local  environmental,   health  and  safety  statutes  and
regulations  or are the  subject of any  governmental  investigation  evaluating
whether  any  remedial  action is needed to respond to a release of any toxic or
hazardous  waste or substance  into the  environment,  which  non-compliance  or
remedial action could have a material adverse effect on the financial condition,
Properties,  business or  operations  of the  Borrower,  any  Guarantor or their
Subsidiaries.

     Section 5.16 Other Agreements. Neither the Borrower, any Guarantor or their
Subsidiaries  is in  default  under  the  terms of any  covenant,  indenture  or
agreement of or affecting the Borrower,  any Guarantor or their  Subsidiaries or
any of their Properties for which a forbearance or waiver has not been obtained,
as  described  more fully in the Parent's  Quarterly  Report on Form 10Q for the
fiscal quarter ended March 31, 2001 filed with the U.S.  Securities and Exchange
Commission.

     Section 5.17 No  Defaults.  No Default or Event of Default has occurred and
is continuing.

SECTION 6.        CONDITIONS PRECEDENT
                  --------------------

     The  obligation  of the  Lender  to make  any Loan or any  other  financial
accommodation hereunder shall be subject to the following conditions precedent:

     Section  6.1  Initial  Loan.  Prior  to  the  making  of the  initial  Loan
hereunder:

     (a) The Lender shall have received the favorable  written opinion of Wyche,
Burgess, Freeman & Parham, P.A., counsel to the Borrower and the Guarantors,  in
form and substance satisfactory to the Lender;

     (b) The Lender shall have received (i) certified  copies of  resolutions of
the Board of Directors of the Borrower,  authorizing  the execution and delivery
of this  Agreement  and the other  Loan  Documents,  indicating  the  authorized
signers of this Agreement and the other Loan  Documents and all other  documents
relating  thereto,  the persons  authorized to request  Loans  hereunder and the
specimen  signatures of such signers,  and (ii) copies of  certificates  of good
standing certified by the appropriate  governmental  officer in the jurisdiction
of the Borrower's  incorporation  and, upon request by the Lender  therefor,  in
each state in which it is authorized to do business as a foreign corporation;

                                       20
<PAGE>

     (c) The Lender shall have received this  Agreement,  the Note and the other
Loan  Documents,  together  with any  financing  statements  and  amendments  to
existing financing statements requested by the Lender in connection therewith;

     (d) The  Guarantors  shall  have  executed  and  delivered  a  Consent  and
Reaffirmation Agreement in the form of Exhibit K attached hereto.

     (e) The Lender shall have received copies (executed or certified, as may be
appropriate) of all legal documents or proceedings  taken in connection with the
execution and delivery of this Agreement and the other Loan Documents;

     (f) The Lender shall have received  certified  copies of the Borrower's and
each  Corporate  Guarantor's  articles  of  incorporation  and  by-laws  and all
amendments thereto through the date hereof.

     (g) The Lender shall have received  evidence or assurances  satisfactory to
it of the accuracy of the representations contained in Section 5.15 hereof.

     Section 6.2 All Loans. As of the time of the making of each Loan (including
the initial Borrowing):

     (a) The Lender shall have  received the notice and copies of the  documents
required by Section 2.4 hereof and a fully executed Closing Agent Agreement from
the relevant Closing Agent(s).

     (b) Each of the representations and warranties of the Borrower set forth in
Section 5 hereof shall be true and correct as of said time, except to the extent
that any such representation or warranty relates solely to an earlier date;

     (c) The  Borrower  shall be in full  compliance  with all of the  terms and
conditions of this Agreement and of the other Loan Documents,  and no Default or
Event of Default  shall have  occurred  and be  continuing  or would  occur as a
result of making such Borrowing;

     (d) After giving effect to any  Committed  Loan,  the  aggregate  principal
amount of all Committed  Loans  hereunder shall not exceed the lesser of (i) the
Borrowing  Base  and  (ii)  the  Commitment  and  after  giving  effect  to  any
Discretionary  Loan, the aggregate principal amount of all Loans hereunder shall
not exceed the Commitment; and

     (e) Such Loan shall not violate any order,  judgment or decree of any court
or other  authority or any  provision  of law or  regulation  applicable  to the
Lender.

     Each request for a Loan  hereunder  shall be deemed to be a  representation
and  warranty  by the  Borrower  on the date of such  Borrowing  as to the facts
specified in this Section 6.2.

                                       21
<PAGE>
SECTION 7.        COVENANTS
                  ---------

     The Borrower  agrees that, so long as any Commitment is available to or any
Obligations are outstanding  hereunder,  except to the extent  compliance in any
case or cases is waived in writing by the Lender:

     Section 7.1 Maintenance of Business.  The Borrower  shall,  and shall cause
each  Subsidiary  to,  preserve  and  keep in force  and  effect  its  corporate
existence  and all  licenses,  permits and  franchises  necessary  to the proper
conduct of its business.

     Section 7.2 Maintenance of Property.  The Borrower will maintain,  preserve
and keep its  Properties in good repair,  working order and condition  (ordinary
wear and tear  excepted)  and will from time to time make all needful and proper
repairs,  renewals,  replacements,  additions and betterments thereto so that at
all times the efficiency  thereof shall be fully preserved and  maintained,  and
will cause each Subsidiary to do so in respect of Property owned or used by it.

     Section  7.3  Taxes  and  Assessments.  The  Borrower  will  duly  pay  and
discharge,  and will cause each Subsidiary to duly pay and discharge, all taxes,
rates,  assessments,  fees and  governmental  charges  upon or against it or its
Properties,  in each case before the same become delinquent and before penalties
accrue  thereon,  unless and to the extent that the same are being  contested in
good faith and by  appropriate  proceedings  which  prevent  enforcement  of the
matter under contest and adequate reserves are provided therefor.

     Section 7.4 Insurance.  The Borrower will insure and keep insured, and will
cause each  Subsidiary  to insure and keep  insured,  with good and  responsible
insurance companies,  all insurable Property owned by it which is of a character
usually  insured by Persons  similarly  situated and operating  like  Properties
against loss or damage from such hazards and risks, and in such amounts,  as are
insured by Persons  similarly  situated and operating like  Properties;  and the
Borrower will insure,  and cause each  Subsidiary to insure,  such other hazards
and risks  (including  employers'  and  public  liability  risks)  with good and
responsible  insurance companies as and to the extent usually insured by Persons
similarly situated and conducting similar businesses.  The Borrower shall in any
event  maintain  insurance  on the  Collateral  to the  extent  required  by the
Collateral  Documents.  The Borrower  will upon request of the Lender  furnish a
certificate setting forth in summary form the nature and extent of the insurance
maintained pursuant to this Section.

     Section 7.5  Financial  Reports.  The Parent and Borrower  will  maintain a
standard  and  modern  system of  accounting  in  accordance  with GAAP and will
furnish to the Lender and its duly authorized  representatives  such information
(including financial statements) respecting the business and financial condition
of the  Borrower,  the  Guarantors  and their  Subsidiaries  as the  Lender  may
reasonably request; and without any request, will furnish to the Lender:

     (a) as soon as  available,  and in any event within  thirty (30) days after
the end of each  calendar  month,  a  borrowing  base  certificate  in the  form
attached  hereto as Exhibit E showing the  computation  of the Borrowing Base in
reasonable  detail as of the close of such monthly  period,  certified to by the
chief financial officer of the Borrower;

                                       22
<PAGE>
     (b) as soon as  available,  and in any event within  thirty (30) days after
the end of each calendar  month, a copy of the  consolidated  and  consolidating
balance sheet and consolidated and consolidating  statements of income, retained
earnings and cash flows of the Parent, Corporate Guarantors and Subsidiaries for
such period,  all in reasonable  detail showing in comparative  form the figures
for the corresponding  date and period in the previous fiscal year,  prepared by
the Parent or Borrower in  accordance  with GAAP,  together with a report on the
aging of Mortgage  Loans  included or identified  for inclusion in the Borrowing
Base or with  respect  to which  the  Lender  has  made a Loan  and a report  of
charge-offs,  recoveries  and  repossession  of collateral  with respect to such
Mortgage Loans all in reasonable detail prepared by the Parent or Borrower,  and
in each  case  certified  to by the chief  financial  officer  of the  Parent or
Borrower;

     (c) as soon as  available,  and in any event within  ninety (90) days after
the close of each  fiscal  year of the Parent,  a copy of the  consolidated  and
consolidating balance sheet of the Parent,  Corporate  Guarantors,  Borrower and
Subsidiaries  as of the  close  of such  fiscal  year and the  consolidated  and
consolidating  statements  of income,  retained  earnings  and cash flows of the
Parent,  Corporate  Guarantors,  Borrower and Subsidiaries for such period,  and
accompanying notes thereto, all in reasonable detail showing in comparative form
the figures for the previous fiscal year,  accompanied by an unqualified opinion
thereon  of  Elliott,  Davis & Company  or another  firm of  independent  public
accountants  of  recognized  standing,  selected  by the  Borrower or Parent and
satisfactory  to the Lender,  to the effect that the financial  statements  have
been prepared in accordance with GAAP and present fairly in accordance with GAAP
the consolidated and consolidating financial condition of the Parent,  Borrower,
Corporate  Guarantors and  Subsidiaries  as of the close of such fiscal year and
the  results of their  operations  and cash flows for the fiscal year then ended
and that an  examination  of such  accounts in  connection  with such  financial
statements  has  been  made  in  accordance  with  generally  accepted  auditing
standards  and,  accordingly,  such  examination  included  such  tests  of  the
accounting  records  and  such  other  auditing  procedures  as were  considered
necessary in the circumstances;

     (d) not later than thirty (30)  business days after receipt by the Borrower
or Parent  thereof,  a copy of any  management  letters on  internal  accounting
controls  of the  Borrower,  Parent,  Corporate  Guarantors  or  any  Subsidiary
prepared by its independent public accountants;

     (e) not later than thirty (30)  business days after receipt by the Borrower
or Parent thereof,  a copy of any internal audit reports (with  responses,  when
available) with respect to the Borrower,  Parent, any Corporate Guarantor or any
Subsidiary   prepared  by  its  controller's  office  or  other  in-house  staff
accountants;

     (f) not later than thirty (30)  business days after receipt by the Borrower
or Parent  thereof,  a copy of each audit made by any  regulatory  agency of the
books and  records of the  Borrower,  Parent,  any  Corporate  Guarantor  or any
Subsidiary; and

     (g) promptly  after  knowledge  thereof shall have come to the attention of
any  responsible  officer of the Borrower or Parent,  written  notice of (i) any
threatened or pending litigation or governmental proceeding or labor controversy
against the Borrower,  Parent, any Guarantor or any Subsidiary which involves an
amount of  $10,000  or more or which,  if  adversely  determined,  would  have a
material  adverse  effect on the financial  condition,  Properties,  business or
operations of the Parent, Borrower, Corporate Guarantor and Subsidiaries,  taken

                                       23
<PAGE>
as a whole,  or of the  occurrence of any Default or Event of Default  hereunder
and (ii) any material  dispute or claim relating to any Mortgage Loan identified
for inclusion in the Borrowing Base or with respect to which the Lender has made
a Loan.

     Each of the  financial  statements  furnished  to the  Lender  pursuant  to
clauses (b) and (c) of this Section shall be accompanied by a written compliance
certificate  in the form  attached  hereto  as  Exhibit  F signed  by the  chief
financial  officer of the  Borrower  or Parent to the effect that to the best of
the chief  financial  officer's  knowledge  and  belief no  Default  or Event of
Default has occurred  during the period  covered by such  statements  or, if any
such Default or Event of Default has occurred during such period,  setting forth
a description of such Default or Event of Default and specifying the action,  if
any, taken by the Borrower to remedy the same. Such  certificate  shall also set
forth the  calculations  supporting such statements in respect of Sections 7.14,
7.15 and 7.16 of this Agreement

     Section 7.6  Indebtedness  for Borrowed  Money.  The Borrower will not, nor
will  it  permit  any  Subsidiary  to,  issue,  incur,  assume,  create  or have
outstanding any Indebtedness  for Borrowed Money;  provided,  however,  that the
foregoing provisions shall not restrict nor operate to prevent:

     (a) the indebtedness of the Borrower owing to the Lender hereunder;

     (b) the  indebtedness  of the  Borrower  to  other  lenders  not  exceeding
$35,000,000 in aggregate principal amount from time to time incurred to fund the
purchase,  origination and holding by the Borrower or any of its Subsidiaries of
mortgage loans which are pledged to and in the possession of such lenders (or an
agent  or  bailee  acting  on  their   behalf)  to  secure   repayment  of  such
indebtedness;

     (c) purchase money  indebtedness and capitalized lease obligations  secured
by liens permitted by Section 7.7(f) hereof in an aggregate amount not to exceed
$250,000 at any one time outstanding;

     (d)  indebtedness  of the Borrower  and/or any of its  Subsidiaries  to any
Guarantors;

     (e) guaranties of the Parent's 10.75% Senior Notes due 2004;

     (f) guaranties of any other  Indebtedness  for Borrowed Money  permitted by
this Agreement; and

     (g) hedging obligations.

     Section 7.7 Liens. The Borrower will not, nor will it permit any Subsidiary
to, create,  incur or permit to exist any Lien of any kind on any Property owned
by the Borrower or any Subsidiary;  provided,  however,  that this Section shall
not apply to nor operate to prevent:

     (a) Liens  arising by statute in  connection  with  worker's  compensation,
unemployment insurance,  old age benefits,  social security obligations,  taxes,
assessments,  statutory  obligations or other similar  charges,  good faith cash

                                       24
<PAGE>
deposits in connection  with tenders,  contracts or leases to which the Borrower
or any  Subsidiary is a party or other cash deposits  required to be made in the
ordinary  course of business,  provided in each case that the  obligation is not
for  borrowed  money  and that the  obligation  secured  is not  overdue  or, if
overdue,  is being  contested  in good faith by  appropriate  proceedings  which
prevent  enforcement of the matter under contest and adequate reserves have been
established therefor;

     (b) mechanics', workmen's,  materialmen's,  landlords', carriers', or other
similar  Liens  arising  in the  ordinary  course of  business  with  respect to
obligations  which  are not due or which are being  contested  in good  faith by
appropriate proceedings which prevent enforcement of the matter under contest;

     (c) the pledge of assets for the  purpose of  securing  an appeal,  stay or
discharge in the course of any legal  proceeding,  provided  that the  aggregate
amount of liabilities of the Borrower and its  Subsidiaries  secured by a pledge
of assets permitted under this clause, including interest and penalties thereon,
if any, shall not be in excess of $10,000 any one time outstanding;

     (d) the Liens granted in favor of the Lender by the Collateral Documents;

     (e) Liens on  mortgage  loans and other  assets  other than the  Collateral
securing indebtedness permitted by Section 7.6(b) hereof;

     (f) Liens on property of the  Borrower or any of its  Subsidiaries  created
solely for the  purpose of securing  indebtedness  permitted  by Section  7.6(c)
hereof incurred to finance the purchase price of Property, provided that no such
Lien shall extend to or cover other Property of the Borrower or such  Subsidiary
other than the  respective  Property so  acquired,  and the  original  principal
amount of the  indebtedness  secured  by any such  Lien  shall  not  exceed  the
original purchase price of such Property

     (g) Liens on assets other than the  Collateral  securing  the  indebtedness
permitted by Section 7.6(d) hereof;

     (h) Liens on assets other than the  Collateral  securing  the  indebtedness
permitted by Section 7.6(f) hereof;

     (i) Liens on assets other than the  Collateral  securing  the  indebtedness
permitted by Section 7.6(g) hereof;

     (j) Liens on retained interest  receivables arising in connection with loan
securitizations,  or on the capital stock of any Subsidiary substantially all of
the assets of which are retained interest receivables arising in connection with
loan securitizations; and

     (k)  Any  Liens  in  the  form  of  "overall-collateralization"  of  senior
securities  issues in, or  subordination  of or  recourse to all or a portion of
retained  interest  receivables  of the  Borrower  or  any  of its  Subsidiaries
attributable to, a  securitization  of receivables or similar  arrangements,  in
each case to the extent  reflected in the book value of such  retained  interest

                                       25
<PAGE>
receivables, which Lien is in favor of the holders of other securities issued by
the securitization trust or other Person relating to such securitization.

     Section 7.8 Mergers,  Consolidations  and Sales. The Borrower will not, nor
will it permit any Subsidiary to, be a party to any merger or consolidation,  or
sell, transfer, lease or otherwise dispose of all or any substantial part of its
Property, or in any event sell or discount (with or without recourse) any of its
notes or  accounts  receivable  other  than  (i)  sales of  Mortgage  Loans  not
constituting  Collateral  in the  ordinary  course of  business,  (ii)  sales of
Collateral  permitted  under  the  Security  Agreement  and  (iii)  any  merger,
consolidation with, or sale,  transfer,  lease or other disposition to Borrower,
the Parent or any Subsidiary of the Parent or the Borrower which is or becomes a
Guarantor, provided however that in the event of any transaction permitted under
clause  (iii)  of this  Section  7.8 in which  either  the  Borrower  is not the
survivor or which involves the sale or other  transfer of a substantial  part of
Borrower's  Property,  the survivor or transferee in such transaction  shall, if
requested by the Lender,  have agreed in advance in writing to assume all of the
obligations  of Borrower  and  otherwise  succeed  and  replace  Borrower as the
borrower  hereunder  and  under the  Collateral  Documents  and the  other  Loan
Documents  and shall  execute and deliver to Lender  such other  agreements  and
instruments  as Lender shall  reasonably  request in connection  therewith,  all
substantially concurrently with the consummation of such transaction.  The sale,
lease,  transfer or other disposition of 5% of the assets of the Borrower or any
Subsidiary shall be deemed substantial for the foregoing purposes.

     Section 7.9 ERISA.  The Borrower will,  and will cause each  Subsidiary to,
promptly pay and discharge all obligations  and liabilities  arising under ERISA
of a character which if unpaid or unperformed  might result in the imposition of
a Lien against any of its  Properties.  The Borrower  will,  and will cause each
Subsidiary  to,  promptly  notify  the  Lender  of  (i)  the  occurrence  of any
reportable  event (as defined in ERISA) with respect to a Plan,  (ii) receipt of
any notice from the PBGC of its  intention  to seek  termination  of any Plan or
appointment of a trustee therefor,  (iii) its intention to terminate or withdraw
from any Plan,  and (iv) the  occurrence  of any event with  respect to any Plan
which would result in the  incurrence  by the Borrower or any  Subsidiary of any
material liability,  fine or penalty, or any material increase in the contingent
liability of the Borrower or any Subsidiary with respect to any  post-retirement
Welfare Plan benefit.

     Section 7.10  Compliance  with Laws. The Borrower will, and will cause each
Subsidiary  to,  comply in all material  respects with the  requirements  of all
federal,  state  and local  laws,  rules,  regulations,  ordinances  and  orders
applicable to or pertaining to the Collateral, Properties or business operations
of the  Borrower  or any  Subsidiary,  non-compliance  with  which  could have a
material  adverse  effect on the financial  condition,  Properties,  business or
operations of the Borrower or any  Subsidiary or could result in a Lien upon any
of their Property.  The Borrower agrees, at intervals  reasonably  acceptable to
the  Lender,  to make  periodic  inspections  of the  documentation  relating to
mortgage  loans made or  acquired by it to monitor  compliance  of the same with
applicable law and to provide the Lender with the results of such inspections.

     Section 7.11 Burdensome  Contracts with Affiliates.  The Borrower will not,
nor will it permit any  Subsidiary  to,  enter into any  contract,  agreement or
business  arrangement with any of its Affiliates  (other than with  Wholly-Owned
Subsidiaries)  on terms and conditions  which are less favorable to the Borrower

                                       26
<PAGE>
or such  Subsidiary  than would be usual and  customary  in  similar  contracts,
agreements or business  arrangements  between  Persons not affiliated  with each
other.

     Section 7.12  Maintenance  of  Subsidiaries.  The Borrower will not assign,
sell or transfer,  or permit any Subsidiary to issue,  assign, sell or transfer,
any Voting Stock of a Subsidiary,  provided that the foregoing shall not operate
to  prevent;  (i) the  issuance,  sale and  transfer to any person of any voting
stock of a Subsidiary  solely for the purpose of  qualifying,  and to the extent
legally necessary to qualify,  such person as a director of such Subsidiary,  or
(ii) the pledge or encumbrance in connection with a loan  securitization  of any
stock of a  Subsidiary  substantially  all of the  assets of which are  retained
interest receivables arising in connection with loan securitizations.

     Section 7.13 Change in the Nature of Business.  The Borrower  will not, and
will not permit any  Subsidiary  to,  engage in any business or activity if as a
result the  general  nature of the  business of the  Borrower or any  Subsidiary
would be changed in any material respect from the general nature of the business
engaged in by the Borrower or any Subsidiary on the date of this Agreement.

Section 7.14      [INTENTIONALLY OMITTED]
                  -----------------------

Section 7.15      [INTENTIONALLY OMITTED]
                  -----------------------

     Section 7.16 Net Income.  The Borrower  shall have  positive Net Income for
the fiscal  quarter  ending June 30, 2001 and shall have positive net income for
the month ending July 31, 2001 and for each month thereafter.

     Section 7.17 Dividends and Certain Other  Restricted  Payments.  The Parent
will not during any fiscal year (a) declare or pay any  dividends on or make any
other  distributions  in  respect  of any class or series of its  capital  stock
(other than (i) dividends payable solely in its capital stock and (ii) dividends
and  distributions  required to be paid with  respect to the  Parent's  Series A
non-convertible preferred stock, $1.00 par value per share pursuant to the terms
and provisions  thereof which have been disclosed to the Lender) or (b) directly
or indirectly purchase, redeem or otherwise acquire or retire any of its capital
stock.

SECTION 8.        EVENTS OF DEFAULT AND REMEDIES
                  ------------------------------

     Section  8.1  Events of  Default.  Any one or more of the  following  shall
constitute an Event of Default hereunder:

     (a) default in the payment when due of all or any part of the  principal of
or interest on any Loan (whether at the stated maturity  thereof or at any other
time provided for in this  Agreement)  or of any fee or other amount  payable by
the Borrower hereunder or by the Borrower under any other Loan Document; or

     (b) default in the  observance or  performance of any covenant set forth in
Sections 7.5, 7.8, 7.9 or 7.13 or 7.14 through 7.17 hereof; or

                                       27
<PAGE>
     (c) default in the observance or performance of any other provision  hereof
or of any other Loan  Document  which is not  remedied  within  thirty (30) days
after the  earlier to occur of (i) the date on which such  failure  shall  first
become  known to any officer of the  Borrower or (ii) the date on which  written
notice thereof is given to the Borrower by the Lender; or

     (d) any  representation  or warranty made by the Borrower  herein or by the
Borrower or any  Guarantor in any other Loan  Document,  or in any  statement or
certificate  furnished  by the  Borrower  or any  Guarantor  pursuant  hereto or
thereto,  or in connection  with any Loan made  hereunder,  proves untrue in any
material respect as of the date of the issuance or making thereof; or

     (e) any event occurs or  condition  exists  (other than those  described in
clauses (a) through (d) above) which is  specified as an Event of Default  under
any Loan  Document,  or any Loan  Document  shall for any reason not be or shall
cease to be in full force and  effect,  or any Loan  Document  is declared to be
null and void or any  Guarantor or Borrower  shall  attempt to terminate  (other
than  pursuant  to Section  2.7  hereof) or contest in any manner the  validity,
binding nature or enforceability of any Loan Document; or

     (f) either (i) default shall occur under any evidence of  Indebtedness  for
Borrowed  Money  issued,  assumed or guaranteed by the Borrower or any Guarantor
(including,  without  limitation,  any  Subordinated  Indebtedness) or under any
indenture, agreement or other instrument under which the same may be issued, and
such  default  shall  continue  for a period of time  sufficient  to permit  the
acceleration  of the  maturity  of any  such  Indebtedness  for  Borrowed  Money
(whether or not such maturity is in fact  accelerated) or any such  Indebtedness
for  Borrowed  Money  shall  not be paid  when  due  (whether  by lapse of time,
acceleration  or otherwise) or (ii) Borrower or any Guarantor  shall fail to pay
or perform when due any repurchase  obligation or any other  obligation owing by
it to HFS or to any of Lender's other Affiliates; or

     (g) any  judgment or  judgments,  writ or writs,  or warrant or warrants of
attachment, or any similar process or processes in an aggregate amount in excess
of $10,000  shall be entered or filed  against the Borrower or any  Guarantor or
any of their  Subsidiaries  or against any of their  Property,  and in each case
which  remains  unvacated,  unbonded,  unstayed or  unsatisfied  for a period of
thirty (30) days; or

     (h) either (i) 36% of the issued and outstanding shares of capital stock of
the Parent  having the power to vote for the election of directors of the Parent
ceases at any time and for any  reason  (including  death or  incapacity)  to be
owned, legally and beneficially, by Ronald J. Sheppard or (ii) a majority of the
Members of the Board of  Directors  of the  Borrower or Parent shall cease to be
Continuing  Members (for purposes of the foregoing,  "Continuing  Members" means
members of the Board of Directors of the Borrower or Parent, as appropriate,  on
December  31,  2000 or (iii) the  Parent  ceases to own 100% of the  issued  and
outstanding capital stock of the Borrower; or

     (i)  Ronald J.  Sheppard  shall at any time and for any  reason  (including
death or incapacity) cease to be actively involved in the day-to-day  management
of the Borrower; or

                                       28
<PAGE>
     (j) the  Borrower or any member of its  Controlled  Group shall fail to pay
when due an amount or amounts  aggregating  in excess $1,000 which it shall have
become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or notice
of  intent  to  terminate  a Plan or  Plans  having  aggregate  Unfunded  Vested
Liabilities  in excess of $25,000  (collectively,  a "Material  Plan")  shall be
filed  under  Title IV of ERISA  by the  Borrower  or any  other  member  of its
Controlled Group, any plan administrator or any combination of the foregoing; or
the PBGC shall institute  proceedings under Title IV of ERISA to terminate or to
cause a trustee to be appointed to administer  any Material Plan or a proceeding
shall be  instituted by a fiduciary of any Material Plan against the Borrower or
any member of its Controlled Group to enforce Section 515 or 4219(c)(5) of ERISA
and such  proceeding  shall  not have been  dismissed  within  thirty  (30) days
thereafter;  or a  condition  shall  exist by reason of which the PBGC  would be
entitled  to  obtain  a  decree  adjudicating  that any  Material  Plan  must be
terminated; or

     (k) the Borrower,  any Guarantor or any  Subsidiary  shall (i) have entered
involuntarily  against it an order for relief under the United States Bankruptcy
Code,  as amended,  (ii) not pay, or admit in writing its  inability to pay, its
debts  generally as they become due, (iii) make an assignment for the benefit of
creditors, (iv) apply for, seek, consent to, or acquiesce in, the appointment of
a receiver,  custodian, trustee, examiner, liquidator or similar official for it
or any substantial part of its Property, (v) institute any proceeding seeking to
have entered  against it an order for relief under the United States  Bankruptcy
Code, as amended, to adjudicate it insolvent,  or seeking  dissolution,  winding
up, liquidation, reorganization, arrangement, adjustment or composition of it or
its debts under any law relating to bankruptcy,  insolvency or reorganization or
relief  of  debtors  or fail to file an  answer or other  pleading  denying  the
material  allegations of any such  proceeding  filed against it, or (vi) fail to
contest in good faith any appointment or proceeding  described in Section 8.1(l)
hereof; or

     (l)  a  custodian,  receiver,  trustee,  examiner,  liquidator  or  similar
official  shall be appointed  for the  Borrower,  any  Guarantor or any of their
Subsidiaries or any substantial  part of any of their Property,  or a proceeding
described in Section  8.1(k)(v)  shall be instituted  against the Borrower,  any
Guarantor  or  any  of  their  Subsidiaries,   and  such  appointment  continues
undischarged or such proceeding  continues  undismissed or unstayed for a period
of thirty (30) days.

     Section 8.2 Remedies - Certain Events of Default. When any Event of Default
described  in clauses  (a)  through  (j),  both  inclusive,  of Section  8.1 has
occurred and is continuing,  the Lender may take either or both of the following
actions:

     (a)  terminate the  obligation  of the Lender to extend any further  credit
hereunder on the date (which may be the date thereof) stated in such notice;

     (b) declare  the  principal  of and the accrued  interest on the Note to be
forthwith due and payable and thereupon the Note,  including  both principal and
interest and all fees, charges and other amounts payable hereunder and under the
other Loan  Documents,  shall be and become  immediately due and payable without
further demand, presentment, protest or notice of any kind.

                                       29
<PAGE>
     Section 8.3 Remedies - Other  Events of Default.  When any Event of Default
described in clauses (k) or (l) of Section 8.1 has  occurred and is  continuing,
then the Note, including both principal and interest,  and all fees, charges and
other  amounts  payable  hereunder  and under the other  Loan  Documents,  shall
immediately  become due and  payable  without  presentment,  demand,  protest or
notice of any kind,  and the  obligations of the Lender to extend further credit
pursuant to any of the terms hereof shall immediately terminate.

     Section 8.4  Expenses.  The  Borrower  agrees to pay to the Lender,  or any
other holder of the Note, all costs and expenses  incurred or paid by the Lender
or any such holder,  including  reasonable  attorneys'  fees and court costs, in
connection with any Default or Event of Default by the Borrower  hereunder or in
connection  with the enforcement of any of the terms hereof or of the other Loan
Documents.


SECTION 9.        MISCELLANEOUS
                  -------------

     Section  9.1 No Waiver of  Rights.  No delay or  failure on the part of the
Lender or on the part of the holder or holders  of the Note in the  exercise  of
any power or right shall operate as a waiver thereof,  nor as an acquiescence in
any default, nor shall any single or partial exercise thereof preclude any other
or further  exercise  of any other power or right,  and the rights and  remedies
hereunder of the Lender and of the holder or holders of the Note are  cumulative
to,  and not  exclusive  of,  any  rights or  remedies  which any of them  would
otherwise have.

     Section 9.2  Non-Business  Day. If any payment of  principal or interest on
any Loan or of any fee hereunder shall fall due on a day which is not a Business
Day,  interest at the rate such principal bears for the period prior to maturity
or at the rate such fee  accrues  shall  continue  to accrue from the stated due
date thereof to and  including  the next  succeeding  Business Day, on which the
same shall be payable. If any Settlement Date shall fall on a day which is not a
Business  Day,  such  Settlement  Date shall be extended to the next  succeeding
Business Day.

     Section 9.3  Documentary  Taxes.  The Borrower  agrees that it will pay any
documentary,  stamp or similar taxes payable in respect to this  Agreement,  the
Note or any other Loan Document,  including interest and penalties, in the event
any such taxes are assessed  irrespective  of when such  assessment  is made and
whether or not any credit is then in use or available hereunder.

     Section 9.4 Survival of Representations. All representations and warranties
made herein or in certificates given pursuant hereto shall survive the execution
and delivery of this Agreement and of the Note, and shall continue in full force
and  effect  with  respect to the date as of which they were made as long as any
credit is in use or available hereunder.

     Section 9.5 Survival of Indemnities.  All  indemnities  with respect to the
Loans shall  survive the  termination  of this  Agreement and the payment of the
Loans and the Note.

     Section 9.6 Notices.  Except as  otherwise  specified  herein,  all notices
hereunder shall be in writing (including cable,  telecopy or telex) and shall be
given to the relevant party at its address or telecopier  number set forth below
or such  other  address,  telecopier  number or telex  number as such  party may

                                       30
<PAGE>
hereafter  specify by notice to the other,  given by United States  certified or
registered  mail, by telecopy or by other  telecommunication  device  capable of
creating a written  record of such  notice and its  receipt.  Notices  hereunder
shall be addressed to:

                           If to the Borrower:
                           ------------------

                           Homegold, Inc.
                           113 Reed Avenue
                           Lexington, SC 29071
                           Attention: Ronald J. Sheppard
                           Telephone: (803) 996-2222
                           Telecopy:    (803) 996-2127

                           If to the Lender:
                           ----------------

                           Household Commercial Financial Services,
                             Inc.
                           700 North Wood Dale Road,
                           Building 3A
                           Wood Dale, Illinois 60191
                           Attention:        Robert Carse
                           Telephone:        (630) 350-4237
                           Telecopy:         (630) 616-3260

Each such notice, request or other communication shall be effective (i) if given
by  telecopier,  when such  telecopy is  transmitted  to the  telecopier  number
specified in this Section and a confirmation  of such telecopy has been received
by the sender,  (ii) if given by mail, five (5) days after such communication is
deposited in the mail,  certified or registered  with return receipt  requested,
addressed as aforesaid or (iii) if given by any other means,  when  delivered at
the addresses specified in this Section; provided that any notice given pursuant
to Section 2 hereof shall be effective only upon receipt.

     Section 9.7  Counterparts.  This Agreement may be executed in any number of
counterparts,  and by the different parties on different  counterparts,  each of
which when executed shall be deemed an original but all such counterparts  taken
together shall constitute one and the same instrument.

     Section 9.8  Successors and Assigns.  This Agreement  shall be binding upon
the Borrower and its successors  and assigns,  and shall inure to the benefit of
the Lender and its  successors and assigns,  including any subsequent  holder of
the Note; provided,  however, that the Borrower may not assign any of its rights
or obligations hereunder without the written consent of the Lender.

     Section 9.9 Amendments.  Any provision of this  Agreement,  the Note or the
other Loan Documents may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by the Borrower and the Lender.

                                       31
<PAGE>
     Section 9.10 Fees and  Indemnification.  (a) The Borrower agrees to pay the
reasonable fees and  disbursements of counsel to the Lender,  in connection with
the  preparation  and execution of this Agreement and the other Loan  Documents,
and any recording or filing of any of the foregoing,  and any amendment,  waiver
or consent related hereto,  whether or not the transactions  contemplated herein
are  consummated.  The  Borrower  further  agrees to pay the Lender or any other
holder of the  Obligations  all costs and  expenses  (including  court costs and
attorneys'  fees)  incurred  or paid by the  Lender or any  other  holder of the
Obligations in connection  with any Default or Event of Default or in connection
with the  enforcement  of this Agreement or any other Loan Document or any other
instrument or document delivered thereunder.

     (b) The Borrower  further  agrees to indemnify the Lender,  its  directors,
officers  and  employees  against  all  losses,  claims,   damages,   penalties,
judgments,   liabilities  and  expenses  (including,  without  limitations,  all
reasonable  expenses of litigation or  preparation  therefor  whether or not the
Lender is a party  thereto) which any of them may pay or incur arising out of or
relating to this Agreement,  any other Loan Document,  the Collateral (including
without  limitation  any  environmental  claims or  liabilities  related  to any
property  subject to a Mortgage Loan) the  transactions  contemplated  hereby or
thereby or the direct or indirect  application  or proposed  application  of the
proceeds  of any Loan  hereunder,  other than those  which  arise from the gross
negligence or willful  misconduct  of the party  claiming  indemnification.  The
obligations of the Borrower under this Section shall survive the  termination of
this Agreement.

     Section 9.11 Assignments. The Lender may, with the prior written consent of
the Borrower (which consent shall not be  unreasonably  withheld or delayed and,
in any event,  shall not be required for an  assignment  by Lender to one of its
Affiliates) at any time assign and delegate to another financial  institution or
other Person (any Person to which such an  assignment  and  delegation  is to be
made being herein called  "Assignee")  all of the Lenders'  Loans and Commitment
provided  that the  Borrower  shall be  entitled  to continue to deal solely and
directly with the Lender in connection  with the interests so assigned until the
date when all of the following conditions shall have been satisfied:

          (i) one (1)  Business Day shall have passed  after  written  notice of
     such  assignment  and  delegation  (together  with  payment   instructions,
     addresses and related  information with respect to the Assignee) shall have
     been given to the Borrower; and

          (ii) the  assigning  Lender and the Assignee  shall have  executed and
     delivered  an  Assignment  Agreement  and  furnished a copy  thereof to the
     Borrower.

From and after the date on which the conditions  described  above have been met,
the Assignee shall be deemed automatically to have become party hereto and shall
have the rights and obligations of the Lender hereunder and the assigning Lender
shall be released  from its  obligations  hereunder.  Within five  Business Days
after effectiveness of any assignment and delegation, the Borrower shall execute
and deliver to the Assignee  Lender a new Note (such Note to be in exchange for,
but not in payment of, the predecessor Note held by the assigning Lender).  Each
such Note shall be dated the effective  date of such  assignment.  The assigning
Lender  shall  mark the  predecessor  Note  "exchanged"  and  deliver  it to the
Borrower.  Accrued interest on the predecessor Note shall be paid as provided in

                                       32
<PAGE>
the Assignment  Agreement.  Within five Business Days after  requested to do so,
Borrower  shall  also  execute  and  deliver  such  UCC  and  other   Collateral
assignments as may be requested by Assignee Lender on the assigning Lender.

     Section 9.12 Governing Law. This Agreement and the Note, and the rights and
duties of the parties  hereto and thereto,  shall be construed and determined in
accordance  with  the laws of the  State  of  Illinois,  without  regard  to the
internal laws thereof with respect to conflicts of law.

     Section 9.13  Headings.  Section  headings  used in this  Agreement are for
reference only and shall not affect the construction of this Agreement.

     Section  9.14  Entire  Agreement.  This  Agreement  constitutes  the entire
understanding  of the parties  hereto with respect to the subject  matter hereof
and any prior or  contemporaneous  agreements,  whether  written  or oral,  with
respect thereto are superseded hereby.

     Section  9.15  Terms  of  Collateral  Documents  Not  Superseded.   Nothing
contained  herein  shall be deemed or  construed  to permit any act or  omission
which is prohibited by the terms of any Collateral  Document,  the covenants and
agreements contained herein being in addition to and not in substitution for the
covenants and agreements contained in the Collateral Documents.

     Section 9.16  Construction.  The parties hereto  acknowledge and agree that
this Agreement  shall not be construed more in favor of one than the other based
upon which party drafted the same, it being acknowledged that all parties hereto
contributed substantially to the negotiation and preparation of this Agreement.

         Section 9.17      Extension of Original Credit Agreement
                           --------------------------------------

     The parties hereto  acknowledge and agree that the  Termination  Date under
the Original Credit  Agreement is hereby extended  through the date prior to the
date hereof but from and after the date hereof,  all Loans and other Obligations
of the Borrower,  whether  outstanding  under the Original  Credit  Agreement or
otherwise,  shall be subject in all respects to the terms and conditions of this
Amended and Restated  Credit  Agreement.  The Lender hereby waives any Events of
Default that may have existed under the Original  Credit  Agreement prior to its
amendment and restatement pursuant to the terms hereof.





                                       33
<PAGE>

         Upon execution  hereof by all the parties,  this  Agreement  shall be a
contract among the parties for the purposes hereinabove set forth.

                                 Dated as of June 11, 2001


                                 HOMEGOLD, INC.

                                 By:
                                 Name:
                                 Title:


                  The  undersigned  executes and  delivers  this  Agreement  for
purposes of confirming its agreements set forth in Sections 7.5 and 7.17 hereof.



                                  HOMEGOLD FINANCIAL, INC.


                                  By:
                                  Name:
                                  Title:





<PAGE>



         Accepted and agreed to as of the day and year last above written.

                                 HOUSEHOLD COMMERCIAL FINANCIAL SERVICES, INC.


                                 By: _______________________________________
                                       Loren J. Morris
                                       Vice President




<PAGE>



                                    EXHIBIT A

                             [INTENTIONALLY OMITTED]

















                                    Ex. A-2
<TABLE>
<CAPTION>
<PAGE>
                                    EXHIBIT B


              STATES IN WHICH THE BORROWER AND CORPORATE GUARANTORS
                 ARE QUALIFIED TO CONDUCT BUSINESS AS OF CLOSING


<S>                         <C>                          <C>                           <C>
HomeGold, Inc.:             Alabama                      Maine                         Pennsylvania
                            Arkansas                     Maryland                      Rhode Island
                            California                   Michigan                      South Carolina
                            Colorado                     Minnesota                     South Dakota
                            Connecticut                  Mississippi                   Tennessee
                            Delaware                     Missouri                      Texas
                            District of Columbia         Montana                       Utah
                            Florida                      Nebraska                      Vermont
                            Georgia                      New Hampshire                 Virginia
                            Idaho                        New Jersey                    Washington
                            Illinois                     New Mexico                    West Virginia
                            Indiana                      North Carolina                Wisconsin
                            Iowa                         North Dakota                  Wyoming
                            Kansas                       Ohio
                            Kentucky                     Oklahoma
                            Louisiana                    Oregon

HomeGold Financial, Inc.:   South Carolina
Carolina Investors, Inc.:   South Carolina
Premier Financial Services, Inc.:                        South Carolina
The Loan Pro$, Inc.:                                     South Carolina
Emergent Business Capital Asset
     Based Lending, Inc.:   South Carolina
Reedy River Ventures, LP:   South Carolina
Emergent SBIC, Inc.:                                     none (charter forfeiture October 20, 1999)
Emergent Commercial Mortgage, Inc.:                      South Carolina
Emergent Business Capital, Inc.:                         South Carolina
Emergent Insurance Agency Corp.:                         South Carolina
Emergent Mortgage Corp. of Tennessee:                    South Carolina                Tennessee
HomeGold Realty, Inc.:      South Carolina


</TABLE>



                                    Ex. B-1

<PAGE>
                                    EXHIBIT C

                               REQUIRED DOCUMENTS


A.       INITIAL REQUIRED DOCUMENTS

         1.  Original  mortgage  note  executed by a third party in favor of the
Borrower  (properly  endorsed or assigned to the  Borrower if  purchased  by the
Borrower)  and endorsed by the Borrower in blank,  unless the original  mortgage
note is delivered to the Lender directly by the Closing Agent.

         2. Mortgage or deed of trust securing  above  mortgage  note,  together
with an assignment(s) to Borrower from the original holder(s), if applicable. In
lieu of executed,  original  recorded  documents,  the Lender will accept a copy
which has been  stamped as having  been  recorded by the  appropriate  recorders
office or,  certified  by the Closing  Agent as a true and  correct  copy of the
original  sent to the  appropriate  recording  office  so  long as the  original
recorded  mortgage or a copy thereof  indicating  the original has been recorded
from the appropriate recorder's office is delivered to the Lender within 60 days
from the date the Borrower  funded such  Mortgage  Loan or the date the Borrower
acquired such Mortgage Loan, as appropriate.

         3.  Either  a policy  of title  insurance  written  by a title  company
insuring  the  mortgage or deed of trust as a first or second,  as  appropriate,
lien on the Property and in amount and containing exceptions satisfactory to the
Lender or a commitment or binder from such title company  indicating that such a
policy will be issued and such policy is delivered to Lender within 30 days from
the date of such commitment.

         4.       Original, or certified true and correct copy of the applicable
final executed HUD-1 statement.

B.       ADDITIONAL REQUIRED DOCUMENTS.
         -----------------------------

         1. Assignment of the mortgage or deed of trust by the Borrower in blank
and in  recordable  form and the original or a duly  certified  copy of a proper
assignment  or  assignments  of the  related  mortgage or deed of trust from the
original  holder,  through  and  subsequent  transferees  to the  Borrower  duly
recorded.  The  assignment  by the Borrower to the Lender shall not be filed for
record  unless the Lender  shall  determine  in its sole  discretion  that it is
necessary to do so in connection  with the  perfection of the security  interest
therein, such recordation to be at the Borrower's expense.

         2. Allonge of the mortgage  note by the Borrower  executed in blank and
the original endorsement or original proper allonge or allonges attached to such
mortgage note from the original  holder,  through and subsequent  transferees to
the Borrower duly executed.

         3. Other documentation as  the Lender may deem appropriate,  as well as
documentation  necessary to fulfill requirements of take-out commitments.

                                    Ex. C-1
<PAGE>
         4. The Borrower will execute at any time such  additional  documents as
may be  necessary in the opinion of the Lender to transfer to the Lender for the
title to any  Collateral  pledged and/or  hypothecated  pursuant to the Security
Agreement.

C.       CREDIT PACKAGE

         Documents  to be received by Lender by 3:30 p.m.  CST the  Business Day
prior to funding:

     1. Copy of completed  and signed HFS Funding  Request Form as identified in
Exhibit C-1 hereto

     2. Copy of the Uniform Residential Loan Application (FNMA 1003)

     3. Copy of original mortgage note (copy of signed mortgage note required on
refinance transactions)

     4. Copy of original mortgage/deed of trust (copy of signed mortgage/deed of
trust required on refinance transactions)

     5. Copy of  Settlement  Statement  / HUD-1  (final or  estimated  - copy of
singed settlement statement required on refinance transactions)

     6. Copy of title commitment or binder

     7. Copy of first two pages of property  appraisal (single family) and first
four pages if a 1-4 multi-family property

     8. Copy of merged credit bureau report

     9. Copy of the DISSCO Report

     10. Copy of the Insured  Closing  Protection  Letter from an approved title
insurance underwriter

     11. If not already on file with HFS, the original  executed  Closing  Agent
Agreement package as identified in Exhibit C-2 hereto.



                                    Ex. C-2
<PAGE>


                                   EXHIBIT C-1
       HOUSEHOLD COMMERCIAL FINANCIAL SERVICES - WAREHOUSE LINES OF CREDIT
[HOUSEHOLD LOGO]                                            FUNDING REQUEST FORM


Household Commercial Financial Services          Today's Date: _________________
Warehouse Lines of Credit
700 N. Wood Dale Road - Bldg 3A                  DATE TO FUND:__________________
Wood Dale, IL  60191
Attn:  Chuck Hoving                              WIRE AMOUNT:___________________
Phone  630-616-7453  Fax: 800-547-8696

"Mortgage Company" Rep Authorization: ___________Contact Phone:_________________

We certify that we are in possession of a completed  mortgage  application  from
the borrower.  We have issued a commitment  to the borrower  covering this loan.
This loan will be  properly  closed and funded.  We ensure  that the  collateral
documents are in our own, or our Closing Agent's possession, and will be shipped
to the Custodian in accordance with the Credit Agreement between our companies.


Customer Name(s):_______________________________________________________________


Subject Address:________________________________________________________________
<TABLE>
<S>                   <C>                                      <c>                  <C>          <C>       <C>
Note Amount:          $___________________________________     Occupancy Type:      OO           INVT      2ND  HOME
Note Date:            ____________________________________     Purpose:             CO REFI      REFI      PURCHASE
Lien Position:        ____________________________________     Doc Type:            FULL         ALT       NIV             NIQ
LTV / CLTV:             ___________   /  ___________%          DIR%:___________________
</TABLE>
We hereby  request an ADVANCE under our  warehouse  line of credit for the above
loan,  and in  support  thereof,  we enclose  the  following  documents  (PLEASE
CHECK-OFF):

______   COPY OF THE UNIFORM RESIDENTIAL LOAN APPLICATION (FNMA 1003)
______   COPY OF MORTGAGE NOTE
         (Copy of signed Mortgage Note required on refi's) REFI'S)
______   COPY OF DEED OF TRUST
         (Copy of signed Deed of Trust required on refi's) REFI'S)
______   COPY OF SETTLEMENT STATEMENT/HUD-1
         (Final or Estimated - Signed copy  required on refi's)  refi's)
______   COPY OF MERGED CREDIT REPORT

______   COPY OF APPRAISAL
         (Pages 1&2 single family,
         Pages 1-4 multiple family properties)
______   COPY OF PRELIMINARY TITLE COMMITMENT
______   COPY OF DISSCO REPORT
______   COPY OF INSURED CLOSING PROTECTION LETTER
         (Not required if Original, Blanket Letter addressed to HFS is on file)

ALL CREDIT PACKAGES MUST BE RECEIVED BY 3:30 P.M. CENTRAL STANDARD TIME.  Please
verify all required documents are included with initial fax package.  Incomplete
credit packages can NOT be guaranteed for next day funding.

ALL  CLOSING  AGENTS ARE SUBJECT TO APPROVAL  BY  HOUSEHOLD.  Please  verify all
required  documents are in Household's  possession prior to funding.  Funds will
NOT be wired to a Closing  Agent/Attorney that is not approved by Household.  If
Closing Agent is not approved,  please instruct  Closing Agent to call Household
at (800) 365-2644.

|_|      Check if Closing Agent is already Approved with HFS

Approved Underwriter Issuing Policy:____________________________________________
Approved Attorney/Closing Agent:_____________________________Phone:_____________
Bank Acct # _________________________________Fax #:_____________________________
Address:_____________________________________City/State/Zip:____________________
Bank Name: __________________________________City/State:________________________
ABA #:  _____________________________________Reference: ________________________
Attention:  _________________________________Escrow #:__________________________
Further Credit Bank:  _______________________Further Credit Acct #:_____________
     Please advance funds for this loan in accordance with our agreements.

                   FAX ALL FUNDING DOCUMENTS TO (800) 547-8696



                                   Ex. C-1-1
<PAGE>
                                   EXHIBIT C-2

                         CLOSING AGENT APPROVAL PACKAGE

We fund  all  loans  directly  to  approved  closing  agents;  attorneys,  title
companies,  or escrow companies. In order to obtain approval, each closing agent
must complete and return the approval  package as outlined  below. We maintain a
list of approved closing agents for each originator.  Each month, we will fax to
you your list of approved closing agents.  We will not wire funds to any closing
agent that has not executed, fulfilled, and returned the approval package.

The Closing Agent approval package will include the following information:

o    An insured closing protection letter (ICPL) as described below

o    An executed closing agent agreement (Exhibit J)

o    The declaration page of their E&O Policy which must contain the following:

     o    Must list the  Title  Company,  attorney,  or  escrow  company  as the
          insured
     o    Professional liability will be the only acceptable type of coverage
     o    List a minimum insured amount of $500,000 per claim
     o    List a minimum aggregate coverage amount of $1 million
     o    Term of policy must exceed 60 days

o    If the underwriter is the closing agent, we will not require the E&O Policy

o    Current writing instructions on closing agent's letterhead


INSURED CLOSING PROTECTION AND APPROVED TITLE UNDERWRITERS

Adequate closing protection will consist of an insured closing protection letter
(ICPL) issued on the letterhead of an approved major title insurance underwriter
in acceptable Alta format.

Household approved title insurance  underwriters can be found on Demotech's free
website located at demotech.com,  with a financial stability rating of A", A', A
or S.

The ICPL should be addressed as follows:

         Household Commercial Financial Services, Inc.,
            Its Successors and/or Assigns
         Warehouse Lending Division
         700 North Wood Dale Road - Building 3A
         Wood Dale, IL  60191

                                   Ex. C-2-1
<PAGE>

o    The ICPL may also be  addressed  to the  name of,  the  "Originator",  "Its
     Successors and/or Assigns."

STATE EXCEPTIONS

o    New York closing agents will not be required to execute the insured closing
     protection  letters  and will be dry funded only for  refinance  and second
     mortgages. The original note must be received prior to disbursement.
o    Iowa closings  through  attorneys will be dry funded only for refinance and
     second mortgages.
o    Some  counties in Washington  State may not be required to provide  closing
     protection letters,  and refinances and second mortgages will be dry funded
     only.
o    Approval  of closing  agent  funding in these  states  for  purchase  money
     mortgages will be handled on a case-by-case basis.

Note:    If multiple  closing  agents are listed on the  Schedule A of the ICPL,
         each  individual  closing agent  location must obtain  approval  before
         funds will be wired. Lender will only fund to those locations that have
         submitted an original Closing Agent Agreement.









                                   Ex. C-2-2
<PAGE>
<TABLE>
<CAPTION>

                                    EXHIBIT D

                             SUBSIDIARIES OF PARENT

                                                           JURISDICTION                  OWNER
                                                                OF                     PERCENTAGE                   OTHER THAN
NAME                                                      INCORPORATION               OF OWNERSHIP                    PARENT
---------------------------------------------------- ------------------------- --------------------------- -------------------------
<S>                                                          <C>                        <C>                <C>
Carolina Investors, Inc.                                        SC                        100%
Emergent Mortgage Holdings Corp.                             Delaware                   100%(1)            Carolina Investors, Inc.
Emergent Mortgage Holdings Corp. II                          Delaware                    100(2)            Carolina Investors, Inc.
Emergent Residual Holdings Corp.                             Delaware                   99.9%(2)           Emergent Mortgage Holding
                                                                                                           Corp. II
HomeGold Residual Holdings Corp.                             Delaware                     100%             Carolina Investors, Inc.
HomeGold Residual Holdings Corp. II                          Delaware                     100%             Carolina Investors, Inc.
HomeGold, Inc.                                                  SC                        100%
Emergent Insurance Agency, Corp.                                SC                        100%             HomeGold, Inc.
Emergent Mortgage Corp. of Tennessee                            SC                        100%             HomeGold, Inc.
HomeGold Realty, Inc.                                           SC                        100%             HomeGold, Inc.
Premier Financial Services, Inc.                                SC                        100%
The Loan Pro$, Inc.                                             SC                        100%
Emergent  Business  Capital  Asset  Based  Lending,
Inc. f/k/a Emergent Financial Corp.                             SC                        100%
Emergent SBIC, Inc.                                             SC                        100%
Emergent Commercial Mortgage, Inc.                              SC                        100%
Emergent Business Capital, Inc.                                 SC                        100%
Emergent Business Capital Equity Group, Inc.                    SC                        100%
Reedy River Ventures, LP
                                                                SC                        100%
---------------------------------------------------- ------------------------- --------------------------- -------------------------

(1)      Pledged  to First  Union  National  Bank on behalf  of  Financial  Security  Assurance,  Inc.  in 1999 - 1
         Securitization
(2)      Pledge  to  Wilmington  Trust  Company  on  behalf  of  Financial  Security  Assurance,  Inc.  in 1997 - 4
         Securitization

</TABLE>

                                    Ex. D-1
<PAGE>

                                    EXHIBIT E

                                 HOMEGOLD, INC.

                           BORROWING BASE CERTIFICATE


To:      Household Commercial Financial Services, Inc.

         Pursuant to the terms of the Credit  Agreement  dated as of May 2, 2000
as amended and as amended and  restated  pursuant  to that  certain  Amended and
Restated  Credit  Agreement  dated as of June 11, 2001  between us (the  "Credit
Agreement"),  we submit this Borrowing Base  Certificate to you and certify that
the information  set forth below and on any  attachments to this  Certificate is
true, correct and complete as of the date of this Certificate.
<TABLE>
<S>     <C>                                                                         <C>           <C>
I.       COMMITTED LOANS

         A.     Borrowing Base(All Category A items to be reported as
                original principal amount less payments by account debtors
                exceeding 2% of aggregate principal amount)
                                                                                                  ===================
                1.       Aggregated Pledged Mortgage Loans(1)                                               A1
                2.       Less:

                         (a)      Owed by an account debtor who is an              _________
                                  Affiliate, shareholder, or employee
                         (b)      Owed by an account debtor who is in an           _________
                                  insolvency or reorganization proceeding
                         (c)      Unpaid more than 30 days                         _________
                         (d)      Subject to claims, offsets or defenses           _________
                         (e)      Rewritten or subject to forbearance              _________
                                  arrangement
                         (f)      Included in Borrowing Base for more than 45      __________
                                  days
                         (g)      Required documentation not received              _________
                         (h)      Otherwise not an Eligible Mortgage Loan          _________
                         (i)      Original principal amount of outstanding         _________
                                  Discretionary Loans(2)
---------------------------------------
     (1) Including all mortgage loans against which HCFS has advanced funds even
if mortgage  note and other  required  documents  have not yet been  pledged and
including all ineligible mortgage loans supporting Discretionary Loans


                                    Ex. E-1
<PAGE>
                                                                                                  ===================
                         Sum of Lines A2(a)-A2(h) minus Line A2(i)                                        A2

                                                                                                  ===================
                3.       Eligible Mortgage Loans (line A1 minus A2)                                       A3

                                                                                                  ===================
                4.       Borrowing Base (Line A3x100%)3                                                   A4

                                                                                                  ===================
         B.     Outstanding Committed Revolving Credit Loans                                              B

                                                                                                  ===================
         C.     Line A4 minus Line B (if positive, unused availability                                    C
                against existing collateral, if negative, prepayment required)


II.      DISCRETIONARY LOANS

         A.     Prepayments due on account of sales of Mortgage Loans
                                                                                                  ===================
                1.       Number of sales during period                                                    A1
                2.       Minimum payment amount per sale
                                                                                                  ===================
                                                                                                          A2

                3.       Aggregate minimum payment due on   account  of  sales                       $__________
                (line A1 times A2)
                4.       Prepayments made by Borrower in    connection    with                       $__________
                Sales
                5.       Borrower in compliance?                                                        Yes/No

         B.     Prepayments due on account of curtailment arrangements

                1.       Scheduled Curtailment payments due (attach                                  $__________
                calculation)
                2.       Curtailment payments made                                                   $__________
                3.       Borrower in compliance                                                         Yes/No


</TABLE>
--------------------------------------
     (2) Including Loans which were originally made as  Discretionary  Loans and
Loans which were converted to Discretionary Loans, in each case in Lender's sole
discretion per Credit Agreement.
     (3) If  percentage  advance  rate has been  reduced  per Credit  Agreement,
substitute applicable percentage

                                    Ex. E-2
<PAGE>

         Dated as of this _______ day of ____________, _____.






                                      HOMEGOLD, INC.

                                      By:


                                      Its:












                                    Ex. E-3
<PAGE>
                                    EXHIBIT F

                                 HOMEGOLD, INC.

                             COMPLIANCE CERTIFICATE

To:      Household Commercial Financial Services, Inc.

         This  Compliance  Certificate  is  furnished  to  you  pursuant  to the
requirements of Section 7.5 of that certain Credit  Agreement dated as of May 2,
2000 as amended and as amended and restated pursuant to that certain Amended and
Restated Credit Agreement dated as of June 11, 2001 (the "Credit Agreement"), by
and between  Homegold,  Inc. (the  "Borrower")  and you (the  "Lender").  Unless
otherwise defined herein, the terms used in this Compliance Certificate have the
meanings ascribed thereto in the Credit Agreement.

         The Undersigned hereby certifies that:

         1.       I am the duly elected _______________________ of the Borrower;

         2. I have  reviewed the terms of the Credit  Agreement and I have made,
or have  caused  to be made  under my  supervision,  a  detailed  review  of the
transactions  and  conditions  of the Borrower and its  Subsidiaries  during the
accounting period covered by the attached financial statements;

         3. The  examinations  described in paragraph 2 did not disclose,  and I
have no knowledge of, the  existence of any  condition or the  occurrence of any
event which  constitutes  a Default or Event of Default  during or at the end of
the accounting period covered by the attached financial  statements or as of the
date of this Certificate, except as set forth below;

         4. The financial statements  required  pursuant  to Section 7.5 of  the
Credit Agreement and being furnished to you concurrently  with this  certificate
are true,  correct  and  complete  as  of  the dates and for the periods covered
thereby; and

         5. The Attachment  hereto sets forth  financial  data and  computations
evidencing  the  Borrower's  compliance  with  certain  covenants  of the Credit
Agreement, all of which data and computations are true, correct and complete and
have been made in accordance with the relevant Sections of the Credit Agreement.

         Described below are the exceptions,  if any, to paragraph 3 by listing,
in detail,  the nature of the condition or event, the period during which it has
existed and the action which the Borrower has taken,  is taking,  or proposes to
take with respect to each such condition or event:

________________________________________________________________________________

________________________________________________________________________________

                                    Ex. F-1
<PAGE>

         The foregoing certifications,  together with the computations set forth
in the  Attachment  hereto  and the  financial  statements  delivered  with this
Certificate  in support  hereof,  are made and delivered  this  _________ day of
__________________ _____.


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

                                --------------------, ----------------
                                (Type or Print Name)   (Title)


















                                    Ex. F-2
<PAGE>
                      ATTACHMENT TO COMPLIANCE CERTIFICATE

                                 HOMEGOLD, INC.

                  COMPLIANCE CALCULATIONS FOR CREDIT AGREEMENT
                       CALCULATIONS AS OF ____________, __


A.        Net Income (Section 7.16)

          1.       Net Income for month                                    $

          2.       Line C1 amount must be equal to or
                   greater than                                            $ 0

          3.       Borrower in compliance? (circle)                      yes/no

B.        Indebtedness (Section 7.6)

          1.       Indebtedness under other warehousing
                   credit facilities (Section 7.6(b))                      $

          2.       Line D1 amount must not exceed                          $

          3.       Borrower in compliance? (circle)                      yes/no

          4.       Purchase money indebtedness                             $

          5.       Capitalized lease obligations                           $

          6.       Sum of Lines D4 and D5                                  $

          7.       Line D6 amount must not exceed                          $

          8.       Borrower in compliance? (circle)                      yes/no


                                    Ex. F-3
<PAGE>
                                    EXHIBIT G

                               PENDING LITIGATION

                PENDING LITIGATION, GOVERNMENTAL PROCEEDINGS AND

        LABOR CONTROVERSIES PENDING AGAINST HOMEGOLD, INC. AND AFFILIATES




Michael  Chasten and  Kimberly  Chasten on behalf of  themselves  and all others
similarly  situated v.  HomeGold,  Inc.,  (formerly  known as Emergent  Mortgage
Corp.), and Contimortgage Corporation,  No. 7:00-CV-49-F(1),  Southern Division,
Eastern  District North  Carolina,  District Court.  Nature of Claim:  Excessive
Fees, Unjust Enrichment,  Usury & Breach of Fiduciary Duty. At this time, Motion
to Dismiss is pending.

The First  National  Bank of Chicago as Trustee v. Anita T.  Harney,  Stephan B.
Harney, Emergent Mortgage Corp. d/b/a HomeGold,  Carolina Investors, Inc., First
Union National Bank of North Carolina as Trustee,  HomeGold, Inc., and C&B Farms
Associates, a South Carolina General Partnership, No. 99-CP-42-1603, Spartanburg
County,  South  Carolina,  Seventh  Judicial  Circuit  Court.  Nature  of Claim:
Non-Jury Mortgage Foreclosure. The Answer, Crossclaims, and Counterclaims allege
causes of action against HomeGold for fraud; misrepresentation; breach of trust;
negligence;  breach of duty of good faith and fair  dealing;  and a violation of
South Carolina's Unfair Trade Practices Acts.  HomeGold is defending this matter
vigorously. At this time, discovery is proceeding in the case.

Residential  Funding  Corporation,  v. Lester  Blackwell  and Emergent  Mortgage
Corp.,  99-CP-16-0112,  County of Darlington,  South  Carolina,  Fourth Judicial
Circuit Court. Nature of Claim: Non-Jury Mortgage  Foreclosure.  Current Status:
Motion to Dismiss is pending.

Janice H. Tomlin and Isaiah  Tomlin,  and  Constance  A.  Wiggins,  on behalf of
themselves and all others  similarly  situated,  v. Dylan Mortgage  Incorporated
(formerly know as Chase Mortgage Brokers,  Inc., HomeGold,  Inc. (formerly known
as Emergent Mortgage Corp.), Associates Financial Services of America, Inc., and
Equicredit  Corporation of America,  No.99-CVS-3551,  New Hanover County,  North
Carolina,  Superior Court.  Nature of Claim:  Excessive Fees, Unjust Enrichment,
Usury & Breach of Fiduciary Duty.  HomeGold is defending this matter vigorously.
At  this  time,  HomeGold  is  awaiting  the  ruling  on the  Motion  for  Class
Certification.

Reginald L. Troy,  on behalf of himself  and all other  similarly  situated,  v.
Clarence M. Caviness, HomeGold, Inc. (formerly know as Emergent Mortgage Corp.),
and Associates Home Equity Services, Inc., No. 00-CVS-1487,  New Hanover County,
North  Carolina,  Superior  Court.  Nature  of  Claim:  Excessive  Fees,  Unjust
Enrichment,  Usury and Breach of  Fiduciary  Duty.  HomeGold is  defending  this
matter vigorously. At this time, discovery is proceeding in the case.

                                    Ex. G-1
<PAGE>
Teresa R. Samples v.  HomeGold  Financial,  Inc. and Premier  Mortgage  Centers,
Inc., No.  100CC2018,  Greene County,  Missouri Circuit Court.  Nature of Claim:
Unfair Business Practices.  Ms. Samples was unsuccessful in her motion to obtain
a preliminary  injunction  prohibiting the  foreclosure of HomeGold's  mortgage.
Discovery is proceeding.

Kerry  Mills and Tracy  Mills v. North  American  Financial  Service,  HomeSense
Financial Corp and the Town of Wister, No. CJ-00-271,  LeFlore County,  Oklahoma
District Court. Nature of Claim: Fraud regarding insurance premium.  HomeGold is
defending this matter  vigorously.  Dismissal of HomeGold from the case has been
requested, with response pending.

Collins,  Bobby Gene & Dawne v.  Equitable;  HomeSense;  Chase et al.,  Case No.
98-40215, Western District North Carolina, US Bankruptcy Court. Nature of Claim:
Bankruptcy.  HomeGold  is  defending  this  matter  vigorously.  At  this  time,
discovery is proceeding in the case.

HomeGold,  Inc. f/k/a Emergent Mortgage Corp. v. Joe Murray David,  Tammy David,
Oakwood Mobile Homes, The United States of America by and through the Department
of Treasury  Internal Revenue Service,  Case No.  98-CP-32-2708,  Lexington,  SC
Court of Common  Pleas.  Nature of Claim:  Foreclosure  of loan  purchased  then
resold by  HomeGold,  in response to which the  defendants  now seek to assert a
Third Amended Answer and  Counterclaim  alleging  violations of South Carolina's
unauthorized practice of law, attorney preference and unfair and deceptive trade
practices statutes. HomeGold is defending this matter vigorously.

Phyllis Lawson v. TMS Mortgage,  Inc. d/b/a The Money Store, HomeSense Financial
Corporation, f/k/a Equitable Mortgage Company, O. Gay Elmore, Jr., Amy K. Lyons,
and John R.  Lawson,  Civil  Action No.  2:00-0708,  Southern  District  of West
Virginia,  US District Court.  Nature of Claim:  Defendants accused of violating
Truth in  Lending  regulations,  of  conspiring  to  commit  unlawful  acts,  of
noncompliance  with the Consumer Credit and Protection Act, of predatory lending
practices,  and of fraud. HomeGold is defending this matter vigorously.  At this
time, discovery is proceeding.

Informal  Department of Labor wage and hour claim.  The  Department of Labor has
contacted  HomeGold   informally  to  question  the  classification  of  certain
employees as exempt or non-exempt for purposes of overtime payments. The company
does not agree  with the DOL's  conclusions,  but has  agreed to settle to avoid
litigation.  Final settlement terms have been agreed to and the final settlement
amount is estimated to be between  $173,000 and $175,000 (a few  remaining  wage
calculations  are still  outstanding at this time).  The issue is expected to be
fully resolved no later than June 15, 2001.

                                    Ex. G-2
<PAGE>

                             MISSING COLLATERAL FEES


In the event a  complete  Credit  Package  and all  Required  Documents  for any
Mortgage Loan are not received within seven (7) calendar days of disbursement of
the related Loan, fees will be due and payable on a cumulative basis as follows:

                  DAYS                              FEE

                    8-14                            $25
                   15-27                            $40
                   28-37                            $60
                     37+           $75 plus $10 per day thereafter
                                   (fees will be capped at $150)

Collateral  will not be considered  complete until the entire Credit Package and
all Required Documents have been received by Lender.

In  addition,  there will be a $50.00  charge for  bypassing  Lender and sending
collateral directly to the Investor.









                                    Ex. H-1
<PAGE>
                                    EXHIBIT I

                            AGED LOAN PROCESSING FEES


The  following  fees  will be due and  payable  on a  cumulative  basis  for any
outstanding Loan that is aged:


           DAYS OUTSTANDING                     TOTAL AGED LOAN PROCESSING FEE

                   61-90                                    $175
                  91-120                                    $225
                    121+                                    $275












                                     Ex. K-1
<PAGE>
                                    EXHIBIT J

                             CLOSING AGENT AGREEMENT

     This Agreement entered into by and between Household  Commercial  Financial
Services,  Inc. (as "Lender")  and  ______________________(as  "Closing  Agent")
located  at  ________________________   _________________________________   this
______ day of _______________, 2001.

                                    RECITALS

         Lender  funds Loans for the  purchase or refinance of real estate to be
secured by Mortgages/Deeds of Trust  ("Mortgages")  constituting first or second
liens on the subject  property  ("Loans"),  which Loans have been  originated by
Homegold, Inc. ("Originator").

         Closing Agent closes the Loans,  disperses  Loan funds and delivers and
records closing documents pursuant to written instructions.  Closing Agent holds
these funds in trust for Lender pending the Loan closing, proper disbursement of
Loan proceeds and proper delivery of closing documents.

         NOW,  THEREFORE,  in consideration of the benefits  accruing to Closing
Agent hereunder, and as an inducement to Lender to fund the Loans, Closing Agent
agrees as follows:

1.   Closing  Agent shall close all of the Loans in compliance  with  applicable
     laws and regulations.

2.   For all Loan  closings  that are  funded by  Lender,  Closing  Agent  shall
     deliver to Lender the original Note, a copy of the Deed of  Trust/Mortgage,
     a copy of the executed  final HUD-1,  and the  Commitment  for the Mortgage
     Title Policy  (collectively,  the  "Initial  Loan  Documents").  All of the
     Initial  Loan  Documents  shall be delivered  to Lender  immediately  after
     funding by overnight express delivery to:

                  HOUSEHOLD COMMERCIAL FINANCIAL SERVICES, INC.
                  WAREHOUSE LINES OF CREDIT- BLDG. 3A
                  700 N. WOOD DALE ROAD
                  WOOD DALE, IL  60191

         Closing Agent shall hold the Initial Loan Documents, until delivered as
set forth above, in trust for Lender. Closing Agent acknowledges that Lender has
been granted a first priority security interest in the Initial Loan Documents by
Originator securing the Loan funds disbursed by Lender.

3.   Closing Agent shall hold all funds received from Lender in trust for Lender
     and be used  solely for the  purpose of  disbursing  and fully  funding the
     Loans,  in accordance  with the Final  HUD-1(s) and related Loan  Documents
     associated with said Loans.

                                    Ex. J-1
<PAGE>
         In no event may any portion of these funds be sent to the Originator or
to any  counter-party or other entity that is not listed for receipt of funds in
accordance with the Final HUD-1 and related Loan Documents.

         In the event the Loans do not close or  disburse  the day the funds are
received;  you are  instructed to  immediately  return the funds via  electronic
funds transfer, ONLY to the Lender whose wiring instructions are:

        Bank Name:                         Household Bank, f.s.b.
        Locations:                         Prospect Heights, IL
        ABA #:                             271970011
        Account #:                         0190047827
        Account Name:                      HCFS Warehouse Clearing
        Attention:                         Therese Murphy by PHO 85-3204
        Reference:                         Originator & Borrower Name

4.   Any instructions given by the Originator which contradict the provisions of
     Paragraphs 2 or 3 shall be disregarded  unless the prior written consent of
     the Lender is obtained.

5.   This  Agreement  and the rights and  obligations  of the parties  hereunder
     shall be governed by and construed under the laws of the State of Illinois.
     Closing Agent further  consents to Illinois  Jurisdiction and venue for any
     and all  disputes  arising  hereunder.  This  Agreement  shall inure to the
     benefit of and be binding on the  respective  successors and assigns of the
     parties hereto.

         IN WITNESS  WHEREOF,  the parties have signed this  Agreement as of the
date first above written.

LENDER:                                  CLOSING AGENT:

HOUSEHOLD COMMERCIAL                     ________________________
FINANCIAL SERVICES, INC.


By:_________________________________     By:____________________________
Its:_________________________________    Its:____________________________








                                    Ex. J-2
<PAGE>



                                    EXHIBIT K

                       CONSENT AND REAFFIRMATION AGREEMENT

Household Commercial Financial Services, Inc.
Wood Dale, Illinois



         A. CORPORATE  GUARANTORS.  The undersigned have heretofore executed and
delivered  to the  Lender  (i) a  Guaranty  dated May 2,  2000 (the  "Guaranty")
pursuant to which the undersigned  guaranteed all indebtedness,  obligations and
liabilities of Homegold, Inc. a South Carolina corporation (the "Borrower") from
time to time owing to you (the "Lender") and (ii) a Security Agreement dated May
2, 2000 (the "Security  Agreement") in favor of Lender.  Each of the undersigned
hereby consents to the Amended and Restated Credit  Agreement  bearing even date
herewith  between the Borrower and Lender and confirms that the Guaranty and the
Security  Agreement each remain in full force and effect in accordance  with the
terms  thereof and shall not in any manner be affected,  impaired or  discharged
thereby.  Each  of the  undersigned  further  agrees  that  the  consent  of the
undersigned to any further  modifications  to the Credit  Agreement shall not be
required as a result of this consent having been obtained, except to the extent,
if any, required by the Guaranty or Security Agreement.  The undersigned further
acknowledge  and agree  that the Lender is relying  upon the  agreements  of the
undersigned  contained  herein as an inducement to entering into the Amended and
Restated Credit Agreement with the Borrower.

         Dated as of this 11th day of June, 2001.


                      HOMEGOLD FINANCIAL, INC.


                      By:
                      Name:
                      Its:

                      CAROLINA INVESTORS, INC.


                      By:
                      Name:
                      Its:






<PAGE>

                            PREMIER FINANCIAL SERVICES INC.


                            By:
                            Name:
                            Its:

                            LOAN PROS, INC.


                            By:
                            Name:
                            Its:

                            EMERGENT BUSINESS CAPITAL ASSET BASED LENDING, INC.


                            By:
                            Name:
                            Its:

                            REEDY RIVER VENTURES, LP.


                            By:
                            Name:
                            Its:

                            EMERGENT SBIC, INC.


                            By:
                            Name:
                            Its:

                            EMERGENT COMMERCIAL MORTGAGE,
                            INC.


                            By:
                            Name:
                            Its:


                                    Ex. K-3
<PAGE>

                            EMERGENT BUSINESS CAPITAL, INC.


                            By:
                            Name:
                            Its:

                            EMERGENT INSURANCE AGENCY CORP.


                            By:
                            Name:
                            Its:

                            EMERGENT MORTGAGE CORP. OF TENNESSEE


                            By:
                            Name:
                            Its:

                            HOMEGOLD REALTY, INC.


                            By:
                            Name:
                            Its:



                                    Ex. K-2
<PAGE>


B.  INDIVIDUAL  GUARANTOR.  The  undersigned,  Ronald  Sheppard,  has heretofore
executed and delivered to you (the "Lender") that certain Guaranty dated October
24, 2000 (the  "Guaranty")  pursuant to which the Guarantor has  guaranteed  all
indebtedness,  obligations  and liabilities of Homegold,  Inc. (the  "Borrower")
from time to time owing to Lender, all as more fully set forth in the Guaranty.

         The  undersigned  hereby  consents to the Amended and  Restated  Credit
Agreement  bearing even date herewith between the Borrower and Lender and to the
matters and things  contemplated  thereby.  The undersigned  further repeats and
reaffirms  all of their  obligations  and  agreements  under  the  Guaranty  and
acknowledges  that the same remain in full force and effect in  accordance  with
the terms of the Guaranty  and shall not in any manner be affected,  impaired or
discharged thereby.

         The undersigned  further  acknowledges  that the Lender is relying upon
the agreements of the undersigned  contained herein as an inducement to entering
into the Amended and Restated Credit Agreement with the Borrower.

         Dated as of this 11th day of June, 2001.

                                       ---------------------------------
                                       Ronald J. Sheppard



  Acknowledged and agreed to as of the date last above written.

  HOUSEHOLD COMMERCIAL
  FINANCIAL SERVICES, INC.


  By:____________________________
  Name:  Loren J. Morris
  Its:  Vice President







                                    Ex. K-4
<PAGE>

                                  SCHEDULE 5.4

                                  ERISA MATTERS



         During  1999,   Borrower  discovered  errors  in  the  calculation  and
remittance of 1997  deferral and matching  contributions  to  Borrower's  401(k)
plan. These errors resulted in a deficiency in employer  matching  contributions
and caused Borrower to fail to remit employee elective deferral contributions to
the plan.  Borrower is in the process of  calculating  the precise amount of the
matching  contributions,  employee deferrals and earnings related to the errors.
Initial calculations  indicate that the aggregate amount will be in the range of
$40,000 to $70,000.  Borrower expects to complete its correction of these errors
in  accordance  wit  the  Self-Correction  Program  of the  IRS  Employee  Plans
Compliance Resolution System no later than July 31, 2001.
















                                    Ex. K-1

</TEXT>
</DOCUMENT>
