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                                                                       Exhibit B

                           GUARANTY OF HOMEGOLD, INC.
                             AND SECURITY AGREEMENT

         This Guaranty & Security Agreement (the "Guaranty") is entered into to
be effective as of December 31, 2000, by and between HomeGold, Inc., a South
Carolina corporation ("HGI"), and Carolina Investors, Inc., a South Carolina
corporation ("CII"), in connection with that certain Assumption of Debt and
Contribution to Capital Agreement (the "Agreement") effective as of even date
herewith by and between HomeGold Financial, Inc., a South Carolina corporation
("HFI"), HGI, and CII as a condition of CII's entry into the Agreement.

         HGI hereby irrevocably, fully and unconditionally, guarantees to CII,
its successors and permitted assigns the full and prompt performance by HFI of
all of its obligations under, and the full and prompt payment by HFI of all
amounts owed by it under, that certain Revolving Promissory Note dated December
31, 2000 with HFI as borrower and CII as lender (the "Revolving Promissory
Note"). This Guaranty is a continuing guaranty and shall remain in full force
and effect as long as the Revolving Promissory Note remains outstanding.

         In order to secure the payment and performance in full of the
obligations of HGI to CII under the terms of this Guaranty, HGI hereby grants to
CII a security interest in and to (i) all equipment of HGI currently located in
the State of South Carolina as of the date hereof, wherever hereafter located,
and all equipment hereafter acquired by HGI in the State of South Carolina,
whether located elsewhere after such acquisition, (ii) all notes receivable of
HGI other than notes receivable now or hereinafter securing any other debts of
HGI or subject to any loan purchase facility of HGI and (iii) any and all
proceeds from any and all of the foregoing collateral (including without
limitation, all payments under insurance, or any indemnity, warranty, guaranty
or insured closing letter, payable by reason of the loss or damage to or
otherwise with respect to any of the foregoing).

         The obligations of HGI under this Guaranty are independent of the
obligations under the Revolving Promissory Note and any other related documents,
and a separate action or actions may be brought and prosecuted against HGI to
enforce HGI's obligations under this Guaranty, irrespective of whether any
action is brought against HFI or whether HFI is joined in any such action.

         HGI hereby waives, to the extent permitted by applicable law, (i) the
benefits of promptness, diligence, presentment or demand of payment; (ii) notice
of acceptance and notice of the incurrence of any liability by HFI; (iii) notice
of any actions taken by HFI under the Revolving Promissory Note or any other
related agreement or instrument; (iv) all other notices, demands and protests,
and all other formalities of every kind in connection with the enforcement of
the covenants, agreements, or liabilities of HGI hereunder, the omission of or
delay in which, but for the provisions of this paragraph, might constitute
grounds for relieving HGI of its obligations hereunder; (v) any right to compel
or direct CII to seek payment or recovery of any amounts owed under this
Guaranty from any one particular fund or source; and (vi) any requirement that
CII protect, secure, perfect or insure any security interest or lien or any
property

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subject thereto or exhaust any right or take any action against the HFI or any
other Person or any collateral.

         HGI hereby irrevocably waives and agrees it will not exercise any and
all rights which it has or may have at any time or from time to time (whether
arising directly or indirectly by operation of law or contract) to assert any
claim against HFI on account of any payments made under the Revolving Promissory
Note, this Guaranty or otherwise, including, without limitation, any and all
existing and future rights of subrogation, reimbursement, exoneration,
contribution and/or indemnity to the extent that the exercise of such rights
would limit or impair the full performance of any and all obligations of HFI to
CII under the Revolving Promissory Note or of HGI to CII under this Guaranty. If
any amount shall be paid to HGI on account of such subrogation rights at any
time when any obligation or liability owed to CII shall not have been paid in
full, such amount shall be held in trust for the benefit of CII, shall be
segregated from the other funds of HGI and shall forthwith be paid over to CII
to be applied in whole or in part by CII against the liability owed to it,
whether matured or unmatured, and all such other expenses in accordance with the
terms of the Revolving Promissory Note.

         All costs and expenses (including reasonable attorneys fees which
attorneys fees shall be based upon the usual and customary hourly rates of CII's
counsel and not based upon a percentage of the amounts owing under this
Guaranty) incurred by CII in exercising any right, power or remedy conferred by
this Guaranty or in the enforcement thereof, shall become part of the
obligations of HGI secured hereunder and shall be paid by HGI to CII or repaid
from the proceeds of the sale of the collateral hereunder.

         CII shall not by any act, delay, omission or otherwise be deemed to
have waived any of its rights or remedies hereunder, and no waiver shall be
valid unless in writing, signed by CII, and then only to the extent therein set
forth. A waiver by CII of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which CII would otherwise
have on any future occasion. No failure to exercise nor any delay in exercising
on the part of CII, any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided are cumulative and may be
exercised singly or concurrently, and are not exclusive of any rights or
remedies provided by law.

         Any provision of this Guaranty which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

         This Guaranty shall be governed by, and construed and interpreted in
accordance with, the internal laws of the State of South Carolina applicable to
contracts made and to be performed therein without consideration as to choice of
law.

                                     * * * *

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          IN WITNESS WHEREOF, each of the parties hereto has caused this
Guaranty to be executed on its behalf by its duly authorized officer as of the
date first set forth above.

HOMEGOLD, INC.                              CAROLINA INVESTORS, INC.

By:                                         By:
    -------------------------------             ------------------------------

Name:                                       Name:
      -----------------------------               ----------------------------

Title:                                      Title:
       ----------------------------                ---------------------------

                                      3<PAGE>

                        SECURED REVOLVING PROMISSORY NOTE

$75,000,000.00                                                   January 2, 2001
                                                      Greenville, South Carolina

         For value received, the undersigned HOMEGOLD, INC., a South Carolina
corporation (the "Borrower"), hereby promises to pay to the order of CAROLINA
INVESTORS, INC., a South Carolina corporation (the "Lender") (i) the principal
amount of Seventy Five Million Dollars ($75,000,000), or if less, an amount
equal to the aggregate unpaid principal amount of loans made from time to time
by the Lender to the Borrower, and (ii) interest on the unpaid principal amount
of this Note from the date hereof, payable monthly in arrears based on the
average principal amount outstanding during such month, no later than the 15th
day of the following month until this Note is paid in full at the per annum
prime rate announced by the Wall Street Journal on the first day of the month in
which interest accrues plus two percent. Notwithstanding any other provision of
this Note, interest paid or becoming due hereunder shall in no event exceed the
maximum rate permitted by applicable law. Interest will be calculated on a daily
basis computed on the actual number of days elapsed over a year of three hundred
sixty-five (365) days. This Note shall mature, and all outstanding amounts
hereunder shall be due and payable, on December 31, 2005.

         In order to secure the payment and performance in full of the
obligations of Borrower to Lender under the terms of this Note, Borrower hereby
grants to Lender a security interest in and to (1) all property of Borrower
currently located in the State of South Carolina as of the date hereof, wherever
hereafter located, and all property hereafter acquired by Borrower in the State
of South Carolina, whether located elsewhere after such acquisition, in each
case other than (a) Borrower's real property and (b) Borrower's property
(including without limitation notes receivable and rights, documents and other
collateral related thereto) now or hereinafter securing any other debts of
Borrower or subject to any loan purchase facility of Borrower and (2) any and
all proceeds from any and all of the foregoing collateral (including without
limitation, all payments under insurance, or any indemnity, warranty, or insured
closing letter, payable by reason of the loss or damage to or otherwise with
respect to any of the foregoing) (collectively, the "Collateral").

          Borrower and Lender hereby acknowledge and agree that the security
interest granted in the Collateral hereby is second in priority to, and
subordinate in all respects to, (1) the security interest in any of the same
Collateral granted by Borrower to Lender pursuant to that certain Guaranty of
HomeGold, Inc. and Security Agreement dated December 31, 2000 by and between
Borrower and Lender entered into in connection with the assumption of all of
Borrowers debts to Lender as of December 31, 2000 by HomeGold Financial, Inc.
and (2) any security interest, lien, set-off right or other encumbrance granted
by Borrower to any bank.

          The Borrower may at any time prepay the whole or any part of the
unpaid principal amount of this Note, without penalty or premium, with interest
accrued to the date fixed for prepayment.

          The Borrower expressly waives presentment, demand, protest, notice of
dishonor, notice of nonpayment and/or protest, and any and all other notices and
demands whatsoever, and agrees to remain bound until the principal and interest
are paid in full, notwithstanding any extension of
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time for payment or all or any part of the principal or interest hereof and
notwithstanding any inaction by, or failure to assert any legal right available
to Lender.

          In the event that this Note shall at any time after maturity or
default be placed with an attorney for collection, Borrower agrees to pay, in
addition to the entire remaining principal balance and accrued interest, all
costs of collection, including without limitation reasonable attorneys fees,
which attorneys fees shall be based upon the usual and customary hourly rates of
Lender's counsel and not based upon a percentage of the balance due on this
Note.

          Whenever Lender is referred to in this Note, such reference shall be
deemed to include the successors and assigns of Lender, including without
limitation subsequent assigns or holders of this Note, and all covenants,
provisions and agreements by or on behalf of Borrower which are contained herein
shall inure to the benefit of the successors and assigns of Lender.

          The Lender shall not by any act, delay, omission or otherwise be
deemed to have waived any of its rights or remedies hereunder, and no waiver
shall be valid unless in writing, signed by the Lender, and then only to the
extent therein set forth. A waiver by the Lender of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which the Lender would otherwise have on any future occasion. No failure
to exercise nor any delay in exercising on the part of the Lender, any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights or remedies provided by law.

          Any provision of this Note which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

         This Note shall be governed by, and construed and interpreted in
accordance with, the internal laws of the State of South Carolina applicable to
contracts made and to be performed therein without consideration as to choice of
law.

         In witness whereof, the Borrower has caused this Note to be executed on
its behalf by its duly authorized corporate officer, to be effective as of the
date first written above.

                                           HOMEGOLD, INC.

                                           By:
                                               ---------------------------------
                                           Name:
                                                 -------------------------------
                                           Title:
                                                  ------------------------------
ACCEPTED AND AGREED:
CAROLINA INVESTORS, INC.

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

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