EXHIBIT 10.38

May 1, 2000

Mr. Hoyt Hackney, President

Wellington Hall Caribbean Corporation ("WHCC " or "Company")
P.O. Box 1354
Lexington, North Carolina  27293-1354

Mr. Hoyt Hackney, President
Wellington Hall, Limited ("WH" or "Sponsor")
Route 17, U.S. Highway No. 29 and No. 70
P.O. Box 1354
Lexington, North Carolina  27293-1354

Mr. Hoyt Hackney, President
Muebles Wellington Hall, S.A. ("Muebles" or "Guarantor")
P.O. Box 1371
San Pedro Sula, Honduras, C.A.

Re:  Wellington Hall Caribbean Corporation's
     Financing for Operations in Honduras

Ladies and Gentlemen:

1. We refer to the Loan Agreement,  (as amended), and related documents executed
among and between Wellington Hall Caribbean  Corporation  ("WHCC" or "Company"),
Wellington  Hall,  Limited  ("WH" or  "Sponsor")  and  Muebles  Wellington  Hall
("Muebles"  or  Guarantor")  and the  Overseas  Private  Investment  Corporation
("OPIC" or "Lender") with respect to WHCC's furniture  manufacturing  operations
in Honduras (the "Project")  through its wholly owned subsidiary,  Muebles.  All
capitalized  terms used and not otherwise  defined herein shall have the meaning
set forth for such terms in the Loan Agreement.

2.  Pursuant  to the Loan  Agreement,  the  parties  hereto  agree that the Loan
disbursed  by OPIC has  matured and remains  unpaid and past due.  The  Company.
Sponsor and Guarantor each hereby acknowledge liability for the unpaid, matured,
and past due loan balance of $832,677.75, which unpaid balance consists of : (i)
an unpaid  principal  balance in the amount of $826,479.16;  and (ii) unpaid and
accrued default  interest in the amount of $6,198.59.  Each of WHCC, the Sponsor
and the  Guarantor  further  hereby  acknowledge  that  failure  to pay the loan
balance in full when due  constitutes  an Event of Default as defined  under the
Loan Agreement, and the OPIC has the right to proceed to protect and enforce its
rights  and  remedies  by  appropriate  proceedings  under the terms of the Loan
Agreement.  OPIC,  however,  as the Lender  proposed to undertake  the following
measure  in lieu of  foreclosure,  based  upon  certain  conditions  hereinafter
stipulated:

     From October 31, 1999 until October 31, 2000, (the  "Forbearance  Period"),
OPIC agrees to forbear from seeking to enforce its rights against the collateral
under the Loan  Agreement  due to the failure by the Company to make  payment of
principal in full,  and interest  thereon by October 31, 1999, as required under
the terms of the Loan Agreement.

3. In consideration for OPIC's above-stated agreement to forbear from seeking to
enforce rights against the collateral, WHCC shall:

     (i) No later than July 31, 2000, pledge, or cause to be pledged, to OPIC in
a manner and with documentation (including legal opinions) acceptable to OPIC in
form  and  substance  (once  executed,   such  documentation   shall  constitute
"Financing Documents") all of the shares of Muebles; and

     (ii) Make quarterly interest payments in the manner and at the default rate
specified  in the Loan  Agreement  on the  full,  unpaid  balance  of the  loan,
effective as of October 31, 1999; and

     (iii)  Exercise its best efforts to sell Muebles at a net value  sufficient
to repay  OPIC's  debt in full,  and to cover  OPIC's  cost of  collection,  and
commencing  May 1,  2000,  provide a written  report to OPIC on a monthly  basis
regarding the Company's efforts to sell Muebles.  The terms of any proposed sale
are subject to OPIC's prior approval,  and all of the proceeds of any sale shall
be payable to OPIC,  in the manner OPIC may  specify,  up to the amount owing to
OPIC under the Financing Documents; and

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     (iv) As may be requested  by OPIC,  WHCC shall  cooperate  fully to provide
OPIC with a written appraisal,  or to work with such broker as OPIC may identify
to expeditiously sell Muebles, subject to the provisions of the last sentence of
subparagraph (iii) above;

4.  OPIC's  agreement  to  forbear  as  stated  herein is  subject  to the prior
fulfillment, to OPIC's satisfaction of the following conditions precedent:

     (i) OPIC's  shall  have  received  corporate  resolutions  authorizing  the
transactions specified herein,  including a copy of the resolutions of the Board
of Directors of WHCC, the Sponsor and the Guarantor,  authorizing the execution,
delivery and  performance of this  Agreement,  and any other  authorizations  or
documents that OPIC may, in its reasonable discretion request; and

     (ii) OPIC's shall have received a duly executed original of this Agreement,
signed by an Authorized  Officer of each of WHCC, the Sponsor and the Guarantor,
together with all documents, certificates, security interest, legal opinions and
other items required as preconditions  to the  effectiveness of such agreements,
each of which is in full force and effect; and

     (iii) WHCC shall have delivered legal opinions from law firms acceptable to
OPIC in  form  and  substance  as to the  validity  and  enforceability  of this
Agreement,  the documents  delivered pursuant to this Agreement,  and such other
related matters as OPIC may reasonably request.

Upon satisfaction of all of the above conditions,  OPIC will agree to forbear on
proceeding  to  protect  and  enforce  its rights and  remedies  by  appropriate
proceedings under the terms of the Loan Agreement.

5. Noncompliance with the Agreement will be treated as an Event of Default under
the  Financing  Documents.  OPIC is  under no  obligation  to  forbear  upon the
occurrence of any Event of Default under the Financing Documents other than that
described  in  paragraph  2 hereof.  Upon the  occurrence  of any such  Event of
Default   under  the  Financing   Documents,   the   Forbearance   Period  shall
automatically terminate and OPIC may exercise any of its rights and remedies.

6. All principal  payments  deferred during the Forbearance  Period shall be due
and payable in full on October 31, 2000, or, if earlier, upon termination of the
Forbearance Period.

7. Except for the forbearance granted hereunder,  no waiver of any default under
any of the  Financing  Documents  has been granted by OPIC,  nor shall  anything
contained  in this  Agreement  constitute  or be  construed  as a waiver  of any
existing or future  default or a  modification  or  limitation  of any  existing
rights  or  remedies  available  to the  OPIC  against  WHCC or the  Sponsor  of
Guarantor.  Further, OPIC has no obligation to extend the expiration date of the
Forbearance  Period (and the execution of this Agreement  shall not be construed
to require  any such  extension),  to enter  into any  further  forbearances  or
waivers  with respect to the  Financing  Documents.  Subject to the  forbearance
granted  hereunder,  OPIC  specifically  reserves  the right to insist on strict
compliance  with the terms of the Financing  Documents,  this Agreement and each
document  executed in  connection  herewith.  Each of WHCC,  the Sponsor and the
Guarantor hereby expressly acknowledge such reservation of rights.

8. The Company,  the Sponsor and the Guarantor  hereby reaffirms its obligations
under the Financing  Documents  with each of the  undersigned  and confirms that
such obligation remain in full force and effect, without any claims, set-offs or
defenses.

9. Upon termination of the Forbearance  Period,  all principal  amounts deferred
hereunder  shall  be  immediately  due and  payable,  and OPIC  may  pursue  all
available  rights  and  remedies  pursuant  to the  Financing  Documents  or the
documents signed pursuant to this Agreement, at law or in equity.

10. No other  person and no creditor of WHCC,  the Sponsor,  or Guarantor  other
than the undersigned may rely on this Agreement.

11. Each  signatory of WHCC,  the Sponsor and the  Guarantor  has full power and
authority to enter into this Agreement and to incur and perform all  obligations
and covenants  contained  herein,  all of which have been duly authorized by all
proper and necessary corporate action.

12. This Agreement embodies the entire  understanding of the parties hereto, and
supersedes  all prior  negotiations,  understandings,  promises  and  agreements
between them with respect to the subject matter hereof. This Agreement

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may not be  modified in any manner,  except by written  agreement  signed by all
parties  hereto.  This Agreement may be executed in any number of  counterparts,
all of which taken together shall constitute one and the same instrument and any
of  the  parties   hereto  may  execute  this  Agreement  by  signing  any  such
counterpart.  In addition,  each of the Company,  Sponsor and  Guarantor  hereby
acknowledge  and agree that neither the execution and delivery of this Agreement
nor any of the terms,  provisions,  covenants or  agreements  contained in these
Agreement  shall in any  manner  release,  impair,  lessen,  modify,  waive,  or
otherwise  affect the  liability  and  obligations  of the Company,  Sponsor and
Guarantor  under the terms of the Financing  Documents,  except provided in this
Forbearance Agreement.

13. THE COMPANY,  SPONSOR,  AND GUARANTOR EACH HEREBY ACKNOWLEDGE THAT THEY HAVE
FREELY AND VOLUNTARILY ENTERED INTO THIS AGREEMENT AFTER AN ADEQUATE OPPORTUNITY
AND  SUFFICIENT  PERIOD OF TIME TO REVIEW,  ANALYZE,  AND  DISCUSS ALL TERMS AND
CONDITIONS OF THIS AGREEMENT WITH COUNSEL FREELY AND  INDEPENDENTLY  SELECTED BY
THE COMPANY,  SPONSOR, AND GUARANTOR. EACH OF THE COMPANY, SPONSOR AND GUARANTOR
FURTHER   ACKNOWLEDGE   AND  AGREE  THAT  THEY  HAVE   ACTIVELY  AND  WITH  FULL
UNDERSTANDING  PARTICIPATED  IN THE  NEGOTIATION  OF THIS  AGREEMENT  WITH THEIR
COUNSEL;  THAT ALL OF THE TERMS AND  CONDITIONS OF THIS  AGREEMENT AND THE OTHER
DOCUMENTS  EXECUTED AND DELIVERED IN CONNECTION  WITH THIS  AGREEMENT  HAVE BEEN
NEGOTIATED AT  ARMS-LENGTH,  AND THAT THIS  AGREEMENT AND ANY AND ALL SUCH OTHER
DOCUMENTS HAVE BEEN  NEGOTIATED,  PREPARED,  AND EXECUTED  WITHOUT  FRAUD,  BEEN
EXERTED BY OR IMPOSED UPON ANY PARTY TO THIS  AGREEMENT OR UPON ANY OTHER PARTY.
NO  PROVISION  OF THIS  AGREEMENT  OR OTHER SUCH  DOCUMENTS  SHALL BE  CONSTRUED
AGAINST OR INTERPRETED TO THE DISADVANTAGE OF ANY PARTY TO THIS AGREEMENT BY ANY
COURT OR OTHER GOVERNMENTAL OR JUDICIAL AUTHORITY BY REASON OF SUCH PARTY HAVING
OR BEEN DEEMED TO HAVE STRUCTURED, DICTATED, OR DRAFTED SUCH PROVISION.

14.  This  Agreement  shall be  binding  upon and  inure to the  benefit  of the
Company, Sponsor, Guarantor, OPIC , and each of their respective heirs, personal
representatives,  successors,  and  assigns.  None of the Company,  Sponsor,  or
Guarantor shall assign any of their respective  rights or obligations under this
Agreement without the express written consent of OPIC.

16. In case one or more provisions contained in this Agreement shall be invalid,
illegal, or unenforceable in any respect under any law, the validity,  legality,
and  enforceability  of the remaining  provisions  contained herein shall remain
effective and binding shall not be affected or impaired thereby.

17. This  Agreement  shall be  governed by the laws of the  District of Columbia
without regard to the conflict of laws principles thereof.

18. Time is of the essence with respect to each provision of this Agreement.

     Please  sign  and  return  a  copy  of  this  Agreement   confirming   your
acknowledgment  and agreement  with the terms hereof,  whereupon  this Agreement
shall constitute a legally binding document.

Yours truly,

John R. Aldonas
Manager, Special Assets

                                   SIGNATURES

WELLINGTON HALL CARIBBEAN CORPORATION

By:                                         Date:
   ---------------------------                    ------------------------------
   Hoyt Hackney
   President

WELLINGTON HALL, LIMITED

By:                                         Date:
   ---------------------------                    ------------------------------
   Hoyt Hackney
   President

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MUEBLES WELLINGTON HALL, S.A.

By:                                         Date:
   ---------------------------                    ------------------------------
   Hoyt Hackney
   President