Document:

Exhibit 4.1

                               TERM LOAN AGREEMENT

                                      among

                        PULASKI FURNITURE CORPORATION and
                         DAWSON FURNITURE COMPANY, INC.,
                                as the Borrowers

                                       and

                         NATIONSBANK, N.A., as the Bank

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                                TABLE OF CONTENTS

TABLE OF CONTENTS.............................................................i

ARTICLE I - DEFINITIONS.......................................................1

ARTICLE II - THE TERM LOAN AND TERM LOAN NOTE................................10
         2.1 Term Loan.......................................................10
         2.2 Note............................................................10
         2.3 Disbursement of Loan............................................11

ARTICLE III - INTEREST, NOTICES OF INTEREST PERIODS AND PAYMENTS.............11
         3.1 Selection of Interest Period; Borrowing.........................11
         3.2 Payments........................................................14
         3.3 Payment on Days Other Than Business Days........................14
         3.4 LIBOR Provisions................................................14

ARTICLE IV - PREPAYMENTS.....................................................16
         4.1 Optional Prepayments............................................16
         4.2 Calculation of Loss or Out-of-Pocket Expense....................16
         4.3 Application of Prepayments......................................17
         4.4 No Reborrowing..................................................17

ARTICLE V - REPRESENTATIONS..................................................17
         5.1 Subsidiaries....................................................17
         5.2 Incorporation; Good Standing....................................17
         5.3 Corporate Authority.............................................18
         5.4 Binding Agreements..............................................18
         5.5 Litigation......................................................18
         5.6 No Conflicting Agreements.......................................18
         5.7 Financial Condition.............................................19
         5.8 Employee Benefit Pension Plans..................................19
         5.9 Environmental Law Compliance....................................20
         5.10 Year 2000 Compliance...........................................20

ARTICLE VI - CONDITIONS OF LOAN..............................................21
         6.1 Approval of Bank's Counsel......................................21
         6.2 Evidence of Corporate Action....................................21
         6.3 Opinion of Borrower's Counsel...................................21

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         6.4 Acquisition of Seller...........................................22
         6.5 Compliance......................................................22

ARTICLE VII - AFFIRMATIVE COVENANTS..........................................22
         7.1 Financial Statements............................................22
         7.2 Taxes...........................................................23
         7.3 Insurance.......................................................24
         7.4 Corporate Existence.............................................24
         7.5 Properties......................................................24
         7.6 Employee Benefit Pension Plans..................................24
         7.7 Compliance With Laws............................................25
         7.8 Notice of Environmental Matters.................................25
         7.9 Deposit Account.................................................26
         7.10 Repayment of Loans.............................................26
         7.11 Year 2000 Compliance...........................................26

ARTICLE VIII - NEGATIVE COVENANTS............................................26
         8.1 Borrowing.......................................................26
         8.2 Mortgages and Pledges...........................................27
         8.3 Merger, Acquisition or Sale of Assets...........................28
         8.4 Contingent Liabilities..........................................28
         8.5 Investments.....................................................29
         8.6 Capital Expenditures............................................29
         8.7 Sale and Leaseback..............................................29
         8.8 Loans...........................................................29
         8.9 Environmental Law Compliance....................................30
         8.10 Use of Proceeds................................................30
         8.11 Business.......................................................31
         8.12 Accounting.....................................................31
         8.13 Subsidiaries...................................................31

ARTICLE IX - FINANCIAL COVENANTS.............................................31
         9.1 Funded Debt to EBITDA...........................................31
         9.2 Funded Debt to Capitalization...................................33
         9.3 Fixed Charge Coverage Ratio.....................................32

ARTICLE X - EVENTS OF DEFAULT................................................32

ARTICLE XI - MISCELLANEOUS PROVISIONS........................................36
         11.1 Costs and Expenses.............................................36
         11.2 Setoffs........................................................36
         11.3 Cumulative Rights and No Waiver................................36

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         11.4 Indemnification of the Bank....................................36
         11.5 Mandatory Arbitration..........................................38
         11.6 Joint and Several Obligations..................................39
         11.7 Notices........................................................40
         11.8 Accounting Terms...............................................41
         11.9 Entire Agreement...............................................41
         11.10 Applicable Law................................................41
         11.11 Amendments, Etc...............................................41
         11.12 Survivorship..................................................42
         11.13 Headings......................................................42
         11.14 Execution in Counterparts.....................................42

Exhibit A         -        Promissory Note
Exhibit B         -        Notice of Borrowing
Exhibit C         -        Notice of Conversion/Continuation
Exhibit D         -        Opinion of Borrowers' Counsel
Exhibit E         -        Form of Compliance Certificate

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<PAGE>

                               TERM LOAN AGREEMENT

         THIS TERM LOAN  AGREEMENT is made as of February 26, 1999, by and among
PULASKI FURNITURE CORPORATION  ("Pulaski"),  a Virginia corporation,  and DAWSON
FURNITURE  COMPANY,  INC.  ("Dawson"),  a  Virginia  corporation,  both of whose
principal  offices are located at One Pulaski Square,  Pulaski,  Virginia 24301,
and  NATIONSBANK,  N.A. (the "Bank"),  a national  banking  association  with an
office located at 302 South Jefferson Street, Roanoke, Virginia 24011-2010.

         Pulaski  and  Dawson  (each,   a  "Borrower"  and   collectively,   the
"Borrowers") have applied to the Bank for a term loan in the amount of Seventeen
Million Dollars ($17,000,000), the proceeds of which will be used to acquire the
assets of Dawson Heritage Furniture Company,  Inc., a Missouri  corporation (the
"Seller"),  for working  capital and for other corporate  purposes.  The Bank is
willing  to make the term loan to the  Borrowers  upon the terms and  conditions
hereinafter set forth.

         ACCORDINGLY, each Borrower and the Bank agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

         As used  herein the  following  terms  shall have the  meanings  herein
specified and shall include in the singular  number the plural and in the plural
number the singular:

         "Affiliate" means as to any person,  each other person that directly or
indirectly  (through  one or more  intermediaries  or  otherwise)  controls,  is
controlled by or is under common control with such person.

         "Agreement" shall mean this agreement as it may be amended from time to
time.

<PAGE>

         "Applicable Margin" means 0.65% through February 28, 2000.  Thereafter,
Applicable Margin for any date means the margin amount expressed as a percentage
shown by the following  table using for the purposes  hereof the Ratio of Funded
Debt to EBITDA determined as of the last day of the preceding fiscal quarter for
the four (4) fiscal quarters ending on such date.

         Funded Debt/EBITDA Ratio                      Applicable Margin
         ------------------------                      -----------------

         2.0 to 1 or less                                   0.40%
         2.01 - 2.50 to 1                                   0.60%
         2.51 - 2.75 to 1                                   0.70%
         2.76 - 3.00 to 1                                   0.80%
         3.01 to 1 or greater                               0.90%

         Any change in the  Applicable  Margin shall become  effective  upon the
delivery to the Bank of the certificate with respect to the financial statements
to be  delivered  pursuant to Section 7.1 for the fiscal  quarter or fiscal year
most  recently  ended,  as the  case may be,  and  shall  apply to a LIBOR  Loan
outstanding on and after such delivery date.  Notwithstanding the foregoing,  at
any time  during  which the  Borrowers  have  failed to  deliver to the Bank the
certificate  referred to above with  respect to a fiscal  quarter or fiscal year
following the date that delivery of financial statements relating to such fiscal
quarter or fiscal year are  required to be  delivered  under  Section  7.1,  the
Funded Debt/EBITDA Ratio shall be deemed, solely for the purposes of calculating
the  Applicable  Margin,  to be  3.01 to 1 or  greater  until  such  time as the
Borrowers shall have delivered such certificate and financial  statements to the
Bank. Upon the occurrence and during the continuance of an Event of Default, the
Applicable Margin shall  automatically and without any prior notice be increased
by two percent (2%) per annum.

         "Bank" means NationsBank, N.A., a national banking association.

         "Borrowers"  shall  mean  Pulaski  Furniture  Corporation,  a  Virginia
corporation, and Dawson Furniture Company, Inc., a Virginia corporation.

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<PAGE>

         "Business Day" shall mean any day other than Saturday,  Sunday or other
day on which commercial banks in Roanoke, Virginia are authorized or required to
close under  applicable laws and, with respect to any LIBOR Loan, a day on which
dealings are carried on in the London interbank market.

         "Consolidated Net Worth" means as of any date the sum of capital stock,
additional paid in capital and retained earnings of Pulaski and its Subsidiaries
on a consolidated basis determined in accordance with GAAP.

         "Current Maturities of Long-Term Debt" means for any period the current
maturities for such period  determined in accordance  with GAAP of any long-term
debt of Pulaski and its Subsidiaries, on a consolidated basis.

         "Dawson"  shall  mean  Dawson  Furniture  Company,   Inc.,  a  Virginia
corporation.

         "Default" shall mean any event,  act or condition which with the giving
of notice or lapse of time or both would constitute an Event of Default.

         "EBITDA," for any period,  means the  following,  without  duplication,
each calculated for such period: Net Income; plus, to the extent paid or accrued
and  deducted  in  determining  Net  Income,  income  taxes,  interest  expense,
amortization  and depreciation of Pulaski and its Subsidiaries on a consolidated
basis determined in accordance with GAAP. For purposes of calculating EBITDA for
Pulaski and its  Subsidiaries  for the four (4) fiscal  quarters ending on April
30,  1999,  July 31,  1999,  October  31,  1999 and January 31, 2000 in order to
account for the  historical  impact of Seller after its  acquisition  by Dawson,
EBITDA  shall be  determined  by adding the amount set forth below to the actual
results of the EBITDA calculation for Pulaski and its Subsidiaries:

                                       3
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                              April 30, 1999 -              $2,500,000
                              July 31, 1999 -               $1,875,000
                              October 31, 1999 -            $1,250,000
                              January 31, 2000 -            $625,000

         "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.

         "Event of Default" shall have the meaning set forth in Section 10.

         "Fixed  Charge  Coverage  Ratio"  means  as of the  end  of any  fiscal
quarter,  for Pulaski and its Subsidiaries on a consolidated basis, the ratio of
(i) the sum of Net Income  plus,  to the extent paid or accrued and  deducted in
determining Net Income,  interest expense (including,  without duplication,  the
interest portion of any capital lease payments), depreciation, amortization, and
rents  under  operating  leases  less  dividends  paid for the  four (4)  fiscal
quarters  ending on such date to (ii) the sum of  interest  expense  (including,
without  duplication,  the  interest  portion of any  capital  lease  payments),
Current  Maturities  of  Long-Term  Debt due in each such  quarter,  rents under
operating leases,  and the principal portion of capital lease payments,  all for
the four (4) fiscal  quarters  ending on such date.  For purposes of calculating
the Fixed Charge  Coverage Ratio for Pulaski and its  Subsidiaries  for the four
(4) fiscal quarters  ending on April 30, 1999,  July 31, 1999,  October 31, 1999
and January 31,  2000 in order to account  for the  historical  impact of Seller
after its acquisition by Dawson,  the amount  determined  pursuant to clause (i)
above shall be increased by the following amounts:

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<PAGE>

                              April 30, 1999 -                  $1,647,390
                              July 31, 1999 -                   $1,235,543
                              October 31, 1999 -                $  823,695
                              January 31, 2000 -                $  411,848

         "Funded Debt" means the principal  amount of indebtedness  for borrowed
money and capitalized lease  obligations of Pulaski and its  Subsidiaries,  on a
consolidated basis determined in accordance with GAAP.

         "GAAP" means generally accepted accounting principles as promulgated by
opinions  of the  Accounting  Principles  Board  of the  American  Institute  of
Certified  Public  Accountants  and  statements  of  the  Financial   Accounting
Standards Board, consistently applied.

         "Governmental  Authority" means the United States of America, any state
or other  political  subdivision  thereof  and any  court,  agency,  department,
commission, board, bureau or instrumentality of any of the foregoing.

         "Hazardous  Materials"  shall mean all  materials  defined as hazardous
wastes or substances under any local, state or federal environmental laws, rules
or regulations and petroleum, petroleum products, oil and asbestos.

         "Interest  Period" means the period  commencing on the date the Loan or
any portion  thereof  begins to bear  interest  at a rate based on LIBOR,  which
shall be the last day of the  preceding  Interest  Period  except on the day the
Loan is funded, and ending on, but not including, the last day of such period as
selected  by the  Borrowers  pursuant to the  provisions  set forth  below.  The
duration of each  Interest  Period shall be 1, 3, 6, 9 or 12 months,  subject in
any case to  availability  and as the Borrowers may, upon notice received by the
Bank,  select;  provided,  however,  that  whenever  the last day of an Interest
Period would otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next succeeding  Business

                                       5
<PAGE>

Day, provided,  that if such extension would cause the last day of such Interest
Period  to occur  in the next  following  calendar  month,  the last day of such
Interest  Period shall occur on the next  preceding  Business  Day, and provided
further  that any  Interest  Period  which begins on a day for which there is no
numerically  corresponding  day in the calendar month during which such Interest
Period is to end shall end on, but not  include,  the last  Business Day of such
calendar  month.  In no event shall an Interest Period extend beyond October 31,
2005.

         "LIBOR" means that rate per annum (rounded  upward to the nearest 1/100
of 1%)  determined by the Bank to be equal to the quotient of (i) the LIBOR Base
for the Loan or a portion  thereof for such Interest  Period divided by (ii) one
minus the LIBOR Reserve  Percentage for the Loan or such portion thereof for the
Interest  Period.  The  definition  of LIBOR  is  illustrated  by the  following
formula:

                  LIBOR =                 LIBOR Base
                           ----------------------------------------
                                 1 - LIBOR Reserve Percentage

         "LIBOR  Base"  means,  for  any  LIBOR  Loan  for any  Interest  Period
therefor,  the rate per annum  (rounded  upwards,  if necessary,  to the nearest
1/100 of 1%)  appearing  on Telerate  Page 3750 (or any  successor  page) as the
London  interbank  offered rate for deposits in Dollars at  approximately  11:00
a.m.  (London  time) two Business  Days prior to the first day of such  Interest
Period for a term  comparable  to such Interest  Period.  If for any reason such
rate is not available, the term "Eurodollar Rate" shall mean, for any Eurodollar
Loan for any Interest Period therefor,  the rate per annum (rounded upwards,  if
necessary,  to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as
the London interbank offered rate for deposits in Dollars at approximately 11:00

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<PAGE>

a.m.  (London  time) two Business  Days prior to the first day of such  Interest
Period for a term comparable to such Interest Period; provided, however, if more
than one rate is  specified on Reuters  Screen LIBO Page,  the  applicable  rate
shall be the arithmetic mean of all such rates (rounded  upwards,  if necessary,
to the nearest 1/100 of 1%).

         "LIBOR Loan" means all or a portion of the Loan when it bears  interest
based on LIBOR.

         "LIBOR Reserve  Percentage"  means for any Interest  Period the reserve
percentage (expressed as a decimal) applicable during such Interest Period under
regulations  issued from time to time by the Board of  Governors  of the Federal
Reserve  System (or any  successor)  (or if more than one such  percentage is so
applicable,  the  daily  average  of such  percentages  for  those  days in such
Interest  Period during which any such  percentage  shall be so applicable)  for
determining the maximum reserve requirement (including,  without limitation, any
marginal  reserve  requirement) for the Bank in respect of liabilities or assets
consisting of or including Eurocurrency Liabilities (as defined in Regulation D)
having a term equal to such Interest Period.

         "Loan" shall have the meaning set forth in Section 2.1.

         "Material  Adverse  Effect" means a material  adverse effect on (i) the
condition (financial or otherwise), operations, business, assets, or liabilities
of Pulaski  and its  Subsidiaries  (taken as a whole),  (ii) the  ability of the
Borrowers to perform any material  obligation  under this Agreement or the Note,
or (iii) the material  rights and  remedies of the Bank under this  Agreement or
the Note.

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<PAGE>

         "Net  Income"  means the  consolidated  net income of  Pulaski  and its
Subsidiaries after the deduction of any income taxes Pulaski is required to pay,
determined  in  accordance  with GAAP  consistently  with the method used by its
accountants in the preparation of its annual financial statements.

         "Note" shall have the meaning set forth in Section 2.2.

         "PBGC" shall mean the Pension Benefit  Guaranty  Corporation as created
under ERISA, or any successor thereto under ERISA.

         "Prime Rate" shall mean the rate which the Bank  establishes  from time
to time as its prime rate; any change of interest resulting from a change in the
Prime Rate shall be effective on the effective date of each change therein.  The
Borrowers  acknowledge  and agree  that the Prime  Rate is a  reference  used in
determining  interest  rates on certain loans by the Bank and is not intended to
be the  lowest  rate of  interest  charged  on any  extension  of  credit to any
customer.

         "Prime  Rate  Loan"  means  the  Loan or any  portion  thereof  bearing
interest based on the Prime Rate.

         "Pulaski" means Pulaski Furniture Corporation, a Virginia corporation.

         "Pulaski  Sales"  means  Pulaski  Foreign  Sales  Corporation,  Inc., a
corporation organized under the laws of the U.S. Virgin Islands.

         "Ratio of Funded Debt to Capitalization" means the Ratio of Funded Debt
to the sum of  Funded  Debt  and  Consolidated  Net  Worth  of  Pulaski  and its
Subsidiaries.

         "Ratio  of Funded  Debt to  EBITDA"  means as of the end of any  fiscal
quarter  the  ratio of Funded  Debt as of such  date to EBITDA  for the four (4)
fiscal quarters ending on such date.

                                       8
<PAGE>

         "Regulation  D" means  Regulation  D of the Board of  Governors  of the
Federal Reserve System, as it may be amended from time to time.

         "Restricted  Subsidiary"  means a Subsidiary  (i) the total revenues of
which equal or exceed 10% of the total revenues of Pulaski and its  Subsidiaries
(taken as a whole) or (ii) with total assets in excess of $5,000,000.

         "Seller" shall mean Dawson Heritage Furniture Company, Inc.

         "Subsidiary" shall mean as to any person, any corporation, partnership,
limited liability company or other entity of which more than fifty percent (50%)
of the outstanding  capital stock or other ownership  interests  having ordinary
voting power to elect a majority of the board of directors or other  managers of
such corporation,  partnership,  limited liability company or other entity is at
the time, directly or indirectly, owned by such person (irrespective of whether,
at the time,  capital stock or other  ownership  interests of any other class or
classes of such  corporation,  partnership,  limited  liability company or other
entity shall have or might have voting  power by reason of the  happening of any
contingency).   Unless  otherwise  qualified,   references  to  "Subsidiary"  or
"Subsidiaries" herein shall refer to those of Pulaski.

         "Tranche"  means any  portion of the Loan when it bears  interest at an
interest rate based on LIBOR for a specified  Interest Period and any portion of
the Loan when it bears interest at an interest rate based on the Prime Rate.

         "Type" shall mean either a LIBOR Loan or a Prime Rate Loan.

         "UCC" means the Uniform  Commercial  Code as adopted and in effect from
time to time in the Commonwealth of Virginia.

         "Written" or "in writing" shall mean any form of written  communication
or a communication by means of telex, telecopier device, telegraph or cable.

                                       9
<PAGE>

                                   ARTICLE II

                        THE TERM LOAN AND TERM LOAN NOTE

         2.1 Term Loan.  The Bank  agrees,  subject to the terms and  conditions
contained herein, to make a term loan (the "Loan") to the Borrowers on or before
February 28, 1999, in the amount of Seventeen Million Dollars ($17,000,000).

         2.2 Note.  The  obligation  of the Borrowers to repay the Loan shall be
evidenced by the Borrowers' promissory note (the "Note") payable to the order of
the  Bank  at its  office  at 302  South  Jefferson  Street,  Roanoke,  Virginia
24011-2010,  or such  other  place as the Bank may from time to time  designate,
substantially  in the form of Exhibit A attached  hereto with the blanks therein
appropriately  completed,  dated  as of the  date of the  Loan  in the  original
principal  amount of  Seventeen  Million  Dollars  ($17,000,000)  and payable in
installments  as herein  provided.  A  principal  installment  of Three  Hundred
Seventy-Five  Thousand Dollars ($375,000) will be due and payable on the Note on
April  30,  1999,  and on each  July 31,  October  31,  January  31 and April 30
thereafter to and including  January 31, 2002. A principal  installment of Seven
Hundred Fifty Thousand Dollars ($750,000) will be due and payable on the Note on
April 30,  2002,  July 31,  2002,  October 31,  2002,  and January 31,  2003.  A
principal  installment of Eight Hundred Seventy-Five Thousand Dollars ($875,000)
will be due and  payable  on April  30,  2003 and on each July 31,  October  31,
January 31 and April 30 thereafter  to and including  July 31, 2005. A principal
installment of Seven Hundred Fifty Thousand  Dollars  ($750,000) will be due and
payable on October 31, 2005, on which date the entire unpaid  principal  balance
of the Loan and all  interest  accrued  thereon will be due and payable in full.
The Note shall bear  interest at the rates and interest  shall be payable as set
forth in Section 3.

                                       10
<PAGE>

         2.3  Disbursement  of Loan. The Bank shall disburse the proceeds of the
Loan to wire transfer instructions initiated by Pulaski.

                                   ARTICLE III

                          INTEREST, NOTICES OF INTEREST
                              PERIODS, AND PAYMENTS

         3.1      Selection of Interest Period; Borrowing.

         (a) Initial Interest  Period.  The Borrowers shall give the Bank (i) at
least  three (3)  Business  Days'  notice of the Loan  (which  notice  may be in
writing or by telecopy,  telex or  telegraph,  or by telephone,  if  immediately
confirmed in writing,  substantially  in the form attached  hereto as Exhibit B)
(the "Notice of Borrowing") prior to the proposed funding date, of the intention
of the  Borrowers  to borrow  hereunder at a rate based on LIBOR and the initial
Interest Period or Interest  Periods,  and in the case of more than one Interest
Period,  the amount of the Loan to which each is to apply, and (ii) notice on or
before the proposed  funding date of the  intention to borrow based on the Prime
Rate.  If the Notice of Borrowing is given to the Bank after 12:00 noon (Eastern
Time),  it shall be deemed to have been given on the following  Business Day. If
the  Borrowers  fail to borrow all or any  portion  of the Loan  after  giving a
Notice of a Borrowing of all or any portion of the Loan as a LIBOR Loan, it will
reimburse the Bank for any loss or out-of-pocket expense incurred by the Bank in
connection  with such  failure to borrow  the LIBOR  Loan as if such  failure to
borrow were a prepayment  of such LIBOR Loan,  computed in  accordance  with the
provisions of Section 4.2.

         (b)      Conversions and Continuations.

                  (i)  Subject  to the  provisions  of  Sections  3.4(b) and (c)
hereof,  the Borrowers  shall have the option on any Business Day to convert all
of the Loan or any Tranche from one Type to another Type or, upon the expiration

                                       11
<PAGE>

of any Interest  Period,  to continue all of the Loan or any Tranche as the same
Type with the  succeeding  Interest  Period of such continued Loan or Tranche to
commence  on the last day of the  Interest  Period of the Loan or  Tranche to be
continued;  provided, that (A) a LIBOR Loan may be converted into a different or
the same Type only on the last day of an Interest Period applicable thereto, (B)
no  partial  conversion  of a LIBOR Loan or  continuation  of a LIBOR  Loan,  as
permitted  under this Section  3.1(b),  shall reduce the  outstanding  principal
amount of any such Loan or Tranche to less than $1,000,000, (C) no conversion to
a LIBOR Loan or  continuation  of a LIBOR Loan as  permitted  under this Section
3.1(b) may be made if a Default or Event of  Default is then in  existence,  and
(D)  conversions  to a  LIBOR  Loan  shall  be in  amounts  equal  to  at  least
$1,000,000, or if greater, in integral multiples of $500,000.

                  (ii) Each such conversion or continuation shall be effected by
the  Borrowers  delivering  to the  Bank  a  Notice  of  Conversion/Continuation
(substantially  in the form of Exhibit C) on or before the date of the  proposed
conversion to or  continuation  of a Prime Rate Loan or at least three  Business
Days before the date of the proposed  conversion to or  continuation  of a LIBOR
Rate Loan, each such notice to be given prior to 12:00 P.M.  (Roanoke,  Virginia
time) on the date specified.

                  (iii)    In    lieu    of     delivering     a    Notice    of
Conversion/Continuation,  the Borrowers may give the Bank  telephonic  notice of
the proposed conversion or continuation by the dates and times applicable to the
Type;  provided,  that such  notice  shall be promptly  confirmed  in writing by
delivery  to the Bank of a Notice  of  Conversion/Continuation.  The Bank  shall
incur no  liability  to either  Borrower  in acting upon any  telephonic  notice
referred to above which the Bank believes,  in good faith, to have been given by
a duly  authorized  officer of a Borrower or for otherwise  acting in good faith
under this Section 3.1(b).

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<PAGE>

                  (iv) Each  Notice of  Conversion/Continuation  (or  telephonic
notice in lieu thereof)  shall be  irrevocable,  and shall specify the amount of
the Loan or  Tranche  to be so  converted  into or  continued  as and,  if to be
converted to or continued as a LIBOR Loan, the Interest  Period to be applicable
thereto.  Notwithstanding the foregoing or the provisions of Section 3.4 hereof,
if an  Event of  Default  is in  existence  or would  result  from any  proposed
continuation of or conversion to a LIBOR Loan, such Loan may not be continued as
or converted to a LIBOR Loan but instead shall be automatically converted on the
last day of such Interest Period into a Prime Rate Loan.

         (c) Absence of Notice.  If, upon the expiration of any Interest  Period
for a LIBOR Loan, the Borrowers have failed to elect a new Interest Period to be
applicable  to a LIBOR Loan,  the  Borrowers  shall be deemed to have elected to
convert  such LIBOR Loan into a LIBOR Loan with an Interest  Period of one month
effective as of the expiration date of such current Interest Period.

         (d)      Interest Basis; Interest Payment Dates.

                  Borrowers  agree to pay  interest  in  respect  of the  unpaid
principal amount of the Loan from the date of the Loan until the Loan is paid in
full, at the following rates per annum:

                  (i) during  such period that all or a portion of the Loan is a
Prime Rate Loan, the Prime Rate;

                  (ii) during such period that all or a portion of the Loan is a
LIBOR Loan, LIBOR for the related Interest Period plus the Applicable Margin.

                                       13
<PAGE>

         (e) Interest  Payment  Dates.  Interest on any LIBOR Loan or Prime Rate
Loan shall be computed on the basis of the actual  number of days elapsed over a
year of 365 days and shall be payable in arrears on each  January 31,  April 30,
July 31 and October 31.

         3.2  Payments.  The  disbursement  of the Loan and each  payment of the
principal  of and  interest  on the  Note  shall  be made in  federal  or  other
immediately available funds. For purposes of this provision,  collected funds on
deposit with the Bank are immediately available funds.

         3.3 Payment on Days Other Than Business  Days.  Whenever any payment to
be made  hereunder  or under  the Note  shall be stated to be due on a day other
than a Business Day,  except as provided in the  definition  of Interest  Period
with respect to a LIBOR Loan,  such  payment may be made on the next  succeeding
Business  Day, and such  extension of time shall in such case be included in the
computation of interest to be paid on such date.

         3.4  LIBOR Provisions.

         (a) Increased Costs. If either (i) the introduction of or any change by
any  central  bank or other  Governmental  Authority  (whether or not having the
force of law) (including, without limitation, any change by way of imposition or
increase of reserve requirements other than those included in the computation of
LIBOR but excluding  any income tax on the overall  income of the Bank) in or in
the  interpretation  of any law or  regulation  by any  central  bank  or  other
Governmental  Authority  (whether  or not having the force of law),  or (ii) the
compliance by the Bank with any guideline or directive  from any central bank or
other  Governmental  Authority  (whether or not having the force of law),  shall
result in any actual  increase  in the cost to the Bank of  maintaining  a LIBOR
Loan or reduce  the  amount  receivable  by the Bank on the Loan or any  portion
thereof,  the Borrowers shall from time to time, upon demand by the Bank, pay to
the Bank  additional  amounts  sufficient  to  indemnify  the Bank  against such
increased cost actually  incurred or reduction in amount  actually  received.  A
certificate  in  reasonable  detail as to the amount of such  increased  cost or
reduction in amount received and method of calculation shall be submitted to the
Borrowers by the Bank and shall be conclusive (absent manifest error).

                                       14
<PAGE>

         (b) LIBOR Deposits Unavailable. If before the beginning of any Interest
Period,  by  reason of  circumstances  affecting  the  London  interbank  market
generally, deposits in dollars are not being offered to the Bank, the Bank shall
forthwith give notice thereof to the Borrowers,  whereupon (unless the Borrowers
and the Bank shall  have  agreed on an  alternative  method of  determining  the
interest rate for the Loan) at the expiration of any applicable  Interest Period
any LIBOR Loan shall become a Prime Rate Loan.

         (c) Changes in Law Rendering a LIBOR Loan Unlawful.  If, after the date
of this Agreement,  the  introduction  of, or any change in, any applicable law,
rule or regulation or in the  interpretation  or  administration  thereof by any
Governmental   Authority  charged  with  the  interpretation  or  administration
thereof,  or compliance by the Bank with any guideline or directive  (whether or
not having the force of law) of any such Governmental  Authority,  shall make it
unlawful or  impossible  for the Bank to  maintain a LIBOR Loan,  the Bank shall
promptly notify the Borrowers,  and the obligation of the Bank to have the Loan,
or any portion thereof bear interest at a rate based on LIBOR shall forthwith be
suspended for the duration of such illegality or impossibility. Upon such notice
(i) if the Bank may  lawfully  continue  to maintain a LIBOR Loan to such day or
days, on the last day of each then current  Interest  Period,  unless  otherwise
agreed to by the  Borrowers  and the Bank,  each LIBOR Loan shall become a Prime
Rate  Loan,  and  (ii)  immediately  if the Bank may not  lawfully  continue  to
maintain a LIBOR Loan to such day or days, the Loan shall  immediately  become a
Prime Rate Loan.

                                       15
<PAGE>

         (d) Certificate. The Bank shall furnish to the Borrowers upon request a
certificate  outlining  in  reasonable  detail the  computation  of any  amounts
claimed by it under this  Section  3.4 giving  rise to a change in LIBOR and the
assumptions underlying such computations.

                                   ARTICLE IV

                                   PREPAYMENTS

         4.1 Optional  Prepayments.  On the last day of any Interest Period, the
Borrowers  shall have the right  without  premium or penalty to prepay any LIBOR
Loan.  At any time and from  time to time the  Borrowers  shall  have the  right
without  premium or  penalty to prepay all or any  portion of a Prime Rate Loan.
The Borrowers may prepay all or any part of a LIBOR Loan which bears interest at
a rate  based on LIBOR at any time and from time to time other than the last day
of the Interest  Period used in determining  such interest rate provided that at
the time of such  prepayment  the  Borrowers  reimburse the Bank for any loss or
out-of-pocket  expense  incurred by the Bank in connection with such prepayment,
computed in accordance with the provisions of Section 4.2.

         4.2  Calculation  of  Loss  or  Out-of-Pocket   Expense.  The  loss  or
out-of-pocket expense resulting from a prepayment of a LIBOR Loan on a day other
than the last day of an Interest  Period  which is  applicable  to the amount of
such prepayment  shall be an amount equal to the excess of (i) the interest that
would have been  received from the  Borrowers on the amount  prepaid  during the
remaining  portion of the  Interest  Period in question  had the  Borrowers  not
prepaid the Loan or such portion without giving effect to the Applicable  Margin
or to the provisions of Section 3.4 over (ii) the amount of interest which would
have  accrued on such funds if the Bank had placed such funds on deposit  with a
prime bank in the London interbank market from the date of such prepayment until
the end of such Interest  Period,  determined as of the time of such  prepayment
using an assumed  Interest  Period which commences on the date of prepayment and
ends on the last day of the originally scheduled Interest Period,  discounted in

                                       16
<PAGE>

each case to the present  value using the  interest  rate then  existing on U.S.
Treasury  obligations  maturing  as of  the  end of  such  Interest  Period,  as
reasonably  determined by the Bank. A certificate  in reasonable  detail setting
forth the  calculation of such loss or expense,  including the amount and method
of  calculation,  shall be  submitted  to the  Borrowers by the Bank and, in the
absence of manifest error, shall be conclusive.

         4.3  Application of  Prepayments.  Each partial  prepayment of the Note
shall be applied to the  installments  of  principal  payable on the Note in the
inverse order of their maturity.

         4.4  No Reborrowing. Amounts prepaid on the Loan may not be reborrowed.

                                    ARTICLE V

                                 REPRESENTATIONS

         The Borrowers  jointly and severally  represent and warrant to the Bank
that:

         5.1  Subsidiaries.  Pulaski  has the  following  Subsidiaries  and none
others:
              Pulaski Foreign Sales Corporation, Inc.
              Dawson Furniture Company, Inc.

         5.2  Incorporation;  Good  Standing.  Pulaski  is  a  corporation  duly
organized and existing in good standing  under the laws of the  Commonwealth  of
Virginia  and has the  corporate  power to own its  property and to carry on its
business  activities as now being conducted and is duly qualified to do business
and is in good  standing  in each  jurisdiction  in which the  character  of the
properties owned by it therein or in which the transaction of its business makes
such qualification necessary and in which the failure so to qualify would have a
Material Adverse Effect.  Dawson is a corporation duly organized and existing in
good  standing  under  the  laws of the  Commonwealth  of  Virginia  and has the
corporate  power to own its property and to carry on its business  activities as
now being conducted and is duly qualified to do business and is in good standing
in each  jurisdiction  in which  the  character  of the  properties  owned by it
therein or in which the  transaction  of its business  makes such  qualification
necessary and in which the failure so to qualify  would have a Material  Adverse

                                       17
<PAGE>

Effect.  Pulaski  Sales is a  corporation  duly  organized  and existing in good
standing under the laws of the U. S. Virgin Islands and has the corporate  power
to own its  property  and to  carry  on its  business  activities  as now  being
conducted  and is duly  qualified to do business and is in good standing in each
jurisdiction in which the character of the properties  owned by it therein or in
which the transaction of its business makes such qualification  necessary and in
which the failure so to qualify would have a Material Adverse Effect.

         5.3 Corporate Authority. Each of Pulaski and its Subsidiaries have full
corporate  power  and  authority  to  enter  into  this  Agreement,  to make the
borrowings  hereunder,  to  execute  and  deliver  the  Note  and to  incur  the
obligations  provided  for  herein  and  therein,  all of which  have  been duly
authorized  by all  necessary  corporate  action.  No  consent  or  approval  of
shareholders  or consent or  approval  of,  notice to or filing  with any public
authority is required as a condition  to the  validity of this  Agreement or the
Note.

         5.4 Binding Agreements. This Agreement constitutes,  and the Note, when
issued and delivered  pursuant hereto for value received,  will constitute,  the
valid  and  legally  binding  joint and  several  obligations  of the  Borrowers
enforceable   in  accordance   with  their  terms  except  to  the  extent  such
enforceability   may  be   limited   by   applicable   bankruptcy,   insolvency,
reorganization  and moratorium  laws and similar laws relating  generally to the
enforcement of creditors' rights.

         5.5  Litigation.  There are no  proceedings  pending  or, so far as the
officers of the Borrowers know,  threatened  before any court or  administrative
agency that, in the opinion of the officers of the Borrowers,  is likely to have
a Material Adverse Effect.

         5.6 No Conflicting Agreements. There is no charter, bylaw or preference
stock  provision of Pulaski or any of its  Subsidiaries  and no provision of any
existing mortgage, indenture, contract or agreement binding on Pulaski or any of

                                       18
<PAGE>

its  Subsidiaries or affecting their property that would conflict with or in any
way  prevent  the  execution,  delivery  or  carrying  out of the  terms of this
Agreement or the Note.

         5.7 Financial Condition.  The consolidated balance sheet of Pulaski and
its Subsidiaries as of November 1, 1998, and the related consolidated statements
of income and  retained  earnings  and of cash flows for the period  then ended,
certified by Ernst & Young LLP, heretofore delivered to the Bank, fairly present
the financial condition of Pulaski and its Subsidiaries and the results of their
operations and their cash flows as of the dates and for the periods  referred to
therein and have been  prepared in accordance  with GAAP.  There are no material
liabilities,  direct  or  indirect,  fixed or  contingent,  of  Pulaski  and its
Subsidiaries  as of the  dates of such  balance  sheets  that are not  reflected
therein or in the notes  thereto.  There has been no material  adverse change in
the financial  condition or operations of Pulaski and its Subsidiaries since the
dates of said balance sheets. The balance sheet of the Seller as of December 31,
1998, and the related statements of income,  stockholders' equity and cash flows
for the  period  then  ended,  certified  by  Myers,  Baker,  Rife  and  Denham,
heretofore  delivered to the Bank, fairly present the financial condition of the
Seller and the results of its  operations  and its cash flows as of the date and
for the period  referred to therein and have been  prepared in  accordance  with
GAAP applied on a consistent basis. There are no material liabilities, direct or
indirect,  fixed or  contingent,  of the  Seller as of the date of such  balance
sheet that are not reflected therein or in the notes thereto.  There has been no
material  adverse change in the financial  condition or operations of the Seller
since the date of said balance sheet.

         5.8 Employee Benefit Pension Plans. No fact, including, but not limited
to,  any  Reportable  Event  as  defined  in  Section  4043 of ERISA  exists  in
connection with any employee  benefit plan of Pulaski or any of its Subsidiaries
covered  by ERISA  (including  any plan of any member of a  controlled  group of

                                       19
<PAGE>

corporations and all trades and businesses  (whether or not incorporated)  under
common  control  which,  together with Pulaski or any of its  Subsidiaries,  are
treated as a single employer,  under Section 414 of the Internal Revenue Code of
1986, as amended),  which could  constitute  grounds for the  termination of any
such plan by the PBGC or for the  appointment of any trustee to administer  such
plan by the appropriate United States District Court.

         5.9  Environmental  Law Compliance.  The conduct of Pulaski's  business
operations and those of any Subsidiary and the conduct of the proposed  business
operations  of Pulaski and its  Subsidiaries  following the  acquisition  of the
assets of the Seller by Dawson does not and will not  violate any federal  laws,
rules or ordinances for environmental protection, including, but not limited to,
the  following:  Clean Air Act,  42 U.S.C.  ss.  7401,  et seq.;  Federal  Water
Pollution Control Act, 33 U.S.C. ss. 1251, et seq.; Solid Waste Disposal Act, 42
U.S.C. ss. 6901, et seq.; Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA" or "SUPERFUND"),  42 U.S.C. ss. 9601, et seq.;  National
Environmental  Policy Act,  42 U.S.C.  ss.  4321,  et seq.;  regulations  of the
Environmental  Protection  Agency and any  applicable  local or state law, rule,
regulation  or  rule of  common  law and  any  judicial  interpretation  thereof
relating primarily to the environment or Hazardous Materials other than any such
violation  or  violations  which  will not  cause or  result  in and  might  not
reasonably be expected to cause or result in a Material Adverse Effect.

         5.10     Year 2000 Compliance.

         (a) Pulaski has (i) begun  analyzing the  operations of Pulaski and its
Subsidiaries  and  Affiliates  that could be  adversely  affected  by failure to
become  Year 2000  compliant  (that is,  that  computer  applications,  imbedded
microchips  and other systems will be able to perform  date-sensitive  functions
prior to and after  December  31,  1999) and (ii)  developed a plan for becoming

                                       20
<PAGE>

Year  2000  compliant  in a timely  manner,  the  implementation  of which is on
schedule in all material  respects.  Pulaski  reasonably  believes  that it will
become Year 2000 compliant for its operations and those of its  Subsidiaries and
Affiliates  on a timely basis except to the extent that a failure to do so could
not reasonably be expected to have a Material Adverse Effect.

         (b) Pulaski  reasonably  believes  any  suppliers  and vendors that are
material to the operations of Pulaski and its Subsidiaries and Affiliates (taken
as a whole)  will be Year 2000  compliant  for their own  computer  applications
except to the extent that a failure to do so could not reasonably be expected to
have a Material Adverse Effect.

                                   ARTICLE VI

                               CONDITIONS OF LOAN

         The  obligation  of the Bank to make the Loan is subject to each of the
following conditions precedent:

         6.1 Approval of Bank's Counsel. All legal matters incident to the Loan,
including  all  documents and  opinions,  shall be  reasonably  satisfactory  to
counsel for the Bank.

         6.2  Evidence of  Corporate  Action.  The Bank shall have  received (i)
certified  copies  of  papers  evidencing  all  corporate  action  taken  by the
Borrowers to authorize this Agreement, the Note and the borrowing hereunder, and
(ii) such other papers as the Bank shall reasonably require.

         6.3  Opinion of  Borrowers'  Counsel.  The Bank  shall have  received a
favorable written opinion of counsel for the Borrowers,  dated as of the date of
the making of the Loan,  substantially  in the form of Exhibit D attached hereto
and otherwise satisfactory in form and substance to the Bank and its counsel.

                                       21
<PAGE>

         6.4 Acquisition of Seller. Dawson shall have acquired the assets of the
Seller in accordance with the Asset Purchase  Agreement by and among Dawson, the
Seller,  James S. Dawson and Jack E. Dawson previously delivered to and approved
by the Bank.

         6.5 Compliance. At the time of the making of the Loan (i) the Borrowers
shall have complied and shall then be in compliance in each case in all material
respects with all the terms, covenants and conditions of this Agreement that are
applicable  to it,  (ii) there  shall  exist no Event of Default  and no Default
shall  have  occurred  and be  continuing,  and  (iii) the  representations  and
warranties  contained in Article V hereof shall,  except to the extent that they
relate solely to an earlier date, be true in all material respects with the same
effect as though such  representations  and warranties had been made at the time
of the making of the Loan

                                   ARTICLE VII

                              AFFIRMATIVE COVENANTS

         Until payment in full of the Note and performance of all other monetary
obligations  of Borrowers  hereunder,  except  those set forth in Section  11.4,
Pulaski will:

         7.1 Financial Statements.  Furnish to the Bank (i) as soon as available
but in no event  more than  forty-five  (45) days  after the end of each  fiscal
quarter, a consolidated  balance sheet of Pulaski and its Subsidiaries as of the
end of such  quarter and a  consolidated  income  statement  and a  consolidated
statement of cash flows for such quarter and for that portion of the fiscal year
ending on the last day of such quarter,  accompanied by a schedule setting forth
the  calculations  to show  compliance  with the financial  covenants  contained
herein,  certified by the chief executive officer or the chief financial officer
of Pulaski,  together with a  certificate  of that officer  stating  whether any
event has occurred or condition exists that constitutes an Event of Default or a
Default hereunder,  and, if so, stating the facts with respect thereto;  (ii) as
soon as available, but in no event more than one hundred twenty (120) days after
the close of each of Pulaski's  fiscal years,  a copy of the annual audit report

                                       22
<PAGE>

of Pulaski in reasonable detail,  prepared in accordance with generally accepted
accounting  principles  applied on a basis consistent with that of the preceding
year and certified by independent  certified public accountants  satisfactory to
the Bank, which report shall include a consolidated balance sheet of Pulaski and
its Subsidiaries of the end of such fiscal year, a consolidated income statement
of  Pulaski  and  its  Subsidiaries  for  such  fiscal  year,  and  consolidated
statements  of  stockholders'  equity  and of  cash  flows  of  Pulaski  and its
Subsidiaries  for  such  fiscal  year,  accompanied  by a  certificate  of  said
accountants  stating  that in the  course of  making  their  audit  they did not
discover  any  condition  existing  as of  the  end of  such  fiscal  year  that
constituted an Event of Default or a Default hereunder, or, if they did, stating
the facts with respect thereto; (iii) promptly upon their receipt, copies of all
management  letters  received  by Pulaski  from its  accountants;  and (iv) such
additional information,  reports or statements as the Bank may from time to time
reasonably  request.  Pulaski  will  also  upon  request,  and  will  cause  its
Subsidiaries  to permit the Bank and its agents to inspect its books and records
and those of its  Subsidiaries  during normal  business  hours and discuss their
affairs with their  officers and employees and the officers and employees of its
Subsidiaries.

         7.2 Taxes.  Pay and discharge all taxes,  assessments and  governmental
charges  upon  it,  its  income  and its  properties  prior to the date on which
penalties are attached thereto,  and cause its Subsidiaries to do so, unless and
to the extent only that such taxes,  assessments and governmental  charges shall
be contested by them in good faith and by appropriate  proceedings,  and Pulaski
shall have set aside on its books  adequate  reserves  with  respect to any such
tax, assessment or charge so contested.

                                       23
<PAGE>

         7.3 Insurance. Maintain and cause its Subsidiaries to maintain adequate
insurance with responsible companies reasonably satisfactory to the Bank in such
amounts and against  such risks as is  customarily  carried by owners of similar
businesses and property.

         7.4 Corporate Existence. Maintain and cause its Restricted Subsidiaries
to maintain its and their corporate existence in good standing.

         7.5 Properties. Maintain, preserve and protect and cause its Restricted
Subsidiaries  to maintain,  preserve and protect all  franchises and trade names
and preserve all the  remainder of their  property used or useful in the conduct
of their business and keep the same in good repair, working order and condition,
and from time to time make or cause to be made all needful  and proper  repairs,
renewals,  replacements,  betterments and  improvements  thereto (subject to the
limitations of Section 8.6 hereof) so that the business carried on in connection
therewith may be properly and efficiently conducted at all times, and permit the
Bank and its agents to enter upon and  inspect  such  properties  during  normal
business hours,  provided that nothing contained herein shall require Pulaski or
any of its Restricted  Subsidiaries to repair,  maintain or replace any property
which  is not  of  substantial  use  in the  business  of  Pulaski  or any  such
Restricted  Subsidiary and nothing contained herein shall prevent Pulaski or any
Restricted  Subsidiary from selling or otherwise  disposing of any such property
if such property is no longer of  substantial  use in the business of Pulaski or
such Restricted Subsidiary.

         7.6 Employee  Benefit  Pension Plans.  During each year within the time
required by law, pay  contributions  that in the judgment of the chief executive
and chief financial  officers of Pulaski after  reasonable  inquiry are believed
adequate to meet at least all applicable  minimum funding standards set forth in
Sections 302 through 305 of ERISA, with respect to each employee benefit plan of
Pulaski and any of its Subsidiaries  covered by ERISA (including any plan of any

                                       24
<PAGE>

member of a  controlled  group of  corporations  and all trades  and  businesses
(whether or not incorporated) under common control which,  together with Pulaski
or any of its Subsidiaries,  are treated as a single employer, under Section 414
of the Internal Revenue Code of 1986, as amended), and file or cause to be filed
each  annual  report  required  to be filed  pursuant to Section 103 of ERISA in
connection with each such plan for each year and notify the Bank within ten (10)
days of the  occurrence  of a  Reportable  Event (as defined in Section  4043 of
ERISA) that could  reasonably be expected to constitute  grounds for termination
of any such plan by PBGC or for the appointment by the appropriate United States
District Court of a trustee to administer  any such plan,  provided that nothing
contained  herein  shall  prohibit  Pulaski  or  any of  its  Subsidiaries  from
terminating any such plan if it has theretofore  complied with the provisions of
this Section.

         7.7 Compliance With Laws.  Comply and cause each of its Subsidiaries to
comply in all material respects with all applicable laws, rules, regulations and
orders of any governmental  authority having jurisdiction over them,  including,
without limitation,  the Americans with Disabilities Act of 1990 and those laws,
rules, regulations and orders relating to the environment.

         7.8 Notice of  Environmental  Matters.  Immediately  advise the Bank in
writing of (i) any and all enforcement,  cleanup,  remedial,  removal,  or other
governmental or regulatory actions instituted, completed or, to the knowledge of
either Borrower,  threatened pursuant to any applicable federal, state, or local
laws,  ordinances or regulations  relating to any Hazardous  Materials affecting
the  business  operations  of Pulaski or any of its  Subsidiaries,  and (ii) all
claims made or, to the  knowledge of either  Borrower,  threatened  by any third
party  against  Pulaski  or  any  of  its  Subsidiaries   relating  to  damages,
contribution,  cost recovery  compensation,  loss or injury  resulting  from any
Hazardous Materials and immediately notify the Bank of any remedial action taken
by either Borrower in response to any such action or claim or threatened  action
or claim  with  respect  to the  business  operations  of  Pulaski or any of its
Subsidiaries.

                                       25
<PAGE>

         7.9 Deposit  Account.  Maintain  the  principal  depository  account of
Pulaski with the Bank.

         7.10 Repayment of Loans. Repay not less than Three Million Five Hundred
Thousand  Dollars  ($3,500,000) of term loans (including the Loan) of Pulaski in
each of its fiscal years.

         7.11 Year 2000 Compliance. Promptly notify the Bank in the event either
Borrower  determines  that any  computer  application  which is  material to the
operations  of  Pulaski  or any of its  Subsidiaries  or any of  their  material
vendors or suppliers  will not be fully Year 2000  compliant on a timely  basis,
except to the extent that such failure could not  reasonably be expected to have
a Material Adverse Effect.

                                  ARTICLE VIII

                               NEGATIVE COVENANTS

         Until  payment  in  full  of the  Note  and  performance  of all  other
obligations  of the  Borrowers  hereunder  other than those set forth in Section
11.4, without the written consent of the Bank, Pulaski will not:

         8.1 Borrowing.  Create,  incur, assume or suffer to exist any liability
for borrowed money or the deferred  payment for goods and services or permit any
of its Restricted  Subsidiaries to create,  incur, assume or suffer to exist any
liability  for borrowed  money or the deferred  payment for goods and  services,
except (i) liabilities under this Agreement, (ii) liabilities in existence as of
the date of this  Agreement  which are described on Schedule 1 attached  hereto,
(iii) accrued expenses and trade accounts payable arising in the ordinary course
of business and payable on customary  terms,  (iv)  purchase  money  obligations

                                       26
<PAGE>

(including  capitalized  lease  obligations),  provided no such  obligations  in
excess of Five Hundred  Thousand  Dollars  ($500,000) are incurred in any fiscal
year, and (v) liabilities under any interest rate protection  agreement relating
to the Loan or any other indebtedness permitted hereby.

         8.2 Mortgages and Pledges. Create, incur, assume or suffer to exist any
mortgage,  pledge,  lien or other  encumbrance of any kind upon, or any security
interest  in, any of its  property  or assets,  whether  now owned or  hereafter
acquired,  or permit any of its  Restricted  Subsidiaries  to do so,  except (i)
liens for taxes  not yet  delinquent  or being  contested  in good  faith and by
appropriate  proceedings;  (ii) liens in connection with workers'  compensation,
unemployment insurance, or other social security obligations;  (iii) deposits or
pledges to secure bids, tenders, contracts (other than contracts for the payment
of money),  leases,  statutory  obligations,  surety or appeal bonds,  and other
obligations  of like nature  arising in the ordinary  course of  business;  (iv)
mechanic's, workman's, materialman's, landlord's, carrier's, or other like liens
arising in the ordinary course of business with respect to obligations  that are
not due or that are being contested in good faith; (v) mortgages, pledges, liens
and  encumbrances  in favor of the Bank;  (vi) zoning  restrictions,  easements,
licenses,  restrictions on the use of real property or minor  irregularities  in
the title thereto,  which do not, in the opinion of Pulaski,  materially  impair
the use of such  property in the  operation of the business of Pulaski or any of
its  Subsidiaries  or the  value  of  such  property  for the  purposes  of such
business;  (vii) any  mortgage,  encumbrance  or other  lien upon,  or  security
interest  in,  any  property  hereafter  acquired  by  Pulaski  or  any  of  its
Subsidiaries  created  contemporaneously  with  such  acquisition  to  secure or
provide for the payment or financing of any part of the purchase  price thereof,
or the  assumption  of any  mortgage,  encumbrance  or lien  upon,  or  security
interest in, any such property  hereafter  acquired existing at the time of such
acquisition,  or the  acquisition of any such property  subject to any mortgage,

                                       27
<PAGE>

encumbrance or other lien or security interest without the assumption thereof to
the extent they are not  prohibited  under Section 8.6,  provided that each such
mortgage,  encumbrance,  lien or  security  interest  shall  attach  only to the
property so acquired and fixed  improvements  thereon;  (viii) liens existing on
the date of this  Agreement  which are described on Schedule 2 attached  hereto;
and (ix)  liens for  judgments  which do not  otherwise  constitute  an Event of
Default. Nothing contained in this Section 8.2 shall prohibit either Borrower or
any of its Restricted  Subsidiaries  from entering into any lease required to be
capitalized by GAAP in accordance with the Financial  Accounting Standards Board
Statement  No. 13  (Accounting  for Leases) in effect on June 1, 1992,  provided
such lease is not otherwise prohibited by the terms of this Agreement.

         8.3  Merger,  Acquisition  or Sale of Assets.  Enter into any merger or
consolidation  with, or acquire all or  substantially  all of the assets of, any
person, firm, joint venture or corporation (except for investments not exceeding
$5,000,000  in the  aggregate),  or sell,  lease or otherwise  dispose of all or
substantially  all of its assets except in the ordinary  course of its business,
or permit any of its Restricted Subsidiaries to do so.

         8.4 Contingent  Liabilities.  Assume,  guarantee,  endorse or otherwise
become  surety  for or upon the  obligation  of any other  person,  firm,  joint
venture or corporation,  or permit any of its Restricted  Subsidiaries to do so,
except by the endorsement of negotiable instruments for deposit or collection in
the ordinary course of business.

         8.5  Investments.  Purchase or acquire the  obligations or stock of, or
any other interest in, any other person,  firm,  joint  venture,  corporation or
other  enterprise  whatsoever,  or permit any  Restricted  Subsidiary  to do so,
except (i) accounts  receivable  arising in the ordinary  course of its business
and  other  receivables  arising  out of the  sale  of  equipment  which  is not
prohibited by Section 8.3; (ii) certificates of deposit issued by banks that are
members of the Federal Reserve System and have total assets of not less than One
Billion Dollars ($1,000,000,000);  (iii) direct obligations of the United States
of America;  (iv) obligations of agencies of the United States Government if the

                                       28
<PAGE>

payment of all principal and interest thereof is guaranteed by the United States
of America; (v) commercial paper issued by corporations  domiciled in the United
States of America and  maturing  within nine (9) months or less from the date of
investment and given the highest rating by Moody's Investors Service, Inc. or by
Standard  and Poor's  Ratings  Group,  a division of The McGraw Hill  Companies,
Inc.; (vi) repurchase  agreements  having  maturities not more than one (1) year
from the date of  acquisition  which are entered into with banking  institutions
described  in clause (ii) above;  and (vii) money  market  funds or mutual funds
which invest solely in  obligations  described in clauses (i),  (ii),  (iii) and
(iv) of this  Section  8.5 and (viii) any such  investments  which do not exceed
$5,000,000 in the aggregate for Pulaski and its Subsidiaries.

         8.6 Capital Expenditures. Make any capital expenditures exceeding Seven
Million Five Hundred Thousand Dollars  ($7,500,000) in the aggregate for Pulaski
and its  Subsidiaries in fiscal year 1999 or in any fiscal year  thereafter,  or
permit any of its Subsidiaries to do so.

         8.7 Sale and Leaseback. Directly or indirectly enter into, or cause any
of its Restricted  Subsidiaries  to enter into, any  arrangement  whereby either
Pulaski or any such  Restricted  Subsidiary  shall sell or  transfer  any of the
fixed assets then owned by either of them and shall thereupon or within one year
thereafter rent or lease the assets so sold or transferred.

         8.8 Loans.  Make or permit any of its Restricted  Subsidiaries  to make
loans or advances to any person,  firm, joint venture or corporation,  except in
the normal course of business and except that Pulaski or any of its Subsidiaries
may make loans to its employees, provided the aggregate amount of all such loans
to employees  (other than advances in the ordinary course of business for travel
and other expenses,  which shall not be limited by this section) does not exceed
One Million Dollars ($1,000,000) at any time outstanding.

                                       29
<PAGE>

         8.9 Environmental Law Compliance.  Use or permit any other party to use
any  Hazardous  Materials  at any of the places of business of Pulaski or any of
its Subsidiaries  except such materials as are incidental to their normal course
of  business,  maintenance  and  repair,  and  are  in  strict  accordance  with
applicable  laws,  unless  such use will not  cause or  result  in and might not
reasonably be expected to cause or result in a Material  Adverse Effect.  If the
Bank has reasonable cause to believe that this covenant has or will be violated,
Pulaski  agrees to permit the Bank,  its agents,  contractors  and  employees to
enter and inspect any of the places of business of Pulaski,  and agrees to cause
any of its  Subsidiaries  to permit such entry and inspection as to any place of
business of such Subsidiary,  at any reasonable times upon three (3) days' prior
notice for the purposes of conducting an environmental  investigation  and audit
(including  taking  physical  samples) to insure that Pulaski is complying  with
this covenant and to pay the reasonable  costs for such  inspections if the Bank
has  reasonable  cause to believe a  violation  of this  Section  has  occurred.
Pulaski  shall  provide  the  Bank,  its  agents,  contractors,   employees  and
representatives  with  access to and  copies  of any and all data and  documents
relating  to  or  dealing  with  any  Hazardous   Materials   used,   generated,
manufactured,  stored or disposed of by business operations of Pulaski or any of
its Subsidiaries within five (5) days of the request therefor.

         8.10 Use of Proceeds.  Use or permit any  Subsidiary to use, all or any
part of the  proceeds  of any of the  Loan  for the  purpose  of  purchasing  or
carrying any margin stock,  as that term is defined in Regulation U of the Board
of  Governors  of the Federal  Reserve  System,  or  otherwise  in  violation of
Regulations  G, T, U or X of the  Board  of  Governors  of the  Federal  Reserve
System.

                                       30
<PAGE>

         8.11 Business.  Engage in any business other than the business in which
Pulaski  and  its  Subsidiaries  are  presently  engaged  and  any  business  of
substantially the same type.

         8.12  Accounting.  Change the fiscal  year or method of  accounting  of
Pulaski.

         8.13 Subsidiaries.  Organize,  acquire or own any Restricted Subsidiary
(other than a  Borrower),  unless  such  restricted  Subsidiary  unconditionally
guarantees the Loan pursuant to a guaranty in form and substance satisfactory to
the Bank and its counsel.

                                   ARTICLE IX

                               FINANCIAL COVENANTS

         Until  payment  in  full  of the  Note  and  performance  of all  other
obligations  of the  Borrowers  hereunder  other than those set forth in Section
11.4, without the written consent of the Bank, of the Borrowers will not:

         9.1 Funded Debt to EBITDA. Permit the Ratio of Funded Debt to EBITDA of
Pulaski  and its  Subsidiaries  to exceed  3.25 to 1 as of the end of the fiscal
quarters ending on or about April 30, 1999, on or about July 31, 1999, and on or
about  October  31,  1999;  or to  exceed  3.0 to 1 as of the end of the  fiscal
quarter  ending on or about  January  31,  2000,  or as of the end of any fiscal
quarter thereafter.

         9.2 Funded Debt to  Capitalization.  Permit the Ratio of Funded Debt to
Capitalization of Pulaski and its Subsidiaries to exceed 0.50 to 1 as of the end
of the fiscal quarter ending on or about April 30, 1999, or as of the end of any
fiscal quarter thereafter.

         9.3 Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage Ratio
of Pulaski and its  Subsidiaries  to be less than 1.50 to 1 as of the end of the
fiscal quarter ending on or about April 30, 1999, or as of the end of any fiscal
quarter thereafter.

                                       31
<PAGE>

                                    ARTICLE X

                                EVENTS OF DEFAULT

         If one or more of the  following  events of default  (each an "Event of
Default") shall occur:

         10.1  Default  shall be made by the  Borrowers  in the  payment  of any
interest upon the Note when such  interest is due and payable,  and such default
shall continue for a period of five (5) days; or

         10.2 Default shall be made in the payment of any principal of the Note,
when and as the same  becomes due and  payable,  whether at the stated  maturity
thereof or by acceleration or otherwise; or

         10.3 Default shall be made in the due  observance or performance of any
term,  covenant,  or  agreement  contained in Article VIII or Article IX of this
Agreement and such default shall continue unremedied for a period of thirty (30)
days, or default shall be made in the due observance or performance of any other
term,  covenant or agreement  contained in this Agreement and such default shall
continue  unremedied  for a period of  thirty  (30) days  after  written  notice
thereof from the Bank to the Borrowers; or

         10.4  Default  shall  be  made in the  payment  of any  installment  of
principal or interest on any  indebtedness of Pulaski or any of its Subsidiaries
to the Bank other than the Loan,  when and as the same  becomes due and payable,
whether at the stated maturity thereof or by acceleration or otherwise; or

                                       32
<PAGE>

         10.5 A custodian,  other than a trustee, receiver or agent appointed or
authorized  to take  charge of less than  substantially  all of the  property of
Pulaski or any of its  Restricted  Subsidiaries  for the purpose of  enforcing a
lien  against  such  property,  is  appointed  for, or takes  possession  of any
material  property or assets of, Pulaski or any of its Restricted  Subsidiaries;
or

         10.6 Any  representation  or warranty made by either Borrower herein or
any  statement  or  representation  made in any  certificate,  report or opinion
delivered  pursuant  hereto  shall prove to have been  incorrect in any material
respect when made; or

         10.7  Either  Pulaski or any of its  Restricted  Subsidiaries  shall be
generally not paying its debts as such debts become due, shall become  insolvent
or unable to meet its  obligations as they mature,  shall make an assignment for
the benefit of  creditors,  shall consent to the  appointment  of a trustee or a
receiver,  or shall  admit in  writing  its  inability  to pay its debts as they
mature; or

         10.8 A trustee or receiver (other than a custodian described in Section
10.5) shall be appointed for Pulaski or any of its  Restricted  Subsidiaries  or
for a substantial  part of the  properties of any of them without the consent of
either  Borrower,  as the case may be, and not be discharged  within thirty (30)
days; or

         10.9 Any case in bankruptcy shall be commenced,  or any reorganization,
arrangement,  insolvency or liquidation  proceedings shall be instituted,  by or
against  Pulaski or any of its  Restricted  Subsidiaries,  and, if  commenced or
instituted  against either,  be consented to by any of them, as the case may be,
or remain undismissed for a period of forty-five (45) days; or

         10.10  Any  default  shall  be made  in the  performance  of any  other
obligation or  obligations  incurred in  connection  with any  indebtedness  for
borrowed  money of Pulaski or any of its  Subsidiaries  aggregating  One Million
Dollars ($1,000,000) or more, if such default causes the holder of such notes or
indebtedness  (or a trustee  on behalf of such  holder)  to cause  them or it to
become  due  prior  to  their  or its  stated  maturity,  or any  such  note  or
indebtedness  becomes due prior to its stated maturity or shall not be paid when
due; or

                                       33
<PAGE>

         10.11 One or more final judgments for the payment of money  aggregating
in excess of One Million  Dollars  ($1,000,000)  which is or are not  adequately
insured or indemnified  against shall be rendered at any time against Pulaski or
any of its Subsidiaries (and not satisfied or otherwise discharged) and the same
shall  remain  undischarged  for a period of thirty (30) days during  which time
execution shall not be effectively stayed; or

         10.12 Either Pulaski or any of its Restricted  Subsidiaries shall be in
default  under the terms of any  interest  rate  protection  agreement  to which
either Pulaski or any of its Restricted Subsidiaries is a party and such default
shall continue after any applicable grace period or if there is no grace period,
for a period of thirty (30) days,  or as a result of any default any other party
to such agreement shall have the right to exercise any remedy thereunder; or

         10.13 Any  substantial  part of the properties of Pulaski or any of its
Restricted Subsidiaries shall be sequestered or attached and shall not have been
returned to the possession of Pulaski or any of its Restricted  Subsidiaries  or
released from such attachment within thirty (30) days; or

         10.14 The  occurrence of a Reportable  Event as defined in Section 4043
of ERISA which could constitute  grounds for termination of any employee benefit
plan of  Pulaski  or any of its  Subsidiaries  covered  by  ERISA by the PBGC or
grounds for the appointment by the appropriate United States District Court of a
trustee to administer  any such plan,  then, (A) upon the occurrence of an Event
of  Default  described  in  Section  10.9  hereof,  (i) the  entire  outstanding
principal  balance of the Note and all  accrued  interest  thereon and all other
amounts payable by the Borrowers to the Bank shall automatically and immediately
become due and payable without presentment, demand, protest or any notice of any
kind,  or any other action by or on behalf of the Bank,  all of which are hereby
waived,   anything   contained   herein   or  in  the   Note  to  the   contrary
notwithstanding,  and (ii) the Bank may  proceed to enforce  payment of the Note
and to  exercise  any  and all of its  rights  hereunder,  under  the  Note,  or
otherwise  available to the Bank,  and (B) upon the  occurrence  of any Event of
Default  other than an Event of Default  described in Section  10.9 hereof,  the
Bank may, by written notice to Pulaski, declare the Note to be forthwith due and
payable,  whereupon  the Note shall be  forthwith  due and  payable,  both as to
principal and interest, without presentment, demand, protest or any other notice

                                       34
<PAGE>

of any kind, all of which are hereby expressly waived, anything contained herein
or in the Note to the  contrary  notwithstanding,  and the Bank may  proceed  to
enforce payment of the Note and exercise any and all of their rights  hereunder,
under the Note or otherwise available to the Bank. In the event the Bank demands
payment under the  provisions  of this Section 10 during any unexpired  Interest
Period,  the  Borrowers  will pay, in addition to principal  and  interest,  all
reasonable losses, expenses and liabilities which Bank may sustain as the result
of such acceleration (including, without limitation,  breakage costs and funding
losses, determined as provided in Section 4.2).

                                       35
<PAGE>

                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS

         11.1  Costs  and  Expenses.  The  Borrowers  will  pay  all  reasonable
out-of-pocket  expenses  incurred by the Bank in connection with the negotiation
and preparation of this Agreement and the Note (whether or not the  transactions
hereby contemplated shall be consummated), the making of the Loan hereunder, any
waiver of any provision  hereof,  or any amendment or amendment and  restatement
hereof,  the  enforcement  of the  rights  of the Bank in  connection  with this
Agreement  or with the Loan or the Note,  including,  but not  limited  to,  the
reasonable fees and disbursements of counsel for the Bank,  provided the fees of
counsel for the  negotiation  and  preparation of this Agreement and the Note do
not exceed Fifteen Thousand Dollars ($15,000).

         11.2  Setoffs.  If an Event  of  Default  shall  have  occurred  and be
continuing,  the Bank shall have the right to setoff  against  all  property  of
either  Borrower now or at any time  hereafter in the Bank's  possession  in any
capacity whatever  (including,  without limitation,  any balance or share of any
deposit,  trust or  agency  account)  as  security  for all  liabilities  of the
Borrowers to the Bank.

         11.3 Cumulative  Rights and No Waiver.  Each and every right granted to
the Bank  hereunder  or under  any  other  document  delivered  hereunder  or in
connection herewith, or allowed it by law or equity, shall be cumulative and may
be exercised  from time to time. No failure on the part of the Bank to exercise,
and no delay in  exercising,  any right shall operate as a waiver  thereof,  nor
shall any single or partial exercise by the Bank of any right preclude any other
or future exercise thereof or the exercise of any other right.

         11.4     Indemnification of the Bank

         (a) Each  Borrower  shall  indemnify,  defend and hold the Bank and its
respective  successors and assigns harmless from and against any and all claims,
demands, suits, losses, damages, assessments, fines, penalties, reasonable costs

                                       36
<PAGE>

or other expenses (including reasonable attorneys' fees and court costs) arising
from or in any way related to actual or  threatened  damage to the  environment,
agency costs of investigation, personal injury or death, or property damage, due
to a release  or  alleged  release  of  Hazardous  Materials,  arising  from the
business  operations of Pulaski or any of its  Subsidiaries or in the surface or
ground  water  arising  from the  business  operations  of Pulaski or any of its
Subsidiaries  or gaseous  emissions  arising  from the  business  operations  of
Pulaski or any of its  Subsidiaries or any other  condition  existing or arising
from the business  operations  of Pulaski or any of its  Subsidiaries  resulting
from the use or existence of Hazardous  Materials,  whether such claim proves to
be true or false. The term "property damage" as used in this paragraph includes,
but is not limited to, damage to any real or personal property of Pulaski or any
of its  Subsidiaries,  the Bank or any third  parties.  The  obligations  of the
Borrowers under this paragraph shall survive the repayment of the Loan.

         (b) From and at all  times  after  the date of this  Agreement,  and in
addition to all of the Bank's other rights and remedies  against the  Borrowers,
each Borrower  agrees to hold the Bank harmless  from, and to indemnify the Bank
against all losses, damages,  reasonable costs and expenses (including,  but not
limited to, reasonable attorneys' fees, costs and expenses) incurred by the Bank
from and after the date hereof, whether direct, indirect or consequential,  as a
result of or arising from or relating to any suit,  action or  proceeding by any
person  other  than  one of the  Borrowers,  whether  threatened  or  initiated,
asserting a claim for any legal or equitable remedy against any person under any
statute or  regulation,  including,  but not  limited  to, any  federal or state
securities  laws,  or under any  common  law or  equitable  cause or  otherwise,
arising from or in connection with the  negotiation,  preparation,  execution or
performance of, or the financing  transactions  contemplated by, this Agreement,
the Note and any other  documents  relating to the Loan,  or the  furnishing  of

                                       37
<PAGE>

funds to either  Borrower  by the Bank,  pursuant to this  Agreement;  provided,
however,  that the  foregoing  indemnification  shall not  protect the Bank from
loss, damage, cost or expense directly attributable to its willful misconduct or
gross  negligence.  All of the foregoing losses,  damages,  reasonable costs and
expenses  of the Bank  shall be payable by the  Borrowers  within  five (5) days
after demand by the Bank.

         (c) The undertakings  contained in this Section 11.4 are in addition to
any  contained  in any  security  agreement,  deed of trust or other  collateral
document now or hereafter delivered to or for the benefit of the Bank.

         11.5 Mandatory  Arbitration.  Any controversy or claim between or among
the parties  hereto,  including,  but not limited  to,  those  arising out of or
relating  to  this  Agreement,  the  Note or any  other  related  agreements  or
instruments, including any claim based on or arising from an alleged tort, shall
be determined by binding  arbitration in accordance with the Federal Arbitration
Act (or if not applicable,  the applicable state law), the Rules of Practice and
Procedure for the Arbitration of Commercial  Disputes of  J.A.M.S./Endispute  or
any successor  thereof  ("J.A.M.S.") and the "Special Rules" set forth below. In
the event of any inconsistency,  the Special Rules shall control.  Judgment upon
any arbitration award may be entered in any court having jurisdiction. Any party
to this  Agreement  may  bring an  action,  including  a  summary  or  expedited
proceeding,  to compel  arbitration  of any  controversy  or claim to which this
Agreement applies in any court having jurisdiction over such action.

         (a) Special  Rules.  The  arbitration  shall be  conducted  in Roanoke,
Virginia,  and  administered  by J.A.M.S.  who will  appoint an  arbitrator;  if
J.A.M.S. is unable or legally precluded from administering the arbitration, then

                                       38
<PAGE>

the American  Arbitration  Association will serve. All arbitration hearings will
be commenced within ninety (90) days of the demand for arbitration; further, the
arbitrator  shall,  upon  a  showing  of  cause,  be  permitted  to  extend  the
commencement of such hearing only for up to an additional sixty (60) days.

         (b)  Reservations of Rights.  Nothing in this Agreement shall be deemed
to  (i)  limit  the  applicability  of  any  otherwise  applicable  statutes  of
limitation  or repose and any waivers  contained  in this  Agreement;  (ii) be a
waiver by the Bank of the protection  afforded to it by 12 U.S.C.  ss. 91 or any
substantially  equivalent  state law;  (iii)  limit the right of the Bank (A) to
exercise  self-help  remedies  such as (but not limited  to)  setoff,  or (B) to
foreclose  against any real or personal  property  collateral,  or (C) to obtain
from a court  provisional  or  ancillary  remedies  such as (but not limited to)
injunctive  relief,  writ of possession or the  appointment of a receiver or the
right of Pulaski or Dawson to contest any such  action;  or (iv) limit the right
of any party to initiate a proceeding  under the United States  Bankruptcy Code.
The Bank may exercise such self-help rights,  foreclose upon such property, sell
or otherwise  dispose of collateral  after default or obtain such provisional or
ancillary  remedies  before,  during or after the  pendency  of any  arbitration
proceeding brought pursuant to this Agreement. Neither the exercise of self-help
remedies nor the  institution or maintenance of an action for foreclosure or for
provisional or ancillary  remedies shall constitute a waiver of the right of any
party, including the claimant in any such action, to arbitrate the merits of the
controversy or claim occasioning  resort to such remedies.  No provision in this
Agreement  regarding  submission  to  jurisdiction  and/or venue in any court is
intended or shall be construed to be in  derogation  of the  provisions  in this
Agreement for arbitration of any controversy or claim.

         11.6 Joint and Several  Obligations.  The  obligations of the Borrowers
under this Agreement and the Note shall be joint and several.

                                       39
<PAGE>

         11.7  Notices.  Any notice  shall be  conclusively  deemed to have been
received by a party  hereto and be  effective  on the day on which  delivered to
such party at the  addresses  set forth below (or at such other  address as such
party shall  specify to the other party in writing) or if sent by  registered or
certified  mail,  on the  third  business  day  after  the day on which  mailed,
addressed to such party at said address:

                  If to the Borrowers:

                           Pulaski Furniture Corporation
                           One Pulaski Square
                           Post Office Box 1371
                           Pulaski, Virginia  24301

                           Attn:    Carl Hoffman
                                    Chief Financial Officer

                  If to the Bank:

                           NationsBank, N.A.
                           302 South Jefferson Street  (Zip 24011)
                           Post Office Box 14111
                           Roanoke, Virginia  24038-4111

                           Attn:    James D. Cockey
                                    Senior Vice President

         11.8 Accounting Terms.  Except as otherwise  expressly provided herein,
all  accounting  terms  used  herein  shall be  interpreted,  and all  financial
statements and certificates  and reports as to financial  matters required to be
delivered to the Bank  hereunder  shall be  prepared,  in  accordance  with GAAP
except  that  interim   financial   statements  shall  be  subject  to  year-end
adjustments and the omission of footnotes.

                                       40
<PAGE>

         11.9 Entire  Agreement.  This  Agreement  (including the Note and other
agreements and documents  referred to herein)  constitutes the entire  agreement
between the parties and supersedes all prior agreements and understandings, oral
and written, between the parties with respect to the subject matter hereof.

         11.10 Applicable Law. This Agreement and the Note shall be construed in
accordance with and governed by the laws of the Commonwealth of Virginia.

         11.11 Amendments,  Etc. No amendment of any provision of this Agreement
or the Note  shall be  effective  unless  it is in  writing  and  signed  by the
Borrowers and the Bank,  and no waiver of any provision of this Agreement or the
Note,  nor  consent to any  departure  by either  Borrower  therefrom,  shall be
effective  unless it is in writing and signed by the Bank. Any waiver or consent
shall be effective  only in the specific  instance and for the specific  purpose
for which it is given.

         11.12  Survivorship.  All covenants,  agreements,  representations  and
warranties made herein and in the certificates  delivered  pursuant hereto shall
survive  the  making  of the Loan  herein  contemplated  and the  execution  and
delivery of the Note and shall  continue in full force and effect so long as the
Note is  outstanding  and unpaid.  Whenever in this Agreement any of the parties
hereto is referred to, such reference  shall be deemed to include the successors
and assigns of such party;  and all covenants,  promises and agreements by or on
behalf of either  Borrower which are contained in this Agreement  shall bind and
inure to the benefit of the successors and assigns of the Bank.

         11.13  Headings.  Section and Section  headings in this  Agreement  are
included  herein for  convenience  of reference  only and shall not constitute a
part of this Agreement for any other purpose.

                                       41
<PAGE>

         11.14 Execution in Counterparts.  This Agreement may be executed in any
number of  counterparts,  each of which when so executed and delivered  shall be
deemed to be an original and all of which taken  together  shall  constitute but
one and the same instrument.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       42
<PAGE>

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

                                   PULASKI FURNITURE CORPORATION

                                   By
                                     ---------------------------------
                                   Its
                                      --------------------------------

                                   DAWSON FURNITURE COMPANY, INC.

                                   By
                                     ---------------------------------
                                   Its
                                      --------------------------------

                                   NATIONSBANK, N.A.

                                   By
                                     ---------------------------------
                                   Its
                                      --------------------------------Exhibit 4.2

                                 TERM LOAN NOTE

                              Due October 31, 2005

$17,000,000                                                    February 26, 1999
                                                               Roanoke, Virginia

         FOR  VALUE  RECEIVED,  PULASKI  FURNITURE  CORPORATION  ("Pulaski"),  a
Virginia corporation,  and DAWSON FURNITURE COMPANY, INC. ("Dawson"), a Virginia
corporation,  jointly and severally  promise to pay to the order of NATIONSBANK,
N.A. (the "Bank") at its office at 302 South Jefferson Street, Roanoke, Virginia
24011-2010,  or at such other place as the Bank may from time to time  designate
in  writing,   the  principal  sum  of  Seventeen  Million  and  00/100  Dollars
($17,000,000)  in  twenty-seven  (27)  principal  installments  with  the  first
installment due on April 30, 1999, and with subsequent  installments due on each
July 31, October 31, January 31 and April 30 thereafter to and including October
31, 2005 (each an "Installment  Payment Date"),  on which date the entire unpaid
principal  balance and all accrued and unpaid  interest will be due and payable.
Each of the first twelve (12)  installments  shall be in the principal amount of
Three Hundred Seventy-Five  Thousand Dollars ($375,000).  Each of the thirteenth
through the sixteenth  installments  which shall be due and payable on April 30,
2002,  July 31,  2002,  October  31,  2002 and  January 31, 2003 shall be in the
principal amount of Seven Hundred Fifty Thousand Dollars ($750,000). Each of the
seventeenth  through  the  twenty-sixth  installments  which shall be due on the
Installment  Payment Dates  commencing on April 30, 2003 and  continuing on each
Installment  Payment  Date  thereafter  through  July 31,  2005  shall be in the
principal amount of Eight Hundred Seventy-Five Thousand Dollars ($875,000).  The
twenty-seventh  installment,  which shall be due on October 31, 2005 shall be in
the principal amount of Seven Hundred Fifty Thousand Dollars ($750,000). Pulaski
and Dawson also  jointly  and  severally  promise to pay  interest on the unpaid
principal balance of such sum from the date hereof at the rates and on the dates
set forth in the Loan Agreement (as hereinafter defined) until the same shall be
paid in full. In any event, the entire unpaid principal balance of this Note and
all accrued and unpaid interest will be due and payable on October 31, 2005.

         If any  installment of interest is not paid within ten (10) days of its
due date,  Pulaski and Dawson  jointly and severally  agree to pay the holder of
this  Note on  demand a late  charge of two  percent  (2%) of the  amount of the
installment.

         This Note evidences a borrowing  under, and is subject to, the terms of
a Term Loan  Agreement  dated  February 26, 1999 (the "Loan  Agreement")  by and
among Pulaski, Dawson and the Bank.

         Pulaski and Dawson shall have the right to make prepayments as provided
in the Loan Agreement.

         The events of default (the "Events of Default") hereunder are described
in the Credit  Agreement and are  incorporated  herein by reference.  The entire
unpaid  amount of the  principal  of this  Note and all  accrued  interest  will
automatically  become due upon the Event of Default described in Section 10.9 of
the Loan  Agreement.  In the event of any or all of the other Events of Default,
the entire unpaid principal amount of this Note and all accrued interest thereon
may be declared  due and  payable in the manner and with the effect  provided in
the Loan Agreement.

         Presentment,  protest  and  notice of  dishonor  are  hereby  waived by
Pulaski and Dawson and all  endorsers  hereon.  Pulaski  and Dawson  jointly and
severally agree to pay all costs of collection,  including reasonable attorneys'
fees,  if after an Event of  Default  this  Note be  placed  in the  hands of an
attorney  for  collection,  or if after an Event of Default the holder  finds it
necessary  or  desirable  to secure the  services or advice of an attorney  with
regard to collection.

         IN WITNESS WHEREOF,  PULASKI FURNITURE CORPORATION and DAWSON FURNITURE
COMPANY,  INC.  have caused  their  names to be signed by their duly  authorized
officers this date first above written.

                                   PULASKI FURNITURE CORPORATION

                                   By
                                     ---------------------------------
                                   Its
                                      --------------------------------

                                   DAWSON FURNITURE COMPANY, INC.

                                   By
                                     ---------------------------------
                                   Its
                                      --------------------------------

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