<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 2, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ------------ to -----------
Commission File Number 1-11577
FALCON PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 43-0730877
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
9387 DIELMAN INDUSTRIAL DRIVE 63132
ST. LOUIS, MISSOURI (Zip Code)
(Address of principal executive offices)
(314) 991-9200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months, and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
------- -------
As of June 15, 1998, the registrant had 9,046,090 shares of common stock,
$.02 par value, outstanding.
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
--------------------
<TABLE>
Falcon Products, Inc. and Subsidiaries
--------------------------------------
Consolidated Statements of Earnings
-----------------------------------
(Unaudited)
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Endeded
------------------------ ------------------------
May 2, May 3, May 2, May 3,
(In thousands, except per share data) 1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 33,651 $ 26,850 $ 61,711 $ 53,583
Cost of sales 24,126 19,006 44,052 38,081
--------- --------- --------- ---------
Gross margin 9,525 7,844 17,659 15,502
Selling, general and administrative expenses 6,465 5,351 11,813 10,355
--------- --------- --------- ---------
Operating profit 3,060 2,493 5,846 5,147
Interest income (expense), net (90) 16 7 48
Minority interest in consolidated subsidiary 19 40 34 75
--------- --------- --------- ---------
Earnings from continuing operations before
income taxes 2,989 2,549 5,887 5,270
Income tax expense 1,151 969 2,267 2,002
--------- --------- --------- ---------
Net earnings from continuing operations 1,838 1,580 3,620 3,268
Earnings from discontinued operations, net of tax -- 362 -- 541
--------- --------- --------- ---------
Net earnings $ 1,838 $ 1,942 $ 3,620 $ 3,809
========= ========= ========= =========
Basic and diluted earnings per share:
Continuing operations $ .20 $ .16 $ .38 $ .33
Discontinued operations -- .04 -- .05
--------- --------- --------- ---------
Net earnings per share $ .20 $ .20 $ .38 $ .38
========= ========= ========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
2
<PAGE> 3
<TABLE>
Falcon Products, Inc. and Subsidiaries
--------------------------------------
Consolidated Balance Sheets
---------------------------
(Unaudited)
<CAPTION>
(In thousands, except share data)
May 2, Nov. 1,
1998 1997
---------- ---------
<S> <C> <C>
Assets
- ------
Current assets:
Cash and cash equivalents $ 2,057 $ 16,294
Accounts receivable, less allowances
of $807 and $337, respectively 19,922 18,625
Inventories 24,861 22,687
Prepaid expenses and other current assets 5,609 3,732
---------- ---------
Total current assets 52,449 61,338
---------- ---------
Property, plant and equipment:
Land 2,707 2,731
Buildings and improvements 14,147 12,347
Machinery and equipment 34,763 26,360
---------- ---------
51,617 41,438
Less accumulated depreciation 22,702 16,227
---------- ---------
Net property, plant and equipment 28,915 25,211
---------- ---------
Other assets, net of accumulated amortization:
Goodwill 23,557 9,454
Other 3,848 3,354
---------- ---------
Total other assets 27,405 12,808
---------- ---------
$ 108,769 $ 99,357
========== =========
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable $ 12,458 $ 10,458
Accrued liabilities 5,518 10,716
Current maturities of long-term debt 1,364 1,473
---------- ---------
Total current liabilities 19,340 22,647
Long-term obligations:
Long-term debt 17,825 321
Pension liability 96 96
Deferred income taxes 241 2,155
Minority interest in consolidated subsidiary 840 874
---------- ---------
Total liabilities 38,342 26,093
---------- ---------
Stockholders' equity:
Common stock, $.02 par value:
authorized 20,000,000 shares;
9,915,117 shares issued 198 198
Additional paid-in capital 47,376 47,376
Treasury stock, at cost (865,527 and
477,512 shares, respectively) (12,263) (6,855)
Cumulative translation adjustments (903) (727)
Retained earnings 36,019 33,272
---------- ---------
Total stockholders' equity 70,427 73,264
---------- ---------
$ 108,769 $ 99,357
========== =========
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE> 4
<TABLE>
Falcon Products, Inc. and Subsidiaries
--------------------------------------
Consolidated Statements of Stockholders' Equity
-----------------------------------------------
Twenty-Six Weeks Ended May 2, 1998, and May 3, 1997
---------------------------------------------------
(Unaudited)
<CAPTION>
(In thousands, except per share amounts)
Additional Cumulative Total
Common Paid-In Treasury Translation Retained Stockholders'
Stock Capital Stock Adjustments Earnings Equity
------ --------- ---------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, November 2, 1996 $ 198 $ 47,260 $ (1,529) $ 274 $ 22,273 $ 68,476
Net earnings -- -- -- -- 3,809 3,809
Exercise of stock options -- -- 182 -- (80) 102
Issuance of stock to Employee
Stock Purchase Plan -- 8 426 -- -- 434
Compensation expense under
stock and option plans -- 4 -- -- 16 20
Translation adjustments -- -- -- 6 -- 6
Cash dividends ($.07 per share) -- -- -- -- (679) (679)
Treasury stock purchases -- -- (2,487) -- -- (2,487)
Issuance of stock for business
acquisition -- (4) 181 -- -- 177
------ --------- ---------- ------- --------- ---------
Balance, May 3, 1997 $ 198 $ 47,268 $ (3,227) $ 280 $ 25,339 $ 69,858
====== ========= ========== ======= ========= =========
Balance, November 1, 1997 $ 198 $ 47,376 $ (6,855) $ (727) $ 33,272 $ 73,264
Net earnings -- -- -- -- 3,620 3,620
Exercise of stock options -- -- 219 -- (139) 80
Issuance of stock to Employee
Stock Purchase Plan -- -- 30 -- -- 30
Translation adjustments -- -- -- (176) -- (176)
Cash dividends ($.08 per share) -- -- -- -- (734) (734)
Treasury stock purchases -- -- (5,900) -- -- (5,900)
Issuance of stock for business
acquisition -- -- 243 -- -- 243
------ --------- ---------- ------- --------- ---------
Balance, May 2, 1998 $ 198 $ 47,376 $ (12,263) $ (903) $ 36,019 $ 70,427
====== ========= ========== ======= ========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE> 5
<TABLE>
Falcon Products, Inc. and Subsidiaries
--------------------------------------
Consolidated Statements of Cash Flows
--------------------------------------
(Unaudited)
<CAPTION>
Twenty-Six Weeks Ended
-----------------------
(In thousands) May 2, May 3,
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 3,620 $ 3,809
-------- --------
Adjustments to reconcile net earnings to net cash provided by
(used in) operating activities:
Earnings from discontinued operations -- (541)
Depreciation and amortization 1,823 1,984
Translation adjustments (176) 6
Compensation expense under stock and option plans -- 20
Minority interest in consolidated subsidiary (34) (75)
Change in assets and liabilities:
Decrease (increase) in:
Accounts receivable, net 2,166 (442)
Inventories (1,429) (2,645)
Prepaid expenses and other current assets (1,127) (210)
Other assets, net (221) (536)
Increase (decrease) in:
Accounts payable (1,082) (120)
Accrued liabilities (6,510) (1,155)
-------- --------
Total adjustments (6,590) (3,714)
-------- --------
Net cash provided by (used in) by continuing operations (2,970) 95
Net cash provided by discontinued operations -- 719
-------- --------
Net cash provided by (used in) operating activities (2,970) 814
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment, net (3,931) (2,464)
Cost of business acquired, net of cash (15,962) --
-------- --------
Net cash used in investing activities (19,893) (2,464)
-------- --------
Cash flows from financing activities:
Additions to (repayment of) long-term debt, net 15,150 (69)
Common stock issuances 110 713
Cash dividends (734) (679)
Treasury stock purchases (5,900) (2,487)
-------- --------
Net cash provided by (used in) financing activities 8,626 (2,522)
-------- --------
Net decrease in cash and cash equivalents (14,237) (4,172)
Cash and cash equivalents-beginning of period 16,294 5,714
-------- --------
Cash and cash equivalents-end of period $ 2,057 $ 1,542
======== ========
Supplemental Cash Flow Information:
Cash paid for interest $ 277 $ 44
======== ========
Cash paid for income taxes $ 9,770 $ 1,687
======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
5
<PAGE> 6
Falcon Products, Inc. and Subsidiaries
--------------------------------------
Notes to Consolidated Financial Statements
------------------------------------------
Note 1. - Accounting Policies
Interest Rate Hedge Agreement
- -----------------------------
The Company manages fluctuations in interest rates by using an interest
rate swap agreement. The interest rate swap is accounted for as a hedge of a
debt obligation, and accordingly, the net settlement amount is recorded as an
adjustment to interest expense in the period incurred.
The Company's interest rate swap agreement requires the Company to pay
a fixed rate and receive a floating rate thereby creating fixed rate debt.
The Company's participation in interest rate hedging transactions involves
instruments that have a close correlation with its debt, thereby managing
risk. The interest rate swap agreement has been designed for hedging
purposes and is not held or issued for speculative purposes.
Note 2. - Interim Results
The financial statements contained herein are unaudited. In the
opinion of management, these financial statements reflect all adjustments,
consisting only of normal recurring adjustments, which are necessary for fair
presentation of the results of the interim periods presented. Interim
results are not necessarily indicative of results for the full years.
Reference is made to the footnotes to the consolidated financial statements
contained in the Company's Annual Report on Form 10-K for the year ended
November 1, 1997, filed with the Securities and Exchange Commission.
Note 3. - Business Acquisition
In March 1998, the Company acquired the stock of Howe Furniture
Corporation and its subsidiaries ("Howe") for $16.595 million. Howe
specializes in the design, engineering and marketing of tables for the
contract office and hospitality markets. The Company used the purchase method
of accounting to record this acquisition. Accordingly, results of operations
have been included in the financial statements from the date of acquisition.
The excess of the purchase price over amounts assigned to net tangible assets
($13.365 million) was recorded as Goodwill.
In connection with this acquisition, the Company entered into a unsecured
$20.0 million revolving line of credit expiring April 22, 2000. The rate of
interest on borrowings under this agreement is, at the Company's option, the
Prime Rate, Federal Funds Rate or LIBOR adjusted for a spread based upon the
Company's leverage ratio. The variable interest rate was 6.5% at May 2,
1998. Under the revolving line of credit agreement, the Company must comply
with certain covenants including, but not limited to, the maintenance of
specific ratios.
6
<PAGE> 7
Note 4. - Interest Rate Hedge Agreement
The Company entered into an interest swap agreement with a notional amount
of $12.0 million. The notional amount of the interest swap does not represent
amounts exchanged by the parties and thus, is not a measure of the Company's
exposure through its use of the interest rate swap agreement. The amounts
exchanged are determined by reference to the notional amount and other terms
of the contract.
Management believes that the seller of the interest rate swap agreement
will be able to meet its obligation under the agreement. The Company has
policies regarding the financial stability and credit standing of major
counterparties. Nonperformance by the counterparty is not anticipated nor
would it have a material adverse effect on the results of operations or
financial position of the Company.
Item 2. - Management's Discussion and Analysis of Results of Operations and
-----------------------------------------------------------------
Financial Condition
-------------------
The information contained in this Item 2 includes statements regarding
matters which are not historical facts (including statements as to the
Company's plans, beliefs or expectations) that are forward-looking statements
within the meaning of the federal securities laws. Because such
forward-looking statements involve certain risks and uncertainties, the
Company's actual results and the timing of certain events could differ
materially from those discussed herein.
RESULTS OF OPERATIONS
General
The following table sets forth, for the periods presented, certain
information relating to the operations of the Company, expressed as a
percentage of net sales:
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Endeded
------------------------ ------------------------
May 2, May 3, May 2, May 3,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 71.7 70.8 71.4 71.1
--------- --------- --------- ---------
Gross margin 28.3 29.2 28.6 28.9
Selling, general and administrative expenses 19.2 19.9 19.1 19.3
--------- --------- --------- ---------
Operating profit 9.1 9.3 9.5 9.6
Interest income (expense), net and other (.2) .2 -- .2
--------- --------- --------- ---------
Earnings from continuing operations before income
taxes 8.9 9.5 9.5 9.8
Income tax expense 3.4 3.6 3.7 3.7
--------- --------- --------- ---------
Net earnings from continuing operations 5.5% 5.9% 5.8% 6.1%
========= ========= ========= =========
</TABLE>
Thirteen weeks ended May 2, 1998, compared to the thirteen weeks ended May 3,
1997
Net earnings from continuing earnings were $1.8 million or $.20 per
share in the second quarter of 1998, compared to $1.6 million or $.16 per
share in 1997, an increase in net earnings from continuing operations of
16.3% and an increase in earnings per share from continuing operations of
25.0%.
7
<PAGE> 8
Net earnings were $1.8 million in the second quarter of 1998, compared
to $1.9 million in 1997, a decrease of 5.4%. Earnings per share were $.20 in
both 1998 and 1997.
Net sales for the second quarter of 1998 were $33.7 million, an
increase of 25.3% over 1997 second quarter net sales of $26.9 million. This
increase resulted from increased sales within the Company's lodging and
government markets. Sales in the second quarter of 1998 also benefited from
the acquisition of Howe.
Cost of sales was $24.1 million for the 1998 second quarter, an
increase of 26.9% from $19.0 million in the second quarter of 1997. The
overall increase is a result of the increased sales volume. Gross margin
increased to $9.5 million for the second quarter of 1998, a 21.4% increase
from $7.8 million in the same quarter of 1997. Gross margin as a percentage
of net sales decreased to 28.3% in 1998 from 29.2% in 1997. The lower gross
margin percentage during the second quarter of 1998 was due primarily to
production difficulties associated with the plant consolidations of the
Belding, Michigan, and Anaheim, California manufacturing operations into the
City of Industry, California facility.
Selling, general and administrative expenses were $6.5 million in the
second quarter of 1998, compared to $5.4 million in the second quarter of
1997, an 20.8% increase. Selling, general and administrative expenses as a
percentage of net sales, decreased to 19.2% for the second quarter of 1998 as
compared to 19.9% for the same period of 1997. The increase from the prior
year is principally related to increased selling costs, customer support
costs, and increased marketing expenditures. The decrease in the expense
rate in 1998 is primarily the result of certain efficiencies associated with
higher sales volume, the Company's cost control measures and lower expenses
for the Company's management bonus program.
Net interest expense was $90,000 for the second quarter of 1998, versus
net interest income of $16,000 for the comparable period in 1997. Financing
related to the Howe acquisition accounted for the increase in borrowing
costs. Income tax expense increased by $182,000, or 18.8%, in the second
quarter of 1998 compared to the same period in 1997 due to greater earnings
from continuing operations in 1998.
Twenty-six weeks ended May 2, 1998, compared to the twenty-six weeks ended
May 3, 1997
Net earnings from continuing operations were $3.6 million or $.38 per
share in the second quarter of 1998, compared to $3.3 million or $.33 per
share in 1997, an increase in net earnings from continuing operations of
10.8% and an increase in earnings per share from continuing operations of
15.2%.
Net earnings were $3.6 million or .$38 per share, and $3.8 million or
$.38 per share, during the first half of 1998 and 1997, respectively.
Net sales for the first half of 1997 were $61.7 million, an increase of
15.2% over net sales of $53.6 million recorded for the same period in 1996.
Net sales increased due to growth in the Company's contract/office, lodging
and government markets and the Howe acquisition.
8
<PAGE> 9
Cost of sales was $44.1 million for the first half of 1998, an increase
of 15.7% from $38.1 million in the first half of 1997. The overall increase
is primarily related to the increased sales volume. Gross margin increased
to $17.7 million for the first half of 1998, a 13.9% increase from $15.5
million in the same period of 1997. Gross margin as a percentage of net
sales decreased to 28.6% in 1998 from 28.9% in 1997. The lower gross margin
percentage during the second quarter of 1998 was due primarily to production
difficulties associated with the plant consolidations of the Belding,
Michigan, and Anaheim, California manufacturing operations into the City of
Industry, California facility.
Selling, general and administrative expenses were $11.8 million in the
first half of 1998, compared to $10.4 million in 1997, a 14.1% increase. The
overall increase is primarily related to increased sales and marketing
programs, including salaries, travel expense and commissions, associated with
the increased sales volume. Selling, general and administrative expenses as
a percentage of net sales decreased to 19.1% for the first half of 1998, as
compared to 19.3% for the same period of 1997, due to certain efficiencies
associated with the higher sales volume, the Company's cost control measures
and lower expenses for the Company's management bonus program.
Net interest income was $7,000 for the first half of 1998, versus
$48,000 for the comparable period in 1997. Financing costs associated with
the Howe acquisition caused the decrease in net interest income. Income tax
expense was $2.3 million for the first half of 1998, as compared to $2.0
million for 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at May 2, 1998, was $33.1 million and its
ratio of current assets to current liabilities was 2.7 to 1.0, compared with
$38.7 million and 2.7 to 1.0 at November 1, 1997.
In connection with the Howe acquisition, the Company entered into a
unsecured $20.0 million revolving line of credit expiring April 22, 2000.
The rate of interest on borrowings under this agreement is, at the Company's
option, the Prime Rate, Federal Funds Rate or LIBOR adjusted for a spread
based upon the Company's leverage ratio. The variable interest rate was 6.5%
at May 2, 1998. Under the revolving line of credit agreement, the Company
must comply with certain covenants including, but not limited to, the
maintenance of specific ratios.
At May 2, 1998, $17.550 million was outstanding under the revolving line
of credit and the Company had unused and available borrowing capacity of
$2.450 million.
The Company expects that it will meet its ongoing working capital and
capital requirements from a combination of internally generated funds,
available cash reserves and available borrowings under its revolving credit
facility. The Company's operating cash flows constitute its primary source
of liquidity.
During the first two quarters of 1998, the Company repurchased 420,500
shares of its common stock for a total cost of approximately $5.9 million.
The Company is authorized to purchase up to an additional 436,000 shares of
its common stock under stock repurchase programs authorized by the Board of
Directors.
9
<PAGE> 10
PART II - OTHER INFORMATION
Item 1. - Legal Proceedings
-----------------
From time to time, the Company is subject to legal proceedings and
other claims arising in the ordinary course of its business. The Company
maintains insurance coverage against potential claims in an amount it
believes to be adequate. There are no material pending legal proceedings,
other than routine litigation incidental to the business, to which the
Company is a party or of which any of the Company's property is the subject.
Item 2. - Changes in Securities
---------------------
None.
Item 3. - Defaults Upon Senior Securities
-------------------------------
None.
10
<PAGE> 11
Item 4. - Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Company held its Annual Meeting of Stockholders on March 6,
1998, for the purposes of electing three Class B directors for a
term expiring in 2001, and considering and voting upon proposals
to adopt the Company's 1997 Employee Stock Purchase Plan and
Non-Employee Directors' Deferred Compensation Plan.
The number of votes for and withheld for each nominee for director
and the number of votes for, against and abstained for the
proposals to adopt the Company's 1997 Employee Stock Purchase Plan
and Non-Employee Directors' Deferred Compensation Plan are as
follows:
<TABLE>
<CAPTION>
Nominee Votes For Votes Withheld
------- --------- --------------
<S> <C> <C>
Raynor E. Baldwin 7,365,851 16,442
Darryl C. Rosser 7,369,305 12,988
James Schneider 7,369,798 12,495
<CAPTION>
Votes For Votes Against Votes Abstained
--------- ------------- ---------------
<S> <C> <C> <C>
Adoption of 1997 Employee
Stock Purchase Plan 6,581,525 155,499 645,269
<CAPTION>
Votes For Votes Against Votes Abstained
--------- ------------- ---------------
<S> <C> <C> <C>
Adoption of Non-Employee
Directors' Deferred
Compensation Plan 6,573,181 164,202 644,910
</TABLE>
Item 5. - Other Information
-----------------
None.
Item 6. - Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
Exhibit 10.29 - Loan Agreement dated as of April 22,1998,
between the Company and NationsBank, N.A. entered into
with respect to a $20,000,000 revolving line of credit,
filed herewith
Exhibit 11 - Computation of Earnings Per Share
Exhibit 27 - Financial data schedule (filed in EDGAR
version only)
(b) Reports on Form 8-K
None.
11
<PAGE> 12
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FALCON PRODUCTS, INC.
---------------------
(Registrant)
Date: June 15, 1998 /s/ Franklin A. Jacobs
----------------------
Franklin A. Jacobs
Chief Executive Officer
and Chairman of the Board
Date: June 15, 1998 /s/ Michael J. Dreller
----------------------
Michael J. Dreller
Vice President and
Chief Financial Officer
12
<PAGE> 1
LOAN AGREEMENT
AMONG
NATIONSBANK, N.A.
AS LENDER
AND
FALCON PRODUCTS, INC.
AND ITS SUBSIDIARIES, AS IDENTIFIED HEREIN
AS BORROWER
Effective April 22, 1998
<PAGE> 2
Table of Contents
1. Effective Date.. . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Definitions and Rules of Construction. . . . . . . . . . . . . . 1
2.1. Listed Definitions.. . . . . . . . . . . . . . . . . . . . 1
2.2. Other Definitions. . . . . . . . . . . . . . . . . . . . . 1
2.3. References to Borrower.. . . . . . . . . . . . . . . . . . 1
2.4. Accounting Terms.. . . . . . . . . . . . . . . . . . . . . 1
2.5. Meaning of Satisfactory. . . . . . . . . . . . . . . . . . 1
2.6. Computation of Time Periods. . . . . . . . . . . . . . . . 2
2.7. Certificates of Borrower and Borrowing Officer, Advance
Requests--Appointment of Falcon Products, Inc. . . . . . . 2
2.8. General. . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. Lender's Commitment. . . . . . . . . . . . . . . . . . . . . . . 2
3.1. Revolving Loan Commitment. . . . . . . . . . . . . . . . . 2
3.1.1. Aggregate Amount; Reductions.. . . . . . . . . . . 2
3.1.2. Limitation on Revolving Loan Advances. . . . . . . 3
3.1.3. Revolving Note.. . . . . . . . . . . . . . . . . . 3
4. Interest.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.1. Interest on Loans; Interest Periods for Eurodollar
Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.2. Increments.. . . . . . . . . . . . . . . . . . . . . . . . 4
4.3. Conversion of Loans. . . . . . . . . . . . . . . . . . . . 4
4.4. Time of Accrual. . . . . . . . . . . . . . . . . . . . . . 5
4.5. Computation. . . . . . . . . . . . . . . . . . . . . . . . 5
4.6. Rate After Maturity. . . . . . . . . . . . . . . . . . . . 5
5. Payments.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.1. Scheduled Payments on Revolving Loan.. . . . . . . . . . . 5
5.1.1. Interest.. . . . . . . . . . . . . . . . . . . . . 5
5.1.2. Principal. . . . . . . . . . . . . . . . . . . . . 6
5.2. Prepayments. . . . . . . . . . . . . . . . . . . . . . . . 6
5.2.1. Mandatory Prepayments When Over-Advances Exist . . 6
5.3. Manner of Payments and Timing of Application of
Payments.. . . . . . . . . . . . . . . . . . . . . . . . . 6
5.3.1. Payment Requirement. . . . . . . . . . . . . . . . 6
5.4. Application of Payments and Proceeds.. . . . . . . . . . . 6
5.4.1. Interest Calculation.. . . . . . . . . . . . . . . 6
5.5. Voluntary Prepayments. . . . . . . . . . . . . . . . . . . 6
5.6. Returned Instruments.. . . . . . . . . . . . . . . . . . . 7
5.7. Compelled Return of Payments or Proceeds.. . . . . . . . . 7
5.8. Due Dates Not on Business Days.. . . . . . . . . . . . . . 7
6. Procedure for Obtaining Advances.. . . . . . . . . . . . . . . . 7
i
<PAGE> 3
6.1. Initial Advances.. . . . . . . . . . . . . . . . . . . . . 7
6.2. Subsequent Revolving Loan Advances.. . . . . . . . . . . . 7
6.2.1. Borrower Requests. . . . . . . . . . . . . . . . 7
6.2.2. Lender's Right to Make Other Revolving Loan
Advances.. . . . . . . . . . . . . . . . . . . . 7
6.2.2.1. Payment of Loan Obligations. . . . . . . . 7
6.2.2.2. Payments to Other Creditors. . . . . . . . 8
6.3. Disbursement.. . . . . . . . . . . . . . . . . . . . . . . 8
6.4. Restrictions on Advances.. . . . . . . . . . . . . . . . . 8
6.5. Restriction on Number of Eurodollar Loans. . . . . . . . . 8
6.6. Each Advance Request Certification.. . . . . . . . . . . . 8
6.7. Requirements for Every Advance Request.. . . . . . . . . . 8
6.8. Exoneration of Lender. . . . . . . . . . . . . . . . . . . 9
6.9. Suspension of Obligation to Make Eurodollar
Advances.. . . . . . . . . . . . . . . . . . . . . . . . . 9
7. Power of Attorney. Each . . . . . . . . . . . . . . . . . . . . 9
8. Conditions of Lending. . . . . . . . . . . . . . . . . . . . . . 9
8.1. Conditions to Initial Advance. . . . . . . . . . . . . . . 9
8.1.1. Listed Documents and Other Items.. . . . . . . .10
8.1.2. Financial Condition. . . . . . . . . . . . . . .10
8.1.3. Default. . . . . . . . . . . . . . . . . . . . .10
8.1.4. Representations and Warranties.. . . . . . . . .10
8.1.5. Material Adverse Change. . . . . . . . . . . . .10
8.1.6. Environmental. . . . . . . . . . . . . . . . . .10
8.1.7. Pending Material Proceedings.. . . . . . . . . .10
8.1.8. Payment of Fees. . . . . . . . . . . . . . . . .10
8.1.9. Other Items. . . . . . . . . . . . . . . . . . .10
8.2. Conditions to Subsequent Advances. . . . . . . . . . . . .10
8.2.1. General Conditions. . . . . . . . . . . . . . .10
8.2.2. Representations and Warranties. . . . . . . . .11
8.2.3. Default.. . . . . . . . . . . . . . . . . . . .11
9. Representations and Warranties.. . . . . . . . . . . . . . . . .11
9.1. Organization and Existence.. . . . . . . . . . . . . . . .11
9.2. Authorization. . . . . . . . . . . . . . . . . . . . . . .11
9.3. Due Execution. . . . . . . . . . . . . . . . . . . . . . .11
9.4. Enforceability of Obligations. . . . . . . . . . . . . . .11
9.5. Burdensome Obligations. . .. . . . . . . . . . . . . . . .11
9.6. Legal Restraints. . .. . . . . . . . . . . . . . . . . . .11
9.7. Labor Disputes. . .. . . . . . . . . . . . . . . . . . . .12
9.8. No Material Proceedings. . . . . . . . . . . . . . . . . .12
9.9. Material Licenses. . . . . . . . . . . . . . . . . . . . .12
9.10. Compliance with Material Laws. . . . . . . . . . . . . . .12
9.10.1. Proceedings. . . . . . . . . . . . . . . . . . .12
9.10.2. Hazardous Materials on Real Property.. . . . . .12
9.11. Other Names. . . . . . . . . . . . . . . . . . . . . . . .12
9.12. Financial Statements.. . . . . . . . . . . . . . . . . . .12
9.13. No Change in Condition.. . . . . . . . . . . . . . . . . .12
ii
<PAGE> 4
9.14. No Defaults. . . . . . . . . . . . . . . . . . . . . .12
9.15. Solvency.. . . . . . . . . . . . . . . . . . . . . . .13
9.16. Indebtedness.. . . . . . . . . . . . . . . . . . . . .13
9.17. Tax Liabilities; Governmental Charges. . . . . . . . .13
9.18. Pension Benefit Plans. . . . . . . . . . . . . . . . .13
9.19. Welfare Benefit Plans. . . . . . . . . . . . . . . . .13
9.20. Retiree Benefits.. . . . . . . . . . . . . . . . . . .13
9.21. State of Property. . . . . . . . . . . . . . . . . . .13
9.22. Margin Stock.. . . . . . . . . . . . . . . . . . . . .13
9.23. Securities Matters.. . . . . . . . . . . . . . . . . .14
9.24. Investment Company Act, Etc. . . . . . . . . . . . . .14
9.25. No Material Misstatements or Omissions.. . . . . . . .14
9.26. Investments. . . . . . . . . . . . . . . . . . . . . .14
9.27. Indirect Obligations.. . . . . . . . . . . . . . . . .14
9.28. Capital Leases.. . . . . . . . . . . . . . . . . . . .14
9.29. Subsidiaries.. . . . . . . . . . . . . . . . . . . . .14
9.30. Falcon International E.U.R.L. and Falcon Products of
California, Inc... . . . . . . . . . . . . . . . . . .14
10. Survival.. . . . . . . . . . . . . . . . . . . . . . . . . . . .14
11. Affirmative Covenants. . . . . . . . . . . . . . . . . . . . . .15
11.1. Use of Proceeds. . . . . . . . . . . . . . . . . . . .15
11.2. Corporate Existence. . . . . . . . . . . . . . . . . .15
11.3. Maintenance of Property and Leases.. . . . . . . . . .15
11.4. Inventory. . . . . . . . . . . . . . . . . . . . . . .15
11.5. Insurance. . . . . . . . . . . . . . . . . . . . . . .15
11.6. Payment of Taxes and Other Obligations.. . . . . . . .15
11.7. Compliance With Laws.. . . . . . . . . . . . . . . . .16
11.8. Discovery and Clean-Up of Hazardous Material.. . . . .16
11.9. Termination of Pension Benefit Plan. . . . . . . . . .16
11.10. Notice to Lender of Material Events. . . . . . . . . .16
11.11. Borrowing Officer. . . . . . . . . . . . . . . . . . .17
11.12. Accounting System; Tracing of Proceeds.. . . . . . . .17
11.13. Financial Statements.. . . . . . . . . . . . . . . . .17
11.13.1. Annual Financial Statements. . . . . . . .17
11.13.2. Quarterly Financial Statements.. . . . . .18
11.14. Other Financial Information. . . . . . . . . . . . . .18
11.14.2. Stockholder and SEC Reports. . . . . . . .18
11.14.3. Pension Benefit Plan Reports.. . . . . . .19
11.14.4. Tax Returns. . . . . . . . . . . . . . . .19
11.15. Review of Accounts.. . . . . . . . . . . . . . . . . .19
11.16. Inventory. . . . . . . . . . . . . . . . . . . . . . .19
11.17. Annual Projections.. . . . . . . . . . . . . . . . . .19
11.18. Other Information. . . . . . . . . . . . . . . . . . .19
11.19. Exams by Lender. . . . . . . . . . . . . . . . . . . .19
11.20. Access to Officers and Auditors. . . . . . . . . . . .19
11.21. Intercompany Indebtedness. . . . . . . . . . . . . . .20
11.22. Liquidation of Falcon Products of California, Inc. . .20
11.23. Further Assurances.. . . . . . . . . . . . . . . . . .20
iii
<PAGE> 5
12. Negative Covenants. Each . . . . . . . . . . . . . . . . . . .20
12.1. Investments. . . . . . . . . . . . . . . . . . . . . .20
12.2. Indebtedness.. . . . . . . . . . . . . . . . . . . . .21
12.3. Security Interests.. . . . . . . . . . . . . . . . . .21
12.4. Change of Control. . . . . . . . . . . . . . . . . . .22
12.5. Distributions. . . . . . . . . . . . . . . . . . . . .22
12.6. Indirect Obligations.. . . . . . . . . . . . . . . . .22
12.7. Capital Structure; Equity Securities.. . . . . . . . .22
12.8. Change of Business.. . . . . . . . . . . . . . . . . .22
12.9. Transactions With Affiliates.. . . . . . . . . . . . .22
12.10. No Default on Indebtedness or Material Agreements. . .22
12.11. Conflicting Agreements.. . . . . . . . . . . . . . . .22
12.12. Fiscal Year. . . . . . . . . . . . . . . . . . . . . .22
12.13. Bank Accounts. . . . . . . . . . . . . . . . . . . . .23
12.14. New Subsidiaries.. . . . . . . . . . . . . . . . . . .23
12.15. Transactions Having a Material Adverse Effect or
Causing a Default. . . . . . . . . . . . . . . . . . .23
12.16. Disposal of Property.. . . . . . . . . . . . . . . . .23
12.17. Acquisitions.. . . . . . . . . . . . . . . . . . . . .23
13. Financial Covenants. . . . . . . . . . . . . . . . . . . . . . .23
13.1. Special Definitions. . . . . . . . . . . . . . . . . .23
13.2. Maximum Leverage.. . . . . . . . . . . . . . . . . . .24
13.3. Total Liabilities to Tangible Net Worth. . . . . . . .24
13.4. Minimum Current Ratio. . . . . . . . . . . . . . . . .24
14. Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
14.1. Events of Default. . . . . . . . . . . . . . . . . . .24
14.1.1. Failure to Pay Principal or Interest. . . . .24
14.1.2. Failure to Pay Other Amounts Owed to
Lender. . . . . . . . . . . . . . . . . . . .24
14.1.3. Failure to Pay Amounts Owed to Other
Persons.. . . . . . . . . . . . . . . . . . .25
14.1.4. Representations or Warranties.. . . . . . . .25
14.1.5. Certain Covenants.. . . . . . . . . . . . . .25
14.1.6. Other Covenants.. . . . . . . . . . . . . . .25
14.1.7. Acceleration of Other Indebtedness. . . . . .25
14.1.8. Default Under Other Agreements. . . . . . . .25
14.1.9. Bankruptcy; Insolvency; Etc.. . . . . . . . .25
14.1.10. Judgments; Attachment; Settlement; Etc. . . .25
14.1.11. Pension Benefit Plan Termination, Etc.. . . .26
14.1.12. Liquidation or Dissolution. . . . . . . . . .26
14.1.13. Seizure of Assets.. . . . . . . . . . . . . .26
14.1.14. Loss to Collateral. . . . . . . . . . . . . .26
14.2. Cross-Default. . . . . . . . . . . . . . . . . . . . .26
14.3. Rights and Remedies in the Event of Default. . . . . .26
14.3.1. Termination of Commitments. . . . . . . . . .26
14.3.2. Acceleration. . . . . . . . . . . . . . . . .27
14.3.3. Right of Set-off. . . . . . . . . . . . . . .27
14.3.4. Miscellaneous.. . . . . . . . . . . . . . . .27
14.3.5. Joint and Several.. . . . . . . . . . . . . .27
iv
<PAGE> 6
14.3.6. Application of Funds. . . . . . . . . . . . .27
14.4. Notice.. . . . . . . . . . . . . . . . . . . . . . . .27
15. Changes in Circumstances.. . . . . . . . . . . . . . . . . . . .28
15.1. Compensation for Increased Costs and Reduced Returns;
Capital Adequacy.. . . . . . . . . . . . . . . . . . .28
15.1.1. Increased Costs or Reduced Returns to
Lender. . . . . . . . . . . . . . . . . . . .28
15.1.2. Capital Adequacy. . . . . . . . . . . . . . .28
15.1.3. Notice to Borrower. . . . . . . . . . . . . .29
15.2. Limitations on Eurodollar Loans. . . . . . . . . . . .29
15.2.1. Market Failure. . . . . . . . . . . . . . . .29
15.2.2. Inadequate Reflection of Cost.. . . . . . . .29
15.3. Illegality.. . . . . . . . . . . . . . . . . . . . . .29
15.4. Compensation.. . . . . . . . . . . . . . . . . . . . .29
15.4.1. Early Payment.. . . . . . . . . . . . . . . .29
15.4.2. Failure to Take Advances. . . . . . . . . . .30
15.5. Treatment of Affected Revolving Loans. . . . . . . . .30
15.5.1. Payments. . . . . . . . . . . . . . . . . . .30
15.5.2. Prime Rate. . . . . . . . . . . . . . . . . .30
16. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
16.1. Gross-Up.. . . . . . . . . . . . . . . . . . . . . . .30
16.2. Lender's Undertaking.. . . . . . . . . . . . . . . . .31
17. Usury Limitations. . . . . . . . . . . . . . . . . . . . . . . .31
18. General. . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
18.1. Lender's Right to Cure.. . . . . . . . . . . . . . . .31
18.2. Rights Not Exclusive.. . . . . . . . . . . . . . . . .32
18.3. Survival of Agreements.. . . . . . . . . . . . . . . .32
18.4. Payment of Expenses. . . . . . . . . . . . . . . . . .32
18.5. General Indemnity. . . . . . . . . . . . . . . . . . .32
18.6. Changes in Accounting Principles.. . . . . . . . . . .33
18.7. Loan Records.. . . . . . . . . . . . . . . . . . . . .33
18.8. Loan Obligations Payable in Dollars. . . . . . . . . .34
19. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . .34
19.1. Notices. . . . . . . . . . . . . . . . . . . . . . . .34
19.2. Amendments, Waivers and Consents.. . . . . . . . . . .34
19.3. Rights Cumulative. . . . . . . . . . . . . . . . . . .34
19.4. Successors and Assigns.. . . . . . . . . . . . . . . .34
19.5. Severability.. . . . . . . . . . . . . . . . . . . . .35
19.6. Counterparts.. . . . . . . . . . . . . . . . . . . . .35
19.7. Governing Law; No Third Party Rights.. . . . . . . . .35
19.8. Counterpart Facsimile Execution. . . . . . . . . . . .35
19.9. No Other Agreements. . . . . . . . . . . . . . . . . .35
19.10. Negotiated Transaction.. . . . . . . . . . . . . . . .35
19.12. CHOICE OF FORUM. . . . . . . . . . . . . . . . . . . .36
19.13. SERVICE OF PROCESS.. . . . . . . . . . . . . . . . . .37
v
<PAGE> 7
19.14. JURY TRIAL.. . . . . . . . . . . . . . . . . . . . . .37
19.15. Incorporation By Reference.. . . . . . . . . . . . . .37
19.16. Statutory Notice.. . . . . . . . . . . . . . . . . . .37
19.17. Statutory Notice-Insurance.. . . . . . . . . . . . . .37
vi
<PAGE> 8
LOAN AGREEMENT
In consideration of the mutual agreements herein and other
sufficient consideration, the receipt of which is hereby
acknowledged, Falcon Products, Inc., a Delaware corporation, Falcon
Holdings, Inc., a Missouri corporation, Falcon de Juarez, S.A. de
C.V., a Mexican corporation, Funduciones Technicas, S.A., a
Mexican corporation, Falcon De Baja California, S.A. de C.V., a
Mexican corporation, Falcon Mimon, a.s., a Czech Republic
corporation formerly known as MITON, a.s., Howe Furniture
Corporation, a New York corporation, Johnson Industries, Inc., an
Illinois corporation, Howe Europe A/S, a Denmark corporation, and
Falcon Products (Shenzhen) Limited, a China corporation also known
as Falcon Products China, Limited, and each of their respective
Subsidiaries, whether now existing or hereafter acquired or created
(separately and collectively, "Borrower") and NationsBank, N.A.
("Lender") agree as follows:
1. EFFECTIVE DATE. This Agreement is effective April 22, 1998.
2. DEFINITIONS AND RULES OF CONSTRUCTION.
2.1. LISTED DEFINITIONS. Capitalized words defined in the
Glossary and Index of Defined Terms attached hereto as Exhibit
2.1 shall have such defined meanings wherever used in this
Agreement and the other Loan Documents.
2.2. OTHER DEFINITIONS. If a capitalized word in this
Agreement is not defined in the Glossary and Index of Defined
Terms, it shall have such meaning as defined elsewhere herein,
or if not defined elsewhere herein, the meaning defined in the
UCC.
2.3. REFERENCES TO BORROWER. A Borrower, any Borrower, each
Borrower, and every Borrower refers to Falcon Products, Inc.,
a Delaware corporation, Falcon Holdings, Inc., a Missouri
corporation, Falcon de Juarez, S.A. de C.V., a Mexican
corporation, Funduciones Technicas, S.A., a Mexican
corporation, Falcon De Baja California, S.A. de C.V., a
Mexican corporation, Falcon Mimon, a.s., a Czech Republic
corporation formerly known as MITON, a.s., Howe Furniture
Corporation, a New York corporation, Johnson Industries, Inc.,
an Illinois corporation, Howe Europe A/S, a Denmark
corporation, and Falcon Products (Shenzhen) Limited, a China
corporation also known as Falcon Products China, Limited, and
each of their respective Subsidiaries, whether now existing or
hereafter created, organized or acquired from time to time,
both separately and collectively, as though each such entity
were actually listed, and their Obligations and liabilities
(including, without limitation, the Loan Obligations) under
the Loan Documents are joint and several in all respects.
2.4. ACCOUNTING TERMS. Unless the context otherwise requires,
accounting terms herein that are not defined herein shall be
determined under GAAP. All financial measurements
contemplated hereunder respecting Borrower shall be made and
calculated for Borrower and all of its now existing or later
acquired, created or organized subsidiaries, on a consolidated
basis in accordance with GAAP unless expressly provided
otherwise herein.
2.5. MEANING OF SATISFACTORY. Whenever herein a document or
matter is required to be satisfactory to Lender, unless
expressly stated otherwise such document must be satisfactory
to Lender in both form and substance in its commercially
reasonable discretion, and unless expressly stated otherwise,
Lender shall have the commercially reasonable discretion to
determine whether the document or matter is satisfactory. The
right to exercise such discretion is absolute.
<PAGE> 9
2.6. COMPUTATION OF TIME PERIODS. In computing or defining
periods of time from a specified date to a later specified
date, and in computing the accrual of interest or fees, the
word from shall mean from and including and the words to and
until shall each mean to but excluding. Periods of days
referred to in this Agreement shall be counted in calendar
days unless Business Days are expressly prescribed, and
references in this Agreement to months and years are to
calendar months and calendar years unless otherwise specified.
2.7. CERTIFICATES OF BORROWER AND BORROWING OFFICER, ADVANCE
REQUESTS--APPOINTMENT OF FALCON PRODUCTS, INC. For so long as
the Loan Obligations remain outstanding and any Commitment
remains in effect, each Borrower hereby covenants and agrees,
and hereby grants to Falcon Products, Inc., an absolute and
irrevocable power of attorney coupled with interest, to
(a) certify the financial statements of Borrower, (b) request
Advances and execute and deliver written requests for
Advances, (c) make any other deliveries required to be
delivered periodically hereunder to Lender, and (d) act as its
Borrowing Officer, and Lender is entitled to rely on any such
document or certificate signed by Falcon Products, Inc.
2.8. GENERAL. Unless the context of this Agreement clearly
requires otherwise: (i) references to the plural include the
singular and vice versa; (ii) references to any Person
include such Person's successors and assigns but, if
applicable, only if such successors and assigns are permitted
by this Agreement; (iii) references to one gender include all
genders; (iv) including is not limiting; (v) or has the
inclusive meaning represented by the phrase and/or; (vi) the
words hereof, herein, hereby, hereunder and similar terms in
this Agreement refer to this Agreement as a whole, including
its Exhibits, and not to any particular provision of this
Agreement; (vii) the word Section or section and Page or page
refer to a section or page, respectively, of, and the word
Exhibit refers to an Exhibit to, this Agreement unless it
expressly refers to something else; (viii) reference to any
agreement, document, or instrument (including this Agreement
and any other Loan Document or other agreement, document or
instrument defined herein), means such agreement, document, or
instrument as amended, modified, restated or replaced and in
effect from time to time in accordance with the terms thereof
and, if applicable, the terms hereof, and includes all
attachments thereto and documents incorporated therein, if
any; and (ix) general and specific references to any Law means
such Law as amended, modified, codified or reenacted, in whole
or in part, and in effect from time to time. Section captions
and the Table of Contents are for convenience only and shall
not affect the interpretation or construction of this
Agreement or the other Loan Documents.
3. LENDER'S COMMITMENT. Subject to the terms and conditions
hereof, and in reliance upon the representations and warranties of
Borrower herein, Lender makes the following commitment to Borrower:
3.1. REVOLVING LOAN COMMITMENT.
3.1.1. AGGREGATE AMOUNT; REDUCTIONS. Subject to the
limitations in Section 3.1.2 and elsewhere herein, Lender
commits to make available to Borrower, from the Effective
Date to the Revolving Loan Maturity Date a "Revolving
Loan Commitment" of $20,000,000 by funding Revolving Loan
Advances made from time to time by Lender as provided
herein to accounts at Lender. Subject to the limitations
in Section and elsewhere herein, payments and prepayments
that are applied to reduce the Revolving Loan may be
reborrowed through Revolving Loan Advances. Borrower may
also reduce the amount of the Revolving Loan Commitment
in whole multiples of $100,000 at any time and from time
to time, but only if (i) Borrower gives Lender written
notice of Borrower's intention to make such reduction at
least three Business Days prior to the effective date of
the reduction, and
2
<PAGE> 10
(ii) Borrower makes on the effective date of the
reduction any payment on the Revolving Loan required
under Section 5.2.1 as a consequence of the reduction.
Any such reduction of the amount of the Revolving Loan
Commitment, whether scheduled or voluntary, shall be
permanent.
3.1.2. LIMITATION ON REVOLVING LOAN ADVANCES. No
Revolving Loan Advance will be made which would result in
the Revolving Loan exceeding the Revolving Loan
Commitment and no Revolving Loan Advance will be made on
or after the Revolving Loan Maturity Date. Lender may,
however, in its absolute discretion make Revolving Loan
Advances exceeding the Revolving Loan Commitment, but
shall not be deemed by doing so to have increased the
Revolving Commitment and shall not be obligated to make
any such Revolving Loan Advances thereafter. At any time
that there is an Existing Default, the Revolving Loan
Commitment may be canceled as provided in Section 14.3.
3.1.3. REVOLVING NOTE. The obligation of Borrower to
repay Lender's Revolving Loan shall be evidenced by a
promissory note payable to the order of Lender in a
maximum principal amount equal to the amount of the
Revolving Loan Commitment and otherwise satisfactory to
Lender.
4. INTEREST.
4.1. INTEREST ON LOANS; INTEREST PERIODS FOR EURODOLLAR
LOANS. Borrower may, as provided herein, designate each
Advance or part of an Advance to be either a Prime Rate
Advance, a Federal Funds Rate Advance, or a Eurodollar
Advance; provided, however, during the existence of an
Existing Default, Borrower may not designate an Advance
or part of an Advance as a Federal Funds Rate Advance or
a Eurodollar Advance. Each Prime Rate Advance when made
will become a Prime Rate Loan, which shall bear interest
at the Prime Rate (which will fluctuate as described in
Section 4.5) plus the Prime Increment (determined from
time to time as provided in Section 4.2). Each Federal
Funds Rate Advance when made will become a Federal Funds
Rate Loan, which shall bear interest at the Federal Funds
Rate (which will fluctuate as described in Section 4.5)
plus the Federal Funds Increment (determined from time to
time as provided in Section 4.2). Each Eurodollar
Advance when made will become a Eurodollar Loan, which
shall bear interest at the Adjusted Eurodollar Rate. The
"Adjusted Eurodollar Rate" for any Eurodollar Loan is the
Adjusted Eurodollar Base Rate (which shall be determined
before the beginning of the applicable Interest Period as
provided herein and shall apply throughout such Interest
Period) plus the applicable Eurodollar Increment (as
defined below) determined from time to time as provided
in Section 4.2. Borrower may also, as provided herein,
convert some or all of a Prime Rate Loan into a Federal
Funds Rate Loan or a Eurodollar Loan, some or all of a
Federal Funds Rate Loan into a Prime Rate Loan or a
Eurodollar Loan, and some or all of a Eurodollar Loan
into a Prime Rate Loan or a Federal Funds Rate Loan.
Borrower shall select an Interest Period for each
Eurodollar Loan. Each Interest Period shall be either
one, two, three, six or twelve months; provided that (i)
every such Interest Period shall commence on the date of
the Advance; (ii) if any Interest Period would otherwise
expire on a day of a calendar month which is not a
Business Day, then such Interest Period shall expire on
the next succeeding Business Day in that calendar month;
provided, however, that if the next succeeding Business
Day would be in the following calendar month, it shall
expire on the first preceding Business Day; (iii) any
Interest Period that begins on the last Business Day of
a calendar month (or on a day for which there is no
3
<PAGE> 11
numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last
Business Day of a calendar month; and (iv) no Interest
Period shall extend beyond the Maturity Date. A
Eurodollar Loan shall bear interest at the Adjusted
Eurodollar Rate throughout the applicable Interest Period
designated by Borrower.
4.2. INCREMENTS. The applicable Prime Increment, Federal
Funds Increment, and Eurodollar Increment shall be
determined on the Effective Date in accordance with the
table below based on the ratio of (i) the Total Funded
Indebtedness of each Borrower (other than Howe Furniture
Corporation, Johnson Industries, Inc., and Howe Europe
A/S) as of January 31, 1998 combined with the Total
Funded Indebtedness of Howe Furniture Corporation,
Johnson Industries, Inc., and Howe Europe A/S as of
December 31, 1997 to (ii) the EBITDA of each Borrower
(other than Howe Furniture Corporation, Johnson
Industries, Inc., and Howe Europe A/S) for the twelve
month period ended January 31, 1998 combined with the
EBITDA of Howe Furniture Corporation, Johnson Industries,
Inc., and Howe Europe A/S for the twelve month period
ended December 31, 1997. Thereafter, the applicable
Prime Increment, Federal Funds Increment, and Eurodollar
Increment shall be determined quarterly, beginning with
Borrower's fiscal quarter ended April 30, 1998, in
accordance with the table below, based on the ratio of
Borrower's Total Funded Indebtedness (including, without
duplication, the Total Funded Indebtedness of Howe
Furniture Corporation, Johnson Industries, Inc. and Howe
Europe A/S) to Borrower's EBITDA (including, without
duplication, the EBITDA of Howe Furniture Corporation,
Johnson Industries, Inc. and Howe Europe A/S), as
reflected in the consolidated Financial Statements of
Borrower and the consolidated Financial Statements of
Howe Furniture Corporation, without duplication, for the
fiscal quarter most recently ended, for the twelve month
period then ended:
<TABLE>
- ----------------------------------------------------------------------------------------------
<CAPTION>
Ratio of Total Funded Prime Federal Funds Eurodollar
Indebtedness to EBITDA Increment (%) Increment (%) Increment (%)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Greater than or equal to
1.50 to 1.00 -1.75% +1.00% +1.00%
- ----------------------------------------------------------------------------------------------
Greater than or equal to
1.00 to 1.00 and less
than 1.50 to 1.00 -.2.00% +0.75% +0.75%
- ----------------------------------------------------------------------------------------------
Less than 1.00 to 1.00 -2.25% +0.50% +0.50%
</TABLE>
Any change in the Prime Increment, Federal Funds Increment,
and Eurodollar Increment shall become applicable on the first
day of each fiscal quarter, based on Borrower's Financial
Statements as of the last day of the immediately preceding
fiscal quarter (and on the date the Financial Statements for
such immediately preceding fiscal quarter are delivered as
required in Section 11.13, any change in the Prime Increment,
Federal Funds Increment, or Eurodollar Increment shall be
applied retroactively to the first day of the current fiscal
quarter). The foregoing notwithstanding, any change in the
Eurodollar Increment shall not become applicable to any
Eurodollar Loan until and unless it is renewed as a Eurodollar
Loan.
4.3. CONVERSION OF LOANS. Borrower may (i) at any time
convert some or all of a Prime Rate Loan or a Federal Funds
Rate Loan to a Eurodollar Loan, or (ii) at the end of any
Interest Period
4
<PAGE> 12
of a Eurodollar Loan, continue the Loan as a Eurodollar Loan
for an additional Interest Period or convert some or all of
such Eurodollar Loan to a Prime Rate Loan or a Federal Funds
Rate Loan. To cause any conversion or continuation, Borrower
shall give Lender, prior to 12:00 p.m. St. Louis time prior to
the date the conversion or continuation is to be effective
(or, if at any time Lender "matches funds" with respect to
Eurodollar Loans, then Lender may notify Borrower that a
request for a conversion or continuation must be given prior
to 12:00 p.m., St. Louis time, at least 3 Business Days prior
to such date), a written request (which may be mailed,
personally delivered or telecopied as provided in
Section 19.1) or an oral request (which must be confirmed by
facsimile on such date) (a) specifying whether a conversion or
continuation is requested, (b) in the case of a conversion,
specifying the amount to be converted and whether it is to be
a Eurodollar Loan, a Prime Rate Loan, or a Federal Funds Rate
Loan upon the conversion, and (c) in the case of any
conversion to or continuation of a Eurodollar Loan, specifying
the Interest Period therefor. If such notice is not given by
12:00 p.m. St. Louis time on the second Business Day preceding
the last day of the Interest Period of a Eurodollar Loan, then
Borrower shall be deemed to have timely given a notice to
Lender requesting to convert all of such Eurodollar Loan to a
Prime Rate Loan. In the case of a Eurodollar Loan, any
conversion or continuation shall become effective only on the
day following the last day of the current Interest Period.
4.4. TIME OF ACCRUAL. Interest shall accrue on all principal
amounts outstanding from the date when first outstanding to
the date when no longer outstanding. Amounts shall be deemed
outstanding until payments are applied thereto as provided
herein.
4.5. COMPUTATION. Interest shall be computed for the actual
days elapsed over a year deemed to consist of 360 days.
Interest rates that are based on the Prime Rate or the Federal
Funds Rate shall change simultaneously with any change in the
Prime Rate or the Federal Funds Rate, as applicable, and shall
be effective for the entire day on which such change becomes
effective. The Prime Rate and the Federal Funds Rate will be
determined by Lender before the initial Advance on the
Effective Date and on each Business Day thereafter when the
Prime Rate or the Federal Funds Rate changes.
4.6. RATE AFTER MATURITY. Borrower shall pay interest on the
Loans after their Maturity, and (at the option of Lender on
the Loans and on the other Loan Obligations) upon the
occurrence and during the continuance of an Event of Default,
at a rate per annum of 2.0% plus the Prime Rate.
5. PAYMENTS.
5.1. SCHEDULED PAYMENTS ON REVOLVING LOAN.
5.1.1. INTEREST. Borrower shall pay interest accrued
on each Prime Rate Loan and each Federal Funds Rate Loan
included in the Revolving Loan monthly in arrears
beginning on the first day of the first full calendar
month following the Effective Date and continuing on the
first day of each calendar month thereafter, and on the
Revolving Loan Maturity Date. Borrower shall pay
interest accrued on each Eurodollar Loan included in the
Revolving Loan at the end of its Interest Period, except
Eurodollar Loans with Interest Periods of more than three
months, in which case Borrower shall pay interest on the
last day of each fiscal quarter of Borrower. Borrower
shall pay interest accrued on each Revolving Loan after
the Revolving Loan Maturity Date on demand.
5
<PAGE> 13
5.1.2. PRINCIPAL. Borrower shall repay the entire
amount of the Revolving Loan on the Revolving Loan
Maturity Date.
5.2. PREPAYMENTS.
5.2.1. MANDATORY PREPAYMENTS WHEN OVER-ADVANCES
EXIST. If at any time the Revolving Loan exceeds the
Revolving Loan Commitment, whether as a result of
optional Revolving Loan Advances by Lender as
contemplated by Section 3.1.2 or otherwise, Borrower
shall on demand make a payment in the amount of such
excess to Lender. Each such prepayment will be applied
by Lender first to reduce the Federal Funds Rate Loans
that are included in the Revolving Loan until they are
reduced to zero, and then to reduce the Prime Rate Loans
that are included in the Revolving Loan until they are
reduced to zero, and then to reduce the Eurodollar Loans
that are included in the Revolving Loan.
5.3. MANNER OF PAYMENTS AND TIMING OF APPLICATION OF PAYMENTS.
5.3.1. PAYMENT REQUIREMENT. Borrower shall make each
payment on the Loan Obligations to Lender for the account
of Lender as required hereunder and under the other Loan
Documents at the Lending Office on the date when due,
without deduction, set-off or counterclaim. All payments
on the Loan Obligations shall be by wire transfer or
direct debit to accounts maintained by Borrower at
Lender.
5.4. APPLICATION OF PAYMENTS AND PROCEEDS. All payments
received by Lender in immediately available funds at or before
12:00 p.m. (St. Louis time) on a Business Day will be applied
to the relevant Loan Obligation on the same day. Such
payments received on a day that is not a Business Day or after
12:00 p.m. on a Business Day will be applied to the relevant
Loan Obligation on the next Business Day. Except as expressly
provided otherwise herein, Lender may apply, and reverse and
reapply, payments to the Loan Obligations in such order and
manner as Lender determines in its absolute discretion. So
long as there is any Existing Default, Borrower hereby
irrevocably waives the right to direct the application of
payments. All payments and prepayments shall be deemed made
on Federal Funds Rate Loans that are included in the Revolving
Loan, and then to Prime Rate Loans that are included in the
Revolving Loan, and then to the Eurodollar Loans included in
the Revolving Loan.
5.4.1. INTEREST CALCULATION. Section 5.4
notwithstanding, for purposes of interest calculation
only (i) a payment in cash, by wire transfer, or by ACH
transfer, received at or before 12:00 p.m. (St. Louis
time) on a Business Day shall be deemed to have been
applied to the relevant Loan Obligation on the Business
Day when it is received, and (ii) a payment in cash, by
wire transfer or by ACH transfer, received on a day that
is not a Business Day or after 12:00 p.m. (St. Louis
time) on a Business Day shall be deemed to have been
applied to the relevant Loan Obligation on the next
Business Day.
5.5. VOLUNTARY PREPAYMENTS. Borrower shall not be entitled to
prepay any Eurodollar Loan. Borrower may wholly prepay any
Prime Rate Loan or Federal Funds Rate Loan that is included in
the Revolving Loan at any time and may make a partial
prepayment thereon from time to time, without penalty or
premium.
6
<PAGE> 14
5.6. RETURNED INSTRUMENTS. If a payment is made by check,
draft or other instrument and the check, draft or other
instrument is returned unpaid, any application of the payment
to the Loan Obligations will be reversed and will be treated
as never having been made.
5.7. COMPELLED RETURN OF PAYMENTS OR PROCEEDS. If Lender is
for any reason compelled to surrender any payment because such
payment or the application of such proceeds is for any reason
invalidated, declared fraudulent, set aside, or determined to
be void or voidable as a preference, an impermissible setoff,
or a diversion of trust funds, then this Agreement and the
Loan Obligations to which such payment or proceeds was applied
or intended to be applied shall be revived as if such
application was never made; and Borrower shall be liable to
pay to Lender, and shall indemnify Lender for and hold Lender
harmless from any loss with respect to, the amount of such
payment or proceeds surrendered. This Section shall be
effective notwithstanding any contrary action that Lender may
take in reliance upon its receipt of any such payment or
proceeds. Any such contrary action so taken by Lender shall
be without prejudice to Lender's rights under this Agreement
and shall be deemed to have been conditioned upon the
application of such payment or proceeds having become final
and indefeasible. The provisions of this Section shall
survive termination of the Commitment, and the payment and
satisfaction of all of the Loan Obligations.
5.8. DUE DATES NOT ON BUSINESS DAYS. If any payment required
hereunder becomes due on a date that is not a Business Day,
then such due date shall be deemed automatically extended to
the next Business Day.
6. PROCEDURE FOR OBTAINING ADVANCES.
6.1. INITIAL ADVANCES. Lender will fund and make the initial
Revolving Loan Advance on the Effective Date as directed by
Borrower in a written direction delivered to Lender, which
shall specifically authorize Lender to apply the initial
Revolving Loan Advance to the existing Indebtedness of
Borrower to Lender. The manner of disbursement shall be
subject to Lender's approval.
6.2. SUBSEQUENT REVOLVING LOAN ADVANCES.
6.2.1. BORROWER REQUESTS. Borrower may request a
subsequent Revolving Loan Advance at any time, but not
more often than once each Business Day, by submitting a
request therefor to Lender as provided in Section 6.7.
Every request for a Revolving Loan Advance shall be
irrevocable. A request for an Advance received by Lender
on a day that is not a Business Day or that is received
by Lender after 12:00 p.m. (St. Louis time) on a Business
Day shall be treated as having been received by Lender at
12:00 p.m. (St. Louis time) on the next Business Day.
All Advances shall be funded to Borrower's account at
Lender.
6.2.2. LENDER'S RIGHT TO MAKE OTHER REVOLVING LOAN
ADVANCES.
6.2.2.1. PAYMENT OF LOAN OBLIGATIONS. Lender
shall have the right to make Revolving Loan
Advances at any time and from time to time to cause
timely payment of any of the Loan Obligations or
any other amounts required to be paid by Borrower
hereunder or under any of the other Loan Documents.
Lender may select the Advance Date for any such
Revolving Loan Advance, but such Advance Date may
only be a Business Day. Lender will give notice to
Borrower after any
7
<PAGE> 15
such Revolving Loan Advance is made. Any such
Revolving Loan Advance will be a Prime Rate
Advance.
6.2.2.2. PAYMENTS TO OTHER CREDITORS. If Lender
becomes obligated to reimburse or pay to any
creditor of Borrower any amount in order to satisfy
an Obligation of Borrower to such creditor to the
extent not indefeasibly satisfied by the initial
Advances, then Lender shall have the right to make
Revolving Loan Advances for that purpose. Lender
may select the Advance Date for any such Advance,
but such Advance Date may only be a Business Day.
Lender will give notice to Borrower after any such
Revolving Loan Advance is made. Any such Revolving
Loan Advance will be a Prime Rate Advance.
6.3. DISBURSEMENT. Provided that all conditions precedent
herein to a requested Advance have been satisfied, Lender will
make the amount of such requested Advance available to
Borrower on the applicable Advance Date in immediately
available funds in Dollars at the Lending Office.
6.4. RESTRICTIONS ON ADVANCES. No Advance will be made unless
it is a whole multiple of $50,000 and not less than $50,000.
No more than one Revolving Loan Advance will be made on any
one day pursuant to a request for a Revolving Loan Advance.
Advances will only be made for the purposes permitted in
Section 11.1.
6.5. RESTRICTION ON NUMBER OF EURODOLLAR LOANS. No more than
six Eurodollar Loans with different Interest Periods may be
outstanding at any one time.
6.6. EACH ADVANCE REQUEST CERTIFICATION. Each submittal of a
request for an Advance by a Borrowing Officer shall constitute
a certification by Borrower that (i) there is no Existing
Default, (ii) all representations and warranties of Borrower
in this Agreement and the other Loan Documents are then true,
with such exceptions as have been disclosed to Lender in
writing by Borrower as addenda to the Disclosure Schedule
which are satisfactory to Lender, and will be true on the
Advance Date or issuance date, as applicable, as if then made
with such exceptions and except that with respect to the
representations and warranties made regarding Financial
Statements or financial data, such representations and
warranties shall be deemed made with respect to the most
recent Financial Statements and other financial data delivered
by Borrower, and (iii) all conditions precedent hereunder to
the making of the requested Advance shall have been satisfied.
6.7. REQUIREMENTS FOR EVERY ADVANCE REQUEST. Only a request
(which shall be in writing and mailed, personally delivered or
telecopied as provided in Section 19.1; or if oral, which
shall be confirmed in writing via facsimile on the date of
such request) in the form of Exhibit 7.7 from a Borrowing
Officer to Lender that specifies the amount of the Advance to
be made, the Advance Date for the requested Advance, the
portion of the Advance which is requested to be a Eurodollar
Advance, the portion of the Advance which is requested to be
a Prime Rate Advance, the portion of the Advance which is
requested to be a Federal Funds Rate Advance, and the Interest
Period to be applicable to the Eurodollar Loan that will
result from a requested Eurodollar Advance, shall be treated
as a request for an Advance. No Advance Date for any
requested Advance may be other than a Business Day. A request
for a Eurodollar Advance must be given prior to 12:00 p.m.,
St. Louis time, on the Advance Date for such Eurodollar
Advance; provided, however, if at any time Lender "matches
funds" with respect to Eurodollar Loans, then Lender may
notify Borrower that a request for a Eurodollar Advance must
be given prior to 12:00 p.m., St. Louis time, at least 3
Business Days prior to the Advance Date. A request for a
Prime Rate Advance or a Federal
8
<PAGE> 16
Funds Rate Advance must be given prior to 2:00 p.m., St. Louis
time, on the Advance Date for such Prime Rate Advance or
Federal Funds Rate Advance.
6.8. EXONERATION OF LENDER. Lender shall not incur any
liability to Borrower for treating a request that meets the
express requirements of Section 6.7 as a request for an
Advance if Lender believes in good faith that the Person
making the request is a Borrowing Officer. Lender shall not
incur any liability to Borrower for failing to treat any such
request as a request for an Advance if Lender believes in good
faith that the Person making the request is not a Borrowing
Officer.
6.9. SUSPENSION OF OBLIGATION TO MAKE EURODOLLAR ADVANCES. If
(i) on any date for determining the Eurodollar Rate for any
Interest Period, by reason of any changes arising after the
Execution Date affecting the London Interbank Market, Lender's
position in such market, adequate and fair means do not exist
for ascertaining the applicable interest rate on the basis
provided for in the definition herein of Eurodollar Rate, or
(ii) the making of any Advance which is to be a Eurodollar
Advance or the continuance by Lender of any Eurodollar Loan
has become unlawful by compliance by Lender in good faith with
any Law or any pronouncement of a Governmental Authority
(whether or not having the force of law and whether or not
failure to comply therewith would be unlawful), then Lender
shall promptly give notice to Borrower of such determination.
Until Lender notifies Borrower that the circumstances giving
rise to the suspension described herein no longer exist,
(a) the obligation of Lender to fund Eurodollar Advances shall
be suspended, (b) each outstanding Eurodollar Loan shall be
automatically converted into a Prime Rate Loan, on the earlier
of the last day of the Interest Period for such Eurodollar
Loan or the last date permitted by applicable Law, and (c) all
Revolving Loan Advances shall be Prime Rate Advances or
Federal Funds Rate Advances, at the option of Borrower.
Notwithstanding anything to the contrary contained herein, if
any part of a Eurodollar Loan is converted to a Prime Rate
Loan pursuant to this Section 6.9, the per annum interest rate
applicable thereto from and after the effective date of such
conversion shall be the Prime Rate or the Federal Funds Rate,
as applicable (but otherwise calculated as provided in
Section 4).
7. POWER OF ATTORNEY. Each Borrower hereby authorizes Lender and
irrevocably appoints Lender (acting by any of its officers) as
Borrower's agent and attorney-in-fact (which appointment is coupled
with an interest and is therefore irrevocable) to do any of the
following until all of the Loan Obligations are fully and
irrevocably paid and satisfied in full in cash, and the Commitments
are terminated: (a) while there is an Existing Default (i) prepare,
file and sign any Borrower's name on any proof of claim in
bankruptcy or other similar documents against an Account Debtor;
(ii) notify the postal authorities of any change of the address for
delivery of any Borrower's mail to any address designated by
Lender, and open and process all mail addressed to such Borrower;
and (iii) do anything that Lender deems necessary in its reasonable
discretion to assure that the Loan Obligations are fully paid in
cash; and (b) at any time until all of the Loan Obligations are
fully and irrevocably paid and satisfied in full in cash, and the
Commitments are terminated, have access to any lockbox or postal
box into which any Covered Person's mail is deposited.
The foregoing power of attorney and authorization shall be deemed
automatically revoked upon the irrevocable payment in full in cash
of all of the Loan Obligations, and the termination of the
Commitments.
8. CONDITIONS OF LENDING.
8.1. CONDITIONS TO INITIAL ADVANCE. Lender will have no
obligation to fund the initial Revolving Loan Advance or any
subsequent Revolving Loan Advance unless:
9
<PAGE> 17
8.1.1. LISTED DOCUMENTS AND OTHER ITEMS. Lender shall
have received on or before the Effective Date all of the
documents and other items listed or described in
Exhibit 8.1.1 hereto as being conditions to the initial
Advances, with each being satisfactory to Lender and (as
applicable) duly executed and (also as applicable)
sealed, attested, acknowledged, certified, or
authenticated.
8.1.2. FINANCIAL CONDITION. Lender shall have
determined to its satisfaction that the financial
statements of Borrower for the periods January 31, 1998
and the forecasts for Howe Furniture Corporation for the
calendar years 1998 and 1999 as furnished to Lender, and
other information furnished to Lender by Borrower (i) for
the periods ended on or before the Effective Date, fairly
and accurately reflect the business and financial
condition of Borrower, its cash flows and the results of
its operations for such periods, and (ii) for the periods
that will end after the Effective Date, fairly and
accurately forecast the business and financial condition
of Borrower, its cash flows, and the results of its
operations for such periods.
8.1.3. DEFAULT. There shall be no Existing Default
and no Default or Event of Default will occur as a result
of such Advance being requested or made or the
application of the proceeds thereof.
8.1.4. REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained in the Loan
Documents shall be true and correct.
8.1.5. MATERIAL ADVERSE CHANGE. Since November 1,
1997, with respect to Borrower, there shall not have been
any change which has or is reasonably likely to have a
Material Adverse Effect.
8.1.6. ENVIRONMENTAL. Lender shall be reasonably
satisfied with the results of its environmental due
diligence.
8.1.7. PENDING MATERIAL PROCEEDINGS. There shall be
no pending Material Proceedings.
8.1.8. PAYMENT OF FEES. Borrower shall have paid in
cash and reimbursed to Lender all fees, costs and
expenses that are payable or reimbursable to Lender
hereunder on or before the Effective Date.
8.1.9. OTHER ITEMS. Lender shall have received such
other consents, approvals, opinions, certificates,
documents or information as it reasonably deems
necessary.
8.2. CONDITIONS TO SUBSEQUENT ADVANCES. Lender will have no
obligation to fund any Advance after the initial Revolving
Loan Advance unless:
8.2.1. GENERAL CONDITIONS. All of the conditions to
the initial Advances in Section 8.1 shall have been and
shall remain satisfied.
10
<PAGE> 18
8.2.2. REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained in the Loan
Documents, with such exceptions as have been disclosed to
Lender in writing by Borrower from time to time and are
satisfactory to Lender, shall be true and correct as of
the time of such Advance, with the same force and effect
as if made at such time.
8.2.3. DEFAULT. There shall be no Existing Default
and no Default or Event of Default will occur as a result
of such Advance being requested or made or the
application of the proceeds thereof.
9. REPRESENTATIONS AND WARRANTIES. Except as otherwise described
in the Disclosure Schedule attached hereto as Exhibit 11 (which
references the specific Sections of this Section 9 hereof),
Borrower represents and warrants to Lender as follows:
9.1. ORGANIZATION AND EXISTENCE. Each Borrower is duly
organized and existing in good standing under the Laws of the
state or nation of its organization, is duly qualified to do
business and is in good standing in every state where the
nature or extent of its business or properties require it to
be qualified to do business, except where the failure to so
qualify will not have a Material Adverse Effect. Each
Borrower has the power and authority to own its properties and
carry on its business as now being conducted.
9.2. AUTHORIZATION. Each Borrower is duly authorized to
execute and perform every Loan Document to which such Borrower
is a party, and Borrower is duly authorized to borrow
hereunder, and this Agreement and the other Loan Documents
have been duly authorized by all requisite corporate action of
each Borrower. No consent, approval or authorization of, or
declaration or filing with, any Governmental Authority, and no
consent of any other Person, is required in connection with
Borrower's execution, delivery or performance of this
Agreement and the other Loan Documents, except for those
already duly obtained.
9.3. DUE EXECUTION. Every Loan Document to which a Borrower
is a party has been executed on behalf of such Borrower by a
Person duly authorized to do so.
9.4. ENFORCEABILITY OF OBLIGATIONS. Each of the Loan
Documents to which a Borrower is a party constitutes the
legal, valid and binding obligation of such Borrower,
enforceable against such Borrower in accordance with its
terms, except to the extent that the enforceability thereof
against such Borrower may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar Laws
affecting creditors' rights generally or by equitable
principles of general application.
9.5. BURDENSOME OBLIGATIONS. No Borrower is a party to or
bound by any Contract or is subject to any provision in the
Charter Documents of such Borrower which would, if performed
by such Borrower, result in a Default or Event of Default
either immediately or upon the elapsing of time.
9.6. LEGAL RESTRAINTS. The execution and performance of any
Loan Document by a Borrower will not violate or constitute a
default under the Charter Documents of such Borrower, any
Material Agreement of such Borrower, or any Material Law, and
will not, except as expressly contemplated or permitted in
this Agreement, result in any Security Interest being imposed
on any of such Borrower's property.
11
<PAGE> 19
9.7. LABOR DISPUTES. There is no pending or, to Borrower's
knowledge, threatened, strike, work stoppage, unfair labor
practice claim or other labor dispute against or affecting any
Borrower or its employees, which could reasonably be likely to
have a Material Adverse Effect.
9.8. NO MATERIAL PROCEEDINGS. There are no Material
Proceedings pending or, to the best knowledge of Borrower,
threatened.
9.9. MATERIAL LICENSES. All Material Licenses have been
obtained for each Borrower.
9.10. COMPLIANCE WITH MATERIAL LAWS. Each Borrower is in
compliance with all Material Laws. Without limiting the
generality of the foregoing:
9.10.1. PROCEEDINGS. None of the operations of any
Borrower are, or have been since November 1, 1997 the
subject of any judicial or administrative complaint,
order or proceeding alleging the violation of any
applicable Environmental Laws or Employment Laws. None
of the operations of any Borrower are, or have been since
November 1, 1997, the subject of investigation by any
Governmental Authority regarding the improper
transportation, storage, disposal, generation or release
into the environment of any Hazardous Material, the
results of which have or are reasonably likely to have a
Material Adverse Effect on such Borrower, or reduce
materially the value of Borrower's property.
9.10.2. HAZARDOUS MATERIALS ON REAL PROPERTY. No
Borrower, nor to Borrower's knowledge, any other Person,
has at any time transported, stored, disposed of,
generated or released any Hazardous Material on the
surface, below the surface, or within the boundaries of
the real property owned or operated by such Borrower or
any improvements thereon. Borrower has no knowledge of
any Hazardous Material on the surface, below the surface,
or within the boundaries of the real property owned or
operated by such Borrower or any improvements thereon.
No property of such Borrower is subject to a Security
Interest in favor of any Governmental Authority for any
liability under any Environmental Law or damages arising
from or costs incurred by such Governmental Authority in
response to a spill or release of Hazardous Material into
the environment.
9.11. OTHER NAMES. No Borrower has used any name other
than the full name which identifies such Borrower in this
Agreement. The only trade name or trade style under which a
Borrower sells Inventory or creates Accounts or to which
instruments in payment of Accounts are made payable, is the
name which identifies such Borrower in this Agreement.
9.12. FINANCIAL STATEMENTS. The Financial Statements are
and shall remain complete and correct in all material
respects, have been prepared in accordance with GAAP, and
fairly reflect the financial condition, results of operations
and cash flows of the Persons covered thereby as of the dates
and for the periods stated therein, subject, in the case of
monthly and quarterly Financial Statements, to normal year-end
adjustments made in accordance with GAAP.
9.13. NO CHANGE IN CONDITION. Since November 1, 1997,
there has been no change which has or is reasonably likely to
have a Material Adverse Effect on any Borrower.
9.14. NO DEFAULTS. No Borrower has breached or violated
or has defaulted under any Material Agreement, or has
defaulted with respect to any Material Obligation of such
Borrower. No Default has occurred which is continuing and no
Event of Default has occurred.
12
<PAGE> 20
9.15. SOLVENCY. Borrower is solvent prior to and after
giving effect to the making of the initial Revolving Loan
Advance on the Effective Date.
9.16. INDEBTEDNESS. No Borrower has any Indebtedness
except existing Permitted Indebtedness (as specified in
Section 12.1 hereof).
9.17. TAX LIABILITIES; GOVERNMENTAL CHARGES. Each Borrower
has filed or caused to be filed all tax reports and
returns required to be filed by it with any Governmental
Authority, except where extensions have been properly
obtained. Each Borrower has paid or made adequate provision
for payment of all Taxes of such Borrower, except Taxes which
are being diligently contested in good faith by appropriate
proceedings and as to which such Borrower has established
adequate reserves in conformity with GAAP. No Security
Interest for any such Taxes has been filed and no claims are
being asserted with respect to any such Taxes which, if
adversely determined, has or is reasonably likely to have a
Material Adverse Effect on such Borrower. The federal incom
e tax returns of every Borrower organized under the laws of
the United States have been audited by the Internal Revenue
Service and passed upon without exception for all fiscal years
of Borrower ended on or prior to 1997, or the period during
which any assessments may be made by the IRS with respect to
such returns has expired without waiver or extension. There
are no material unresolved issues or other matters concerning
any liability of a Borrower for any Taxes which, if adversely
determined, has or is reasonably likely to have a Material
Adverse Effect on such Borrower.
9.18. PENSION BENEFIT PLANS. All Pension Benefit Plans
maintained by each Borrower or an ERISA Affiliate of any
Borrower qualify under Section 401 of the Code and are in
compliance with the provisions of ERISA, except where the
failure to comply could not reasonably be likely to have a
Material Adverse Effect.
9.19. WELFARE BENEFIT PLANS. No Borrower or ERISA
Affiliate of any Borrower maintains a Welfare Benefit Plan
that has a liability which, if enforced or collected, has or
is reasonably likely to have a Material Adverse Effect. Each
Borrower and each ERISA Affiliate of any Borrower has complied
in all material respects with the applicable requirements of
Section 4980B of the Code pertaining to continuation coverage
as mandated by COBRA.
9.20. RETIREE BENEFITS. No Borrower or ERISA Affiliate of
any Borrower has an obligation to provide any Person with any
medical, life insurance, or similar benefit following such
Person's retirement or termination of employment (or to such
Person's beneficiary subsequent to such Person's death) other
than (i) such benefits provided to Persons at such Person's
sole expense and (ii) obligations under COBRA.
9.21. STATE OF PROPERTY. Each Borrower has good and
marketable or merchantable title to all of such Borrower's
real and personal property purported to be owned by it or
reflected in the Initial Financial Statements, except for
personal property sold in the ordinary course of business
after the date of the Initial Financial Statements. There are
no Security Interests on any of the property purported to be
owned by any Borrower, except existing Permitted Security
Interests.
9.22. MARGIN STOCK. Borrower is not engaged and will not
engage, principally or as one of its important activities, in
the business of extending credit for the purpose of purchasing
or carrying margin stock (within the meaning of Regulation U),
and no part of the proceeds of any Advance will be used to
purchase or carry any such margin stock or to extend credit to
others for the
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purpose of purchasing or carrying any such margin stock or for
any purpose which violates, or which would be inconsistent
with, the provisions of Regulation U or Regulation G.
9.23. SECURITIES MATTERS. No proceeds of any Advance will
be used to acquire any security in any transaction which is
subject to Sections 13 and 14 of the Securities Exchange Act
of 1934.
9.24. INVESTMENT COMPANY ACT, ETC. Borrower is not an
investment company registered or required to be registered
under the Investment Company Act of 1940, or a company
controlled (within the meaning of such Investment Company Act)
by such an investment company or an affiliated person of, or
promoter or principal underwriter for, an investment company,
as such terms are defined in the Investment Company Act of
1940. Borrower is not subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act,
the Interstate Commerce Act or any other Law limiting or
regulating its ability to incur Indebtedness for money
borrowed.
9.25. NO MATERIAL MISSTATEMENTS OR OMISSIONS. Neither the
Loan Documents, any of the Financial Statements nor any
statement, list, certificate or other information furnished or
to be furnished by Borrower to Lender in connection with the
Loan Documents or any of the transactions contemplated there
by contains any untrue statement of a material fact, or omits
to state a material fact necessary to make the statements
therein not misleading. Borrower has disclosed to Lender
everything known to a Responsible Officer regarding the
business, operations, property, financial condition, or
business prospects or itself and every Borrower that has or is
reasonably likely to have a Material Adverse Effect on any
Borrower.
9.26. INVESTMENTS. No Borrower has any Investments in
other Persons except existing Permitted Investments.
9.27. INDIRECT OBLIGATIONS. No Borrower has any Indirect
Obligations except existing Permitted Indirect Obligations.
9.28. CAPITAL LEASES. No Borrower has an interest as a
lessee under any Capital Leases other than Capital Leases that
are Permitted Indebtedness.)
9.29. SUBSIDIARIES. All of the Borrowers (other than
Falcon Products, Inc.) are wholly-owned direct Subsidiaries of
Falcon Products, Inc., except for Johnson Industries, Inc. and
Howe Europe A/S, which are direct, wholly-owned Subsidiaries
of Howe Furniture Corporation. No Borrower has any
Subsidiaries which are not Borrowers.
9.30. FALCON INTERNATIONAL E.U.R.L. AND FALCON PRODUCTS OF
CALIFORNIA, INC. Falcon International, E.U.R.L. has been duly
liquidated and has no assets or liabilities, and Falcon
Products of California, Inc. has no assets or liabilities.
10. SURVIVAL. All representations and warranties, covenants and
agreements, contained herein, in any other Loan Document, or in any
certificate delivered by any Borrower pursuant hereto or thereto,
as the same may be updated, modified or amended from time to time
upon a Borrower's written request to Lender of such update,
modification or amendment and upon Lender's written approval of the
same shall survive execution of each of the Loan Documents and the
making of every Advance, and may be relied upon by Lender as being
true and correct as of the date when made or deemed made or
reaffirmed until all of the Loan Obligations are fully and
indefeasibly paid in full in cash.
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11. AFFIRMATIVE COVENANTS. Borrower covenants and agrees that,
while any of the Commitments remains in effect and until all of the
Loan Obligations are fully and indefeasibly paid in full in cash,
Borrower shall do, and cause each Borrower to do, each of the
following:
11.1. USE OF PROCEEDS. Subject to the terms and
conditions hereof, the proceeds of the Revolving Loan Advances
shall be used to fund Permitted Acquisitions and Capital
Expenditures, as well as for general corporate and working
capital purposes.
11.2. CORPORATE EXISTENCE. Each Borrower shall maintain
its existence in good standing and shall maintain in good
standing its right to transact business in those states or
countries in which it is now or hereafter doing business,
except where the failure to so qualify will not have and will
not be reasonably likely to have a Material Adverse Effect.
Each Borrower shall obtain and maintain all Material Licenses
for such Borrower.
11.3. MAINTENANCE OF PROPERTY AND LEASES. Each Borrower
shall maintain in good condition and working order, and repair
(ordinary wear and tear excepted) and replace as required, all
buildings, equipment, machinery, fixtures and other real and
personal property whose useful economic life has not elapsed
and which is reasonably necessary for the ordinary conduct of
the business of such Borrower. Each Borrower shall maintain
in good standing and free of defaults all of its leases of
buildings, equipment, machinery, fixtures and other real and
personal property whose useful economic life has not elapsed
and which is necessary for the ordinary conduct of the
business of such Borrower.
11.4. INVENTORY. Each Borrower shall keep its Inventory
in good and merchantable condition at its own expense and
shall hold such Inventory for sale or lease, or to be
furnished in connection with the rendition of services, in the
ordinary course of such Borrower's business, on terms which do
not include sale and return, sale on approval, consignment or
similar repurchase or return terms. All such Inventory shall
be produced in accordance with the Federal Fair Labor
Standards Act of 1938 and all rules, regulations, and orders
thereunder.
11.5. INSURANCE. Each Borrower shall at all times keep
insured or cause to be kept insured, in insurance companies
having a rating of at least "A" by Best's Rating Service, all
property owned by it of a character usually insured by others
carrying on businesses similar to that of such Borrower in
such manner and to such extent and covering such risks as such
properties are usually insured. Each Borrower shall carry
business interruption insurance at such levels as are
acceptable to Lender. Each Borrower shall at all times carry
insurance, in insurance companies having a rating of at least
"A" by Best's Rating Service, against liability on account of
damage to persons or property (including product liability
insurance and insurance required under all Laws pertaining to
workers' compensation) and covering all other liabilities
common to such Borrower's business, in such manner and to such
extent as such coverage is usually carried by others
conducting businesses similar to that of such Borrower. All
policies of insurance maintained hereunder shall contain a
clause providing that such policies may not be canceled,
reduced in coverage or otherwise modified without 30 days
prior written notice to Lender. Borrower shall upon request
of Lender at any time furnish to Lender updated evidence of
insurance (in the form required as a condition to Lender's
lending hereunder) for such insurance.
11.6. PAYMENT OF TAXES AND OTHER OBLIGATIONS. Each
Borrower shall promptly pay and discharge or cause to be paid
and discharged, as and when due, any and all income taxes,
federal or
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otherwise, lawfully assessed and imposed upon it, and any and
all lawful taxes, rates, levies, and assessments whatsoever
upon its properties and every part thereof, or upon the income
or profits therefrom and all claims of materialmen, mechanics,
carriers, warehousemen, landlords and other like Persons for
labor, materials, supplies, storage or other items or services
which if unpaid might be or become a Security Interest or
charge upon any of its property; provided, however, that a
Borrower may diligently contest in good faith by appropriate
proceedings the validity of any such taxes, rates, levies, or
assessments, provided such Borrower has established adequate
reserves therefor in conformity with GAAP on the books of such
Borrower, and no Security Interest, other than a Permitted
Security Interest, results from such non-payment.
11.7. COMPLIANCE WITH LAWS. Each Borrower shall comply
with all Material Laws.
11.8. DISCOVERY AND CLEAN-UP OF HAZARDOUS MATERIAL. Upon
any Responsible Officer of Borrower receiving notice or
becoming aware of any violation of Environmental Laws or any
similar notice described in Section 11.10.2, or upon any
Borrower otherwise discovering Hazardous Material on any
property owned or leased by such Borrower which is in
violation of, or which would result in liability under, any
Environmental Law, Borrower shall: (i) promptly take such acts
as may be necessary to prevent danger or harm to the property
or any person therein as a result of such Hazardous Material;
and (ii) take all necessary steps to initiate and
expeditiously complete all removal, remedial, response,
corrective and other action to eliminate any such
environmental problems, and keep Lender informed of such
actions and the results thereof.
11.9. TERMINATION OF PENSION BENEFIT PLAN. No Borrower or
ERISA Affiliate of any Borrower shall terminate or amend any
Pension Benefit Plan maintained by such Borrower or such ERISA
Affiliate if such termination or amendment would result in any
liability to such Borrower or such ERISA Affiliate under
ERISA, which could reasonably be likely to have a Material
Adverse Effect, or any increase in current liability for the
plan year for which such Borrower or such ERISA Affiliate is
required to provide security to such Pension Benefit Plan
under the Code, which could reasonably be likely to have a
Material Adverse Effect.
11.10. NOTICE TO LENDER OF MATERIAL EVENTS. Borrower
shall, promptly upon any Responsible Officer of Borrower
obtaining knowledge or notice thereof, give notice to Lender
of (i) any breach of any of the covenants in Section 11, 12,
or 13; (ii) any Default or Event of Default; (iii) the
commencement of any Material Proceeding; and (iv) any loss of
or damage to any assets of a Borrower or the commencement of
any proceeding for the condemnation or other taking of any of
the assets of a Borrower, or if such loss, damage or
proceeding has or is reasonably likely to have a Material
Adverse Effect on such Borrower. In addition,
11.10.1. Borrower shall furnish to Lender from time to
time all information which Lender requests with respect
to the status of any Material Proceeding.
11.10.2. Borrower shall promptly inform Lender of its
receipt of, and deliver to Lender a copy of, any
(i) notice that any violation of any Material Law may
have been committed or is about to be committed by any
Borrower, or (ii) notice that any administrative or
judicial complaint or order has been filed or is about to
be filed against any Borrower alleging violations of any
Material Law.
11.10.3. Borrower shall promptly deliver to Lender
notice of any default or event of default, or the
occurrence of any event which would with the passage of
time, giving of
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notice or otherwise, constitute a default or event of
default with respect to any of the Permitted
Indebtedness.
11.10.4. Borrower shall promptly deliver notice to
Lender of the assertion by the holder of any Indebtedness
of a Borrower in the outstanding principal amount in
excess of $500,000 that a default exists with respect
thereto or that such Borrower is not in compliance with
the terms thereof, or of the threat or commencement by
such holder of any enforcement action because of such
asserted default or noncompliance.
11.10.5. Borrower shall, promptly after any Responsible
Officer of Borrower becoming aware thereof, deliver
notice to Lender of any pending or threatened strike,
work stoppage, unfair labor practice claim or other
material labor dispute affecting a Borrower, which could
reasonably be likely to have a Material Adverse Effect.
11.10.6. Borrower shall promptly deliver notice to
Lender of any change in the name, state of incorporation,
or form of organization of any Borrower, or the trade
names or styles under which a Borrower will sell
Inventory or create Accounts, or to which instruments in
payment of Accounts may be made payable, at least 30 days
prior to such change.
11.10.7. Borrower shall, promptly after any Responsible
Officer of Borrower becoming aware thereof, deliver
notice to Lender of any event that has or is reasonably
likely to have a Material Adverse Effect with respect to
any Borrower, and Borrower shall provide such additional
information to Lender regarding any such event as Lender
may reasonably request from time to time.
11.11. BORROWING OFFICER. Borrower shall keep on file with
Lender at all times an appropriate instrument naming each
Borrowing Officer.
11.12. ACCOUNTING SYSTEM; TRACING OF PROCEEDS. Each
Borrower shall maintain a system of accounting established and
administered in accordance with GAAP. Each Borrower shall
maintain detailed and accurate records of proceeds of the
Loans and transfers of proceeds of the Loans (i) received by
it from the Lender, (ii) transferred from it to any other
Borrower, and (iii) received by it from another Borrower.
Each Borrower acknowledges that its ability to obtain the
Loans hereunder is made possible by the fact that the
Borrowers are co-borrowers under this Agreement and the other
Loan Documents, and are operated as one enterprise. Each
Borrower agrees that (a) the business operations of each
Borrower complement one another, and such entities have a
common business purpose, and (b) the proceeds of Advances
hereunder will benefit each Borrower, severally and jointly,
regardless of which Borrower requests or receives part or all
of any Advance.
11.13. FINANCIAL STATEMENTS. Borrower shall deliver to
Lender:
11.13.1. ANNUAL FINANCIAL STATEMENTS. Within 120 days
after the close of each fiscal year of Borrower, year-end
consolidated financial statements prepared in accordance
with GAAP of Borrower, containing a balance sheet, income
statement, statement of cash flows and an audit report
without qualification by Arthur Andersen LLP, or another
"big six" independent certified public accounting firm
selected by Borrower and satisfactory to Lender, and
accompanied by (a) a certificate of the independent
certified public accounting firm that examined such
financial statements to the effect that they have
reviewed and are
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familiar with this Agreement and that, in examining such
financial statements, they did not become aware of any
fact or condition which then constituted a Default or
Event of Default, except for those, if any, described in
reasonable detail in such certificate, and (b) the
management letter and report on internal controls
delivered by such independent certified public accounting
firm in connection with their audit.
11.13.2. QUARTERLY FINANCIAL STATEMENTS. Within 45 days
after the end of each fiscal quarter of Borrower,
unaudited consolidated financial statements of Borrower
prepared in accordance with GAAP for each of the months
not covered by the latest year-end financial statements,
in each case containing a balance sheet, income
statement, and statement of cash flows and accompanied by
(a) a Compliance Certificate of the Chief Financial
Officer of Borrower, and (b) statement comparing the
current statements delivered pursuant to this Section
with the statements for the equivalent months and
equivalent elapsed periods during the prior fiscal year
of Borrower.
Each Compliance Certificate shall be provided within 45
days after the end of each fiscal quarter shall be in the
form of Exhibit 11.13.2, shall contain detailed
calculations of the financial measurements referred to in
Section 13 for the relevant periods, and shall contain
statements by the signing officer to the effect that,
except as explained in reasonable detail in such
Compliance Certificate, (i) the attached Financial
Statements fairly state in all material respects the
financial position and results of operations of Borrower
on a consolidated basis (subject, in the case of
Financial Statements other than annual, to normal year-
end audit adjustments) and have been prepared in
accordance with GAAP applied consistently throughout the
periods covered thereby and with prior periods (except as
disclosed therein), (ii) all of the representations and
warranties of Borrower contained in this Agreement and
other Loan Documents are true and correct as of the date
such certification is given as if made on such date, and
(iii) there is no Existing Default. If any Compliance
Certificate delivered to Lender discloses that a
representation or warranty is not true and correct, or
that there is an Existing Default that has not been
waived in writing by Lender, such Compliance Certificate
shall state what action Borrower has taken or proposes to
take with respect thereto.
11.14. OTHER FINANCIAL INFORMATION. Borrower shall also
deliver the following to Lender, as specified below:
11.14.1. OTHER REPORTS OR INFORMATION CONCERNING
ACCOUNTS, OR INVENTORY. Promptly and only upon the
reasonable request of Lender, such other reports and
information, in form and detail satisfactory to Lender,
and documents, concerning Accounts, or Inventory
including, to the extent so requested by Lender, copies
of all invoices, bills of lading, shipping receipts,
purchase orders, and warehouse receipts.
11.14.2. STOCKHOLDER AND SEC REPORTS. Promptly and only
upon the reasonable request of Lender at any time or from
time to time, copies of any (i) proxy statements,
financial statements and reports which Borrower makes
available to its stockholders, and (ii) reports,
registration statements and prospectuses filed by
Borrower with any securities exchange or the Securities
and Exchange Commission or any Governmental Authority
succeeding to any of its functions.
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11.14.3. PENSION BENEFIT PLAN REPORTS. Promptly and
only upon the reasonable request of Lender at any time or
from time to time, a copy of each annual report or other
filing or notice filed with respect to each Pension
Benefit Plan of a Borrower or an ERISA Affiliate of a
Borrower.
11.14.4. TAX RETURNS. Promptly and only upon the
reasonable request of Lender at any time or from time to
time, a copy of each federal, state, or local tax return
or report filed by Borrower.
11.15. REVIEW OF ACCOUNTS. Not less often than annually,
and promptly at Lender's request if there is an Existing
Default, Borrower shall conduct a review of its Accounts, bad
debt reserves, and collection histories of Account Debtors and
promptly following such review provide Lender with a report of
such review in form and detail satisfactory to Lender.
11.16. INVENTORY. Not less often than annually, and
promptly at Lender's request if there is an Existing Default,
Borrower shall conduct a physical count of its Inventory and
promptly following the completion of such count provide Lender
with a report thereof in form and detail satisfactory to
Lender, including the value of such Inventory.
11.17. ANNUAL PROJECTIONS. Within the 30 days after the
first day of each fiscal year of Borrower, projected balance
sheets, statements of income and expense, and statements of
cash flows for Borrower as of the end of and for each month of
such fiscal year.
11.18. OTHER INFORMATION. Upon the request of Lender,
Borrower shall promptly deliver to Lender such other
information about the business, operations, revenues,
financial condition, property, or business prospects of any
Borrower as Lender may, from time to time, reasonably request.
11.19. EXAMS BY LENDER. Lender or Persons authorized by
and acting on behalf of Lender may at any time during normal
business hours examine the books and records and inspect any
of the property of each Borrower from time to time upon
reasonable notice (except that during an Existing Default, no
prior notice shall be required) to such Borrower, and in the
course thereof may make copies or abstracts of such books and
records and discuss the affairs, finances and books and
records of such Borrower with its accountants, officers and
employees. Each Borrower shall cooperate with Lender and such
Persons in the conduct of such exams and shall deliver to
Lender any instrument necessary for Lender to obtain records
from any service bureau maintaining records for such Borrower.
Borrower shall reimburse Lender for all reasonable costs and
expenses actually incurred by it in conducting each exam, but
if an Event of Default has not occurred, such reimbursement
for each such exam shall be limited to $500 per day (or in the
case of a partial day, the per hour prorata portion of $500,
based on an 8-hour day) for each Person involved in conducting
the exam plus Lender's other actual out-of-pocket costs and
expenses.
11.20. ACCESS TO OFFICERS AND AUDITORS. Each Borrower
shall permit Lender and Persons authorized by Lender to
discuss the business, operations, revenues, financial
condition, property, or business prospects of such Borrower
with its officers, employees, accountants and independent
auditors as often as Lender may request in its discretion, and
such Borrower shall direct such officers, employees,
accountants and independent auditors to cooperate with Lender
and make full disclosure to Lender of those matters that they
may deem relevant to the continuing ability of Borrower timely
to pay and perform the Loan Obligations except as provided in
this Agreement.
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Lender agrees that it will not disclose to third Persons any
information that it obtains about Borrower or its operations
or finances. Lender may, however, disclose such information
to all of its officers, attorneys, auditors, accountants, bank
examiners, agents and representatives who have a need to know
such information in connection with the administration,
interpretation or enforcement of the Loan Documents or the
lending and collection activity contemplated therein or to the
extent required by Law or a Governmental Authority. Lender
shall advise such Persons that such information is to be
treated as confidential and Lender is contractually obligated
to keep such information confidential. Lender may also
disclose such information in any documents that it files in
any legal proceeding to pursue, enforce or preserve its rights
under the Loan Documents to the extent that Lender's counsel
advises it that such disclosure is reasonably necessary.
Lender's non-disclosure obligation shall not apply to any
information that (i) is disclosed to Lender by a third Person
not affiliated with or employed by Borrower who does not have
a duty of non-disclosure, or (ii) becomes publicly known other
than as a result of disclosure by Lender.
11.21. INTERCOMPANY INDEBTEDNESS. Any Indebtedness owing
between or among the Borrowers from time to time, shall, at
all times during which the Commitment shall be outstanding or
any Loan Obligations shall be owing to Lender, be unsecured
and subordinated to the indefeasible prior repayment in full
in cash of all of the Loan Obligations.
11.22. LIQUIDATION OF FALCON PRODUCTS OF CALIFORNIA,
INC. Falcon Products, Inc. shall duly liquidate Falcon
Products of California, Inc. on or before June 30, 1998, and
shall not cause or permit Falcon Products of California, Inc.
to own any assets or incur any liabilities at any time.
11.23. FURTHER ASSURANCES. Borrower shall execute and
deliver, or cause to be executed and delivered, to Lender such
documents and agreements, and shall take or cause to be taken
such actions, as Lender may from time to time reasonably
request to carry out the terms and conditions of this
Agreement and the other Loan Documents. During the
continuance of an Existing Default and at any time thereafter,
Borrower covenants and agrees that the Lender may, in its sole
and absolute discretion, proceed directly against Borrower, or
any other Person liable for the payment or performance of the
Loan Obligations, or any or all of Borrower's property, or any
combination of the foregoing, in one or more claims, actions
or proceedings, whether or not any such claims, actions or
proceedings are instituted simultaneously or at different
times.
12. NEGATIVE COVENANTS. Each Borrower covenants and agrees that,
while any of the Commitments remains in effect and until all of the
Loan Obligations are fully and indefeasibly paid in full in cash,
such Borrower shall not, directly or indirectly, do any of the
following, or permit any other Borrower to do any of the following,
without the prior written consent of Lender:
12.1. INVESTMENTS. Make any Investments in any other Person
except the following:
12.1.1. Investments in (i) interest-bearing United
States government obligations; (ii) certificates of
deposit issued by Lender; (iii) prime commercial paper
rated A1 or better by Standard and Poor's Corporation or
Prime P1 or better by Moody's Investor Service, Inc.;
(iv) agreements involving the sale to Borrower of United
States government securities and their guarantied
repurchase the next Business Day by a Qualified Financial
Institution; (v) certificates of deposit issued by and
time deposits with any Qualified Financial Institution;
or (vi) money market mutual funds up to $100,000
outstanding at any one time.
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12.1.2. Investments existing on the Execution Date
and disclosed in Section 9.26 of the Disclosure Schedule.
12.1.3. Accounts arising in the ordinary course of
business and payable in accordance with Borrower's
customary trade terms.
12.1.4. Any Investments that are Permitted
Acquisitions.
12.2. INDEBTEDNESS. Create, incur, assume, or allow to exist
any Indebtedness of any kind or description, except the
following:
12.2.1. Indebtedness to trade creditors incurred in
the ordinary course of business, to the extent that it
does not remain unpaid for a period greater than sixty
(60) from the date of invoice, except for Indebtedness to
trade creditors subject to a bona fide dispute (the
amount of which is reflected on the Financial
Statements).
12.2.2. The Loan Obligations.
12.2.3. Indebtedness secured by Purchase money
Security Interests permitted by Section 12.3.
12.2.4. Indebtedness represented by Capital Leases to
the extent permitted hereunder.
12.2.5. Other Indebtedness existing on the date
hereof and disclosed in the Disclosure Schedule.
12.3. SECURITY INTERESTS. Create, incur, assume or allow to
exist any Security Interest upon all or any part of its
property, real or personal, now owned or hereafter acquired,
except the following:
12.3.1. Security Interests for taxes, assessments or
governmental charges not delinquent or being diligently
contested in good faith and by appropriate proceedings
and for which adequate book reserves in accordance with
GAAP are maintained.
12.3.2. Security Interests arising out of deposits in
connection with workers' compensation insurance,
unemployment insurance, old age pensions, or other social
security or retirement benefits legislation.
12.3.3. Deposits or pledges to secure bids, tenders,
contracts (other than contracts for the payment of
money), leases, statutory obligations, surety and appeal
bonds, and other obligations of like nature arising in
the ordinary course of business.
12.3.4. Security Interests imposed by any Law, such
as mechanics', workmen's, materialmen's, landlords',
carriers', or other like Security Interests arising in
the ordinary course of business which secure payment of
obligations which are not past due or which are being
diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance
with GAAP are maintained on Borrower's books.
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12.3.5. Purchase money Security Interests securing
payment of the purchase price of capital assets acquired
by Borrower after the Execution Date up to $50,000 in the
aggregate outstanding principal amount at any one time.
12.3.6. Security Interests existing on the Execution
Date that are disclosed in Section 9.21 of the Disclosure
Schedule and are satisfactory to Lender.
12.4. CHANGE OF CONTROL. Merge or consolidate with or into
another Person, or permit any Person, other than the current
shareholders, to become the record or beneficial owner,
directly or indirectly, of securities representing 20% or more
of the voting power of any Borrower's then outstanding
securities, or acquiring a sufficient interest to elect a
majority of the board of directors, elect or appoint the
managing partner(s) or otherwise direct the day-to-day control
of any Borrower.
12.5. DISTRIBUTIONS. Declare or pay any Distribution (i) if
there is an Existing Default or (ii) if after giving effect to
the payment of such Distribution, such Distribution would
result in the occurrence of a Default or Event of Default.
For purposes of this Section 12.5, "Distribution" means and
includes (a) any cash dividend or distribution to the
stockholders of a Borrower with respect to the stock of
Borrower, and (b) any acquisition or redemption of any
outstanding stock or other equity interest of a Borrower.
12.6. INDIRECT OBLIGATIONS. Create, incur, assume or allow to
exist any Indirect Obligations.
12.7. CAPITAL STRUCTURE; EQUITY SECURITIES. Make any change
in the capital structure of any Borrower which has or is
reasonably likely to have a Material Adverse Effect; or issue
or create any securities other than securities issued or
created in connection with a Permitted Acquisition.
12.8. CHANGE OF BUSINESS. Engage in any business other than
the business currently conducted by Borrower or a business
reasonably related thereto.
12.9. TRANSACTIONS WITH AFFILIATES. Enter into or be a party
to any transaction or arrangement, including the purchase,
sale or exchange of property of any kind or the rendering of
any service, with any Affiliate other than a Borrower, or make
any loans or advances to any Affiliate other than a Borrower,
in each case on terms more favorable than could be obtained
with independent third parties.
12.10. NO DEFAULT ON INDEBTEDNESS OR MATERIAL AGREEMENTS.
Default upon or fail to pay any Indebtedness for borrowed
money in excess of $500,000, as the same matures, or breach,
violate, or be in default under any Material Agreement and
fail to cure such failure to pay, breach, violation, or
default within the applicable cure period provided therein.
12.11. CONFLICTING AGREEMENTS. Enter into any agreement, that
would, if fully complied with by it, result in a Default or
Event of Default either immediately or upon the elapsing of
time.
12.12. FISCAL YEAR. Change its fiscal year end, which is
currently the Saturday closest to October 31.
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12.13. BANK ACCOUNTS. Maintain any depository or other
account at any financial institution other than Lender, except
for petty cash accounts which do not in the aggregate have a
balance at any time in excess of $10,000 and payroll accounts.
12.14. NEW SUBSIDIARIES. Organize, create or acquire any
Subsidiary other than those in existence on the date hereof
and disclosed on the Disclosure Schedule, unless
simultaneously with such Person becoming a Subsidiary, such
Person becomes a Borrower under this Agreement and executes
any joinder agreements or other documents deemed necessary by
Lender to evidence such Subsidiary's joint and several
liability for the Loan Obligations.
12.15. TRANSACTIONS HAVING A MATERIAL ADVERSE EFFECT OR
CAUSING A DEFAULT. Enter into any transaction which has or is
reasonably likely to have a Material Adverse Effect; or enter
into any transaction, or take or contemplate taking any other
action, or omit or contemplate omitting to take any action,
which any Borrowing Officer knows, or reasonably should know,
is likely to cause a Default or Event of Default hereunder.
12.16. DISPOSAL OF PROPERTY. Sell, transfer, exchange,
lease, or otherwise dispose of any of its assets to any
Person, including, without limitation, to any Subsidiary of
Borrower. Notwithstanding the foregoing, any Borrower may
sell, transfer or otherwise dispose of obsolete or unusable
equipment or other equipment in the ordinary course of
business, in all cases, having an orderly liquidation value no
greater than $1,000,000 in the aggregate for all Borrowers in
any fiscal year of Borrower, and may sell finished goods
Inventory sold in the ordinary course of business in arm's-
length transactions.
12.17. ACQUISITIONS. Acquire stock or any other equity
interest in a Person sufficient for such Person to become a
Subsidiary or Affiliate of a Borrower, or acquire all or
substantially all of the assets of a Person (including all or
substantially all of the operating assets of an operating
division of a Person) unless (i) at the time of such
acquisition there is no Existing Default and after giving
effect to such acquisition there would not be a Default or
Event of Default immediately or with the passage of time, (ii)
if such acquisition involves the acquisition of an equity
interest in a Person, such Person becomes a wholly-owned
Subsidiary of a Borrower and such Person becomes a Borrower
under this Agreement and executes any joinder agreements or
other documents deemed necessary by Lender to evidence such
Person's joint and several liability for the Loan Obligations,
and (iii) if any Subsidiary is formed or acquired in
connection with any such acquisition permitted hereby, such
Subsidiary shall simultaneously with the effectiveness of such
acquisition become a party to this Agreement and each other
Loan Document as a Borrower.
13. FINANCIAL COVENANTS.
13.1. SPECIAL DEFINITIONS. As used in this Section 13 and
elsewhere herein, the following capitalized terms have the
following meanings:
"EBITDA" means for any period of calculation, an amount equal
to the sum of (i) Net Income, (ii) federal, state and local
income tax expense paid or accrued for as a liability,
(iii) Interest Expense, (iv) depreciation and amortization
expense, (v) losses on the sale or other disposition of
assets, (vi) extraordinary losses, minus (a) gains on the sale
or other disposition of assets, and (b) extraordinary gains.
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"INTEREST EXPENSE" means, for any period of calculation, all
interest, whether paid or accrued as a liability, but without
duplication, on Indebtedness of Borrower during such period.
"TANGIBLE NET WORTH" means, at any date: the total equity of
Borrower (including common stock and preferred stock exclusive
of mandatorily redeemable preferred stock), including stated
capital or value, paid in capital, and retained earnings after
deducting treasury stock, that would appear on a balance sheet
of Borrower as of such date in accordance with GAAP, minus (i)
patents, copyrights, trademarks, trade names, franchises,
goodwill, research and all other intangibles, (ii) unamortized
debt expense, and (iii) the cost to acquire any asset in
excess of fair value of such asset.
"TOTAL FUNDED INDEBTEDNESS" means, as of any time, the sum of
any contractual obligations to pay borrowed money (including,
without limitation, any such Indebtedness incurred in
connection with purchase money financing) and to make payments
or reimbursements with respect to letters of credit (whether
or not there have been drawings thereunder) at such time
including, without limitation, the Loan and the aggregate
dollar amount of Capital Leases presented in Borrower's most
recent Financial Statements as Liabilities (as defined under
GAAP).
All other capitalized terms used in this Section 13 shall have
their meanings, and shall be determined, under GAAP. All
calculations shall be for Borrower and its Subsidiaries permitted
hereunder on a consolidated basis. Sections 13.2 through and
including Section 13.4 shall remain effective while any of the
Commitments are in effect, and until all of the Loan Obligations
(except contingent indemnification obligations) have been paid in
full in cash.
13.2. MAXIMUM LEVERAGE. Borrower covenants and agrees
that The ratio of Borrower's Total Funded Indebtedness to
Borrower's EBITDA for the preceding twelve (12) month period,
calculated as of the last day of each fiscal quarter, shall at
no time be greater than 2.00 to 1.00.
13.3. TOTAL LIABILITIES TO TANGIBLE NET WORTH. Borrower
covenants and agrees that the ratio of Borrower's total
Liabilities (including all accounts payable) to Tangible Net
Worth, calculated as of the last day of each fiscal quarter,
shall at no time be greater than 1.00 to 1.00.
13.4. MINIMUM CURRENT RATIO. Borrower covenants and
agrees that the ratio of Borrower's Current Assets to Current
Liabilities, calculated as of the last day of each fiscal
quarter, shall at no time be less than 2.25 to 1.00.
14. DEFAULT.
14.1. EVENTS OF DEFAULT. Any one or more of the following
shall constitute an event of default (an "Event of Default")
under this Agreement:
14.1.1. FAILURE TO PAY PRINCIPAL OR INTEREST. Failure
of Borrower to pay any principal of the Loans when due or
interest accrued thereon within five days of the date
when due.
14.1.2. FAILURE TO PAY OTHER AMOUNTS OWED TO
LENDER. Failure of Borrower to pay any of the Loan
Obligations (other than principal of the Loans or
interest accrued thereon) within 3 days after the date
when due.
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14.1.3. FAILURE TO PAY AMOUNTS OWED TO OTHER
PERSONS. Failure of any Borrower to make any payment due
on Indebtedness of such Borrower over $500,000 to Persons
other than Lender which continues unwaived beyond any
applicable grace period specified in the documents
evidencing such Indebtedness.
14.1.4. REPRESENTATIONS OR WARRANTIES. Any
representation or warranty made by any Borrower in this
Agreement or in any other Loan Document, or in any
statement or representation made in any certificate,
report, opinion or other document delivered pursuant to
any of the foregoing by Borrower or any other Borrower,
is discovered to have been false in any material respect
when made.
14.1.5. CERTAIN COVENANTS. Failure of any Borrower to
comply with the covenants in Sections 11.1, 11.10, 11.11,
11.12, 11.13, 11.15, 11.16, 11.17, 11.19, 11.20,11.22,
12.1, 12.2, 12.3, 12.5, 12.7, 12.8, 12.9, 12.10, 12.12,
12.13, 12.14, 12.17, or 13.
14.1.6. OTHER COVENANTS. Failure of any Borrower to
comply with any of the terms or provisions of any of the
Loan Documents applicable to it (other than a failure
which constitutes an Event of Default under any of
Sections 14.1.1 through 14.1.5), which such failure is
not remedied or waived in writing by Lender within 30
days after the initial occurrence of such failure.
14.1.7. ACCELERATION OF OTHER INDEBTEDNESS. Any
Obligation of a Borrower (other than the Loan
Obligations) for the payment of borrowed money in excess
of $500,000 becomes or is declared to be due and payable
or required to be prepaid (other than by a regularly
scheduled prepayment) prior to the original or stated
Maturity thereof.
14.1.8. DEFAULT UNDER OTHER AGREEMENTS. The occurrence
of any default or event of default under any agreement to
which a Borrower is a party (other than the Loan
Documents), which default or breach continues unwaived
beyond any applicable grace period provided therein and
likely has or is reasonably likely to have a Material
Adverse Effect.
14.1.9. BANKRUPTCY; INSOLVENCY; ETC. A Borrower
(i) fails to pay, or admits in writing its inability to
pay, its debts generally as they become due, or otherwise
becomes insolvent (however evidenced); (ii) makes an
assignment for the benefit of creditors; (iii) files a
petition in bankruptcy, is adjudicated insolvent or
bankrupt, petitions or applies to any tribunal for any
receiver or any trustee of such Borrower or any
substantial part of its property; (iv) commences any
proceeding relating to such Borrower under any
reorganization, arrangement, readjustment of debt,
dissolution or liquidation Law of any jurisdiction,
whether now or hereafter in effect; (v) has commenced
against it any such proceeding which remains undismisse
d for a period of 60 days, or by any act indicates its
consent to, approval of, or acquiescence in any such
proceeding or the appointment of any receiver of or any
trustee for it or of any substantial part of its
property, or allows any such receivership or trusteeshi
p to continue undischarged for a period of 60 days; or
(vi) takes any action to authorize any of the foregoing.
14.1.10. JUDGMENTS; ATTACHMENT; SETTLEMENT; ETC. Any
one or more judgments or orders is entered against a
Borrower or any attachment or other levy is made against
the property of a Borrower with respect to a claim or
claims involving in the aggregate
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liabilities (not paid or fully covered by insurance, less
the amount of reasonable deductibles in effect on the
Execution Date) in excess of $50,000 becomes final and
non-appealable and remains unsatisfied for 30 days, or if
timely appealed is not fully bonded and collection
thereof stayed pending the appeal.
14.1.11. PENSION BENEFIT PLAN TERMINATION, ETC. Any
Pension Benefit Plan termination by the PBGC or the
appointment by the appropriate United States District
Court of a trustee to administer any Pension Benefit Plan
or to liquidate any Pension Benefit Plan; or any event
which constitutes grounds either for the termination of
any Pension Benefit Plan by PBGC or for the appointment
by the appropriate United States District Court of a
trustee to administer or liquidate any Pension Benefit
Plan shall have occurred and be continuing for thirty
(30) days after Borrower has notice of any such event; or
any voluntary termination of any Pension Benefit Plan
which is a defined benefit pension plan as defined in
Section 3(35) of ERISA while such defined benefit pension
plan has an accumulated funding deficiency, unless Lender
has been notified of such intent to voluntarily termina
te such plan and Lender have given their consent and
agreed that such event shall not constitute a Default; or
the plan administrator of any Pension Benefit Plan
applies under Section 412(d) of the Code for a waiver of
the minimum funding standards of Section 412(1) of the
Code and Lender determine that the substantial business
hardship upon which the application for such waiver is
based could subject any Borrower or ERISA Affiliate of
any Borrower to a liability in excess of $50,000.
14.1.12. LIQUIDATION OR DISSOLUTION. Any Borrower files
a certificate of dissolution under applicable state Law
or is liquidated or dissolved or suspends or terminates
the operation of its business, or has commenced against
it any action or proceeding for its liquidation or
dissolution or the winding up of its business, or takes
any corporate action in furtherance thereof, except in
connection with the consolidation of such a Borrower and
its assets with another Borrower and its assets.
14.1.13. SEIZURE OF ASSETS. All or a material part of
the property of any Borrower is nationalized,
expropriated, seized or otherwise appropriated, or
custody or control of such property or of any Borrower
shall be assumed by any Governmental Authority or any
court of competent jurisdiction at the instance of any
Governmental Authority, unless the same is being
contested in good faith by proper proceedings diligently
pursued and a stay of enforcement is in effect.
14.1.14. LOSS TO COLLATERAL. Any loss, theft, damage or
destruction of any item or items of property occurs which
either (i) has or is reasonably likely to have a Material
Adverse Effect on any Borrower.
14.2. CROSS-DEFAULT. Any Event of Default under this
Agreement will constitute an event of default under any other
agreement between any Borrower and Lender and under any
evidence of Indebtedness of any Borrower held by Lender,
whether or not such is an event of default specified therein.
14.3. RIGHTS AND REMEDIES IN THE EVENT OF DEFAULT.
14.3.1. TERMINATION OF COMMITMENTS. Upon an Event of
Default described in Section 14.1.9, the Commitments
shall be deemed automatically canceled. During any
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other Existing Default, Lender may cancel the
Commitments. Such cancellation may be, in either case,
without presentment, demand or notice of any kind, which
Borrower expressly waives.
14.3.2. ACCELERATION. Upon an Event of Default
described in Section 14.1.9, all of the outstanding Loan
Obligations shall automatically become immediately due
and payable. During any other Existing Default, Lender
may declare all of the outstanding Loan Obligations
immediately due and payable. Such acceleration may be,
in either case, without presentment, demand or notice of
any kind, which Borrower expressly waives.
14.3.3. RIGHT OF SET-OFF. During any Existing Default,
Lender is hereby authorized, without notice to Borrower
(any such notice being expressly waived by Borrower), to
set off and apply against the Loan Obligations any and
all deposits (general or special, time or demand,
provisional or final) or other assets at any time held or
at Lender, or any other Indebtedness at any time owing by
Lender to or for the credit or the account of Borrower,
irrespective of whether or not Lender shall have made any
demand under this Agreement or the Notes and although
such Loan Obligations may be unmatured. The rights of
Lender under this Section are in addition to other rights
and remedies (including, without limitation, other rights
of set-off) which Lender may otherwise have.
14.3.4. MISCELLANEOUS. During an Existing Default and
at any time thereafter, Lender may exercise any other
rights and remedies available to Lender under the Loan
Documents or otherwise available to Lender at law or in
equity.
14.3.5. JOINT AND SEVERAL. Each Obligation and
liability to Lender of each Borrower, including, without
limitation, the Loan Obligations, are the joint and
several obligations of each Borrower, and Lender may
proceed directly against any Borrower, all Borrowers, or
any one of the foregoing or any combination of the
foregoing, without first proceeding against any other
Borrower, or without joining all Persons liable or
potentially liable for any portion of the Loan
Obligations in one action.
14.3.6. APPLICATION OF FUNDS. Any funds received by
Lender with respect to the Loan Obligations after
maturity or any acceleration, including proceeds of any
of Borrower's property, shall be applied as follows:
(i) first, to reimburse Lender for any amounts due to
Lender under Section 18.5; (ii) second, to reimburse to
Lender all unreimbursed costs and expenses paid or
incurred by Lender that are payable or reimbursable by
Borrower hereunder; (iii) third, to the payment of
accrued and unpaid fees due hereunder and all other
amounts due hereunder (other than the Loans and interest
accrued thereon); (iv) fourth, to the payment of interest
accrued on the Loans to Lender; (v) fifth, to the payment
of the Loans, in such order as Lender determines in its
absolute discretion; and (vi) sixth, to the payment of
the other Loan Obligations. Any remaining amounts shall
be paid to Borrower or such other Persons as shall be
legally entitled thereto.
14.4. NOTICE. Any notice of intended action required to be
given by Lender, if given as provided in Section 19.1 at least
10 days prior to such proposed action, shall be effective and
constitute reasonable and fair notice to Borrower.
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15. CHANGES IN CIRCUMSTANCES.
15.1. COMPENSATION FOR INCREASED COSTS AND REDUCED RETURNS;
CAPITAL ADEQUACY.
15.1.1. INCREASED COSTS OR REDUCED RETURNS TO
LENDER. If, after the date hereof, the adoption of any
applicable Law or any change in any applicable Law or any
change in the interpretation or administration thereof by
any Governmental Authority charged with the
interpretation or administration thereof, or compliance
by Lender (or the Lending Office) with any request or
directive (whether or not having the force of law) of any
such Governmental Authority:
(i) subjects Lender (or the Lending Office) to any
Tax with respect to any Eurodollar Loan or its
obligation to make any Advance that will be a
Eurodollar Loan, or change the basis of taxation of
any amounts payable to Lender (or the Lending
Office) under this Agreement in respect of any
Eurodollar Loan (other than Taxes imposed on the
overall net income of Lender by the jurisdiction in
which Lender has its principal office or the
Lending Office);
(ii) imposes, modifies, or deems applicable any
reserve, special deposit, assessment, compulsory
loan or similar requirement (other than the Reserve
Requirement) relating to any extensions of credit
or other assets of, or any deposits with or other
liabilities or Commitment of, Lender (or the
Lending Office), including the Commitment of Lender
hereunder; or
(iii) imposes on Lender (or the Lending Office),
or the London interbank market, any other condition
affecting this Agreement, the Commitment or any of
the Loan Obligations;
and the result of any of the foregoing is to increase the
cost to Lender (or the Lending Office) of making,
converting into, continuing, or maintaining any Revolving
Loan or to reduce any sum received or receivable by
Lender (or the Lending Office) under this Agreement or
any of the other Loan Documents with respect to any
Revolving Loan, then Borrower shall pay to Lender on
demand such amount or amounts as will compensate Lender
for such increased cost or reduction. If Lender requests
compensation by Borrower under this Section Borrower may,
by notice to Lender, suspend the obligation of Lender to
make or continue Revolving Loans of the type with respect
to which such compensation is requested, or to convert
Revolving Loans of any other type into Revolving Loans of
such type, until the event or condition giving rise to
such request ceases to be in effect (in which case the
provisions of Section 15.5 shall be applicable);
provided, however, that such suspension shall not affect
the right of Lender to receive the compensation so
requested.
15.1.2. CAPITAL ADEQUACY. If at any time after the
date hereof Lender determines that the adoption of any
applicable Law regarding capital adequacy or any change
therein or in the interpretation or administration
thereof by any governmental authority, charged with the
interpretation or administration thereof, or any request
or directive regarding capital adequacy (whether or not
having the force of law) of any such Governmental
Authority, has or would have the effect of reducing the
rate of return on the capital of Lender or any
corporation controlling Lender as a consequence of
Lender's obligations hereunder to a
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level below that which Lender or such corporation could
have achieved but for such adoption, change, request, or
directive (taking into consideration its policies with
respect to capital adequacy), then from time to time upon
demand Borrower shall pay to Lender such additional
amount or amounts as will compensate Lender for such
reduction.
15.1.3. NOTICE TO BORROWER. Lender shall promptly
notify Borrower of any event of which it has knowledge,
occurring after the date hereof, which will entitle
Lender to compensation pursuant to this Section 15.1 and
will designate a different Lending Office if such
designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the judgment of
Lender, be otherwise disadvantageous to it. If Lender
claims compensation under this Section, Lender will
furnish to Borrower a statement stating the additional
amount or amounts to be paid to it hereunder, which shall
be conclusive in the absence of manifest error. In
determining such amount, Lender may use any reasonable
averaging and attribution methods.
15.2. LIMITATIONS ON EURODOLLAR LOANS. If on or prior to the
first day of any Interest Period for any Eurodollar Loan:
15.2.1. MARKET FAILURE. Lender determines (which
determination shall be conclusive) that by reason of
circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the
Eurodollar Rate for such Interest Period; or
15.2.2. INADEQUATE REFLECTION OF COST. Lender
determines (which determination shall be conclusive) that
the Eurodollar Rate will not adequately and fairly
reflect the cost to Lender of funding Eurodollar Loans
for such Interest Period;
then Lender will give Borrower prompt notice thereof, and
while such condition remains in effect, Lender will have no
obligation to make additional Advances that will be Eurodollar
Loans, to continue Eurodollar Loans, or to convert Prime Rate
Loans or Federal Funds Rate Loans into Eurodollar Loans.
15.3. ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for Lender or
the Lending Office to make Advances that will be Eurodollar
Loans or maintain Eurodollar Loans hereunder, then Lender
shall promptly notify Borrower thereof and Lender's obligation
to do so or to convert Prime Rate Loans or Federal Funds Rate
Loans into Eurodollar Loans shall be suspended until such time
as Lender may again do so, and Lender's outstanding Eurodollar
Loans shall be converted into Prime Rate Loans in accordance
with Section 15.5.
15.4. COMPENSATION. Upon the request of Lender, Borrower
shall pay to Lender such amount or amounts as will be
sufficient (in the reasonable determination of Lender) to
compensate it for any loss, cost, or expense (including loss
of anticipated profits) incurred by it as a result of:
15.4.1. EARLY PAYMENT. Any payment, prepayment, or
conversion of a Eurodollar Loan for any reason
(including, without limitation, the acceleration of the
Revolving Loan pursuant to the terms hereof) on a date
other than the last day of the Interest Period for such
Eurodollar Loan; or
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15.4.2. FAILURE TO TAKE ADVANCES. Any failure by
Borrower for any reason (other than pursuant to
Section 15.2 or 15.3) to take an Advance that is
requested to be a Eurodollar Loan or to convert,
continue, or prepay a Eurodollar Loan on the date
therefor specified in the relevant request for an Advance
or notice of prepayment, continuation, or conversion
under this Agreement.
If Lender claims compensation under this Section 15.4, Lender
shall furnish a certificate to Borrower that states the amount
to be paid to it hereunder and includes a description in
reasonable detail of the method used by Lender in calculating
such amount. Borrower shall have the burden of proving that
the amount of any such compensation calculated by Lender is
not correct. Any compensation payable by Borrower to Lender
under this Section shall be payable without regard to whether
Lender has funded any Advance or Eurodollar Loan through the
purchase of deposits in an amount or of a maturity
corresponding to the deposits used as a reference in
determining the Eurodollar Rate as provided herein.
15.5. TREATMENT OF AFFECTED REVOLVING LOANS. If the
obligation of Lender to make an Advance that will be a
Eurodollar Loan or to continue any Eurodollar Loan or to
convert any Prime Rate Loan or Federal Funds Rate Loan into a
Eurodollar Loan shall be suspended pursuant to Section 15.2 or
15.3 each such Revolving Loan shall be automatically and
immediately converted into a Prime Rate Loan on the last day
of its Interest Period (or, in the case of a conversion
required by Section 15.3, on such earlier date as Lender may
specify to Borrower). Unless and until Lender gives notice as
provided below that the circumstances specified in
Section 15.2 or 15.3 that gave rise to such conversion no
longer exist:
15.5.1. PAYMENTS. to the extent that such Revolving
Loans have been so converted, all payments and
prepayments of principal that would otherwise be applied
to such Revolving Loans shall continue to be made and
applied as provided for herein; and
15.5.2. PRIME RATE. All Advances by Lender that would
otherwise become Eurodollar Loans and all Revolving Loans
that would otherwise be continued by Lender as Eurodollar
Loans shall become or be continued instead as Prime Rate
Loans, and all Revolving Loans that would otherwise be
converted into Eurodollar Loans shall be converted
instead into (or shall remain as) Prime Rate Loans or
Federal Funds Rate Loans.
Lender shall give prompt notice to Borrower if and when the
circumstances specified in Section 15.2 or 15.3 that gave rise
to the conversion of Revolving Loans pursuant to this
Section 15.5 no longer exist.
16. TAXES.
16.1. GROSS-UP. All payments by Borrower to or for the
account of Lender hereunder or under any other Loan Document
shall be made free and clear of and without deduction for all
present or future Taxes, excluding franchise Taxes and Taxes
imposed on Lender's net income, by the jurisdiction under the
Laws of which Lender is organized or the Lending Office is
located or any political subdivision thereof. If Borrower is
required by Law to deduct any Taxes from or in respect of any
sum payable under this Agreement or any other Loan Document to
Lender, (i) the sum payable shall be increased as necessary so
that after making all required deductions (including
deductions applicable to additional sums payable under this
Section) Lender receives an amount equal to the sum it would
have received had no such deductions been made, (ii) Borrower
shall
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make such deductions, (iii) Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority
in accordance with applicable Law, and (iv) Borrower shall
furnish to Lender, at its address referred to herein, the
original or a certified copy of a receipt evidencing payment
thereof. In addition, Borrower agrees to pay any and all
present or future Impositions. Impositions include stamp or
documentary taxes and any other excise or property taxes or
charges or similar levies which arise from the Loan
Obligations, any payment made under this Agreement or any
other Loan Document or from the execution or delivery of, or
otherwise with respect to, the Loan Obligations, this
Agreement or any other Loan Document. Borrower agrees to
indemnify Lender for the full amount of all Impositions and
Taxes, excluding franchise Taxes and Taxes imposed on Lender's
net income, (including any such Taxes or Impositions imposed
or asserted by any jurisdiction on amounts payable under this
Section) paid by Lender and any liability (including
penalties, interest and expenses) arising therefrom or with
respect thereto. Within thirty days after the date of any
payment of Taxes, Borrower shall furnish Lender the original
or a certified copy of a receipt evidencing such payment.
16.2. LENDER'S UNDERTAKING. If Borrower is required to pay
additional amounts to or for the account of Lender pursuant to
Section 16.1, then Lender will use reasonable efforts to
change the jurisdiction of the Lending Office so as to
eliminate or reduce any such additional payment which may
thereafter accrue if such change, in the judgment of Lender,
is not otherwise disadvantageous to Lender.
17. USURY LIMITATIONS. Notwithstanding any provisions to the
contrary in Section 4 or elsewhere in any of the Loan Documents,
Borrower shall not be obligated to pay interest at a rate which
exceeds the maximum rate permitted by Law. If, but for this
Section 17, Borrower would be deemed obligated to pay interest at
a rate which exceeds the maximum rate permitted by Law, or if any
of the Loan Obligations is paid or becomes payable before its
originally scheduled Maturity and as a result Borrower has paid or
would be obligated to pay interest at such an excessive rate, then
(i) Borrower shall not be obligated to pay interest to the extent
it exceeds the interest that would be payable at the maximum rate
permitted by Law; (ii) if the outstanding Loan Obligations have not
been accelerated as provided in Section 14.3.2, any such excess
interest that has been paid by Borrower shall be refunded; (iii) if
the outstanding Loan Obligations have been accelerated as provided
in Section 14.3.2, any such excess that has been paid by Borrower
shall be applied to the Loan Obligations as provided in Section
14.3.6; and (iv) the effective rate of interest shall be deemed
automatically reduced to the maximum rate permitted by Law.
18. GENERAL.
18.1. LENDER'S RIGHT TO CURE. So long as there is an Existing
Default, after first giving notice to Borrower, Lender may
from time to time, in its absolute discretion, for Borrower's
account and at Borrower's expense, pay or make a Revolving
Loan Advance to pay any amount or do any act required of
Borrower hereunder. So long as there is an Existing Default,
Lender may also from time to time, in its absolute discretion,
for Borrower's account and at Borrower's expense pay or make
a Revolving Loan Advance to pay any amount or do any act
reasonably requested by Lender to preserve, protect, maintain
or enforce the Loan Obligations and which Borrower fails to
pay. Such payments and actions include payment of any
judgment against Borrower, insurance premium, taxes or
assessments, warehouse charge, finishing or processing charge,
landlord's claim, and any other claim. All payments made by
Lender pursuant to this Section and all out-of-pocket costs
and expenses incurred by Lender in connection with any action
taken by Lender hereunder shall be a part of the Loan
Obligations. Any payment made or other action taken by
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<PAGE> 39
Lender pursuant to this Section shall be without prejudice to
any right to assert an Event of Default hereunder and to
pursue Lender's other rights and remedies with respect
thereto.
18.2. RIGHTS NOT EXCLUSIVE. Every right granted to Lender
hereunder or under any other Loan Document or allowed to it at
law or in equity shall be deemed cumulative and may be
exercised from time to time.
18.3. SURVIVAL OF AGREEMENTS. All covenants and agreements
made herein and in the other Loan Documents shall survive the
execution and delivery of this Agreement, the Notes and other
Loan Documents and the making of every Advance. All
agreements, obligations and liabilities of Borrower under this
Agreement concerning the payment of money to Lender, including
Borrower's obligations under Sections 18.4 and 18.5, but
excluding the obligation to repay the Loans and interest
accrued thereon, shall survive the indefeasible repayment in
full of the Loans and interest accrued thereon, the return of
the Notes to Borrower, and the termination of the Commitments.
18.4. PAYMENT OF EXPENSES. Borrower agrees to pay or
reimburse to Lender all of Lender's reasonable out-of-pocket
costs incurred in connection with Lender's due diligence
review before execution of the Loan Documents; the negotiation
and preparation of any proposal, a commitment letter and the
Loan Documents; the interpretation of any of the Loan
Documents; the enforcement of Lender's rights and remedies
under the Loan Documents after a Default or Event of Default;
any amendment of or supplementation to any of the Loan
Documents; and any waiver, consent or forbearance with respect
to any Default or Event of Default. Lender's reasonable out-
of-pocket costs may include but are not limited to the
following, to the extent they are actually paid or incurred by
Lender: title insurance fees and premiums; the cost of
searches for Security Interests existing against Borrowers;
recording and filing fees; appraisal fees; audit and exam
fees; environmental consultant fees; litigation costs; and all
reasonable attorneys' and paralegals' expenses and reasonable
fees; and all reasonable expenses incurred in connection with
any of the foregoing. Attorneys' and paralegals' expenses may
include but are not limited to filing charges; telephone, data
transmission, facsimile and other communication costs; courier
and other delivery charges; and photocopying charges.
Litigation costs may include but are not limited to filing
fees, deposition costs, expert witness fees, expenses of
service of process, and other such costs paid or incurred in
any administrative, arbitration, or court proceedings
involving Lender and any Borrower, including proceedings under
the Federal Bankruptcy Code. All costs which Borrower is
obligated to pay or reimburse Lender are Loan Obligations
payable to Lender and are payable on demand by Lender.
18.5. GENERAL INDEMNITY.
18.5.1. Borrower shall pay, indemnify and hold
harmless Lender and its respective directors, officers,
employees, agents, and representatives (the "Indemnified
Parties") for, from and against, and promptly to
reimburse the Indemnified Parties for, any and all
claims, damages, liabilities, losses, costs and expenses
(including reasonable attorneys' fees and expenses and
amounts paid in settlement) incurred, paid or sustained
by the Indemnified Parties in connection with, arising
out of, based upon or otherwise involving or resulting
from any threatened, pending or completed action, suit,
investigation or other proceeding by, against or
otherwise involving the Indemnified Parties and in any
way dealing with, relating to or otherwise involving this
Agreement, any of the other Loan Documents, or any
transaction contemplated hereby or thereby except to the
extent that they arise from the gross negligence, bad
faith or willful misconduct of any of the
32
<PAGE> 40
Indemnified Parties. Borrower shall pay, indemnify and
hold harmless the Indemnified Parties for, from and
against, and promptly reimburse the Indemnified Parties
for, any and all claims, damages, liabilities, losses,
costs and expenses (including reasonable attorneys' and
consultant fees and expenses, investigation and
laboratory fees, removal, remedial, response and
corrective action costs, and amounts paid in settlement)
incurred, paid or sustained by the Indemnified Parties as
a result of the manufacture, storage, transportation,
release or disposal of any Hazardous Material on, from,
over or affecting any of the assets, properties, or
operations of any Borrower or any predecessor in
interest, directly or indirectly.
18.5.2. The obligations of Borrower under this
Section 18.5 shall survive the termination of the
Commitments, and the indefeasible full payment and
satisfaction of all of the Loan Obligations.
18.5.3. To the extent that any of the indemnities
required from Borrower under this Section are
unenforceable because they violate any Law or public
policy, Borrower shall pay the maximum amount which it is
permitted to pay under applicable Law.
18.6. CHANGES IN ACCOUNTING PRINCIPLES. If Borrower, at the
end of its fiscal year and with the concurrence of its
independent certified public accountants, changes the method
of valuing the Inventory of Borrower, or if any other changes
in accounting principles from those used in the preparation of
any of the Financial Statements are required by or result from
the promulgation of principles, rules, regulations,
guidelines, pronouncements or opinions by the Financial
Accounting Standards Board or the American Institute of
Certified Public Accountants (or successors thereto or bodies
with similar functions), and any of such changes result in a
change in the method of calculation of, or affect the results
of such calculation of, any of the financial covenants,
standards or terms found herein, then the parties hereto agree
to enter into and diligently pursue negotiations in order to
amend such financial covenants, standards or terms so as to
equitably reflect such changes, with the desired result that
the criteria for evaluating the financial condition and
results of operations of Borrower shall be the same after such
changes as if such changes had not been made; provided,
however, that until such changes are made, all financial
covenants herein and all the provisions hereof which
contemplate financial calculation hereunder shall remain in
full force and effect.
18.7. LOAN RECORDS. The date and amount of all Advances to
Borrower and payments of amounts due from Borrower under the
Loan Documents will be recorded in the records that Lender
normally maintains for such types of transactions. The
failure to record, or any error in recording, any of the
foregoing shall not, however, affect the obligation of
Borrower to repay the Loans and other amounts payable under
the Loan Documents. Borrower shall have the burden of proving
that such records are not correct. Borrower agrees that
Lender's books and records showing the Loan Obligations and
the transactions pursuant to this Agreement shall be
admissible in any action or proceeding arising therefrom,
irrespective of whether any Loan Obligation is also evidenced
by a promissory note or other instrument. Such statement
shall be deemed correct, accurate and binding on Borrower and
an account stated (except for reversals and reapplications of
payments as provided in Section 5.7 and corrections of errors
discovered by Lender), unless Borrower notifies Lender in
writing to the contrary within 30 days after such statement is
rendered. In the event a timely written notice of objections
is given by Borrower, only the items to which exception is
expressly made will be considered to be disputed by Borrower.
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<PAGE> 41
18.8. LOAN OBLIGATIONS PAYABLE IN DOLLARS. All Loan
Obligations that are payable in Dollars under the terms of the
Loan Documents shall be payable only in Dollars. If, however,
to obtain a judgment in any court it is necessary to convert
a Loan Obligation payable in Dollars into another currency,
the rate of exchange used shall be that at which Lender, using
its customary procedures, could purchase Dollars with such
other currency in New York, New York on the Business Day
immediately preceding the day on which such judgment is
rendered. If any sum in another currency is paid to Lender or
received by Lender and applied to a Loan Obligation payable in
Dollars, such Loan Obligation shall be deemed paid and
discharged only to the extent of the amount of Dollars that
Lender, using its customary procedures, is able to purchase in
New York, New York with such sum on the Business Day
immediately following receipt thereof. Borrower agrees to
indemnify Lender against any loss in Dollars that it may incur
on such Loan Obligation as a result of such payment or receipt
and application to such Loan Obligation.
19. MISCELLANEOUS.
19.1. NOTICES. All notices, consents, requests and
demands to or upon the respective parties hereto shall be in
writing, and shall be deemed to have been given or made when
delivered in person to those Persons listed on the signature
pages hereof or four days after being deposited in the United
States mail, postage prepaid, or, in the case of overnight
courier services, one Business Day after delivery to the
overnight courier service, or in the case of telex or telecopy
notice, when sent, verification received, in each case
addressed as set forth on the signature pages hereof, or such
other address as either party may designate by notice to the
other in accordance with the terms of this Section. No notice
given to or demand made on Borrower by Lender in any instance
shall entitle Borrower to notice or demand in any other
instance.
19.2. AMENDMENTS, WAIVERS AND CONSENTS. Unless otherwise
provided herein, no amendment to or waiver of any provision of
this Agreement, or of any of the other Loan Documents, nor
consent to any departure by Borrower herefrom or therefrom,
shall be effective unless it is in writing and signed by
authorized officers of Borrower and Lender; provided, however,
that any such amendment, waiver or consent shall be effective
only in the specific instance and for the purpose for which
given. No notice to or demand on Borrower in any instance
shall entitle Borrower to any other or further notice or
demand in another similar or different instance. No failure
by Lender to exercise, and no delay by Lender in exercising,
any right, remedy, power or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise
by Lender of any right, remedy, power or privilege hereunder
preclude any other exercise thereof, or the exercise of any
other right, remedy, power or privilege existing under any Law
or otherwise.
19.3. RIGHTS CUMULATIVE. Each of the rights and remedies
of Lender under this Agreement shall be in addition to all of
its other rights and remedies under applicable Law, and
nothing in this Agreement shall be construed as limiting any
such rights or remedies.
19.4. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties hereto
and all future holders of the Notes and their respective
successors and assigns, except that Borrower may not assign,
delegate or transfer any of its rights or obligations under
this Agreement without the prior written consent of Lender.
With respect to Borrower's successors and assigns, such
successors and assigns shall include any receiver, trustee or
debtor-in-possession of or for Borrower.
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<PAGE> 42
19.5. SEVERABILITY. Any provision of this Agreement which
is prohibited, unenforceable or not authorized in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition, unenforceability or lack of
authorization without invalidating the remaining provisions
hereof or affecting the validity, enforceability or legality
of such provision in any other jurisdiction unless the
ineffectiveness of such provision would result in such a
material change as to cause completion of the transactions
contemplated hereby to be unreasonable.
19.6. COUNTERPARTS. This Agreement may be executed by the
parties hereto on any number of separate counterparts, and all
such counterparts taken together shall constitute one and the
same instrument. It shall not be necessary in making proof of
this Agreement to produce or account for more than one
counterpart signed by the party to be charged.
19.7. GOVERNING LAW; NO THIRD PARTY RIGHTS. This
Agreement, the other Loan Documents and the Notes and the
rights and obligations of the parties hereunder and thereunder
shall be governed by and construed and interpreted in
accordance with the internal Laws of the State of Missouri
applicable to contracts made and to be performed wholly within
such state, without regard to choice or conflict of laws
provisions. This Agreement is solely for the benefit of the
parties hereto and their respective successors and assigns,
and no other Person shall have any right, benefit, priority or
interest under, or because of the existence of, this
Agreement.
19.8. COUNTERPART FACSIMILE EXECUTION. For purposes of
this Agreement, a document (or signature page thereto) signed
and transmitted by facsimile machine or telecopier is to be
treated as an original document. The signature of any Person
thereon, for purposes hereof, is to be considered as an
original signature, and the document transmitted is to be
considered to have the same binding effect as an original
signature on an original document. At the request of any
party hereto, any facsimile or telecopy document is to be re-
executed in original form by the Persons who executed the
facsimile or telecopy document. No party hereto may raise the
use of a facsimile machine or telecopier or the fact that any
signature was transmitted through the use of a facsimile or
telecopier machine as a defense to the enforcement of this
Agreement or any amendment or other document executed in
compliance with this Section.
19.9. NO OTHER AGREEMENTS. There are no other agreements
between Lender and Borrower, oral or written, concerning the
subject matter of the Loan Documents, and all prior agreements
concerning the same subject matter, including any proposal or
Commitment Letter, are merged into the Loan Documents and
thereby extinguished.
19.10. NEGOTIATED TRANSACTION. Borrower and Lender
represent each to the others that in the negotiation and
drafting of this Agreement and the other Loan Documents they
have been represented by and have relied upon the advice of
counsel of their choice. Borrower and Lender affirm that
their counsel have both had substantial roles in the drafting
and negotiation of this Agreement and Lender affirms that its
counsel has participated in the drafting and negotiation of
this Agreement; therefore, this Agreement will be deemed
drafted by all of Borrower and Lender and the rule of
construction to the effect that any ambiguities are to be
resolved against the drafter will not be employed in the
interpretation of this Agreement.
19.11. MANDATORY ARBITRATION.
19.11.1. Any controversy or claim between or among
the parties hereto arising out of or relating to this
Agreement or the other Loan Documents, including any
claim
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<PAGE> 43
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 Judicial Arbitration and Mediation Services, Inc.,
predecessor in interest to Endispute, Inc., doing
business as "J.A.M.S./Endispute" 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.
19.11.2. The arbitration shall be conducted in
the St. Louis, Missouri and administered by
J.A.M.S./Endispute who will appoint an arbitrator; if
J.A.M.S./Endispute is unable or legally precluded from
administering the arbitration, then the American
Arbitration Association will serve. All arbitration
hearings will be commenced within ninety (90) calendar
days of the demand for arbitration; further, the
arbitrator shall only, upon a showing of cause, be
permitted to extend the commencement of such hearing
for up to an additional sixty (60) calendar days.
19.11.3. 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; or (ii) be a
waiver by Lender of the protection afforded to it by
12 U.S.C. Sec. 91 or any substantially equivalent
state law; or (iii) limit the right of Lender (A) to
exercise self help remedies such as (but not limited
to) setoff, or (B) to obtain from a court provisional
or ancillary remedies such as (but not limited to)
injunctive relief or the appointment of a receiver.
Lender may exercise such self help rights, obtain such
provisional or ancillary remedies, or take any other
action permitted by law or equity against Borrower or
any other Person liable for all or any portion of the
Loan Obligations, before, during or after the pendency
of any arbitration proceeding brought pursuant to this
Agreement or any of the other Loan Documents. Neither
the exercise of self help remedies nor the institution
or maintenance of an action for foreclosure or
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 herein or in this Agreement or
the Loan Documents regarding submission to
jurisdiction, choice of forum, jury trial waiver,
and/or venue in any court is intended or shall be
construed to be in derogation of the provisions herein
or therein for arbitration of any controversy or
claim.
19.12. CHOICE OF FORUM. SUBJECT ONLY TO THE EXCEPTION IN THE
NEXT SENTENCE, BORROWER AND LENDER HEREBY AGREE TO THE
EXCLUSIVE JURISDICTION OF THE FEDERAL COURT OF THE EASTERN
DISTRICT OF MISSOURI AND THE STATE COURTS OF MISSOURI LOCATED
IN ST. LOUIS COUNTY, MISSOURI, AND WAIVE ANY OBJECTION BASED
ON VENUE OR FORUM NON CONVENIENS WITH RESPECT TO ANY ACTION
----- --- ----------
INSTITUTED THEREIN, AND AGREE THAT ANY DISPUTE CONCERNING THE
RELATIONSHIP BETWEEN LENDER AND BORROWER OR THE CONDUCT OF ANY
OF THEM IN CONNECTION WITH THIS AGREEMENT OR OTHERWISE SHALL
BE HEARD ONLY IN THE COURTS DESCRIBED ABOVE. NOTWITHSTANDING
THE FOREGOING: (1) LENDER SHALL HAVE THE RIGHT TO BRING ANY
ACTION OR PROCEEDING AGAINST BORROWER OR ITS PROPERTY IN ANY
COURTS OF ANY OTHER JURISDICTION LENDER DEEM NECESSARY OR
APPROPRIATE, AND (2) EACH OF THE PARTIES HERETO ACKNOWLEDGES
THAT ANY APPEALS FROM THE COURTS DESCRIBED IN THE IMMEDIATELY
PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A COURT LOCATED
OUTSIDE THOSE JURISDICTIONS.
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<PAGE> 44
19.13. SERVICE OF PROCESS. BORROWER HEREBY WAIVE PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL
SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL (RETURN
RECEIPT REQUESTED) DIRECTED TO BORROWER AT ITS ADDRESS SET
FORTH ON THE SIGNATURE PAGES HEREOF, AND SERVICE SO MADE SHALL
BE DEEMED TO BE COMPLETED FIVE DAYS AFTER THE SAME SHALL HAVE
BEEN SO DEPOSITED IN THE U.S. MAILS; OR AT LENDER'S OPTION, BY
SERVICE UPON CT CORPORATION, WHICH BORROWER IRREVOCABLY
APPOINTS AS BORROWER'S AGENT FOR THE PURPOSE OF ACCEPTING
SERVICE OF PROCESS WITHIN THE STATE OF MISSOURI. LENDER SHALL
PROMPTLY FORWARD BY REGISTERED MAIL ANY PROCESS SO SERVED UPON
SAID AGENT TO BORROWER AT ITS ADDRESS ON THE SIGNATURE PAGES
HEREOF. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF
LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW. BORROWER SHALL CAUSE EACH OTHER BORROWER TO AGREE TO THE
TERMS OF THIS SECTION.
19.14. JURY TRIAL. BORROWER AND LENDER HEREBY WAIVE ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE
OF ACTION (1) ARISING UNDER THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR (2) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR EITHER OF
THEM IN RESPECT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT,
OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE. BORROWER AND
LENDER AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY AND THAT EITHER MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT
TO TRIAL BY JURY. BORROWER SHALL CAUSE EACH OTHER BORROWER TO
AGREE TO THE TERMS OF THIS SECTION.
19.15. INCORPORATION BY REFERENCE. All of the terms of the
other Loan Documents are incorporated in and made a part of
this Agreement by this reference.
19.16. STATUTORY NOTICE. The following notice is given
pursuant to Section 432.045 of the Missouri Revised Statutes;
nothing contained in such notice shall be deemed to limit or
modify the terms of the Loan Documents:
ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR
TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING
PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO
PROTECT YOU (BORROWER) AND US (CREDITOR) FROM MISUNDERSTANDING
OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH
MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE
AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS
WE MAY LATER AGREE IN WRITING TO MODIFY IT.
19.17. STATUTORY NOTICE-INSURANCE. The following notice is
given pursuant to Section 427.120 of the Missouri Revised
Statutes; nothing contained in such notice shall be deemed to
limit or modify the terms of the Loan Documents:
UNLESS YOU PROVIDE EVIDENCE OF THE INSURANCE COVERAGE REQUIRED
BY YOUR AGREEMENT WITH US, WE MAY PURCHASE INSURANCE AT YOUR
EXPENSE TO PROTECT OUR INTERESTS IN YOUR COLLATERAL. THIS
INSURANCE MAY, BUT NEED NOT, PROTECT YOUR INTERESTS. THE
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<PAGE> 45
COVERAGE THAT WE PURCHASE MAY NOT PAY ANY CLAIM THAT YOU MAKE
OR ANY CLAIM THAT IS MADE AGAINST YOU IN CONNECTION WITH THE
COLLATERAL. YOU MAY LATER CANCEL ANY INSURANCE PURCHASED BY
US, BUT ONLY AFTER PROVIDING EVIDENCE THAT YOU HAVE OBTAINED
INSURANCE AS REQUIRED BY OUR AGREEMENT. IF WE PURCHASE
INSURANCE FOR THE COLLATERAL, YOU WILL BE RESPONSIBLE FOR THE
COSTS OF THAT INSURANCE, INCLUDING THE INSURANCE PREMIUM,
INTEREST AND ANY OTHER CHARGES WE MAY IMPOSE IN CONNECTION
WITH THE PLACEMENT OF THE INSURANCE, UNTIL THE EFFECTIVE DATE
OF THE CANCELLATION OR EXPIRATION OF THE INSURANCE. THE COSTS
OF THE INSURANCE MAY BE ADDED TO YOUR TOTAL OUTSTANDING
BALANCE OR OBLIGATION. THE COSTS OF THE INSURANCE MAY BE MORE
THAN THE COST OF INSURANCE YOU MAY BE ABLE TO OBTAIN ON YOUR
OWN.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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<PAGE> 46
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by appropriate duly authorized officers on April
22, 1998.
FALCON PRODUCTS, INC.
By: /s/ Michael Dreller
-----------------------------------
Print Name: MICHAEL DRELLER
-----------------------------------
Title:
-----------------------------------
FALCON HOLDINGS, INC.
By: /s/ Darryl C. Rosser
-----------------------------------
Print Name: DARRYL C. ROSSER
-----------------------------------
Title: President
-----------------------------------
FALCON DE JUAREZ, S.A. DE C.V.
By: /s/ Darryl C. Rosser
-----------------------------------
Print Name: DARRYL C. ROSSER
-----------------------------------
Title: Director
-----------------------------------
FUNDUCIONES TECHNICAS, S.A.
By: /s/ Darryl C. Rosser
-----------------------------------
Print Name: DARRYL C. ROSSER
-----------------------------------
Title: Director
-----------------------------------
FALCON DE BAJA CALIFORNIA, S.A. DE C.V.
By: /s/ Darryl C. Rosser
-----------------------------------
Print Name: DARRYL C. ROSSER
-----------------------------------
Title: Director
-----------------------------------
FALCON MIMON, A.S., formerly known as MITON, a.s.
By: /s/ Darryl C. Rosser
-----------------------------------
Print Name: DARRYL C. ROSSER
-----------------------------------
Title: Director
-----------------------------------
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<PAGE> 47
HOWE FURNITURE CORPORATION
By: /s/ Darryl C. Rosser
-----------------------------------
Print Name: DARRYL C. ROSSER
-----------------------------------
Title: CEO
-----------------------------------
JOHNSON INDUSTRIES, INC.
By: /s/ Darryl C. Rosser
-----------------------------------
Print Name: DARRYL C. ROSSER
-----------------------------------
Title: President
-----------------------------------
HOWE EUROPE A/S
By: /s/ Darryl C. Rosser
-----------------------------------
Print Name: DARRYL C. ROSSER
-----------------------------------
Title: Director
-----------------------------------
FALCON PRODUCTS (SHENZHEN) LIMITED, also known as Falcon
Products China, Limited
By: /s/ Michael J. Dreller
------------------------------------
Print Name: MICHAEL J. DRELLER
-----------------------------------
Title: Director
-----------------------------------
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<PAGE> 48
Notice Address for all Borrowers:
--------------------------------
Falcon Products, Inc.
9387 Dielman Industrial Drive
St. Louis, Missouri 63132
Attn: Michael J. Dreller, Chief Financial Officer
FAX No.: 314-991-9295
Confirming Telephone No.: 314-991-9204
with a copy to:
--------------
Robert Wexler, Esq.
Gallop, Johnson & Neuman, L.C.
101 South Hanley Road
St. Louis, Missouri 63105
FAX No.: 314-862-1219
Confirming Telephone No.: 314-862-1200
NATIONSBANK, N.A.
By: /s/ Jeffrey S. Potts
-----------------------------------
Print Name: JEFFREY S. POTTS
-----------------------------------
Title: SENIOR VICE PRESIDENT
-----------------------------------
Notice Address for Lender:
-------------------------
NationsBank, N.A.
One NationsBank Plaza
800 Market Street
St. Louis, Missouri 63101
Attention: Jeffrey S. Potts
FAX No.: 314-466-6744
Confirming Telephone No.: 314-466-6061
with a copy to:
--------------
Lewis, Rice & Fingersh, L.C.
500 North Broadway, Suite 2000
St. Louis, Missouri 63102
Attention: Steven C. Drapekin, Esq.
FAX No.: 314-241-6056
Confirming Telephone No.: 314-444-7600
41
<PAGE> 49
EXHIBIT 2.1
GLOSSARY AND INDEX OF DEFINED TERMS
ACCOUNT -- as to any Person, the right of such Person to payment for
goods sold or leased or for services rendered by such Person.
ACCOUNT DEBTOR -- the obligor on any Account.
ACQUIRING COMPANY -- the Person obligated to pay or provide the
consideration payable in connection with a Permitted Acquisition
upon the consummation thereof.
ADJUSTED EURODOLLAR RATE -- the rate of interest defined in Section 4.
ADJUSTED EURODOLLAR BASE RATE -- for any Eurodollar Loan for any
Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) determined by the Agent to
be equal to the quotient obtained by dividing (a) the Eurodollar
Rate for such Eurodollar Loan for such Interest Period by (b) the
result of subtracting from one the Reserve Requirement for such
Eurodollar Loan for such Interest Period expressed as a decimal.
ADVANCE -- a Revolving Loan Advance.
ADVANCE DATE -- the date on which an Advance is requested by Borrower
to be made, or is otherwise contemplated or intended to be made, as
provided herein.
AFFILIATE -- with respect to any Person, (a) any other Person who is
a partner, director, officer or stockholder of such Person; and
(b) any other Person which, directly or indirectly, is in control
of, is controlled by or is under common control with such Person,
and any partner, director, officer or stockholder of such other
Person described. For purposes of this Agreement, control of a
Person by another Person shall be deemed to exist if such other
Person has the power, directly or indirectly, either to (i) vote
twenty percent (20%) or more of the securities or partnership
interests having the power to vote in an election of directors of
such Person, or (ii) direct the management of such Person, whether
by contract or otherwise and whether alone or in combination with
others.
ASBESTOS MATERIAL -- either asbestos or asbestos-containing materials.
BENEFICIAL OWNER -- as defined in Rule 13-D-3 of the Securities and
Exchange Commission.
BORROWING OFFICER -- each individual of Borrower who is duly
authorized by Borrower to submit a request for an Advance on behalf
of Borrower.
BUSINESS DAY -- a day other than a Saturday, Sunday or other day on
which commercial banks are authorized or required to close under
the Laws of either the United States or the State of Missouri.
CAPITAL EXPENDITURE -- an expenditure for an asset that must be
depreciated or amortized under GAAP, for goodwill, or for any asset
that under GAAP must be treated as a capital asset, including
payments under Capital Leases. An expenditure for purposes of this
definition includes any deferred or seller financed portion of the
purchase price of an asset and the original capitalized amount of
a Capital Lease.
2.1-i
<PAGE> 50
The original capitalized amount of all Capital Leases shall be
taken into account during the applicable calculation period in
which such Capital Leases were entered.
CAPITAL LEASE -- any lease that has been or should be capitalized
under GAAP.
CHARTER DOCUMENTS -- the articles or certificate of incorporation and
bylaws of a corporation; the certificate of limited partnership and
partnership agreement of a limited partnership; the partnership
agreement of a general partnership; the articles of organization
and operating agreement of a limited liability company; or the
indenture of a trust.
COBRA -- the Consolidated Omnibus Budget Reconciliation Act.
CODE -- the Internal Revenue Code of 1986 and all regulations
thereunder of the IRS.
COMMITMENT -- the Revolving Loan Commitment of Lender.
COMMONLY CONTROLLED ENTITY -- a Person which is under common control
with another Person within the meaning of Section 414(b) or (c) of
the Code.
CONTRACT -- any contract, note, bond, indenture, deed, mortgage,
deed of trust, security agreement, pledge, hypothecation agreement,
assignment, or other agreement or undertaking, or any security.
DEFAULT -- any of the events listed in Section 14.1 of this
Agreement, without giving effect to any requirement for the giving
of notice, for the lapse of time, or both, or for the happening of
any other condition, event or act.
DEFAULT RATE -- the rate of interest payable on each Loan after its
Maturity and in certain other circumstances as provided in
Section 4.6.
DISCLOSURE SCHEDULE -- the disclosure schedule of Borrower attached
hereto as Exhibit 11.
DOL -- the United States Department of Labor.
DOLLARS and the sign $ -- lawful money of the United States.
EBITDA -- defined in Section 13.1.
EFFECTIVE DATE -- the date when this Agreement is effective as
provided in Section 1.
EMPLOYMENT LAW -- ERISA, the Occupational Safety and Health Act, the
Fair Labor Standards Act, or any other Law pertaining to the terms
or conditions of labor or safety in the workplace or discrimination
or sexual harassment in the workplace.
ENVIRONMENTAL LAW -- the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability
Act, the Clean Water Act, the Clean Air Act, or any other Law
pertaining to environmental quality or remediation of Hazardous
Material.
EPA -- the United States Environmental Protection Agency.
ERISA -- the Employee Retirement Income Security Act of 1974.
2.1-ii
<PAGE> 51
ERISA AFFILIATE -- as to any Person, any trade or business
(irrespective of whether incorporated) which is a member of a group
of which such Person is a member and thereafter treated as a single
employer under "414(b), (c), (m) or (o) of the Code or applicable
Treasury Regulations.
EURODOLAR ADVANCEe -- an Advance that will become a Eurodollar Loan.
EURODOLLAR LOAN -- any portion of a Loan on which interest accrues at
the Adjusted Eurodollar Rate.
EURODOLLAR RATE -- the rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%), as determined by Lender appearing, in
the case of a Eurodollar Loan denominated in Dollars, on Dow Jones
Markets 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 for a Eurodollar Loan denominated in
dollars 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 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%).
EVENT OF DEFAULT -- any of the events listed in Section 14.1 of this
Agreement as to which any requirement for the giving of notice, for
the lapse of time, or both, or for the happening of any further
condition, event or act has been satisfied.
EXECUTION DATE -- the date when this Agreement has been executed.
EXISTING DEFAULT -- an Event of Default which has occurred and is
continuing, which has not been waived in writing by Lender.
FEDERAL FUNDS RATE -- the per annum interest rate so designated from
time to time as the Federal Funds Rate by Lender, which is only a
reference rate and does not necessarily represent the lowest or
best rate charged to any customer of Lender or the actual cost of
funds of Lender or that Lender may obtain from the Federal Reserve
Bank or any member of the Federal Reserve.
FEDERAL FUNDS RATE ADVANCE -- an Advance that will become a Federal
Funds Rate Loan.
FEDERAL FUNDS RATE LOAN -- any portion of a Loan on which interest
accrues at the Federal Funds Rate.
FINANCIAL STATEMENTS -- the most recent of the Initial Financial
Statements and the financial statements of Borrower required to be
furnished to Lender under Section 11.13 of this Agreement.
FRB -- the Board of Governors of the Federal Reserve System and any
successor thereto or to the functions thereof.
GAAP -- those generally accepted accounting principles set forth in
Statements of the Financial Accounting Standards Board and in
Opinions of the Accounting Principles Board of the American
Institute of Certified Public Accountants or which have other
substantial authoritative support in the United States and are
applicable in the circumstances, as applied on a consistent basis.
2.1-iii
<PAGE> 52
GOVERNMENTAL AUTHORITY -- the federal government of the United States;
the government of any foreign country that is recognized by the
United States or is a member of the United Nations; any state of
the United States; any local government or municipality within the
territory or under the jurisdiction of any of the foregoing; any
department, agency, division, or instrumentality of any of the
foregoing; and any court, arbitrator, or board of arbitrators whose
orders or judgements are enforceable by or within the territory of
any of the foregoing.
HAZARDOUS MATERIAL -- any hazardous, radioactive, toxic, solid or
special waste, material, substance or constituent thereof, or any
other such substance (as defined under any applicable Law or
regulation), including Asbestos Material. Hazardous Material does
not include materials or products containing hazardous constituents
which are not considered to be waste under the applicable
Environmental Law or which are considered to be waste but are
transported, handled or disposed of in accordance with the
applicable Environmental Law, or Asbestos Material which is not
friable.
INDEBTEDNESS -- as to any Person at any particular date, any
contractual obligation enforceable against such Person (i) to repay
borrowed money; (ii) to pay the deferred purchase price of property
or services; (iii) to make payments or reimbursements with respect
to bank acceptances or to a factor; (iv) to make payments or
reimbursements with respect to letters of credit whether or not
there have been drawings thereunder; (v) with respect to which
there is any Security Interest in any property of such Person;
(vi) to make any payment or contribution to a Multi-Employer Plan;
(vii) that is evidenced by a note, bond, debenture or similar
instrument; (viii) under any conditional sale agreement or title
retention agreement; or (ix) to pay interest or fees with respect
to any of the foregoing. Indebtedness also includes any other
Obligation that either (i) is non-contingent and liquidated in
amount or (ii) should under GAAP be included in liabilities and not
just as a footnote on a balance sheet.
INDIRECT OBLIGATION -- as to any Person, (a) any guaranty by such
Person of any Obligation of another Person; (b) any Security
Interest in any property of such Person that secures any Obligation
of another Person, (c) any enforceable contractual requirement that
such Person (i) purchase an Obligation of another Person or any
property that is security for such Obligation, (ii) advance or
contribute funds to another Person for the payment of an Obligation
of such other Person or to maintain the working capital, net worth
or solvency of such other Person as required in any documents
evidencing an Obligation of such other Person, (iii) purchase
property, securities or services from another Person for the
purpose of assuring the beneficiary of any Obligation of such other
Person that such other Person has the ability to timely pay or
discharge such Obligation, (iv) grant a Security Interest in any
property of such Person to secure any Obligation of another Person,
or (v) otherwise assure or hold harmless the beneficiary of any
Obligation of another Person against loss in respect thereof; and
(d) any other contractual requirement enforceable against such
Person that has the same substantive effect as any of the
foregoing. The term Indirect Obligation does not, however, include
the indorsement by a Person of instruments for deposit or
collection in the ordinary course of business or the liability of
a general partner of a partnership for Obligations of such
partnership. The amount of any Indirect Obligation of a Person
shall be deemed to be the stated or determinable amount of the
Obligation in respect of which such Indirect Obligation is made or,
if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by such Person in good
faith.
INITIAL FINANCIAL STATEMENTS -- the financial statements, including the
pro-forma financial statements, of Borrower referred to in
Section 8.1.2.
INTEREST HEDGE OBLIGATION -- any obligations of Borrower to Lender
under an agreement or agreements between Borrower and Lender under
which the exposure of Borrower to fluctuations in interest rates is
2.1-iv
<PAGE> 53
effectively limited, whether in the form of one or more interest
rate cap, collar, or corridor agreements, interest rate swaps, or
the like, or options therefor.
INTEREST PERIOD -- the period during which a particular Adjusted
Eurodollar Rate applies to a Eurodollar Loan, as selected by
Borrower as provided in Section 4.1.
INVENTORY -- goods owned and held by a Person for sale, lease or
resale or furnished or to be furnished under contracts for
services, and raw materials, goods in process, materials, component
parts and supplies used or consumed, or held for use or consumption
in such Person's business.
INVESTMENT -- (a) a loan or advance of money or property to a Person,
(b) stock or other equity interest in a Person, (c) a debt
instrument issued by a Person, whether or not convertible to stock
or other equity interest in such Person, or (d) any other interest
in or rights with respect to a Person which include, in whole or in
part, a right to share, with or without conditions or restrictions,
some or all of the revenues or net income of such Person.
IRS -- the Internal Revenue Service.
LAW -- any statute, rule, regulation, order, judgment, award or
decree of any Governmental Authority.
LENDER -- is defined in the Preamble of this Agreement.
LENDING OFFICE -- the Lender set forth on the signature page hereto,
or such other address or wire instructions as Lender may designate
from time to time by notice to Borrower in accordance with the
terms of Section 19.1.
LOAN -- a Revolving Loan.
LOAN DOCUMENTS -- this Agreement, the Notes, and all other
agreements, certificates, documents, instruments and other writings
executed in connection herewith.
LOAN OBLIGATIONS -- all of Borrower's Indebtedness owing to Lender
under the Loan Documents, whether as principal, interest, fees or
otherwise, all reimbursement obligations of Borrower, and all other
Obligations and liabilities of Borrower to Lender under the Loan
Documents and all Interest Hedge Obligations (in each cased
including all extensions, renewals, modifications, rearrangements,
restructures, replacements and refinancings of the foregoing,
whether or not the same involve modifications to interest rates or
other payment terms), whether now existing or hereafter created,
absolute or contingent, direct or indirect, joint or several,
secured or unsecured, due or not due, contractual or tortious,
liquidated or unliquidated, arising by operation of law or
otherwise, including but not limited to the obligation of Borrower
to repay future advances by Lender, whether or not made pursuant to
commitment and whether or not presently contemplated by Borrower
and/or Lender in the Loan Documents.
MATERIAL ADVERSE EFFECT -- as to any Person and with respect to any
event or occurrence of whatever nature (including any adverse
determination in any litigation, arbitration, investigation or
proceeding), a material adverse effect on the business, operations,
revenues, financial condition, property, or business prospects of
all of the Borrowers taken as a whole, or the value of property of
all of the Borrowers taken as a whole, or the ability of the
Borrowers, taken as a whole, to timely pay or perform the
Borrower's Obligations generally, or to Lender specifically.
2.1-v
<PAGE> 54
MATERIAL AGREEMENT -- as to any Person, any Contract to which such
Person is a party or by which such Person is bound which, if
violated or breached, has or is reasonably likely to have a
Material Adverse Effect on such Person, or any Borrower, and with
respect to the Borrower, and the Loan Documents.
MATERIAL LAW -- any separately enforceable provision of a Law whose
violation by a Person has or is reasonably likely to have a
Material Adverse Effect with respect to such Person or any
Borrower.
MATERIAL LICENSE -- (i) as to any Borrower, any license, permit or
consent from a Governmental Authority or other Person and any
registration and filing with a Governmental Authority or other
Person which if not obtained, held or made by such Borrower has or
is reasonably likely to have a Material Adverse Effect with respect
to such Borrower or any other Borrower and (ii) as to any Person
who is a party to this Agreement or any of the other Loan
Documents, any license, permit or consent from a Governmental
Authority or other Person and any registration or filing with a
Governmental Authority or other Person that is necessary for the
execution or performance by such party, or the validity or
enforceability against such party, of this Agreement or such other
Loan Document.
MATERIAL OBLIGATION -- as to any Person, an Obligation of such Person
which if not fully and timely paid or performed has or is
reasonably likely to have a Material Adverse Effect on such Person
or any Borrower.
MATERIAL PROCEEDING -- any litigation, investigation or other
proceeding by or before any Governmental Authority (i) which
involves any of the Loan Documents or any of the transactions
contemplated thereby, or involves a Borrower as a party or any
property of Borrower and has or is reasonably likely to have a
Material Adverse Effect on a Borrower if adversely determined,
(ii) in which there has been issued an injunction, writ, temporary
restraining order or any other order of any nature which purports
to restrain or enjoin the making of any Advance, the consummation
of any other transaction contemplated by the Loan Documents, or the
enforceability of any provision of any of the Loan Documents,
(iii) which involves the actual or alleged breach or violation by
a Borrower of, or default by a Borrower under, any Material
Agreement and has or is reasonably likely to have a Material
Adverse Effect on a Borrower, or (iv) which involves the actual or
alleged violation by a Borrower of any Material Law and has or is
reasonably likely to have a Material Adverse Effect on a Borrower.
MATURITY -- as to any Indebtedness, the time when it becomes payable
in full, whether at a regularly scheduled time, because of
acceleration or otherwise.
MULTI-EMPLOYER PLAN -- a Pension Benefit Plan which is a multi-
employer plan as defined in Section 4001(a)(3) of ERISA.
NOTE -- any Revolving Note .
OBLIGATION -- as to any Person, any Indebtedness of such Person, any
guaranty by such Person of any Indebtedness of another Person, and
any contractual requirement enforceable against such Person that
does not constitute Indebtedness of such Person or a guaranty by
such Person but which would involve the expenditure of money by
such Person if complied with or enforced.
PBGC -- the Pension Benefit Guaranty Corporation.
PENSION BENEFIT PLAN -- any pension or profit-sharing plan which is
covered by Title I of ERISA and all other benefit plans, in each
case in respect of which a Borrower or a Commonly Controlled Entity
of such Borrower is an "employer" as defined in Section 3(5) of
ERISA.
2.1-vi
<PAGE> 55
PERMITTED ACQUISITION -- any acquisition which is permitted by Section
12.17.
PERMITTED INDEBTEDNESS -- Indebtedness that Borrower is permitted under
Section 12.2 to incur, assume, or allow to exist.
PERMITTED INDIRECT OBLIGATIONS -- Indirect Obligations that Borrower is
permitted under Section 12.6 to create, incur, assume, or allow to
exist.
PERMITTED INVESTMENTS -- Investments that Borrower is permitted under
Section 12.1 to make in other Persons.
PERMITTED SECURITY INTERESTS -- Security Interests that Borrower is
permitted under Section 12.3 to create, incur, assume, or allow to
exist.
PERSON -- any individual, partnership, corporation, trust,
unincorporated association, joint venture, limited liability
company, Governmental Authority, or other organization in any form
that has the legal capacity to sue or be sued. If the context so
implies or requires, the term Person includes Borrower.
PRIME RATE -- the per annum interest rate so designated from time to
time as the Prime Rate by Lender, which is a reference rate and
does not necessarily represent the lowest or best rate charged to
any customer of Lender.
PRIME RATE ADVANCE -- an Advance that will become a Prime Rate Loan.
PRIME RATE LOAN -- any portion of a Loan on which interest accrues at
the Prime Rate.
QUALIFIED FINANCIAL INSTITUTION -- is any commercial bank chartered
under the laws of the United States or any state thereof which has
capital and surplus of not less than $500,000,000.
REGULATION D, REGULATION G, AND REGULATION U -- respectively, Regulation
D issued by the FRB, Regulation G issued by the FRB, and Regulation
U issued by the FRB.
REPORTABLE EVENT -- a reportable event as defined in Title IV of ERISA
or the regulations thereunder.
RESPONSIBLE OFFICER -- as to any Person that is not an individual,
partnership or trust, the Chairman of the Board of Directors, the
President, the chief executive officer, the chief operating
officer, the chief financial officer, the Treasurer, or the
Secretary (provided, however, that for all Borrowers other than
Falcon Products, Inc. neither the Treasurer nor the Secretary shall
be deemed to be a Responsible Officer) as to any partnership, any
individual who is a general partner thereof or any individual who
has general management or administrative authority over all or any
principal unit of the partnership's business; and as to any trust,
any individual who is a trustee.
REVOLVING LOAN -- Lender's aggregate Revolving Loan Advances.
REVOLVING LOAN ADVANCE -- an advance by Lender under the Revolving
Loan Commitment.
REVOLVING LOAN COMMITMENT -- the commitment of Lender as stated in
Section 3.1.1. to fund Revolving Advances.
2.1-vii
<PAGE> 56
REVOLVING LOAN MATURITY DATE -- April 22, 2000.
REVOLVING NOTE -- any note delivered to Lender as required by
Section 3.1.3 to evidence Borrower's obligation to repay Lender's
Revolving Loan.
SECURITY INTEREST -- as to any item of tangible or intangible
property, any interest therein or right with respect thereto that
secures an Obligation or an Indirect Obligation, whether such
interest or right is created under a Contract, or by operation of
law or statute (such as but not limited to a statutory lien for
work or materials), or as a result of a judgment, or which arises
under any form of preferential or title retention agreement or
arrangement (including a conditional sale agreement or a lease)
that has substantially the same economic effect as any of the
foregoing.
SOLVENT -- as to any Person, such Person not being "insolvent"
within the meaning of Section 101(32) of the Bankruptcy Code,
Section 2 of the Uniform Fraudulent Transfer Act (the "UFTA") or
Section 428.014 of the Missouri Revised Statutes, (ii) such Person
not having unreasonably small capital, within the meaning of
Section 548 of the Bankruptcy Code, Section 4 of the UFTA or
Section 428.024 of the Missouri Revised Statutes, and (iii) such
Person not being unable to pay such Person's debts as they become
due within the meaning of Section 548 of the Bankruptcy Code,
Section 4 of the UFTA or Section 428.024 of the Missouri Revised
Statutes.
SUBSIDIARY -- as to any Person, a corporation, limited liability
company, trust or partnership with respect to which more than 20%
of the outstanding shares of stock, membership interests,
partnership interests or trustee powers having ordinary voting
power (other than stock having such power only by reason of the
happening of a contingency) is at the time owned by such Person or
by one or more Subsidiaries of such Person.
TAX -- as to any Person, any tax, assessment, fee, or other charge
levied by a Governmental Authority on the income or property of
such Person, including any interest or penalties thereon, and which
is payable by such Person.
THIS AGREEMENT -- this document (including every document that is
stated herein to be an appendix, exhibit or schedule hereto,
whether or not physically attached to this document).
TOTAL FUNDED INDEBTEDNESS -- defined in Section 13.1.
UCC -- the Uniform Commercial Code as in effect from time to time
in the State of Missouri or such other similar statute as in effect
from time to time in Missouri or any other appropriate
jurisdiction.
UNITED STATES -- when used in a geographical sense, all the states of
the United States of America and the District of Columbia; and when
used in a legal jurisdictional sense, the government of the country
that is the United States of America.
WELFARE BENEFIT PLAN -- any plan described by Section 3(1) of ERISA.
2.1-viii
<PAGE> 57
EXHIBIT 7.7
-----------
FORM OF REQUEST FOR REVOLVING LOAN ADVANCE
NationsBank, N.A.
One NationsBank Plaza
800 North Market Street
St. Louis, Missouri 63101
Attn.: Jeffrey S. Potts
Re: Loan Agreement effective April 22, 1998 between Falcon
Products, Inc. and its Subsidiaries. ("Borrower) and
NationsBank, N.A. ("Lender"), as it may be amended, modified,
restated or replaced from time to time (the "Loan Agreement")
Attention:
Ladies and Gentlemen:
The undersigned is the authorized Borrowing Officer and, as
such is authorized to make and deliver this Advance Request
pursuant to Section 6.7 of the Loan Agreement. All capitalized
words used herein that are defined in the Loan Agreement have the
meanings defined in the Loan Agreement.
Borrower hereby requests that Lender make a Revolving Loan
Advance of $------- to Borrower under the terms of the Loan
Agreement on ---------------. Of the requested Revolving Loan
Advance, $<-> is to be a Eurodollar Advance, $<-> is to be a Prime
Rate Advance, and $<-> is to be a Federal Funds Rate Advance. The
Interest Period for the portion that is a Eurodollar Advance is
- ------ months. The proceeds of the Advance should be deposited
- --------------------, .
The undersigned hereby certifies on behalf of Borrower that:
(i) There is no Existing Default.
(ii) The representations and warranties of Borrower in
Section 9 of the Loan Agreement are true as if made
on the date hereof (except only for the matters
described on the attachment hereto, which if
satisfactory to Lender as provided in the Loan
Agreement, will become Attachment <--> to the
Disclosure Schedule). Borrower understands that the
attachment hereto will not be deemed attached to the
Disclosure Schedule, and the conditions precedent to
the making of the requested Revolving Loan Advance in
Section 8.2 of the Loan Agreement will not be deemed
satisfied, unless and until Lender notifies Borrower
that the matters described in the attachment hereto
are satisfactory to them).
(iii) The amount of the requested Revolving Loan Advance
will not, when added to the current amount of the
Aggregate Revolving Loan, exceed the Revolving Loan
Commitment.
(iv) All conditions precedent under Section 8.2 of the
Loan Agreement have been satisfied, (subject to
Lender's giving Borrower notice that the matters
described in the attachment hereto are satisfactory
to them).
7.7-i
<PAGE> 58
Executed this ---- day of ---------------, -----.
FALCON PRODUCTS, INC., ON
BEHALF OF ITSELF AND THE OTHER
BORROWERS
By:
--------------------------------
Title:
------------------------------
7.7-ii
<PAGE> 59
EXHIBIT 8.1.1
-------------
DOCUMENTS AND REQUIREMENTS LIST
1. Loan Agreement.
2. $20,000,000 Revolving Note.
3. Opinion of Counsel to Borrower, in form and substance attached
hereto and otherwise satisfactory to Lender.
4. Initial Financial Statements and Pro-Formas.
5. Certificates of Insurance, evidencing liability, casualty, and
business interruption insurance, in the name of Borrower,
reflecting Lender, and its successors and assigns, as primary
additional insured.
6. Secretary's Certificate for each of the following (to include
certified articles of incorporation, certified bylaws,
certified resolutions, and certificate of incumbency):
Falcon Products, Inc.
Falcon Holdings, Inc.
Falcon de Juarez, S.A. de C.V.
Funduciones Technicas, S.A.
Falcon De Baja California, S.A. de C.V.
Falcon Mimon, a.s.
Howe Furniture Corporation
Johnson Industries, Inc.
Howe Europe A/S
Falcon Products (Shenzhen) Limited
7. Solvency Certificate executed by each of the following:
Falcon Products, Inc.
Falcon Holdings, Inc.
Falcon de Juarez, S.A. de C.V.
Funduciones Technicas, S.A.
Falcon De Baja California, S.A. de C.V.
Falcon Mimon, a.s.
Howe Furniture Corporation
8.1.1-i
<PAGE> 60
Johnson Industries, Inc.
Howe Europe A/S
Falcon Products (Shenzhen) Limited
8. Good Standing Certificates or Fictitious Name Registrations
for each from the jurisdiction of incorporation for each of
the following:
Falcon Products, Inc.
Falcon Holdings, Inc.
Falcon de Juarez, S.A. de C.V.
Funduciones Technicas, S.A.
Falcon De Baja California, S.A. de C.V.
Falcon Mimon, a.s.
Howe Furniture Corporation
Johnson Industries, Inc.
Howe Europe A/S
Falcon Products (Shenzhen) Limited
9. UCC search results regarding the following Borrowers from
filing officers for the following jurisdictions:
Falcon Products, Inc.
---------------------
Arkansas Secretary of State
California Secretary of State
Delaware Secretary of State
Illinois Secretary of State
Indiana Secretary of State
Michigan Secretary of State
Minnesota Secretary of State
Mississippi Secretary of State
Missouri Secretary of State
St. Louis County Recorder of Deeds (tax and judgment lien
searches will also be ordered)
New York Secretary of State
Ohio Secretary of State
Tennessee Secretary of State
Washington, D.C.
Falcon Products of California, Inc.
-----------------------------------
California Secretary of State
Delaware Secretary of State
10. Evidence of termination of UCC-1 financing statements filed
against Howe Furniture Corporation with the Connecticut
Secretary of State and against Johnson Industries, Inc. with
the Illinois Secretary of State, the Cook County, Illinois
Recorder of Deeds, and the Kane County, Illinois Recorder of
Deeds.
8.1.1-ii
<PAGE> 61
EXHIBIT 11
----------
DISCLOSURE SCHEDULE OF BORROWER
11-i
<PAGE> 62
EXHIBIT 13.14
-------------
FORM OF COMPLIANCE CERTIFICATE
TO: NATIONSBANK, N.A.
This Compliance Certificate is furnished pursuant to that certain
Loan Agreement by and between Falcon Products, Inc. and its
Subsidiaries ("Borrower") and NationsBank, N.A. ("Lender"),
effective April 22, 1998 (as the same may be amended, modified,
restated or replaced from time to time, the "Loan Agreement").
Unless otherwise defined herein, capitalized terms used in this
Compliance Certificate have the meanings defined in the Loan
Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected Chief Financial Officer
of Borrower and am authorized to provide this
Certificate on behalf of Borrower pursuant to
the Loan Agreement.
2. I have reviewed the terms of the Loan
Agreement and the Loan Documents and I have
made, or have caused to be made under my
supervision, a review of the transactions and
conditions of Borrower during the accounting
period covered by the attached Financial
Statements.
3. The examinations described in paragraph 2 did
not disclose, and I have no knowledge of, the
existence of any condition or event which
constitutes an Default or Event of Default as
of the date of this Compliance Certificate;
and to my knowledge all of the representations
and warranties of Borrower contained in the
Loan Agreement and other Loan Documents are
true and correct.
4. [Use for annual financial statements: Schedule
I attached hereto contains the Financial
Statements for Borrower for the fiscal year
ended ----------, which are complete and
correct in all material respects and have been
prepared in accordance with GAAP applied
consistently throughout the period and with
prior periods (except as disclosed therein).]
[Use for quarterly financial statements:
Schedule I attached hereto contains the
Financial Statements for Borrower for the
fiscal quarter ended ----------, which are
complete and correct in all material respects
(subject to normal year-end audit adjustments)
and have been prepared in accordance with GAAP
applied consistently throughout the period and
with prior periods (except as disclosed
therein).]
5. Borrower is in compliance with all of the
covenants in the Loan Agreement, including the
financial covenants in Section 13, and
Schedule II attached hereto contains
calculations based on Borrower's financial
statements and other financial records that
show Borrower's
13.14-i
<PAGE> 63
compliance with such financial covenants. The
calculations and the data upon which they are
based are believed by me to be complete and
correct.
This Compliance Certificate, together with the Schedules hereto, is
executed and delivered this ----- day of ------------------------.
FALCON PRODUCTS, INC., on behalf of
itself and each of its Subsidiaries
- ----------------------------------------
Print Name:
-----------------------------
Title:
----------------------------------
Schedule I - Financial Statements
Schedule II - Financial Covenant Calculations
13.14-ii
<PAGE> 64
SCHEDULE I TO COMPLIANCE CERTIFICATE
------------------------------------
See current Financial Statements.
SCHEDULE II TO COMPLIANCE CERTIFICATE
-------------------------------------
All calculations done in accordance with GAAP on a
consolidated basis, in accordance with the provisions of the Loan
Agreement and based on the period ended ------------------. Any
inconsistencies between the descriptions of the items set forth in
this Schedule II and the terms of any of Sections 13.1 through 13.2
shall be resolved in favor of the terms set forth in Sections 13.1
through 13.2. Reference should be made to Sections 13.1 through
13.2 of the Loan Agreement for more specific instructions regarding
the calculation periods and how the components of the financial
covenants should be calculated.
<TABLE>
<CAPTION>
I. EBITDA (for preceding 12 month period):
<C> <S> <C>
(i) Net Income $---------
(ii) Federal, State and Local Income
Tax expense paid or accrued for as a liability $---------
(iii) Interest Expense $---------
(iv) Depreciation and amortization
expense $---------
(v) Loss on asset sales & dispositions $---------
(vi) Extraordinary losses $---------
(vii) Sum of Items (i), (ii), (iii),
(iv), (v), and (vi) $---------
(viii) Extraordinary income/gain $---------
(ix) Gain on asset sales & dispositions $---------
(x) Item (vii) minus the sum of Items
(viii) and (ix)--EBITDA $---------
<CAPTION>
II. MAXIMUM LEVERAGE RATIO (SECTION 13.2)
<C> <S> <C>
A. Total Funded Indebtedness $---------
B. EBITDA for preceding 12 months, per Item I $---------
C. Ratio of Item A to Item B ---------
D. Maximum Leverage Ratio permitted by Section 13.2 2.00 to 1.00
Schedule i
<PAGE> 65
<CAPTION>
III. TOTAL LIABILITIES TO TANGIBLE NET WORTH (SECTION 13.3)
<C> <S> <C>
A. Total Liabilities $---------
B. Tangible Net Worth $---------
C. Ratio of Item A to Item B ---------
D. Maximum ratio of Total Liabilities to
Tangible Net Worth permitted by Section 13.3 1.00 to 1.00
<CAPTION>
IV. MINIMUM CURRENT RATIO (SECTION 13.4)
<C> <S> <C>
A. Current Assets $-----------
B. Current Liabilities $-----------
C. Ratio of Item A to Item B -----------
D. Minimum Ratio required by Section 13.4. 2.25 to 1.00
</TABLE>
Schedule ii
<PAGE> 1
EXHIBIT 11
<TABLE>
Falcon Products, Inc. and Subsidiaries
--------------------------------------
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
<CAPTION>
(In thousands, except share and per share Thirteen Weeks Ended Twenty-Six Weeks Endeded
amounts) ------------------------ ------------------------
May 2, May 3, May 2, May 3,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Basic Earnings Per Share:
- ------------------------
Average number of common shares outstanding 9,197 9,703 9,272 9,724
Net earnings $ 1,838 $ 1,942 $ 3,620 $ 3,809
======== ======== ======== ========
Earnings per share $ .20 $ .20 $ .38 $ .38
======== ======== ======== ========
Diluted Earnings Per Share:
- --------------------------
Average number of common shares outstanding 9,197 9,703 9,272 9,724
Assumed exercise of options
(treasury stock method) 122 207 158 200
-------- -------- -------- --------
Shares for diluted computation 9,319 9,910 9,430 9,924
======== ======== ======== ========
Net earnings $ 1,838 $ 1,942 $ 3,620 $ 3,809
======== ======== ======== ========
Earnings per share $ .20 $ .20 $ .38 $ .38
======== ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC
Form 10-Q for the quarterly period ended May 2, 1998 and is qualified
in its entirety by reference to such statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-01-1998
<PERIOD-END> MAY-02-1998
<CASH> 2,057
<SECURITIES> 0
<RECEIVABLES> 19,922
<ALLOWANCES> 807
<INVENTORY> 24,861
<CURRENT-ASSETS> 52,449
<PP&E> 51,617
<DEPRECIATION> 22,702
<TOTAL-ASSETS> 108,769
<CURRENT-LIABILITIES> 19,340
<BONDS> 0
<COMMON> 198
0
0
<OTHER-SE> 70,427
<TOTAL-LIABILITY-AND-EQUITY> 108,769
<SALES> 61,711
<TOTAL-REVENUES> 61,711
<CGS> 44,052
<TOTAL-COSTS> 44,052
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7
<INCOME-PRETAX> 5,887
<INCOME-TAX> 2,267
<INCOME-CONTINUING> 3,620
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,620
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
</TABLE>
