Execution Copy

 

 

POST-PETITION
CREDIT AGREEMENT

Dated as of February 4, 2005

by and among

FALCON PRODUCTS, INC.,
SHELBY WILLIAMS INDUSTRIES, INC.,
SELLERS & JOSEPHSON INC.,
EPIC FURNITURE GROUP, INC.,

HOWE FURNITURE CORPORATION,
FALCON HOLDINGS, INC.,
THE FALCON COMPANIES INTERNATIONAL, INC.,
JOHNSON INDUSTRIES, INC., and
MADISON FURNITURE INDUSTRIES, INC.,
as Borrowers,

THE FINANCIAL INSTITUTIONS AND OTHER LENDERS NAMED HEREIN,
as Lenders, and

DDJ CAPITAL MANAGEMENT, LLC,
as Administrative Agent and Collateral Agent

TABLE OF CONTENTS

> > > > > > > > > > > > > > Page

 

Article I - Definitions; Certain Terms

1

 

Section 1.01.

Definitions

1

 

Section 1.02.

Terms Generally

24

 

Section 1.03.

Accounting and Other Terms

24

 

Section 1.04.

Time References

24

   

Article II - The Loans

25

 

Section 2.01.

Loans

25

 

Section 2.02.

Letter of Credit Accommodations

28

 

Section 2.03.

Promise to Pay; Evidence of Debt

28

 

Section 2.04.

Authorized Officers and Administrative Agent

29

 

Section 2.05.

Optional Conversion to Exit Facility

29

 

Section 2.06.

Priority; Liens

30

   

Article III - Payments and Other Compensation

30

 

Section 3.01.

Prepayments; Reductions in Commitments

30

 

Section 3.02.

Payments

32

 

Section 3.03.

Taxes

35

 

Section 3.04.

Increased Capital

37

   

Article IV - Interest and Fees

38

 

Section 4.01.

Interest on the Loans and Other Obligations

38

 

Section 4.02.

Fees

38

   

Article V - Conditions to Loans

39

 

Section 5.01.

Conditions Precedent to the Initial Loans

39

 

Section 5.02.

Conditions Precedent to All Loans

42

   

Article VI - Representations and Warranties

43

 

Section 6.01.

General Representations and Warranties

43

 

Section 6.02.

Survival of Representations and Warranties

60

   

Article VII - Reserved

60

   

Article VIII - Affirmative Covenants

60

 

Section 8.01.

Visits and Inspections; Lender Meeting

60

 

Section 8.02.

Notices

61

 

Section 8.03.

Financial Statements

61

 

Section 8.04.

Borrowing Base Certificates

63

 

Section 8.05.

Landlord, Processor and Storage Agreements

63

 

Section 8.06.

Reserved

63

 

Section 8.07.

Domestic Subsidiaries

63

 

Section 8.08.

Deposit and Brokerage Accounts

63

 

Section 8.09.

Updated Information

64

i

 

 

Section 8.10.

Consultant

64

 

Section 8.11.

Certain Insurance

64

 

Section 8.12.

Payment of Notes and Other Obligations

65

 

Section 8.13.

Compliance with Laws; Consents

65

 

Section 8.14.

Legal Existence

65

 

Section 8.15.

Maintenance of Properties

65

 

Section 8.16.

Communications with Accountants

66

 

Section 8.17.

Environmental Matters

66

 

Section 8.18.

Further Assurances

66

 

Section 8.19.

Change in Collateral; Collateral Records

67

 

Section 8.20.

Delivery of Phase I Reports and Other Matters

67

 

Section 8.21.

Delivery of Bankruptcy Court Filings

67

 

Section 8.22.

Budgets

67

 

Section 8.23.

Resignation of Depository

67

   

Article IX - Negative Covenants

68

 

Section 9.01.

Mergers; Consolidations; Acquisitions; Structural Changes

68

 

Section 9.02.

Loans

68

 

Section 9.03.

Total Indebtedness for Money Borrowed

69

 

Section 9.04.

Affiliate Transactions

70

 

Section 9.05.

Limitation on Liens

70

 

Section 9.06.

Reserved

72

 

Section 9.07.

Distributions

72

 

Section 9.08.

Capital Expenditures

72

 

Section 9.09.

Disposition of Assets

72

 

Section 9.10.

Securities of Subsidiaries

73

 

Section 9.11.

Bill-and-Hold Sales, Etc

73

 

Section 9.12.

Restricted Investment

73

 

Section 9.13.

Subsidiaries and Joint Ventures

73

 

Section 9.14.

Tax Consolidation

73

 

Section 9.15.

Governing Documents

73

 

Section 9.16.

Fiscal Year End

74

 

Section 9.17.

Negative Pledges

74

 

Section 9.18.

Reserved

74

 

Section 9.19.

Leases

74

 

Section 9.20.

No Other Plans of Reorganization

74

 

Section 9.21.

Payments of Certain Fees

74

 

Section 9.22.

No Amendment to Interim Order or Final Order

75

 

Section 9.23.

Certain Agreements

75

   

Article X - Reserved

75

   

Article XI - Events of Default, Rights and Remedies

75

 

Section 11.01.

Events of Default

75

ii

 

   

Article XII - Management, Collection and Status of Accounts Receivable and Other
Collateral

79

 

Section 12.01.

Management of Collateral

79

 

Section 12.02.

INTENTIONALLY OMITTED

81

 

Section 12.03.

Status of Accounts Receivable and Other Collateral

81

   

Article XIII - The Agents

82

 

Section 13.01.

Appointment Powers and Immunities; Delegation of Duties,
Liability of Agents

82

 

Section 13.02.

Reliance by Agents

84

 

Section 13.03.

Defaults

84

 

Section 13.04.

Rights as a Lender

85

 

Section 13.05.

Costs and Expenses; Indemnification

85

 

Section 13.06.

Non-Reliance on Agents and Other Lenders

86

 

Section 13.07.

Failure to Act

87

 

Section 13.08.

Resignation of Agent

87

 

Section 13.09.

Collateral Matters

87

 

Section 13.10.

Restrictions on Actions by the Lenders; Sharing Payments

88

 

Section 13.11.

Several Obligations; No Liability

89

   

Article XIV - Miscellaneous

89

 

Section 14.01.

Notices, Etc

89

 

Section 14.02.

Amendments, Etc

90

 

Section 14.03.

No Waiver; Remedies, Etc

91

 

Section 14.04.

Expenses; Taxes, Attorneys' Fees

92

 

Section 14.05.

Right of Set-off, Sharing of Payments, Etc

92

 

Section 14.06.

Severability

93

 

Section 14.07.

Assignments and Participations

93

 

Section 14.08.

Counterparts

94

 

Section 14.09.

GOVERNING LAW

94

 

Section 14.10.

Releases and Validation of Pre-Petition Indebtedness and Liens; Allowance of
Secured Claims

94

 

Section 14.11.

Objections by Parties In Interest

95

 

Section 14.12.

Consent

95

 

Section 14.13.

Interpretation

95

 

Section 14.14.

Reinstatement; Certain Payments

95

 

Section 14.15.

Indemnification

95

 

Section 14.16.

Interest

96

 

Section 14.17.

Records

97

 

Section 14.18.

Binding Effect

97

 

Section 14.19.

Confidentiality

97

 

Section 14.20.

Integration

98

 

Section 14.21.

Lender Advertising

98

 

Section 14.22.

Liability of Borrowers

98

 

Section 14.23.

Reliance on Representations and Actions of Falcon

98

iii

 

POST-PETITION
CREDIT AGREEMENT

THIS POST-PETITION CREDIT AGREEMENT (this "Agreement") is entered into as of
February 4, 2005, among:

> > > (i)

FALCON PRODUCTS, INC., a Delaware corporation ("Falcon"), Shelby Williams
Industries, Inc., a Delaware corporation, Sellers & Josephson Inc., a New Jersey
corporation, EPIC Furniture Group, Inc., a Delaware corporation, HOWE FURNITURE
CORPORATION, a New York corporation, FALCON HOLDINGS, INC., a Missouri
corporation, THE FALCON COMPANIES INTERNATIONAL, INC., a Missouri corporation,
JOHNSON INDUSTRIES, INC., a Illinois corporation, and MADISON FURNITURE
INDUSTRIES, INC., a Mississippi corporation (collectively, with Falcon, the
"Borrowers", and each, a "Borrower");

(ii)

each of the lenders that from time to time is a party hereto (such lenders, each
individually a "Lender" and collectively, the "Lenders"); and

(iii) DDJ CAPITAL MANAGEMENT, LLC ("DDJ"), as administrative agent for the
Lenders (in such capacity, together with its successors and assigns, if any, in
such capacity, the "Administrative Agent"), and as collateral agent for the
Lenders (in such capacity, together with its successors and assigns, if any, in
such capacity, the "Collateral Agent").

WHEREAS, the Borrowers have filed the Chapter 11 Cases (as defined below) and
the Lenders have agreed to provide a credit facility to the Borrowers to finance
operations during the Chapter 11 Cases and for the other purposes specified
herein.

NOW THEREFORE, in consideration of the premises and the covenants and agreements
contained herein, the parties agree as follows:

Article I -

Definitions; Certain Terms

Section 1.01.

Definitions. As used in this Agreement, the following terms shall have the
respective meanings indicated below, such meanings to be applicable equally to
both the singular and plural forms of such terms:

"Account" has the respective meaning assigned thereto under the UCC.

"Account Debtor" means any Person who is or may become obligated under or on
account of any Account, Contract Right, Chattel Paper or General Intangible.

"Account Receivable" means, with respect to any Person, all of such Person's now
owned or hereafter acquired right, title, and interest with respect to
"accounts" (as that term is defined in the UCC), and any and all "supporting
obligations" (as that term is defined in the UCC) in respect thereof.

 

"Action" has the meaning set forth in Section 14.12.

"Administrative Agent" has the meaning set forth in the introductory paragraph
hereto.

"Administrative Agent Account" means the account designated by the
Administrative Agent into which the Borrowers shall make all payments to the
Administrative Agent for the benefit of the Agents and the Lenders under this
Agreement and the other Loan Documents.

"Affiliate" means a Person (other than a Subsidiary): (i) which directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, a Person; (ii) which beneficially owns or holds 5%
or more of any class of the Voting Stock of a Person; or (iii) 5% or more of the
Voting Stock (or in the case of a Person which is not a corporation, 5% or more
of the equity interest) of which is beneficially owned or held by a Person or a
Subsidiary of a Person. Notwithstanding anything to the contrary, in non event
shall any Lender by considered an "Affiliate" of any Loan Party.

"Agents" means, collectively, the Administrative Agent and the Collateral Agent.

"Agent-Related Persons" means the Administrative Agent and any successor agents
thereto (in accordance with the terms of this Agreement), and the Collateral
Agent and any successor agents thereto (in accordance with the terms of this
Agreement), together with their respective Affiliates, and the officers,
directors, employees, counsel, agents, and attorneys-in-fact of such Persons and
their Affiliates.

"Agreement" means this Post-Petition Credit Agreement, together with all
Exhibits and Schedules hereto, as such agreement may be amended, supplemented or
otherwise modified from time to time.

"Applicable Interest Rate" means the greater of (a) the prime rate of interest
(calculated daily as reported in The Wall Street Journal) plus 3.50 % per annum
and (b) 8.75% per annum.

"Approved Budget" means as of the Closing Date the budget of the Borrowers,
substantially in the form of Exhibit A hereto, projecting operations of the
Borrowers for fiscal year 2005 (the "Budget Period") in form and substance
satisfactory to the Administrative Agent in its sole discretion and from time to
time thereafter any subsequent budget of the Borrowers approved by the
Administrative Agent pursuant to Section 8.22 and not superceded by a subsequent
budget of the Borrowers that has been approved by the Administrative Agent in
its sole discretion.

"Approved Letter of Credit" means each letter of credit to be issued by a bank
chosen by Borrowers and approved by the Administrative Agent, the terms and
conditions of which have been approved by the Administrative Agent in its sole
discretion.

"Assignment and Acceptance" means an Assignment and Acceptance substantially in
the form of Exhibit B attached hereto and made a part hereof (with blanks
appropriately completed) delivered to the Administrative Agent in connection
with an assignment of a Lender's interest under this Agreement in accordance
with Section 14.07.

2

"Availability" means, at any time, the amount by which the Maximum Revolving
Credit Amount at such time exceeds the Revolving Credit Obligations at such
time; provided, however, that if the Borrowing with respect to which
Availability is being determined is for the purpose, in whole or in part, of
paying the Carve-Out Expenses, Availability shall be deemed to be increased by
the amount of such Carve-Out Expenses, so long as the proceeds of such Borrowing
are in fact used to pay such Carve-Out Expenses.

"Bankruptcy Code" means Title 11 of the United States Code (11 U.S.C. Sections
101 et seq.), as amended from time to time, and any successor statute.

"Bankruptcy Court" means the United States Bankruptcy Court for the Eastern
District of Missouri in St. Louis, Missouri.

"Benefit Plan" means an employee pension benefit plan, excluding any
Multiemployer Plan, which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code for which a Borrower or
any of its Subsidiaries or any of their ERISA Affiliates has been an "employer"
(as defined in Section 3(5) of ERISA) within the preceding six years or has any
liability.

"Blocked Account Agreement" means a Blocked Account Agreement executed and
delivered by Falcon, Fleet National Bank and Collateral Agent, in favor of the
Lenders, in form and substance satisfactory to the Agents.

"Borrowing" means a borrowing hereunder consisting of Loans made on the same
Funding Date.

"Borrower" and "Borrowers" have the meanings ascribed to such terms in the
preamble hereto.

"Borrowing Base" means, as of any date of determination, the sum of (i) the
amount expended to pay the Fleet Debt plus the lesser of (A) $15,000,000 and (B)
the applicable Budgeted Borrowing Needs, plus (ii) fifty percent (50%) of the
amount by which the Borrowers' actual Cumulative Net Operating Cash Flow as
shown on the most recent monthly financial statements delivered pursuant to
Section 8.03(d) is greater than the amount of "Cumulative Net Operating Cash
Flow" shown on the Approved Budget for the period commencing on February 1, 2005
through the date of such monthly financial statements, and less (iii) fifty
percent (50%) of the amount by which the Borrowers' actual Cumulative Net
Operating Cash Flow as shown on the most recent monthly financial statements
delivered pursuant to Section 8.03(d) is less than the amount of "Cumulative Net
Operating Cash Flow" shown on the Approved Budget for the period commencing on
February 1, 2005 through the date of such monthly financial statements;
provided, however, that prior to the entry of a Final Order the Borrowing Base
shall be in the amount of the sum of amounts used to pay the Fleet Debt plus
$5,000,000.

"Borrowing Base Certificate" means a certificate, substantially in the form of
Exhibit C attached hereto and made a part hereof, signed by a Responsible
Officer of Falcon.

"Budget Period" has the meaning set forth in the definition of Approved Budget.

3

"Budgeted Borrowing Needs" means, as of any date of determination in any
calendar month, (a) if such date of determination is prior to the seventh (7th)
day of such calendar month, an amount equal to 138% of the amount shown on the
Approved Budget as "Cumulative Borrowing Needs" for the immediately preceding
calendar month, and (b) if such date of determination is on or after such
seventh (7th) day, an amount equal to the sum of (i) the amount determined
pursuant to the foregoing clause (a) plus (ii) the pro rata portion (based on
the number of days elapsed in the calendar month in which such determination is
being made to but excluding such date of determination) of the difference
between (A) an amount equal to 138% of the amount shown on the Approved Budget
as "Cumulative Borrowing Needs" for the calendar month in which such
determination is being made and (B) the amount determined pursuant to the
foregoing clause (a).

"Business Day" means a day, which is not a Saturday or a Sunday or a legal
holiday on which the New York Stock Exchange is open and on which banks are not
required or permitted by law or other governmental action to close in New York,
New York.

"Capital Expenditures" means expenditures made or liabilities incurred for the
acquisition of any fixed assets or improvements, replacements, substitutions or
additions thereto which have a useful life of more than one year, including the
total principal portion of Capitalized Lease Obligations.

"Capitalized Lease" means, with respect to any Person, any lease of real or
personal property by such Person as lessee which is required under GAAP to be
capitalized on the balance sheet of such Person.

"Capitalized Lease Obligations" means, with respect to any Person, obligations
of such Person and its Subsidiaries under Capitalized Leases, and, for purposes
hereof, the amount of any such obligation shall be the capitalized amount
thereof determined in accordance with GAAP.

"Capital Stock" means (i) with respect to any Person that is a corporation, any
and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, and (ii) with respect
to any Person that is not a corporation, any and all partnership, limited
liability company or other equity interests of such Person.

"Carve-Out" has the meaning set forth in the definition of "Carve-Out Expenses".

"Carve-Out Expenses" means the aggregate amount of claims having priority ahead
of the super priority of, and Liens securing, the Obligations for (i) ) the
payment of any unpaid fees payable to the United States Trustee pursuant to 28
U.S.C. Section1930 and (ii) the payment of unpaid claims (whether allowed on an
interim or final basis; provided however, in the event the cases  are dismissed
or the jurisdiction of the Bankruptcy Court is otherwise terminated, such claims
need not be allowed) for fees and expenses incurred by professionals retained by
an order of the Court, including fees and expenses incurred prior to, and after,
the occurrence of an Event of Default, not to exceed $500,000 in the aggregate
(the "Professional Expense Cap"); provided, that any payments actually made to
such professionals under sections 330 or 331 of the Bankruptcy Code or any other
provision of the Bankruptcy Code or order of the Bankruptcy

4

 Court after the occurrence of an Event of Default (and during the continuance
of such an Event of Default) shall reduce the Professional Expense Cap on a
dollar-for-dollar basis (the amounts specified in clauses (i) and (ii),
including the limitations therein, collectively, the "Carve-Out").

"Change of Control" means the occurrence of one or more of the following events:
(a) any Person or affiliated group of Persons other than Franklin A. Jacobs, the
spouse, lineal descendants and spouses of lineal descendants of Franklin A.
Jacobs, the estates of one or more of the foregoing individuals and trusts
established solely for the benefit of one or more of the foregoing individuals,
shall own and control, beneficially and of record either (i) in excess of 51% of
the issued and outstanding Voting Stock of Falcon or (ii) a sufficient
percentage of the issued and outstanding Voting Stock of Falcon to control the
board of directors of Falcon, (b) Falcon shall cease to own and control,
beneficially and of record (directly or indirectly), 100% of the issued and
outstanding Securities and Voting Stock of each of the other Borrowers and each
of the Domestic Subsidiaries other than Epic, (c) Falcon shall cease to own and
control, beneficially and of record (directly or indirectly), at least 80% of
the issued and outstanding Securities and Voting Stock of Epic, (d) Falcon shall
cease to own and control, beneficially and of record (directly or indirectly),
the same percentage of the issued and outstanding Securities and Voting Stock of
each of the Foreign Subsidiaries that Falcon owns (directly or indirectly) on
the Closing Date, (e) a "Change of Control" (as defined in the Subordinated Note
Indenture, as in existence on the Closing Date) shall occur, or (f) the
employment of either of Franklin A. Jacobs or Stephen E. Cohen shall be
terminated by Falcon without the consent of the Administrative Agent and the
Required Lenders, (g) either of Franklin A. Jacobs or Steven E. Cohen shall
cease to function in his current capacity as an executive officer of Falcon
without the consent of the Administrative Agent and the Required Lenders or (h)
Alvarez & Marsal, Inc. (or another operations consultant to the Borrowers which
is acceptable to the Administrative Agent and the Required Lenders in their sole
discretion) shall be terminated as operations consultant to the Borrowers
without the consent of the Administrative Agent and the Required Lenders.

"Chapter 11 Cases" shall mean, collectively, the proceedings commenced by the
Borrowers under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court.

"Chattel Paper" has the respective meaning assigned thereto under the UCC.

"Closing Date" means the first date practicable following the entry of the
Interim Order, on which all of the conditions precedent set forth in Sections
5.01 and 5.02 have been satisfied (or waived by the Administrative Agent).

"Collateral" means all of the property and assets and all interests therein and
proceeds thereof now owned or hereafter acquired by any Person upon which a Lien
is granted or purported to be granted by such Person pursuant to the Security
Documents as security for all or any part of the Obligations.

"Collateral Agent" has the meaning set forth in the introductory paragraph
hereto.

"Collections" means all cash, checks, notes, instruments, and other items of
payment (including insurance and condemnation proceeds, cash proceeds of sales
and other voluntary or involuntary dispositions of property, rental proceeds,
and tax refunds).

5

"Commission" means the Securities and Exchange Commission and any Person
succeeding to the functions thereof.

"Commitment" means, with respect to any Lender, the obligation of such Lender to
make the Loans pursuant to the terms and conditions of this Agreement, and which
shall not exceed the principal amount set forth opposite such Lender's name on
the signature pages hereof or the signature page of the Assignment and
Acceptance by which it became (or becomes) a Lender, as such may be modified
from time to time pursuant to the terms of this Agreement or to give effect to
any applicable Assignment and Acceptance; "Commitments" means the aggregate
principal amount of the Commitments of all the Lenders.

"Commitment Termination Date" means the date that is the earliest to occur of
(i) the first anniversary of the Closing Date, (ii) the effective date of a
joint plan of reorganization in the Chapter 11 Cases or the effective date of a
plan of reorganization of substantially all of the Chapter 11 Cases involving a
Borrower or Borrowers (the "Effective Date"), (iii) the date the Commitment is
terminated in connection with an Event of Default pursuant to Section 11.01,
(iv) if no budget has been approved pursuant to Section 8.22, the thirtieth
(30th) day following the expiration of the Approved Budget, (v) the date of any
determination to proceed with the sale or liquidation of any of the Borrowers
without the consent of the Lenders other than pursuant to a sale or a plan that
pays the Obligations in full in cash and terminates the Commitments, or (vi) the
date designated by Falcon on behalf of the Borrowers in a notice to the
Administrative Agent as the date on which the Borrowers intend to voluntarily
terminate the Commitments pursuant to Section 3.01(a)(ii) and pay the
Obligations in full.

"Consent" means any consent, approval, authorization, waiver, permit, grant,
franchise, license, exemption or order of, or any registration, certificate,
qualification, declaration or filing with, or any notice to, any Person,
including, without limitation, any governmental authority.

"Consolidated" means the consolidation in accordance with GAAP of the accounts
or other items as to which such term applies.

"Contingent Obligations" means with respect to any Person, any obligation, or
arrangement, direct or indirect, contingent or otherwise, of such Person
(i) with respect to any Indebtedness, lease, dividend, letter of credit or other
obligation ("Primary Obligations") of another Person, including, without
limitation, any direct or indirect guarantee of such Indebtedness (other than
any endorsement for collection or deposit in the ordinary course of business) or
any other direct or indirect obligation, by agreement or otherwise, to purchase
or repurchase any such Primary Obligation or any property constituting direct or
indirect security therefor, or to provide funds for the payment or discharge of
any such Primary Obligation (whether in the form of loans, advances, or
purchases of property, securities or services, capital contributions, dividends
or otherwise), letters of credit and reimbursement obligations for letters of
credit, (ii) to provide funds to maintain the financial condition of any other
Person, (iii) otherwise to indemnify or hold harmless the holders of Primary
Obligations of another Person against loss in respect thereof (other than
pursuant to customary indemnification provisions included in contracts entered
into in the ordinary course of business which do not obligate a specified Person
for the obligations of a third party) or (iv) in connection with any synthetic
lease or other off-balance sheet lease transaction. The amount of any Contingent

6

Obligation under clauses (i) and (ii) above shall be the maximum amount
guaranteed or otherwise supported by the Contingent Obligation.

"Contract Right" means any right of a Borrower to payment under a contract for
the sale or lease of goods or the rendering of services, which right is at the
time not yet earned by performance.

"Contractual Obligation" means, as applied to any Person, any provision of any
securities issued by that Person or any indenture, mortgage, deed of trust,
security agreement, pledge agreement, guaranty, contract, undertaking, agreement
or instrument to which that Person is a party or by which it or any of its
properties is bound, or to which it or any of its properties is subject.

"Control Agreements" means, with respect to a Securities Account or a Deposit
Account, any agreement, in form and substance satisfactory to the Collateral
Agent, which effectively gives "control" (as defined in the UCC) to the
Collateral Agent in such Securities Account and all investment property
contained therein or Deposit Account and all funds contained therein, as the
case may be.

"Conversion Commitment Fee" has the meaning set forth in Section 4.02(d).

"Convertible Subordinated Debentures" means the 12% Junior Subordinated
Convertible Debentures due 2010 issued by Falcon on December 15, 2003, as in
effect on the Closing Date and as the same may be amended, modified or
supplemented from time to time if and to the extent permitted under this
Agreement.

"Convertible Subordinated Debt" means Falcon's Indebtedness for Money Borrowed
in the aggregate principal amount of $4,150,000 incurred pursuant to the
Convertible Subordinated Debentures.

"Cumulative Net Operating Cash Flow" means (a) with respect to the Approved
Budget, "Net Operating Cash Flow" as shown as a line item on the Approved Budget
from February 1, 2005 through the last day of the calendar month immediately
preceding the applicable date of measurement and (b) with respect to the
Borrowers' actual operating results with respect to the same period, the sum of
the following, determined on a Consolidated basis for Falcon and its
Consolidated Subsidiaries: (i) net income, plus (ii) to the extent deducted in
determining such net income, (A) depreciation and amortization expense, and,
without duplication, non-cash write-offs of deferred financing costs, (B)
interest expense, (C) taxes, (D) professional fees in connection with the
Chapter 11 Cases, and (E) restructuring charges in an aggregate amount not to
exceed $2,000,000, plus (iii) any net decrease in working capital, and less (iv)
(A) to the extent included or added in determining such net income, (1) tax
refunds or other tax benefits and (2) interest income, (B) Capital Expenditures
made or accrued in respect of such period and (C) any net increase in working
capital.

"Cure Loans" has the meaning set forth in Section 3.02(c)(iii)(C).

"DDJ" has the meaning set forth in the introductory paragraph hereto.

7

"Default" means an event which, with the giving of notice or the lapse of time
or both, would constitute an Event of Default.

"Default Rate" has the meaning set forth in Section 4.01(c).

"Deposit Account" means a "deposit account" as that term is defined in the UCC.

"Derivative Obligations" every obligation of a Person under any forward
contract, futures contract, exchange contract, swap, option or other financing
agreement or arrangement (including, without limitation, caps, floors, collars
and similar agreement), the value of which is dependent upon interest rates,
currency exchange rates, commodities or other indices.

"Disbursement Account" means the accounts identified on Schedule 1.01(A) which
the Borrowers will use to make disbursements after the Petition Date and into
which the Administrative Agent shall make the Loans.

"Disposition" means any transaction, or series of related transactions, pursuant
to which any Borrower or any of its Subsidiaries sells, assigns, transfers or
otherwise disposes of any property or assets (whether now owned or hereafter
acquired) to any other Person, in each case whether or not the consideration
therefor consists of cash, securities or other assets owned by the acquiring
Person, excluding (i) any sales of Inventory in the ordinary course of business
on ordinary business terms and (ii) sales or other dispositions of Permitted
Investments identified in clauses (i) through (vii) in the definition of
"Permitted Investments".

"Distribution(s)" means in respect of any Person and includes: (i) the payment
of any dividends or other distributions on Securities of such Person (except
distributions consisting of additional such Securities), (ii) the redemption,
restriction, retirement, sinking fund or similar payment, purchase or other
acquisition of Securities of such Person, including the acquisition of
Securities of Epic by Falcon, as the case may be, unless made contemporaneously
from the net proceeds of the sale of Securities, and (iii) any management,
consulting or similar fees payable by any Borrower or Subsidiary to any other
Borrower or Subsidiary or any Affiliate of any Borrower or Subsidiary.

"Dollar", "Dollars" and the symbol "$" each means lawful money of the United
States of America.

"Domestic Subsidiary" means any now or hereafter existing Subsidiary of any
Borrower that is incorporated under the laws of a State of the United States or
the District of Columbia.

"Dominion Account" means an account or accounts of the Borrowers established by
the Borrowers pursuant to Section 12.01(a) of this Agreement at a depository
institution acceptable to the Agents, and over which the Collateral Agent shall
have sole and exclusive access and control for withdrawal purposes, subject to
the terms of an account control agreement entered into by the applicable
depository institution, the Collateral Agent and Borrowers, including, without
limitation, the account or accounts established by Falcon pursuant to the
Blocked Account Agreement.

8

"Effect of Bankruptcy" means, with respect to any Contractual Obligation,
contract or agreement to which any Borrower is party any default or other legal
consequence arising solely on account of filing the Chapter 11 Cases (including
the application of the automatic stay) and any rejecting of any such Contractual
Obligation, contract or agreement with the Bankruptcy Court's approval.

"Effective Date" has the meaning set forth in the definition of the "Commitment
Termination Date".

"Environmental Actions" means any complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, judicial or administrative
proceeding, judgment, letter or other communication from any Governmental
Authority involving violations of Environmental Laws or Releases of Hazardous
Materials (i) from any assets, properties or businesses of any Borrower or any
of its Subsidiaries or any predecessor in interest; (ii) from adjoining
properties or businesses; or (iii) onto any facilities which received Hazardous
Materials generated by any Borrower or any of its Subsidiaries or any
predecessor in interest.

"Environmental Conditions" means any release of any Hazardous Materials (whether
or not such Release constituted at the time thereof a violation of any
Environmental Laws) or any violation of any Environmental Law as a result of
which any Borrower or Subsidiary has or may become liable to any Person or by
reason of which the business, condition or operations of such Borrower or
Subsidiary or any of its assets or properties may suffer or be subjected to any
Lien or liability.

"Environmental Laws" means all Federal, state and local laws, rules,
regulations, ordinances, orders and consent decrees relating to Hazardous
Materials or the protection of human health or the environment, including all
requirements pertaining to reporting, permitting, investigating or remediating
releases or threatened releases of Hazardous Materials into the environment, or
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials. Without limiting the
generality of the foregoing, the term Environmental Laws shall include the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
Section 9601 et seq.) ("CERCLA"), the Hazardous Materials Transportation Act (49
U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery Act (42
U.S.C. Section 6901 et seq.) ("RCRA"), the Federal Clean Water Act (33 U.S.C.
Section 1251 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.) and
the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.), as such laws
may be amended from time to time, and any other present or future federal,
state, local or foreign statute, ordinance, rule, regulation, order, judgment,
decree, permit, license or request or binding determination of, or agreement
with, any governmental authority relating to or imposing liability or
establishing standards of conduct for the protection of human health or safety
or the environment.

"Environmental Liabilities and Costs" means all liabilities, monetary
obligations, Remedial Actions, losses, damages, punitive damages, consequential
damages, treble damages, costs and expenses (including all reasonable fees,
disbursements and expenses of counsel, experts and consultants and costs of
investigations and feasibility studies), fines, penalties, sanctions and
interest incurred as a result of any claim or demand by any Governmental
Authority or any third party, and which relate to any environmental condition or
a Release of

9

Hazardous Materials from or onto (i) any property presently or formerly owned by
any Borrower or any of its Subsidiaries or (ii) any facility which received
Hazardous Materials generated by any Borrower or any of its Subsidiaries.

"Environmental Lien" means any Lien in favor of any Governmental Authority for
Environmental Liabilities and Costs.

"Epic" means Epic Furniture Group, Inc., a Delaware corporation.

"Equipment" has the respective meaning assigned thereto under the UCC.

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended,
and any successor statute of similar import, and regulations thereunder, in each
case as in effect from time to time. References to sections of ERISA shall be
construed also to refer to any successor sections.

"ERISA Affiliate" means, with respect to any Person, any trade or business
(whether or not incorporated) which is a member of a group of which such Person
is a member and which would be deemed to be a "controlled group" within the
meaning of Sections 414(b), (c), (m) and (o) of the Internal Revenue Code.

"Event of Default" means any of the occurrences set forth in Section 11.01 after
the expiration of any applicable grace period and the giving of any applicable
notice, in each case as expressly provided in Section 11.01.

"Existing Affiliate Advances" means all Indebtedness evidencing loans to
Affiliates, employees and officers of Falcon, made prior to the Petition Date.

"Facility" means the post-petition credit facility provided under this
Agreement.

"Fair Labor Standards Act" means the Fair Labor Standards Act of 1938, as
amended and as the same may be amended from time to time by the United States
Congress.

"Falcon" has the meaning set forth in the introductory paragraph hereto.

"Falcon Mimon" means Falcon Mimon a/s.

"Federal Reserve Board" means the Board of the Federal Reserve System or any
Governmental Authority succeeding to its functions.

"Final Order" means an order entered by the Bankruptcy Court: (i) finally and
unconditionally approving this Agreement and the transactions contemplated
hereby substantially in the form of the Interim Order with such changes as are
satisfactory to the Administrative Agent in its sole discretion, (ii) that has
not been reversed or stayed, (iii) as to which either no appeal has been made,
or, in the event of an appeal, no stay has been obtained, or (iv) as to which
the time for filing a notice of appeal has not expired.

"Fiscal Year" means the fiscal year of each Borrower and its Subsidiaries.

10

"Fleet Credit Agreement" means the Second Amended and Restated Loan and Security
Agreement, dated as of October 6, 2004, by and among Falcon, Shelby, Sellers,
Epic, the Lenders signatory hereto and Fleet Capital Corporation, as Agent, as
amended, modified and/or supplemented from time to time through the Petition
Date, including without limitation Amendment No. 1 dated as of January 19, 2005.

"Fleet Debt" means the Indebtedness and other Obligations of the Borrowers and
their respective Subsidiaries to repay principal of Revolving Credit Loans (as
defined in the Fleet Credit Agreement), including the Term Component Loans (as
defined in the Fleet Credit Agreement), and to pay interest thereon under the
Fleet Credit Agreement and the other "Loan Documents" (as defined in the Fleet
Credit Agreement) and fees, costs, expenses, and other amounts in connection
with such Revolving Credit Loans in an aggregate amount (including principal,
interest, fees, costs, expenses and all other amounts) not to exceed
$25,000,000.

"Foreign Subsidiary" means any Subsidiary that is not a Domestic Subsidiary.

"Forfeiture Proceeding" means any action, proceeding or investigation affecting
any Borrower or any of its Subsidiaries before any court, governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, or the receipt of notice by any such party that any of them is a
suspect in or a target of any governmental inquiry or investigation, which may
result in an indictment of any of them or the seizure or forfeiture of any of
their respective properties.

"Former Agent" means Fleet Capital Corporation.

"Funding Date" means the date of the funding of a Loan.

"Funded Reserves" means amounts from time to time maintained in or otherwise
credited to an account designated by the Borrowers in writing to the
Administrative Agent containing funds for payment of professional and other fees
and disbursements of the kind that are included in Carve-Out Expenses.

"GAAP" means generally accepted accounting principles in effect from time to
time in the United States; provided that for the purpose of this Agreement and
the definitions used herein, "GAAP" shall mean generally accepted accounting
principles in effect on the date hereof and consistent with those used in the
preparation of the financial statements; provided, further, that if there occurs
after the date of this Agreement any change in GAAP that affects in any material
respect the calculation of Cumulative Net Operating Cash Flow, the
Administrative Agent, and Falcon on behalf of itself and the other Borrowers,
shall negotiate in good faith an amendment to the definition of such term and
any other provision of this Agreement that relates to such definition with the
intent of having the respective positions of the Lenders and the Borrowers after
such change in GAAP conform as nearly as possible to their respective positions
as of the date of this Agreement and, until any such amendments have been agreed
upon, Cumulative Net Operating Cash Flow shall be calculated as if no such
change in GAAP has occurred.

"General Intangible" has the respective meaning assigned thereto under the UCC.

11

"Governing Documents" means, (a) with respect to any corporation, (i) the
articles/certificate of incorporation (or the equivalent organizational
documents) of such corporation, (ii) the by-laws (or the equivalent governing
documents) of the corporation and (iii) any document setting forth the
designation, amount and/or relative rights, limitations and preferences of any
class or series of such corporation's capital stock; and (b) with respect to any
general partnership, (i) the partnership agreement (or the equivalent
organizational documents) of such partnership and (ii) any document setting
forth the designation, amount and/or relative rights, limitations and
preferences of any of the partnership interests; and (c) with respect to any
limited partnership, (i) the partnership agreement (or the equivalent
organizational documents) of such partnership, (ii) a certificate of limited
partnership (or the equivalent organizational documents) and (iii) any document
setting forth the designation, amount and/or relative rights, limitations and
preferences of any of the partnership interests; and (d) with respect to any
limited liability company, (i) the certificate of limited liability (or
equivalent filings) of such limited liability company, (ii) the operating
agreement (or the equivalent organizational documents) of such limited liability
company, and (iii) any document setting forth the designation, amount and/or
relative rights, limitations and preferences of any of such company's membership
interests.

"Governmental Authority" means any nation or government, any Federal, state,
city, town, municipality, county, local or other political subdivision thereof
or thereto and any department, commission, board, bureau, instrumentality,
agency or other entity exercising executive, legislative, judicial, taxing,
regulatory or administrative powers or functions of or pertaining to government.

"Hazardous Materials" means any substance (i) the presence of which requires
investigation or remediation under any Environmental Laws; (ii) that is defined
or becomes defined as a "hazardous waste" or "hazardous substance" under any
Environmental Laws; (iii) that is toxic, explosive, corrosive, inflammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and is
or becomes regulated under any Environmental Laws; (iv) the presence of which on
any real property causes or threatens to cause a nuisance upon the real property
or to adjacent properties or poses or threatens to pose a hazard to any real
property or to the health or safety of Persons on or about any real property; or
(v) that contains gasoline or other petroleum hydrocarbons, polychlorinated
biphenyls or asbestos.

"Hazardous Materials Claim" has the meaning set forth in Section 8.17.

"Highest Lawful Rate" means with respect to any Agent or any Lender, the maximum
non-usurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the Obligations under
laws applicable to such Agent or such Lender which are currently in effect or,
to the extent allowed by law, under such applicable laws which may hereafter be
in effect and which allow a higher maximum non-usurious interest rate than
applicable laws now allow.

"Indebtedness" means as applied to a Person, without duplication:

(i) all items which in accordance with GAAP would be included in determining
total liabilities as shown on the liability side of a balance sheet of such
Person as at the date as of

12

which Indebtedness is to be determined, including, without limitation,
Capitalized Lease Obligations;

(ii) all obligations of other Persons which such Person has guaranteed;

(iii) all reimbursement obligations in connection with letters of credit or
letter of credit guaranties issued for the account of such Person;

(iv) Derivative Obligations; and

(v) in the case of Borrowers (without duplication), the Obligations.

"Indemnified Matters" has the meaning set forth in Section 14.15.

"Indemnified Party" has the meaning set forth in Section 14.15.

"Intellectual Property" means all past, present and future: trade secrets,
know-how and other proprietary information; trademarks, internet domain names,
service marks, trade dress, trade names, business names, designs, logos, slogans
(and all translations, adaptations, derivations and combinations of the
foregoing) indicia and other source and/or business identifiers, and the
goodwill of the business relating thereto and all registrations or applications
for registrations which have heretofore been or may hereafter be issued thereon
throughout the world; copyrights (including copyrights for computer programs)
and copyright registrations or applications for registrations which have
heretofore been or may hereafter be issued throughout the world and all tangible
property embodying the copyrights, unpatented inventions (whether or not
patentable); patent applications and patents; industrial design applications and
registered industrial designs; license agreements related to any of the
foregoing and income therefrom; books, records, writings, computer tapes or
disks, flow diagrams, specification sheets, computer software, source codes,
object codes, executable code, data, databases and other physical
manifestations, embodiments or incorporations of any of the foregoing; the right
to sue for all past, present and future infringements of any of the foregoing;
all other intellectual property; and all common law and other rights throughout
the world in and to all of the foregoing.

"Interest Accrual Period" means a one month period.

"Interim Order" means an order by the Bankruptcy Court initially approving this
Agreement and the transactions contemplated hereby substantially in the form of
Exhibit D hereto (with such changes as may be approved by the Administrative
Agent in its sole discretion) which is entered on or before February 9, 2005.

"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended (or
any successor statute thereto) and the regulations thereunder.

"Inventory" has the respective meaning assigned thereto under the UCC.

"Investment" means, with respect to any Person, (i) any purchase or other
acquisition by that Person of Securities, or of a beneficial interest in
Securities, issued by any other Person, (ii) any purchase by that Person of all
or substantially all of the assets of a business conducted by

13

another Person, and (iii) any direct or indirect loan, advance (other than
prepaid expenses, accounts receivable, advances to employees and similar items
made or incurred in the ordinary course of business) or capital contribution by
that Person to any other Person, including all Indebtedness to such Person
arising from a sale of any property or assets by such Person other than in the
ordinary course of its business.

"IRS" means the Internal Revenue Service or any successor federal tax
Governmental Authority.

"Judgment" has the meaning set forth in Section 11.01(k).

"Lease" means any lease of real property to which any Borrower or any of its
Subsidiaries is a party as lessor or lessee.

"Lender" and "Lenders" have the respective meanings ascribed to such term in the
preamble to this Agreement, and shall include any other Person made a party to
this Agreement as a "Lender" in accordance with the provisions hereof.

"Lender-Related Persons" means, with respect to any Lender, such Lender,
together with such Lender's Affiliates, and the officers, directors, employees,
counsel, agents, and attorneys-in-fact of such Lender and such Lender's
Affiliates.

"Lien" means any lien (statutory or other), pledge, mortgage, deed of trust,
assignment, deposit arrangement, priority, security interest, or other charge or
encumbrance or other preferential arrangement of any kind or nature whatsoever
(including, without limitation, the interest of a lessor under a Capital Lease
having substantially the same economic effect in property security an obligation
owed to, or a claim by, a Person other than the owner of the property, whether
such interest is based on common law, statute or contract), any lease in the
nature thereof and the filing or existence of any financing statement or other
similar form of notice under the laws of any jurisdiction or any security
agreement authorizing any Person to file such a financing statement, whether
arising by contract, operation of law, or otherwise. The term "Lien" shall
include rights of seller under conditional sales contracts or title retention
agreements, reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting property. For the purpose of this Agreement, a Borrower
shall be deemed to be the owner of any Property which it has acquired or holds
subject to a conditional sale agreement or other arrangement pursuant to which
title to the Property has been retained by or vested in some other Person for
security purposes.

"Loan" has the meaning set forth in Section 2.01(a).

"Loan Account" means an account maintained hereunder by Administrative Agent on
its books of account, at Administrative Agent's office and with respect to the
Borrowers, in which the Borrowers will be charged, jointly and severally, with
all loans made to, and all other Obligations incurred by, the Borrowers.

"Loan Documents" means this Agreement, the Notes, the Security Documents and all
other agreements, instruments and all documents executed and delivered pursuant
hereto or

14

thereto or otherwise evidencing or securing any Loan executed by the Borrowers,
or any of them, in connection with this Agreement.

"Loan Parties" means the Borrowers.

"Material Adverse Change" means, except for the filing of the Cases and the
retraction or modification of trade terms by vendors as a result of events
leading up to and following the commencement of a proceeding under Chapter 11 of
the Bankruptcy Code, the occurrence of (i) any material adverse change with
respect to the business, assets, condition (financial or otherwise), operations,
performance, prospects or properties of Borrowers and their Subsidiaries taken
as a whole, as such business, assets, condition, operations, performance,
prospects or properties existed on January 28, 2005 as reflected in the
information provided in writing prior to the date hereof to the Administrative
Agent by or on behalf of the Borrowers, (ii) a material adverse effect on the
rights and remedies of the Agents or Lenders under the Loan Documents, or (iii)
the material impairment of the ability of Borrowers and the Domestic
Subsidiaries, taken as a whole, to perform their obligations hereunder or under
any Loan Document.

"Maturity Date" means the same date as the Commitment Termination Date or such
earlier date on which the Loans shall become due and payable in accordance with
the terms of this Agreement and the other Loan Documents.

"Maximum Revolving Credit Amount" means at any particular time, an amount equal
to the lesser of (a) the Commitments at such time and (b) the Borrowing Base at
such time, less, in each case, $500,000.

"Money Borrowed" means (i) Indebtedness arising from the lending of money by any
Person to any Borrower or any Subsidiary; (ii) Indebtedness, whether or not in
any such case arising from the lending by any Person of money to any Borrower or
any Subsidiary, (1) which is represented by notes payable or drafts accepted
that evidence extensions of credit, (2) which constitutes obligations evidenced
by bonds, debentures, notes or similar instruments, or (3) upon which interest
charges are customarily paid (other than accounts payable) or that was issued or
assumed as full or partial payment for Property; (iii) Indebtedness that
constitutes a Capitalized Lease Obligation; (iv) reimbursement obligations with
respect to letters of credit or guaranties of letters of credit and (v)
Indebtedness of any Borrower or any Subsidiary under any guaranty of obligations
that would constitute Indebtedness for Money Borrowed under clauses (i) through
(iii) hereof, if owed directly by a Borrower or any Subsidiary. Money Borrowed
shall not include trade payables or accrued expenses.

"Moody's" means Moody's Investors Service, Inc. and any successor thereto.

"Mortgages" means (i) the Real Property Deed of Trust, Assignment of Rents,
Security Agreement and Fixture Filing, by which Shelby has granted to the
Collateral Agent, as security for the Obligations, a Lien upon the real Property
of Shelby located at 150 Shelby Williams Drive, Morristown, Tennessee 37813,
(ii) the Leasehold and Fee Deed of Trust, Assignment of Rents and Security
Agreement, by which Falcon has granted to the Collateral Agent, as security for
the Obligations, a Lien upon the leased and owned real Property of Falcon
located at 22 Falcon Drive, Belmont, Mississippi 38827, (iii) the Deed of Trust,
Assignment of Rents and

15

Security Agreement, by which Shelby has granted to the Collateral Agent, as
security for the obligations, a Lien upon the real Property of Shelby located at
2075 Highway 43, Canton, Mississippi 38827, (iv) the Real Property Mortgage and
Security Agreement, by which Falcon has granted to the Collateral Agent, as
security for the Obligations, a Lien upon the real property of Falcon located at
615 South Front Street, Belding, Michigan 46809, and (v) all other mortgages,
deeds of trust and comparable documents now or at any time hereafter securing
the whole or any part of the Obligations, in each case as the same may be
amended or otherwise modified from time to time.

"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA for which any Borrower or any of its Subsidiaries or any of
their ERISA Affiliates has contributed to, or has been obligated to contribute
to, at any time during the preceding six years, or has liability.

"Net Cash Proceeds" means, (i) with respect to any Disposition by any Person,
the amount of cash received (directly or indirectly) from time to time (whether
as initial consideration or through the payment of deferred consideration) by or
on behalf of such Person or any of its Subsidiaries or Affiliates, in connection
therewith after deducting therefrom, only (A) the principal amount of any
Indebtedness secured by any Permitted Lien on any asset that is the subject of
the Disposition (other than Indebtedness assumed by the purchaser of such asset)
which is required to be, and is, repaid in connection with such Disposition
(other than Indebtedness under this Agreement), (B) reasonable expenses related
thereto reasonably incurred by such Person or such Affiliate in connection
therewith, (C) transfer taxes paid by such Person or such Affiliate in
connection therewith and (D) a provision for net income taxes, whether paid or
payable, in connection with such Disposition (after taking into account any tax
credits or deductions and any tax sharing arrangements) and (ii) with respect to
the issuance or incurrence of any Indebtedness by any Person, or the sale or
issuance by any Person of any shares of its Capital Stock, the aggregate amount
of cash received (directly or indirectly) from time to time (whether as initial
consideration or through the payment of deferred consideration) by or on behalf
of such Person or any of its Subsidiaries or Affiliates in connection therewith
after deducting therefrom only reasonable brokerage commissions, underwriting
fees and discounts, legal fees and similar fees and commissions.

"Non Pro Rata Loan" has the meaning set forth in Section 3.02(c)(iii).

"Non-Qualified Representation" means each of the representations, warranties or
other statements made or furnished to the Agents or any Lender by or on behalf
of any Borrower or any Subsidiary contained in this Agreement, any of the other
Loan Documents or any instrument, certificate or financial statement furnished
in compliance with or in reference thereto, other than the representations and
warranties contained in the following subsections of Section 6.01: (a), but only
as to the second sentence thereof; (f), but only as to the last sentence
thereof; (h); (i); (m); (n); (o); (p); (q), but only as to the first sentence
thereof; (r); (t); (v); (w); (y); (dd); (ff); (ii), but only as to the last
sentence thereof; and (jj).

"Note" has the meaning set forth in Section 2.03(a).

16

"Notice of Borrowing" means a notice substantially in the form of Exhibit E
attached hereto and made a part hereof.

"Obligations" means all Loans, advances, debts, liabilities, obligations,
covenants and duties owing by any Loan Party to the Administrative Agent, the
Collateral Agent, any Lender, any Affiliate of any Lender or any Person entitled
to indemnification pursuant to Section 14.15 of this Agreement, of any kind or
nature, present or future, whether or not evidenced by any note, guaranty or
other instrument, whether or not for the payment of money, whether arising by
reason of an extension of credit, loan, guaranty, indemnification, interest rate
contract, foreign exchange contract or in any other manner, whether direct or
indirect (including those acquired by assignment), absolute or contingent, due
or to become due, but in all such circumstances only to the extent now existing
or hereafter arising or however acquired, arising under or in connection with
this Agreement, the Notes or any other Loan Document. The term "Obligation"
includes all interest (including any interest that, but for the provisions of
the Bankruptcy Code, would have accrued), charges, expenses, fees, attorneys'
fees and disbursements and any other sum chargeable to the Loan Parties under
this Agreement, the Notes or any other Loan Document.

"Officer's Certificate" has the meaning set forth in Section 8.03(i).

"Operating Lease Obligations" means all obligations for the payment of rent for
any real or personal property under leases or agreements to lease, other than
Capitalized Lease Obligations.

"Operating Licenses" means, collectively, all licenses, franchises, permits,
Consents, approvals, registrations, certificates and authorizations of all
governmental authorities necessary or advisable to the conduct of the business
of any Borrower or any Subsidiary.

"Organizational I.D. Number" means with respect to any Person, the
organizational identification number assigned to such Person by the applicable
governmental unit or agency of the jurisdiction of organization of such Person.

"Other Taxes" has the meaning set forth in Section 3.03(b)

"Permitted Capital Lease Obligations" means Capitalized Lease Obligations of
Borrowers and the Subsidiaries incurred after the Closing Date and permitted
under Section 9.03(f) of this Agreement. For the purposes of this definition,
the principal amount of any Purchase Money Indebtedness consisting of
capitalized leases (as opposed to operating leases) shall be computed as a
Capitalized Lease Obligation.

"Permitted Investments" means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within six (6) months from the date of acquisition thereof;
(ii) commercial paper, maturing not more than 270 days after the date of issue
rated P-1 by Moody's or A-1 by Standard & Poor's; (iii) certificates of deposit
maturing not more than one year after the date of issue, issued by commercial
banking institutions and money market or demand Deposit Accounts maintained at
commercial banking institutions, each of which is a member of the Federal
Reserve System and has a combined capital and surplus and undivided profits of
not less than $500,000,000; (iv) repurchase

17

agreements having maturities of not more than 90 days from the date of
acquisition which are entered into with major money center banks included in the
commercial banking institutions described in clause (iii) above; (v) money
market accounts maintained with mutual funds having assets in excess of
$2,500,000,000; (vi) tax exempt securities rated A or better by Moody's or A+ or
better by Standard & Poor's; (vii) the equity interests owned by Falcon or any
of its Subsidiaries in the existing Subsidiaries of Falcon's Subsidiaries,
(viii) Existing Affiliate Advances and other existing Investments existing on
the Petition Date; (ix) loans and advances to employees and officers of the
Borrowers and their respective Subsidiaries from time to time in the ordinary
course of business for travel expenses, moving expenses, signing bonuses and for
other purposes, in an aggregate outstanding amount not to exceed $50,000 at any
time; (x) Investments in connection with employee benefit plans existing on the
Petition Date to the extent included in the Approved Budget; (xi) Investments
received in settlement of debts of insolvent account debtors; and (xii)
Investments not otherwise described in the foregoing clauses of this definition
in an aggregate outstanding amount not in excess of $100,000.

"Permitted Liens" means any Lien of a kind specified in Section 9.05 of this
Agreement.

"Permitted Pre-Petition Payments" means (i) payments authorized by the
Bankruptcy Court pursuant to "first-day" orders, (ii) payments on reclamation
claims, (iii) cure payments in respect of the assumption of leases and other
contracts, (iv) the application of proceeds of Collateral to validly perfected
secured pre-petition claims, and (v) payments for other pre-petition claims
reflected in the Approved Budget or approved by the Administrative Agent and the
Required Lenders in their sole discretion.

"Permitted Priority Liens" means Permitted Liens that (a) are of a type
contemplated by subsections (f), (g), (m) or (q) of Section 9.05, (b) are valid,
perfected and non-avoidable and (c) were in existence prior to the Petition
Date.

"Permitted Purchase Money Indebtedness" means Purchase Money Indebtedness of any
Borrower or any Subsidiary of any Borrower incurred after the Closing Date which
is secured by a Purchase Money Lien and permitted under Section 9.03(f) of this
Agreement.

"Person" means an individual, corporation, limited liability company,
partnership, association, joint-stock company, trust, unincorporated
organization, joint venture or Governmental Authority.

"Petition Date" means the date on which the Chapter 11 Cases shall have been
filed.

"Plan" has the definition set forth in Section 6.01(w)(i)(D) of this Agreement.

"Pledge Agreements" means the pledge agreements, executed and delivered by the
Loan Parties and Collateral Agent, in favor of the Lenders, in respect of the
outstanding Capital Stock owned by the Loan Parties, each in form and substance
satisfactory to the Agents.

"Pre-Petition Term Loan Documents" means (i) the Fleet Credit Agreement and the
other "Loan Documents" (as defined in the Fleet Credit Agreement) and (ii) the
Tranche B Loan Documents.

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"Pro Rata Share" means, with respect to any Lender, the percentage obtained by
dividing (i) such Lender's Commitment, by (ii) the aggregate Commitments of all
Lenders. "Pro Rata Shares" has a correlative meaning.

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

"Purchase Money Lien(s)" means a Lien upon fixed assets which secures Purchase
Money Indebtedness, but only if such Lien shall at all times be confined solely
to the Fixed Assets the purchase price of which was financed through the
incurrence of the Purchase Money Indebtedness secured by such Lien and the
proceeds thereof.

"Register" has the meaning set forth in Section 2.03(b).

"Regulation T", "Regulation U", and "Regulation X" mean, respectively,
Regulations T, U, and X of the Board or any successor, as the same may be
amended or supplemented from time to time.

"Release" means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, seeping, migrating, dumping or
disposing of any Hazardous Material (including the abandonment or discarding of
barrels, containers and other closed receptacles containing any Hazardous
Material) into the indoor or outdoor environment, including ambient air, soil,
surface or ground water.

"Remedial Action" means all actions taken to (i) clean up, remove, remediate,
contain, treat, monitor, assess, evaluate or in any other way address Hazardous
Materials in the indoor or outdoor environment; (ii) prevent or minimize a
Release or threatened Release of Hazardous Materials so they do not migrate or
endanger or threaten to endanger public health or welfare or the indoor or
outdoor environment; (iii) perform pre-remedial studies and investigations and
post-remedial operation and maintenance activities; or (iv) any other actions
authorized by 42 U.S.C. Section 9601.

"Remedial Work" means any and all remedial work in response to Hazardous
Materials Claims to the extent required by any governmental authority involved
or as recommended by prudent business practices, if such standard requires a
higher degree of remediation, and in all events to minimize any impairment to
the real Property. All Remedial Work must be conducted in a diligent and timely
fashion by licensed contractors acting under the supervision of a consulting
environmental engineer following receipt of any required permits, licenses or
approvals. The selection of the Remedial Work contractors and consulting
environmental engineer, the contracts entered into with such parties, any
disclosures to or agreements with any public or private agencies or parties
relating to Remedial Work and the written plan for the Remedial Work (and any
changes thereto) at the Agent's option, are subject to prior written notice
being given to the Agent.

"Rentals" means the same as defined in Section 9.19 of this Agreement.

"Reportable Event" means any of the events set forth in Section 4043(c) of
ERISA.

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"Required Lenders" means, at any time, Lenders whose Pro Rata Shares aggregate
more than 50% of the Commitments or, if the Commitments shall have been
terminated irrevocably, Lenders holding more than 50% of the Obligations then
outstanding.

"Requirements of Law" means, as to any Person, the charter and by-laws or other
organizational or governing documents of such Person, and any law, rule or
regulation, or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject including,
without limitation, the Securities Act, the Securities Exchange Act, Regulations
T, U and X, ERISA, the Fair Labor Standards Act and any certificate of
occupancy, zoning ordinance, building, environmental or land use requirement or
permit, any Environmental Laws or any labor, employment, occupational safety or
health law, rule or regulation.

"Responsible Officer" means the chief executive officer, president or chief
financial officer of Falcon.

"Restricted Investment(s)" means any investment made in cash or by delivery of
Property to any Person, whether by acquisition of stock, Indebtedness or other
obligation or Security, or by loan, advance or capital contribution, or
otherwise, or in any Property except the following:

(i) investments by a Borrower or a Subsidiary of a Borrower, to the extent
existing on the Closing Date, in one or more Subsidiaries of such Person;

(ii) so long as no Default or Event of Default is then in existence or is
reasonably likely to occur, investments after the Closing Date by a Borrower or
a Domestic Subsidiary of a Borrower in a Foreign Subsidiary of Borrower (as
loans or equity investments) the Securities of which are subject to a Pledge
Agreement, in an aggregate amount after the Closing Date for all Foreign
Subsidiaries not in excess of $1,000,000 in any fiscal year; provided, that any
unused portion of such amount may be carried over to the next fiscal year;

(iii) Property to be used in the ordinary course of business the acquisition of
which is not otherwise prohibited by this Agreement or the other Loan Documents;

(iv) Current Assets arising from the sale of goods and services in the ordinary
course of business of any Borrower or any Subsidiary;

(v) investments in direct obligations of the United States of America, or any
agency thereof or obligations guaranteed by the United States of America,
provided that such obligations mature within one year from the date of
acquisition thereof;

(vi) investments in certificates of deposit maturing within one year from the
date of acquisition and fully insured by the Federal Deposit Insurance
Corporation;

(vii) investments in commercial paper given the highest rating by a national
credit rating agency and maturing not more than two hundred seventy (270) days
from the date of creation thereof;

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(viii) investments in money market, mutual or similar funds having assets in
excess of $100,000,000 and the investments of which are limited to investment
grade securities;

(ix) intercompany loans permitted under Section 9.02(e) and (f) of this
Agreement;

(x) investments existing on the date hereof and listed on Schedule 6.01(cc)
hereto;

(xi) Deposit Accounts and other bank accounts maintained by a Borrower or a
Subsidiary in the ordinary course of business, subject, in the case of Deposit
Accounts of a Borrower or a Domestic Subsidiary, to Control Agreements
acceptable to the Administrative Agent;

(xiii) intercompany accounting entries made in respect of sales of Inventory and
collections of Accounts in the ordinary course of business;

(xiv) investments by Foreign Subsidiaries in other Foreign Subsidiaries whose
Securities are subject to a Pledge Agreement; and

(xv) investments otherwise expressly permitted pursuant to this Agreement.

"Restricted Subsidiary" means the same as defined in the Subordinated Note
Indenture, as in existence on the Closing Date.

"Revolving Credit Obligations" means, at any particular time, the aggregate
outstanding principal amount of the Loans at such time.

"SEC" means the Securities and Exchange Commission or any other similar or
successor agency of the Federal government administering the Securities Act.

"Security" or "Securities" means all shares of stock, partnership interests,
membership interests, membership units or other ownership interests in any other
Person and all warrants, options or other rights to acquire the same.

"Securities Act" means the Securities Act of 1933, as amended, or any successor
Federal statute, and the rules and regulations of the SEC thereunder, all as the
same shall be in effect at the time.

"Securities Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor Federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time.

"Securities Account" means a "securities account" as that term is defined in the
UCC.

"Security Agreement" means a Security Agreement executed and delivered by the
Loan Parties and Collateral Agent, in favor of the Lenders, in form and
substance satisfactory to the Agents.

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"Security Documents" means the security agreements executed and delivered by the
Loan Parties and the Collateral Agent, in favor of the Lenders, each in form and
substance satisfactory to the Collateral Agent, including, without limitation
the Security Agreement, the Trademark Security Agreement, the Pledge Agreements,
the Blocked Account Agreement, the Control Agreements and the Mortgages.

"Sellers" means Sellers & Josephson Inc., a Delaware corporation.

"Settlement Period" has the meaning set forth in Section 2.01(d).

"Shelby" means Shelby Williams Industries, Inc., a New Jersey corporation.

"Site" means any real Property previously, currently or hereafter owned, leased
or operated directly or indirectly by any Borrower or Domestic Subsidiary.

"Solvent" means with respect to any Person, on the date of determination, that:
(i) the present fair saleable value of the assets (i.e., the price a buyer is
willing to pay for such asset in an arms-length transaction) of such Person will
exceed the amount that will be required to pay the probable liability on the
existing debts (whether matured or unmatured, liquidated or unliquidated,
absolute, fixed or contingent) of such Person as they become absolute and
matured; (ii) the assets of such Person do not constitute unreasonably small
capital for such Person to carry on its businesses as now conducted or proposed
to be conducted; and (iii) such Person is able to pay all of its Indebtedness as
such Indebtedness matures. For purposes of the preceding sentence, the amount of
contingent obligations outstanding at any time shall be computed as the amount
that, in the light of all the facts and circumstances existing at such time,
represents the amount that are reasonably expected to become an actual or mature
liability.

"Standard & Poor's" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. and any successor thereto.

"Subordinated Debt" means the Subordinated Notes, the Convertible Subordinated
Debentures and any other Indebtedness of any Borrower or any Subsidiary that is
subordinated to the Obligations in a manner satisfactory to Administrative Agent
and the Required Lenders, and contains terms, including without limitation,
payment terms, satisfactory to the Administrative Agent and the Required
Lenders.

"Subordinated Note Debt" means Falcon's Indebtedness for Money Borrowed in the
aggregate outstanding principal amount of $100,000,000 incurred pursuant to the
Subordinated Note Documents.

"Subordinated Note Indenture" means the Indenture dated as of June 17, 1999
among Falcon, as Issuer, certain Subsidiaries of Falcon, as Guarantors and the
Bank of New York, as Trustee, as amended, modified or supplemented through the
Closing Date, and as it may be hereafter amended, modified or supplemented from
time to time if and to the extent permitted under this Agreement.

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"Subordinated Notes" means the 11 3/8% Senior Subordinated Notes due June 15,
2009, Series B, issued by Falcon pursuant to the Subordinated Note Indenture and
the other Subordinated Note Documents.

"Subsidiary" means any Person of which another Person owns, directly or
indirectly through one or more intermediaries, more than 50% of the Voting Stock
at the time of determination.

"Taxes" has the meaning set forth in Section 3.03(a).

"Termination Amount" has the meaning set forth in Section 4.02(d).

"Termination Event" means (1) any Reportable Event with respect to any Plan; (2)
any event that could cause Company to incur liability under Sections 4062, 4063,
4064, 4069, 4201, 4204 or 4212 of ERISA or Section 4971 of the Internal Revenue
Code; (3) the filing of a notice of intent to terminate a Plan or the treatment
of a Plan amendment as a termination under Section 4041 of ERISA; (4) the
institution of proceedings by the Pension Benefit Guaranty Corporation to
terminate a Plan; or (5) any other event or condition which could constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan.

"Total Borrowing Needs" means the amount shown on the Approved Budget as "Total
Borrowing Needs".

"Total Facility" means $45,000,000.

"Trademark Security Agreement" means a Trademark Security Agreement executed and
delivered by Falcon and Collateral Agent for the benefit of the Lenders, in form
and substance satisfactory to the Agents.

"Tranche B Lenders" means the lenders under the Tranche B Loan Agreement,
together with their successors and assignees.

"Tranche B Loan Agreement" means the Loan and Securities Purchase Agreement
dated on or about the Closing Date by and among Borrowers, the collateral agent
thereunder and the Tranche B Lenders, as the same may be amended, restated,
modified or supplemented and in effect from time to time.

"Tranche B Loan Documents" means the "Loan Documents" as defined in the Tranche
B Loan Agreement, as such Loan Documents may be amended, restated, modified or
supplemented and in effect from time to time.

"Type of Organization" means with respect to any Person, the kind or type of
entity by which such Person is organized, such as a corporation or limited
liability company.

"UCC" means the Uniform Commercial Code enacted in the State of New York, as
amended from time to time.

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"Unrestricted Subsidiary" means the same as defined in the Subordinated Note
Indenture, as in existence on the Closing Date.

"Unused Commitment Fee" has the meaning set forth in Section 4.02(c).

"Voting Stock" means Securities of any class or classes of a corporation,
limited partnership or limited liability company or any other entity the holders
of which are ordinarily, in the absence of contingencies, entitled to vote with
respect to the election of corporate directors (or Persons performing similar
functions).

"Wholly Owned Subsidiary" means, with respect to any Person at any date, any
corporation, limited or general partnership, limited liability company, trust,
association or other entity of which 100% of (A) the outstanding Capital Stock
having (in the absence of contingencies) ordinary voting power to elect a
majority of the board of directors of such corporation, (B) the interest in the
capital or profits of such partnership or limited liability company or (C) the
beneficial interest in such trust or estate is, at the time of determination,
owned or controlled directly or indirectly through one or more intermediaries,
by such Person.

Section 1.02.

Terms Generally. The definitions of terms herein shall apply equally to the
singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include", "includes" and "including" shall be deemed to
be followed by the phrase "without limitation". The word "will" shall be
construed to have the same meaning and effect as the word "shall". Unless the
context requires otherwise, (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement.

Section 1.03.

Accounting and Other Terms. Unless otherwise expressly provided herein, each
accounting term used herein shall have the meaning given it under GAAP. All
terms used in this Agreement which are defined in Article 8 or Article 9 of the
UCC and which are not otherwise defined herein shall have the same meanings
herein as set forth therein.

Section 1.04.

Time References. Unless otherwise indicated herein, all references to time of
day refer to Eastern standard time or Eastern daylight saving time, as in effect
in New York, New York on such day. For purposes of the computation of a period
of time from a specified date to a later specified date, the word "from" means
"from and including" and the words "to" and "until" each means "to but
excluding"; provided, however, that with respect to a computation of fees or
interest payable to the Administrative Agent or the Lenders, such period shall
in any event consist of at least one full day.

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Article II -

The Loans

Section 2.01.

Loans.

(a)

Availability. Subject to the terms and conditions set forth in this Agreement,
each Lender severally agrees to make revolving credit loans on a revolving basis
(each individually, a "Loan" and collectively, the "Loans") to the Borrowers
from time to time on any Business Day during the period commencing on the
Closing Date and ending on the Commitment Termination Date (or until the earlier
reduction of its Commitments to zero in accordance with the terms hereof) in an
aggregate amount not to exceed at any time such Lender's Pro Rata Share of the
Availability at such time. The Commitment of each Lender to make Loans shall
automatically and permanently be reduced to zero on the Maturity Date. Within
the foregoing limits, the Borrowers may borrow, repay and reborrow, on or after
the Closing Date and prior to the Maturity Date, subject to the terms,
provisions and limitations set forth herein. Notwithstanding the foregoing, the
Loans shall be limited to $5,000,000 plus amounts used to pay the Fleet Debt
until the entry of a Final Order.

(b)

Notice of Borrowing.

(i)

When the Borrowers desire to borrow under this Section 2.01, Falcon shall
deliver, on its own behalf and on behalf of the other Borrowers, to the
Administrative Agent a Notice of Borrowing, signed by Falcon, not later than
12:00 p.m. (New York City time) at least one (1) Business Day (and not more than
two (2) Business Days) in advance of any proposed Borrowing.

(ii)

Such Notice of Borrowing shall specify (i) the amount of the proposed Loan and
(ii) the proposed Funding Date, which must be a Business Day, and have attached
to it the most recent Borrowing Base Certificate delivered pursuant to Section
8.04, updated to give effect to the proposed Loan, and shall certify as to the
satisfaction and/or compliance with each of the conditions precedent to a
Borrowing set forth in Section 5.02. Each Notice of Borrowing given pursuant to
this Section 2.01 shall be irrevocable and binding on each and every Borrower.
Each Loan shall be made in a minimum amount of $500,000 and shall be in an
integral multiple of $100,000 in excess thereof.

(c)

Making the Loans.

(i)

The Administrative Agent shall promptly notify each Lender of the amount of the
proposed Borrowing as set forth in the Borrowers' Notice of Borrowing delivered
to the Administrative Agent pursuant to Section 2.01(b) above. Each such Lender
shall deposit an amount equal to its Pro Rata Share of the amount of such
Borrowing with the Administrative Agent in the Administrative Agent Account in
immediately available funds, not later than 3:00 p.m. (New York City time) on
any Funding Date applicable thereto. Subject to the satisfaction of the
conditions precedent set forth in Section 5.01 (in the case of Loans made on the
Closing Date) and Section 5.02, the Administrative Agent

25

shall make the proceeds of such amounts received by it available to the
Borrowers not later than 4:00 p.m. (New York City time) on such Funding Date and
shall disburse such proceeds to the Disbursement Account. On each day that any
Revolving Credit Obligations are outstanding, the Borrowers shall be deemed to
represent and warrant to the Agents and the Lenders that the Borrowing Base
calculated as of such day equals or exceeds the aggregate principal amount of
all Revolving Credit Obligations outstanding on such day.

(ii)

Except as otherwise provided in this Section 2.01(c), all Loans under this
Agreement shall be made by the Lenders simultaneously and proportionately to
their Pro Rata Shares of the Commitments. The failure of any Lender to deposit
the amount described in clause (i) above with the Administrative Agent on the
applicable Funding Date shall not relieve any other Lender of its obligations
hereunder to make its Loan on such Funding Date. No Lender shall be responsible
for any failure by any other Lender to perform its obligation to make a Loan
hereunder nor shall the Commitment of any Lender be increased or decreased as a
result of any such failure, and each Lender shall be obligated to make the Loans
required to be made by it by the terms of this Agreement regardless of the
failure by any other Lender.

(iii)

The Administrative Agent may assume that each Lender has funded its Loan and is
depositing the proceeds thereof in the Administrative Agent Account on the
Funding Date, and the Administrative Agent in its sole discretion may, but shall
not be obligated to, disburse a corresponding amount to the Borrowers on the
Funding Date. If the Loan proceeds corresponding to that amount are advanced to
the Borrowers by the Administrative Agent but are not in fact deposited with the
Administrative Agent by such Lender on or prior to the applicable Funding Date,
such Lender agrees to pay to the Administrative Agent forthwith on demand such
corresponding amount, together with interest thereon, for each day from the date
such amount is disbursed to or for the benefit of the Borrowers until the date
such amount is paid to the Administrative Agent at the rate set forth in Section
4.01. During the period in which such Lender has not paid such corresponding
amount to the Administrative Agent, notwithstanding anything to the contrary
contained in this Agreement or any other Loan Document, the amount so advanced
by the Administrative Agent to the Borrowers shall, for all purposes hereof, be
a Loan made by the Administrative Agent for its own account. If such Lender does
not pay such corresponding amount forthwith upon Administrative Agent's demand
therefor, Administrative Agent shall promptly notify the Borrowers and, if so
notified, the Borrowers shall immediately pay such corresponding amount to the
Administrative Agent for its own account, together with interest at the rate set
forth in Section 4.01, for each day from the date such amount is disbursed to or
for the benefit of the Borrowers until the date such amount is repaid to
Administrative Agent. Any interest paid to Administrative Agent by the Borrowers
in respect of such corresponding amount shall be credited against interest
payable by the Borrowers to such Lender under Section 4.01 in respect of such
corresponding amount. If such Lender shall pay to the Administrative Agent the
corresponding amount, the amount so paid shall

26

constitute such Lender's Loan, and if both such Lender and the Borrowers shall
pay and repay such corresponding amount, the Administrative Agent shall promptly
pay Falcon, which shall distribute such amounts to the Borrowers, as agreed
among the Borrowers, such corresponding amount (together with any interest
included in such payment). This Section 2.01(c)(iii) does not relieve any Lender
of its obligation to make its Loan on any Funding Date.

(d)

Settlement Period.

(i)

With respect to all periods for which the Administrative Agent has funded Loans
pursuant to Section 2.01(c), on Friday of each week, or if the applicable Friday
is not a Business Day, then on the following Business Day, or such shorter
period as the Administrative Agent may from time to time select (any such week
or shorter period being herein called a "Settlement Period"), the Administrative
Agent shall notify each Lender of the unpaid principal amount of the Loans
outstanding as of the last day of each such Settlement Period. In the event that
such amount is greater than the unpaid principal amount of the Loans outstanding
on the last day of the Settlement Period immediately preceding such Settlement
Period (or, if there has been no preceding Settlement Period, the amount of the
Loans made on the Funding Date of such Lender's initial funding), each Lender
shall promptly (and in any event not later than 3:00 p.m. (New York City time)
if the Administrative Agent requests payment from such Lender not later than
10:00 a.m. (New York City time) on such day) make available to the
Administrative Agent its Pro Rata Share of the difference in immediately
available funds. In the event that such amount is less than such unpaid
principal amount, the Administrative Agent shall promptly pay over to each
Lender its Pro Rata Share of the difference in immediately available funds. In
addition, if the Administrative Agent shall so request at any time when a
Default or an Event of Default shall have occurred and be continuing, or any
other event shall have occurred as a result of which the Administrative Agent
shall determine that it is desirable to present claims against the Borrowers for
repayment, each Lender shall promptly remit to the Administrative Agent or, as
the case may be, the Administrative Agent shall promptly remit to each Lender,
sufficient funds to adjust the interests of the Lenders in the then outstanding
Loans to such an extent that, after giving effect to such adjustment, each such
Lender's interest in the then outstanding Loans will be equal to its Pro Rata
Share thereof. The obligations of the Administrative Agent and each Lender under
this Section 2.01(d) shall be absolute and unconditional. Each Lender shall only
be entitled to receive interest on its Pro Rata Share of the Loans which have
been funded by such Lender.

(ii)

In the event that any Lender fails to make any payment required to be made by it
pursuant to Section 2.01(d)(i), the Administrative Agent shall be entitled to
recover such corresponding amount on demand from such Lender together with
interest thereon, for each day from the date such payment was due until the date
such amount is paid to the Administrative Agent, at a per annum rate equal to
the prime rate of interest (calculated daily as reported in The Wall Street
Journal) for three Business Days and thereafter at the rate set forth in

27

Section 4.01. During the period in which such Lender has not paid such
corresponding amount to the Administrative Agent, notwithstanding anything to
the contrary contained in this Agreement or any other Loan Document, the amount
so advanced by the Administrative Agent to the Borrowers shall, for all purposes
hereof, be a Loan made by the Administrative Agent for its own account. Upon any
such failure by a Lender to pay the Administrative Agent, the Administrative
Agent shall promptly thereafter notify Falcon, on behalf of itself and on behalf
of any of its Borrowers, of such failure and the Borrowers shall immediately pay
such corresponding amount to the Administrative Agent for its own account.
Nothing in this Section 2.01(d)(ii) shall be deemed to relieve any Lender from
its obligation to fulfill its Commitment hereunder or to prejudice any rights
that the Administrative Agent may have against any Lender as a result of any
default by such Lender hereunder.

(e)

Repayment of Loans; Termination of Commitments. The principal amount of all
outstanding Loans shall be repaid in full on the Maturity Date; and the
Commitments shall terminate on the Commitment Termination Date.

(f)

Use of Proceeds. Proceeds of the Loans shall be used (i) in an aggregate amount
not to exceed $25,000,000 to repay principal of and to pay interest on, and
other fees and amounts due in respect of, the Fleet Debt and to provide cash
collateral for letters of credit outstanding under the Fleet Credit Agreement or
replacement letters of credit therefor, and (ii) in an aggregate amount up to
the amount of the Total Facility less amounts expended pursuant to the foregoing
clause (i), to pay post-petition operating expenses of the Borrowers (including
working capital), permitted Capital Expenditures, and Permitted Pre-Petition
Payments, to collateralize Approved Letters of Credit (excluding letters of
credit outstanding under the Fleet Credit Agreement and replacement letters of
credit therefor other than incremental increases in such letters of credit), to
fund Funded Reserves and Carve-Out Expenses that have been billed but not paid
(including holdbacks imposed by the Bankruptcy Court) and other costs and
expenses incurred in connection with the administration of the Chapter 11 Cases.

Section 2.02.

Letter of Credit Accommodations. The Lenders and the Administrative Agent will
not provide letters of credit. However, proceeds of the Loans may be used to
cash collateralize up to 105% of any Approved Letter of Credit; provided that
such use of proceeds with respect to any Approved Letter of Credit outstanding
under the Fleet Credit Agreement (or any Approved Letter of Credit issued in
substitution or replacement for any such Approved Letter of Credit outstanding
under the Fleet Credit Agreement prior to or promptly following expiration or
other cancellation or termination thereof) shall be deemed to be the repayment
of Fleet Debt for purpose of this Agreement and the other Loan Documents. The
Lenders shall have a Lien on Borrowers' rights with respect to any cash
collateral supporting Approved Letter of Credit, including any such right with
respect to the return of such cash collateral, junior only to the Lien of the
issuing bank.

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Section 2.03.

Promise to Pay; Evidence of Debt.

(a)

Promise to Pay. Each Borrower hereby agrees, jointly and severally, to pay on
the Maturity Date, the unpaid principal amount of each Loan that has been made
to any of Borrowers, and further agrees, jointly and severally, to pay all
unpaid interest accrued thereon, in accordance with the terms of this Agreement
and the promissory notes evidencing the Loans owing to the Lenders, and the
Borrowers shall execute and deliver to each Lender requesting a promissory note
such promissory notes as are necessary to evidence the Loans owing to such
Lender after giving effect to any assignment thereof pursuant to Section 14.07,
each substantially in the form of Exhibit F attached hereto and made a part
hereof (all such promissory notes and all amendments thereto, replacements
thereof and substitutions therefor being collectively referred to as the
"Notes"; and "Note" means any one of the Notes).

(b)

Master Account. The register maintained by the Administrative Agent pursuant to
Section 14.07(c) (the "Register") shall include a master account and a
subsidiary account for each Lender, in which accounts (taken together) shall be
recorded (i) the date and amount of each Loan made hereunder and any Interest
Accrual Period applicable thereto, (ii) the effective date and amount of each
Assignment and Acceptance delivered to and accepted by it and the parties
thereto, (iii) the amount of any principal or interest due and payable or to
become due and payable from the Borrowers to each Lender hereunder or under the
Notes, and (iv) the amount of any sum received by the Administrative Agent from
the Borrowers hereunder and each Lender's share thereof.

Section 2.04.

Authorized Officers and Administrative Agent. On the Closing Date and from time
to time thereafter, each Borrower shall deliver to the Administrative Agent a
secretary's certificate setting forth the names of the officers of such Borrower
authorized to request Loans on behalf of such Borrower and containing a specimen
signature of each such officer. The officers so authorized shall also be
authorized to act for such Borrower in respect of all other matters relating to
the Loan Documents. The Administrative Agent shall be entitled to rely
conclusively on such officer's authority to request such Loan until the
Administrative Agent receives written notice to the contrary. In addition, the
Administrative Agent shall be entitled to rely conclusively on any written
notice sent to it by telecopy. The Administrative Agent shall have no duty to
verify the authenticity of the signature appearing on, or any telecopy or
facsimile of, any written Notice of Borrowing or any other document, and, with
respect to an oral request for such a Loan, the Administrative Agent shall have
no duty to verify the identity of any person representing himself or herself as
one of the officers authorized to make such request or otherwise to act on
behalf of such Borrower. The Administrative Agent and the Lenders shall not
incur any liability to such Borrower or any other Person in acting upon any
telecopy or facsimile or telephonic notice referred to above which the
Administrative Agent in good faith believes to have been given by a duly
authorized officer or other person authorized to borrow on behalf of such
Borrower except in the case of gross negligence or willful misconduct by the
Administrative Agent or any Lender as determined in a final judgment by a court
of competent jurisdiction.

Section 2.05.

Optional Conversion to Exit Facility. In connection with the consummation of a
consensual plan of reorganization with respect to the Chapter 11 Cases,

29

the Borrowers shall have the option to convert the Facility to an exit credit
facility, which facility would have substantially similar terms as those
provided in this Agreement, including, without limitation, Articles II, III, and
IV (except that the terms set forth in Articles VI, VIII, IX, X and XIV would be
as agreed between the Agents, the Lenders and the Borrowers in good faith based
on circumstances of the Borrowers at the time of the exercise of such option and
would include financial covenants as so agreed), would provide Liens on the
assets of the Borrowers substantially similar to those provided in the Final
Order, and would be for a term up to 364 days following the Effective Date,
subject to the approval of each Lender (which may be withheld in its sole and
absolute discretion) and the prior payment in full of the Conversion Commitment
Fee as provided in Section 4.02. If the Borrowers determine to exercise such
option, they shall do so by giving notice to the Administrative Agent at least
sixty (60) days prior to such proposed effective date. On or before thirty (30)
days prior to such proposed effective date, the Administrative Agent shall
notify Falcon, on behalf the Borrowers, of the Lenders' agreement to convert the
Facility.

Section 2.06.

Priority; Liens. All of the Obligations are secured by Liens on substantially
all the assets of the Borrowers and, upon entry of the Interim Order or the
Final Order, as applicable, shall be valid and perfected liens on the
Collateral, prior to all other Liens thereon other than Permitted Priority Liens
and as otherwise provided in the Interim Order. All of the Obligations
constitute administrative expenses of the Borrowers in the Chapter 11 Cases with
priority under section 364(c)(1) of the Bankruptcy Code over any and all other
administrative expenses of the kind specified in sections 503(b) and 507(b) of
the Bankruptcy Code, subject and subordinate only to claims for Carve-Out
Expenses. No other claim having a priority superior or pari passu to that
granted to or on behalf of the Agents or the Lenders shall be granted or
approved while any of the Obligations or the Commitments remain outstanding.

Article III -

Payments and Other Compensation

Section 3.01.

Prepayments; Reductions in Commitments.

(a)

Voluntary Prepayments/Reductions.

(i)

The Borrowers may, upon at least two (2) Business Days' prior written notice to
the Administrative Agent, at any time and from time to time, prepay the Loans in
whole or in part without premium or penalty; provided, however, no such prior
notice is required for the automatic daily cash sweep and paydown of the Loans.
Any notice of prepayment given to the Administrative Agent under this Section
3.01(a)(i) shall specify the Loans to be prepaid, the date (which shall be a
Business Day) of prepayment, and the aggregate principal amount of the
prepayment. When notice of prepayment is delivered as provided herein, the
principal amount of the Loans specified in the notice, together with accrued and
unpaid interest thereon, shall become due and payable on the prepayment date
specified in such notice and such notice shall be irrevocable.

(ii)

The Borrowers may, upon at least three (3) Business Days' prior written notice
to the Administrative Agent, at any time and from time to time, terminate in
whole, or permanently reduce in part, the Commitments. Any

30

partial reduction of the Commitments shall be in an aggregate minimum amount of
$1,000,000 and integral multiples of $250,000 in excess of that amount and shall
reduce the Commitment of each Lender proportionately in accordance with its Pro
Rata Share. Any notice of termination or reduction given to the Administrative
Agent under this Section 3.01(a)(ii) shall specify the date (which shall be a
Business Day) of such termination or reduction and, with respect to a partial
reduction, the aggregate principal amount thereof. When notice of termination or
reduction of the Commitments is delivered as provided herein, the principal
amount of the Loans so reduced, together with accrued and unpaid interest
thereon, shall become due and payable on the date specified in such notice to
the extent the Revolving Credit Obligations exceed the Commitments after giving
effect to such reduction. The payments in respect of reductions and terminations
described in this Section 3.01(a)(ii) may be made without premium or penalty.
Once reduced the Commitment may not be increased.

(b)

Mandatory Prepayments/Reductions.

(i)

Immediately upon the Revolving Credit Obligations exceeding the Maximum
Revolving Credit Amount, the Borrowers shall make or cause to be made a
mandatory prepayment of the Loans in an amount equal to such excess, together
with accrued and unpaid interest thereon.

(ii)

The Commitments shall be permanently reduced among the Lenders in accordance
with their Pro Rata Share by the amount of any Net Cash Proceeds received by the
Borrowers from any sale, assignment or other disposition of property or assets
of any Borrower after the Petition Date which are outside such Borrower's
ordinary course of business and which, together with the aggregate amount of Net
Cash Proceeds received from other such dispositions after the Petition Date, are
in excess of $500,000 (other than any such Net Cash Proceeds resulting from the
sale of excess inventory in an aggregate amount not in excess of $1,000,000).

(iii)

The Commitment shall be permanently reduced among the Lenders in accordance with
their Pro Rata Share by the amount of any Net Cash Proceeds received by the
Borrowers from insurance proceeds or condemnation awards after the Petition Date
which, together with the aggregate amount of Net Cash Proceeds received from
other such insurance claims and condemnation awards after the Petition Date, are
in excess of $100,000; provided, however, the Borrower shall have the option not
to reduce the Commitments under this subsection if such Net Cash Proceeds are to
be applied to the costs of repairs, replacement or restoration of the asset that
is the subject of the loss, destruction, or taking by condemnation, so long as
(A) no Default or Event of Default shall have occurred and be continuing, (B)
Falcon, on behalf of the Borrowers, shall have given the Administrative Agent
and the Collateral Agent prior written notice of the intention to apply such
cash proceeds to the costs of repairs, replacement or restoration of the asset
which is the subject of the loss, destruction, or taking by condemnation, which
notice shall indicate in sufficient detail Falcon's belief,

31

and the basis therefor, that such repairs, replacement or restoration are
capable of being, and will be, accomplished prior to the Maturity Date, and (C)
Falcon or the applicable Subsidiary commences the permitting process or the
construction with respect to such repairs, replacement or restoration within 45
days after receiving such cash proceeds and completes such repairs, replacements
or restoration at the same location that the loss, destruction or taking
occurred prior to the Maturity Date.

(c)

Nothing in Section 3.01(b) shall be construed to constitute the Lenders' consent
to any transaction which is not expressly permitted by Article IX.

(d)

Cumulative Prepayments. Except as otherwise expressly provided in this Section
3.01, mandatory prepayments and Commitment reductions with respect to any
subsection of this Section 3.01 are in addition to payments made or required to
be made under any other subsection of this Section 3.01.

Section 3.02. Payments.

(a)

Manner and Time of Payment. All payments of principal and interest on the Loans
and other Obligations (including, without limitation, fees and expenses) which
are payable to the Administrative Agent or the Lenders shall be made without
condition or reservation of right, in immediately available funds, deposited to
the Administrative Agent Account not later than 1:00 p.m. (New York time) on the
date due (and shall be deemed received on the following Business Day if received
later than such time). Thereafter, payments received by the Administrative Agent
for the account of the Lenders shall be distributed to each Lender in accordance
with its Pro Rata Share in accordance with the provisions of Section 3.02(c) on
the date received, if received prior to 1:00 p.m., and on the next succeeding
Business Day if received thereafter, by the Administrative Agent. All payments
shall be made by the Borrowers without set-off, counterclaim, deduction or other
defense to the Agents and the Lenders. Whenever any payment to be made under any
such Loan Document shall be stated to be due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be. Each determination by the Administrative Agent of
an interest rate or fees hereunder shall be conclusive and binding for all
purposes in the absence of manifest error.

(b)

Except as provided in Section 2.01 hereof, if any Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of any Obligation in excess of its ratable
share of payments on account of similar obligations obtained by all the Lenders,
such Lender shall forthwith purchase from the other Lenders such participations
in such similar obligations held by them as shall be necessary to cause such
purchasing Lender to share the excess payment ratably with each of them;
provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, such purchase from each Lender
shall be rescinded and such Lender shall repay to each purchasing Lender the
purchase price to the extent of such recovery. Each Borrower agrees that any
Lender

32

so purchasing a participation from another Lender pursuant to this Section 3.02
may, to the fullest extent permitted by law, exercise all of its rights
(including the Lender's right of set-off) with respect to such participation as
fully as if such Lender were the direct creditor of the Borrowers in the amount
of such participation.

(c)

Apportionment of Payments.

(i)

Subject to the provisions of Section 3.02(c)(ii) and (iii), all payments of
principal and interest in respect of outstanding Loans and all payments of fees
(other than as set forth in Section 4.01) and all other payments in respect of
any other Obligation shall be allocated among the Lenders in proportion to their
respective Pro Rata Shares or otherwise as provided herein or, in respect of
payments not made on account of Loans, as designated by the Person making
payment at the time when such payment is made. All such payments and any other
proceeds of Collateral or other amounts received by the Administrative Agent
from or on behalf of a Borrower or any of its Subsidiaries shall be promptly
applied first, to pay principal of and interest on any portion of the Loans made
to the Borrowers that the Administrative Agent may have advanced pursuant to the
express provisions of this Agreement on behalf of any Lender, for which the
Administrative Agent has not then been reimbursed by such Lender or the
Borrower; and second, to pay all other Obligations of the Borrowers then due and
payable.

(ii)

After the occurrence and during the continuance of an Event of Default, the
Administrative Agent may, and shall upon the acceleration of the Obligations
pursuant to Section 11.01, apply all payments in respect of any Obligations and
all proceeds of Collateral to the Obligations in the following order:

(A)

first, to pay interest on and the principal of any portion of the Loans which
the Administrative Agent may have advanced on behalf of any Lender for which the
Administrative Agent has not then been reimbursed by such Lender or the
Borrowers;

(B)

second, to pay Obligations in respect of any expense reimbursements, indemnities
or other liabilities then due to the Administrative Agent or the Collateral
Agent;

(C)

third, to pay Obligations in respect of any fees then due to the Agents and the
Lenders;

(D) fourth, to pay interest due in respect of the Loans;

(E) fifth, to pay the outstanding principal of the Loans;

(F) sixth, to the ratable payment of all other Obligations; and

33

(G) seventh, so long as the Commitments shall have terminated or been reduced to
zero, to Falcon, on behalf of the Borrowers, to be distributed to the Borrowers
as agreed among the Borrowers;

provided, however, that if sufficient funds are not available to fund all
payments to be made in respect of any of the Obligations described in any of the
foregoing clauses (A) through (F), the available funds being applied with
respect to any such Obligations referred to in any one of such clauses shall be
allocated to the payment of such Obligations ratably, based on the proportion of
the Administrative Agent's, Collateral Agent's and each Lender's interest in the
aggregate outstanding Obligations described in such clauses.

(iii)

If any Lender fails to fund its Pro Rata Share of any Borrowing requested by the
Borrowers under which such Lender is obligated to fund under the terms hereof
(the funded portion of such Borrowing being hereinafter referred to as a "Non
Pro Rata Loan"), excluding any such Lender who has delivered to the
Administrative Agent written notice that one or more of the conditions precedent
contained in Section 5.02 shall not on the date of such request be satisfied and
until such conditions are satisfied, then until the earlier of such Lender's
cure of such failure and the termination of the Commitments, the proceeds of all
amounts thereafter repaid to the Administrative Agent by the Borrowers and
otherwise required to be applied to such Lender's share of all other Obligations
pursuant to the terms hereof shall be advanced to the Borrowers by the
Administrative Agent on behalf of such Lender to cure, in full or in part, such
failure by such Lender, but shall nevertheless be deemed to have been paid to
such Lender in satisfaction of such other Obligations. Notwithstanding anything
contained herein to the contrary:

(A)

the foregoing provisions of this Section 3.02(b)(iii) shall apply only with
respect to the proceeds of payments of Obligations;

(B) a Lender shall be deemed to have cured its failure to fund its Pro Rata
Share of any Loan at such time as an amount equal to such Lender's original Pro
Rata Share of the requested principal portion of such Loan is fully funded to
the Borrowers, whether made by such Lender itself or by operation of the terms
of this Section 3.02(c)(iv), and whether or not the Non Pro Rata Loan with
respect thereto has been repaid;

(C) amounts advanced to the Borrowers to cure, in full or in part, any such
Lender's failure to fund its Pro Rata Share of any Borrowing ("Cure Loans")
shall bear interest from and after the date made available to the Borrowers at
the rate applicable to the other Loans comprising such Borrowing and shall be
treated as Loans comprising such Borrowing for all purposes herein;

(D) regardless of whether or not an Event of Default has occurred or is
continuing, and notwithstanding the instructions of the

34

Borrowers as to its desired application, all repayments of principal which, in
accordance with the other terms of this Section 3.02, would be applied to the
outstanding Loans shall be applied first, ratably to all Loans constituting Non
Pro Rata Loans; second, ratably to the Loans other than those constituting Non
Pro Rata Loans or Cure Loans; and, third, ratably to the Loans constituting Cure
Loans; and

(E)

no Lender shall be relieved of any obligation such Lender may have to the
Borrowers under the terms of this Agreement as a result of the provisions of
this Section 3.02(c)(iv).

Section 3.03. Taxes.

> > (a)

Payment of Taxes. Any and all payments by the Borrowers hereunder, under the
Notes or under any other Loan Document shall be made free and clear of and
without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Agent and each Lender, respectively, taxes
imposed on its income, capital, profits or gains and franchise taxes imposed on
it, in each case by (i) the United States except withholding taxes contemplated
pursuant to Section 3.03(e)(ii)(C), (ii) the Governmental Authority of the
jurisdiction in which such Lender's principal office is located or (iii) the
Governmental Authority in which such Person is organized, in each case including
all political subdivisions thereof (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If the Borrowers shall be required by law to withhold
or deduct any Taxes from or in respect of any sum payable hereunder, under the
Notes or under any other Loan Document to any Agent or Lender, (x) such sum
payable shall be increased as may be necessary so that after making all required
withholdings or deductions (including withholdings or deductions applicable to
additional sums payable under this Section 3.03) such Lender receives an amount
equal to the sum it would have received had no such withholdings or deductions
been made, (y) the Borrowers shall make such withholdings or deductions, and (z)
the Borrowers shall pay the full amount withheld or deducted to the relevant
taxation authority or other authority in accordance with applicable law. The
Borrowers shall not be required to increase any such amounts payable to any
Agent or any Lender with respect to any Taxes or Other Taxes (i) that are
attributable to such Agent's or such Lender's failure to comply with the
requirements of Section 3.03(e) and (ii) that are United States withholding
taxes imposed on amounts payable to such Agent or such Lender at the time such
Agent or such Lender becomes a party to this Agreement, except to the extent
that such Agent's or such Lender's assignor (if any) was or would have been
entitled, at the time of assignment, to receive additional amounts from the
Borrowers with respect to such Tax pursuant to this Section 3.03(a).

(b)

Other Taxes. In addition, each Borrower agrees, jointly and severally, to pay
any present or future stamp, value-added or documentary taxes or any other
excise or property taxes, charges or similar levies which arise from and which
relate directly to (i) any payment made under any Loan Document or (ii) the
execution, delivery

35

or registration of, or otherwise with respect to, this Agreement, the Notes or
any other Loan Document (hereinafter referred to as "Other Taxes").

(c)

Indemnification. The Borrowers shall, jointly and severally, indemnify each
Lender and each Agent who has fully complied with the requirements of Section
3.03(e) against, and reimburse each, within twenty (20) days of a receipt of
written demand for, the full amount of all Taxes and Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed by any Governmental
Authority on amounts payable under this Section 3.03 and any additional income
or franchise taxes resulting therefrom) incurred or paid by such Lender or such
Agent (as the case may be) or any Affiliate of such Lender or Agent and any
liability (including penalties, interest, and out-of-pocket expenses paid to
third parties) arising therefrom or with respect thereto, whether or not such
Taxes or Other Taxes were correctly or lawfully payable. A certificate as to any
amount payable to any Person under this Section 3.03 submitted by such Person to
the Borrowers shall, absent manifest error, be final, conclusive and binding
upon all parties hereto.

(d)

Receipts. Within thirty (30) days after a request from the Administrative Agent,
the Borrowers will furnish to the Administrative Agent, the original or a
certified copy of a receipt, if available, or other reasonably available
documentation satisfactory to the Administrative Agent evidencing payment of
such Taxes or Other Taxes. The Borrowers will furnish to the Administrative
Agent upon the Administrative Agent's request from time to time an Officer's
Certificate stating that all Taxes and Other Taxes of which it is aware that are
due have been paid and that no additional Taxes or Other Taxes of which it is
aware are due.

(e)

Foreign Lender Certifications.

(i)

Each Lender that is not created or organized under the laws of the United States
or a political subdivision thereof shall deliver to Falcon on behalf of the
Borrowers and the Administrative Agent on the date on which such Lender becomes
a Lender pursuant to Section 14.07 hereof a true and accurate certificate
executed in duplicate by a duly authorized officer of such Lender to the effect
that such Lender is eligible to receive payments hereunder and under the Notes
without deduction or withholding of United States federal income tax (I) under
the provisions of an applicable tax treaty concluded by the United States (in
which case the certificate shall be accompanied by two duly completed copies of
IRS Form W-8BEN (or any successor or substitute form or forms)) or (II) under
Sections 1441 or 1442 of the Internal Revenue Code (in which case the
certificate shall be accompanied by two duly completed copies of IRS Form W-8ECI
(or any successor or substitute form or forms).

(ii)

Each such Lender further agrees to deliver to Falcon, on behalf of itself and
its Subsidiaries, and the Administrative Agent from time to time, a true and
accurate certificate executed in duplicate by a duly authorized officer of such
Lender before or promptly upon the occurrence of any event requiring a change in
the most recent certificate previously delivered by such

36

Lender pursuant to this Section 3.03(e). Each certificate required to be
delivered pursuant to this Section 3.03(e)(ii) shall certify as to one of the
following:

(A)

that such Lender can receive payments hereunder and under the Notes without
deduction or withholding of United States federal income tax;

(B)

that such Lender cannot continue to receive payments hereunder and under the
Notes without deduction or withholding of United States federal income tax as
specified therein but does not require additional payments pursuant to Section
3.03(a) because it is entitled to recover the full amount of any such deduction
or withholding from a source other than the Borrowers;

(C)

that such Lender is no longer capable of receiving payments hereunder and under
the Notes without deduction or withholding of United States federal income tax
as specified therein by reason of a change in law (including the Internal
Revenue Code or applicable tax treaty) after the later of the date on which a
Lender became a Lender pursuant to Section 14.07 and that it is not capable of
recovering the full amount of the same from a source other than the Borrowers;
or

(D)

that such Lender is no longer capable of receiving payments hereunder without
deduction or withholding of United States federal income tax as specified
therein other than by reason of a change in law (including the Internal Revenue
Code or applicable tax treaty) after the date on which a Lender became a Lender
pursuant to Section 14.07.

> (f)

If any Agent or any Lender receives a refund in respect of any amounts paid by
the Borrowers pursuant to this Section 3.03, which refund in the sole discretion
of such Person is allocable to such payment, it shall notify Falcon, on behalf
of itself and the other Borrowers, of such refund and shall pay the amount of
such refund to the Borrowers, together with all interest received by such Person
on such amount.

Section 3.04.

Increased Capital. If after the date hereof any Lender determines that (i) the
adoption or implementation of or any change in or in the interpretation or
administration of any law or regulation or any guideline or request from any
central bank or other Governmental Authority exercising jurisdiction, power or
control over any Lender (whether or not having the force of law), compliance
with which affects or would affect the amount of capital required or expected to
be maintained by such Lender or any corporation controlling such Lender and (ii)
the amount of such capital is increased by or based upon the making or
maintenance by any Lender of its Loans, any Lender's participation in or
obligation to participate in the Loans or other advances made hereunder or the
existence of any Lender's obligation to make the Loans, then, in any such case,
upon written demand by such Lender (with a copy of such demand to the
Administrative Agent), each Borrower agrees to pay to the Administrative Agent
for the account of such Lender within 10 Business Days of written demand
therefor, from time to time as specified by such Lender, additional amounts
sufficient to

37

compensate such Lender or such corporation therefor. Such demand shall be
accompanied by a statement certifying in reasonable detail as to the amount of
such compensation and include a brief summary of the basis for such demand. Such
statement shall be conclusive and binding for all purposes, in the absence of
manifest error.

Article IV -

Interest and Fees

Section 4.01.

Interest on the Loans and Other Obligations.

(a)

Rate of Interest. All Loans and the outstanding principal balance of all other
Obligations shall bear interest on the unpaid principal amount thereof from the
date such Loans are made and such other Obligations are due and payable until
paid in full, except as otherwise provided in Section 4.01(c), at a rate equal
to the Applicable Interest Rate.

(b)

Interest Payments.

(i)

Interest accrued on each Loan shall be payable in cash in arrears in Dollars (A)
on the first Business Day of each calendar month for the preceding calendar
month, commencing on the first such day following the making of such Loan and
(B) if not theretofore paid in full, on the Maturity Date. Interest accrued at
the Default Rate will be payable on demand.

(ii) Interest accrued on the principal balance of all other Obligations shall be
payable in arrears in Dollars on demand.

(c)

Default Rate. Notwithstanding the rate of interest specified in Section 4.01(a),
and to the extent permitted by applicable law, effective immediately upon the
occurrence of any Event of Default but only for as long thereafter as such Event
of Default shall be continuing, the principal balance of all Loans and of all
other Obligations shall bear interest at a rate which is two percent (2.0%) per
annum in excess of the Applicable Interest Rate in effect from time to time (the
"Default Rate").

(d)

Computation of Interest. Interest on all Obligations shall be computed on the
basis of the actual number of days elapsed in the period during which interest
accrues and a year of 360 days. In computing interest on any Loan, the date of
the making of the Loan shall be included and the date of payment shall be
excluded; provided, however, if a Loan is repaid on the same day on which it is
made, one (1) day's interest shall be paid on the Loan.

Section 4.02.

Fees.

(a)

Agent's Fee. The Borrowers jointly and severally agree to pay to the
Administrative Agent a monthly administrative and collateral agency fee in the
amount $15,000 per month, which shall be payable in advance to the
Administrative Agent on (1) the Closing Date and (2) the first Business Day of
each calendar month for such calendar month.

38

(b) Commitment Fee. The Borrowers jointly and severally agree to pay to the
Administrative Agent, for the account of the Lenders in accordance with their
respective Pro Rata Shares, a commitment fee payable as follows: $467,000 on the
date of the entry of an Interim Order; and $360,000 on the earlier of the date
of (i) the entry of the Final Order and (ii) payment in full of the Fleet Debt.

(c) Unused Commitment Fee. The Borrowers agree, jointly and severally, to pay to
the Administrative Agent, for the account of the Lenders in accordance with
their respective Pro Rata Shares, a fee (the "Unused Commitment Fee"), accruing
at the rate equal to one percent (1.0%) per annum on the daily average amount by
which the Commitments exceed the Revolving Credit Obligations during the period
commencing on the Closing Date and ending on the Commitment Termination Date,
such fee being payable monthly in arrears on (1) the first Business Day of each
calendar month for the preceding calendar month and (2) if not theretofore paid
in full, on the Maturity Date.

(d)

Termination; Conversion. The Borrowers agree, jointly and severally, to pay to
the Administrative Agent, for the account of the Lenders in accordance with
their respective Pro Rata Shares, additional compensation, equal to one percent
(1.0%) of the Total Facility on the Commitment Termination Date ("Termination
Amount"). The Borrowers further agree, jointly and severally, to pay to the
Administrative Agent, for the account of the Lenders in accordance with their
respective Pro Rata Shares, a fee (the "Conversion Commitment Fee"), equal to
two percent (2.0%) of the Total Facility under this Agreement less the amount of
the Termination Amount actually paid. The Conversion Commitment Fee shall be
payable no later than the effective date of any exit credit facility entered
into pursuant to Section 2.05 and only if such exit credit facility is entered
into.

(e)

Calculation and Payment of Fees. All of the above fees that are based on a per
annum rate shall be calculated on the basis of the actual number of days elapsed
in a 360-day year. All such fees shall be payable in addition to, and not in
lieu of, interest, expense reimbursements, indemnification and other
Obligations. All fees payable hereunder shall be fully earned and nonrefundable
when paid. All fees specified or referred to herein due to the Administrative
Agent or any Lender, including those referred to in this Section 4.02, shall
bear interest, if not paid when due, at the interest rate for Loans in
accordance with Section 4.01(c), shall constitute Obligations and shall be
secured by the Collateral. The Borrower hereby authorizes the Administrative
Agent to, and the Administrative Agent may, charge the Loan Account with the
amount of the fees or charges due under this Section 4.02.

Article V -

Conditions to Loans

Section 5.01.

Conditions Precedent to the Initial Loans. The effectiveness of this Agreement
and the obligation of each Lender on the Closing Date to make its initial Loan
requested to be made by it on the Closing Date shall be subject to the
satisfaction of all of the following conditions precedent:

39

(a)

Documents. The Administrative Agent (on behalf of itself and the Lenders) shall
have received on or before the Closing Date all of the following:

(i)

This Agreement, the Notes and all other agreements, instruments, opinions,
certificates and other documents relating to the Loans, required to be delivered
on the Closing Date (including, without limitation, a pay-off letter executed by
Falcon and the Former Agent, which provides, inter alia, pay-off figures for the
Fleet Debt and a release of all Liens, other than those Liens referenced in such
pay-off letter which shall survive as referenced in such pay-off letter in favor
of the lenders and agents under the Fleet Credit Agreement upon payment in full
of the Fleet Debt) each duly executed where appropriate and in form and
substance satisfactory to the Lenders and the Administrative Agent in their sole
discretion and in sufficient copies for each of the Lenders;

(ii)

A copy of the initial Approved Budget; and

(iii)

Such additional documentation as the Administrative Agent and the Lenders may
request.

(b)

Certain Information. The Administrative Agent shall have received complete and
accurate information from the Borrowers with respect to the state of
organization, and the name and the location of the principal place of business
and chief executive office for each Borrower and each Subsidiary of such
Borrower.

(c)

No Legal Impediments. No law, regulation, order, judgment or decree of any
Governmental Authority shall exist, and the Administrative Agent shall not have
received any notice that any action, suit, investigation, litigation or
proceeding is pending or threatened in any court or before any arbitrator or
Governmental Authority, which (i) purports to enjoin, prohibit, restrain or
otherwise affect (A) the ability of any Borrower and its respective Subsidiaries
to perform their respective obligations hereunder and under each Loan Document,
(B) the making of the Loans on the Closing Date or (C) the consummation of the
transactions contemplated hereby or contemplated under the other Loan Documents
or (ii) would reasonably be expected to result in a Material Adverse Change.

(d)

No Change in Condition. No Material Adverse Change shall have occurred since
January 28, 2005.

(e)

No Default. No Event of Default shall have occurred and be continuing or would
result from the making of the Loans requested to be made on the Closing Date.

(f)

Representations and Warranties. All of the representations and warranties
contained in Section 6.01 and in the other Loan Documents shall be true and
complete in all respects on and as of the Closing Date, both before and
immediately after giving effect to the making of the Loans.

40

(g)

Fees and Expenses Paid. There shall have been paid to the Administrative Agent,
for its account, the account of the Collateral Agent and the respective accounts
of the Lenders, all fees and expenses (including the reasonable legal fees and
expenses of counsel to the Agents and the Lenders) due and payable on or before
the Closing Date.

(h)

Consents, Etc. The Borrowers shall have obtained all consents and approvals of
any Governmental Authority as may be necessary to allow the Borrowers (A) to
execute, deliver and perform their respective obligations hereunder, under the
other Loan Documents to which each of them is or shall be a party and each other
agreement or instrument to be executed and delivered by each of them pursuant
thereto or in connection therewith, and (B) to commence the Chapter 11 Cases,
all such consents and approvals to remain in full force and effect on the
Closing Date.

(i)

Closing Date. The Closing Date shall have occurred on or before February 9,
2005.

(j)

Bankruptcy Court Motions and Documents; Interim Order. All motions and other
documents to be filed with and submitted to the Bankruptcy Court in connection
with the Loans (including, without limitation, the Interim Order) shall be in
form and substance satisfactory to the Administrative Agent in its sole
discretion. The Bankruptcy Court shall have entered an Interim Order, in form
and substance satisfactory to the Administrative Agent in its sole discretion,
which order shall be in full force and effect, shall not have been reversed,
vacated or stayed and shall not have been amended, supplemented or otherwise
modified without the prior written consent of the Administrative Agent (which
consent may be withheld by the Administrative Agent in its sole discretion), (i)
authorizing and approving the Loan Documents and the transactions contemplated
thereby, including, without limitation, the granting of the super-priority
status, security interests and liens, the payment of all fees and other amounts
referred to herein or therein, and the payment in full of the Fleet Debt, and
(ii) lifting the automatic stay to permit the Borrowers that are debtors under
the Bankruptcy Code to perform their obligations under the Loan Documents and
the Lenders to exercise their rights and remedies with respect to the Loans,
provided that such Interim Order may provide that the Administrative Agent shall
provide Falcon with five (5) Business Days prior written notice before
exercising such rights and remedies.

(k)

Cash Collateral. The Borrowers shall have established the lockbox arrangements
and a cash collection system in form and substance satisfactory to the
Collateral Agent in its sole discretion, including the arrangements with respect
to the Disbursement Account, and shall have entered into the Blocked Account
Agreement.

(l)

Fleet Debt. The Lenders shall have confirmed that the Fleet Debt is not greater
than $25,000,000.

(m)

Evidence of Insurance. The Borrower shall have provided evidence of insurance
satisfactory to the Administrative Agent in its sole discretion.

41

Section 5.02.

Conditions Precedent to All Loans. The effectiveness of this Agreement, and the
obligation of each Lender to make any Loan requested to be made by it on any
Funding Date on or after the Closing Date is subject to the satisfaction of each
of the following conditions precedent as of each such date:

(a)

Representations and Warranties. As of such date (except where such
representation and warranty expressly relates to a specific date, in which case,
as of such specified date), both before and after giving effect to the Loans to
be made on such date, all of the representations and warranties contained in
Section 6.01 and in the other Loan Documents shall be true and complete in all
respects except, in the case of each Loan other than the initial Loans made
hereunder, where the reason for any such representation or warranty (other than
the Non-Qualified Representations) not being true and complete in all respects
has not resulted in, and could not reasonably be expected to result in, a
Material Adverse Change (and, for purposes of making any such determination, any
qualification contained in any such representation or warranty based on Material
Adverse Change or other concept of materiality, and any qualification based on a
threshold Dollar amount, shall be ignored and given no effect so as to avoid a
redundancy in materiality qualifications with respect to any such representation
or warranty).

(b)

No Defaults. As of such date, no Event of Default or Default shall have occurred
and be continuing or would result from the making of the requested Loan.

(c)

No Change in Condition. No Material Adverse Change shall have occurred.

(d)

Final Order. With respect to any Loan requested to be made on or after the day
that is 30 days after entry of the Interim Order, the Bankruptcy Court shall
have entered the Final Order, which order shall be in full force and effect,
shall not have been reversed, vacated or stayed and shall not have been amended,
supplemented or otherwise modified without the prior written consent of the
Administrative Agent (which consent may be withheld by the Administrative Agent
in its sole discretion).

(e)

Reorganization Milestones. The Lenders and the Administrative Agent shall have
received milestone projections for the Borrowers' plan of reorganization, in
form and substance satisfactory to the Administrative Agent in its sole
discretion, setting forth milestone completion dates for, among other things,
(i) the filing of such plan of reorganization and disclosure statement, (ii) the
approval by the Bankruptcy Court of the disclosure statement, (iii) the
commencement of solicitation of approval by the required creditors and interest
holders of such plan of reorganization, (iv) the approval of such plan of
reorganization by the votes required for a confirmation of such plan of
reorganization, (v) the confirmation of such plan of reorganization by the
Bankruptcy Court, and (vi) the effectiveness of such plan of reorganization
plan, with such effectiveness to be no later than the first anniversary of the
Closing Date.

(f)

Notice of Borrowing; Borrowing Base Certificate. The Borrowers shall have
complied with the requirements of Section 2.01(b).

42

Each request by the Borrowers, or any of them, for a Loan, each submission by
the Borrowers, or any of them, of a Notice of Borrowing and, each acceptance by
the Borrowers, or any of them, of the proceeds of each Loan made hereunder,
shall constitute a representation and warranty by the Borrowers as of the
Funding Date in respect of such Loan that all conditions set forth in this
Section 5.02 have been satisfied.

Article VI -

Representations and Warranties

Section 6.01.

General Representations and Warranties. In order to induce the Administrative
Agent and each Lender to enter into this Agreement and to make Loans hereunder,
each Borrower warrants, represents and covenants to the Administrative Agent and
each Lender, on a joint and several basis, that:

(a)

Qualification. Each Borrower and each of its Subsidiaries is a corporation,
limited partnership or limited liability company duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization. Each Borrower and each of its Subsidiaries is
duly qualified and is authorized to do business and is in good standing as a
foreign limited liability company, limited partnership or corporation, as
applicable, in (a) as of the date hereof, each state or jurisdiction listed on
Schedule 6.01(a) hereto and (b) all States and jurisdictions in which the
failure of such Borrower or any of its Subsidiaries to be so qualified could
reasonably be expected to result in a Material Adverse Change.

(b)

Power and Authority. Each Borrower and each of its Subsidiaries is duly
authorized and empowered to enter into, execute, deliver and perform this
Agreement and each of the other Loan Documents to which it is a party. The
execution, delivery and performance of this Agreement and each of the other Loan
Documents have been duly authorized by all necessary corporate or other relevant
action and do not and will not (i) require any consent or approval of the
shareholders of such Borrower or any of the shareholders, partners or members,
as the case may be, of any Subsidiary of such Borrower (other than any such
consents or approvals which have been obtained); (ii) contravene such Borrower's
or any of its Subsidiaries' Governing Documents; (iii) violate, or cause such
Borrower or any of its Subsidiaries to be in default under, any provision of any
law, rule, regulation, order, writ, judgment, injunction, decree, determination
or award in effect having applicability to such Borrower or any of its
Subsidiaries, the violation of which has resulted in, or could reasonably be
expected to result in, a Material Adverse Change; (iv) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other agreement, lease or instrument to which such Borrower or any of its
Subsidiaries is a party or by which it or its Properties may be bound or
affected, the breach of or default under which has resulted in, or could
reasonably be expected to result in, a Material Adverse Change; or (v) result
in, or require, the creation or imposition of any Lien (other than Permitted
Liens) upon or with respect to any of the Properties now owned or hereafter
acquired by such Borrower or any of its Subsidiaries.

(c)

Legally Enforceable Agreement. This Agreement is, and each of the other Loan
Documents when delivered under this Agreement will be, a legal, valid

43

and binding obligation of each Borrower and each of its Subsidiaries party
hereto or thereto, enforceable against it in accordance with its respective
terms.

(d)

Capital Structure. Schedule 6.01(d) hereto states, as of the date hereof, (i)
the correct name of each of the Subsidiaries of each Borrower, its jurisdiction
of incorporation or organization and the percentage of its Voting Stock owned by
such Borrower, (ii) the name of each Borrower's and each of its Subsidiaries'
corporate or joint venture Affiliates and the nature of the relationship, (iii)
the number, nature and holder of all outstanding Securities of each Borrower and
of each Subsidiary of such Borrower, (iv) the number of authorized, issued and
treasury Securities of each Borrower and (v) the number of shares of Voting
Stock of each Borrower reserved for issuance upon exercise of warrants, options
or other rights to acquire Voting Stock. Each Borrower has good title to all of
the Securities it purports to own of each of such Subsidiaries, free and clear
in each case of any Lien (including any restrictions on the right to vote, sell
or otherwise dispose of such Securities) other than Permitted Liens or any
preemptive or other similar rights to subscribe for or to purchase any such
Securities except as set forth on Schedule 6.01(d). All such Securities have
been duly issued and are fully paid and non-assessable.

(e)

Names; Organization. As of the date hereof, each Borrower's and each of its
Subsidiaries' State(s) or jurisdiction(s) of incorporation or organization, Type
of Organization and Organizational I.D. Number is set forth on Schedule 6.01(e).
As of the date hereof, the exact legal name of each Borrower and each of its
Subsidiaries is set forth on Schedule 6.01(e).

(f)

Business Locations; Administrative Agent for Process. Each Borrower's and each
of its Subsidiary's chief executive office, location of books and records and
other places of business are as listed on Schedule 6.01(f) hereto, as updated
from time to time by Borrowers providing prior written notice to the
Administrative Agent of any new location. All tangible Collateral is and will at
all times be kept by a Borrower and its Subsidiaries as set forth on Schedule
6.01(f). Except as shown on Schedule 6.01(f), as of the date hereof, no
Inventory is stored with a bailee, processor, distributor, warehouseman or
similar party, nor is any Inventory consigned to any Person. At no time is
Inventory of Borrowers and the Subsidiaries with an aggregate value in excess of
$1,000,000 located with third party processors.

(g)

Title to Properties. Each Borrower and each of its Subsidiaries has good,
indefeasible and marketable title to and fee simple ownership of, or valid and
subsisting leasehold interests in, all of its real Property, and good title to
all of the Collateral and all of its other Property, in each case, free and
clear of all Liens except Permitted Liens.

(h)

Accounts. With respect to each of each Borrower's Accounts arising in the
ordinary course of business from the sale of goods or the rendition of services
(other than Accounts for which adequate reserves have been established in
accordance with GAAP), unless otherwise disclosed to the Administrative Agent in
writing:

44

(i)

It is genuine and in all respects what it purports to be, and it is not
evidenced by a judgment;

(ii)

It arises out of a completed, bona fide sale and delivery of goods or rendition
of services by such Borrower, in the ordinary course of its business and in
accordance with the terms and conditions of all purchase orders, contracts or
other documents relating thereto and forming a part of the contract between such
Borrower and the Account Debtor;

(iii) It is for a liquidated amount maturing as stated in the duplicate invoice
covering such sale or rendition of services, a copy of which has been furnished
or is available to the Administrative Agent;

(iv) To the best of such Borrower's knowledge, there are no facts, events or
occurrences which in any way impair the validity or enforceability of any
Accounts or tend to reduce the amount payable thereunder from the face amount of
the invoice and statements delivered or made available to the Administrative
Agent with respect thereto; and

(v)

To the best of such Borrower's knowledge, the Account Debtor thereunder (1) had
the capacity to contract at the time any contract or other document giving rise
to the Account was executed and (2) such Account Debtor is Solvent; and to the
best of such Borrower's knowledge, there are no proceedings or actions which are
threatened or pending against the Account Debtor thereunder which might result
in any material adverse change in such Account Debtor's financial condition or
the collectibility of such Account.

(i)

Equipment. The Equipment of each Borrower and its Subsidiaries is in good
operating condition and repair, and all necessary replacements of and repairs
thereto shall be made so that the operating efficiency thereof shall be
maintained and preserved, reasonable wear and tear excepted, except where the
failure to so maintain such Equipment has not resulted in, and could not
reasonably be expected to result in, a Material Adverse Change. Neither any
Borrower nor any of its Domestic Subsidiaries will permit after the date hereof
any material Equipment to become affixed to any real Property leased to any
Borrower or any of its Domestic Subsidiaries so that an interest arises therein
under the real estate laws of the applicable jurisdiction unless the landlord of
such real Property has executed a landlord waiver or leasehold mortgage in favor
of and in form acceptable to the Administrative Agent, and no Borrower will
permit any of the Equipment of any Borrower or any of its Domestic Subsidiaries
to become an accession to any personal Property other than Equipment that is
subject to first priority (except for Permitted Liens) Liens in favor of the
Administrative Agent.

(j)

Financial Statements; Fiscal Year. (i) The Consolidated and consolidating
(showing all Borrowers and Domestic Subsidiaries as a Consolidated entity and
the Foreign Subsidiaries on a consolidating basis) audited balance sheets of
Borrowers and the Subsidiaries (including the accounts of all Subsidiaries of
Borrowers and their respective Subsidiaries for the respective periods during
which a Subsidiary

45

relationship existed) as of October 31, 2004 and (ii) the unaudited restated
financial statements of Borrowers and the Subsidiaries for the three years
ending October 31, 2004, on a Consolidated basis, when delivered to the
Administrative Agent in accordance with requirements of Section 8.03, will each
have been prepared in accordance with GAAP, and each will present fairly in all
material respects the financial positions of Borrowers and such Persons, taken
as a whole, at such dates and the results of Borrowers' and such Person's
operations, taken as a whole, for such periods. As of the date hereof, the
fiscal year of Falcon and each of its Subsidiaries ends on the Saturday closest
to October 31st of each year.

(k)

Full Disclosure. After due inquiry of the directors, officers and employees of
Borrowers having knowledge of the matters represented, warranted or stated
herein, neither this Agreement nor any other Loan Document, nor any certificate,
report, questionnaire (including, without limitation any management
questionnaire), statement (including the financial statements referred to in
Section 6.01(j)) or document furnished by or on behalf of any Borrower or
Subsidiary of any Borrower (including, without limitation, all statements and
materials prepared or furnished to the Administrative Agent or any Lender in
connection with its due diligence inquiries, including all materials delivered
in response to any due diligence request), nor any representation or warranty
contained in any of the foregoing, whether included in any materials provided to
the Administrative Agent or any Lender prior to the date hereof or included in
this Agreement or any other Loan Document or in any other document or instrument
delivered at any time on or prior to the Closing Date, is, or will be, untrue
with respect to any material fact or omits, or will omit, to state a material
fact necessary in order to make the statement made herein or therein, in light
of the circumstances in which such statement was made, not misleading; provided
that no statement or document delivered prior to the date of this Agreement
shall be the basis for any claim or breach under this Section 6.01(k) if such
statement or document was clearly updated by the representations and warranties
contained in this Agreement. There are not facts or circumstances existing which
have resulted in, or could reasonably be expected to result in, a Material
Adverse Change, either individually or in the aggregate.

(l)

Reserved.

(m)

Surety Obligations. Except as set forth on Schedule 6.01(m), as of the date
hereof, neither any Borrower nor any of its Subsidiaries is obligated as surety
or indemnitor under any surety or similar bond or other contract or has issued
or entered into any agreement to assure payment, performance or completion of
performance of any undertaking or obligation of any Person.

(n)

Taxes. As of the date hereof, the federal tax identification number of each
Borrower and Domestic Subsidiary of each Borrower is shown on Schedule 6.01(n)
hereto. Each Borrower and each of its Subsidiaries has filed all federal or
other national, state and local tax returns and other reports relating to taxes
it is required by law to file, other than returns and reports, and has paid, or
made provision for the payment of, all taxes, assessments, fees, levies and
other governmental charges upon it, its income and Properties as and when such
taxes, assessments, fees, levies and charges are due and

46

payable, unless and to the extent any thereof are being actively contested in
good faith and by appropriate proceedings and each Borrower and each of its
Subsidiaries maintains reasonable reserves on its books therefor, other than any
such returns, reports and taxes the failure of which to file or pay has not
resulted in, and could not reasonably be expected to result in, a Material
Adverse Change.

(o)

Brokers. Except as shown on Schedule 6.01(o) hereto, there are no claims for
brokerage commissions, finder's fees or investment banking fees payable by
Borrowers in connection with the transactions contemplated by this Agreement,
the Fleet Credit Agreement or any prior transaction whether consummated or not.

(p)

Patents, Trademarks, Copyrights and Licenses. Each Borrower and each of its
Subsidiaries owns, possesses or licenses or has the right to use all the
patents, trademarks, service marks, trade names, copyrights, licenses and other
Intellectual Property necessary for the present and planned future conduct of
its business without any known conflict with the rights of others, except for
such conflicts as could not reasonably be expected to result in a Material
Adverse Change. All such patents, trademarks, service marks, tradenames,
copyrights, licenses, and other similar rights as of the date hereof are listed
on Schedule 6.01(p) hereto. As of the date hereof, no claim has been asserted to
any Borrower or any of its Subsidiaries which is currently pending that their
use of their Intellectual Property or the conduct of their business does or may
infringe upon the Intellectual Property rights of any third party. To the
knowledge of each Borrower and except as set forth on Schedule 6.01(p) hereto,
as of the date hereof, no Person is engaging in any activity that infringes in
any material respect upon any Borrower's or any of its Subsidiaries'
Intellectual Property. Except as set forth on Schedule 6.01(p), each Borrower's
and each of its Subsidiary's (i) material United States trademarks, service
marks, and copyrights are registered with the U.S. Patent and Trademark office
or in the U.S. Copyright Office, as applicable and (ii) material license
agreements and similar arrangements relating to its Inventory (1) permits, and
does not restrict, the assignment by any Borrower or any of its Domestic
Subsidiaries to the Administrative Agent, or any other Person designated by the
Administrative Agent, of all of such Borrower's or such Domestic Subsidiary's,
as applicable, rights, title and interest pertaining to such license agreement
or such similar arrangement and (2) would permit the continued use by such
Borrower or such Domestic Subsidiary, or the Administrative Agent or their
assignee, of such license agreement or such similar arrangement and the right to
sell Inventory subject to such license agreement for a period of no less than
six (6) months after a default or breach of such agreement or arrangement. The
consummation and performance of the transactions and actions contemplated by
this Agreement and the other Loan Document, including without limitation, the
exercise by the Administrative Agent of any of its rights or remedies under
Article XI, will not result in the termination or impairment of Borrower's or
any Subsidiary's ownership or rights relating to its Intellectual Property,
except for such Intellectual Property rights the loss or impairment of which has
not resulted in, and could not reasonably be expected to result in, a Material
Adverse Change. Except as listed on Schedule 6.01(p) and except as could not
reasonably be expected to result in a Material Adverse Change, (i) neither any
Borrower nor any of its Subsidiaries is in breach of, or default under, any term
of any license or sublicense with respect to any of its Intellectual Property
and (ii) to the

47

knowledge of each Borrower, no other party to such license or sublicense is in
breach thereof or default thereunder, and such license is valid and enforceable.

(q)

Governmental and Third Party Consents. Each Borrower and each of its
Subsidiaries has, and is in good standing with respect to, all governmental and
(as applicable) third party Consents, approvals, licenses, authorizations,
permits, certificates, inspections and franchises necessary to continue to
conduct its business as heretofore or proposed to be conducted by it and to own
or lease and operate its Properties as now owned or leased by it, except where
the failure to possess or so maintain such rights has not resulted in, and could
not reasonably be expected to result in, a Material Adverse Change. Except for
the Consents that have already been obtained or made, if any, no Borrower or
Subsidiary is required to obtain any material consent from, or is required to
make any declaration or filing with, any governmental authority or any other
Person in connection with the execution, delivery and performance of this
Agreement or any other Loan Document, or for the purpose of maintaining in full
force and effect any Operating Licenses. Each of the Consents which have been
obtained or made, if any, in connection with the execution, delivery and
performance of this Agreement or any other Loan Document is in full force and
effect. The time within which any administrative or judicial appeal,
reconsideration, rehearing or other review of any such Consent may be taken or
instituted has lapsed, and no such appeal, reconsideration or rehearing or other
review has been taken or instituted.

(r)

Compliance with Laws; Operating Licenses. Each Borrower and each of its
Subsidiaries has duly complied, and its Properties, business operations and
leaseholds are in compliance with, the provisions of all federal, state and
local laws, rules and regulations applicable to such Borrower or such
Subsidiary, as applicable, its Properties or the conduct of its business, except
for such non-compliance that has not resulted in, and not could reasonably be
expected to result in, a Material Adverse Change, and there have been no
citations, notices or orders of noncompliance issued to any Borrower or any of
its Subsidiaries under any such law, rule or regulation, except where such
noncompliance has not resulted in, and could not reasonably be expected to
result in, a Material Adverse Change. Each Borrower and each of its Subsidiaries
has established and maintains an adequate monitoring system to insure that it
remains in compliance in all material respects with all federal, state and local
rules, laws and regulations applicable to it. No Inventory has been produced in
violation of the Fair Labor Standards Act (29 U.S.C. Section 201 et seq.), as
amended. Schedule 6.01(r) sets forth a true, correct and complete list of all
material Operating Licenses held by the Borrowers and their Subsidiaries in
connection with the ownership of its or their assets or the conduct of its or
their businesses (which Schedule 6.01(r) shall set forth, with respect to each
material Operating License, its name, the issuing Person, the date it was issued
and the date of expiration), and such Operating Licenses constitute all of the
material Operating Licenses required under applicable laws to own their
respective assets or conduct their respective businesses as now conducted and as
proposed to be conducted. All of the material Operating Licenses obtained by the
Borrowers and their Subsidiaries are validly issued and in full force and
effect, and the Borrowers and their Subsidiaries have fulfilled and performed in
all material respects their obligations with respect thereto and have full power
and authority to operate thereunder. Except as set forth on Schedule

48

6.01(r), no Borrower or Subsidiary is aware of any law, rule, regulation,
decree, order or position issued, enacted or published by any governmental
authority to the effect that the business of the Borrowers and their
Subsidiaries or any aspect thereof is unlawful or is being or will be
challenged.

(s)

Restrictions. After giving effect to the Interim Order (or, if applicable, the
Final Order), neither any Borrower nor any of its Subsidiaries is a party to or
subject to any contract or agreement which prohibits the execution of or
compliance with this Agreement or the other Loan Documents by any Borrower or
any of its Subsidiaries, as applicable.

(t)

Litigation. Except as set forth on Schedule 6.01(t) hereto, there are no
actions, suits, proceedings or investigations pending, or to the knowledge of
each Borrower, threatened, against or affecting any Borrower or any of its
Subsidiaries, or the business, operations, Properties, prospects, profits or
condition of any Borrower or any of its Subsidiaries which, singly or in the
aggregate, have resulted in, or could reasonably be expected to result in, a
Material Adverse Change. Neither any Borrower nor any of its Subsidiaries is in
default with respect to any order, writ, injunction, judgment, decree or rule of
any court, governmental authority or arbitration board or tribunal, which,
singly or in the aggregate, have resulted in, or could reasonably be expected to
result in, a Material Adverse Change.

(u)

No Defaults. No event has occurred and no condition exists which would, upon or
after the execution and delivery of this Agreement or any Borrower's performance
hereunder, constitute a Default or an Event of Default under this Agreement.

(v)

Personal Property Leases. Schedule 6.01(v) hereto is a complete listing of all
capitalized and operating personal property leases of each Borrower and its
Subsidiaries as of the date hereof. Other than leases that have been rejected
pursuant to the Bankruptcy Code, each Borrower and each of its Subsidiaries is
in full compliance with all of the terms of each of its respective capitalized
and operating leases, except where the failure to so comply has not resulted in,
and could not reasonably be expected to result in, a Material Adverse Change.

(w)

Pension Plans. For purposes of this Section 6.01(w), the term "Company" shall
include all Borrowers, the Domestic Subsidiaries and any Person that is
aggregated with the Borrowers and the Domestic Subsidiaries under Section
414(b), (c), (m), or (o) of the Internal Revenue Code. However, this Section
6.01(w) will not apply to any Multiemployer Plan, except as expressly referred
to herein.

(i)

Schedule 6.01(w) sets forth a true, correct and complete list of:

(A)

Each termination or severance agreement involving (A) any Company, on the one
hand, and any of its respective employees whose annual compensation is at a base
rate equal to or exceeding $50,000, on the other hand or (B) total payments in
excess of $50,000;

49

(B) All employee benefit plans, as defined in ERISA Section 3(3); and

(C) All other profit sharing, bonus, stock option, stock purchase, stock bonus,
restricted stock, stock appreciation right, phantom stock, vacation pay, holiday
pay, tuition reimbursement, scholarship, severance, deferred compensation,
dependent care assistance, excess benefit, incentive compensation, salary
continuation, supplemental retirement, employee loan or loan guarantee program,
split dollar, cafeteria plan, group or individual health, dental, medical, life
insurance, survivor benefit or similar plan, policy or arrangement, whether
formal or informal, written or oral;

(D) in each case maintained or contributed to by any Company for the benefit of
its current or former directors, employees or other service providers and/or
their beneficiaries. All of these types of arrangements shall be collectively
referred to as "Plans". An arrangement will not fail to be a Plan simply because
it only covers one individual, or because the obligations of a Company under the
plan arise by reason of its being a "successor employer" under applicable laws.
Furthermore, a Voluntary Employees' Beneficiary Association under Section
501(c)(9) of the Internal Revenue Code will be considered a Plan for this
purpose.

(ii)

To the extent requested by the Administrative Agent, the Borrowers have
delivered to the Administrative Agent a true and complete copy of the following
documents, to the extent that they are applicable:

(A)

Each Plan and any related funding agreements (e.g., trust agreements, custodial
agreements or insurance contracts), including all amendments (and Schedule
6.01(w) includes a description of any such amendment that is not in writing);

(B) The current summary plan description and all subsequent summaries of
material modifications of each Plan;

(C) The most recent Internal Revenue Service determination letter or opinion
letter for each Plan that is intended to qualify for favorable income tax
treatment under Section 401(a) or 501(c)(9) of the Internal Revenue Code, which
letter reflects all amendments that have been made to the plan (except as set
forth in Schedule 6.01(w)) and any other governmental advisory opinions,
rulings, compliance statements, closing agreements or similar materials specific
to each Plan;

(D)

The annual reports (including all applicable Schedules and the opinions of the
independent accountants), actuarial

50

reports or disclosure materials submitted to any governmental agency in the
current or any of the two preceding plan years; and

(E)

any services agreement.

(iii)

All costs of administering and contributions required to be made to each Plan
under the terms of that Plan, ERISA, the Internal Revenue Code, or any other
applicable law have been timely made, and are fully deductible in the year for
which they were paid, except as set forth on Schedule 6.01(w). All other amounts
that should be accrued to date as liabilities of the Company under or with
respect to each Plan (including administrative expenses and incurred but not
reported claims) for the current plan year of the Plan have been recorded on the
books of the Company. There will be no liability of the Company (i) with respect
to any Plan that has previously been terminated, or (ii) under any insurance
policy or similar arrangement procured in connection with any Plan in the nature
of a retroactive rate adjustment, loss sharing arrangement, or other liability
arising wholly or partially out of events occurring before the Closing Date.

(iv)

Each Plan has been operated at all times in accordance with its terms, and
complies currently in all material respects, and has complied in the past in all
material respects, both in form and in operation, with all applicable laws,
including ERISA and the Internal Revenue Code, except as set forth on Schedule
6.01(w). Except as set forth on Schedule 6.01(w), the Internal Revenue Service
has issued a favorable determination letter or opinion letter with respect to
each Plan that is intended to qualify under Section 401(a) or 501(c)(9) of the
Internal Revenue Code, and nothing has occurred (either before or after the date
of the letter) which has resulted or is likely to result in the revocation of
such qualification or which requires or could require action under the
compliance resolution programs of the Internal Revenue Service to preserve such
qualification.

(v)

The Company does not maintain any Plan that provides (or will provide) medical
or death benefits following termination of employment, other than benefits that
are required to be provided under COBRA or any state law continuation coverage
or conversion rights. The Company has complied in all material respects with the
continuation coverage requirements of COBRA.

(vi)

There are no investigations, proceedings, lawsuits or claims pending (other than
claims pending in the ordinary course of the administration of a Plan) or, to
the best knowledge of the Company, threatened relating to any Plan and to the
best knowledge of the Company there is no basis for any such investigation,
proceeding, lawsuit or claim, except as set forth on Schedule 6.01(w).

(vii)

No Company has any intention or commitment, whether legally binding or not, to
create any additional Plan, or to modify any existing

51

Plan so as to increase benefits to participants or the cost of maintaining the
Plan. The benefits under all Plans are as represented, and have not been, and
will not be increased subsequent to the date documents are provided to the
Administrative Agent except in the ordinary course of business and consistent
with competitive business standards. No statement, either oral or written, has
been made by a Company (or any Administrative Agent of a Company) to any Person
regarding any Plan that did not accurately reflect the terms and operations of
such Plan. Company has not undertaken to maintain any Plan for any period of
time and each such Plan is terminable at the sole discretion of the sponsor
thereof, subject only to such constraints as may be imposed by applicable law.

(viii)

None of the persons performing services for a Company is improperly classified
as being independent contractors, leased employees, or as being exempt from the
payment of wages for overtime.

(ix)

None of the Plans provide any benefits that (i) become payable or become vested
solely as a result of the consummation of the transactions contemplated by this
Agreement or (ii) would result in excess parachute payments (within the meaning
of Section 280G of the Internal Revenue Code), either (A) solely as a result of
the consummation of the transactions contemplated by this Agreement or (B) as a
result of the consummation of the transactions contemplated by this Agreement
and any actions taken by the Lenders after the Closing Date. Furthermore, the
consummation of the transactions contemplated by this Agreement will not require
the funding (whether formal or informal) of the benefits under any Plan (e.g.,
contributions to a "rabbi trust").

(x)

None of the assets of any Plan that is a "pension plan" within the meaning of
Section 3(2) of ERISA are invested in a group annuity contract or other
insurance contract that is subject to any surrender charge, interest rate
adjustment, or other similar expense upon its premature termination.

(xi) No Plan has any interest in any annuity contract or other investment or
insurance contract issued by an insurance company that is the subject of
bankruptcy, conservatorship, rehabilitation, or similar proceeding.

(xii) No Plan is a Multiemployer Plan.

(xiii) In the case of each Plan that is subject to the Internal Revenue Code
Section 412, there is no accumulated funding deficiency (within the meaning of
the Internal Revenue Code Section 4971), whether or not such deficiency has been
waived, except as set forth on Schedule 6.01(w).

(xiv)

No liability (contingent or otherwise) to the Pension Benefit Guaranty
Corporation or any Multiemployer Plan has been incurred by Company or any
Affiliate thereof (other than insurance premiums satisfied in due course),
except as set forth on Schedule 6.01(w).

52

(xv)

No Termination Event has occurred nor has any other event occurred that may
result in such a Termination Event. For purposes of the foregoing, "Termination
Event" means (1) any Reportable Event with respect to any Plan; (2) any event
that could cause Company to incur liability under Sections 4062, 4063, 4064,
4069, 4201, 4204 or 4212 of ERISA or Section 4971 of the Internal Revenue Code;
(3) the filing of a notice of intent to terminate a Plan or the treatment of a
Plan amendment as a termination under Section 4041 of ERISA; (4) the institution
of proceedings by the Pension Benefit Guaranty Corporation to terminate a Plan;
or (5) any other event or condition which could constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, except as set forth on Schedule 6.01(w).

(xvi)

Neither any Plan nor any party in interest with respect thereof, has engaged in
a prohibited transaction which could subject a Company directly or indirectly to
liability under Section 409 or 502(i) of ERISA or Section 4975 of the Internal
Revenue Code.

(xvii)

Neither any Borrower nor any of its Subsidiaries is a "party in interest" within
the meaning of Section 3(14) of ERISA, as amended, with respect to either the
General Motors Welfare Benefit Trust or any employee benefit plan having an
interest therein.

(x)

Reserved.

(y)

Labor Relations. Except as described on Schedule 6.01(y) hereto, as of the date
hereof, neither any Borrower nor any of its Subsidiaries is a party to any
collective bargaining agreement. There are no material grievances, disputes or
controversies with any union or any other organization of any Borrower's or any
of its Subsidiaries employees, or threats of strikes, work stoppages or any
asserted pending demands for collective bargaining by any union or organization,
except those that have not resulted in, and could not reasonably be expected to
result in, a Material Adverse Change.

(z)

Common Enterprise. Borrowers are engaged in the businesses of the manufacturing
of furniture for the commercial market, as well as in certain other businesses.
These operations require financing on a basis such that the credit supplied can
be made available from time to time to Borrowers, as required for the continued
successful operation of Borrowers taken as a whole. Borrowers have requested the
Lenders to make credit available hereunder for the purposes set forth herein and
generally for the purposes of financing the operations of Borrowers. Each
Borrower and each Subsidiary of each Borrower expects to derive benefit (and the
Board of Directors of each Borrower and each Subsidiary of each Borrower has
determined that such Borrower or Subsidiary may reasonably be expected to derive
benefit), directly or indirectly, from a portion of the credit extended by
Lenders hereunder, both in its separate capacity and as a member of the group of
companies, since the successful operation and condition of each Borrower and
each Subsidiary of each Borrower is dependent on the continued successful

53

performance of the functions of the group as a whole. Each Borrower acknowledges
that, but for the agreement of each of the other Borrowers to execute and
deliver the Loan Documents to which it is a party, Administrative Agent and
Lenders would not have made available the credit facilities established hereby
on the terms set forth herein.

(aa)

Reserved.

(bb)

Reserved.

(cc)

Reserved.

(dd)

Absence of Certain Changes. Except as set forth on Schedule 6.01(dd), and as
contemplated as part of the transactions evidenced by this Agreement, since
January 28, 2005, there has not been, and there is no agreement, commitment or
obligation to do, any of the following:

(i)

Any transaction involving any Borrower or Subsidiary not in the ordinary course
of business, including, without limitation, any sale of any assets or properties
(other than Inventory in the ordinary course of business);

(ii) Any declaration, setting aside or payment of any dividend or other
distribution or payment (whether in cash, stock or property) with respect to the
Capital Stock of Falcon, or any redemption, purchase or other acquisition of
Securities of any Borrower or Subsidiary, or any payment to any equity holder of
Falcon not in his, her or its capacity as an equity holder;

(iii) Any damage, destruction or loss over $50,000 in value, whether or not
covered by insurance, to any material assets or properties of any Borrower or
any Subsidiary;

(iv) Any Material Adverse Change;

(v) Any loan or advance made by any Borrower or Subsidiary to any Person, except
(1) intercompany loans permitted under Section 9.02(e) and (f) and (2) normal
travel advances or other reasonable business expense advances made in the
ordinary course of business to its own employees;

(vi) Any Indebtedness for Money Borrowed incurred by any Borrower or Subsidiary
or any commitment to incur Indebtedness for Money Borrowed entered into by any
Borrower or Subsidiary (other than as contemplated by this Agreement);

(vii)

Any Capital Expenditures or commitments to make Capital Expenditures in excess
of the amount reflected in the Approved Budget;

(viii) The formation or creation of any direct or indirect Subsidiary of any
Borrower or Subsidiary, or the disposition of the capital stock or assets of any
Borrower or Subsidiary;

54

(ix) Any payment, satisfaction, discharge or cancellation of any debts or claims
of any Borrower or Subsidiary in excess of $50,000 other than in the ordinary
course of business consistent with past practices or pursuant to an order of the
Bankruptcy Court;

(x) Any change in the Contingent Obligations of any Borrower or Subsidiary, by
way of guarantee or otherwise;

(xi)

Any resignation by, or termination of the employment of, any director or officer
of any Borrower or Subsidiary;

(xii) Any Investment by any Borrower or Subsidiary in the capital stock of any
Person;

(xiii) Any payment of management, consulting or similar fees by any Borrower or
Subsidiary to any of its Affiliates (other than salaries paid in the ordinary
course of business to any such Affiliates who are executive officers of any of
the Borrowers) in excess of $50,000;

(xiv) Any alteration or change in any Borrower's or Subsidiary's credit
guidelines and policies, charge off policies or accounting methods, quality
control procedures or policies or manner of preparing its financial statements
or maintaining its books of account;

(xv) Any increase in, or commitment to increase, the salaries, wages, bonuses or
other compensation payable or to become payable to any officer or other employee
of any Borrower or Subsidiary, other than increases in salaries and wages in the
ordinary course of business consistent with past practices;

(xvi)

Any settlement of any litigation, entry of a consent decree or entry of any
judgment against any Borrower or Subsidiary with a value of $50,000 or more; or

(xvii) The occurrence of any other event or the development of any other
condition which has resulted in, or could reasonably be expected to result in, a
Material Adverse Change.

(ee)

Reserved.

(ff)

Transactions with Affiliates. Except as set forth on Schedule 6.01(ff), there is
no Indebtedness owing by any Borrower or Subsidiary or any of their Affiliates
to any other Borrower or Subsidiary or any of their respective Affiliates.
Except as set forth on Schedule 6.01(ff), immediately following the Closing
Date:

(i)

no Borrower or Subsidiary will be indebted, directly or indirectly, to any of
its own officers, directors, managers, members, partners, shareholders or
employees, or the officers, directors, managers, members,

55

partners, shareholders or employees of its Affiliates, or to any members of the
immediate families of such officers, directors, managers, members, partners,
shareholders or employees except for, in the case of employees, compensation
payable in the ordinary course of business and reasonable travel advances
accrued in the ordinary course of business consistent with past practices;

(ii)

no officer, director, manager, member, partner, shareholder or employee of any
Borrower or Subsidiary, and no members of their immediate families, will (A) be
indebted to any Borrower or Subsidiary in any amount whatsoever or (B) have any
direct or indirect ownership interests in any Person which competes, directly or
indirectly, with any Borrower or Subsidiary, other than the ownership of less
than two percent of any class of publicly-traded securities; and

(iii)

there are no voting or similar agreements between or among the partners or
members of any Borrower or Subsidiary.

(iv)

except for the matters set forth on Schedule 6.01(ff), no officer, director,
manager, member, partner, shareholder or employee of any Borrower or Subsidiary,
and no member, or Affiliate of a member, or the immediate families of any of the
foregoing, has any direct or indirect interest in any contract (including,
without limitation, franchise agreements, development agreements and supply
agreements (whether oral or written)), commitment, license, agreement,
obligation or arrangement to which any Borrower or Subsidiary is a party.

(v)

no Borrower or Subsidiary is a party to any agreement relating to the voting or
disposition of the capital stock of any other Borrower or any Subsidiary.

(vi)

since January 28, 2005, except as disclosed on Schedule 6.01(ff), no
shareholder, employee, officer, director, member, manager, partner or Affiliate
of any Borrower or Subsidiary, and no member, or Affiliate of a member, of the
immediate family of any such Person, has engaged in any transaction or
relationship with any Borrower or Subsidiary (other than with respect to
compensation payable to its employees and reasonable travel advances accrued in
the ordinary course of business).

(vii)

no Borrower or Subsidiary has any outstanding loan or advance of funds to any of
its or their Affiliates' officers, directors, employees, members, managers,
partners or shareholders, or to any member of the immediate families of any of
the foregoing.

(gg)

Investment Company Act. No Borrower or Subsidiary is an "investment company," or
a company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.

56

(hh)

Governmental Regulation. No Borrower or Subsidiary is (i) a "holding company" or
a "subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," within the meaning
of the Public Utility Holding Company Act of 1935, or (ii) subject to
regulations under the Federal Power Act, the Interstate Commerce Act, any state
public utilities code or any other federal or state statute or regulation
limiting its ability to incur Indebtedness.

(ii)

Real Property. Schedule 6.01(ii) sets forth a true, correct and complete list of
all real Property in which any Borrower or Domestic Subsidiary owns or holds a
fee interest, which list includes, as to each parcel of such real Property, the
legal owner, its common name, a legal description and the name of any mortgagee
or trustee thereof. Schedule 6.01(ii) sets forth a true, correct and complete
list of all real Property leases, subleases or licenses pursuant to which any
Borrower or Domestic Subsidiary is a lessor, lessee, sublessor, sublessee,
licensor or licensee, in each case as amended through the date hereof, which
list includes the street address, the identity of the lessors, lessees,
sublessors, sublessees, licensors or licensees, or with respect to which a
Borrower or Domestic Subsidiary has guarantied the obligations of any other
Person, the term thereof (referencing applicable extension or renewal periods,
the rent payment terms, maximum potential exposure and the current use). To the
extent requested by the Administrative Agent, the Borrowers and Domestic
Subsidiaries have delivered to the Administrative Agent true, correct and
complete copies of each such lease, sublease or license. The real Property
interests described or listed on Schedule 6.01(ii) constitute all of the
interests in real Property owned, leased or otherwise held for use by any
Borrower or Domestic Subsidiary. Upon entry of the Interim Order, no consent of
any party to any lease, sublease, license or mortgage is required in connection
with the consummation of the transactions contemplated by this Agreement or the
other Loan Documents, and no such event shall be prohibited by, or shall
constitute a default under, any such lease, sublease, license or mortgage. With
respect to each such lease, sublease and license, except as set forth on
Schedule 6.01(ii):

(i)

there are no disputes, oral agreements or forbearance programs in effect as to
any such lease, sublease or license; and

(ii) no Borrower or Domestic Subsidiary has assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest therein.

(jj)

Environmental Matters. Except as set forth in Schedule 6.01(jj):

(i)

Each Borrower and Domestic Subsidiary and each Site is in compliance with all,
and no Borrower or Domestic Subsidiary has any liability under, any
Environmental Laws, and no Hazardous Materials are being used by any Borrower or
Domestic Subsidiary on any real Property in violation of Environmental Laws.

57

(ii)

There are no present or past material Environmental Conditions in any way
relating to any Borrower or Domestic Subsidiary, any Site or the business or
operations of any Borrower or Domestic Subsidiary.

(iii)

Schedule 6.01(jj) sets forth a true, correct and complete list of all
environmental site assessments, audits, studies or reports relating to any
Environmental Condition or relating to the property, business, condition or
operations of all Borrowers and Domestic Subsidiaries. To the extent requested
by the Administrative Agent, the Borrowers have delivered to the Administrative
Agent true, correct and complete copies of all such environmental site
assessments, audits, studies or reports.

(iv)

No Borrower or Subsidiary has received notice of any alleged, actual or
potential responsibility, inquiry, investigation or administrative or judicial
proceeding regarding (i) any Release directly or indirectly by any Borrower or
Subsidiary at any Site or other location or (ii) any violation of or
non-compliance by any Borrower or Subsidiary with the conditions of any license
or permit required under any Environmental Laws or the provisions of any
Environmental Laws. No Borrower or Subsidiary has received notice of any other
claim, demand or action by any Person alleging any actual or threatened material
injury or damage to any Person, property, natural resources or the environment
arising from or relating to any release of any Hazardous Materials.

(v)

Each Borrower and Subsidiary has furnished all notices and warnings, made all
reports and has kept and maintained all records required by, and in compliance
with, all Environmental Laws.

(kk)

Insurance. There is in full force and effect one or more policies of insurance
issued by insurers of recognized national standing insuring the properties and
business of each Borrower and its Subsidiaries, and the directors and officers
of each Borrower and its Subsidiaries, against such losses and risks and in such
amounts as are usual and customary in the industry in which any Borrower and its
Subsidiaries operates or conducts business, as required pursuant to Section
8.11. None of the Borrowers or their Subsidiaries is in default with respect to
its obligations under any of such outstanding insurance policies and all
premiums with respect thereto are current. None of the Borrowers or their
Subsidiaries nor any other name insured has failed to give any notice or to
present any material claim under any such policy in a due and timely fashion.
Such policies are in full force and effect on the date hereof and will continue
to be kept in full force and effect on substantially equivalent terms, except to
the extent policies expire and are replaced in the ordinary course of business
with policies on substantially equivalent terms. Except as set forth in Schedule
6.01(kk), all premiums due under such policies have been paid and none of the
Borrowers or their Subsidiaries nor any such insured has been issued or has
received any notice of cancellation, material modification or termination in
respect of any such policy (unless the basis for such notice of cancellation,
material modification or termination in respect of any such policy has been
cured within five (5) days following receipt of such notice by any of the
Borrowers or their Subsidiaries) or is in material default thereunder (unless
cured prior to the earlier of

58

(x) termination of such policy as a result of such default and (y) the fifth
(5th ) day following the occurrence of such default).

(ll)

Reserved.

(mm)

Reserved.

(nn)

Use of Proceeds; Margin Stock. The proceeds to be received by the Borrowers from
the Loans as contemplated hereunder shall be used solely for the purposes set
forth in Section 2.01(f) of this Agreement and applied in accordance with the
uses described therein. No Borrower or Subsidiary is engaged in extending credit
for the purposes of purchasing or carrying margin stock. No Borrower or
Subsidiary has any margin stock, as determined in accordance with the margin
regulations. None of the proceeds of the Loans will be used to buy or carry any
margin stock.

(oo)

Depository and Other Accounts. Schedule 6.01(oo) sets forth a true and complete
list of all banks and other financial institutions and depositories at which any
Borrower or Subsidiary maintains (or has caused to be maintained) Deposit
Accounts, spread accounts, yield supplement reserve accounts, operating
accounts, trust accounts, trust receivable accounts or other accounts of any
kind or nature into which funds of any Borrower or Subsidiary is deposited from
time to time. Such Schedule 6.01(oo) correctly identifies the name and address
of each depository, the name in which each account is held, the purpose of the
account, the account number, the contact person at such depository and his or
her telephone number.

(pp)

Reserved.

(qq)

Books and Records. The minute books and other similar records of Borrowers
contain true and complete records of all actions taken at any meeting of each
Borrower's stockholders, directors, or any committees thereof, as the case may
be, and of all written consents executed in lieu of the holding of any such
meeting. The books and records of Borrowers accurately reflect in all material
respects the assets, liabilities, business, financial condition and results of
operations of Borrowers, as the case may be, and have been maintained in
accordance with GAAP (to the extent applicable) and good business, accounting
and bookkeeping practices, with respect to all periods commencing on or after
November 1, 2004 (subject to adjustment based on the financial statements to be
delivered pursuant to Section 8.03(a) and subject to normal year-end adjustments
and adjustments based on completion of physical inventory).

(rr)

Financial Condition. The Borrowers have heretofore furnished to the
Administrative Agent an Approved Budget for the Borrowers and their respective
Subsidiaries for fiscal year 2005. The Approved Budget has been prepared on a
reasonable basis and in good faith by the Borrowers, and has been based on
assumptions believed by the Borrowers to be reasonable at the time made and upon
the best information then reasonably available to the Borrowers, and none of the
Borrowers is aware of any facts or information that would lead it to believe
that such projections, as so updated, are incorrect or misleading.

59

(ss)

Security Interests. The Security Documents and Interim Order (and the Final
Order, when applicable) create in favor of the Collateral Agent, for the benefit
of the Agents and the Lenders, a legal, valid and enforceable security interest
in the Collateral secured thereby. Such security interests in and Liens on the
Collateral granted thereby are perfected, first priority security interests,
subject only to Permitted Priority Liens, and no further recordings or filings
are or will be required in connection with the creation, perfection or
enforcement of such security interests and Liens.

(tt)

Schedules. All of the information that is required to be scheduled to this
Agreement is set forth on the Schedules attached hereto, and is correct and
accurate, except (i) if this Agreement refers to the correctness and accuracy of
Schedules as of an earlier date and (ii) for differences resulting from
circumstances, conditions, actions or inactions otherwise permitted by the terms
of any Loan Document, including, without limitation, the Effect of Bankruptcy.

Section 6.02.

Survival of Representations and Warranties.

All representations and warranties of each Borrower contained in this Agreement
or any of the other Loan Documents shall survive the execution, delivery and
acceptance thereof by the Agents and each Lender and the parties thereto, the
making of Loans and the closing of the transactions described therein or related
thereto.

Article VII -

Reserved

Article VIII -

Affirmative Covenants

The Borrowers, jointly and severally, covenant and agree that so long as any
Commitments are outstanding and thereafter until payment in full of all of the
Obligations:

Section 8.01.

Visits and Inspections; Lender Meeting. Permit (i) representatives of the
Administrative Agent and any Lender, from time to time, as often as may be
reasonably requested, but only during normal business hours, to visit and
inspect the Properties of each Borrower and each of its Subsidiaries, inspect,
audit and make extracts from its books and records, and discuss with its
officers, its employees and its independent accountants, each Borrower's and
each of its Subsidiaries' business, assets, liabilities, financial condition,
business prospects and results of operations and (ii) appraisers engaged by the
Administrative Agent (whether or not personnel of the Administrative Agent or
any Lender), from time to time, as often as may be reasonably requested, but
only during normal business hours, to visit and inspect the Properties of each
Borrower and each of its Subsidiaries, for the purpose of completing such
requested appraisals. The Administrative Agent or such Lender, if no Default or
Event of Default then exists or is reasonably likely to occur, shall give the
applicable Borrower reasonable prior notice of any such inspection or audit.
Without limiting the foregoing, Borrowers will participate and will cause their
key management personnel to participate in meetings with the Administrative
Agent, the Lenders and their representatives periodically during each year,
which meeting(s) shall be held at such times and such places as may be
reasonably requested by the Administrative Agent.

60

Section 8.02.

Notices. Promptly notify the Administrative Agent and each Lender in writing of
the occurrence of any event or the existence of any fact which renders any
representation or warranty in this Agreement or any of the other Loan Documents
inaccurate, incomplete or misleading to the extent that such event or fact or
the effect thereof would make the Borrowers unable to meet the conditions
precedent to each Loan set forth in Section 5.02, including without limitation
the conditions precedent set forth in Section 5.02(a). Each Borrower agrees to
provide the Administrative Agent and each Lender with prompt written notice of
any amendments, waivers or other modifications of the Fleet Credit Agreement,
together with copies thereof, and the terms and amounts of any fees paid or
payable in connection therewith. In addition, immediately upon any of the
Borrowers obtaining knowledge of any condition or event which constitutes an
Event of Default or Default, the Borrowers shall deliver to the Administrative
Agent and the Lenders an Officer's Certificate specifying (A) the nature and
period of existence of any such Event of Default or Default and (B) the action
the Borrowers have taken, and propose to take with respect thereto.

Section 8.03.

Financial Statements. Keep, and cause each Subsidiary to keep, adequate records
and books of account with respect to its business activities in which proper
entries are made in accordance with customary accounting practices reflecting
all its financial transactions; and cause to be prepared and furnished to the
Administrative Agent and each Lender, the following, all to be prepared in
accordance with GAAP applied on a consistent basis, unless Borrowers' certified
public accountants concur in any change therein and such change is disclosed to
the Administrative Agent and Lenders and is consistent with GAAP:

(a) not later than March 31, 2005, the Consolidated and consolidating (showing
all Borrowers and Domestic Subsidiaries as a Consolidated entity and the Foreign
Subsidiaries on a consolidating basis) audited balance sheets of Borrowers and
the Subsidiaries (including the accounts of all Subsidiaries of Borrowers and
their respective Subsidiaries for the respective periods during which a
Subsidiary relationship existed) as of October 31, 2004, certified by Eisner
LLP, or another firm of independent certified public accountants of recognized
national standing selected by Borrowers but acceptable to the Administrative
Agent in its reasonable discretion and, within a reasonable time thereafter a
copy of any management letter issued in connection therewith;

(b) not later than March 31, 2005, the unaudited financial statements of
Borrowers and the Subsidiaries for the three years ending October 31, 2004, on a
Consolidated basis, certified by the chief financial officer of Falcon as
prepared in accordance with GAAP and fairly presenting in all material respects
the financial position and results of operations of Borrowers and the
Subsidiaries for such fiscal month and period subject only to changes from audit
and year-end adjustments and except that such statements need not contain notes;

(c) not later than ninety (90) days after the close of each fiscal year of
Borrowers, commencing with the fiscal year ending in October 2005, unqualified
(except for a qualification for a change in accounting principles with which the
accountant concurs) audited financial statements of Borrowers and the
Subsidiaries as of the end of such year, on a Consolidated basis, certified by
Eisner LLP, or another firm of

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independent certified public accountants of recognized national standing
selected by Borrowers but acceptable to the Administrative Agent and, within a
reasonable time thereafter a copy of any management letter issued in connection
therewith;

(d) not later than thirty (30) days after the end of each fiscal month
hereafter, including the last fiscal month of each fiscal year of Borrowers,
unaudited interim financial statements of Borrowers and the Subsidiaries as of
the end of such fiscal month and of the portion of the fiscal year then elapsed,
on a Consolidated and consolidating basis (showing all Borrowers and Domestic
Subsidiaries as a Consolidated entity and the Foreign Subsidiaries on a
consolidating basis), certified by the chief financial officer of Falcon as
prepared in accordance with GAAP and fairly presenting in all material respects
the financial position and results of operations of Borrowers and the
Subsidiaries for such fiscal month and period subject only to changes from audit
and year-end adjustments and except that such statements need not contain notes;

(e) not later than ten (10) days after the end of each fiscal month hereafter, a
report of the Borrowers' and the Subsidiaries' sales as of the end of the prior
fiscal month;

(f) together with each delivery of financial statements pursuant to clauses (a),
(b), (c) and (d) of this Section 8.03, a management report (1) setting forth in
comparative form the corresponding figures for the corresponding periods of the
previous fiscal year and (2) identifying the reasons for any significant
variations. The information above shall be presented in reasonable detail and
shall be certified by the chief financial officer of Falcon to the effect that
such information fairly presents in all material respects the results of
operation and financial condition of Borrowers and the Subsidiaries as at the
dates and for the periods indicated;

(g) promptly after the sending or filing thereof, as the case may be, copies of
any proxy statements, financial statements or reports which any Borrower or any
Subsidiary has made available to its Securities holders and copies of any
regular, periodic and special reports or registration statements which any
Borrower or any Subsidiary files with the SEC or any governmental authority
which may be substituted therefor, or any national securities exchange;

(h) upon request of the Administrative Agent, copies of any annual report to be
filed with the Pension Benefit Guaranty Corporation or the Internal Revenue
Service in connection with each Plan; and such other data and information
(financial and otherwise) as the Administrative Agent or any Lender, from time
to time, may reasonably request, bearing upon or related to the Collateral or
any Borrower's or any Subsidiary's financial condition or results of operations;

(i) concurrently with the delivery of the financial statements described in
clause (a) of this Section 8.03, Borrowers shall forward to the Administrative
Agent and each Lender a copy of the accountants' letter to any Borrowers'
management that is prepared in connection with such financial statements; and

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(j)

concurrently with the delivery of the financial statements described in
paragraph (a), (b), (c) and (d) of this Section 8.03, Borrowers shall cause to
be prepared and furnished to the Administrative Agent and each Lender an
Officer's Certificate in the form of Exhibit G hereto executed by the chief
financial officer of Falcon (an "Officer's Certificate").

Section 8.04.

Borrowing Base Certificates. On or before the tenth day of each month from and
after the date hereof, Borrowers shall deliver to the Administrative Agent a
Borrowing Base Certificate, as of the last day of the immediately preceding
month, certified as being true and correct by a Responsible Officer of Falcon,
accompanied by monthly backlog reports, financial information and such
supporting materials as the Administrative Agent may request from time to time.
If the Administrative Agent shall request, Borrowers shall execute and deliver
to the Administrative Agent Borrowing Base Certificates more frequently than
monthly.

Section 8.05.

Landlord, Processor and Storage Agreements. Provide the Administrative Agent
with copies of all agreements between any Borrower or any Domestic Subsidiary
and any landlord, processor, distributor, warehouseman or consignee which owns
any premises at which any Collateral may, from time to time, be kept. In respect
of any lease or warehousing arrangement existing on or entered into by a
Borrower or a Domestic Subsidiary after the Closing Date (other than leases for
showrooms or sales offices), Borrowers shall provide the Administrative Agent
with such landlord waivers or bailee letters with respect to such leased
premises as it may reasonably request. Such landlord waivers or bailee letters
shall be in a form supplied by the Administrative Agent to Borrowers with such
reasonable revisions as are accepted by the Administrative Agent in its sole
discretion.

Section 8.06.

Reserved.

Section 8.07.

Domestic Subsidiaries. Cause each Domestic Subsidiary, whether now or hereafter
in existence, promptly upon the Administrative Agent's request therefor, and, in
any event, contemporaneously with the formation or acquisition of any such
Domestic Subsidiary formed or acquired after the date hereof, to execute and
deliver to the Administrative Agent a security agreement, in each case
satisfactory in form and substance to the Administrative Agent, pursuant to
which such Domestic Subsidiary grants to the Administrative Agent a first
priority Lien (subject only to Permitted Liens) on all of its Properties and, if
requested by the Administrative Agent, satisfactory in form and substance to the
Administrative Agent, pursuant to which such Domestic Subsidiary guarantees the
payment and performance when due of all of the Obligations. Additionally, the
applicable Person shall execute and deliver to the Administrative Agent pledge
agreement, satisfactory in form and substance to the Administrative Agent,
pursuant to which such Person grants to the Administrative Agent a first
priority Lien (subject only to Permitted Liens) with respect to all of the
issued and outstanding Securities of each such Domestic Subsidiary owned by such
Person.

Section 8.08.

Deposit and Brokerage Accounts. For each Deposit Account or brokerage account
that any Borrower at any time opens or maintains, such Borrower shall, at the
Administrative Agent's request and option, contemporaneously with the opening of
such account, pursuant to an agreement in form and substance satisfactory to the
Administrative

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Agent, cause the depository bank or securities intermediary, as applicable, to
agree to comply at any time with instructions from the Administrative Agent to
such depository bank or securities intermediary, as applicable, directing the
disposition of funds from time to time credited to such deposit or brokerage
account, without further consent of such Borrower.

Section 8.09.

Updated Information. Promptly notify the Administrative Agent in writing of (a)
each state or jurisdiction in which any Borrower or any Subsidiary qualifies to
do business after the date hereof, (b) the use by any Borrower or any Subsidiary
of a legal, fictitious or trade name not listed on Schedule 6.01(e) hereto, (c)
any change after the date hereof in the tax identification number of any
Borrower or any Domestic Subsidiary, (d) the ownership by any Borrower or any
Subsidiary of any patent, trademark, service mark, tradename, copyright, license
or other similar rights not listed on Schedule 6.01(p), (e) the assertion by any
Person of a claim against any Borrower or any Subsidiary that its use of its
Intellectual Property or the conduct of its business does or may infringe upon
the Intellectual Property rights of any third party, (f) any change after the
date hereof in the list of capitalized and operating personal property leases
and real Property leases of any Borrower or any Subsidiary listed on Schedule
6.01(v) hereto and (g) any change after the date hereof in the list of Plans
listed on Schedule 6.01(w) hereto; provided, that Borrowers shall only be
required to provide the foregoing information regarding the Foreign Subsidiaries
at such time as such information becomes known to a Responsible Officer.

Section 8.10.

Consultant. Borrowers agree that they shall continue to retain Alvarez & Marsal,
Inc. (or another operations consultant to the Borrowers which is acceptable to
the Administrative Agent and the Required Lenders in their sole discretion) as
operations consultant to assist the management and board of directors of Falcon
in seeking to improve financial and operating performance, including but not
limited to assistance in evaluating Falcon's Morristown, Tennessee manufacturing
operations and implementation of operational improvements at such location,
assistance with identification of cost reduction and operational improvement
opportunities and the making of related recommendations, as necessary, and to
perform such other advisory functions as are reasonably requested by the
Administrative Agent and the Lenders. Borrowers shall provide the Administrative
Agent and the Lenders with access to such consultant and shall cause such
consultant to provide the Administrative Agent and the Lenders with such reports
as shall be reasonably requested by the Administrative Agent. Notwithstanding
the foregoing, Borrowers shall retain the authority to supervise such
consultant. The Borrowers acknowledge and agree that the management of their
businesses is within their sole control, and nothing in this Agreement shall
obligate Borrowers to follow the recommendations of such consultant.

Section 8.11.

Certain Insurance. In addition to the insurance required to be maintained
pursuant to Section 8.17, Borrowers shall at all times maintain in full force
and effect directors and officers liability insurance, employment practice
liability insurance and flood insurance in such coverage amounts and with such
insurers as are reasonably acceptable to the Administrative Agent and deliver to
the Administrative Agent and Lenders the certificates evidencing the existence
of such coverage including such loss payable endorsements as are acceptable to
the Administrative Agent.

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Section 8.12.

Payment of Notes and Other Obligations. Fully and timely pay, and ensure that
each of their Subsidiaries fully and timely pays, all Obligations owing pursuant
to the terms of this Agreement, the Notes (including, without limitation, all
principal thereof, premium, if any, and interest thereon), and the other Loan
Documents to which they are parties, in each case on the dates and in the manner
provided for herein and therein.

Section 8.13.

Compliance with Laws; Consents. Comply, and ensure that each of their
Subsidiaries complies, at all times with all applicable laws (including, without
limitation, Environmental Laws, ERISA and the Internal Revenue Code) in respect
of the conduct of its or their businesses and the ownership of its or their
Properties in the states or other jurisdictions in which it or they conduct
their respective businesses, except to the extent that non-compliance has not
resulted in, and could not reasonably be expected to result in, a Material
Adverse Change. The Borrowers shall obtain and maintain and shall ensure that
each of their respective Subsidiaries obtains and maintains all Consents
necessary in connection with the execution, delivery and performance of this
Agreement and the other Loan Documents, the consummation of the transactions
herein and therein contemplated and all Consents necessary in connection with
the conduct of their business and the ownership of their properties.

Section 8.14.

Legal Existence. At all times do or cause to be done all things necessary to (a)
maintain and preserve its and its Subsidiaries legal existence organizational
and tax structure and its and their material rights and privileges, (b) become
or remain duly qualified and in good standing in each jurisdiction in which the
character of the properties owned or leased by it or its Subsidiaries or in
which the transaction of its business makes such qualification necessary, except
where the failure to be so qualified has not resulted in, and could not
reasonably be expected to result in, a Material Adverse Change and (c) preserve,
renew and keep in full force and effect all of its and its Subsidiaries
Operating Licenses, except where the failure to maintain such Operating Licenses
has not resulted in, and could not reasonably be expected to result in, a
Material Adverse Change.

Section 8.15.

Maintenance of Properties. Maintain and preserve all of its or their and their
respective Subsidiaries' Properties which are necessary or materially useful in
the conduct of their respective businesses in good working order and condition,
ordinary wear and tear excepted, except where the failure to do so would not
result in a Material Adverse Change, and comply in all material respects at all
times with the provisions of all material personal Property leases to which each
of them is a party as lessee or under which each of them occupies Property, so
as to prevent any loss or forfeiture thereof or thereunder. Unless rejected
pursuant to the Bankruptcy Code, the Borrowers shall, and shall cause their
respective Subsidiaries to, make all payments and otherwise perform all of their
obligations under all leases of real Property, and all leases of material
personal Property, to which any such Person is a party, keep such leases in full
force and effect and not permit such leases to lapse or be terminated (or any
rights to renew such leases to be forfeited or canceled), notify the
Administrative Agent of any material default by any party thereto and cooperate
with the Administrative Agent in all respects to cure any such default.
Notwithstanding anything to the contrary contained in this Section 8.15, the
Borrowers may determine in good faith that any of their or their respective
Subsidiaries' assets or Properties, whether owned or leased, is obsolete or has
been damaged and the cost of repair makes it inadvisable to repair such asset or
Property.

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Section 8.16.

Communications with Accountants. The Borrowers hereby authorize the
Administrative Agent and each Lender to communicate directly with the Borrowers'
independent certified public accountants, and authorize such accountants to
disclose to the Administrative Agent and each Lender any and all financial
statements and other supporting financial documents, workpapers and schedules as
Agent and/or any Lender may request, without any restrictions being placed on
such communications.

Section 8.17.

Environmental Matters. The Borrowers shall, and shall use commercially
reasonable efforts to cause all tenants and other Persons who may come upon any
real Property to comply in all material respects, with all Environmental Laws,
including those requiring disclosures to prospective and actual buyers or
tenants of all or any portion of the real Property. The Borrowers will not, and
will not permit their Subsidiaries to, install or allow to be installed any
underground storage tanks on any real Property. The Borrowers shall each
promptly (and in any event within five (5) Business Days) notify the
Administrative Agent in writing (i) if it knows, suspects or believes there may
be any Hazardous Materials in violation of applicable Environmental Laws in or
around any part of the real Property, any improvements constructed on the real
Property, or the soil, groundwater or soil vapor on or under the real Property,
or knows that any Borrower or Subsidiary or the real Property is subject to any
threatened or pending investigation by any governmental authority under any
applicable laws pertaining to any Hazardous Materials, and (ii) of any claim
made or threatened by any Person arising out of or resulting from any Hazardous
Materials being present or released in, on or around any part of the real
Property, any improvements constructed on the real Property or the soil,
groundwater or soil vapor on or under the real Property in which the amount
involved is $100,000 or more and not covered by insurance or in which injunctive
or similar relief is sought (any of the matters described in clauses (i) and
(ii) above being referred to as a "Hazardous Materials Claim"). The Borrowers
shall promptly undertake any and all Remedial Work to the extent required by any
governmental authority involved or as recommended by prudent business practices,
if such standard requires a higher degree of remediation, and in all events to
minimize any impairment to the real Property. All Remedial Work must be
conducted in a diligent and timely fashion by licensed contractors acting under
the supervision of a consulting environmental engineer following receipt of any
required permits, licenses or approvals. The selection of the Remedial Work
contractors and consulting environmental engineer, the contracts entered into
with such parties, any disclosures to or agreements with any public or private
agencies or parties relating to Remedial Work and the written plan for the
Remedial Work (and any changes thereto) at the Administrative Agent's option,
are subject to prior written notice being given to the Administrative Agent.

Section 8.18.

Further Assurances. Each Borrower shall take such action and execute,
acknowledge and deliver, and cause each of its Subsidiaries to take such action
and execute, acknowledge and deliver, at its sole cost and expense, such
agreements, instruments or other documents as the Lenders may reasonably require
from time to time in order (i) to carry out more effectively the purposes of
this Agreement and the other Loan Documents, (ii) to subject to valid and
perfected first priority Liens (except for Permitted Liens and the failure to
perfect funds on deposit in Deposit Accounts of the Loan Parties (other than the
Disbursement Account) in an aggregate amount not to exceed $50,000 at any one
time) any of the Collateral or any other property of the Borrowers and their
respective Subsidiaries acquired after the Closing Date, (iii) to establish and
maintain the validity and effectiveness of any of the

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Loan Documents and the validity, perfection and priority of the Liens intended
to be created thereby, and (iv) to better assure, convey, grant, assign,
transfer and confirm unto the Collateral Agent for the ratable benefit of the
Lenders the rights now or hereafter intended to be granted to the Collateral
Agent for the ratable benefit of the Lenders under this Agreement or any other
Loan Document. Notwithstanding the foregoing, the Agents do not intend to file
financing statements, record mortgages or seek landlord consents unless the
Agents make a determination that the Interim Order and Final Order fail to
adequately perfect the security interests in the Collateral.

Section 8.19.

Change in Collateral; Collateral Records. The Borrowers shall (i) give the
Administrative Agent and the Collateral Agent not less than thirty (30) days'
prior written notice of any change in the location of any Collateral, that is
inventory (other than inventory in transit) or equipment other than locations
set forth on Schedule 6.01(f) and other than any change in location resulting
from a Disposition which is permitted under this Agreement, and any change
permitted under the Security Documents, (ii) advise the Collateral Agent
promptly, in sufficient detail, of any change which could reasonably be expected
to result in a Material Adverse Change relating to the value of the Collateral
or the Lien granted thereon and (iii) execute and deliver, and cause each of
their respective Subsidiaries to execute and deliver, to the Collateral Agent
for the benefit of the Lenders from time to time, solely for the Collateral
Agent's convenience in maintaining a record of Collateral, such written
statements and schedules, maintained by the Borrowers and their respective
Subsidiaries in the ordinary course of business, as the Collateral Agent may
require, designating, identifying or describing the Collateral.

Section 8.20.

Delivery of Phase I Reports and Other Matters. Within thirty (30) days of the
Closing Date Borrowers shall deliver to the Administrative Agent copies of Phase
I reports, together with ALTA surveys certified to the Administrative Agent with
respect to each of the Properties subject to a Mortgage, in each case in form
and substance satisfactory to the Administrative Agent. As soon as practicable
after the Closing Date, Borrowers shall instruct the title company to deliver
original signed title insurance policies for each of the Properties subject to a
Mortgage.

Section 8.21.

Delivery of Bankruptcy Court Filings. Prior to or simultaneously with the filing
thereof, the Borrowers shall deliver to the Administrative Agent and its counsel
copies of all pleadings, motions and other documents filed or to be filed with
and submitted to the Bankruptcy Court on behalf of any of the Borrowers.

Section 8.22.

Budgets. Not later than one month prior to the expiration of the initial Budget
Period, the Borrowers shall deliver to the Administrative Agent an updated
budget for an additional six months in substantially the same format as the
initial Approved Budget, which budget upon acceptance by the Administrative
Agent and the Lenders in their sole discretion, shall become the Approved
Budget.

Section 8.23.

Resignation of Depository. In the event that Fleet National Bank gives notice of
its intention to terminate the Blocked Account Agreement and/or close the
Blocked Account referred to therein, Borrowers shall promptly (and in any event
prior to such termination or closing) enter into Control Agreements with respect
to any replacement

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Deposit Accounts established by the Borrowers with a bank or banks chosen by
Borrowers and satisfactory to the Administrative Agent, and shall enter into
related lockbox and cash management arrangements requested by or otherwise
satisfactory to the Administrative Agent.

Article IX -

Negative Covenants

The Borrowers, jointly and severally, covenant and agree that each Borrower
shall comply with the following covenants so long as any Commitments are
outstanding and thereafter until payment in full of all of the Obligations:

Section 9.01.

Mergers; Consolidations; Acquisitions; Structural Changes.

Merge or consolidate, or permit any Subsidiary to merge or consolidate, with any
Person; nor change its or any Subsidiary's state of incorporation or
organization, Type of Organization or Organizational I.D. Number; nor change its
or any Subsidiary's legal name; nor acquire, nor permit any Subsidiary to
acquire, all or any substantial part of the Properties of any Person; nor make
any change in its or its Subsidiaries' business objectives, purposes, structure
on operations, except for:

(a) mergers or consolidations of any Borrower (other than Falcon) or any
Domestic Subsidiary of a Borrower into a Borrower or a Wholly Owned Domestic
Subsidiary of a Borrower;

(b) mergers or consolidations of any Foreign Subsidiary of a Borrower into any
other Foreign Subsidiary of a Borrower; and

(c) acquisitions of assets consisting of fixed assets or real property that
constitute Capital Expenditures permitted under Section 9.08.

Section 9.02.

Loans.

Make, or permit any Subsidiary to make, any loans or other advances of money to
any Person, including any Foreign Subsidiary, except:

(a) travel advances, advances against commissions and other similar advances to
employees in the ordinary course of business;

(b) extensions of trade credit in the ordinary course of business;

(c) deposits with financial institutions permitted under this Agreement;

(d) prepaid expenses and deposits with vendors made in the ordinary course of
business;

(e) so long as no Default or Event of Default is then in existence or is
reasonably likely to occur, loans made after the Closing Date by a Borrower or a

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Domestic Subsidiary of a Borrower to a Foreign Subsidiary of a Borrower, the
Securities of which are subject to a Pledge Agreement, in an aggregate amount at
any time outstanding for all such Foreign Subsidiaries, together with all equity
investments permitted under clause (ii) of the definition of the term Restricted
Investments, made by a Borrower or a Domestic Subsidiary of a Borrower after the
Closing Date in such Foreign Subsidiaries, not in excess of $1,000,000 in any
fiscal year; provided, that any unused portion of such amount may be carried
over to the next fiscal year; and

(f)

loans by a Foreign Subsidiary of a Borrower to another Foreign Subsidiary of a
Borrower, the Securities of which are subject to a Pledge Agreement, in each
case so long as such loans are evidenced by a written agreement and subordinated
to the prior repayment in full of the Obligators on terms satisfactory to the
Administrative Agent.

Section 9.03.

Total Indebtedness for Money Borrowed.

Create, incur, assume, issue, or suffer to exist, or permit any Subsidiary to
create, incur, assume, issue, or suffer to exist, any Indebtedness for Money
Borrowed. Notwithstanding the foregoing, the Borrowers may create, incur, assume
or suffer to exist, or permit any Subsidiary to create, incur, or suffer to
exist (without duplication):

(a) Obligations owing to the Administrative Agent or any Lender under this
Agreement or any of the other Loan Documents;

(b) Indebtedness for Money Borrowed under the Fleet Credit Agreement;

(c) Indebtedness for Money Borrowed existing on the date of this Agreement and
listed on Schedule 9.03(c) and any renewals, extensions, refinancings or
replacements thereof, but only if (a) the principal amount of such new
Indebtedness for Money Borrowed does not exceed the principal amount of the
existing Indebtedness for Money Borrowed at the time of such transaction, and
(b) such new Indebtedness for Money Borrowed does not contain terms materially
more restrictive to Borrowers and their Subsidiaries than those contained in the
existing Indebtedness for Money Borrowed;

(d) the Subordinated Note Debt and the Convertible Subordinated Debt;

(e) Subordinated Debt (other than the Subordinated Note Debt and the Convertible
Subordinated Debt), so long as the aggregate principal amount of such
Subordinated Debt does not exceed $5,000,000 at any time;

(f) Permitted Purchase Money Indebtedness and Permitted Capital Lease
Obligations, in an aggregate principal amount not in excess of $300,000;

(g) guaranties of any Indebtedness permitted under this Section 9.03; provided
that in the case of any Subordinated Debt such guaranties are subordinated to

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the Obligations (including any guaranty thereof) on terms satisfactory to the
Administrative Agent;

(h) Indebtedness for Money Borrowed in respect of intercompany loans permitted
under Section 9.02(e) and (f); and

(i) Indebtedness for Money Borrowed of any Foreign Subsidiary in an aggregate
amount for all of the Foreign Subsidiaries not to exceed $1,000,000 at any time
outstanding.

Section 9.04.

Affiliate Transactions.

Enter into, or be a party to, or permit any Subsidiary to enter into or be a
party to, any transaction with any Affiliate of any Borrower or any holder of
more than 5% of the Securities of any Borrower or any Subsidiary (other than,
subject to the limitations contained in Sections 9.02 and 9.12, any Borrower or
any Subsidiary), including without limitation any management, consulting or
similar fees, except (i) in the ordinary course of and pursuant to the
reasonable requirements of such Borrower's or such Subsidiary's business and
upon fair and reasonable terms which are (1) approved in writing in advance by a
majority of the disinterested directors of the Board of Directors of such or
such Subsidiary (2) fully disclosed to the Administrative Agent and (3) are no
less favorable to such Borrower or such Subsidiary than would be obtained in a
comparable arms-length transaction with a Person not an Affiliate or Security
holder of such Borrower, (ii) other Affiliate transactions that are specifically
permitted under other provisions of this Agreement, (iii) the sale of Inventory
by a Borrower or a Borrower's Subsidiary to a Borrower or a Borrower's
Subsidiary, in a manner, at pricing and with payment terms no more
disadvantageous to such Borrower than those currently in effect, and (iv) as
described on Schedule 9.04 hereto.

Section 9.05.

Limitation on Liens.

Create or suffer to exist, or permit any Subsidiary to create or suffer to
exist, any Lien upon its Property, income or profits, whether now owned or
hereafter acquired, except:

(a) Liens at any time granted in favor of the Administrative Agent for the
benefit of Lenders, pursuant to the priorities provided for herein;

(b) Liens securing the Fleet Debt, including, without limitation, those granted
by the Bankruptcy Court as replacement liens in exchange for use of cash and
other collateral;

(c) claims of professionals to Funded Reserves;

(d) Liens for taxes, assessments or governmental charges (excluding any Lien
imposed pursuant to any of the provisions of ERISA) not yet due, or being
contested in the manner described in Section 6.01(n) hereto, but only if in
Administrative Agent's reasonable judgment such Lien would not reasonably be
expected to adversely effect the Agents' rights or the priority of the
Collateral Agent's Lien on any Collateral;

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(e) Liens arising in the ordinary course of the business of such Borrower or any
Subsidiary by operation of law or regulation (such as statutory and common law
Liens of landlords, carriers, warehousemen, mechanics, materialmen and
suppliers), but only if payment in respect of any such Lien is not at the time
required (or is being contested in good faith by appropriate proceedings being
diligently conducted, so long as the aggregate amount of such payments being so
contested does not exceed $100,000) and such Liens do not, in the aggregate,
materially detract from the value of the Property of such Borrower or any
Subsidiary or materially impair the use thereof in the operation of the business
of such Borrower or any Subsidiary;

(f) Purchase Money Liens securing Permitted Purchase Money Indebtedness;

(g) Liens securing Permitted Capital Lease Obligations;

(h) such other Liens outstanding prior to the Petition Date and listed in the
applicable filing with the Bankruptcy Court;

(i) Liens incurred or deposits made in the ordinary course of business in
connection with (1) worker's compensation, social security, unemployment
insurance and other like laws or (2) sales contracts, leases, statutory
obligations, work in progress advances, bids, licenses, surety bonds,
performance bonds and other similar obligations not incurred in connection with
the borrowing of money or the payment of the deferred purchase price of
property;

(j) reservations, covenants, zoning and other land use regulations, title
exceptions or encumbrances granted in the ordinary course of business, affecting
real Property owned or leased by a Borrower or a Subsidiary; provided, that such
exceptions do not in the aggregate materially interfere with the use of such
Property in the ordinary course of such Borrower's or such Subsidiary's
business;

(k) judgment Liens on Properties (other than Property subject to a Mortgage) in
respect of judgments or awards in place for less than the applicable period for
taking an appeal so long as execution is not levied thereunder or in respect of
which the applicable Borrower or Subsidiary shall at the time in good faith be
prosecuting an appeal and in respect of which a stay of execution shall have
been obtained pending such appeal;

(l) Liens on the assets of Foreign Subsidiaries securing Indebtedness of Foreign
Subsidiaries permitted under Section 9.03(i);

(m) any interest of title of a lessor under, and Liens arising from financing
statements (or equivalent filings, registrations or agreements in foreign
jurisdictions) relating to, leases permitted by this Agreement;

(n) Liens of a collection bank arising under the UCC (or similar provisions of
applicable law) on items in the course of collection;

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(o) normal and customary rights of setoff upon cash deposits in favor of banks
and other depository institutions (subject to limitations on such rights
contained in any applicable Control Agreement);

(p) matters appearing on lender's mortgagee title insurance policies delivered
to and accepted by the Administrative Agent, to the extent requested by the
Administrative Agent; and

(q) such other Liens as the Administrative Agent and the Required Lenders may
hereafter approve in writing.

Section 9.06.

Reserved.

Section 9.07.

Distributions.

Declare or make, or permit any Subsidiary to declare or make, any Distributions,
except for:

(a)

Distributions by any Borrower (other than Falcon) or any Subsidiary of a
Borrower to Falcon or a Subsidiary of Falcon; and

(b) Distributions paid solely in Securities of a Borrower or any Subsidiary
provided that no Default or Event of Default has occurred and is continuing or
is reasonable likely to occur.

Section 9.08.

Capital Expenditures.

Make Capital Expenditures (including, without limitation, by way of capitalized
leases) which, in the aggregate, as to all Borrowers and all of the
Subsidiaries, exceed $2,000,000 for the fiscal year ending on or about October
31, 2005 or for the period from and including the Closing Date to the Maturity
Date.

Section 9.09.

Disposition of Assets.

Sell, lease or otherwise dispose of any of, or permit any Subsidiary to sell,
lease or otherwise dispose of any of, its Properties, including any disposition
of Property as part of a sale and leaseback transaction, to or in favor of any
Person, except for:

(a)

sales of Inventory in the ordinary course of business;

(b) transfers of Property by a Borrower or a Subsidiary to a Borrower or a
Domestic Subsidiary;

(c) transfers of Property by a Foreign Subsidiary to another Foreign Subsidiary
whose Securities are subject to a Pledge Agreement;

(d) dispositions of investments described in paragraphs (v), (vi), (vii) and
(viii) of the definition of the term "Restricted Investments";

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(e)

sales, leases or other dispositions of Equipment or other fixed assets with a
fair market value of up to $500,000 in the aggregate in any one calendar year,
that are substantially worn, damaged or obsolete and that are replaced with
Equipment or other fixed assets of like kind, function and value; provided, that
the Borrowers shall be in compliance with the provisions of Section 3.01(b)(ii)
with respect thereto; and

(f)

sales, leases and other dispositions of (1) excess inventory with a fair market
value of up to $1,000,000 in the aggregate, (2) the Phillocraft product line in
an aggregate amount of up to $150,000 and (3) other Property not included within
clause (e) above or otherwise within this clause (f), with a fair market value
of up to $100,000 in the aggregate in any one calendar year, so long as, in each
case, (a) no Default or Event of Default is then in existence or is reasonably
likely to occur or would result from such transaction and (b) the proceeds
thereof are applied to the Obligations in accordance with Section 3.01(b).

Section 9.10.

Securities of Subsidiaries.

Permit any of its Domestic Subsidiaries to issue any additional Securities
except to a Borrower or a Domestic Subsidiary and except for director's
qualifying Securities; or permit any of its Foreign Subsidiaries to issue any
additional Securities except to a Borrower or a Subsidiary and except for
director's qualifying Securities.

Section 9.11.

Bill-and-Hold Sales, Etc.

Make, or permit any Subsidiary to make, a sale to any customer on a
bill-and-hold, guaranteed sale, sale and return, sale on approval, repurchase or
return or consignment basis, except for consignment sales of Inventory with an
aggregate value not in excess of $250,000 at any time outstanding.

Section 9.12.

Restricted Investment.

Make or have, or permit any Subsidiary of such Borrower to make or have, any
Restricted Investment.

Section 9.13.

Subsidiaries and Joint Ventures.

Create, acquire or otherwise suffer to exist, or permit any Subsidiary of such
Borrower to create, acquire or otherwise suffer to exist, any Subsidiary or
joint venture arrangement or limited partnership or limited liability company
not in existence on the Closing Date and described in Schedule 9.13, or become a
general partner of any such Person.

Section 9.14.

Tax Consolidation.

File or consent to the filing of any consolidated income tax return with any
Person other than the other Borrowers and the Subsidiaries of Borrowers.

Section 9.15.

Governing Documents.

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Agree to, or suffer to occur, any amendment, supplement or addition to its or
any Subsidiary's Governing Documents that could reasonably be expected to result
in a Material Adverse Change.

Section 9.16.

Fiscal Year End.

Change, or permit any Subsidiary to change, its fiscal year end.

Section 9.17.

Negative Pledges.

Except with respect to Falcon Mimon in connection with its Indebtedness for
Money Borrowed, after the date hereof, enter into any agreement limiting the
ability of any Borrower or any Subsidiary to (i) voluntarily create Liens upon
any of its Property (other than limitations on junior Liens on Property subject
to Liens permitted by subsections (e) and (f) of Section 9.05); (ii) pay
dividends or make any other Distributions on its Securities; (iii) make loans or
advances to any Borrower or any Subsidiary; or (iv) transfer any of its Property
to any Borrower or any Subsidiary.

Section 9.18.

Reserved.

Section 9.19.

Leases.

Be or become, or permit any Subsidiary to be or become, a lessee under any
operating lease (other than a lease under which a Borrower or any Subsidiary is
lessor) of Property if the aggregate Rentals payable during any current or
future period of twelve (12) consecutive months under the lease in question and
all other leases under which Borrowers or any Subsidiary is then lessee would
exceed $4,000,000. The term "Rentals" means, as of the date of determination,
all payments which the lessee is required to make by the terms of any lease.

Section 9.20.

No Other Plans of Reorganization.

The Borrowers shall not, and shall not permit any of their respective
Subsidiaries to file, support, endorse or otherwise consent to any plan of
reorganization or propose any sale of assets of the Borrowers or their
respective Subsidiaries outside of the ordinary course of business without the
prior written consent of the Administrative Agent unless such plan or sale
provides for the payment of the Obligations in full in cash on the Effective
Date.

Section 9.21.

Payments of Certain Fees.

The pre-petition and post-petition Liens, security interests and the
administrative priority claims of the Administrative Agent and the Lenders shall
be senior to and no proceeds of the Loans nor any Collateral (nor proceeds
thereof) may be used to pay, any and all claims for services rendered by any of
the professionals retained by the Borrowers or any official committee in
connection with the investigation of, assertion of or joinder in any claim,
counterclaim, action, proceeding, application, motion, objection, defense or
other contested matter against the Administrative Agent or the Lenders;
provided, however, that the foregoing limitations shall not apply to claims for
services rendered by the professionals retained by the official creditors'
committee in an amount not to exceed $25,000 in connection with the

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investigation of the validity, extent, priority, avoidability or enforceability
of the Indebtedness under the Pre-Petition Term Loan Documents or such parties'
liens and security interests on the collateral granted thereunder. In the event
the Chapter 11 Cases are dismissed or the jurisdiction of the Bankruptcy Court
is otherwise terminated, fees and expenses allowed and  paid to professionals in
an interim or final basis shall not be subject to disgorgement.

Section 9.22.

No Amendment to Interim Order or Final Order.

The Borrowers shall not, and shall not permit their respective Subsidiaries to,
amend, modify or otherwise change the Interim Order or the Final Order or
consent to any such amendment, modification or change, without the prior written
consent of the Administrative Agent.

Section 9.23.

Certain Agreements.

The Borrowers shall not, and shall not permit their respective Subsidiaries to,
agree to any material amendment or other material change to or material waiver
of any of its rights under any material Contractual Obligation (other than the
rejection of, entry into or modification of, any Contractual Obligation under
any Chapter 11 Case).

Article X -

Reserved

Article XI -

Events of Default, Rights and Remedies

Section 11.01.

Events of Default. Each of the following occurrences shall constitute an Event
of Default under this Agreement:

(a)

Payment of Obligations. Borrowers shall fail to pay any of the Obligations
(whether principal, reimbursement obligations, interest, fees, expenses,
indemnities or other obligations) when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise).

(b)

Misrepresentations. Any representation, warranty or other statement made or
furnished to the Agents or any Lender by or on behalf of any Borrower, any
Subsidiary in this Agreement, any of the other Loan Documents or any instrument,
certificate or financial statement furnished in compliance with or in reference
thereto proves to have been false or misleading when made, furnished or deemed
to be made hereunder (i) in the case of each Non-Qualified Representation in any
material respect, or (ii) in the case of each other such representation,
warranty or other statement, where the reason for such representation, warranty
or statement being false or misleading has resulted or could reasonably be
expected to result in a Material Adverse Change (and, for purposes of making any
such determination, any qualification contained in any such representation or
warranty based on Material Adverse Change or other concept of materiality, and
any qualification based on a threshold Dollar amount, shall be ignored

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and given no effect so as to avoid a redundancy in materiality qualifications
with respect to any such representation or warranty).

(c)

Breach of Specific Covenants. Any Borrower shall fail or neglect to perform,
keep or observe any covenant contained in Article VIII (except Sections 8.02,
8.03, 8.05, 8.08, 8.15 and 8. 23), Article IX or Article XII hereof on the date
that such Borrower is required to perform, keep or observe such covenant or
shall fail or neglect to perform, keep or observe any covenant contained in
Sections 8.02, 8.03, 8.05, 8.08, 8.15 and 8. 23 hereof within five (5) days
following the date on which Borrowers are required to perform, keep or observe
such covenant.

(d)

Breach of Other Covenants. Any Borrower shall fail or neglect to perform, keep
or observe any covenant contained in this Agreement (other than a covenant which
is dealt with specifically elsewhere in Section 11.01 hereof) and the breach of
such other covenant is not cured to the Administrative Agent's satisfaction
within ten (10) Business Days after the sooner to occur of Borrowers' receipt of
notice of such breach from the Administrative Agent or the date on which such
failure or neglect first becomes known to any officer of any Borrower.

(e)

Default Under Security Documents. Any event of default shall occur under, or any
Borrower or any Subsidiary shall default in the performance or observance of any
term, covenant, condition or agreement contained in, any of the Security
Documents and such default shall continue beyond any applicable grace or cure
period.

(f)

Uninsured Losses. Any material loss, theft, damage or destruction of any portion
of the Collateral having a fair market value of $500,000, in the aggregate, if
not fully covered (subject to such deductibles and self-insurance retentions as
the Administrative Agent shall have permitted) by insurance.

(g)

Business Disruption; Condemnation. Except with respect to Falcon Mimon, there
shall occur a cessation of a substantial part of the business of any Borrower or
any Subsidiary for a period which materially adversely affects such Borrower's
or such Subsidiary's capacity to continue its business on a profitable basis; or
any Borrower or any Subsidiary shall suffer the loss or revocation of any
material license or permit now held or hereafter acquired by such Borrower or
such Subsidiary which is necessary to the continued or lawful operation of its
business; or any Borrower or any Subsidiary shall be enjoined, restrained or in
any way prevented by court, governmental or administrative order from conducting
all or any material part of its business affairs; or any material lease or
agreement pursuant to which any Borrower or any Subsidiary leases, uses or
occupies any Property shall be canceled or terminated prior to the expiration of
its stated term, except any such lease or agreement the cancellation or
termination of which has not resulted in, and could not reasonably be expected
to result in, a Material Adverse Change; or any material portion of the
Collateral shall be taken through condemnation or the value of such Property
shall be impaired through condemnation.

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(h)

ERISA. A Reportable Event shall occur which, in the Administrative Agent's
reasonable determination, constitutes grounds for the termination by the Pension
Benefit Guaranty Corporation of any Plan or for the appointment by the
appropriate United States district court of a trustee for any Plan, or if any
Plan shall be terminated or any such trustee shall be requested or appointed, or
any Borrower or any Subsidiary is in "default" (as defined in Section 4219(c)(5)
of ERISA) with respect to payments to a Multiemployer Plan resulting from such
Borrower's or such Subsidiary's complete or partial withdrawal from such Plan
and, in each case, any such event could reasonably be expected to result in a
Material Adverse Change.

(i)

Invalidity of Documents; Challenge to Agreement. Any provision of any Loan
Document shall at any time for any reason (other than pursuant to the express
terms thereof) cease to be valid and binding on or enforceable against any
Borrower intended to be a party thereto; any Borrower or any Subsidiary, or any
Affiliate of any of them, shall challenge or contest in any action, suit or
proceeding the validity or enforceability of this Agreement or any of the other
Loan Documents, the legality or enforceability of any of the Obligations or the
perfection or priority of any Lien granted to the Collateral Agent; or any
Borrower shall deny in writing that it has any liability or obligation purported
to be created under any Loan Document.

(j)

Criminal Forfeiture. Any Borrower or any Subsidiary shall be criminally indicted
or convicted under any law that could lead to a forfeiture of any material
Property of such Borrower or such Subsidiary.

(k)

Judgments. Any money judgments, writ of attachment or similar processes
(collectively, "Judgments") are issued or rendered against any Borrower or any
Subsidiary, or any of their respective Property (i) in the case of money
judgments (other than any such money judgment issued or rendered against Falcon
Mimon or its Property), in an amount of $100,000 or more for any single
judgment, attachment or process or $250,000 or more for all such judgments,
attachments or processes in the aggregate, in each case in excess of any
applicable insurance with respect to which the insurer has admitted liability,
and (ii) in the case of non-monetary Judgments, such Judgment or Judgments (in
the aggregate) could reasonably be expected to result in a Material Adverse
Change, in each case which Judgment is not stayed, released or discharged within
thirty (30) days.

(l)

Default as to Other Indebtedness for Money Borrowed. Any Borrower shall fail to
make any payment when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) with respect to any Indebtedness for Money
Borrowed entered into after the Petition Date if the aggregate amount of such
Indebtedness for Money Borrowed is in excess of $300,000 in the aggregate and
such failure shall continue after the applicable grace period, if any, specified
in the agreement or instrument relating to such Indebtedness for Money Borrowed;
or any other breach, default or event of default shall occur, or any other
condition shall exist under any instrument, agreement or indenture pertaining to
any such Indebtedness for Money Borrowed, if the effect thereof (with or without
the giving of notice or lapse of time or both) is to cause an acceleration,
mandatory redemption or

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other required repurchase of such Indebtedness for Money Borrowed or, as to such
Indebtedness for Money Borrowed, permit the holder or holders of such
Indebtedness for Money Borrowed to accelerate the maturity of any such
Indebtedness for Money Borrowed or require a redemption or other repurchase of
such Indebtedness for Money Borrowed; or any Indebtedness for Money Borrowed if
the aggregate amount of such Indebtedness for Money Borrowed is $300,000 shall
be declared be due and payable (by acceleration or otherwise) or required to be
prepaid, redeemed or otherwise repurchased by any Borrower (other than by a
regularly scheduled required prepayment) prior to the stated maturity thereof.

(m)

Loan Documents. At any time, for any reason, (i) any Loan Document, the Interim
Order and the Final Order (when applicable) shall for any reason (other than
pursuant to the express terms hereof or thereof) fail or cease to create a valid
and perfected Lien or the Liens intended to be created thereby are, or any
Borrower seeks to render such Liens, invalid or unperfected except for the
failure to perfect funds on deposit in Deposit Accounts of the Borrowers in an
aggregate amount not to exceed $50,000 at any one time, or (ii) Liens in favor
of the Collateral Agent contemplated by the Loan Documents shall be invalidated
or otherwise cease to be in full force and effect, or such Liens shall not have
the priority contemplated hereby or by the other Loan Documents , the Interim
Order and the Final Order (subject to Permitted Liens).

(n)

Change of Control. A Change of Control shall have occurred.

(o)

Material Adverse Change. A Material Adverse Change shall have occurred and be
continuing.

(p)

Post Bankruptcy Filing Events. (A) Failure of the Bankruptcy Court to enter the
Interim Order on or before February 9, 2005; (B) failure of the Bankruptcy Court
to enter the Final Order acceptable to the Lenders in their sole discretion
within 30 days of the Closing Date; (C) dismissal of any material portion of the
Chapter 11 Cases with respect to any of the Borrowers or conversion of any of
such Chapter 11 Cases to a Chapter 7 case; (D) appointment of a Chapter 11
trustee or examiner or other person with expanded powers; (E) granting of relief
from the automatic stay to permit (1) payment of any pre-petition claims other
than Permitted Pre-Petition Payments or (2) foreclosure on material assets of
the Borrowers; (F) reversal, vacation or stay of the effectiveness of either the
Interim Order or the Final Order; or (G) cessation of liens or super-priority
claims granted with respect to the Loans to be valid, perfected and enforceable
in all respects.

then, and in any such event and during the continuance thereof, the
Administrative Agent may, and at the written direction of the Required Lenders
shall, (A) by notice to Falcon (which notice shall be effective notice to all
the Borrowers), (i) terminate or reduce the Commitments, whereupon the
Commitments shall immediately be terminated or reduced, and (ii) declare all or
a portion of the Loans then outstanding to be due and payable, whereupon all or
such portion of the aggregate principal of such Loans, all accrued and unpaid
interest thereon, all fees and all other amounts payable under this Agreement
and all other Obligations shall become immediately due and payable, without
presentment, demand, protest or further notice of any kind, all of which

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are hereby expressly waived by the Borrowers and (B) following at least five (5)
Business Days' written notice to Falcon, exercise any and all of its other
rights and remedies hereunder, under the other Loan Documents, under applicable
law and otherwise.

Article XII -

Management, Collection and Status of
Accounts Receivable and Other Collateral

Section 12.01.

Management of Collateral.

(a)

The Borrowers shall maintain a Dominion Account or Dominion Accounts pursuant to
the Blocked Account Agreement or other lockbox and blocked account arrangements
acceptable to the Administrative Agent with such banks as may be selected by
such Borrower and which are acceptable to the Administrative Agent. The
Borrowers shall issue to any such banks an irrevocable letter of instruction
directing such banks to deposit all payments or other remittances received in
the lockbox and blocked accounts to the Dominion Account for application on
account of the Obligations as provided in this Agreement. All funds deposited in
any Dominion Account shall immediately become the property of the Administrative
Agent, for the ratable benefit of Lenders as provided in this Agreement, and the
Borrowers shall obtain the agreement by the applicable banks in favor of the
Administrative Agent to waive any recoupment, setoff rights, and any security
interest in, or against, the funds so deposited. The Administrative Agent
assumes no responsibility for such lockbox and blocked account arrangements,
including, without limitation, any claim of accord and satisfaction or release
with respect to deposits accepted by any bank thereunder. Each Borrower agrees
that all invoices rendered and other requests made by such Borrower for payment
in respect of Accounts shall contain a written statement directing payment in
respect of such Accounts to be paid to a Dominion Account or another lockbox
established pursuant to this Section 12.01(a). To expedite collection, each
Borrower shall endeavor in the first instance to make collection of its Accounts
for the Administrative Agent. All remittances received by each Borrower on
account of Accounts, together with the proceeds of any other Collateral, shall
be held as Administrative Agent's property, for its benefit and the benefit of
Lenders as provided in this Agreement, by such Borrower as trustee of an express
trust for Administrative Agent's benefit and such Borrower shall immediately
deposit same in kind in the Dominion Account. The Administrative Agent retains
the right at all times after the occurrence and during the continuance of an
Event of Default to notify Account Debtors that each Borrower's Accounts have
been assigned to the Administrative Agent and to collect each Borrower's
Accounts directly in its own name, or in the name of the Administrative Agent's
agent, and to charge the collection costs and expenses, including attorneys'
fees, jointly and severally to Borrowers.

(b)

Until the Administrative Agent has advised the Borrowers to the contrary upon
the occurrence and during the continuance of an Event of Default, the Borrowers
and their respective Subsidiaries may and will enforce, collect and receive all
amounts owing on the Account Receivables for the benefit of, and on behalf of,
the Collateral Agent and the Lenders. All Collections (including checks, drafts,
notes, money orders, acceptances, cash and other evidences of Indebtedness)
received directly by the Borrowers or any of their respective Subsidiaries from
any Account Debtor or any

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other source (exclusive of the Lenders), whether as proceeds from Accounts
Receivable, or as proceeds of any other Collateral, or otherwise, shall be
received and held by the applicable Loan Party in trust for the Lenders and
deposited by such Loan Party in original form and no later than the next
Business Day after receipt thereof into the Dominion Account. The Borrowers
shall not, nor shall they permit any of their respective Subsidiaries to,
commingle such Collections with the proceeds of any Loan.

(c)

During the continuance of an Event of Default, the Collateral Agent may send a
notice of assignment and/or notice of the Collateral Agent's security interest,
held for the benefit of it, the Administrative Agent and the Lenders, to any and
all Account Debtors, and during such time period, the Collateral Agent shall
have the sole right to collect the Accounts Receivable and/or take possession of
the Accounts Receivable and the books and records relating thereto. Except with
respect to Accounts Receivable in an aggregate amount not in excess of $100,000
(so long as no Event of Default shall have occurred and be continuing), the
Borrowers shall not, and shall not permit their respective Subsidiaries to,
without prior written consent of the Administrative Agent, grant any extension
of time of payment of any Account Receivable, compromise or settle any Account
Receivable for less than the full amount thereof, release, in whole or in part,
any Person or property liable for the payment thereof, or allow any credit or
discount whatsoever thereon.

(d)

Falcon and each other Borrower hereby appoints the Administrative Agent for the
benefit of the Collateral Agent and the Lenders or their designee as such
Borrower's attorney-in-fact with power exercisable during the continuance of any
Event of Default: (i) to demand payment of the Accounts Receivable from Account
Debtors, to enforce payment of the Accounts Receivable by legal proceedings or
otherwise, and generally to exercise all of such Borrower's rights and remedies
with respect to the collection of the Accounts Receivable, (ii) to endorse such
Borrower's name upon any checks or other evidences of payment relating to the
Accounts Receivable, (iii) to sign such Borrower's name on any invoice or bill
of lading relating to any of the Accounts Receivable, (iv) to sign such
Borrower's name on any drafts against Account Debtors with respect to Accounts
Receivable, (v) to prepare, file, and sign such Borrower's name to a proof of
claim or similar document against any Account Debtor in connection with a
bankruptcy proceeding commenced by or with respect to such Account Debtor, (vi)
to use such Borrower's stationery and to sign such Borrower's name on any
assignments of Accounts Receivable, verifications of Accounts Receivable and
notices to Account Debtors with respect to Accounts Receivables, and (vii) to
send verifications of Accounts Receivable. All acts of said attorney or designee
are hereby ratified and approved, and said attorney or designee shall not be
liable for any acts of omission or commission, or for any error of judgment or
mistake of fact or law (other than acts, errors, or mistakes, constituting gross
negligence or willful misconduct as determined by a final order of a court of
competent jurisdiction); this power being coupled with an interest is
irrevocable until all of the Loans and other Obligations under the Loan
Documents are paid in full and the Commitments and all of the Loan Documents are
terminated.

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(e)

Nothing contained herein shall be construed to constitute the Collateral Agent,
the Administrative Agent or any Lender as agent of the Borrowers or any of their
respective Subsidiaries in connection with its actions under this Article XII
for any purpose whatsoever, and the Collateral Agent, the Administrative Agent
and the Lenders shall not be responsible or liable for any shortage,
discrepancy, damage, loss or destruction of any part of the Accounts Receivable
regardless of the cause thereof (other than from acts or omissions of the
Collateral Agent, the Administrative Agent or the Lenders constituting gross
negligence or willful misconduct as determined by a final order by a court of
competent jurisdiction). The Collateral Agent, the Administrative Agent and the
Lenders shall not, under any circumstance or in any event whatsoever, have any
liability for any error or omission or delay of any kind occurring in the
settlement, collection or payment of any of the Accounts Receivable or any
instrument received in payment thereof or for any damage resulting therefrom
(other than acts or omissions of the Collateral Agent, the Administrative Agent
or the Lenders constituting gross negligence or willful misconduct as determined
by a final order of a court of competent jurisdiction). The Collateral Agent,
the Administrative Agent and the Lenders do not assume, by anything in this
Article XII or in any assignment or otherwise, any of the obligations under any
contract or agreement assigned or pledged to the Collateral Agent and shall not
be responsible in any way for the performance by the Borrowers or any of their
respective Subsidiaries of any of the terms and conditions thereof.

(f)

If any Account Receivable includes a charge for any tax payable to any
Governmental Authority, the Administrative Agent is hereby authorized (but in no
event obligated) in its discretion to pay the amount thereof to the proper
taxing authority for the Borrowers' account and to charge the Borrowers
therefor. The Borrowers shall notify the Administrative Agent if any Account
Receivable includes any taxes due to any such Governmental Authority and, in the
absence of such notice or actual knowledge of such tax, the Administrative Agent
for the benefit of the Collateral Agent and the Lenders shall not, to the
fullest extent permitted by law, be liable for any taxes that may be due by
reason of the sale and delivery or the rendering of services creating such
Account Receivable.

Section 12.02.

INTENTIONALLY OMITTED.

Section 12.03.

Status of Accounts Receivable and Other Collateral. The Borrowers, jointly and
severally, covenant, represent and warrant as follows: (a) Borrowers shall be
the sole owner, free and clear of all Liens except in favor of the Collateral
Agent for the benefit of the Lenders or as otherwise permitted hereunder, and
fully authorized to sell, transfer, pledge and/or grant a security interest in
each such Account Receivable; (b) substantially all of such Accounts Receivable
shall be good and valid Accounts Receivable representing undisputed bona fide
indebtedness incurred or an amount indisputably owed by the Account Debtor
therein named, for a fixed sum as set forth in the invoice relating thereto with
respect to any absolute sale and delivery upon the specified terms of goods sold
or services rendered by the Borrowers; (c) substantially all of such Accounts
Receivable shall not be subject to any defense, offset, counterclaim, discount
or allowance except as may be stated in the invoice relating thereto, discounts
and allowances as may be customary in the Borrowers' business and as otherwise
disclosed to the Administrative Agent; (d) none of the transactions underlying
or giving rise to

81

substantially all of such Accounts Receivable shall violate any applicable state
or federal laws or regulations, and all documents relating thereto shall be
legally sufficient under such laws or regulations and shall be legally
enforceable in accordance with their terms; (e) the Borrowers shall, and shall
cause their respective Subsidiaries to, maintain books and records pertaining to
such Accounts Receivable in such detail, form and scope as is in accordance with
its past practices; (f) the Borrowers shall immediately notify the
Administrative Agent if the material portion of any Accounts Receivable arises
out of contracts with the United States or any department, agency, or
instrumentality thereof and will execute any instruments and take any steps
required by the Administrative Agent or the Collateral Agent in order that all
monies due or to become due under any such contract shall be assigned to the
Collateral Agent for the benefit of the Lenders and notice thereof given to the
United States government under the Federal Assignment of Claims Act; (g) the
Borrowers will, immediately upon learning thereof, report to the Administrative
Agent any material loss or destruction of, or substantial damage to, any
material portion of such Accounts Receivable, and any other matters affecting
the value, enforceability or collectibility of any material portion of such
Accounts Receivable; and (h) if any amount payable under or in connection with
any material portion of such Accounts Receivable is evidenced by a promissory
note or other instrument, such promissory note or instrument shall be
immediately endorsed and delivered to the Collateral Agent for the benefit of
the Lenders.

Article XIII -

The Agents

Section 13.01.

Appointment Powers and Immunities; Delegation of Duties, Liability of Agents.

(a)

The Lenders hereby designate and appoint Administrative Agent as its
administrative agent under this Agreement and the other Loan Documents and
Collateral Agent as its collateral agent under this Agreement and the other Loan
Documents. The Lenders hereby irrevocably authorize each such Agent to take such
action on the Lenders' behalf under the provisions of this Agreement and each
other Loan Document and to exercise such powers and perform such duties as are
expressly delegated to it by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental thereto. Each
such Agent agrees to act as such on the express conditions contained in this
Article XIII. The provisions of this Article XIII are solely for the benefit of
the Administrative Agent, Collateral Agent, and the Lenders. Borrowers shall not
have any rights as a third party beneficiary of any of the provisions contained
herein. Any provision to the contrary contained elsewhere in this Agreement or
in any other Loan Document notwithstanding, each such Agent shall not have any
duties or responsibilities, except those expressly set forth herein or therein,
nor shall each such Agent have or be deemed to have any fiduciary relationship
with any of the Lenders and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into this Agreement or any
other Loan Document or otherwise exist against each such Agent; it being
expressly understood and agreed that the use of the word "Agent" is for
convenience only and that each such Agent is merely the representative of the
Lenders, and has only the contractual duties set forth in this Agreement and the
other Loan Documents. Except as expressly otherwise provided in this Agreement,
each such Agent shall have and may use its sole discretion with respect

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to exercising or refraining from exercising any discretionary rights or taking
or refraining from taking any actions which such Agent is expressly entitled to
take or assert under or pursuant to this Agreement and the other Loan Documents.
No Lender shall have any right of action whatsoever against each such Agent as a
result of such Agent acting or refraining from acting hereunder pursuant to such
discretion and any action taken or failure to act pursuant to such discretion
shall be binding on the Lenders. Without limiting the generality of the
foregoing, or of any other provision of the Loan Documents that provides rights
or powers to Administrative Agent or Collateral Agent, each of the Lenders agree
that, as long as this Agreement remains in effect: (i) (A) Administrative Agent
shall have the right to maintain, in accordance with its customary business
practices, ledgers and records reflecting the status of the Obligations, the
Loans, the Collections, and related matters, and (B) Collateral Agent shall have
the right to maintain, in accordance with its customary business practices,
ledgers and records reflecting the status of the Collateral and related matters;
(ii) Collateral Agent shall have the right to execute or file any and all
financing or similar statements or notices, amendments, renewals, supplements,
documents, instruments, proofs of claim, and other written agreements with
respect to the Loan Documents; (iii) Administrative Agent shall have the right
to make the Loans, for itself or on behalf of the applicable Lenders as provided
in the Loan Documents; (iv) Administrative Agent shall have the right to
exclusively receive, apply, and distribute the Collections as provided in the
Loan Documents; (v) Administrative Agent shall have the right to open and
maintain such bank accounts and lock boxes as Administrative Agent deems
necessary and appropriate in accordance with the Loan Documents for the
foregoing purposes with respect to the Collections and, on behalf of Collateral
Agent, the Collateral; (vi) (A) Administrative Agent shall have the right to
perform, exercise, and enforce any and all other rights and remedies of the
Lenders with respect to Borrowers, the Obligations, the Collections, or
otherwise related to any of same as provided in the Loan Documents, and (B)
Collateral Agent shall have the right to perform, exercise, and enforce any and
all other rights and remedies of the Lenders with respect to Borrowers, the
Obligations, the Collateral, or otherwise related to any of same as provided in
the Loan Documents; and (vii) Administrative Agent and Collateral Agent each
shall have the right to incur and pay such fees, charges, and expenses under the
Loan Documents as such Agent may deem necessary or appropriate for the
performance and fulfillment of its functions and powers pursuant to the Loan
Documents. Administrative Agent may deem and treat the payee of any Obligation
as the holder thereof for all purposes of the Loan Documents unless and until a
notice of the assignment or transfer of such Obligation shall have been filed
with Administrative Agent. Each Lender further consents to (y) the execution,
delivery, and performance by Administrative Agent or Collateral Agent of each
Loan Document entered into by such Agent on behalf of the Lenders as
contemplated by this Agreement, and (z) the terms of such Loan Documents.

(b)

Except as otherwise provided in this section, each of Administrative Agent and
Collateral Agent may execute any of its duties under this Agreement or any other
Loan Document by or through agents, employees or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
Each of Administrative Agent and Collateral Agent shall not be responsible for
the negligence or misconduct of any agent or attorney-in-fact that it selects as
long as

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such selection was made in compliance with this section and without gross
negligence or willful misconduct of Administrative Agent or Collateral Agent as
determined by a final order of a court of competent jurisdiction.

(c)

None of the Agent-Related Persons shall (i) be liable for any action taken or
omitted to be taken by any of them under or in connection with this Agreement or
any other Loan Document or the transactions contemplated hereby (except for its
own gross negligence or willful misconduct as determined by a final order of a
court of competent jurisdiction), or (ii) be responsible in any manner to any
Lender for any recital, statement, representation or warranty made by Borrowers
or any Subsidiary or Affiliate of any Borrower, or any officer or director
thereof, contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for in,
or received by Administrative Agent or Collateral Agent under or in connection
with, this Agreement or any other Loan Document, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document, or for any failure of Borrowers or any other party to any Loan
Document to perform its obligations hereunder or thereunder. No Agent-Related
Person shall be under any obligation to any Lender to ascertain or to inquire as
to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of Borrowers or any of their respective
Subsidiaries.

Section 13.02.

Reliance by Agents. Each Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent, or made by the proper Person, and upon
advice and statements of legal counsel (including counsel to Borrowers or
counsel to any Lender), independent accountants and other experts selected by
such Agent. Each Agent shall be fully justified in failing or refusing to take
any action under this Agreement or any other Loan Document unless it first shall
receive such advice or concurrence of the Lenders as it deems appropriate and
until such instructions are received, such Agent shall act, or refrain from
acting, as it deems advisable without limiting Sections 13.05 and 13.07, if any
Agent so requests, it first shall be indemnified to its reasonable satisfaction
by the Lenders against any and all liability and expense that may be incurred by
it by reason of taking or continuing to take any such action. Each Agent in all
cases shall be fully protected in acting, or in refraining from acting, under
this Agreement or any other Loan Document in accordance with a request or
consent of the Lenders and such request and any action taken or failure to act
pursuant thereto shall be binding upon all Lenders.

Section 13.03.

Defaults. Administrative Agent shall not be deemed to have knowledge or notice
of the occurrence of any Default or Event of Default, except with respect to
defaults in the payment of principal, interest, fees, and expenses required to
be paid to Administrative Agent for the account of the Lenders and unless
Administrative Agent shall have received written notice from a Lender or
Borrowers referring to this Agreement, describing such Default or Event of
Default, and stating that such notice is a "Notice of Default". Administrative
Agent promptly will notify the Lenders of its receipt of any such notice or of
any Event of Default of which Administrative Agent has actual knowledge. If any
Lender obtains actual

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knowledge of any Event of Default, such Lender promptly shall notify the other
Lenders and each Agent of such Event of Default. Each Lender shall be solely
responsible for giving any notices to its Loan participants, if any. Subject to
Sections 13.02 and 13.07, each Agent shall take such action with respect to such
Default or Event of Default as may be requested by the Required Lenders in
accordance with Article XI; provided, however, that unless and until such Agent
has received any such request, such Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable.

Section 13.04.

Rights as a Lender.

(a)

With respect to its Commitments and the Loans made by it, DDJ (and any successor
acting as Administrative Agent, if any, as permitted by Section 13.08(a) hereof)
in its capacity as a Lender under the Loan Documents (or in its capacity as
manager or advisor to any fund or account that is a Lender) shall have the same
rights, privileges and powers under the Loan Documents as any other Lender and
may exercise the same as though it were not acting as Administrative Agent, and
the term "Lender" or "Lenders" shall, unless the context otherwise indicates,
include Administrative Agent in its individual capacity. DDJ (and any successor
acting as Administrative Agent) and its Affiliates may (without having to
account for the same to any Lender) accept deposits from, lend money to, make
investments in and generally engage in any kind of banking, trust or other
business with Borrowers (and any of their respective Subsidiaries or Affiliates)
as if it were not acting as Administrative Agent, and DDJ (and its successors)
and its Affiliates may accept fees and other consideration from Borrowers for
services in connection with this Agreement or otherwise without having to
account for the same to the Lenders.

(b)

With respect to its Commitments and the Loans made by it, DDJ (and any successor
acting as Collateral Agent, if any, as permitted by Section 13.08(b) hereof) in
its capacity as a Lender under the Loan Documents (or in its capacity as manager
or advisor to any fund or account that is a Lender) shall have the same rights,
privileges and powers under the Loan Documents as any other Lender and may
exercise the same as though it were not acting as Collateral Agent, and the term
"Lender" or "Lenders" shall, unless the context otherwise indicates, include
Collateral Agent in its individual capacity. DDJ (and any successor acting as
Collateral Agent) and its Affiliates may (without having to account for the same
to any Lender) accept deposits from, lend money to, make investments in and
generally engage in any kind of banking, trust or other business with Borrowers
(and any of their respective Subsidiaries or Affiliates) as if it were not
acting as Collateral Agent, and DDJ and its affiliates may accept fees and other
consideration from Borrowers for services in connection with this Agreement or
otherwise without having to account for the same to the Lenders.

Section 13.05.

Costs and Expenses; Indemnification. Each Agent may incur and pay fees, costs,
and expenses under the Loan Documents to the extent such Agent deems necessary
or appropriate for the performance and fulfillment of its functions, powers, and
obligations pursuant to the Loan Documents, including without limiting the
generality of the foregoing, court costs, attorneys fees and expenses, costs of
collection by outside collection

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agencies and auctioneer fees and costs of security guards or insurance premiums
paid to maintain the Collateral, whether or not any of the Borrowers is
obligated to reimburse the Lenders for such expenses pursuant to the Loan
Agreement or otherwise. Each Lender hereby agrees that it is and shall be
obligated to pay to or reimburse each Agent for the amount of such Lender's Pro
Rata Share thereof (in accordance with its Commitment). Whether or not the
transactions contemplated hereby are consummated, the Lenders shall indemnify
upon demand the Agent-Related Persons (without limiting the obligation of
Borrowers to do so), according to their Pro Rata Shares (in accordance with
their respective Commitments), from and against any and all Indemnified Matters
(including without limitation Indemnified Matters arising under any
Environmental Law as provided in Section 14.15); provided, however, that no
Lender shall be liable for the payment to the Agent-Related Persons of any
portion of such Indemnified Matters resulting solely from such Person's gross
negligence or willful misconduct as determined in a final order by a court of
competent jurisdiction. Without limitation of the foregoing, each Lender shall
reimburse Administrative Agent or Collateral Agent, as the case may be, upon
demand for such Lender's ratable share of any costs or out-of-pocket expenses
(including attorneys fees and expenses) incurred by such Agent in connection
with the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement, any other Loan Document, or any document contemplated by or
referred to herein. The undertaking in this section shall survive the payment of
all Obligations, the termination of the Commitments and the resignation or
replacement of any Agent.

Section 13.06.

Non-Reliance on Agents and Other Lenders. Each Lender acknowledges that none of
the Agent-Related Persons has made any representation or warranty to it, and
that no act by any Agent hereinafter taken, including any review of the affairs
or property of Borrowers and their respective Subsidiaries, shall be deemed to
constitute any representation or warranty by any Agent-Related Person to any
Lender. Each Lender represents to each Agent that it has, independently and
without reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of Borrowers and any other Person party to
a Loan Document, and all applicable bank regulatory or other laws relating to
the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to Borrowers. Each Lender also represents
that it will, independently and without reliance upon any Agent-Related Person
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrowers and any other Person party to a Loan Document.
Except for notices, reports and other documents expressly herein required to be
furnished to the Lenders by Agents, no Agent shall have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, prospects, operations, Property, financial and other
condition or creditworthiness of Borrowers and any other Person party to a Loan
Document that may come into the possession of any of the Agent-Related Persons.

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Section 13.07.

Failure to Act. Except for action expressly required of any Agent under the Loan
Documents, such Agent shall in all cases be fully justified in failing or
refusing to act under any Loan Document unless it shall receive further
assurances to its satisfaction from the Lenders of their indemnification
obligations under Section 13.05 against any and all liability and expense that
may be incurred by it by reason of taking or continuing to take any such action.

Section 13.08.

Resignation of Agent.

(a)

Subject to the appointment and acceptance of a successor Administrative Agent as
provided below, the Administrative Agent may resign at any time by notice to the
Lenders and Borrowers. Upon any such resignation, the Required Lenders shall
have the right to appoint a successor Administrative Agent. If no successor
Administrative Agent shall have been appointed by the Required Lenders and have
accepted such appointment within 30 days after the retiring Administrative
Agent's giving of notice of resignation, then the retiring Administrative Agent
may, on behalf of the Lenders, appoint a successor Administrative Agent. Upon
the acceptance of any appointment as the Administrative Agent by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, remedies, powers, privileges,
duties and obligations of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations, under
the Loan Documents. After any retiring Administrative Agent's resignation as
Administrative Agent, the provisions of this Article XIII shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken by
it while it was acting as Administrative Agent.

(b)

Subject to the appointment and acceptance of a successor Collateral Agent as
provided below, Collateral Agent may resign at any time by notice to the Lenders
and Borrowers. Upon any such resignation, Required Lenders shall have the right
to appoint a successor Collateral Agent. If no successor Collateral Agent shall
have been appointed by Required Lenders and have accepted such appointment
within 30 days after the retiring Collateral Agent's giving of notice of
resignation, then the retiring Collateral Agent may, on behalf of Lenders,
appoint a successor Collateral Agent. Upon the acceptance of any appointment as
Collateral Agent by a successor Collateral Agent, such successor Collateral
Agent shall thereupon succeed to and become vested with all the rights,
remedies, powers, privileges, duties and obligations of the retiring Collateral
Agent, and the retiring Collateral Agent shall be discharged from its duties and
obligations, under the Loan Documents. After any retiring Collateral Agent's
resignation as Collateral Agent, the provisions of this Article XIII shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as Collateral Agent.

Section 13.09.

Collateral Matters.

(a)

The Lenders hereby irrevocably authorize Collateral Agent, at its option and in
its sole discretion, to release any Lien on any Collateral (i) upon the
termination of the Commitments and payment and satisfaction in full by Borrowers
of all

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Obligations, or (ii) constituting property being sold or disposed of if a
release is required or desirable in connection therewith and if Borrowers
certify in writing to Collateral Agent that the sale or disposition is permitted
under this Agreement or the other Loan Documents (and Collateral Agent may rely
conclusively on any such certificate, without further inquiry). Except as
provided above or expressly provided in any other Loan Document, Collateral
Agent will not execute and deliver a release of any Lien on any Collateral
without the prior written authorization of all of the Lenders. Upon request by
Collateral Agent or Borrowers at any time, Administrative Agent and the Lenders
will confirm in writing Collateral Agent's authority to release any such Liens
on particular types or items of Collateral pursuant to this Section 13.09;
provided, however, that (1) Collateral Agent shall not be required to execute
any document necessary to evidence such release on terms that, in Collateral
Agent's opinion, would expose Collateral Agent to liability or create any
obligation or entail any consequence other than the release of such Lien without
recourse, representation, or warranty, and (2) such release shall not in any
manner discharge, affect, or impair the Obligations or any Liens (other than
those expressly being released) upon (or obligations of Borrowers in respect of)
all interests retained by Borrowers, including, the proceeds of any such sale or
disposition, all of which shall continue to constitute part of the Collateral.

(b)

Collateral Agent shall have no obligation whatsoever to any other Lenders to
assure that the Collateral exists or is owned by Borrowers or is cared for,
protected, or insured or has been encumbered, or that the Lenders' Liens have
been properly or sufficiently or lawfully created, perfected, protected, or
enforced or are entitled to any particular priority, or to exercise at all or in
any particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to Collateral Agent pursuant to any of the Loan Documents, it being
understood and agreed that in respect of the Collateral, or any act, omission or
event related thereto, subject to the terms and conditions contained herein,
Collateral Agent may act in any manner it may deem appropriate in its sole
discretion and that Collateral Agent shall have no other duty or liability
whatsoever to any other Lender as to any of the foregoing, except as otherwise
provided herein.

Section 13.10.

Restrictions on Actions by the Lenders; Sharing Payments.

(a)

Each of the Lenders agrees that it shall not, without the express consent of
Administrative Agent and Collateral Agent, and that it shall, to the extent it
is lawfully entitled to do so, upon the request of Administrative Agent and
Collateral Agent, set off against the Obligations, any amounts owing by such
Lenders to Borrowers or any accounts of Borrowers now or hereafter maintained
with such Lenders. Each of the Lenders further agrees that it shall not, unless
specifically requested to do so by Collateral Agent, take or cause to be taken
any action, including, the commencement of any legal or equitable proceedings,
to foreclose any Lien on, or otherwise enforce any security interest in, any of
the Collateral the purpose of which is, or could be, to give such Lenders any
preference or priority against the other Lenders with respect to the Collateral.

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(b)

Subject to Section 13.04, if, at any time or times any Lender shall receive (i)
by payment, foreclosure, setoff or otherwise, any proceeds of Collateral or any
payments with respect to the Obligations arising under, or relating to, this
Agreement or the other Loan Documents, except for any such proceeds or payments
received by such Lender from Administrative Agent pursuant to the terms of this
Agreement, or (ii) payments from Administrative Agent in excess of such Lender's
ratable portion of all such distributions by Administrative Agent, such Lender
promptly shall turn the same over to Administrative Agent, in kind, and with
such endorsements as may be required to negotiate the same to Administrative
Agent, or in same day funds, as applicable, for the account of the Lenders and
for apportionment and application to the Obligations in accordance with Section
3.02 hereof.

Section 13.11.

Several Obligations; No Liability. Nothing contained herein shall confer upon
any Lender any interest in, or subject any Lender to any liability for, or in
respect of, the business, assets, profits, losses, or liabilities of any other
Lenders. Each Lender shall be solely responsible for notifying its Loan
participants of any matters relating to the Loan Documents to the extent any
such notice may be required, and no Lender shall have any obligation, duty, or
liability to any Loan participant of any other Lender. Except as provided in
Section 13.05, no Agent or any Lender shall have any liability for the acts of
the other Agent or any other Lender. No Lender shall be responsible to Borrowers
or any other Person for any failure by any other Lender to fulfill its
obligations to make credit available hereunder, nor to advance for it or on its
behalf in connection with its Commitment, nor to take any other action on its
behalf hereunder or in connection with the financing contemplated herein.

Article XIV -

Miscellaneous

Section 14.01.

Notices, Etc. All notices and other communications provided for hereunder shall
be in writing and shall be mailed, telecopied or delivered:

> if to Borrowers, at the following address:

FALCON PRODUCTS, INC.

9387 Dielman Industrial Drive

St. Louis, Missouri 63132

Attention: Neal R. Restivo

Telecopier: 314-991-9295

> with a copy to:

Dechert LLP

30 Rockefeller Plaza

New York, New York 10112

Attention: Richard A. Goldberg, Esq.

Telecopier: 212-698-3599

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> with a copy to:

Stutman, Treister & Glatt
1901 Avenue of the Stars, 12th Floor
Los Angeles, California 90067
Attention: Robert A. Greenfield, Esq.
Telecopier: 310-228-5788

> if to either Agent or to either Agent on behalf of the Lenders, at the
> following address:

DDJ Capital Management, LLC

141 Linden Street, Suite 4

Wellesley, MA 02482

Attention: John S. Ehlinger

Telecopier: 781-283-8555

DDJ Capital Management, LLC

141 Linden Street, Suite 4

Wellesley, MA 02482

Attention: Joshua McCarthy

Telecopier: 781-283-8541

> with a copy to:

Akin Gump Strauss Hauer & Feld LLP

590 Madison Avenue

New York, NY 10022

Attention: Michael S. Stamer, Esq.

Telecopier: (212) 872-1002

or, as to each party, at such other address as shall be designated by such party
in a written notice to the other party complying as to delivery with the terms
of this Section 14.01. All such notices and other communications shall be
effective, (i) if mailed, when received or five (5) days after deposited in the
mails with postage pre-paid and properly addressed, whichever occurs first, (ii)
if telecopied, when transmitted and confirmation received, or (iii) if
delivered, upon delivery, except that notices to Administrative Agent pursuant
to Article II shall not be effective until received by Administrative Agent.

Section 14.02.

Amendments, Etc. No amendment or waiver of any provision of this Agreement or
any other Loan Document, and no consent to any departure by Borrowers or any
Lenders therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Required Lenders (or by Administrative Agent and
Collateral Agent, in each case, at the written direction of the Required
Lenders), and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that no such waiver, amendment, or consent shall, unless in writing and
signed by Borrowers, each of the Lenders affected thereby, Administrative Agent
and Collateral Agent do any of the following:

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(a) increase or extend the Commitment of any Lender;

(b) postpone or delay any date fixed by this Agreement or any other Loan
Document for any payment of principal, interest, fees or other amounts due to
the Lenders (or any of them) hereunder or under any other Loan Document;

(c) reduce the principal of, or the rate of interest specified herein, on any
Loan, or any fees or other amounts payable hereunder or under any other Loan
Document, or forgive, compromise, or cancel any of the Obligations;

(d) change the percentage of the Commitments that is required for the Lenders or
any of them to take any action hereunder;

(e) amend this Section or any provision of this Agreement providing for consent
or other action by all Lenders;

(f) release Collateral other than as permitted by Section 13.09, or subordinate
any security interest or liens of Collateral Agent for the benefit of the
Lenders;

(g) change the definition of "Required Lenders";

(h) release Borrowers from any Obligation for the payment of money, or agree to
subordinate any of the Obligations in right of payment to any other
Indebtedness;

(i) amend the provisions of Section 3.03;

(j) permit the sale of all or substantially all of the Capital Stock of
Borrowers or any of their respective Subsidiaries (except to the extent
necessary to effect a sale or disposition otherwise permitted hereunder); or

(k) change the definition of "Borrowing Base" or "Availability";

and, provided further, however, that (1) no amendment, waiver or consent shall,
unless in writing and signed by the Administrative Agent, affect the rights or
duties of the Administrative Agent under this Agreement or any other Loan
Document, (2) no amendment, waiver or consent shall, unless in writing and
signed by Collateral Agent, affect the rights or duties of Collateral Agent
under this Agreement or any other Loan Document, and (3) each of the Lenders is
hereby deemed to have instructed the Collateral Agent (A) to release its Liens
as to the property which is the subject of any asset sale, assignment or other
disposition of property or assets which is permitted hereunder without any
further consent of any Lender, and (B) to take such other actions as are
necessary or desirable to facilitate any such disposition. The foregoing
notwithstanding, any amendment, modification, waiver, consent, termination, or
release of or with respect to Article XIII shall not require the consent by or
the agreement of any Loan Party.

Section 14.03.

No Waiver; Remedies, Etc. No failure on the part of the Lenders or the Agents to
exercise, and no delay in exercising, any right hereunder or under any

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other Loan Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any right under any Loan Document preclude any other or
further exercise thereof or the exercise of any other right. The rights and
remedies of the Lenders and the Agents provided herein and in the other Loan
Documents are cumulative and are in addition to, and not exclusive of, any
rights or remedies provided by law. The rights of the Lenders and the Agents
under any Loan Document against any party thereto are not conditional or
contingent on any attempt by the Lenders and the Agents to exercise any of their
rights under any other Loan Document against such party or against any other
Person.

Section 14.04.

Expenses; Taxes, Attorneys' Fees. Borrowers will pay, within two (2) Business
Days following demand therefor, all (i) reasonable out of pocket costs and
expenses of the Agents (including, without limitation, all reasonable fees,
expenses and disbursements of outside counsel and consultants) in connection
with the preparation, execution and delivery of the Loan Documents, the funding
of Loans, the administration of the Loan Documents (including, without
limitation, participation in the Chapter 11 Cases) and any amendment or waiver
of any provision of the Loan Documents and (ii) out of pocket costs and expenses
of the Agents and the Lenders (including, without limitation, fees, expenses and
disbursements of counsel) in connection with the enforcement or protection of
any of their rights and remedies under the Loan Documents.

Section 14.05.

Right of Set-off, Sharing of Payments, Etc.

(a)

During the continuance of any Event of Default and in addition to (and without
limitation of) any right of set-off, banker's lien, or counterclaim any Lender
may otherwise have, each Lender (at its option but only with the prior written
consent of the Required Lenders) may, and is hereby authorized by Borrowers to,
at any time and from time to time, without notice to Borrowers (any such notice
being expressly waived by Borrowers), to the fullest extent permitted by law,
set-off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by such Lender to or for the credit or the account of the Borrowers against any
and all Obligations now or hereafter existing under any Loan Document,
irrespective of whether or not the Lenders shall have made any demand hereunder
or thereunder and although such obligations may be contingent or unmatured. The
Lenders agree to notify Borrowers, Collateral Agent and Administrative Agent
promptly after any such set-off and application made by the Lenders provided
that the failure to give such notice to Borrowers shall not affect the validity
of such set-off and application.

(b)

If any Lender shall obtain from Borrowers payment of any Obligation through the
exercise of any right of set-off, banker's lien, or counterclaim or similar
right or otherwise (other than from Administrative Agent as provided in this
Agreement), and, as a result of such payment, such Lender shall have received a
greater amount of the Obligations than the amount allocable to such Lender
hereunder, Administrative Agent and the other Lenders (including such Lender)
shall promptly make such adjustments from time to time as shall be equitable, to
the end that the Lenders shall share the benefit of such excess payment (net of
any expenses that may be incurred by such Lender in obtaining or preserving such
excess payment) in accordance with Section

92

3.02(b). To such end the Lenders shall make appropriate adjustments among
themselves if such payment is rescinded or must otherwise be restored.

(c) Nothing contained in this Section 14.05 shall require any Lender to exercise
any such right or shall affect the right of any Lender to exercise, and retain
the benefits of exercising, any such right with respect to any other
indebtedness or obligation of Borrowers. If, under any applicable bankruptcy,
insolvency or other similar law, any Lender receives a secured claim in lieu of
a set-off to which this Section 14.05 applies, such Lender shall, to the extent
practicable, exercise its rights in respect of such secured claim in a manner
consistent with the rights of Lenders entitled under this Section 14.05 to share
in the benefits of any recovery on such secured claim.

Section 14.06.

Severability. Any provision of this Agreement, which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction.

Section 14.07.

Assignments and Participations.

(a)

This Agreement shall be binding upon and inure to the benefit of Borrowers and
the Lenders and their respective successors and assigns; provided, however, that
Borrowers may not assign or transfer any of their rights hereunder without the
prior written consent of the Lenders and the Agents and any such assignment
without the Lenders' and the Agents' prior written consent shall be null and
void. Each Lender may at any time sell, assign or participate its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitments and the Loans made by it) without notice to or the
consent of the Borrowers or any other Lenders but with the prior written consent
of the Administrative Agent. Any such assignment by a Lender shall be effected
pursuant to an Assignment and Acceptance, and the Administrative Agent's consent
to such assignment shall be evidenced by its signature thereto.

(b) Any non-U.S. Person who purchases, is assigned or is granted a participation
in, any portion of such Loan shall provide the Borrowers and the Administrative
Agent (in the case of a purchase or assignment) or the applicable Lender (in the
case of a participation) with a completed Internal Revenue Service Form W-8
(Certificate of Foreign Status) or a substantially similar form for such
purchaser or participant.

(c) From and after the date that the Administrative Agent notifies the assignor
Lender that it has received an executed Assignment and Acceptance and has
indicated thereon its consent thereto, (i) the Assignee thereunder shall be a
party hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, shall have the rights
and obligations of a Lender under the Loan Documents, and (ii) the assignor
Lender shall, to the extent that rights and obligations hereunder and under the
other Loan Documents have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights (except rights granted pursuant to Section
14.15 with respect to claims, losses, demands, settlements, damages,

93

liabilities, obligations, penalties, fines, fees reasonable costs and expenses
incurred with respect to the period of time that the assignor Lender was a party
to this Agreement) and be released from its obligations under this Agreement
(except with respect to Section 14.05) (and in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement and the other Loan Documents, such Lender
shall cease to be a party hereto and thereto), and such assignment shall effect
a novation among Borrowers, the assignor Lender, and the Assignee.

(d)

Immediately upon the effectiveness of such Assignment and Acceptance, this
Agreement shall be deemed to be amended to the extent, but only to the extent,
necessary to reflect the addition of the Assignee and the resulting adjustment
of the Commitments arising therefrom. The Commitments allocated to each Assignee
shall reduce such Commitments of the assigning Lender pro tanto.

(e)

In connection with any such assignment or participation or proposed assignment
or participation, a Lender may disclose all documents and information which it
now or hereafter may have relating to Borrowers or Borrowers' business; provided
in each case that such assignee or participant (or prospective assignee or
participant) shall agree to maintain the confidentiality of such information
pursuant to Section 14.19.

Section 14.08.

Counterparts. This Agreement may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which shall be
deemed to be an original, but all of which taken together shall constitute one
and the same agreement.

Section 14.09.

GOVERNING LAW. THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
AND, TO THE EXTENT APPLICABLE, THE BANKRUPTCY CODE.

Section 14.10.

Releases and Validation of Pre-Petition Indebtedness and Liens; Allowance of
Secured Claims. The Borrowers hereby (i) release and discharge the Lenders and
the Administrative Agent, together with their affiliates, agents, attorneys,
officers, directors, employees and all other Agent-Related Persons and
Lender-Related Persons from any and all claims and causes of action arising out,
based upon or related to, in whole or in part, any of the Pre-Prepetition Term
Loan Documents, any aspect of the pre-petition relationship between the Lenders,
the Administrative Agent and the Borrowers or any other acts or omissions of the
Lenders or the Administrative Agent in connection with any of the Pre-Petition
Term Loan Documents or their pre-petition relationship with the Borrowers; (ii)
waive any and all defenses (including, without limitation, offsets and
counterclaims of any nature or kind) as to the validity, perfection, priority,
enforceability and nonavoidability (under the Bankruptcy Code or otherwise) of
the Indebtedness under the Pre-Petition Term Loan Documents and the security
interests in and liens on the collateral securing such Indebtedness; and (iii)
agree, without further Bankruptcy Court order and without the need for filing of
any proof of claim, to the allowance of the pre-petition claims of the
Administrative Agent

94

and the Lenders pursuant to sections 502 and 506 of the Bankruptcy Code on
account of such Indebtedness as fully secured claims for principal, plus accrued
pre-petition and post-petition interest, fees, expenses and other amounts
chargeable under the Pre-Petition Term Loan Documents.

Section 14.11.

Objections by Parties In Interest. Any official committee appointed in the
Chapter 11 Cases shall have until 60 days from the appointment of such committee
within which to file, on behalf of the Borrowers, and to serve upon counsel for
the Administrative Agent, objections or complaints respecting (a) the claims,
causes of action and defenses released by the Borrowers pursuant to Section
14.10 or (b) the validity, extent, priority, avoidability, or enforceability of
the indebtedness under the Pre-Petition Term Loan Documents or the liens and
security interests in the collateral granted thereby.

Section 14.12.

Consent. Except as otherwise expressly set forth herein to the contrary, if the
consent, approval, satisfaction, determination, judgment, acceptance or similar
action (an "Action") of the Lenders or the Agents (or any of them), shall be
permitted or required pursuant to any provision hereof or any provision of any
other Loan Document, such Action shall be required to be in writing and may be
withheld or denied by the Lenders or the Agents (or any of them) with or without
any reason in their sole and absolute discretion.

Section 14.13. Interpretation. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against the Lenders, the Agents
or the Borrowers, whether under any rule of construction or otherwise. On the
contrary, this Agreement has been reviewed by all parties and shall be construed
and interpreted according to the ordinary meaning of the words used so as to
accomplish fairly the purposes and intentions of all parties hereto.

Section 14.14.

Reinstatement; Certain Payments. If any claim is ever made upon the Lenders or
the Agents (or any of them) for repayment or recovery of any amount or amounts
received by the Lenders or the Agents (or any of them) in payment or received on
account of any of the Obligations, the Lenders or the Agents shall give prompt
notice of such claim to the Borrowers, and if such Lenders or such Agents repay
all or part of such amount by reason of (i) any judgment, decree or order of any
court of competent jurisdiction or administrative body having jurisdiction over
such Lenders, such Agents or any of their respective property, or (ii) any good
faith settlement or compromise of any such claim effected by such Lenders or
such Agents with any such claimant, then and in such event the Borrowers agree,
jointly and severally, that (A) any such judgment, decree, order, settlement or
compromise shall be binding upon it notwithstanding the cancellation of any
instrument evidencing the Obligations or the other Loan Documents or the
termination of the Commitments, this Agreement or any other Loan Document, and
(B) the Borrowers shall be and remain jointly and severally liable to the
Lenders or Agents hereunder for the amount so repaid or recovered to the same
extent as if such amount had never originally been received by the Lenders or
the Agents (or any of them, as the case may be).

Section 14.15.

Indemnification. In addition to the Borrowers' other Obligations under this
Agreement, the Borrowers (and each of them) agree, jointly and severally, to
defend, protect, indemnify and hold harmless, the Administrative Agent, each
Lender,

95

the Collateral Agent, and each of their affiliates and each of the respective
officers, directors, members, partners, employees, agents, advisors, attorneys
and representatives of each, including without limitation all Lender-Related
Persons and Agent-Related Persons (each, an "Indemnified Party"), from and
against any and all claims, damages, losses, liabilities, and expenses
(including, without limitation, reasonable fees and disbursements of counsel),
joint or several, that may be incurred by or asserted or awarded against any
Indemnified Party (including, without limitation, in connection with or relating
to any investigation, litigation or proceeding or the preparation of any defense
in connection therewith), in each case arising out of or in connection with or
by reason of the Facility, the Loan Documents or any of the transactions
contemplated hereby or thereby, or any actual or proposed use of the proceeds of
the Facility (collectively, the "Indemnified Matters"), except to the extent
such claim, damage, loss, liability or expense is found in a final judgment by a
court of competent jurisdiction to have resulted from such Indemnified Party's
gross negligence or willful misconduct. In the case of an investigation,
litigation or other proceeding to which the indemnity in this paragraph applies,
such indemnity shall be effective whether or not such investigation, litigation
or proceeding is brought by the Borrowers, any of their directors, security
holders or creditors, an Indemnified Party or any other person, or an
Indemnified Party is otherwise a party thereto and whether or not the
transactions contemplated hereby are consummated. The Borrowers further agree
that no Indemnified Party shall have any liability (whether direct or indirect,
in contract, tort, or otherwise) to the Borrowers or any of their security
holders or creditors for or in connection with the transactions contemplated
hereby, except for direct damages (as opposed to special, indirect,
consequential or punitive damages (including, without limitation, any loss of
profits, business or anticipated savings)) determined in a final judgment by a
court of competent jurisdiction to have resulted from such Indemnified Party's
gross negligence or willful misconduct. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in this Section 14.15 may be
unenforceable because it is violative of any law or public policy, Borrowers
shall contribute the maximum portion which it is permitted to pay and satisfy
under applicable law, to the payment and satisfaction of all Indemnified Matters
incurred by any Indemnified Party. This Indemnity shall survive the repayment of
the Obligations, the termination of the Commitments and the discharge of the
Liens granted under the Loan Documents.

Section 14.16.

Interest. It is the intention of the parties hereto that each Agent and each
Lender shall conform strictly to usury laws applicable to it. Accordingly, if
the transactions contemplated hereby or by any other Loan Document would be
usurious as to any Agent or any Lender under laws applicable to it (including
the laws of the United States of America and the State of New York or any other
jurisdiction whose laws may be mandatorily applicable to such Agent or such
Lender notwithstanding the other provisions of this Agreement), then, in that
event, notwithstanding anything to the contrary in this Agreement or any other
Loan Document or any agreement entered into in connection with or as security
for the Obligations, it is agreed as follows: (i) the aggregate of all
consideration which constitutes interest under law applicable to any Agent or
any Lender that is contracted for, taken, reserved, charged or received by such
Agent or such Lender under this Agreement or any other Loan Document or
agreements or otherwise in connection with the Obligations shall under no
circumstances exceed the maximum amount allowed by such applicable law, any
excess shall be canceled automatically and if theretofore paid shall be credited
by such Agent or such Lender to the principal amount of the Obligations (or, to
the extent that the principal amount of the Obligations shall have been or would
thereby be paid in full, refunded by such Agent or such

96

Lender, as applicable, to the Borrowers); and (ii) in the event that the
maturity of the Obligations is accelerated by reason of any Event of Default
under this Agreement or otherwise, or in the event of any required or permitted
prepayment, then such consideration that constitutes interest under law
applicable to any Agent or any Lender may never include more than the maximum
amount allowed by such applicable law, and excess interest, if any, provided for
in this Agreement or otherwise shall be canceled automatically by such Agent or
such Lender, as applicable, as of the date of such acceleration or prepayment
and, if theretofore paid, shall be credited by such Agent or such Lender, as
applicable, to the principal amount of the Obligations (or, to the extent that
the principal amount of the Obligations shall have been or would thereby be paid
in full, refunded by such Agent or such Lender to the Borrowers). All sums paid
or agreed to be paid to any Agent or any Lender for the use, forbearance or
detention of sums due hereunder shall, to the extent permitted by law applicable
to such Agent or such Lender, be amortized, prorated, allocated and spread
throughout the full term of the Loans until payment in full so that the rate or
amount of interest on account of any Loans hereunder does not exceed the maximum
amount allowed by such applicable law. If at any time and from time to time (x)
the amount of interest payable to any Agent or any Lender on any date shall be
computed at the Highest Lawful Rate applicable to such Agent or such Lender
pursuant to this Section 14.16 and (y) in respect of any subsequent interest
computation period the amount of interest otherwise payable to such Agent or
such Lender would be less than the amount of interest payable to such Agent or
such Lender computed at the Highest Lawful Rate applicable to such Agent or such
Lender, then the amount of interest payable to such Agent or such Lender in
respect of such subsequent interest computation period shall continue to be
computed at the Highest Lawful Rate applicable to such Agent or such Lender
until the total amount of interest payable to such Agent or such Lender shall
equal the total amount of interest which would have been payable to such Agent
or such Lender if the total amount of interest had been computed without giving
effect to this Section 14.16.

For purposes of this Section 14.16, the term "applicable law" shall mean that
law in effect from time to time and applicable to the loan transaction between
the Borrowers, on the one hand, and the Agents and the Lenders, on the other,
that lawfully permits the charging and collection of the highest permissible,
lawful non-usurious rate of interest on such loan transaction and this
Agreement, including laws of the State of New York and, to the extent
controlling, laws of the United States of America.

Section 14.17.

Records. The unpaid principal of, and interest on, the Obligations, the interest
rate or rates applicable to such unpaid principal and interest, the duration of
such applicability, the Commitment, and the accrued and unpaid fees payable
pursuant to Section 4.02 hereof shall at all times be ascertained from the
records of the Administrative Agent, which shall be conclusive and binding
absent manifest or demonstrable error.

Section 14.18.

Binding Effect. This Agreement shall be binding upon and inure to the benefit of
Borrowers, Lender and Agents, and their respective successors and assigns,
except that Borrowers shall not have the right to assign its rights hereunder or
any interest herein without the prior written consent of the Lenders and Agents,
and any assignment by the Lenders shall be governed by Section 14.07 hereof.

97

Section 14.19.

Confidentiality. Each of the Lenders, Administrative Agent and Collateral Agent
agree (on behalf of itself and each of its respective affiliates, directors,
officers, employees and representatives) to use reasonable precautions to keep
confidential, in accordance with its customary procedures for handling
confidential information of this nature and in accordance with safe and sound
practices of comparable financial institutions, any non-public information
supplied to it by Borrowers pursuant to this Agreement or the other Loan
Documents which is identified in writing by the Loan Parties as being
confidential at the time the same is delivered to such Person (and which at the
time is not, and does not thereafter become, publicly available or available to
such Person from another source not known to be subject to a confidentiality
obligation to such Person not to disclose such information), or available to
such Person from another source not known to be subject to a confidentiality
obligation to such Person not to disclose such information, provided that
nothing herein shall limit the disclosure of any such information (a) to the
extent required by statute, rule, regulation or judicial process, (b) to any
Lender, Administrative Agent, Collateral Agent, to counsel, accountants,
auditors and other advisors for any of the Lenders, (c) to examiners, auditors,
accountants, to any issuer of an Approved Letter of Credit, to the extent
required by any court, governmental or administrative agency, pursuant to any
subpoena or other legal process, or by any law, statute, regulation or court
order, or in connection with any litigation to which any of the Agents or the
Lenders are party or (d) to any assignee or participant (or prospective assignee
or participant) so long as such assignee or participant (or prospective assignee
or participant) agrees to be bound by the provisions of this Section 14.19. The
Lenders agree that, upon receipt of a request or identification of the
requirement for disclosure pursuant to clause (c) hereof (unless prohibited by
applicable law, statute, regulation or court order), it will make reasonable
efforts to keep Borrowers informed of such request or identification; provided
that Borrowers acknowledges that the Lenders and the Agent may make disclosure
as required by any Governmental Authority or representative thereof.

Section 14.20.

Integration. This Agreement, together with the other Loan Documents, reflects
the entire understanding of the parties with respect to the transactions
contemplated hereby and shall not be contradicted or qualified by any other
agreement, oral or written, before the date hereof.

Section 14.21.

Lender Advertising. Each of the Borrowers consents to the publication by either
Agent or any Lender of a tombstone or similar advertising material relating to
the financing transactions contemplated by this Agreement. Each Agent reserves
the right to provide to industry trade organizations information necessary and
customary for inclusion in league table measurements without Borrower's further
consent. Without limiting the generality of the foregoing, Borrower hereby
agrees that either Agent may publish, at Borrower's expense, a tombstone or
similar advertising material relating to the financing transactions contemplated
by this Agreement in The Wall Street Journal and/or such other industry
publications as such Agent shall select, in its sole discretion.

Section 14.22.

Liability of Borrowers. Notwithstanding any provision herein or in any other
Loan Document, the Borrowers, and each of them, are and shall be jointly and
severally liable for any and all Obligations (whether any such Obligation is
specified as an obligation of the Borrowers or of any of them).

98

Section 14.23.

Reliance on Representations and Actions of Falcon. Each Borrower (other than
Falcon) hereby appoints Falcon as such Borrower's agent to execute, deliver,
perform and receive, on behalf of such Borrower, any and all notices,
certificates, documents and actions to be executed, delivered, performed or
given hereunder or under any other Loan Documents, and such Borrower hereby
agrees that the Agents and the Lenders may rely upon any representation,
warranty, certificate, notice, document or telephone request which purports to
be executed or made or which the Agents or the Lenders in good faith believe to
have been executed or made by Falcon or any of its Responsible Officers.

[Signature pages follow]

99

IN WITNESS WHEREOF, the parties hereto have caused this Post-Petition Credit
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.

BORROWERS:

 

FALCON PRODUCTS, INC.

   

By:

  /s/ Franklin A. Jacobs  

Name:  Franklin A. Jacobs

 

Title:

   

SHELBY WILLIAMS INDUSTRIES, INC.

   

By:

  /s/ Franklin A. Jacobs  

Name:  Franklin A. Jacobs

 

Title:

   

SELLERS & JOSEPHSON INC.

   

By:

  /s/ Franklin A. Jacobs  

Name:  Franklin A. Jacobs

 

Title:

   

EPIC FURNITURE GROUP, INC.

   

By:

  /s/ Franklin A. Jacobs  

Name:  Franklin A. Jacobs

 

Title:

   

HOWE FURNITURE CORPORATION

   

By:

  /s/ Franklin A. Jacobs  

Name:  Franklin A. Jacobs

 

Title:

 

100

FALCON HOLDINGS, INC.

   

By:

  /s/ Franklin A. Jacobs  

Name:  Franklin A. Jacobs

 

Title:

   

THE FALCON COMPANIES INTERNATIONAL, INC.

 

By:

  /s/ Franklin A. Jacobs  

Name:  Franklin A. Jacobs

 

Title:

   

JOHNSON INDUSTRIES, INC.

   

By:

  /s/ Franklin A. Jacobs  

Name:  Franklin A. Jacobs

 

Title:

   

MADISON FURNITURE INDUSTRIES, INC.

   

By:

  /s/ Franklin A. Jacobs  

Name:  Franklin A. Jacobs

 

Title:

 

101

ADMINISTRATIVE AGENT AND COLLATERAL AGENT:

 

DDJ Capital Management, LLC

   

By:

/s/ Robert L. Hockett

Name:

Robert L. Hockett

Title:   

Principal  

By:

/s/ John S. Ehlinger

Name:

John S. Ehlinger

Title:  

Vice President

 

LENDERS:

 

GMAM INVESTMENT FUNDS TRUST II

 

By:

DDJ Capital Management, LLC, on behalf of GMAM Investment Funds Trust II, in its
capacity as investment manager  

By:

/s/ Robert L. Hockett

Name:

Robert L. Hockett

Title:   

Principal  

By:

/s/ John S. Ehlinger

Name:

John S. Ehlinger

Title:  

Vice President       Commitment: 16.666667%     $7,500,000.00

102

GMAM INVESTMENT FUNDS TRUST

 

By: DDJ Capital Management, LLC, on behalf
of GMAM Investment Funds Trust, in its capacity as investment manager  

By:

/s/ Robert L. Hockett  

Name: Robert L. Hockett

 

Title:    Principal

   

By:

/s/ John S. Ehlinger  

Name: John S. Ehlinger

 

Title:   Vice President

     

Commitment:

8.333333%    

$3,750,000.00

   

 

State Street Bank and Trust Company, solely in its capacity as Trustee for
GENERAL MOTORS WELFARE BENEFIT TRUST (VEBA) as directed by DDJ Capital
Management, LLC, and not in its individual capacity

   

By:

/s/ Matthew Daly  

Name:  Matthew Daly

 

Title:     Vice President

     

Commitment:

5.833333%    

$2,625,000.00

   

103

DDJ U.S. HIGH YIELD TRUST

 

By: DDJ Capital Management, LLC,  its
attorney in fact  

By:

/s/ Robert L. Hockett  

Name: Robert L. Hockett

 

Title:    Principal

   

By:

/s/ John S. Ehlinger  

Name: John S. Ehlinger

 

Title:   Vice President

     

Commitment:

0.666667%    

$300,000.00

   

 

MULTI-STYLE, MULTI-MANAGER FUNDS PLC, The Global High Yield Fund

 

By:

DDJ Capital Management, LLC, on behalf of Multi-Style, Multi-Manager Funds, PLC,
The Global High Yield Fund, in its capacity as Money Manager

   

By:

/s/ Robert L. Hockett  

Name: Robert L. Hockett

 

Title:    Principal

   

By:

/s/ John S. Ehlinger  

Name: John S. Ehlinger

 

Title:   Vice President

     

Commitment:

1.833333%    

$825,000.00

   

104

DDJ TOTAL RETURN LOAN FUND, LP

 

By:

GP Total Return, L.P., its General Partner

By:

GP Total Return, LLC, its General Partner

By:

DDJ Capital Management, LLC, its Manager

   

By:

/s/ Robert L. Hockett  

Name: Robert L. Hockett

 

Title:    Principal

   

By:

/s/ John S. Ehlinger  

Name: John S. Ehlinger

 

Title:   Vice President

     

Commitment:

3.333333%    

$1,500,000.00

   

 

MAST CREDIT OPPORTUNITIES I,
(MASTER) LTD

 

By:

/s/ Chris Madison  

Name: Chris Madison

 

Title:   Director

     

Commitment:

36.666667%    

$16,500,000.00

   

 

ORE HILL FUND LP

 

By:

/s/ Fredrick J. Wahl  

Name: Fredrick J. Wahl

 

Title:    Managing Member

     

Commitment: 12.777777%

   

$5,750,000.00

      by its Investment Advisory

105

AIRLIE OPPORTUNITY MASTER FUND, LTD

 

By:

/s/ Jeremy Bloomer  

Name:

Jeremy Bloomer  

Title:

Managing Director    

     

Commitment: 4.666667%

   

$2,100,000.00

   

 

QVT FUND, LP

 

By:

QVT Associates GP LLC,
Its General Partner

   

By:

/s/ Kevin McGocy  

Name: Kevin McGocy

 

Title:    Authorized Signatory

   

By:

/s/ Tracy Fu  

Name: Tracy Fu

 

Title:    Managing Member

   

     

Commitment: 9.222222%

   

$4,150,000

   

106

 

Exhibit A

Form of Approved Budget

 

 

 

 

 

 

 

 

 

107

Exhibit B

Form of Assignment and Acceptance

 

 

 

 

 

 

 

 

 

108

Exhibit C

Form of Borrowing Base Certificate

 

 

 

 

 

 

 

 

 

109

Exhibit D

Form of Interim Order

 

 

 

 

 

 

 

 

 

110

Exhibit E

Form of Notice of Borrowing

 

 

 

 

 

 

 

 

 

111

Exhibit F

Form of Note

 

 

 

 

 

 

 

 

 

112

Exhibit G

Form of Officer's Certificate

 

 

 

 

 

 

 

 

 

 

113