DEF 14A 1 falconproxy.htm FALCON PRODUCTS, INC. PROXY

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

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FALCON PRODUCTS, INC.
(Name of Registrant as Specified In Its Charter)

 
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FALCON PRODUCTS, INC.
9387 Dielman Industrial Drive
St. Louis, Missouri 63132

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

St. Louis, Missouri
January 28, 2003

      The annual meeting of the stockholders of Falcon Products, Inc., will be held on Thursday, March 6, 2003, at 10:30 a.m. at the St. Louis Club, 7701 Forsyth Boulevard, Clayton, Missouri 63105 for the purposes of:

  1. Electing two Class A directors for a term expiring in 2006; and
  2. Transacting such other business as may properly come before the meeting.

      Stockholders of record at the close of business on January 15, 2003, will be entitled to vote at the meeting. A list of all stockholders entitled to vote at the annual meeting, arranged in alphabetical order and showing the address of and number of shares held by each stockholder, will be open at the principal office of Falcon Products, Inc. at 9387 Dielman Industrial Drive, St. Louis, Missouri 63132, during usual business hours, to the examination of any stockholder for any purpose germane to the annual meeting for 10 days prior to the date thereof.

      A copy of the Annual Report for fiscal 2002 accompanies this notice.

      By Order of the Board of Directors
MICHAEL J. DRELLER
Secretary

      Whether or not you intend to be present at the meeting, please mark, sign, date, and return the accompanying proxy promptly. A return addressed envelope is enclosed for your convenience.

FALCON PRODUCTS, INC.
9387 Dielman Industrial Drive
St. Louis, Missouri 63132

PROXY STATEMENT

SOLICITATION OF PROXIES

      The enclosed proxy is solicited by the Board of Directors of Falcon Products, Inc. (the ''Company''), for use at the annual meeting of the Company's stockholders to be held at the St. Louis Club, 7701 Forsyth Boulevard, Clayton, Missouri 63105 on Thursday, March 6, 2003, at 10:30 a.m. and at any adjournments thereof. Whether or not you expect to attend the meeting in person, please return your executed proxy in the enclosed envelope and the shares represented thereby will be voted in accordance with your wishes. This proxy statement and the enclosed form of proxy are being first sent to stockholders on or about January 28, 2003.

REVOCABILITY OF PROXY

      Any stockholder executing a proxy that is solicited hereby has the power to revoke it prior to the voting of the proxy. Revocation may be made by attending the annual meeting and voting the shares of stock in person, or by delivering to the Secretary of the Company at the principal office of the Company prior to the annual meeting a written notice of revocation or a later-dated, properly executed proxy.

RECORD DATE

      Stockholders of record at the close of business on January 15, 2003, will be entitled to vote at the meeting.

ACTION TO BE TAKEN UNDER PROXY

      Unless otherwise directed by the giver of the proxy, the persons named in the enclosed form of proxy,
to-wit, Franklin A. Jacobs and Michael J. Dreller, or either one of them who acts, will vote:

  1. FOR the election of the persons named herein as nominees for Class A directors of the Company, for a term expiring at the 2006 annual meeting of stockholders (or until successors are duly elected and qualified); and
  2. According to their judgment, on the transaction of such other business as may properly come before the meeting or any adjournments thereof.

      Should any nominee named herein for election as a Class A director become unavailable for any reason, it is intended that the persons named in the proxy will vote for the election of such other person in his stead as may be designated by the Board of Directors. The Board of Directors is not aware of any reason that might cause the nominee to be unavailable.

VOTING SECURITIES, PRINCIPAL HOLDERS THEREOF
AND CUMULATIVE VOTING RIGHTS

      On January 15, 2003, there were 8,996,910 shares of common stock, par value $.02 per share (''Common Stock''), outstanding, which constitute all of the outstanding capital stock of the Company. Each share is entitled to one vote, and stockholders are entitled to vote cumulatively in the election of directors; that is, each stockholder may vote the number of his, her or its shares multiplied by the number of directors to be elected and may cast all such votes for a single nominee or may distribute them among any number of nominees. There is no condition precedent to the exercise of these cumulative voting rights.

      A majority of the outstanding shares present in person or represented by proxy will constitute a quorum at the meeting. Under applicable state law and provisions of the Company's Certificate of Incorporation (the ''Certificate'') and Restated By-Laws, as amended (the ''By-Laws''), the vote required for the election of directors is a plurality of the votes of the issued and outstanding shares of Common Stock present in person or represented by proxy at the annual meeting of stockholders and entitled to vote on the election of directors.

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      Abstentions from voting and broker non-votes will operate as neither a vote for nor a vote against the nominee for director. Votes on all matters will be counted by duly appointed inspectors of election, whose responsibilities are to ascertain the number of shares outstanding and the voting power of each, determine the number of shares represented at the meeting and the validity of proxies and ballots, count all votes and report the results to the Company.

      As of January 15, 2003, the following persons were known to the Company who may, individually or as a group, be deemed to be the beneficial owners of more than 5% of the Common Stock, each having sole voting and dispositive power over such Common Stock, except as indicated in the footnotes hereto:

                     Name and Address
   Amount and Nature
of Beneficial Ownership(1)
   Percent
of Class
                                    
                     Franklin A. Jacobs        2,133,226 (2)            23.3 %
                     Chairman of the Board and
Chief Executive Officer of the Company       
9387 Dielman Industrial Drive
St. Louis, Missouri 63132		              
                                    
                     Royce & Associates, Inc.        1,035,900 (3)            11.5 %
                     1414 Avenue Of The Americas
New York, NY 10022		              
                                    
                     Rutabaga Capital Management, LLC        920,550 (4)            10.2 %
                     64 Broad Street
Boston, MA 02109		              
                                    
                     Wellington Management Company LLP        821,500 (5)            9.1 %
                     75 State Street
Boston, MA 02109		              
                                    
                     Dimensional Fund Advisors Inc.              668,256 (6)            7.4 %
                     1299 Ocean Avenue, 11th Floor      
Santa Monica, CA 90401      		              
                                    
                     Putnam Investments, LLC              653,001 (7)            7.3 %
                     One Post Office Square      
Boston, MA 02109      		              
                                    
     
(1)   Reflects the number of shares outstanding on January 15, 2003, and, with respect to each person, assumes the exercise of all stock options held by such person that are exercisable currently or within 60 days of the date of this proxy statement (such options being referred to hereinafter as ''currently exercisable options'').
     
(2)   Includes 3,500 shares held by Marilyn Mann Jacobs, the wife of Mr. Jacobs, 94,557 shares held in revocable trusts for the benefit of Mr. Jacobs' children as to which Mr. Jacobs serves as sole trustee, and 97,785 shares held by the Jacobs Family Foundation, a charitable trust in which Mr. Jacobs has no pecuniary interest but is the trustee. Also includes currently exercisable options to acquire 170,000 shares of Common Stock. Does not include 95,240 shares held in trust for the benefit of Mr. Jacobs' children as to which Mr. Jacobs is not the trustee.
     
(3)   Provided to the Company by a representative from Royce & Associates, Inc. Beneficial owner has shared voting and disposition power for all shares.
     
(4)   Provided to the Company by a representative from Rutabaga Capital Management, LLC. Beneficial owner has shared voting and disposition power over 582,800 and 920,550 shares, respectively.
     
(5)   Provided to the Company by a representative from Wellington Management Company LLP. Beneficial owner has shared voting and disposition power for all shares.
     
(6)   Provided to the Company by a representative from Dimensional Fund Advisors Inc. (''Dimensional''). Dimensional, an investment advisor registered under Section 203 of the Investment Advisors Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager to certain other commingled group trusts and separate accounts. These investment companies, trusts and accounts are the ''Funds''. In its role as investment advisor or manager, Dimensional possesses voting and/or investment power over the shares of Falcon Products, Inc. described in this statement that are owned by the Funds. All shares reported in this statement are owned by the Funds. Dimensional disclaims beneficial ownership of such shares.
     
(7)   Based on an amendment to Schedule 13G filed on February 13, 2002, Putnam Investments, LLC has shared voting and disposition power over 301,705 and 653,001 shares, respectively.

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SECURITY OWNERSHIP OF MANAGEMENT

      On January 15, 2003, the following represented beneficial ownership of Common Stock by each director and nominee for election as a director, by each of the executive officers named in the Summary Compensation Table (see ''Executive Compensation'' below), and by all current directors, nominees and executive officers as a group (each director, nominee and officer having sole voting and dispositive power over the shares listed opposite his name except as indicated in the footnotes hereto):

                     Name
   Amount and Nature
of Beneficial Ownership(1)
   Percent
of Class
                                      
                     Martin Blaylock              2,600 (2)              *  
                                      
                     Melvin F. Brown              17,650 (3)              *  
                                      
                     Franklin A. Jacobs              2,133,226 (4)              23.3 %
                                      
                     S. Lee Kling              212,812 (5)              2.4 %
                                      
                     Lee M. Liberman              47,292 (6)              *  
                                      
                     David L. Morley              284,092 (7)              3.1 %
                                      
                     Steven C. Roberts              74,060 (8)              *  
                                      
                     Michael F. Shanahan, Sr.              40,000                *  
                                      
                     Stephen E. Cohen              74,650 (9)              *  
                                      
                     Michael J. Dreller              78,521 (10)              *  
                                      
                     Michael J. Kula              63,081 (11)              *  
                                      
                     All Directors, Nominees and Executive
  Officers as a Group (12 individuals)      		        3,037,484 (12)              31.5 %(13)
     
  *   Represents less than 1% of the class.
     
 (1)   See Note (1) to the table under ''Voting Securities, Principal Holders Thereof and Cumulative Voting Rights.''
     
 (2)   Includes currently exercisable options to acquire 600 shares of Common Stock.
     
 (3)   Includes currently exercisable options to acquire 6,650 shares of Common Stock.
     
 (4)   See Note (2) to the table under ''Voting Securities, Principal Holders Thereof and Cumulative Voting Rights.''
     
 (5)   Includes 130,716 shares owned by a revocable trust of which Mr. Kling and his wife are the trustees. Mr. Kling shares voting and dispositive power over such shares. Also includes currently exercisable options to acquire 13,250 shares of Common Stock.
     
 (6)   Includes currently exercisable options to acquire 13,250 shares of Common Stock.
     
 (7)   Includes currently exercisable options to acquire 260,000 shares of Common Stock.
     
 (8)   Includes currently exercisable options to acquire 600 shares of Common Stock.
     
 (9)   Includes currently exercisable options to acquire 52,925 shares of Common Stock.
     
(10)   Includes currently exercisable options to acquire 60,000 shares of Common Stock.
     
(11)   Includes currently exercisable options to acquire 56,000 shares of Common Stock.
     
(12)   Includes 176,925 shares subject to currently exercisable options held by non-director executive officers of the Company and 464,350 shares subject to currently exercisable options held by directors of the Company.
     
(13)   For purposes of determining the aggregate amount and percentage of shares deemed beneficially owned by directors and executive officers of the Company individually and by all directors, nominees and executive officers as a group, exercise of all options listed in the footnotes hereto that are exercisable within 60 days of the date hereof is assumed. For such purpose, 9,638,185 shares of Common Stock are deemed to be outstanding.

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PROPOSAL 1—ELECTION OF DIRECTORS

INFORMATION ABOUT THE NOMINEES

      The Company's Certificate and By-Laws provide for a division of the Board of Directors into three classes. One of the classes is elected each year to serve a three-year term. The term of the current Class A directors expires at the 2003 Annual Meeting of Stockholders. It is the intention of the persons named in the accompanying proxy, unless otherwise directed, to vote for the election of the Class A nominees listed below to serve until the 2006 annual meeting of stockholders.

      The Company's Bylaws currently specify that the number of Directors shall be nine, subject to amendment by the Board of Directors. The Company currently has one vacancy on the Board of Directors. In addition, Lee M. Liberman, a current Class A Director of the Company, has notified the Company that he will not be standing for reelection and will retire from the Board of Directors effective March 6, 2003. As a result, the Company will have two vacancies on the Board of Directors following the 2003 Annual Meeting. The Company's Bylaws provide that vacancies on the Board of Directors may be filled by the remaining members of the Board of Directors. Although the Board of Directors intends to fill these vacancies, no person has yet been selected, and it is not anticipated that such vacancy will be filled until after the 2003 Annual Meeting. Proxies solicited by the Company for the election of Directors cannot be voted for a greater number of persons than the number of nominees named in the proxy.

      The following table shows for each nominee and director continuing in office his age, his principal occupation for at least the last five years, his present position with the Company, the year in which he was first elected or appointed a director (each serving continuously since first elected or appointed except as set forth in the footnotes hereto), his directorships with other companies whose securities are registered with the Securities and Exchange Commission (''SEC''), and the class and expiration of his term as director.

Class A—To be elected to serve as director until 2006
 
Name
 Age
      Principal Occupation
      Service As
Director Since
               
Melvin F. Brown   67        Retired. President and Chief Executive Officer of Deutsche Financial Services, a commercial finance company, since June 30, 1998; prior thereto, Vice Chairman of Deutsche Financial Services, since January 1997.      1997
               
Steven C. Roberts   50        Co-Founder and President of Roberts-Roberts & Associates, a firm consulting in the areas of public relations, market research, labor relations and real estate development, since 1974, President of Roberts Broadcasting Company, operator of television stations in St. Louis and Denver; Director of Alamosa Holdings, Inc.      2001
               
Class B—To continue to serve as director until 2004
 
Name
 Age
      Principal Occupation
      Service As
Director Since
               
David L. Morley (1)   46        President and Chief Operating Officer of the Company since December 2000; prior thereto, Senior Vice President of Monsanto Company from 1998 to 2000; President—Nutrition and Consumer Products Company of Monsanto Company from 1997 to 1998.      2000
               
Martin Blaylock   62        Retired. Vice President of Manufacturing Operations of Monsanto Company 1996-2001; prior thereto, Vice President of Manufacturing Operations for Monsanto Agricultural Company 1994-1996.      2001
               

5

Class C—To continue to serve as director until 2005
 
Name
 Age
      Principal Occupation
      Service As
Director Since
               
Franklin A. Jacobs (1)   70        Chairman of the Board and Chief Executive Officer of the Company for more than the last five years and President of the Company until December 1995.      1957
               
S. Lee Kling (1)   74        Chairman of the Board of The Kling Company since June 2002; prior thereto, Chairman of the Board of Kling Rechter & Co., L.P., a merchant banking company, for more than the last five years; Director of Bernard Chaus, Inc., Electro Rent Corporation, Engineered Support Systems, Inc., Kupper Parker Communications, Inc., and National Beverage Corp.      1969
               
Michael F. Shanahan, Sr.   63        Chairman of the Board and Chief Executive Officer of Engineered Support Systems, Inc. for more than the last five years; Director of Engineered Support Systems, Inc.      2002
               
     
(1)   Members of Executive Committee.

INFORMATION CONCERNING BOARD OF DIRECTORS

      During fiscal 2002, four regular meetings of the Board of Directors were held. During such fiscal year, each director attended 75 percent or more of the aggregate of (i) the total number of meetings of the Board of Directors held during the period and (ii) the total number of meetings held during the period by all committees of the Board of Directors on which he served.

      The Board of Directors of the Company has a standing Audit Committee consisting of Messrs. Liberman (Chairman), Brown and Roberts, all of whom are independent directors as defined by the New York Stock Exchange. The primary purpose of the Audit Committee is to assist the Board of Directors in fulfilling its responsibility to oversee management's conduct of the Company's: (i) financial reporting process; (ii) systems of internal accounting and financial controls; (iii) annual independent audit of the Company's financial statements; and (iv) legal compliance and any ethics programs established by management and the Board of Directors. During fiscal 2002, four Audit Committee meetings were held.

      The Company also has a standing Compensation Committee consisting of Messrs. Kling (Chairman), Blaylock and Shanahan. The purpose of the Compensation Committee is to review and determine the annual salary, bonus and other benefits of all executive officers of the Company, which determinations are subject to the approval of the Board of Directors, and to administer the Company's stock option and other benefit plans. The Compensation Committee also serves as a nominating committee to evaluate and recommend to the Board of Directors qualified nominees for election or appointment as directors and qualified persons for selection as senior officers. See the ''COMPENSATION COMMITTEE REPORT'' beginning on page 10 for a discussion of the key elements and policy of the Company's executive compensation program. The Compensation Committee will give appropriate consideration to a written recommendation by a stockholder for the nomination of a qualified person to serve as a director of the Company, provided that such recommendation contains sufficient information regarding the proposed nominee for the Committee to properly evaluate such nominee's qualifications to serve as a director. During fiscal 2002, one Compensation Committee meeting was held.

COMPENSATION OF DIRECTORS

      Directors that are not salaried employees of the Company receive an annual fee of $15,500. The Company's Directors have the opportunity to defer all or a portion of the fees payable to such Directors under the Company's Non-Employee Directors' Deferred Compensation Plan (the ''Directors' Plan''). Any fees deferred under the Directors' Plan are credited to a bookkeeping reserve account and converted into a number of stock units equal to 120% of the deferred fees divided by the fair market value of a share of the Company's Common Stock on the last day of the month in which the amount of deferred fees would have been paid but for the deferral. Directors' fees of $93,000 were earned during fiscal 2002, all of which were deferred under the Directors' Plan.

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      The Company also maintains a Non-Employee Director Stock Option Plan, which provides for an automatic annual grant in December of each year of a nonqualified stock option to purchase shares of Common Stock at a per share exercise price equal to the fair market value of the Common Stock on the date the option is granted. Options granted under the plan are exercisable in increments of 20 percent of the underlying shares commencing upon the date of grant and thereafter on each of the four successive anniversaries of the date of grant, however, such options become immediately exercisable upon retirement, death or disability of the director. Seven non-employee directors of the Company were each granted options to purchase 3,000 shares of Common Stock under the plan in December 2001 at an exercise price of $5.90 per share.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

      No current member of the Compensation Committee is now an officer or an employee of the Company or any of its subsidiaries, was ever an officer or an employee of the Company or any of its subsidiaries or has had any substantial business dealings with the Company or any of its subsidiaries.

EXECUTIVE COMPENSATION

      The following table reflects compensation paid or payable for fiscal years 2002, 2001, and 2000 with respect to the Company's chief executive officer and each of the four other most highly compensated executive officers whose fiscal 2002 salaries and bonuses combined exceeded $100,000 in each instance.

SUMMARY COMPENSATION TABLE

        Annual Compensation
   Long Term Compensation
        
                            Awards
   Payouts
        
Name and Principal Position
     Fiscal
Year
   Salary ($)
     Bonus
   Other
Annual
Compensa-
tion ($)(1)
     Restricted
Stock
Award ($)
   Securities
Underlying
Options (#)
     LTIP
Payouts ($)
   All Other
Compen-
sation ($)
Franklin A. Jacobs     2002       679,710       0       0       0       100,000       0       815 (2)
Chairman of the Board and     2001       734,328       0       0       0       100,000       0       815 (2)
Chief Executive Officer     2000       718,908       0       0       0       0       0       815 (2)
                                                 
David L. Morley     2002       360,000       0       6,367       0       50,000       0       0  
President & Chief     2001       390,769       0       0       0       500,000       0       0  
Operating Officer(3)     2000       0       0       0       0       0       0       0  
                                                 
Stephen E. Cohen     2002       176,814       0       3,130       0       10,000       0       0  
Vice President—Sales     2001       191,802       0       3,408       0       15,000       0       0  
and Marketing     2000       184,808       0       3,522       0       0       0       0  
                                                 
Michael J. Dreller     2002       176,814       0       0       0       10,000       0       0  
Vice President—Finance     2001       191,802       0       3,408       0       15,000       0       0  
and Chief Financial Officer                  2000       184,808       0       3,522       0       0       0       0  
                                                 
Michael J. Kula     2002       167,508       0       1,186       0       10,000       0       0  
Vice President—     2001       181,741       0       1,291       0       15,000       0       0  
Corporate Technology     2000       178,269       0       1,376       0       0       0       0  
and Development                                                
                                                 
     
(1)   Consists of the discount under the Falcon Products, Inc. 1997 Employee Stock Purchase Plan under which employees of the Company may acquire shares of Common Stock at 85% of the lesser of the fair market value on the grant date or the exercise date.
     
(2)   Consists of the economic benefit of premiums paid for a survivorship life insurance policy on the life of Mr. Jacobs.
     
(3)   Mr. David Morley was hired as the President and Chief Operating Officer of the Company on December 6, 2000.

7

OPTION/SAR GRANTS IN LAST FISCAL YEAR

      The following table provides certain information as to option grants in fiscal 2002 to the persons named in the Summary Compensation Table.

    Individual Grants
       Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Option Term (2)
Name
   Number of
Securities
Underlying
Options
Granted (#)
   Percent of
Total Options
Granted to
Employees
in Fiscal
Year
        Exercise or
Base Price
($/Share)
        Expiration Date
   5% ($)
   10% ($)
                                         
Franklin A. Jacobs(1)              100,000            22.0 %        5.90        12/18/2011          371,048            940,308  
                                         
David L. Morley(1)              50,000            11.0 %        5.90        12/18/2011          185,524            470,154  
                                         
Michael J. Dreller(1)              10,000            2.2 %        5.90        12/18/2011          37,105            94,031  
                                         
Stephen E. Cohen(1)              10,000            2.2 %        5.90        12/18/2011          37,105            94,031  
                                         
Michael J. Kula(1)              10,000            2.2 %        5.90        12/18/2011          37,105            94,031  
                                         
     
(1)   Such options were granted at fair market value on date of grant and are exercisable in 20 percent annual increments, beginning on the first anniversary date of grant and on each anniversary date thereafter. All options listed above expire ten years from date of grant, subject generally to earlier terminations upon cessation of employment.
     
(2)   The potential realizable value amounts shown illustrate the values that might be realized upon exercise immediately prior to expiration of their term using 5 percent and 10 percent appreciation rates set by the SEC, compounded annually, and, therefore, are not intended to forecast possible future appreciation, if any, of the Company's stock price.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

      The following table lists option exercises in fiscal 2002 and the value of options held as of the end of fiscal 2002 by the persons listed in the Summary Compensation Table.

Name
   Shares
Acquired
on Exercise (#)
   Value
Realized ($)
        Number of Securities
Underlying Unexercised
Options at Fiscal Year-End (#)

Exercisable/Unexercisable
        Value of Unexercised
In-The-Money Options
at Fiscal Year-End ($)

Exercisable/Unexercisable
                         
Franklin A. Jacobs              0            0          212,500/180,000        0/0
                         
David L. Morley              0            0          125,000/425,000        0/0
                         
Stephen E. Cohen              825            1,575          43,420/30,000        0/0
                         
Michael J. Dreller              0            0          50,000/30,000        0/0
                         
Michael J. Kula              0            0          47,000/28,000        0/0

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PENSION PLAN TABLE

      The following table sets forth the estimated annual benefits payable under the Company's defined benefit pension plan upon normal retirement of covered individuals. The estimates assume that benefits commence at age 65 under a straight-life annuity form.

    Years of Service
Remuneration
   5
   10
   15
   20
   25
   30
   35
                                           
$ 25,000             $ 1,875      $ 3,750      $ 5,635      $ 7,500      $ 9,375      $ 11,250      $ 13,125
                                           
   50,000               3,750        7,500        11,250        15,000        18,750        22,500        26,250
                                           
   75,000               5,625        11,250        16,875        22,500        28,125        33,750        39,375
                                           
 100,000               7,500        15,000        22,500        30,000        37,500        45,000        52,500
                                           
 150,000               11,250        22,500        33,750        45,000        56,250        67,500        78,750
                                           
 175,000               13,125        26,250        39,375        52,500        65,625        78,750        91,875

      The pension plan benefit is determined by calculating 1.5 percent of the average of the plan participant's salary or wages up to the maximum amount permitted under the Internal Revenue Code (currently $170,000). The plan provides for a maximum of salary and wages of up to $75,000 per year from November 1, 1992 to November 1, 1997, and up to $50,000 per year prior to November 1, 1992, for each year of service. Estimated benefit amounts listed in the above table are not subject to any deduction for Social Security benefits or other offset amounts.

      The credited years of service under the retirement plan for each of the executive officers listed in the Summary Compensation Table are as follows:

        
     Franklin A. Jacobs      44                                                        Michael J. Dreller      9
          
     Stephen E. Cohen       12                                                        Michael J. Kula         7
          
     David L. Morley          2    

EMPLOYMENT ARRANGEMENTS WITH EXECUTIVE OFFICERS

      Other than the employment agreement with Mr. Morley discussed below; the Company is not a party to any employment, severance agreements or similar arrangement with its executive officers.

      On December 6, 2000, in connection with its employment of David L. Morley, the Company entered into an employment agreement with Mr. Morley providing for (i) an initial base salary of $400,000 per year subject to upward adjustments by the Board of Directors, and (ii) the participation by Mr. Morley in the Company's executive bonus plan. In the event that the Company terminates Mr. Morley's employment without cause, or Mr. Morley terminates his employment for good cause or because of the occurrence of a change in control, Mr. Morley is entitled to be paid 100% of his annual base salary payable over a twelve month period, subject to certain specified limitations. If his employment is terminated with cause or if Mr. Morley resigns, his salary and bonus rights will cease on the date of such termination or resignation.

      Notwithstanding anything to the contrary set forth in any of the Company's previous filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate by reference future filings, including this Proxy Statement, in whole or in part, the following Compensation Committee Report, Audit Committee Report, Five Year Total Return Chart and Accounting Fees shall not be incorporated by reference into any such filings.

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COMPENSATION COMMITTEE REPORT

General Policy

      The Company's executive compensation program is linked to corporate performance and returns to stockholders. To this end, the Company has developed a compensation strategy that ties a significant portion of executive compensation to the Company's success in meeting performance goals and to appreciation in the Company's stock price. The overall objectives of this strategy are to attract and retain the best possible executive talent, to link executive and stockholder interests through an equity-based plan and to provide compensation levels that recognize individual contributions as well as overall business results.

      Each year the Compensation Committee reviews the Company's overall executive compensation program in comparison to the Company's executive compensation, corporate performance, stock price appreciation and total return to its stockholders, to other companies of similar size. The annual compensation reviews permit an evaluation of the link between the Company's performance and its executive compensation in the context of the compensation programs of other companies.

      The Compensation Committee determines the compensation of corporate executives elected by the Board of Directors, including the individuals whose compensation is detailed in this proxy statement. In reviewing the individual performance of the executives whose compensation is detailed in this proxy statement, other than Franklin A. Jacobs (the Company's Chief Executive Officer), the Compensation Committee takes into account the views of Mr. Jacobs.

      The key elements of the Company's executive compensation program consist of base salary, annual bonus and stock options. The Compensation Committee's policies with respect to each of these elements, including the basis for the compensation awarded to Mr. Jacobs, are discussed below. The Compensation Committee also takes into account the full compensation package afforded by the Company to the individual, including pension benefits, insurance and other benefits, as well as the programs described below. The Compensation Committee continues to monitor qualifying compensation paid to the Company's executive officers with respect to its deductibility under Section 162(m) of the Internal Revenue Code.

Base Salaries

      Base salaries for executive officers are initially determined by evaluating the responsibilities of the position held and the experience of the individual, and by reference to the competitive marketplace for executive talent, including a comparison to base salaries for comparable positions at other companies. The comparative group is not limited to companies that comprise the published industry index shown in the Company's stock performance graph presented below.

      Annual salary adjustments are determined by evaluating the performance of the Company and of each executive officer, and also taking into account new responsibilities. The Compensation Committee exercises judgment and discretion in the information it reviews and the analysis it considers, and where appropriate, also considers non-financial performance measures. These include increases in market share, manufacturing efficiency gains, improvements in product quality and improvements in relations with customers, suppliers and employees. Due to the Company's recent performance, the Company's executive officers took a temporary salary reduction of 10%. The reduction was effective November 1, 2001, and will be periodically evaluated by the Compensation Committee.

      With respect to the base salary granted to Mr. Jacobs in fiscal 2002, the Compensation Committee took into account the Company's financial results in fiscal 2001, and the assessment by the Compensation Committee of Mr. Jacob's individual performance. Mr. Jacobs was granted an annual base salary, commencing January 1, 2002, of $753,234, the same salary as calendar year 2001.

Annual Bonuses

      The Company's executive officers are eligible for annual cash bonuses under the terms of the Company's Officer Bonus Plan. Under such Plan, the Compensation Committee establishes bonuses as a percentage of base salary to be paid if and to the extent annual projections for net earnings are met or exceeded. In light of the Company's earnings levels in fiscal years 2002, 2001 and 2000, the Compensation Committee did not recommend, nor did the Board of Directors authorize, a bonus for any of the Company's officers attributable to fiscal

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years 2002, 2001 and 2000. Mr. Jacobs did not participate in the Officer Bonus Plan for fiscal years 2002, 2001 and 2000, and accordingly, was not considered.

Stock Options

      The granting of stock options is a key part of the Company's overall compensation program and is designed to provide its executive officers and other key employees with incentives to maximize the Company's long-term financial performance.

      In determining whether and how many options should be granted, the Compensation Committee may consider the responsibilities and seniority of each of the executive officers, as well as the financial performance of the Company and such other factors as it deems appropriate, consistent with the Company's compensation policies. However, the Compensation Committee has not established specific target awards governing the recipient, timing or size of option grants. Thus, determinations by the Compensation Committee with respect to the granting of stock options are subjective in nature.

Conclusion

      Through the programs described above, a significant portion of the Company's executive compensation is linked directly to individual and corporate performance. The Compensation Committee intends to continue the policy of linking executive compensation to corporate performance, recognizing that the volatility of the business cycle from time to time may result in an imbalance for a particular period.

                                                                                S. Lee Kling, Chairman
                                                                                Martin Blaylock
                                                                                Michael F. Shanahan, Sr.

AUDIT COMMITTEE REPORT

      The Audit Committee is composed of three independent directors as defined by the New York Stock Exchange. The Audit Committee operates under a written charter adopted by the Board of Directors on June 7, 2000.

      We have reviewed and discussed with management the Company's consolidated financial statements as of and for the fiscal year ended November 2, 2002.

      We have discussed with the independent public accountants the matters required to be discussed by Statement on Auditing Standards No. 61, Communication with Audit Committees.

      We have received and reviewed the written disclosures and the letter from the independent public accountants required by Independence Standard No. 1, Independence Discussions with Audit Committees and have discussed with the independent public accountants their independence.

      Based on the reviews and discussions referred to above, we recommend to the Board of Directors that the financial statements referred to above be included in the Company's Annual Report on Form 10-K for the fiscal year ended November 2, 2002, to be filed with the Securities and Exchange Commission.

                                                                                Lee M. Liberman, Chairman
                                                                                Melvin F. Brown
                                                                                Steven C. Roberts

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FIVE YEAR TOTAL RETURN CHART

      The following chart compares the Company's cumulative yearly stockholder return over a five-year period, calculated monthly, with the NYSE Composite Index of U.S. Companies and a peer group index of public companies that in the judgment of the Company manufacture and/or sell furniture and related products similar to those of the Company. The companies included in the index, in addition to Falcon Products, Inc. are: Chromcraft Revington, Inc.; Flexsteel Industries, Inc.; Herman Miller, Inc.; Hon Industries, Inc.; and Knape & Vogt Manufacturing Co.

      The chart assumes a $100 investment made October 31, 1997 and the reinvestment of all dividends.

      10/31/97
   10/30/98
   10/29/99
   10/28/00
   11/3/01
   11/2/02
                                                      
     Falcon Products, Inc                100.0            68.9            57.9            53.0            37.2            27.3  
                                                      
     NYSE Stock Market (U.S. Companies)                100.0            115.7            135.1            141.2            126.9            112.0  
                                                      
     Self-Determined Peer Group                100.0            87.3            83.7            96.4            91.6            89.4  

TRANSACTIONS WITH ISSUER AND OTHERS

      Donald P. Gallop, a former director of the Company, was the former Chairman of the law firm of Gallop, Johnson & Neuman, L.C., which has provided legal services to the Company in prior years and is expected to provide legal services to the Company in the future.

      The Company believes that the terms and conditions of the transactions with affiliated persons described above were no less favorable to the Company than those that would have been available to the Company in comparable transactions with unaffiliated persons.

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COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

      Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's executive officers and directors, and persons who own more than 10% of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership with the SEC. Such individuals are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based solely on its review of the copies of such forms furnished to the Company or written representations that no reports were required to be filed, the Company believes that such persons complied with all Section 16(a) filing requirements applicable to them with respect to transactions during fiscal 2002.

RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS

      Ernst & Young LLP, the Company's independent public accountants for the fiscal year ended November 2, 2002, have been selected as its independent public accountants for the fiscal year ending November 1, 2003. Representatives of Ernst & Young LLP are expected to attend the annual meeting and will have the opportunity to make statements and respond to appropriate questions from stockholders.

ACCOUNTING FEES

      The following table sets forth the aggregate fees billed to the Company for fiscal year 2002 by the Company's independent public accountants, Ernst & Young LLP:

                     Audit Fees            $ 178,000  
                     Financial Information Systems Design and Implementation Fees            $ 0  
                     All Other Fees            $ 126,266 (1)
                              
     
(1)   Related to tax matters

      The Audit Committee has determined that the nature and extent of non-audit services provided by Ernst & Young LLP is compatible with maintaining auditor independence.

ANNUAL REPORT

      The Annual Report of the Company for fiscal 2002 accompanies this Notice of Annual Meeting and Proxy Statement.

FUTURE PROPOSALS OF SECURITY HOLDERS

      All proposals of security holders intended to be presented at the 2004 annual meeting of stockholders must be received by the Company not later than September 30, 2003, for inclusion in the Company's 2004 proxy statement and form of proxy relating to the 2004 annual meeting.

      In addition, under the SEC's proxy rules, if a stockholder wishes to bring a proposal before the annual meeting of stockholders outside of the proxy inclusion process discussed above but does not provide written notice of the proposal to the Company at least 45 days before the anniversary date of the day that proxy materials were first mailed for the prior year's annual meeting of stockholders, such notice will be untimely and any proxies received by the Board of Directors from stockholders in response to its solicitation will be voted by the Company's designated proxies in their discretion on such matter, regardless of whether specific authority to vote on such matter has been received from the stockholders submitting such proxies. Accordingly, any stockholder who wishes to submit a proposal at the 2004 annual meeting of stockholders and also wishes to avoid, in certain instances, the possibility of discretionary voting by the Company's proxies on such matter must give written notice to the Secretary of the Company on or before December 14, 2003.

HOUSEHOLDING OF MATERIALS

      In some instances, only one copy of this proxy is being delivered to multiple stockholders, sharing an address, unless the Company has received instructions from one or more of the stockholders to continue to deliver multiple copies. We will deliver promptly upon oral or written request a separate copy of the proxy statement to any stockholder at your address. If you wish to receive a separate copy of the proxy statement, you may call us at (314) 991-9200, or send a written request to Michael J. Dreller, Secretary, Falcon Products, Inc.,

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9387 Dielman Industrial Drive, St. Louis, Missouri 63132. If you have received only one copy of the proxy statement and wish to receive a separate copy for each stockholder in the future, you may call us at the telephone number or write us at the address listed above. Alternatively, stockholders sharing an address who now receive multiple copies of the proxy statement may request delivery of a single copy, also by calling us at the number or writing to us at the address listed above.

MISCELLANEOUS

      The Company will pay the cost of soliciting proxies in the accompanying form. In addition to solicitation by mail, certain officers and regular employees of the Company may solicit the return of proxies by telephone, telegram or personal interview and may request brokerage houses, custodians, nominees and fiduciaries to forward soliciting material to their principals and will agree to reimburse them for their reasonable out-of-pocket expenses.

OTHER BUSINESS

      The Board of Directors knows of no business to be brought before the annual meeting other than as set forth above. If other matters properly come before the meeting, it is the intention of the persons named in the solicited proxy to vote the proxy on such matters in accordance with their judgment.

      Stockholders are urged to mark, sign and send in their proxies without delay.

      A copy of the Company's annual report on Form 10-K for Fiscal 2002 filed with the Securities and Exchange Commission (including related financial statements and schedules) is available to stockholders without charge, upon written request to Michael J. Dreller, Secretary, Falcon Products, Inc., 9387 Dielman Industrial Drive, St. Louis, Missouri 63132.

      By Order of the Board of Directors

MICHAEL J. DRELLER
Secretary

St. Louis, Missouri
January 28, 2003

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