**Exhibit 10.13.1**

 

**EXCHANGE AGREEMENT**dated as of**September 9, 2004**among**DECRANE AIRCRAFT HOLDINGS, INC.,THE GUARANTORS SET FORTH ON THE SIGNATURE PAGES HERETO**and**THE HOLDERS SET FORTH ON THE SIGNATURE PAGES HERETO**

 

----

 

**TABLE OF CONTENTS**

 
| ARTICLE 1                                                           |   |
|--------------------------------------------------------------------------|--------|
| ISSUANCE AND EXCHANGE                                                    |   |
| * *                                                                 |   |
| *Section 1.01.  Issuance, Exchange And Delivery*               |   |
| *Section 1.02.  Closing*                                       |   |
|                                                                     |   |
| ARTICLE 2                                                           |   |
| REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE GUARANTORS         |   |
| * *                                                                 |   |
| *Section 2.01.  No Default under the Credit Agreement*         |   |
| *Section 2.02.  Authorizations*                                |   |
| *Section 2.03.  Governmental Authorization*                    |   |
| *Section 2.04.  Non-Contravention*                             |   |
| *Section 2.05.  No Registration*                               |   |
| *Section 2.06.  Litigation*                                    |   |
| *Section 2.07.  Finder’s Fees*                            |   |
|                                                                     |   |
| ARTICLE 3                                                           |   |
| REPRESENTATIONS AND WARRANTIES OF THE  HOLDERS                           |   |
| * *                                                                 |   |
| *Section 3.01.  Ownership of Old Notes*                        |   |
| *Section 3.02.  Authorization of Exchange Agreement*           |   |
| *Section 3.03.  Non-Contravention*                             |   |
| *Section 3.04.  Exchange for Investment*                       |   |
| *Section 3.05.  Restricted Securities*                         |   |
| *Section 3.06.  Inspections; No Other Representations*         |   |
| *Section 3.07.  Finder’s Fees*                            |   |
| *Section 3.08.  Taxpayer Identification Numbers*               |   |
|                                                                     |   |
| ARTICLE 4                                                           |   |
| COVENANTS                                                                |   |
| * *                                                                 |   |
| *Section 4.01.  Covenants of the Company*                      |   |
| *Section 4.02.  Covenants of the Holders*                      |   |
|                                                                     |   |
| ARTICLE 5                                                           |   |
| CONDITIONS TO THE CLOSING                                                |   |
| * *                                                                 |   |
| *Section 5.01.  Conditions to Obligation of Each Party*        |   |
| *Section 5.02.  Conditions to the Obligations of the  Holders* |   |
| *Section 5.03.  Conditions to the Obligations of the  Company* |   |
|                                                                     |   |
| ARTICLE 6                                                           |   |
| SURVIVAL; INDEMNIFICATION                                                |   |
| * *                                                                 |   |
| *Section 6.01.  Survival*                                      |   |

 

----

 
| *Section 6.02.  Indemnification*               |   |
|----------------------------------------------------------|--------|
|                                                     |   |
| ARTICLE 7                                           |   |
| MISCELLANEOUS                                            |   |
| * *                                                 |   |
| *Section 7.01.  Notices*                       |   |
| *Section 7.02.  No Waivers; Amendments*        |   |
| *Section 7.03.  Exclusivity*                   |   |
| *Section 7.04.  Termination*                   |   |
| *Section 7.05.  Successors And Assigns*        |   |
| *Section 7.06.  Governing Law*                 |   |
| *Section 7.07.  Jurisdiction*                  |   |
| *Section 7.08.  WAIVER OF JURY TRIAL*          |   |
| *Section 7.09.  Counterparts; Effectiveness*   |   |
| *Section 7.10.  Expenses*                      |   |
| *Section 7.11.  Entire Agreement*              |   |
| *Section 7.12.  Captions; Certain Definitions* |   |
| * *                                                 |   |
| **Schedule 1.02**                                   | -      | **Amount of Old Notes and New Notes; Taxpayer  Identification Number** |   |
|                                                          |        |  |  |

 

ii

----

 

**EXCHANGE AGREEMENT**

 

AGREEMENT dated as of September 9, 2004, among DeCrane AircraftHoldings, Inc., a Delaware corporation (the “**Company**”),the affiliates of the Company set forth on the signature pages hereto asGuarantors (the “**Guarantors**”), and certain holdersof the Company’s 12% Senior Subordinated Notes due 2008 (the “**Old Notes**”) set forth on the signaturepages hereto (together with their successors and assigns, the “**Holders**”).

 

**W I  T  N E  S  S E  T  H :**

 

WHEREAS, the Holders are holders of a portion the Old Notes;

 

WHEREAS, the Holders and the Company desire that the Holders exchangethe Old Notes for new 17% Senior Discount Notes due 2008 of the Company (the “**New Notes**”) guaranteed by each of the Guarantors, to beissued pursuant to the provisions of an Indenture dated as of July 23,2004 among the Company, the Guarantors named therein and U.S. Bank NationalAssociation, as Trustee (the “**Trustee**”),as supplemented by the First Supplemental Indenture dated as ofSeptember 9, 2004 among the Company, the Guarantors named therein and theTrustee (the “**Indenture**”).

 

WHEREAS, the Company has entered into an amendment (the “**Credit Agreement Amendment**”) to the Third Amended andRestated Credit Agreement dated May 11, 2000 among the Company, the lendersparty thereto and Credit Suisse First Boston, as administrative agent andsyndication agent for the lenders (as amended, the “**CreditAgreement**”), which amendment will permit such exchange; and

 

WHEREAS, the Company has entered into an amendment (the “**Second Lien Credit Agreement Amendment**”) to the Second LienCredit Agreement dated December 22, 2003 among the Company, the lendersparty thereto and Credit Suisse First Boston, acting through its Cayman IslandsBranch, as administrative agent and syndication agent for the lenders (asamended, the “**Second Lien****CreditAgreement**”), which amendment will permit such exchange.

 

NOW THEREFORE, the parties hereto agree as follows:

 

ARTICLE 1ISSUANCE AND EXCHANGE

 

*Section 1.01**.  Issuance, Exchange AndDelivery.*Upon the terms and subject to the terms and conditions ofthis Agreement, the Company agrees to issue to each Holder, and each Holderagrees, severally but not jointly, to accept from the Company at the Closing,the New Notes in exchange for the surrender of the Old Notes, in each case inthe principal amounts set forth opposite such Holder’s name onSchedule 1.02 hereto.

 

*Section 1.02**.  Closing. *The closing (the “**Closing**”) of the issuance of the New Noteshereunder shall take place at the offices of Davis Polk & Wardwell, 450Lexington Avenue, New York, New York, as soon as possible, but in no eventlater than five (5) Business Days after satisfaction of the conditions setforth in Article 5, or at such other time or place as Company and 

 

1

----

 

the Holders may agree, such date ishereinafter referred to as the “**Closing Date**”.  At the Closing (a) each Holder shallsurrender to the Company the principal amount of the Old Notes set forthopposite such Holder’s name on Schedule 1.02 hereto; and (b) the Companyshall deliver to each Holder New Notes with an initial accreted value equal tothe amount  set forth opposite suchHolder’s name on Schedule 1.02 hereto, plus an amount in cash equal to theaccrued and unpaid interest on the Old Notes being exchanged to the ClosingDate.

 

ARTICLE 2REPRESENTATIONS AND WARRANTIES OF THECOMPANY AND THE GUARANTORS

 

The Company and each of the Guarantors represents and warrants to eachHolder that:

 

*Section 2.01**.  No Default under the CreditAgreement. *As of the datehereof, (i) no Potential Event of Default or Event of Default (each as definedin the Credit Agreement) under the Credit Agreement has occurred and iscontinuing, and (ii) the Company is able to satisfy the conditions to borrowingthereunder to permit the Company to borrow at least $1 of additional debtthereunder pursuant to the terms thereto on the date hereof.

 

*Section 2.02**.  Authorizations. *The execution, delivery andperformance by the Company and each of the Guarantors of this Agreement havebeen duly authorized by all necessary corporate action on the part of theCompany and each of the Guarantors.  TheNew Notes have been duly authorized and, when executed and authenticated inaccordance with the provisions of the Indenture and issued to the holders inexchange for the Old Notes in accordance with the terms of this Agreement, willbe valid and binding obligations of the Company, enforceable in accordance withtheir terms, subject to applicable bankruptcy, insolvency, fraudulent transferand similar laws affecting creditors’ rights generally and equitable principlesof general applicability, and will be entitled to the benefits of theIndenture; each of the Guarantors has duly authorized its guarantee of the NewNotes and, when the New Notes have been executed and authenticated inaccordance with the provisions of the Indenture and issued to the holders inexchange for the Old Notes in accordance with the terms of this Agreement, theguarantee of the New Notes will be a valid and binding obligation of the eachGuarantor, enforceable in accordance with its terms, subject to applicablebankruptcy, insolvency, fraudulent transfer and similar laws affectingcreditors’ rights generally and equitable principles of general applicability. The Indenture has been duly authorized by all necessary corporateaction on the part of the Company and each of the Guarantors, as applicable.  Each of this Agreement and the Indenture is,a valid and binding agreement of the Company and each of the Guarantors, asapplicable, enforceable in accordance with its terms, subject to applicablebankruptcy, insolvency, fraudulent transfer and similar laws affectingcreditors’ rights generally and equitable principles of general applicability.

 

*Section 2.03**.  GovernmentalAuthorization. *Assuming theaccuracy of the representations and warranties of the Holders and theircompliance with the covenants herein, the execution, delivery and performanceby the Company and each of the Guarantors of this Agreement, the Indenture andthe New Notes require no material order, license, consent, authorization, orapproval of, or exemption by, or action by or in respect of, or notice to, orfiling or registration with, any governmental body, agency or official, exceptas may be required by Federal and state securities laws with respect to theCompany’s obligations under the 

 

2

----

 

Registration Rights Agreement (as definedbelow) and except as may be required by state securities laws.

 

*Section 2.04**.  Non-Contravention. *The execution, delivery andperformance by the Company and each of the Guarantors of this Agreement, theIndenture and the New Notes do not and will not (i) violate the certificate ofincorporation or bylaws of the Company or any Guarantor or any materialagreement or other instrument binding upon the Company or any Guarantor or (ii)violate any material applicable law, rule, regulation, judgment, injunction,order or decree.

 

*Section 2.05**.  No Registration. *Assuming the accuracy of therepresentations and warranties of the Holders and their compliance with thecovenants herein, it is not necessary in connection with the issuance of theNew Notes to the Holders in the manner contemplated by this Agreement toregister the New Notes under the Securities Act of 1933, as amended (the “**Securities Act**”) or to qualify the Indenture under the TrustIndenture Act of 1939, as amended.

 

*Section 2.06**.  Litigation. *There is no action, suit,investigation or proceeding pending against, or to the knowledge of the Companyor any Guarantor, threatened in writing against or affecting the Company or anyGuarantor or any of their respective properties before any court or arbitratoror any governmental body, agency or official which could reasonably be expectedto have a material adverse effect on the transactions contemplated by thisAgreement.

 

*Section 2.07**.  Finder’s Fees. *Except for Credit Suisse First Boston LLC, whose compensation inconnection with the exchange of the Old Notes for the New Notes will be paid bythe Company, there is no investment banker, broker, finder or otherintermediary which has been retained by or is authorized to act on behalf ofthe Company or any of its Affiliates (as defined in Rule 405 under theSecurities Act) which might be entitled to any fee or commission from anyHolder, the Company or any of their respective Affiliates upon consummation ofthe transactions contemplated by this Agreement.

 

ARTICLE 3REPRESENTATIONS AND WARRANTIES OFTHE HOLDERS

 

Each Holder, severally as to itself and not jointly, represents,warrants and agrees to the Company and the Guarantors as follows:

 

*Section 3.01**.  Ownership of OldNotes. *Such Holder has, and on theClosing Date will have valid title to, or a valid “security entitlement” withinthe meaning of Section 8-501 of the New York Uniform Commercial Code inrespect of, the Old Notes to be exchanged by such Holder free and clear of allsecurity interests, claims, liens, equities or other encumbrances and the legalright and power, and all authorization and approval required by law, to enterinto this Agreement and to transfer and deliver the Old Notes to be exchangedby such Holder or a security entitlement in respect of such Old Notes.

 

*Section 3.02**.  Authorization of ExchangeAgreement. *The execution,delivery and performance of this Agreement are within such Holder’s powers andhave been duly authorized 

 

3

----

 

by all requisite corporate action on the part of such Holder.  This Agreement constitutes a valid andbinding agreement of such Holder enforceable in accordance with its terms.  This Agreement has been duly executed anddelivered by such Holder.

 

*Section 3.03**.  Non-Contravention*.  The execution and delivery by such Holder of,and the performance by such Holder of its obligations under, this Agreementwill not contravene any provision of applicable law or the certificate ofincorporation, by-laws or other organizational document of such Holder or anymaterial agreement or other instrument binding upon such Holder, or anyjudgment, order or decree of any governmental body, agency or court havingjurisdiction over such Holder.

 

*Section 3.04**.  Exchange for Investment. *Such Holder acknowledges that theNew Notes have not been registered under the Securities Act or any statesecurities laws and that the issuance of the New Notes contemplated hereby isto be effected pursuant to an exemption from the registration requirementsimposed by such laws, including Section 4(2) under the SecuritiesAct.  Such Holder is an “accreditedinvestor” within the meaning of Rule 501(a) under the Securities Act and theNew Notes to be received by it pursuant to this Agreement are being receivedfor its own account without a view toward distribution in violation of theSecurities Act and such Holder will not offer, sell, transfer, pledge,hypothecate or otherwise dispose of the New Notes unless (i) pursuant to atransaction either registered under, or exempt from registration pursuant toRule 144A and Regulation S under, the Securities Act or (ii) to an accreditedinvestor, provided that such accredited investor accepts delivery of such NewNotes in the form of a definitive note registered in the name of suchaccredited investor.

 

*Section 3.05**.  Restricted Securities. *Such Holder acknowledges that theNew Notes have not been registered under the Securities Act and may not beoffered, sold, pledged or otherwise transferred prior to the expiration of theapplicable holding period of the New Notes under Rule 144 (k) of the SecuritiesAct, except (a) in accordance with Rule 144A or Regulation S under theSecurities Act or pursuant to another exemption from the registrationrequirements of the Securities Act or (b) pursuant to an effective registrationstatement under the Securities Act.  TheNew Notes will bear a legend and will be subject to transfer restrictions asset forth in the Indenture.

 

*Section 3.06**.  Inspections; No OtherRepresentations. *Each Holderis an informed and sophisticated purchaser, and has engaged expert advisorsexperienced in the evaluation of the transactions contemplated hereunder.  Each Holder has undertaken such investigationand has been provided with and has evaluated such documents and information asit has deemed necessary to enable it to make an informed and intelligentdecision with respect to the execution, delivery and performance of thisAgreement.  Each Holder acknowledges thatthe Company has given such Holder complete and open access (to the extentrequested by such Holder) to the key employees, and documents of the Companyand its subsidiaries.  Each Holder agreesto accept the New Notes on the Closing Date based upon its own inspection,examination and determination with respect thereto as to all matters, andwithout reliance upon any express or implied representations or warranties ofany nature made by or on behalf of or imputed to the Company, except as expresslyset forth in this Agreement.  Withoutlimiting the generality of the foregoing, each Holder acknowledges that theCompany makes no representation or warranty with respect to (i) anyprojections, estimates or budgets delivered to or made available to the 

 

4

----

 

Holder of future revenues, future results of operations (or anycomponent thereof), future cash flows or future financial condition (or anycomponent thereof) of the Company and the Guarantors or the future business andoperations of the Company and the Guarantors or (ii) any other information ordocuments made available to such Holder or its advisors with respect to the Company or the Guarantors or their respectivebusinesses or operations, except as expressly set forth in this Agreement.

 

*Section 3.07**.  Finder’s Fees. *There is no investment banker, broker, finder or otherintermediary which has been retained by or is authorized to act on behalf ofsuch Holder or any of its Affiliates which might be entitled to any fee orcommission from such Holder, the Company or any of their respective Affiliatesupon consummation of the transactions contemplated by this Agreement.

 

*Section 3.08**.  Taxpayer IdentificationNumbers. *The number set forth under “TaxpayerIdentification Number” on Schedule 1.02 hereto listed next to the name ofsuch Holder is such Holder’s federal taxpayer identification number.

 

ARTICLE 4COVENANTS

 

*Section 4.01**.  Covenants of the Company. *In further consideration of theagreements of the Holders contained in this Agreement, the Company covenantswith each of the Holders as follows:

 

(a)                        theCompany will use its commercially reasonable efforts to take, or cause to betaken, all actions and to do, or cause to be done, all things necessary ordesirable under applicable laws and regulations to consummate the transactionscontemplated by this Agreement;

 

(b)                       the Companywill use its commercially reasonable efforts to obtain any consents, approvalsor waivers that are required to be obtained from third parties to any materialcontracts, in connection with the consummation of the transactions contemplatedby this Agreement;

 

(c)                        prior tothe Closing Date, the Company agrees that, except as the Company and itscounsel reasonably determine to be required by law, it will not disclose theidentity of the Holders to any third party without the prior written consent ofsuch Holder, which consent shall not be unreasonably withheld, except that theCompany may disclose any Holder’s identity to its advisors and counsel or toany other Holder that is a party to this Agreement (it being understood thatthe Company will be required to publicly file this Agreement with theSecurities and Exchange Commission, which documents will identify each Holder);and

 

(d)                                 tothe extent that the New Notes constitute Transfer Restricted Securities (asdefined in the Registration Rights Agreement), the Company will include any NewNotes held by the Holder in any Registration Statement (as defined in theRegistration Rights Agreement) that the Company files pursuant to theRegistration Rights Agreement dated July 23, 2004 among the Company, theGuarantors and the holders listed therein.

 

5

----

 

*Section 4.02**.  Covenants of the Holders. *In further consideration of theagreements of the Company contained in this Agreement, each Holder covenantswith the Company as follows:

 

(a)                        suchHolder and its Affiliates (as defined in Rule 405 under the Securities Act)will hold, and will use their commercially reasonable efforts to cause theirrespective officers, directors, employees, accountants, counsel, consultants,advisors and agents to hold, in confidence, (i) the existence of this Agreementor any facts relating to the transaction contemplated by this Agreement and(ii) all confidential documents and information concerning the Company or anyGuarantor furnished to such Holder or its Affiliates in connection with thetransactions contemplated by this Agreement, except to the extent that suchinformation can be shown to have been (A) previously known on anon-confidential basis by such Holder, (B) in the public domain through nofault of such Holder or (C) later lawfully acquired by such Holder from sourcesother than the Company or any Guarantor; provided that such Holder may disclosesuch information to its officers, directors, employees, accountants, counsel,consultants, advisors and agents in connection with the transactionscontemplated by this Agreement  so longas such persons are informed by such Holder of the confidential nature of suchinformation and are directed by such Holder to treat such informationconfidentially.  Each Holder shall beresponsible for any failure to treat such information confidentially by suchpersons.  The obligation of each Holderand its Affiliates to hold any such information in confidence shall besatisfied if they exercise the same care with respect to such information asthey would take to preserve the confidentiality of their own similar informationand shall in any event expire six months from the Closing Date.  If this Agreement is terminated, each Holderand its Affiliates will, and will use their commercially reasonable efforts tocause their respective officers, directors, employees, accountants, counsel,consultants, advisors and agents to, destroy or deliver to the Company, uponrequest, all documents and other materials, and all copies thereof, obtained bysuch Holder or its Affiliates or on their behalf from the Company or anyGuarantor in connection with this Agreement that are subject to suchconfidentiality provisions;

 

(b)                       unless thisAgreement is terminated in accordance with Section 7.04 hereof, suchHolder will not pledge, sell, contract to sell, grant any option, right orwarrant to purchase, lend or otherwise transfer or dispose of any of the OldNotes or any right or interest (voting or otherwise and including anyparticipation interest) therein, except with the consent of the Company orpursuant to Section 1.02 hereof; and

 

(c)                        suchHolder will use its commercially reasonable efforts to take, or cause to betaken, all actions and to do, or cause to be done, all things necessary ordesirable under applicable laws and regulations to consummate the transactionscontemplated by this Agreement.

 

ARTICLE 5CONDITIONS TO THE CLOSING

 

*Section 5.01**.  Conditions to Obligation ofEach Party. *The obligationsof each party hereto to consummate the issuance of the New Notes in exchangefor the Old Notes is subject to the satisfaction (or, to the extent permittedby law, waiver by such party), at or prior to the Closing Date, of thefollowing conditions:

 

6

----

 

(a)                        noprovision of any applicable law or regulation and no judgment, injunction,order or decree shall prohibit the consummation of the Closing and there shallnot be threatened, instituted or pending any action, suit, investigation orproceeding which could reasonably be expected to have a material adverse effecton the transactions contemplated by this Agreement;

 

(b)                       the CreditAgreement Amendment shall be in full force and effect; and

 

(c)                        the SecondLien Credit Agreement Amendment shall be in full force and effect.

 

*Section 5.02**.  Conditionsto the Obligations of the Holders. *Theobligation of the Holders to exchange the Old Notes for the New Notes issubject to the satisfaction (or, to the extent permitted by law, waiver by eachHolder), at or prior to the Closing Date, of the following additionalconditions:

 

(a)                        the representations and warrantiesof the Company contained in this Agreement shall be true and correct in allmaterial respects, the Company shall have performed and complied with allcovenants and agreements required by this Agreement to be performed by it at orprior to the Closing Date, and each Holder shall have received a certificate,dated the Closing Date, signed by an authorized officer of the Company to theforegoing effect;

 

(b)                       the Company shall havedelivered to each Holder an opinion of Davis Polk & Wardwell, special counsel to the Company, dated theClosing Date, in form and substance reasonably satisfactory to the Holders, tothe effect that (subject to appropriate assumptions and limitations):

 

(i)                                     theNew Notes have been duly authorized by the Company and, when executed andauthenticated in accordance with the provisions of the Indenture and issued tothe Holders in exchange for the Old Notes in accordance with the terms of thisAgreement, will be entitled to the benefits of the Indenture and will be validand binding obligations of the Company, enforceable against the Company inaccordance with their terms, except (x) as such enforcement may be limited bybankruptcy, insolvency, fraudulent conveyance or similar laws affectingcreditors’ rights generally, (y) as such enforcement is subject to generalprinciples of equity (regardless of whether such enforceability is consideredin a proceeding in equity or at law) and (z) to the extent that a waiver of therights under any usury or stay law may be unenforceable, we express no opinion,however, as to the applicability (and, if applicable, the effect) ofSection 548 of the United States Bankruptcy Code or any comparableprovision of state law to the questions addressed above or on the conclusionsexpressed with respect thereto;

 

(ii)                                  the Indenture has been dulyauthorized, executed and delivered by each of the Company and each of theGuarantors organized under the laws of Delaware (the “**DelawareGuarantors**”) and is a valid and binding agreement of the Company,and (assuming due authorization, execution and delivery by each other Guarantor(the “**Non-Delaware Guarantors**”)) theGuarantors, enforceable in accordance with its terms; except (x) as suchenforcement may be limited by bankruptcy, insolvency, fraudulent conveyance orsimilar laws affecting creditors’ rights generally, (y) as such enforcement issubject to general principles of equity (regardless of whether suchenforceability is 

 

7

----

 

considered in a proceeding in equity or at law) and (z) to the extentthat a waiver of the rights under any usury or stay law may be unenforceable,we express no opinion, however, as to the applicability (and, if applicable,the effect) of Section 548 of the United States Bankruptcy Code or anycomparable provision of state law to the questions addressed above or on theconclusions expressed with respect thereto; and

 

(iii)                               this Agreement has been dulyauthorized, executed and delivered by each of the Company and the DelawareGuarantors.

 

(c)                                  TheHolders shall have received copies of each of the Credit Agreement Amendmentand the Second Lien Credit Agreement Amendment, each of which shall be in fullforce and effect and no term or condition thereof shall have been amended,waived or otherwise modified without the prior consent of the Holders; and

 

(d)                                 eachHolder shall have received all documents reasonably requested by it relating tothe existence of the Company and the corporate authority for entering into thisAgreement and the consummation of the transactions contemplated hereby, all inform and substance reasonably satisfactory to it.

 

*Section 5.03**.  Conditions to the Obligationsof the Company. *Theobligations of the Company to issue the New Notes to the Holders pursuant tothis Agreement are subject to the satisfaction (or, to the extent permitted bylaw, waiver by each Holder), at or prior to the Closing Date, of the followingconditions:

 

(a)                        the representations andwarranties of the Holders contained in this Agreement shall be true and correctin all material respects and the Holders shall have performed and complied withall covenants and agreements required by this Agreement to be performed by themat or prior to the Closing Date; and

 

(b)                       the Companyshall have received all documents reasonably requested by it relating to theexistence of each Holder and the authority for entering into this Agreement andthe consummation of the transactions contemplated hereby, all in form andsubstance reasonably satisfactory to it.

 

ARTICLE 6SURVIVAL; INDEMNIFICATION

 

*Section 6.01**.  Survival. *The representations and warrantiesof the parties hereto contained in this Agreement, shall survive the executionand delivery of this Agreement.  Thecovenants and agreements of the parties contained in this Agreement shallsurvive the Closing in accordance with their terms or, if no term is specified,indefinitely.

 

*Section 6.02**.  Indemnification. *(a) The Company hereby indemnifieseach of the Holders, each person, if any, who controls any Holder within the meaningof either Section 15 of the Securities Act or Section 20 of theSecurities Exchange Act of 1934, and each affiliate of any Holder within themeaning of Rule 405 under the Securities Act against and agrees to hold each 

 

8

----

 

of them harmless from any and all losses, claims, damages, costs,liabilities or expenses (or actions, suits or proceedings in respect thereof),including reasonable expenses of investigation and reasonable attorneys’ feesand expenses, in each case, in connection with any action, suit or proceedinginvolving a third party (“**Damages**”)incurred or suffered by any of them, in each case arising out of anymisrepresentation or breach of warranty, covenant or agreement made or to beperformed by the Company pursuant to this Agreement.

 

(b)                       The Company shall not be responsible for anyDamages to the extent a court of competent jurisdiction shall have finallydetermined that such Damages resulted primarily from (i) such indemnifiedperson’s bad faith or gross negligence; (ii) any claims made by one or more ofthe indemnified persons against another indemnified person or indemnifiedpersons in connection with the Transactions or (iii) any breach of therepresentations and warranties of any of the Holders set forth in thisAgreement (clauses (i) through (iii), collectively, “**Excluded Claims**”).  If for any reason (other than that suchliability is an Excluded Claim) the foregoing indemnity is unavailable orinsufficient to hold an indemnified person harmless, then the Company shallcontribute to amounts paid or payable by such indemnified person in respect ofsuch Damages in such proportion as appropriately reflects the relative benefitsreceived by, and fault of, the Company and such indemnified person inconnection with the matters as to which such Damages relate and other equitableconsiderations.

 

(c)                        The partyseeking indemnification under this Section (the “**IndemnifiedParty**”) agrees to give prompt notice to the party against whomindemnity is sought (the “**Indemnifying Party**”)of the assertion of any claim, or the commencement of any suit, action orproceeding (“**Claim**”) in respect of whichindemnity may be sought under such Section and will provide theIndemnifying Party such information with respect thereto that the IndemnifyingParty may reasonably request. The failure to so notify the Indemnifying Partyshall not relieve the Indemnifying Party of its obligations hereunder, exceptto the extent such failure shall have adversely prejudiced the IndemnifyingParty.

 

(d)                       TheIndemnifying Party shall be entitled to participate in the defense of any Claimasserted by any third party (“**Third Party Claim**”)and, subject to the limitations set forth in this Section, shall be entitled tocontrol and appoint lead counsel for such defense, in each case at its expense.

 

(e)                        If theIndemnifying Party shall assume the control of the defense of any Third PartyClaim in accordance with the provisions of this Section the IndemnifyingParty shall obtain the prior written consent of the Indemnified Party (whichshall not be unreasonably withheld) before entering into any settlement of suchThird Party Claim and the Indemnified Party shall be entitled to participate inthe defense of such Third Party Claim and to employ separate counsel of itschoice for such purpose.  The fees andexpenses of such separate counsel shall be paid by the Indemnified Party.

 

(f)                          Eachparty shall cooperate, and cause their respective Affiliates to cooperate, inthe defense or prosecution of any Third Party Claim and shall furnish or causeto be furnished such records, information and testimony, and attend suchconferences, discovery proceedings, hearings, trials or appeals, as may bereasonably requested in connection therewith.

 

9

----

 

ARTICLE 7MISCELLANEOUS

 

*Section 7.01**.  Notices. *All notices, requests and othercommunications to any party hereunder shall be in writing (including facsimiletransmission) and shall be given,

 

if to the Holders, to:

 

The Putnam Advisory Company, LLCThe Putnam Fiduciary Trust CompanyOne Post Office SquareBoston , MA  02109Attention:  James P. MillerFacsimile:  (617) 760-8639

 

with a copy (which shall not constitute notice to any Holder) to:

 

Ropes & Gray LLPOne International PlaceBoston, MA  02110Attention:  Don De Amicis, Esq.Facsimile:  (617) 951-7050

 

if to the Company, to:

 

DeCrane Aircraft Holdings, Inc.2361 Rosecrans Avenue, Suite 180El Segundo, California  90245Attention:  Chief Financial OfficerFacsimile:  (310) 643-5106

 

with a copy (which shall not constitute notice to the Company) to:

 

Davis Polk & Wardwell450 Lexington AvenueNew York, New York 10017Attention:  Michael P. Kaplan, Esq.Facsimile:  (212) 450-3800

 

All such notices, requests and other communications shall be deemedreceived on the date of receipt by the recipient thereof if received prior to 5p.m. in the place of receipt and such day is a Business Day in the place ofreceipt.  Otherwise, any such notice,request or communication shall be deemed not to have been received until thenext succeeding business day in the place of receipt.

 

*Section 7.02**.  No Waivers; Amendments.*(a)**Nofailure or delay on the part of any party in exercising any right, power orprivilege hereunder shall operate as a waiver thereof, nor shall any single orpartial exercise thereof preclude any other or further exercise thereof or the 

 

10

----

 

exercise of any other right, power or privilege. The rights and remediesherein provided shall be cumulative and not exclusive of any rights or remediesprovided by law.

 

(b)                       Anyprovision of this Agreement may be amended or waived if, but only if, suchamendment or waiver is in writing and is signed by all parties hereto.

 

*Section 7.03**.  Exclusivity.*Afterthe Closing, Article 6 will provide the exclusive remedy for Holders forany misrepresentation, breach of warranty, covenant or other agreement or otherclaim arising out of this Agreement or the transactions contemplatedhereby.  The Company shall retain allremedies available at law for any misrepresentation, breach of warranty,covenant or other agreement or other claim arising out of this Agreement or thetransactions contemplated hereby.

 

*Section 7.04**.  Termination.*(a)** This Agreement shall terminate, prior to theClosing Date:

 

(i)                                     atany time by mutual written agreement of the Company and the Holders; or

 

(ii)                                  ifthere shall be any law or regulation that makes consummation of thetransactions contemplated by this Agreement illegal or otherwise prohibited orif consummation of the transactions contemplated hereby would violate anynon-appealable final order, decree or judgment of any court or governmentalbody having competent jurisdiction, if so determined by the Company or theHolders.

 

The party desiring to terminate this Agreement pursuant to thisSection 7.04 shall give notice of such termination to the other parties.

 

(b)                       If thisAgreement is terminated as permitted by Section 7.04, such terminationshall be without liability of any party (or any stockholder, director, officer,employee, agent, consultant or representative of such party) to the otherparties to this Agreement; *provided*that if such termination shall result from the (i) willful failure of any partyto fulfill a condition to the performance of the obligations of the otherparties, (ii) failure to perform a covenant of this Agreement or (iii) breachby any party hereto of any representation or warranty or agreement containedherein, such party shall be fully liable for any and all damages incurred orsuffered by the other party as a result of such failure or breach.

 

*Section 7.05**.  Successors And Assigns.*TheCompany may not assign any of its rights and obligations hereunder without theprior written consent of the Holders.  NoHolder may assign its rights or obligations hereunder without the prior writtenconsent of the Company.  This Agreementshall be binding upon the Company and the Holders and their respectivesuccessors and assigns.

 

*Section 7.06**.  Governing Law.*ThisAgreement shall be governed and construed in accordance with the laws of theState of New York, without regard to the choice of law rules of such state.

 

11

----

 

*Section 7.07**.  Jurisdiction.*Exceptas otherwise expressly provided in this Agreement, the parties hereto agreethat any suit, action or proceeding seeking to enforce any provision of, orbased on any matter arising out of or in connection with, this Agreement or thetransactions contemplated hereby shall be brought in the United States DistrictCourt for the Southern District of New York or any New York State court sittingin New York City, so long as one of such courts shall have subject matterjurisdiction over such suit, action or proceeding, and that any cause of actionarising out of this Agreement shall be deemed to have arisen from a transactionof business in the State of New York, and each of the parties herebyirrevocably consents to the jurisdiction of such courts (and of the appropriateappellate courts therefrom) in any such suit, action or proceeding andirrevocably waives, to the fullest extent permitted by law, any objection thatit may now or hereafter have to the laying of the venue of any such suit,action or proceeding in any such court or that any such suit, action orproceeding which is brought in any such court has been brought in aninconvenient forum.  Process in any suchsuit, action or proceeding may be served on any party anywhere in the world,whether within or without the jurisdiction of any such court.  Without limiting the foregoing, each partyagrees that service of process on such party as provided in thisSection shall be deemed effective service of process on such party.

 

*Section 7.08**.  WAIVER OF JURY TRIAL.*EACHOF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BYJURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THETRANSACTIONS CONTEMPLATED HEREBY.

 

*Section 7.09**.  Counterparts;Effectiveness. *This Agreementmay be executed in any number of counterparts each of which shall be anoriginal with the same effect as if the signatures thereto and hereto were uponthe same instrument.  This Agreementshall become effective when each party hereto shall have received a counterparthereof signed by the other parties hereto. No provision of this Agreement is intended to confer upon any Personother than the parties hereto any rights or remedies hereunder

 

*Section 7.10**.  Expenses. *Except as otherwise provided inArticle 6 herein, all costs and expenses incurred in connection with thisAgreement shall be paid by the party incurring such cost or expense.

 

*Section 7.11**.  Entire Agreement. *This Agreement, the Indenture andthe New Notes constitute the entire agreement and understanding among theparties hereto and supersedes any and all prior agreements and understandings,written or oral, relating to the subject matter hereof.

 

*Section 7.12**.  Captions; Certain Definitions.*The captions herein are included for convenience of reference onlyand shall be ignored in the construction or interpretation hereof.  All references to “**$**” or “**dollars**”shall be to United States dollars and all references to “**days**” shall be to calendar days unlessotherwise specified.  Whenever the words“**include**,” “**includes**” or “**including**” are used in this Agreement, they shall be deemed tobe followed by the words, “without limitation.”

 

**[Remainderof page intentionally left blank; next page is signature page]**

 

12

----

 

**IN WITNESS WHEREOF**,the parties hereto have caused this Exchange Agreement to be duly executed by their respective authorizedofficers as of the day and year first above written.

 

 
| ** ** | **DECRANE AIRCRAFT HOLDINGS INC.**         |
|------------|--------------------------------------------|
| ** ** | ** **                                 |
| ** ** | ** **                                 |
|       | By:                                        |   | /S/ RICHARD J. KAPLAN |   |
|       |                                       | Name: | Richard J. Kaplan |
|       |                                       | Title: | Senior Vice President, Chief Financial Officer, |
|       |                                       |   | Secretary and Treasurer |
|       |                                       |   |   |
| ** ** | **AUDIO INTERNATIONAL, INC.**              |
| ** ** | **CARL F. BOOTH & CO., LLC**           |
| ** ** | **DECRANE AIRCRAFT SEATING COMPANY, INC.** |
| ** ** | **DECRANE CABIN INTERIORS-CANADA, INC.**   |
| ** ** | **DECRANE CABIN INTERIORS, LLC**           |
| ** ** | **HOLLINGSEAD INTERNATIONAL, INC.**        |
| ** ** | **PATS AIRCRAFT, LLC**                     |
| ** ** | **PCI NEWCO, INC.**                        |
| ** ** | **PRECISION PATTERN, INC.**                |
|       | as Guarantors                              |
|       |                                       |
|       |                                       |
|       | By:                                        |   | /S/ RICHARD J. KAPLAN | * * |
|       | Name:                                      | Richard J. Kaplan |
|       | Title:                                     | Chief Financial Officer |
|            |                                            |  |  |  |  |  |  |

 

13

----

 
| ** ** | **THE  PUTNAM ADVISORY COMPANY, LLC**on behalf of:** ** |
|------------|--------------------------------------------------------------|
|       | **THE NORTHROP GRUMAN PENSION MASTER TRUST**                 |
|       | **ABBOTT  LABORATORIES ANNUITY RETIREMENT   PLAN**      |
|       | **PUTNAM WORLD TRUST II - PUTNAM HIGH YIELD   BOND FUND**    |
|       | By:                                                          |   |   |   |
|       | Name:                                                        |   |
|       | Title:                                                       |   |
|            |                                                              |  |  |  |  |

 

 
| ** ** | **THE  PUTNAM FIDUCIARY TRUST COMPANY** on behalf of: |
|------------|-------------------------------------------------------|
|       | **MARSH & MCLENNAN COMPANIES, INC. U.S.**         |
|       | **RETIREMENT  PLAN - HIGH YIELD**                     |
|       |                                                  |
|       | By:                                                   |   |   |   |
|       | Name:                                                 |   |
|       | Title:                                                |   |
|            |                                                       |  |  |  |  |

 

14

----

 

**SCHEDULE 1.02**

 
| **Holder**                                                                   | ** ** | **Taxpayer Identification  Number** | ** ** | **Principal Amount of Old Notes** | ** ** | **Initial Accreted Value of New Notes** | ** ** |
|------------------------------------------------------------------------------|------------|-------------------------------------|------------|----------------------------------------|------------|-----------------------------------------|------------|
| The Putnam Advisory Company, LLC, on behalf of:                              |       |                                |       |                                   |       |                                    |       |
| The Northrop Grumman Pension Master Trust                                    |       |                                |       | $                                      | 240,000    |                                    | $          | 240,000 |   |
| Abbott Laboratories Annuity Retirement Plan                                  |       |                                |       | $                                      | 90,000     |                                    | $          | 90,000 |   |
| Putnam World Trust II – Putnam High Yield Bond  Fund                    |       |                                |       | $                                      | 74,000     |                                    | $          | 74,000 |   |
| The Putnam Fiduciary Trust Company on behalf of:                             |       |                                |       |                                   |       |                                    |       |
| Marsh & McLennan Companies, Inc. U.S.  Retirement Plan – High Yield |       |                                |       | $                                      | 111,000    |                                    | $          | 111,000 |   |
| Total                                                                        |       |                                |       | $                                      | 515,000    |                                    | $          | 515,000 |   |

 

15

----