**Exhibit10.14**

 

**SENIOR PREFERRED STOCK AMENDMENT AGREEMENT**

 

 

dated as of

 

 

**July 23, 2004**

 

 

among

 

 

**DECRANE AIRCRAFT HOLDINGS, INC.,**

 

**DECRANE HOLDINGS CO.**

 

and

 

**THE HOLDERS SET FORTH ON THE SIGNATURE PAGESHERETO**

 

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**TABLE OF CONTENTS**

 
| ARTICLE 1                                                                                |   |
|-----------------------------------------------------------------------------------------------|--------|
| AMENDMENT                                                                                     |   |
|                                                                                          |   |
| Section 1.01.  *Consent to Amendment*                                               |   |
| Section 1.02.  *Closing*                                                            |   |
|                                                                                          |   |
| ARTICLE 2                                                                                |   |
| REPRESENTATIONS AND WARRANTIES OF THE  COMPANY AND DECRANE HOLDINGS                           |   |
|                                                                                          |   |
| Section 2.01.  *No Default Under Credit Agreement*                                  |   |
| Section 2.02.  *Authorizations*                                                     |   |
| Section 2.03 . *Governmental Authorization*                                              |   |
| Section 2.04.  *Non-Contravention*                                                  |   |
| Section 2.05.  *Litigation*                                                         |   |
|                                                                                          |   |
| ARTICLE 3                                                                                |   |
| REPRESENTATIONS AND WARRANTIES OF THE HOLDERS                                                 |   |
|                                                                                          |   |
| Section 3.01.  *Ownership of Existing Preferred Stock*                              |   |
| Section 3.02.  *Authorization of Agreement*                                         |   |
| Section 3.03.  *Non-Contravention*                                                  |   |
| Section 3.04.  *Investment Purposes*                                                |   |
| Section 3.05.  *Inspections; No Other Representations*                              |   |
| Section 3.06 . *Taxpayer Identification Number*                                          |   |
|                                                                                          |   |
| ARTICLE 4                                                                                |   |
| COVENANTS                                                                                     |   |
|                                                                                          |   |
| Section 4.01.  *Covenants of the Company and DeCrane Holdings*                      |   |
| 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 and  DeCrane Holdings* |   |
|                                                                                          |   |
| ARTICLE 6                                                                                |   |
| SURVIVAL; INDEMNIFICATION                                                                     |   |
|                                                                                          |   |
| Section 6.01.  *Survival*                                                           |   |
| Section 6.02.  *Indemnification*                                                    |   |

 

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| ARTICLE 7                                               |
|--------------------------------------------------------------|
| MISCELLANEOUS                                                |
|                                                         |
| Section 7.01.  *Notices*                           |   |
| Section 7.02.  *No Waivers; Amendments*            |   |
| Section 7.03.  *Waiver of Warrant Requirements*    |   |
| Section 7.04.  *Termination*                       |   |
| Section 7.05.  *Successors And Assigns*            |   |
| Section 7.06.  *Limited Recourse and Non-Petition* |   |
| Section 7.07.  *Governing Law*                     |   |
| Section 7.08.  *Jurisdiction*                      |   |
| Section 7.09.  *WAIVER OF JURY TRIAL*              |   |
| Section 7.10.  *Counterparts; Effectiveness*       |   |
| Section 7.11.  *Expenses*                          |   |
| Section 7.12.  *Entire Agreement*                  |   |
| Section 7.13.  *Captions; Certain Definitions*     |   |
|                                                         |   |   |
| Schedule 1.02                                           | - | Taxpayer  Identification Number; Shares of Existing  Preferred Stock and Senior Preferred Stock; Shares of  Common Stock to be Issued |   |
| Schedule 3.01                                           | - | Ownership  of Existing Preferred Stock |   |
|                                                         |   |   |   |
| Exhibit A                                                    | - | Certificate of Amendment to Certificate of Designations |   |
| Exhibit B                                                    |   | Form of Waiver |   |
| Exhibit C                                                    | - | Form of Registration Rights Agreement Amendment |   |
| Exhibit D                                                    | - | Form of Investors’ Agreement Amendment |   |

 

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**SENIOR PREFERRED STOCK AMENDMENT AGREEMENT**

 

AGREEMENT dated as of July 23, 2004, among DeCrane AircraftHoldings, Inc., a Delaware corporation (the “**Company**”),DeCrane Holdings Co., a Delaware corporation (“**DeCrane Holdings**”), and theother persons set forth on the signature pages hereto (together with theirsuccessors and assigns, each a “**Holder**” and together the “**Holders**”).

** **

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

 

WHEREAS, the Holders are holders of all of the outstanding shares of16% Senior Redeemable Exchangeable Preferred Stock Due 2009 of the Company (the“**ExistingPreferred Stock**”);

 

WHEREAS, the Holders and the Company have agreed to amend certain termsof the Existing Preferred Stock such that the powers, designations, preferencesand relative, participating, optional and other special rights, and thequalifications, limitations and restrictions of the Existing Preferred Stock asamended (the “**Senior Preferred Stock**”) shall be as set forth in Exhibit A(the “**Certificate of Designations**”);

 

WHEREAS, in connection with, and in consideration for, the amendment ofthe Existing Preferred Stock, DeCrane Holdings will also issue certain sharesof common stock, par value $.01 per share, of DeCrane Holdings (the “**Common Stock**”)to the Holders as provided herein;

 

WHEREAS, in connection with the amendment of the Existing PreferredStock, the Company will enter into an amendment (the “**Credit Agreement Amendment**”)to the Third Amended and Restated Credit Agreement dated as of May 11, 2000among the Company, the lenders party thereto and Credit Suisse First Boston (assuccessor to DLJ Capital Funding, Inc.), as administrative agent andsyndication agent for the lenders (as amended prior to the date hereof and bythe Credit Agreement Amendment, the “**Senior Credit Agreement**”)

 

WHEREAS, in connection with the amendment of the Existing PreferredStock, the Company will enter into an amendment  (the “**Second Lien Credit Agreement Amendment**”) tothe Second Lien Credit Agreement dated as of December 22, 2003 among theCompany, the lenders party thereto and Credit Suisse First Boston, actingthrough its Cayman Islands Branch, as administrative agent and syndicationagent for the lenders (as amended prior to the date hereof and by the SecondLien Credit Agreement Amendment, the “**Second Lien Credit Agreement**”);

 

WHEREAS, concurrently with the amendment of the Existing PreferredStock, the Company will exchange a portion of the 12% Senior Subordinated NotesDue 2008 (the “**Old Notes**”) for new 17% Senior Discount Notes Due 2008 (the “**New Notes**”)to be issued pursuant to the provisions of an indenture, dated

 

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as of the Closing Date (as defined herein) (the “**Indenture**”) among theCompany, the Guarantors named therein and U.S. Bank National Association, asTrustee;

 

WHEREAS, concurrently with the amendment of the Existing PreferredStock, DeCrane Holdings will obtain waivers of certain rights from holders ofmore than 99% of the outstanding shares of its 14% Senior RedeemableExchangeable Preferred Stock Due 2009 (the “**Junior Preferred Stock**”)pursuant to a waiver substantially in the form attached hereto as Exhibit B(the “**JuniorPreferred Stock Waiver**”); and

 

WHEREAS, the Holders and the Company will enter into Amendment No. 2 tothe Senior Preferred Stock Registration Rights Agreement dated as ofJune 30, 2000 among the Company and the stockholders named therein (as thesame may be amended from time to time, the “Registration Rights Agreement”),substantially in the form attached hereto as Exhibit C (the “RegistrationRights Agreement Amendment”) and DeCrane Holdings, with the approval of itsboard of directors and the holders of at least 75% of the outstanding shares ofcommon stock and preferred stock of DeCrane Holdings, will enter into AmendmentNo. 2 to the Amended and Restated Investors’ Agreement dated October 6,2000 among DeCrane Holdings, the Company and the stockholders named therein (asthe same may be amended from time to time, the “Investors’ Agreement”),substantially in the form attached hereto as Exhibit D (the “Investors’Agreement Amendment”).

 

NOW THEREFORE, the parties hereto agree as follows:

 

ARTICLE 1AMENDMENT

 

Section 1.01*.  Consent to Amendment.*Subject tothe terms and conditions set forth herein and in reliance on therepresentations and warranties contained herein, the Company agrees to amendthe Certificate of Designations, Preferences and Rights of 16% SeniorRedeemable Exchangeable Preferred Stock Due 2009 so that the powers,designations, preferences and relative, participating, optional and otherspecial rights, and the qualifications, limitations and restrictions of theSenior Preferred Stock shall be as set forth in the Certificate ofDesignations, and each Holder consents to such amendment, which amendment shallbe effective on the Closing Date (as defined herein).

 

Section 1.02*.  Closing. *The closing (the “**Closing**”)of the amendment of the Existing Preferred Stock and the issuance of the CommonStock hereunder, as consideration for the amendment of the Existing PreferredStock, 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 

 

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as the Company, DeCrane Holdings and the Holders may agree, such dateis hereinafter referred to as the “Closing Date”.  On the Closing Date, the Company will file the Certificate ofDesignations with the Secretary of State of Delaware.  At the Closing, each Holder, severally and not jointly, shallsurrender to the Company its Existing Preferred Stock certificates and theCompany shall deliver to each Holder (a) a new certificate for the same numberof shares of Senior Preferred Stock and (b) a certificate for a number ofshares of Common Stock determined by (i) dividing (A) the number of shares ofExisting Preferred Stock held by such Holder immediately prior to the Closingby (B) the total number of outstanding shares of Existing Preferred Stockimmediately prior to the Closing and (ii) multiplying such quotient by 7.5% ofthe total number of shares of Common Stock of DeCrane Holdings outstandingimmediately after the Closing (including for this purpose the total number ofshares of Common Stock issuable upon exercise of the Class A Warrants for thePurchase of Shares of Common Stock of DeCrane Holdings and the Class B Warrantsfor the Purchase of Shares of Common Stock of DeCrane Holdings (collectively,the “Penny Warrants”)). Schedule 1.02 hereto sets forth the number of shares of CommonStock that DeCrane Holdings will issue to each Holder, subject to any changesthat might result from any transfer of shares of the Existing Preferred Stockand/or any changes in the total number of outstanding shares of Common Stockbetween the date hereof and the Closing Date.

 

ARTICLE 2REPRESENTATIONS AND WARRANTIES OF THE COMPANYAND DECRANE HOLDINGS

 

The Company and DeCrane Holdings represent and warrant to each Holderthat:

 

Section 2.01*.  No Default Under Credit Agreement. *As of the date hereof, (i) noPotential Event of Default or Event of Default (each as defined in the SeniorCredit Agreement) has occurred and is continuing, and (ii) the Company is ableto satisfy the conditions to borrowing under the Senior Credit Agreement topermit the Company to borrow at least $1 of additional debt thereunder pursuantto the terms thereto on the date hereof.

 

Section 2.02*.  Authorizations. *The execution, delivery and performance by the Companyand DeCrane Holdings of this Agreement have been duly authorized by allnecessary corporate action on the part of the Company and DeCraneHoldings.  Upon the effectiveness ofthis Agreement, the amendments to the terms of the Existing Preferred Stock asset forth in the Certificate of Designations shall have been duly authorized byall necessary corporate action on the part of the Company.  Theissuance of Common Stock to the Holders as provided herein has been dulyauthorized by all necessary corporate action on the part of DeCraneHoldings.  Each of the RegistrationRights Agreement Amendment and the Investors’ Agreement Amendment has been dulyauthorized 

 

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by all necessary corporate action on the partof the Company and DeCrane Holdings, as applicable.  This Agreement is and, when executed and delivered on the ClosingDate, each of the Credit Agreement Amendment, Second Lien Credit AgreementAmendment, Registration Rights Agreement Amendment and the Investors’ AgreementAmendment will be, a valid and binding agreement of the Company and DeCraneHoldings, as applicable, enforceable in accordance with its terms, subject toapplicable bankruptcy, insolvency, fraudulent transfer and similar laws affectingcreditors’ rights generally and equitable principles of general applicabilityand except as rights to indemnification and contribution under the RegistrationRights Agreement or the Investors’ Agreement may be limited under applicablelaw.

 

Section 2.03*.Governmental Authorization. *Assumingthe accuracy of the representations and warranties of the Holders and theircompliance with the covenants herein, the execution, delivery and performanceby the Company and DeCrane Holdings ofthis Agreement, the Registration Rights Agreement Amendment and the Investors’Agreement Amendment and the consummation of the transactions contemplatedhereby require no material order, license, consent, authorization, or approvalof, or exemption by, or action by or in respect of, or notice to, or filing orregistration with, any governmental body, agency or official, other than thefiling of the Certificate of Designations with the Secretary of State ofDelaware and except as may be required by Federal and state securities lawswith respect to the Company’s obligations under the Registration RightsAgreement and except as may be required by state securities laws.

 

Section 2.04.*  Non-Contravention. *The execution, delivery and performance by the Companyand DeCrane Holdings of this Agreement, the Registration Rights AgreementAmendment, the Investors’ Agreement Amendment and the Certificate ofDesignations do not and will not (i) violate the certificate of incorporationor bylaws of the Company or DeCrane Holdings or (ii) violate any materialapplicable law, rule, regulation, judgment, injunction, order or decree, (iii)upon obtaining the consents and taking the other actions required to satisfythe conditions precedent set forth in Article 5, require any materialconsent or other action by any person under, constitute a material defaultunder, or give rise to any material right of termination, cancellation oracceleration of any right or obligation of the Company or DeCrane Holdings orto a loss of any material benefit to which the Company or DeCrane Holdings areentitled under any provision of any agreement or other instrument binding uponthe Company or DeCrane Holdings or any of the Company’s or DeCrane Holdings’assets or properties or (iv) result in the creation or imposition of anymaterial lien on any property or assets of the Company or DeCrane Holdings.

 

Section 2.05*.  Litigation. *There is no action, suit, investigation or proceeding pendingagainst, or to the knowledge of the Company or DeCrane Holdings, threatened inwriting against or affecting the Company or DeCrane Holdings or any of theirrespective properties before any court or arbitrator or any governmental body,agency or official which could reasonably be expected to 

 

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have a material adverse effect on thetransactions contemplated by this Agreement.

 

 

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF THE HOLDERS

 

Each Holder, severally and not jointly, as to itself only, representsand warrants to the Company and DeCrane Holdings as follows:

 

Section 3.01*.  Ownership of Existing Preferred Stock. *Except as set forth onSchedule 3.01 with respect to a pledge prior to the date hereof, suchHolder has, and on the Closing Date will have valid title to, or a valid “securityentitlement” within the meaning of Section 8-501 of the New York UniformCommercial Code in respect of, the shares of Existing Preferred Stock shown onSchedule 1.02, free and clear of all security interests, claims, liens,equities or other encumbrances.

 

Section 3.02*.  Authorization of Agreement. *The execution, delivery andperformance of this Agreement are within such Holder’s powers and have beenduly authorized by all requisite corporate action on the part of suchHolder.  This Agreement constitutes avalid and binding agreement of such Holder enforceable in accordance with itsterms.  This Agreement has been dulyexecuted and delivered by such Holder, subject to applicable bankruptcy,insolvency, fraudulent transfer and similar laws affecting creditors’ rightsgenerally and equitable principles of general applicability.

 

Section 3.03*.  Non-Contravention*.  The execution and delivery by such Holderof, 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.  *Investment Purposes. *Such Holder acknowledges that the Senior Preferred Stock andthe Common Stock have not been registered under the Securities Act or any statesecurities laws and that the amendment of the Existing Preferred Stock and theissuance of the Common Stock contemplated hereby are to be effected pursuant toan exemption from the registration requirements imposed by such laws, includingSection 4(2) under the Securities Act. Such Holder is an “accredited investor” within the meaning of Rule501(a) under the Securities Act and the shares of Common Stock to be receivedby it pursuant to this Agreement are being received for its own account withouta view toward distribution in violation of the Securities Act and such Holderwill not offer, sell, transfer, pledge, hypothecate or otherwise dispose of theSenior Preferred Stock unless pursuant to a transaction either registeredunder, or exempt from

 

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registration under, the Securities Act, itbeing agreed that Neon Capital Limited may grant a security interest in theSenior Preferred Stock and the Common Stock for the benefit of the holders ofthe Series 95 $5,929,820 Limited Recourse Pass-Through Secured Notes due 2013(the “**NeonNotes**”), subject to compliance with applicable securities laws.

 

Section 3.05*.  Inspections; No Other Representations. *Each Holder is an informed andsophisticated purchaser, and has engaged expert advisors, experienced in theevaluation of the transactions contemplated hereunder.  Each Holder has undertaken suchinvestigation and has been provided with and has evaluated such documents andinformation as it has deemed necessary to enable it to make an informed andintelligent decision with respect to the execution, delivery and performance ofthis Agreement.  Each Holderacknowledges that the Company and DeCrane Holdings have given such Holdercomplete and open access (to the extent requested by such Holder) to the keyemployees and documents of the Company, DeCrane Holdings and their respectivesubsidiaries.  Each Holder agrees to theamendment of the Existing Preferred Stock and the issuance of the Common Stockon the Closing Date based upon its own inspection, examination anddetermination with respect thereto as to all matters, and without reliance uponany express or implied representations or warranties of any nature made by oron behalf of or imputed to the Company or DeCrane Holdings, except as expresslyset forth in this Agreement.  Withoutlimiting the generality of the foregoing, each Holder acknowledges that theCompany and DeCrane Holdings make no representation or warranty with respect to(i) any projections, estimates or budgets delivered to or made available to theHolder of future revenues, future results of operations (or any componentthereof), future cash flows or future financial condition (or any componentthereof) of the Company and DeCrane Holdings or the future business andoperations of the Company and DeCrane Holdings or (ii) any other information ordocuments made available to such Holder or its advisors with respect to theCompany or DeCrane Holdings or their businesses or operations, except asexpressly set forth in this Agreement.

 

Section 3.06*. TaxpayerIdentification Number. *Thenumber set forth under “Taxpayer Identification Number” on Schedule 1.02hereto next to the name of such Holder is such Holder’s federal taxpayeridentification number.

 

ARTICLE 4COVENANTS

 

Section 4.01*.  Covenants of the Company and DeCraneHoldings. *In furtherconsideration of the agreements of the Holders contained in this Agreement, theCompany and DeCrane Holdings covenant with each of the Holders as follows:

 

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(a)        the Company and DeCraneHoldings will use their 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 Company and DeCraneHoldings will use their commercially reasonable efforts to obtain or cause tobe obtained any consents, approvals or waivers that are required to be obtainedfrom third parties to any material contracts in connection with theconsummation of the transactions contemplated by this Agreement; and

 

(c)        in addition to theobligations contained in Section 7.11(a) of the Securities PurchaseAgreement dated as of June 20, 2000 among the Company, DeCrane Holdingsand the purchasers party thereto (the “**Securities Purchase Agreement**”), prior tothe Closing Date, the Company and DeCrane Holdings agree that, except as theCompany or DeCrane Holdings and their counsel reasonably determine to berequired by law, they will not disclose the identity of the Holders to anythird party without the prior written consent of such Holder, which consentshall not be unreasonably withheld, except that the Company or DeCrane Holdingsmay disclose any Holder’s identity to their advisors and counsel or to anyother Holder that is a party to this Agreement (it being understood that theCompany will be required to publicly file this Agreement and the RegistrationRights Agreement Amendment and the Investors’ Agreement Amendment with theSecurities and Exchange Commission and that DeCrane Holdings will be requiredto publicly file this Agreement and the Investors’ Agreement with theSecurities and Exchange Commission, which documents will identify each Holder).

 

Section 4.02*.  Covenants of the Holders. *In further consideration of theagreements of the Company and DeCrane Holdings contained in this Agreement,each Holder covenants with the Company and DeCrane Holdings as follows:

 

(a)        in addition to theobligations contained in Section 7.11(b) of the Securities PurchaseAgreement, such Holder and its Affiliates (as defined in Rule 405 under theSecurities Act) will hold, and will use their best 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 orDeCrane Holdings furnished to such Holder or its Affiliates in connection withthe 

 

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transactions contemplated bythis Agreement, except to the extent that such information can be shown to havebeen (A) previously known on a nonconfidential basis by such Holder, (B) in thepublic domain through no fault of such Holder or (C) later lawfully acquired bysuch Holder from sources other than the Company or DeCrane Holdings; *provided*that such Holder may disclose such information (1) to another Holder, (2) toits officers, directors, employees, accountants, counsel, consultants, advisorsand agents in connection with the transactions contemplated by this Agreementso long as such persons are informed by such Holder of the confidential natureof such information and are directed by such Holder to treat such informationconfidentially, (3) upon the request or demand of any governmental authorityhaving jurisdiction over such Holder, (4) in response to any order of any courtor other governmental authority or as may be required pursuant to anyrequirement of law or (5) in connection with the exercise of any remedyhereunder; *providedfurther* that Neon Capital Limited (“**Neon**”) may disclose suchinformation to (i) the trustee with respect to the Neon Notes and (ii) to thebeneficiaries of the security interest granted by Neon with respect to theExisting Preferred Stock.  Each Holdershall be responsible for any failure to treat such information confidentiallyby such persons.  The obligation of eachHolder and 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 similarinformation and shall in any event expire six months from the ClosingDate.  If this Agreement is terminated,each Holder and its Affiliates will, and will use their best efforts to causetheir respective officers, directors, employees, accountants, counsel,consultants, advisors and agents to, destroy or deliver to the Company orDeCrane Holdings, upon request, all documents and other materials, and allcopies thereof, obtained by such Holder or its Affiliates or on their behalffrom the Company or DeCrane Holdings in connection with this Agreement that aresubject to such confidentiality provisions;

 

(b)        such Holder will use itscommercially reasonable efforts to take, or cause to be taken, all actions andto do, or cause to be done, all things necessary or desirable under applicablelaws and regulations to consummate the transactions contemplated by thisAgreement; and

 

(c)        unless this Agreement isterminated in accordance with Section 7.05 hereof, until the ExistingPreferred Stock is amended pursuant to the terms of this Agreement, such Holderwill not pledge, sell, contract to sell, grant any option, right or warrant topurchase, lend or otherwise transfer or dispose of any shares of the ExistingPreferred Stock or any right or interest (voting or otherwise and including anyparticipation interest) therein, except with the consent of the Company andDeCrane Holdings or pursuant to Section 1.02 hereof.

 

ARTICLE 5CONDITIONS TO THE CLOSING

 

Section 5.01*.  Conditions to Obligation of Each Party. *The Holders’ consent to theamendment of the Existing Preferred Stock as set forth in the Certificate ofDesignations and the obligations of the Company to amend the Existing PreferredStock and of DeCrane Holdings to issue the Common Stock hereunder are subject tothe satisfaction (or, to the extent permitted by law, waiver by such party), ator prior to the Closing Date, of the following conditions:

 

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(a)        no provision of anyapplicable law or regulation and no judgment, injunction, order or decree shallprohibit the consummation of the Closing and there shall not be threatened,instituted or pending any action, suit, investigation or proceeding which couldreasonably be expected to have a material adverse effect on the transactionscontemplated by this Agreement;

 

(b)        the exchange of the OldNotes for the New Notes shall have been consummated or shall be consummatedconcurrently with the Closing;

 

(c)        the Credit AgreementAmendment shall be in full force and effect; and

 

(d)        the Second Lien CreditAgreement Amendment shall be in full force and effect.

 

Section 5.02.  Conditions to the Obligations of theHolders.  The consent of the Holders tothe amendment of the Existing Preferred Stock as set forth in the Certificateof Designations is subject to the satisfaction (or, to the extent permitted bylaw, waiver by each Holder), at or prior to the Closing Date, of the followingadditional conditions:

 

(a)        the representations and warranties ofthe Company and DeCrane Holdings contained in this Agreement shall be true andcorrect in all material respects, each of the Company and DeCrane Holdingsshall have performed and complied with all covenants and agreements required bythis Agreement to be performed by it or complied with by it at or prior to theClosing Date, and each Holder shall have received a certificate, dated theClosing Date, signed by an authorized officer of each of the Company andDeCrane Holdings to the foregoing effect;

 

(b)        new certificatesrepresenting the shares of Senior Preferred Stock and Common Stock to be issuedto the Holders hereunder shall have been prepared and made available fordelivery to the Holders in exchange for Existing Preferred Stock certificatesas provided in Section 1.02;

 

(c)        the Certificate ofDesignations shall have been filed with the Secretary of State of Delawareprior to or concurrently with the Closing;

 

(d)        the Company and the DLJEntities (as defined in the Investors’ Agreement) shall have executed anddelivered the Junior Preferred Stock Waiver;

 

(e)        the Company shall haveexecuted and delivered the Registration Rights Agreement Amendment and theInvestors’ Agreement Amendment and DeCrane Holdings, with the approval of itsboard of directors and the holders of at least 75% of the outstanding shares ofcommon stock and preferred stock of DeCrane Holdings, shall have executed anddelivered the Investors’ Agreement Amendment;

 

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(f)         The Holders shall havereceived copies of each of the Credit Agreement Amendment, the Second LienCredit Agreement Amendment, the Exchange Agreement relating to the exchange ofthe Old Notes for the New Notes and the Indenture for the New Notes, each ofwhich shall be in full force and effect and no term or condition thereof shallhave been amended, waived or otherwise modified without the prior consent ofthe Holders;

 

(g)        the Company shall havedelivered to each Holder an opinion of Davis Polk & Wardwell, special counsel to the Company and DeCraneHoldings, dated the Closing Date, in form and substance reasonably satisfactoryto the Holders, to the effect that (subject to appropriate assumptions andlimitations):

 

(i)            the Company andDeCrane Holdings are validly existing and in good standing under the laws ofthe State of Delaware with corporate power to enter into the amendment;

 

(ii)           the Common Stock to beissued pursuant to this Agreement has been duly authorized by DeCrane Holdingsand, when issued and delivered to the Holders, will be fully paid andnonassessable;

 

(iii)          the filing of theCertificate of Designations by the Company in the State of Delaware and theissuance by DeCrane Holdings of the Common Stock pursuant to this Agreement donot (A) contravene the Certificate of Incorporation or By-laws of DeCraneHoldings or of the Company, (B) contravene the Indenture, the indenturegoverning the Old Notes, the Credit Agreement or the Second Lien CreditAgreement or (C) violate any New York or federal law that in our experience arenormally applicable to transactions of this type; *provided* that Davis Polk& Wardwell expresses no opinion as to federal or state securities laws;

 

(iv)          each of this Agreement,the Investors’ Agreement Amendment and the Registration Rights AgreementAmendment has been duly authorized, executed and delivered by each of theCompany and DeCrane Holdings (to the extent party thereto) and is a valid andbinding agreement of the Company and DeCrane Holdings (to the extent partythereto) in each case enforceable in accordance with its terms, subject toapplicable bankruptcy, insolvency, fraudulent transfer and similar lawsaffecting creditors’ rights generally and equitable principles of generalapplicability and except (x) as such enforcement may be limited by bankruptcy, insolvency,fraudulent conveyance or similar laws affecting creditors’ rights generally,(y) as such enforcement is subject to general principles of equity (regardlessof whether such enforceability is considered in a proceeding in equity or atlaw) and (z) to the extent that a waiver of the rights under any usury or staylaw may be unenforceable, we express no opinion, however, as to theapplicability (and, if applicable, the effect) of Section 548 of theUnited States Bankruptcy Code or any 

 

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comparableprovision of state law to the questions addressed above or on the conclusionsexpressed with respect thereto;

 

(v)           the Certificate ofDesignations has been duly authorized by all necessary corporate action on thepart of the Company;

 

(vi)          the New Notes have beenduly authorized by the Company 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 the ExchangeAgreement, 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;

 

(vii)         the Indenture has been duly authorized,executed and delivered by each of the Company and each of the affiliatesof the Company set forth on the signature pages of the Indenture as Guarantors (the “**Guarantors**”) organized underthe laws of Delaware (the “**Delaware Guarantors**”) and is a valid andbinding agreement of the Company, and (assuming due authorization, executionand delivery by each other Guarantor (the “**Non-Delaware Guarantors**”)) the Guarantors,enforceable in accordance with its terms, except (x) as such enforcementmay be limited by bankruptcy, insolvency, fraudulent conveyance or similar lawsaffecting creditors’ rights generally, (y) as such enforcement is subject togeneral principles of equity (regardless of whether such enforceability isconsidered in a proceeding in equity or at law) and (z) to the extent that awaiver of the rights under any usury or stay law may be unenforceable, weexpress no opinion, however, as to the applicability (and, if applicable, theeffect) 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

 

(viii)        each of the DelawareGuarantors has duly authorized its Guarantee of the New Notes; assuming each ofthe Non-Delaware Guarantors has duly authorized its Guarantee of the New Notes,when the New Notes and the Guarantee evidenced thereon have been executed andauthenticated in accordance with the terms of the Indenture and issued to

 

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 the Holders in exchange for the Old Notes inaccordance with the terms thereof, the Guarantee of each Guarantor will be thelegally valid and binding obligation of such Guarantor, enforceable againstsuch Guarantor in accordance with its terms, except (x) as such enforcement maybe limited by bankruptcy, insolvency, fraudulent conveyance or similar lawsaffecting creditors’ rights generally, (y) as such enforcement is subject togeneral principles of equity (regardless of whether such enforceability isconsidered in a proceeding in equity or at law) and (z) to the extent that awaiver of the rights under any usury or stay law may be unenforceable, weexpress no opinion, however, as to the applicability (and, if applicable, theeffect) 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.

 

(h)        all fees and expensespayable to the Holders on or prior to the Closing Date shall have been paid infull; and

 

(i)         each Holder shall havereceived all documents reasonably requested by it relating to the existence ofthe Company and DeCrane Holdings and the corporate authority for entering intothis Agreement and the consummation of the transactions contemplated hereby,all in form and substance reasonably satisfactory to it.

 

Section 5.03*.  Conditions to the Obligations of the Companyand DeCrane Holdings. *Theobligation of the Company to amend the Existing Preferred Stock and theobligation of DeCrane Holdings to issue the Common Stock pursuant to thisAgreement are subject to the satisfaction (or, to the extent permitted by law,waiver by each Holder), at or prior to the Closing Date, of the followingadditional conditions:

 

(a)        the representations and warranties ofthe Holders contained in this Agreement shall be true and correct in allmaterial respects;

 

(b)        the Holders shall haveexecuted and delivered the Registration Rights Agreement Amendment and theInvestors’ Agreement Amendment; and

 

(c)        the Company and DeCraneHoldings shall have received all documents reasonably requested by it relatingto the existence of each Holder and the authority for entering into thisAgreement and the consummation of the transactions contemplated hereby, all inform and substance reasonably satisfactory to it.

 

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ARTICLE 6SURVIVAL; INDEMNIFICATION

 

Section 6.01*.  Survival. *The representations and warranties of the parties heretocontained in this Agreement shall survive the execution and delivery of thisAgreement.

 

Section 6.02*.  Indemnification. *(a) The Company and DeCrane Holdings hereby indemnify,jointly and severally, each Holder and its affiliates, limited partners,general partners, directors, members, officers and employees against and agreesto hold each of them harmless from any and all damage, loss, liability andexpense (including, without limitation, reasonable expenses of investigationand reasonable attorneys’ fees and expenses in connection with any action, suitor proceeding) (“**Damages**”) incurred or suffered by any such party arising outof any misrepresentations or breach of warranty, covenant or agreement made orto be performed by the Company and DeCrane Holdings pursuant to this Agreement.

 

(b)        After the Closing Date,this Section 6.02 will provide the exclusive remedy for the Holders forany misrepresentation, breach of warranty, covenant or other agreement or otherclaim arising out of this Agreement or the transactions contemplated herebyexcept to the extent any such claim is in respect of fraud.  The Company shall retain all remediesavailable at law for any misrepresentation, breach of warranty, covenant orother agreement or other claim arising out of this Agreement or thetransactions contemplated hereby.

 

ARTICLE 7MISCELLANEOUS

 

Section 7.01*.  Notices. *All notices, requests and other communications to any partyhereunder shall be in writing (including facsimile transmission) and shall begiven,

 

if to the Holders, to:

 

DLJ Investment Partners II, L.P.DLJ Investment Partners, L.P.DLJIP II Holdings, L.P.11 Madison Avenue New York, NY 10010Attention:  Rob PetriniFacsimile:  (212) 448-3220

 

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

 

Cahill Gordon & Reindel LLP80 Pine Street

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New York, NY 10005Attention:  John SchusterFacsimile:  (212) 269-5420

 

and

 

Putnam Investment Management, LLCPutnam Fiduciary Trust CompanyOne Post Office SquareBoston, MA 02109Attention:  Michael DeFao, Senior VicePresidentFacsimile:  (617) 292-1625

 

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

 

and

 

Neon Capital LimitedP.O. Box 1984 GTElizabethan SquareGeorgetown, Grand CaymanCayman Islands, British West IndiesAttention:  Neil Ross/Scott MacdonaldFacsimile:  (345) 949-5223

 

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:  Nancy L. Sanborn, Esq.Facsimile:  (212) 450-3800

 

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if to DeCrane Holdings, to:

 

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

 

with a copy (which shall not constitute notice to DeCrane Holdings) to:

 

Davis Polk & Wardwell450 Lexington AvenueNew York, New York 10017Attention:  Nancy L. Sanborn, 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)**No failure or delay on thepart of any party in exercising any right, power or privilege hereunder shalloperate as a waiver thereof, nor shall any single or partial exercise thereofpreclude any other or further exercise thereof or the exercise of any otherright, power or privilege. The rights and remedies herein provided shall becumulative and not exclusive of any rights or remedies provided by law.

 

(b)        Any provision of thisAgreement may be amended or waived if, but only if, such amendment or waiver isin writing and is signed by all parties hereto.

 

Section 7.03*.  Waiver of Warrant Requirements*.  In connection with the issuance of theCommon Stock, each Holder hereby waives the requirement that notice must begiven to such Holder under Sections (h)(2) and (h)(11) of the Penny Warrantsheld by such Holder.  Each such Holderalso hereby waives the requirement that DeCrane Holdings file an officers’certificate setting forth the adjusted exercise price for the Penny Warrants,the facts requiring such adjustment and the manner of computing such adjustmentas required pursuant to Section (h)(11) of the Penny Warrants.** It is understood and agreed that there shallbe no adjustment to the exercise price of the Penny Warrants in connection withthe issuance of the Common Stock.

 

Section 7.04.  *Termination.*(a)** This Agreementshall terminate, prior to the Closing Date:

 

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(i)            at any time by mutualwritten agreement of the Company, DeCrane Holdings and the Holders;

 

(ii)           if there shall be anylaw or regulation that makes consummation of the transactions contemplated bythis Agreement illegal or otherwise prohibited or if consummation of thetransactions contemplated hereby would violate any non-appealable final order,decree or judgment of any court or governmental body having competentjurisdiction, if so determined by the Company, DeCrane Holdings or the Holders;or

 

(iii)          on July 30, 2004,unless extended to a later date by an instrument executed by the Company,DeCrane Holdings and the Holders.

 

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

 

(b)        If this Agreement isterminated as permitted by 7.04, such termination shall be without liability ofany party (or any stockholder, director, officer, employee, agent, consultantor representative of such party) to the other parties to this Agreement; *provided* that if such termination shallresult from the (i) willful failure of any party to fulfill a condition to theperformance of the obligations of the other parties, (ii) failure to perform acovenant of this Agreement or (iii) breach by any party hereto of anyrepresentation or warranty or agreement contained herein, such party shall befully liable for any and all damages incurred or suffered by the other party asa result of such failure or breach.

 

Section 7.05*.  Successors And Assigns.*TheCompany or DeCrane Holdings may not assign any of their respective rights andobligations hereunder without the prior written consent of the Holders.  No Holder may assign any of its rights orobligations hereunder without the prior written consent of the Company andDeCrane Holdings.  This Agreement shallbe binding upon the Company, DeCrane Holdings and the Holders and theirrespective successors and permitted assigns.

 

Section 7.06*.  Limited Recourse and Non-Petition*.  Claims against each Holder arising out ofthis Agreement shall be limited to the economic value of such Holders’ SeniorPreferred Stock and any payments or distributions with respect to such Holder’sSenior Preferred Stock, and the Company shall have no recourse against theHolder for any obligation with respect to this Agreement beyond the economicvalue of the Senior Preferred Stock and any payments or distributions withrespect to the Senior Preferred Stock, and should the amount of any suchobligation exceed the economic value of such Holder’s Senior Preferred Stockand such payments or distributions, the Company shall not be entitled topetition for the dissolution or winding-up of such Holder.

 

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Section 7.07.  *Governing Law.*This Agreement shall begoverned and construed in accordance with the laws of the State of New York,without regard to the choice of law rules of such state.

 

Section 7.08*.  Jurisdiction.*Except as otherwiseexpressly provided in this Agreement, the parties hereto agree that any suit,action or proceeding seeking to enforce any provision of, or based on anymatter arising out of or in connection with, this Agreement or the transactionscontemplated hereby shall be brought in the United States District Court forthe Southern District of New York or any New York State court sitting in NewYork City, so long as one of such courts shall have subject matter jurisdictionover such suit, action or proceeding, and that any cause of action arising outof this Agreement shall be deemed to have arisen from a transaction of businessin the State of New York, and each of the parties hereby irrevocably consentsto the jurisdiction of such courts (and of the appropriate appellate courtstherefrom) in any such suit, action or proceeding and irrevocably waives, tothe fullest extent permitted by law, any objection that it may now or hereafterhave to the laying of the venue of any such suit, action or proceeding in anysuch court or that any such suit, action or proceeding which is brought in anysuch court has been brought in an inconvenient forum.  Process in any such suit, action or proceeding may be served onany party anywhere in the world, whether within or without the jurisdiction ofany such court.  Without limiting the foregoing,each party agrees that service of process on such party as provided in thisSection shall be deemed effective service of process on such party.

 

Section 7.09*.  WAIVER OF JURY TRIAL.*EACH OF THEPARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY INANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THETRANSACTIONS CONTEMPLATED HEREBY.

 

Section 7.10*.  Counterparts; Effectiveness. *This Agreement may be executed inany number of counterparts each of which shall be an original with the sameeffect as if the signatures thereto and hereto were upon the sameinstrument.  This Agreement shall becomeeffective when each party hereto shall have received a counterpart hereof signedby the other parties hereto.  No provisionof this Agreement is intended to confer upon any person other than the partieshereto any rights or remedies hereunder

 

Section 7.11*.  Expenses. *Except as otherwise provided in Article 6 herein, allcosts and expenses incurred in connection with this Agreement shall be paid bythe party incurring such cost or expense; *provided**however*, that the Companyshall pay the reasonable fees and expenses of (i) Cahill Gordon & ReindelLLP, special counsel to certain Holders and (ii) Ropes & Gray LLP, special counselto certain other Holders, in each case to the extent incurred in connectionwith the negotiation, execution and delivery of this Agreement and thetransactions contemplated hereby; *provided**further* that the fees andexpenses payable by the 

 

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Company pursuant to the foregoing provisoshall not exceed $55,000 with respect to Cahill Gordon & Reindel LLP and$20,000 with respect to Ropes & Gray LLP.

 

Section 7.12*.  Entire Agreement. *This Agreement, the Registration Rights Agreement, theInvestors’ Agreement, the Certificate of Designations and the SecuritiesPurchase Agreement (including without limitation the indemnification provisionscontained therein and the Company’s and DeCrane Holdings’ covenants underArticle VI of the Securities Purchase Agreement), which shall survive theexecution and delivery of this Agreement) constitute the entire agreement andunderstanding among the parties hereto and supersedes any and all prioragreements and understandings, written or oral, relating to the subject matterhereof.

 

Section 7.13*.  Captions; Certain Definitions.*Thecaptions herein are included for convenience of reference only and shall beignored in the construction or interpretation hereof.  All references to “**$**”or “**dollars**” shall be to UnitedStates dollars and all references to “**days**”shall be to calendar days unless otherwise specified.  Whenever the words “**include**,”“**includes**” or “**including**” are used in this Agreement, theyshall be deemed to be followed by the words, “without limitation.”

 

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

 

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**IN WITNESS WHEREOF**,the parties hereto have caused this Senior Preferred Stock Amendment Agreementto be duly executed by their respective authorized officers as of the day andyear first above written.

 
|   | **DECRANE AIRCRAFT  HOLDINGS, INC.**                                                                                                                                                                                                                                                            |                                    |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------|
|   |                                                                                                                                                                                                                                                                                            |                                    |
|   | By:                                                                                                                                                                                                                                                                                             |   /s/  R. JACK  DECRANE  |   |   |
|   |                                                                                                                                                                                                                                                                                            | Name:  /s/ R. Jack DeCrane         |   |
|   |                                                                                                                                                                                                                                                                                            | Title:  Chief Executive Officer    |   |
|   |                                                                                                                                                                                                                                                                                            |                                    |
|   | **DECRANE HOLDINGS  CO.**                                                                                                                                                                                                                                                                       |                                    |
|   |                                                                                                                                                                                                                                                                                            |                                    |
|   | By:                                                                                                                                                                                                                                                                                             |   /s/  R. JACK  DECRANE  |   |
|   |                                                                                                                                                                                                                                                                                            | Name:  /s/ R. Jack DeCrane         |   |   |
|   |                                                                                                                                                                                                                                                                                            | Title:  Chief Executive  Officer   |   |
|   |                                                                                                                                                                                                                                                                                            |                                    |
|   | **DLJ INVESTMENT PARTNERS II, INC.**on  behalf of: **DLJ  INVESTMENT PARTNERS II, L.P.  DLJ INVESTMENT PARTNERS, L.P.   DLJIP II HOLDINGS, L.P.**                                                                                                                                               |                                    |
|   |                                                                                                                                                                                                                                                                                            |                                    |   |
|   | By:                                                                                                                                                                                                                                                                                             |   /S/  JOHN M. MORIARTY, JR.  |   |   |
|   |                                                                                                                                                                                                                                                                                            | Name:  John M. Moriarty, Jr.       |   |
|   |                                                                                                                                                                                                                                                                                            | Title:  Managing Director          |   |
|   |                                                                                                                                                                                                                                                                                            |                                    |   |
|   | **PUTNAM INVESTMENT  MANAGEMENT, LLC**on behalf of:        **PUTNAM VARIABLE TRUST- PUTNAM VT HIGH                YIELD  FUND**        **PUTNAM HIGH YIELD TRUST** |                                    |
|   |                                                                                                                                                                                                                                                                                            |                                    |   |
|   | By:                                                                                                                                                                                                                                                                                             |   /s/  MICHAEL E.  DEFAO |   |   |
|   |                                                                                                                                                                                                                                                                                            | Name:  Michael E. DeFao            |   |
|   |                                                                                                                                                                                                                                                                                            | Title:  Senior Vice President      |   |
|   |                                                                                                                                                                                                                                                                                            |                                    |
|   | **NEON CAPITAL  LIMITED**                                                                                                                                                                                                                                                                       |                                    |
|   |                                                                                                                                                                                                                                                                                            |                                    |   |
|   | By:                                                                                                                                                                                                                                                                                             |   /S/** **PAUL  COPE     |   |
|   |                                                                                                                                                                                                                                                                                            | Name:  Paul Cope                   |   |
|   |                                                                                                                                                                                                                                                                                            | Title:  Director                   |   |
|        |                                                                                                                                                                                                                                                                                                 |                                         |  |  |  |  |  |  |  |  |  |  |

 

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**SCHEDULE 1.02***

 
| **Holder**                                             |   | **Taxpayer  Identification  Number** |   | **Shares of  Existing  Preferred Stock  and Senior  Preferred Stock** |   | **Shares of  Common Stock to  be Issued**** |   |
|--------------------------------------------------------|--------|--------------------------------------|--------|-----------------------------------------------------------------------|--------|---------------------------------------------|--------|
| DLJ Investment Partners II, L.P.                       |   | 13-4048184                           |   | 113,651.2                                                             |   | 158,632                                     |   |
|                                                   |   |                                 |   |                                                                  |   |                                        |   |
| DLJ Investment Partners, L.P.                          |   | 13-3868693                           |   | 50,512.0                                                              |   | 70,504                                      |   |
|                                                   |   |                                 |   |                                                                  |   |                                        |   |
| DLJIP II Holdings, L.P.                                |   | 13-4192504                           |   | 35,836.8                                                              |   | 50,020                                      |   |
|                                                   |   |                                 |   |                                                                  |   |                                        |   |
| Neon Capital Limited                                   |   |                                 |   | 21,000.0                                                              |   | 29,311                                      |   |
|                                                   |   |                                 |   |                                                                  |   |                                        |   |
| Putnam High Yield Trust                                |   | 04-6415410                           |   | 21,000.0                                                              |   | 29,311                                      |   |
|                                                   |   |                                 |   |                                                                  |   |                                        |   |
| Putnam Variable Trust – Putnam VT High Yield Fund |   | 04-2986135                           |   | 8,000.0                                                               |   | 11,167                                      |   |
|                                                   |   |                                 |   |                                                                  |   |                                        |   |
| Total                                                  |   |                                 |   | 250,000.0                                                             |   | 348,945                                     |   |

 

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| *      | Assumes  no transfers after the date of this Agreement.                                                                                                                     |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                        |
| **     | Assumes  348,945 shares of Common Stock is equal to 7.5% of the Common Stock  outstanding immediately after the Closing (calculated in accordance with  Section 1.02). |

 

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**SCHEDULE 3.01**

 

The Existing Preferred Stock of Neon Capital Limited is subject to asecurity agreement granted in favor of the trustee for the Neon Notes.

 

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