**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**

 

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**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*                                      |   |

 

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| *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** |   |
|                                                          |        |  |  |

 

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**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 holders of the Company’s 12% SeniorSubordinated Notes due 2008 (the “**Old Notes**”)set forth on the signature pages hereto (together with their successors andassigns, 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 be issued pursuant to the provisionsof an Indenture dated as of July 23, 2004 among the Company, theGuarantors named therein and U.S. Bank National Association, as Trustee (the “**Trustee**”), as supplemented by the FirstSupplemental Indenture dated as of September 9, 2004 among the Company,the Guarantors named therein and the Trustee (the “**Indenture**”).

 

WHEREAS, the Company has entered into an amendment (the “**CreditAgreement Amendment**”) to the Third Amended and Restated CreditAgreement dated May 11, 2000 among the Company, the lenders party thereto andCredit Suisse First Boston, as administrative agent and syndication agent forthe lenders (as amended, the “**Credit Agreement**”), which amendment willpermit such exchange; and

 

WHEREAS, the Company has entered into an amendment (the “**Second LienCredit Agreement Amendment**”) to the Second Lien Credit Agreementdated December 22, 2003 among the Company, the lenders party thereto andCredit Suisse First Boston, acting through its Cayman Islands Branch, asadministrative agent and syndication agent for the lenders (as amended, 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 And Delivery.*Uponthe terms and subject to the terms and conditions of this Agreement, theCompany agrees to issue to each Holder, and each Holder agrees, severally butnot jointly, to accept from the Company at the Closing, the New Notes inexchange for the surrender of the Old Notes, in each case in the principalamounts set forth opposite such Holder’s name on Schedule 1.02 hereto.

 

*Section 1.02**.  Closing. *The closing (the “**Closing**”)of the issuance of the New Notes hereunder shall take place at the offices ofDavis Polk & Wardwell, 450 Lexington Avenue, New York, New York, as soon aspossible, but in no event later than five (5) Business Days after satisfactionof the conditions set forth in Article 5, or at such other time or placeas Company and 

 

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the Holders may agree, such date ishereinafter referred to as the “**Closing Date**”.  At the Closing (a) each Holder shall surrender to the Company theprincipal amount of the Old Notes set forth opposite such Holder’s name onSchedule 1.02 hereto; and (b) the Company shall deliver to each Holder NewNotes with an initial accreted value equal to the amount  set forth opposite such Holder’s name onSchedule 1.02 hereto, plus an amount in cash equal to the accrued andunpaid interest on the Old Notes being exchanged to the Closing Date.

 

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 Credit Agreement. *As of the date hereof, (i) noPotential Event of Default or Event of Default (each as defined in the CreditAgreement) under the Credit Agreement has occurred and is continuing, and (ii)the Company is able to satisfy the conditions to borrowing thereunder to permitthe Company to borrow at least $1 of additional debt thereunder pursuant to theterms thereto on the date hereof.

 

*Section 2.02**.  Authorizations. *The execution, delivery and performance by the Companyand each of the Guarantors of this Agreement have been duly authorized by allnecessary corporate action on the part of the Company and each of theGuarantors.  The New Notes have beenduly authorized and, when executed and authenticated in accordance with theprovisions of the Indenture and issued to the holders in exchange for the OldNotes in accordance with the terms of this Agreement, will be valid and bindingobligations of the Company, enforceable in accordance with their terms, subjectto applicable bankruptcy, insolvency, fraudulent transfer and similar lawsaffecting creditors’ rights generally and equitable principles of generalapplicability, and will be entitled to the benefits of the Indenture; each ofthe Guarantors has duly authorized its guarantee of the New Notes and, when theNew Notes have been executed and authenticated in accordance with theprovisions of the Indenture and issued to the holders in exchange for the OldNotes in accordance with the terms of this Agreement, the guarantee of the NewNotes will be a valid and binding obligation of the each Guarantor, enforceablein accordance with its terms, subject to applicable bankruptcy, insolvency,fraudulent transfer and similar laws affecting creditors’ rights generally andequitable principles of general applicability.  The Indenture has beenduly authorized by all necessary corporate action on the part of the Companyand each of the Guarantors, as applicable. Each of this Agreement and the Indenture is, a valid and bindingagreement of the Company and each of the Guarantors, as applicable, enforceablein accordance with its terms, subject to applicable bankruptcy, insolvency,fraudulent transfer and similar laws affecting creditors’ rights generally andequitable principles of general applicability.

 

*Section 2.03**.  Governmental Authorization. *Assuming the accuracy of therepresentations and warranties of the Holders and their compliance with thecovenants herein, the execution, delivery and performance by the Company andeach of the Guarantors of this Agreement, the Indenture and the New Notesrequire no material order, license, consent, authorization, or approval of, orexemption by, or action by or in respect of, or notice to, or filing orregistration with, any governmental body, agency or official, except as may berequired by Federal and state securities laws with respect to the Company’sobligations under the 

 

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

 

*Section 2.04**.  Non-Contravention. *The execution, delivery and performance by the Companyand each of the Guarantors of this Agreement, the Indenture and the New Notesdo not and will not (i) violate the certificate of incorporation or bylaws ofthe Company or any Guarantor or any material agreement or other instrumentbinding upon the Company or any Guarantor or (ii) violate any material applicablelaw, rule, regulation, judgment, injunction, order or decree.

 

*Section 2.05**.  No Registration. *Assuming the accuracy of the representations andwarranties of the Holders and their compliance with the covenants herein, it isnot necessary in connection with the issuance of the New Notes to the Holdersin the manner contemplated by this Agreement to register the New Notes underthe Securities Act of 1933, as amended (the “**Securities Act**”) or toqualify the Indenture under the Trust Indenture Act of 1939, as amended.

 

*Section 2.06**.  Litigation. *There is no action, suit, investigation or proceeding pendingagainst, or to the knowledge of the Company or any Guarantor, threatened inwriting against or affecting the Company or any Guarantor or any of theirrespective properties before any court or arbitrator or any governmental body,agency or official which could reasonably be expected to have a materialadverse effect on the transactions contemplated by this Agreement.

 

*Section 2.07**.  Finder’s Fees. *Exceptfor Credit Suisse First Boston LLC, whose compensation in connection with theexchange of the Old Notes for the New Notes will be paid by the Company, thereis no investment banker, broker, finder or other intermediary which has beenretained by or is authorized to act on behalf of the Company or any of itsAffiliates (as defined in Rule 405 under the Securities Act) which might beentitled to any fee or commission from any Holder, the Company or any of theirrespective Affiliates upon consummation of the transactions contemplated bythis 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 Old Notes. *Such Holder has, and on the Closing Datewill have valid title to, or a valid “security entitlement” within the meaningof Section 8-501 of the New York Uniform Commercial Code in respect of,the Old Notes to be exchanged by such Holder free and clear of all securityinterests, claims, liens, equities or other encumbrances and the legal rightand power, and all authorization and approval required by law, to enter intothis Agreement and to transfer and deliver the Old Notes to be exchanged bysuch Holder or a security entitlement in respect of such Old Notes.

 

*Section 3.02**.  Authorization of Exchange Agreement. *The execution, delivery andperformance of this Agreement are within such Holder’s powers and have beenduly authorized 

 

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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 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**.  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 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 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 acknowledgesthat the 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 Holderagrees to accept the New Notes on the Closing Date based upon its owninspection, examination and determination with respect thereto as to allmatters, and without reliance upon any express or implied representations orwarranties of any nature made by or on behalf of or imputed to the Company,except as expressly set forth in this Agreement.  Without limiting the generality of the foregoing, each Holderacknowledges that the Company makes no representation or warranty with respectto (i) any projections, estimates or budgets delivered to or made available tothe 

 

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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 theirrespective businesses or operations, except as expressly set forth in thisAgreement.

 

*Section 3.07**.  Finder’s Fees. *Thereis no investment banker, broker, finder or other intermediary which has beenretained by or is authorized to act on behalf of such Holder or any of itsAffiliates which might be entitled to any fee or commission from such Holder,the Company or any of their respective Affiliates upon consummation of thetransactions contemplated by this Agreement.

 

*Section 3.08**.  Taxpayer Identification Numbers. *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.

 

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*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 of Each Party. *The obligations of each partyhereto to consummate the issuance of the New Notes in exchange for the OldNotes is subject to the satisfaction (or, to the extent permitted by law,waiver by such party), at or prior to the Closing Date, of the followingconditions:

 

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(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 “**Delaware Guarantors**”) and isa valid and binding agreement of the Company, and (assuming due authorization,execution and delivery by each other Guarantor (the “**Non-Delaware Guarantors**”))the Guarantors, enforceable in accordance with its terms; except (x) assuch enforcement may be limited by bankruptcy, insolvency, fraudulentconveyance or similar laws affecting creditors’ rights generally, (y) as suchenforcement is subject to general principles of equity (regardless of whethersuch enforceability is 

 

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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 Obligations of theCompany. *The obligations ofthe Company to issue the New Notes to the Holders pursuant to this Agreement aresubject to the satisfaction (or, to the extent permitted by law, waiver by eachHolder), at or prior to the Closing Date, of the following conditions:

 

(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 warranties of the parties heretocontained in this Agreement, shall survive the execution and delivery of thisAgreement.  The covenants and agreementsof the parties contained in this Agreement shall survive the Closing inaccordance with their terms or, if no term is specified, indefinitely.

 

*Section 6.02**.  Indemnification. *(a) The Company hereby indemnifies each of theHolders, each person, if any, who controls any Holder within the meaning ofeither 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 

 

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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 such liability is an ExcludedClaim) the foregoing indemnity is unavailable or insufficient to hold anindemnified person harmless, then the Company shall contribute to amounts paidor payable by such indemnified person in respect of such Damages in suchproportion as appropriately reflects the relative benefits received by, andfault of, the Company and such indemnified person in connection with thematters as to which such Damages relate and other equitable considerations.

 

(c)                        The partyseeking indemnification under this Section (the “**Indemnified Party**”) agrees togive prompt notice to the party against whom indemnity is sought (the “**IndemnifyingParty**”) of the assertion of any claim, or the commencement of anysuit, action or proceeding (“**Claim**”) in respect of which indemnity maybe sought under such Section and will provide the Indemnifying Party suchinformation with respect thereto that the Indemnifying Party may reasonablyrequest. The failure to so notify the Indemnifying Party shall not relieve theIndemnifying Party of its obligations hereunder, except to the extent suchfailure shall have adversely prejudiced the Indemnifying Party.

 

(d)                       TheIndemnifying Party shall be entitled to participate in the defense of any Claimasserted by any third party (“**Third Party Claim**”) and, subject to thelimitations set forth in this Section, shall be entitled to control and appointlead 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.

 

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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:

 

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)**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 

 

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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.*After the Closing,Article 6 will provide the exclusive remedy for Holders for anymisrepresentation, 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 the Closing 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. No Holder may assign its rights or obligations hereunder without theprior written consent of the Company. This Agreement shall be binding upon the Company and the Holders andtheir respective successors and assigns.

 

*Section 7.06**.  Governing Law.*This Agreementshall be governed and construed in accordance with the laws of the State of NewYork, without regard to the choice of law rules of such state.

 

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*Section 7.07**.  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 theforegoing, each party agrees that service of process on such party as providedin this Section shall be deemed effective service of process on suchparty.

 

*Section 7.08**.  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 7.09**.  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 hereofsigned by the other parties hereto.  Noprovision of this Agreement is intended to confer upon any Person other thanthe parties hereto any rights or remedies hereunder

 

*Section 7.10**.  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.

 

*Section 7.11**.  Entire Agreement. *This Agreement, the Indenture and the New Notesconstitute the entire agreement and understanding among the parties hereto andsupersedes any and all prior agreements and understandings, written or oral,relating to the subject matter hereof.

 

*Section 7.12**.  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 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 |
|        |                                             |  |  |  |  |  |  |

 

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|   | **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:                                                |   |
|        |                                                       |  |  |  |  |

 

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**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 |   |

 

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