Document:

Exhibit 10.13

 

EXCHANGE AGREEMENT

dated as of

July 23, 2004

among

DECRANE AIRCRAFT HOLDINGS, INC.,

THE GUARANTORS SET FORTH ON THE SIGNATURE PAGES 

HERETO

and

THE HOLDERS SET FORTH ON THE SIGNATURE PAGES HERETO

 

 

TABLE OF CONTENTS

 

	
  Article 1

  	
   

  
	
  ISSUANCE AND EXCHANGE

  	
   

  
	
   

  	
   

  
	
  Section 1.01.  Issuance, Exchange And Delivery

  	
   

  
	
  Section 1.02.  Closing

  	
   

  
	
  Article 2

  	
   

  
	
  REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE GUARANTORS

  	
   

  
	
   

  	
   

  
	
  Section 2.01.  Incorporation Of
  Representations And Warranties In 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

  	
   

  
	
  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

  	
   

  

 

i

 

	
  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

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Exhibit A 

  	
  -

  	
  Form of
  Indenture

  	
   

  
	
  Exhibit B 

  	
  -

  	
  Form of
  Registration Rights Agreement

  	
   

  

 

ii

 

EXCHANGE AGREEMENT

 

AGREEMENT
dated as of July 23, 2004, among DeCrane Aircraft Holdings, Inc., a Delaware
corporation (the “Company”), the
affiliates of the Company set forth on the signature pages hereto as Guarantors
(the “Guarantors”), and certain holders of
the Company’s 12% Senior Subordinated Notes due 2008 (the “Old Notes”) set forth on the signature
pages hereto (together with their successors and assigns, the “Holders”).

 

W 
I  T  N 
E  S  S 
E  T  H :

 

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

 

WHEREAS, the
Holders and the Company desire that the Holders exchange the 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 provisions
of an Indenture, substantially in the form attached hereto as Exhibit A, dated
as of the Closing Date (as defined herein) (the “Indenture”) among the Company, the Guarantors named therein
and U.S. Bank National Association, as Trustee 
(the “Trustee”);

 

WHEREAS, in connection with the exchange of the Old Notes for the New
Notes, the Company will enter into an amendment (the “Credit
Agreement Amendment”) to the Third Amended and Restated Credit
Agreement dated May 11, 2000 among the Company, the lenders party thereto and
Credit Suisse First Boston, as administrative agent and syndication agent for
the lenders (as amended, the “Credit Agreement”);

 

WHEREAS, in connection with the exchange of the Old Notes for the New
Notes, the Company will enter into an amendment (the “Second Lien
Credit Agreement Amendment”) to the Second Lien Credit Agreement
dated December 22, 2003 among the Company, the lenders party thereto and Credit
Suisse First Boston, acting through its Cayman Islands Branch, as
administrative agent and syndication agent for the lenders (as amended, the “Second Lien  Credit Agreement”);

 

WHEREAS, concurrently with the exchange of the Old Notes for the New
Notes, the Company will amend the terms of its 16% Senior Redeemable
Exchangeable Preferred Stock due 2009 (the “Senior
Preferred Stock Amendment”) and DeCrane Holdings Co. will amend the
terms of substantially all of its 14% Senior Redeemable Exchangeable Preferred
Stock due 2009, whether through an amendment of such securities or an exchange
therefor (the “Junior Preferred Stock Amendment”);
and

 

WHEREAS, the Holders, the Company and the Guarantors will enter into a
Registration Rights Agreement relating to the New Notes, substantially in the
form attached hereto as Exhibit B, dated as of the Closing Date (the “Registration Rights Agreement”).

 

1

 

NOW THEREFORE,
the parties hereto agree as follows:

 

 

ARTICLE 1

ISSUANCE AND
EXCHANGE

 

Section 1.01.  Issuance,
Exchange And Delivery. Upon the terms and subject to
the terms and conditions of this Agreement, the Company agrees to issue to each
Holder, and each Holder agrees, severally but not jointly, to accept from the
Company at the Closing, the New Notes in exchange for the surrender of the Old
Notes, in each case in the principal amounts 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 of Davis Polk & Wardwell, 450
Lexington Avenue, New York, New York, as soon as possible, but in no event
later than five (5) Business Days after satisfaction of the conditions set
forth in Article 5, or at such other time or place as Company and the Holders
may agree, such date is hereinafter referred to as the “Closing Date”.  At the Closing (a) each Holder shall
surrender to the Company the principal amount of the Old Notes set forth
opposite such Holder’s name on Schedule 1.02 hereto; and (b) the Company shall
deliver to each Holder New Notes with an initial accreted value equal to the
amount  set forth opposite such Holder’s
name on Schedule 1.02 hereto, plus an amount in cash equal to the accrued and
unpaid interest on the Old Notes being exchanged to the Closing Date.

 

 

ARTICLE 2

REPRESENTATIONS
AND WARRANTIES OF THE COMPANY AND THE GUARANTORS

 

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

 

Section 2.01.  No Default under the Credit Agreement.  As of the date
hereof, (i) no Potential Event of Default or Event of Default (each as defined
in the Credit Agreement) under the Credit Agreement has occurred and is
continuing, and (ii) the Company is able to satisfy the conditions to borrowing
thereunder to permit the Company to borrow at least $1 of additional debt
thereunder pursuant to the terms thereto on the date hereof.

 

Section 2.02.  Authorizations.  The
execution, delivery and performance by the Company and each of the Guarantors
of this Agreement have been duly authorized by all necessary corporate action
on the part of the Company and each of the Guarantors.  The New Notes have been duly authorized and,
when executed and authenticated in accordance with the provisions of the
Indenture and issued to the holders in exchange for the Old Notes in accordance
with the  terms of this

 

2

 

Agreement,
will be valid and binding obligations of the Company, enforceable in accordance
with their terms, subject to applicable bankruptcy, insolvency, fraudulent
transfer and similar laws affecting creditors’ rights generally and equitable
principles of general applicability, and will be entitled to the benefits of
the Indenture; each of the Guarantors has duly authorized its guarantee of the
New Notes and, when the New Notes have been executed and authenticated in
accordance with the provisions of the Indenture and issued to the holders in
exchange for the Old Notes in accordance with the terms of this Agreement and
the Indenture has been executed and delivered by each Guarantor, the guarantee
of the New Notes will be a valid and binding obligation of the each Guarantor,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent transfer and similar laws affecting creditors’ rights
generally and equitable principles of general applicability. 
Each of the Indenture and the Registration Rights Agreement has
been duly authorized by all necessary corporate action on the part of the
Company and each of the Guarantors, as applicable.  This Agreement is and, when executed and
delivered on the Closing Date, each of the Indenture and the Registration
Rights Agreement will be, a valid and binding agreement of the Company and each
of the Guarantors, as applicable, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent transfer and similar
laws affecting creditors’ rights generally and equitable principles of general
applicability and except as rights to indemnification and contribution under
the Registration Rights Agreement may be limited under applicable law.

 

Section 2.03.  Governmental Authorization.  Assuming the
accuracy of the representations and warranties of the Holders and their
compliance with the covenants herein, the execution, delivery and performance
by the Company and each of the Guarantors of this Agreement, the Indenture, the
Registration Rights Agreement and the New Notes require no material order,
license, consent, authorization, or approval of, or exemption by, or action by
or in respect of, or notice to, or filing or registration with, any
governmental body, agency or official, except as may be required by Federal and
state securities laws with respect to the Company’s obligations under the
Registration Rights Agreement and except as may be required by state securities
laws.

 

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

 

Section 2.05.  No Registration. 
Assuming the accuracy of the representations
and warranties of the Holders and their compliance with the covenants herein,
it is not necessary in connection with the issuance of the New Notes to the
Holders in the manner contemplated by this Agreement to register 

 

3

 

the  New Notes under the Securities Act of 1933,
as amended (the “Securities Act”) or to qualify the
Indenture under the Trust Indenture Act of 1939, as amended.

 

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

 

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

 

ARTICLE 3

REPRESENTATIONS
AND WARRANTIES OF THE 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 Date
will have valid title to, or a valid “security entitlement” within the meaning
of 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 security interests,
claims, liens, equities or other encumbrances and the legal right and power,
and all authorization and approval required by law, to enter into this
Agreement and to transfer and deliver the Old Notes to be exchanged by such Holder
or a security entitlement in respect of such Old Notes.

 

Section 3.02.  Authorization of Exchange Agreement.  The execution,
delivery and performance of this Agreement are within such Holder’s powers and
have been duly authorized by all requisite corporate action on the part of such
Holder.  This Agreement constitutes a
valid and binding agreement of such Holder enforceable in accordance with its
terms.  This Agreement has been duly
executed and delivered by such Holder.

 

Section 3.03.  Non-Contravention. 
The execution and delivery by such Holder of, and the performance by
such Holder of its obligations under, this Agreement will not contravene any
provision of applicable law or the certificate 

 

4

 

of incorporation,
by-laws or other organizational document of such Holder or any material
agreement or other instrument binding upon such Holder, or any judgment, order
or decree of any governmental body, agency or court having jurisdiction over
such Holder.

 

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

 

Section 3.05.  Restricted Securities.  Such Holder
acknowledges that the New Notes have not been registered under the Securities
Act and may not be offered, sold, pledged or otherwise transferred prior to the
expiration of the applicable holding period of the New Notes under Rule 144 (k)
of the Securities Act, except (a) in accordance with Rule 144A or Regulation S
under the Securities Act or pursuant to another exemption from the registration
requirements of the Securities Act or (b) pursuant to an effective registration
statement under the Securities Act.  The
New Notes will bear a legend and will be subject to transfer restrictions as
set forth in the Indenture.

 

Section 3.06.  Inspections; No Other Representations.  Each Holder is an
informed and sophisticated purchaser, and has engaged expert advisors
experienced in the evaluation of the transactions contemplated hereunder.  Each Holder has undertaken such investigation
and has been provided with and has evaluated such documents and information as
it has deemed necessary to enable it to make an informed and intelligent
decision with respect to the execution, delivery and performance of this
Agreement.  Each Holder acknowledges that
the Company has given such Holder complete and open access (to the extent
requested by such Holder) to the key employees, and documents of the Company
and its subsidiaries.  Each Holder agrees
to accept the New Notes on the Closing Date based upon its own inspection,
examination and determination with respect thereto as to all matters, and
without reliance upon any express or implied representations or warranties 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 Holder
acknowledges that the Company makes no representation or warranty with respect
to (i) any projections, estimates or budgets delivered to or made available to
the Holder of future revenues, future 

 

5

 

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

 

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

 

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

 

ARTICLE 4
COVENANTS

 

Section 4.01.  Covenants of the Company.  In further
consideration of the agreements of the Holders contained in this Agreement, the
Company covenants with each of the Holders as follows:

 

(a)        the Company will use its commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary or desirable under applicable laws and
regulations to consummate the transactions contemplated by this Agreement;

 

(b)        the Company will use its commercially
reasonable efforts to obtain any consents, approvals or waivers that are
required to be obtained from third parties to any material contracts, in
connection with the consummation of the transactions contemplated by this
Agreement; and

 

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

 

6

 

Section 4.02.  Covenants of the Holders.  In further
consideration of the agreements of the Company contained in this Agreement,
each Holder covenants with the Company as follows:

 

(a)        such Holder and its Affiliates (as
defined in Rule 405 under the Securities Act) will hold, and will use their
commercially reasonable efforts to cause their respective officers, directors,
employees, accountants, counsel, consultants, advisors and agents to hold, in
confidence, (i) the existence of this Agreement or any facts relating to the
transaction contemplated by this Agreement and (ii) all confidential documents
and information concerning the Company or any Guarantor furnished to such
Holder or its Affiliates in connection with the transactions contemplated by
this Agreement, except to the extent that such information can be shown to have
been (A) previously known on a non-confidential basis by such Holder, (B) in
the public domain through no fault of such Holder or (C) later lawfully
acquired by such Holder from sources other than the Company or any Guarantor;
provided that such Holder may disclose such information to its officers,
directors, employees, accountants, counsel, consultants, advisors and agents in
connection with the transactions contemplated by this Agreement  so long as such persons are informed by such
Holder of the confidential nature of such information and are directed by such
Holder to treat such information confidentially.  Each Holder shall be responsible for any
failure to treat such information confidentially by such persons.  The obligation of each Holder and its
Affiliates to hold any such information in confidence shall be satisfied if
they exercise the same care with respect to such information as they would take
to preserve the confidentiality of their own similar information and shall in
any event expire six months from the Closing Date.  If this Agreement is terminated, each Holder
and its Affiliates will, and will use their commercially reasonable efforts to
cause their respective officers, directors, employees, accountants, counsel,
consultants, advisors and agents to, destroy or deliver to the Company, upon
request, all documents and other materials, and all copies thereof, obtained by
such Holder or its Affiliates or on their behalf from the Company or any
Guarantor in connection with this Agreement that are subject to such
confidentiality provisions;

 

(b)        unless this Agreement is terminated in
accordance with Section 7.04 hereof, such Holder will not pledge, sell,
contract to sell, grant any option, right or warrant to purchase, lend or
otherwise transfer or dispose of any of the Old Notes or any right or interest
(voting or otherwise and including any participation interest) therein, except
with the consent of the Company or pursuant to Section 1.02 hereof; and

 

(c)        such Holder will use its commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary or desirable under applicable laws and
regulations to consummate the transactions contemplated by this Agreement.

 

7

 

ARTICLE 5

CONDITIONS TO
THE CLOSING

 

Section 5.01.  Conditions to Obligation of Each Party.  The obligations of
each party hereto to consummate the issuance of the New Notes in exchange for
the Old Notes 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 following
conditions:

 

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

 

(b)        the Senior Preferred Stock Amendment and
the Junior Preferred Stock Amendment shall have been consummated or shall be
consummated concurrently with the Closing;

 

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

 

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

 

Section 5.02. 
Conditions to the Obligations of the
Holders.  The
obligation of the Holders to exchange the Old Notes for the New Notes is
subject to the satisfaction (or, to the extent permitted by law, waiver by each
Holder), at or prior to the Closing Date, of the following additional
conditions:

 

(a)        no more than $65,000,000 in principal
amount of Old Notes shall be exchanged for New Notes or other securities of the
Company;

 

(b)        the representations and warranties of
the Company contained in this Agreement shall be true and correct in all
material respects, the Company shall have performed and complied with all
covenants and agreements required by this Agreement to be performed by it at or
prior 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 the
foregoing effect;

 

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

 

(i)    the New Notes have been duly authorized by
the Company and, when executed and authenticated in accordance with the
provisions of the Indenture and issued to the Holders in exchange for the Old
Notes in 

 

8

 

accordance with the terms of this Agreement,
will be entitled to the benefits of the Indenture and will be valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, 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
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and (z) to the extent that 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 any comparable provision of state law to the
questions addressed above or on the conclusions expressed with respect thereto;

 

(ii)   the Indenture has been duly authorized,
executed and delivered by each of the Company and each of the Guarantors
organized under the laws of Delaware (the “Delaware Guarantors”)
and is a valid and binding agreement of the Company, and (assuming due
authorization, execution and delivery by each other Guarantor (the “Non-Delaware Guarantors”)) the Guarantors, enforceable in
accordance with its terms; 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 (regardless of whether such enforceability is considered
in a proceeding in equity or at law) and (z) to the extent that 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 any comparable provision of state
law to the questions addressed above or on the conclusions expressed with
respect thereto;

 

(iii)  this
Agreement has been duly authorized, executed and delivered by each of the
Company and the Delaware Guarantors;

 

(iv)  the Registration Rights Agreement has been duly
authorized, executed and delivered by each of the Company and the Delaware
Guarantors and is a valid and binding agreement of the Company and
(assuming due authorization, execution and delivery by the Non-Delaware Guarantors) the
Guarantors, enforceable against each of the Company and the Guarantors in
accordance with its terms, 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 (regardless of whether such enforceability is considered
in a proceeding in equity or at law) and (z) rights to indemnity and
contribution thereunder may be limited by applicable law;

 

9

 

(v)   each of the Delaware Guarantors has duly
authorized its Guarantee of the New Notes; assuming each of the Non-Delaware
Guarantors has duly authorized its Guarantee of the New Notes, when the New
Notes and the Guarantee evidenced thereon have been executed and authenticated
in accordance with the terms of the Indenture and issued to the Holders in
exchange for the Old Notes in accordance with the terms thereof, the Guarantee
of each Guarantor will be the legally valid and binding obligation of such
Guarantor, enforceable against such Guarantor in accordance with its terms,
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 (regardless
of whether such enforceability is considered in a proceeding in equity or at
law) and (z) to the extent that 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 any comparable provision of state law to the
questions addressed above or on the conclusions expressed with respect thereto;
and

 

(vi)  the Exchange will not contravene the Credit
Agreement, the Second Lien Credit Agreement, or the indenture for the Old
Notes.

 

(d)        the Company and the Guarantors shall
have executed and delivered the Indenture and the Registration Rights
Agreement;

 

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

 

(f)         all fees and expenses payable to the
Holders on or prior to the Closing Date shall have been paid in full; and

 

(g)        each Holder shall have received all
documents reasonably requested by it relating to the existence of the Company
and the corporate authority for entering into this 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
Company.  The
obligations of the Company to issue the New Notes to the Holders pursuant to
this Agreement 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 following
conditions:

 

(a)        the representations and warranties of
the Holders contained in this Agreement shall be true and correct in all
material respects and the Holders shall 

 

10

 

have performed
and complied with all covenants and agreements required by this Agreement to be
performed by them at or prior to the Closing Date; and

 

(b)        the Holders shall have executed and
delivered the Registration Rights Agreement; and

 

(c)        the Company shall have received all
documents reasonably requested by it relating to the existence of each Holder
and the authority for entering into this Agreement and the consummation of the
transactions contemplated hereby, all in form and substance reasonably
satisfactory to it.

 

ARTICLE 6
SURVIVAL; INDEMNIFICATION

 

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

 

Section 6.02.  Indemnification. 
(a) The Company hereby indemnifies each of the
Holders, each person, if any, who controls any Holder within the meaning of
either Section 15 of the Securities Act or Section 20 of the Securities
Exchange Act of 1934, and each affiliate of any Holder within the meaning of
Rule 405 under the Securities Act against and agrees to hold each 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’ fees and
expenses, in each case, in connection with any action, suit or proceeding
involving a third party (“Damages”)
incurred or suffered by any of them, in each case arising out of any
misrepresentation or breach of warranty, covenant or agreement made or to be
performed by the Company pursuant to this Agreement.

 

(b)        The Company shall not be responsible for any
Damages to the extent a court of competent jurisdiction shall have finally
determined that such Damages resulted primarily from (i) such indemnified
person’s bad faith or gross negligence; (ii) any claims made by one or more of
the indemnified persons against another indemnified person or indemnified
persons in connection with the Transactions or (iii) any breach of the
representations and warranties of any of the Holders set forth in this
Agreement (clauses (i) through (iii), collectively, “Excluded Claims”).  If for any reason (other than that such
liability is an Excluded Claim) the foregoing indemnity is unavailable or
insufficient to hold an indemnified person harmless, then the Company shall
contribute to amounts paid or payable by such indemnified person in respect of
such Damages in such proportion as appropriately reflects the relative benefits
received by, and fault of, 

 

11

 

the Company
and such indemnified person in connection with the matters as to which such
Damages relate and other equitable considerations.

 

(c)        The party seeking indemnification under
this Section (the “Indemnified Party”)
agrees to give prompt notice to the party against whom indemnity is sought (the
“Indemnifying Party”) of the assertion
of any claim, or the commencement of any suit, action or proceeding (“Claim”) in respect of which indemnity may be sought under
such Section and will provide the Indemnifying Party such information with
respect thereto that the Indemnifying Party may reasonably request. The failure
to so notify the Indemnifying Party shall not relieve the Indemnifying Party of
its obligations hereunder, except to the extent such failure shall have
adversely prejudiced the Indemnifying Party.

 

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

 

(e)        If the Indemnifying Party shall assume
the control of the defense of any Third Party Claim in accordance with the
provisions of this Section the Indemnifying Party shall obtain the prior
written consent of the Indemnified Party (which shall not be unreasonably
withheld) before entering into any settlement of such Third Party Claim and the
Indemnified Party shall be entitled to participate in the defense of such Third
Party Claim and to employ separate counsel of its choice for such purpose.  The fees and expenses of such separate
counsel shall be paid by the Indemnified Party.

 

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

 

ARTICLE 7

MISCELLANEOUS

 

Section 7.01.  Notices.
 All notices,
requests and other communications to any party hereunder shall be in writing
(including facsimile transmission) and shall be given,

 

if to the Holders, to:

 

Wayzata Investment Partners, LLC

701 East Lake Street

Suite 300

Wayzata, MN  55391

12

 

Attention:  Joe Deignan

Facsimile:  (952) 345-8900

 

and

 

Putnam Investment Management, LLC

Putnam Fiduciary Trust Company

One Post Office Square

Boston , MA  02109

Attention:  James P. Miller

Facsimile:  (617) 760-8639

 

and

 

Deephaven Distressed Opportunities Trading Ltd

130 Cheshire Lane

Suite 102

Minnetonka, MN 55305

Attention:  Peter H. Glerum

Facsimile:  (952) 249-5316

 

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

 

Ropes & Gray LLP

One International Place

Boston, MA  02110

Attention:  Don De Amicis, Esq.

Facsimile:  (617) 951-7050

 

if to the Company, to:

 

DeCrane Aircraft Holdings, Inc.

2361 Rosecrans Avenue, Suite 180

El Segundo, California  90245

Attention:  Chief Financial Officer

Facsimile:  (310) 643-5106

 

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

 

Davis Polk & Wardwell

450 Lexington Avenue

New York, New York 10017

Attention:  Michael P. Kaplan, Esq.

Facsimile:  (212) 450-3800

 

All such
notices, requests and other communications shall be deemed received on the date
of receipt by the recipient thereof if received prior to 5 p.m. in the place of
receipt and such day is a Business Day in the place of receipt.  Otherwise, any 

 

 

13

 

such notice,
request or communication shall be deemed not to have been received until the
next succeeding business day in the place of receipt.

 

Section 7.02.  No
Waivers; Amendments. (a)  No failure or delay on the part
of any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.

 

(b)   Any provision of this
Agreement may be amended or waived if, but only if, such amendment 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 any
misrepresentation, breach of warranty, covenant or other agreement or other
claim arising out of this Agreement or the transactions contemplated
hereby.  The Company shall retain all
remedies available at law for any misrepresentation, breach of warranty,
covenant or other agreement or other claim arising out of this Agreement or the
transactions contemplated hereby.

 

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

 

(i)    at any time by mutual written agreement of
the Company and the Holders;

 

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

 

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

 

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

 

(b)        If this Agreement is terminated as
permitted by Section 7.04, such termination shall be without liability of any
party (or any stockholder, director, officer, employee, agent, consultant or
representative of such party) to the other parties to this Agreement; provided that if such termination shall
result from the (i) willful failure of any party to fulfill a condition to the
performance of the obligations of the other parties, (ii) failure to perform a
covenant of this Agreement or (iii) breach by any party hereto of any
representation or warranty or 

 

14

 

agreement
contained herein, such party shall be fully liable for any and all damages
incurred or suffered by the other party as a result of such failure or breach.

 

Section 7.05.  Successors And Assigns. The
Company may not assign any of its rights and obligations hereunder without the
prior written consent of the Holders.  No
Holder may assign its rights or obligations hereunder without the prior written
consent of the Company.  This Agreement
shall be binding upon the Company and the Holders and their respective
successors and assigns.

 

Section 7.06.  Governing Law. This Agreement
shall be governed 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 7.07.  Jurisdiction. Except as
otherwise expressly provided in this Agreement, the parties hereto agree that
any suit, action or proceeding seeking to enforce any provision of, or based on
any matter arising out of or in connection with, this Agreement or the
transactions contemplated hereby shall be brought in the United States District
Court for the Southern District of New York or any New York State court sitting
in New York City, so long as one of such courts shall have subject matter
jurisdiction over such suit, action or proceeding, and that any cause of action
arising out of this Agreement shall be deemed to have arisen from a transaction
of business in the State of New York, and each of the parties hereby
irrevocably consents to the jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection that
it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an inconvenient
forum.  Process in any such suit, action
or proceeding may be served on any party anywhere in the world, whether within
or without the jurisdiction of any such court. 
Without limiting the foregoing, each party agrees that service of
process on such party as provided in this Section shall be deemed effective
service of process on such party.

 

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

 

Section 7.09.  Counterparts; Effectiveness.  This Agreement may
be executed in any number of counterparts each of which shall be an original
with the same effect as if the signatures thereto and hereto were upon the same
instrument.  This Agreement shall become
effective when each party hereto shall have received a counterpart hereof
signed by the other parties hereto.  No 

 

15

 

provision of this Agreement is intended to confer upon any Person other
than the parties hereto any rights or remedies hereunder

 

Section 7.10.  Expenses.  Except as otherwise
provided in Article 6 herein, all costs and expenses incurred in connection
with this Agreement shall be paid by the party incurring such cost or expense; provided  however, that
the Company shall pay the fees and expenses of Ropes & Gray LLP, special
counsel to the Holders incurred in connection with the negotiation, execution
and delivery of this Agreement and the transactions contemplated hereby; provided  further that
such fees and expenses shall not exceed $75,000.

 

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

 

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

 

[Remainder of page intentionally left blank;
next page is signature page]

 

16

 

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

 

	
   

  	
  DECRANE AIRCRAFT HOLDINGS INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ R. JACK DECRANE

  	
   

  
	
   

  	
   

  	
  Name:

  	
  R.Jack DeCrane

  
	
   

  	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  AUDIO INTERNATIONAL, INC.

  
	
   

  	
   

  	
  CARL F. BOOTH & CO., LLC

  
	
   

  	
   

  	
  CUSTOM WOODWORK & PLASTICS, LLC

  
	
   

  	
   

  	
  DAH-IP HOLDINGS, INC.

  
	
   

  	
   

  	
  DAH-IP INFINITY, INC.

  
	
   

  	
   

  	
  DECRANE AIRCRAFT SEATING COMPANY, INC.

  
	
   

  	
   

  	
  DECRANE CABIN INTERIORS-CANADA, INC.

  
	
   

  	
   

  	
  DECRANE CABIN INTERIORS, LLC

  
	
   

  	
   

  	
  HOLLINGSEAD INTERNATIONAL, INC.

  
	
   

  	
   

  	
  PATS AIRCRAFT, LLC

  
	
   

  	
   

  	
  PCI NEWCO, INC.

  
	
   

  	
   

  	
  PPI HOLDINGS, INC.

  
	
   

  	
   

  	
  PRECISION PATTERN, INC.

  
	
   

  	
   

  	
  THE INFINITY PARTNERS, LTD.

  
	
   

  	
   

  	
  as Guarantors

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ R. JACK DECRANE

  	
   

  
	
   

  	
   

  	
  Name:

  	
  R. Jack DeCrane

  
	
   

  	
   

  	
  Title:

  	
  Chief Executive Officer

  
							

 

 

	
   

  	
  WAYZATA INVESTMENT PARTNERS, LLC

  
	
   

  	
  as Manager, on behalf of various funds

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ JOSEPH M.
  DEIGNAN

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Joseph M. Deignan

  
	
   

  	
   

  	
  Title:

  	
  Authorized Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
  PUTNAM INVESTMENT MANAGEMENT, LLC on behalf
  of:

  
	
   

  	
  PUTNAM
  HIGH YIELD TRUST

  
	
   

  	
  PUTNAM
  HIGH YIELD ADVANTAGE FUND

  
	
   

  	
  PUTNAM
  VARIABLE TRUST- PUTNAM VT HIGH YIELD FUND

  
	
   

  	
  PUTNAM
  MASTER INCOME TRUST

  
	
   

  	
  PUTNAM
  PREMIER INCOME TRUST

  
	
   

  	
  PUTNAM
  MASTER INTERMEDIATE INCOME TRUST

  
	
   

  	
  PUTNAM
  DIVERSIFIED INCOME TRUST

  
	
   

  	
  PUTNAM
  VARIABLE TRUST - PUTNAM VT DIVERSIFIED INCOME FUND

  
	
   

  	
  PUTNAM ASSET ALLOCATION:
  CONSERVATIVE PORTFOLIO

  
	
   

  	
  PUTNAM MANAGED HIGH YIELD TRUST

  
	
   

  	
  PUTNAM HIGH INCOME BOND FUND

  
	
   

  	
  PUTNAM HIGH INCOME OPPORTUNITIES
  TRUST

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ MICHAEL E. DEFAO

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Michael E. DeFao

  
	
   

  	
   

  	
  Title: 

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  PUTNAM
  FIDUCIARY TRUST COMPANY on behalf of:

  PUTNAM HIGH YIELD FIXED INCOME FUND, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ MICHAEL E. DEFAO

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Michael E. DeFao

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  DEEPHAVEN
  DISTRESSED OPPORTUNITIES TRADING

  LTD.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Peter H. Glerum

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Peter H. Glerum

  
	
   

  	
   

  	
  Title:

  	
  Assistant Portfolio Manager

  
										

 

 

SCHEDULE 1.02

 

	
  Holder

  	
   

  	
  Taxpayer

  Identification

  Number

  	
   

  	
  Principal

  Amount of Old

  Notes

  	
   

  	
  Initial Accreted

  Value of

  New Notes

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Wayzata Investment Partners, LLC, as Manager for:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sapphire Special Opportunities Fund, LLC

  	
   

  	
  23-3895790

  	
   

  	
  $

  	
  7,789,000

  	
   

  	
  $

  	
  7,789,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Wayland Recovery Fund, LLC

  	
   

  	
  22-3875940

  	
   

  	
  $

  	
  8,708,000

  	
   

  	
  $

  	
  8,708,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Wayland Investment Fund II, LLC

  	
   

  	
  41-1982966

  	
   

  	
  $

  	
  8,707,000

  	
   

  	
  $

  	
  8,707,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Wayland Distressed Opportunities Fund I-A, LLC

  	
   

  	
  11-3693643

  	
   

  	
  $

  	
  6,466,000

  	
   

  	
  $

  	
  6,466,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Putnam High Yield Trust

  	
   

  	
  04-6415410

  	
   

  	
  $

  	
  11,600,000

  	
   

  	
  $

  	
  11,600,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Putnam High Yield Advantage Fund

  	
   

  	
  06-6290063

  	
   

  	
  $

  	
  5,000,000

  	
   

  	
  $

  	
  5,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Putnam Variable Trust-Putnam VT High Yield Fund

  	
   

  	
  04-2986135

  	
   

  	
  $

  	
  2,155,000

  	
   

  	
  $

  	
  2,155,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Putnam Master Income Trust

  	
   

  	
  04-2993219

  	
   

  	
  $

  	
  500,000

  	
   

  	
  $

  	
  500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Putnam Premier Income Trust

  	
   

  	
  04-2995046

  	
   

  	
  $

  	
  1,310,000

  	
   

  	
  $

  	
  1,310,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Putnam Master Intermediate Income Trust

  	
   

  	
  04-6584465

  	
   

  	
  $

  	
  1,000,000

  	
   

  	
  $

  	
  1,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Putnam Diversified Income Trust

  	
   

  	
  04-3017475

  	
   

  	
  $

  	
  4,290,000

  	
   

  	
  $

  	
  4,290,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Putnam Variable Trust - Putnam VT Diversified Income Fund

  	
   

  	
  04-6737822

  	
   

  	
  $

  	
  820,000

  	
   

  	
  $

  	
  820,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Putnam Asset Allocation: 
  Conservative Portfolio

  	
   

  	
  04-6746611

  	
   

  	
  $

  	
  150,000

  	
   

  	
  $

  	
  150,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Putnam Managed High Yield Trust

  	
   

  	
  04-6733967

  	
   

  	
  $

  	
  240,000

  	
   

  	
  $

  	
  240,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Putnam High Income Bond Fund

  	
   

  	
  04-6562068

  	
   

  	
  $

  	
  60,000

  	
   

  	
  $

  	
  60,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Putnam High Income Opportunities Trust

  	
   

  	
  04-6777185

  	
   

  	
  $

  	
  60,000

  	
   

  	
  $

  	
  60,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Putnam High Yield Fixed Income Fund, LLC

  	
   

  	
  51-6190220

  	
   

  	
  $

  	
  100,000

  	
   

  	
  $

  	
  100,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Deephaven Distressed Opportunities Trading Ltd

  	
   

  	
  41-1963795

  	
   

  	
  $

  	
  5,530,000

  	
   

  	
  $

  	
  5,530,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
   

  	
   

  	
  $

  	
  64,485,000

  	
   

  	
  $

  	
  64,485,000Exhibit 10.13.1

 

EXCHANGE AGREEMENT

dated as of

September 9, 2004

among

DECRANE AIRCRAFT HOLDINGS, INC.,

THE GUARANTORS SET FORTH ON THE SIGNATURE PAGES HERETO

and

THE HOLDERS SET FORTH ON THE SIGNATURE PAGES HERETO

 

 

TABLE OF CONTENTS

 

	
  ARTICLE 1

  	
   

  
	
  ISSUANCE AND EXCHANGE

  	
   

  
	
   

  	
   

  
	
  Section 1.01.  Issuance, Exchange And Delivery

  	
   

  
	
  Section 1.02.  Closing

  	
   

  
	
   

  	
   

  
	
  ARTICLE 2

  	
   

  
	
  REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE GUARANTORS

  	
   

  
	
   

  	
   

  
	
  Section 2.01.  No Default under the Credit Agreement

  	
   

  
	
  Section 2.02.  Authorizations

  	
   

  
	
  Section 2.03.  Governmental Authorization

  	
   

  
	
  Section 2.04.  Non-Contravention

  	
   

  
	
  Section 2.05.  No Registration

  	
   

  
	
  Section 2.06.  Litigation

  	
   

  
	
  Section 2.07.  Finder’s Fees

  	
   

  
	
   

  	
   

  
	
  ARTICLE 3

  	
   

  
	
  REPRESENTATIONS AND WARRANTIES OF THE
  HOLDERS

  	
   

  
	
   

  	
   

  
	
  Section 3.01.  Ownership of Old Notes

  	
   

  
	
  Section 3.02.  Authorization of Exchange Agreement

  	
   

  
	
  Section 3.03.  Non-Contravention

  	
   

  
	
  Section 3.04.  Exchange for Investment

  	
   

  
	
  Section 3.05.  Restricted Securities

  	
   

  
	
  Section 3.06.  Inspections; No Other Representations

  	
   

  
	
  Section 3.07.  Finder’s Fees

  	
   

  
	
  Section 3.08.  Taxpayer Identification Numbers

  	
   

  
	
   

  	
   

  
	
  ARTICLE 4

  	
   

  
	
  COVENANTS

  	
   

  
	
   

  	
   

  
	
  Section 4.01.  Covenants of the Company

  	
   

  
	
  Section 4.02.  Covenants of the Holders

  	
   

  
	
   

  	
   

  
	
  ARTICLE 5

  	
   

  
	
  CONDITIONS TO THE CLOSING

  	
   

  
	
   

  	
   

  
	
  Section 5.01.  Conditions to Obligation of Each Party

  	
   

  
	
  Section 5.02.  Conditions to the Obligations of the
  Holders

  	
   

  
	
  Section 5.03.  Conditions to the Obligations of the
  Company

  	
   

  
	
   

  	
   

  
	
  ARTICLE 6

  	
   

  
	
  SURVIVAL; INDEMNIFICATION

  	
   

  
	
   

  	
   

  
	
  Section 6.01.  Survival

  	
   

  

 

 

	
  Section 6.02.  Indemnification

  	
   

  
	
   

  	
   

  
	
  ARTICLE 7

  	
   

  
	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  
	
  Section 7.01.  Notices

  	
   

  
	
  Section 7.02.  No Waivers; Amendments

  	
   

  
	
  Section 7.03.  Exclusivity

  	
   

  
	
  Section 7.04.  Termination

  	
   

  
	
  Section 7.05.  Successors And Assigns

  	
   

  
	
  Section 7.06.  Governing Law

  	
   

  
	
  Section 7.07.  Jurisdiction

  	
   

  
	
  Section 7.08.  WAIVER OF JURY TRIAL

  	
   

  
	
  Section 7.09.  Counterparts; Effectiveness

  	
   

  
	
  Section 7.10.  Expenses

  	
   

  
	
  Section 7.11.  Entire Agreement

  	
   

  
	
  Section 7.12.  Captions; Certain Definitions

  	
   

  
	
   

  	
   

  
	
  Schedule 1.02

  	
  -

  	
  Amount of Old Notes and New Notes; Taxpayer
  Identification Number

  	
   

  
				

 

ii

 

EXCHANGE AGREEMENT

 

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

 

W 
I  T  N 
E  S  S 
E  T  H :

 

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

 

WHEREAS, the Holders and the Company desire that the Holders exchange
the 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 provisions of an Indenture dated as of July 23,
2004 among the Company, the Guarantors named therein and U.S. Bank National
Association, as Trustee (the “Trustee”),
as supplemented by the First Supplemental 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 “Credit Agreement Amendment”) to the Third Amended and
Restated Credit Agreement dated May 11, 2000 among the Company, the lenders
party thereto and Credit Suisse First Boston, as administrative agent and
syndication agent for the lenders (as amended, the “Credit
Agreement”), which amendment will permit such exchange; and

 

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

 

NOW THEREFORE, the parties hereto agree as follows:

 

ARTICLE 1

ISSUANCE AND EXCHANGE

 

Section 1.01.  Issuance, Exchange And
Delivery. Upon the terms and subject to the terms and conditions of
this Agreement, the Company agrees to issue to each Holder, and each Holder
agrees, severally but not jointly, to accept from the Company at the Closing,
the New Notes in exchange for the surrender of the Old Notes, in each case in
the principal amounts 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 of Davis Polk & Wardwell, 450
Lexington Avenue, New York, New York, as soon as possible, but in no event
later than five (5) Business Days after satisfaction of the conditions set
forth in Article 5, or at such other time or place as Company and 

 

1

 

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

 

ARTICLE 2

REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE GUARANTORS

 

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

 

Section 2.01.  No Default under the Credit
Agreement.  As of the date
hereof, (i) no Potential Event of Default or Event of Default (each as defined
in the Credit Agreement) under the Credit Agreement has occurred and is
continuing, and (ii) the Company is able to satisfy the conditions to borrowing
thereunder to permit the Company to borrow at least $1 of additional debt
thereunder pursuant to the terms thereto on the date hereof.

 

Section 2.02.  Authorizations.  The execution, delivery and
performance by the Company and each of the Guarantors of this Agreement have
been duly authorized by all necessary corporate action on the part of the
Company and each of the Guarantors.  The
New Notes have been duly authorized and, when executed and authenticated in
accordance with the provisions of the Indenture and issued to the holders in
exchange for the Old Notes in accordance with the terms of this Agreement, will
be valid and binding obligations of the Company, enforceable in accordance with
their terms, subject to applicable bankruptcy, insolvency, fraudulent transfer
and similar laws affecting creditors’ rights generally and equitable principles
of general applicability, and will be entitled to the benefits of the
Indenture; each of the Guarantors has duly authorized its guarantee of the New
Notes and, when the New Notes have been executed and authenticated in
accordance with the provisions of the Indenture and issued to the holders in
exchange for the Old Notes in accordance with the terms of this Agreement, the
guarantee of the New Notes will be a valid and binding obligation of the each
Guarantor, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent transfer and similar laws affecting
creditors’ rights generally and equitable principles of general applicability. 
The Indenture has been duly authorized by all necessary corporate
action on the part of the Company and each of the Guarantors, as applicable.  Each of this Agreement and the Indenture is,
a valid and binding agreement of the Company and each of the Guarantors, as
applicable, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent transfer and similar laws affecting
creditors’ rights generally and equitable principles of general applicability.

 

Section 2.03.  Governmental
Authorization.  Assuming the
accuracy of the representations and warranties of the Holders and their
compliance with the covenants herein, the execution, delivery and performance
by the Company and each of the Guarantors of this Agreement, the Indenture and
the New Notes require no material order, license, consent, authorization, or
approval of, or exemption by, or action by or in respect of, or notice to, or
filing or registration with, any governmental body, agency or official, except
as may be required by Federal and state securities laws with respect to the
Company’s obligations under the 

 

2

 

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

 

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

 

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

 

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

 

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

 

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF
THE 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 Date will have valid title to, or a valid “security entitlement” within
the meaning of 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
security interests, claims, liens, equities or other encumbrances and the legal
right and power, and all authorization and approval required by law, to enter
into this Agreement and to transfer and deliver the Old Notes to be exchanged
by such Holder or a security entitlement in respect of such Old Notes.

 

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

 

3

 

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

 

Section 3.03.  Non-Contravention.  The execution and delivery by such Holder of,
and the performance by such Holder of its obligations under, this Agreement
will not contravene any provision of applicable law or the certificate of
incorporation, by-laws or other organizational document of such Holder or any
material agreement or other instrument binding upon such Holder, or any
judgment, order or decree of any governmental body, agency or court having
jurisdiction over such Holder.

 

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

 

Section 3.05.  Restricted Securities.  Such Holder acknowledges that the
New Notes have not been registered under the Securities Act and may not be
offered, sold, pledged or otherwise transferred prior to the expiration of the
applicable holding period of the New Notes under Rule 144 (k) of the Securities
Act, except (a) in accordance with Rule 144A or Regulation S under the
Securities Act or pursuant to another exemption from the registration
requirements of the Securities Act or (b) pursuant to an effective registration
statement under the Securities Act.  The
New Notes will bear a legend and will be subject to transfer restrictions as
set forth in the Indenture.

 

Section 3.06.  Inspections; No Other
Representations.  Each Holder
is an informed and sophisticated purchaser, and has engaged expert advisors
experienced in the evaluation of the transactions contemplated hereunder.  Each Holder has undertaken such investigation
and has been provided with and has evaluated such documents and information as
it has deemed necessary to enable it to make an informed and intelligent
decision with respect to the execution, delivery and performance of this
Agreement.  Each Holder acknowledges that
the Company has given such Holder complete and open access (to the extent
requested by such Holder) to the key employees, and documents of the Company
and its subsidiaries.  Each Holder agrees
to accept the New Notes on the Closing Date based upon its own inspection,
examination and determination with respect thereto as to all matters, and
without reliance upon any express or implied representations or warranties 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 Holder acknowledges that the
Company makes no representation or warranty with respect to (i) any
projections, estimates or budgets delivered to or made available to the 

 

4

 

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

 

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

 

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

 

ARTICLE 4

COVENANTS

 

Section 4.01.  Covenants of the Company.  In further consideration of the
agreements of the Holders contained in this Agreement, the Company covenants
with each of the Holders as follows:

 

(a)                        the
Company will use its commercially reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary or
desirable under applicable laws and regulations to consummate the transactions
contemplated by this Agreement;

 

(b)                       the Company
will use its commercially reasonable efforts to obtain any consents, approvals
or waivers that are required to be obtained from third parties to any material
contracts, in connection with the consummation of the transactions contemplated
by this Agreement;

 

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

 

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

 

5

 

Section 4.02.  Covenants of the Holders.  In further consideration of the
agreements of the Company contained in this Agreement, each Holder covenants
with the Company as follows:

 

(a)                        such
Holder and its Affiliates (as defined in Rule 405 under the Securities Act)
will hold, and will use their commercially reasonable efforts to cause their
respective officers, directors, employees, accountants, counsel, consultants,
advisors and agents to hold, in confidence, (i) the existence of this Agreement
or any facts relating to the transaction contemplated by this Agreement and
(ii) all confidential documents and information concerning the Company or any
Guarantor furnished to such Holder or its Affiliates in connection with the
transactions contemplated by this Agreement, except to the extent that such
information can be shown to have been (A) previously known on a
non-confidential basis by such Holder, (B) in the public domain through no
fault of such Holder or (C) later lawfully acquired by such Holder from sources
other than the Company or any Guarantor; provided that such Holder may disclose
such information to its officers, directors, employees, accountants, counsel,
consultants, advisors and agents in connection with the transactions
contemplated by this Agreement  so long
as such persons are informed by such Holder of the confidential nature of such
information and are directed by such Holder to treat such information
confidentially.  Each Holder shall be
responsible for any failure to treat such information confidentially by such
persons.  The obligation of each Holder
and its Affiliates to hold any such information in confidence shall be
satisfied if they exercise the same care with respect to such information as
they would take to preserve the confidentiality of their own similar information
and shall in any event expire six months from the Closing Date.  If this Agreement is terminated, each Holder
and its Affiliates will, and will use their commercially reasonable efforts to
cause their respective officers, directors, employees, accountants, counsel,
consultants, advisors and agents to, destroy or deliver to the Company, upon
request, all documents and other materials, and all copies thereof, obtained by
such Holder or its Affiliates or on their behalf from the Company or any
Guarantor in connection with this Agreement that are subject to such
confidentiality provisions;

 

(b)                       unless this
Agreement is terminated in accordance with Section 7.04 hereof, such
Holder will not pledge, sell, contract to sell, grant any option, right or
warrant to purchase, lend or otherwise transfer or dispose of any of the Old
Notes or any right or interest (voting or otherwise and including any
participation interest) therein, except with the consent of the Company or
pursuant to Section 1.02 hereof; and

 

(c)                        such
Holder will use its commercially reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary or
desirable under applicable laws and regulations to consummate the transactions
contemplated by this Agreement.

 

ARTICLE 5

CONDITIONS TO THE CLOSING

 

Section 5.01.  Conditions to Obligation of
Each Party.  The obligations
of each party hereto to consummate the issuance of the New Notes in exchange
for the Old Notes 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
following conditions:

 

6

 

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

 

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

 

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

 

Section 5.02.  Conditions
to the Obligations of the Holders.  The
obligation of the Holders to exchange the Old Notes for the New Notes is
subject to the satisfaction (or, to the extent permitted by law, waiver by each
Holder), at or prior to the Closing Date, of the following additional
conditions:

 

(a)                        the representations and warranties
of the Company contained in this Agreement shall be true and correct in all
material respects, the Company shall have performed and complied with all
covenants and agreements required by this Agreement to be performed by it at or
prior 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 the
foregoing effect;

 

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

 

(i)                                     the
New Notes have been duly authorized by the Company and, when executed and
authenticated in accordance with the provisions of the Indenture and issued to
the Holders in exchange for the Old Notes in accordance with the terms of this
Agreement, will be entitled to the benefits of the Indenture and will be valid
and binding obligations of the Company, enforceable against the Company in
accordance with their terms, 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 (regardless of whether such enforceability is considered
in a proceeding in equity or at law) and (z) to the extent that 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 any comparable
provision of state law to the questions addressed above or on the conclusions
expressed with respect thereto;

 

(ii)                                  the Indenture has been duly
authorized, executed and delivered by each of the Company and each of the
Guarantors organized under the laws of Delaware (the “Delaware
Guarantors”) and is a valid and binding agreement of the Company,
and (assuming due authorization, execution and delivery by each other Guarantor
(the “Non-Delaware Guarantors”)) the
Guarantors, enforceable in accordance with its terms; 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 (regardless of whether such
enforceability is 

 

7

 

considered in a proceeding in equity or at law) and (z) to the extent
that 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 any
comparable provision of state law to the questions addressed above or on the
conclusions expressed with respect thereto; and

 

(iii)                               this Agreement has been duly
authorized, executed and delivered by each of the Company and the Delaware
Guarantors.

 

(c)                                  The
Holders shall have received copies of each of the Credit Agreement Amendment
and the Second Lien Credit Agreement Amendment, each of which shall be in full
force 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)                                 each
Holder shall have received all documents reasonably requested by it relating to
the existence of the Company and the corporate authority for entering into this
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 Company.  The
obligations of the Company to issue the New Notes to the Holders pursuant to
this Agreement 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 following
conditions:

 

(a)                        the representations and
warranties of the Holders contained in this Agreement shall be true and correct
in all material respects and the Holders shall have performed and complied with
all covenants and agreements required by this Agreement to be performed by them
at or prior to the Closing Date; and

 

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

 

ARTICLE 6

SURVIVAL; INDEMNIFICATION

 

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

 

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

 

8

 

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

 

(b)                       The Company shall not be responsible for any
Damages to the extent a court of competent jurisdiction shall have finally
determined that such Damages resulted primarily from (i) such indemnified
person’s bad faith or gross negligence; (ii) any claims made by one or more of
the indemnified persons against another indemnified person or indemnified
persons in connection with the Transactions or (iii) any breach of the
representations and warranties of any of the Holders set forth in this
Agreement (clauses (i) through (iii), collectively, “Excluded Claims”).  If for any reason (other than that such
liability is an Excluded Claim) the foregoing indemnity is unavailable or
insufficient to hold an indemnified person harmless, then the Company shall
contribute to amounts paid or payable by such indemnified person in respect of
such Damages in such proportion as appropriately reflects the relative benefits
received by, and fault of, the Company and such indemnified person in
connection with the matters as to which such Damages relate and other equitable
considerations.

 

(c)                        The party
seeking indemnification under this Section (the “Indemnified
Party”) agrees to give prompt notice to the party against whom
indemnity is sought (the “Indemnifying Party”)
of the assertion of any claim, or the commencement of any suit, action or
proceeding (“Claim”) in respect of which
indemnity may be sought under such Section and will provide the
Indemnifying Party such information with respect thereto that the Indemnifying
Party may reasonably request. The failure to so notify the Indemnifying Party
shall not relieve the Indemnifying Party of its obligations hereunder, except
to the extent such failure shall have adversely prejudiced the Indemnifying
Party.

 

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

 

(e)                        If the
Indemnifying Party shall assume the control of the defense of any Third Party
Claim in accordance with the provisions of this Section the Indemnifying
Party shall obtain the prior written consent of the Indemnified Party (which
shall not be unreasonably withheld) before entering into any settlement of such
Third Party Claim and the Indemnified Party shall be entitled to participate in
the defense of such Third Party Claim and to employ separate counsel of its
choice for such purpose.  The fees and
expenses of such separate counsel shall be paid by the Indemnified Party.

 

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

 

9

 

ARTICLE 7

MISCELLANEOUS

 

Section 7.01.  Notices.  All notices, requests and other
communications to any party hereunder shall be in writing (including facsimile
transmission) and shall be given,

 

if to the Holders, to:

 

The Putnam Advisory Company, LLC

The Putnam Fiduciary Trust Company

One Post Office Square

Boston , MA  02109

Attention:  James P. Miller

Facsimile:  (617) 760-8639

 

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

 

Ropes & Gray LLP

One International Place

Boston, MA  02110

Attention:  Don De Amicis, Esq.

Facsimile:  (617) 951-7050

 

if to the Company, to:

 

DeCrane Aircraft Holdings, Inc.

2361 Rosecrans Avenue, Suite 180

El Segundo, California  90245

Attention:  Chief Financial Officer

Facsimile:  (310) 643-5106

 

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

 

Davis Polk & Wardwell

450 Lexington Avenue

New York, New York 10017

Attention:  Michael P. Kaplan, Esq.

Facsimile:  (212) 450-3800

 

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

 

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

 

10

 

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

 

(b)                       Any
provision of this Agreement may be amended or waived if, but only if, such
amendment 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
any misrepresentation, breach of warranty, covenant or other agreement or other
claim arising out of this Agreement or the transactions contemplated
hereby.  The Company shall retain all
remedies available at law for any misrepresentation, breach of warranty,
covenant or other agreement or other claim arising out of this Agreement or the
transactions contemplated hereby.

 

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

 

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

 

(ii)                                  if
there shall be any law or regulation that makes consummation of the
transactions contemplated by this Agreement illegal or otherwise prohibited or
if consummation of the transactions contemplated hereby would violate any
non-appealable final order, decree or judgment of any court or governmental
body having competent jurisdiction, if so determined by the Company or the
Holders.

 

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

 

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

 

Section 7.05.  Successors And Assigns. The
Company may not assign any of its rights and obligations hereunder without the
prior written consent of the Holders.  No
Holder may assign its rights or obligations hereunder without the prior written
consent of the Company.  This Agreement
shall be binding upon the Company and the Holders and their respective
successors and assigns.

 

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

 

11

 

Section 7.07.  Jurisdiction. Except
as otherwise expressly provided in this Agreement, the parties hereto agree
that any suit, action or proceeding seeking to enforce any provision of, or
based on any matter arising out of or in connection with, this Agreement or the
transactions contemplated hereby shall be brought in the United States District
Court for the Southern District of New York or any New York State court sitting
in New York City, so long as one of such courts shall have subject matter
jurisdiction over such suit, action or proceeding, and that any cause of action
arising out of this Agreement shall be deemed to have arisen from a transaction
of business in the State of New York, and each of the parties hereby
irrevocably consents to the jurisdiction of such courts (and of the appropriate
appellate courts therefrom) in any such suit, action or proceeding and
irrevocably waives, to the fullest extent permitted by law, any objection that
it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum.  Process in any such
suit, action or proceeding may be served on any party anywhere in the world,
whether within or without the jurisdiction of any such court.  Without limiting the foregoing, each party
agrees that service of process on such party as provided in this
Section shall be deemed effective service of process on such party.

 

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

 

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

 

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

 

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

 

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

 

[Remainder
of page intentionally left blank; next page is signature page]

 

12

 

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

 

 

	
   

  	
  DECRANE AIRCRAFT HOLDINGS INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /S/ RICHARD J. KAPLAN

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Richard J. Kaplan

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President, Chief Financial Officer, 

  
	
   

  	
   

  	
   

  	
  Secretary and Treasurer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  AUDIO INTERNATIONAL, INC.

  
	
   

  	
  CARL F. BOOTH & CO., LLC

  
	
   

  	
  DECRANE AIRCRAFT SEATING COMPANY, INC.

  
	
   

  	
  DECRANE CABIN INTERIORS-CANADA, INC.

  
	
   

  	
  DECRANE CABIN INTERIORS, LLC

  
	
   

  	
  HOLLINGSEAD INTERNATIONAL, INC.

  
	
   

  	
  PATS AIRCRAFT, LLC

  
	
   

  	
  PCI NEWCO, INC.

  
	
   

  	
  PRECISION PATTERN, INC.

  
	
   

  	
  as Guarantors

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /S/ RICHARD J. KAPLAN

  	
   

  
	
   

  	
  Name:

  	
  Richard J. Kaplan

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
								

 

13

 

	
   

  	
  THE
  PUTNAM ADVISORY COMPANY, LLC on behalf of: 

  
	
   

  	
  THE NORTHROP GRUMAN PENSION MASTER TRUST
  

  
	
   

  	
  ABBOTT
  LABORATORIES ANNUITY RETIREMENT 

  PLAN  

  
	
   

  	
  PUTNAM WORLD TRUST II - PUTNAM HIGH YIELD 

  BOND FUND

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
						

 

 

	
   

  	
  THE
  PUTNAM FIDUCIARY TRUST COMPANY on behalf of:

  
	
   

  	
  MARSH & MCLENNAN COMPANIES, INC. U.S. 

  
	
   

  	
  RETIREMENT
  PLAN - HIGH YIELD

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
						

 

14

 

SCHEDULE 1.02

 

	
  Holder

  	
   

  	
  Taxpayer Identification
  Number

  	
   

  	
  Principal
 Amount of Old Notes

  	
   

  	
  Initial Accreted Value of New Notes

  	
   

  
	
  The Putnam Advisory Company, LLC, on behalf of:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The Northrop Grumman Pension Master Trust

  	
   

  	
   

  	
   

  	
  $

  	
  240,000

  	
   

  	
  $

  	
  240,000

  	
   

  
	
  Abbott Laboratories Annuity Retirement Plan

  	
   

  	
   

  	
   

  	
  $

  	
  90,000

  	
   

  	
  $

  	
  90,000

  	
   

  
	
  Putnam World Trust II – Putnam High Yield Bond
  Fund

  	
   

  	
   

  	
   

  	
  $

  	
  74,000

  	
   

  	
  $

  	
  74,000

  	
   

  
	
  The Putnam Fiduciary Trust Company on behalf of:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Marsh & McLennan Companies, Inc. U.S.
  Retirement Plan – High Yield

  	
   

  	
   

  	
   

  	
  $

  	
  111,000

  	
   

  	
  $

  	
  111,000

  	
   

  
	
  Total

  	
   

  	
   

  	
   

  	
  $

  	
  515,000

  	
   

  	
  $

  	
  515,000

  	
   

  

 

15

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