Document:

Exhibit 10.14

 

SENIOR PREFERRED STOCK AMENDMENT AGREEMENT

 

 

dated as of

 

 

July 23, 2004

 

 

among

 

 

DECRANE AIRCRAFT HOLDINGS, INC.,

 

DECRANE HOLDINGS CO.

 

and

 

THE HOLDERS SET FORTH ON THE SIGNATURE PAGES
HERETO

 

 

TABLE OF CONTENTS

 

	
  ARTICLE 1

  	
   

  
	
  AMENDMENT

  	
   

  
	
   

  	
   

  
	
  Section 1.01.  Consent to Amendment

  	
   

  
	
  Section 1.02.  Closing

  	
   

  
	
   

  	
   

  
	
  ARTICLE 2

  	
   

  
	
  REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND DECRANE HOLDINGS

  	
   

  
	
   

  	
   

  
	
  Section 2.01.  No Default Under Credit
  Agreement

  	
   

  
	
  Section 2.02.  Authorizations

  	
   

  
	
  Section 2.03 . Governmental
  Authorization

  	
   

  
	
  Section 2.04.  Non-Contravention

  	
   

  
	
  Section 2.05.  Litigation

  	
   

  
	
   

  	
   

  
	
  ARTICLE 3

  	
   

  
	
  REPRESENTATIONS AND WARRANTIES OF THE HOLDERS

  	
   

  
	
   

  	
   

  
	
  Section 3.01.  Ownership of Existing
  Preferred Stock

  	
   

  
	
  Section 3.02.  Authorization of
  Agreement

  	
   

  
	
  Section 3.03.  Non-Contravention

  	
   

  
	
  Section 3.04.  Investment Purposes

  	
   

  
	
  Section 3.05.  Inspections; No Other
  Representations

  	
   

  
	
  Section 3.06 . Taxpayer
  Identification Number

  	
   

  
	
   

  	
   

  
	
  ARTICLE 4

  	
   

  
	
  COVENANTS

  	
   

  
	
   

  	
   

  
	
  Section 4.01.  Covenants of the Company
  and DeCrane Holdings

  	
   

  
	
  Section 4.02.  Covenants of the Holders

  	
   

  
	
   

  	
   

  
	
  ARTICLE 5

  	
   

  
	
  CONDITIONS TO THE CLOSING

  	
   

  
	
   

  	
   

  
	
  Section 5.01.  Conditions to Obligation
  of Each Party

  	
   

  
	
  Section 5.02.  Conditions
  to the Obligations of the Holders

  	
   

  
	
  Section 5.03.  Conditions to the
  Obligations of the Company and DeCrane Holdings

  	
   

  
	
   

  	
   

  
	
  ARTICLE 6

  	
   

  
	
  SURVIVAL; INDEMNIFICATION

  	
   

  
	
   

  	
   

  
	
  Section 6.01.  Survival

  	
   

  
	
  Section 6.02.  Indemnification

  	
   

  

 

 

	
  ARTICLE 7

  
	
  MISCELLANEOUS

  
	
   

  
	
  Section 7.01.  Notices

  	
   

  
	
  Section 7.02.  No Waivers; Amendments

  	
   

  
	
  Section 7.03.  Waiver of Warrant
  Requirements

  	
   

  
	
  Section 7.04.  Termination

  	
   

  
	
  Section 7.05.  Successors And Assigns

  	
   

  
	
  Section 7.06.  Limited Recourse and
  Non-Petition

  	
   

  
	
  Section 7.07.  Governing Law

  	
   

  
	
  Section 7.08.  Jurisdiction

  	
   

  
	
  Section 7.09.  WAIVER OF JURY TRIAL

  	
   

  
	
  Section 7.10.  Counterparts;
  Effectiveness

  	
   

  
	
  Section 7.11.  Expenses

  	
   

  
	
  Section 7.12.  Entire Agreement

  	
   

  
	
  Section 7.13.  Captions; Certain
  Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 1.02

  	
  -

  	
  Taxpayer
  Identification Number; Shares of Existing

  Preferred Stock and Senior Preferred Stock; Shares of

  Common Stock to be Issued

  	
   

  
	
  Schedule 3.01

  	
  -

  	
  Ownership
  of Existing Preferred Stock

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  -

  	
  Certificate of Amendment to Certificate of Designations

  	
   

  
	
  Exhibit B

  	
   

  	
  Form of Waiver

  	
   

  
	
  Exhibit C

  	
  -

  	
  Form of Registration Rights Agreement Amendment

  	
   

  
	
  Exhibit D

  	
  -

  	
  Form of Investors’ Agreement Amendment

  	
   

  

 

ii

 

SENIOR PREFERRED STOCK AMENDMENT AGREEMENT

 

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

 

W 
I  T  N 
E  S  S 
E  T  H :

 

WHEREAS, the Holders are holders of all of the outstanding shares of
16% Senior Redeemable Exchangeable Preferred Stock Due 2009 of the Company (the
“Existing Preferred Stock”);

 

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

 

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

 

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

 

WHEREAS, in connection with the amendment of the Existing Preferred
Stock, the Company will enter into an amendment 
(the “Second Lien Credit Agreement Amendment”)
to the Second Lien Credit Agreement dated as of 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 prior to the date hereof and by the Second
Lien Credit Agreement Amendment, the “Second Lien Credit
Agreement”);

 

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

 

 

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;

 

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

 

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

 

NOW THEREFORE, the parties hereto agree as follows:

 

ARTICLE 1

AMENDMENT

 

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

 

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

 

2

 

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

 

ARTICLE 2

REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND DECRANE HOLDINGS

 

The Company and DeCrane Holdings represent and warrant to each Holder
that:

 

Section 2.01.  No Default Under Credit
Agreement.  As of the date
hereof, (i) no Potential Event of Default or Event of Default (each as defined
in the Senior Credit Agreement) has occurred and is continuing, and (ii) the
Company is able to satisfy the conditions to borrowing under the Senior Credit
Agreement 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 DeCrane Holdings of this Agreement have been
duly authorized by all necessary corporate action on the part of the Company
and DeCrane Holdings.  Upon the
effectiveness of this Agreement, the amendments to the terms of the Existing
Preferred Stock as set forth in the Certificate of Designations shall have been
duly authorized by all necessary corporate action on the part of the Company. 
The issuance of Common Stock to the Holders as provided herein
has been duly authorized by all necessary corporate action on the part of
DeCrane Holdings.  Each of the
Registration Rights Agreement Amendment and the Investors’ Agreement Amendment
has been duly authorized 

 

3

 

by all necessary corporate action on the part
of the Company and DeCrane Holdings, as applicable.  This Agreement is and, when executed and
delivered on the Closing Date, each of the Credit Agreement Amendment, Second
Lien Credit Agreement Amendment, Registration Rights Agreement Amendment and the
Investors’ Agreement Amendment will be, a valid and binding agreement of the
Company and DeCrane Holdings, 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 or the Investors’ 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 DeCrane Holdings of
this Agreement, the Registration Rights Agreement Amendment and the Investors’
Agreement Amendment and the consummation of the transactions contemplated
hereby 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, other than the
filing of the Certificate of Designations with the Secretary of State of
Delaware and 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 DeCrane Holdings of this Agreement, the
Registration Rights Agreement Amendment, the Investors’ Agreement Amendment and
the Certificate of Designations do not and will not (i) violate the certificate
of incorporation or bylaws of the Company or DeCrane Holdings or (ii) violate
any material applicable law, rule, regulation, judgment, injunction, order or
decree, (iii) upon obtaining the consents and taking the other actions required
to satisfy the conditions precedent set forth in Article 5, require any
material consent or other action by any person under, constitute a material
default under, or give rise to any material right of termination, cancellation
or acceleration of any right or obligation of the Company or DeCrane Holdings
or to a loss of any material benefit to which the Company or DeCrane Holdings
are entitled under any provision of any agreement or other instrument binding
upon the Company or DeCrane Holdings or any of the Company’s or DeCrane
Holdings’ assets or properties or (iv) result in the creation or imposition of
any material lien on any property or assets of the Company or DeCrane Holdings.

 

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

 

4

 

have a material adverse effect on the
transactions contemplated by this Agreement.

 

 

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF THE HOLDERS

 

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

 

Section 3.01.  Ownership of Existing
Preferred Stock.  Except as
set forth on Schedule 3.01 with respect to a pledge prior to the date
hereof, 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 shares of Existing
Preferred Stock shown on Schedule 1.02, free and clear of all security
interests, claims, liens, equities or other encumbrances.

 

Section 3.02.  Authorization of
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, subject to applicable bankruptcy,
insolvency, fraudulent transfer and similar laws affecting creditors’ rights
generally and equitable principles of general applicability.

 

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.  Investment Purposes.  Such Holder acknowledges that the
Senior Preferred Stock and the Common Stock have not been registered under the
Securities Act or any state securities laws and that the amendment of the
Existing Preferred Stock and the issuance of the Common Stock contemplated
hereby are 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 shares of Common Stock 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 Senior
Preferred Stock unless pursuant to a transaction either registered under, or
exempt from

 

5

 

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

 

Section 3.05.  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 and DeCrane Holdings have given such Holder complete and open
access (to the extent requested by such Holder) to the key employees and
documents of the Company, DeCrane Holdings and their respective
subsidiaries.  Each Holder agrees to the
amendment of the Existing Preferred Stock and the issuance of the Common Stock
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 or DeCrane Holdings, except as expressly
set forth in this Agreement.  Without
limiting the generality of the foregoing, each Holder acknowledges that the
Company and DeCrane Holdings make 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 results of operations (or any component
thereof), future cash flows or future financial condition (or any component
thereof) of the Company and DeCrane Holdings or the future business and
operations of the Company and DeCrane Holdings or (ii) any other information or
documents made available to such Holder or its advisors with respect to the
Company or DeCrane Holdings or their businesses or operations, except as
expressly set forth in this Agreement.

 

Section 3.06. Taxpayer Identification Number. 
The number set forth under “Taxpayer Identification Number”
on Schedule 1.02 hereto 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 and
DeCrane Holdings.  In further
consideration of the agreements of the Holders contained in this Agreement, the
Company and DeCrane Holdings covenant with each of the Holders as follows:

 

6

 

(a)        the Company and DeCrane
Holdings will use their 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 and DeCrane
Holdings will use their commercially reasonable efforts to obtain or cause to
be obtained 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)        in addition to the
obligations contained in Section 7.11(a) of the Securities Purchase
Agreement dated as of June 20, 2000 among the Company, DeCrane Holdings
and the purchasers party thereto (the “Securities Purchase
Agreement”), prior to the Closing Date, the Company and DeCrane
Holdings agree that, except as the Company or DeCrane Holdings and their
counsel reasonably determine to be required by law, they 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 or DeCrane Holdings may disclose any Holder’s identity to their
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 and the Registration Rights Agreement Amendment and the Investors’ Agreement
Amendment with the Securities and Exchange Commission and that DeCrane Holdings
will be required to publicly file this Agreement and the Investors’ Agreement
with the Securities and Exchange Commission, which documents will identify each
Holder).

 

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

 

(a)        in addition to the
obligations contained in Section 7.11(b) of the Securities Purchase
Agreement, such Holder and its Affiliates (as defined in Rule 405 under the
Securities Act) will hold, and will use their best 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
DeCrane Holdings furnished to such Holder or its Affiliates in connection with
the 

 

7

 

transactions contemplated by
this Agreement, except to the extent that such information can be shown to have
been (A) previously known on a nonconfidential 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 DeCrane Holdings; provided that such Holder may disclose such information (1)
to another Holder, (2) 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, (3) upon the request or demand
of any governmental authority having jurisdiction over such Holder, (4) in
response to any order of any court or other governmental authority or as may be
required pursuant to any requirement of law or (5) in connection with the
exercise of any remedy hereunder; provided further
that Neon Capital Limited (“Neon”) may
disclose such information to (i) the trustee with respect to the Neon Notes and
(ii) to the beneficiaries of the security interest granted by Neon with respect
to the Existing Preferred Stock.  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 best
efforts to cause their respective officers, directors, employees, accountants,
counsel, consultants, advisors and agents to, destroy or deliver to the Company
or DeCrane Holdings, 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 DeCrane Holdings in connection with this Agreement that are
subject to such confidentiality provisions;

 

(b)        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; and

 

(c)        unless this Agreement is
terminated in accordance with Section 7.05 hereof, until the Existing
Preferred Stock is amended pursuant to the terms of this Agreement, 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 shares of the Existing
Preferred Stock or any right or interest (voting or otherwise and including any
participation interest) therein, except with the consent of the Company and
DeCrane Holdings or pursuant to Section 1.02 hereof.

 

ARTICLE 5

CONDITIONS TO THE CLOSING

 

Section 5.01.  Conditions to Obligation of
Each Party.  The Holders’
consent to the amendment of the Existing Preferred Stock as set forth in the
Certificate of Designations and the obligations of the Company to amend the
Existing Preferred Stock and of DeCrane Holdings to issue the Common Stock
hereunder are 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:

 

8

 

(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 exchange of the Old
Notes for the New Notes 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 consent of the Holders to
the amendment of the Existing Preferred Stock as set forth in the Certificate
of Designations 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 and DeCrane Holdings contained in this Agreement shall be true and
correct in all material respects, each of the Company and DeCrane Holdings
shall have performed and complied with all covenants and agreements required by
this Agreement to be performed by it or complied with 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 each of the Company and
DeCrane Holdings to the foregoing effect;

 

(b)        new certificates
representing the shares of Senior Preferred Stock and Common Stock to be issued
to the Holders hereunder shall have been prepared and made available for
delivery to the Holders in exchange for Existing Preferred Stock certificates
as provided in Section 1.02;

 

(c)        the Certificate of
Designations shall have been filed with the Secretary of State of Delaware
prior to or concurrently with the Closing;

 

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

 

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

 

9

 

(f)         The Holders shall have
received copies of each of the Credit Agreement Amendment, the Second Lien
Credit Agreement Amendment, the Exchange Agreement relating to the exchange of
the Old Notes for the New Notes and the Indenture for the New Notes, 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;

 

(g)        the Company shall have
delivered to each Holder an opinion of 
Davis Polk & Wardwell, special counsel to the Company and DeCrane
Holdings, 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 Company and
DeCrane Holdings are validly existing and in good standing under the laws of
the State of Delaware with corporate power to enter into the amendment;

 

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

 

(iii)          the filing of the
Certificate of Designations by the Company in the State of Delaware and the
issuance by DeCrane Holdings of the Common Stock pursuant to this Agreement do
not (A) contravene the Certificate of Incorporation or By-laws of DeCrane
Holdings or of the Company, (B) contravene the Indenture, the indenture
governing the Old Notes, the Credit Agreement or the Second Lien Credit
Agreement or (C) violate any New York or federal law that in our experience are
normally applicable to transactions of this type; provided
that Davis Polk & Wardwell expresses no opinion as to federal or state
securities laws;

 

(iv)          each of this Agreement,
the Investors’ Agreement Amendment and the Registration Rights Agreement
Amendment has been duly authorized, executed and delivered by each of the
Company and DeCrane Holdings (to the extent party thereto) and is a valid and
binding agreement of the Company and DeCrane Holdings (to the extent party
thereto) in each case 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 (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 

 

10

 

comparable
provision of state law to the questions addressed above or on the conclusions
expressed with respect thereto;

 

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

 

(vi)          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 the Exchange
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;

 

(vii)         the Indenture has been duly authorized,
executed and delivered by each of the Company and each of the affiliates
of the Company set forth on the signature pages of the Indenture as Guarantors (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; and

 

(viii)        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

 

11

 

 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.

 

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

 

(i)         each Holder shall have
received all documents reasonably requested by it relating to the existence of
the Company and DeCrane Holdings 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 and DeCrane Holdings.  The
obligation of the Company to amend the Existing Preferred Stock and the
obligation of DeCrane Holdings to issue the Common Stock 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
additional conditions:

 

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

 

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

 

(c)        the Company and DeCrane
Holdings 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.

 

12

 

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.

 

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

 

(b)        After the Closing Date,
this Section 6.02 will provide the exclusive remedy for the Holders for
any misrepresentation, breach of warranty, covenant or other agreement or other
claim arising out of this Agreement or the transactions contemplated hereby
except to the extent any such claim is in respect of fraud.  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.

 

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:

 

DLJ Investment Partners II, L.P.

DLJ Investment Partners, L.P.

DLJIP II Holdings, L.P.

11 Madison Avenue 

New York, NY 10010

Attention:  Rob Petrini

Facsimile:  (212) 448-3220

 

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

 

Cahill Gordon & Reindel LLP

80 Pine Street

13

 

 

New York, NY 10005

Attention:  John Schuster

Facsimile:  (212) 269-5420

 

and

 

Putnam Investment Management, LLC

Putnam Fiduciary Trust Company

One Post Office Square

Boston, MA 02109

Attention:  Michael DeFao, Senior Vice
President

Facsimile:  (617) 292-1625

 

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

 

and

 

Neon Capital Limited

P.O. Box 1984 GT

Elizabethan Square

Georgetown, Grand Cayman

Cayman Islands, British West Indies

Attention:  Neil Ross/Scott Macdonald

Facsimile:  (345) 949-5223

 

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:  Nancy L. Sanborn, Esq.

Facsimile:  (212) 450-3800

 

14

 

if to DeCrane Holdings, to:

 

DeCrane Holdings Co.

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 DeCrane Holdings) to:

 

Davis Polk & Wardwell

450 Lexington Avenue

New York, New York 10017

Attention:  Nancy L. Sanborn, 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
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.  Waiver of Warrant Requirements.  In connection with the issuance of the Common
Stock, each Holder hereby waives the requirement that notice must be given to
such Holder under Sections (h)(2) and (h)(11) of the Penny Warrants held by
such Holder.  Each such Holder also
hereby waives the requirement that DeCrane Holdings file an officers’ certificate
setting forth the adjusted exercise price for the Penny Warrants, the facts
requiring such adjustment and the manner of computing such adjustment as
required pursuant to Section (h)(11) of the Penny Warrants.   It is understood and
agreed that there shall be no adjustment to the exercise price of the Penny
Warrants in connection with the issuance of the Common Stock.

 

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

 

15

 

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

 

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

 

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

 

(b)        If this Agreement is
terminated as permitted by 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 or DeCrane Holdings may not assign any of their respective rights and
obligations hereunder without the prior written consent of the Holders.  No Holder may assign any of its rights or
obligations hereunder without the prior written consent of the Company and
DeCrane Holdings.  This Agreement shall
be binding upon the Company, DeCrane Holdings and the Holders and their
respective successors and permitted assigns.

 

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

 

16

 

Section 7.07.  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 7.08.  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 7.09.  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 7.10.  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 7.11.  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 reasonable fees and expenses of (i) Cahill Gordon
& Reindel LLP, special counsel to certain Holders and (ii) Ropes & Gray
LLP, special counsel to certain other Holders, in each case to the extent
incurred in connection with the negotiation, execution and delivery of this
Agreement and the transactions contemplated hereby; provided
further that the fees and expenses
payable by the 

 

17

 

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

 

Section 7.12.  Entire Agreement.  This Agreement, the Registration
Rights Agreement, the Investors’ Agreement, the Certificate of Designations and
the Securities Purchase Agreement (including without limitation the
indemnification provisions contained therein and the Company’s and DeCrane
Holdings’ covenants under Article VI of the Securities Purchase
Agreement), which shall survive the execution and delivery of this Agreement)
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 7.13.  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]

 

18

 

IN WITNESS WHEREOF,
the parties hereto have caused this Senior Preferred Stock Amendment 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:  /s/ R. Jack DeCrane

  	 

	
   

  	
   

  	
  Title:  Chief Executive Officer

  	 

	
   

  	
   

  	 

	
   

  	
  DECRANE HOLDINGS CO.

  	 

	
   

  	
   

  	 

	
   

  	
  By:

  	
    /s/  R. JACK
  DECRANE

  	 

	
   

  	
   

  	
  Name:  /s/ R. Jack DeCrane

  	
   

  	 

	
   

  	
   

  	
  Title:  Chief Executive Officer

  	 

	
   

  	
   

  	 

	
   

  	
  DLJ
  INVESTMENT PARTNERS II, INC. on behalf of: 

  DLJ INVESTMENT PARTNERS II, L.P.

  DLJ INVESTMENT PARTNERS, L.P. 

  DLJIP II HOLDINGS, L.P.

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
  By:

  	
    /S/  JOHN M. MORIARTY, JR.

  	
   

  	 

	
   

  	
   

  	
  Name:  John M. Moriarty, Jr.

  	 

	
   

  	
   

  	
  Title:  Managing Director

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
  PUTNAM INVESTMENT MANAGEMENT, LLC on behalf
  of:

        PUTNAM VARIABLE TRUST-
  PUTNAM VT HIGH 

               YIELD
  FUND  

        PUTNAM HIGH YIELD TRUST

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
  By:

  	
    /s/  MICHAEL E.
  DEFAO

  	
   

  	 

	
   

  	
   

  	
  Name:  Michael E. DeFao

  	 

	
   

  	
   

  	
  Title:  Senior Vice President

  	 

	
   

  	
   

  	 

	
   

  	
  NEON CAPITAL LIMITED

  	 

	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /S/  PAUL COPE

  	
   

  
	
   

  	
   

  	
  Name:  Paul Cope

  	
   

  
	
   

  	
   

  	
  Title:  Director

  	
   

  
											

 

 

SCHEDULE 1.02*

 

	
  Holder

  	
   

  	
  Taxpayer

  Identification

  Number

  	
   

  	
  Shares of Existing

  Preferred Stock

  and Senior

  Preferred Stock

  	
   

  	
  Shares of

  Common Stock to

  be Issued**

  	
   

  
	
  DLJ Investment Partners II, L.P.

  	
   

  	
  13-4048184

  	
   

  	
  113,651.2

  	
   

  	
  158,632

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DLJ Investment Partners, L.P.

  	
   

  	
  13-3868693

  	
   

  	
  50,512.0

  	
   

  	
  70,504

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DLJIP II Holdings, L.P.

  	
   

  	
  13-4192504

  	
   

  	
  35,836.8

  	
   

  	
  50,020

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Neon Capital Limited

  	
   

  	
   

  	
   

  	
  21,000.0

  	
   

  	
  29,311

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Putnam High Yield Trust

  	
   

  	
  04-6415410

  	
   

  	
  21,000.0

  	
   

  	
  29,311

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Putnam Variable Trust – Putnam VT High Yield Fund

  	
   

  	
  04-2986135

  	
   

  	
  8,000.0

  	
   

  	
  11,167

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
   

  	
   

  	
  250,000.0

  	
   

  	
  348,945

  	
   

  

 

	
  *

  	
  Assumes
  no transfers after the date of this Agreement.

  
	
   

  	
   

  
	
  **
  

  	
  Assumes
  348,945 shares of Common Stock is equal to 7.5% of the Common Stock
  outstanding immediately after the Closing (calculated in accordance with
  Section 1.02).

  

 

 

SCHEDULE 3.01

 

The Existing Preferred Stock of Neon Capital Limited is subject to a
security agreement granted in favor of the trustee for the Neon Notes.Exhibit
4.5.1

 

(Face of Note)

 

THIS SECURITY MAY BE ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR THE
PURPOSES OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.  HOLDERS THAT WISH TO OBTAIN INFORMATION
ABOUT THE ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE DISCOUNT, ISSUE DATE AND YIELD
TO MATURITY OF THE INSTRUMENT FOR PURPOSES OF U.S. TAX LAW MAY DO SO BY
CONTACTING: DeCrane Aircraft Holdings, Inc., 2361 Rosecrans Avenue, Suite 180
El Segundo, California  90245,
Attention:  Chief Financial Officer.

 

CUSIP 243662 AE3

 

17% Senior Discount Notes due 2008

 

	
  No. 1

  	
   

  	
  $127,771,000

  

 

DECRANE AIRCRAFT
HOLDINGS, INC. (THE “ISSUER”)

 

promises to pay to CEDE
& CO., or registered assigns, the principal sum of One Hundred and Twenty
Seven Million, Seven Hundred and Seventy-One Thousand Dollars ($127,771,000) on
September 30, 2008.

 

	
   

  	
  Dated: July 23,
  2004

  
	
   

  	
   

  
	
   

  	
  DECRANE AIRCRAFT HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  RICHARD J. KAPLAN

  	
   

  
	
   

  	
   

  	
  Name:  Richard J. Kaplan

  
	
   

  	
   

  	
  Title:  Chief Financial
  Officer

  

 

This
is one of the

Notes referred to in the

within-mentioned Indenture:

 

	
  U.S.
  BANK NATIONAL ASSOCIATION

  
	
  as
  Trustee

  
	
   

  
	
  By:

  	
  /S/  CAUNA M. SILVA

  	
   

  
	
   

  	
  Name:

  	
  Cauna M. Silva

  
	
   

  	
  Title:

  	
  Vice President

  
				

 

 

(Back of Note)

 

17% Senior
Discount Notes due 2008

 

THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY
BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL
NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a)
OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS
GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN
CONSENT OF DECRANE AIRCRAFT HOLDINGS, INC.

 

THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET
FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL
INTEREST HEREIN, THE HOLDER: (1) REPRESENTS THAT (A) IT IS A “QUALIFIED
INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A
“QIB”), (B) IT HAS ACQUIRED THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL
“ACCREDITED INVESTOR” (AS DEFINED IN RULE 501(A) (1), (2), (3) OR (7) OR
REGULATION D UNDER THE SECURITIES ACT (AN “IAI”), (2) AGREES THAT IT WILL NOT
RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE ISSUERS OR ANY OF ITS
SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN IAI
THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE
(THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS
IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT AT MATURITY OF NOTES LESS THAN
$250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUERS THAT SUCH TRANSFER IS
IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL ACCEPTABLE TO THE ISSUERS) OR (G) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND.  AS USED HEREIN, THE
TERMS “OFFSHORE TRANSACTION” AND “UNITED STATES” HAVE THE MEANINGS GIVEN TO
THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE
CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER
OF THIS NOTE IN VIOLATION OF THE FOREGOING.

 

2

 

Capitalized terms
used herein shall have the meanings assigned to them in the Indenture referred
to below unless otherwise indicated.

 

1.                                       INTEREST.  No interest shall accrue on this Note.  Instead, the Accreted Value of the Note will
accrete at a rate of 17% from the date of issuance, compounded semiannually on
each March 30 and September 30 (commencing September 30, 2004),
to an aggregate Accreted Value of $127,771,000, the full principal amount at
maturity, on September 30, 2008. 
The Issuer shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at a rate of 18% per annum.

 

2.                                       METHOD OF
PAYMENT.  The Notes will be payable as to principal, premium
and interest on overdue principal, if any, at the office of the Paying Agent
and Registrar.  Holders of Notes must
surrender their Notes to the Paying Agent to collect principal payments, and
the Issuer may pay principal, premium and interest on overdue principal, if
any, by check and may mail checks to a Holder’s registered address; provided
that all payments with respect to Global Notes and Definitive Notes, the
Holders of which have given wire transfer instructions to the Issuer, will be
required to be made by wire transfer of immediately available funds to the
accounts specified by the Holders thereof. 
Such payment shall be in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts.

 

3.                                       PAYING AGENT
AND REGISTRAR.  Initially,
U.S. Bank National Association, the Trustee under the Indenture, will act as
Paying Agent and Registrar.  The Issuer
may change any Paying Agent or Registrar without notice to any Holder.  The Issuer or any of its Subsidiaries may
act in any such capacity.

 

4.                                       INDENTURE   The Issuer issued the Notes under an
Indenture dated as of July 23, 2004 (“Indenture”), among the Issuer, the
Guarantors and the Trustee.  The terms
of the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S.
Code §§ 77aaa-77bbbb).  The
Notes are subject to all such terms, and Holders are referred to the Indenture
and such Act for a statement of such terms. 
To the extent any provision of this Note conflicts with the express provisions
of the Indenture, the provisions of the Indenture shall govern and be
controlling.  The Notes are obligations
of the Issuer initially limited to $127,771,000 in aggregate principal amount
at maturity.  Subject to limits in the
Indenture, the Issuer may issue Additional Notes constituting the same series
as the Initial Notes.

 

5.                                       OPTIONAL
REDEMPTION.

 

Prior to
September 30, 2004, the Notes may be redeemed at any time at the option of
the Issuer, in whole or in part, upon not less than 30 nor more than 60 days’
notice, in cash at a redemption price equal to 106% of Accreted Value.  Thereafter, the Notes will be subject to
redemption at any time at the option of the Issuer, in whole or in part, upon
not less than 30 nor more than 60 days’ notice, in cash at the redemption
prices (expressed as percentages of Accreted Value) set forth below, if
redeemed during the twelve month period beginning on September 30 of the
years indicated below, to the applicable redemption date:

 

	
  Year

  	
   

  	
  Percentage

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2004

  	
   

  	
  104.000

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  2005

  	
   

  	
  102.000

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  2006
  and thereafter

  	
   

  	
  100.000

  	
  %

  

 

3

 

6.                                       MANDATORY
REDEMPTION.

 

Except as set
forth in paragraph 7 below, the Issuer is not required to make mandatory
redemption of, or sinking fund payments with respect to, the Notes.

 

7.                                       REPURCHASE
AT OPTION OF HOLDER.

 

(a)                                  Upon
the occurrence of a Change of Control (such date being the ‘‘Change of Control Payment’’),
each Holder of Notes shall have the right to require the Issuer to purchase all
or any part (equal to $1,000 or an integral multiple thereof) of such Holder’s
Notes pursuant to an offer at an offer price in cash equal to 101% of the
aggregate Accreted Value thereof. 
Within 60 days following any Change of Control, subject to the
provisions of the Indenture, the Issuer shall mail a notice to each Holder of
Notes at such Holder’s registered address setting forth the procedures
governing the offer as required by the Indenture.

 

(b)                                 When
the aggregate amount of Excess Proceeds exceeds $10.0 million, the Issuer will
be required to make an offer to all Holders of Notes to purchase the maximum
principal amount of Notes that may be purchased out of Excess Proceeds, at an
offer price in cash in an amount equal to 100% of the Accreted Value thereof in
accordance with the procedures set forth in the Indenture.  Holders of Notes that are subject to an
offer to purchase will receive an Asset Sale Offer from the Issuer prior to any
related purchase date and may elect to have such Notes purchased by completing
the form entitled “Option of Holder to Elect Purchase” on the reverse side of
this Note.

 

8.                                       NOTICE OF
REDEMPTION.   Notice of
any redemption or offer to purchase will be mailed at least 30 days but not
more than 60 days before the redemption or purchase date to each Holder of
Notes to be redeemed or purchased at such Holder’s registered address.  Notes in denominations larger than $1,000
principal amount at maturity may be redeemed in part but only in whole
multiples of $1,000 principal amount at maturity, unless all of the Notes held
by a Holder are to be redeemed.

 

9.                                       DENOMINATIONS,
TRANSFER, EXCHANGE.  The Notes are in registered form without
coupons in denominations of $1,000 principal amount at maturity and integral
multiples thereof.  The transfer of Notes may be registered and Notes may
be exchanged as provided in the Indenture.  The Registrar and the Trustee
may require a Holder, among other things, to furnish appropriate endorsements
and transfer documents and the Issuer may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture.  The Issuer need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part.  Also, the Issuer need not exchange or register the transfer of any
Notes for a period of 15 days before a selection of Notes to be redeemed.

 

10.                                 PERSONS
DEEMED OWNERS.  The
registered Holder of a Note may be treated as its owner for all purposes.

 

11.                                 AMENDMENT,
SUPPLEMENT AND WAIVER. Subject to certain exceptions set forth
in the Indenture, the Indenture, the Note Guarantees or the Notes may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount at maturity of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount at maturity of the
then outstanding Notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes).  Notwithstanding the foregoing, without the
consent of any Holder of Notes, the Issuer, the Guarantors and the Trustee may
amend or supplement the

 

4

 

Indenture, the Note Guarantees or the Notes to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Notes in addition to or
in place of certificated Notes, to provide for the assumption of the Issuer’s
obligations to Holders of Notes in the case of a merger or consolidation or
sale of all or substantially all of the Issuer’s assets, to make any change
that would provide any additional rights or benefits to the Holders of Notes or
that does not materially adversely affect the legal rights under the Indenture
of any such Holder, or to comply with requirements of the Commission in order
to effect or maintain the qualification of the Indenture under the Trust
Indenture Act or to provide for additional Note Guarantees of the Notes.

 

12.                                 DEFAULTS AND
REMEDIES.

 

(a) Events of
Default include: (a)
default in payment when due of the principal of or premium, if any, on the
Notes; (b) failure by the Issuer or any of its Restricted Subsidiaries for 30
days after receipt of notice from the Trustee or Holders of at least 25% in
principal amount at maturity of the Notes then outstanding to comply with the
provisions of Sections 4.07, 4.09, 4.10, 4.14 and Article 5 of the
Indenture; (c) failure by the Issuer for 60 days after notice from the Trustee
or the Holders of at least 25% in principal amount at maturity of the Notes
then outstanding to comply with any of their other agreements in the Indenture
or the Notes; (d) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Issuer or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Issuer or any of its
Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or
is created after the date of the Indenture, which default (i) is caused by a
failure to pay Indebtedness at its stated final maturity (after giving effect
to any applicable grace period provided in such Indebtedness) (a “Payment
Default”) or (ii) results in the acceleration of such Indebtedness prior to its
stated final maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $10.0 million or more; (e) failure by the Issuer or
any of its Restricted Subsidiaries to pay final judgments aggregating in excess
of $10.0 million (net of any amounts with respect to which a reputable and
creditworthy insurance company has acknowledged liability in writing), which
judgments are not paid, discharged or stayed for a period of 60 days; (f)
except as permitted by the Indenture, any Note Guarantee shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Guarantor, or any Person acting on
behalf of any Guarantor, shall deny or disaffirm its obligations under its Note
Guarantee; and (g) certain events of bankruptcy or insolvency with respect to
the Issuer or any of its Restricted Subsidiaries that is a Significant
Subsidiary.  If any Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Notes may declare all the Notes to be
due and payable immediately. 
Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency with respect to the
Issuer or any of its Restricted Subsidiaries that is a Significant Subsidiary, all
outstanding Notes will become due and payable without further action or notice.

 

(b) In the event
of a declaration of acceleration of the Notes because an Event of Default has
occurred and is continuing as a result of the acceleration of any Indebtedness
described in clause (d) of the preceding paragraph, the declaration of
acceleration of the Notes shall be automatically annulled if the holders of any
Indebtedness described in clause (d) have rescinded the declaration of
acceleration in respect of such Indebtedness within 30 days of the date of such
declaration and if (i) the annulment of the acceleration of the Notes would not
conflict with any judgment or decree of a court of competent jurisdiction and
(ii) all existing Events of Default, except non-payment of principal or
interest on the Notes that became due solely because of the acceleration of the
Notes, have been cured or waived.

 

5

 

13.                                 NOTE
GUARANTEES. The payment of principal of, premium, and interest and
Liquidated Damages, if any, on the Notes are unconditionally guaranteed,
jointly and severally, by the Guarantors.

 

14.                                 ADDITIONAL
RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES.  In addition to the rights provided to
Holders of Notes under the Indenture, Holders of Restricted Global Notes shall
have the rights set forth in the Registration Rights Agreement dated as of
July 23, 2004, among the Issuer, the Guarantors and the parties named on
the signature pages thereof  (the “Registration
Rights Agreement”).

 

15.                                 TRUSTEE
DEALINGS WITH ISSUER.  The
Trustee, in its individual or any other capacity, may make loans to, accept
deposits from, and perform services for the Issuer or its Affiliates, and may
otherwise deal with Issuer or its Affiliates, as if it were not the Trustee.

 

16.                                 NO RECOURSE
AGAINST OTHERS.  A director, officer, employee, incorporator or
stockholder, of the Issuer, as such, shall not have any liability for any
obligations of the Issuer under the Notes or the Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation.  Each Holder by accepting a Note waives and
releases all such liability.  The waiver and release are part of the
consideration for the issuance of the Notes.

 

17.                                 AUTHENTICATION. 
This Note shall not be valid until authenticated by the manual signature of the
Trustee or an authenticating agent.

 

18.                                 ABBREVIATIONS. 
Customary abbreviations may be used in the name of a Holder or an assignee,
such as:  TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).

 

19.                                 CUSIP
NUMBERS.  Pursuant to a
recommendation promulgated by the Committee on Uniform Security Identification
Procedures, the Issuer has caused CUSIP numbers to be printed on the Notes and
the Trustee may use CUSIP numbers in notices of redemption as a convenience to
Holders.  No representation is made as
to the accuracy of such numbers either as printed on the Notes or as contained
in any notice of redemption and reliance may be placed only on the other
identification numbers placed thereon.

 

The Issuer will
furnish to any Holder upon written request and without charge a copy of the
Indenture and/or the Registration Rights Agreement.  Requests may be made to:

 

DeCrane Aircraft
Holdings, Inc.

2361 Rosecrans Avenue, Suite 180

El Segundo, California  90245

Attention: Chief Financial Officer

 

6

 

ASSIGNMENT FORM

 

To assign this Note, fill
in the form below: (I) or (we) assign and transfer this Note to

 

	
   

  
	
  (Insert
  assignee’s soc. sec. or tax I.D. no.)

  
	
   

  
	
   

  
	
   

  
	
  (Print or type
  assignee’s name, address and zip code)

  
	
   

  
	
  and
  irrevocably appoint

  
	
  to
  transfer this Note on the books of the Issuer.  The agent may substitute
  another to act for him.

  
	
   

  
	
   

  
	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Your Signature:

  	
   

  	
   

  
	
   

  	
   

  	
   (Sign exactly as your name

  
	
   

  	
   

  	
  appears on the face of
  this Note)

  
	
   

  	
   

  
	
   

  	
  Signature Guarantee:

  
								

 

7

 

OPTION OF HOLDER TO ELECT PURCHASE

 

If you want to
elect to have this Note purchased by the Issuer pursuant to Section 4.10
or 4.14 of the Indenture, check the box below:

 

o
Section 4.10                                                           o
Section 4.14

 

If you want to elect
to have only part of the Note purchased by the Issuer pursuant to
Section 4.10 or Section 4.14 of the Indenture, state the principal
amount at maturity you elect to have purchased:
$           

 

 

	
  Date:

  	
   

  	
   

  	
  Your Signature:

  	
   

  	
   

  
	
   

  	
  (Sign
  exactly as your name appears on the Note)

  
	
   

  	
   

  
	
   

  	
  Tax Identification No:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature Guarantee:

  
								

 

8

 

SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE

 

The following
exchanges of a part of this Global Note for an interest in another Global Note
or for a Definitive Note, or exchanges of a part of another Global Note or
Definitive Note for an interest in this Global Note, have been made:

 

	
  Date of Exchange

  	
   

  	
  Amount of
  decrease

  in

  Principal Amount

  of this

  Global Note

  	
   

  	
  Amount of

  increase in

  Principal

  Amount of this

  Global Note

  	
   

  	
  Principal
  Amount

  of this Global Note

  following such

  decrease (or increase)

  	
   

  	
  Signature
  of

  authorized officer

  of Trustee or

  Note Custodian

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

9

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