<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 10, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
DECRANE AIRCRAFT HOLDINGS, INC.
(exact name of Registrant as specified in its charter) (and Certain Subsidiaries
identified in Footnote (1) below)
<TABLE>
<S> <C>
DELAWARE 34-1645569
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
2361 ROSECRANS AVENUE, SUITE 180
EL SEGUNDO, CALIFORNIA 90245
(310) 725-9123
(Name, address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
R. JACK DECRANE
DECRANE AIRCRAFT HOLDINGS, INC.
2361 ROSECRANS AVENUE, SUITE 180
EL SEGUNDO, CALIFORNIA 90245
(310) 725-9123
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
PETER P. WALLACE
MORGAN, LEWIS & BOCKIUS LLP
300 SO. GRAND AVE., 22ND FLOOR
LOS ANGELES, CALIFORNIA 90071
(213) 612-2500
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after this Registration Statement becomes effective.
------------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER NOTE OFFERING PRICE(2) REGISTRATION FEE(2)
<S> <C> <C> <C> <C>
12% Senior Subordinated Notes due 2008...... $100,000,000 100% $100,000,000 $27,800
Senior Subordinated Guarantees(3)...........
</TABLE>
(1) The following direct and indirect subsidiaries of DeCrane Aircraft
Holdings, Inc. are co-registrants, as guarantors of the notes registered
hereby, with the employer identification number indicated: Aerospace Display
Systems, LLC, a Delaware limited liability company, EIN 94-3369980; Audio
International, Inc., an Arkansas corporation, EIN 71-0640962; Avtech
Corporation, a Washington corporation, EIN 91-0761549; Carl F. Booth & Co.,
LLC, a Delaware limited liability company, EIN 31-1706019; Cory
Components, Inc., a California corporation, EIN 95-3938746; Custom
Woodwork & Plastics, LLC, a Delaware limited liability company, EIN
94-3369982; DAH-IP Holdings, Inc., a Delaware corporation, EIN 74-2936057;
DAH-IP Infinity, Inc., a Delaware corporation, EIN 75-285056; DeCrane
Aircraft Furniture Co., L.P., a Texas limited partnership, EIN 74-2961069;
Dettmers Industries, Inc., a Delaware corporation, EIN 95-4693717; Elsinore
Aerospace Services, Inc., a California corporation, EIN 95-2585262; Elsinore
Engineering, Inc., a Delaware corporation, EIN 77-0443200; ERDA, Inc., a
Wisconsin corporation, EIN 39-1422413; Flight Refueling, Inc., a Maryland
corporation, EIN 52-1112836; Hollingsead International, Inc., a California
corporation, EIN 95-2500766; International Custom Interiors, Inc., a Florida
corporation, EIN 59-3300923; Patrick Aircraft Tank Systems, Inc., a Maryland
corporation, EIN 52-1185155; PATS Aircraft and Engineering Corporation, a
Maryland corporation, EIN 52-1096518; PATS Support, Inc., a Maryland
corporation, EIN 52-2010611; PATS, Inc., a Maryland corporation, EIN
52-1067232; PCI NEWCO, Inc., a Delaware corporation, EIN 74-2931488; PPI
Holdings, Inc., a Kansas corporation, EIN 74-2814579; Precision
Pattern, Inc., a Kansas corporation, EIN 48-0759147; The Infinity
Partners, Ltd., a Texas limited partnership, EIN 74-2936058; and Tri-Star
Electronics International, Inc., a California corporation, EIN 34-1687242.
(2) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457; fee previously paid in connection with Registration
Statement No. 333-70365, from which all securities are being carried
forward.
(3) The 12% Series B Senior Subordinated Notes due 2008 are fully and
unconditionally guaranteed on a joint and several basis by the guarantors as
their unsecured, senior subordinated obligation. No separate consideration
will be paid in respect of the guarantees.
As permitted by Rule 429, the Prospectus included in this Registration
Statement also relates to the Registrant's Registration Statement No. 333-70365
on Form S-1.
----------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
PROSPECTUS
[LOGO]
DECRANE AIRCRAFT HOLDINGS, INC.
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12% SERIES B SENIOR SUBORDINATED NOTES DUE 2008
We issued the notes in exchange for our old 12% Series A Senior Subordinated
Notes due 2008. The notes are identical to the old notes, except that certain
transfer restrictions and registration rights relating to the old notes do not
apply to the new notes.
Interest on the notes is payable on March 30 and September 30 of each year,
beginning March 30, 1999. We have the right to redeem any new notes at any time
beginning September 30, 2003 at the redemption prices set forth on page 16, plus
accrued interest. In addition, before September 30, 2001, we may redeem up to
35% of the notes at a redemption price of 112% of their principal amount, plus
interest, using proceeds from certain sales of our stock; provided that at least
65% of the principal amount of notes ever issued under the indenture remains
outstanding immediately after such redemption. We will also have the right to
redeem, and you will have the right to require us to purchase, the notes upon
the occurrence of certain change of control events, at the price set forth on
page 17.
The notes rank junior to our senior indebtedness and secured debt, including
the debt owed under our bank credit facility. The notes rank equally with any
further unsecured, senior subordinated debt. The notes are unconditionally
guaranteed on a senior subordinated basis by all of our existing wholly-owned
domestic subsidiaries, and rank junior to such guarantors' senior and secured
debt and equally with their future unsecured, senior subordinated debt. The
notes will effectively rank junior to all liabilities of our subsidiaries that
are not guarantors. As of March 31, 2000, on a pro forma basis, DeCrane Aircraft
and its guarantor subsidiaries would have had outstanding approximately
$270.4 million of senior indebtedness, and the non-guarantor subsidiaries would
have had approximately $1.3 million of outstanding liabilities, including trade
payables.
INVESTING IN THE NOTES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE
2.
This prospectus is to be used by Donaldson, Lufkin & Jenrette Securities
Corporation in connection with offers and sales in market-making transactions at
negotiated prices related to prevailing market prices. We do not intend to list
the notes on any securities exchange. DLJ Securities Corporation has advised us
that it intends to make a market in the notes; however, it is not obligated to
do so and may stop at any time. We will not receive the proceeds of the sale of
the notes but will bear the expenses of registration.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is August , 2000
<PAGE>
TABLE OF CONTENTS
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Summary..................................................... 1
The Company................................................. 1
Risk Factors................................................ 2
Ratio of Earnings to Fixed Charges.......................... 9
The Notes................................................... 10
Where You Can Find More Information......................... 12
Use of Proceeds............................................. 12
Description of Notes........................................ 13
Plan of Distribution........................................ 45
Experts..................................................... 46
</TABLE>
------------------------
You should rely only on the information contained in this prospectus and any
supplement. We have not authorized any other person to provide you with
different or additional information. If anyone provides you with different or
additional information, you should not rely on it. This prospectus is not an
offer to sell these securities in any jurisdiction where the offer or sale is
not permitted. You should assume that the information appearing in or
incorporated by reference in this prospectus and any supplement is accurate as
of its date only. Our business, financial condition, results of operations and
prospects may have changed since that date.
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this prospectus or incorporated by reference
in this prospectus and may not contain all the information that is important to
you.
THE COMPANY
Since our founding in 1989, through acquisitions and internal growth, we
have become one of the premier suppliers to the general aviation market. We
offer a complete line of interior cabin furniture, galleys, seating, and
entertainment systems for corporate aircraft. In addition, we manufacture
aviation electronic components, referred to as avionics, and provide systems
integration services. We sell our products in the corporate, commercial
(including regional), retrofit, aftermarket and military aircraft markets.
Within these markets, our customers include original manufacturers of aircraft
and related avionics equipment, commonly referred to as OEM's, major components
suppliers, aircraft repair and modification centers and commercial airlines. We
generated pro forma revenues of $329.2 million and EBITDA (as defined) of
$75.1 million for the year ended December 31, 1999 and pro forma revenues of
$90.0 million and EBITDA of $20.6 million for the three months ended March 31,
2000.
During 1998 and 1999, and the first half of 2000, we completed and
integrated ten acquisitions, increasing our diversification within the aircraft
industry and reducing our reliance on the commercial aircraft market. We have
built a leading position in a number of niche markets in the aircraft industry.
The substantial majority of our revenue is generated by businesses in which we
have a leading market share. In order to take advantage of the complementary
nature of our various product offerings, to rationalize and consolidate the
operations of each of our separate companies and to provide even higher levels
of customer service, in 1999 we reorganized our related businesses into three
separate operating groups: Cabin Management, Specialty Avionics and Systems
Integration.
THE CABIN MANAGEMENT GROUP. We are the leading independent provider of
cabin management products for the corporate aircraft market, serving major
manufacturers such as Boeing Business Jet, Bombardier, Cessna, Dassault,
Gulfstream and Raytheon. We provide a full line of interior cabin components,
including seats, furniture, cabinetry, galleys, in-flight entertainment systems,
sidewalls and headliners, which are either sold separately or as a
pre-engineered, pre-fabricated set. Our "cabinet-in-a-box" product offers
customized, pre-engineered, pre-fit interior cabinetry and galley kits to
corporate jet OEM's and independent completion centers. We also have developed
and are currently marketing our "cabin-in-a-box" product, which is comprised of
a customized, pre-engineered, pre-fit cabin interior system, including
furniture, galleys, seats, audio-visual entertainment systems, lighting,
sidewalls, headliners and electrical control units. Our cabin-in-a-box product
will enable our customers to rely on us as the single source for cabin-related
products. We estimate that this product could decrease cycle times by 15% to
20%, offering significant cost reduction opportunities to our customers, and
could increase the dollar content per plane for us. The Cabin Management Group
contributed approximately 48% of our pro forma revenue for the year ended
December 31, 1999 and 52% for the three months ended March 31, 2000.
THE SPECIALTY AVIONICS GROUP. This group designs, engineers and
manufactures electronic components, electronic display devices and interconnect
components and assemblies. Among the products offered by this group are flight
deck communications and audio power control equipment, harness assemblies and
connectors, power and signal contact products and liquid crystal display
devices, commonly referred to as LCD's. Customers of this group include Airbus,
Boeing, Honeywell, Matsushita, and Rockwell Collins. The Specialty Avionics
Group contributed approximately 34% of our pro forma revenue for the year ended
December 31, 1999 and 29% for the three months ended March 31, 2000.
THE SYSTEMS INTEGRATION GROUP. This group provides auxiliary fuel tanks,
auxiliary power units and system integration services, including engineering,
kit manufacturing, installation and certification. Customers of this group
include Boeing Business Jet, Bombardier, Cessna, Gulfstream, Raytheon and
Rockwell Collins. The Systems Integration Group contributed approximately 18% of
our pro forma revenue for the year ended December 31, 1999 and 19% for the three
months ended March 31, 2000.
Our principal executive offices are located at 2361 Rosecrans Avenue, Suite
180, El Segundo, California 90245. Our telephone number is (310) 725-9123.
Further information is also available as noted under "Where You Can Find More
Information."
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<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING INFORMATION AS PART OF YOUR
EVALUATION OF OUR COMPANY AND ITS BUSINESS BEFORE MAKING AN INVESTMENT IN THE
OFFERED SECURITIES.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this prospectus discuss future expectations,
beliefs or strategies, projections or other "forward-looking" information. These
statements are subject to known and unknown risks. Many factors could cause
actual company results, performance or achievements, or industry results, to be
materially different from the projections expressed or implied by this
prospectus. Some of those risks are specifically described below, but we are
also vulnerable to a variety of elements that affect many businesses, such as:
- fuel prices and general economic conditions that affect demand for
aircraft and air travel, which in turn affect demand for our products and
services;
- changes in prevailing interest rates and the availability of financing to
fund our plans for continued growth;
- inflation, and other general changes in costs of goods and services;
- liability and other claims asserted against us;
- the ability to attract and retain qualified personnel;
- labor disturbances; and
- changes in operating strategy, or our acquisition and capital expenditure
plans.
We cannot predict any of the foregoing with certainty, so our
forward-looking statements are not necessarily accurate predictions. Also, we
are not obligated to update any of these statements, to reflect actual results
or report later developments. You should not rely on our forward-looking
statements as if they were certainties.
SUBSTANTIAL LEVERAGE--OUR SUBSTANTIAL LEVELS OF DEBT COULD ADVERSELY AFFECT OUR
FINANCIAL HEALTH AND PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE NOTES.
We incurred significant debt as part of our acquisition by DLJ in
August 1998 and in connection with companies we have acquired. As of March 31,
2000, on a pro forma basis, we would have had total consolidated indebtedness of
approximately $370.5 million, and we would have had available $50.0 million of
additional revolving borrowings under the DeCrane Aircraft bank credit facility.
In order to borrow those funds, we will have to satisfy funding conditions of
the kind usually imposed in similar agreements. The bank credit facility and the
indenture under which DeCrane Aircraft's senior subordinated notes are issued
each also permit us to incur significant amounts of additional debt and to
secure that debt with some of our assets.
The amount of debt we carry could have important consequences:
- It may limit the cash flow available for general corporate purposes and
acquisitions. Interest payments on our debt would have been $37.2 million
for the year ended December 31, 1999 and $9.7 million for the three months
ended March 31, 2000, all on a pro forma basis. We had deficiencies of
earnings to cover fixed charges of $2.3 million for the year ended
December 31, 1995, $2.9 million for the four months ended December 31,
1998 and $3.2 million for the year ended December 31, 1999.
- It may limit our ability to obtain additional debt financing in the future
for working capital, capital expenditures or acquisitions.
- It may limit our flexibility in reacting to competitive and other changes
in the industry and economic conditions generally.
- It may expose us to increased interest expenses, when interest rates
fluctuate, because some of our borrowing may be, and in recent years most
of it has been, at variable "floating" rates.
- It may limit our ability to respond to changes in our markets or exploit
business opportunities.
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<PAGE>
RESTRICTIVE COVENANTS--OUR OPERATIONS AND THOSE OF OUR SUBSIDIARIES ARE
RESTRICTED BY THE TERMS OF THE NOTES AND OUR BANK CREDIT FACILITY.
The indenture under which the notes were issued and our bank credit facility
limit our flexibility in operating our businesses, including our ability and the
ability of our subsidiaries to:
- incur debt;
- issue preferred stock;
- repurchase capital stock or subordinated debt;
- enter into transactions with affiliates;
- enter into sale and leaseback transactions;
- create liens or allow them to exist;
- pay dividends or other distributions;
- make investments;
- sell assets; and
- enter into mergers and consolidations.
In addition, our bank credit facility requires that we satisfy several tests
of financial condition. Our ability to do so can be affected by events beyond
our control, and we cannot assure you that we will meet those tests. Our failure
to do so could result in a default under our bank credit facility or the notes.
ADDITIONAL BORROWINGS--DESPITE CURRENT INDEBTEDNESS LEVELS, WE AND OUR
SUBSIDIARIES MAY STILL BE ABLE TO INCUR SUBSTANTIALLY MORE DEBT. THIS COULD
INTENSIFY THE RISKS DESCRIBED ABOVE.
We and our subsidiaries may be able to incur substantial additional
indebtedness in the future. The terms of our debt do not fully prohibit us or
our subsidiaries from doing so. In addition to senior debt which we might incur,
we may issue an unlimited amount of additional senior subordinated notes under
the existing indenture, so long as the total amount of debt is permitted by our
financial covenants. See "Description of Notes--Incurrence of Indebtedness and
Issuance of Preferred Stock." If new debt is added to our and our subsidiaries'
current debt levels, the related risks that we and they now face could
intensify.
SUBORDINATION--YOUR RIGHTS UNDER THE NOTES ARE SUBORDINATED TO SUBSTANTIALLY ALL
OUR EXISTING DEBT.
The notes and the subsidiary guarantees are general unsecured obligations of
DeCrane Aircraft and its subsidiaries which have provided note guarantees. The
notes and the subsidiary guarantees rank lower in right of payment than most of
the debt of those companies, including the amounts owed under the bank credit
facility. The senior creditors have rights that might reduce the payments made
to you as a holder of the notes. Among other things:
- As of March 31, 2000, on a pro forma basis, DeCrane Aircraft and the
guarantor subsidiaries would have had outstanding about $270.4 million of
senior debt. We would be required to pay the applicable holders of this
senior debt in full before paying the holders of the notes if DeCrane
Aircraft or one of the guarantor subsidiaries, as applicable, suffers a
bankruptcy filing, insolvency, liquidation or similar event, or if such
senior debt is accelerated.
- We are blocked from paying holders of the notes whenever there is a
payment default on specified senior debt, and principal and premium
payments may also be blocked for up to 179 days while there is a
non-payment default on such senior debt. See "Description of
Notes--Subordination" for the terms of this subordination.
- The bank credit facility is secured by our key assets, excluding assets of
our foreign subsidiaries. If we default under our senior debt agreements,
the lenders could choose to declare all outstanding amounts immediately
due and payable, and seek foreclosure of the assets we granted to them as
collateral. We cannot assure you that, if our bank credit facility were
accelerated, our assets would be sufficient to repay all of our debt,
including the notes, in full.
3
<PAGE>
HOLDING COMPANY--OUR ABILITY TO REPAY THE NOTES AND OUR OTHER DEBT DEPENDS ON
CASH FLOW FROM OUR SUBSIDIARIES; OUR NON-GUARANTOR SUBSIDIARIES' LIABILITIES
WILL BE EFFECTIVELY SENIOR TO THE NOTES.
We conduct all of our operations through subsidiaries. We have no material
operations or assets other than the capital stock of our operating subsidiaries.
Consequently, we depend on distributions or other intercompany transfers of
funds from our subsidiaries to meet our debt service and other obligations. We
cannot assure you that the operating results of our subsidiaries will be
sufficient to enable us to make payments on the notes. Our non-guarantor
subsidiaries are not obligated to make funds available to us for payment on the
notes, and state law also may limit the amount of the dividends that any of our
subsidiaries are permitted to pay to us.
In addition, our non-guarantor subsidiaries' liabilities will be effectively
senior to the notes. Our rights and the rights of our creditors, including
holders of the notes, to participate in the assets of any of our non-guarantor
subsidiaries upon their liquidation or recapitalization will generally be
subject to the prior claims of those subsidiaries' creditors. As of March 31,
2000, on a pro forma basis, our non-guarantor subsidiaries would have had
$1.3 million of outstanding liabilities, including trade payables.
POTENTIAL INABILITY TO SERVICE DEBT--WE WILL REQUIRE A SIGNIFICANT AMOUNT OF
CASH TO SERVICE OUR DEBT. OUR ABILITY TO GENERATE CASH DEPENDS ON CASH FLOWS
FROM OUR SUBSIDIARIES AND MANY FACTORS BEYOND OUR CONTROL.
Our ability to satisfy our debt obligations, including these notes, and to
fund planned capital expenditures will depend on our ability to generate cash in
the future. This, to an extent, is subject to general economic, financial,
competitive, legislative, regulatory and other factors that are beyond our
control.
We cannot assure you that our operating cash flow will be sufficient to meet
our anticipated future operating and capital expenditures and debt payments as
they become due or that future borrowings will be available to us for such
purposes. If our cash flow is lower than we expect, we might be forced to reduce
or delay acquisitions or capital expenditures, sell assets and/or reduce
operating expenses in order to make all required debt service payments.
Alternatively, we may have to refinance all or a portion of our debt on or
before maturity. A reduction in our operating expenses might reduce important
efforts, such as selling and marketing programs, management information system
upgrades and new product development. In addition, we may not be able to
refinance our debt on commercially reasonable terms or at all.
On a pro forma basis, we would have had a net loss of $3.2 million for the
year ended December 31,1999. In the past, our acquisitions resulted in increased
interest and amortization expenses. As a result we have incurred historical net
losses every year since our inception, except 1997, despite positive operating
income. The first historical net profit we reported in 1997 occurred, in part,
because of the repayment of a significant part of our outstanding debt with the
net proceeds of our initial public offering.
AIRCRAFT INDUSTRY RISKS--THE AIRCRAFT INDUSTRY IS CYCLICAL AND AFFECTED BY MANY
FACTORS BEYOND OUR CONTROL, INCLUDING MILITARY SPENDING TRENDS AND REGIONAL
ECONOMIC INSTABILITY IN ASIA.
A downturn in the aircraft market could adversely affect our business.
- The principal markets for corporate aircraft manufacturers are
corporations, fractional ownership programs and wealthy individuals. The
corporate aircraft market is cyclical and has been adversely affected by a
number of factors, including the general state of the U.S. economy,
corporate profits, interest rates and commercial airline fares. A downturn
in any of these factors could depress the demand for corporate aircraft.
- The principal markets for manufacturers of commercial aircraft are the
commercial and regional airline industries, which are cyclical and have
been adversely affected by a number of factors, including increased fuel
and labor costs and intense price competition. Commercial aircraft
production may increase and decrease in response to changes in customer
demand caused by general economic conditions. For example, new commercial
aircraft deliveries declined from a peak of approximately 767 aircraft in
1991 to approximately 367 aircraft in 1995, according to AEROSPACE AND
AIRTRANSPORT CURRENT ANALYSIS published by Standard and Poor's Industry
Surveys, and the Boeing Company also has announced reductions in 2000 and
2001 from its 1999 delivery levels.
- The Asian markets are important for manufacturers of commercial aircraft
and components for those aircraft. Boeing has characterized the economic
situation in Asia as a risk to its deliveries over the
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<PAGE>
next few years. In 1999 Boeing announced scheduled production slowdowns in
its 747, 767 and 777 aircraft lines, among others, during 2000 and 2001.
Recently, however, Boeing has announced that production of certain
aircraft lines would be increased later in 2000 and in 2001. The Asian
market situation could, if it continues or worsens, result in significant
cancellations or deferrals of deliveries for new aircraft.
- The military aircraft industry is dependent upon the level of equipment
expenditures by the armed forces of countries throughout the world, and
especially those of the United States. In recent years, this industry has
been adversely affected by a number of factors, including the reduction in
military spending since the end of the Cold War. Further decreases in
military spending could further depress demand for military aircraft.
Any decrease in demand for new aircraft will likely result in a decrease in
demand for our products and services, and, correspondingly, our revenues,
thereby adversely affecting our financial condition.
CONCENTRATION OF KEY CUSTOMERS--WE RECEIVE A SIGNIFICANT SHARE OF OUR REVENUES
FROM A SMALL GROUP OF KEY CUSTOMERS, AND WE ARE VULNERABLE TO CHANGES IN THEIR
ECONOMIC CONDITION AND PURCHASING PLANS.
A significant decline in business from any one of our key customers could
have a material adverse effect on our business. Our three largest customers for
the year ended December 31, 1999 were Boeing, Textron (which includes Cessna),
and Bombardier. On a pro forma basis, Boeing accounted for approximately 14.4%
of our consolidated revenues for that twelve month period, Textron for
approximately 14.1% and Bombardier for approximately 11.4%. Some of our
customers have the in-house capabilities to perform the services and provide
many of the products we offer and, accordingly, could discontinue outsourcing
their business to us.
In addition to the percentage of revenues directly earned from Boeing, a
significant part of our revenues are earned indirectly from Boeing through sales
of components to Boeing's suppliers. Most of our contracts with Boeing allow
Boeing to stop purchasing or terminate the contract at any time. In addition,
under some circumstances, those contracts may allow Boeing to enforce
alternative economic terms, which would make the contracts less commercially
favorable to us. During October 1997, Boeing announced that parts shortages
adversely affected its production and delivery rates. Boeing shut down its 737
and 747 production lines for approximately one month and did not resume normal
production rates until late November 1997. In late 1998, among other things,
Boeing announced reductions in its previously scheduled production for the 747,
767 and 777 programs in 2000 and 2001, as described in "--Aircraft Industry
Risks" above. Boeing might suffer further production schedule reductions.
COMPETITION--WE COMPETE WITH LARGER COMPANIES IN A FRAGMENTED INDUSTRY.
We operate in a highly competitive industry. Some of our competitors include
corporate aircraft manufacturers and independent completion and modification
companies, major airlines and other independent services organizations,
including some of our customers, many of whom may have significantly greater
financial, technological, manufacturing and marketing resources than we do. The
niche markets within the aircraft industry that we serve are relatively
fragmented, with several competitors offering the same products and services we
provide. Due to the global nature of the aircraft industry, competition comes
from both U.S. and foreign companies.
GROWTH STRATEGY--OUR ACQUISITION OF OTHER COMPANIES MAY POSE CERTAIN RISKS.
We consider and take advantage of selected opportunities to grow by
acquiring other businesses whose operations or product lines complement our
existing businesses. Our ability to implement this growth strategy will depend
on finding suitable acquisition candidates at acceptable valuations and
obtaining the required financing. Any acquisition we may make in the future
could be subject to a number of risks, including:
- our ability to integrate the operations and personnel of the acquired
company;
- our failure to identify liabilities of the acquired company for which we
may be responsible as a successor owner or operator;
- the loss of key personnel in the acquired company; and
5
<PAGE>
- the impact on our financial position, results of operations and cash flows
resulting from additional acquisition indebtedness.
Our inability to adequately manage these or other risks could have an
adverse effect on our business.
REGULATION--THE FAA CLOSELY REGULATES MANY OF OUR OPERATIONS. IF WE FAIL TO
COMPLY WITH ITS MANY STANDARDS, OR IF THOSE STANDARDS CHANGE, WE COULD LOSE
INSTALLATION OR CERTIFICATION CAPABILITIES, WHICH ARE IMPORTANT TO OUR BUSINESS.
The Federal Aviation Administration prescribes standards and licensing
requirements for aircraft components, licenses private repair stations and
issues Designated Alteration Station approvals, which give the holder the right
to certify some aircraft design modifications on behalf of the FAA. Our ability
to arrange for rapid government certification of the systems integration
services we perform is important to our business. It depends on our continuing
access to, or use of, these FAA certifications and approvals, and our employment
of, or access to, FAA-certified individual engineering professionals. We cannot
assure you that we will continue to have adequate access to those
certifications, approvals and certified professionals. The FAA curtailed our
subsidiary's use of a Designated Alteration Station certification for new
projects for several months during 1997, until the facility was brought into
compliance with the FAA's regulations governing FAA-certified repair stations as
further described in "Business--Industry Regulation." The loss of a required
license or certificate, or its unavailability, could adversely affect our
operations. The FAA could also change its policies regarding the delegation of
inspection and certification responsibilities to private companies, which could
adversely affect our business.
EXCESS LOSS RISKS--WE COULD SUSTAIN LOSSES IN EXCESS OF OUR INSURANCE FOR
LIABILITY CLAIMS.
Our business exposes us to possible claims for damages resulting from the
manufacture, installation and use of our products. Many factors beyond our
control could lead to such claims, such as the failure of an aircraft on which
our products have been installed, the reliability and skill of the operators of
such aircraft and the maintenance performed on such aircraft, We carry aircraft
products and grounding liability insurance for this purpose, but we cannot
assure you that our insurance coverage will be adequate to cover claims that may
arise or that we will be able to renew our coverage in the future at
commercially reasonable rates.
ENVIRONMENTAL RISKS AND REGULATION--SOME OF OUR OPERATIONS AND FACILITIES
GENERATE WASTE OR HAVE DONE SO IN THE PAST, WHICH MAY RESULT IN UNKNOWN FUTURE
LIABILITIES FOR ENVIRONMENTAL REMEDIATION.
Federal and state laws, particularly the federal Comprehensive Environmental
Response, Compensation and Liability Act (CERCLA), impose strict, retroactive
and joint and several liability upon persons responsible for releases or
potential releases of hazardous substances and other parties who have some
relationship to a site or a source of waste. We have sent waste to treatment,
storage or disposal facilities that have been designated as National Priority
List sites under CERCLA-A or equivalent listings under state laws. We have
received requests for information or allegations of potential responsibility
from the U.S. Environmental Protection Agency regarding our use of several of
these sites. Given the potentially retroactive nature of environmental
liability, it is possible that we will receive additional notices of potential
liability relating to current or former activities. We may incur costs in the
future for prior waste disposal by us or former owners of our subsidiaries or
our facilities. Some of our operations are located on properties which are
contaminated to varying degrees. In addition, some of our manufacturing
processes create wastewater which requires chemical treatment, and one of our
facilities has been cited for excessive quantity and strength of its wastewater.
We may incur costs in the future to address existing or future contamination. If
we incur significant costs in connection with these or other environmental
issues, our business and financial condition could be adversely affected.
REPURCHASE UPON CHANGE OF CONTROL--WE MAY NOT HAVE THE ABILITY TO RAISE THE
FUNDS NECESSARY TO FUND A CHANGE OF CONTROL OFFER IF IT IS REQUIRED BY THE
INDENTURE.
If we experience a change of control of the types described in "Description
of Notes--Repurchase at the Option of Holders," you will have the right to
require us to repurchase all or any part of your notes at an offer price in cash
equal to 101% of their aggregate principal amount, plus accrued interest to the
date of repurchase. We cannot assure you that we will have sufficient resources
to satisfy our repurchase obligation to every note holder following a change of
control.
6
<PAGE>
Our bank credit facility prohibits us from purchasing the notes, and makes
change of control events a default. The terms of any other future senior debt
may contain similar restrictions. If a change of control occurs while any senior
debt prohibits us from purchasing the notes, we could seek the consent of the
senior lenders to the purchase, or attempt to refinance the debt which prohibits
it. However, we can not assure you that those attempts would be successful. If
they are not, we would still be prohibited from repurchasing the notes. Our
failure to do so would result in a default under the indenture, which could also
result in a default in the senior debt, and therefore block any payments to you
under the "blocking" covenants described in
"--Subordination."
CONTROL BY PRINCIPAL SHAREHOLDERS--WE ARE CONTROLLED BY PRINCIPAL SHAREHOLDERS
WHO ARE AFFILIATED WITH OUR LENDERS AND MAY HAVE ECONOMIC INTERESTS WHICH DIFFER
OR CONFLICT WITH YOURS.
DeCrane Aircraft is wholly owned by DeCrane Holdings, and a significant
amount of the outstanding shares of common stock of DeCrane Holdings are held by
DLJ Merchant Banking Partners II, L.P. and affiliated funds and entities. Those
DLJ affiliates own approximately 85.7% of the common stock of DeCrane Holdings,
on a fully diluted basis assuming exercise of all outstanding warrants and
options. As a result of their stock ownership, the DLJ affiliates control
DeCrane Holdings and DeCrane Aircraft and have the power to approve all matters
requiring approval of the common stockholders, including electing all of their
directors, appointing new management, and approving sales of all or
substantially all of the assets of the companies. The directors elected by the
DLJ affiliates will have the ability to control decisions affecting our capital
structure, including issuing additional capital stock, establishing stock
purchase programs and declaring dividends.
DLJ Capital Funding, Inc., which is an agent and lender under our bank
credit facility, DLJ Bridge Finance, Inc., which purchased the original bridge
notes refinanced by the old notes, and Donaldson, Lufkin & Jenrette Securities
Corporation, which was the initial purchaser of the old notes, are also DLJ
affiliates, but they do not own any equity securities of DeCrane Aircraft or
DeCrane Holdings.
The interests of the principal shareholders could conflict with your
interests as a holder of the notes. For example, those shareholders may have an
interest in pursuing transactions that they believe enhance the value of their
equity investment in DeCrane Aircraft or DeCrane Holdings, even though the
transactions involve risks to your investment in the notes.
FRAUDULENT TRANSFERS--FEDERAL AND STATE "FRAUDULENT TRANSFER" STATUTES ALLOW
COURTS TO ORDER NOTEHOLDERS TO RETURN PAYMENTS ALREADY MADE, OR VOID GUARANTEES,
IF THE ISSUER'S OR GUARANTOR'S FINANCIAL CONDITION MEETS SPECIFIC TESTS.
Your rights to repayment of the notes, and to retain amounts already paid
under the notes, could be affected by the application of federal or state
"fraudulent transfer" laws. These statutes permit obligations to be undone or
rescinded if tests having to do with the obligation, the person's intent and the
person's financial condition are satisfied. Our repayment obligations to you
under the notes could be impaired by those laws if a court determined that, when
we issued or exchanged the notes, or, in some states, when payments become due
on the notes, we either:
- had the actual intent to hinder, delay or defraud current or future
creditors, or
- received less than fair consideration or reasonably equivalent value for
incurring the debt represented by the notes, AND we either:
- were insolvent or were rendered insolvent by reason of the incurrence,
or
- were engaged, or about to engage, in a business or transaction for
which our remaining unencumbered assets were unreasonably small, or
- intended to incur, or believed or should have believed we would incur,
debts beyond our ability to pay as such debts mature.
Based on such a finding, a court could void all or a portion of our
obligations to you, subordinate your right to repayment to our other existing
and future senior debt, in which case those other creditors would be paid in
full before any payment could be made on the notes, and take other action
detrimental to your rights, including invalidating the notes. A court would
likely find that we received less than fair consideration or reasonably
equivalent value for our obligations under the notes to the extent that we used
the proceeds
7
<PAGE>
from the original issuance of the notes for the acquisition of DeCrane Aircraft
by DLJ Merchant Banking. We cannot assure you that, if that occurred, you would
ever recover any repayment on your notes.
In addition, the obligations of our subsidiary guarantors under their
subsidiary guarantees may be subject to review under the same laws. In that
event, if a court were to find that when a subsidiary guarantor issued its
subsidiary guarantee (or, in some jurisdictions, when it became obligated to
make payments thereunder), the factors set forth above applied to that
subsidiary guarantor, a court could avoid the subsidiary guarantee and the
subsidiary guarantor's obligations thereunder and direct the return of any
amount paid to you pursuant to that subsidiary guarantee. A court would likely
find that a subsidiary guarantor received less than fair consideration or
reasonably equivalent value for its obligations under the subsidiary guarantee
to the extent that it did not receive direct or indirect benefit from the
issuance of the notes. If a court were to avoid a subsidiary guarantee of any
subsidiary guarantor, holders of notes would retain their rights against us and
the other subsidiary guarantors, although those entities' assets may be
insufficient to pay the notes in full.
The definition of insolvency used in the foregoing tests varies among
jurisdictions, depending upon the court and the law that is being applied. A
given court might apply different standards in determining whether we were
insolvent on a particular date, or regarding other grounds that might lead it to
take the actions noted above. Generally, however, an entity would be considered
insolvent if:
- the sum of its debts, including contingent and unliquidated liabilities,
were greater than the fair saleable value of all of its assets; or
- the present fair saleable value of its assets were less than the amount
that would be required to pay its probable liability on its existing
debts, including contingent and unliquidated liabilities, as they become
absolute and mature.
INDUSTRY AND MARKET DATA--WE CANNOT GUARANTEE THE ACCURACY AND COMPLETENESS OF
THE INDUSTRY AND MARKET DATA INCLUDED IN THIS PROSPECTUS.
Industry and market data used throughout this prospectus is based on the
good faith estimates of our management, which estimates are based primarily upon
internal management information and, to the extent available, independent
industry publications and other publicly available information. However, the
nature of the aircraft industry and competition in our markets results in
limited availability of reliable, independent data. Although we believe that the
sources we have used are reliable, we do not guarantee, and have not
independently verified, the accuracy and completeness of the information.
TRADING MARKET FOR THE NOTES--WE CANNOT ASSURE YOU THAT A MARKET FOR THE NOTES
WILL CONTINUE.
We cannot assure you about your ability to sell the notes or the price at
which you may be able to sell them. The notes may trade at prices that may be
higher or lower, and have recently traded at prices lower than their initial
offering price. The trading price, depends on many factors, including prevailing
interest rates, our operating results and the market for similar securities. DLJ
Securities Corporation currently makes a market in the notes. However, DLJ
Securities Corporation is not obligated to do so and it may discontinue or
interrupt any such market-making at any time without notice.
Because DLJ Securities Corporation may be deemed to be our "affiliate" (as
defined in the Securities Act), we maintain a registration statement that allows
DLJ to engage in market-making transactions in the notes and DLJ delivers a
prospectus in connection with its market-marking activities. If at any time the
market-making prospectus is not in compliance with the disclosure obligations of
the Securities Act, DLJ Securities Corporation may be unable to engage in
market-making activities until the prospectus is brought into compliance. There
are no other market-makers in the notes.
DEPENDENCE ON KEY PERSONNEL--WE NEED TO RETAIN THE SERVICES OF OUR KEY
EMPLOYEES.
Our success and growth depends in large part on the skills and efforts of
our management team and on our ability to attract and retain qualified personnel
experienced in the various operations of our business. The loss of key
personnel, including our founder, R. Jack DeCrane, combined with the failure to
attract additional qualified personnel for whatever reason, could delay
implementation of our business plan or otherwise adversely affect our
operations. We do not carry key man life insurance on any members of our
management team.
8
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RATIO OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges for the periods indicated are set
forth below.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------
EIGHT MONTHS FOUR MONTHS THREE MONTHS
ENDED ENDED ENDED
AUGUST 31, DECEMBER 31, MARCH 31,
------------ ------------ -------------------
1995 1996 1997 1998 1998 1999 1999 2000
-------- -------- -------- ------------ ------------ -------- -------- --------
(PREDECESSOR) (SUCCESSOR)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Historical Ratio.................. -- 1.0x 3.3x 3.0x -- -- -- 1.2x
Deficiency, in thousands........ $2,283 -- -- -- $2,910 $3,221 $ 273 --
Pro Forma Ratio................... -- 1.3x
Deficiency, in thousands........ $ 671 --
</TABLE>
We compute the ratio of earnings to fixed charges by dividing earnings by
fixed charges. Earnings represent net income before income taxes, minority
interest in the income of majority-owned subsidiaries, extraordinary items and
fixed charges. Fixed charges consist of:
- interest, whether expensed or capitalized;
- amortization of debt expense and discount relating to any indebtedness,
whether expensed or capitalized; and
- one-third of rental expense under operating leases which is considered to
be a reasonable approximation of the interest portion of such expense.
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<PAGE>
THE NOTES
We have summarized the general features of the debt securities offered by
this prospectus. For a detailed description of the notes, see the "Description
of Notes" section beginning on page 13.
<TABLE>
<S> <C>
Maturity Date........................ September 30, 2008.
Interest Payment Dates............... Each March 30 and September 30, beginning March 30, 1999.
Optional Redemption.................. We may redeem:
- all or some of the notes, on or after September 30, 2003,
- up to 35% of the notes, on or before September 30, 2001,
with the net cash proceeds of any public equity offerings,
and
- 100% of the notes, before September 30, 2003, if the
change of control events which are described herein occur,
at the redemption prices specified on pages 17 and 18.
Change of Control.................... You can require that we repurchase your notes, if the change
of control events which are described herein occur, at 101%
of the principal amount plus accrued interest. See "Risk
Factors--Repurchase upon Change of Control" and "Description
of Notes--Repurchase of the Option of Holders Upon Change of
Control."
Ranking.............................. The notes rank junior to all of our senior indebtedness and
secured debt, including the debt owed under our bank credit
facility. The notes rank equally with any of our future
unsecured, senior subordinated debt. The terms of the
indenture do not fully prohibit us or our subsidiaries from
incurring substantial additional indebtedness in the future.
In addition to senior debt which we might incur, we may
issue an unlimited amount of additional senior subordinated
notes under the indenture, so long as the total amount of
debt is permitted by our financial covenants.
The notes also will effectively rank junior to all
liabilities of our subsidiaries that are not guarantors. See
"Description of Notes--Note Guarantees." As of March 31,
2000, on a pro forma basis, DeCrane Aircraft and its
subsidiary guarantors would have had approximately
$270.4 million of senior indebtedness outstanding, and the
non-guarantor subsidiaries would have had approximately
$1.3 million of liabilities outstanding, including trade
payables.
Guarantors........................... The notes are fully and unconditionally guaranteed jointly
and severally by all of our existing wholly-owned domestic
subsidiaries. The notes are senior subordinated obligations
of the guarantors, and rank junior to their senior and
unsecured debt and equally with their future unsecured,
senior debt.
Covenants............................ The indenture which governs the notes includes covenants
that, among other things, limit our ability, and that of our
subsidiaries defined as "Restricted Subsidiaries," to:
- incur debt,
- issue preferred stock,
- repurchase capital stock or subordinated debt,
- enter into transactions with affiliates,
- enter into sale and leaseback transactions,
- create liens or allow them to exist,
- pay dividends or other distributions,
- make investments,
- sell assets, and
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
- enter into mergers or consolidations.
See "Description of Notes--Covenants."
The Warrants; the Units.............. The old notes were originally sold as "units," paired with
warrants for the common stock of DeCrane Aircraft's parent
company, DeCrane Holdings. The warrants may trade separately
from the notes on and after the effective date of the
registration statement of which this prospectus is a part.
The warrants are subject to a separate "shelf" registration
statement filed concurrently.
</TABLE>
11
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Any registered purchaser may request from us any information it wishes in
order to verify the information in this prospectus. Apart from this prospectus
and any responses we make to those requests, no one is authorized to give
information about this exchange offer or the notes on our behalf.
We have filed with the Securities and Exchange Commission a registration
statement on the SEC's Form S-3, to register the notes. This prospectus, and the
registration statement of which it is a part, update that registration
statement. However, the registration statement has additional information which
is not included here, in accordance with SEC rules. Our descriptions and
statements about any contract or other document in this prospectus or
incorporated herein by reference are summaries only, and, in each instance,
reference is made to a copy of such contract or other document filed as an
exhibit hereto or in a document incorporated by reference, each such description
or statement being qualified in all respects by such reference.
We became a reporting company as a result of the registration of the notes,
and file annual, quarterly and current reports, proxy statements and other
information with the SEC. Our fiscal year ends on December 31. You may read and
copy any reports, statements or other information we file with the SEC at the
SEC's reference room in Washington D.C. Please call the SEC at (202) 942-8090
for further information on the operation of the reference rooms. You can also
request copies of these documents, upon payment of a duplicating fee, by writing
to the SEC, or review our SEC filings on the SEC's EDGAR web site, which can be
found at http www.sec.gov. You may also write or call us at our corporate
headquarters located at 2361 Rosecrans Avenue, Suite 180, El Segundo, California
90245. Our telephone number is (310) 725-9123.
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents that are considered part of this prospectus. Later
information that we file with the SEC will automatically update and supersede
this information. We incorporate by reference the documents listed below and any
future filings made by us with the SEC under Section 13(a), 13(c), 14 or 15(d)
of the Securities Exchange Act of 1934 until this offering of securities has
been completed. This prospectus is part of a registration statement filed with
the SEC under the Securities Act.
- Annual Report on Form 10-K for the year ended December 31, 1999.
- Quarterly Report on Form 10-Q for the quarter ended March 31, 2000.
- Current Reports on Form 8-K and 8-K/A filed with the SEC on February 11,
2000, May 25, 2000, June 16, 2000, July 13, 2000 and August 2, 2000.
You may obtain a copy of these filings at no cost, by writing or telephoning
us at the following address:
DeCrane Aircraft Holdings, Inc.
2361 Rosecrans Avenue, Suite 180
El Segundo, California 90245
(310) 725-9123
USE OF PROCEEDS
This prospectus is delivered in connection with the sale of the notes by DLJ
Securities Corporation in market-making transactions. We have not received and
will not receive any of the proceeds from such transactions.
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<PAGE>
DESCRIPTION OF NOTES
GENERAL
The notes have been issued pursuant to an indenture between DeCrane Aircraft
and State Street Bank and Trust Company, as Trustee. The terms of the notes
include those stated in the indenture, and those which are incorporated into the
indenture by reference to the Trust Indenture Act of 1939. The notes are subject
to all of those terms, and holders of notes are referred to the indenture and
the Trust Indenture Act for a statement thereof.
The terms of the new notes and the old notes are substantially the same in
all material respects, except that the new notes will not be subject to
liquidated damages penalties for failure to timely register the notes under the
Securities Act, and will be more freely transferable by the holders thereof by
reason of their registration thereunder.
You should read the entire indenture, and the registration rights agreement
described below, for a complete understanding of the rights and obligations of
the holders of notes. Copies of the indenture and registration rights agreement
are available as set forth under "Where You Can Find More Information." Also,
the terms of the indenture use many specially defined terms. In this summary, we
have used the key defined terms, which are shown here as capitalized words. You
should refer to the definitions listed in "--Key Definitions" below for their
complete scope and meaning.
The notes are:
- general unsecured obligations of DeCrane Aircraft;
- subordinated in right of payment to all existing and future Senior
Indebtedness of DeCrane Aircraft, including the bank credit facility;
- ranking at the same level of payment priority, sometimes called "PARI
PASSU," with any future senior subordinated Indebtedness of DeCrane
Aircraft and senior in right of payment to all future subordinated
Indebtedness of DeCrane Aircraft;
- effectively subordinated to all liabilities of DeCrane Aircraft's
subsidiaries that are not Guarantors, including trade payables;
- fully and unconditionally guaranteed on a senior subordinated basis by
DeCrane Aircraft's existing wholly-owned domestic subsidiaries, as their
general unsecured obligations, subordinated in right of payment to all
existing and future Senior Indebtedness of the Guarantors, including
indebtedness under our bank credit facility, and ranking senior in right
of payment to any future subordinated indebtedness of the Guarantors.
We may issue an unlimited amount of additional senior subordinated notes
under the indenture, so long as the total amount of debt is permitted by our
financial covenants.
On a pro forma basis, as of March 31, 2000, DeCrane Aircraft and the
Guarantors would have had outstanding approximately $270.4 million of Senior
Indebtedness and DeCrane Aircraft's non-Guarantor subsidiaries would have had
approximately $1.3 million of outstanding liabilities, including trade payables
but excluding guarantees under the bank credit facility. The indenture will
permit DeCrane Aircraft and its Subsidiaries to incur additional Indebtedness,
including Senior Indebtedness, in the future. The risk of such indebtedness to
you as an investor is described in "Risk Factors--Subordination."
As of the date of the indenture, all of DeCrane Aircraft's Subsidiaries were
designated as Restricted Subsidiaries. However, under some circumstances,
DeCrane Aircraft will be permitted to designate current or future Subsidiaries
as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to
the restrictive covenants set forth in the indenture.
PRINCIPAL, MATURITY AND INTEREST
The notes will initially be limited in aggregate principal amount to
$100.0 million and will mature on September 30, 2008. Interest on the notes will
accrue at the rate of 12% per annum and will be payable semi-annually in arrears
on March 30 and September 30, commencing on March 30, 1999, to holders of record
on the immediately preceding March 15 and September 15. Interest on the notes
will accrue from the
13
<PAGE>
most recent date to which interest has been paid or, if no interest has been
paid, from the date of original issuance. Interest will be computed on the basis
of a 360-day year comprised of twelve 30-day months.
Principal of, premium, if any, and interest on the notes will be payable at
the office or agency of DeCrane Aircraft maintained for such purpose in New York
City or, at the option of DeCrane Aircraft, payment of interest may be made by
check mailed to the holders of the notes at their respective addresses set forth
in the register of holders of notes. However, all payments of principal, premium
and interest with respect to notes represented by one or more permanent global
notes will be paid by wire transfer of immediately available funds to the
account of the Depository Trust Company or any successor thereto. Until
otherwise designated by DeCrane Aircraft, DeCrane Aircraft's office or agency in
New York will be the office of the Trustee maintained for such purpose. The
notes will be issued in denominations of $1,000 and integral multiples thereof.
SUBORDINATION
The payment of Subordinated Note Obligations is subordinated in right of
payment, as set forth in the indenture, to the prior payment in full in cash or
cash equivalents of all Senior Indebtedness, whether outstanding on the date of
the indenture or thereafter incurred.
Upon any distribution to creditors of DeCrane Aircraft in a liquidation or
dissolution of DeCrane Aircraft or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to DeCrane Aircraft or their
property, an assignment for the benefit of creditors or any marshalling of
DeCrane Aircraft's assets and liabilities, the holders of Senior Indebtedness
will be entitled to receive payment in full in cash or cash equivalents of all
Obligations due in respect of such Senior Indebtedness, including interest after
the commencement of any such proceeding at the rate specified in the applicable
Senior Indebtedness, before the holders of notes will be entitled to receive any
payment with respect to the Subordinated Note Obligations. In that instance,
until all Obligations with respect to Senior Indebtedness are paid in full in
cash or cash equivalents, any distribution to which the holders of notes would
be entitled shall be made to the holders of Senior Indebtedness except Permitted
Junior Securities and payments made from the trust described under "--Legal
Defeasance and Covenant Defeasance."
DeCrane Aircraft also may not make any payment upon or in respect of the
Subordinated Note Obligations, except in Permitted Junior Securities or from the
trust described under "--Legal Defeasance and Covenant Defeasance", if a default
in the payment of the principal of, premium, if any, or interest on or
commitment fees relating to, Designated Senior Indebtedness occurs and is
continuing beyond any applicable period of grace, or if any other default occurs
and is continuing with respect to Designated Senior Indebtedness that permits
holders of the Designated Senior Indebtedness as to which such default relates
to accelerate its maturity and the Trustee receives a notice of such default
from the holders of any Designated Senior Indebtedness. This right of a senior
creditor is typically called "blockage." Payments on the notes may and shall be
resumed, in the case of a payment default, upon the date on which such default
is cured or waived, and otherwise, upon the earlier of the date on which such
nonpayment default is cured or waived or 179 days after the date on which the
applicable blockage notice is received, unless the maturity of any Designated
Senior Indebtedness has been accelerated. No new period of payment blockage may
be commenced unless and until 360 days have elapsed since the effectiveness of
the immediately prior blockage notice. No nonpayment default that existed or was
continuing on the date of delivery of any blockage notice to the Trustee shall
be, or be made, the basis for a subsequent blockage notice unless such default
shall have been waived or cured for a period of not less than 90 days.
"Designated Senior Indebtedness" means any Indebtedness outstanding under
the bank credit facility, and any other Senior Indebtedness permitted under the
indenture the principal amount of which is $25.0 million or more and that has
been designated by DeCrane Aircraft in writing to the Trustee as "Designated
Senior Indebtedness."
"Permitted Junior Securities" means Equity Interests in DeCrane Aircraft or
debt securities of DeCrane Aircraft that are subordinated to all Senior
Indebtedness, and any debt securities issued in exchange for Senior
Indebtedness, to substantially the same extent as, or to a greater extent than,
the notes are subordinated to Senior Indebtedness.
14
<PAGE>
"Senior Indebtedness" means, with respect to any person,
- all Obligations of such person outstanding under the bank credit facility
and all Hedging Obligations payable to a lender or an Affiliate thereof or
to a person that was a lender or an Affiliate thereof at the time the
contract was entered into under the bank credit facility or any of its
Affiliates, including interest accruing subsequent to the filing of, or
which would have accrued but for the filing of, a petition for bankruptcy,
whether or not such interest is an allowable claim in such bankruptcy
proceeding,
- any other Indebtedness, unless the instrument under which such
Indebtedness is incurred expressly provides that it is subordinated in
right of payment to any other Senior Indebtedness of such person and
- all Obligations with respect to the foregoing.
However, Senior Indebtedness does not include any liability for federal,
state, local or other taxes, any Indebtedness of such person, excluding that
arising under the bank credit facility, to any of its Subsidiaries or other
Affiliates, any trade payables or any Indebtedness that is incurred in violation
of the indenture.
"Subordinated Note Obligations" means all Obligations with respect to the
notes, including principal, premium if any and interest payable pursuant to the
terms of the notes, including upon the acceleration or redemption thereof,
together with and including any amounts received or receivable upon the exercise
of rights of rescission, claims for damages or other rights of action or
otherwise.
The indenture further requires that DeCrane Aircraft promptly notify holders
of Senior Indebtedness if payment of the notes is accelerated because of an
Event of Default. As a result of the subordination provisions described above,
in the event of a liquidation or insolvency, holders of notes may recover less
ratably than creditors of DeCrane Aircraft who are holders of Senior
Indebtedness.
NOTE GUARANTEES
DeCrane Aircraft's payment obligations under the notes are fully and
unconditionally guaranteed on a joint and several basis by the Guarantors. The
guarantee of each Guarantor is subordinated to the prior payment in full in cash
or cash equivalents of all Senior Indebtedness of such Guarantor, including such
Guarantor's guarantee of the bank credit facility, to the same extent that the
notes are subordinated to Senior Indebtedness of DeCrane Aircraft. The
obligations of each Guarantor under its guarantee are limited so as not to
constitute a fraudulent conveyance under applicable law.
The indenture provides that no Guarantor may consolidate or merge with or
into another corporation, person or entity whether or not affiliated with such
Guarantor unless:
- subject to the provisions of the following paragraph, the person formed by
or surviving any such consolidation or merger assumes all the obligations
of such Guarantor pursuant to a supplemental indenture in form and
substance reasonably satisfactory to the Trustee, under the notes, the
indenture and the registration rights agreement;
- immediately after giving effect to such transaction, no Default or Event
of Default exists; and
- Unless the consolidation or merger is with DeCrane Aircraft, DeCrane
Aircraft or another Guarantor would, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred
at the beginning of the applicable four-quarter period, be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the covenant described in
"--Incurrence of Indebtedness and Issuance of Preferred Stock."
The indenture provides that, in the event of a sale or other disposition of
all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of any
Guarantor, that Guarantor will be released and relieved of any obligations under
its guarantee, so long as the Net Proceeds of such sale or other disposition are
applied in accordance with the applicable provisions of the indenture, as
described in "--Repurchase at the Option of Holders."
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<PAGE>
OPTIONAL REDEMPTION
Except as provided below, the notes are not redeemable at DeCrane Aircraft's
option before September 30, 2003. Thereafter, the notes will be subject to
redemption at any time at the option of DeCrane Aircraft, in whole or in part,
on not less than 30 nor more than 60 days' notice, in cash at the redemption
prices set forth below, plus accrued and unpaid interest thereon to the
applicable redemption date, if redeemed during the twelve months beginning on
September 30 of the years indicated below:
<TABLE>
<CAPTION>
PERCENTAGE
YEAR OF PRINCIPAL AMOUNT
---- -------------------
<S> <C>
2003........................................................ 106.000%
2004........................................................ 104.000%
2005........................................................ 102.000%
2006 and thereafter......................................... 100.000%
</TABLE>
Notwithstanding the foregoing, on or prior to September 30, 2001, DeCrane
Aircraft may redeem up to 35% of the aggregate principal amount of notes ever
issued under the indenture in cash at a redemption price of 112% of the
principal amount thereof, plus accrued and unpaid interest thereon to the
redemption date, with the net cash proceeds of one or more Public Equity
Offerings. However, the foregoing redemption is only permitted if at least 65%
of the aggregate principal amount of notes ever issued under the indenture
remains outstanding immediately after the occurrence of the redemption, and the
redemption occurs within 90 days of the date of the closing of any such Public
Equity Offering.
In addition, at any time prior to September 30, 2003, DeCrane Aircraft may,
at its option upon the occurrence of a Change of Control, redeem the notes, in
whole but not in part, upon not less than 30 nor more than 60 days' prior
notice, and no more than 60 days after the occurrence of such Change of Control,
in cash at a redemption price equal to
(1) the present value of the sum of all the remaining interest, excluding
any accrued and unpaid interest, premium and principal payments that would
become due on the notes as if the notes were to remain outstanding and be
redeemed on September 30, 2003, computed using a discount rate equal to the
Treasury Rate plus 50 basis points, plus
(2) accrued and unpaid interest to the date of redemption.
"Treasury Rate" means, as of any redemption date, the yield to maturity as
of such redemption date of United States Treasury securities with a constant
maturity most nearly equal to the period from the redemption date to
September 30, 2003, as stated in the most recent Federal Reserve Statistical
Release H.15 (519) that has become publicly available at least two Business Days
prior to the redemption date or, if such Statistical Release is no longer
published, any publicly available source of similar market data. However, if the
period from the redemption date to September 30, 2003 is less than one year, the
weekly average yield on actually traded United States Treasury securities
adjusted to a constant maturity of one year shall be used.
SELECTION AND NOTICE
If less than all of the notes are to be redeemed at any time, selection of
notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
notes are listed, or, if the notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate. However,
notes of $1,000 or less shall be redeemed in part. Notices of redemption shall
be mailed by first class mail at least 30 but not more than 60 days before the
redemption date to each holder of notes to be redeemed at its registered
address. Notices of redemption may not be conditional. If any note is to be
redeemed in part only, the notice of redemption that relates to such note shall
state the portion of the principal amount thereof to be redeemed. A new note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon cancellation of the original note. Notes called
for redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on notes or portions of them called
for redemption.
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MANDATORY REDEMPTION
DeCrane Aircraft is not required to make mandatory redemption of, or sinking
fund payments with respect to, the notes.
REPURCHASE AT THE OPTION OF HOLDERS UPON CHANGE OF CONTROL
Upon the occurrence of a Change of Control, as specifically defined in the
indenture and summarized below, each holder of notes will have the right to
require DeCrane Aircraft to repurchase all or any part, equal to $1,000 or an
integral multiple thereof, of such holder's notes which the holder offers in the
manner described below at an offer price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest thereon to the date
of repurchase. Within 60 days following any Change of Control, DeCrane Aircraft
will cause the mailing of a notice to each holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
notes on the payment date specified in such notice, which date shall be no
earlier than 30 days and no later than 60 days from the date such notice is
mailed, pursuant to the procedures required by the indenture and described in
such notice. DeCrane Aircraft will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of the notes as a result of a Change of Control. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of the Indenture relating to the foregoing offer and repurchase,
DeCrane Aircraft will comply with the applicable securities laws and regulations
and shall not be deemed to have breached their obligations described in the
Indenture by virtue thereof.
On the foregoing payment date, DeCrane Aircraft will, to the extent lawful,
accept for payment all notes or portions thereof properly tendered pursuant to
its offer to repurchase, deposit with the paying agent an amount equal to the
foregoing payment in respect of all notes or portions thereof so tendered, and
deliver or cause to be delivered to the Trustee the notes so accepted together
with an officers' certificate stating the aggregate principal amount of notes or
portions thereof being purchased by DeCrane Aircraft. The paying agent will
promptly mail to each holder of notes so tendered the foregoing payment for such
notes, and the Trustee will promptly authenticate and mail, or cause to be
transferred by book-entry, to each holder a new Note equal in principal amount
to any unpurchased portion of the notes surrendered, if any. However, each such
new Note must be in a principal amount of $1,000 or an integral multiple
thereof. The indenture provides that, prior to complying with the provisions of
this covenant, but in any event within 90 days following a Change of Control,
DeCrane Aircraft will either repay all outstanding Senior Indebtedness or obtain
the requisite consents, if any, under all agreements governing outstanding
Senior Indebtedness to permit the repurchase of notes required by this covenant.
DeCrane Aircraft will publicly announce the results of its offer to repurchase
on or as soon as practicable after the foregoing payment date.
The change of control provisions described above will be applicable whether
or not any other provisions of the indenture are applicable. Except as described
above, the indenture does not contain provisions that permit the holders of the
notes to require that DeCrane Aircraft repurchase or redeem the notes in the
event of a takeover, recapitalization or similar transaction.
The bank credit facility prohibits DeCrane Aircraft from purchasing any
notes and also provides that change of control events, which may include events
not otherwise constituting a "change of control" as defined in the indenture,
with respect to DeCrane Aircraft would constitute a default thereunder. Any
future credit agreements or other agreements relating to Senior Indebtedness to
which DeCrane Aircraft becomes a party may contain similar restrictions and
provisions. In the event such a change of control occurs at a time when DeCrane
Aircraft is prohibited from purchasing notes, DeCrane Aircraft could seek the
consent of its lenders to the purchase of notes or could attempt to refinance
the borrowings that contain such prohibition. If DeCrane Aircraft does not
obtain such a consent or repay such borrowings, DeCrane Aircraft will remain
prohibited from purchasing notes. In such case, DeCrane Aircraft's failure to
purchase tendered notes would constitute an Event of Default under the
indenture, which would, in turn, constitute a default under the bank credit
facility. In such circumstances, the subordination provisions in the Indenture
would likely restrict payments to the holders of notes.
DeCrane Aircraft will not be required to make an offer to repurchase upon a
change of control in the manner described above if a third party makes the offer
to repurchase in the manner, at the times and otherwise in compliance with the
requirements set forth in the indenture applicable to an offer to repurchase
made by DeCrane Aircraft and purchases all notes validly tendered and not
withdrawn under such offer.
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<PAGE>
"Change of Control" means the occurrence of any of the following:
(1) the sale, lease, transfer, conveyance or other disposition, other
than by way of merger or consolidation, in one or a series of related
transactions, of all or substantially all of the assets of DeCrane Aircraft
and its Subsidiaries, taken as a whole, to any "person" or "group," as such
terms are used in Section 13(d) of the Exchange Act, other than the
Principals and their Related Parties;
(2) the adoption of a plan for the liquidation or dissolution of DeCrane
Aircraft;
(3) the consummation of any transaction, including, any merger or
consolidation the result of which is that any "person" or "group," as such
terms are used in Section 13(d) of the Exchange Act, other than the
Principals and their Related Parties, becomes the "beneficial owner" (as
such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act),
directly or indirectly through one or more intermediaries, of 50% or more of
the voting power of the outstanding voting stock of DeCrane Aircraft; or
(4) the first day on which a majority of the members of the board of
directors of DeCrane Aircraft are not Continuing Members.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of DeCrane Aircraft and its Subsidiaries taken as a whole.
Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a holder of notes to require
DeCrane Aircraft to repurchase such notes as a result of a sale, lease,
transfer, conveyance or other disposition of less than all of the assets of
DeCrane Aircraft and its Subsidiaries taken as a whole to another Person or
group may be uncertain.
"Continuing Members" means, as of any date of determination, any member of
the board of directors of DeCrane Aircraft who was a member of such board of
directors immediately after consummation of the Acquisition, or was nominated
for election or elected to such board of directors with the approval of, or
whose election to the board of directors was ratified by, at least a majority of
the Continuing Members who were members of such board of directors at the time
of such nomination or election or any successor Continuing Directors appointed
by such Continuing Directors or their successors.
ASSET SALES
The indenture provides that DeCrane Aircraft will not, and will not permit
any of its Restricted Subsidiaries to, consummate an Asset Sale unless
(1) DeCrane Aircraft or such Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the fair
market value, evidenced by a resolution of the board of directors set forth in
an officers' certificate delivered to the Trustee, of the assets or Equity
Interests issued or sold or otherwise disposed of, and
(2) at least 75% of the consideration therefor received by DeCrane Aircraft
or such Restricted Subsidiary is in the form of cash or Cash Equivalents or
property or assets that are used or useful in a Permitted Business, or the
Capital Stock of any person engaged in a Permitted Business if, as a result of
the acquisition by DeCrane Aircraft or any Restricted Subsidiary thereof, such
Person becomes a Restricted Subsidiary The foregoing 75% requirement will not
apply to any Asset Sale in which the cash or Cash Equivalents portion of the
consideration received therefrom, determined in accordance with the foregoing
proviso, is equal to or greater than what the after-tax proceeds would have been
had such Asset Sale complied with that 75% rule. The following types of assets
will be deemed cash in applying that 75% test:
(a) any liabilities as shown on DeCrane Aircraft's most recent balance
sheet or such Restricted Subsidiary's of DeCrane Aircraft or any Restricted
Subsidiary as shown on their most recent balance sheet, other than
contingent liabilities and liabilities that are by their terms subordinated
to the notes or any guarantee thereof, that are assumed by the transferee of
any such assets pursuant to a customary novation agreement that releases
DeCrane Aircraft or such Restricted Subsidiary from further liability,
(b) any securities, notes or other obligations received by DeCrane
Aircraft or any such Restricted Subsidiary from such transferee that are
contemporaneously converted by DeCrane Aircraft or such
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<PAGE>
Restricted Subsidiary into cash or Cash Equivalents, to the extent of the
cash or Cash Equivalents received, and
(c) any Designated Noncash Consideration received by DeCrane Aircraft or
any of its Restricted Subsidiaries in such Asset Sale having an aggregate
fair market value, taken together with all other Designated Noncash
Consideration received pursuant to this clause (c) that is at that time
outstanding, not to exceed 15% of Total Assets at the time of the receipt of
such Designated Noncash Consideration, with the fair market value of each
item of Designated Noncash Consideration being measured at the time received
and without giving effect to subsequent changes in value.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
DeCrane Aircraft or any such Restricted Subsidiary shall apply such Net
Proceeds, at its option, or to the extent DeCrane Aircraft is required to apply
such Net Proceeds pursuant to the terms of the bank credit facility, to
(1) repay or purchase Senior Indebtedness or Pari Passu Indebtedness of
DeCrane Aircraft or any Indebtedness of any Restricted Subsidiary, provided
that, if DeCrane Aircraft shall so repay or purchase Pari Passu Indebtedness of
DeCrane Aircraft, it will equally and ratably reduce Indebtedness under the
notes if the notes are then redeemable, or, if the notes may not then be
redeemed, DeCrane Aircraft shall make an offer in accordance with the procedures
set forth below for an Asset Sale Offer to all holders of notes to purchase at a
purchase price equal to 100% of the principal amount of the notes, plus accrued
and unpaid interest thereon to the date of purchase, the notes that would
otherwise be redeemed, or
(2) an investment in property, the making of a capital expenditure or the
acquisition of assets that are used or useful in a Permitted Business, or
Capital Stock of any Person primarily engaged in a Permitted Business if
(a) as a result of the acquisition by DeCrane Aircraft or any Restricted
Subsidiary thereof, such Person becomes a Restricted Subsidiary or
(b) the Investment in such Capital Stock is permitted by clause (f) of
the definition of Permitted Investments. Pending the final application of
any such Net Proceeds, DeCrane Aircraft may temporarily reduce Indebtedness
or otherwise invest such Net Proceeds in any manner that is not prohibited
by the Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the first sentence of this paragraph will be deemed to constitute
"Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds
$10.0 million, DeCrane Aircraft will be required to make an offer to all holders
of notes referred to as an "Asset Sale Offer," to purchase the maximum principal
amount of notes that may be purchased out of the Excess Proceeds, at an offer
price in cash in an amount equal to 100% of the principal amount thereof, plus
accrued and unpaid interest thereon to the date of purchase, in accordance with
the procedures set forth in the indenture. To the extent that any Excess
Proceeds remain after consummation of an Asset Sale Offer, DeCrane Aircraft may
use such Excess Proceeds for any purpose not otherwise prohibited by the
Indenture. If the aggregate principal amount of notes surrendered by holders
thereof in connection with an Asset Sale Offer exceeds the amount of Excess
Proceeds, the Trustee shall select the notes to be purchased as set forth under
"--Selection and Notice." Upon completion of such offer to purchase, the amount
of Excess Proceeds shall be reset at zero.
DeCrane Aircraft will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with the provisions of
the indenture relating to such Asset Sale Offer, DeCrane Aircraft will comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations described in the indenture by virtue thereof.
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<PAGE>
PRINCIPAL COVENANTS
RESTRICTED PAYMENTS
The indenture provides that DeCrane Aircraft will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly:
(a) declare or pay any dividend or make any other payment or distribution on
account of DeCrane Aircraft's or any of its Restricted Subsidiaries' Equity
Interests, other than dividends or distributions payable in Equity Interests
other than Disqualified Stock of DeCrane Aircraft or dividends or distributions
payable to DeCrane Aircraft or any Wholly Owned Restricted Subsidiary of DeCrane
Aircraft;
(b) purchase, redeem or otherwise acquire or retire for value any Equity
Interests of DeCrane Aircraft, any of its Restricted Subsidiaries or any other
Affiliate of DeCrane Aircraft, other than any such Equity Interests owned by
DeCrane Aircraft or any Restricted Subsidiary of DeCrane Aircraft;
(c) make any principal payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value, any Indebtedness of DeCrane
Aircraft that is subordinated in right of payment to the notes, except in
accordance with the mandatory redemption or repayment provisions set forth in
the original documentation governing such Indebtedness, but not pursuant to any
mandatory offer to repurchase upon the occurrence of any event; or
(d) make any Restricted Investment;
all such payments and other actions set forth in clauses (a) through (d) above
are collectively referred to as "Restricted Payments"; unless, at the time of
and after giving effect to such Restricted Payment:
(1) no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof; and
(2) DeCrane Aircraft would, immediately after giving pro forma effect
thereto as if such Restricted Payment had been made at the beginning of the
applicable four-quarter period, have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of the covenant described under "--Incurrence of
Indebtedness and Issuance of Preferred Stock"; and
(3) such Restricted Payment, together with the aggregate amount of all other
Restricted Payments made by DeCrane Aircraft and its Restricted Subsidiaries
after the date of the indenture, excluding Restricted Payments permitted by
clause (a) to the extent that the declaration of any dividend referred to
therein reduces amounts available for Restricted Payments pursuant to this
clause (3), clauses (b) through (i), and clauses (k), (l), (o), (p) and (r) of
the next succeeding paragraph, is less than the sum, without duplication, of
(A) 50% of the Consolidated Net Income of DeCrane Aircraft for the
period, taken as one accounting period, commencing October 1, 1998 to the
end of DeCrane Aircraft's most recently ended fiscal quarter for which
internal financial statements are available at the time of such Restricted
Payment or, if such Consolidated Net Income for such period is a deficit,
less 100% of such deficit, plus
(B) 100% of the Qualified Proceeds received by DeCrane Aircraft on or
after the date of the Indenture from contributions to DeCrane Aircraft's
capital or from the issue or sale on or after the date of the Indenture of
Equity Interests of DeCrane Aircraft or of Disqualified Stock or convertible
debt securities of DeCrane Aircraft to the extent that they have been
converted into such Equity Interests, other than Equity Interests,
Disqualified Stock or convertible debt securities sold to a Subsidiary of
DeCrane Aircraft and other than Disqualified Stock or convertible debt
securities that have been converted into Disqualified Stock, plus
(C) the amount equal to the net reduction in Investments in Persons
after the date of the Indenture who are not Restricted Subsidiaries other
than Permitted Investments resulting from
(x) Qualified Proceeds received as a dividend, repayment of a loan or
advance or other transfer of assets, valued at the fair market value
thereof, to DeCrane Aircraft or any Restricted Subsidiary from such
Persons,
(y) Qualified Proceeds received upon the sale or liquidation of such
Investment and
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(z) the redesignation of Unrestricted Subsidiaries, available for
Restricted Payments pursuant to clause (j) or (n) below arising from the
redesignation of such Restricted Subsidiary, whose assets are used or
useful in, or which is engaged in, one or more Permitted Business as
Restricted Subsidiaries valued, proportionate to DeCrane Aircraft's
equity interest in such Subsidiary, at the fair market value of the net
assets of such Subsidiary at the time of such redesignation.
The foregoing provisions will not prohibit:
(a) the payment of any dividend within 60 days after the date of declaration
thereof, if at said date of declaration such payment would have complied with
the provisions of the Indenture;
(b) the redemption, repurchase, retirement, defeasance or other acquisition
of any subordinated Indebtedness or Equity Interests of DeCrane Aircraft (the
"Retired Capital Stock") in exchange for or out of the net cash proceeds of the
substantially concurrent sale, other than to a Subsidiary of DeCrane Aircraft,
of other Equity Interests of DeCrane Aircraft other than any Disqualified Stock
(the "Refunding Capital Stock"), provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase, retirement,
defeasance or other acquisition shall be excluded from clause (3)(B) of the
preceding paragraph;
(c) the defeasance, redemption, repurchase, retirement or other acquisition
of subordinated Indebtedness of DeCrane Aircraft with the net cash proceeds from
an incurrence of, or in exchange for, Permitted Refinancing Indebtedness;
(d) the repurchase, redemption or other acquisition or retirement for value
of any Equity Interests of DeCrane Aircraft or DeCrane Holdings held by any
member of DeCrane Holdings' or DeCrane Aircraft's or any of its Restricted
Subsidiaries' management pursuant to any management equity subscription
agreement or stock option agreement and any dividend to DeCrane Holdings to fund
any such repurchase, redemption, acquisition or retirement, provided that
(1) the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests shall not exceed
(x) $4.0 million in any calendar year with unused amounts in any
calendar year being carried over to succeeding calendar years subject to
a maximum, without giving effect to the following clause (y) of
$7.0 million in any calendar year, plus
(y) the aggregate cash proceeds received by DeCrane Aircraft during
such calendar year from any reissuance of Equity Interests by DeCrane
Aircraft or DeCrane Holdings to members of management of DeCrane Aircraft
and its Restricted Subsidiaries and
(2) no Default or Event of Default shall have occurred and be continuing
immediately after such transaction;
(e) payments and transactions in connection with the Acquisition, the
Acquisition Financing, the Offering, the bank credit facility including
commitment, syndication and arrangement fees payable thereunder, and the
application of the proceeds thereof including the purchase of shares of Common
Stock of DeCrane Aircraft and any payment therefor by way of dissenting rights
or otherwise, and the payment of fees and expenses with respect thereto;
(f) the payment of dividends or the making of loans or advances by DeCrane
Aircraft to DeCrane Holdings not to exceed $3.0 million in any fiscal year for
costs and expenses incurred by DeCrane Holdings in its capacity as a holding
company or for services rendered by DeCrane Holdings on behalf of DeCrane
Aircraft;
(g) payments or distributions to DeCrane Holdings pursuant to any Tax
Sharing Agreement;
(h) the payment of dividends by a Restricted Subsidiary on any class of
common stock of such Restricted Subsidiary if such dividend is paid pro rata to
all holders of such class of common stock, and at least 51% of such class of
common stock is held by DeCrane Aircraft or one or more of its Restricted
Subsidiaries;
(i) the repurchase of any class of common stock of a Restricted Subsidiary
if such repurchase is made pro rata with respect to such class of common stock,
and at least 51% of such class of common stock is held by DeCrane Aircraft or
one or more of its Restricted Subsidiaries;
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<PAGE>
(j) any other Restricted Investment made in a Permitted Business which,
together with all other Restricted Investments made pursuant to this clause (j)
since the date of the Indenture, does not exceed $25.0 million, in each case,
after giving effect to all subsequent reductions in the amount of any Restricted
Investment made pursuant to this clause (j), either as a result of
(1) the repayment or disposition thereof for cash or
(2) the redesignation of an Unrestricted Subsidiary as a Restricted
Subsidiary, valued proportionate to DeCrane Aircraft's equity interest in
such Subsidiary at the time of such redesignation at the fair market value
of the net assets of such Subsidiary at the time of such redesignation,
in the case of clause (1) and (2), not to exceed the amount of such Restricted
Investment previously made pursuant to this clause (j); provided that no Default
or Event of Default shall have occurred and be continuing immediately after
making such Restricted Investment;
(k) the declaration and payment of dividends to holders of any class or
series of Disqualified Stock of DeCrane Aircraft or any Restricted Subsidiary
issued on or after the date of the indenture in accordance with the covenant
described under "--Incurrence of Indebtedness and Issuance of Preferred Stock";
provided that no Default or Event of Default shall have occurred and be
continuing immediately after making such Restricted Payment;
(l) repurchases of Equity Interests deemed to occur upon exercise of stock
options if such Equity Interests represent a portion of the exercise price of
such options;
(m) the payment of dividends or distributions on DeCrane Aircraft's common
stock, following the first public offering of DeCrane Aircraft's common stock or
DeCrane Holdings' common stock after the date of the Indenture, of up to 6.0%
per annum of
(1) the net proceeds received by DeCrane Aircraft from such public
offering of its common stock or
(2) the net proceeds received by DeCrane Aircraft from such public
offering of DeCrane Holdings' common stock as common equity or preferred
equity other than Disqualified Stock, other than, in each case, with respect
to public offerings with respect to DeCrane Aircraft's common stock or
DeCrane Holdings' common stock registered on Form S-8; provided that no
Default or Event of Default shall have occurred and be continuing
immediately after any such payment of dividends or distributions;
(n) any other Restricted Payment which, together with all other Restricted
Payments made pursuant to this clause (n) since the date of the Indenture, does
not exceed $10.0 million, in each case, after giving effect to all subsequent
reductions in the amount of any Restricted Investment made pursuant to this
clause (n) either as a result of
(1) the repayment or disposition thereof for cash or
(2) the redesignation of an Unrestricted Subsidiary as a Restricted
Subsidiary valued proportionate to DeCrane Aircraft's equity interest in
such Subsidiary at the time of such redesignation at the fair market value
of the net assets of such Subsidiary at the time of such redesignation,
in the case of clause (1) and (2), not to exceed the amount of such Restricted
Investment previously made pursuant to this clause (n); provided that no Default
or Event of Default shall have occurred and be continuing immediately after
making such Restricted Payment;
(o) the pledge by DeCrane Aircraft of the Capital Stock of an Unrestricted
Subsidiary of DeCrane Aircraft to secure Non-Recourse Debt of such Unrestricted
Subsidiary;
(p) the purchase, redemption or other acquisition or retirement for value of
any Equity Interests of any Restricted Subsidiary issued after the date of the
indenture, provided that the aggregate price paid for any such repurchased,
redeemed, acquired or retired Equity Interests shall not exceed the sum of
- the amount of cash and Cash Equivalents received by such Restricted
Subsidiary from the issue or sale thereof and
- any accrued dividends thereon the payment of which would be permitted
pursuant to clause (k) above;
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(q) any Investment in an Unrestricted Subsidiary that is funded by Qualified
Proceeds received by DeCrane Aircraft on or after the date of the Indenture from
contributions to DeCrane Aircraft's capital or from the issue and sale on or
after the date of the Indenture of Equity Interests of DeCrane Aircraft or of
Disqualified Stock or convertible debt securities to the extent they have been
converted into such Equity, other than Equity Interests, Disqualified Stock or
convertible debt securities sold to a Subsidiary of DeCrane Aircraft and other
than Disqualified Stock or convertible debt securities that have been converted
into Disqualified Stock, in an amount measured at the time such Investment is
made and without giving effect to subsequent changes in value that does not
exceed the amount of such Qualified Proceeds; and
(r) distributions or payments of Receivables Fees.
The board of directors of DeCrane Aircraft may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation would not cause
a Default. For purposes of making such designation, all outstanding Investments
by DeCrane Aircraft and its Restricted Subsidiaries, except to the extent repaid
in cash, in the Subsidiary so designated will be deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under the first paragraph of this covenant. All such
outstanding Investments will be deemed to constitute Restricted Investments in
an amount equal to the greater of
- the net book value of such Investments at the time of such designation and
- the fair market value of such Investments at the time of such designation.
Such designation will only be permitted if such Restricted Investment would
be permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments other than cash shall be the fair
market value on the date of the Restricted Payment of the assets or securities
proposed to be transferred or issued by DeCrane Aircraft or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The amount
of all Qualified Proceeds other than cash shall be the fair market value on the
date of receipt thereof by DeCrane Aircraft of such Qualified Proceeds. The fair
market value of any non-cash Restricted Payment shall be determined by the board
of directors of DeCrane Aircraft whose resolution with respect thereto shall be
delivered to the Trustee. Not later than the date of making any Restricted
Payment, DeCrane Aircraft shall deliver to the Trustee an officers' certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by the covenant "Restricted Payments" were
computed.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The indenture provides that
- DeCrane Aircraft will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently
or otherwise, with respect to any Indebtedness, including Acquired
Indebtedness,
- DeCrane Aircraft will not, and will not permit any of its Restricted
Subsidiaries to, issue any shares of Disqualified Stock and
- DeCrane Aircraft will not permit any of its Restricted Subsidiaries to
issue any shares of preferred stock;
Provided that DeCrane Aircraft or any Restricted Subsidiary may incur
Indebtedness, including Acquired Indebtedness, or issue shares of Disqualified
Stock if the Fixed Charge Coverage Ratio for DeCrane Aircraft's most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such additional Indebtedness
is incurred or such Disqualified Stock is issued would have been at least 2.0 to
1, determined on a consolidated pro forma basis including a pro forma
application of the net proceeds therefrom, as if the additional Indebtedness had
been incurred, or the Disqualified Stock had been issued, as the case may be, at
the beginning of such four-quarter period.
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The provisions of the first paragraph of this covenant will not apply to the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Indebtedness"):
(1) the incurrence by DeCrane Aircraft and its Restricted Subsidiaries of
Indebtedness under the bank credit facility; provided that the aggregate
principal amount of all Indebtedness, with letters of credit being deemed to
have a principal amount equal to the maximum potential liability of DeCrane
Aircraft and such Restricted Subsidiaries thereunder, then classified as having
been incurred in reliance upon this clause (1) that remains outstanding under
the bank credit facility after giving effect to such incurrence does not exceed
an amount equal to $150.0 million;
(2) the incurrence by DeCrane Aircraft and its Restricted Subsidiaries of
Existing Indebtedness;
(3) the incurrence by DeCrane Aircraft of Indebtedness represented by the
notes and the Indenture and by the Guarantors of Indebtedness represented by
their note guarantees;
(4) the incurrence by DeCrane Aircraft and its Restricted Subsidiaries of
Indebtedness denominated in Swiss francs or their successor European common
currency in an aggregate principal amount, or accreted value, as applicable, not
to exceed $4.0 million outstanding after giving effect to such incurrence;
(5) the incurrence by DeCrane Aircraft or any of its Restricted Subsidiaries
of Indebtedness represented by Capital Expenditure Indebtedness, Capital Lease
Obligations or purchase money obligations, in each case, incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in the business
of DeCrane Aircraft or such Restricted Subsidiary, in an aggregate principal
amount or accreted value, as applicable not to exceed $15.0 million outstanding
after giving effect to such incurrence;
(6) Indebtedness arising from agreements of DeCrane Aircraft or any
Restricted Subsidiary providing for indemnification, adjustment of purchase
price or similar obligations, in each case, incurred or assumed in connection
with the disposition of any business, assets or a Subsidiary, other than
guarantees of Indebtedness incurred by any Person acquiring all or any portion
of such business, assets or Restricted Subsidiary for the purpose of financing
such acquisition; provided that
(A) such Indebtedness is not reflected on the balance sheet of DeCrane
Aircraft or any Restricted Subsidiary, other than in the footnotes in the
case of a contingent obligation; and
(B) the maximum assumable liability in respect of such Indebtedness
shall at no time exceed the gross proceeds including non-cash proceeds
actually received by DeCrane Aircraft and/or such Restricted Subsidiary in
connection with such disposition, the fair market value of such non-cash
proceeds being measured at the time received and without giving effect to
any subsequent changes in value;
(7) the incurrence by DeCrane Aircraft or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Indebtedness other than
intercompany Indebtedness that was permitted by the Indenture to be incurred;
(8) the incurrence by DeCrane Aircraft or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among DeCrane Aircraft and/or any of its
Restricted Subsidiaries; provided that
(1) if DeCrane Aircraft is the obligor on such Indebtedness, such
Indebtedness is expressly subordinated to the prior payment in full in cash
of all Obligations with respect to the notes and
(2) (A) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than DeCrane
Aircraft or a Restricted Subsidiary thereof and (B) any sale or other
transfer of any such Indebtedness to a Person that is not either DeCrane
Aircraft or a Restricted Subsidiary thereof shall be deemed, in each case,
to constitute an incurrence of such Indebtedness by DeCrane Aircraft or such
Restricted Subsidiary, as the case may be, that was not permitted by this
clause (8);
(9) the incurrence by DeCrane Aircraft or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred for the purpose of fixing or hedging
(A) interest rate risk with respect to any floating rate Indebtedness
that is permitted by the terms of this Indenture to be outstanding and
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(B) exchange rate risk with respect to agreements or Indebtedness of
such Person payable denominated in a currency other than U.S. dollars,
provided that such agreements do not increase the Indebtedness of the
obligor outstanding at any time other than as a result of fluctuations in
foreign currency exchange rates or interest rates or by reason of fees,
indemnities and compensation payable thereunder;
(10) the guarantee by DeCrane Aircraft or any of its Restricted Subsidiaries
of Indebtedness of DeCrane Aircraft or a Restricted Subsidiary of DeCrane
Aircraft that was permitted to be incurred by another provision of this
covenant;
(11) the incurrence by DeCrane Aircraft or any of its Restricted
Subsidiaries of Acquired Indebtedness in an aggregate principal amount or
accreted value, as applicable not to exceed $10.0 million outstanding after
giving effect to such incurrence;
(12) obligations in respect of performance and surety bonds and completion
guarantees provided by DeCrane Aircraft or any Restricted Subsidiary in the
ordinary course of business; and
(13) the incurrence by DeCrane Aircraft or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal amount or
accreted value, as applicable outstanding after giving effect to such
incurrence, including all Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any Indebtedness incurred pursuant to this clause (13), not
to exceed $20.0 million.
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories of
Permitted Indebtedness described in clauses (1) through (13) above or is
entitled to be incurred pursuant to the first paragraph of this covenant,
DeCrane Aircraft shall, in its sole discretion, classify such item of
Indebtedness in any manner that complies with this covenant and such item of
Indebtedness will be treated as having been incurred pursuant to only one of
such clauses or pursuant to the first paragraph hereof. In addition, DeCrane
Aircraft may, at any time, change the classification of an item of Indebtedness
or any portion thereof to any other clause or to the first paragraph hereof,
provided that DeCrane Aircraft would be permitted to incur such item of
Indebtedness or such portion thereof pursuant to such other clause or the first
paragraph hereof, as the case may be, at such time of reclassification. Accrual
of interest, accretion or amortization of original issue discount will not be
deemed to be an incurrence of Indebtedness for purposes of this covenant.
All Indebtedness under the bank credit facility outstanding on the date of
the indenture shall be deemed to have been incurred on such date in reliance on
the first paragraph of the covenant described under "--Incurrence of
Indebtedness and Issuance of Preferred Stock." As a result, DeCrane Aircraft
will be permitted to incur significant additional secured indebtedness under
clause (1) of the definition above of "Permitted Indebtedness."
LIENS
The indenture provides that DeCrane Aircraft will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
assume or suffer to exist any Lien, other than a Permitted Lien, that secures
obligations under any Pari Passu Indebtedness or subordinated Indebtedness of
DeCrane Aircraft on any asset or property now owned or hereafter acquired by
DeCrane Aircraft or any of its Restricted Subsidiaries, or any income or profits
therefrom or assign or convey any right to receive income therefrom, unless the
notes are equally and ratably secured with the obligations so secured until such
time as such obligations are no longer secured by a Lien; provided that, in any
case involving a Lien securing subordinated Indebtedness of DeCrane Aircraft,
such Lien is subordinated to the Lien securing the notes to the same extent that
such subordinated Indebtedness is subordinated to the notes.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES
The indenture provides that DeCrane Aircraft will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to
(a) (1) pay dividends or make any other distributions to DeCrane Aircraft or
any of its Restricted Subsidiaries
(A) on its Capital Stock or
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(B) with respect to any other interest or participation in, or measured
by, its profits, or
(2) pay any Indebtedness owed to DeCrane Aircraft or any of its
Restricted Subsidiaries,
(b) make loans or advances to DeCrane Aircraft or any of its Restricted
Subsidiaries or
(c) transfer any of its properties or assets to DeCrane Aircraft or any of
its Restricted Subsidiaries.
However, the foregoing restrictions will not apply to encumbrances or
restrictions existing under or by reason of
(a) Existing Indebtedness as in effect on the date of the indenture,
(b) the bank credit facility as in effect as of the date of the indenture,
and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof,
(c) the indenture and the notes,
(d) applicable law and any applicable rule, regulation or order,
(e) any agreement or instrument of a Person acquired by DeCrane Aircraft or
any of its Restricted Subsidiaries as in effect at the time of such acquisition,
except to the extent created in contemplation of such acquisition, which
encumbrance or restriction is not applicable to any person, or the properties or
assets of any person, other than the person, or the property or assets of the
person, so acquired, provided that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of the Indenture to be incurred,
(f) customary non-assignment provisions in leases and contracts entered into
in the ordinary course of business and consistent with past practices,
(g) purchase money obligations for property acquired in the ordinary course
of business that impose restrictions of the nature described in clause (e) above
on the property so acquired,
(h) contracts for the sale of assets, including, without limitation,
customary restrictions with respect to a Subsidiary pursuant to an agreement
that has been entered into for the sale or disposition of all or substantially
all of the Capital Stock or assets of such Subsidiary,
(i) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing Indebtedness
are, in the good faith judgment of DeCrane Aircraft's board of directors, not
materially less favorable, taken as a whole, to the holders of the notes than
those contained in the agreements governing the Indebtedness being refinanced,
(j) secured Indebtedness otherwise permitted to be incurred pursuant to the
covenants described under "--Incurrence of Indebtedness and Issuance of
Preferred Stock" and "--Liens" that limit the right of the debtor to dispose of
the assets securing such Indebtedness,
(k) restrictions on cash or other deposits or net worth imposed by customers
under contracts entered into in the ordinary course of business,
(l) other Indebtedness or Disqualified Stock of Restricted Subsidiaries
permitted to be incurred subsequent to the Issuance Date pursuant to the
provisions of the covenant described under "--Incurrence of Indebtedness and
Issuance of Preferred Stock",
(m) customary provisions in joint venture agreements and other similar
agreements entered into in the ordinary course of business, and
(n) restrictions created in connection with any Receivables Facility that,
in the good faith determination of the board of directors of DeCrane Aircraft,
are necessary or advisable to effect such Receivables Facility.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The indenture provides that DeCrane Aircraft may not consolidate or merge
with or into, whether or not DeCrane Aircraft is the surviving corporation, or
sell, assign, transfer, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
person unless
(a) DeCrane Aircraft is the surviving corporation, or the other person
formed by or surviving any such consolidation or merger or to which such sale,
assignment, transfer, conveyance or other disposition shall
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have been made is a corporation organized or existing under the laws of the
United States, any state thereof or the District of Columbia,
(b) the person other than DeCrane Aircraft formed by or surviving any such
consolidation or merger or the person to which such sale, assignment, transfer,
conveyance or other disposition shall have been made assumes all the obligations
of DeCrane Aircraft under the registration rights agreement, the notes and the
indenture pursuant to a supplemental indenture in a form reasonably satisfactory
to the Trustee,
(c) immediately after such transaction no Default or Event of Default
exists, and
(d) DeCrane Aircraft or the other person formed by or surviving any such
consolidation or merger, or to which such sale, assignment, transfer, conveyance
or other disposition shall have been made
(1) will, at the time of such transaction and after giving pro forma
effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of the covenant described under "--Incurrence
of Indebtedness and Issuance of Preferred Stock" or
(2) would together with its Restricted Subsidiaries have a higher Fixed
Charge Coverage Ratio immediately after such transaction, after giving pro
forma effect thereto as if such transaction had occurred at the beginning of
the applicable four-quarter period, than the Fixed Charge Coverage Ratio of
DeCrane Aircraft and its Restricted Subsidiaries immediately prior to such
transaction.
The foregoing clause (d) will not prohibit a merger between DeCrane Aircraft
and a Wholly Owned Subsidiary of DeCrane Holdings created for the purpose of
holding the Capital Stock of DeCrane Aircraft, a merger between DeCrane Aircraft
and a Wholly Owned Restricted Subsidiary or a merger between DeCrane Aircraft
and an Affiliate incorporated solely for the purpose of reincorporating DeCrane
Aircraft in another state of the United States so long as, in each case, the
amount of Indebtedness of DeCrane Aircraft and its Restricted Subsidiaries is
not increased thereby.
The indenture provides that DeCrane Aircraft will not lease all or
substantially all of its assets to any person.
TRANSACTIONS WITH AFFILIATES
The indenture provides that DeCrane Aircraft will not, and will not permit
any of its Restricted Subsidiaries to, make any payment to, or sell, lease,
transfer or otherwise dispose of any of its properties or assets to, or purchase
any property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate of DeCrane Aircraft each of which the indenture refers
to as an "Affiliate Transaction", unless
(a) such Affiliate Transaction is on terms that are no less favorable to
DeCrane Aircraft or such Restricted Subsidiary than those that would have been
obtained in a comparable transaction by DeCrane Aircraft or such Restricted
Subsidiary with an unrelated Person and
(b) DeCrane Aircraft delivers to the Trustee, with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $7.5 million, either
(1) a resolution of the board of directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with
clause (a) above and that such Affiliate Transaction has been approved by a
majority of the disinterested members of the board of directors or
(2) an opinion as to the fairness to the holders of such Affiliate
Transaction from a financial point of view issued by an accounting,
appraisal or investment banking firm of national standing.
Notwithstanding the foregoing, the following items shall not be deemed to be
Affiliate Transactions:
(a) customary directors' fees, indemnification or similar arrangements or
any employment agreement or other compensation plan or arrangement entered into
by DeCrane Aircraft or any of its Restricted Subsidiaries in the ordinary course
of business, including ordinary course loans to employees not to exceed
(1) $5.0 million outstanding in the aggregate at any time and
(2) $2.0 million to any one employee, and consistent with the past
practice of DeCrane Aircraft or such Restricted Subsidiary;
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(b) transactions between or among DeCrane Aircraft and/or its Restricted
Subsidiaries;
(c) payments of customary fees by DeCrane Aircraft or any of its Restricted
Subsidiaries to DLJ Merchant Banking and its Affiliates made for any financial
advisory, financing, underwriting or placement services or in respect of other
investment banking activities, including, without limitation, in connection with
acquisitions or divestitures which are approved by a majority of the board of
directors in good faith;
(d) any agreement as in effect on the date of the indenture or any amendment
thereto which such amendment is not disadvantageous to the holders of the notes
in any material respect, or any transaction contemplated thereby;
(e) payments and transactions in connection with the Acquisition, the bank
credit facility and the bridge notes and the Offering and the application of the
proceeds thereof, and the payment of the fees and expenses with respect thereto;
(f) Restricted Payments that are permitted by the provisions of the
indenture described under "--Restricted Payments" and any Permitted Investments;
(g) payments and transactions in connection with the Global Technology
Investment, and the payment of fees and expenses with respect thereto; and
(h) sales of accounts receivable, or participations therein, in connection
with any Receivables Facility.
SALE AND LEASEBACK TRANSACTIONS
The indenture provides that DeCrane Aircraft will not, and will not permit
any of its Restricted Subsidiaries to, enter into any sale and leaseback
transaction; provided that DeCrane Aircraft or any Restricted Subsidiary may
enter into a sale and leaseback transaction if
(a) DeCrane Aircraft or such Restricted Subsidiary, as the case may be,
could have incurred Indebtedness in an amount equal to the Attributable
Indebtedness relating to such sale and leaseback transaction pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described under "--Incurrence of Indebtedness and Issuance of Preferred
Stock," and incurred a Lien to secure such Indebtedness pursuant to the covenant
described under "--Liens,
(b) the gross cash proceeds of such sale and leaseback transaction are at
least equal to the fair market value, as determined in good faith by the board
of directors and set forth in an officers' certificate delivered to the Trustee,
of the property that is the subject of such sale and leaseback transaction and
(c) the transfer of assets in such sale and leaseback transaction is
permitted by, and DeCrane Aircraft applies the proceeds of such transaction in
compliance with, the covenant described under "--Repurchase at the Option of
Holders--Asset Sales."
NO SENIOR SUBORDINATED INDEBTEDNESS
The indenture provides that DeCrane Aircraft will not incur any Indebtedness
that is subordinate or junior in right of payment to any Senior Indebtedness and
senior in right of payment to the notes and no Guarantor will incur any
Indebtedness that is subordinate or junior in right of payment to any Senior
Indebtedness and senior in right of payment to the Note Guarantees.
ADDITIONAL NOTE GUARANTEES
The indenture provides that, if any Wholly-Owned Restricted Subsidiary of
DeCrane Aircraft that is a Domestic Subsidiary guarantees any Indebtedness under
the bank credit facility, then such Restricted Subsidiary shall become a
Guarantor and execute a supplemental indenture and deliver an opinion of
counsel, in accordance with the terms of the indenture.
ACCOUNTS RECEIVABLE FACILITY
The indenture provides that no Accounts Receivable Subsidiary will incur any
Indebtedness if immediately after giving effect to such incurrence the aggregate
outstanding Indebtedness of all Accounts Receivable Subsidiaries, excluding any
Indebtedness owed to DeCrane Aircraft or any Restricted Subsidiary, would exceed
$60.0 million.
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REPORTS
The indenture provides that, whether or not required by the rules and
regulations of the SEC, so long as any notes are outstanding, DeCrane Aircraft
will furnish to the holders of notes
(1) all quarterly and annual financial information that would be required to
be contained in a filing with the SEC on Forms 10-Q and 10-K if DeCrane Aircraft
were required to file such forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual information only, a report thereon by DeCrane Aircraft's certified
independent accountants and
(2) all current reports that would be required to be filed with the SEC on
Form 8-K if DeCrane Aircraft were required to file such reports, in each case,
within the time periods specified in the SEC's rules and regulations.
In addition, following the consummation of the exchange offer contemplated
by the registration rights agreement, whether or not required by the rules and
regulations of the SEC, DeCrane Aircraft will file a copy of all such
information and reports with the SEC for public availability within the time
periods specified in the SEC's rules and regulations and make such information
available to securities analysts and prospective investors upon request. In
addition, DeCrane Aircraft and the Guarantors have agreed that, for so long as
any notes remain outstanding, they will furnish to the holders and to securities
analysts and prospective investors, upon their request, the information required
to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The indenture provides that each of the following constitutes an Event of
Default:
(a) default for 30 days in the payment when due of interest on the notes,
whether or not prohibited by the subordination provisions of the indenture;
(b) default in payment when due of the principal of or premium, if any, on
the notes, whether or not prohibited by the subordination provisions of the
indenture;
(c) failure by DeCrane Aircraft 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 of the notes then outstanding to comply with the provisions
described under "Repurchase at the Option of Holders--Change of Control,"
"--Asset Sales," "Principal Covenants--Restricted Payments," "--Incurrence of
Indebtedness and Issuance of Preferred Stock" or "Merger, Consolidation or Sale
of Assets";
(d) failure by DeCrane Aircraft for 60 days after notice from the Trustee or
the holders of at least 25% in principal amount of the notes then outstanding to
comply with any of its other agreements in the Indenture or the notes;
(e) 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 DeCrane Aircraft or any of its Restricted Subsidiaries, or the
payment of which is guaranteed by DeCrane Aircraft or any of its Restricted
Subsidiaries, whether such Indebtedness or guarantee now exists, or is created
after the date of the indenture, which default
(1) 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
(2) 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;
(f) failure by DeCrane Aircraft 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;
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(g) 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 of
behalf of any Guarantor, shall deny or disaffirm its obligations under its note
guarantee; and
(h) events of bankruptcy or insolvency with respect to DeCrane Aircraft 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; provided that, so long as any
Indebtedness permitted to be incurred pursuant to the bank credit facility shall
be outstanding, such acceleration shall not be effective until the earlier of
(a) an acceleration of any such Indebtedness under the bank credit facility
or
(b) five business days after receipt by DeCrane Aircraft and the
administrative agent under the bank credit facility of written notice of such
acceleration.
Notwithstanding the foregoing, in the case of an Event of Default arising
from events of bankruptcy or insolvency with respect to DeCrane Aircraft or any
Significant Subsidiary, all outstanding notes will become due and payable
without further action or notice. holders of the notes may not enforce the
indenture or the notes except as provided in the indenture. 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 (e) of the preceding paragraph, the declaration of
acceleration of the notes shall be automatically annulled if the holders of any
Indebtedness described in clause (e) have rescinded the declaration of
acceleration in respect of such Indebtedness within 30 days of the date of such
declaration, and if the annulment of the acceleration of the notes would not
conflict with any judgment or decree of a court of competent jurisdiction, and
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.
Subject to limitations, holders of a majority in principal amount of the
then outstanding notes may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from holders of the notes notice of any
continuing Default or Event of Default, except a Default or Event of Default
relating to the payment of principal or interest, if it determines that
withholding notice is in their interest.
The holders of a majority in aggregate principal amount of the notes then
outstanding by notice to the Trustee may on behalf of the holders of all of the
notes waive any existing Default or Event of Default and its consequences under
the indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the notes.
DeCrane Aircraft is required to deliver to the Trustee annually a statement
regarding compliance with the indenture, and DeCrane Aircraft is required upon
becoming aware of any Default or Event of Default to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF MEMBER, DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No member, director, officer, employee, incorporator or stockholder of
DeCrane Aircraft, as such, shall have any liability for any obligations of
DeCrane Aircraft 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 of
notes by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the notes. Such waiver may
not be effective to waive liabilities under the federal securities laws, and it
is the view of the SEC that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
DeCrane Aircraft may, at its option and at any time, elect to have all of
its and the Guarantors' obligations discharged with respect to the outstanding
notes, the note guarantees and the indenture ("Legal Defeasance") except for
(a) The rights of holders of outstanding notes to receive payments in
respect of the principal of, premium, if any, and interest on such notes when
such payments are due from the trust referred to below,
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(b) DeCrane Aircraft's obligations with respect to the notes concerning
issuing temporary notes, registration of notes, mutilated, destroyed, lost or
stolen notes and the maintenance of an office or agency for payment and money
for security payments held in trust,
(c) the rights, powers, trusts, duties and immunities of the Trustee, and
DeCrane Aircraft's obligations in connection therewith and
(d) the Legal Defeasance provisions of the indenture.
In addition, DeCrane Aircraft may, at its option and at any time, elect to
have their obligations released with respect to some covenants that are
described in the indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the notes. In the event Covenant Defeasance occurs, some
of the events described under "--Events of Default and Remedies" other than
non-payment and bankruptcy will no longer constitute an Event of Default with
respect to the notes.
In order to exercise either Legal Defeasance or Covenant Defeasance,
(a) DeCrane Aircraft must irrevocably deposit with the Trustee, in trust,
for the benefit of the holders of the notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest on the
outstanding notes on the stated maturity or on the applicable redemption date,
as the case may be, and DeCrane Aircraft must specify whether the notes are
being defeased to maturity or to a particular redemption date,
(b) in the case of Legal Defeasance, DeCrane Aircraft shall have delivered
to the Trustee an opinion of counsel in the United States reasonably acceptable
to the Trustee confirming that DeCrane Aircraft has received from, or there has
been published by, the Internal Revenue Service a ruling, or since the date of
the indenture, there has been a change in the applicable federal income tax law,
in either case to the effect that, and based thereon such opinion of counsel
shall confirm that, subject to customary assumptions and exclusions, the holders
of the outstanding notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not occurred,
(c) in the case of Covenant Defeasance, DeCrane Aircraft shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that, subject to customary assumptions and
exclusions, the holders of the outstanding notes will not recognize income, gain
or loss for federal income tax purposes as a result of such Covenant Defeasance
and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred,
(d) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit, other than a Default or Event of Default resulting
from the borrowing of funds to be applied to such deposit, or, insofar as Events
of Default from bankruptcy or insolvency events are concerned, at any time in
the period ending on the 123rd day after the date of deposit,
(e) such Legal Defeasance or Covenant Defeasance will not result in a breach
or violation of, or constitute a default under, any material agreement or
instrument other than the indenture to which DeCrane Aircraft or any of its
Subsidiaries is a party or by which DeCrane Aircraft or any of its Subsidiaries
is bound,
(f) DeCrane Aircraft must have delivered to the Trustee an opinion of
counsel to the effect that, subject to customary assumptions and exclusions,
after the 123rd day following the deposit, the trust funds will not be subject
to the effect of Section 547 of the United States Bankruptcy Code or any
analogous New York State law provision or any other applicable federal or New
York bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally,
(g) DeCrane Aircraft must deliver to the Trustee an officers' certificate
stating that the deposit was not made by DeCrane Aircraft with the intent of
preferring the holders of notes over the other creditors of DeCrane Aircraft
with the intent of defeating, hindering, delaying or defrauding creditors of
DeCrane Aircraft or others, and
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(h) DeCrane Aircraft must deliver to the Trustee an officers' certificate
and an opinion of counsel, subject to customary assumptions and exclusions, each
stating that all conditions precedent provided for relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A holder may transfer or exchange notes in accordance with the indenture.
The Registrar and the Trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents and DeCrane Aircraft may
require a holder to pay any taxes and fees required by law or permitted by the
indenture. DeCrane Aircraft are not required to transfer or exchange any note
selected for redemption. Also, DeCrane Aircraft is not required to transfer or
exchange any note for a period of 15 days before a selection of notes to be
redeemed. The registered holder of a note will be treated as the owner of it for
all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the indenture, the
note guarantees and the notes may be amended or supplemented with the consent of
the holders of at least a majority in principal amount of the notes then
outstanding, and any existing default or compliance with any provision of the
indenture, the note guarantees or the notes may be waived with the consent of
the holders of a majority in principal amount of the then outstanding notes.
Without the consent of each holder affected, an amendment or waiver may not,
with respect to any notes held by a non-consenting holder:
(a) reduce the principal amount of notes whose holders must consent to an
amendment, supplement or waiver,
(b) reduce the principal of or change the fixed maturity of any note or
alter the provisions with respect to the redemption of the notes, other than the
provisions described under the caption "--Repurchase at the Option of Holders,"
(c) reduce the rate of or extend the time for payment of interest on any
note,
(d) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the notes, except a rescission of acceleration
of the notes by the holders of at least a majority in aggregate principal amount
of the notes and a waiver of the payment default that resulted from such
acceleration,
(e) make any note payable in money other than that stated in the notes,
(f) make any change in the provisions of the indenture relating to waivers
of past Defaults,
(g) waive a redemption payment with respect to any note, other than the
provisions described under the caption "--Repurchase at the Option of Holders,"
(h) release any Guarantor from its obligations under its note guarantee or
the Indenture, except in accordance with the terms of the indenture or
(i) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, any amendment to or waiver of the covenant
described under the caption "--Repurchase at the Option of Holders--Change of
Control," and any amendment to Article 10 of the indenture, which relates to
subordination, will require the consent of the holders of at least two-thirds in
aggregate principal amount of the notes then outstanding if such amendment would
materially adversely affect the rights of holders of notes.
Notwithstanding the foregoing, without the consent of any holder of notes,
DeCrane Aircraft, the Guarantors and the Trustee may amend or supplement the
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 DeCrane Aircraft's
obligations to holders of notes in the case of a merger or consolidation or sale
of all or substantially all of DeCrane Aircraft'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
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requirements of the SEC in order to effect or maintain the qualification of the
indenture under the Trust Indenture Act or to provide for guarantees of the
notes.
CONCERNING THE TRUSTEE
The indenture contains limitations on the rights of the Trustee, State
Street Bank & Trust Co., should it become a creditor of any Company, to obtain
payment of claims in some cases, or to realize on property received in respect
of any such claim as security or otherwise. The Trustee will be permitted to
engage in other transactions. However, if it acquires any conflicting interest
it must eliminate such conflict within 90 days, apply to the SEC for permission
to continue or resign.
The holders of a majority in principal amount of the then outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
exceptions. The indenture provides that in case an Event of Default shall occur
and not be cured, the Trustee will be required, in the exercise of its power, to
use the degree of care of a prudent man in the conduct of his own affairs.
Subject to such provisions, the Trustee will be under no obligation to exercise
any of its rights or powers under the indenture at the request of any holder of
notes, unless such holder shall have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense.
KEY DEFINITIONS
Set forth below are key defined terms used in the indenture. Please refer to
the indenture for a full description of all such terms, and any other
capitalized terms used herein for which no definition is provided.
"ACCOUNTS RECEIVABLE SUBSIDIARY" means an Unrestricted Subsidiary of DeCrane
Aircraft to which DeCrane Aircraft or any of its Restricted Subsidiaries sells
any of its accounts receivable pursuant to a Receivables Facility.
"ACQUIRED INDEBTEDNESS" means, with respect to any specified person,
(a) Indebtedness of any other person existing at the time such other person
is merged with or into or became a Subsidiary of such specified person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other person merging with or into or becoming a
Subsidiary of such specified person, and
(b) Indebtedness secured by a Lien encumbering an asset acquired by such
specified person at the time such asset is acquired by such specified person.
"ACQUISITION" means the acquisition by an indirect subsidiary of DeCrane
Holdings of at least majority of the outstanding stock of DeCrane Aircraft, the
merger of such subsidiary into DeCrane Aircraft, the repayment of specified
indebtedness of DeCrane Aircraft, the payment of related fees and expenses and
the Finance Merger.
"ACQUISITION FINANCING" means the issuance and sale by DeCrane Aircraft of
the notes, the execution and delivery by DeCrane Aircraft and certain of its
subsidiaries of the bank credit facility and the borrowing thereunder and the
issuance and sale by DeCrane Aircraft of bridge notes to finance the Acquisition
and the issuance and sale by DeCrane Holdings of common stock and preferred
stock for consideration, the proceeds of each of which were used to fund the
purchase price for the Acquisition.
"AFFILIATE" of any specified person means any other person which, directly
or indirectly, controls, is controlled by or is under direct or indirect common
control with, such specified person. for purposes of this definition, "control,"
when used with respect to any person, means the power to direct the management
and policies of such person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"ASSET SALE" means
(1) the sale, lease, conveyance, disposition or other transfer referred to
as a "disposition" of any properties, assets or rights, provided that the sale,
lease, conveyance or other disposition of all or substantially all of the assets
of DeCrane Aircraft and its Subsidiaries taken as a whole will be governed by
the provisions of the indenture described under the caption "--Change of
Control" and the provisions described under the caption "--merger, Consolidation
or Sale of Assets" and not by the provisions of the indenture's asset sale
covenant, and
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(2) the issuance, sale or transfer by DeCrane Aircraft or any of its
Restricted Subsidiaries of Equity Interests of any of DeCrane Aircraft's
Restricted Subsidiaries, in either case, whether in a single transaction or a
series of related transactions that either have a fair market value in excess of
$5.0 million or are for net proceeds in excess of $5.0 million.
However, the following items shall not be deemed to be Asset Sales:
- dispositions in the ordinary course of business;
- a disposition of assets by DeCrane Aircraft to a Restricted Subsidiary or
by a Restricted Subsidiary to DeCrane Aircraft or to another Restricted
Subsidiary;
- a disposition of Equity Interests by a Restricted Subsidiary to DeCrane
Aircraft or to another restricted subsidiary;
- the sale and leaseback of any assets within 90 days of the acquisition
hereof;
- foreclosures on assets;
- any exchange of like property pursuant to Section 1031 of the Internal
Revenue Code of 1986, for use in a Permitted Business;
- any sale of Equity Interests In, or Indebtedness or other securities of,
an Unrestricted Subsidiary;
- a Permitted Investment or a Restricted Payment that is permitted by the
Covenant described under the caption "--Restricted Payments"; and
- sales of accounts receivable, or participations therein, in connection
with any Receivables Facility.
"ATTRIBUTABLE INDEBTEDNESS" in respect of a sale and leaseback transaction
means, at the time of determination, the present value, discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP, of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction, including any
period for which such lease has been extended or may, at the option of the
lessor, be extended.
"BANK CREDIT FACILITY" means that Credit Agreement dated as of August 28,
1998 among DeCrane Aircraft, various financial institutions party thereto, DLJ
Capital Funding, Inc., as syndication agent, and The First National Bank of
Chicago, as administrative agent, including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, and, in each case, as amended, modified, renewed, refunded, replaced
or refinanced from time to time, including any agreement
(1) extending or shortening the maturity of any Indebtedness incurred
thereunder or contemplated thereby,
(2) adding or deleting borrowers or guarantors thereunder,
(3) increasing the amount of Indebtedness incurred thereunder or available
to be borrowed thereunder, provided that on the date such Indebtedness is
incurred it would not be prohibited by clause (1) of "--Incurrence of
Indebtedness and Issuance of Preferred Stock" or
(4) otherwise altering the terms and conditions thereof. Indebtedness under
the bank credit facility outstanding on the date of the indenture shall be
deemed to have been incurred on such date in reliance on the first paragraph of
the covenant described under the caption "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock."
"CAPITAL EXPENDITURE INDEBTEDNESS" means Indebtedness incurred by any person
to finance the purchase or construction or any property or assets acquired or
constructed by such person which have a useful life or more than one year so
long as
- the purchase or construction price for such property or assets is included
in "addition to property, plant or equipment" in accordance with GAAP,
- the acquisition or construction of such property or assets is not part of
any acquisition of a person or line of business and
- such Indebtedness is incurred within 90 days of the acquisition or
completion of construction of such property or assets.
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"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means
(1) in the case of a corporation, corporate stock,
(2) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents, however designated, of
corporate stock,
(3) in the case of a partnership or limited liability company, partnership
or membership interests whether general or limited and
(4) any other interest or participation that confers on a person the right
to receive a share of the profits and losses of, or distributions of assets of,
the issuing person.
"CASH EQUIVALENTS" means
(1) Government Securities,
(2) any certificate of deposit maturing not more than 365 days after the
date of acquisition issued by, or demand deposit or time deposit of, an Eligible
Institution or any lender under the bank credit facility,
(3) commercial paper maturing not more than 365 days after the date of
acquisition of an issuer, other than an Affiliate of DeCrane Aircraft, with a
rating, at the time as of which any investment therein is made, of "A-3" or
higher according to Standard & Poor's Rating Group or "P-2" or higher according
to Moody's or carrying an equivalent rating by a nationally recognized rating
agency if both of the two named rating agencies cease publishing ratings of
investments,
(4) any bankers acceptances of money market deposit accounts issued by an
Eligible Institution,
(5) any fund investing exclusively in investments of the types described in
clauses (1) through (4) above and (6) in the case of any Subsidiary organized or
having its principal place of business outside the United States, investments
denominated in the currency of the jurisdiction in which such Subsidiary is
organized or has its principal place of business which are similar to the items
specified in clauses (1) through (5) above, including without limitation any
deposit with any bank that is a lender to any such Subsidiary.
"CONSOLIDATED CASH FLOW" means, with respect to any person for any period,
the Consolidated Net Income of such Person and its Restricted Subsidiaries for
such period plus, to the extent deducted in computing Consolidated Net Income,
- an amount equal to any extraordinary or non-recurring loss plus any net
loss realized in connection with an Asset Sale,
- provision for taxes based on income or profits of such person and its
Restricted Subsidiaries for such period,
- Fixed Charges of such person for such period,
- depreciation, amortization, including amortization of goodwill and other
intangibles, and all other non-cash charges, excluding any such non-cash
charge to the extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization of a prepaid cash expense
that was paid in a prior period, including charges related to non-cash
minority interests, of such Person and its Restricted Subsidiaries for
such period,
- net periodic post-retirement benefits,
- other income or expense net as set forth on the face of such person's
statement of operations,
- expenses and charges related to the Acquisition, the bank credit facility
and the application of the proceeds thereof which are paid, taken or
otherwise accounted for within 180 days of the consummation of the
Acquisition, and
- any non-capitalized transaction costs incurred in connection with actual
or proposed financings, acquisition or divestitures, including, but not
limited to, financing and refinancing fees and costs
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incurred in connection with the Acquisition, in each case, on a
consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes based on the income
or profits of, the Fixed Charges of, and the depreciation and amortization and
other non-cash charges of, a Restricted Subsidiary of a person shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the extent and
in the same proportion that Net Income of such Restricted Subsidiary was
included in calculating the Consolidated Net Income of such person.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any person for any
period, the sum of, without duplication,
- the interest expense of such person and its Restricted Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP,
including amortization of original issue discount, non-cash interest
payments, the interest component of all payments associated with Capital
Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of
letter of credit or bankers' acceptance financings, and net payments, if
any, pursuant to Hedging Obligations; provided that in no event shall any
amortization of deferred financing costs be included in Consolidated
Interest Expense; and
- the consolidated capitalized interest of such person and its Restricted
Subsidiaries for such period, whether paid or accrued;
provided, however, that Receivables Fees shall be deemed not to constitute
Consolidated Interest Expense. Notwithstanding the foregoing, the Consolidated
Interest Expense with respect to any Restricted Subsidiary that is not a Wholly
Owned Restricted Subsidiary shall be included only to the extent and in the same
proportion that the net income of such Restricted Subsidiary was included in
calculating Consolidated Net Income.
"CONSOLIDATED NET INCOME" means, with respect to any person for any period,
the aggregate of the Net Income of such person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that
- the Net Income or loss of any person that is not a Restricted Subsidiary
or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions
paid in cash to the referent person or a Restricted Subsidiary thereof,
- the Net Income or loss of any Restricted Subsidiary other than a
Subsidiary organized or having its principal place of business outside the
United States shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Restricted
Subsidiary of that Net Income or loss is not at the date of determination
permitted without any prior governmental approval that has not been
obtained or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Restricted Subsidiary,
- the Net Income or loss of any person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded,
- the cumulative effect of a change in accounting principles shall be
excluded and
- expenses and charges related to the Acquisition, the bank credit facility
and the application of the proceeds thereof which are paid, taken or
otherwise accounted for within 180 days of the consummation of the
Acquisition shall be excluded.
"DECRANE HOLDINGS" means DeCrane Holdings Co., a Delaware corporation, the
corporate parent of DeCrane Aircraft, or its successors.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"DESIGNATED NONCASH CONSIDERATION" means the fair market value of non-cash
consideration received by DeCrane Aircraft or one of its Restricted Subsidiaries
in connection with an Asset Sale that is so designated as Designated Noncash
Consideration pursuant to an officers' certificate, setting forth the basis of
such valuation, executed by the principal executive officer and the principal
financial officer of DeCrane Aircraft,
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less the amount of cash or Cash Equivalents received in connection with a sale
of such Designated Noncash Consideration.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms or by the
terms of any security into which it is convertible, or for which it is
exchangeable; or upon the happening of any event other than any event solely
within the control of the issuer thereof, matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, is exchangeable for
Indebtedness, except to the extent exchangeable at the option of such Person
subject to the terms of any debt instrument to which such Person is a party, or
redeemable at the option of the holder thereof, in whole or in part, on or prior
to the date on which the notes mature. However, that any Capital Stock that
would constitute Disqualified Stock solely because the holders thereof have the
right to require DeCrane Aircraft to repurchase such Capital Stock upon the
occurrence of a Change of Control or an Asset Sale shall not constitute
Disqualified Stock, if the terms of such Capital Stock provide that DeCrane
Aircraft may not repurchase or redeem any such Capital Stock pursuant to such
provisions unless such repurchase or redemption complies with the covenant
described under the caption "--Principal Covenants--Restricted Payments."
Further, if such Capital Stock is issued to any plan for the benefit of
employees of DeCrane Aircraft or its Subsidiaries or by any such plan to such
employees, such Capital Stock shall not constitute Disqualified Stock solely
because it may be required to be repurchased by DeCrane Aircraft in order to
satisfy applicable statutory or regulatory obligations.
"DOMESTIC SUBSIDIARY" means a Subsidiary that is organized under the laws of
the United States or any State, district or territory thereof other than Audio
International Sales, Inc., a U.S. Virgin Islands corporation.
"ELIGIBLE INSTITUTION" means a commercial banking institution that has
combined capital and surplus not less than $100.0 million or its equivalent in
foreign currency, whose short-term debt is rated "A-3" or higher according to
Standard & Poor's Ratings Group or "P-2" or higher according to Moody's Investor
Services, Inc. or carrying an equivalent rating by a nationally recognized
rating agency if both of the two named rating agencies cease publishing ratings
of investments.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock.
"EXISTING INDEBTEDNESS" means Indebtedness of DeCrane Aircraft and its
Restricted Subsidiaries other than in existence on the date of the Indenture,
excluding Indebtedness under the Bank Credit Facility, until such amounts are
repaid.
"FINANCE MERGER" means the merger of DeCrane Finance Co. with and into
DeCrane Aircraft.
"FIXED CHARGES" means, with respect to any person for any period, the sum,
without duplication, of the Consolidated Interest Expense of such person for
such period, and all dividend payments on any series of preferred stock of such
person other than dividends payable solely in Equity Interests that are not
Disqualified Stock, in each case, on a consolidated basis and in accordance with
GAAP.
"FIXED CHARGE COVERAGE RATIO" means, with respect to any person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such person for such period, in each case exclusive of
amounts attributable to discontinued operations, as determined in accordance
with GAAP, or operations and businesses disposed of prior to the date on which
the event for which the calculation of the Fixed Charge Coverage Ratio is made
referred to as the "Calculation Date." In the event that the referent Person or
any of its Subsidiaries incurs, assumes, guarantees or redeems any Indebtedness
other than revolving credit borrowings or issues or redeems preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the Calculation Date, then the Fixed
Charge Coverage Ratio shall be calculated giving pro forma effect to such
incurrence, assumption, guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock and the use of the proceeds therefrom,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, acquisitions that have been made by DeCrane Aircraft or any of its
Subsidiaries, including all mergers or consolidations and any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be deemed to have
occurred on the first day of the four-quarter reference period and Consolidated
Cash Flow for such reference period shall be calculated to include the
Consolidated Cash Flow of the acquired entities on a pro forma basis after
giving effect to cost savings resulting from employee terminations, facilities
consolidations
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and closings, standardization of employee benefits and compensation practices,
consolidation of property, casualty and other insurance coverage and policies,
standardization of sales and distribution methods, reductions in taxes other
than income taxes and other cost savings reasonably expected to be realized from
such acquisition, as determined in good faith by the principal financial officer
of DeCrane Aircraft, regardless of whether such cost savings could then be
reflected in PRO FORMA financial statements under GAAP, Regulation S-X
promulgated by the SEC or any other regulation or policy of the SEC, and without
giving effect to the third clause of the proviso set forth in the definition of
Consolidated Net Income.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"GLOBAL TECHNOLOGY PARTNERS" means Global Technology Partners, LLC and its
Affiliates.
"GLOBAL TECHNOLOGY INVESTMENT" means the sale by DeCrane Holdings to Global
Technology Partners of its common stock, the purchase price of which will be
partially financed by Global Technology Loans, and the granting by DeCrane
Holdings to Global Technology Partners of options to purchase shares of its
common stock.
"GLOBAL TECHNOLOGY LOANS" means one or more loans by DeCrane Aircraft or
DeCrane Holdings to Global Technology Partners to finance Global Technology
Partners' purchase of common stock of DeCrane Holdings; provided, HOWEVER, that
the aggregate principal amount of all such Global Technology Loans outstanding
at any time shall not exceed $2.0 million.
"GUARANTEE" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including letters of credit or reimbursement agreements
in respect thereof, of all or any part of any Indebtedness.
"GUARANTORS" means each of the Domestic Subsidiaries of DeCrane Aircraft
that is a Wholly Owned Restricted Subsidiary on the date of the indenture, and
any other Subsidiary that executes a note Guarantee in accordance with the
provisions of the indenture.
"HEDGING OBLIGATIONS" means, with respect to any person, the obligations of
such person under
(a) interest rate swap agreements, interest rate cap agreements and interest
rate collar agreements and
(b) other agreements or arrangements designed to protect such person against
fluctuations in interest rates and
(c) agreements or arrangements designed to protect such person against
fluctuations in exchange rates.
"INDEBTEDNESS" means, with respect to any person, any indebtedness of such
Person in respect of borrowed money or evidenced by bonds, notes, debentures or
similar instruments or letters of credit, or reimbursement agreements in respect
thereof, or banker's acceptances or representing Capital Lease Obligations or
the balance deferred and unpaid of the purchase price of any property or
representing any Hedging Obligations, except any such balance that constitutes
an accrued expense or trade payable, if and to the extent any of the foregoing
Indebtedness, than letters of credit and Hedging Obligations would appear as a
liability upon a balance sheet of such Person prepared in accordance with GAAP,
as well as all Indebtedness of others secured by a Lien on any asset of such
person whether or not such Indebtedness is assumed by such person and, to the
extent not otherwise included, the guarantee by such Person of any Indebtedness
of any other person, provided that Indebtedness shall not include the pledge by
DeCrane Aircraft of the Capital Stock of an Unrestricted Subsidiary of DeCrane
Aircraft to secure Non-Recourse Debt of such Unrestricted Subsidiary. The amount
of any Indebtedness outstanding as of any date shall be
- the accreted value thereof, together with any interest thereon that is
more than 30 days past due, in the case of any Indebtedness that does not
require current payments of interest, and
- the principal amount thereof, in the case of any other Indebtedness;
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Provided that the principal amount of any Indebtedness that is denominated in
any currency other than United States dollars shall be the amount thereof, as
determined pursuant to the foregoing provision, converted into United States
dollars at the Spot Rate in effect on the date that such Indebtedness was
incurred, or, if such indebtedness was incurred prior to the date of the
Indenture, the Spot Rate in effect on the date of the indenture.
"INVESTMENTS" means, with respect to any person, all investments by such
person in other persons including Affiliates in the forms of direct or indirect
loans, including guarantees by the referent person of, and Liens on any assets
of the referent person securing, Indebtedness or other obligations of other
persons, advances or capital contributions, excluding commission, travel and
similar advances to officers and employees made in the ordinary course of
business, purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP. However, an investment by DeCrane Aircraft for consideration consisting of
common equity securities of DeCrane Aircraft shall not be deemed to be an
Investment. If DeCrane Aircraft or any Restricted Subsidiary of DeCrane Aircraft
sells or otherwise disposes of any Equity Interests of any direct or indirect
Restricted Subsidiary of DeCrane Aircraft such that, after giving effect to any
such sale or disposition, such person is no longer a Subsidiary of DeCrane
Aircraft, DeCrane Aircraft shall be deemed to have made an Investment on the
date of any such sale or disposition equal to the fair market value of the
Equity Interests of such Restricted Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant described
under "--Restricted Payments."
"LIEN" means, with respect to any asset, any mortgage, Lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law, including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code or equivalent statutes of any jurisdiction.
"MANAGEMENT LOANS" means one or more loans by DeCrane Aircraft or DeCrane
Holdings to officers and/or directors of DeCrane Aircraft and any of its
Restricted Subsidiaries to finance the purchase by such officers and directors
of common stock of DeCrane Holdings; provided, however, that the aggregate
principal amount of all such Management Loans outstanding at any time shall not
exceed $5.0 million.
"NET INCOME" means, with respect to any person, the net income or loss of
such person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however,
(a) any gain (or loss), together with any related provision for taxes on
such gain or loss, realized in connection with any Asset Sale, including
dispositions pursuant to Sale and Leaseback Transactions, or the extinguishment
of any Indebtedness of such person or any of its Restricted Subsidiaries and
(b) any extraordinary or nonrecurring gain or loss, together with any
related provision for taxes on such extraordinary or nonrecurring gain or loss.
"NET PROCEEDS" means the aggregate cash proceeds received by DeCrane
Aircraft or any of its Restricted Subsidiaries in respect of any Asset Sale,
including any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale, net of, without duplication:
- the direct costs relating to such Asset Sale, including legal, accounting
and investment banking fees, and sales commissions, recording fees, title
transfer fees and appraiser fees and cost of preparation of assets for
sale, and any relocation expenses incurred as a result thereof,
- taxes paid or payable as a result thereof after taking into account any
available tax credits or deductions and any tax sharing arrangements,
- amounts required to be applied to the repayment of Indebtedness, other
than Revolving Credit Indebtedness incurred pursuant to the Bank Credit
Facility, secured by a Lien on the asset or assets that were the subject
of such Asset Sale and
- any reserve established in accordance with GAAP or any amount placed in
escrow, in either case for adjustment in respect of the sale price of such
asset or assets until such time as such reserve is reversed or such escrow
arrangement is terminated, in which case Net Proceeds shall include only
the
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<PAGE>
amount of the reserve so reversed or the amount returned to DeCrane
Aircraft or its Restricted Subsidiaries from such escrow arrangement, as
the case may be.
"NON-RECOURSE DEBT" means Indebtedness
- no default which, including any rights that the holders thereof may have
to take enforcement action against an Unrestricted Subsidiary, would
permit upon notice, lapse of time or both any holder of any other
Indebtedness of DeCrane Aircraft or any of its Restricted Subsidiaries to
declare a default on such other Indebtedness or cause the payment thereof
to be accelerated or payable prior to its stated maturity; and
- as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of DeCrane Aircraft or any of its
Restricted Subsidiaries, other than the stock of an Unrestricted
Subsidiary pledged by DeCrane Aircraft to secure debt of such Unrestricted
Subsidiary.
However, in no event shall Indebtedness of any Unrestricted Subsidiary fail to
be Non-Recourse Debt solely as a result of any default provisions contained in a
guarantee thereof by DeCrane Aircraft or any of its Restricted Subsidiaries if
DeCrane Aircraft or such Restricted Subsidiary was otherwise permitted to incur
such guarantee pursuant to the Indenture.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFERING" means the offering of the notes by DeCrane Aircraft.
"PARI PASSU INDEBTEDNESS" means Indebtedness of DeCrane Aircraft that ranks
PARI PASSU in right of payment to the notes.
"PERMITTED BUSINESS" means the avionics manufacturing industry and any
business in which DeCrane Aircraft and its Restricted Subsidiaries are engaged
on the date of the indenture or any business reasonably related, incidental or
ancillary thereto.
"PERMITTED INVESTMENTS" means
- any Investment in DeCrane Aircraft or in a Restricted Subsidiary of
DeCrane Aircraft,
- any Investment in cash or Cash Equivalents,
- any Investment by DeCrane Aircraft or any Restricted Subsidiary of DeCrane
Aircraft in a Person, if as a result of such Investment such Person
becomes a Restricted Subsidiary of DeCrane Aircraft, or such Person is
merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, DeCrane
Aircraft or a Wholly Owned Restricted Subsidiary of DeCrane Aircraft,
- any Investment made as a result of the receipt of non-cash consideration
from an Asset Sale that was made pursuant to and in compliance with the
covenant described under the caption "--Repurchase at the Option of
Holders--Asset Sales,"
- any Investment acquired solely in exchange for Equity Interests other than
Disqualified Stock of DeCrane Aircraft,
- any Investment in a Person engaged in a Permitted Business, other than an
Investment in an Unrestricted Subsidiary, having an aggregate fair market
value, taken together with all other Investments made pursuant to this
clause that are at that time outstanding, not to exceed 15% of Total
Assets at the time of such Investment, with the fair market value of each
Investment being measured at the time made and without giving effect to
subsequent changes in value,
- Investments relating to any special purpose Wholly Owned Subsidiary of
DeCrane Aircraft organized in connection with a Receivables Facility that,
in the good faith determination of the board of directors of DeCrane
Aircraft, are necessary or advisable to effect such Receivables Facility
and
- the Management Loans and Global Technology Loans.
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"PERMITTED LIENS" means:
- Liens on property of a person existing at the time such person is merged
into or consolidated with DeCrane Aircraft or any Restricted Subsidiary,
provided that such Liens were not incurred in contemplation of such merger
or consolidation and do not secure any property or assets of DeCrane
Aircraft or any Restricted Subsidiary other than the property or assets
subject to the Liens prior to such merger or consolidation;
- Liens existing on the date of the indenture;
- Liens securing Indebtedness consisting of Capitalized Lease Obligations,
purchase money Indebtedness, mortgage financings, industrial revenue bonds
or other monetary obligations, in each case incurred solely for the
purpose of financing all or any part of the purchase price or cost of
construction or installation of assets used in the business of DeCrane
Aircraft or its Restricted Subsidiaries, or repairs, additions or
improvements to such assets, provided that
- such Liens secure Indebtedness in an amount not in excess of the original
purchase price or the original cost of any such assets or repair,
additional or improvement thereto, plus an amount equal to the reasonable
fees and expenses in connection with the incurrence of such Indebtedness,
- such Liens do not extend to any other assets of DeCrane Aircraft or its
Restricted Subsidiaries, and, in the case of repair, addition or
improvements to any such assets, such Lien extends only to the assets and
improvements thereto or thereon repaired, added to or improved,
- the Incurrence of such Indebtedness is permitted by "--Principal
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock" and
- such Liens attach within 365 days of such purchase, construction,
installation, repair, addition or improvement;
- Liens to secure any refinancings, renewals, extensions, modification or
replacements, such events are collectively referred to as "refinancing,"
or successive refinancings, in whole or in part, of any Indebtedness
secured by Liens referred to in the clauses above so long as such Lien
does not extend to any other property other than improvements thereto;
- Liens securing letters of credit entered into in the ordinary course of
business and consistent with past business practice;
- Liens on and pledges of the capital stock of any Unrestricted Subsidiary
securing Non-Recourse Debt of such Unrestricted Subsidiary;
- Liens securing Indebtedness and Obligations under the bank credit
facility; and
- other Liens securing indebtedness that is permitted by the terms of the
Indenture to be outstanding having an aggregate principal amount at any
one time outstanding not to exceed $50.0 million.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of DeCrane
Aircraft or any of its Restricted Subsidiaries issued within 60 days after
repayment of, in exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace, defease or refund other Indebtedness of DeCrane
Aircraft or any of its Restricted Subsidiaries; provided that
- the principal amount accreted value, if applicable of such Permitted
Refinancing Indebtedness does not exceed the principal amount of accreted
value, if applicable, plus premium, if any, and accrued interest on the
Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded, plus the amount of reasonable expenses incurred in connection
therewith,
- such Permitted Refinancing Indebtedness has a final maturity date no
earlier than the final maturity date of, and has a Weighted Average Life
to Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded, and
- if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the notes,
such Permitted Refinancing Indebtedness is subordinated in right of
payment to, the notes on terms at least as favorable, taken as a whole, to
the
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<PAGE>
holders of notes as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"PRINCIPALS" means DLJ Merchant Banking Partners II, L.P. and its
Affiliates.
"PUBLIC EQUITY OFFERING" means any issuance of common stock by DeCrane
Aircraft, other than to DeCrane Holdings and other than Disqualified Stock, or
common stock or preferred stock by DeCrane Holdings, other than Disqualified
Stock, registered pursuant to the Securities Act, other than issuances
registered on Form S-8 and issuances registered on Form S-4, excluding issuances
of common stock pursuant to employee benefit plans of DeCrane Holdings or
DeCrane Aircraft or otherwise as compensation to employees of DeCrane Aircraft
or DeCrane Holdings.
"QUALIFIED PROCEEDS" means any of the following or any combination of the
following:
- cash;
- Cash Equivalents;
- assets that are used or useful in a Permitted Business; and
- the Capital Stock of any person engaged in a Permitted Business if, in
connection with the receipt by DeCrane Aircraft or any Restricted
Subsidiary of DeCrane Aircraft of such Capital Stock,
- such Person becomes a Restricted Subsidiary of DeCrane Aircraft or any
Restricted Subsidiary of DeCrane Aircraft or
- such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated
into, DeCrane Aircraft or any Restricted Subsidiary of DeCrane Aircraft.
"RECEIVABLES FACILITY" means one or more receivables financing facilities,
as amended from time to time, pursuant to which DeCrane Aircraft or any of its
Restricted Subsidiaries sells its accounts receivable to an Accounts Receivable
Subsidiary.
"RECEIVABLES FEES" means distributions or payments made directly or by means
of discounts with respect to any participation interests issued or sold in
connection with, and other fees paid to a Person that is not a Restricted
Subsidiary in connection with, any Receivables Facility.
"RELATED PARTY" means, with respect to any Principal, any controlling
stockholder or partner of such Principal on the date of the indenture, or any
trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or persons beneficially holding directly or
through one or more Subsidiaries a 51% or more controlling interest of which
consist of the Principals and/or such other persons referred to in the
immediately preceding clauses.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of such person that
is not an Unrestricted Subsidiary.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"SPOT RATE" means, for any currency, the spot rate at which such currency is
offered for sale against United States dollars as determined by reference to the
New York foreign exchange selling rates, as published in The Wall Street Journal
on such date of determination for the immediately preceding business day or, if
such rate is not available, as determined in any publicly available source of
similar market data.
"STATED MATURITY" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"SUBSIDIARY" means, with respect to any person,
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- any corporation, association or other business entity of which more than
50% of the total voting power of shares of Capital Stock entitled without
regard to the occurrence of any contingency to vote in the election of
directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such person or one or more of the
other Subsidiaries of that person or a combination thereof and
- any partnership or limited liability company
- the sole general partner or the managing general partner or managing
member of which is such Person or a Subsidiary of such person or
- the only general partners or managing members of which are such person or
of one or more Subsidiaries of such Person or any combination thereof.
"TAX SHARING AGREEMENT" means any tax sharing agreement or arrangement
between DeCrane Aircraft and DeCrane Holdings, as the same may be amended from
time to time; provided that in no event shall the amount permitted to be paid
pursuant to all such agreements and/or arrangements exceed the amount DeCrane
Aircraft would be required to pay for income taxes were it to file a
consolidated tax return for itself and its consolidated Restricted Subsidiaries
as if it were a corporation that was a parent of a consolidated group.
"TOTAL ASSETS" means the total consolidated assets of DeCrane Aircraft and
its Restricted Subsidiaries, as shown on the most recent balance sheet,
excluding the footnotes of DeCrane Aircraft prepared in accordance with GAAP.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary that is designated by the
board of directors as an Unrestricted Subsidiary pursuant to a board resolution,
but only to the extent that such Subsidiary:
- has no Indebtedness other than Non-Recourse Debt;
- is not party to any agreement, contract, arrangement or understanding with
DeCrane Aircraft or any Restricted Subsidiary of DeCrane Aircraft unless
the terms of any such agreement, contract, arrangement or understanding
are no less favorable to DeCrane Aircraft or such Restricted Subsidiary
than those that might be obtained at the time from Persons who are not
Affiliates of DeCrane Aircraft;
- a person with respect to which neither DeCrane Aircraft nor any of its
Restricted Subsidiaries has any direct or indirect obligation
- to subscribe for additional Equity Interests other than Investments
described in clause (g) of the definition of Permitted Investments or
- to maintain or preserve such Person's financial condition or to cause such
Person to achieve any specified levels, of operating results; and
- has not guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of DeCrane Aircraft or any of its Restricted
Subsidiaries. Any such designation by the board of directors shall be
evidenced to the Trustee by filing with the Trustee a certified copy of
the board resolution giving effect to such designation and an officers'
certificate certifying that such designation complied with the foregoing
conditions and was permitted by the covenant described under "--Principal
Covenants--Restricted Payments." If, at any time, any Unrestricted
Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of such
Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of
DeCrane Aircraft as of such date and, if such Indebtedness is not
permitted to be incurred as of such date under the covenant described
under "--Principal Covenants--Incurrence of Indebtedness and Issuance of
Preferred Stock," DeCrane Aircraft shall be in default of such covenant.
The board of directors of DeCrane Aircraft may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of DeCrane Aircraft of any outstanding Indebtedness
of such Unrestricted Subsidiary and such designation shall only be
permitted if such Indebtedness is permitted under the covenant described
under "--Principal Covenants--Incurrence of Indebtedness and Issuance
Preferred of Stock," and no Default or Event of Default would be in
existence following such designation.
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"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing
(a) the sum of the products obtained by multiplying the amount of each then
remaining installment, sinking fund, serial maturity or other required payments
of principal, including payment at final maturity, in respect thereof, by the
number of years calculated to the nearest one-twelfth that will elapse between
such date and the making of such payment, by
(b) the then outstanding principal amount of such Indebtedness.
"WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such person
all of the outstanding Capital Stock or other ownership interests of which other
than directors' qualifying shares shall at the time be owned by such person or
by one or more Wholly Owned Subsidiaries of such person.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any person means a Restricted
Subsidiary of such person all the outstanding Capital Stock or other ownership
interests of which other than directors' qualifying shares shall at the time be
owned by such person or by one or more Wholly Owned Restricted Subsidiaries of
such person or by such person and one or more Wholly Owned Restricted
Subsidiaries of such person.
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<PAGE>
PLAN OF DISTRIBUTION
This prospectus is to be used by DLJ Securities Corporation in connection
with offers and sales of the notes in market-making transactions effected from
time to time. DLJ Securities Corporation may act as a principal or agent for one
party when acting as principal or as agent for both parties, and may receive
compensation in the form of discounts and commissions, including from both
parties when it acts as agent for both. Those sales will be made at prevailing
market prices at the time of sale, at prices related thereto or at negotiated
prices.
DLJ Merchant Banking Partners II, L.P. and several of its affiliates
beneficially own approximately 85.7% of the common stock of DeCrane Holdings, on
a fully diluted basis assuming exercise of all outstanding warrants and options.
Thompson Dean and Susan C. Schnabel, each of whom is a principal of DLJ Merchant
Banking, are members of the Board of Directors of DeCrane Holdings and DeCrane
Aircraft. DLJ Capital Funding, Inc. acted as syndication agent in connection
with our bank credit facility, for which it received customary fees and
expenses. DLJ Bridge Finance Inc. purchased the bridge notes which were
refinanced by the initial offering of DeCrane Aircraft's 12% Series A Senior
Subordinated Notes due 2008, for which it received customary fees and expenses.
DLJ Securities Corporation acted as dealer/manager in connection with the tender
offer for our common stock in the DLJ acquisition, as arranger in connection
with our prior bank credit facility, and as the initial purchaser of the
Series A notes, and is the financial advisor to DeCrane Holdings and DeCrane
Aircraft. DLJ Merchant Banking, DLJ Capital Funding, Inc. and DLJ Bridge
Finance, Inc. are affiliates of DLJ Securities Corporation. On June 30, 2000,
DLJ Investment Partners, L.P. purchased $25 million of our preferred stock and
warrants to purchase common stock of DeCrane Holdings in connection with
financing our purchase of ERDA, Inc.
DLJ Securities Corporation currently makes a market in the notes. However,
DLJ Securities Corporation is not obligated to do so and it may discontinue or
interrupt any such market-making at any time without notice. Any such
market-making activity is also subject to the limits imposed by the Securities
Act and the Securities Exchange Act of 1934. We cannot assure you that any
market for the notes will continue, or about your ability to sell the notes or
the price at which you may be able to sell them.
DLJ Securities Corporation has, from time to time, provided investment
banking and other financial advisory services to us, for which it has received
customary compensation, and will provide such services and financial advisory
services to us in the future. DLJ Securities Corporation was the initial
purchaser in the initial offering of the old notes and received an underwriting
discount of approximately $3.3 million in connection therewith.
We have entered into a registration rights agreement with DLJ Securities
Corporation regarding its use of this prospectus. Pursuant to such agreement, we
have agreed to bear all registration expenses incurred under that agreement, and
to indemnify DLJ Securities Corporation against some liabilities, including
liabilities under the Securities Act.
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EXPERTS
The following financial statements, which are incorporated by reference in
this prospectus, have been incorporated in reliance on the reports of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting:
- the consolidated balance sheets as of December 31, 1998 and 1999 and the
consolidated statements of operations, of stockholders' equity and of cash
flows for the year ended December 31, 1997, the eight months ended
August 31, 1998, the four months ended December 31, 1998 and the year
ended December 31, 1999 of DeCrane Aircraft Holdings, Inc. (incorporated
by reference to our Annual Report on Form 10-K for the year ended
December 31, 1999);
- the consolidated balance sheets as of June 30, 1997 and 1998 and the
consolidated statements of operations, of stockholders' equity and of cash
flows for the years then ended of PATS, Inc. (incorporated by reference to
our prospectus included in Registration Statement No. 333-70365 on
Form S-1 effective May 14, 1999);
- the balance sheets as of December 31, 1997 and 1998 and the statements of
income, of stockholders' equity and of cash flows for the years then ended
of Custom Woodwork & Plastics, Inc. (incorporated by reference to our
Current Report on Form 8-K filed on October 19, 1999);
- the balance sheets as of December 31, 1998 and September 30, 1999 and the
statements of income, of partners' equity and of cash flows for the year
ended December 31, 1998 and the nine months ended September 30, 1999 of
The Infinity Partners, Ltd (incorporated by reference to our Current
Report on Form 8-K/A filed on February 11, 2000 which incorporated by
reference to our prospectus dated February 10, 2000 filed pursuant to
Rule 424(b)(3) on February 11, 2000); and
- the balance sheets as of December 31, 1998 and 1999 and the statements of
income, of stockholders' equity and of cash flows for the years then ended
of Carl F. Booth & Co., Inc. (incorporated by reference to our Current
Report on Form 8-K/A filed on June 16, 2000).
The following financial statements, which are incorporated by reference in
this prospectus, have been incorporated in reliance on the reports of Baird,
Kurtz & Dobson, independent accountants, given on the authority of said firm as
experts in auditing and accounting:
- the consolidated balance sheets as of December 31, 1997 and 1998 and the
consolidated statements of income, stockholders' equity and cash flows for
the period from June 12, 1997 to December 31, 1997 and the year ended
December 31, 1998 of PPI Holdings, Inc., and the consolidated statements
of income, stockholders' equity and cash flows for the year ended
December 31, 1996 and for the period from January 1, 1997 to June 11, 1997
of Precision Pattern Inc., the predecessor to PPI Holdings, Inc.
(incorporated by reference to our prospectus included in Registration
Statement No. 333-70365 on Form S-1 effective May 14, 1999); and
- the balance sheets as of December 31, 1997 and 1998 and the statements of
income, of stockholders' equity and of cash flows for the years then ended
of PCI NewCo, Inc. (incorporated by reference to our prospectus dated
February 10, 2000 filed pursuant to Rule 424(b)(3) on February 11, 2000).
The following financial statements, which are incorporated by reference in
this prospectus, have been incorporated in reliance on the reports of Grant
Thornton LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting:
- the consolidated balance sheets as of June 30, 1998 and 1999 and the
consolidated statements of income, of stockholders' equity and of cash
flows for the years then ended of ERDA, Inc. and Subsidiary (incorporated
by reference to our Current Report on Form 8-K / A filed on August 2,
2000).
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YOU SHOULD ONLY RELY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN
ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE
INFORMATION IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT IS ACCURATE AS OF
ANY DATE OTHER THAN THE DATE ON THE FRONT OF THOSE DOCUMENTS.
------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary............................... 1
The Company........................... 1
Risk Factors.......................... 2
Ratio of Earnings to Fixed Charges.... 9
The Notes............................. 10
Where You Can Find More Information... 12
Use of Proceeds....................... 12
Description of Notes.................. 13
Plan of Distribution.................. 45
Experts............................... 46
</TABLE>
DeCrane Aircraft
Holdings, Inc.
12% SERIES B SENIOR SUBORDINATED NOTES
DUE 2008
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
---------------------
PROSPECTUS
---------------------
AUGUST , 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses, all of which are to
be borne by the Company, in connection with the registration, issuance and
distribution of the securities being registered hereby. All amounts are
estimates except the SEC registration fee.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ --
Legal Fees and Expenses..................................... 8,000
Accountants' Fees and Expenses.............................. 10,000
Printing and Engraving Expense.............................. 10,000
Miscellaneous............................................... 7,500
-------
Total................................................... $35,500
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The certificates of incorporation of DeCrane Aircraft and DeCrane Holdings
each contains a provision eliminating or limiting director liability to the
company and its stockholders for monetary damages arising from acts or omissions
in the director's capacity as a director. Those provisions may not, however,
eliminate or limit the personal liability of a director:
- for any breach of such director's duty of loyalty to the company or its
stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- under the Delaware statutory provision making directors personally liable,
under a negligence standard, for unlawful dividends or unlawful stock
purchases or redemptions; or
- for any transaction from which the director derived an improper personal
benefit.
As a result of this provision, the ability of either company, or a
stockholder thereof, to successfully prosecute an action against a director for
breach of his duty of care is limited. However, the provision does not affect
the availability of equitable remedies such as an injunction or recision based
upon a director's breach of his duty of care. The SEC has taken the position
that the provision will have no effect on claims arising under the federal
securities laws.
In addition, the certificate of incorporation and bylaws for DeCrane
Aircraft and DeCrane Holdings each provide for mandatory indemnification rights,
subject to limited exceptions, to any director or executive officer of the
company who (by reason of the fact that he or she is a director or officer) is
involved in a legal proceeding of any nature. Such indemnification rights
include reimbursement for expenses incurred by such director or officer in
advance of the final disposition of such proceeding in accordance with the
applicable corporate law.
DeCrane Aircraft also maintains directors' and officers' liability
insurance.
ITEM 16. EXHIBITS.
A list of the exhibits included or incorporated by reference as part of this
Registration Statement is set forth in the Exhibit Index which immediately
precedes such exhibits and is hereby incorporated by reference herein.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
II-1
<PAGE>
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereto) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) of this section
do not apply if the registration statement is on Form S-3, Form S-8 or
Form F-3, and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to Section 13 or
Section 15(d) of the Exchange Act that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in this registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial BONA FIDE offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the State of California on August 10, 2000.
<TABLE>
<S> <C> <C>
DECRANE AIRCRAFT HOLDINGS, INC.
By: /s/ R. JACK DECRANE
----------------------------------------------
R. Jack DeCrane
CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints R.
Jack DeCrane and Richard J. Kaplan, or either of them, his true and lawful
attorney-in-fact and agent, with full power of substitution and re-substitution
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) and supplements to this
Registration Statement and to file the same with all exhibits thereto, and other
documents in connection therewith with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agents, full power and authority to do
and perform each and every act and thing requested or necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agents of said
attorney-in-fact, or his substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
------------------------------------------- Chairman of the Board of Directors August , 2000
Thompson Dean
/s/ R. JACK DECRANE
------------------------------------------- Chief Executive Officer and August 10, 2000
R. Jack DeCrane Director
/s/ RICHARD J. KAPLAN Senior Vice President, Chief
------------------------------------------- Financial Officer, Secretary, August 10, 2000
Richard J. Kaplan Treasurer and Director
------------------------------------------- Director August , 2000
John F. Fort, III
/s/ SUSAN SCHNABEL
------------------------------------------- Director August 10, 2000
Susan Schnabel
</TABLE>
<TABLE>
<S> <C> <C> <C>
By: /s/ R. JACK DECRANE
--------------------------------------
R. Jack DeCrane August 10, 2000
ATTORNEY-IN-FACT
</TABLE>
II-3
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
----------- -------------------
<S> <C>
3.2.1 Certificate of Incorporation of DeCrane Aircraft Holdings,
Inc. (successor by merger to Delight Acquisition Co. and
DAHX, Inc.)*
3.2.2 Bylaws of DeCrane Aircraft Holdings, Inc. (successor by
merger to Delight Acquisition Co. and DAHX, Inc.)*
3.3.1 Certificate of Formation and Certificate of Merger of
Aerospace Display Systems, LLC*
3.3.2 Limited Liability Company Operating Agreement for Aerospace
Display Systems, LLC*
3.4.1 Articles of Incorporation of Audio International, Inc.*
3.4.2 Amended & Restated Bylaws of Audio International, Inc.*
3.5.1 Articles of Incorporation of Avtech Corporation*
3.5.2 Bylaws of Avtech Corporation*
3.6.1 Articles of Incorporation of Cory Components, Inc.*
3.6.2 Bylaws of Cory Components, Inc.*
3.7.1 Certificate of Incorporation of Dettmers Industries, Inc.
(formerly DAHX Acquisition, Inc.)*
3.7.2 Bylaws of Dettmers Industries, Inc.*
3.8.1 Restated Articles of Incorporation of Elsinore Aerospace
Services, Inc.*
3.8.2 Bylaws of Elsinore Aerospace Services Inc.*
3.9.1 Certificate of Incorporation of Elsinore Engineering, Inc.
(formerly EE Acquisition, Inc.)*
3.9.2 Bylaws of Elsinore Engineering, Inc. (formerly EE
Acquisition, Inc.)*
3.10.1 Articles of Incorporation of Hollingsead International,
Inc.*
3.10.2 Bylaws of Hollingsead International Inc.*
3.11.1 Articles of Incorporation of Tri-Star Electronics
International, Inc.*
3.11.2 Bylaws of Tri-Star Electronics International, Inc.*
3.12.1 Articles of Incorporation of PATS, Inc.*
3.12.2 Bylaws of PATS, Inc.*
3.12.3 Amendment to Articles of PATS, Inc.*
3.12.4 Amendment to Bylaws of PATS, Inc.8
3.13.1 Articles of Incorporation of Flight Refueling, Inc.*
3.13.2 Bylaws of Flight Refueling, Inc.*
3.14.1 Articles of Incorporation of Patrick Aircraft Tank Systems,
Inc.*
3.14.2 Bylaws of Patrick Aircraft Tank Systems, Inc.*
3.15.1 Articles of Incorporation of PATS Aircraft and Engineering
Corporation*
3.15.2 Bylaws of PATS Aircraft and Engineering Corporation*
3.16.1 Articles of Incorporation of PATS Support, Inc.*
3.16.2 Bylaws of PATS Support, Inc.*
3.17.1 Articles of Incorporation of PPI Holdings, Inc.*
3.17.2 By Laws of PPI Holdings, Inc.*
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
----------- -------------------
<S> <C>
3.18.1 Articles of Incorporation of Precision Pattern, Inc.*
3.18.2 By Laws of Precision Pattern, Inc.*
3.19.1 Certificate of Formation and Certificate of Merger for
Custom Woodwork & Plastics, LLC*
3.19.2 Limited Liability Company Operating Agreement for Custom
Woodwork & Plastics, LLC*
3.20.1 Articles of Incorporation of PCI Acquisition Co., Inc.*
3.20.2 Bylaws of PCI Acquisition Co., Inc.*
3.21.1 Articles of Incorporation of International Custom Interiors,
Inc.*
3.21.2 Bylaws of International Custom Interiors, Inc.*
3.22.1 Articles of Incorporation DAH-IP Holdings, Inc.*
3.22.2 By Laws of DAH-IP Holdings, Inc.*
3.23.1 Articles of Incorporation of DAH-IP Infinity, Inc.*
3.23.2 By Laws of DAH-IP Infinity, Inc.*
3.24.1 Certificate of Limited Partnership DAH-IP Acquisition Co.,
L.P.* the General Partner, and DeCrane Aircraft Holdings,
Inc., the Limited Partner*
3.24.2 Limited Partnership Agreement of DAH-IP Acquisition Co.,
L.P. among DAH-IP Holdings, Inc., the General Partner, and
DeCrane Aircraft Holdings, Inc., the Limited Partner*
3.24.3 Assignment of Partnership Interest by DeCrane Aircraft
Holdings, Inc. to DAH-IP Infinity, Inc.*
3.25.1 Certificate of Formation and Certificate of Amendment of
Carl F. Booth & Co., LLC*
3.25.2 Limited Liability Company Agreement of Carl F. Booth & Co.,
LLC*
3.26.1 Articles of Incorporation of ERDA, Inc.*
3.26.2 Bylaws of ERDA, Inc.*
4.1 Indenture dated October 5, 1998 between DeCrane Aircraft and
State Street Bank and Trust Company*
4.1.1 Supplemental Indenture dated January 22, 1999 among PATS,
Inc. and its subsidiaries, the other guarantors under the
Indenture, DeCrane Aircraft and State Street Bank and Trust
Company*
4.1.2 Supplemental Indenture to be dated April 23, 1999 among PPI
Holdings, Inc., Precision Pattern, Inc., the other
guarantors under the Indenture, DeCrane Aircraft and State
Street Bank and Trust Company*
4.2 A/B Exchange Registration Rights Agreement among DeCrane
Aircraft Holdings, Inc., the subsidiary guarantors, and DLJ
Securities Corporation*
4.5 Form of DeCrane 12% Senior Subordinated Notes due 2008*
4.6 Certificate of Designations, Preferences and Rights of 16%
Senior Redeemable Exchangeable Preferred Stock due 2009*
4.7 Senior Preferred Stock Registration Rights Agreement dated
as of June 30, 2000 among DeCrane Aircraft Holdings, Inc.
and the Holders of Senior Preferred Stock*
5.1 Opinion of Spolin & Silverman LLP**
5.2 Opinion of Davis Polk & Wardwell**
10.1 Securities Purchase Agreement dated as of June 30, 2000
among DeCrane Aircraft Holdings, Inc., DeCrane Holdings Co.
and the purchasers named therein
10.2 Amended and Restated Investors' Agreement dated as of June
30, 2000 by and among DeCrane Holdings Co., DeCrane Aircraft
Holdings, Inc. and the stockholders named therein*
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
----------- -------------------
<S> <C>
10.5 Tax Sharing Agreement dated March 15, 1993 between DeCrane
Aircraft and several subsidiaries*
10.6 Employment Agreement dated July 17, 1998 between the Company
and R. Jack DeCrane*
10.7 401(k) Salary Reduction Non-Standardized Adoption Agreement
dated April 30, 1992 between the Company and The Lincoln
National Life Insurance Company*
10.8 Form of Subscription Agreement for DeCrane Holdings Co.
common and preferred stock by certain members of Global
Technology Partners LLC*
10.10 Credit Agreement dated August 28, 1998 by and among DeCrane
Aircraft Holdings, Inc. (successor by merger to DeCrane
Finance Co.) and DLJ Capital Funding, Inc.*
10.10.1 First Amendment to Credit Agreement dated January 22, 1999*
10.10.2 Second Amended and Restated Credit Agreement dated as of
December 17, 1999 among DeCrane Aircraft, the lenders listed
therein, DLJ Capital Funding, Inc., as syndication agent,
and Bank One NA, as administrative agent*
10.10.3 Third Amended and Restated Credit Agreement dated as of May
11, 2000 among DeCrane Aircraft, the lenders listed therein,
DLJ Capital Funding, Inc., as syndication agent, and Bank
One NA, as administrative agent*
10.11 Lease between Botzler-Emery Associates Guilford Ten Limited
Partnership and PATS, Inc.*
10.12 Lease among Continental Development Corporation, Tri-Star
Electronics International, Inc., and Cory Components, Inc.
for real property in El Segundo, CA*
10.13 Lease among Kilroy Realty, L.P., Kilroy Realty Corporation
and Hollingsead International for real property in Garden
Grove, California*
10.14 Lease between Sussex County, MD and PATS, Inc.*
10.15 General Terms Agreement dated July 5, 1995 between the
Boeing Company and Cory Components, Number 6-5752-0002*
10.15.1 Special Business Provisions dated November 30, 1995 between
the Boeing Company and Cory Components, Number 6-5752-0004*
10.15.2 Purchase Agreement 9423JC4548 between Boeing Defense &
Space- Irving Co. and Cory Components, January 1, 1995
through December 31, 1999*
10.16 Purchase Agreement dated as of October 1, 1998 between
Matsushita Electronic Industrial Co., Ltd. and Cory
Components Inc.*
10.17 1998 General Terms Agreement between the Boeing Company and
Tri-Star Electronics International, Inc. dated July 1, 1998,
number BCA-6-5632-0032*
10.17.1 Special business provisions between the Boeing Company and
Tri-Star Electronics International, Inc. dated July 1, 1998,
number STD-6-5632-0097*
10.18 General Terms Agreement between Boeing Company and PATS,
Inc. dated February 17, 1998*
10.18.1 Special business provisions between the Boeing Company and
PATS, Inc. dated February 17, 1998*
10.18.2 Letter Agreement dated January 15, 1999 between The Boeing
Company and DeCrane Aircraft Holdings, Inc.*
10.19 Amended Management Incentive Stock Option Plan*
10.20 Amended Stock Subscription Agreement*
10.21 Amended Incentive Bonus Plan*
10.22 Executive Deferred Compensation Plan*
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
----------- -------------------
<S> <C>
12.1 DeCrane Aircraft Holdings, Inc. Earnings to Fixed Charges
Ratio*
20.1 Prospectus of DeCrane Aircraft Holdings, Inc. dated May 14,
1999 (incorporated by reference to the Company's
Registration Statement No. 333-70365 on Form S-1 effective
May 14, 1999)*
21.1 List of Subsidiaries of Registrant*
23.1 Consent of PricewaterhouseCoopers LLP***
23.2 Consent of Baird, Kurtz & Dobson***
23.3 Consent of Spolin & Silverman LLP**
23.4 Consent of Davis Polk & Wardwell**
23.5 Consent of Grant Thornton LLP***
24 Power of Attorney*
25 Statement of Eligibility and Qualification of State Street
Bank & Trust Company, as trustee, under the Indenture listed
as Exhibit 4.1, on Form T-1*
</TABLE>
------------------------
* Previously filed.
** Filed in respect of our previously filed Registration Statement
No. 333-70365 on Form S-1.
*** Filed herewith.
II-7
