10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

COMMISSION FILE NUMBER 000-22371

DECRANE AIRCRAFT HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware	34-1645569
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
2361 Rosecrans Avenue, Suite 180
El Segundo, California 90245
(310) 725-9123
(Address and Telephone Number of Principal Executive Offices)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ýYES  o NO

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). o YES  ý NO

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: Nil

The number of shares of Common Stock outstanding on March 25, 2004 was 100.

DOCUMENTS INCORPORATED BY REFERENCE:

None.

Table of Contents

Part I
Item 1.	Business
Item 2.	Properties
Item 3.	Legal Proceedings
Item 4.	Submission of Matters to a Vote of Security Holders
Part II
Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters
Item 6.	Selected Financial Data
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk
Item 8.	Financial Statements and Supplementary Data
Item 9.	Changes In and Disagreements With Accountants On Accounting and Financial Disclosure
Item 9A.	Controls and Procedures
Part III
Item 10.	Directors and Executive Officers of the Registrant
Item 11.	Executive Compensation
Item 12.	Security Ownership of Certain Beneficial Owners and Management
Item 13.	Certain Relationships and Related Transactions
Item 14.	Principal Accounting Fees and Services
Part IV
Item 15.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Signatures
Index to Financial Statements and Financial Statement Schedules

All statements other than statements of historical facts included in this report are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are subject to known and unknown risks, uncertainties and other factors, which are difficult to predict.  Changes in such factors could cause actual results to differ materially from those contemplated in such forward-looking statements as we describe in “Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations—Forward-Looking Statements and Risk Factors.”  Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct.  We undertake no obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

PART I

ITEM 1.BUSINESS

Company Overview

DeCrane Aircraft Holdings, Inc., a Delaware corporation founded in 1989, is a provider of integrated assemblies, sub-assemblies and component parts to the aerospace industry.  Since our founding in 1989, we have experienced both internal growth and external growth by identifying fragmented, high-growth niche segments within the aerospace industry and acquiring market-leading companies in those niches.  Today, we have product capability within two specific segments of the aerospace industry: cabin interiors for business, VIP and head-of-state aircraft and systems integration services, including auxiliary fuel tanks, retrofit and aircraft completion services.  Within these markets, our customers include original manufacturers of business, VIP and head-of-state aircraft, commonly referred to as OEM’s, and aircraft repair and modification centers.

Our Operating Groups

We are organized into two operating groups, consistent with the segments in which we operate: Cabin Management and Systems Integration.  Through our operating groups, we offer a complete line of cabinetry, galleys, seating and cabin management systems for business, VIP and head-of-state aircraft, as well as systems integration services.

During the first five months of 2003, we also had a third strategic business, the Specialty Avionics Group.  As described in “Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes included in this report, we sold our equity interests in the companies comprising this group on May 23, 2003.  As a result of the sale, the Specialty Avionics Group is presented as a discontinued operation in our consolidated financial statements for all periods and our discussion below reflects only our continuing operations.

Cabin Management Group

DeCrane’s Cabin Management Group contributed approximately 70% of our revenues from continuing operations for the year ended December 31, 2003.

1

Business Description

Our Cabin Management Group is a leading independent provider of cabin products, with a primary focus on serving the business, VIP and head-of-state aircraft market.  Since 1997, our Cabin Management Group has acquired nine companies involved in the engineering, manufacturing and assembly of the key components for the interior of a business, VIP and head-of-state aircraft, including cabin interior furnishings, veneer, cabin management systems, seating and composite components.  Our Cabin Management Group serves major manufacturers of business, VIP and head-of-state aircraft, including Boeing Business Jet, Bombardier, Cessna, Dassault, Gulfstream and Raytheon.

The Cabin Management Group introduced the concept of modularity to the business, VIP and head-of-state aircraft market by offering totally integrated interior products.  In our view, one of the greatest challenges facing the industry’s aircraft manufacturers is minimizing the production cycle time necessary to complete an unfinished “green” aircraft.  We believe our distinctive approach of delivering integrated assemblies and sub-assemblies addresses this challenge by providing our customers with entire pre-engineered, pre-wired and pre-plumbed modular cabin interiors and management systems ready for final integration into the aircraft.  We believe our totally integrated interior products enable our customers to reduce their lead times, supplier base and overall costs.

The Cabin Management Group is guided by our overall strategy to gain market leadership positions in high-growth segments of the aerospace industry by building more related product capabilities than any other company in the industry.  To that end, our Cabin Management Group has focused on pursuing two, closely related, strategic imperatives:

•Building Critical Mass in Cabin Interior Furnishings, Cabin Management Systems and Seating for the Business, VIP and Head-of-State Aircraft Markets.  Our Cabin Management Group is aggressively focused on broadening and deepening its product offerings to the business, VIP and head-of-state aircraft markets.  As a result of this strategy, we have increased revenue content per plane with our existing customer base and have successfully attracted new customers.

•Developing Capabilities to Provide Modular “Total Cabin Solutions” to the Business, VIP and Head-of-State Aircraft Market.  Consistent with our overall corporate strategy to build integrated system solutions, the Cabin Management Group is focused on aggregating its capabilities to provide partial or fully assembled modular business, VIP and head-of-state aircraft cabin interiors to its customers.

In order to meet these strategic objectives, we have aggressively pursued growth in our Cabin Management Group through selective acquisitions.

Products and Services

Our Cabin Management Group designs, engineers and manufactures a full line of customized, pre-fit products and provides related services.  Approximately 39% of our Cabin Management Group’s revenues in 2003 were from two customers, Textron and Bombardier.  Our products and services are in four broad categories, as summarized below.

2

Interior Furnishings

•      entertainment and refreshment centers

•      conference tables

•      hi-low dining and coffee tables

•      end tables

•      cabinets

•      arm and side ledges

•      galleys

•      lavatories

•      vanities

•      room enclosures

•      cabinetry refurbishment services

•      veneers

Seating

•      executive track and swivel seats

•      jump-seats

•      divans, including models that convert to beds or contain storable tables

•      upholstery services

Cabin Management Systems

•      in-flight entertainment systems

•      in-flight data network and communication systems

•      cabin controls

•      switches, controls and lighting

Composite Components

•      sound-dampening side walls and headliners

•      environmental (HVAC) ducting

•      passenger service units

•      closets

Our interior furnishings products and services provided approximately 36% of our consolidated revenues during 2003 and 47% of our consolidated revenues during 2002 and 2001.  Seating provided approximately 13% of our consolidated revenues during 2003 and 10% of our consolidated revenues during 2002 and 2001.  The decrease in interior furnishings products and services is primarily caused by lower revenues from our major customers, Textron and Bombardier, as described in “—Customers” below.

Competition

The markets served by our Cabin Management Group are fragmented, with several competitors offering similar products and services.  Due to the global nature of the aerospace industry, competition comes from both U.S. and foreign companies.  Our Cabin Management Group generally faces competition from a group of smaller companies and enterprises, except for the business, VIP and head-of-state aircraft manufacturers and independent completion centers.  We believe that the principal competitive factors in the markets we serve are quality, price, timely deliveries and overall customer service.  Our principal competitors are summarized below.

Interior Furnishings

•      BE Aerospace

•      C & D Interiors

•      Global Technology

•      Hiller Aircraft

•      The Nordam Group

•      Independent completion centers

•      Business, VIP and head-of-state aircraft manufacturers and completion centers

Seating

•      BE Aerospace

•      Fisher (Germany)

•      IPECO

Cabin Management Systems

•      DPI Labs

•      Honeywell Cabin Management Systems and Services

•      IEC, International

•      Rockwell Collins / Airshow

Composite Components

•      AAR

•      Fibre Art

•      Plastic Fab

•      Scale Composite Works

•      The Nordam Group

3

Systems Integration Group

DeCrane’s Systems Integration Group contributed approximately 30% of our revenues from continuing operations for the year ended December 31, 2003.

Business Description

Our Systems Integration Group provides a range of aircraft retrofit, completion and refurbishment services, from conceptual design to Federal Aviation Administration certification, including engineering, manufacturing and installation.  One of our largest businesses in this group is the design, production and installation of auxiliary fuel systems, which extend the range of an aircraft.  We are presently the sole-source provider of auxiliary fuel systems to Boeing Business Jet (“BBJ”) for its BBJ, a Boeing 737-700IGW, and the BBJ2, a Boeing 737-800, and are one of only four world-wide approved BBJ/BBJ2 service centers.  During 2003, we delivered our second aircraft interior completion on a BBJ aircraft.

We also focus on regulatory authority safety mandates and believe we are the major supplier of integration kits for smoke detection and fire suppression in the cargo hold, and perform structural, avionics and mechanical systems modifications, including FAA certification of those modifications before returning an aircraft to service.

The aerospace industry is highly regulated in the United States by the FAA and similar regulatory agencies abroad, such as the European Joint Aviation Authorities (commonly referred to as the JAA), to ensure that aviation products and services meet stringent safety and performance standards.  There are approximately 35 companies world-wide that have the necessary Designated Alteration Station authorization to offer aircraft certification on behalf of the FAA.  Two companies within our Systems Integration Group are authorized to provide the full spectrum of services, from design to FAA certification, needed for timely retrofitting of an aircraft, thus providing a significant competitive advantage.

Our Systems Integration Group has adopted a two-pronged strategic approach to managing its operations:

•Develop the Most Comprehensive Integrated Retrofit Offering.  For the last thirteen years, our Systems Integration Group has focused on developing the capabilities necessary to provide a fully integrated offering with respect to aircraft refurbishing and aircraft retrofitting with FAA mandated changes and technological innovations.  Through several related acquisitions and aggressive internal product development, our Systems Integration Group has become one of the few non-OEM related operations with the authority to provide alteration services and to offer FAA certification of aircraft that undergo overhaul.  This certification ability represents a significant competitive advantage, as we can offer all the products and services required to re-commission an aircraft in a timely and cost efficient manner.  We believe we have developed the most comprehensive offering in retrofitting aircraft with auxiliary fuel systems in the industry.

•Target Development of Specialty Products and Services Relating to Regulatory Authority Mandates.  Consistent with its first strategic imperative, our Systems Integration Group is also growing its capabilities in providing solution “kits” in response to FAA and JAA mandated aircraft upgrades.  Our Systems Integration Group has demonstrated the ability to identify and quickly respond to probable new regulatory authority mandates.  For example:

•Many domestic commercial airlines believe the FAA will issue a safety mandate requiring cockpit door video surveillance on every commercial aircraft traveling in U.S. domestic airspace by no later than a specific compliance date.  In response, we consulted with commercial airlines and developed what we believe to be a low-cost, high quality cockpit

4

door video surveillance system.  Our Sentry One™ system is based on an in-house developed camera control unit with integral power supplies and is combined with state-of-the-art extreme low light cameras and 5.6” video monitors.  Some airlines are voluntarily electing to install surveillance systems on their aircraft prior to the expected FAA mandate.  We have received FAA approval for our Sentry One™ system on Boeing 737-NG and Embraer EMB 135, 140 and 145 aircraft.  We believe we will also receive FAA approval on Boeing 737-400 and 747-400 aircraft in May 2004.  We are also working on approval for Boeing 737-400, 747-400 and 747-Classics model aircraft as well as several models of 767 and 777 aircraft.  We believe we will be successful in obtaining FAA approval for our system on these and other types of aircraft as well.

•We believe the JAA will mandate new fire safety measures for all aircraft in Europe, similar to the FAA mandate in the United States.  We expect to develop a stand-alone kit, similar to our FAA approved kit, which can be quickly incorporated into an aircraft to ensure compliance with the JAA ruling with minimal downtime.

Products and Services

Our Systems Integration Group provides auxiliary fuel systems, auxiliary power units and system integration services, including engineering, kit manufacturing, installation and certification.  Customers include Boeing (Boeing Business Jet, Boeing’s Commercial Airplane Group and Boeing Integrated Defense Systems), Bombardier, Cessna, Gulfstream, Honeywell, Raytheon and Rockwell Collins.  Approximately 50% of our Systems Integration Group’s revenues in 2003 were from Boeing.  The products and services we provide are described below.

Auxiliary Fuel Systems and Power Units.  We design, engineer, manufacture and install auxiliary fuel systems for business, VIP, head-of-state and commercial aircraft.  Our unique design and construction have made us a leader in the auxiliary fuel system market.  We also manufacture auxiliary power units, which provide ground power to corporate jets made by Bombardier, Cessna, Gulfstream, Learjet and Raytheon.  These products and services provided approximately 16% of our consolidated revenues during 2003, 15% during 2002 and 14% during 2001.

Cabin and Flight Deck Systems Integration.  We have designed and patented avionics support structures we sell under the Box-Mount™ name.  These structures are used to support and environmentally cool avionics equipment, including navigation, communication and flight control equipment.  These support structures are sold to aircraft and related electronics manufacturers, airlines and major modification centers.  In addition, these products are essential components of the installation kits used in our systems integration operations.

Aircraft Completion and Modification Services.  We are one of only four world-wide approved Boeing Business Jet Service Centers providing extensive completion, modification and integration services to the business, VIP and head-of-state aircraft market.

Retrofit and Refurbishment Services.  We also provide retrofit and refurbishment services, including engineering, kit manufacturing, installation and certification, to both commercial and business, VIP and head-of-state aircraft customers.

5

Competition

The markets served by our Systems Integration Group are fragmented with several competitors offering similar products and services.  Due to the global nature of the aerospace industry, competition comes from both U.S. and foreign companies.  Our Systems Integration Group generally faces competition from a group of smaller companies and enterprises, except for the business, VIP and head-of-state aircraft manufacturers and independent completion centers.  We believe that the principal competitive factors in the markets we serve are quality, price, timely deliveries and overall customer service.  Our principal competitors are summarized below.

Auxiliary Fuel Systems and Power Units

•      Marshalls (United Kingdom)

•      Pfalz Flugewerke (Germany)

Auxiliary Power Units (Integration Only)

•      Honeywell

•      Sundstrand

Aircraft Modification Services

•      Associated Air Center

•      Jet Aviation (United States and Switzerland)

•      Lufthansa Technik (Germany)

Cabin and Flight Deck Systems Integration and Retrofit and Refurbishment Services

•      ARINC

•      Aviation Sales

•      Boeing Aircraft Services

•      Flight Structures

•      In-house engineering departments of commercial airlines

•      Numerous independent airframe maintenance and modification companies

Other Information

Acquisitions and Dispositions

Disposition of the Specialty Avionics Group

On May 23, 2003, we consummated the sale of our equity interests in the companies comprising the Specialty Avionics Group to Wings Holdings, Inc., an affiliate of Odyssey Investment Partners, LLC. for $140.0 million in cash.  We used $130.7 million of the proceeds from the sale to repay borrowings under our first-lien credit facility, as amended.  The Specialty Avionics Group consisted of Avtech Corporation of Seattle, Washington, Aerospace Display Systems, LLC of Hatfield, Pennsylvania, and Tri-Star Electronics International, Inc. of El Segundo, California.

The sale of the Specialty Avionics Group is not expected to affect the operations of our remaining operating groups and is reflected as a discontinued operation in this report.  See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information.

Companies Acquired by DeCrane Aircraft

During the five years ended December 31, 2003, DeCrane Aircraft has acquired the stock or assets of seven significant businesses, as such term is defined by Securities and Exchange Commission rules, as follows:

Cabin Management Group

•all of the common stock of Precision Pattern, Inc., a Kansas-based designer and manufacturer of interior furniture components for business, VIP and head-of-state aircraft, on April 23, 1999;

•substantially all of the assets of Custom Woodwork & Plastics, Inc., a Georgia-based designer and manufacturer of interior furniture components for business, VIP and head-of-state aircraft, on August 5, 1999;

6

•substantially all of the assets of PCI NewCo, Inc., a Kansas-based manufacturer of composite material and components for business, VIP and head-of-state aircraft, on October 6, 1999;

•substantially all of the assets of The Infinity Partners, Ltd., a Texas-based designer and manufacturer of interior furniture components for middle- and high-end business, VIP and head-of-state aircraft, on December 17, 1999;

•substantially all of the assets of Carl F. Booth & Co., an Indiana-based manufacturer of wood veneer panels primarily used in aircraft interior cabinetry, on May 11, 2000;

•all of the common stock of ERDA, Inc. (subsequently renamed DeCrane Aircraft Seating Co., Inc.), a Wisconsin-based designer and manufacturer of aircraft seating, on June 30, 2000; and

Systems Integration Group

•all of the common stock of PATS, Inc., a Maryland-based designer, manufacturer and installer of auxiliary fuel systems for business, VIP and head-of-state aircraft and a manufacturer of aircraft auxiliary power units, on January 22, 1999.

All of the acquisitions were accounted for as purchases.  We have used the acquired assets to manufacture products similar to those previously manufactured by the companies prior to their acquisition.  Our financial statements reflect the acquired companies subsequent to their respective acquisition dates.

Customers

We estimate that our Cabin Management Group currently sells its products and services to approximately 800 customers and our Systems Integration Group sells its products and services to approximately 200 customers.  Our primary customers include manufacturers of business, VIP and head-of-state aircraft, airlines and aircraft repair and modification companies.

The following customers accounted for 10% or more of our consolidated revenues from continuing operations for the year ended December 31, 2003.  Historical data for the three years ended December 31, 2003 is presented in Note 17 accompanying our consolidated financial statements included in this report.

Significant Customers	Cabin Management Group		Systems Integration Group		Consolidated Total
Percent of consolidated revenues:
Year ended December 31, 2003:
Boeing (1)	2.4	%	15.1	%	17.5	%
Textron (2)	16.2		0.1		16.3
Bombardier	11.0		1.6		12.6
Consolidated revenues	29.6	%	16.8	%	46.4	%
Year ended December 31, 2002:
Boeing (1)	1.4	%	14.0	%	15.4	%
Textron (2)	23.5		—		23.5
Bombardier	16.0		1.4		17.4
Consolidated revenues	40.9	%	15.4	%	56.3	%

7

Significant Customers	Cabin Management Group		Systems Integration Group
Percent of group revenues (3):
Year ended December 31, 2003:
Boeing (1)	3.4	%	50.1	%
Textron (2)	23.2		0.1
Bombardier	15.7		5.3
Group revenues	42.3	%	55.5	%
Year ended December 31, 2002:
Boeing (1)	1.9	%	56.0	%
Textron (2)	31.3		—
Bombardier	21.4		5.4
Group revenues	54.6	%	61.4	%

(1)Reflects only our direct revenues from Boeing.  Our Systems Integration Group’s revenues from Boeing result from auxiliary fuel systems for the Boeing Business Jet.

(2)Includes Cessna.

(3)Inter-group revenues are eliminated against the group originating the sale.

Revenues from Textron and Bombardier, as a percentage of total consolidated revenues, decreased during the year ended December 31, 2003 compared to our revenues from these customers during the prior year.  The decrease is caused by both companies temporarily suspending production of various models of aircraft for several weeks during fiscal 2003 in response to their low order backlog resulting from the weak demand for new aircraft as described in “—Backlog” below.  Complete loss of any of the customers identified above could have a significant adverse impact on our results of operations expected in future periods.

Significant portions of our revenues from our major customers are pursuant to contracts that may include a variety of terms favorable to the customer.  Such terms may include our agreement to one or more of the following:

•the customer is not required to make purchases, and may terminate such contract at any time;

•we make substantial expenditures to develop products for customers that we may not recoup if we do not receive sufficient orders;

•on a prospective basis, we must extend to the customers any reductions in prices or lead times that we provide to other customers;

•we must match other suppliers’ price reductions or delete the affected products from the contract; and

•we must grant irrevocable non-exclusive worldwide licenses to use our designs, tooling and other intellectual property rights to products sold to a customer if we default, or suffer a bankruptcy filing, or transfer our manufacturing rights to a third party.

8

Backlog

As of December 31, 2003, we had an aggregate sales order backlog of $58.0 million compared to $66.8 million as of December 31, 2002, as follows:

	December 31,
(In thousands)	2003		2002
Cabin Management	$	33,679	$	31,679
Systems Integration	24,323		35,126
Consolidated totals	$	58,002	$	66,805

Orders are usually filled within twelve months; however, backlog totaling $2.5 million as of December 31, 2003 is scheduled for delivery in 2005 and beyond as follows: Cabin Management – $1.4 million; and Systems Integration – $1.1 million.  Orders may be subject to cancellation by the customer prior to shipment.  The level of unfilled orders at any given date will be materially affected by when we receive orders and how fast we fill them.  Period-to-period comparisons of backlog figures may not be meaningful.  For that reason, our backlogs do not necessarily accurately predict actual shipments or sales for any future period.

As described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Industry Overview and Trends,” the acts and ongoing threats of global terrorism, the current military conflicts, health epidemics and weak global economic conditions are all adversely impacting the aerospace industry.  We are not able to predict the continuing impact these events will have in future periods.  However, given the magnitude of these events, the adverse impact could be material.

Employees

As of December 31, 2003, we had 1,296 employees: 1,018 in our Cabin Management Group; 266 in our Systems Integration Group; and 12 in our corporate office.  None of our employees is subject to a collective bargaining agreement, and we have not experienced any material business interruption as a result of labor disputes.  We believe that we generally have a good relationship with our employees.

Research and Development

We continually evaluate opportunities to improve our product offerings and develop new products that incorporate new technologies to meet the demands of our customers and the FAA.  Total research and development expense was $10.4 million for the year ended December 31, 2003, $0.1 million for the year ended December 31, 2002 and $0.7 million during the year ended December 31, 2001.

Commencing January 1, 2003, we elected to change our accounting policy and discontinued the use of program accounting, which resulted in product development costs being expensed as incurred.  Prior to January 1, 2003, such costs were deferred and charged to cost of sales over the expected production cycle of the program.  Product development costs are now reflected as research and development expenses.  If the new accounting policy was in effect during the prior years, total research and development expense would have been $5.0 million for the year ended December 31, 2002 and $11.7 million during the year ended December 31, 2001.

Financial Information About Geographic Areas

Financial information about our revenues and assets by geographic area are included in Note 17 accompanying our financial statements included in this report.

9

Seasonality

Our businesses generally are not seasonal in nature.

Sales and Marketing

Our Cabin Management Group has designated relationship managers who are responsible for maintaining and cultivating relationships with customers.  In addition, a dedicated sales force is utilized for some of our products and services.

Our Systems Integration Group has a dedicated sales force that handles most of its sales activities.

We are continuously seeking opportunities to combine our sales efforts across all of our operating groups in order to ensure that all sales opportunities are explored and that we maximize our revenue content per plane.  We may also assign marketing and sales responsibilities for key customers to one of our senior corporate executives.

Raw Materials and Component Parts

The components we manufacture require the use of various raw materials including aluminum, hardwoods and plastics.  The availability and prices of these materials may fluctuate.  The cost of such raw materials is a significant component in, and part of, the sales price of many of our products.  Although some of our contracts have prices tied to raw materials prices, we cannot always recover raw material price increases in our product sale price.  We also purchase a variety of manufactured sub-component parts from various suppliers.  Raw materials and component parts are generally available from multiple suppliers at competitive prices.  However, any delay in our ability to obtain necessary raw materials and component parts may affect our ability to meet customer production needs.

Intellectual Property and Proprietary Information

We have various trade secrets, proprietary information, trademarks, tradenames, patents, copyrights and other intellectual property rights we believe are important to our business in the aggregate, but not individually.

Government Regulation

Federal Aviation Administration

The aerospace industry is highly regulated in the United States by the Federal Aviation Administration and in other countries by similar agencies to ensure that aviation products and services meet stringent safety and performance standards.  In addition, many of our customers impose their own compliance and quality requirements on us.  The FAA prescribes standards and licensing requirements for aircraft components, issues designated alteration station authorizations, and licenses private repair stations.  We hold various FAA approvals and licenses, which may only be used by our subsidiary obtaining such approval.  If material FAA or customer authorizations or approvals were revoked or suspended, our operations could be adversely affected.

The FAA can authorize or deny authorization of many of the services and products we provide.  Any such denial would preclude our ability to provide the pertinent service or product.  If we failed to comply with applicable FAA standards or regulations, the FAA could exercise a wide range of remedies, including a warning letter, a letter of correction, a civil penalty action, and emergency or non-emergency suspension or revocation of a certificate or approval.

10

Each type of aircraft operated by airlines in the United States must possess an FAA type certificate, generally held by the aircraft manufacturer, indicating that the type design meets applicable airworthiness standards.  When someone else develops a major modification to an aircraft already type-certificated, that person must obtain an FAA-issued Supplemental Type Certificate for the modification.  Historically, we have obtained several hundred of these Supplemental Type Certificates, most of which we obtained on behalf of our customers as part of our systems integration services.  Some of these certificates we obtain were or eventually will be transferred to our customers.  As of December 31, 2003, we own and/or manage on behalf of our customers approximately 300 Supplemental Type Certificates.  Many are multi-aircraft certificates, which apply to all of the aircraft of a single type.  We foresee the need to obtain additional Supplemental Type Certificates so that we can expand the services we provide and the customers we serve and believe we will be able to obtain such certificates as the need arises.

Supplemental Type Certificates can be issued for proposed aircraft modifications directly by the FAA, or on behalf of the FAA by a Designated Alteration Station.  The FAA designates what types of Supplemental Type Certificates can be issued by each Designated Alteration Station.  Two subsidiaries within our Systems Integration Group are FAA-authorized Designated Alteration Stations and can directly issue many of the Supplemental Type Certificates our customers and we require for our systems integration operations.

After obtaining a Supplemental Type Certificate, a manufacturer must apply for a Parts Manufacturer Approval from the FAA, or a supplement to an existing Parts Manufacturer Approval, which permits the holder to manufacture and sell installation kits according to the approved design and data package.  We have six Parts Manufacturer Approvals and approximately 160 supplements to those approvals.  In general, each initial Parts Manufacturer Approval is an approval of a manufacturing or modification facility’s production quality control system.  Each Parts Manufacturer Approval supplement authorizes the manufacture of a particular part in accordance with the requirements of the corresponding Supplemental Type Certificate.  We routinely apply for and receive such Parts Manufacturer Approval supplements.  In order to perform the actual installations of a modification, we are also required to have FAA approval.  This authority is contained either in our Parts Manufacturer Approvals and related supplements, or in our repair station certificates.  In order for a company to perform most kinds of repair, engineering, installation or other services on aircraft, its facility must be designated as an FAA-authorized repair station.  As of December 31, 2003, we had seven authorized repair stations and employed approximately 100 FAA certified representatives.

Occupational Safety and Health Administration

Our manufacturing operations in the United States are subject to a variety of worker and community safety laws.  The Occupational Safety and Health Act of 1970 mandates general requirements for safe workplaces for all employees.  In addition, OSHA provides special procedures and measures for the handling of hazardous and toxic substances and has established specific safety standards for workplaces engaged in the treatment, disposal or storage of hazardous waste.  We believe that our operations are in material compliance with OSHA’s health and safety requirements.

Environmental Matters

Our facilities and operations are subject to various federal, state, local, and foreign environmental laws and regulations, including those relating to discharges to air, water, and land, the handling and disposal of solid and hazardous waste, and the cleanup of properties affected by hazardous substances.  In addition, some environmental laws, such as the federal Comprehensive Environmental Response, Compensation and Liability Act, as amended (“CERCLA”) and similar state laws, impose strict liability upon persons responsible for releases or potential releases of hazardous substances.  That liability generally is retroactive, and may create “joint and several” liability among multiple parties who have

11

some relationship to a site or a source of waste, such as a current or former owner or operator of real property or a party who arranges to transport wastes to a third-party site.  We have sent waste to treatment, storage, or disposal facilities that have been designated as National Priority List sites under CERCLA or equivalent listings under state laws.  We have received CERCLA requests for information or allegations of potential responsibility from the Environmental Protection Agency regarding our use of several of those sites.  In addition, some of our operations are located on properties that may be contaminated to varying degrees.

We have not incurred, nor do we expect to incur, liabilities in any significant amount as a result of the foregoing matters because in most of these cases other entities have been held primarily responsible, the levels of contamination are sufficiently low so as not to require remediation, or we are indemnified against such costs.  However, in a few cases, we do not have sufficient information to assess our potential liability, if any.  In addition, it is possible, given the potentially retroactive nature of environmental liability, that we will receive additional notices of potential liability relating to current or former activities.

We believe that we have no liabilities under environmental laws and regulations, except for liabilities which we do not expect would likely have a material adverse effect on our business, financial position, results of operations or cash flows.  However, some risk of environmental liability is inherent in the nature of our business, and we might in the future incur material costs to meet current or more stringent compliance, cleanup, or other obligations pursuant to environmental laws and regulations.

In connection with the sale of the Specialty Avionics Group, we have agreed to indemnify the buyer for all pre-closing releases of hazardous materials at any of Avtech’s facilities up to a maximum amount of $5.0 million.

ITEM 2.PROPERTIES

We operate in a number of manufacturing, engineering and office facilities in the United States and abroad.  At December 31, 2003, we utilized approximately 0.9 million square feet of floor space, approximately 96% of which is located in the United States.  We believe that our facilities are in good condition and are adequate to support our operations for the foreseeable future.  Our operating groups’ facilities at December 31, 2003 are summarized below.

(In thousands of square feet)	Leased	Owned	Total
Cabin Management	441	204	645
Systems Integration	136	150	286
Corporate	8	—	8
Total in use	585	354	939
Not in use, subleased to others	88	—	88
Total	673	354	1,027

ITEM 3.LEGAL PROCEEDINGS

As part of its investigation of the crash of Swissair Flight 111 off the Canadian coast on September 2, 1998, the Canadian Transportation Safety Board (the “CTSB”) initially notified us that it recovered burned wire that was attached to the in-flight entertainment system installed on some of Swissair’s aircraft by one of our subsidiaries.  Our subsidiary has worked vigorously over the last five years with the CTSB investigators in the fact-finding investigation of this catastrophic incident.  On March 27, 2003, the CTSB released its final report on its investigation.  This report indicated that the CTSB was unable to conclusively determine the cause of the fire which led to the crash of the aircraft.

12

We were a defendant in most, but not all, of the actions brought by the estates of the 229 victims of the crash.  The actions, which sought damages and costs in unstated amounts, claimed negligence, strict liability, and breach of warranty.  Virtually all of the cases have been settled by Boeing and Swissair’s insurers and both assignment of the claims against, and releases in favor, of us have been obtained by the Boeing and Swissair insurers.

On September 22, 2003, the Company and our insurers entered into an agreement with Boeing, Swissair and each of their respective insurers, in which the Company received a release from those parties and an indemnification by Boeing and Swissair’s insurers against claims asserted on behalf of passengers for compensatory damage and by others for contribution and/or indemnity claims.  We believe the agreement adequately protects the Company from all existing litigation pending against the Company arising from this catastrophic incident.  Punitive damages are not subject to the indemnity; however, while some of the passenger actions originally asserted punitive damages, by virtue of a court order, claims for punitive damages may not be prosecuted.  The aforementioned agreement did not result in the Company incurring a loss and, accordingly, no charge to operations was required.

ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

There is no established public trading market for our shares.

Holders

As of March 29, 2004, DeCrane Holdings is our only common stockholder.

Dividends

We have not paid dividends to date on our common stock and do not anticipate paying any cash dividends in the foreseeable future.  The terms of our first-lien credit facility, second-lien term notes and subordinated note indenture restrict our ability to pay dividends if we do not meet certain financial criteria.

Recent Sale of Unregistered Securities

None.

13

ITEM 6.SELECTED FINANCIAL DATA

	Year Ended December 31, (1)
(In thousands)	2003			2002			2001			2000			1999
Statement of Operations Data:
Revenues	$	170,109		$	229,841		$	272,112		$	236,501		$	131,547
Cost of sales (2)	134,953			170,485			196,866			155,134			90,103
Gross profit	35,156			59,356			75,246			81,367			41,444
Selling, general and administrative expenses (3)	24,896			40,262			44,731			31,730			23,465
Research and development expenses (4)	10,440			56			698			1,615			3,347
Impairment of goodwill (5)	34,000			—			8,583			—			—
Amortization of intangible assets (6)	3,651			3,540			12,436			10,628			5,938
Operating income (loss)	(37,831		)	15,498			8,798			37,394			8,694
Interest expense (7)	26,219			25,376			29,645			27,181			15,889
Loss on extinguishment of debt (8)	1,439			—			—			—			—
Other expenses, net	945			505			634			277			855
Income (loss) from continuing operations before income taxes	(66,434		)	(10,383		)	(21,481		)	9,936			(8,050		)
Provision for income taxes (benefit) (9)	(13,496		)	(3,621		)	(3,933		)	4,607			(2,102		)
Income (loss) from continuing operations	(52,938		)	(6,762		)	(17,548		)	5,329			(5,948		)
Income (loss) from discontinued operations, net of tax (10)	(6,621		)	(41,396		)	3,546			(1,727		)	1,578
Cumulative effect of changes in accounting principles (11)	(13,764		)	(17,828		)	—			—			—
Net income (loss)	$	(73,323	)	$	(65,986	)	$	(14,002	)	$	3,602		$	(4,370	)
Net income (loss) applicable to common stockholder	$	(80,077	)	$	(71,827	)	$	(19,063	)	$	1,328		$	(4,370	)
Other Financial Data:
Restructuring, asset impairment and other related charges (12)	$	41,886		$	17,255		$	25,834		$	—		$	9,935
Depreciation and amortization (13)	9,781			10,612			20,364			15,086			8,315
Capital expenditures:
Paid in cash	4,797			4,356			10,191			20,193			4,077
Financed with capital lease obligations	14			67			4,376			105			1,012
Ratio of earnings to fixed charges (14):
Ratio	—			—			—			1.4		x	—
Deficiency of earnings to fixed charges	$	66,434		$	10,383		$	21,481		$	—		$	8,050
Other Operating Data:
Bookings (15)	$	161,306		$	197,132		$	252,800		$	238,546		$	170,547
Backlog at end of period (16)	58,002			66,805			99,518			118,830			107,634

	As of December 31, (1)
(In thousands)	2003			2002		2001		2000		1999
Balance Sheet Data:
Cash and cash equivalents	$	6,936		$	12,421	$	9,478	$	7,706	$	7,899
Working capital (17)	37,904			196,176		81,656		61,398		32,412
Total assets (17)	303,876			548,967		645,711		664,254		531,842
Total debt (18)	269,406			381,017		399,268		381,513		314,936
Mandatorily redeemable securities (19)	40,835			34,081		28,240		23,179		—
Stockholder’s equity (deficit)	(45,181		)	34,951		102,390		121,442		107,773

See accompanying Notes to Selected Financial Data.

14

Notes to Selected Financial Data:

(1)Reflects historical selected consolidated financial data derived from the audited consolidated financial statements and related notes for the periods, reclassified to reflect the Specialty Avionics Group as a discontinued operation.

Also reflects the results of operations and financial position of companies we acquired for all periods subsequent to their respective acquisition dates as follows:

Company Acquired		Date Acquired
•	DeCrane Aircraft Seating Co. (formerly ERDA)	June 30, 2000
•	Carl F. Booth & Co.	May 11, 2000
•	Infinity	December 17, 1999
•	International Custom Interiors	October 8, 1999
•	PCI NewCo	October 6, 1999
•	Custom Woodwork	August 5, 1999
•	Precision Pattern	April 23, 1999
•	PATS	January 22, 1999

(2)Includes charges to reflect:

•our restructuring activities as follows:

•a $4.2 million charge related to lease termination and related expenses and a $3.1 non-cash inventory write-down during the twelve months ended December 31, 2003;

•a $6.9 million noncash inventory write-down, a $2.6 million charge for estimated losses on uncompleted long-term contracts and $1.2 million of other charges during the twelve months ended December 31, 2002;

•a $1.8 million noncash inventory write-down, a noncash write-off of $7.9 million of curtailed product development costs and charges totaling $3.9 million for the realignment of production programs between facilities during the twelve months ended December 31, 2001; and

•a $6.0 million noncash inventory write-down during the twelve months ended December 31, 1999; and

•cost of sales based on the purchase accounting write-up to fair value of inventory acquired of $1.6 million during the twelve months ended December 31, 1999 in connection with the Precision Pattern and Custom Woodworks acquisitions.

(3)Includes charges to reflect our restructuring activities as follows:

•$0.6 million during the year ended December 31, 2003;

•$6.5 million during the year ended December 31, 2002, $3.9 million of which was a noncash asset impairment write-down;

•$3.7 million during the year ended December 31, 2001, $1.3 million of which was a noncash asset impairment write-down; and

•$3.9 million during the year ended December 31, 1999, $1.3 million of which was a noncash asset impairment write-down.

(4)Reflects research and development expenses and, commencing January 1, 2003, includes product development costs.  In 2003, we elected to change our accounting policy and discontinue the use of program accounting, which resulted in product development costs being expensed as incurred.  See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information.

15

(5)Reflects noncash goodwill impairment charges, including charges resulting from our restructuring activities.

(6)For the five years ended December 31, 2003, reflects the amortization of identifiable intangible assets.  For periods prior to January 1, 2002, also reflects the amortization of goodwill as follows: 2001 — $9.1 million; 2000 — $7.8 million; and 1999 — $3.8 million.  Starting January 1, 2002, goodwill is no longer amortized but instead subject to annual impairment testing with a loss charged to operations in the period in which impairment occurs, as required by SFAS No. 142, “Goodwill and Other Intangible Assets.”

(7)Excludes interest expense attributable to the Specialty Avionics Group, which is classified as a component of the income or loss from discontinued operations, as described in Note 10 below.

(8)Reflects the write-off of deferred financing costs associated with debt repaid during the year ended December 31, 2003.

(9)For the year ended December 31, 2003, includes a $19.5 million charge resulting from establishing a net deferred tax asset valuation allowance.  Excluding the effect of the valuation allowances, the provision for income taxes differs from the amount determined by applying the applicable U.S. statutory federal rate to the income before income taxes primarily due to the effects of state income taxes and non-deductible expenses, principally goodwill impairment charges and amortization (for periods prior to January 1, 2002).  The difference in the effective tax rates between periods is mostly a result of the relationship of non-deductible expenses to the loss before income taxes.

(10)Reflects the net income or loss of the Specialty Avionics Group, which was sold on May 23, 2003 and therefore classified as a discontinued operation during the periods.  Includes charges to reflect:

•a $39.3 million noncash charge during the year ended December 31, 2002 to reflect the cumulative effect of the change in accounting principle for the impairment of goodwill upon adoption of SFAS No. 142 on January 1, 2002; and

•interest expense attributable to the Specialty Avionics Group as follows:

	Year Ended December 31,
(In thousands)	2003		2002		2001		2000		1999
Interest expense associated with:
First-lien credit facility debt required to be repaid	$	3,297	$	7,720	$	8,439	$	13,337	$	10,875
Debt obligations assumed by the buyer	270		798		917		1,105		1,154
Interest expense attributable to discontinued operations	$	3,567	$	8,518	$	9,356	$	14,442	$	12,029

Interest expense on first-lien credit facility debt required to be repaid reflects allocated interest expense attributable to the debt which was required to be repaid with the proceeds from the sale.  The allocation is based upon $130.7 million of debt repaid and the historical interest rates charged during each of the periods.  Interest expense for 2003 is through May 23, 2003, the date of sale.

(11)Reflects:

•a $13.8 million noncash charge to reflect the cumulative effect on prior years of changing our accounting policy and discontinuing the use of program accounting.  See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information.

•a $17.8 million noncash charge, net of $0.9 million tax benefit, for the impairment of goodwill upon adoption of SFAS No. 142 on January 1, 2002.

(12)Reflects the total restructuring, asset impairment and other related charges incurred during the periods related to our restructuring activities.

16

(13)Reflects depreciation and amortization of plant and equipment, goodwill (for periods prior to the January 1, 2002 adoption of SFAS No. 142) and other intangible assets.  Excludes amortization of deferred financing costs, which are classified as a component of interest expense.

(14)For the purposes of calculating the ratio of earning to fixed charges, earnings represent net income or loss from continuing operations before income taxes, extraordinary items and fixed charges.  Fixed charges consist of:

•interest;

•amortization of debt expense and discount or premium relating to any indebtedness; and

•one-third of rental expenses under operating leases which is considered to be a reasonable approximation of the interest portion of such expense.

(15)Bookings represent the total invoice value of purchase orders received during the period.

(16)Backlog represents the total invoice value of unfilled purchase orders at the end of the period.  Orders may be subject to cancellation by the customer prior to shipment.  The level of unfilled orders at any given date during the year will be materially affected by the timing of our receipt of orders and the speed with which those orders are filled.

(17)Includes amounts attributable to the Specialty Avionics Group, which is reflected as a discontinued operation, as follows:

	As of December 31,
(In thousands)	2003		2002		2001		2000		1999
Working capital:
Continuing operations	$	37,904	$	55,363	$	39,862	$	20,480	$	(1,992	)
Discontinued operations	—		140,813		41,794		40,918		34,404
Total working capital	$	37,904	$	196,176	$	81,656	$	61,398	$	32,412
Total assets:
Continuing operations	$	303,876	$	388,226	$	423,272	$	429,812	$	305,685
Discontinued operations	—		160,741		222,439		234,442		226,157
Total assets	$	303,876	$	548,967	$	645,711	$	664,254	$	531,842

(18)Total debt is defined as long-term debt, including current portion.

(19)Reflects mandatorily redeemable 16% preferred stock.

17

ITEM 7.       MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussions should be read in conjunction with our financial statements and accompanying notes included in this report.

Industry Overview and Trends

We compete in the aircraft products and services market of the aerospace industry.  The market for our products and services is largely driven by demand in the three civil aircraft markets: (1) business, VIP and head-of-state aircraft and, to a lesser extent, (2) commercial and (3) regional aircraft.  Weak global economic conditions, which were exacerbated by the September 11, 2001 terrorist attack on the United States, ongoing concerns about global terrorism and health epidemics, and the current Middle Eastern military conflicts are all adversely impacting the aerospace industry and have led to a decrease in demand for business, VIP and head-of-state aircraft.  In response to certain of these adverse conditions, we have announced and implemented a series of restructuring activities designed to reduce expenses and conserve working capital.  See “—Restructuring, Asset Impairment and Other Related Charges” below for additional information.

The business, VIP and head-of-state aircraft portion of our business experienced weakness during 2003 as evidenced by various manufacturers’ decision to temporarily suspend production at various times throughout 2003 in response to the weak demand for new aircraft.  While global economic conditions appeared to improve during the second half of 2003, the improvement did not affect the markets we serve, which we believe lag trends in the general economy by six to twelve months.  As a result, we believe orders for business, VIP and head-of-state aircraft may experience a modest recovery in 2004 and reflect continuing strengthening thereafter.  The commercial aircraft portion of our business, which subsequent to the sale of the Specialty Avionics Group accounts for less than 5% of consolidated revenues, also experienced significant weakness in 2003 and we believe this condition will continue into 2004, with potential recovery not expected to occur until at least 2005.  Our beliefs are based on the assumptions that we will experience economic recovery and there are no further negative geo-political developments affecting our industry.

Results of Operations

Performance Measures

The following discussion of our results of operations includes discussions of financial measures and operating statistics we use to evaluate the performance of, and trends in, our businesses.  We believe the presentation of these measures and statistics are relevant and useful to investors because it allows them to view performance and trends in a manner similar to the methods we use.  These measures and statistics, and why they are important to us and could be of interest to you, are described below.

Adjusted EBITDA.  Our discussion of the results of operations includes discussions of financial measures determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”) as well as the financial measure Adjusted EBITDA, which excludes certain charges reflected in our GAAP basis financial statements.  Our presentation of Adjusted EBITDA is in accordance with the GAAP requirements of SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” which requires us to report the primary measure of segment performance we use to evaluate and manage our businesses.

We utilize more than one measurement to evaluate segment performance and allocate resources among our operating segments; however, we consider Adjusted EBITDA, as defined below, to be the primary measurement of overall operating segment core economic performance and return on invested

18

capital.  We also use Adjusted EBITDA in the annual budgeting and planning for future periods, as one of the decision-making criteria for funding discretionary capital expenditure and product development programs and as the measure for determining the value of acquisitions and dispositions.  Our board of directors uses Adjusted EBITDA as one of the performance metrics for determining the amount of bonuses awarded to pursuant to the cash incentive bonus plan and as an indicator of enterprise value used in determining the exercise price of stock options granted and the acceleration of stock option vesting pursuant the incentive stock option plan.

We define Adjusted EBITDA as earnings before interest, income taxes, depreciation and amortization, restructuring, asset impairment and other related charges, acquisition related charges not capitalized and other noncash and nonoperating charges.  We believe the presentation of this measure is relevant and useful to investors because it allows investors and analysts to view segment performance in a manner similar to the method we use, helps improve their ability to understand our core segment performance, adjusted for items we believe are unusual, and makes it easier to compare our results with other companies that have different financing, capital structures and tax rates.  In addition, we believe these measures are consistent with the manner in which our lenders and investors measure our overall performance and liquidity, including our ability to service debt and fund discretionary capital expenditure and product development programs.

Our method of calculating Adjusted EBITDA may not be consistent with that of other companies and should be viewed in conjunction with measurements that are computed in accordance GAAP, such as net income (loss), the nearest comparable GAAP financial measure.  Adjusted EBITDA should not be viewed as substitutes for or superior to net income (loss), cash flow from operations or other data prepared in accordance with GAAP as a measure of our profitability or liquidity.  The notes to our financial statements include information about our operating segments, including Adjusted EBITDA, and should be read in conjunction with the discussions presented herein.  The notes to our financial statements also include a reconciliation of Adjusted EBITDA to net income (loss) to clarify the differences between these financial measures.

Bookings and Backlog.  Bookings and backlog are operating statistics we use as leading trend indicators of future demand for our products and services.  Bookings and backlog are based upon the value of purchase orders received from our customers, which will result in revenues, if and when such orders are filled.

Bookings represent the total invoice value of purchase orders received during the period and backlog represents the total invoice value of unfilled purchase orders as of the end of a period.  Orders may be subject to change or cancellation by the customer prior to shipment.  The level of unfilled orders at any given date during the year will be materially affected by the timing of our receipt of orders and the speed with which those orders are filled.

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

Restructuring, Asset Impairment and Other Charges.  Our results of operations have been affected by restructuring, impairment and other related charges relating to a series of restructuring activities.  These charges, which affect the comparability of our reported results of operations between periods, are more fully described in “—Restructuring, Asset Impairment and Other Related Charges” and “—Goodwill Impairment Charges” below.

Change in Accounting Principle.  Inventories are stated at the lower of cost or market.  Costs include materials, labor, including direct engineering labor, tooling costs and manufacturing overhead.  As described below, measurement of the costs of inventories associated with products manufactured for delivery under production-type contracts in prior periods was made pursuant to the use of program accounting.  As such, the cost of inventories included certain deferred program costs, which were principally comprised of engineering costs.

19

The events of September 11, 2001 and its aftermath have impacted the predictability of demand for our business, VIP and head-of-state aircraft products.  The ability to make reliable estimates of future demand for these products is critical to the use of program accounting and the deferral of engineering and production costs.  Under program accounting, certain product development costs incurred in connection with specific contracted programs were deferred and charged to cost of sales when revenues from the sale of products related to the program were recorded.  Because of the changing economic conditions affecting the markets we serve, demand for our products has exhibited an increased degree of volatility not seen in the past.  In order to improve the reliability of our financial reporting, we decided to discontinue the use of program accounting which requires us to make long-term estimates of future sales for each program.  Therefore, product development costs not specifically reimbursable through contractual terms or recoverable through firm orders will no longer be deferred and included in program inventory.

We concluded that the new method of accounting for program costs is preferable based, in part, on the aforementioned improvement in the reliability of our financial reporting.  This new accounting method will also have the advantage of enhancing investor understanding of our performance since cash flows from operations will now more closely align with Adjusted EBITDA, our primary measurement of overall economic performance and return on invested capital.

This change in accounting policy was made after concluding the 2003 fiscal year but has been applied retroactively to the beginning of the year, January 1, 2003, as required by generally accepted accounting principles.  As a result of the change, program-related product development costs are now classified as a component of research and development expenses in the consolidated financial statements for 2003 rather than classified as a component of inventory cost.  The effect of this accounting change was to increase the Company’s net loss by $17,942,000 through a charge for the cumulative effect of a change in accounting principle in 2003 of $13,764,000 and increase by $4,178,000 the reported loss from continuing operations.

As a result of the change, we have restated the quarterly results of operations for 2003.  Restated condensed quarterly data is in Note 19 accompanying our financial statements included in this report.  The following pro forma data summarizes the results of operations for the years ended December 31, 2002 and 2001 as if the new accounting policy had been in effect during those years.

	Year Ended December 31,
(In millions)	2002			2001
As reported:
Loss from continuing operations	$	(6.8	)	$	(17.5	)
Net loss	(66.0		)	(14.0		)
Pro forma:
Loss from continuing operations	$	(9.7	)	$	(19.4	)
Net loss	(69.0		)	(15.9		)

Revenues.Revenues decreased $59.7 million, or 26.0%, to $170.1 million for the year ended December 31, 2003 from $229.8 million for the year ended December 31, 2002.  By segment, revenues changed as follows:

	Increase (Decrease) From 2002
(In millions)	Amount			Percent
Cabin Management	$	(53.8	)	(31.1	)%
Systems Integration	(6.4		)	(11.0	)
Inter-group elimination	0.5
Total	$	(59.7	)

20

Cabin Management.  Revenues decreased by $53.8 million, or 31.1% compared to the prior year.  The decrease, which is across substantially all of our product and services categories, is caused by the ongoing adverse impact of weak global economic conditions which reduces the affordability of business, VIP and head-of-state aircraft and therefore demand for the products and services we provide.  As a result, the manufacturers of these aircraft have experienced a decrease in orders for new aircraft which, in turn, reduces the orders our customers place with us.  The 2003 decrease consists of:

•a $50.9 million decrease in aircraft furniture and related products revenues;

•a $3.4 million decrease in cabin management and entertainment systems revenues; and

•a $0.5 million decrease in seating products revenues; offset by

•a $1.0 million increase in other product and services revenues.

The revenue decrease was caused by lower order volume (as described above) from our customers as opposed to a loss of customers or price reductions.

Revenues from Textron and Bombardier, our principal customers, decreased $44.6 million compared to the prior year as a result of the decrease in orders and resulting lower production of aircraft they are experiencing during the economic downturn.  Both companies temporarily suspended production of various aircraft models for several weeks during fiscal 2003 in response to their low order backlog.  We also experienced similar volume decreases from our other customers during the period.

Systems Integration.  Revenues decreased by $6.4 million, or 11.0% compared to the prior year, due to:

•a $8.6 million decrease resulting from reduced demand for almost all of our products and services as a result of reduced production and delivery of business, VIP and head-of-state aircraft; offset by

•a $0.1 million increase in the commercial aircraft systems integration engineering services; and

•a $2.1 million increase resulting from revenue pursuant to the “take-or-pay” provisions of a major supply contract.

Gross profit.  Gross profit decreased $24.2 million, or 40.8%, to $35.2 million for the year ended December 31, 2003 from $59.4 million for the same period in the prior year.  By segment, gross profit changed as follows:

	Increase (Decrease) From 2002
(In millions)	Amount			Percent
Cabin Management	$	(20.2	)	(52.2	)%
Systems Integration	(4.0		)	(19.7	)
Total	$	(24.2	)

Cabin Management.  Gross profit decreased by $20.2 million, or 52.2% compared to the prior year, primarily due to:

•a $20.1 million decrease resulting from lower volume for our business, VIP and head-of-state aircraft furniture and seating products; and

•a $1.2 million decrease in gross profit related to lower volume for our cabin management and entertainment systems; offset by

•a $1.1 million increase from our other products and services.

21

Systems Integration.  Gross profit decreased by $4.0 million, or 19.7% compared to the prior year, primarily due to:

•a $7.0 million decrease resulting from lower revenues and unfavorable overhead absorption as a result of lower production and a change in product delivery mix; and

•a $0.3 million decrease in the commercial aircraft systems integration engineering services provided; offset by

•a $3.3 million decrease in restructuring charges incurred in 2003 as compared to those recorded in 2002 related to our restructuring activities.

Selling, general and administrative expenses.  Selling, general and administrative expenses decreased $15.4 million, or 38.2%, to $24.9 million for the year ended December 31, 2003, from $40.3 million for the same period in the prior year.  By segment, SG&A expenses changed as follows:

	Increase (Decrease) From 2002
(In millions)	Amount			Percent
Cabin Management	$	(11.2	)	(46.2	)%
Systems Integration	(2.8		)	(36.6	)
Corporate	(1.4		)
Total	$	(15.4	)

Cabin Management.  SG&A expenses decreased by $11.2 million, or 46.2% compared to the prior year, due to:

•a $6.0 million decrease in restructuring charges incurred in 2003 as compared to those recorded in 2002 related to our restructuring activities; and

•a $5.2 million decrease in expenses resulting from cost reduction measures implemented in response to lower sales volume resulting from the weak demand for our products and services.

Systems Integration.  SG&A expenses decreased by $2.8 million, or 36.6% compared to the prior year, due to lower labor and employee benefit costs resulting from workforce reductions in 2003.

Research and development expenses.  Research and development expenses were $10.4 million for the year ended December 31, 2003 compared to $0.1 million in the prior year.  As more fully described in “—Change in Accounting Principle,” we elected to change our accounting policy for product development costs incurred for long-term programs after concluding the 2003 fiscal year but retroactively applied the change to the beginning of the year, January 1, 2003.  Commencing January 1, 2003, such costs are classified as a component of research and development expenses.  Expenses would have been $5.0 million in 2002 if the new accounting policy had been in effect during that year.

Cabin Management.  R&D expenses were $8.1 million for the year ended December 31, 2003, principally incurred for the development our new single-design seat technology and new interior furnishing components for a major customer’s new model of aircraft they recently introduced.

Systems Integration.  R&D expenses were $2.3 million for the year ended December 31, 2003, principally for development of several new products.

Impairment of goodwill.  During the year ended December 31, 2003, a $34.0 million charge was recorded to reflect the additional impairment of goodwill in connection with the impairment testing provision of SFAS No. 142, “Goodwill and Other Intangible Assets.”  The additional impairment results from continuing weak global economic conditions which reduces the affordability of business, VIP and head-of-state aircraft and therefore demand for the products and services we provide.  The impairment

22

charge pertains to our furniture manufacturing reporting unit within our Cabin Management Group.  See “—Goodwill Impairment Charges” below for additional information.

Depreciation and amortization of intangibles.  Depreciation and amortization expense decreased $0.8 million to $9.8 million for the year ended December 31, 2003 from $10.6 million for the same period in the prior year, primarily resulting from reduced capital expenditures and a lower depreciable base resulting from impairment charges recorded during 2002 as follows.

	Increase (Decrease) From 2002
(In millions)	Amount			Percent
Depreciation charged to:
Cost of sales	$	(0.3	)	(6.6	)%
Selling, general and administrative expense	(0.6		)	(26.2	)
Amortization of intangible assets	0.1			3.1
Total	$	(0.8	)

Adjusted EBITDA.  As described above in “—Performance Measures–Adjusted EBITDA,” we use this financial measure to evaluate the core economic performance of our operating segments.  The notes to our financial statements include additional information about Adjusted EBITDA, and should be read in conjunction with the discussions presented herein.  The notes to our financial statements also include a reconciliation of Adjusted EBITDA to net income (loss), a GAAP financial measure, to clarify the differences between these two measures.

Cabin Management.  Adjusted EBITDA decreased by $23.6 million, or 72.5%, to $9.0 million for the year ended December 31, 2003 compared to $32.6 million for the same period in the prior year primarily due to:

•a $13.6 million decrease in gross profit related to our business, VIP and head-of-state aircraft furniture and seating operations;

•an $8.1 million increase in research and development expenses;

•a $1.1 million decrease in gross profit related our cabin management and entertainment systems; and

•a $0.8 million decrease in gross profit related to our other products and services.

Systems Integration.  Adjusted EBITDA decreased by $7.1 million, or 39.1%, to $11.0 million for the year ended December 31, 2003 compared to $18.1 million for the same period in the prior year due to lower sales volume and a $2.3 million increase in research and development expenses, partially offset by reduced SG&A spending resulting from workforce reductions.

Operating income (loss).  Operating income decreased $53.3 million to a loss of $37.8 million for the year ended December 31, 2003, from operating income of $15.5 million for the same period in the prior year.  By segment, operating income changed as follows:

	Increase (Decrease) From 2002
(In millions)	Amount			Percent
Cabin Management	$	(51.2	)	(401.8	)%
Systems Integration	(3.6		)	(32.3	)
Corporate	1.5
Total	$	(53.3	)

23

Cabin Management.  Operating income decreased by $51.2 million, or 401.8% compared to the prior year, due to:

•a $34.0 million goodwill impairment charge in 2003;

•a $20.1 million decrease in gross profit, primarily due to lower revenues related to our furniture and seating operations; and

•an $8.1 million increase in research and development expenses; offset by

•a $6.0 million decrease in restructuring charges incurred in 2003 as compared to those recorded in 2002 related to our restructuring activities; and

•a $5.0 million decrease in expenses resulting from cost reduction measures implemented in response to lower sales volume resulting from the weak global economic conditions.

Systems Integration. Operating income decreased by $3.6 million, or 32.3% compared to the prior year, due to:

•a $7.0 million decrease in gross profit resulting from lower revenues and unfavorable overhead absorption as a result of lower production and a change in product delivery mix;

•a $2.3 million increase in research and development expenses; and

•a $0.3 million decrease in gross profit in the commercial aircraft systems integration engineering services provided; offset by

•a $3.0 million decrease in restructuring charges incurred in 2003 as compared to those recorded in 2002 related to our restructuring activities; and

•a $3.0 million decrease in expenses resulting from cost reduction measures implemented in response to lower sales volume resulting from the weak global economic conditions.

Interest expense.  Interest expense increased $0.8 million, or 3.3%, to $26.2 million for the year ended December 31, 2003 compared to $25.4 million for the same period in the prior year.  The increase is attributable to a 1.5% increase in interest rate margins charged by our lenders pursuant to the March 28, 2003 first-lien bank credit facility amendment, partially offset by lower principal balances outstanding during 2003 compared to the prior year.

Loss on extinguishment of debt.  Loss on extinguishment of debt was $1.4 million for the year ended December 31, 2003 and reflects the write-off of deferred financing costs attributable to debt repaid during the year.

Provision for income tax benefit.  The provision for income taxes is comprised of the following:

	Year Ended December 31,
(In millions)	2003			2002
Income tax benefit based on reported pre-tax loss	$	33.0		$	2.9
Net deferred tax asset valuation allowance	(19.5		)	—
Net income tax benefit	$	13.5		$	3.6

The provision for income taxes, based on the reported consolidated pre-tax loss, differs from the amount determined by applying the applicable U.S. statutory federal rate to the pre-tax loss primarily due to the effects of state and foreign income taxes and non-deductible expenses, principally the non-deductible portion of goodwill impairment charges.

As of December 31, 2003, we had net deferred tax assets of $19.5 million, prior to recording a valuation allowance; net deferred tax liabilities existed in prior periods.  The change to a net asset position

24

was primarily caused by the $34.0 million goodwill impairment charge recorded during fiscal 2003.  SFAS No. 109, “Accounting for Income Taxes,” requires the recognition of a deferred tax asset for the future income tax benefit of goodwill deductions that will be taken for income tax purposes (i.e. the goodwill that has been written off in the financial statements for book purposes will continue to be amortized and deducted for tax purposes and, accordingly, represents a new deferred tax asset).

As required by SFAS No. 109, we evaluated our deferred assets for expected recoverability based on the nature of the item, the associated taxing jurisdictions, the applicable expiration dates and future taxable income forecasts that would impact utilization.  Since there is no loss carry back potential and we do not have any tax planning strategies to assure recoverability, the only possibility for recovery of the net deferred assets is future taxable income.  Since there have been prior year losses, we believe it is not prudent to rely on future income as the means to support the carrying value of the net assets.  As a result of our evaluation, we recorded a $19.5 million valuation allowance, eliminating the net deferred asset, as of December 31, 2002.

We had net deferred tax liability of $16.6 million as of December 31, 2002.  The full realization of the deferred assets was achieved through the reversal of the deferred tax liabilities in future periods.  As a result, a valuation allowance was not required for periods ending on or prior to December 31, 2003.

Loss from continuing operations.  The loss from continuing operations increased $46.1 million to a loss of $52.9 million for the year ended December 31, 2003 compared to a loss of $6.8 million for the same period in the prior year, primarily due to:

•a $53.3 million decrease in operating income resulting, in part, from a $34.0 million goodwill impairment charge;

•a $1.4 million increase in loss on extinguishment of debt; and

•a $1.3 million increase in interest and other expenses (net); offset by

•a $9.9 million increase in income tax benefit.

Loss from discontinued operations.  Loss from discontinued operations decreased $34.8 million, to a loss of $6.6 million for the year ended December 31, 2003 compared to a loss of $41.4 million for the same period in the prior year.  The decrease is primarily due to:

•a $39.4 million charge in 2002 to reflect the cumulative effect on discontinued operations of the change in accounting principle associated with initial adoption of SFAS No. 142, “Goodwill and Other Intangible Assets” as described below; offset by

•the result of operations of the Specialty Avionics Group through May 22, 2003 compared to a full year of operating results included in the prior year.

Cumulative effect of change in accounting principle.  The $13.8 million charge during the year ended December 31, 2003 was to reflect the cumulative effect on continuing operations of the change in accounting for product development costs.  See “—Change in Accounting for Product Development Costs” for additional information.

The $17.8 million charge in 2002 to reflect the cumulative effect on continuing operations of the change in accounting principle was a result of transitional goodwill impairment charges recognized upon initial adoption of SFAS No. 142, “Goodwill and Other Intangible Assets.”  Including the $39.4 million charged to discontinued operations, the total charge to reflect the cumulative effect of the change in accounting principle was $57.2 million.

25

Net loss.  Net loss increased $7.3 million to a net loss of $73.3 million for the year ended December 31, 2003 compared to a net loss of $66.0 million for the same period in the prior year.  The decrease is attributable to:

•an increase in loss from continuing operations of $46.1 million; offset by

•a decrease in loss from discontinued operations of $34.8 million; and

•a decrease in cumulative effect of change in accounting principle of $4.0 million.

Net loss applicable to common stockholder.  Net loss applicable to DeCrane Holdings, our common stockholder, increased $8.3 million to a net loss of $80.1 million for the year ended December 31, 2003 compared to a net loss of $71.8 million for the same period in the prior year.  The increase in the net loss applicable to our common stockholder is attributable to:

•a $7.3 million increase in our net loss; offset by

•a $1.0 million increase in accrued 16% mandatorily redeemable preferred stock dividends resulting from the quarterly compounding of accrued dividends.

Bookings.  Bookings decreased $35.8 million, or 18.2%, to $161.3 million for the year ended December 31, 2003 compared to $197.1 million for the same period in the prior year.  The decrease in bookings for 2003 is due to decreases in orders for all of our business segments.

Backlog at end of period.  Backlog decreased $8.8 million to $58.0 million as of December 31, 2003 compared to $66.8 million as of December 31, 2002.

As described in “—Industry Overview and Trends,” the acts and ongoing threats of global terrorism, the current military conflicts, health epidemics and weak global economic conditions are having an adverse impact on our business, resulting in the decrease in bookings during 2003.  In addition, we believe that some of our customers have substantially reduced their order lead times which may have adversely affected bookings during the period.

We are not able to predict the continuing impact these events will have on bookings and backlog in future periods.  However, given the magnitude of these events, the adverse impact could be material.

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

Our results of operations have been affected by restructuring, asset impairment and other related charges relating to a series of restructuring activities and goodwill impairment charges.  These charges, which affect the comparability of our reported results of operations between periods, are more fully described in “—Restructuring, Asset Impairment and Other Related Charges” and “—Goodwill Impairment Charges” below.

Revenues.Revenues decreased $42.3 million, or 15.5%, to $229.8 million for the year ended December 31, 2002 from $272.1 million for the year ended December 31, 2001.  By segment, revenues changed as follows:

	Increase (Decrease) From 2001
(In millions)	Amount			Percent
Cabin Management	$	(33.2	)	(16.1	)%
Systems Integration	(9.5		)	(14.0	)
Inter-group elimination	0.4
Total	$	(42.3	)

26

Cabin Management.  Revenues decreased by $33.2 million, or 16.1% compared to the prior year.  The decrease, which is across most of our product and services categories, is caused by the ongoing adverse impact of weak global economic conditions which reduces the affordability of business, VIP and head-of-state aircraft and therefore demand for the products and services we provide.  The 2002 decrease consists of:

•a $22.4 million decrease in aircraft furniture and related products revenues;

•a $9.8 million decrease in cabin management and entertainment systems revenues; and

•a $6.1 million decrease in seating products revenues; offset by

•a $5.1 million increase in other product and services revenues.

The revenue decrease was caused by lower order volume from our customers as opposed to a loss of customers or price reductions.  The decrease in order volume is attributable to weak global economic conditions and the impact these conditions are having on manufacturers of business, VIP and head-of-state aircraft and therefore demand for the products and services we provide to them.  Weak global economic conditions have reduced the amount of discretionary income available to purchase and operate these types of aircraft.  As a result, the manufacturers of these aircraft have experienced a decrease in orders for new aircraft which, in turn, reduces the orders our customers place with us.

Revenues from Textron and Bombardier, our principal customers, decreased $15.0 million compared to the prior year as a result of the decrease in orders and resulting production of aircraft they are experiencing due to the economic downturn.  We also experienced similar volume decreases from our other customers during the period.

Systems Integration.  Revenues decreased by $9.5 million, or 14.0% compared to the prior year, due to:

•a $7.5 million decrease in the commercial aircraft systems integration and engineering services we provide resulting from the aftermath of September 11^th, and resulting down-turn in the commercial airline industry; the airline industry’s corresponding reduction in the size of its operating fleet and the delay or postponement retrofit and refurbishment programs for the remaining operational fleet reduced demand for our integration and engineering services; and

•a $2.0 million decrease resulting from reduced demand for our business, VIP and head-of-state aircraft products and services due to the adverse impact weak global economic conditions are having on the demand for those types of aircraft as follows:

•a $5.6 million decrease in BBJ auxiliary fuel systems revenues; offset by

•a $3.6 million increase in our aircraft completion and modification revenues, principally resulting for our first aircraft interior completion during 2002.

Gross profit.  Gross profit decreased $15.9 million, or 21.1%, to $59.3 million for the year ended December 31, 2002 from $75.2 million for the same period in the prior year.  By segment, gross profit changed as follows:

	Increase (Decrease) From 2001
(In millions)	Amount			Percent
Cabin Management	$	(10.7	)	(21.7	)%
Systems Integration	(5.3		)	(20.3	)
Inter-group elimination	0.1
Total	$	(15.9	)

27

Cabin Management.  Gross profit decreased by $10.7 million, or 21.7% compared to the prior year, primarily due to:

•a $6.6 million net decrease caused by charges related to our 2001 and 2002 restructuring activities;

•a $3.8 million decrease in profit margins due to lower volume for our business, VIP and head-of-state aircraft furniture and seating products, and

•a $0.3 million decrease in gross profit related to lower volume for our cabin management and entertainment systems.

Systems Integration.  Gross profit decreased by $5.3 million, or 20.3% compared to the prior year, primarily due to $4.1 million of other asset impairment related charges and lower sales volume.

Selling, general and administrative expenses.  Selling, general and administrative expenses decreased $4.4 million, or 10.0%, to $40.3 million for the year ended December 31, 2002, from $44.7 million for the same period in the prior year.  By segment, SG&A expenses changed as follows:

	Increase (Decrease) From 2001
(In millions)	Amount			Percent
Cabin Management	$	(1.2	)	(7.3	)%
Systems Integration	(2.1		)	(22.0	)
Corporate	(1.1		)
Total	$	(4.4	)

Cabin Management.  SG&A expenses decreased by $1.2 million, or 7.3% compared to the prior year, due to:

•a $4.0 million decrease in expenses as a result of cost reduction measures implemented in 2001 and 2002 in response to lower sales volume resulting from the weak global economic conditions; offset by

•a $2.8 million increase caused by charges relating to our 2001 and 2002 restructuring activities.

Systems Integration.  SG&A expenses decreased by $2.1 million, or 22.0% compared to the prior year, due to lower labor and employee benefit costs resulting from workforce reductions implemented during the fourth quarter of fiscal 2001.

Corporate.  SG&A expenses decreased by $1.1 million compared to the prior year, primarily due to workforce and travel expense reductions offset by increases in insurance and employee benefit costs.

Research and development expenses.  Research and development expenses were $0.1 million for the year ended December 31, 2002 compared to $0.7 million in the prior year.  As more fully described in “—Change in Accounting Principle,” we elected to change our accounting policy for product development costs incurred for long-term programs.  Commencing January 1, 2003, such costs are classified as a component of result, research and development expenses.  Expenses would have been $5.0 million in 2002 and $11.7 million in 2001 if the new accounting policy had been in effect during those years.

Impairment of goodwill.  In 2001, an $8.6 million impairment charge was recognized pursuant to the provisions of SFAS No. 121, “Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,” to reflect the impairment resulting from our restructuring activities.  See “—Goodwill Impairment Charges” below for additional information.

28

Depreciation and amortization of intangibles.  Depreciation and amortization expense decreased $9.8 million to $10.6 million for the year ended December 31, 2002 compared to $20.4 million for the same period in the prior year, primarily resulting from the adoption of new accounting standards, as follows:

	Increase (Decrease) From 2001
(In millions)	Amount			Percent
Depreciation charged to:
Cost of sales	$	(0.7	)	(14.2	)%
Selling, general and administrative expense	(0.2		)	(5.1	)
Amortization of intangible assets:
Goodwill	(9.1		)	(100.0	)
Identifiable intangible assets	0.2			5.0
Total	$	(9.8	)

Effective January 1, 2002, we adopted SFAS No. 142, “Goodwill and Other Intangible Assets” and the provisions of SFAS No. 141, “Business Combinations,” which were required to be adopted concurrent with the adoption of SFAS No. 142.  Under these new standards, goodwill is deemed to be an indefinite-lived asset and, as a result, the recording of periodic goodwill amortization charges was discontinued effective January 1, 2002.  In addition, SFAS No. 141 requires that intangible assets relating to acquired assembled workforce intangibles not meeting the criteria for recognition apart from goodwill be reclassified to goodwill.  Goodwill amortization was $9.1 million for the year ended December 31, 2001,which includes $1.1 million of assembled workforce amortization, now deemed part of goodwill.  See “—Goodwill Impairment Charges” below for additional information.

Excluding the effect of the accounting change, depreciation and amortization decreased $0.9 million as a result of lower depreciable costs resulting from the impairment of long-lived assets recorded during the fourth quarter of fiscal 2001 and 2002, partially offset by additional depreciation resulting from capital expenditures during the period.

Adjusted EBITDA.  As described above in “—Performance Measures–Adjusted EBITDA,” we use this financial measure to evaluate the core economic performance of our operating segments.  The notes to our financial statements include additional information about Adjusted EBITDA, and should be read in conjunction with the discussions presented herein.  The notes to our financial statements also include a reconciliation of Adjusted EBITDA to net income (loss), a GAAP financial measure, to clarify the differences between these two measures.

Cabin Management.  Adjusted EBITDA decreased by $12.9 million, or 28.3% compared to the prior year, primarily due to:

•a $9.3 million decrease related principally to lower revenues in our business, VIP and head-of-state aircraft furniture and seating operations; and

•a $3.6 million decrease resulting from lower sales volume for our cabin management and entertainment systems.

Systems Integration.  Adjusted EBITDA increased by $0.9 million, or 5.4% compared to the prior year, primarily the result of reduced SG&A spending resulting from workforce reductions.

29

Operating income.  Operating income increased $6.7 million to $15.5 million for the year ended December 31, 2002, from $8.8 million for the same period in the prior year.  Operating income changed as follows:

	Increase (Decrease) From 2001
(In millions)	Amount		Percent
Cabin Management	$	2.7	55.9	%
Systems Integration	1.4		18.1
Corporate	2.5
Inter-group elimination	0.1
Total	$	6.7

Cabin Management.  Operating income increased by $2.7 million, or 55.9% compared to the prior year, primarily due to:

•a $10.7 million decrease in gross profit primarily caused by charges related to our restructuring activities and due to lower volume for our business, VIP and head-of-state aircraft furniture and seating products; offset by

•a $1.9 million decrease in SG&A resulting from cost reduction measures and restructuring charges;

•a $5.0 million decrease in goodwill impairment; and

•a $6.7 million decrease in amortization of intangibles.

Systems Integration.  Operating income increased by $1.4 million, or 18.1% compared to the prior year, primarily due to:

•a $5.2 million decrease in gross profit due to other asset impairment related charges and lower sales volumes; offset by

•a $2.2 million decrease in SG&A resulting from lower labor and employee benefit costs;

•a $3.5 million decrease in goodwill impairment; and

•a $0.9 million decrease in amortization of intangibles.

Corporate.  Operating income increased $2.5 million compared to the prior year, due to principally to reduced SG&A spending.

Interest expense.  Interest expense decreased $4.3 million, or 14.4%, to $25.4 million for the year ended December 31, 2002 compared to $29.7 million for the same period in the prior year due almost entirely to lower average interest rates charged by our lenders.

Provision for income taxes.  The provision for income taxes differs from the amount determined by applying the applicable U.S. statutory federal rate to the income before income taxes primarily due to the effects of state and foreign income taxes and non-deductible expenses, principally goodwill impairment charges and amortization (for periods prior to the January 1, 2002 adoption of SFAS No. 142).  The difference in the effective tax rates between periods is mostly the result of the adoption of SFAS No. 142.

30

Loss from continuing operations.  Loss from continuing operations decreased $10.8 million to a loss of $6.8 million for the year ended December 31, 2002, compared to a loss of $17.6 million for the same period in the prior year.  The decrease in loss from continuing operations is attributable to:

•an $8.9 million decrease in amortization of goodwill and intangible assets resulting from the adoption of SFAS No. 142, “Goodwill and Other Intangible Assets,” on January 1, 2002;

•an $8.6 million decrease in goodwill impairment charges; and

•a $4.3 million decrease in interest expense; offset by

•an $11.0 million loss increase principally resulting from reduced profits caused by lower revenues.

Income (loss) from discontinued operations.  Income from discontinued operations decreased $44.9 million to a loss of $41.4 million for the year ended December 31, 2002 compared to income of $3.5 million for the same period in the prior year.  The change in income (loss) from discontinued operations is attributable to:

•a $39.4 million charge in 2002 to reflect the cumulative effect on discontinued operations of the change in accounting principle associated with initial adoption of SFAS No. 142, “Goodwill and Other Intangible Assets;” and

•a $7.7 million charge in 2002 to reflect the additional impairment of goodwill in connection with the annual impairment testing provisions of SFAS No. 142; and

•a $3.1 million loss increase principally resulting from reduced profits caused by lower revenues; offset by

•a $5.3 million reduction in goodwill amortization expense resulting from discontinuance of periodic amortization charges pursuant to SFAS No. 142.

The $39.4 million and $7.7 million charges in 2002 are attributable to the goodwill impairment of one of the three reporting units within the Specialty Avionics Group.  Aggregate goodwill was $126.5 million as of December 31, 2001 and $80.7 million as of December 31, 2002, after the $47.1 million 2002 impairment charges and a $1.3 million reclassification of intangible assets in connection with the adoption of SFAS No. 142.  See “—Goodwill Impairment Charges” below for additional information.

Cumulative effect of change in accounting principle.  The $17.8 million charge to reflect the cumulative effect of change in accounting principle for the year ended December 31, 2002 was a result of transitional goodwill impairment charges recognized upon initial adoption of SFAS No. 142, “Goodwill and Other Intangible Assets.”  See “—Goodwill Impairment Charges” below for additional information.

Net income (loss).  Net loss increased $52.0 million to a net loss of $66.0 million for the year ended December 31, 2002 compared to a net loss of $14.0 million for the same period in the prior year.  The increase over the prior year is a result of a $10.7 million decrease in loss from continuing operations offset by an increase in loss from discontinued operations of $44.9 million and the cumulative effect of change in accounting principle of $17.8 million.

Net income (loss) applicable to common stockholder.  Net loss applicable to DeCrane Holdings, our common stockholder, increased $52.7 million to a net loss of $71.8 million for the year ended December 31, 2002 compared to a net loss of $19.1 million for the same period in the prior year.  The increase in the net loss applicable to our common stockholder is attributable to:

•a $52.0 million net loss increase; and

•a $0.7 million increase in accrued 16% mandatorily redeemable preferred stock dividends resulting from the quarterly compounding of accrued dividends.

31

Bookings.  Bookings decreased $55.7 million, or 22.0%, to $197.1 million for the year ended December 31, 2002 compared to $252.8 million for the same period in the prior year.  The decrease in bookings for 2002 is due to decreases in orders for all of our business segments.

Backlog at end of period.  Backlog decreased $32.7 million to $66.8 million as of December 31, 2002 compared to $99.5 million as of December 31, 2001.

Restructuring, Asset Impairment and Other Related Charges

The following discussion should be read in conjunction with Note 3 accompanying our financial statements included in this report.

During the three years ended December 31, 2003, we recorded restructuring, asset impairment and other related pre-tax charges, principally relating to our restructuring activities.  These charges are summarized below.

	Year Ended December 31,
(In millions)	2003		2002		2001
Nature of charges:
Seating Product Line and Furniture Manufacturing Facilities Restructuring	$	7.1	$	—	$	—
Asset Realignment Restructuring	—		6.9		20.1
Seat Manufacturing Facilities Restructuring	—		6.3		—
Adjustment of Previous Restructuring Charge	0.8		—		—
Goodwill impairment charges	41.5		7.7		8.6
Other asset impairment related charges	—		4.3		—
Total pre-tax charges	$	49.4	$	25.2	$	28.7
Business segment recording the charges:
Cabin Management	$	41.1	$	13.2	$	22.4
Systems Integration	0.8		4.0		3.5
Total charged to continuing operations	41.9		17.2		25.9
Discontinued operations (Specialty Avionics)	7.5		8.0		2.8
Total pre-tax charges	$	49.4	$	25.2	$	28.7
Charged to operations:
Cost of sales	$	7.3	$	10.7	$	13.6
Selling, general and administrative expenses	0.6		6.5		3.7
Impairment of goodwill	34.0		—		8.6
Total charged to operations	41.9		17.2		25.9
Charged to discontinued operations (Specialty Avionics)	7.5		8.0		2.8
Total pre-tax charges	$	49.4	$	25.2	$	28.7
Components of charges:
Noncash charges	$	37.7	$	11.4	$	19.6
Cash charges	4.2		5.8		6.3
Total charged to continuing operations	41.9		17.2		25.9
Charged to discontinued operations	7.5		8.0		2.8
Total pre-tax charges	$	49.4	$	25.2	$	28.7

32

Seating Product Line and Furniture Manufacturing Facilities Restructuring

During the second quarter of fiscal 2003, we consolidated our seating product line offerings and adopted a restructuring plan to down-size a furniture manufacturing facility in response to continuing weakness in the business, VIP and head-of-state aircraft market.  These actions were designed to reduce engineering, production and inventory carrying costs by supporting fewer product offerings and achieve profitability at the furniture manufacturing facility based on its lower production levels.  In connection with these actions, we recorded pre-tax charges to operations totaling $7.1 million during the second quarter of fiscal 2003, of which $3.6 million were noncash charges.  The charges are comprised of the write-off of excess and obsolete inventory costs related to the discontinued product offerings, lease termination and related charges, and severance and other compensation costs.  These restructuring activities were completed by the end of fiscal 2003.

Asset Realignment Restructuring

During the second quarter of fiscal 2001, we adopted a restructuring program to realign aircraft furniture production programs among our manufacturing facilities.  In addition, and in response to the adverse impact on the aerospace industry resulting from the September 11^th terrorist attack and its aftermath, as well as the weakening of global economic conditions, we announced and implemented a further restructuring program in December 2001 designed to reduce costs and conserve working capital.  This program included permanently closing one manufacturing facility and idling a second facility for an indefinite period, curtailing several product development programs and instituting workforce reductions.  This program primarily affected our Cabin Management and Specialty Avionics Groups.

In connection with these restructuring activities, we recorded pre-tax charges to operations of $28.7 million in fiscal 2001, of which $22.1 million were noncash charges, for the impairment of long-lived assets and restructuring costs related to write-downs and write-offs of inventoried costs, costs associated with the realignment of aircraft furniture production programs among facilities, severance, lease termination and other related costs.  During 2001, we paid $5.0 million of costs related to this restructuring in cash and a $1.6 million restructuring reserve remained as of December 31, 2001 solely for severance, lease termination and other related costs.

Due to the ongoing weakness of the business, VIP and head-of-state aircraft market, we decided during the second quarter of fiscal 2002 to permanently close the temporarily idled manufacturing facility.  In connection with this decision, we recorded additional pre-tax charges to operations totaling $6.9 million during the year ended December 31, 2002, of which $3.8 million were noncash charges, for restructuring, asset impairment charges and other related expenses.  During 2002 and 2003, we paid $4.7 million of costs related to this restructuring in cash.  No future cash payment obligations related to these restructuring activities remains as of December 31, 2003.

Seat Manufacturing Facilities Restructuring

In 2002, we announced we would consolidate the production of four seating and related manufacturing facilities into two, resulting in the permanent closure of two facilities.  This program was designed to improve manufacturing efficiencies and to further reduce costs and conserve working capital.  In connection with these restructuring activities, we recorded pre-tax charges to operations totaling $6.3 million during the year ended December 31, 2002, of which $3.6 million were noncash charges, for restructuring, asset impairment and other related restructuring charges.

The restructuring, asset impairment and other related expenses are comprised of charges for current asset write-downs, the impairment of long-lived assets, severance and lease termination costs and other restructuring-related expenses pertaining to FAA retesting and recertification, moving, transportation and

33

travel costs and shutdown and startup costs.  These restructuring activities were substantially completed during the second quarter of fiscal 2002.

Adjustment of Previous Restructuring Charge

In December 1999, we initiated a plan to reorganize and restructure the operations of two of our subsidiaries within the Systems Integration Group.  The restructuring was a result of a management decision to exit the manufacturing business at these subsidiaries and consolidate and relocate operations into one facility to more efficiently and effectively manage the business and be more competitive.

In connection with these restructuring activities, we provided for lease termination costs expected to be incurred over the remaining term of the existing long-term lease at the facility being vacated following the restructuring. The expected costs were reduced by estimated sublease income which was based on estimated future market rates and anticipated sublease rental periods.

During 2003, the initial sublease was canceled and we entered into a new sublease agreement.  Due to the deterioration in market rates since 1999, the terms of the new sublease were less favorable than the initial lease.  As a result, we determined that the remaining accrual for lease termination costs was insufficient to cover the net costs expected to be incurred over the remaining lease term.  Consequently, an additional $0.8 million was charged to operations during 2003 for these additional costs.  A payment obligation totaling $0.7 million remains as of December 31, 2003.  The future cash payments will be funded from internally generated cash for operations.

Goodwill Impairment Charges

During 2003, we recorded $41.5 million of goodwill impairment charges.  Impairment charges totaling $34.0 million pertained to goodwill impairment testing pursuant to SFAS No. 142 for our Cabin Management Group and were charged to continuing operations.  The remaining $7.5 million pertained to the sale of the Specialty Avionics Group and was charged to discontinued operations.

During 2002, we recorded a pre-tax charge of $7.7 million related to our annual goodwill impairment testing pursuant to SFAS No. 142.  The charged pertained to discontinued operations.

Prior to adoption of SFAS No. 142, impairment testing was in accordance with SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.”  In 2001, we recorded an $8.6 million pre-tax charge to operations to reflect the impairment loss resulting from our restructuring activities.  The impairment charge pertained to our Cabin Management and Systems Integration Groups.

See “—Goodwill Impairment Charges” below for additional information on all of the impairment charges.

Other Asset Impairment Related Charges

Due to continued weakness in the commercial aircraft portion of our business, in the fourth quarter of fiscal 2002 we recorded a pre-tax charge to cost of goods sold of $4.3 million related to inventories.  Of this amount, charges totaling $0.3 million pertained to discontinued operations.

34

Goodwill Impairment Charges

The following discussion should be read in conjunction with Notes 3 and 7 accompanying our financial statements included in this report.

Our results of operations have been affected by the adoption of SFAS No. 142, “Goodwill and Other Intangible Assets,” and goodwill impairment charges.  The table below summarizes the changes in goodwill during the three years ended December 31, 2003.

	Continuing Operations												Discontinued Operations
(In millions)	Cabin Management Group			Systems Integration Group			Corporate			Total			Specialty Avionics Group
Balance, December 31, 2000	$	187.8		$	33.0		$	4.1		$	224.9		$	131.5
Contingent consideration earned	3.8			—			—			3.8			—
Amortization during the period	(6.6		)	(1.2		)	(0.2		)	(8.0		)	(4.7		)
Impairment charge (a)	(5.1		)	(3.5		)	—			(8.6		)	—
Cash received upon settlement of asserted claims	(1.2		)	—			—			(1.2		)	—
Foreign currency translation	—			—			—			—			(0.3		)
Balance, December 31, 2001	178.7			28.3			3.9			210.9			126.5
Adoption of SFAS 141 and 142:
Reclassification of intangible assets	3.1			0.4			0.1			3.6			1.3
Transitional impairment charge (b)	(8.5		)	(7.9		)	(2.3		)	(18.7		)	(39.4		)
Contingent consideration earned	0.6			—			—			0.6			—
Impairment charge (a)	—			—			—			—			(7.7		)
Balance, December 31, 2002	173.9			20.8			1.7			196.4			80.7
Impairment charge (a)	(34.0		)	—			—			(34.0		)	(7.5		)
Sale of Specialty Avionics Group	—			—			—			—			(73.2		)
Balance, December 31, 2003	$	139.9		$	20.8		$	1.7		$	162.4		$	—

(a)Reflects a goodwill impairment charge to operations and reflected as a component of our restructuring, asset impairment and other related charges.  See “—Restructuring, Asset Impairment and Other Related Charges” above.

(b)Reflects a goodwill impairment charge recorded (before $0.9 million of income tax benefit) during the year ended December 31, 2002 as the cumulative effect of change in accounting principle in accordance with the transitional provisions of adopting SFAS No. 142, “Goodwill and Other Intangible Assets.”

Effective January 1, 2002, we adopted SFAS No. 142, “Goodwill and Other Intangible Assets” and the provisions of SFAS No. 141, “Business Combinations,” which were required to be adopted concurrent with the adoption of SFAS No. 142.  Adoption of these accounting pronouncements resulted in the following:

•Reclassification of Intangible Assets.  Intangible assets relating to acquired assembled workforce intangibles not meeting the criteria for recognition apart from goodwill were reclassified to goodwill, net of deferred income taxes.

•Discontinuance of Goodwill Amortization.  Goodwill is deemed to be an indefinite-lived asset.  As a result, and in accordance with SFAS No. 142, the recording of periodic goodwill amortization charges was discontinued effective January 1, 2002.

35

•Annual Testing for Goodwill Impairment.  In lieu of periodic goodwill amortization charges, SFAS No. 142 requires goodwill to be tested annual for impairment, or when events or changes in circumstances indicate the carrying value may not be recoverable.

During 2002, we completed the transitional impairment testing of goodwill recorded as of January 1, 2002 as required under SFAS No. 142.  Fair value of each reporting unit was determined using a discounted cash flow approach taking into consideration projections based on the individual characteristics of the reporting units, historical trends, market multiples for comparable businesses and independent appraisals.  Our Cabin Management Group consists of three reporting units, our Systems Integration Group consists of two and the Specialty Avionics consists of three.  Unallocated goodwill was allocated to the reporting units for impairment testing purposes.  The results indicated that the carrying value of goodwill was impaired at one of the reporting units within each of our operating groups.  The resulting impairment was primarily attributable to a change in the evaluation criteria for goodwill utilized under previous accounting guidance to the fair value approach stipulated in SFAS No. 142.  In accordance with the transitional provision of SFAS No. 142, we recorded a $17.8 million noncash write-down of goodwill (net of $0.9 million income tax benefit) as of January 1, 2002 as a cumulative effect of a change in accounting principle.  An additional $39.4 million noncash write-down of goodwill pertained to the Specialty Avionics Group and is included in the loss from discontinued operations.

During the fourth quarter of fiscal 2002, we performed our annual impairment testing and recorded an additional $7.7 million impairment charge related to one of the reporting units within the Specialty Avionics Group.  The charge was primarily the result of a decrease in fair value caused by using lower cash flow forecasts for the commercial aircraft portion of our business, which experienced further weakness during 2002.  This charge is included as a component of income (loss) from discontinued operations.

As a result of the continuing weakness in the business, VIP and head-of-state aircraft market and our decision to down-size a furniture manufacturing facility in the second quarter of fiscal 2003, we determined that we should reevaluate the carrying value of goodwill prior to the annual October 31^st testing date.  Accordingly, we performed an impairment test of the goodwill associated with the furniture manufacturing reporting unit for recoverability and found the goodwill to be impaired.  As a result, we recorded a pre-tax charge to operations of $34.0 million during the three months ended June 30, 2003.  The charge was primarily a result of a decrease in fair value caused by using lower cash flow forecasts based on the most recently reduced industry estimates of aircraft deliveries resulting from overall industry weakness.  The annual impairment test on October 31^st indicated that no additional impairment had occurred.

Prior to adoption of SFAS No. 142, impairment testing was in accordance with SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.”  In 2001, we recorded an $8.6 million pre-tax charge to operations to reflect the impairment loss resulting from our restructuring activities to close a manufacturing facility.

36

Liquidity and Capital Resources

Our principal cash needs are for debt service, working capital, capital expenditures and strategic acquisitions, as well as to provide DeCrane Holdings with cash to finance its needs, which consists primarily of cash dividends on its preferred stock beginning in 2005, if declared.  Our principal sources of liquidity are expected to be cash flow from operations, potential capital market transactions and third party borrowings, principally under our first-lien credit facility.

Cash Flows During the Year Ended December 31, 2003

Net cash used by operating activities was $19.1 million for the year ended December 31, 2003 and consisted of $12.4 million of cash used by operations after adding back depreciation, amortization, the noncash portion of our restructuring and asset impairment charges and other noncash items and $7.5 million used for working capital, offset by a $0.8 million increase in other liabilities.  The following factors contributed to the $7.5 million working capital increase:

•a $13.5 million decrease in accrued expenses, primarily resulting from:

•a $2.5 million decrease in accrued interest due to lower debt levels;

•a $1.5 million decrease in customer deposits due to lower order activity;

•a $5.2 million decrease in accrued salaries, wages and payroll related taxes due to cost reduction measures; and

•a $4.3 million decrease in other accrued liabilities;

•a $1.1 million decrease in income taxes payable due to lower levels of taxable income; and

•a $0.3 million net increase in other working capital items; offset by

•a $4.9 million decrease in accounts receivables due to lower revenues; and

•a $2.5 million decrease in accounts payable commensurate with lower purchasing volume.

Net cash provided by investing activities was $130.0 million for the year ended and consisted of:

•net proceeds of $132.2 million from the sale of the Specialty Avionics Group; and

•net proceeds of $3.2 million from the sale of property and equipment, principally from the sale of facilities vacated pursuant to our restructuring activities; offset by

•capital expenditures of $4.8 million; and

•payment of $0.6 million of contingent acquisition consideration.

We anticipate spending approximately $3.0 to $5.0 million for capital expenditures in 2004.  There are no other remaining contingent acquisition payment obligations remaining as of December 31, 2003.

Net cash used for financing activities was $118.2 million for the year ended December 31, 2003.  During the year, we used the net proceeds of $130.7 million from the sale of the Specialty Avionics Group and $80.0 million of second-lien term loan proceeds to:

•repay $183.7 million first-line term debt;

•repay $6.0 million of revolving line of credit borrowings;

•repay $1.9 million of secured long-term debt; and

•pay $6.6 million of debt issuance costs.

37

In December 2003, we received second-lien term loans in the aggregate amount of $80.0 million from a syndicate of lenders and used the net proceeds to repay first-lien credit facility indebtedness.  The second-lien debt, which is comprised of $70.0 million of fixed rate debt and $10.0 million of floating rate debt, matures on June 30, 2008.  On both the fixed and floating rate debt, 3% of the interest is pay-in-kind or “accreted” interest, payable at maturity.  The debt is secured by a second lien on substantially all of the Company’s assets.

Debt Obligations and Capital Resources as of December 31, 2003

As of December 31, 2003, first-lien credit facility borrowings and second-lien term debt totaling $90.5 million are at variable interest rates based on defined margins over the current prime rate or LIBOR.  We also had $100.0 million of 12% subordinated notes, $70.1 million of 15% second-lien term debt and other secured indebtedness totaling $8.8 million outstanding as of the end of the year.  The total annual maturities of all of our indebtedness outstanding as of December 31, 2003 are as follows: 2004 – $1.2 million; 2005 – $4.0 million; 2006 – $13.6 million; 2007 – $66.3 million; 2008 – $180.5 million; and 2009 and thereafter – $3.8 million.

As of December 31, 2003, we had $37.9 million of working capital and $23.8 million of borrowings available under our revolving line of credit, which expires in March 2006.

Financial Condition and Liquidity

As more fully described in “—Industry Overview and Trends,” the acts and ongoing threats of global terrorism, the current military conflicts, health epidemics and weak global economic conditions are all adversely impacting our business.  In response, we have implemented a series of restructuring activities as described in “—Restructuring, Asset Impairment and Other Related Charges,” designed to reduce costs and conserve working capital.

During the fourth quarter of fiscal 2002, we further assessed our long-term business strategies in light of current aerospace industry conditions.  In addition, we subsequently determined that we would likely not be in compliance with our first-lien credit facility’s financial covenants in 2003.  We believe that when the aerospace industry recovers, the demand for our Cabin Management and Systems Integration groups’ products and services for business, VIP and head-of-state aircraft will reflect substantial improvement and, accordingly, we decided to focus our resources in these market segments.  To accomplish this objective, we embarked on a plan to sell the Specialty Avionics Group, which is highly dependent on the commercial airline industry.

In March 2003, we amended the first-lien credit facility to permit the sale Specialty Avionics Group and we consummated the sale on May 23, 2003.  As required by the amendment, we used $130.7 million of the proceeds from the sale to repay first-lien credit facility borrowings.  The amendment also relaxed various financial covenants for 2003 and beyond, decreased by $10.0 million the revolving line of credit commitment, increased the prime rate and LIBOR interest margins by 1.5% and permits the issuance of specified types of additional indebtedness and the repurchase of up to $20.0 million aggregate principal amount of our 12% subordinated notes with the proceeds from the sale of junior securities.  Junior securities means: (i) subordinated notes issued by us that are unsecured and do not provide for any scheduled redemptions or prepayments or any sinking fund installment payments or maturities prior to the termination of the first-lien credit facility, or other indebtedness subordinated in right of payment to our obligations under the first-lien credit facility, and whose material terms are satisfactory to the lenders; and (ii) equity securities issued by us.

38

In December 2003, we further amended the first-lien credit facility to permit the incurrence of $80.0 million of second-lien term debt to refinance a substantial portion of our first lien indebtedness.  This amendment further revised various financial covenants to permit the second-lien debt, extended the scheduled repayment dates of the remaining first-lien debt by 12 to 18 months, reduced the revolving commitment by an additional $16.0 million and extended the commitment by 18 months.  Interest rates charged on the first-lien debt remained unchanged.  We were in compliance with all debt financial covenants during 2003 and are in compliance through the date of this report.

As a result of the foregoing amendments and transactions, the future maturities of our long-term indebtedness have been significantly reduced and extended compared to the end of prior year.  The table below reflects the total annual maturities of our long-debt outstanding as of December 31, 2002 and 2003.

	Aggregate Maturities of Long-Term Debt
(In millions)	As of December 31, 2002		Net Increase (Decrease)			As of December 31, 2003
Total maturities during the year ending December 31,
2003	$	16.3	$	(16.3	)	$	—
2004	54.0		(52.8		)	1.2
2005	97.7		(93.7		)	4.0
2006	107.0		(93.4		)	13.6
2007	0.7		65.6			66.3
2008	100.7		79.8			180.5
2009 and thereafter	4.6		(0.8		)	3.8
Total aggregate maturities	$	381.0	$	(111.6	)	$	269.4

We believe the relaxed maturity schedule through 2006 will coincide with our expectations of the recovery period for the business, VIP and head-of state aircraft market and resulting demand for our products and services.  As a result, we believe our expected operating cash flows, together with borrowings under our first-lien credit facility ($23.8 million of which was available as of December 31, 2003, the commitment for which expires in March 2006), will be sufficient to meet our operating expenses, working capital requirements, capital expenditures and debt service obligations for the next twelve months.  However, our ability to comply with our debt financial covenants, pay principal or interest and satisfy our other debt obligations will depend on our future operating performance as well as competitive, legislative, regulatory, business and other factors beyond our control.  Although we cannot be certain, we expect to be in compliance with the revised financial covenants through the end of the year based on our current operating plan.

We continue to explore the possible restructuring of our other debt and equity instruments that would improve our liquidity and reduce our cash needs. We have not entered into any commitments to do so and cannot assure you that we will be able to do so in the future.

Disclosure of Contractual Obligations and Commitments

The following table summarizes our known contractual obligations to make future cash payments as of December 31, 2003, as well an estimate of the periods during which these payments are expected to be made.

39

			Years Ending December 31,
(In millions)	Total		2004		2005 and 2006		2007 and 2008		2009 and Beyond
Long-term debt (a):
First-lien term debt (b)	$	80.5	$	—	$	15.0	$	65.5	$	—
Second-lien term debt (c)	80.1		—		—		80.1		—
12% subordinated notes (d)	100.0		—		—		100.0		—
Capital lease obligations (e)	3.4		0.5		0.9		0.6		1.4
Other indebtedness (e)	5.4		0.7		1.7		0.6		2.4
Total long-term debt	269.4		1.2		17.6		246.8		3.8
Other long-term liabilities	5.5		—		3.8		1.7		—
Operating lease obligations	14.7		2.9		5.0		2.4		4.4
Mandatorily redeemable preferred stock redemption obligation (f)	43.3		—		—		—		43.3
Total obligations as of December 31, 2003	$	332.9	$	4.1	$	26.4	$	250.9	$	51.5

(a)Excludes interest payments.

(b)The first-lien term debt bears interest at variable rates and therefore the amount of future interest payments are uncertain.  The debt bears interest based on a margin over, at our option, the prime rate or LIBOR.  The margins applicable to portions of amounts borrowed vary depending on our consolidated debt leverage ratio.  Currently, the applicable margins are 4.00 to 4.75 for prime rate borrowings and 5.25% to 6.0% for LIBOR borrowings.  The weighted-average interest rate on all first-lien debt was 6.85% as of December 31, 2003.

(c)The second-lien term debt is comprised of $70.0 million of fixed rate debt and $10.0 million of variable rate debt.  The fixed rate debt bears interest at 15%; 12% payable quarterly in cash and 3% pay-in-kind or “accreted” interest, payable at maturity.  The variable rate debt bears cash interest, at our option, at the prime rate plus 7.5% or LIBOR plus 8.5%, plus 3% pay-in-kind interest payable at maturity.  The weighted-average interest rate on all second-lien debt was 14.71% as of December 31, 2003.  All of the second-lien debt matures on June 30, 2008, at which time the cash payment obligation will be $91.7 million, including the 3% pay-in-kind interest obligation.

(d)Interest on the 12% subordinated notes is payable semiannually.

(e)Interest is generally payable monthly.

(f)Dividends accrue quarterly at a 16% annual rate.  Prior to June 30, 2005, we may, at our option, pay dividends either in cash or by the issuance of additional shares of preferred stock.  Since the issuance of the preferred stock in June 2000, we have elected to issue additional shares in lieu of cash dividend payments and may continue to do so until June 2005, after which time we are required to pay quarterly dividends in cash, if declared.  If we elect to continue issuing additional shares until June 2005, our mandatory redemption obligation on March 31, 2009, the mandatory redemption date, will be $54.8 million and our annual cash dividend payment obligation will be $8.8 million, payable quarterly, commencing September 2005, if declared.

Disclosure About Off-Balance Sheet Commitments and Indemnities

We are a wholly-owned subsidiary of DeCrane Holdings, whose capital structure also includes mandatorily redeemable preferred stock.  Since we are DeCrane Holdings’ only operating subsidiary and source of cash, we may be required to fund DeCrane Holdings’ redemption obligation in the future, subject to limitations contained in our first-lien credit agreement, second-lien term notes and the subordinated notes indenture.

40

The DeCrane Holdings preferred stock has a total redemption value of $71.4 million as of December 31, 2003 and the preferred stock is mandatorily redeemable on September 30, 2009.

During our normal course of business, we have entered into agreements containing indemnities pursuant to which we may be required to make payments in the future.  These indemnities are in connection with facility leases and liabilities for specified claims arising from investment banking services our financial advisors provide to us.  The duration of these indemnities, commitments and guarantees varies, and in certain cases, is indefinite.  Substantially all of these indemnities provide no limitation on the maximum potential future payments we could be obligated to make and is not quantifiable.  We have not recorded any liability for these indemnities since no claims have been asserted to date.

In connection with the sale of the Specialty Avionics Group, we made indemnities to the buyer with respect to a number of customary, and certain other specific, representations and warranties.  Our indemnities with respect to some of these matters are limited in terms of duration with the maximum of potential future payments capped at $14.0 million and our indemnities with respect to specified environmental matters will expire not later than October 2010 and provides for a maximum liability of $5.0 million, while others will have no limitations.

As of December 31, 2003, we also had an irrevocable standby letter of credit in the amount of $0.2 million issued and outstanding under our first-lien credit facility.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States of America.  Our preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

We evaluate our estimates on an on-going basis.  We base our estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results could differ from these estimates under different assumptions or conditions.  We believe the following critical accounting policies affect our more significant estimates and judgments used in the preparation of our financial statements.

Allowance for uncollectible accounts receivable.  Accounts receivable are reduced by an allowance for amounts that are deemed uncollectible.  The estimated allowance for uncollectible amounts is based primarily on our evaluation of the financial condition of each of our customers and their payment history.  We also provide an allowance based on the age of all receivables for which we have not established a customer-specific allowance.  Generally, we do not require collateral or other security to support accounts receivable, however, under certain circumstances, we require deposits or cash-on-delivery terms.  While our losses have been within our expectations, a deterioration of our customers’ financial condition may require that we provide additional allowances, reducing our operating income in future periods.  Our customers operate in the business, VIP and head-of-state and commercial aircraft industry throughout the world and are being adversely impacted by the acts and ongoing threats of global terrorism, the current military conflicts, health epidemics and weak global economic conditions.  Accounts receivable of $22.7 million is reduced by an allowance for uncollectible accounts of $1.3 million as of December 31, 2003.

Allowance for excess and obsolete inventory.  Inventories are reduced by an allowance for estimated excess and obsolete inventory.  The allowance is the difference between the cost of the

41

inventory and its estimated market value.  Our market value estimates are based upon existing order backlog, our assumptions about market conditions, including future orders and market pricing.  While our products are not subject to rapid technological obsolescence, we also consider this factor in determining our market value estimates.  If our customers cancel existing orders or actual market conditions, including future orders, are less favorable than we projected, we may provide additional allowances, reducing our gross profit in future periods.  Inventories of $48.2 million were reduced by an allowance for excess and obsolete inventory of $5.2 million as of December 31, 2003.

Goodwill impairment.  On January 1, 2002, we began accounting for goodwill under Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.”  SFAS No. 142 requires an impairment-only approach to accounting for goodwill.  Because of our history of acquisitions, goodwill constitutes a significant portion of our long-term assets.

The SFAS No. 142 goodwill impairment model is a two-step process.  First, it requires a comparison of the book value of net assets to the fair value of the reporting units that have goodwill assigned to them.  If the fair value is determined to be less than book value, a second step is performed to compute the amount of the impairment.  In this process, a fair value for goodwill is estimated, based in part on the fair value of the reporting unit used in the first step, and is compared to its carrying value.  The amount by which carrying value exceeds fair value represents the amount of goodwill impairment.  SFAS No. 142 requires goodwill to be tested for impairment annually at the same time every year, and when an event occurs or circumstances change such that it is reasonably possible that impairment may exist.  We have selected October 31^st as our annual testing date.

We estimate the fair values of our reporting units using a discounted cash flow approach, taking into consideration projections based on the individual characteristics of the reporting units, historical trends, market multiples for comparable businesses and independent appraisals.  The forecasts of future cash flows are based on our best estimate of future revenues and operating costs, based primarily on existing backlog, expected future bookings based on our estimate of aircraft deliveries and general market conditions.  Changes in these forecasts could cause a particular reporting unit to either pass or fail the first step in the goodwill impairment mode, which could significantly change the amount of impairment recorded.  Since we began testing goodwill for impairment in 2002, we have recorded impairment charges totaling $107.3 million, which includes $41.5 million recorded during 2003.

Goodwill with an aggregate book value of $162.4 million remains as of December 31, 2003 and will be subject impairment testing in October 2004, or sooner, if additional events occur or circumstances change such that it is reasonably possible that further impairment may exist.

Valuation of long-lived assets and other intangible assets.  In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” we review long-lived assets and other identifiable intangible assets for impairment when events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.  Factors we consider important, which could trigger an impairment review, include significant:

•underperformance relative to expected future operating results;

•changes in the manner of our use of the acquired assets;

•changes in our business strategy; or

•negative aerospace industry or global economic conditions.

Our impairment review consists of comparing the sum of the expected undiscounted future cash flows resulting from the use of the asset to the carrying value of the assets.  When we determine that the carrying value may not be recoverable, we record an impairment loss equal to the excess of the asset’s carrying value over its fair value.  We measure fair value based on a projected discounted cash flow

42

method using a discount rate we believe to be commensurate with the risk inherent in our current business model.  Net long-lived assets and intangible assets, excluding goodwill, amounted to $56.4 million as of December 31, 2003.

Accounting for income taxes.  As part of the process of preparing our financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate.  This process involves estimating our actual current tax exposure together with assessing permanent and temporary differences resulting from differing treatment of items, such as amortization of assets and other nondeductible expenses, for tax and accounting purposes.  These differences result in deferred tax assets and liabilities, which are included within our statement of financial position.  We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, we must establish a valuation allowance which increases our provision for income taxes in our statement of operations.

We have $19.5 million net deferred tax asset as of December 31, 2003 compared to net deferred tax liabilities in prior years.  The change to a net asset position was primarily caused by the $34.0 million goodwill impairment charge recorded during fiscal 2003.  As required by SFAS No. 109, we evaluated each deferred assets for expected recoverability based on the nature of the item, the associated taxing jurisdictions, the applicable expiration dates and future taxable income forecasts that would impact utilization.  Since there is no loss carry back potential and we do not have any tax planning strategies to assure recoverability, the only possibility for recovery of the net deferred assets is future taxable income.  Since there have been prior year losses, we believe it was not prudent to rely on future income as the means to support the carrying value of the net asset.  As a result of the evaluation, we recorded a $19.5 million valuation allowance, eliminating the net deferred asset, as of December 31, 2003.

In the event actual results differ from our estimates or we adjust these estimates in future periods, we would need to establish an additional valuation allowance in the period such determination is made, which would increase our provision for income taxes.

Revenue and profit recognition under long-term contracts.  Because of relatively long production cycles, a portion of our revenues and profits are recognized under percentage-of-completion method of accounting using total contract price, actual costs incurred to date and an estimate of the completion costs for each contract.  We use this method because reasonably accurate estimates of the revenue and costs applicable to the various stages of a contract can be made.  Recognized revenues and profits on each contract are subject to revisions as the contract progresses towards completion.  Revisions to revenue and profit estimates are made in the period in which the facts that give rise to the revision become known.  Provisions for estimated losses on uncompleted contracts are fully recognized in the period in which such losses are determined.  Approximately 16.7% of our revenues and 41.4% of our gross profit during the year ended December 31, 2003 was recognized under the percentage-of-completion method of accounting.

Litigation.  We evaluate contingencies in accordance with SFAS No. 5, “Accounting for Contingencies.”  We establish reserves for estimated loss contingencies when it is our assessment that a loss is probable and the amount of the loss can be reasonably estimated.  Revisions to contingent liabilities are charged against income in the period in which different facts or information becomes known or circumstances change that affect the previous assumptions with respect to the likelihood or amount of loss.  Reserves for contingent liabilities are based upon our assumptions and estimates, advice of legal counsel or other third parties regarding the probable outcomes of the matter.  Should the outcome differ from the assumptions and estimates, revisions to the estimated reserves for contingent liabilities would be required.

43

As described in “Item 3. Legal Proceedings” and Note 13 accompanying our financial statements included in this report, we are involved in legal proceedings for which no reserves for estimated loss contingencies have been established.  Our current evaluation of these matters is that it is probable we will prevail and therefore are not required to accrue estimated losses in accordance with SFAS No. 5.  However, there is a possibility that we may ultimately be required to pay all or a portion of the contingent liabilities related to these matters, which may have an adverse impact on our business, financial position, results of operations or cash flows in future periods.

Restructuring of our businesses.  As described in “—Restructuring, Asset Impairment and Other Related Charges,” we recorded charges totaling $17.2 million during 2002 and $25.9 million during 2001 in response to the adverse aerospace industry impact the acts, and ongoing threats, of global terrorism and the current weak global economic conditions are having on our businesses.  These charges are based on our present estimates of the impact these events are having on our businesses and the future recovery of the aerospace industry.  Actual results and future recovery could differ from these estimates, potentially resulting in further restructuring, asset impairment and other related charges.

Recently Issued Accounting Pronouncements

SFAS No. 150

In May 2003, the Financial Accounting Standards Board issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.”  SFAS No. 150 establishes standards for the classification and measurement of certain financial instruments with characteristics of both liabilities and equity.  SFAS No. 150 requires classification of financial instruments within its scope as a liability, including financial instruments issued in the form of shares that are mandatorily redeemable, because those financial instruments are deemed to be, in essence, obligations of the issuer.  We will be required to reclassify the 16% mandatorily redeemable preferred stock as a liability commencing January 1, 2004 and reflect quarterly dividend and redemption value accretion as a charge against pre-tax income in future periods.

Forward-Looking Statements and Risk Factors

Special Note Regarding Forward-Looking Statements

All statements other than statements of historical facts included in this report, including statements about our future performance and liquidity and future industry performance, are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements are subject to known and unknown risks, uncertainties and other factors, which are difficult to predict.  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;

•acts, and ongoing threats, of global terrorism, military conflicts and health epidemics that affect demand for aircraft and air travel, which in turn affect demand for our products and services;

•inflation, and other general changes in costs of goods and services;

•price and availability of raw materials, component parts and electrical energy;

•liability and other claims asserted against us that exceeds our insurance coverage;

•the ability to attract and retain qualified personnel;

•labor disturbances;

44

•changes in operating strategy, or our acquisition and capital expenditure plans; and

•the risks described below.

Changes in such factors could cause our actual results to differ materially from those expressed or implied in this report.  Although we believe that the expectations reflected in such statements are reasonable, we can give no assurance that such expectations will prove to be correct.  We undertake no obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.  You should not rely on our forward-looking statements as if they were certainties.

Risk Factors

Substantial Leverage.  Our substantial levels of debt could adversely affect our financial health and prevent us from fulfilling our obligations under the debt agreements.

As of December 31, 2003, we had total consolidated indebtedness of approximately $269.4 million and we had $23.8 million of additional revolving line of credit borrowings available under our first-lien credit facility, subject to customary funding conditions.  We also had $43.3 million of mandatorily redeemable preferred stock as of December 31, 2003.  The first-lien credit facility, second-lien term debt and the indenture under which our 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 were $26.0 million for the year ended December 31, 2003.  Earnings from continuing operations were insufficient to cover fixed charges by $66.4 million for the year ended December 31, 2003.

•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.

Restrictive Covenants.  Our operations and those of our subsidiaries are restricted by the terms of our first-lien credit facility, second-lien term debt and subordinated notes indenture.

Our first-lien credit facility and the indenture under which our subordinated notes are issued 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;

45

•pay dividends or other distributions;

•make investments;

•sell assets; and

•enter into mergers and consolidations.

In addition, our first-lien credit facility requires that we satisfy several tests of financial condition, including minimum levels of EBITDA and interest and fixed charges coverage and maximum permitted levels of leverage and senior debt.  Our ability to do so can be affected by events beyond our control, and we cannot be sure that we will meet those tests.  Our failure to do so could result in a default under our loan agreements, which would permit the lenders to terminate their commitments and accelerate all debt including the subordinated notes indenture.  Although we were in compliance with these covenants as of December 31, 2003, we have required amendments on several occasions in recent years to avoid potential defaults and we may not be able to comply with these tests in the future.

The first-lien credit facility second-lien term loans are secured by substantially all our material assets.  If we default under our 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.

Potential Inability to Service Debt.  We will require a significant amount of cash to service our debt and to fund our operations and planned capital expenditures.  Our ability to generate cash depends on cash flows from our subsidiaries and many factors beyond our control.

We will be required to repay $18.8 million of debt through 2006 and substantial amounts thereafter.  See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources and —Disclosure of Contractual Obligations and Commitments” for additional information.  Our ability to satisfy our debt obligations and to fund our operations and planned capital expenditures will depend on our ability to generate cash in the future and access to our revolving credit facility, which will terminate in March 2006.  During 2003, we used $19.1 million of cash for operations.  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 we will generate operating cash flow at all, or 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 in future periods 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.  A reduction in our operating expenses might reduce important efforts, such as selling and marketing programs, management information system upgrades and new product development.  Also, it is likely we will need to refinance all or a portion of our debt on or before maturity.  At that time, we may not be able to refinance our debt on commercially reasonable terms or at all.

We reported a net loss of $73.3 million for the year ended December 31, 2003 and $66.0 million for the same period in 2002.  The 2003 loss includes $13.8 million as a result of a cumulative effect of change in accounting principle, a $6.6 million loss attributable to discontinued operations and $49.4 million of pre-tax restructuring and long-lived asset impairment charges we recorded resulting from our restructuring activities.  The 2002 loss includes $17.8 million as a result of a cumulative effect of change in accounting principle, a $41.4 million loss attributable to discontinued operations and $17.2 million of pre-tax restructuring and long-lived asset impairment charges we recorded resulting from our restructuring activities.  Our restructuring activities were implemented in response to the adverse impact the events described in “—Aerospace Industry Risks” below are having on our business.

46

Aerospace Industry Risks.  The aerospace industry is cyclical and affected by many factors beyond our control, including geo-political and global economic conditions.

We compete in the aircraft products and services market of the aerospace industry.  The market for our products and services is largely driven by demand in the civil aircraft markets, principally for business, VIP and head-of-state aircraft and, to a lesser extent, commercial and regional aircraft.  The September 11, 2001 terrorist attack on the United States, ongoing concerns about global terrorism, the current Middle-Eastern military conflicts, health epidemics and weak global economic conditions are all adversely impacting the aerospace industry and our business.

The business, VIP and head-of-state aircraft portion of our business experienced weakness throughout 2003 as evidenced by various manufacturers’ temporarily suspension of production at various times throughout the year in response to the weak demand for new aircraft.  We believe aircraft deliveries may reflect a modest recovery in 2004 and show continuing recovery thereafter.  We also believe the commercial aircraft portion of our business will experience significant weakness 2004, with potential recovery not expected to occur until at least 2005.  Our beliefs are based on the assumptions we will experience economic recovery and there are no further negative geo-political developments affecting our industry.

Further or prolonged decreases in demand for new business, VIP and head-of-state and commercial aircraft, as well as related component parts (which occur for a variety of reasons, including those described above), would result in additional decreases in demand for our products and services, and, correspondingly, our revenues, thereby adversely affecting our financial condition.  In addition, further deterioration or prolonged decreases in demand could result in further restructurings of our business.

Concentration of Key Customers.  We receive a significant portion 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 accounted for 46.4% of our consolidated revenues for the year ended December 31, 2003 as follows: Boeing – 17.5%; Textron (which includes Cessna) – 16.3%; and Bombardier – 12.6%.  Some of our customers also 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, significant portions of our revenues from our major customers are pursuant to contracts that may include a variety of terms favorable to the customer.  Such terms may include our agreement to one or more of the following:

•the customer is not required to make purchases, and may terminate such contracts at any time;

•we make substantial expenditures to develop products for customers that we may not recoup if we do not receive sufficient orders;

•on a prospective basis, we must extend to the customers any reductions in prices or lead times that we provide to other customers;

•we must match other suppliers’ price reductions or delete the affected products from the contract; and

•we must grant irrevocable non-exclusive worldwide licenses to use our designs, tooling and other intellectual property rights to products sold to a customer if we default, or suffer a bankruptcy filing, or transfer our manufacturing rights to a third party.

47

Intangible Asset Impairment.  Our total assets include a substantial amount of intangible assets.  The write-off of a significant portion of intangible assets would negatively affect our results of operations.

As of December 31, 2003, goodwill and other intangible assets represented approximately 61.8% of our total assets.  Intangible assets consist of goodwill and other identifiable intangible assets associated with our acquisitions, representing the excess of cost over the fair value of tangible assets we have acquired.  We may not be able to realize the value of these assets.  Since our January 1, 2002 adoption of SFAS No. 142, “Goodwill and Other Intangible Assets,” goodwill is not amortized but is instead subject to annual testing for impairment.  Identifiable intangible assets with finite lives are amortized over their individual useful lives and are also subject to annual impairment testing.  Simply stated, if the carrying value of the asset exceeds the estimated undiscounted future cash flows from the operating activities of the related business, impairment is deemed to have occurred.  In this event, the amount is written down accordingly.  Under current accounting rules, this would result in a charge against income from operations.  Since we began testing goodwill for impairment in 2002, we have recorded impairment charges totaling $107.3 million, which includes $41.5 million recorded during 2003.

Any future impairment testing resulting in the write-off of a significant portion of goodwill or identifiable intangible assets will have an adverse impact on our results of operations and total capitalization, the effect of which could be material.

Competition.  We operate in a highly competitive industry and compete against a number of companies, some of which have significantly greater financial, technological and marketing resources than we do.

We operate in highly competitive markets within the aerospace industry.  Our competitors include business aircraft manufacturers, independent completion and modification companies and other independent service 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 aerospace 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 aerospace industry, competition comes from both U.S. and foreign companies.

We believe our ability to compete depends on high product performance, short lead-time and timely delivery, competitive pricing, superior customer service and support and continued certification under customer quality requirements and assurance programs.  There can be no assurance that we will be able to compete successfully with respect to these factors in the future.

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 prices 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

•the impact on our financial position, results of operations and cash flows resulting from additional acquisition indebtedness.

48

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 aerospace industry is highly regulated in the United States by the Federal Aviation Administration to ensure that aviation products and services meet stringent safety and performance standards.  The FAA prescribes standards and licensing requirements for aircraft components, issues designated alteration station authorizations, and licenses private repair stations.  We hold various FAA authorizations and licenses, including a Designated Alteration Station authorization, which gives one of our subsidiaries the authority to certify some aircraft design modifications on behalf of the FAA.  Our business depends on our continuing access to, or use of, these FAA authorizations and licenses, 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 authorizations, licenses and certified professionals, the loss or unavailability of which 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.

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.

Environmental laws, particularly the federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), may 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, such as a current or former owner or operator of real property or a party who arranges to transport wastes to a third-party site.  We have sent waste to treatment, storage or disposal facilities that have been designated as National Priority List (more commonly known as Superfund) sites under CERCLA 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 also located on properties that may be contaminated to varying degrees.  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.

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.

Industry and Market Data.  We cannot guarantee the accuracy and completeness of the industry and market data and trends we describe in this report and rely upon in preparing our operating forecasts.

49

The industry and market data we use in this report 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 aerospace 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.

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 have employment contracts with our key personnel, other than Mr. DeCrane.  We do not carry key man life insurance on any members of our management team.

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various market risks, including interest rates and changes in foreign currency exchange rates.  Market risk is the potential loss arising from adverse changes in prevailing market rates and prices.  From time to time, we use derivative financial instruments to manage and reduce risks associated with these factors.  We do not enter into derivatives or other financial instruments for trading or speculative purposes.

Interest Rate Risk.  A significant portion of our capital structure is comprised of long-term variable and fixed-rate debt.

Market risk related to our variable-rate debt is estimated as the potential decrease in pre-tax earnings resulting from an increase in interest rates.  The interest rates applicable to variable-rate debt are, at our option, based on defined margins over the current prime rate or LIBOR.  As of December 31, 2003, the current prime rate was 4.00% and the current LIBOR was 1.16%.  Based on $90.5 million of variable-rate debt outstanding as of December 31, 2003, a hypothetical one percent rise in interest rates, to 5.00% for prime rate borrowings and 2.12% for LIBOR borrowings, would reduce our pre-tax earnings by $0.9 million annually.  As of December 31, 2002, the current prime rate was 4.75% and the current LIBOR was 1.95%.  Based on $270.2 million of variable-rate debt outstanding as of December 31, 2002, a hypothetical one percent rise in interest rates, to 5.75% for prime rate borrowings and 2.95% for LIBOR borrowings, would reduce our pre-tax earnings by $2.7 million annually.

To limit a portion of our exposure related to rising interest rates, we have entered into an interest rate swap contract to effectively convert our variable-rate industrial revenue bonds to 4.2% fixed-rate debt until maturity in 2008.  The contract is considered to be a hedge against changes in the amount of future cash flows associated with interest payments on this portion of our variable-rate debt.  Market risk related to this interest rate swap contract is estimated as the potential higher interest expense we will incur if the variable interest rate decreases below the 4.2% fixed rate.  Based on the $3.1 million of variable-rate debt converted to fixed-rate debt outstanding as of December 31 2003, a hypothetical one percent decrease in the variable interest rate to 3.2%, would reduce our pre-tax earnings by less than $0.1 million annually.

The estimated fair value of our $100.0 million fixed-rate long-term debt increased $5.0 million, or 12.5%, to approximately $45.0 million as of December 31, 2003 from $40.0 million as of December 31, 2002.  Although we cannot be certain, we believe the increase may have been a result of the sale of the Specialty Avionics Group.  Market risk related to our fixed-rate debt is deemed to be the potential

50

increase in fair value resulting from a decrease in interest rates.  For example, a hypothetical ten percent decrease in the interest rates, from 12.0% to 10.8%, would increase the fair value of our fixed-rate debt by approximately $7.0 million.

Foreign Currency Exchange Rate Risk.  Our foreign customers are located in various parts of the world, primarily Canada, the Far and Middle East and Western Europe, and we have a subsidiary with manufacturing facilities in Mexico.  To limit our foreign currency exchange rate risk related to sales to our customers, orders are almost always valued and sold in U.S. dollars.  We have entered into forward foreign exchange contracts in the past, primarily to limit the Specialty Avionics Group’s exposure related to foreign inventory procurement and operating costs.  While we have not entered into any such contracts since 1998, we may do so in the future depending on the volume of non-U.S. dollar denominated transactions and our assessment of future foreign exchange rate trends.

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements, supplementary financial information and financial statement schedules are included in a separate section at the end of this report.  The financial statements, supplementary information and schedules are listed in the index on page F-1 of this report and are incorporated herein by reference.

ITEM 9.          CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.CONTROLS AND PROCEDURES

The management of DeCrane Aircraft Holdings, Inc. (the “Company”), under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the Company’s “disclosure controls and procedures” (as defined in Exchange Act Rules 13a-15(e) or 15d-15(e)) as of the end of the period covered by this report.  Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.

There was no change in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the Company’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

51

PART III

ITEM 10.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors and Executive Officers

The following table sets forth certain information concerning each person who is currently a director or executive officer of DeCrane Aircraft and its parent company, DeCrane Holdings.

Name	Age	DeCrane Aircraft	DeCrane Holdings
R. Jack DeCrane (1)(2)	57	Director and Chief Executive Officer	Vice Chairman of the Board of Directors and Chief Executive Officer
Richard J. Kaplan (2)	61	Director, Senior Vice President, Chief Financial Officer, Secretary and Treasurer	Director, Chief Financial Officer and Assistant Secretary
James E. Mann	51	Vice President, Tax and SEC Compliance	—
Robert G. Martin	66	Senior Vice President and Group President	—
Jeffrey A. Nerland	46	Senior Vice President and Group President	—
Thompson Dean (2)	45	Chairman of the Board of Directors	Chairman of the Board of Directors
Susan C. Schnabel (1)(2)	42	Director	Director
Albert E. Suter (1)(2)	68	Director	Director

(1)Member of the Compensation Committee; Ms. Schnabel serves as the committee’s chairperson.

(2)Member of the Audit Committee; the entire board of directors acts as the audit committee.

R. Jack DeCrane is the founder of DeCrane Aircraft.  Mr. DeCrane served as President from the time DeCrane Aircraft was founded in December 1989 until April 1993, when he was elected to the newly created office of Chief Executive Officer.  In August 2002, Mr. DeCrane was also appointed Chief Executive Officer of DeCrane Holdings.  He has served on the board of directors of DeCrane Aircraft and DeCrane Holdings since their inceptions.

Richard J. Kaplan has been the Senior Vice President, Chief Financial Officer, Secretary and Treasurer of DeCrane Aircraft and Assistant Treasurer and Assistant Secretary (principal accounting officer) of DeCrane Holdings since March 1999.  In August 2002, Mr. Kaplan was appointed Chief Financial Officer and Assistant Secretary of DeCrane Holdings.  From April 1998 to March 1999, he served as Executive Vice President and Chief Operating Officer of Developers Diversified Realty Corporation.  From 1977 to 1998, he was a partner with Price Waterhouse LLP, having joined the firm in 1964.  He became a director of DeCrane Aircraft and DeCrane Holdings in 2000.

James E. Mann has been our Vice President, Tax and SEC Compliance since January 2000.  During 1999, Mr. Mann was an independent consultant engaged by DeCrane Aircraft to assist with various tax and SEC compliance matters.  From 1992 through 1998, Mr. Mann severed in various capacities with DeCrane Aircraft, most recently as Vice President, Corporate Controller.

52

Robert G. Martin has been our Senior Vice President and President of the Systems Integration Group since October 1999.  Mr. Martin also served as President of PATS since we acquired it in January 1999 through December 2002 and as President of Aerospace Display Systems from September 1992 until October 1999.

Jeffrey A. Nerland has been our Senior Vice President and President of the Cabin Management Group since December 2001.  From January 1999 until December 2001, Mr. Nerland served as Vice President, Business Development, and was appointed Senior Vice President in March 2001.  Mr. Nerland also served as President of the Cabin Management Group’s Seating Division from June 2000 through December 2001.  From July 1994 through December 1998, he was President of The Nerland Group and a partner with Budetti, Harrison, Nerland and Associates, a consulting and interim management firm.

Thompson Dean has been a director of DeCrane Aircraft and DeCrane Holdings since 1998.  Mr. Dean also served as President of DeCrane Holdings from its inception in 1998 through August 2002.  Mr. Dean has also been the Managing Partner of DLJ Merchant Banking, Inc. since November 1995.  In November 2000, Credit Suisse First Boston, Inc. acquired Donaldson, Lufkin & Jenrette, Inc.  As a result, DLJ Merchant Banking, Inc. became an indirect affiliate of Credit Suisse First Boston, Inc. and Credit Suisse Group.  Mr. Dean serves as a director of AKI Holding Corp., Amatek Holdings S.A., Arcade Holding Corporation, Manufacturers’ Services Limited, Mueller Holdings, Inc., and Von Hoffman Holdings, Inc.

Susan C. Schnabel has been a director of DeCrane Aircraft and DeCrane Holdings since 1998.  Ms. Schnabel has also been a Managing Director of DLJ Merchant Banking, Inc. since January 1998.  In November 2000, Credit Suisse First Boston, Inc. acquired Donaldson, Lufkin & Jenrette, Inc.  As a result, DLJ Merchant Banking, Inc. and Donaldson, Lufkin & Jenrette Securities Corporation became indirect affiliates of Credit Suisse First Boston, Inc. and Credit Suisse Group.  Ms. Schnabel serves as a director of Environmental Systems Products Holdings, Inc., Noveon, Inc. and Shoppers Drug Mart, Inc.

Albert E. Suter has been a director of DeCrane Aircraft and DeCrane Holdings since May 2002.  Mr. Suter is a Senior Advisor and Retired Vice Chairman and Chief Operating Officer of Emerson Electric Co., a manufacturer of electrical, electromechanical and electronic products and systems.  Mr. Suter has served Emerson in various capacities since 1989.  Mr. Suter serves as a director of Furniture Brands International, Inc. and TK Aluminum, Ltd.

Audit Committee Financial Expert

The entire board of directors of DeCrane Aircraft and DeCrane Holdings serves as each Company’s audit committee.  The board of directors has carefully considered the definition of “audit committee financial expert” adopted by the United States Securities and Exchange Commission and has determined that Mr. Kaplan is an audit committee financial expert.  Mr. Kaplan is not independent under Rule 10a-3.

Code of Ethics

DeCrane Aircraft and DeCrane Holdings has adopted a Code of Ethics applicable to its Chief Executive Officer, Chief Financial Officer and all employees performing accounting functions.  A copy of the Code of Ethics is available, without charge, upon written request to the Chief Financial Officer of DeCrane Aircraft at 2361 Rosecrans Avenue, Suite 180, El Segundo, CA 90245.

53

ITEM 11.EXECUTIVE COMPENSATION

Summary Compensation Table

The following table describes all annual compensation awarded to, earned by or paid to our Chief Executive Officer and the four most highly compensated executive officers other than the Chief Executive Officer for the three years ended December 31, 2003.  Columns and tables have been omitted, as permitted by Securities and Exchange Commission rules, because there has been no compensation awarded to, earned by or paid to any of the named executive officers required to be reported in the omitted column or table during any of the years in the three year period ended December 31, 2003.

						All Other Compensation
						Securities
		Annual Compensation				Underlying
Name	Year	Salary		Bonus		Options (1)	Other (2)
R. Jack DeCrane (3)	2003	$	355,144	$	—	—	$	13,533
Chief Executive Officer and	2002	355,144		750,000		—	19,477
Director	2001	352,906		1,290,000		—	15,741
Richard J. Kaplan (4)	2003	212,200		—		—	4,649
Senior Vice President and Director	2002	212,200		330,000		—	9,029
	2001	212,200		470,000		—	5,809
James E. Mann (5)	2003	146,200		20,000		—	671
Vice President, Tax and SEC	2002	146,200		33,000		—	4,583
Compliance	2001	146,200		40,000		—	3,961
Robert G. Martin (6)	2003	222,789		—		—	9,434
Senior Vice President	2002	222,789		300,000		—	6,500
	2001	222,789		403,639		—	6,275
Jeffrey A. Nerland (7)	2003	210,000		—		—	1,044
Senior Vice President	2002	210,000		250,000		—	6,507
	2001	191,794		290,000		—	5,541

(1)Number of shares of common stock of DeCrane Holdings issuable upon exercise of options granted pursuant to our management incentive plan during the applicable fiscal year.

(2)Comprised of life insurance premiums and matching contributions to the Company’s 401(k) Retirement Plan.

(3)Mr. DeCrane also serves as Vice Chairman of the Board of Directors of DeCrane Holdings and was appointed its Chief Executive Officer in August 2002.

(4)Mr. Kaplan also served as Assistant Treasurer and Assistant Secretary (principal accounting officer) of DeCrane Holdings from March 1999 until August 2002 when he was appointed its Chief Financial Officer and Assistant Secretary.

(5)Mr. Mann has served as our Vice President, Tax and SEC Compliance, since January 1, 2000.

(6)Mr. Martin served as President of PATS since we acquired it in January 1999 through December 2002.  In December 2001, Mr. Martin became the President of our Systems Integration Group.

54

(7)Mr. Nerland served as Vice President, Business Development, from January 1999 through December 2001 and was appointed Senior Vice President in March 2001.  In December 2001, Mr. Nerland became our President of the Cabin Management Group.

Stock Option Grants in Last Fiscal Year

During the fiscal year ended December 31, 2003, no options to purchase shares of DeCrane Holdings common stock were granted pursuant to the management incentive plan.  See “—Employment Agreements and Compensation Arrangements—Incentive Plans.”

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values

No stock options were exercised by our executive officers during the year ended December 31, 2003.  The following table sets forth information about the stock options held by the executive officers named below as of December 31, 2003.

Name	Number of Securities Underlying Unexercised Options Exercisable / Unexercisable	Value of Unexercised In-the-Money Options at Fiscal Year End (1) Exercisable / Unexercisable
R. Jack DeCrane
Exercisable at $23.00 per share	36,253 / 73,605	$	— / —
Richard J. Kaplan
Exercisable at $23.00 per share	9,840 / 19,976	–– / ––
Exercisable at $35.00 per share	972 / 1,974	–– / ––
James E. Mann
Exercisable at $23.00 per share	644  / 1,306	–– / ––
Exercisable at $35.00 per share	330 / 670	–– / ––
Robert G. Martin
Exercisable at $23.00 per share	5,954 / 12,088	–– / ––
Exercisable at $35.00 per share	990 / 2,010	–– / ––
Jeffrey A. Nerland
Exercisable at $23.00 per share	3,641 / 7,391	–– / ––
Exercisable at $35.00 per share	1,650 / 3,350	–– / ––

(1)All unexercised options had an exercise price above fair market value as of December 31, 2003.  Since the common stock of DeCrane Holdings is privately-held, there is no established public trading market for its shares.  The Board of Directors determines the fair value of stock options granted and the fair value of the common stock as of any given period-end date based on the aggregate enterprise value of DeCrane Holdings.  Enterprise value is computed based upon a multiple of Adjusted EBITDA, as reflected in our financial statements, and the multiple is based upon comparable data from other publicly-held companies as well as publicly available information on privately-held companies.  The Board of Directors did not determine the specific fair value of the common stock as of December 31, 2003, but did conclude that fair value was below $23.00 per share, the lowest exercise price of any options granted.

Compensation Committee Interlocks and Insider Participation

The Compensation Committee of our Board of Directors makes decisions regarding officer compensation.  Jack DeCrane, chief executive officer of DeCrane Aircraft and DeCrane Holdings, participates in those discussions as a member of the Committee.

55

Employment Agreements and Compensation Arrangements

R. Jack DeCrane

On July 17, 1998, the Compensation Committee of our Board of Directors approved a three-year employment agreement between DeCrane Aircraft and R. Jack DeCrane, replacing his prior employment agreement that was to expire on September 1, 1998.  Mr. DeCrane’s employment agreement was amended on May 5, 2000 to provide for a term through June 30, 2001, which term shall automatically extend for additional one year periods unless terminated by either party giving the other party notice of termination prior to April 1^st of the year prior to the year in which the agreement would otherwise terminate and has therefore been extended to June 30, 2005.  Mr. DeCrane’s employment agreement provides for various benefits, including an initial salary of $310,000, which is subject to annual review and increase, but not a decrease, and an annual bonus, currently determined pursuant to the performance-based cash incentive bonus plan.

The employment agreement also provides that if specified change-of-control events occur, and Mr. DeCrane’s employment is terminated by us for any reason other than for cause or as a result of his death or disability, or by Mr. DeCrane for “good reason,” as defined in the agreement, then we will pay Mr. DeCrane a lump sum in cash within fifteen days.  The amount of that payment will be $1.00 less than three times the sum of Mr. DeCrane’s average base salary plus bonus for the five calendar years preceding his termination date and accrued but unpaid salary and bonus through the termination date.  Mr. DeCrane will also receive other specified benefits, including continued coverage under our welfare plans for up to two years; a lump sum payment in cash equal to any unvested portions of our contributions to him under specified savings plans, plus two times the amount of our annual contributions on his behalf to those plans; a lump sum payment in cash equal to our matching contributions under those savings plans that Mr. DeCrane would have received had he continued maximum participation in the plans until the earlier of two years following his termination and December 31 of the year he turns 65, plus the vested and unvested amounts credited to him under any of our deferred compensation plans and the amount required to be credited during the year of his termination; and outplacement consulting services to aid Mr. DeCrane with re-employment.  We will reduce these payments to the extent necessary to ensure deductibility for tax purposes.

Change of Control Agreements

In August 2002, we entered into change of control agreements with each of our executive officers, other than Mr. DeCrane, whose above described employment agreement contains provisions concerning change of control, and Mr. Mann.  The agreements, which replaced earlier agreements which had expired, provide that, for a term of two years from the effective date, should a change of control, as defined, occur during the term of the agreement and the executive officer’s employment shall be involuntarily terminated for any reason on a date which is less than two years after the date of the change of control, other than for cause, death or disability or terminated by the officer for good reason, DeCrane Aircraft is required to pay such executive a lump sum equal to his then salary plus average annual bonus over the last five years, equal to twenty four months compensation less the number of months elapsed from the date of the change of control to the employment termination date.

401(k) Retirement Plan

Substantially all of our full-time employees are eligible to participate in one of the 401(k) retirement plans we sponsor.  The 401(k) plans allow employees as participants to defer, on a pre-tax basis, a portion of their salary and accumulate tax deferred earnings, as a retirement fund.  The plans generally provide for a discretionary Company match of a percentage of the employee contribution up to a specified percentage of the employee’s salary.  The full amount vested in a participant’s account will be

56

distributed to a participant following termination of employment, normal retirement or in the event of disability or death.

Incentive Plans

Our management incentive plan provides for the issuance of options to purchase the common stock of DeCrane Holdings as incentive compensation to designated executive personnel and other key employees of DeCrane Aircraft and its subsidiaries.  The Compensation Committee of the Board of Directors of DeCrane Holdings administers the management incentive plan.  The plan provides for the granting of options to purchase 356,257 common shares and expires in 2009.  Substantially all of the options awarded become fully vested and exercisable eight years from the date of grant but vesting and exercise can be accelerated based upon future attainment of defined performance criteria.  As of December 31, 2003, 34% of the options granted pursuant to the plan are vested and exercisable.  We believe the per share exercise price of the options granted approximated the fair market value of the underlying common stock on each of the grant dates.

From time-to-time, we have permitted designated executive personnel and other key employees to purchase shares of common stock of DeCrane Holdings.  Prior to the July 30, 2002 enactment of the Sarbanes-Oxley Act of 2002, a portion of the purchase price was in certain instances, loaned to the participants by DeCrane Aircraft.  This arrangement was made available to persons and in amounts determined by the Compensation Committee of the Board of Directors.  In December 1999, management purchased 171,295 shares of DeCrane Holdings common stock for $23.00 per share.  The total purchase price was $3.9 million, of which one-half was paid in cash and one-half was loaned to management by DeCrane Aircraft with interest at applicable federal rates.  During 2000, an additional 19,707 shares of DeCrane Holdings common stock was purchased by employees at $23.00 per share, which was paid in cash.  Subsequent to the July 30, 2002 enactment of the Sarbanes-Oxley Act, we have discontinued making new loans to participants as mandated by the Act.  Loans originated prior to and outstanding as of the effective date of the Act will be repaid in accordance with their terms, as permitted by the Act.

Upon termination of employment of any purchaser by us without cause, DeCrane Holdings has the right to purchase, and the purchaser has the right to cause DeCrane Holdings to purchase, such purchased stock at its then fair market value or, if we terminate the purchaser with cause or the purchaser terminates employment, the purchase price is the lower of $23.00 per share or its then fair market value.

During the year ended December 31, 2003, several DeCrane Aircraft management members surrendered 107,330 shares.  In accordance with the terms of notes evidencing the loans, DeCrane Aircraft canceled the notes.

Our cash incentive bonus plan provides for the allocation of a bonus pool each year for incentive compensation to designated executive personnel and certain other employees of DeCrane Aircraft and its subsidiaries.  The bonus pool, which is approved by the compensation committee, is adjusted each year based on the achievement of certain financial measures, including Adjusted EBITDA, as defined, generated by the relevant participant’s operating unit.  Bonus payments are generally made in the quarter following the end of the year or period to which they pertain.

Deferred Compensation Plan

From December 1999 through December 2002, we had a deferred compensation plan in which certain designated executive officers and key employees were permitted to defer a portion of their compensation earned.  DeCrane Aircraft invested amounts deferred and participants were fully vested in the amounts representing the fair market value of their investment accounts.  We made no contributions on behalf of the participants and the invested assets are subject to the claims of our general creditors.  The

57

plan was terminated in January 2003 and the fair market values of the individual investment accounts on the termination date were distributed to the individual participants.

Directors

Selection of Directors and Term of Office

DLJ Merchant Banking Partners II, L.P. is entitled to select all members of the Board of Directors of DeCrane Holdings and DeCrane Aircraft as described in “Certain Relationships and Related Transactions—Investors’ Agreement.”  At least one of such directors selected by DLJ Merchant Banking on each board must be an independent director as defined in the agreement.  Mr. Suter is an independent director.  All directors hold office until their successor is designated and qualified.

Directors’ Compensation

The directors of DeCrane Holdings and DeCrane Aircraft generally do not receive annual fees or fees for attending meetings of the Board of Directors or committees thereof.  However, Albert E. Suter, an independent director not affiliated with any investor in DeCrane Holdings, receives a director’s fee of $50,000 per year.  In addition, the Board of Directors of DeCrane Holdings authorized the issuance of options to purchase 7,500 shares of DeCrane Holdings common stock to Mr. Suter under the same terms as the management incentive plan.  See “Certain Relationships and Related Transactions—Transactions with Management and Others—Recent Transactions” for additional information.  Also, Mr. Suter is reimbursed for out-of-pocket expenses.  We expect to continue these policies.

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security Ownership of Certain Beneficial Owners and Management

DeCrane Aircraft

As of March 15, 2004, DeCrane Aircraft has the following securities issued and outstanding:

•100 shares of common stock, which are owned by one stockholder; and

•250,000 shares of non-voting 16% Senior Redeemable Exchangeable Preferred Stock Due 2009, which are owned by seven stockholders.

The following table sets forth the beneficial ownership of DeCrane Aircraft’s voting and non-voting securities as of March 15, 2004 by its principal owners and its executive officers and directors.

	Common Stock (2)			16% Senior Redeemable
	Number			Preferred Stock
	of Shares,			Number
	Partially			of
Name of Beneficial Owner (1)	Diluted	Percentage		Shares	Percentage
DeCrane Holdings Co.  c/o DLJ Merchant Banking Partners II, L.P. Eleven Madison Avenue, New York, NY 10010	100	100.0	%	—	—
DLJ Merchant Banking Partners II, L.P. affiliates (3)  Eleven Madison Avenue, New York, NY 10010	—	—		200,000	80.0	%

58

	Common Stock (2)		16% Senior Redeemable
	Number		Preferred Stock
	of Shares,		Number
	Partially		of
Name of Beneficial Owner (1)	Diluted	Percentage	Shares	Percentage
Thompson Dean (4) c/o Credit Suisse First Boston Eleven Madison Avenue, New York, NY 10010	—	—	—	—
Susan C. Schnabel (4) c/o Credit Suisse First Boston Eleven Madison Avenue, New York, NY 10010	—	—	—	—
Putnam Investment Management, Inc. and affiliates (5) One Post Office Square, Boston, MA 02109	—	—	29,000	11.6	%
Neon Capital Limited. c/o Deutsche Bank (Cayman) Limited P.O. Box 1984, George Town Cayman Islands, British West Indies	—	—	21,000	8.4	%
Albert E. Suter	—	—	—	—
R. Jack DeCrane	—	—	—	—
Richard J. Kaplan	—	—	—	—
James E. Mann	—	—	—	—
Robert G. Martin	—	—	—	—
Jeffrey A. Nerland	—	—	—	—
All directors and named executive officers as a group (eight persons)	—	—	—	—

(1)Each person who has the power to vote and direct the disposition of shares is deemed to be a beneficial owner of those shares.

(2)The common stock columns reflect the number of shares owned and the total percentage ownership in the manner required by Securities and Exchange Commission rules.  The entries for each holder assumes, if applicable, that the particular holder, and no one else, fully exercises all rights under warrants to purchase common stock and common stock which may be acquired upon the exercise of stock options and which are exercisable, or will be exercisable, prior to 60 days from March 15, 2004.

(3)Reflects preferred stock held by the following investors affiliated with DLJ Merchant Banking Partners II, L.P.:

•DLJ Investment Partners, L.P.

•DLJ Investment Partners II, L.P.

•DLJIP II Holdings, L.P.

The address of each of the investors is Eleven Madison Avenue, New York, New York 10010.

(4)Mr. Dean and Ms. Schnabel are officers of DLJ Merchant Banking, Inc., an affiliate of DLJ Merchant Banking Partners II, L.P. and directors of DeCrane Holdings Co.  The DLJ entities are affiliates of, and commonly collectively referred to as, Credit Suisse First Boston.  See “Item 13. Certain Relationships and Related Transactions—Transactions with Management and Others” for additional information.  The share data shown for these individuals excludes shares shown as held

59

by the DLJ affiliates and DeCrane Holdings Co. separately listed in this table; Mr. Dean and Ms. Schnabel disclaim beneficial ownership of those shares.

(5)Reflects preferred stock held by the following investors related to Putnam Investment Management, Inc.:

•Putnam Fund Trust - Putnam High Yield Trust II

•Putnam High Yield Trust

•Putnam Variable Trust – Putnam VT High Yield Fund

The address of each of the investors is One Post Office Square, Boston, MA 02109.

DeCrane Holdings

As of March 15, 2004, DeCrane Holdings has the following securities issued and outstanding:

•4,009,297 shares of common stock, which is owned by 31 stockholders; and

•342,417 shares of non-voting 14% Senior Redeemable Exchangeable Preferred Stock Due 2009, which is owned by 18 stockholders.

The following table sets forth the beneficial ownership of DeCrane Holdings’ voting and non-voting securities as of March 15, 2004 by its principal owners and its executive officers and directors.

	Common Stock (2)			14% Senior Redeemable
	Number			Preferred Stock
	of Shares,			Number
	Partially			of
Name of Beneficial Owner (1)	Diluted	Percentage		Shares	Percentage
DLJ Merchant Banking Partners II, L.P. and affiliates (3) Eleven Madison Avenue, New York, NY 10010	4,179,530	97.7	%	340,000	99.3	%
Thompson Dean (4) c/o Credit Suisse First Boston Eleven Madison Avenue, New York, NY 10010	—	—		—	—
Susan C. Schnabel (4) c/o Credit Suisse First Boston Eleven Madison Avenue, New York, NY 10010	—	—		—	—
Albert E. Suter (5)	8,704		*	—	—
R. Jack DeCrane (6)	36,253		*	—	—
Richard J. Kaplan (7)	10,812		*	—	—
James E. Mann (8)	974		*	—	—
Robert G. Martin (9)	6,944		*	—	—
Jeffrey A. Nerland (10)	5,291		*	—	—
All directors and named executive officers as a group (eight persons)	68,978	1.7	%	—	—

*Less than 1.0%

(1)Each person who has the power to vote and direct the disposition of shares is deemed to be a beneficial owner of those shares.

(2)The common stock columns reflect the number of shares owned and the total percentage ownership in the manner required by Securities and Exchange Commission rules.  The entries for each holder

60

assumes, if applicable, that the particular holder, and no one else, fully exercises all rights under warrants to purchase common stock and common stock which may be acquired upon the exercise of stock options and which are exercisable, or will be exercisable, prior to 60 days from March 15, 2004.

(3)Reflects 3,913,044 shares of common stock, warrants to purchase an additional 266,486 shares of common stock and preferred stock held directly by DLJ Merchant Banking Partners II, L.P. and the following affiliated investors:

•DLJ Diversified Partners, L.P.

•DLJ Diversified Partners-A, L.P.

•DLJ EAB Partners, L.P.

•DLJ ESC II, L.P.

•DLJ First ESC L.P.

•DLJ Investment Partners, L.P.

•DLJ Investment Partners II, L.P.

•DLJ Merchant Banking Partners II-A, L.P.

•DLJ Millennium Partners, L.P.

•DLJ Millennium Partners-A, L.P.

•DLJ Offshore Partners II, C.V.

•DLJIP II Holdings, L.P.

•DLJMB Funding II, Inc.

•MBP II Plan Investors

•UK Investment Plan 1997 Partners, Inc.

The address of each of the investors is Eleven Madison Avenue, New York, New York 10010.

(4)Mr. Dean and Ms. Schnabel are officers of DLJ Merchant Banking, Inc., an affiliate of DLJ Merchant Banking Partners II, L.P. and directors of DeCrane Aircraft.  The DLJ entities are affiliates of, and commonly collectively referred to as, Credit Suisse First Boston.  See “Item 13. Certain Relationships and Related Transactions—Transactions with Management and Others” for additional information.  The share data shown for these individuals excludes shares shown as held by the DLJ affiliates separately listed in this table; Mr. Dean and Ms. Schnabel disclaim beneficial ownership of those shares.

(5)Includes 2,500 shares that may be acquired upon the exercise of stock options that are exercisable or will become exercisable prior to 60 days from March 15, 2004.

(6)Includes 36,253 shares that may be acquired upon the exercise of stock options that are exercisable or will become exercisable prior to 60 days from March 15, 2004.

(7)Includes 10,812 shares that may be acquired upon the exercise of stock options that are exercisable or will become exercisable prior to 60 days from March 15, 2004.

(8)Includes 974 shares that may be acquired upon the exercise of stock options that are exercisable or will become exercisable prior to 60 days from March 15, 2004.

(9)Includes 6,944 shares that may be acquired upon the exercise of stock options that are exercisable or will become exercisable prior to 60 days from March 15, 2004.

(10)Includes 5,291 shares that may be acquired upon the exercise of stock options that are exercisable or will become exercisable prior to 60 days from March 15, 2004.

Securities Authorized for Issuance Under Equity Compensation Plans

We have a Management Incentive Stock Option Plan under which shares of DeCrane Holdings common stock are authorized for issuance to employees and directors in exchange for their services.  In 1999, we also granted DeCrane Holdings incentive common stock options to non-employees in exchange for consulting and advisory services.  Our Management Incentive Stock Option Plan and the stock options awarded to non-employees are approved by our security holders.  The following table provides aggregate information regarding the shares of DeCrane Holdings common stock that may be issued upon the exercise of the options as of December 31, 2003.

61

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights	Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (1))
Equity compensation plans approved by security holders:
Management Incentive Stock Option Plan	239,515	$	24.15	107,490
Incentive stock options granted to non-employees	44,612	23.00		—
Equity compensation plans not approved by security holders	—	—		—
Total	284,127	23.97		107,490

The provisions of our Management Incentive Stock Option Plan and the terms of the options granted to non-employees are described in Note 15 accompanying our financial statements included in this report.

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Acquisition of Donaldson, Lufkin & Jenrette, Inc. by Credit Suisse Group

DLJ Merchant Banking Partners, II, L.P. is an affiliate of Donaldson, Lufkin & Jenrette, Inc.  In November 2000, Credit Suisse Group and its Credit Suisse First Boston, Inc. subsidiary acquired Donaldson, Lufkin & Jenrette, Inc.  Upon completion of the acquisition, Donaldson, Lufkin & Jenrette, Inc. was renamed Credit Suisse First Boston (USA), Inc.  The combined operations are commonly referred to collectively as Credit Suisse First Boston or CSFB.

Transactions with Management and Others

Arrangements with Other CSFB / DLJ Affiliates

Credit Suisse First Boston, as successor to DLJ Capital Funding, Inc., receives customary fees and reimbursement of expenses in connection with the arrangement, syndication and administration of our first-lien credit facility, second-lien debt and as lenders thereunder.  Credit Suisse First Boston LLC is the sole market-maker for our subordinated notes.  In addition, DeCrane Aircraft is obligated to pay CSFB Corporation an annual advisory fee, currently in the amount of $350,000 per year.  We may from time to time enter into other investment banking relationships with CSFB Corporation or one of its affiliates pursuant to which they will receive customary fees and will be entitled to reimbursement for all reasonable disbursements and out-of-pocket expenses incurred in connection therewith.  We expect that any such arrangement will include provisions for the indemnification of CSFB Corporation against liabilities, including liabilities under the federal securities laws.

Investors’ Agreement

Investors owing 96.6% of DeCrane Holdings’ issued and outstanding common stock and common stock warrants and options, all of DeCrane Holdings’ preferred stock and all of DeCrane Aircraft’s preferred and common stock, have entered into an Amended and Restated Investors’ Agreement, dated October 6, 2000, among DeCrane Holdings Co., DLJ Merchant Banking Partners II, L.P. and affiliated funds and entities, Putnam Investment Management, Inc. and affiliated funds and entities and all

62

management investors.  Investors who own DeCrane Holdings’ warrants to purchase 159,794 shares of common stock are not parties to the Investors’ Agreement.  The agreement provides that:

•The parties to the agreement shall vote their shares to cause DLJ Merchant Banking Partners, II, L.P. to select all members of the Board of Directors of DeCrane Holdings and DeCrane Aircraft and at least one of such directors on each board shall be an independent director.

•Transfers of the shares by the parties to the agreement are restricted.

•Parties to the agreement may participate in some specific kinds of sales of shares by DLJ affiliates.

•DLJ affiliates may require the other parties to the agreement to sell shares of DeCrane Holdings’ common stock in some cases should the DLJ affiliates choose to sell any such shares owned by them.

•The DLJ affiliates may request six demand registrations with respect to all or any of the DeCrane Holdings common stock, preferred stock and Class A warrants to purchase 155,000 common shares held by those affiliates, which are immediately exercisable subject to customary deferral and cutback provisions.

•The holders of Class B warrants to purchase 139,357 shares of DeCrane Holdings common stock may request two demand registrations together with all or any common stock held by them, which are immediately exercisable subject to customary deferral and cutback provisions.

•The parties to the agreement are entitled to unlimited piggyback registration rights, subject to customary cutback provisions, and excluding registrations of shares issuable in connection with any employee stock options, employee benefit plan or an acquisition.

•DeCrane Holdings will indemnify the stockholders against some liabilities and expenses, including liabilities under the Securities Act.

•Any person acquiring shares of common stock or preferred stock who is required by the terms of the Investors’ Agreement or any employment agreement or stock purchase, option, stock option or other compensation plan to become a party thereto shall execute an agreement to become bound by the Investors’ Agreement.

Each DeCrane Holdings’ Class A Warrant entitles the holder to purchase one share of common stock at an exercise price of not less than $0.01 per share subject to customary antidilution provisions and other customary terms.  The warrants are exercisable at any time prior to 5:00 p.m. New York City time on August 28, 2009, subject to applicable federal and state securities laws.

Each DeCrane Holdings’ Class B Warrant entitles the holder to purchase one share of common stock at an exercise price of not less than $0.01 per share subject to customary antidilution provisions and other customary terms.  The warrants are exercisable at any time prior to 5:00 p.m. New York City time on June 30, 2010, subject to applicable federal and state securities laws.

Transactions During 2003 and 2004

Securities and Exchange Commission rules require we briefly describe transactions, or series of similar transactions, with specified persons (as defined in the rules) and involving amounts exceeding $60,000, which have occurred since January 1, 2003, the beginning of our most recent fiscal year.  These transactions are briefly described below and are also described in the notes accompanying our financial statements included in this report.

63

Year Ended December 31, 2003

The following transactions occurred during the year ended December 31, 2003.

•DeCrane Aircraft sold its Specialty Avionics Group on May 23, 2003.  CSFB Corporation served as DeCrane Aircraft’s financial advisors for the transaction and received customary fees and reimbursement of expenses in connection with the transaction.

•DeCrane Aircraft amended its first-lien credit facility in connection with the sale of its Specialty Avionics Group in March 2003 and in connection with issuance of second-lien term debt in December 2003.  Credit Suisse First Boston received customary fees and reimbursement of expenses in connection with obtaining these amendments.  Credit Suisse First Boston was also paid an annual fee for serving as administrative agent for the first-lien credit facility and second-lien term debt.

•DeCrane Aircraft paid Credit Suisse First Boston a fee for arranging the syndication of its second-lien term debt in December 2003.

•CSFB Corporation received an annual advisory fee.

CSFB and affiliated funds and entities were paid an aggregate of $9.7 million in connection with the above transactions.

January 1, 2004 to the Present

The following transactions occurred during the period from January 1, 2004 to the date of this report:

•CSFB Corporation has received $87,500 of its annual advisory fee for 2004.

•CSFB Corporation has also received $375,000 for additional financial advisory services.

Indebtedness of Executive Officers and Directors

Securities and Exchange Commission rules require we disclose indebtedness owed to us by our executive officers and directors that individually exceeded $60,000 at any time during the year ended December 31, 2003.

All indebtedness set forth below results from purchases of DeCrane Holdings common stock in transactions consummated prior to the July 30, 2002 enactment of the Sarbanes-Oxley Act of 2002 and was payable to DeCrane Aircraft.  Beginning July 30, 2002, we no longer provide loans to directors or executive officers as mandated by the Act.  The indebtedness, plus accrued interest, is collateralized by shares of DeCrane Holdings stock.  On December 29, 2003, the executive officers listed in the table surrendered the shares of stock collateralizing the loans.  In accordance with the terms of notes evidencing the loans, DeCrane Aircraft canceled the notes.  See “Item 10. Directors and Executive Officers of the Registrant” for information regarding each individual’s relationship with DeCrane Aircraft and DeCrane Holdings.

The table sets forth the maximum amount of indebtedness during the year ended December 31, 2003.  None of the indebtedness remains as of December 31, 2003.

64

Name	Number of Shares Held as Collateral (1)	Interest Rate (2)		Maximum Indebtedness to DeCrane Aircraft During the Year Ended December 31, 2003
				Principal (3)		Accrued Interest (4)		Total
R. Jack DeCrane	56,521	5.74	%	$	649,991	$	163,992	$	813,983
Richard J. Kaplan	21,739	5.74		249,998		63,074		313,072
James E. Mann	4,347	5.74		49,990		12,613		62,603
Robert G. Martin	4,347	5.74		49,990		12,613		62,603
Jeffrey A. Nerland	6,521	5.74		74,991		18,920		93,911

(1)Reflects the number of shares of DeCrane Holdings common stock held by DeCrane Aircraft as collateral for the loans.

(2)Reflects the applicable federal rate of interest charged on the loans.  Interest is compounded annually.

(3)Reflects the original principal amount of the loans.

(4)Reflects accrued interest payable through December 29, 2003, the date the stock was surrendered.

ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICES

Principal Audit and Non-Audit Fees and Services

The aggregate fees billed by PricewaterhouseCoopers LLP (“PWC”), our independent accountants, in fiscal years 2003 and 2002 were as follows:

	Year Ended December 31,
(In thousands)	2003		2002
Audit fees (1)	$	383	$	253
Audit related fees (2)	358		181
Tax fees (3)	479		206
All other fees	—		—
Consolidated totals	$	1,220	$	640

(1)Reflects fees for the audits of our annual financial statements included in our Form 10-K’s and the review of the quarterly financial statements included in our Form 10-Q’s for fiscal years 2003 and 2002.

(2)Includes fees for due diligence related to acquisitions, stand-alone audits of acquisition targets and dispositions, employee benefit plan audits and consents related to SEC filings.

(3)Reflects fees for federal, state, local and foreign tax compliance, advisory (including due diligence related to acquisitions and dispositions) and planning services.

The Audit Committee has concluded the provision of the non-audit services listed above is compatible with maintaining the independence of PricewaterhouseCoopers LLP.

Pre-approval Policies and Procedures

The Board of Directors, acting as the audit committee, has adopted policies and procedures for pre-approving all non-audit work performed by PWC after January 1, 2003.  Specifically, the policies and procedures prohibit PWC from performing any services for the Company or its subsidiaries without the

65

prior approval of the audit committee, except that the audit committee pre-approved the use of PWC for tax compliance, advisory and planning services.

All of the services provided by PWC in 2003 were approved by the audit committee pursuant to the approval policies described above.  None of such services were approved pursuant to the procedures described in Rule 2-01(c)(7)(i)(C) of Regulation S-X, which waives the general requirement for pre-approval in certain circumstances.

PART IV

ITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)List of Documents Filed as Part of this Report

1.Financial Statements

Our consolidated financial statements filed with this report are included in a separate section at the end of this report and are listed in an index on page F-1.

2.Financial Statement Schedules

Our consolidated financial statement schedules filed with this report are included in a separate section at the end of this report and are listed in an index on page F-1.

3.Exhibits

The following exhibits are filed as part of this report.

Exhibit Number	Filing Reference	Exhibit Description
2.1	(17)	Stock Purchase Agreement dated as of March 14, 2003 among Wings Holdings, Inc. and DeCrane Aircraft Holdings, Inc. and DeCrane Holdings Co. relating to the purchase and sale of 100% of the Common Stock of Avtech Corporation and Tri-Star Electronics International, Inc. and 100% of the Membership Interest of Aerospace Display Systems, LLC
3.2.1	(1)	Certificate of Incorporation of DeCrane Aircraft Holdings, Inc.
3.2.1.1	(14)	Certificate of Amendment of Certificate of Incorporation of DeCrane Aircraft Holdings, Inc. dated October 17, 2001
3.2.2	*	Bylaws of DeCrane Aircraft Holdings, Inc., as amended on February 2, 2004
3.3.1	(1)	Articles of Incorporation of Audio International, Inc.
3.3.2	(1)	Amended & Restated Bylaws of Audio International, Inc.
3.4.1	(1)	Articles of Incorporation of Hollingsead International, Inc.
3.4.2	(1)	Bylaws of Hollingsead International Inc.
3.5.1	*	Certificate of Formation and Certificate of Merger for PATS Aircraft, LLC
3.5.2	*	Limited Liability Company Operating Agreement for PATS Aircraft, LLC

66

Exhibit Number	Filing Reference	Exhibit Description
3.6.1	(3)	Articles of Incorporation of PPI Holdings, Inc.
3.6.2	(3)	Bylaws of PPI Holdings, Inc.
3.7.1	(3)	Articles of Incorporation of Precision Pattern, Inc.
3.7.2	(3)	Bylaws of Precision Pattern, Inc.
3.8.1	(9)	Certificate of Formation and Certificate of Merger for Custom Woodwork & Plastics, LLC
3.8.2	(9)	Limited Liability Company Operating Agreement for Custom Woodwork & Plastics, LLC
3.9.1	(4)	Articles of Incorporation of PCI Newco, Inc. (formerly PCI Acquisition Co., Inc.)
3.9.1.1	(15)	Certificate of Amendment of Articles of Incorporation of PCI Acquisition Co., Inc. (changing its name to PCI Newco, Inc.)
3.9.2	(4)	Bylaws of PCI Newco, Inc. (formerly PCI Acquisition Co., Inc.)
3.10.1	(5)	Articles of Incorporation DAH-IP Holdings, Inc.
3.10.2	(5)	Bylaws of DAH-IP Holdings, Inc.
3.11.1	(5)	Articles of Incorporation of DAH-IP Infinity, Inc.
3.11.2	(5)	Bylaws of DAH-IP Infinity, Inc.
3.12.1	(5)	Certificate of Limited Partnership of The Infinity Partners, LTD. (formerly DAH-IP Acquisition Co., L.P.)
3.12.1.1	(15)	Certificate of Amendment of the Certificate of Limited Partnership of DAH-IP Acquisition Co., L.P. (changing its name to The Infinity Partners, LTD.)
3.12.2	(5)	Limited Partnership Agreement of The Infinity Partners, LTD. (formerly DAH-IP Acquisition Co., L.P.) among DAH-IP Holdings, Inc., the General Partner, and DeCrane Aircraft Holdings, Inc., the Limited Partner
3.12.3	(5)	Assignment of Partnership Interest in The Infinity Partners, LTD. (formerly DAH-IP Acquisition Co., L.P.) by DeCrane Aircraft Holdings, Inc. to DAH-IP Infinity, Inc.
3.13.1	(7)	Certificate of Formation and Certificate of Amendment of Carl F. Booth & Co., LLC
3.13.2	(7)	Limited Liability Company Agreement of Carl F. Booth & Co., LLC
3.14.1	(9)	Restated Articles of Incorporation of ERDA, Inc.
3.14.1.1	(16)	Articles of Amendment amending the Restated Articles of Incorporation of ERDA, Inc. (changing its name to DeCrane Aircraft Seating Company, Inc.)
3.14.2	(9)	Bylaws of ERDA, Inc. (formerly ERDA Acquisition Co., Inc.)
3.15.1	(16)	Certificate of Formation of DeCrane Cabin Interiors, LLC
3.15.2	(16)	Limited Liability Company Agreement of DeCrane Cabin Interiors, LLC
3.16.1	*	Certificate of Incorporation of DeCrane Cabin Interiors – Canada, Inc.
3.16.2	*	Bylaws of DeCrane Cabin Interiors – Canada, Inc.
4.1	(1)	Indenture dated October 5, 1998 between DeCrane Aircraft and State Street Bank and Trust Company

67

Exhibit Number	Filing Reference	Exhibit Description
4.1.1	*	Supplemental Indenture dated December 11, 2003 among PATS Aircraft, LLC, the other guarantors under the Indenture, DeCrane Aircraft and State Street Bank and Trust Company
4.1.2	(2)	Supplemental Indenture 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
4.1.3	(11)	Supplemental Indenture dated August 5, 1999 among CWP Acquisition, Inc. d/b/a Custom Woodwork & Plastics, Inc., the other guarantors under the Indenture, DeCrane Aircraft and State Street Bank and Trust Company
4.1.4	(11)	Supplemental Indenture dated October 6, 1999 among PCI Acquisition Co., Inc. d/b/a PCI Newco, Inc., the other guarantors under the Indenture, DeCrane Aircraft and State Street Bank and Trust Company
4.1.5	(11)	Supplemental Indenture dated December 17, 1999 among DAH-IP Acquisition, L.P. d/b/a Infinity Partners, L.P., DAH-IP Holdings, Inc., DAH-IP Infinity, Inc., the other guarantors under the Indenture, DeCrane Aircraft and State Street Bank and Trust Company
4.1.6	(11)	Supplemental Indenture dated May 11, 2000 among Booth Acquisition, LLC, the other guarantors under the Indenture, DeCrane Aircraft and State Street Bank and Trust Company
4.1.7	(11)	Supplemental Indenture dated June 30, 2000 among ERDA, Inc., the other guarantors under the Indenture, DeCrane Aircraft and State Street Bank and Trust Company
4.1.8	(18)	Supplemental Indenture dated June 17, 2003 among DeCrane Cabin Interiors, LLC, the other guarantors under the Indenture, DeCrane Aircraft and State Street Bank and Trust Company
4.1.9	*	Supplemental Indenture dated January 1, 2004 among DeCrane Cabin Interiors — Canada, Inc., the other guarantors under the Indenture, DeCrane Aircraft and State Street Bank and Trust Company
4.2	(1)	A/B Exchange Registration Rights Agreement among DeCrane Aircraft Holdings, Inc., the subsidiary guarantors, and DLJ Securities Corporation
4.5	(1)	Form of DeCrane Aircraft 12% Senior Subordinated Notes due 2008
4.6	(9)	Certificate of Designations, Preferences and Rights of 16% Senior Redeemable Exchangeable Preferred Stock due 2009
4.6.1	(11)	Amendment to the Certificate of Designations, Preferences and Rights of 16% Senior Redeemable Exchangeable Preferred Stock due 2009 dated October 5, 2000
4.7	(9)	Senior Preferred Stock Registration Rights Agreement dated as of June 30, 2000 among DeCrane Aircraft Holdings, Inc. and the Holders of Senior Preferred Stock
4.7.1	(11)	Amendment No. 1 to the Senior Preferred Stock Registration Rights Agreement dated as of June 30, 2000 among DeCrane Aircraft Holdings, Inc. and the Holders of Senior Preferred Stock dated October 6, 2000
10.1	(9)	Securities Purchase Agreement dated as of June 30, 2000 among DeCrane Aircraft Holdings, Inc., DeCrane Holdings Co. and the purchasers named therein

68

Exhibit Number	Filing Reference	Exhibit Description
10.2	(11)	Amended and Restated Investors’ Agreement dated as of October 6, 2000 by and among DeCrane Holdings Co., DeCrane Aircraft Holdings, Inc. and the stockholders named therein
10.5	(1)	Tax Sharing Agreement dated March 15, 1993 between DeCrane Aircraft and several subsidiaries
10.6 **	(1)	Employment Agreement dated July 17, 1998 between DeCrane Aircraft Holdings, Inc. and R. Jack DeCrane
10.6.1 **	(12)	First Amendment to Employment Agreement dated May 5, 2000 between DeCrane Aircraft Holdings, Inc. and R. Jack DeCrane
10.7 **	(1)	401(k) Salary Reduction Non-Standardized Adoption Agreement dated April 30, 1992 between the Company and The Lincoln National Life Insurance Company
10.8	(1)	Form of Subscription Agreement for DeCrane Holdings Co. common and preferred stock by certain members of Global Technology Partners LLC
10.10	(1)	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	(1)	First Amendment to Credit Agreement dated January 22, 1999
10.10.2	(6)	Second Amended and Restated Credit Agreement dated as of December 17, 1999 among DeCrane Aircraft Holdings, Inc., the lenders listed therein, DLJ Capital Funding, Inc., as syndication agent, and Bank One NA, as administrative agent
10.10.3	(8)	Third Amended and Restated Credit Agreement dated as of May 11, 2000 among DeCrane Aircraft Holdings, Inc., the lenders listed therein, DLJ Capital Funding, Inc., as syndication agent, and Bank One NA, as administrative agent
10.10.3.1	(11)	First Amendment to the Third Amended and Restated Credit Agreement dated as of June 30, 2000 among DeCrane Aircraft Holdings, Inc., the lenders listed therein, DLJ Capital Funding, Inc., as syndication agent, and Bank One NA, as administrative agent
10.10.4	(13)	Increased Commitments Agreement, dated as of April 27, 2001, pursuant to Third Amended and Restated Credit Agreement, dated as of May 11, 2000, as amended by the First Amendment to the Third Amended and Restated Credit Agreement, dated as of June 30, 2000
10.10.5	(15)	Second Amendment to the Third Amended and Restated Credit Agreement dated as of March 19, 2002 among DeCrane Aircraft Holdings, Inc., the lenders listed therein, Credit Suisse First Boston (as successor to DLJ Capital Funding, Inc.) as syndication agent, and Bank One NA, as administrative agent
10.10.6	(17)	Third Amendment to the Third Amended and Restated Credit Agreement dated as of March 31, 2003 among DeCrane Aircraft Holdings, Inc., the lenders listed therein, Credit Suisse First Boston (as successor to DLJ Capital Funding, Inc.) as syndication agent, and Bank One NA, as administrative agent

69

Exhibit Number	Filing Reference	Exhibit Description
10.10.7	*	Fourth Amendment to the Third Amended and Restated Credit Agreement dated as of December 10, 2003 among DeCrane Aircraft Holdings, Inc., the lenders listed therein and Credit Suisse First Boston (as successor to DLJ Capital Funding, Inc.), as syndication and administrative agent for the lenders
10.11	(1)	General Terms Agreement between The Boeing Company and PATS, Inc. dated February 17, 1998
10.11.1	(1)	Special Business Provisions between The Boeing Company and PATS, Inc. dated February 17, 1998
10.11.2	(1)	Letter Agreement between The Boeing Company and DeCrane Aircraft Holdings, Inc. dated January 15, 1999
10.11.3	(19)	Addendum 6-5723-03-064 to the Special Business Provisions between The Boeing Company and PATS, Inc. dated April 16, 2003
10.12	*	Credit Agreement dated as of December 22, 2003 among DeCrane Aircraft Holdings, Inc., the lenders listed therein and Credit Suisse First Boston (acting through its Cayman Islands Branch), as syndication and administrative agent for the lenders
10.19 **	(5)	Amended Management Incentive Stock Option Plan
10.20 **	(5)	Amended Stock Subscription Agreement
10.21 **	(5)	Amended Incentive Bonus Plan
10.23 **	(17)	Form of Change of Control Agreements between DeCrane Aircraft Holdings, Inc. and certain executives
12.1	*	Computation of Earnings to Fixed Charges Ratios
18	*	Letter regarding change in accounting principle effective January 1, 2003
21.1	*	List of Subsidiaries of Registrant
31.1	*	Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	*	Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	*	Chief Executive Officer and Chief Financial Officer Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*Filed herewith.

**Denotes management contracts and compensatory plans and arrangements required to be filed as exhibits to this report.

(1)Filed as an exhibit to our Registration Statement (Registration No. 333-70365) on Form S-1 (Amendment No. 1) filed with the Commission on March 3, 1999.

(2)Filed as an exhibit to our Registration Statement (Registration No. 333-70365) on Form S-1 (Amendment No. 2) filed with the Commission on April 23, 1999.

(3)Filed as an exhibit to our Registration Statement (Registration No. 333-70365) on Form S-1 (Amendment No. 3) filed with the Commission on May 6, 1999.

70

(4)Filed as an exhibit to our Form 8-K dated August 5, 1999 filed with the Commission on October 19, 1999.

(5)Filed as an exhibit to our Form 8-K dated December 17, 1999 filed with the Commission on December 31, 1999.

(6)Filed as an exhibit to our Form 10-K dated December 31, 1999 filed with the Commission on March 30, 2000.

(7)Filed as an exhibit to our Form 8-K dated May 11, 2000 filed with the Commission on May 25, 2000.

(8)Filed as an exhibit to our Form 8-K (Amendment No. 1) dated May 11, 2000 filed with the Commission on June 16, 2000.

(9)Filed as an exhibit to our Form 8-K (Amendment No. 1) dated June 30, 2000 filed with the Commission on August 2, 2000.

(10)Filed as an exhibit to our Form 10-Q dated June 30, 2000 filed with the Commission on August 14, 2000.

(11)Filed as an exhibit to our Form 10-Q dated September 30, 2000 filed with the Commission on November 14, 2000.

(12)Filed as an exhibit to our Form 10-K dated December 31, 2000 filed with the Commission on March 30, 2001.

(13)Filed as an exhibit to our Form 10-Q dated March 31, 2001 filed with the Commission on May 14, 2001.

(14)Filed as an exhibit to our Form 10-Q dated September 30, 2001 filed with the Commission on November 13, 2001.

(15)Filed as an exhibit to our Form 10-K dated December 31, 2001 filed with the Commission on March 27, 2002.

(16)Filed as an exhibit to our Form 10-Q dated March 31, 2002 filed with the Commission on May 13, 2002.

(17)Filed as an exhibit to our Form 10-K dated December 31, 2002 filed with the Commission on April 15, 2003.

(18)Filed as an exhibit to our Registration Statement (Registration No. 333-106381) on Form S-1 filed with Commission on June 23, 2003.

(19)Filed as an exhibit to our Registration Statement (Registration No. 333-106381) on Form S-1 (Amendment No. 1) filed with Commission on August 12, 2003.

(20)Filed as an exhibit to our Registration Statement (Registration No. 333-106381) on Form S-1 (Amendment No. 2) filed with Commission on September 18, 2003.

(b)Reports of Form 8-K Filed During the Quarter Ended December 31, 2003

On November 26, 2003 we filed a Form 8-K Current Report regarding the Company receiving commitments from financial institutions for an $80.0 million syndicated second-lien term loan.

On December 11, 2003 we filed a Form 8-K Current Report regarding the Company receiving requisite lender approval to permit the $80.0 million syndicated second-lien term loan.

On December 22, 2003 we filed a Form 8-K Current Report regarding the Company completing the $80.0 million syndicated second-lien term loan financing.

71

SIGNATURES

Pursuant to the requirements of Section 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

DECRANE AIRCRAFT HOLDINGS, INC. (Registrant)
By:	/s/  R. Jack DeCrane	By:	/s/  Richard J. Kaplan
	R. Jack DeCrane		Richard J. Kaplan
	Chief Executive Officer		Senior Vice President, Chief Financial Officer, Secretary and Treasurer
Date:	March 25, 2004

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:	/s/  Thompson Dean	By:	/s/  R. Jack DeCrane
	Thompson Dean		R. Jack DeCrane
	Chairman of the Board of Directors		Director
By:	/s/  Richard J. Kaplan	By:	/s/  Susan C. Schnabel
	Richard J. Kaplan		Susan C. Schnabel
	Director		Director
By:	/s/  Albert E. Suter
	Albert E. Suter
	Director
Date:	March 25, 2004

72

Index to Consolidated Financial Statements and Financial Statement Schedules

Consolidated Financial Statements

All other schedules are omitted because they are either not applicable or the required information is shown in the consolidated financial statements or notes thereto.

F-1

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholder of

DeCrane Aircraft Holdings, Inc.

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of DeCrane Aircraft Holdings, Inc. and its subsidiaries at December 31, 2003 and 2002, and the results of their operations and cash flows for each of the three years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America.  In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.  These financial statements and financial statement schedule are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.  We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 1, the Company decided to discontinue the use of program accounting for the costs of products manufactured for delivery under production-type contracts in 2003.  As a result, certain deferred program costs are no longer included in inventory commencing January 1, 2003.

As discussed in Note 7, in 2002 the Company adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.”  Accordingly, the Company ceased amortizing goodwill as of January 1, 2002.

PRICEWATERHOUSECOOPERS LLP

Los Angeles, California

March 25, 2004

F-2

DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

	December 31,
(In thousands, except share data)	2003			2002
Assets
Current assets:
Cash and cash equivalents	$	6,936		$	12,421
Accounts receivable, net	21,455			26,354
Inventories	42,981			59,300
Deferred income taxes	—			16,430
Prepaid expenses and other current assets	1,082			1,724
Assets of discontinued operations	—			160,741
Total current assets	72,454			276,970
Property and equipment, net	30,900			36,139
Goodwill	162,430			196,430
Other assets, principally intangibles, net	38,092			39,428
Total assets	$	303,876		$	548,967
Liabilities, Mandatorily Redeemable Preferred Stock and Stockholder’s Equity (Deficit)
Current liabilities:
Current portion of long-term debt	$	1,198		$	16,317
Accounts payable	15,462			13,055
Accrued liabilities	17,890			31,494
Liabilities of discontinued operations	—			19,928
Total current liabilities	34,550			80,794
Long-term debt	268,208			364,700
Deferred income taxes	—			27,077
Other long-term liabilities	5,464			7,364
Commitments and contingencies (Note 13)
Mandatorily redeemable preferred stock	40,835			34,081
Stockholder’s equity (deficit):
Common stock, $.01 par value, 1,000 shares authorized as of December 31, 2003 and 2002; 100 shares issued and outstanding as of December 31, 2003 and 2002	—			—
Additional paid-in capital	112,987			121,212
Notes receivable for shares sold	(1,268		)	(2,591		)
Accumulated deficit	(156,632		)	(83,309		)
Accumulated other comprehensive loss	(268		)	(361		)
Total stockholder’s equity (deficit)	(45,181		)	34,951
Total liabilities, mandatorily redeemable preferred stock and stockholder’s equity (deficit)	$	303,876		$	548,967

The accompanying notes are an integral part of the consolidated financial statements.

F-3

DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

	Year Ended December 31,
(In thousands)	2003			2002			2001
Revenues	$	170,109		$	229,841		$	272,112
Cost of sales	134,953			170,485			196,866
Gross profit	35,156			59,356			75,246
Operating expenses:
Selling, general and administrative expenses	24,896			40,262			44,731
Research and development expenses	10,440			56			698
Impairment of goodwill	34,000			—			8,583
Amortization of goodwill and other intangible assets	3,651			3,540			12,436
Total operating expenses	72,987			43,858			66,448
Income (loss) from operations	(37,831		)	15,498			8,798
Other expenses:
Interest expense	26,219			25,376			29,645
Loss on extinguishment of debt	1,439			—			—
Other expenses, net	945			505			634
Loss from continuing operations before income taxes	(66,434		)	(10,383		)	(21,481		)
Income tax benefit	13,496			3,621			3,933
Loss from continuing operations	(52,938		)	(6,762		)	(17,548		)
Income (loss) from discontinued operations, net of tax	(6,621		)	(41,396		)	3,546
Cumulative effect of changes in accounting principles	(13,764		)	(17,828		)	—
Net loss	(73,323		)	(65,986		)	(14,002		)
Accrued preferred stock dividends	(6,286		)	(5,373		)	(4,593		)
Preferred stock redemption value accretion	(468		)	(468		)	(468		)
Net loss applicable to common stockholder	$	(80,077	)	$	(71,827	)	$	(19,063	)

The accompanying notes are an integral part of the consolidated financial statements.

F-4

DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholder’s Equity (Deficit)

				Additional			Notes Receivable						Accumulated Other
	Common Stock			Paid-in			For Shares			Accumulated			Comprehensive
(In thousands, except share data)	Shares	Amount		Capital			Sold			Deficit			Loss			Total
Balance, December 31, 2000	100	$	—	$	127,315		$	(2,552	)	$	(3,321	)	$	—		$	121,442
Comprehensive loss:
Net loss	—	—		—			—			(14,002		)	—			(14,002		)
Unrealized loss on interest rate swap contract	—	—		—			—			—			(88		)	(88		)
																(14,090		)
Accrued preferred stock dividends	—	—		(4,593		)	—			—			—			(4,593		)
Preferred stock redemption value accretion	—	—		(468		)	—			—			—			(468		)
Compensatory stock option expense	—	—		215			—			—			—			215
Notes receivable interest accrued	—	—		—			(116		)	—			—			(116		)
Balance, December 31, 2001	100	—		122,469			(2,668		)	(17,323		)	(88		)	102,390
Comprehensive loss:
Net loss	—	—		—			—			(65,986		)	—			(65,986		)
Unrealized loss on interest rate swap contract	—	—		—			—			—			(273		)	(273		)
																(66,259		)
Capital contribution	—	—		5,000			—			—			—			5,000
Return of capital in connection with the repurchase of common stock, net of related note receivable repaid and tax benefit of options exercised	—	—		(554		)	200			—			—			(354		)
Accrued preferred stock dividends	—	—		(5,373		)	—			—			—			(5,373		)
Preferred stock redemption value accretion	—	—		(468		)	—			—			—			(468		)
Compensatory stock option expense	—	—		138			—			—			—			138
Notes receivable interest accrued	—	—		—			(123		)	—			—			(123		)
Balance, December 31, 2002	100	—		121,212			(2,591		)	(83,309		)	(361		)	34,951
Comprehensive income (loss):
Net loss	—	—		—			—			(73,323		)	—			(73,323		)
Unrealized gain on interest rate swap contract	—	—		—			—			—			93			93
																(73,230		)
Common stock (collateral) surrendered and cancellation of the related notes	—	—		(1,471		)	1,471			—			—			—
Accrued preferred stock dividends	—	—		(6,286		)	—			—			—			(6,286		)
Preferred stock redemption value accretion	—	—		(468		)	—			—			—			(468		)
Notes receivable interest accrued	—	—		—			(148		)	—			—			(148		)
Balance, December 31, 2003	100	$	—	$	112,987		$	(1,268	)	$	(156,632	)	$	(268	)	$	(45,181	)

The accompanying notes are an integral part of the consolidated financial statements.

F-5

DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

	Year Ended December 31,
(In thousands)	2003			2002			2001
Cash flows from operating activities:
Net loss	$	(73,323	)	$	(65,986	)	$	(14,002	)
Adjustments to reconcile net loss to net cash provided by (used for) operating activities:
Cumulative effect of change in accounting principle	13,764			17,828			—
Net (income) loss from discontinued operations	6,621			41,396			(3,546		)
Loss on extinguishment of debt	1,439			—			—
Noncash portion of restructuring, asset impairment and other related charges	37,664			11,456			19,558
Depreciation and amortization	12,589			13,304			22,582
Deferred income taxes	(11,461		)	690			2,322
Other, net	331			110			389
Changes in assets and liabilities:
Accounts receivable	4,899			14,969			(5,508		)
Inventories	(518		)	(4,792		)	(10,427		)
Prepaid expenses and other assets	241			155			(2,126		)
Accounts payable	2,407			(1,458		)	409
Accrued liabilities	(13,496		)	(16,418		)	(7,321		)
Income taxes payable	(1,079		)	438			3
Other long-term liabilities	834			28			(400		)
Net cash provided by (used for) operating activities	(19,088		)	11,720			1,933
Cash flows from investing activities:
Net cash proceeds from sale of Specialty Avionics Group	132,223			—			—
Proceeds from sale of property and equipment	3,208			—			636
Capital expenditures	(4,797		)	(4,356		)	(10,191		)
Cash paid for acquisitions	(606		)	(5,890		)	(13,529		)
Net cash provided by (used for) investing activities	130,028			(10,246		)	(23,084		)
Cash flows from financing activities:
Debt borrowings:
First-lien term debt	—			—			20,000
Second-lien term debt	80,000			—			—
Other secured long-term debt	—			1,145			2,797
Capital contribution	—			5,000			—
Debt repayments:
Revolving line of credit, net	(6,000		)	(6,000		)	(400		)
First-lien term debt	(183,679		)	(11,506		)	(7,738		)
Other secured long-term debt	(1,876		)	(2,028		)	(1,401		)
Deferred financing costs	(6,614		)	(1,656		)	(767		)
Return of capital in connection with shares repurchased	—			(368		)	—
Net cash provided by (used for) financing activities	(118,169		)	(15,413		)	12,491
Net cash provided by discontinued operations	1,744			16,882			10,432
Net increase (decrease) in cash and cash equivalents	(5,485		)	2,943			1,772
Cash and cash equivalents at beginning of period	12,421			9,478			7,706
Cash and cash equivalents at end of period	$	6,936		$	12,421		$	9,478

The accompanying notes are an integral part of the consolidated financial statements.

F-6

DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1.Summary of Significant Accounting Policies

Description of the Business

DeCrane Aircraft Holdings, Inc. and subsidiaries (the “Company” or “DeCrane Aircraft”) is a provider of products and services to the business, VIP and head-of-state aircraft market within the aerospace industry.  The Company’s businesses are organized into two separate operating groups: Cabin Management and Systems Integration.  The Company also had a third strategic business, its Specialty Avionics Group, which it sold in 2003 (Note 2).  The Company is a wholly-owned subsidiary of DeCrane Holdings Co. (“DeCrane Holdings”).

Basis of Presentation

The consolidated financial statements include the accounts of the Company and all wholly-owned subsidiaries and a majority-owned partnership.  All intercompany accounts and transactions have been eliminated.  Certain reclassifications have been made to prior years’ financial statements to conform to the current year presentation.

Preparation of these consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.  Actual results could differ from those estimates.

Change in Accounting Principle

Inventories are stated at the lower of cost or market.  Costs include materials, labor, including direct engineering labor, tooling costs and manufacturing overhead.  As described below, measurement of the costs of inventories associated with products manufactured for delivery under production-type contracts in prior periods was made pursuant to the use of program accounting.  As such, the cost of inventories included certain deferred program costs, which were principally comprised of engineering costs.

The events of September 11, 2001 and its aftermath have impacted the predictability of demand for the Company’s business, VIP and head-of-state aircraft products.  The ability to make reliable estimates of future demand for these products is critical to the use of program accounting and the deferral of engineering and production costs.  Under program accounting, certain product development costs incurred in connection with specific contracted programs were deferred and charged to cost of sales when revenues from the sale of products related to the program were recorded.  Because of the changing economic conditions affecting the Company’s markets, demand for the Company’s products has exhibited an increased degree of volatility not seen in the past.  In order to improve the reliability of its financial reporting, the Company decided to discontinue the use of program accounting which requires it to make long-term estimates of future sales for each program.  Therefore, product development costs not specifically reimbursable through contractual terms or recoverable through firm orders will no longer be deferred and included in program inventory.

F-7

The Company concluded that the new method of accounting for program costs is preferable based, in part, on the aforementioned improvement in the reliability of its financial reporting.  This new accounting method will also have the advantage of enhancing investor understanding of the Company’s performance since cash flows from operations will now more closely align with Adjusted EBITDA, the Company’s primary measurement of overall economic performance and return on invested capital.

This change in accounting policy was made after concluding the 2003 fiscal year but has been applied retroactively to the beginning of the year, January 1, 2003, as required by generally accepted accounting principles.  As a result of the change, program-related product development costs are now classified as a component of research and development expenses in the consolidated financial statements for 2003 rather than classified as a component of inventory cost.  The effect of this accounting change was to increase the Company’s net loss by $17,942,000 through a charge for the cumulative effect of a change in accounting principle in 2003 of $13,764,000 and increase by $4,178,000 the reported loss from continuing operations.

As a result of the change, the Company has restated its quarterly results of operations for 2003 (Note 19).  The following pro forma data summarizes the results of operations for the years ended December 31, 2002 and 2001 as if the new accounting policy had been in effect during those years.

	Year Ended December 31,
(In thousands)	2002			2001
As reported:
Loss from continuing operations	$	(6,762	)	$	(17,548	)
Net loss	(65,986		)	(14,002		)
Pro forma:
Loss from continuing operations	$	(9,738	)	$	(19,423	)
Net loss	(68,962		)	(15,877		)

Inventories

Inventories are stated at the lower of cost, as determined under the first-in, first-out (“FIFO”) method, or market.  Costs include materials, labor, including direct engineering labor, tooling costs and manufacturing overhead.  Prior to January 1, 2003, inventories also included deferred program costs, which were principally comprised of engineering costs relative to programs and contracts with long production cycles.

F-8

Property and Equipment

Property and equipment for companies acquired are stated at fair value as of the date the acquisition occurred and at cost for all subsequent additions.  Property and equipment are depreciated using the straight-line method over their estimated useful lives.  Useful lives for machinery and equipment range from three to twenty years.  Building and building improvements are depreciated using the straight-line method over their estimated useful lives of forty years.  Leasehold improvements are amortized using the straight-line method over their estimated useful lives or remaining lease term, whichever is less.  Expenditures for maintenance and repairs are expensed as incurred.  The costs for improvements are capitalized.  Upon retirement or disposal, the cost and accumulated depreciation of property and equipment are reduced and any gain or loss is recorded in income or expense.

Goodwill

Prior to January 1, 2002, goodwill was amortized on a straight-line basis over thirty years from the date the acquisition occurred.  Additional goodwill resulting from contingent consideration payments subsequent to the acquisition date was amortized prospectively over the remaining period of the initial thirty-year term.  Starting January 1, 2002, goodwill is no longer amortized but instead is subject to at least annual impairment testing with a loss charged to operations in the period in which impairment occurs (Note 7).

Other Assets

Identifiable finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives, ranging from three to fifteen years.  Deferred financing costs are amortized using either the straight-line or effective interest method, over the term of the related debt.

Impairment of Goodwill

Effective January 1, 2002 the Company adopted and began testing goodwill for impairment in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets” as described in Note 7.  As required by SFAS No. 142, the Company tests goodwill for impairment annually, on October 31^st of each year, or when events or changes in circumstances indicate the carrying amount may not be recoverable.  The goodwill impairment model is a two-step process.  First, it requires a comparison of the book value of net assets to the fair value of the related reporting units that have goodwill assigned to them.  If the fair value is determined to be less than book value, a second step is performed to compute the amount of the impairment.  In this process, a fair value for goodwill is estimated, based in part on the fair value of the operations used in the first step, and is compared to its carrying value.  The amount by which carrying value exceeds fair value represents the amount of goodwill impairment.  As a result of this impairment testing, the Company recorded pre-tax charges in 2003 of $34,000,000 relating to its Cabin Management Group and $7,500,000 relating to the sale of its Specialty Avionics Group.  In 2002, the Company recorded pre-tax charges of $7,672,000 relating to its Specialty Avionics Group.

Prior to adoption of SFAS No. 142, impairment testing was in accordance with SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.”  In 2001, the Company recorded an $8,583,000 pre-tax charge to operations to reflect the impairment loss resulting from its restructuring program to close a manufacturing facility (Notes 3 and 7).

F-9

Impairment of Long-Lived Assets and Other Intangible Assets

In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the Company reviews long-lived assets held for use and intangible assets, other than goodwill, for impairment when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.  In the event the sum of the expected undiscounted future cash flows resulting from the use of the asset is less than the carrying value of the asset, an impairment loss equal to the excess of the asset’s carrying value over its fair value is recorded.  Long-lived assets deemed held for sale are stated at the lower of cost or fair value.  As a result of two restructuring programs conducted during 2001 and 2002, the Company recorded pre-tax charges of $1,320,000 during 2001 and $3,931,000 during 2002 to reflect the impairment of long-lived assets.  The impairment losses are described in Note 3.

Product Warranty Obligations

The Company sells some products to customers with various repair or replacement warranties.  The terms of the warranties vary according to the customer and/or product involved.  The most common warranty periods are generally one to five years from the earlier of the date of delivery to the customer or six to twelve months from the date of manufacture.

Provisions for estimated future warranty costs are made in the period corresponding to the sale of the product and are charged to cost of sales.  Warranty costs have been within management’s expectations.  Classification between current and long-term warranty obligations is estimated based on historical trends.

Income Taxes

Deferred income taxes are determined using the liability method.  A deferred tax asset or liability is determined based on the difference between the financial statement and tax basis of assets and liabilities as measured by the enacted tax rates that will be in effect when these differences reverse.  Deferred tax expense is the result of changes in the deferred tax asset or liability.  If necessary, valuation allowances are established to reduce deferred tax assets to their expected realizable values.

Derivative Financial Instruments

The Company accounts for derivative financial instruments in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities.”  SFAS No. 133 requires companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value.  It also requires that gains or losses resulting from changes in the values of those derivatives be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting.

F-10

The Company does not use derivative financial instruments for trading purposes but only to manage the risk that changes in interest rates would have on future interest payments for a portion of its variable-rate debt.  As of December 31, 2003, the Company has an interest rate swap contract to effectively convert $3,102,000 of variable-rate debt to 4.2% fixed-rate debt until maturity in 2008.  The contract is considered to be a hedge against changes in the amount of future cash flows associated with interest payments on this variable-rate debt.  As a result, the interest rate swap contract is reflected at fair value and the related loss of $268,000 on this contract is deferred in stockholder’s equity as a component of comprehensive income (loss).  The deferred loss will be recognized in future periods as interest expense as the related fixed-rate interest payments are made.  In the unlikely event that the counterparty fails to perform under the contract, the Company bears the credit risk that payments due to the Company may not be collected.

Fair Value of Financial Instruments

All financial instruments are held for purposes other than trading.  The estimated fair value of the Company’s long-term debt is based on either quoted market prices or current rates for similar issues for debt of the same remaining maturities.  The estimated fair value of the Company’s $100,000,000 subordinated debt was approximately $45,000,000 as of December 31, 2003 and $40,000,000 as of December 31, 2002.  All other non-derivative financial instruments as of December 31, 2003 and 2002 approximate their carrying amounts either because of the short maturity of the instrument, or based on their effective interest rates compared to current market rates for similar long-term debt or obligations.

Revenue Recognition

Revenues from the sale of manufactured products, except for products manufactured under long-term contracts, are recognized upon shipment of product to the customer provided that the Company has received a signed purchase order, the price is fixed, title has transferred, collection of the resulting receivables is reasonably assured and there are no remaining significant obligations.

Revenues for products manufactured under long-term contracts are recognized under the percentage-of-completion method using total contract price, actual costs incurred to date and an estimate of the completion costs for each contract.  Costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs, and depreciation.  Selling, general, and administrative costs are charged to expense as incurred.

Percentage-of-completion is measured using an estimate of total costs incurred to date to total expected costs for each contract.  This method is used because management considers total costs expended to be the best available measure of progress on these contracts.  Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined.  Management believes that the Company will not incur any losses on uncompleted contracts as of December 31, 2003.

F-11

Measuring a contract’s percentage-of-completion requires management to make estimates.  As a result, it is reasonably possible that factors may cause management to change its revenue and cost estimates, thereby altering estimated profitability.  These factors include, but are not limited to, changes in contract scope, material and labor efficiencies, contract penalty provisions, if any, and final contract settlements.  Revisions to revenue and profit estimates are made in the period in which the facts that give rise to the revision become known.

The asset “Costs and estimated earnings in excess of billings” represents revenues recognized in excess of amounts billed on uncompleted contracts and is reflected as a component of inventory.  Conversely, the liability “Billings in excess of costs and estimated earnings” represents billings in excess of revenues recognized on uncompleted contracts and is reflected as an accrued liability.  Unbilled revenues are expected to be billed and collected during the succeeding twelve-month period.

Research and Development Costs

Research and development costs are expensed as incurred.  Commencing January 1, 2003, the Company changed its accounting policy for product developments costs incurred for long-term programs and such costs are also reflected as research and development.  See “—Change in Accounting Principle” for additional information.

Stock Option Plan

The Company has one stock-based employee compensation plan, which is more fully described in the Note 15.  As permitted under SFAS No. 123, “Accounting for Stock-Based Compensation,” the Company measures compensation expense related to the employee stock option plan utilizing the intrinsic value method as prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations.  No stock-based employee compensation cost is reflected in net income (loss), as all options granted under the plan had an exercise price equal to the value of the underlying common stock on the date of grant.

The following table illustrates the effect on net income if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation.

	Year Ended December 31,
(In thousands)	2003			2002			2001
Net loss, as reported	$	(73,323	)	$	(65,986	)	$	(14,002	)
Less total stock-based employee compensation expense determined under the fair value based method for all awards, net of related tax effects	(324		)	(376		)	(392		)
Pro forma net loss	$	(73,647	)	$	(66,362	)	$	(14,394	)

The effect of applying SFAS No. 123 may not be representative of the pro forma effect in future years since additional options may be granted during those future years.  The assumptions underlying the computations of the fair value of the options are described in Note 15.

F-12

Statements of Cash Flows

For purposes of the statements of cash flows, cash equivalents include short-term, highly liquid investments with maturities of three months or less at the time of purchase.

Recent Accounting Pronouncements

SFAS No. 150

In May 2003, the Financial Accounting Standards Board issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.”  SFAS No. 150 establishes standards for the classification and measurement of certain financial instruments with characteristics of both liabilities and equity.  SFAS No. 150 requires classification of financial instruments within its scope as a liability, including financial instruments issued in the form of shares that are mandatorily redeemable, because those financial instruments are deemed to be, in essence, obligations of the issuer.  The Company will be required to reclassify its 16% mandatorily redeemable preferred stock as a liability commencing January 1, 2004 and reflect quarterly dividend and redemption value accretion as a charge against pre-tax income in future periods.

Note 2.Acquisitions and Dispositions

Disposition of Specialty Avionics Group

During the fourth quarter of fiscal 2002 the Company assessed its long-term business strategies in light of current aerospace industry conditions.  The Company believes that as the aerospace industry recovers, the demand for its Cabin Management and Systems Integration Groups’ products and services for business, VIP and head-of-state aircraft will return to historical levels and, accordingly, the Company decided to focus its resources in these market segments.  To accomplish this objective, the Company embarked on a plan to sell its Specialty Avionics Group, which is highly dependent on the commercial airline industry.

On March 14, 2003, the Company entered into a definitive agreement to sell its equity interests in the subsidiaries comprising its Specialty Avionics Group to Wings Holdings, Inc., an affiliate of Odyssey Investment Partners, LLC, for $140,000,000 in cash.  The sale was consummated on May 23, 2003.  Proceeds from the sale of $130,723,000 were used to repay first-lien credit facility borrowings (Note 10).  The sale of the Specialty Avionics Group is not expected to affect the operations of the Company’s remaining operating groups.

Based upon the fair value of the group implied in the definitive agreement, the Company determined that the carrying value of the group’s net assets was not fully recoverable.  As required by SFAS No. 142, the Company recorded a goodwill impairment charge of $7,500,000 in 2003 to reduce the carrying value to the estimated net realizable value established by the definitive agreement.  The Company recorded a modest $72,000 loss on the sale, based on the actual financial position of the group on the date of sale.

F-13

As a result of the sale, the Specialty Avionics Group is presented as a discontinued operation in the accompanying consolidated financial statements.  The financial statements for prior periods have been reclassified to segregate the group’s assets and liabilities, results of operations and cash flows for all periods.

In accordance with the Financial Accounting Standards Board’s Emerging Issues Task Force Issue No. 87-24, “Allocation of Interest to Discontinued Operations,” as amended, interest expense includes interest on debt that is to be assumed by the buyer as well as interest on the $130,723,000 of debt that was required to be repaid as a result of the sale.  Interest expense was based on the historical interest rates charged during each of the periods.  In addition, and also in accordance with EITF 87-24, costs and expenses of the Specialty Avionics Group exclude the allocation of general corporate overhead.

The following tables summarize the financial position, results operations and cash flows of the Specialty Avionics Group.

(In thousands)	December 31, 2002
Assets:
Current assets	$	41,614
Property and equipment, net	15,744
Other assets, principally intangibles, net	103,383
Total assets	160,741
Liabilities:
Current liabilities	8,288
Long-term liabilities	11,640
Total liabilities	19,928
Net assets of the Specialty Avionics Group	$	140,813

F-14

	Year Ended December 31,
(In thousands)	2003 (1)			2002			2001
Results of Operations:
Revenues	$	36,595		$	95,789		$	123,240
Operating expenses:
Costs and expenses	30,128			75,031			97,320
Impairment of goodwill	7,500			7,672			—
Amortization of goodwill and other intangible assets	878			2,228			7,484
Total operating expenses	38,506			84,931			104,804
Income (loss) from operations	(1,911		)	10,858			18,436
Other expenses:
Interest expense:
Debt required to be repaid with proceeds from sale	3,297			7,720			8,439
Debt obligations assumed by the buyer	270			798			917
Other expenses, net	153			439			413
Pre-tax income (loss)	(5,631		)	1,901			8,667
Provision for income taxes	(918		)	(3,975		)	(5,121		)
Income (loss) before change in accounting principle	(6,549		)	(2,074		)	3,546
Cumulative effect of change in accounting principle	—			(39,322		)	—
Income (loss) from operations	(6,549		)	(41,396		)	3,546
Loss on sale, net of tax	(72		)	—			—
Net income (loss) from discontinued operations	$	(6,621	)	$	(41,396	)	$	3,546
Cash Flows Provided By (Used For):
Operating activities	$	3,310		$	18,598		$	12,996
Investing activities	(902		)	(1,073		)	(1,708		)
Financing activities	(649		)	(815		)	(1,094		)
Net (increase) decrease in cash and cash equivalents	(13		)	125			177
Effect of foreign currency translation on cash	(2		)	47			61
Net cash provided by discontinued operations	$	1,744		$	16,882		$	10,432

(1)Reflects the results of operations and cash flows through May 23, 2003, the date of sale.

F-15

Contingent Acquisition Consideration

During the three years ended December 31, 2000, seven companies were acquired in transactions in which the sellers were entitled to contingent consideration payments based upon their respective levels of attainment of defined performance criteria.  Based upon the levels of attainment of the defined performance criteria during the two years ended December 31, 2002, the Company recorded contingent consideration payable of $600,000 in 2002 and $700,000 in 2001 resulting in a corresponding increase in goodwill.  As of December 31, 2002 and 2003, there are no remaining contingent consideration payment obligations.

During 2001, the Company settled its asserted claims against the sellers of two companies acquired in 2000 for breach of representation and warranty provisions contained in the purchase agreements.  The Company received $3,718,000 from the sellers upon entering into the settlement agreements, which also provided that the Company pay in 2002 a minimum of $3,125,000 of previously contingent consideration for the year ended December 31, 2001.

Note 3.Restructuring, Asset Impairment and Other Related Charges

During the three years ended December 31, 2003, the Company recorded restructuring, assets impairment and other related charges as follows:

	Year Ended December 31,
(In thousands)	2003		2002		2001
Nature of charges:
Seating Product Line and Furniture Manufacturing Facilities Restructuring	$	7,132	$	—	$	—
Asset Realignment Restructuring	—		6,901		20,075
Seat Manufacturing Facilities Restructuring	—		6,294		—
Adjustment of Previous Restructuring Charge	754		—		—
Goodwill impairment charges	41,500		7,672		8,583
Other asset impairment related charges	—		4,376		—
Total pre-tax charges	$	49,386	$	25,243	$	28,658
Business segment recording the charges:
Cabin Management	$	41,132	$	13,195	$	22,309
Systems Integration	754		4,060		3,525
Total continuing operations	41,886		17,255		25,834
Discontinued operations (Specialty Avionics)	7,500		7,988		2,824
Total pre-tax charges	$	49,386	$	25,243	$	28,658
Charged to operations:
Cost of sales	$	7,327	$	10,676	$	13,557
Selling, general and administrative expenses	559		6,579		3,694
Impairment of goodwill	34,000		—		8,583
Discontinued operations (Specialty Avionics)	7,500		7,988		2,824
Total pre-tax charges	$	49,386	$	25,243	$	28,658

F-16

	Year Ended December 31,
(In thousands)	2003		2002		2001
Components of charges:
Continuing operations:
Noncash charges	$	37,664	$	11,456	$	19,558
Cash charges	4,222		5,799		6,276
Total continuing operations	41,886		17,255		25,834
Discontinued operations (Specialty Avionics):
Noncash charges	7,500		7,988		2,500
Cash charges	—		—		324
Total discontinued operations	7,500		7,988		2,824
Total pre-tax charges	$	49,386	$	25,243	$	28,658

Seating Product Line and Furniture Manufacturing Facilities Restructuring

During the second quarter of fiscal 2003, the Company consolidated its seating product line offerings and adopted a restructuring plan to down-size a furniture manufacturing facility in response to continuing weakness in the business, VIP and head-of-state aircraft market.  These actions were designed to reduce engineering, production and inventory carrying costs by supporting fewer product offerings and achieve profitability at the furniture manufacturing facility based on its lower production levels.  In connection with these actions, the Company recorded pre-tax charges to operations totaling $7,132,000, comprised of the following:

•Lease Termination and Related Charges.  Lease termination charges reflect lease cancellation costs for the facilities vacated and possession returned to the lessor in connection with down-sizing a furniture manufacturing facility.  Other related charges include the write-off of leasehold improvements related to the vacated facilities.

•Excess and Obsolete Inventory Write-Downs.  Inventory was written down by $3,073,000 to reflect its net realizable value for quantities on hand exceeding current and forecast order backlog requirements and obsolete inventory related to the curtailed seating product offerings.

•Severance and Other Compensation Costs.  The Company reduced its total workforce at the down-sized facility by 49 employees, or 37%, from December 31, 2002 levels.

The components of the restructuring, asset impairment and other related charges are as follows:

	Total		Amounts Incurred						Balance at December 31,
(In thousands)	Charges		Noncash			Cash			2003
Lease termination and other related charges	$	3,876	$	(591	)	$	(3,285	)	$	—
Excess and obsolete inventory write-downs	3,073		(3,073		)	—			—
Severance and other compensation costs	183		—			(183		)	—
Total	$	7,132	$	(3,664	)	$	(3,468	)	$	—

The restructuring activities were completed during 2003.

F-17

Asset Realignment Restructuring

During the second quarter of 2001, the Company’s Cabin Management Group adopted a restructuring program to realign production programs between its manufacturing facilities.  In response to the adverse impact on the aerospace industry resulting from the September 11^th terrorist attack and its aftermath, as well as the weakening of global economic conditions, the Company announced and implemented a further restructuring program in December 2001 designed to reduce costs and conserve working capital.  This program included permanently closing one manufacturing facility and idling a second facility for an indefinite period, curtailing several product development programs and instituting workforce reductions.  Due to the ongoing weakness of the business, VIP and head-of-state aircraft market, the Company decided during the second quarter of fiscal 2002 to permanently close the temporarily idled manufacturing facility.  This program primarily affected the Company’s Cabin Management and Specialty Avionics Groups.

The restructuring, asset impairment and other related charges are comprised of the following:

•Impairment of Long-Lived Assets.  In 2001, the restructuring program resulted in the impairment of property, equipment and goodwill and, accordingly, these assets were written down to their net realizable value.  In 2002, the decision to permanently close the additional manufacturing facility resulted in an additional impairment of property and equipment and, accordingly, these assets were written down to their estimated net realizable value in 2002.  Net realizable values are based on estimated current market values and the actual losses could exceed these estimates.

•Write-off of Product Development Costs.  The curtailment of several product development programs in 2001 resulting in the write-off of inventoried costs related to these programs.

•Excess Inventory Write-Downs.  Inventory was written down to net realizable value for quantities on hand exceeding current and forecast order backlog requirements.

•Realignment of Production Programs Between Facilities.  Costs associated with this realignment were incurred during the fiscal second quarter of 2001.

•Severance and Other Compensation Costs.  Since the September 11^th terrorist attack, the Company has reduced its total workforce by approximately 500 employees, or 18.5%, as of December 2002, of which approximately 260 employees had separated as of December 31, 2001.

•Lease Termination and Other Related Costs.  Lease termination and other related costs are comprised of the net losses expected to be incurred under the existing long-term lease agreements for facilities permanently vacated.  The losses have been reduced by the expected sublease income.  These expected losses were based on estimated current market rates and anticipated dates that these facilities are subleased.  If market rates decrease or should it take longer than expected to sublease these facilities, the actual loss could exceed these estimates.

•Other Asset Impairment Related Charges.  Other expenses pertain to provisions for estimated losses on uncompleted long-term contracts aggregating $2,577,000 and other related charges expensed as incurred.

F-18

The components of the restructuring, assets impairment and other related charges are as follows:

	Balance at Beginning of		Total		Amounts Incurred						Balance at End of
(In thousands)	the Year		Charges		Noncash			Cash			the Year
Year ended December 31, 2002:
Severance and other compensation costs	$	1,185	$	—	$	—		$	(1,185	)	$	—
Lease termination and other related costs	424		—		—			(334		)	90
Impairment of property and equipment	—		2,557		(2,557		)	—			—
Excess inventory write-downs	—		1,265		(1,265		)	—			—
Total	$	1,609	3,822		$	(3,822	)	$	(1,519	)	$	90
Other restructuring-related charges			3,079
Total pre-tax charges			$	6,901
Year ended December 31, 2001:
Impairment of long-lived assets:
Goodwill	$	—	$	8,583	$	(8,583	)	$	—		$	—
Property and equipment	—		1,320		(1,320		)	—			—
Product development cost write-offs	—		7,908		(7,908		)	—			—
Excess inventory write-downs	—		4,247		(4,247		)	—			—
Realignment of production programs between facilities	—		3,902		—			(3,902		)	—
Severance and other compensation costs	—		2,024		—			(839		)	1,185
Lease termination and other related costs	—		674		—			(250		)	424
Total	$	—	$	28,658	$	(22,058	)	$	(4,991	)	$	1,609

From the inception of this restructuring program in 2001, severance and other compensation costs of approximately $2,024,000 have been paid to manufacturing and administrative employees terminated at the manufacturing facilities closed.  Since the September 11^th terrorist attack, the Company has, in addition to the positions eliminated as a result of the 2002 plant closures described below, reduced its total workforce by approximately 500 employees, or 18.5%, as of December 2002 pursuant to this restructuring program, of which approximately 260 employees had separated as of December 31, 2001.

This restructuring program was completed during the fourth quarter of fiscal 2002.  The remaining balance of restructuring costs includes lease termination and other exit costs.  The restructuring program related to leased facilities was completed during the second quarter of fiscal 2002; however, $90,000 of future cash payments extend into 2003 due to lease payments on the vacated facility and the incurrence of other exit costs.  No future cash payment obligations related these restructuring activities remains as of December 31, 2003.

F-19

Seat Manufacturing Facilities Restructuring

During the first quarter of fiscal 2002, the Company announced it would consolidate the production of four seating and related manufacturing facilities into two, resulting in the permanent closure of two facilities.  This program was designed to improve manufacturing efficiencies and to further reduce costs and conserve working capital.  In connection with this restructuring program, the Company recorded pre-tax charges to operations totaling $6,294,000 during 2002 for restructuring, asset impairment and other related charges.  The charges are comprised of the following:

•Inventory and Accounts Receivable Write-Downs.  In connection with the consolidation of all production, the Company will discontinue manufacturing certain products, principally those which overlap.  Inventory and certain receivables related to the discontinued products were written down to net realizable value.

•Impairment of Long-Lived Assets.  The restructuring program resulted in the impairment of property and equipment and, accordingly, these assets were written down to their net realizable value.

•Severance and Other Compensation Costs.  Approximately 115 employees were terminated in connection with the permanent closure of the manufacturing facilities.

•Lease Termination and Other Related Costs.  Lease termination and other related costs are comprised of the net losses expected to be incurred under existing long-term lease agreements for the facilities being permanently vacated.  The losses have been reduced by the expected sublease income.  These expected losses were based on estimated current market rates and anticipated dates that these facilities are subleased.  If market-rates decrease or should it take longer than expected to sublease these facilities, the actual loss could exceed these estimates.

•Other Asset Impairment Related Expenses.  Other expenses pertain to FAA retesting and recertification of products manufactured at a different facility, moving, transportation and travel costs and shutdown / startup costs.  Such costs were charged to expense as incurred.

The components of the restructuring, assets impairment and other related charges are as follows:

	Total		Amounts Incurred						Balance at December 31,
(In thousands)	Charges		Noncash			Cash			2002
Restructuring and assets impairment charges:
Inventory and accounts receivable write-downs	$	2,200	$	(2,200	)	$	—		$	—
Impairment of property and equipment	1,374		(1,374		)	—			—
Severance and other compensation costs	450		—			(450		)	—
Lease termination and other related costs	300		—			(236		)	64
Total restructuring and asset impairment charges	4,324		$	(3,574	)	$	(686	)	$	64
Other restructuring-related expenses	1,970
Total pre-tax charges	$	6,294

This restructuring program was completed during the second quarter of fiscal 2002.  The remaining balance of restructuring costs includes lease termination and other exit costs.  The manufacturing facilities were closed during June 2002; however, future cash payments extend beyond this date due to lease payments on the vacated facilities and the incurrence of other exit costs.  No future cash payment obligations remain as of December 31, 2003.

F-20

Adjustment of Previous Restructuring Charge

In December 1999, the Company initiated a plan to reorganize and restructure the operations of two of its subsidiaries within the Systems Integration Group.  The restructuring was a result of a management decision to exit the manufacturing business at these subsidiaries and consolidate and relocate operations into one facility to more efficiently and effectively manage the business and be more competitive.

In connection with these restructuring activities, the Company provided for lease termination costs expected to be incurred over the remaining term of the existing long-term lease at the facility being vacated following the restructuring. The expected costs were reduced by estimated sublease income which was based on estimated future market rates and anticipated sublease rental periods.

During 2003, the initial sublease was canceled and the Company entered into a new sublease agreement.  Due to the deterioration in market rates since 1999, the terms of the new sublease were less favorable than the initial one.  As a result, the Company determined that its remaining accrual for lease termination costs was insufficient to cover the net costs expected to be incurred over the remaining lease term.  Consequently, an additional $754,000 was charged to operations during 2003 for these additional costs.  A payment obligation totaling $734,000 remains as of December 31, 2003.  The future cash payments will be funded from internally generated cash for operations.

Goodwill and Other Asset Impairment Related Charges

During the year ended December 31, 2003, the Company recorded $41,500,000 of goodwill impairment charges.  Impairment charges totaling $34,000,000 pertained to goodwill impairment testing pursuant to SFAS No. 142 (Note 7) and were charged to continuing operations.  The remaining $7,500,000 pertained to the sale of the Specialty Avionics Group and was charged to discontinued operations (Notes 2 and 7).

Due to continued weakness in the commercial aircraft portion of our business, in the fourth quarter of fiscal 2002 the Company recorded a pre-tax charge of $12,048,000 for additional asset impairments.  Of this amount, $7,672,000 related to the Company’s annual goodwill impairment testing pursuant to SFAS No. 142 (Note 7) and $4,376,000 related to inventories and was charged to cost of goods sold.  Charges totaling $7,988,000 pertained to discontinued operations.

Note 4.Accounts Receivable

The Company is potentially subject to concentrations of credit risk as the Company relies heavily on customers operating in the domestic and foreign business, VIP and head-of-state aircraft industries.  Generally, the Company does not require collateral or other security to support accounts receivable subject to credit risk.  Under certain circumstances, deposits or cash-on-delivery terms are required.  The Company maintains allowances for doubtful accounts and generally, such losses have been within management’s expectations.

Accounts receivable are net of an allowance for doubtful accounts of $1,268,000 as of December 31, 2003 and $1,205,000 as of December 31, 2002.

F-21

Note 5.Inventories

Inventories are comprised of the following as of December 31, 2003 and 2002:

	December 31,
(In thousands)	2003		2002
Raw materials	$	30,414	$	28,911
Work-in-process:
Direct and indirect manufacturing costs	6,817		6,843
Program costs, principally engineering costs	—		13,764
Finished goods	1,693		4,773
Costs and estimated earnings in excess of billings on uncompleted contracts	4,057		5,009
Total inventories	$	42,981	$	59,300

As described in Note 1, the Company changed its accounting policy for program costs, electing to expense such costs as incurred commencing January 1, 2003.

Total costs and estimated earnings on all uncompleted contracts as of December 31, 2003 and 2002 are comprised of the following:

	December 31,
(In thousands)	2003			2002
Costs incurred on uncompleted contracts	$	71,784		$	50,577
Estimated earnings recognized	77,782			63,699
Total costs and estimated earnings	149,566			114,276
Less billings to date	(145,661		)	(109,880		)
Net	$	3,905		$	4,396
Balance sheet classification:
Asset – Costs and estimated earnings in excess of billings	$	4,017		$	5,009
Liability – Billings in excess of costs and estimated earnings (Note 9)	(112		)	(613		)
Net	$	3,905		$	4,396

Note 6.Property and Equipment

Property and equipment includes the following as of December 31, 2003 and 2002:

	December 31,
(In thousands)	2003			2002
Land, buildings and leasehold improvements	$	22,251		$	25,074
Machinery and equipment	16,430			16,500
Computer equipment and software, furniture and fixtures	15,700			13,459
Tooling	1,001			1,111
Total cost	55,382			56,144
Accumulated depreciation and amortization	(24,482		)	(20,005		)
Net property and equipment	$	30,900		$	36,139

F-22

Property and equipment under capital leases included above consists of the following as of December 31, 2003 and 2002:

	December 31,
(In thousands)	2003			2002
Land, buildings and leasehold improvements	$	4,608		$	4,594
Machinery and equipment	601			608
Computer equipment and software, furniture and fixtures	1,717			1,747
Total cost	6,926			6,949
Accumulated depreciation and amortization	(1,836		)	(1,424		)
Net property and equipment	$	5,090		$	5,525

Depreciation of property and equipment under capital leases is included in depreciation expense in the consolidated financial statements.

Note 7.Goodwill

Effective January 1, 2002, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets” and the provisions of SFAS No. 141, “Business Combinations,” which were required to be adopted concurrent with the adoption of SFAS No. 142.  Adoption of these accounting pronouncements resulted in the following:

•Reassessment of Useful Lives of Intangible Assets.  The reassessment of the useful lives of intangible assets acquired on or before June 30, 2001 (Note 8) was completed during the first quarter of fiscal 2002.  The remaining useful lives were deemed appropriate.

•Reclassification of Intangible Assets.  Intangible assets relating to acquired assembled workforce intangibles (Note 8) not meeting the criteria for recognition apart from goodwill were reclassified to goodwill, net of deferred income taxes.

•Discontinuance of Goodwill Amortization.  Goodwill is deemed to be an indefinite-lived asset.  As a result, and in accordance with SFAS No. 142, the recording of periodic goodwill amortization charges was discontinued effective January 1, 2002.

During 2002, the Company completed the transitional impairment testing of goodwill recorded as of January 1, 2002 as required under SFAS No. 142.  Fair value of each reporting unit was determined using a discounted cash flow approach taking into consideration projections based on the individual characteristics of the reporting units, historical trends, market multiples for comparable businesses and independent appraisals.  Unallocated goodwill was allocated to the reporting units for impairment testing purposes.  The results indicated that the carrying value of goodwill was impaired.  The resulting impairment was primarily attributable to a change in the evaluation criteria for goodwill utilized under previous accounting guidance to the fair value approach stipulated in SFAS No. 142.  In accordance with the transitional provision of SFAS No. 142, the Company recorded a $17,828,000 noncash write-down of goodwill (net of $878,000 income tax benefit) as of January 1, 2002 as a cumulative effect of a change in accounting principle.  An additional $39,322,000 noncash write-down of goodwill pertained to the Specialty Avionics Group and is included in the loss from discontinued operations.

F-23

Reported income (loss) from continuing operations, net of tax and before the cumulative effect of the change in accounting principle, adjusted to reflect the discontinuance of periodic goodwill and assembled workforce amortization charges, is as follows:

	Year Ended December 31,
(In thousands)	2003			2002			2001
Reported loss from continuing operations, net of tax	$	(52,938	)	$	(6,762	)	$	(17,548	)
Add back goodwill and assembled workforce amortization, net of tax	—			—			6,681
Adjusted loss from continuing operations	$	(52,938	)	$	(6,762	)	$	(10,867	)

Changes in the carrying amount of goodwill, by business segment (Note 17), for the two years ended December 31, 2003 are as follows:

	Continuing Operations												Discontinued
(In thousands)	Cabin Management Group			Systems Integration Group			Corporate			Total			Specialty Avionics Group
Balance, December 31, 2001	$	178,715		$	28,277		$	3,956		$	210,948		$	126,495
Adoption of SFAS 141 and 142:
Reclassification of intangible assets	3,076			386			120			3,582			1,221
Transitional impairment charge	(8,463		)	(7,881		)	(2,362		)	(18,706		)	(39,322		)
Contingent consideration earned, including acquisition related expenses	606			—			—			606			—
Impairment charge	—			—			—			—			(7,672		)
Balance, December 31, 2002	173,934			20,782			1,714			196,430			80,722
Impairment charge	(34,000		)	—			—			(34,000		)	(7,500		)
Sale of Specialty Avionics Group	—			—			—			—			(73,222		)
Balance, December 31, 2003	$	139,934		$	20,782		$	1,714		$	162,430		$	—

During the fourth quarter of fiscal 2002, the Company performed its annual impairment testing and recorded an additional $7,672,000 impairment charge related to the Specialty Avionics Group.  The charge resulted from a decrease in fair value due to further weakness during 2002 in the commercial aircraft portion of our business.  This charge is included as a component of income (loss) from discontinued operations.

As described in Note 2, on March 14, 2003, the Company entered into a definitive agreement to sell its equity interests in the subsidiaries comprising its Specialty Avionics Group.  Based upon the fair value of the group implied in the definitive agreement, the Company determined that the carrying value of the group’s net assets was not fully recoverable.  As a result, the Company recorded a goodwill impairment charge of $7,500,000 during the three months ended March 31, 2003 to reduce the carrying value to estimated net realizable value.

F-24

As a result of the continuing weakness in the business, VIP and head-of-state aircraft market and the Company’s decision to down-size a furniture manufacturing facility in the second quarter of fiscal 2003, the Company determined that it should reevaluate the carrying value of its goodwill prior to the annual October 31^st testing date.  Accordingly, the Company performed an impairment test of the goodwill associated with its furniture manufacturing reporting unit for recoverability and found the goodwill to be impaired.  As a result, the Company recorded a pre-tax charge to operations of $34,000,000 during the three months ended June 30, 2003.  The charge was primarily a result of a decrease in fair value caused by using lower cash flow forecasts based on the most recently reduced industry estimates of aircraft deliveries resulting from overall industry weakness.  The annual impairment test on October 31^st indicated that no additional impairment had occurred.

Note 8.Other Assets, Principally Intangibles

Other assets are comprised of the following as of December 31, 2003 and 2002:

	December 31,
(In thousands)	2003		2002
Identifiable intangible assets with finite useful lives	$	25,455	$	29,106
Deferred financing costs	11,812		9,168
Other non-amortizable assets	825		1,154
Total other assets	$	38,092	$	39,428

Identifiable Intangible Assets with Finite Useful Lives

Identifiable intangible assets with finite useful lives are comprised of the following as of December 31, 2003 and 2002:

	December 31, 2003							December 31, 2002
(In thousands)	Cost		Accumulated Amortization			Net		Cost		Accumulated Amortization			Net
FAA certifications	$	22,272	$	(6,222	)	$	16,050	$	22,272	$	(4,737	)	$	17,535
Engineering drawings	7,645		(2,286		)	5,359		7,645		(1,776		)	5,869
Other identifiable intangibles	11,345		(7,299		)	4,046		11,345		(5,643		)	5,702
Total identifiable intangibles	$	41,262	$	(15,807	)	$	25,455	$	41,262	$	(12,156	)	$	29,106

Estimated annual amortization expense for all identifiable intangible assets with finite useful lives for the five-year period ending December 31, 2008 is as follows: 2004 – $3,644,000; 2005 – $3,477,000; 2006 – $2,275,000; 2007 – $2,175,000; and 2008 – $2,171,000.

F-25

Effective January 1, 2002, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets” and the provisions of SFAS No. 141, “Business Combinations,” which were required to be adopted concurrent with the adoption of SFAS No. 142.  Adoption of these accounting pronouncements resulted in the following:

•Reassessment of Useful Lives of Intangible Assets.  The reassessment of the useful lives of intangible assets acquired on or before June 30, 2001 was completed during the first quarter of fiscal 2002.  The remaining useful lives were deemed appropriate.

•Reclassification of Intangible Assets.  Intangible assets relating to acquired assembled workforce intangibles not meeting the criteria for recognition apart from goodwill were reclassified to goodwill, net of deferred income taxes.

Note 9.Accrued Liabilities

Accrued liabilities are comprised of the following as of December 31, 2003 and 2002:

	December 31,
(In thousands)	2003		2002
Accrued interest	$	4,969	$	7,465
Salaries, wages, compensated absences and payroll related taxes	4,017		9,212
Customer advances and deposits	3,147		4,662
Current portion of accrued product warranty obligations	2,064		2,801
Billings in excess of costs and estimated earnings on uncompleted contracts	112		613
Other accrued liabilities	3,581		6,741
Total accrued liabilities	$	17,890	$	31,494

Accrued Product Warranty Obligations

The following table reflects the accrued product warranty obligation activity during the three years ended December 31, 2003.

	Year Ended December 31,
(In thousands)	2003			2002			2001
Accrual activity during the year:
Accrual at beginning of the year	$	3,686		$	2,642		$	2,640
Accruals for warranties issued during the period	369			763			602
Change in accrual estimate related to pre-existing warranties	518			481			(482		)
Settlements made (in cash or in kind) during the period	(989		)	(200		)	(118		)
Accrual at end of the year	$	3,584		$	3,686		$	2,642
Classification at end of the year:
Current liability	$	2,064		$	2,801		$	2,531
Long-term liability	1,520			885			111
Total	$	3,584		$	3,686		$	2,642

F-26

Note 10.Long-Term Debt

Long-term debt includes the following amounts as of December 31, 2003 and 2002:

	December 31,
(In thousands)	2003			2002
First-lien credit facility:
Term debt	$	80,521		$	264,200
Revolving line of credit	—			6,000
Second-lien term debt	80,067			—
Capital lease obligations and other debt, secured by property and equipment	8,818			10,817
12% subordinated notes	100,000			100,000
Total long-term debt	269,406			381,017
Less current portion	(1,198		)	(16,317		)
Long-term debt, less current portion	$	268,208		$	364,700

First-Lien Credit Facility

The credit facility provides, through a syndicate of lenders, for term debt borrowings in the initial principal amount of $290,000,000 and a revolving line of credit for working capital and to finance acquisitions.  In March 2003, the credit facility was amended to permit the sale of the Specialty Avionics Group and, in December 2003, the credit facility was further amended to permit the incurrence of $80,000,000 of second-lien term debt.

Net proceeds from the sale of the Specialty Avionics Group of $130,723,000 and the net proceeds from the second-lien term debt of $74,081,000 were used to repay first-lien credit facility indebtedness.  As a result of the debt repayments, the Company recorded noncash charges of $3,494,000 to reflect the write-off of deferred financing costs associated with the debt repaid.  In connection with debt repaid with the proceeds from the sale of the Specialty Avionics Group, $2,055,000 of such debt issuance costs were written off and are reflected in the loss from discontinued operations; the remaining $1,439,000 is reflected as a loss on the extinguishment of debt.

The March 2003 amendment also revised various financial covenants (which the Company would otherwise have not been able to meet as of March 31, 2003), decreased by $10,000,000 the revolving line of credit commitment, increased the prime rate and LIBOR interest margins by 1.5% and permits the repurchase of a portion of the Company’s 12% subordinated notes with the proceeds from the sale of junior securities.  The December 2003 amendment further revised various financial covenants to permit the second-lien debt, extended the scheduled repayment dates of the remaining first-lien term debt by 12 to 18 months, reduced the revolving credit commitment by an additional $16,000,000 and extended the commitment by 18 months.  Interest rates charged on the first-lien debt remained unchanged.

F-27

The revolving line of credit commitment is $24,000,000 as of December 31, 2003 and all borrowings under the revolving facility must be repaid by March 31, 2006.  Term debt principal payments are due in increasing amounts commencing December 31, 2005 and continue through December 31, 2007.  Loans under the credit facility generally bear interest based on a margin over, at the Company’s option, prime rate or LIBOR.  The margins applicable to portions of amounts borrowed vary depending upon the Company’s consolidated debt leverage ratio.  Currently, the applicable margins are 4.00% to 4.75% for prime rate borrowings and 5.25% to 6.00% for LIBOR borrowings.  The weighted-average interest rate on all first-lien credit facility borrowings outstanding was 6.85% as of December 31, 2003.  Borrowings under this credit facility are secured by a first lien on substantially all of the assets of the Company.  The Company is subject to certain commitment fees under the facility as well as the maintenance of certain financial ratios, cash flow results and other restrictive covenants, including the payment of dividends in cash.  The Company was in compliance with the covenants during the year ended December 31, 2003.

As of December 31, 2003, the Company had an irrevocable standby letter of credit in the amount of $250,000 issued and outstanding under the credit facility, which reduces borrowings available under the revolving line credit.

Second-Lien Term Debt

In December 2003, the Company received proceeds from second-lien term loans in the aggregate amount of $80,000,000 from a syndicate of lenders and used the net proceeds to repay first-lien credit facility indebtedness.  The second-lien debt, which is comprised of $70,000,000 of fixed rate debt and $10,000,000 of floating rate debt, matures on June 30, 2008.

The fixed rate debt bears interest at 15%; 12% payable quarterly in cash and 3% pay-in-kind or “accreted” interest, payable at maturity.  The variable rate debt bears cash interest, at the Company’s option, at prime rate plus 7.5% or LIBOR plus 8.5%, plus 3% pay-in-kind interest.  The weighted-average interest rate on all second-lien term debt outstanding was 14.71% as of December 31, 2003.  As of December 31, 2003, $67,000 of pay-in-kind interest has accreted to the initial principal balance of the term debt.  The term debt is secured by a second lien on substantially all of the assets of the Company.  The Company is subject to customary fees under the agreement as well as the maintenance of certain financial ratios, cash flow results and other restrictive covenants which are similar to the covenants in the first-lien credit facility.  The Company was in compliance with the covenants during the year ended December 31, 2003.

12% Subordinated Notes

The subordinated notes mature on September 30, 2008 and interest is payable semi-annually on March 30, and September 30, of each year.  The subordinated notes are unsecured general obligations of the Company and are subordinated in right of payment to substantially all existing and future senior indebtedness of the Company, including first-lien credit facility and second-lien term indebtedness.  Prior to maturity, the Company may redeem all or some of the subordinated notes at defined redemption prices, which may include a premium.  In the event of a change in control, the holders may require the Company to repurchase the subordinated notes for a redemption price that may also include a premium.  The Company is subject to restrictive covenants, including the payment of dividends in cash.

F-28

Aggregate Maturities

The total annual maturities of long-term debt outstanding as of December 31, 2003 are as follows:

(In thousands)
Year ending December 31,
2004	$	1,198
2005	4,007
2006	13,536
2007	66,289
2008	180,540
2009 and thereafter	3,836
Total aggregate maturities	$	269,406

Financial Condition and Liquidity

The acts and ongoing threats of global terrorism, the current military conflicts, health epidemics and weak global economic conditions are all adversely impacting the Company’s business.  In response, a series of restructuring activities have been implemented as described in Note 3 which were designed to reduce costs and conserve working capital.

Also, as described above, the first-lien credit facility was amended twice during 2003 and $80,000,000 of second-lien debt was issued with the proceeds thereof used to repay first-lien indebtedness.  These actions, among other things, resulted in debt maturities being extended and debt covenants relaxed.

The ability to comply with debt financial covenants, pay principal or interest and satisfy other debt obligations will depend on the Company’s future operating performance as well as competitive, legislative, regulatory, business and other factors beyond its control.  The Company believes the extended debt maturity schedule through 2006 will coincide with its expectations of the recovery period for the business, VIP and head-of state aircraft market and resulting demand for its products and services.  As a result, management believes expected operating cash flows, together with borrowings under the first-lien credit facility ($23,800,000 of which was available as of December 31, 2003, the commitment for which expires in March 2006), will be sufficient to meet operating expenses, working capital requirements, capital expenditures and debt service obligations for the next twelve months.

F-29

Note 11.Income Taxes

The components of the loss before income taxes and cumulative effect of change in accounting principle are as follows:

	Year Ended December 31,
(In thousands)	2003			2002			2001
Reported by:
Continuing operations	$	(66,434	)	$	(10,383	)	$	(21,481	)
Discontinued operations	(5,631		)	1,901			8,667
Total	$	(72,065	)	$	(8,482	)	$	(12,814	)
Taxed under the following jurisdictions:
Domestic	$	(71,657	)	$	(7,381	)	$	(12,236	)
Foreign	(408		)	(1,101		)	(578		)
Total	$	(72,065	)	$	(8,482	)	$	(12,814	)

The provisions for income taxes (benefit) are as follows:

	Year Ended December 31,
(In thousands)	2003			2002			2001
Current:
U.S. federal	$	(1,548	)	$	—		$	62
State and local	295			255			1,133
Foreign	(82		)	67			30
Total current	(1,335		)	322			1,225
Deferred:
U.S. federal	(6,112		)	(144		)	545
State and local	(5,131		)	463			(464		)
Foreign	—			(287		)	(118		)
Total deferred	(11,243		)	32			(37		)
Total provision:
U.S. federal	(7,660		)	(144		)	607
State and local	(4,836		)	718			669
Foreign	(82		)	(220		)	(88		)
Total provision	$	(12,578	)	$	354		$	1,188
Allocation of total provision:
Continuing operations	$	(13,496	)	$	(3,621	)	$	(3,933	)
Discontinued operations	918			3,975			5,121
Total provision	$	(12,578	)	$	354		$	1,188

F-30

The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal rate to the income (loss) before income taxes and cumulative effect of change in accounting principle as a result of the following differences:

	Year Ended December 31,
(In thousands)	2003			2002			2001
Income tax (benefit) at U.S. statutory rates	$	(25,223	)	$	(2,969	)	$	(4,485	)
Tax effect of increases (decreases) resulting from:
Book benefit not provided for operating loss carryforwards	12,402			—			—
Amortization of assets and other expenses not deductible for income tax purposes	3,422			2,927			5,477
State income taxes, net of federal benefit	(3,143		)	467			265
Lower tax rates on earnings of foreign subsidiaries and foreign sales corporation	(64		)	(8		)	(57		)
Other, net	28			(63		)	(12		)
Income tax (benefit) at effective rates	$	(12,578	)	$	354		$	1,188

Deferred tax assets and (liabilities) are comprised of the following as of December 31, 2003 and 2002:

	December 31,
(In thousands)	2003			2002
Gross deferred tax assets:
Loss carryforwards	$	23,471		$	12,173
Accrued liabilities	3,670			6,797
Inventory	2,920			4,252
Other	1,165			832
Gross deferred tax assets	31,226			24,054
Gross deferred tax (liabilities):
Intangible assets	(10,902		)	(31,267		)
Program costs	(491		)	(6,168		)
Property and equipment	(305		)	(3,119		)
Other	—			(56		)
Gross deferred tax (liabilities)	(11,698		)	(40,610		)
Net deferred asset (liability) before valuation allowance	19,528			(16,556		)
Net deferred tax asset valuation allowance	(19,528		)	—
Net deferred tax liability	$	—		$	(16,556	)
Balance sheet classification:
Continuing operations:
Current deferred tax asset	$	—		$	16,430
Noncurrent deferred tax liability	—			(27,077		)
Net continuing operations	—			(10,647		)
Discontinued operations:
Current deferred tax asset	—			6,201
Noncurrent deferred tax liability	—			(12,110		)
Net discontinued operations	—			(5,909		)
Net deferred tax liability	$	—		$	(16,556	)

F-31

As of December 31, 2003, the Company had a net deferred tax asset of $19,528,000, prior to recording the valuation allowance; a net deferred tax liability existed in prior periods.  The change to a net asset position was primarily caused by the $34,000,000 goodwill impairment charge recorded during fiscal 2003.  SFAS No. 109, “Accounting for Income Taxes,” requires the recognition of a deferred tax asset for the future income tax benefit of goodwill deductions that will be taken for income tax purposes (i.e. the goodwill that has been written off in the financial statements for book purposes will continue to be amortized and deducted for tax purposes and, accordingly, represents a new deferred tax asset).

As required by SFAS No. 109, the Company evaluated its deferred assets for expected recoverability based on the nature of the item, the associated taxing jurisdictions, the applicable expiration dates and future taxable income forecasts that would impact utilization.  Since there is no loss carry back potential and the Company does not have any tax planning strategies to assure recoverability, the only possibility for recovery of the net deferred assets is future taxable income.  Since there have been prior year losses, the Company believes it is not prudent to rely on future income as the means to support the carrying value of the net asset.  As a result of the evaluation, the Company recorded a $19,528,000 valuation allowance, eliminating the net deferred asset, as of December 31, 2003.

The Company had a net deferred tax liability of $16,556,000 as of December 31, 2002.  The full realization of the deferred tax assets was achieved through the reversal of the deferred tax liabilities in future periods.  As a result, a valuation allowance was not required for periods ending or prior to December 31, 2002.

As of December 31, 2003, the Company has total loss carryforwards of approximately $55,472,000 for federal income tax purposes and $60,985,000 for state income tax purposes.  The loss carryforwards are not subject to limitations on their annual utilization (“Section 382 limitation,” as defined in the Internal Revenue Code) and therefore are available for utilization in 2004 and future periods.  The federal and state loss carryforwards expire in varying amounts commencing in 2011 and continuing through 2023.

Note 12.Capital Structure

Mandatorily Redeemable Preferred Stock

The table below summarizes mandatorily redeemable preferred stock issued during the three years ended December 31, 2003.

(In thousands, except share data)	Number of Shares	Mandatory Redemption Value		Unamortized Issuance Discount			Net Book Value
Balance, December 31, 2000	270,400	$	27,040	$	(3,861	)	$	23,179
Accrued dividends and redemption value accretion	45,930	4,593		468			5,061
Balance, December 31, 2001	316,330	31,633		(3,393		)	28,240
Accrued dividends and redemption value accretion	53,731	5,373		468			5,841
Balance, December 31, 2002	370,061	37,006		(2,925		)	34,081
Accrued dividends and redemption value accretion	62,858	6,286		468			6,754
Balance, December 31, 2003	432,919	$	43,292	$	(2,457	)	$	40,835

F-32

DeCrane Aircraft is authorized to issue 700,000 shares of 16% Senior Redeemable Exchangeable Preferred Stock Due 2009, $.01 par value.  The preferred stock has a $100.00 per share liquidation preference, plus accrued and unpaid cash dividends, and is non-voting.

Holders of the preferred stock are entitled to receive, when, as and if declared, dividends at a rate equal to 16% per annum.  Prior to June 30, 2005, DeCrane Aircraft may, at its option, pay dividends either in cash or by the issuance of additional shares of preferred stock.  Since the preferred stock issuance date on June 30, 2000, DeCrane Aircraft has elected to issue additional shares in lieu of cash dividend payments.  The preferred stock is mandatorily redeemable on March 31, 2009.  Upon the occurrence of a change in control, as defined, each holder has the right to require DeCrane Aircraft to redeem all or part of such holder’s shares at a price equal to 101% of the liquidation preference, plus accrued and unpaid cash dividends.

A portion of the proceeds from the sale of the preferred stock was ascribed to the value of the DeCrane Holdings common stock warrants issued in connection with the sale and was credited to additional paid-in capital.  The corresponding reduction in redemption value of the preferred stock, and related issuance costs, are recorded as an issuance discount and are being amortized using the effective interest method through the preferred stock mandatory redemption date.

Common Stock

DeCrane Aircraft has 100 shares ($.01 par value) issued and outstanding as of December 31, 2003 and 2002.  All of the shares are owned by DeCrane Holdings, DeCrane Aircraft’s parent company.

During 2002, DeCrane Aircraft received additional cash capital contributions from DeCrane Holdings aggregating $5,000,000 resulting from DeCrane Holdings’ sale of capital stock.  The proceeds were used to fund working capital requirements.

Also during 2002, DeCrane Holdings repurchased and canceled 18,743 common shares from former members of the Company’s management.  The former management members also elected to exercise 9,252 vested stock options on a cashless basis.  The $14,000 income tax benefit associated with the stock options exercised was also credited to additional paid-in capital.  In connection with the repurchase, a note receivable collateralized by the repurchased common stock was repaid.  The Company returned $368,000 of paid-in capital to DeCrane Holdings to fund its cash requirements for these transactions.

Notes Receivable for Shares Sold

During 1998 and 1999, DeCrane Holdings sold mandatorily redeemable preferred and common stock in three transactions in which one-half of the purchase price was paid in cash and one-half was loaned to the purchasers by DeCrane Aircraft, with interest at the then applicable federal rates.  The loans bear interest at rates ranging between 4.33% and 5.74%.  The loans, plus accrued interest, are payable upon the sale of the stock and are collateralized by such stock.  The resulting notes receivable, plus accrued interest, are classified as a reduction of stockholder’s equity in the consolidated statement of financial position.

F-33

The three transactions, which were based on the fair market value of the underlying securities as determined by the Board of Directors, resulted in loans for one-half of the total purchase price, were as follows:

•in December 1998, a group of related party investors (Note 16) purchased mandatorily redeemable preferred and common stock for $704,000;

•in October 1999, the same group of investors purchased additional shares of common stock for $250,000; and

•in December 1999, DeCrane Aircraft’s management purchased common stock for $3,940,000.

During 2002, a note receivable totaling $200,000, plus accrued interest, was repaid in connection with the repurchase of the common stock collateralizing the note receivable.  During 2003, several DeCrane Aircraft management members surrendered 107,330 shares of common stock.  In accordance with the terms of the notes evidencing the loans, the Company canceled the notes.  The cancellation of the notes, which aggregated $1,471,000, including accrued interest, was charged to additional paid-in capital.

Note 13.         Commitments and Contingencies

Litigation

As part of its investigation of the crash of Swissair Flight 111 off the Canadian coast on September 2, 1998, the Canadian Transportation Safety Board (the “CTSB”) initially notified the Company that it recovered burned wire that was attached to the in-flight entertainment system installed on some of Swissair’s aircraft by one of the Company’s subsidiaries.  The Company’s subsidiary has worked vigorously over the last five years with the CTSB investigators in the fact-finding investigation of this catastrophic incident.  On March 27, 2003, the CTSB released its final report on its investigation.  This report indicated that the CTSB was unable to conclusively determine the cause of the fire which led to the crash of the aircraft.

The Company was a defendant in most, but not all, of the actions brought by the estates of the 229 victims of the crash.  The actions, which sought damages and costs in unstated amounts, claimed negligence, strict liability, and breach of warranty.  Virtually all of the cases have been settled by Boeing and Swissair’s insurers and both assignment of the claims against, and releases in favor, of the Company have been obtained by the Boeing and Swissair insurers.

On September 22, 2003, the Company and its insurers entered into an agreement with Boeing, Swissair and each of their respective insurers, in which the Company received a release from those parties and an indemnification by Boeing and Swissair’s insurers against claims asserted on behalf of passengers for compensatory damage and by others for contribution and/or indemnity claims.  Company management believes the agreement adequately protects the Company from all existing litigation pending against the Company arising from this catastrophic incident.  Punitive damages are not subject to the indemnity; however, while some of the passenger actions originally asserted punitive damages, by virtue of a court order, claims for punitive damages may not be prosecuted.  The aforementioned agreement did not result in the Company incurring a loss and, accordingly, no charge to operations was required.

F-34

The Company and its subsidiaries are also involved in other routine legal and administrative proceedings incident to the normal conduct of business.  Management believes the ultimate disposition of all such matters will not have a material adverse effect on the Company’s business, consolidated financial position, results of operations or cash flows.

Lease Commitments

The Company leases some of its facilities and equipment under capital and operating leases.  Some of the leases require payment of property taxes and include escalation clauses.  Future minimum capital and operating lease commitments under non-cancelable leases are as follows as of December 31, 2003:

(In thousands)	Capital Leases			Operating Leases
Year ending December 31,
2004	$	786		$	2,937
2005	839			2,656
2006	595			2,359
2007	534			1,481
2008	368			885
2009 and thereafter	1,787			4,403
Total minimum payments required	4,909			$	14,721
Less amount representing future interest cost	(1,534		)
Recorded obligation under capital leases	$	3,375

Total rental expense charged to operations was $2,911,000 for the year ended December 31, 2003, $3,083,000 for the year ended December 31, 2002 and $2,982,000 for the year ended December 31, 2001.

Funding of DeCrane Holdings Preferred Stock Obligations

The Company is a wholly owned subsidiary of DeCrane Holdings whose capital structure also includes mandatorily redeemable preferred stock.  Since the Company is DeCrane Holdings’ only operating subsidiary and source of cash, the Company may be required to fund DeCrane Holdings’ preferred stock dividend and redemption obligations in the future.

DeCrane Holdings’ preferred stock dividends are payable quarterly at a rate of 14% per annum.  Prior to September 30, 2005, dividends are not paid in cash but instead accrete to the liquidation value of the preferred stock, which, in turn, increases the redemption obligation.  On or after September 30, 2005, preferred stock dividends are required to be paid in cash, if declared, and the preferred stock is mandatorily redeemable on September 30, 2009.  The DeCrane Holdings preferred stock has a total redemption value of $71,402,000 as of December 31, 2003, including accumulated dividends.

F-35

Note 14.         Consolidated Statements of Cash Flows

The following information supplements the Company’s consolidated statements of cash flows.

	Year Ended December 31,
(In thousands)	2003			2002			2001
Components of cash paid for acquisitions:
Contingent consideration paid for previously completed acquisitions	$	600		$	5,826		$	17,075
Cash purchase price reductions received as a result of settling asserted claims against the sellers (Note 2)	—			—			(3,718		)
Additional acquisition related expenses	6			64			172
Total cash paid for acquisitions	$	606		$	5,890		$	13,529
Noncash investing and financing transactions:
16% mandatorily redeemable preferred stock:
Dividends paid by the issuance of additional shares	$	6,286		$	5,373		$	4,593
Redemption value accretion	468			468			468
Capital expenditures financed with capital lease obligations	14			67			4,376
Additional acquisition contingent consideration earned and recorded as a liability	—			600			3,825
Interest accrued during the period on loans to stockholders for the purchase of DeCrane Holdings capital stock	148			123			116
Paid in cash:
Interest	$	25,973		$	27,619		$	34,904
Income taxes paid (refunded), net	(225		)	(91		)	1,161

Note 15.         Employee Benefit Plans

Stock Based Incentive Compensation

Management Incentive Stock Option Plan

DeCrane Holding’s Board of Directors has approved a management incentive plan which provides for the issuance of options to purchase the common stock of DeCrane Holdings as incentive compensation to designated executive personnel and other key employees of the Company and its subsidiaries.  The Compensation Committee of the Board of Directors of DeCrane Holdings administers the plan and makes a determination as to any options to be granted.  The plan provides for the granting of options to purchase a maximum of 356,257 common shares prior to expiration in 2009.  The options are granted at fair market value at the date of grant.  Substantially all of the options awarded become fully vested and exercisable eight years from the date of grant but vesting can be accelerated based upon future attainment of defined performance criteria.  In addition, the Compensation Committee may authorize alternate vesting schedules.  The plan also provides for the acceleration of vesting upon the occurrence of certain events, including, under certain circumstances, a change of control.

F-36

During 2001, no options were granted under the plan and no additional shares from prior year grants vested based on the required year 2001 performance criteria.  During 2002, options to purchase 15,000 shares, with vesting over a three year period from the grant date, were granted under the plan and no additional shares from prior year grants vested based on the required year 2002 performance criteria.  During 2003, no options were granted under the plan and no additional shares from prior year grants vested based on the required year 2003 performance criteria.

The per share exercise price of the options granted was equal to the fair market value of the common stock on each of the grant dates and, accordingly, no compensation expense was recognized during the three years ended December 31, 2003.

Incentive Stock Options Granted to Others

In July 1999, a group of related party investors, including two individuals who were then serving as directors, were granted options as compensation for consulting services.  Options were granted to purchase 44,612 shares of DeCrane Holdings common stock at an exercise price of $23.00 per share, equal to the fair market value of the common stock on the grant date.  The options vest over a three-year period, are subject to acceleration if DLJ and its affiliates sell any of their shares of common stock, and expire in 2009.  The options are fully vested as of December 31, 2003.

Summary of All Stock Options

The following table summarizes all stock option activity during the three years ended December 31, 2003.

	Year Ended December 31,
	2003				2002				2001
	Number of Shares		Weighted- Average Exercise Price		Number of Shares		Weighted- Average Exercise Price		Number of Shares		Weighted- Average Exercise Price
Options outstanding at beginning of the year	338,073		$	24.37	363,353		$	24.82	386,869		$	24.86
Granted	—		—		15,000		27.00		—		—
Exercised	—		—		(9,252	)	23.00		—		—
Canceled	(53,946	)	26.45		(31,028	)	31.32		(23,516	)	25.55
Options outstanding at end of the year	284,127		23.97		338,073		24.37		363,353		24.82
Options exercisable at end of the year	125,185		23.56		138,546		23.66		139,051		23.82

F-37

As of December 31, 2003, options to purchase 107,490 common shares remained available for grant under the Management Incentive Stock Option Plan.  The following table summarizes information about stock options outstanding and stock options exercisable as of December 31, 2003.

	All Options Outstanding		Number
	Number		of Shares
	of Shares		Exercisable
	as of	Weighted-Average	as of
	December 31,	Remaining	December 31,
	2003	Contractual Life	2003
Per share exercise price:
$23.00	256,081	5.94 years	117,630
$27.00	7,500	8.35 years	2,500
$35.00	20,546	6.93 years	5,055
Total	284,127	6.07 years	125,185

For compensatory stock options granted to non-employees, the Company recognized compensation expense of $138,000 for the year ended December 31, 2002 and $215,000 for the year ended December 31, 2001.

For non-compensatory stock options granted to employees, the Company uses APB Opinion No. 25 to account for stock-based compensation and, accordingly, no compensation expense was recognized during the three years ended December 31, 2003.  The Company has adopted the disclosure-only provisions of SFAS No. 123, as amended by SFAS No. 148 (Note 1).  For the purposes of the pro forma disclosure presented in Note 1, the estimated fair value of the options is amortized over the options’ vesting period.  The effect of applying SFAS No. 123 may not be representative of the pro forma effect in future years since additional options may be granted during those future years.

The fair value of the options was determined using the following assumptions:

	2003		2002			2001
Compensatory options (1):
Risk free interest rates	—		5.13		%	5.35		%
Expected dividend yield	—		—			—
Expected life	—		10 years			10 years
Expected stock price volatility	—		—			—
Non-compensatory options granted to employees and directors (2):
Risk free interest rates	—		—			—
Expected dividend yield	—		—			—
Expected life	—		—			—
Weighted-average fair value of options granted (per share)	$	—	$	10.96		$	—

(1)       Using the Black Scholes option valuation model.

(2)       Using the minimum value method.

F-38

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable.  In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility.  Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models, as well as the minimum value method, do not necessarily provide a reliable single measure of its employee stock options.  The Company determines the fair value of its common shares as of any given period-end date based on the aggregate enterprise value of DeCrane Holdings.  Enterprise value is computed based upon a multiple of Adjusted EBITDA, as reflected in its financial statements, and the multiple is based upon comparable data from other publicly-held companies as well as publicly available information on privately-held companies.

The minimum value method, which is an acceptable method for non-public companies, excludes stock price volatility.

Management Stock Purchases

Beginning in December 1999, DeCrane Holding’s Board of Directors has permitted designated executive personnel and other key employees to purchase shares of common stock of DeCrane Holdings, with a portion of the purchase price to be loaned to the participants by DeCrane Aircraft.  In December 1999, management purchased 171,295 shares of DeCrane Holdings’ common stock for $23.00 per share.  The total purchase price was approximately $3,900,000, of which one-half was paid in cash and one-half was loaned to management by DeCrane Aircraft as described in Note 12.  In 2000, management purchased an additional 20,707 shares for $23.00 per share in cash pursuant to the plan’s antidilution provisions.  Dilution resulted from the issuance of the DeCrane Holdings common stock warrants in connection with the sale of DeCrane Aircraft’s 16% preferred stock.

401(k) Retirement Plan

Substantially all domestic employees are eligible to participate in one of the 401(k) retirement plans the Company sponsors, which are defined contribution plans satisfying the requirements of the Employee Retirement Income Security Act of 1974.  The Company’s expense related to its matching contributions to these plans totaled $1,007,000 for the year ended December 31, 2002 and $1,767,000 for the year ended December 31, 2001; no matching contributions were made during the year ended December 31, 2003.

F-39

Note 16.         Related Party Transactions and Investors’ Agreement

Related Party Transactions

The Company’s transactions with related parties included in the consolidated financial statements are summarized in the table below.

	Year Ended December 31,
(In thousands)	2003		2002		2001
CSFB / DLJ:
Transaction and advisory fees and expenses	$	9,375	$	1,627	$	520
Management fees:
Charged to operations during the period	350		350		300
Payable as of period end	—		125		375
Global Technology Partners, LLC:
Promissory notes:
Receivable as of period end, including interest	594		567		542

Each related party is described below.

CSFB / DLJ

DLJ Merchant Banking Partners II, L.P. and affiliated funds own 97.1% of DeCrane Holdings common stock and 99.3% of its preferred stock, and 80.0% of DeCrane Aircraft’s preferred stock, all on a fully diluted basis.  DLJ Merchant Banking Partners II, L.P. and affiliated funds are indirect affiliates of Credit Suisse First Boston.

DLJ is represented on the Board of Directors of both DeCrane Holdings and DeCrane Aircraft.  In addition, CSFB is involved in market-making activities for DeCrane Holding’s Class A $22.31 common stock warrants and DeCrane Aircraft’s subordinated notes and may hold such securities from time to time.  CSFB is paid fees for serving as the syndication agent and, commencing in 2003, administrative agent for the lenders providing DeCrane Aircraft’s first-lien credit facility and second-lien term debt.  In 2003, CSFB also received customary fees and reimbursement of expenses for serving as DeCrane Aircraft’s financial advisors for the sale of the Specialty Avionics Group.

Global Technology Partners, LLC

Members of Global Technology own 1.8% of DeCrane Holdings common stock and 0.7% of its preferred stock, all on a fully diluted basis, and had two members on the Company’s Board of Directors from August 1998 through July 2000.  DeCrane Aircraft loaned one-half of the purchase price for such shares to the members at rates ranging between 4.33% and 5.44%.  The loans, plus accrued interest, are payable from the proceeds from the sale of the stock and are collateralized by such stock.

F-40

Investors’ Agreement

Investors owing 96.6% of DeCrane Holdings’ issued and outstanding common stock and common stock warrants and options, all of DeCrane Holdings’ preferred stock and all of DeCrane Aircraft’s preferred and common stock, have entered into an Amended and Restated Investors’ Agreement, dated October 6, 2000, among DeCrane Holdings Co., DLJ Merchant Banking Partners II, L.P. and affiliated funds and entities, Putnam Investment Management, Inc. and affiliated funds and entities and all management investors.  Investors who own DeCrane Holdings’ warrants to purchase 159,794 shares of common stock are not parties to the Investors’ Agreement.  The agreement provides that:

•The parties to the agreement shall vote their shares to cause DLJ Merchant Banking Partners, II, L.P. to select all members of the Board of Directors of DeCrane Holdings and DeCrane Aircraft, thereby giving them control over the Company’s operations.  At least one of such directors on each board shall be an independent director.

•Transfers of the shares by the parties to the agreement are restricted.

•Parties to the agreement may participate in some specific kinds of sales of shares by DLJ affiliates.

•DLJ affiliates may require the other parties to the agreement to sell shares of DeCrane Holdings’ common stock in some cases should the DLJ affiliates choose to sell any such shares owned by them.

•The DLJ affiliates may request six demand registrations with respect to all or any of the DeCrane Holdings common stock, preferred stock and Class A warrants to purchase 155,000 common shares held by those affiliates, which are immediately exercisable subject to customary deferral and cutback provisions.

•The holders of Class B warrants to purchase 139,357 shares of DeCrane Holdings common stock may request two demand registrations together with all or any common stock held by them, which are immediately exercisable subject to customary deferral and cutback provisions.

•The parties to the agreement are entitled to unlimited piggyback registration rights, subject to customary cutback provisions, and excluding registrations of shares issuable in connection with any employee stock options, employee benefit plan or an acquisition.

•DeCrane Holdings will indemnify the stockholders against some liabilities and expenses, including liabilities under the Securities Act.

•Any person acquiring shares of common stock or preferred stock who is required by the terms of the Investors’ Agreement or any employment agreement or stock purchase, option, stock option or other compensation plan to become a party thereto shall execute an agreement to become bound by the Investors’ Agreement.

F-41

Note 17.         Business Segment Information

The Company supplies products and services to the business, VIP and head-of-state aircraft market within the aerospace industry.  The Company’s subsidiaries are organized into two groups, each of which is a strategic business that develops, manufactures and sells distinct products and services.  The groups and a description of their businesses are as follows:

•Cabin Management – manufactures interior cabin components, including cabin interior furnishings, cabin management systems, seating and composite components;

•Systems Integration – manufactures auxiliary fuel systems and auxiliary power units, provides system integration services, provides aircraft completion and refurbishment services and is a Boeing Business Jet authorized service center.

In prior periods, the Company’s Specialty Avionics Group was a third strategic business for which segment information was provided.  As a result of the sale of the Specialty Avionics Group, this group is reflected as a discontinued operation and segment information for prior periods has been restated to exclude the group.

Management utilizes more than one measurement to evaluate group performance and allocate resources; however, management considers Adjusted EBITDA, as defined, to be the primary measurement of a group’s overall core economic performance and return on invested capital.  Management also uses Adjusted EBITDA in the Company’s annual budget and planning process for future periods, as one of the decision-making criteria for funding discretionary capital expenditures and product development programs and as the measure in determining the value of acquisitions and dispositions.  The board of directors uses Adjusted EBITDA as one of the performance metrics for determining the amount of bonuses awarded to pursuant to the Company’s cash incentive bonus plan and as an indicator of enterprise value used in determining the exercise price of stock options granted and the acceleration of stock option vesting pursuant to the Company’s incentive stock option plan.

Management defines Adjusted EBITDA as earnings before interest, income taxes, depreciation and amortization, restructuring, asset impairment and other related charges, acquisition related charges not capitalized and other noncash and nonoperating charges.  Management believes the presentation of this measure is relevant and useful to investors because it allows investors and analysts to view group performance in a manner similar to the method used by management, helps improve their ability to understand the Company’s core segment performance, adjusted for items management believes are unusual, and makes it easier to compare the Company’s results with other companies that have different financing, capital structures and tax rates.  In addition, management believes these measures are consistent with the manner in which its lenders and investors measure the Company’s overall performance and liquidity, including its ability to service debt and fund discretionary capital expenditure and product development programs.

F-42

The financial measure Adjusted EBITDA, as defined, excludes certain charges reflected in the Company’s financial statements which are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  However, the Company’s presentation of Adjusted EBITDA is in accordance with the GAAP requirements of SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” which requires the Company to report the primary measure of segment performance used by management to evaluate and manage its businesses.  The Company’s method of calculating Adjusted EBITDA may not be consistent with that of other companies and should be viewed in conjunction with measurements that are computed in accordance GAAP, such as net income (loss), the nearest comparable GAAP financial measure.  A reconciliation of Adjusted EBITDA to net income (loss) is included herein to clarify the differences between these financial measures.

The accounting policies of the groups are substantially the same as those described in the summary of significant accounting policies (Note 1).  Some transactions are recorded at the Company’s corporate headquarters and are not allocated to the groups, such as most of the Company’s cash and cash equivalents, debt and related net interest expense, corporate headquarters costs and income taxes.

Summary of Business by Segment

	Year Ended December 31,
(In thousands)	2003			2002			2001
Revenues:
Cabin Management	$	119,000		$	172,832		$	206,052
Systems Integration	51,687			58,051			67,528
Inter-group elimination (1)	(578		)	(1,042		)	(1,468		)
Consolidated totals	$	170,109		$	229,841		$	272,112
Revenues from significant customers (2):
Cabin Management	$	50,297		$	94,014		$	108,737
Systems Integration	28,508			35,388			46,138
Consolidated totals	$	78,805		$	129,402		$	154,875
Adjusted EBITDA (as defined):
Cabin Management	$	8,978		$	32,644		$	45,554
Systems Integration	11,020			18,084			17,152
Corporate (3)	(5,488		)	(6,072		)	(7,125		)
Inter-group elimination (4)	110			9			(62		)
Consolidated totals (5)	14,620			44,665			55,519
Reconciling items (6)	(87,943		)	(110,651		)	(69,521		)
Net loss	$	(73,323	)	$	(65,986	)	$	(14,002	)
Depreciation and amortization:
Cabin Management	$	6,335		$	6,695		$	14,607
Systems Integration	2,770			2,956			4,346
Corporate	676			961			1,411
Consolidated totals (7)	$	9,781		$	10,612		$	20,364

The notes appear on the next page.

F-43

Summary of Business by Geographical Area

	Year Ended December 31,
(In thousands)	2003			2002			2001
Total assets (as of period end):
Cabin Management	$	224,116		$	281,655		$	311,476
Systems Integration	58,395			62,437			76,312
Corporate (8)	21,456			44,247			35,627
Inter-group elimination (9)	(91		)	(113		)	(143		)
Continuing operations	303,876			388,226			423,272
Discontinued operations (Specialty Avionics)	—			160,741			222,439
Consolidated totals	$	303,876		$	548,967		$	645,711
Capital expenditures:
Cabin Management	$	4,216		$	3,829		$	6,579
Systems Integration	555			478			3,371
Corporate	26			49			241
Consolidated totals (10)	$	4,797		$	4,356		$	10,191
Consolidated net revenues to unaffiliated customers (11)
United States	$	159,052		$	222,401		$	268,981
Mexico	11,057			7,440			3,131
Consolidated totals	$	170,109		$	229,841		$	272,112
Consolidated long-lived assets (12):
United States	$	28,786		$	34,420		$	40,369
Mexico	2,114			1,719			2,291
Consolidated totals	$	30,900		$	36,139		$	42,660

Notes

(1)Inter-group sales are accounted for at prices comparable to sales to unaffiliated customers, and are eliminated in consolidation.

(2)Three customers each accounted for more than 10% of the Company’s consolidated revenues during the three years ended December 31, 2003 as shown in the table below.  Complete loss of any of these customers could have a significant adverse impact on the results of operations expected in future periods.

	Year Ended December 31,
(In thousands)	2003		2002		2001
Boeing (b)	$	29,815	$	35,427	$	43,836
Textron (a)	27,578		54,017		55,522
Bombardier (b)	21,412		39,958		55,517
Consolidated totals	$	78,805	$	129,402	$	154,875

All operating groups derived revenues from each of the customers during each of the years in the three years ended December 31. 2003.

(3)Reflects the Company’s corporate headquarters costs and expenses not allocated to the groups.

(4)Reflects elimination of the effect of inter-group profits in inventory.

F-44

(5)Adjusted EBITDA (as defined) for the year ended December 31, 2003 was reduced by $8,124,000 for Cabin Management and $2,316,000 for Systems Integration as a result of the Company’s change in accounting policy for program costs as more fully described in Note 1—Change in Accounting Principle. 

(6)Adjusted EBITDA (as defined) excludes the following charges reflected in the Company’s financial statements which are prepared in accordance with generally accepted accounting principles:

	Year Ended December 31,
(In thousands)	2003			2002			2001
Restructuring, asset impairment and other related charges	$	41,886		$	17,255		$	25,834
Depreciation and amortization of long-lived assets (7)	9,781			10,612			20,364
Acquisition related charges not capitalized	784			1,162			308
Other noncash charges	—			138			215
Interest expense	26,219			25,376			29,645
Loss on extinguishment of debt	1,439			—			—
Other expenses, net	945			505			634
Income tax benefit	(13,496		)	(3,621		)	(3,933		)
(Income) loss from discontinued operations, net of tax	6,621			41,396			(3,546		)
Cumulative effect of change in accounting principle	13,764			17,828			—
Total reconciling items	$	87,943		$	110,651		$	69,521

(7)Reflects depreciation and amortization of long-lived assets, goodwill (for periods prior to the January 1, 2002 adoption of SFAS No. 142), other intangible assets and deferred financing costs, which are classified as a component of interest expense, as follows:

	Year Ended December 31,
(In thousands)	2003		2002		2001
Depreciation and amortization of long-lived assets	$	9,781	$	10,612	$	20,364
Amortization of deferred financing costs	2,808		2,692		2,218
Consolidated depreciation and amortization	$	12,589	$	13,304	$	22,582

(8)Reflects the Company’s corporate headquarters assets, excluding investments in and notes receivable from subsidiaries.

(9)Reflects elimination of inter-group receivables and profits in inventory as of period end.

(10)Reflects capital expenditures paid in cash.  Excludes capital expenditures financed with capital lease obligations of $14,000 for the year ended December 31, 2003, $67,000 for the year ended December 31, 2002 and $4,376,000 for the year ended December 31, 2001.

(11)Allocated on the basis of the location of the subsidiary originating the sale.

(12)Allocated on the basis of the location of the subsidiary and consists of the Company’s property and equipment.  Corporate long-lived assets are included with the United States assets.

F-45

Note 18.         Supplemental Condensed Consolidating Financial Information

In conjunction with the 12% subordinated notes described in Note 10, the following condensed consolidating financial information is presented segregating the Company, as the issuer, and the guarantor and non-guarantor subsidiaries.  The accompanying financial information in the guarantor subsidiaries column reflects the financial position, results of operations and cash flows for those subsidiaries guaranteeing the notes.  The non-guarantor subsidiaries are companies within the Specialty Avionics Group which was sold in May 2003 and is therefore classified as a component of discontinued operations.

The guarantor subsidiaries are wholly-owned subsidiaries of the Company and their guarantees are full and unconditional on a joint and several basis.  There are no restrictions on the ability of the guarantor subsidiaries to transfer funds to the issuer in the form of cash dividends, loans or advances.  Separate financial statements of the guarantor subsidiaries are not presented because management believes that such financial statements would not be material to investors.  Investments in subsidiaries in the following condensed consolidating financial information are accounted for under the equity method of accounting.  Consolidating adjustments include the following:

(1)Elimination of investments in subsidiaries.

(2)Elimination of intercompany accounts.

(3)Elimination of equity in earnings of subsidiaries.

F-46

Balance Sheets

	December 31, 2003
(In thousands)	Issuer			Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Total
Assets
Current assets:
Cash and cash equivalents	$	6,540		$	396		$	—		$	6,936
Accounts receivable, net	—			21,455			—			21,455
Inventories	—			42,981			—			42,981
Other current assets	254			828			—			1,082
Total current assets	6,794			65,660			—			72,454
Property and equipment, net	1,047			29,853			—			30,900
Other assets, principally goodwill	13,615			186,907			—			200,522
Investments in subsidiaries	85,668			—			(85,668		)(1)	—
Intercompany receivables	261,631			100,642			(362,273		)(2)	—
Total assets	$	368,755		$	383,062		$	(447,941	)	$	303,876
Liabilities, Mandatorily Redeemable Preferred Stock and Stockholder’s Equity (Deficit)
Current liabilities:
Current portion of long-term debt	$	11		$	1,187		$	—		$	1,198
Other current liabilities	8,532			24,820			—			33,352
Total current liabilities	8,543			26,007			—			34,550
Long-term debt, less current portion	260,654			7,554			—			268,208
Intercompany payables	100,642			261,631			(362,273		)(2)	—
Other long-term liabilities	2,994			2,470			—			5,464
Mandatorily redeemable preferred stock	40,835			—			—			40,835
Stockholder’s equity (deficit):
Paid-in capital	111,719			151,492			(151,492		)(1)	111,719
Retained earnings (deficit)	(156,632		)	(65,824		)	65,824		(1)	(156,632		)
Accumulated other comprehensive loss	—			(268		)	—			(268		)
Total stockholder’s equity (deficit)	(44,913		)	85,400			(85,668		)	(45,181		)
Total liabilities, mandatorily redeemable preferred stock and stockholder’s equity (deficit)	$	368,755		$	383,062		$	(447,941	)	$	303,876

F-47

	December 31, 2002
(In thousands)	Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Total
Assets
Current assets:
Cash and cash equivalents	$	12,343		$	78		$	—		$	—		$	12,421
Accounts receivable, net	—			26,354			—			—			26,354
Inventories	—			59,300			—			—			59,300
Other current assets	17,711			443			—			—			18,154
Assets of discontinued operations	—			166,507			5,197			(10,963		)(1)	160,741
Total current assets	30,054			252,682			5,197			(10,963		)	276,970
Property and equipment, net	2,485			33,654			—			—			36,139
Other assets, principally goodwill	11,708			224,150			—			—			235,858
Investments in subsidiaries	348,559			—			—			(348,559		)(1)	—
Intercompany receivables	276,121			172,389			5,740			(454,250		)(2)	—
Total assets	$	668,927		$	682,875		$	10,937		$	(813,772	)	$	548,967
Liabilities, Mandatorily Redeemable Preferred Stock and Stockholder’s Equity
Current liabilities:
Current portion of long-term debt	$	15,337		$	980		$	—		$	—		$	16,317
Other current liabilities	16,786			27,763			—			—			44,549
Liabilities of discontinued operations	—			19,954			(26		)	—			19,928
Total current liabilities	32,123			48,697			(26		)	—			80,794
Long-term debt, less current portion	355,568			9,132			—			—			364,700
Intercompany payables	178,242			276,008			—			(454,250		)(2)	—
Other long-term liabilities	33,601			840			—			—			34,441
Mandatorily redeemable preferred stock	34,081			—			—			—			34,081
Stockholder’s equity:
Paid-in capital	118,621			337,592			15,440			(353,032		)(1)	118,621
Retained earnings (deficit)	(83,309		)	10,967			(4,477		)	(6,490		)(1)	(83,309		)
Accumulated other comprehensive loss	—			(361		)	—			—			(361		)
Total stockholder’s equity	35,312			348,198			10,963			(359,522		)	34,951
Total liabilities, mandatorily redeemable preferred stock and stockholder’s equity	$	668,927		$	682,875		$	10,937		$	(813,772	)	$	548,967

F-48

Statements of Operations

	Year Ended December 31, 2003
(In thousands)	Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Total
Revenues	$	—		$	170,109		$	—		$	—		$	170,109
Cost of sales	—			134,953			—			—			134,953
Gross profit	—			35,156			—			—			35,156
Selling, general and administrative expenses	6,948			17,948			—			—			24,896
Research and development expenses	—			10,440			—			—			10,440
Impairment of goodwill	—			34,000			—			—			34,000
Amortization of intangible assets	—			3,651			—			—			3,651
Interest expense	25,708			511			—			—			26,219
Loss on extinguishment of debt	1,439			—			—			—			1,439
Intercompany charges	(25,819		)	25,819			—			—			—
Equity in loss of subsidiaries	55,404			218			—			(55,622		)(3)	—
Other expenses, net	466			479			—			—			945
Provision for income taxes (benefit)	9,177			(22,673		)	—			—			(13,496		)
Loss from discontinued operations	—			6,403			218			—			6,621
Cumulative effect of change in accounting principle	—			13,764			—			—			13,764
Net loss	$	(73,323	)	$	(55,404	)	$	(218	)	$	55,622		$	(73,323	)

	Year Ended December 31, 2002
(In thousands)	Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Total
Revenues	$	—		$	229,841		$	—		$	—		$	229,841
Cost of sales	—			170,485			—			—			170,485
Gross profit	—			59,356			—			—			59,356
Selling, general and administrative expenses	11,206			29,056			—			—			40,262
Research and development expenses	—			56			—			—			56
Amortization of intangible assets	—			3,540			—			—			3,540
Interest expense	20,583			4,793			—			—			25,376
Intercompany charges	(24,309		)	24,309			—			—			—
Equity in loss of subsidiaries	55,833			9,535			—			(65,368		)(3)	—
Other expenses, net	495			10			—			—			505
Provision for income taxes (benefit)	694			(4,315		)	—			—			(3,621		)
Loss from discontinued operations	—			31,861			9,535			—			41,396
Cumulative effect of change in accounting principle	1,484			16,344			—			—			17,828
Net loss	$	(65,986	)	$	(55,833	)	$	(9,535	)	$	65,368		$	(65,986	)

F-49

	Year Ended December 31, 2001
(In thousands)	Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Total
Revenues	$	—		$	272,112		$	—		$	—		$	272,112
Cost of sales	—			196,866			—			—			196,866
Gross profit	—			75,246			—			—			75,246
Selling, general and administrative expenses	11,840			32,891			—			—			44,731
Research and development expenses	—			698			—			—			698
Impairment of goodwill	—			8,583			—			—			8,583
Amortization of intangible assets	202			12,234			—			—			12,436
Interest expense	29,357			288			—			—			29,645
Intercompany charges	(23,815		)	23,815			—			—			—
Equity in earnings of subsidiaries	(1,259		)	(115		)	—			1,374		(3)	—
Other expenses, net	361			273			—			—			634
Provision for income tax benefit	(2,684		)	(1,249		)	—			—			(3,933		)
Income from discontinued operations	—			(3,431		)	(115		)	—			(3,546		)
Net income (loss)	$	(14,002	)	$	1,259		$	115		$	(1,374	)	$	(14,002	)

F-50

Statements of Cash Flows

	Year Ended December 31, 2003
(In thousands)	Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Total
Cash flows from operating activities:
Net loss	$	(73,323	)	$	(55,404	)	$	(218	)	$	55,622	(3)	$	(73,323	)
Noncash adjustments:
Cumulative effect of change in accounting principle	—			13,764			—			—			13,764
Loss from discontinued operations	—			6,403			218			—			6,621
Equity in loss of subsidiaries	55,404			218			—			(55,622		)(3)	—
Other noncash adjustments	(6,835		)	47,397			—			—			40,562
Changes in working capital	3,441			(10,153		)	—			—			(6,712		)
Net cash provided by (used for) operating activities	(21,313		)	2,225			—			—			(19,088		)
Cash flows from investing activities:
Net proceeds from sale of Specialty Avionics Group	132,223			—			—			—			132,223
Proceeds from sale of property and equipment	855			2,353			—			—			3,208
Capital expenditures	(26		)	(4,771		)	—			—			(4,797		)
Cash paid for acquisitions	(606		)	—			—			—			(606		)
Net cash provided by (used for) investing activities	132,446			(2,418		)	—			—			130,028
Cash flows from financing activities:
Second-lien term debt borrowings	80,000			—			—			—			80,000
Revolving line of credit repayments, net	(6,000		)	—			—			—			(6,000		)
First-lien debt repaid	(183,679		)	—			—			—			(183,679		)
Other secured long-term debt repaid	(643		)	(1,233		)	—			—			(1,876		)
Deferred financing costs	(6,614		)	—			—			—			(6,614		)
Net cash used for financing activities	(116,936		)	(1,233		)	—			—			(118,169		)
Net cash provided by discontinued operations	—			1,744			—			—			1,744
Net increase (decrease) in cash and equivalents	(5,803		)	318			—			—			(5,485		)
Cash and equivalents at beginning of period	12,343			78			—			—			12,421
Cash and equivalents at end of period	$	6,540		$	396		$	—		$	—		$	6,936

F-51

	Year Ended December 31, 2002
(In thousands)	Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Total
Cash flows from operating activities:
Net loss	$	(65,986	)	$	(55,833	)	$	(9,535	)	$	65,368	(3)	$	(65,986	)
Noncash adjustments:
Loss from discontinued operations	—			31,861			9,535			—			41,396
Equity in loss of subsidiaries	55,833			9,535			—			(65,368		)(3)	—
Other noncash adjustments	5,542			37,846			—			—			43,388
Changes in working capital	28,171			(35,249		)	—			—			(7,078		)
Net cash provided by (used for) operating activities	23,560			(11,840		)	—			—			11,720
Cash flows from investing activities:
Cash paid for acquisitions, net of cash acquired	(5,890		)	—			—			—			(5,890		)
Capital expenditures	(49		)	(4,307		)	—			—			(4,356		)
Net cash used for investing activities	(5,939		)	(4,307		)	—			—			(10,246		)
Cash flows from financing activities:
Capital contribution, net	5,000			—			—			—			5,000
Other secured long-term borrowings	—			1,145			—			—			1,145
First-lien debt repaid	(11,506		)	—			—			—			(11,506		)
Revolving line of credit repayments, net	(6,000		)	—			—			—			(6,000		)
Other secured debt repaid	(389		)	(1,639		)	—			—			(2,028		)
Deferred financing costs	(1,656		)	—			—			—			(1,656		)
Other, net	(368		)	—			—			—			(368		)
Net cash used for financing activities	(14,919		)	(494		)	—			—			(15,413		)
Net cash provided by discontinued operations	—			16,882			—			—			16,882
Net increase in cash and equivalents	2,702			241			—			—			2,943
Cash and equivalents at beginning of period	9,641			(163		)	—			—			9,478
Cash and equivalents at end of period	$	12,343		$	78		$	—		$	—		$	12,421

F-52

	Year Ended December 31, 2001
(In thousands)	Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated Total
Cash flows from operating activities:
Net income (loss)	$	(14,002	)	$	1,259		$	115		$	(1,374	)(3)	$	(14,002	)
Noncash adjustments
Income from discontinued operations	—			(3,431		)	(115		)	—			(3,546		)
Equity in earnings of subsidiaries	(1,259		)	(115		)	—			1,374		(3)	—
Other noncash adjustments	3,950			40,901			—			—			44,851
Changes in working capital	16,352			(41,722		)	—			—			(25,370		)
Net cash provided by (used for) operating activities	5,041			(3,108		)	—			—			1,933
Cash flows from investing activities:
Cash paid for acquisitions, net of cash acquired	(13,529		)	—			—			—			(13,529		)
Capital expenditures and other	(241		)	(9,314		)	—			—			(9,555		)
Net cash used for investing activities	(13,770		)	(9,314		)	—			—			(23,084		)
Cash flows from financing activities:
First-lien term debt borrowings	20,000			—			—			—			20,000
Other secured long-term borrowings	—			2,797			—			—			2,797
Revolving line of credit repayments, net	(400		)	—			—			—			(400		)
First-lien debt repaid	(7,738		)	—			—			—			(7,738		)
Other secured long-term debt repaid	(465		)	(936		)	—			—			(1,401		)
Deferred financing costs	(580		)	(187		)	—			—			(767		)
Net cash provided by financing activities	10,817			1,674			—			—			12,491
Net cash provided by discontinued operations	—			10,432			—			—			10,432
Net increase (decrease) in cash and equivalents	2,088			(316		)	—			—			1,772
Cash and equivalents at beginning of period	7,553			153			—			—			7,706
Cash and equivalents at end of period	$	9,641		$	(163	)	$	—		$	—		$	9,478

F-53

Note 19.         Restated Selected Quarterly Financial Data (Unaudited)

Unaudited condensed quarterly data for the year ended December 31, 2003 are summarized in the tables below.  As more fully described in Note 1—Change in Accounting Principle, the Company elected to change its accounting policy for program costs after concluding the 2003 fiscal year but retroactively applied the change to the beginning of the year, January 1, 2003.  As a result, the condensed quarterly data are presented on both an “as reported” and “as restated” basis.

The “as reported” data for 2003 reflects the results of operations as originally reported for the first three quarters and, for the fourth quarter and resulting year, as would have been reported, prior to the accounting change.  The “as restated” data reflects the accounting change as of the beginning of the year, January 1, 2003.

	Year Ended December 31, 2003
(In thousands)	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter			Total
As reported:
Revenues	$	41,900		$	44,113		$	44,273		$	39,823		$	170,109
Gross profit (loss)	10,997			(1,270		)	9,221			9,946			28,894
Loss from continuing operations	(2,763		)	(40,266		)	(2,743		)	(2,988		)	(48,760		)
Income (loss) from discontinued operations	(6,397		)	747			—			(971		)	(6,621		)
Net loss	(9,160		)	(39,519		)	(2,743		)	(3,959		)	(55,381		)
As restated:
Revenues	$	41,900		$	44,113		$	44,273		$	39,823		$	170,109
Gross profit	10,997			4,992			9,221			9,946			35,156
Loss from continuing operations	(4,336		)	(37,282		)	(4,954		)	(6,366		)	(52,938		)
Income (loss) from discontinued operations	(6,397		)	747			—			(971		)	(6,621		)
Cumulative effect of change in accounting principle	(13,764		)	—			—			—			(13,764		)
Net loss	(24,497		)	(36,535		)	(4,954		)	(7,337		)	(73,323		)

The principal differences between “as reported” and “as restated” are caused by the recognition of the $13,764,000 cumulative effect of the change in accounting principle in the first quarter and the timing of a write off of previously deferred program costs.  As part of the Company’s second quarter restructuring activities, $6,262,000 of program costs that were deferred under the old accounting policy were written off and charged to cost of sales.  Since under the new policy (which was adopted in 2004 and retroactively applied to January 1, 2003) those costs are deemed expensed as incurred, the second quarter write off is not required in the “as restated” data.

F-54

DECRANE AIRCRAFT HOLDINGS, INC. AND SUBSIDIARIES

Consolidated Financial Statement Schedules

Schedule II – Valuation and Qualifying Accounts

(In thousands)	Balance at Beginning of Period		Charged to Cost and Expense		Charged to Other Accounts		Deductions			Balance at End of Period
Year Ended December 31, 2003 (1)
Allowance for doubtful accounts	$	1,205	$	670	$	—	$	(607	)	$	1,268
Reserve for excess, slow moving and potentially obsolete material	3,759		3,199		—		(1,744		)	5,214
Deferred tax asset valuation allowance	—		19,528		—		—			19,528
Year Ended December 31, 2002 (1)
Allowance for doubtful accounts	$	2,108	$	843	$	—	$	(1,746	)	$	1,205
Reserve for excess, slow moving and potentially obsolete material (2)	2,986		3,553		—		(2,780		)	3,759
Year Ended December 31, 2001 (1)
Allowance for doubtful accounts	$	1,536	$	2,001	$	—	$	(1,429	)	$	2,108
Reserve for excess, slow moving and potentially obsolete material (3)	3,213		731		—		(958		)	2,986

(1)       Excludes amounts attributable to the Specialty Avionics Group which is classified as discontinued operation.

(2)       Excludes $7,241,000 of other asset impairment related charges resulting from the 2002 and 2001 restructuring programs.

(3)       Excludes $12,155,000 of inventory and capitalized program cost write-offs resulting from the 2001 restructuring program.

F-55

EX-3.2.2

Exhibit 3.2.2

BYLAWS

OF

DECRANE AIRCRAFT HOLDINGS, INC.

ARTICLE 1
OFFICES

SECTION 1.01. Registered Office. The registered office shall be in the City of Wilmington, County of New Castle, State of Delaware.

SECTION 1.02. Other Offices. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require.

SECTION 1.03. Books. The books of the Corporation may be kept within or without of the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require.

ARTICLE 2
MEETINGS OF STOCKHOLDERS

SECTION 2.01. Time and Place of Meetings. All meetings of stockholders shall be held at such place, either within or without the State of Delaware, on such date and at such time as may be determined from time to time by the Board of Directors (or the Chairman in the absence of a designation by the Board of Directors).

SECTION 2.02. Annual Meetings. Annual meetings of stockholders, shall be held to elect the Board of Directors and transact such other business as may properly be brought before the meeting.

SECTION 2.03. Special Meetings. Special meetings of stockholders may be called by the Board of Directors or the chairman of the Board and shall be called by the Secretary at the request in writing of holders of record of a majority of the outstanding capital stock of the Corporation entitled to vote. Such request shall state the purpose or purposes of the proposed meeting.

SECTION 2.04. Notice of Meetings and Adjourned Meetings; Waivers of Notice. (a) Whenever stockholders are required or permitted to take any action at a

meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended (“Delaware Law”), such notice shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder of record entitled to vote at such meeting. Unless these bylaws otherwise require, when a meeting is adjourned to another time or place (whether or not a quorum is present), notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days, or after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

(b) Notice of a meeting shall not be required to be given to any person if such person signs a written waiver of such notice, either before or after the date of such meeting. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends the meeting for the express purpose of objecting, at the beginning of the meeting, tothe transaction of any business because the meeting is not lawfully called or convened. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.

SECTION 2.05. Quorum. Unless otherwise provided under the certificate of incorporation or these bylaws and subject to Delaware Law, the presence, in person or by proxy, of the holders of a majority of the outstanding capital stock of the Corporation entitled to vote at a meeting of stockholders shall constitute a quorum for the transaction of business.

SECTION 2.06. Voting. (a) Unless otherwise provided in the certificate of incorporation and subject to Delaware Law, each stockholder shall be entitled to one vote for each outstanding share of capital stock of the Corporation held by such stockholder. Unless otherwise provided in Delaware Law, the certificate of incorporation or these bylaws, the affirmative vote of a majority of the shares of capital stock of the Corporation present, in person or by proxy, at a meeting of stockholders and entitled to vote on the subject matter shall be the act of the stockholders.

(b) Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to a corporate action in writing without a meeting may authorize another person or persons to act for him by proxy, but no such proxy shall

2

be voted or acted upon after three years from its date, unless the proxy provides for a longer period.

SECTION 2.07. Action by Consent. (a) Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting of stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding capital stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail return receipt requested. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.

(b) Every written consent shall bear the date of signature of each stockholder who signs the consent, and no written consent shall be effective to take the corporate action referred to therein unless, within 60 days of the earliest dated consent delivered in the manner required by this Section and Delaware Law to the Corporation, written consents signed by a sufficient number of holders to take action are delivered to the Corporation by delivery to its registered office in Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested.

SECTION 2.08. Organization. At each meeting of stockholders, the Chairman of the Board, if one shall have shall not have been elected, (or in his absence or if one shall not have been elected, the President) shall act as chairman of the meeting.  The Secretary (or in his absence or inability to act, the person whom the chairman of the meeting shall appoint secretary of the meeting) shall act as secretary of the meeting and keep the minutes thereof.

SECTION 2.09. Order of Business. The order of business at all meetings of stockholders shall be as determined by the chairman of the meeting.

3

ARTICLE 3

DIRECTORS

SECTION 3.01. General Powers. Except as otherwise provided in Delaware Law or the certificate of incorporation, the business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.

SECTION 3.02. Number, Election and Term of Office. The number of directors which shall constitute the whole Board shall be fixed from time to time by resolution of the Board of Directors but shall not be less than two nor more than nine. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 3.12 herein, and each director so elected shall hold office until his successor is elected and qualified or until his earlier death, resignation or removal. Directors need not be stockholders.

SECTION 3.03. Quorum and Manner of Acting. Unless the certificate of incorporation or these bylaws require a greater number, a majority of the total number of directors shall constitute a quorum for the transaction of business, and the affirmative vote of a majority of the directors present at meeting at which a quorum is present shall be the act of the Board of Directors. When a meeting is adjourned to another time or place (whether or not a quorum is present), notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Board of Directors may transact any business which might have been transacted at the original meeting. If a quorum shall not be present at any meeting of the Board of Directors the directors present thereat may adjourn the meeting, from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

SECTION 3.04. Time and Place of Meetings. The Board of Directors shall hold its meetings at such place, either within or without the State of Delaware, and at such time as may be determined from time to time by the Board of Directors (or the Chairman in the absence of a determination by the Board of Directors).

SECTION 3.05. Annual Meeting. The Board of Directors shall meet for the purpose of organization, the election of officers and the transaction of other business, as soon as practicable after each annual meeting of stockholders, on the same day and at the same place where such annual meeting shall be held. Notice of such meeting need not be given. In the event such annual meeting is not so held, the annual meeting of the Board of Directors may be held at such place either within or without the state of Delaware, on such date and at such time as shall be specified in a notice thereof given as hereinafter provided in Section 3.07 hereof or in a waiver of notice thereof signed by any director who chooses to waive the requirement of notice.

4

SECTION 3.06. Regular Meetings. After the place and time of regular meetings ofthe Board ofDirectors shall have been determined and notice thereof shall have been once given to each member of the Board ofDirectors, regular meetings may be held without further notice being given.

SECTION 3.07. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board or the President and shall be called by the Chairman of the Board, President or Secretary on the written request of three directors. Notice of special meetings of the Board of Directors shall be given to each director in such manner as is determined by the Board of Directors at least three days before the date of the meeting unless, in the view of the Chairman of the Board, the President or the Secretary, there is an urgency requiring the meeting to be held on shorter notice, in which event notice shall be given as far in advance of the time of the meeting as is practicable under the circumstances.

SECTION 3.08. Committees. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.  In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not the member or members present constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.  Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the certificate of incorporation (except that a committee may, to the extent authorized in a resolution or resolutions providing for the issuance of any class or series of stock adopted by the Board of Directors as provided in subsection (a) of Section 151 of the Delaware General Corporation Law and the certificate of incorporation, fix the voting powers, designations, preferences, rights and qualifications, limitations and restrictions of any such class or series of stock, including rights to receive dividends or other distributions, rights upon the dissolution of, or upon any distribution of the assets of, the Corporation and rights with respect to conversion into, or exchange for, shares of any other class or classes or any other series of the same or other class or classes of stock, and fix the number of shares of such class or series of stock or authorize the increase or decrease in such number of shares) adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the

5

Corporation’s property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the bylaws of the Corporation; and unless the resolution of the Board of Directors or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors

SECTION 3.09. Action by Consent. Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee.

SECTION 3.10. Telephonic Meetings. Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

SECTION 3.11. Resignation. Any director may resign at any time by giving written notice to the Board of Directors or to the Secretary of the Corporation. The resignation of any director shall take effect upon receipt of notice thereof or at such later time as shall be specified in such notice; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

SECTION 3.12. Vacancies. Unless otherwise provided in the certificate of incorporation vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected. Each director so chosen shall hold office until his successor is elected and qualified, or until his earlier death, resignation or removal. If there are no directors in office, then an election of directors may be held in accordance with Delaware Law. Unless otherwise provided in the certificate of incorporation, when one or more directors shall resign from the Board, effective at a

6

future date, a majority of the directors then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in the filling of other vacancies.

SECTION 3.13. Removal. Any director or the entire Board of Directors may be removed, with or without cause, at any time by the affirmative vote of the holders of a majority of the outstanding capital stock of the Corporation entitled to vote and the vacancies thus created may be filled in accordance with Section 3.12 herein.

SECTION 3.14. Compensation. Unless otherwise restricted by the certificate of incorporation or these bylaws, the Board of Directors shall have authority to fix the compensation of directors, including fees and reimbursement of expenses.

ARTICLE 4
OFFICERS

SECTION 4.01. Principal Officers. The principal officers of the Corporation shall be a President, one or more Vice Presidents, a Treasurer and a Secretary who shall have the duty, among other things, to record the proceedings of the meetings of stockholders and directors in a book kept for that purpose. The Corporation may also have such other principal officers, including one or more Controllers, as the Board may in its discretion appoint. One person may hold the offices and perform the duties of any two or more of said offices, except that no one person shall hold the offices and perform the duties of President and Secretary.

SECTION 4.02. Election, Term of Office and Remuneration. The principal officers of the Corporation shall be elected annually by the Board of Directors at the annual meeting thereof. Each such officer shall hold office until his successor is elected and qualified, or until his earlier death resignation or removal.  The remuneration of all officers of the Corporation shall be fixed by the Board of Directors. Any vacancy in any office shall be filled in such manner as the Board of Directors shall determine.

SECTION 4.03. Subordinate Officers. In addition to the principal officers enumerated in Section 4.01 hereof, the Corporation may have one or more Assistant Treasurers, Assistant Secretaries and Assistant Controllers and such other subordinate officers, agents and employees as the Board of Directors may deem necessary, each of whom shall hold office for such period as the Board of Directors may from time to time determine. The Board of Directors may delegate to any principal officer the power to appoint and to remove any such subordinate officers, agents or employees.

7

SECTION 4.04. Removal. Except as otherwise permitted with respect to subordinate officers, any officer may be removed, with or without cause, at any time, by resolution adopted by the Board of Directors.

SECTION 4.05. Resignations. Any officer may resign at any time by giving written notice to the Board of Directors (or to a principal officer if the Board of Directors has delegated to such principal officer the power to appoint and to remove such officer). The resignation of any officer shall take effect upon receipt of notice thereof or at such later time as shall be specified in such notice; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

SECTION 4.06. Powers and Duties. The officers of the Corporation shall have such powers and perform such duties incident to each of their respective offices and such other duties as may from time to time be conferred upon or assigned to them by the Board of Directors.

ARTICLE 5

INDEMNIFICATION

SECTION 5.01. Right of Indemnification. The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”) by reason of the fact that he, or a person for whom he is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director or officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such person.  The Corporation shall be required to indemnify a person in connection with a proceeding (or part thereof) initiated by such person only if the proceeding (or part thereof) was authorized by the Board of Directors of the Corporation.

SECTION 5.02. Prepayment of Expenses. The Corporation may, in its discretion, pay the expenses (including attorneys’ fees) incurred in defending any proceeding in advance of its final disposition, provided, however, that the payment of expenses incurred by a director or officer in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by the director or officer to repay all amounts advanced if it should be ultimately determined that the director or officer is not entitled to be indemnified under this Article or otherwise.

8

SECTION 5.03. Insurance. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss incurred by such person in any such capacity or arising out of such person’s status as such, whether or not the Corporation would have the power to indemnify such person against such liability under Delaware Law.

SECTION 5.04. Non-Exclusivity of Rights. The rights conferred on any person by this Article 5 shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the certificate of incorporation, these by-laws, agreement, vote of stockholders or disinterested directors or otherwise.

SECTION 5.05. Other Indemnification. The Corporation’s obligation, if any, to indemnify any person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or non-profit entity shall be reduced by any amount such person may collect as indemnification from such other corporation, partnership, joint venture, trust, enterprise, or nonprofit enterprise.

SECTION 5.06. Amendment of Repeal. Any repeal or modification of the foregoing provisions if this Article 5 shall not adversely effect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification.

ARTICLE 6

GENERAL PROVISIONS

SECTION 6.01. Fixing the Record Date. (a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting;

9

provided that the Board of Directors may fix a new record date for the adjourned meeting.

(b)In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by Delaware Law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by Delaware Law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.

(c)In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

SECTION 6.02. Dividends. Subject to limitations contained in Delaware Law and the certificate of incorporation, the Board of Directors may declare and pay dividends upon the shares of capital stock of the Corporation, which dividends may be paid either in cash, in property or in shares of the capital Stock of the Corporation.

SECTION 6.03. Fiscal Year. The fiscal year of the Corporation shall commence on January 1 and end on December 31 of each year.

SECTION 6.04. Corporate Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words

10

“Corporate Seal, Delaware”. The seal may be used by causing it or a facsimile thereof to be impressed, affixed or otherwise reproduced.

SECTION 6.05. Voting of Stock Owned by the Corporation. The Board of Directors may authorize any person, on behalf of the Corporation, to attend, vote at and grant proxies to be used at any meeting of stockholders of any corporation (except this Corporation) in which the Corporation may hold stock.

SECTION 6.06. Amendments. These bylaws or any of them, may be altered, amended or repealed, or new bylaws may be made, by the stockholders entitled to vote thereon at any annual or special meeting thereof or by the Board of Directors.

11

EX-3.5.1

Exhibit 3.5.1

STATE of DELAWARE

LIMITED LIABILITY COMPANY

CERTIFICATE of FORMATION

FIRST:The name of the limited liability company is PATS AIRCRAFT, LLC.

SECOND:The address of its registered office in the State of Delaware is: 2711 Centerville Road, Suite 400, Wilmington DE

19808. The name of its Registered agent at such address is Corporation Service Company.

IN WITNESS WHEREOF, the undersigned has executed this Certificate of Formation of Pats Aircraft, LLC this 11th day of December, 2003.

By:	/s/ Richard J. Kaplan
	Authorized Person(s)
Name:	Richard J. Kaplan
	Type or Print

CERTIFICATE OF MERGER

OF

PATS, INC.

(a Maryland corporation)

AND

PATS AIRCRAFT, LLC

(a Delaware limited liability company)

Pursuant to Title 6, Section 18-209 of the Delaware Limited Liability Company Act.

1.The name of the surviving limited liability company is PATS AIRCRAFT, LLC, a Delaware limited liability company.

2.The name of the corporation being merged into this surviving limited liability company is PATS, INC.  The jurisdiction in which this corporation was formed is Maryland.

3.The Agreement of Merger has been approved and executed by both the corporation and limited liability company.

4.The name of the surviving limited liability company is PATS AIRCRAFT, LLC.

5.The executed Agreement of Merger is on file at 21652 Nanticoke Avenue, Georgetown, Delaware 19947, the principal place of business of the surviving limited liability company.

6.A copy of the Agreement of Merger will be furnished by the surviving limited liability company on request, without cost, to any member of the limited liability company or any person holding an interest in any other business entity, which is to merge or consolidate.

7.The Merger shall be effective on December 31, 2003.

IN WITNESS WHEREOF, said limited liability company has caused this certificate to be signed by an authorized person, this 29th day of December, A.D., 2003.

By:	/s/ Richar J. Kaplan
		Authorized Person
Name: Richard J. Kaplan
		Print or Type

EX-3.5.2

Exhibit 3.5.2

LIMITED LIABILITY COMPANY OPERATING AGREEMENT

OF

PATS AIRCRAFT, LLC

This LIMITED LIABILITY COMPANY OPERATING AGREEMENT (this “Agreement”) of PATS AIRCRAFT, LLC, a limited liability company organized under the laws of Delaware (the “Company”), is made and entered into effective as of December 23, 2003 by DeCrane Aircraft Holdings, Inc., a Delaware corporation (the “Initial Member”). Capitalized words and phrases used in this Agreement and not otherwise defined here are used as defined in Article 13 or in Section 14.21 (Tax Definitions).

RECITALS

WHEREAS, the Initial Member formed the Company pursuant to the Delaware Limited Liability Company Act, 6 Del. C. § 18-101, et seq., as amended from time to time (the “Act”), by filing a Certificate of Formation of the Company with the office of the Secretary of State of the State of Delaware.

WHEREAS, the Initial Member intends that the Company be treated as a pass-through entity for federal income tax purposes.

NOW, THEREFORE, the Initial Member hereby provides as follows:

1.ORGANIZATION

1.1Name

The name of the Company will be “PATS AIRCRAFT, LLC.”  The business of the Company may be conducted under that name or, upon compliance with applicable laws, any other name that the Board of Directors deems appropriate or advisable.  Any Manager may file any fictitious name certificates and similar filings, and any amendments thereto, that such Manager considers appropriate or advisable.

1.2Purpose and Limitations

The purpose of the Company is to engage in any lawful activity for which a limited liability company may be organized under the Act.    The Company shall have full power and authority to do every act and thing necessary or convenient to carry out the purposes for which it was formed.

1.3Managed by Managers and Board of Directors

The Company shall be managed by its Managers appointed hereunder, subject to the supervision and powers of the Board of Directors as set forth in this Agreement.

1.4Principal Office

The principal office of the Company shall be at PATS AIRCRAFT, LLC, 21652 Nanticoke Avenue, Georgetown, Delaware 19947.  The Board of Directors may change the principal place of business of the Company to any place from time to time in their discretion.

1.5Agent for Service of Process

The initial agent for service of process on the Company shall be CT Corporation System.

2.CAPITAL CONTRIBUTIONS

2.1Initial Member

DeCrane Aircraft Holdings, Inc. shall be the sole Initial Member.  The address, initial Capital Contribution and initial LLC Percentage of the Initial Member are:

Member, Address	Capital Contribution	Initial LLC Percentage
DeCrane Aircraft Holdings, Inc. 2361 Rosecrans Avenue, Suite 180 El Segundo, California 90245	100% of the capital stock of Pats, Inc.	100	%
Totals:		100	%

2.2Initial Capital Contribution

The initial Capital Contribution shall be paid to the Company concurrently with the signing of this Agreement.  No Person shall be treated as a Member for any purpose until the Company receives such Person’s initial Capital Contribution.

2.3Expertise

Each Member shall make available to the Manager his or its expertise for the benefit of the Company and the Company’s business.

2.4Guarantees of the Company’s Debts

If a Member guarantees a debt of the Company and that debt is paid by the Member (or its successors in interest), then such payment shall be considered a loan to the Company and not an additional Capital Contribution.  The amount of debt paid by the Member shall be repayable out of the Company’s cash and, unless otherwise agreed between the Company and the lending Member, shall bear interest at an annual rate equal to one percentage point above the prime lending rate of Bank of America, NA (or another similar financial institution, if any, designated jointly by such Member and the Managers) in effect at the time the debt is paid.

2

2.5Additional Capital Contributions or Loans

No Member shall be required to contribute or lend any additional funds to the Company.

2.6Loans

If any Member makes any loan to the Company or advances money on its behalf, the amount of any such loan or advance shall not be treated as a Capital Contribution but shall be a debt due from the Company.  The amount of any such loan or advance by a lending Member shall be repayable out of the Company’s cash and shall bear interest at an annual rate equal to one points above the prime lending rate of Bank of America, NA (or a similar financial institution acceptable to the lending Member and the Managers) then in effect.

2.7Investment Representation

Each Member represents and warrants to the Company as of the date on which he or it becomes a Member that (a) he or it has a pre-existing personal or business relationship with each other Member, and (b) his or its acquisition of an Interest is made as principal for his or its own account and not with a view to or for sale in connection with any distribution of such Interest.

2.8Title to Property

All real and personal property owned by the Company shall be owned by it as an entity and, insofar as permitted by applicable law, no Member shall have any ownership interest in such property in his or its individual name or right, and each Member’s interest in the Company shall be personal property for all purposes.

2.9Interests Uncertificated

Interests shall not be evidenced or represented by any instrument or certificate, but rather, their ownership shall be determined by reference to the terms of this Agreement as it may be amended from time to time.

3.DISTRIBUTIONS

3.1Distributions Generally

The Managers shall cause the Company to make such distributions to the Members in amounts (if any) as may be determined from time to time by the Board of Directors.   Any distributions that are made to Members shall be made in the following order and priority:

(a)First, to the Members until their Adjusted Capital Contributions are reduced to zero (pro rata among them in proportion to their Adjusted Capital Contributions); and

(b)Second, the balance, if any, to the Members in proportion to their LLC Percentages at that time.

3

3.2Estimated Tax Payments

If required by applicable law, or permitted by applicable law and approved by the Board of Directors, the Managers may cause the Company to make estimated payments of tax for any Member after consultation with such Member.

3.3Amounts Withheld

All amounts withheld pursuant to applicable law with respect to any payment or distribution to the Company or the Members shall be treated as amounts distributed to such Members for all purposes under this Agreement.  The Managers shall allocate any such amounts among the Members in accordance with applicable law.

3.4Return of Capital

Except as otherwise provided in this Agreement, no Member shall demand or receive a return of his or its Capital Contribution without the approval of the Board of Directors.  Under circumstances requiring a return of any Capital Contribution, no Member shall have the right to receive property other than cash except as may be specifically provided in this Agreement.  No Member shall have any personal liability for the repayment of the Capital Contribution of any other Member.

4.FINANCE

4.1LLC Funds

All property of the Company in the form of cash not otherwise invested shall be deposited in one or more bank accounts maintained in the name of the Company or the name of the Initial Member, in such financial institutions as the Managers shall determine. The funds of the Company shall not be commingled with the funds of any other Person.  The Managers shall deposit into such accounts all revenue and proceeds of or in connection with the Company’s business and all amounts received by the Managers from, for, or on behalf of, the Company.

4.2Books and Records

The Managers shall maintain or cause to be maintained accurate books and records of account of the business of the Company in accordance with generally accepted accounting principles consistently applied, setting forth a true and accurate account of all business transactions arising out of and in connection with the conduct of the Company’s business.

4.3Tax Information

The Managers shall prepare or cause to be prepared, and file, any applicable tax returns required to be filed by the Company consistent with the terms of this Agreement.  The Managers shall select an accounting firm to prepare any such tax returns, subject to approval by the Board of Directors.  Within 90 days after the end of each taxable year (or such earlier deadlines as may be imposed upon the Members by law), the Managers shall deliver to each Member all tax information regarding the Company necessary for such Member to make all required returns, together with a copy of any federal, state and local income tax or information returns of the Company for the year, and a report listing each material elective adjustment or calculation (if any) made by any Manager with respect to such period pursuant to Article 14 hereof.

4

4.4Allocations

The Profits, Losses and other items of the Company shall be allocated as set forth in Article 14 (Additional Tax Provisions).  The Members agree to be bound by these allocations in reporting their shares of the Company’s income, loss and other items for income tax purposes.

5.ROLE OF THE MANAGERS

5.1Managers

The Initial Member of the Company has designated the following persons to serve as the initial managers and officers of the Company (herein, “Managers”), until changed pursuant to Sections 5.3 or 5.4:

R. Jack DeCrane	Chief Executive Officer
Robert G. Martin	Chief Operating Officer
Richard J. Kaplan	Chief Financial Officer and Secretary
Daniel Fulgham	President
William Hubbard	Vice President
George Toly	Vice President
Stephen A. Silverman	Assistant Secretary

5.2Authority

Except to the extent otherwise provided in the Articles of Organization or this Agreement (including the powers reserved to the Board of Directors and the Members), the business and affairs of the Company shall be managed and all corporate powers shall be exercised by the Managers, who shall have all of the authority, rights and powers which may be possessed by managers of a limited liability company under the Act, and may at their discretion, delegate and assign their management duties.  The Managers may act jointly or severally in their role as Managers, and the act of any one Manager is the act of all Managers.

5.3Qualification and Election

The Managers of the Company shall be selected by the Initial Member.   The Initial Member may appoint additional Managers from time to time in its discretion, with such title and such roles as the Initial Member may specify.

5.4Removal and Resignation

(a) All Managers serve at the pleasure of the Initial Member, and any Manager may be removed with or without cause by the Initial Member, for any reason or no reason, by providing written notice thereof to such Manager.

(b)Any Manager may resign at any time by giving written notice to the Company.  Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

5

5.5Duties and Obligations of the Managers

The Managers shall take all actions which may be necessary or appropriate to operate and manage the Company’s business, and otherwise directed by the Board of Directors.

5.6Matters Requiring Unanimous Consent of the Members

Notwithstanding any other term of this Agreement, the Managers shall not, without the unanimous written consent of the Members:

(a)Do any act in contravention of this Agreement;

(b)Do any act which would make it impossible to carry on the ordinary business of the Company, except as otherwise provided in this Agreement;

(c)Sell or otherwise dispose of at one time all or substantially all of the property of the Company, except pursuant to Section 11.3(e) (Winding Up);

(d)Amend this Agreement or the Certificate of Formation;

(e)Liquidate or dissolve the Company;

(f)Admit a new Member;

(g)Reduce, increase or alter the outstanding capital of the Company, make any call on capital, issue or redeem Interests, options or other securities of the Company or any subsidiary of the Company;

(h)Grant a power of attorney or other delegation of the Members’ powers; or

(i)Cause the Company to merge or consolidate with any other business.

5.7Matters Requiring the Approval of the Board of Directors

Notwithstanding any other term of this Agreement, without first obtaining the approval of a majority of the Board of Directors, at a meeting duly held, or by a written act of such Directors in lieu of a meeting, the Managers shall not:

(a)Appoint or remove an auditor;

(b)Obtain, incur or suffer an aggregate amount of debt other than in the ordinary course of its business in excess of $50,000; or

6

(c)Cause the Company to acquire shares of or any interest in any corporation or other legal entity, or create any partnership, joint venture or legal entity of which the Company is or will be a partner, member or similar participant.

5.8Indemnification of Managers

5.8(a)  Mandatory

The Company, its receiver or its trustee, shall indemnify, save harmless and pay all judgments and claims against the Managers relating to any liability or damage incurred by reason of any act performed or omitted to be performed by the Managers in connection with the business of the Company, including attorneys’ fees incurred by the Managers in connection with the defense of any action based on any such act or omission, which attorneys’ fees may be paid as incurred, including all such liabilities under federal and state securities laws (including the Securities Act of 1933, as amended) as permitted by law.

5.8(b) If Manager is Exonerated in the Proceeding

In the event of any action by a Member against a Manager, including a derivative suit on behalf of the Company, the Company shall indemnify, save harmless and pay all expenses of such Manager, including attorneys’ fees, incurred in the defense of such action, if such Manager is successful in such action.

5.8(c)  No Indemnification

Notwithstanding the foregoing provisions of this Section 5.8, the Managers shall not be indemnified from any liability for fraud, bad faith, willful misconduct or gross negligence.

5.8(d)  Limitation

Any indemnification under this Section 5.8 shall be paid from and only to the extent of the Company’s assets, and no Member shall have personal liability for such indemnification.

6.ROLE OF THE BOARD OF DIRECTORS

6.1Number and Designation of Directors

The Company shall have a Board of Directors composed of two directors.  The Initial Member designates R. Jack DeCrane and Richard J. Kaplanas the initial directors.

6.2Rights and Powers

The Board of Directors shall have the powers reserved to it in this Agreement and, in addition, may take any action reserved to the Members in this Agreement or in the Act.

6.3Term;  Removal

Each director serves at the pleasure of the Member who designated him  or her pursuant to Section 3.1;  and each Member having the right to designate one or

7

more directors may remove and replace such designated directors at will, by notice to the Managers and directors.   In the event a Member sells, transfers or loses all of its Interests in the Company, all directors designated by such Member shall be removed from the Board of Directors and their seats shall be declared vacant.

6.4Meetings

The Board of Directors shall meet at such times as they may elect from time to time, in each case at the dates and times agreed by the directors; but the Board of Directors shall not be required to meet at any fixed time.  The rules set forth in Section 8.2(a), (d), (e), (f) and (g) for the meetings of Members shall also apply to all meetings of the Board of Directors, except that there shall be no record date in connection with propositions to be put to a vote at meetings of the Board.  60% of the then-seated directors shall constitute a quorum for any transacting of business by the Board of Directors, and the Board of Directors may not act in the absence of a quorum.  Any action approved by a majority of the directors present at a duly called meeting of the Board of Directors at which a quorum is present, or by all of the directors then-seated by written consent without meeting, shall be the action of the Board of Directors.  Any action that may be taken at any meeting of the Board of Directors may be taken without a meeting if a consent in writing, setting forth the action so taken, is signed and delivered to the Managers by directors having not less than the minimum number of votes that would be necessary to authorize or take that action at a meeting at which all of the directors entitled to vote thereon were present and voted.

6.5Limited Liability

The rights and powers of a member of the Board of Directors, in his capacity as a director, shall not exceed the rights and powers that a member of a manager-managed limited liability company could exercise under the Act.  Except to the extent (if any) otherwise required by the Act, no director shall be liable for the debts, liabilities, contracts or any other obligations of the Company.

7.ROLE OF MEMBERS

7.1Rights and Powers

The Members shall have the powers reserved to them in this Agreement or in the Act.

7.2Limited Liability

Except to the extent (if any) otherwise required in the Act, no Member shall be liable for the debts, liabilities, contracts or any other obligations of the Company.

7.3No Partition

No Member or director shall, either directly or indirectly, take any action to require partition of the Company or of any of its property or to cause the sale of any of such property, nor shall any Manager do so without the approval of the Board of Directors.

8

8.MEETINGS OF MEMBERS

8.1Required Meetings

The Member or Members shall hold meetings at such times as it or they may unanimously agree in writing, but shall not be required to meet at any fixed time.  At any such meeting, Members holding a majority in Interest shall constitute a quorum.  No action can be taken by the Members at a meeting after a quorum ceases to be present at the meeting.  The failure of the Company to observe any corporate formalities or requirements relating to the exercise of its powers or management of its business or affairs under this Agreement or the Act shall not be grounds for imposing personal liability on the Members for liabilities of the Company.

8.2Procedure

8.2(a)Location

Unless all of the Members agree otherwise in writing, meetings of Members shall be held at the chief executive office of the Initial Member in California (or at any other place in the County of Los Angeles, State of California, selected by the Board of Directors and specifically identified in the notice of the meeting), so long as the meeting place has adequate facilities to permit participation by telephone conference call.

8.2(b)Call

A meeting of the Members may be called by any Manager, or by any Member or Members representing more than 10% of the Interests for the purpose of addressing any matters on which the Members may vote.

8.2(c)Notice

(1)Whenever Members are required or permitted to take any action at a meeting, a written notice of the meeting shall be given pursuant to Article 12 (Other Provisions) not less than 10 days nor more than 60 days before the date of the meeting to each Member entitled to vote at the meeting. The notice shall state the place, date, and hour of the meeting and the general nature of the business to be transacted.  No other business may be transacted at this meeting.

(2)An affidavit of mailing of any notice or report in accordance with the provisions of this paragraph, signed by a Manager, shall be prima facie evidence of the giving of the notice or report.

(3)Upon written request to a Manager by any person entitled to call a meeting of Members, the Manager shall immediately cause notice to be given to the Members entitled to vote that a meeting will be held at a time requested by the person calling the meeting, not less than 10 days nor more than 60 days after the receipt of the request. If the notice is not given within 20 days after receipt of the request, the person entitled to call the meeting may give the notice or, upon the application of that person, the superior court of the county in California in which the principal office of the Company is located shall summarily order the giving of the notice, after notice to the Company affording it an opportunity to be heard.  The court may issue any order as may be appropriate, including an order designating the time and place of the meeting, the record date for determination of members entitled to vote, and the form of notice.

9

8.2(d)Adjourned Meetings

When a meeting of Members is adjourned to another time or place, unless the articles of organization or this Agreement otherwise require and, except as provided in this paragraph, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Company may transact any business that may have been transacted at the original meeting.  If the adjournment is for more than 45 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each Member of record entitled to vote at the meeting.

8.2(e)Waiver of Notice

The actions taken at any meeting of Members, however called and noticed, and wherever held, have the same validity as if taken at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, each of the Members entitled to vote, not present in person or by proxy, signs a written waiver of notice or consents to the holding of the meeting or approves the minutes of the meeting.  All waivers, consents, and approvals shall be filed with the Company records or made a part of the minutes of the meeting. Attendance of a person at a meeting shall constitute a waiver of notice of the meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Attendance at a meeting is not a waiver of any right to object to the consideration of matters required by this title to be included in the notice but not so included, if the objection is expressly made at the meeting. Neither the business to be transacted nor the purpose of any meeting of Members need be specified in any written waiver of notice, unless otherwise provided in the articles of organization or operating agreement, except as provided in paragraph (g) below.

8.2(f)Participation by Telephone Conference Call

Members may participate in a meeting of Members through the use of conference telephones or similar communications equipment, as long as all Members participating in the meeting can hear one another.  Participation in a meeting pursuant to this provision constitutes presence in person at that meeting.

8.2(g)Nature of Proposal

Any action approved at a meeting, other than by unanimous approval of those entitled to vote, shall be valid only if the general nature of the proposal so approved was stated in the notice of meeting (or at the previous meeting) or in any written waiver of notice.

8.2(h)Quorum

A majority in Interest of the Members represented in person or by proxy shall constitute a quorum at a meeting of Members.  In the absence of a quorum, any meeting of Members may be adjourned from time to time by the vote of a majority of the Interest represented either in person or by proxy, but no other business may be transacted.

10

8.2(i)Written Action Without Meeting

Any action that may be taken at any meeting of the Members may be taken without a meeting if a consent in writing, setting forth the action so taken, is signed and delivered to the Managers within 60 days of the record date for that action by Members having not less than the minimum number of votes that would be necessary to authorize or take that action at a meeting at which all Members entitled to vote thereon were present and voted.

(1)Unless the consents of all Members entitled to vote have been solicited in writing, (A) notice of any Member approval of an amendment to the articles of organization or this Agreement, a dissolution of the Company, or a merger of the Company, without a meeting by less than unanimous written consent shall be given at least 10 days before the consummation of the action authorized by such approval, and (B) prompt notice shall be given of the taking of any other action approved by Members without a meeting by less than unanimous written consent, to those Members entitled to vote who have not consented in writing.

(2)Any Member giving a written consent, or the Member’s proxyholder, may revoke the consent by a writing received by the Company prior to the time that written consents of Members having the minimum number of votes that would be required to authorize the proposed action have been filed with the Company, but may not do so thereafter. This revocation is effective upon its receipt at the principal office of the Company in California.

8.2(j)Proxies

The use of proxies in connection with this section will be governed in the same manner as in the case of corporations formed under the Delaware General Corporation Law.

8.2(k)Record Date

In order that the Company may determine the Members of record entitled to notices of any meeting or to vote, or entitled to receive any distribution or to exercise any rights in respect of any other lawful action, a Manager, or Members representing more than 10 percent of the interests of Members, may fix, in advance, a record date, that is not more than 60 days nor less than 10 days prior to the date of the meeting and not more than 60 days prior to any other action. If no record date is fixed:

(1)The record date for determining Members entitled to notice of or to vote at a meeting of Members shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held.

(2)The record date for determining Members entitled to give consent to limited liability company action in writing without a meeting shall be the day on which the first written consent is given.

(3)The record date for determining Members for any other purpose shall be at the close of business on the day on which the Managers adopt the

11

resolution relating thereto, or the 60th day prior to the date of the other action, whichever is later.

(4)The determination of Members of record entitled to notice of or to vote at a meeting of Members shall apply to any adjournment of the meeting unless a Manager or the Members who called the meeting fix a new record date for the adjourned meeting, but the Manager or the Members who called the meeting shall fix a new record date if the meeting is adjourned for more than 45 days from the date set for the original meeting.

8.3Voting Rights

The Members shall have the right to vote on the matters explicitly set forth in this Agreement or in the Act.  Each Member shall have a vote on all matters on which all Members may vote equal to his or its LLC Percentage.  With respect to the Members, the term “majority in interest” means more than 50% of the LLC Percentages of all Members.

8.4Rules of Conduct

At each meeting of Members they shall appoint a chair who shall conduct the meeting and who shall appoint a secretary of the meeting to keep minutes and file the minutes with the Company’s permanent files.

9.RESTRICTIONS ON TRANSFER

9.1Restriction on Transfers

Except as otherwise permitted by this Agreement, no Member shall Transfer all or any portion of any Interest.

9.2Permitted Transfers

The Initial Member may Transfer its Interest in connection with a sale of substantially all assets of the Initial Member, to the purchaser thereof.  The Initial Member may Transfer its Interest for the purpose of providing security for an obligation, by hypothecation, pledge, collateralization or otherwise.   Any Interest so held or Transferred shall remain subject to all of the provisions of this Agreement and the Member, both individually and as trustee of the trust, shall continue to be considered a “Member” for purposes of this Agreement.

9.3Involuntary Transfer

Any proposed Transfer of an Interest that is required by law pursuant to any insolvency proceeding of a Member shall be subject to the terms and conditions of this Agreement, including Section 9.7.

9.4Prohibited Transfers

Any purported Transfer of an Interest that is not permitted by this Agreement shall be null and void and of no effect whatever; provided that if the Company is required to recognize a Transfer that is not so permitted, the Interest Transferred shall be strictly limited to the transferor’s rights to allocations and distributions under this

12

Agreement with respect to the Transferred Interest, which allocations and distributions may be applied (without limiting any other legal or equitable rights of the Company) to satisfy any debts, obligations, or liabilities for damages that the transferor or transferee of such Interest may have to the Company.

In the case of a Transfer or attempted Transfer that is not permitted by this Agreement, the parties engaging or attempting to engage in such Transfer shall be liable to indemnify and hold harmless the Company and the other Members from all costs, liabilities and damages that any of such indemnified Persons may incur (including additional tax liability and lawyers’ fees and expenses) as a result of such Transfer or attempted Transfer and efforts to enforce this Section 9.4, including such indemnity.

9.5General Transfer Provisions

(a)All Transfers shall be by instrument in form and substance satisfactory to counsel for the Company and shall contain an expression by the transferee of his or its intention to accept the Transfer and to adopt and be bound by all of the provisions of this Agreement, and shall provide for the payment by the transferor of all reasonable expenses incurred by the Company in connection with such Transfer, including the necessary amendments to this Agreement to reflect such Transfer.  The transferor shall sign and acknowledge all such instruments, in form and substance reasonably satisfactory to the Company’s counsel, as may be necessary or desirable to effect such Transfer.

(b)The Company shall not dissolve or terminate upon the admission of any new Member or upon any permitted Transfer.  Each Member hereby waives any right such Member may have to dissolve, liquidate or terminate the Company in any such event.

(c)This Section 9.5 imposes additional restrictions on the Transfer of Interests and does not permit any Transfer not otherwise permitted by this Agreement.

9.6Compliance

Notwithstanding anything to the contrary in this Agreement, at law or in equity, no Member shall Transfer or otherwise deal with any Interest in a way that would cause a default under any material agreement to which the Company is a party or by which it is bound.

9.7Admission of Members

No new Members shall be admitted without the approval required by Section 5.6.  A transferee of an Interest shall not be admitted as a Member without the approval required by Section 5.6, provided that if the transferee is already a Member at the time of the transfer and the transfer is permitted by this Agreement, then the transferee shall have all rights of a Member with respect to the transferred Interest.

9.8Rights of Unadmitted Assignees

Notwithstanding any other provision of this Agreement, a Person who acquires an Interest but who is not admitted as a Member of the Company pursuant to this Agreement shall be entitled only to receive, to the extent assigned, the distributions and the allocations to which the assignor would be entitled under this Agreement, but

13

shall have no right to vote or to participate in the management and affairs of the Company, or to exercise any of the rights of a Member.

10.[DELIBERATELY OMITTED.]

11.DISSOLUTION

11.1Liquidating Events

The Company shall dissolve and commence winding up and liquidating upon the first to occur of any of the following (“Liquidating Events”):

(a)The decision of all of the Members to dissolve, wind up and liquidate the Company;

(b)The sale or transfer by the Company of all or substantially all of its assets;

(c)The occurrence of any other event that makes it unlawful or impossible to carry on the business of the Company; or

(d)Entry of a decree of judicial dissolution pursuant to the Act.

11.2Continuing Limited Liability Company

Notwithstanding any provision of the Act, the Company shall not dissolve prior to the occurrence of a Liquidating Event.  The withdrawal, resignation or retirement of any Member which the Company is required by proper authority to recognize, or the death, expulsion, bankruptcy or dissolution of any Member or the occurrence of any other event which terminates the continued membership in the Company of any Member shall not be a liquidating event.

11.3Winding Up

Upon the occurrence of a Liquidating Event:

(a)The Company shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors and Members;

(b)No Member shall take any action that is inconsistent with, or not necessary to or appropriate for, the winding up of the Company’s business and affairs;

(c)A person, who may but need not be a Member, shall be unanimously selected by the Members (or by arbitration pursuant to the terms hereof if agreement cannot be reached) as the Company’s liquidator, and shall be responsible for overseeing the winding up and dissolution of the Company and shall take full account of the Company’s liabilities and assets;

(d)No Manager shall receive any additional compensation for any services performed pursuant to this Section 11.3;

14

(e)Unless all Members agree upon a sale among themselves or a division in kind of assets, the assets of the Company shall be sold in the usual course of business using reasonable business judgment; and

(f)If any property of the Company is to be distributed in kind upon the liquidation of the Company, such property shall be liquidated as promptly as is consistent with obtaining its fair value.

11.4Application of Proceeds

The liquidation proceeds shall be applied and distributed, to the extent sufficient to do so, in the following order:

First, to the payment and discharge of all of the Company’s debts and liabilities to creditors other than the Members;

Second, to the payment and discharge of all of the Company’s debts and liabilities to the Members; and

The balance, if any, to the Members in accordance with their Capital Accounts, after giving effect to all contributions, distributions and allocations for all periods.  Any in-kind distributions of property of the Company shall be made among the Members pro rata in proportion with their relative Capital Accounts.

11.5Negative Capital Accounts

If a Liquidation Event and a Tax Liquidation both occur, then:

Distributions shall be made pursuant to this Article 11 to the Members who have positive Capital Accounts; and

(a)If any Member has a deficit balance in his or its Capital Account (after giving effect to all contributions, distributions and allocations for all taxable years, including the year during which such liquidation occurs), then such Member shall have no obligation to contribute to the capital of the Company and the deficit shall not be considered a debt owed to the Company or any other Person for any purpose whatsoever; and

(b)Section 14.19 (Negative Capital Accounts: Tax Issues) shall apply.

11.6Discretionary Withholding and Distributions

With the approval of the Board of Directors, a pro rata portion of the distributions that would otherwise be made to the Members pursuant to this Article 11 may be:

(a)Distributed to a trust established for the benefit of the Members for the purposes of liquidating property of the Company, collecting amounts owed to the Company, and paying any contingent or unforeseen liabilities or obligations of the Company or of the Managers arising out of or in connection with the Company, provided

15

that assets of any such trust shall be distributed to the Members from time to time, in the reasonable discretion of the liquidator appointed hereunder, in the same proportions as the amount distributed to such trust by the Company would otherwise have been distributed to the Members pursuant to this Agreement; or

(b)Withheld to provide a reasonable reserve for liabilities (contingent or otherwise) of the Company and to reflect the unrealized portion of any installment obligations owed to the Company, provided that such withheld amounts shall be distributed to the Members as soon as practicable.

11.7Rights of Members

Except as otherwise provided in this Agreement, the Members shall look solely to the assets of the Company for the return of their Capital Contributions and no Member shall have any right or power to demand or receive property other than cash from the Company.  No Member shall have priority over any other Member as to the return of his or its Capital Contribution, distributions or allocations.

11.8Notice of Dissolution

If a Liquidating Event occurs, the Company shall, within 60 days after the occurrence, provide written notice of the occurrence to each of the Members and to all known creditors and claimants whose names appear on the records of the Company.

11.9Certificates of Dissolution

Upon the dissolution of the Company, the liquidator appointed hereunder  and, to the extent required, any other party hereto or appointed hereunder, shall promptly sign and cause to be filed certificates of dissolution in accordance with the Act and the laws of any other states or jurisdictions in which the Company has filed its Articles of Organization or qualified to transact intrastate business.

12.OTHER PROVISIONS

12.1Entire Agreement

This Agreement, which includes material provisions on the schedules hereto, each of which is incorporated in full herein, constitutes the entire agreement pertaining to the organization of the Company and completely supersedes all other agreements and all drafts, understandings, negotiations and discussions, whether oral or written, among the parties pertaining to the subject matter of this Agreement.

12.2Amendments

No amendment or waiver of any provision of this Agreement shall be effective unless and until an instrument reflecting the amendment or waiver has received the approval of the Members.

The waiver by any party of a breach or default of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach or default.  A party’s failure either to insist upon any other party’s strict performance of any provision of this Agreement or to exercise any of the party’s rights or remedies under this

16

Agreement shall not constitute a waiver of any default by the other party or of any right or remedy of the non-defaulting party.

12.3Governing Law

Delaware law shall govern this Agreement, any agreement to amend or adopt this Agreement, and all disputes arising hereunder.

12.4Severable Provisions

The provisions of this Agreement are severable, and if any provision is determined to be illegal or otherwise unenforceable, in whole or in part, then the remaining provisions, and any partially unenforceable provisions to the extent enforceable, shall nevertheless be binding and enforceable and shall be construed as closely as possible to their original meanings.

12.5Binding Effect

Except as otherwise provided in this Agreement, every provision of this Agreement shall bind and benefit the Members and their respective heirs, legatees, legal representatives, successors, transferees and assigns.

12.6Parties in Interest; Third Parties

All references in this Agreement to “parties” refer to the parties to this Agreement.  Nothing in this Agreement, expressed or implied, is intended to confer on any Person or entity other than a party any right or remedy under or by reason of this Agreement.  The provisions of this Agreement are not intended to benefit any creditor or other Person (other than a Member in his or its capacity as a Member) to whom any debts, liabilities or obligations are owed or who otherwise has a claim against the Company or any Member; and no such creditor or other Person shall obtain any right under this Agreement against the Company or any Member by reason of any such debt, liability or obligation, or otherwise.

13.DEFINITIONS

Capitalized words and phrases used in this Agreement have the following meanings

13.1“Adjusted Capital Contributions”

means, as of any day with respect to a Member, such Member’s Capital Contributions, adjusted as follows:

(a)Increased by the amount of any Company liabilities which, in connection with distributions to such Member pursuant to Section 3.1 (Distributions Generally) and 11.4 (Dissolution/Application of Proceeds) are assumed by such Member or are secured by any property of the Company distributed to such Member; and

(b)Reduced by the amount of cash and the Gross Asset Value (as defined in Section 14.21) of any property of the Company distributed to such Member pursuant to Sections 3.1 (Distributions Generally) and 11.4 (Dissolution/Application of

17

Proceeds) and the amount of any liabilities of such Member assumed by the Company or which are secured by any property contributed by such Member to the Company.

(c)If such Member Transfers all or any portion of his Interest in accordance with the terms of this Agreement, his transferee shall succeed to his or its Adjusted Capital Contributions to the extent it relates to the Transferred Interest.

13.2“Agreement”

means this Operating Agreement, as amended from time to time.

13.3“Board of Directors”

means the board established pursuant to Article 6 (Role of the Board of Directors).

13.4“Business Day”

means a day that is not a Saturday, Sunday or public holiday in the place to which the notice, consent or other communication is sent.

13.5“Capital Account”

means, with respect to any Member, the Capital Account maintained for such Person in accordance with the following provisions and Section 14.21:

(a)To each Person’s Capital Account there shall be credited such Person’s Capital Contribution, such Person’s distributive share of Profits and any items in the nature of income or gain which are specially allocated pursuant to Sections 14.4 (Minimum Gain Chargeback) through 14.12 (Order of Application), and the amount of any of the Company’s liabilities assumed by such Person or which are secured by any property of the Company distributed to such Person.

(b)To each Person’s Capital Account there shall be debited the amount of money and the Gross Asset Value of any property distributed to such Person pursuant to any provision of this Agreement, such Person’s distributive share of Losses and any items in the nature of expenses or losses which are specially allocated pursuant to Sections 14.4 through 14.12 and the amount of any liabilities of such Person assumed by the Company or which are secured by any property contributed by such Person to the Company.

(c)If any Interest is Transferred in accordance with this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the Transferred Interest.

13.6“Capital Contribution”

means, with respect to any Member, the amount of money and the gross fair market value of any property (other than money) contributed pursuant to this Agreement to the controlled by such a person or entity.

13.7“Code”

means the Internal Revenue Code of 1986, as amended from time to time.

18

13.8“Company”

means the California limited liability company created and pursuant to this Agreement and the limited liability company continuing the business in the event of dissolution as provided in Section 11.2 (Dissolution).

13.9“Initial Member”

has the meaning set forth for such term in the introductory paragraph of this Agreement.

13.10“Interest”

means, with respect to any Member, the ownership rights of the Member in the Company, including the right to receive distributions from the Company.  In the event any Interest is Transferred in accordance with the provisions of this Agreement, the transferee of such interest shall succeed to the Interest of his or its transferor to the extent it is Transferred.

13.11“Liquidating Event”

has the meaning set forth in Section 11.1.

13.12“LLC Percentage”

means, with respect to any Member at any time, the proportion (expressed as a percentage) of such Member’s Interests at such time to the aggregate number of all Interests then outstanding.   If any Interest is Transferred in accordance with the provisions of this Agreement, the transferee of such Interest shall succeed to the portion of the transferor’s LLC Percentage represented by the Transferred Interest.

13.13“Managers”

means the Persons serving as managers of the Company within the meaning of the Act and pursuant to the terms and conditions of this Agreement.

13.14“Member”

means any Person who is (a) the Initial Member, as designated in Section 2.1, or subsequently admitted as a Member pursuant to this Agreement, and (b) who owns an Interest.  “Members” means all such Persons.

13.15 “Person”

means any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust (including any beneficiary of the trust), unincorporated organization, or government or any agency or political subdivision.

13.16“Profits” and “Losses”

means, for each fiscal year or other period, an amount equal to the Company’s taxable income or loss for such year or period, determined in accordance with Section 14.21.

19

13.17“Transfer”

(a)means, as a noun, any voluntary or involuntary assignment, transfer, sale, pledge, hypothecation or other disposition, and, as a verb, voluntarily or involuntarily to assign, transfer, sell, pledge, hypothecate or otherwise dispose of or to obtain a charging order against.   A “Transfer” includes a gift or transmutation of an Interest into another type of property interest or into an Interest jointly owned with another Person, including a gift or transmutation of a separate property Interest into a community or other joint property Interest with a spouse or another Person, or the partition of a community or other joint property Interest (whether voluntarily, pursuant to a divorce proceeding or otherwise).

14.ADDITIONAL TAX PROVISIONS

14.1Tax Classification

The Members intend that the Company shall be classified as a partnership for federal income tax purposes under Code Section 7701(a)(2) and the corresponding provisions, if any, of state and local law.

14.2Profits

After giving effect to the special allocations in Sections 14.4 (Minimum Gain Chargeback) through 14.12 (Order of Application), Profits for any fiscal year or other period shall be allocated to the Members in proportion to their LLC Percentages.

14.3Losses and Other Items

After giving effect to the special allocations in Sections 14.4 (Minimum Gain Chargeback) through 14.12 (Order of Application), Losses for any fiscal year or other period shall be allocated in the following order and priority:

(a)Except as provided in Section 14.3(b), Losses shall be allocated to the Members in proportion to their LLC Percentages.

(b)The Losses allocated pursuant to Section 14.3(a) shall not exceed the maximum amount of Losses that can be so allocated without causing any Member to have an Adjusted Capital Account Deficit at the end of any fiscal year.  If some but not all of the Members would have Adjusted Capital Account Deficits as a consequence of an allocation of Losses pursuant to Section 14.3(a), the limitation set forth in this Section 14.3(b) shall be applied on a Member-by-Member basis so as to allocate the maximum permissible Losses to each Member under Section 1.704-1(b)(2)(ii)(d) of the Regulations.

Except as otherwise provided in this Agreement, all items of the Company income, gain, loss, deduction, credit and any other allocations not otherwise provided for shall be divided among the Members in the same proportions as they share Losses for the period.

14.4Minimum Gain Chargeback

Except as provided in Section 1.704-2(f) of the Regulations, notwithstanding any other provision of this Article 14, if there is a net decrease in Minimum Gain during any fiscal year of the Company, each Member shall be specially

20

allocated items of Company income and gain for such year (and, if necessary, subsequent years) in an amount equal to the portion of such Member’s share of the net decrease in Minimum Gain, determined in accordance with Section 1.704-2(g) of the Regulations.  Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant to such Regulations.  The items to be so allocated shall be determined in accordance with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the Regulations.  This Section 14.4 is intended to comply with the minimum gain chargeback requirement in Section 1.704-2(f) of the Regulations and shall be interpreted consistently with it.

14.5Member Nonrecourse Debt Minimum Gain

Except as provided in Section 1.704-2(i)(4) of the Regulations, notwithstanding any other provision of this Article 14 except Section 14.4, if there is a net decrease in Member Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse Debt during any Company fiscal year, each Member who has a share of the Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of the Regulations, shall be specially allocated items of Company income and gain for such year (and, if necessary, subsequent years) in an amount equal to the portion of such Member’s share of the net decrease in Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(4) of the Regulations.  Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant to such Regulations.  The items to be so allocated shall be determined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the Regulations.  This Section 14.5 is intended to comply with the minimum gain chargeback requirement in Section 1.704-2(i)(4) of the Regulations and shall be interpreted consistently with it.

14.6Qualified Income Offset

In the event any Member unexpectedly receives any adjustments, allocations or distributions described in Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations, items of Company income and gain shall be specially allocated to each such Member in an amount and manner sufficient to eliminate, to the extent required by the Regulations, the Adjusted Capital Account Deficit of such Member as quickly as possible, provided that an allocation pursuant to this Section 14.6 shall be made only if and to the extent that such Member would have an Adjusted Capital Account Deficit after all other allocations provided for in this Section 14.6 have been tentatively made as if this Section 14.6 were not in the Agreement.

14.7Gross Income Allocation

In the event any Member has a deficit Capital Account at the end of any Company fiscal year which is in excess of the sum of (1) the amount such Member is obligated to restore pursuant to any provision of this Agreement and (2) the amount such Member is deemed to be obligated to restore pursuant to the penultimate sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations, each such Member shall be specially allocated items of Company income and gain in the amount of such excess as quickly as possible, provided that an allocation pursuant to this Section 14.7 shall be made only if and to the extent that such Member would have a deficit Capital Account in

21

excess of such sum after all other allocations provided for in Sections 14.4 through 14.10 have been tentatively made as if this Section 14.7 were not in the Agreement.

14.8Nonrecourse Deductions

Nonrecourse Deductions for any fiscal year or other period shall be specially allocated among the Members in proportion to their LLC Percentages.

14.9Member Nonrecourse Deductions

Any Member Nonrecourse Deductions for any fiscal year or other period shall be specially allocated to the Member who bears the economic risk of loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Section 1.704-2(i)(1) of the Regulations.

14.10Code Section 754 Adjustments

To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or 743(b) is required, pursuant to Section 1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4) of the Regulations, to be taken into account in determining Capital Accounts as the result of a distribution to a Member in complete liquidation of his or its interest in the Company, the amount of such adjustment to Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Members in accordance with their Interests if such Section 1.704-1(b)(2)(iv)(m)(2) applies, or, if such Section 1.704-1(b)(2)(m)(4) applies, to the Member to whom such distribution was made.

14.11Curative Allocations

The allocations in the last sentence of the first paragraph of Section 14.3 (Losses and Other Items) and Sections 14.4 (Minimum Gain Chargeback), 14.5 (Member Nonrecourse Debt Minimum Gain), 14.6 (Qualified Income Offset), 14.7 (Gross Income Allocation), 14.8 (Nonrecourse Deductions), 14.9 (Member Nonrecourse Deductions) and 14.10 (Code Section 754 Adjustments) (the “Regulatory Allocations”) are intended to comply with certain requirements of the Regulations.  It is the intent of the Members that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or with special allocations of other items of Company income, gain, loss or deduction pursuant to this Section 14.11.  Therefore, notwithstanding any other provision of this Article 14 (other than the Regulatory Allocations), the Managers shall make such offsetting special allocations of Company income, gain, loss or deduction in whatever manner they determine appropriate so that, after such offsetting allocations are made, each Member’s Capital Account balance is, to the extent possible, equal to the Capital Account balance such Member would have had if the Regulatory Allocations were not part of the Agreement and all Company items were allocated pursuant to Section 14.2.  In exercising their discretion under this Section 14.11, the Managers shall take into account future Regulatory Allocations under Sections 14.4 and 14.5 that, although not yet made, are likely to offset other Regulatory Allocations previously made under Sections 14.8 and 14.9.

22

14.12Order of Application

Sections 14.4 through 14.11 shall be applied in the order in which they are set forth in this Agreement.

14.13Allocation Method

For purposes of determining the Profits, Losses or any other items allocable to any period, Profits, Losses and any such other items shall be determined on a daily, monthly, or other basis, as determined by the Managers using any permissible method under Code Section 706 and the Regulations under it.

14.14Excess Nonrecourse Liabilities

Solely for purposes of determining a Member’s proportionate share of the “excess nonrecourse liabilities” of the Company within the meaning of Section 1.752-3(a)(3) of the Regulations, the Members’ interests in the Company’s Profits are in proportion to their LLC Percentages.

14.15Source of Distributions

To the extent permitted by Section 1.704-2(h)(3) of the Regulations, the Managers shall endeavor to treat cash distributions to Members as having been made from the proceeds of Nonrecourse Liabilities or Member Nonrecourse Debt only to the extent that such distributions would cause or increase an Adjusted Capital Account Deficit for any Member.

14.16Tax Allocations:  Code Section 704(c)

In accordance with Code Section 704(c), income, gain, loss and deduction with respect to any property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its initial Gross Asset Value (computed in accordance with Section 14.22(d)(1)).

If the Gross Asset Value of any Company asset is adjusted pursuant to Section 14.22(d)(3), subsequent allocations of income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Gross Asset Value in the same manner as under Code Section 704(c) and the Regulations under it.

Any elections or other decisions relating to such allocations shall be made by the Managers in any manner that reasonably reflects the purpose and intention of this Agreement.  Allocations pursuant to this Section 14.16 are solely for purposes of federal, state and local taxes and shall not affect, or in any way be taken into account in computing, any Person’s Capital Account or share of Profits, Losses, other items or distributions pursuant to any provision of this Agreement.

14.17Distributions and Allocations in Respect to Transferred Interests

If any Interest is Transferred during any accounting period in compliance with Article 8 (Restrictions on Transfer), then Profits, Losses, each item of Profit and Loss

23

and all other items attributable to the Transferred Interest for such period shall be divided and allocated between the transferor and the transferee by taking into account their varying Interests during the period in accordance with Code Section 706(d), using any conventions permitted by law and selected by the Managers.

All distributions on or before the date of such Transfer shall be made to the transferor, and all distributions thereafter shall be made to the transferee.

14.18Tax Characterization of Payments to a Selling Partner

The Managers shall, to the greatest extent allowed by law, determine the tax classification of all payments by the Company or a Member to a Selling Member.  The parties intend that such payments shall, to the extent possible, be deductible to the Company and ordinary income to the Selling Member.

14.19Negative Capital Accounts: Tax Issues

When a Tax Liquidation occurs, any distributions required by Section 11.5((a)) shall be made in compliance with Section 1.704-1(b)(2)(ii)(b)(2) of the Regulations.

14.20Tax Matters Partner

The Initial Member shall be the Person designated to receive all notices from the Internal Revenue Service and other tax authorities that pertain to the tax affairs of the Company, and shall be the “tax matters partner” for purposes of Code Sections 6221 through 6233.  Each party agrees to be bound by those Code Sections.  The “tax matters partner” shall provide to each other Member in a timely manner the notices required to be provided by Section 301.6223(g)-1T of the Regulations and the corresponding provisions of state tax law.  The “tax matters partner” shall be reimbursed by the Company for expenses reasonably incurred in connection with his work as “tax matters partner.”  The “tax matters partner” shall not be otherwise compensated for such work; and if he or it resigns as “tax matters partner” or ceases to be a Member, then the Members shall select another “tax matters partner.”

14.21Tax Definitions

14.21(a)“Adjusted Capital Account Deficit”

means, with respect to any Member, the deficit balance, if any, in such Member’s Capital Account as of the end of the relevant fiscal year, after giving effect to the following adjustments:

(1)Credit to such Capital Account any amounts which such Member is obligated to restore pursuant to any provision of this Agreement or is deemed to be obligated to restore pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and

(2)Debit to such Capital Account the items described in Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.

24

The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently with it.

14.21(b)Capital Accounts:  Tax Issues

In determining the amount of any liability for purposes of Sections 13.1(a), 13.1(b), 13.5(a) and 13.5(b) there shall be taken into account Code Section 752(c) and any other applicable provisions of the Code and Regulations.

The provisions of Section 13.5 (Capital Account) and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Section 1.704-1(b) of the Regulations, and shall be interpreted and applied in a manner consistent with it.

If the Managers determine that to comply with the Regulations it is prudent to modify the manner in which the Capital Accounts, or any debits or credits to the Capital Accounts (including debits or credits relating to liabilities which are secured by property contributed to or distributed from the Company or which are assumed by the Company or Members), are computed, they may make such modification, provided that it is not likely to have a material effect on the amounts distributable to any Member pursuant to Article 10 (Dissolution) upon the dissolution of the Company.

The Managers also shall (a) make any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the Members and the amount of Company capital reflected on the Company’s balance sheet, as computed for book purposes, in accordance with Section 1.704-1(b)(2)(iv)(g) of the Regulations, and (b) make any appropriate modifications if unanticipated events might otherwise cause this Agreement not to comply with Section 1.704-1(b) of the Regulations.

14.21(c)“Depreciation”

means, for each fiscal year or other period, an amount equal to the depreciation, amortization or other cost recovery deduction allowable with respect to an asset for such year or other period, except that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization or other cost recovery deduction for such year or other period bears to such beginning adjusted tax basis; provided, however, that if the federal income tax depreciation, amortization or other cost recovery deduction for such year is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Managers.

14.21(d)“Gross Asset Value”

means, with respect to any asset, the asset’s adjusted basis for federal income tax purposes, except as follows:

25

(1)The initial Gross Asset Value of any asset contributed by a Member to the Company shall be the gross fair market value of such asset, as determined by the contributing Member and the Company;

(2)The Gross Asset Value of any the Company asset distributed to any Member shall be the asset’s gross fair market value on the date of distribution;

(3)The Gross Asset Values of all the Company assets shall be adjusted to equal their respective gross fair market values, as determined by the Managers, as of the following times:  (a) the acquisition of an additional Interest by any new or existing Member in exchange for more than a de minimis Capital Contribution; (b) the distribution by the Company to a Member of more than a de minimis amount of property as consideration for an interest in the Company if such adjustment is necessary or appropriate to reflect the relative economic interests of the Members in the Company; and (c) the Tax Liquidation of the Company; provided, however that adjustments pursuant to clauses (a) and (b) above shall be made only if the Managers reasonably determine that such adjustments are necessary or appropriate to reflect the relative economic interests of the Members in the Company.

(4)The Gross Asset Values of the property of the Company shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the Regulations and Sections 14.10 (Code Section 754 Adjustments) and 14.22(j)(6) (Profits and Losses); provided, however, that Gross Asset Values shall not be adjusted pursuant to this Section 14.22(d)(4) to the extent the Managers determine that an adjustment pursuant to Section 14.22(d) is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this Section 14.22(d)(4).

(5)After the Gross Asset Value of an asset has been determined or adjusted pursuant to Section 14.22(d)(1), (3) or (4), such Gross Asset Value shall be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Profits and Losses.

14.21(e)“Member Nonrecourse Debt”

has the meaning set forth in Section 1.704-2(b)(4) of the Regulations.

14.21(f)“Member Nonrecourse Debt Minimum Gain”

means an amount, with respect to each Member Nonrecourse Debt, equal to the Minimum Gain that would result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Section 1.704-2(i)(3) of the Regulations.

26

14.21(g)“Member Nonrecourse Deductions”

has the meaning set forth in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations.

14.21(h)“Minimum Gain”

has the meaning set forth in Sections 1.704-2(b)(2) and 1.704-2(d) of the Regulations.

14.21(i)“Nonrecourse Deductions”

has the meaning set forth in Section 1.704-2(b)(1) of the Regulations.

14.21(j)“Nonrecourse Liability”

has the meaning set forth in Section 1.704-2(b)(3) of the Regulations.

14.21(k)“Profits” and “Losses”

under Section 13.16 shall be determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments:

(1)Any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Profits or Losses pursuant to this Section 14.22(j) shall be added to such taxable income or loss;

(2)Any expenditures of the Company described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Section 1.704-1(b)(2)(iv)(i) of the Regulations, and not otherwise taken into account in computing Profits or Losses pursuant to this Section 14.22(j) shall be subtracted from such taxable income or loss;

(3)If the Gross Asset Value of any Company asset is adjusted pursuant to Section  14.22(d)(3) or (4), the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Profits or Losses;

(4)Gain or loss resulting from any disposition of property of the Company with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of such property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Gross Asset Value;

(5)In lieu of the depreciation, amortization and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such fiscal year or other period, computed in accordance with Section 14.22(c) (Depreciation);

27

(6)To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or 743(b) is required by Section 1.704-1(b)(2)(iv)(m)(4) of the Regulations to be taken into account in determining Capital Accounts as a result of a distribution other than in liquidation of a Member’s interest in the Company, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis of the asset) from the disposition of the asset and shall be taken into account for purposes of computing Profits or Losses; and

(7)Notwithstanding any other provision of this Section 14.22(j), any items which are specially allocated pursuant to Sections 14.4 (Minimum Gain Chargeback) through 14.12 (Order of Application) shall not be taken into account in computing Profits or Losses.

The amounts of the items of Company income, gain, loss, or deduction available to be specifically allocated pursuant to Sections 14.4 (Minimum Gain Chargeback) through 14.12 (Order of Application), shall be determined by applying rules analogous to those set forth in this Section 14.22(j).

14.21(l)“Regulations”

means the Income Tax Regulations promulgated under the Code, as such regulations may be amended from time to time.

14.21(m)“Tax Liquidation”

means the liquidation of the Company within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations.

28

THIS AGREEMENT AFFECTS IMPORTANT RIGHTS.    EACH PARTY REPRESENTS TO EACH OTHER PARTY THAT HE OR IT HAS READ THIS AGREEMENT AND HAS HAD THE OPPORTUNITY TO SEEK INDEPENDENT TAX AND LEGAL ADVICE CONCERNING THIS AGREEMENT.

Initial Member:
DeCRANE AIRCRAFT HOLDINGS, INC.
By:	/s/ Richard J. Kaplan

29

EX-3.16.1

Exhibit 3.16.1

CERTIFICATE OF INCORPORATION

of

DECRANE CABIN INTERIORS CANADA, INC.

FIRST:  The name of this corporation shall be: DECRANE CABIN INTERIORS CANADA, INC.

SECOND:  Its registered office in the State of Delaware is to be located at 2711 Centerville Road, Suite 400, in the City of Wilmington, County of New Castle and its registered agent at such address is CORPORATION SERVICE COMPANY.

THIRD:  The purpose or purposes of the corporation shall be to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.

FOURTH:  The total number of shares of stock which this corporation is authorized to issue is:

1,000 shares with a par value of $.01.

FIFTH:  The name and address of the incorporator is as follows:

Richard J. Kaplan

DeCrane Aircraft Holdings, Inc.

2361 Rosecrans Ave., Suite 180

El Segundo, CA  90245

SIXTH:  The Board of Directors shall have the power to adopt, amend or repeal the by-laws.

SEVENTH:  No director shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such director as a director.  Notwithstanding the foregoing sentence, a director shall be liable to the extent provided by applicable law, (i) for breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director derived an improper personal benefit.  No amendment to or repeal of this Article Seventh shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment.

IN WITNESS WHEREOF, the undersigned, being the incorporator herein before named, has executed signed and acknowledged this certificate of incorporation this 1 day of January, A.D. 2004.

s/s Richard J. Kaplan
Name:	Richard J. Kaplan
Incorporator

EX-3.16.2

Exhibit 3.16.2

BYLAWS

OF
DECRANE CABIN INTERIORS CANADA, INC.

ARTICLE 1
OFFICES

SECTION 1.01. Registered Office. The registered office shall be in the City of Wilmington, County of New Castle, State of Delaware.

SECTION 1.02. Other Offices. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require.

SECTION 1.03. Books. The books of the Corporation may be kept within or without of the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require.

ARTICLE 2
MEETINGS OF STOCKHOLDERS

SECTION 2.01. Time and Place of Meetings. All meetings of stockholders shall be held at such place, either within or without the State of Delaware, on such date and at such time as may be determined from time to time by the Board of Directors (or the Chairman in the absence of a designation by the Board of Directors).

SECTION 2.02. Annual Meetings. Annual meetings of stockholders shall be held to elect the Board of Directors and transact such other business as may properly be brought before the meeting.

SECTION 2.03. Special Meetings. Special meetings of stockholders may be called by the Board of Directors or the chairman of the Board and shall be called by the Secretary at the request in writing of holders of record of a majority of the outstanding capital stock of the Corporation entitled to vote. Such request shall state the purpose or purposes of the proposed meeting.

SECTION 2.04. Notice of Meetings and Adjourned Meetings; Waivers of Notice. (a) Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended (“Delaware Law”), such notice shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder of record entitled to vote at such meeting. Unless these bylaws otherwise require, when a meeting is adjourned to another time or place (whether or not a quorum is present), notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Corporation may transact any business, which might have

been transacted at the original meeting. If the adjournment is for more than 30 days, or after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

(b) Notice of a meeting shall not be required to be given to any person if such person signs a written waiver of such notice, either before or after the date of such meeting. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends the meeting for the express purpose of objecting, at the beginning of the meeting, tothe transaction of any business because the meeting is not lawfully called or convened. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.

SECTION 2.05. Quorum. Unless otherwise provided under the certificate of incorporation or these bylaws and subject to Delaware Law, the presence, in person or by proxy, of the holders of a majority of the outstanding capital stock of the Corporation entitled to vote at a meeting of stockholders shall constitute a quorum for the transaction of business.

SECTION 2.06. Voting. (a) Unless otherwise provided in the certificate of incorporation and subject to Delaware Law, each stockholder shall be entitled to one vote for each outstanding share of capital stock of the Corporation held by such stockholder. Unless otherwise provided in Delaware Law, the certificate of incorporation or these bylaws, the affirmative vote of a majority of the shares of capital stock of the Corporation present, in person or by proxy, at a meeting of stockholders and entitled to vote on the subject matter shall be the act of the stockholders.

(b) Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to a corporate action in writing without a meeting may authorize another person or persons to act for him by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period.

SECTION 2.07. Action by Consent. (a) Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting of stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding capital stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail return receipt requested. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.

(b) Every written consent shall bear the date of signature of each stockholder who signs the consent, and no written consent shall be effective to take the corporate action referred to therein unless, within 60 days of the earliest dated consent delivered in the manner required by this Section and Delaware Law to the Corporation, written consents signed by a sufficient number of holders to take action are delivered to the Corporation by delivery to its registered

2

office in Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested.

SECTION 2.08. Organization. At each meeting of stockholders, the Chairman of the Board, if one shall have shall not have been elected, (or in his absence or if one shall not have been elected, the President) shall act as chairman of the meeting.  The Secretary (or in his absence or inability to act, the person whom the chairman of the meeting shall appoint secretary of the meeting) shall act as secretary of the meeting and keep the minutes thereof.

SECTION 2.09. Order of Business. The order of business at all meetings of stockholders shall be as determined by the chairman of the meeting.

ARTICLE 3
DIRECTORS

SECTION 3.01. General Powers. Except as otherwise provided in Delaware Law or the certificate of incorporation, the business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.

SECTION 3.02. Number, Election and Term of Office. The number of directors which shall constitute the whole Board shall be fixed from time to time by resolution of the Board of Directors but shall not be less than two or more than nine. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 3.12 herein, and each director so elected shall hold office until his successor is elected and qualified or until his earlier death, resignation or removal. Directors need not be stockholders.

SECTION 3.03. Quorum and Manner of Acting. Unless the certificate of incorporation or these bylaws require a greater number, a majority of the total number of directors shall constitute a quorum for the transaction of business, and the affirmative vote of a majority of the directors present at meeting at which a quorum is present shall be the act of the Board of Directors. When a meeting is adjourned to another time or place (whether or not a quorum is present), notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Board of Directors may transact any business, which might have been transacted at the original meeting. If a quorum shall not be present at any meeting of the Board of Directors the directors present thereat may adjourn the meeting, from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

SECTION 3.04. Time and Place of Meetings. The Board of Directors shall hold its meetings at such place, either within or without the State of Delaware, and at such time as may be determined from time to time by the Board of Directors (or the Chairman in the absence of a determination by the Board of Directors).

SECTION 3.05. Annual Meeting. The Board of Directors shall meet for the purpose of organization, the election of officers and the transaction of other business, as soon as practicable after each annual meeting of stockholders, on the same day and at the same place where such

3

annual meeting shall be held. Notice of such meeting need not be given. In the event such annual meeting is not so held, the annual meeting of the Board of Directors may be held at such place either within or without the state of Delaware, on such date and at such time as shall be specified in a notice thereof given as hereinafter provided in Section 3.07 hereof or in a waiver of notice thereof signed by any director who chooses to waive the requirement of notice.

SECTION 3.06. Regular Meetings. After the place and time of regular meetings ofthe Board ofDirectors shall have been determined and notice thereof shall have been once given to each member of the Board ofDirectors, regular meetings may be held without further notice being given.

SECTION 3.07. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board or the President and shall be called by the Chairman of the Board, President or Secretary on the written request of a director. Notice of special meetings of the Board of Directors shall be given to each director in such manner as is determined by the Board of Directors at least three days before the date of the meeting unless, in the view of the Chairman of the Board, the President or the Secretary, there is an urgency requiring the meeting to be held on shorter notice, in which event notice shall be given as far in advance of the time of the meeting as is practicable under the circumstances.

SECTION 3.08. Committees. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.  In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not the member or members present constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.  Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the certificate of incorporation (except that a committee may, to the extent authorized in a resolution or resolutions providing for the issuance of any class or series of stock adopted by the Board of Directors as provided in subsection (a) of Section 151 of the Delaware General Corporation Law and the certificate of incorporation, fix the voting powers, designations, preferences, rights and qualifications, limitations and restrictions of any such class or series of stock, including rights to receive dividends or other distributions, rights upon the dissolution of, or upon any distribution of the assets of, the Corporation and rights with respect to conversion into, or exchange for, shares of any other class or classes or any other series of the same or other class or classes of stock, and fix the number of shares of such class or series of stock or authorize the increase or decrease in such number of shares) adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the bylaws of the Corporation; and unless the resolution of the Board of Directors or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock.  Each

4

committee shall keep regular minutes of its meetings and report the same to the Board of Directors

SECTION 3.09. Action by Consent. Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee.

SECTION 3.10. Telephonic Meetings. Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

SECTION 3.11. Resignation. Any director may resign at any time by giving written notice to the Board of Directors or to the Secretary of the Corporation. The resignation of any director shall take effect upon receipt of notice thereof or at such later time as shall be specified in such notice; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

SECTION 3.12. Vacancies. Unless otherwise provided in the certificate of incorporation vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected. Each director so chosen shall hold office until his successor is elected and qualified, or until his earlier death, resignation or removal. If there are no directors in office, then an election of directors may be held in accordance with Delaware Law. Unless otherwise provided in the certificate of incorporation, when one or more directors shall resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in the filling of other vacancies.

SECTION 3.13. Removal. Any director or the entire Board of Directors may be removed, with or without cause, at any time by the affirmative vote of the holders of a majority of the outstanding capital stock of the Corporation entitled to vote and the vacancies thus created may be filled in accordance with Section 3.12 herein.

SECTION 3.14. Compensation. Unless otherwise restricted by the certificate of incorporation or these bylaws, the Board of Directors shall have authority to fix the compensation of directors, including fees and reimbursement of expenses.

5

ARTICLE 4
OFFICERS

SECTION 4.01. Principal Officers. The principal officers of the Corporation shall be a President, one or more Vice Presidents, a Treasurer and a Secretary who shall have the duty, among other things, to record the proceedings of the meetings of stockholders and directors in a book kept for that purpose. The Corporation may also have such other principal officers, including one or more Controllers, as the Board may in its discretion appoint. One person may hold the offices and perform the duties of any two or more of said offices, except that no one person shall hold the offices and perform the duties of President and Secretary.

SECTION 4.02. Election, Term of Office and Remuneration. The principal officers of the Corporation shall be elected annually by the Board of Directors at the annual meeting thereof. Each such officer shall hold office until his successor is elected and qualified, or until his earlier death resignation or removal.  The remuneration of all officers of the Corporation shall be fixed by the Board of Directors. Any vacancy in any office shall be filled in such manner, as the Board of Directors shall determine.

SECTION 4.03. Subordinate Officers. In addition to the principal officers enumerated in Section 4.01 hereof, the Corporation may have one or more Assistant Treasurers, Assistant Secretaries and Assistant Controllers and such other subordinate officers, agents and employees as the Board of Directors may deem necessary, each of whom shall hold office for such period as the Board of Directors may from time to time determine. The Board of Directors may delegate to any principal officer the power to appoint and to remove any such subordinate officers, agents or employees.

SECTION 4.04. Removal. Except as otherwise permitted with respect to subordinate officers, any officer may be removed, with or without cause, at any time, by resolution adopted by the Board of Directors.

SECTION 4.05. Resignations. Any officer may resign at any time by giving written notice to the Board of Directors (or to a principal officer if the Board of Directors has delegated to such principal officer the power to appoint and to remove such officer). The resignation of any officer shall take effect upon receipt of notice thereof or at such later time as shall be specified in such notice; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

SECTION 4.06. Powers and Duties. The officers of the Corporation shall have such powers and perform such duties incident to each of their respective offices and such other duties as may from time to time be conferred upon or assigned to them by the Board of Directors.

ARTICLE 5
INDEMNIFICATION

SECTION 5.01. Right of Indemnification. The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”) by reason of the fact that he, or a person for whom he is the legal

6

representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director or officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such person.  The Corporation shall be required to indemnify a person in connection with a proceeding (or part thereof) initiated by such person only if the proceeding (or part thereof) was authorized by the Board of Directors of the Corporation.

SECTION 5.02. Prepayment of Expenses. The Corporation may, in its discretion, pay the expenses (including attorneys’ fees and expert witness fees) incurred in defending any proceeding in advance of its final disposition, provided, however, that the payment of expenses incurred by a director or officer in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by the director or officer to repay all amounts advanced if it should be ultimately determined that the director or officer is not entitled to be indemnified under this Article or otherwise.

SECTION 5.03. Insurance. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss incurred by such person in any such capacity or arising out of such person’s status as such, whether or not the Corporation would have the power to indemnify such person against such liability under Delaware Law.

SECTION 5.04. Non-Exclusivity of Rights. The rights conferred on any person by this Article 5 shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the certificate of incorporation, these by-laws, agreement, vote of stockholders or disinterested directors or otherwise.

SECTION 5.05. Other Indemnification. The Corporation’s obligation, if any, to indemnify any person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or non-profit entity shall be reduced by any amount such person may collect as indemnification from such other corporation, partnership, joint venture, trust, enterprise, or nonprofit enterprise.

SECTION 5.06. Amendment of Repeal. Any repeal or modification of the foregoing provisions if this Article 5 shall not adversely effect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification.

ARTICLE 6
GENERAL PROVISIONS

SECTION 6.01. Fixing the Record Date. (a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than 60 nor less than 10 days before the date

7

of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided that the Board of Directors may fix a new record date for the adjourned meeting.

(b)In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by Delaware Law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by Delaware Law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.

(c)In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

SECTION 6.02. Dividends. Subject to limitations contained in Delaware Law and the certificate of incorporation, the Board of Directors may declare and pay dividends upon the shares of capital stock of the Corporation, which dividends may be paid either in cash, in property or in shares of the capital Stock of the Corporation.

SECTION 6.03. Fiscal Year. The fiscal year of the Corporation shall commence on January 1 and end on December 31 of each year.

SECTION 6.04. Corporate Seal. The corporation shall not have a seal.

SECTION 6.05. Voting of Stock Owned by the Corporation. The Board of Directors may authorize any person, on behalf of the Corporation, to attend, vote at and grant proxies to be used at any meeting of stockholders of any corporation (except this Corporation) in which the

8

Corporation may hold stock.

SECTION 6.06. Amendments. These bylaws or any of them, may be altered, amended or repealed, or new bylaws may be made, by the stockholders entitled to vote thereon at any annual or special meeting thereof or by the Board of Directors.

9

EX-4.1.1

Exhibit 4.1.1

SUPPLEMENTAL INDENTURE

(PATS Aircraft, LLC)

SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”), dated as of December 11, 2003 among PATS Aircraft, LLC, a Delaware limited liability company (“Guarantor”), a subsidiary of DeCrane Aircraft Holdings, Inc. (or its permitted successor), a Delaware corporation (the “Issuer”), the other Guarantors (as defined in the Indenture referred to herein) and U.S. Bank National Association, as trustee under the Indenture referred to below (the “Trustee”).

W I T N E S S E T H

WHEREAS, the Issuer has heretofore executed and delivered to the Trustee an indenture (the “Indenture”), dated as of October 5, 1998 providing for the issuance of an aggregate principal amount of up to $100.0 million of 12% Senior Subordinated Notes due 2008 (the “Notes”);

WHEREAS, the Indenture provides that under certain circumstances Guarantor shall execute and deliver to the Trustee a supplemental indenture, pursuant to which Guarantor shall unconditionally guarantee all of the Issuer’s Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the “Note Guarantee”); and

WHEREAS, pursuant to Section 9.06 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture.

NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, Guarantor and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:

1.CAPITALIZED TERMS.  Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.

2. AGREEMENT TO GUARANTEE.  The Guarantor hereby agrees as follows:

(a)Along with all Guarantors named in the Indenture, to jointly and severally Guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes or the obligations of Issuer hereunder or thereunder, that:

(i)the principal of and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, is lawful, and all other obligations of the Issuer to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and

(ii)in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately.

1

(b)The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against Issuer, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor.

(c)The following is hereby waived: diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Issuer, any right to require a proceeding first against the Issuer, protest, notice and all demands whatsoever.

(d)This Note Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and the Indenture.

(e)If any Holder or the Trustee is required by any court or otherwise to return to the Issuer, the Guarantor, or any Custodian, trustee, liquidator or other similar official acting in relation to either the Issuer or the Guarantor, any amount paid by either to the Trustee or such Holder, this Note Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect.

(f)The Guarantor shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby.

(g)As between the Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of this Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantor for the purpose of this Note Guarantee.

(h)The Guarantor shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantee.

(i)Pursuant to Section 11.03 of the Indenture, after giving effect to any maximum amount and any other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under Article 11 of the Indenture shall result in the obligations of such Guarantor under its Note Guarantee not constituting a fraudulent transfer or conveyance.

3.EXECUTION AND DELIVERY.   The Guarantor agrees that the Note Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Note Guarantee.

4.GUARANTOR MAY CONSOLIDATE ETC. ON CERTAIN TERMS.

(a)Guarantor may not consolidate with or merge with or into (whether or not Guarantor is the surviving Person), another corporation, Person or entity whether or not affiliated with Guarantor unless:

(i)subject to Section 5(a) hereof, the Person formed by or surviving any such consolidation or merger (if other than Guarantor) assumes all the obligations of Guarantor pursuant to a supplemental indenture in form and substance reasonably

2

satisfactory to the Trustee, under the Notes, the Indenture and the Registration Rights Agreement;

(ii)immediately after giving effect to such transaction, no Default or Event of Default exists; and

(iii)Issuer 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 Section 4.09 of the Indenture;

provided that, the requirements of clause (iii) of this Section 4(a) will not apply in the case of a consolidation with or merger with or into the Issuer or another Guarantor.

(b)In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture executed and delivered to the Trustee in the form of Exhibit E to the Indenture or otherwise satisfactory in form to the Trustee, of the Note Guarantee and the due and punctual performance of all of the covenants and conditions of the Indenture to be performed by the Guarantor, such successor Person shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. All the Note Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture as the Note Guarantees theretofore and thereafter issued in accordance with the terms of the Indenture as though all of such Note Guarantees had been issued at the date of the execution hereof.

(c)Except as set forth in Articles 4 and 5 of the Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in the Indenture or in any of the Notes shall prevent any consolidation or merger of Guarantor with or into the Issuer or another Guarantor, or shall prevent any sale or conveyance of the property of Guarantor as an entirety or substantially as an entirety to the Issuer or another Guarantor.

5.RELEASES.

(a)In the event of a sale or other disposition of all of the assets of Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the capital stock of Guarantor, Guarantor (in the event of a sale or other disposition, by way of such a merger, consolidation or otherwise, of all of the capital stock of Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all of the assets of Guarantor) will be released and relieved of any obligations under its Note Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture, including without limitation Section 4.10 of the Indenture.  Upon delivery by the Issuer to the Trustee of an Officers’ Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Issuer in accordance with the applicable provisions of the Indenture, including, without limitation, Section 4.10 of the Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of Guarantor from its obligations under its Note Guarantee.

(b)Any Guarantor not released from its obligations under its Note Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under the Indenture as provided in Article 11 of the Indenture.

6.NO RECOURSE AGAINST OTHERS.  No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guarantor, as such, shall have any liability for any obligations of the Issuer or Guarantor under the Notes, any Note Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation.  Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the

3

Notes.  Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy.

7.NEW YORK LAW TO GOVERN.   THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

8.COUNTERPARTS.  The parties may sign any number of copies of this Supplemental Indenture.  Each signed copy shall be an original, but all of them together represent the same agreement.

9.EFFECT OF HEADINGS.  The Section headings herein are for convenience only and shall not affect the construction hereof.

10.THE TRUSTEE.  The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by Guarantor and the Issuer.

Dated as of December 11, 2003	AUDIO INTERNATIONAL, INC.
	BY:	/s/  Richard J. Kaplan
		Name: Richard J. Kaplan
		Title: Chief Financial Officer
	CARL F. BOOTH & CO., LLC
	BY:	/s/  Richard J. Kaplan
		Name: Richard J. Kaplan
		Title: Chief Financial Officer
	CUSTOM WOODWORK & PLASTICS, LLC
	BY:	/s/  Richard J. Kaplan
		Name: Richard J. Kaplan
		Title: Chief Financial Officer
	DAH-IP HOLDINGS, INC.
	BY:	/s/  Richard J. Kaplan
		Name: Richard J. Kaplan
		Title: Chief Financial Officer

4

DAH-IP INFINITY, INC.
BY:	/s/  Richard J. Kaplan
	Name: Richard J. Kaplan
	Title: Chief Financial Officer
DECRANE AIRCRAFT FURNITURE CO., L.P. a Texas limited partnership,
By:	DAH-IP Holdings, Inc., a Delaware
	corporation, its general partner
BY:	/s/  Richard J. Kaplan
	Name: Richard J. Kaplan
	Title: Chief Financial Officer
DECRANE AIRCRAFT SEATING COMPANY, INC.
BY:	/s/  Richard J. Kaplan
	Name: Richard J. Kaplan
	Title: Chief Financial Officer
DECRANE CABIN INTERIORS, LLC
BY:	/s/  Richard J. Kaplan
	Name: Richard J. Kaplan
	Title: Chief Financial Officer
HOLLINGSEAD INTERNATIONAL, INC.
BY:	/s/  Richard J. Kaplan
	Name: Richard J. Kaplan
	Title: Chief Financial Officer
PATS AIRCRAFT, LLC
BY:	/s/  Richard J. Kaplan
	Name: Richard J. Kaplan
	Title: Chief Financial Officer
PCI NEWCO, INC.
BY:	/s/  Richard J. Kaplan
	Name: Richard J. Kaplan
	Title: Chief Financial Officer

5

PPI HOLDINGS, INC.
BY:	/s/  Richard J. Kaplan
	Name: Richard J. Kaplan
	Title: Chief Financial Officer
PRECISION PATTERN, INC.
BY:	/s/  Richard J. Kaplan
	Name: Richard J. Kaplan
	Title: Chief Financial Officer
THE INFINITY PARTNERS, LTD. a Texas limited partnership,
By:	DAH-IP Holdings, Inc., a Delaware corporation, its general partner
BY:	/s/  Richard J. Kaplan
	Name: Richard J. Kaplan
	Title: Chief Financial Officer

6

U.S. BANK NATIONAL ASSOCIATION

BY:

Name:

Title:

7

EX-4.1.9

Exhibit 4.1.9

SUPPLEMENTAL INDENTURE

(DeCrane Cabin Interiors—Canada, Inc.)

SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”), dated as of January 1, 2004 among DeCrane Cabin Interiors—Canada, Inc., a Delaware corporation (“Guarantor”), a subsidiary of DeCrane Aircraft Holdings, Inc. (or its permitted successor), a Delaware corporation (the “Issuer”), the other Guarantors (as defined in the Indenture referred to herein) and U.S. Bank National Association, as trustee under the Indenture referred to below (the “Trustee”).

W I T N E S S E T H

WHEREAS, the Issuer has heretofore executed and delivered to the Trustee an indenture (the “Indenture”), dated as of October 5, 1998 providing for the issuance of an aggregate principal amount of up to $100.0 million of 12% Senior Subordinated Notes due 2008 (the “Notes”);

WHEREAS, the Indenture provides that under certain circumstances Guarantor shall execute and deliver to the Trustee a supplemental indenture, pursuant to which Guarantor shall unconditionally guarantee all of the Issuer’s Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the “Note Guarantee”); and

WHEREAS, pursuant to Section 9.06 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture.

NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, Guarantor and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:

1.CAPITALIZED TERMS.  Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.

2.AGREEMENT TO GUARANTEE.  The Guarantor hereby agrees as follows:

(a)Along with all Guarantors named in the Indenture, to jointly and severally Guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes or the obligations of Issuer hereunder or thereunder, that:

(i)the principal of and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, is lawful, and all other obligations of the Issuer to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and

(ii)in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately.

1

(b)The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against Issuer, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor.

(c)The following is hereby waived: diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Issuer, any right to require a proceeding first against the Issuer, protest, notice and all demands whatsoever.

(d)This Note Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and the Indenture.

(e)If any Holder or the Trustee is required by any court or otherwise to return to the Issuer, the Guarantor, or any Custodian, trustee, liquidator or other similar official acting in relation to either the Issuer or the Guarantor, any amount paid by either to the Trustee or such Holder, this Note Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect.

(f)The Guarantor shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby.

(g)As between the Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of this Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantor for the purpose of this Note Guarantee.

(h)The Guarantor shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantee.

(i)Pursuant to Section 11.03 of the Indenture, after giving effect to any maximum amount and any other contingent and fixed liabilities that are relevant under any applicable Bankruptcy or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under Article 11 of the Indenture shall result in the obligations of such Guarantor under its Note Guarantee not constituting a fraudulent transfer or conveyance.

3.EXECUTION AND DELIVERY.   The Guarantor agrees that the Note Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Note Guarantee.

4.GUARANTOR MAY CONSOLIDATE ETC. ON CERTAIN TERMS.

(a)Guarantor may not consolidate with or merge with or into (whether or not Guarantor is the surviving Person), another corporation, Person or entity whether or not affiliated with Guarantor unless:

(i)subject to Section 5(a) hereof, the Person formed by or surviving any such consolidation or merger (if other than Guarantor) assumes all the obligations of Guarantor pursuant to a supplemental indenture in form and substance reasonably

2

satisfactory to the Trustee, under the Notes, the Indenture and the Registration Rights Agreement;

(ii)immediately after giving effect to such transaction, no Default or Event of Default exists; and

(iii)Issuer 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 Section 4.09 of the Indenture;

provided that, the requirements of clause (iii) of this Section 4(a) will not apply in the case of a consolidation with or merger with or into the Issuer or another Guarantor.

(b)In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture executed and delivered to the Trustee in the form of Exhibit E to the Indenture or otherwise satisfactory in form to the Trustee, of the Note Guarantee and the due and punctual performance of all of the covenants and conditions of the Indenture to be performed by the Guarantor, such successor Person shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. All the Note Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture as the Note Guarantees theretofore and thereafter issued in accordance with the terms of the Indenture as though all of such Note Guarantees had been issued at the date of the execution hereof.

(c)Except as set forth in Articles 4 and 5 of the Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in the Indenture or in any of the Notes shall prevent any consolidation or merger of Guarantor with or into the Issuer or another Guarantor, or shall prevent any sale or conveyance of the property of Guarantor as an entirety or substantially as an entirety to the Issuer or another Guarantor.

5.RELEASES.

(a)In the event of a sale or other disposition of all of the assets of Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the capital stock of Guarantor, Guarantor (in the event of a sale or other disposition, by way of such a merger, consolidation or otherwise, of all of the capital stock of Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all of the assets of Guarantor) will be released and relieved of any obligations under its Note Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture, including without limitation Section 4.10 of the Indenture.  Upon delivery by the Issuer to the Trustee of an Officers’ Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Issuer in accordance with the applicable provisions of the Indenture, including, without limitation, Section 4.10 of the Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of Guarantor from its obligations under its Note Guarantee.

(b)Any Guarantor not released from its obligations under its Note Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under the Indenture as provided in Article 11 of the Indenture.

6.NO RECOURSE AGAINST OTHERS.  No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guarantor, as such, shall have any liability for any obligations of the Issuer or Guarantor under the Notes, any Note Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation.  Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the

3

Notes.  Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy.

7.NEW YORK LAW TO GOVERN.   THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

8.COUNTERPARTS.  The parties may sign any number of copies of this Supplemental Indenture.  Each signed copy shall be an original, but all of them together represent the same agreement.

9.EFFECT OF HEADINGS.  The Section headings herein are for convenience only and shall not affect the construction hereof.

10.THE TRUSTEE.  The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by Guarantor and the Issuer.

Dated as of January 1, 2004	AUDIO INTERNATIONAL, INC.
	BY:	/s/  Richard J. Kaplan
		Name: Richard J. Kaplan
		Title: Chief Financial Officer
	CARL F. BOOTH & CO., LLC
	BY:	/s/  Richard J. Kaplan
		Name: Richard J. Kaplan
		Title: Chief Financial Officer
	CUSTOM WOODWORK & PLASTICS, LLC
	BY:	/s/  Richard J. Kaplan
		Name: Richard J. Kaplan
		Title: Chief Financial Officer
	DAH-IP HOLDINGS, INC.
	BY:	/s/  Richard J. Kaplan
		Name: Richard J. Kaplan
		Title: Chief Financial Officer

4

DAH-IP INFINITY, INC.
BY:	/s/  Richard J. Kaplan
	Name: Richard J. Kaplan
	Title: Chief Financial Officer
DECRANE AIRCRAFT FURNITURE CO., L.P. a Texas limited partnership,
By:	DAH-IP Holdings, Inc., a Delaware corporation, its general partner
BY:	/s/  Richard J. Kaplan
	Name: Richard J. Kaplan
	Title: Chief Financial Officer
DECRANE AIRCRAFT SEATING COMPANY, INC.
BY:	/s/  Richard J. Kaplan
	Name: Richard J. Kaplan
	Title: Chief Financial Officer
DECRANE CABIN INTERIORS—CANADA, INC.
BY:	/s/  Richard J. Kaplan
	Name: Richard J. Kaplan
	Title: Chief Financial Officer
DECRANE CABIN INTERIORS, LLC
BY:	/s/  Richard J. Kaplan
	Name: Richard J. Kaplan
	Title: Chief Financial Officer
HOLLINGSEAD INTERNATIONAL, INC.
BY:	/s/  Richard J. Kaplan
	Name: Richard J. Kaplan
	Title: Chief Financial Officer
PATS AIRCRAFT, LLC
BY:	/s/  Richard J. Kaplan
	Name: Richard J. Kaplan
	Title: Chief Financial Officer

5

PCI NEWCO, INC.
BY:	/s/  Richard J. Kaplan
	Name: Richard J. Kaplan
	Title: Chief Financial Officer
PPI HOLDINGS, INC.
BY:	/s/  Richard J. Kaplan
	Name: Richard J. Kaplan
	Title: Chief Financial Officer
PRECISION PATTERN, INC.
BY:	/s/  Richard J. Kaplan
	Name: Richard J. Kaplan
	Title: Chief Financial Officer
THE INFINITY PARTNERS, LTD. a Texas limited partnership,
By:	DAH-IP Holdings, Inc., a Delaware corporation, its general partner
BY:	/s/  Richard J. Kaplan
	Name: Richard J. Kaplan
	Title: Chief Financial Officer

6

U.S. BANK NATIONAL ASSOCIATION

BY:

Name:

Title:

7

EX-10.10.7

Exhibit 10.10.7

DECRANE AIRCRAFT HOLDINGS, INC.

FOURTH AMENDMENT
TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT

This FOURTH AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”) is dated as of December 10, 2003 and entered into by and among DeCrane Aircraft Holdings, Inc., a Delaware corporation (“Company”), the financial institutions listed on the signature pages hereof (“Lenders”), Credit Suisse First Boston (successor to DLJ Capital Funding, Inc.), as syndication agent for Lenders (in such capacity, “Syndication Agent”) and as administrative agent for Lenders (in such capacity, “Administrative Agent”), and is made with reference to that certain Third Amended and Restated Credit Agreement, dated as of May 11, 2000, as amended by a First Amendment to Third Amended and Restated Credit Agreement, dated as of June 30, 2000, as further amended by an Increased Commitments Agreement to Third Amended and Restated Credit Agreement, dated as of April 27, 2001, as further amended by a Second Amendment to Third Amended and Restated Credit Agreement dated as of March 19, 2002 and as further amended by a Third Amendment to Third Amended and Restated Credit Agreement dated as of March 31, 2003 (the “Credit Agreement”), by and among Company, the lenders listed on the signature pages thereof, Syndication Agent and Administrative Agent.  Capitalized terms used herein without definition shall have the same meanings herein as set forth in the Credit Agreement.

RECITALS

WHEREAS, Company and Lenders desire to amend the Credit Agreement to (i) extend the Revolving Loan Commitment Termination Date, (ii) extend the scheduled repayment dates of the Term Loans, (iii) modify the financial covenants in certain respects, (iv) increase the commitment fees payable by Company with respect to the Revolving Loans, and (v) make certain other amendments as set forth below;

NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows:

Section 1.   AMENDMENTS TO THE CREDIT AGREEMENT

1.1Amendments to Section 1: Definitions

A.Subsection 1.1 of the Credit Agreement is hereby amended by adding thereto the following definitions, which shall be inserted in proper alphabetical order:

“Net Bank Debt” means, at any date, the outstanding principal amount of all Loans and Letters of Credit less Cash and Cash Equivalents held by Company and its Subsidiaries, in each case at such date.

“Net Bank Debt Ratio” means, at the end of any Fiscal Quarter, subject to subsection 1.2(b), the ratio of (a) Net Bank Debt as of the last day of such Fiscal Quarter to

(b) Consolidated EBITDA for the consecutive four Fiscal Quarters ending on the last day of such Fiscal Quarter.

“Second Lien Facility Closing Date” means the date that Company receives Net Securities Proceeds aggregating at least $70,000,000 from the issuance of Permitted Indebtedness and the conditions to the issuance of Permitted Indebtedness required by this Agreement and any amendment thereto have been satisfied.

B.Subsection 1.1 of the Credit Agreement is further amended by adding, in the definition of the term “Change of Control”, (1) the phrase, “Liens described in subsection 7.2A(xi)” after the phrase “Liens created under the Loan Documents” in clause (i) thereof and (2) the phrase “or Permitted Indebtedness” after the phrase “any Subordinated Indebtedness” in clause (iv) thereof.”

C.Subsection 1.1 of the Credit Agreement is further amended by (a) deleting “the Permitted Indebtedness or” in clause (i) of the definition of “Intercreditor Agreement,” and (b) deleting clause (ii) in the definition of “Intercreditor Agreement” in its entirety and substituting the following therefor:

“(ii) no Holder of Permitted Indebtedness may take any action as Designated Senior Indebtedness under the Senior Subordinated Note Indenture, unless the Obligations and any refinancing of the Obligations (provided any such refinancing is secured by a First Priority Lien on the Collateral) have been paid in full in cash, all Letters of Credit have expired or been surrendered to Issuing Lender or cash collateralized in a manner satisfactory to Syndication Agent and the Revolving Loan Commitments have been terminated;”

D.Subsection 1.1 of the Credit Agreement is further amended by deleting the definition of “Issuing Lender” in its entirety and substituting the following therefor:

“Issuing Lender” means any Lender that at the request of Company agrees to issue a Letter of Credit pursuant to subsection 3.1(B)(ii) and, for purposes of that certain Letter of Credit issued for the benefit of Royal Indemnity Company on behalf of itself and its affiliated companies in the face amount of $400,000, Bank One NA, until such Letter of Credit is surrendered or expires.

E.Subsection 1.1 of the Credit Agreement is further amended by replacing the term “First Chicago” with “DLJ” each time such term appears in the definitions of “Corporate Base Rate,” “Eurodollar Base Rate,” and “Swing Line Lender,” and by deleting the definition of “First Chicago.”

F.Subsection 1.1 of the Credit Agreement is further amended, effective upon the Second Lien Facility Closing Date, by deleting the definition of “Working Capital Loan Commitment Termination Date”.

G.Subsection 1.1 of the Credit Agreement is further amended, effective upon the Second Lien Facility Closing Date, by deleting the definitions of “Permitted

2

Indebtedness,” “Revolving Loan Commitment Termination Date” and “Subdebt Reduction Event” and replacing them with the following:

“Permitted Indebtedness”  means up to $100,000,000 in aggregate principal amount of Indebtedness (plus any amounts paid in kind or otherwise accreted to the original principal amount to satisfy interest obligations) which (a) shall (i) provide for no scheduled redemptions, scheduled prepayments (excluding requirements to prepay or purchase upon asset sales, change of control events, equity contributions and other similar prepayment events and excluding any requirement to prepay upon an acceleration), sinking fund installment payments or maturities prior to June 30, 2008 and (ii) not bear cash interest in excess of 12% per annum or, with respect to up to $10,000,000 of such Permitted Indebtedness, a floating rate equal to either (1) 8.5% per annum plus a rate based on applicable Eurodollar rates or (2) 7.5% per annum plus a rate based on the prime rate of the agent for such Permitted Indebtedness, (b) may be secured by Liens on all or a portion of the Collateral, subject to an Intercreditor Agreement, and (c) shall be issued pursuant to documentation containing covenants, defaults, remedies and other material terms in form and substance satisfactory to Syndication Agent.

“Revolving Loan Commitment Termination Date” means March 31, 2006.

“Subdebt Reduction Event” means the first issuance after April 1, 2003 of Permitted Indebtedness (other than Permitted Indebtedness issued on the Second Lien Facility Closing Date) in a principal amount equal to or greater than $50 million.

1.2Amendment to Subsection 1.2:  Accounting Terms; Utilization of GAAP for Purposes of Calculations under Agreement.

Subsection 1.2(b) of the Credit Agreement is hereby amended, effective upon the Second Lien Facility Closing Date, by inserting “, Net Bank Debt Ratio” after “Consolidated Leverage Ratio.”

1.3Amendment to Subsection 2.1:  Commitments; Making of Loans; Notes.

Subsection 2.1A(iii) is hereby amended to read in full as follows:

(iii)“Revolving Loans.  Each Revolving Lender severally agrees, subject to the limitations set forth below with respect to the maximum amount of Revolving Loans permitted to be outstanding from time to time, to lend to Company from time to time during the period from the Second Amendment Closing Date to but excluding the Revolving Loan Commitment Termination Date an aggregate amount not exceeding its Pro Rata Share of the aggregate amount of the Revolving Loan Commitments to be used for the purposes identified in subsection 2.5B.  As of December 10, 2003, the aggregate amount of the Revolving Loan Commitments is $40,000,000, and, on the Second Lien Facility Closing Date the aggregate amount of the Revolving Loan Commitments shall be reduced to $24,000,000; provided that the Revolving Loan Commitments of the Revolving Lenders shall be adjusted to give effect to any assignments of the Revolving Loan Commitments pursuant to subsection

3

10.1B; and provided further that the amount of the Revolving Loan Commitments shall be reduced from time to time by the amount of any reductions thereto made pursuant to subsection 2.4B(ii).  Each Revolving Lender’s Revolving Loan Commitment shall expire on the Revolving Loan Commitment Termination Date and all Revolving Loans and all other amounts owed hereunder with respect to the Revolving Loans and the Revolving Loan Commitments shall be paid in full no later than that date.  Amounts borrowed under this subsection 2.1A(iii) may be repaid and, at any time to but excluding the Revolving Loan Commitment Termination Date, reborrowed.

Anything contained in this Agreement to the contrary notwithstanding, in no event shall the Total Utilization of Revolving Loan Commitments at any time exceed the Revolving Loan Commitments then in effect.”

1.4Amendment to Subsection 2.2:  Interest on the Loans.

Subsection 2.2B(v) is hereby amended to read in full as follows effective on the Second Lien Facility Closing Date:

“(v)no Interest Period with respect to any portion of the Tranche A Term Loans shall extend beyond March 31, 2006, no Interest Period with respect to any portion of the Tranche B Term Loans shall extend beyond March 31, 2007, no Interest Period with respect to any portion of the Tranche D Term Loans shall extend beyond December 31, 2007 and no Interest Period with respect to any portion of the Revolving Loans shall extend beyond the Revolving Loan Commitment Termination Date;”

1.5Amendment to Subsection 2.3:  Fees

Subsection 2.3A is hereby amended to read in full as follows:

“A.Commitment Fees.  Company agrees to pay to Administrative Agent, for distribution to each Revolving Lender in proportion to that Lender’s Pro Rata Share of the Revolving Loan Commitments, commitment fees for each day during the period from and including the Second Lien Facility Closing Date to and excluding the Revolving Loan Commitment Termination Date (or, if earlier, the date of termination of the Revolving Loan Commitments in their entirety) on the excess on such day of the Revolving Loan Commitments over the sum of (i) the aggregate principal amount of outstanding Revolving Loans on such day plus (ii) the Letter of Credit Usage (but not including any outstanding Swing Line Loans) on such day at a rate per annum equal to the commitment fee percentage set forth below opposite the Consolidated Leverage Ratio as set forth in the most recent Margin Determination Certificate delivered pursuant to subsection 6.1(iv), depending on utilization of the Revolving Loan Commitments (i.e., if the Total Utilization of Revolving Loan Commitments exceeds 50% of the Revolving Loan Commitments as of any date, the commitment fee percentage will be the lower of the two rates per annum set forth below opposite the relevant Consolidated Leverage Ratio):

4

	Revolving Loan Commitment Fee Percentage
Consolidated Leverage Ratio	Utilization Less Than or Equal to 50%		Utilization Greater Than 50%
Greater than or equal to 5.00:1.00	1.50	%	1.25	%
Greater than or equal to 4.00:1.00 but less than 5.00:1.00	1.375	%	1.125	%
Greater than or equal to 3.00:1.00 but less than 4.00:1.00	1.30	%	1.05	%
Less than 3.00:1.00	1.25	%	1.00	%

such commitment fees to be calculated on the basis of a 360-day year and the actual number of days elapsed and to be payable quarterly in arrears on each Quarterly Date of each year, commencing on the first such date to occur after the Second Lien Facility Closing Date, and on the Revolving Loan Commitment Termination Date.  Changes in the applicable commitment fee rate for Revolving Loan Commitments resulting from a change in the Consolidated Leverage Ratio shall become effective as provided in subsection 2.3C. In the event that Company fails to deliver a Margin Determination Certificate timely in accordance with the provisions of subsection 6.1(iv), from the time such Margin Determination Certificate was required to be delivered until such date as such a Margin Determination Certificate is actually delivered, the applicable commitment fee percentage shall be the maximum percentage amount set forth above per annum.  Commitment Fees for periods prior to the Second Lien Facility Closing Date shall accrue as provided in this Agreement as in effect prior to the Second Lien Facility Closing Date.”

1.6Amendments to Subsection 2.4:  Repayments, Prepayments and Reductions in Loan Commitments; General Provisions Regarding Payments

A.Subsection 2.4A of the Credit Agreement is amended to read as follows, effective upon the Second Lien Facility Closing Date:

“A.Scheduled Payments of Tranche A Term Loans, Tranche B Term Loans and Tranche D Term Loans.

(i)Scheduled Payments of Tranche A Term Loans.  As of December 10, 2003, giving effect to prepayments and repayments made by Company on or prior to such date, the outstanding principal amount of the Tranche A Term Loans is $11,508,141.  After giving effect to the mandatory prepayment required by reason of the issuance of Permitted Indebtedness on the Second Lien Facility Closing Date, the outstanding principal amount of the Tranche A Term Loans will be $6,904,885.  After the Second Lien Facility Closing Date, Company shall make principal payments on

5

the Tranche A Term Loans on each of the following dates in the aggregate amount set forth opposite such date in the table set forth below:

Scheduled Repayment Date	Scheduled Repayment of Tranche A Term Loans
December 31, 2005	$	2,639,260
March 31, 2006	$	4,265,625
Total	$	6,904,885

; provided that the scheduled installments of principal of the Tranche A Term Loans set forth above shall be reduced by an amount equal to the aggregate principal amount of any voluntary or mandatory prepayments of the Tranche A Term Loans in accordance with subsection 2.4B(iv); and provided, further that the Tranche A Term Loans and all other amounts owed hereunder with respect to the Tranche A Term Loans shall be paid in full no later than March 31, 2006, and the final installment payable by Company in respect of the Tranche A Term Loans on such date shall be in an amount, if such amount is different from that specified above, sufficient to repay all amounts owing by Company under this Agreement with respect to the Tranche A Term Loans.

(ii)Scheduled Payments of Tranche B Term Loans.  As of December 10, 2003, giving effect to prepayments and repayments made by Company on or prior to such date, the outstanding principal amount of the Tranche B Term Loans is $66,515,769.  After giving effect to the mandatory prepayment required by reason of the issuance of Permitted Indebtedness on the Second Lien Facility Closing Date, the outstanding principal amount of the Tranche B Term Loans will be $39,909,461.  After the Second Lien Facility Closing Date, Company shall make principal payments on the Tranche B Term Loans on each of the following dates in the aggregate amount set forth opposite such date in the table set forth below:

Scheduled Repayment Date	Scheduled Repayment of Tranche B Term Loans
December 31, 2006	$	8,084,461
March 31, 2007	$	31,825,000
Total	$	39,909,461

; provided that the scheduled installments of principal of the Tranche B Term Loans set forth above shall be reduced by an amount equal to the aggregate principal amount of any voluntary or mandatory prepayments of the Tranche B Term Loans in accordance with subsection 2.4B(iv); and provided, further that the Tranche B Term

6

Loans and all other amounts owed hereunder with respect to the Tranche B Term Loans shall be paid in full no later than March 31, 2007, and the final installment payable by Company in respect of the Tranche B Term Loans on such date shall be in an amount, if such amount is different from that specified above, sufficient to repay all amounts owing by Company under this Agreement with respect to the Tranche B Term Loans.

(iii)Scheduled Payments of Tranche D Term Loans.  As of December 10,  2003, giving effect to prepayments and repayments made by Company on or prior to such date, the outstanding principal amount of the Tranche D Term Loans is $56,177,729.  After giving effect to the mandatory prepayment required by reason of the issuance of Permitted Indebtedness on the Second Lien Facility Closing Date, the outstanding principal amount of the Tranche D Term Loans will be $33,706,637.  After the Second Lien Facility Closing Date, Company shall make principal payments on the Tranche D Term Loans on each of the following dates in the aggregate amount set forth opposite such date in the table set forth below:

Scheduled Repayment Date	Scheduled Repayment of Tranche D Term Loans
September 30, 2007	$	7,173,825
December 31, 2007	$	26,532,812
Total	$	33,706,637

; provided that the scheduled installments of principal of the Tranche D Term Loans set forth above shall be reduced by an amount equal to the aggregate principal amount of any voluntary or mandatory prepayments of the Tranche D Term Loans in accordance with subsection 2.4B(iv); and provided, further that the Tranche D Term Loans and all other amounts owed hereunder with respect to the Tranche D Term Loans shall be paid in full no later than December 31, 2007 and the final installment payable by Company in respect of the Tranche D Term Loans on such date shall be in an amount, if such amount is different from that specified above, sufficient to repay all amounts owing by Company under this Agreement with respect to the Tranche D Term Loans.”

B.Subsection 2.4B(iii)(c) of the Credit Agreement is hereby amended by deleting the last proviso thereof and substituting the following therefor:

“; provided further that, notwithstanding the foregoing, the Net Securities Proceeds from the issuance of any Permitted Indebtedness shall be applied to the prepayment of Loans as provided in subsection 2.4B(iv)(b) no later than the first Business Day following receipt thereof.”

C.Subsection 2.4B(iv)(b) of the Credit Agreement is hereby amended by adding at the end thereof a further proviso as follows:

7

“; provided further that, notwithstanding the foregoing, (i) of the Net Securities Proceeds from the issuance of Permitted Indebtedness on the Second Lien Facility Closing Date, $53,680,656 shall be applied to the prepayment of the Term Loans as provided in subsection 2.4B(iv)(c) and up to 100% of the remaining Net Securities Proceeds shall be applied to the prepayment of the Revolving Loans to the extent of such outstanding Revolving Loans, and (ii) 50% of the Net Securities Proceeds from the issuance of any Permitted Indebtedness after the Second Lien Facility Closing Date shall be applied to the prepayment of the Loans as provided in subsection 2.4B(iv)(c), and the balance, in each case, may be retained by Company for general corporate purposes.”

1.7Amendments to Section 3:  Letters of Credit 

A.Subsection 3.1A(iii) of the Credit Agreement is hereby amended by adding at the end thereof a further proviso as follows:

“provided further that nothing in this clause (iii) shall obligate Bank One NA, as Issuing Lender, to extend that certain Letter of Credit issued for the benefit of Royal Indemnity Company in the face amount of $400,000 beyond December 31, 2003, the scheduled expiration of such Letter of Credit.”

B.Subsection 3.1.B(ii) of the Credit Agreement is hereby amended to read as follows:

“(ii)Issuing Lender.  Company may request any Lender to issue a Letter of Credit.  If such Lender agrees to issue such Letter of Credit, such Lender shall promptly notify Company and Administrative Agent that it has elected to issue such Letter of Credit and such Lender shall thereafter be the Issuing Lender of such Letter of Credit.”

1.8Amendment to Section 6:  Company’s Affirmative Covenants

Subsection 6.5 of the Credit Agreement is hereby amended by adding the following phrase at the end of the first sentence thereof:  “unless otherwise consented to by Company”.

1.9Amendments to Section 7:  Company’s Negative Covenants

A.Subsection 7.2C of the Credit Agreement is hereby amended by inserting “and, with respect solely to clauses (ii) and (iii) below, any Indebtedness incurred in reliance on Section 7.1(x)” at the end of clause (y) after “(viii)”.

B.Subsection 7.3(xi) of the Credit Agreement is hereby amended to read as follows:

“(xi)Company and its Subsidiaries may (x) continue to own Investments in the form of loans made prior to the Second Lien Facility Closing Date to officers, directors and employees of the Company and its

8

Subsidiaries for the sole purpose of purchasing common stock of Parent (or purchases of such loans made by others) and (y) make and own Investments in the form of loans to Global Technology Partners in an aggregate principal amount not to exceed $1,000,000 for the sole purpose of purchasing common stock of Parent;

C.Subsection 7.3(xiii) of the Credit Agreement is hereby amended by replacing “$10,000,000” with “5,000,000” and adding at the end thereof a proviso as follows:

“; provided that such Investments are with respect to businesses similar or related to the businesses engaged in by Company and its Subsidiaries.”

D.Subsection 7.5 of the Credit Agreement is hereby amended by deleting the text of clauses (ii) and (iv).

E.Subsection 7.6A of the Credit Agreement is hereby amended by adding after the table at the end thereof the following:

“; provided further that, notwithstanding the foregoing, effective upon the Second Lien Facility Closing Date, the immediately preceding table shall be amended in its entirety for all periods from and including the Fourth Fiscal Quarter 2003, as follows:

Period	Minimum Fixed Charge Coverage Ratio
4th Fiscal Quarter, 2003	.70	x
1st Fiscal Quarter, 2004	.75	x
2nd Fiscal Quarter, 2004	.70	x
3rd Fiscal Quarter, 2004	.70	x
4th Fiscal Quarter, 2004	.75	x
1st Fiscal Quarter, 2005	.85	x
2nd Fiscal Quarter, 2005	.90	x
3rd Fiscal Quarter, 2005	.90	x
4th Fiscal Quarter, 2005	.80	x
1st Fiscal Quarter, 2006	.80	x
2nd Fiscal Quarter, 2006	.80	x
3rd Fiscal Quarter, 2006	.75	x
4th Fiscal Quarter, 2006 and thereafter	.75	x”

F.Subsection 7.6B of the Credit Agreement is hereby amended to read in full as follows, effective upon the Second Lien Facility Closing Date:

“B.Maximum Net Bank Debt Ratio.  Company shall not permit the Net Bank Debt Ratio as of the last day of any Fiscal Quarter, beginning with the Fourth Fiscal Quarter 2003 (or if the Second Lien Facility Closing Date occurs after the Fourth Fiscal Quarter 2003, the first Fiscal Quarter ended on or after the Second Lien

9

Facility Closing Date), occurring during any period set forth below to exceed the correlative ratio indicated:

Period	Minimum Fixed Charge Coverage Ratio
4th Fiscal Quarter, 2003	3.45	x
1st Fiscal Quarter, 2004	3.60	x
2nd Fiscal Quarter, 2004	3.75	x
3rd Fiscal Quarter, 2004	3.85	x
4th Fiscal Quarter, 2004	3.30	x
1st Fiscal Quarter, 2005	3.15	x
2nd Fiscal Quarter, 2005	2.95	x
3rd Fiscal Quarter, 2005	2.90	x
4th Fiscal Quarter, 2005	2.80	x
1st Fiscal Quarter, 2006	2.65	x
2nd Fiscal Quarter, 2006	2.55	x
3rd Fiscal Quarter, 2006	2.45	x
4th Fiscal Quarter, 2006 and thereafter	2.35	x”

G.Subsection 7.6C of the Credit Agreement is hereby amended by adding after the table at the end thereof the following:

“; provided further that, notwithstanding the foregoing, effective upon the Second Lien Facility Closing Date, the immediately preceding table shall be amended in its entirety for all periods from and including the Fourth Fiscal Quarter 2003 (or if the Second Lien Facility Closing Date occurs after the Fourth Fiscal Quarter 2003, from and including the first Fiscal Quarter ended on or after the Second Lien Facility Closing Date), as follows:

Quarter Ended	Minimum EBITDA Amount
4th Fiscal Quarter, 2003	$	24,000,000
1st Fiscal Quarter, 2004	24,600,000
2nd Fiscal Quarter, 2004	23,900,000
3rd Fiscal Quarter, 2004	24,200,000
4th Fiscal Quarter, 2004	26,400,000
1st Fiscal Quarter, 2005	29,000,000
2nd Fiscal Quarter, 2005	30,600,000
3rd Fiscal Quarter, 2005	32,400,000
4th Fiscal Quarter, 2005	32,300,000
1st Fiscal Quarter, 2006	33,800,000
2nd Fiscal Quarter, 2006	35,300,000
3rd Fiscal Quarter, 2006	36,800,000
4th Fiscal Quarter, 2006 and thereafter	38,200,000”

H.Subsection 7.6D of the Credit Agreement is hereby amended by adding after the table at the end thereof the following:

10

“; provided further that, notwithstanding the foregoing, effective upon the Second Lien Facility Closing Date, the immediately preceding table shall be amended in its entirety for all periods from and including the Fourth Fiscal Quarter 2003 (or if the Second Lien Facility Closing Date occurs after the Fourth Fiscal Quarter 2003, from and including the first Fiscal Quarter ended on or after the Second Lien Facility Closing Date), as follows:

Period	Minimum Interest Coverage Ratio
4th Fiscal Quarter, 2003	1.00	x
1st Fiscal Quarter, 2004	.95	x
2nd Fiscal Quarter, 2004	.90	x
3rd Fiscal Quarter, 2004	.85	x
4th Fiscal Quarter, 2004	.90	x
1st Fiscal Quarter, 2005	.95	x
2nd Fiscal Quarter, 2005	1.00	x
3rd Fiscal Quarter, 2005	1.05	x
4th Fiscal Quarter, 2005	1.05	x
1st Fiscal Quarter, 2006	1.05	x
2nd Fiscal Quarter, 2006	1.10
3rd Fiscal Quarter, 2006	1.15
4th Fiscal Quarter, 2006	1.15
1st Fiscal Quarter, 2007 and thereafter	1.20	”

I.Subsection 7.6E of the Credit Agreement is hereby amended by adding after the table at the end thereof the following:

“; provided further that, notwithstanding the foregoing, effective upon the Second Lien Facility Closing Date, the immediately preceding table shall be amended in its entirety for all periods from and including the Fourth Fiscal Quarter 2003 (or if the Second Lien Facility Closing Date occurs after the Fourth Fiscal Quarter 2003, from and including the first Fiscal Quarter ended on or after the Second Lien Facility Closing Date), as follows:

Period	Maximum Net Senior Debt Ratio
4th Fiscal Quarter 2003	7.10	x
1st Fiscal Quarter, 2004	7.20	x
2nd Fiscal Quarter, 2004	7.50	x
3rd Fiscal Quarter, 2004	7.55	x
4th Fiscal Quarter, 2004	6.70	x
1st Fiscal Quarter, 2005	6.25	x
2nd Fiscal Quarter, 2005	5.90	x
3rd Fiscal Quarter, 2005	5.70	x
4th Fiscal Quarter, 2005	5.65	x
1st Fiscal Quarter, 2006	5.40	x

11

Period	Maximum Net Senior Debt Ratio
2nd Fiscal Quarter, 2006	5.20	x
3rd Fiscal Quarter, 2006	5.00	x
4th Fiscal Quarter, 2006 and thereafter	4.75	x"

J.Subsection 7.7(xii) of the Credit Agreement is hereby amended by replacing “75%” in clause (y) with “90%”.

K.Subsection 7.12 of the Credit Agreement is hereby amended by replacing “10%” with “5%”, inserting “consistent with past practice” at the end of clauses (ii) and (v) thereof and inserting “or any Intercreditor Agreement” at the end of clause (ix) thereof.

L.Subsection 7.15C of the Credit Agreement is hereby amended by inserting “(other than any Permitted Indebtedness issued on the Second Lien Facility Closing Date)” after “Indebtedness.”

M.Subsection 7.15 of the Credit Agreement is hereby amended by adding at the end thereof a new subparagraph D as follows:

“D.Company shall not, and shall not permit any of its Subsidiaries to, amend or otherwise change the terms of any Permitted Indebtedness, or make any amendment thereof or change thereto, if the effect of such amendment or change is to increase the interest rate or fees on such Permitted Indebtedness, increase the cash component of interest payments, change (to earlier dates) any dates upon which payments of principal or interest are due thereon, change any event of default or condition to an event of default with respect thereto (other than to eliminate any such event of default or increase any grace period related thereto), change the redemption, prepayment or defeasance provisions thereof, change the subordination provisions thereof (or of any guaranty thereof), or change any collateral therefor (other than to release such collateral or add collateral as to which a First Priority Lien has been granted to Administrative Agent for the benefit of Lenders), or if the effect of such amendment or change, together with all other amendments or changes made, is to increase materially the obligations of the obligor thereunder to the detriment of Lenders or to confer any additional rights on the holders of such Permitted Indebtedness (or a trustee or other representative on their behalf) which would be adverse to Lenders.”

1.10Amendment to Section 9.3:  Successor Agents and Swing Line Lender.  Subsection 9.3B of the Credit Agreement is hereby amended by deleting “First Chicago” and by inserting “DLJ” in lieu thereof.

12

Section 2.   CONDITIONS TO EFFECTIVENESS; SECOND LIEN FACILITY CLOSING DATE

A.Section 1 of this Amendment shall become effective only upon the satisfaction of all of the following conditions precedent and the conditions set forth in Section 5E hereof (the date of satisfaction of such conditions being referred to herein as the “Fourth Amendment Effective Date”); provided that, certain provisions of Section 1 shall become effective upon consent by Requisite Lenders and certain other provisions of Section 1 shall become effective only upon consent by each Lender (as noted in clause (3) below):

1.On or before the Fourth Amendment Effective Date, Company shall deliver to Lenders (or to Syndication Agent for Lenders with sufficient originally executed copies, where appropriate, for each Lender and its counsel) the following, each, unless otherwise noted, dated the Fourth Amendment Effective Date:

(a)Resolutions of its Board of Directors approving and authorizing the execution, delivery, and performance of this Amendment and of allonges to the Notes (the “Allonges”) in accordance with subsection B.3 below, certified as of the Fourth Amendment Effective Date by its corporate secretary or an assistant secretary as being in full force and effect without modification or amendment;

(b)Signature and incumbency certificates of its officers executing this Amendment and any Allonges; and

(c)Executed originals of this Amendment, executed by Parent, Company and each Subsidiary Guarantor.

2.Lenders shall have received originally executed copies of one or more favorable written opinions of Davis Polk & Wardwell, Spolin Silverman Cohen & Bartlett LLP and other counsel reasonably acceptable to the Agents, each counsel for Company, in form and substance reasonably satisfactory to Syndication Agent and its counsel, dated as of the Fourth Amendment Effective Date and setting forth, collectively, substantially the matters in the opinions designated in Annex A to this Amendment.

3.Executed originals of this Amendment executed by (a) as to Section 1.1 (other than Sections 1.1A, 1.1F and 1.1G), Section 1.7, Section 1.8, Section 1.9D and Section 1.10, Requisite Lenders, and (b) as to each other provision of Section 1 of this Amendment, each Lender.

4.All fees and expenses owing to Administrative Agent in connection with this Amendment pursuant to Section 5B that have been invoiced to Company at least one Business Day prior to the Fourth Amendment Effective Date shall be paid to Administrative Agent on the Fourth Amendment Effective Date.

5.All documents executed or submitted in connection with the transactions contemplated hereby by or on behalf of Parent, Company or any of its Subsidiaries shall be reasonably satisfactory in form and substance to Agents and their counsel; Agents and their counsel shall have received all information, approvals, opinions, documents or instruments

13

that Agents or their counsel shall have reasonably requested, including as may be requested in connection with the receipt of executed originals pursuant to Section 2A(3)(b) of this Amendment, if such receipt occurs after the date that all other conditions specified in this Section 2A have been satisfied.

B.On the Second Lien Facility Closing Date,

1.Company shall have paid any and all amendment fees due in connection with this Amendment.

2.Company shall have received Net Securities Proceeds equal to at least $70,000,000 from the issuance and sale of Permitted Indebtedness.

3.Upon request of any Lender at least three Business Days prior to the Second Lien Facility Closing Date, such Lender shall have received an Allonge to such Lender’s Note, reflecting the extension of the maturity date thereof.

4.Syndication Agent shall have received executed originals of documentation satisfactory to it evidencing the Permitted Indebtedness issued on the Second Lien Facility Closing Date demonstrating compliance with the provisions of the Credit Agreement, including the Intercreditor Agreement and the opinion of counsel required by subsection 7.1(x) of the Credit Agreement.

Section 3.   COMPANY’S REPRESENTATIONS AND WARRANTIES

In order to induce Lenders to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, Company represents and warrants to each Lender that the following statements are true, correct and complete on and as of the Fourth Amendment Effective Date:

A.Corporate Power and Authority.  Each of Company and its Subsidiaries has all requisite corporate power and authority to enter into this Amendment and the Allonges and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement as amended by this Amendment and the Revolving Notes as amended by the Allonges (the “Amended Agreements”).

B.Authorization of Agreement.  The execution and delivery of this Amendment and the performance of the Amended Agreements have been duly authorized by all necessary corporate action on the part of each of Company and its Subsidiaries.

C.No Conflict.  The execution, delivery and performance by each of Company and each of its Subsidiaries of this Amendment, and the performance by Company of the Amended Agreements do not and will not (i) violate any provision of (x) any law or any governmental rule or regulation applicable to Company or any of its Subsidiaries where such violations in the aggregate have had or could reasonably be expected to have a Material Adverse Effect, (y) the Certificate or the Articles of Incorporation or Bylaws (or any other organization document) of Parent, Company or any of Company’s Subsidiaries or (z) any order, judgment or decree of any court or other agency of government binding on Company

14

 or any of Company’s Subsidiaries where such violations in the aggregate have had or could reasonably be expected to have a Material Adverse Effect, (ii) conflict with, result in a breach of or constitute a default under any Contractual Obligation of Parent, Company or any of its Subsidiaries where such conflict, breach or default in the aggregate have had or could reasonably be expected to have a Material Adverse Effect, (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of Company or any of Company’s Subsidiaries (other than Liens created under any of the Loan Documents in favor of Administrative Agent on behalf of Lenders), or (iv) require any approval of or consent of any Person under any Contractual Obligation of Parent, Company or any of Company’s Subsidiaries, except for this Amendment and such approvals or consents the failure of which to obtain has not had and could not reasonably be expected to have a Material Adverse Effect.

D.Governmental Consents.  The execution, delivery and performance by each of Company and each of its Subsidiaries of this Amendment and the performance by Company of the Amended Agreements do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any federal, state or other governmental authority or regulatory body other than any such registrations, consents, approvals, notices or other actions (x) that have been made, obtained or taken on or prior to the date on which such registrations, consents, approvals, notices or other actions are required to be made, obtained or taken, as the case may be, and are in full force and effect or (y) the failure of which to make, obtain or take has not had and could not reasonably be expected to have a Material Adverse Effect.

E.Binding Obligation.  Each of this Amendment and the Amended Agreements has been duly executed and delivered by each Loan Party that is a party thereto and is the legally valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its respective terms, subject to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.

F.Incorporation of Representations and Warranties From Credit Agreement.  The representations and warranties contained in Section 5 of the Credit Agreement are and will be true, correct and complete in all material respects on and as of the Fourth Amendment Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date.

G.Absence of Default.  No event has occurred and is continuing or will result from the consummation of the transactions contemplated by this Amendment that would constitute an Event of Default or a Potential Event of Default.

15

Section 4.   ACKNOWLEDGEMENT AND CONSENT

Each of Parent and the Subsidiary Guarantors (each a “Guarantor”) is a party to a Guaranty and each such Guarantor has guarantied the Obligations.

Each Guarantor hereby acknowledges that it has reviewed the terms and provisions of the Credit Agreement and this Amendment and consents to the amendment of the Credit Agreement effected pursuant to this Amendment.  Each Guarantor hereby confirms that the Guaranty to which it is a party or otherwise bound will continue to guaranty to the fullest extent possible the payment and performance of all “Guarantied Obligations” as such term is defined in the applicable Guaranty, including without limitation the payment and performance of all such “Guarantied Obligations” in respect of the Obligations of Company now or hereafter existing under or in respect of the Amended Agreements.

Each Guarantor (a) acknowledges and agrees that the Guaranty to which it is a party or otherwise bound shall continue in full force and effect and that all of its obligations thereunder shall be valid and enforceable and shall not be impaired or limited by the execution or effectiveness of this Amendment;  (b) represents and warrants that all representations and warranties contained in the Amended Agreements and in the Guaranty to which it is a party or otherwise bound are true, correct and complete in all material respects on and as of the Fourth Amendment Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date; and (c) acknowledges and agrees that (i) notwithstanding the conditions to effectiveness set forth in this Amendment, such Guarantor is not required by the terms of the Credit Agreement or any other Loan Document to consent to the amendments to the Credit Agreement effected pursuant to this Amendment and (ii) nothing in the Credit Agreement, this Amendment or any other Loan Document shall be deemed to require the consent of such Guarantor to any future amendments to the Credit Agreement.

Section 5.   MISCELLANEOUS

A.Effect of Amendment.  Reference to and effect on the Credit Agreement and the other Loan Documents.

(i)On and after the Fourth Amendment Effective Date, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to the “Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement shall mean and be a reference to the Amended Agreements.

(ii)On and after the Fourth Amendment Effective Date, each reference in the other Loan Documents to the “Lenders,” “Commitments,” or words of like import shall mean and be a reference to the Lenders and Commitments as amended by this Agreement.

(iii)Except as specifically amended by this Amendment, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed.

16

(iv)The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of Agents or any Lender under, the Credit Agreement or any of the other Loan Documents.

B.Fees and Expenses.  Company acknowledges that all costs, fees and expenses as described in subsection 10.2 of the Credit Agreement incurred by Agents and their counsel with respect to this Amendment and the documents and transactions contemplated hereby shall be for the account of Company.

C.Headings.  Section and subsection headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect.

D.Applicable Law.  THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

E.Counterparts; Effectiveness.  This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document.  This Amendment (other than the provisions of Section 1 hereof, the effectiveness of which is governed by Section 2 hereof) shall become effective upon the execution of a counterpart hereof by Company, Requisite Lenders, Syndication Agent and Guarantors and receipt by Company and Agents of written or telephonic notification of such execution and authorization of delivery thereof.

17

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.

DECRANE AIRCRAFT HOLDINGS, INC., a Delaware corporation
By:
	Name: Richard J. Kaplan
	Title: Senior Vice President and Chief Financial Officer
AUDIO INTERNATIONAL, INC., an Arkansas corporation (for purposes of Section 4 only) as a Subsidiary Guarantor
By:
	Name: Richard J. Kaplan
	Title: Chief Financial Officer and Secretary
CARL F. BOOTH & CO., LLC, a Delaware limited liability company (for purposes of Section 4 only) as a Subsidiary Guarantor
By:
	Name: Richard J. Kaplan
	Title: Chief Financial Officer and Secretary
CUSTOM WOODWORK & PLASTICS, LLC., a Delaware limited liability company (for purposes of Section 4 only) as a Subsidiary Guarantor
By:
	Name: Richard J. Kaplan
	Title: Chief Financial Officer and Secretary

S-1

DAH-IP HOLDINGS, INC., a Delaware corporation (for purposes of Section 4 only) as a Subsidiary Guarantor
By:
	Name: Richard J. Kaplan
	Title: Chief Financial Officer and Secretary
DAH-IP INFINITY, INC., a Delaware corporation (for purposes of Section 4 only) as a Subsidiary Guarantor
By:
	Name: Richard J. Kaplan
	Title: Chief Financial Officer and Secretary
DECRANE AIRCRAFT FURNITURE CO., L.P., a Texas limited partnership
By:  DAH-IP Holdings, Inc., a Delaware corporation, its General Partner (for purposes of Section 4 only) as a Subsidiary Guarantor
By:
	Name: Richard J. Kaplan
	Title: Chief Financial Officer and Secretary
DECRANE AIRCRAFT SEATING COMPANY, INC., a Wisconsin corporation (for purposes of Section 4 only) as a Subsidiary Guarantor
By:
	Name: Richard J. Kaplan
	Title: Chief Financial Officer and Secretary

S-2

DECRANE CABIN INTERIORS, LLC, a Delaware limited liability company (for purposes of Section 4 only) as a Subsidiary Guarantor
By:
	Name: Richard J. Kaplan
	Title: Chief Financial Officer and Secretary
HOLLINGSEAD INTERNATIONAL, INC., a California corporation (for purposes of Section 4 only) as a Subsidiary Guarantor
By:
	Name: Richard J. Kaplan
	Title: Chief Financial Officer and Secretary
PATS, INC., a Maryland corporation (for purposes of Section 4 only) as a Subsidiary Guarantor
By:
	Name: Richard J. Kaplan
	Title: Chief Financial Officer and Secretary
PCI NEWCO., INC., a Kansas corporation (for purposes of Section 4 only) as a Subsidiary Guarantor
By:
	Name: Richard J. Kaplan
	Title: Chief Financial Officer and Secretary

S-3

PPI HOLDINGS, INC., a Kansas corporation (for purposes of Section 4 only) as a Subsidiary Guarantor
By:
	Name: Richard J. Kaplan
	Title: Chief Financial Officer and Secretary
PRECISION PATTERN, INC., a Kansas corporation (for purposes of Section 4 only) as a Subsidiary Guarantor
By:
	Name: Richard J. Kaplan
	Title: Chief Financial Officer and Secretary
THE INFINITY PARTNERS, LTD., a Texas limited partnership
by:  DAH-IP Holdings, Inc., a Delaware limited partnership, its general partner (for purposes of Section 4 only) as a Subsidiary Guarantor
By:
	Name: Richard J. Kaplan
	Title: Chief Financial Officer and Secretary
DECRANE HOLDINGS CO., a Delaware corporation (for purposes of Section 4 only) as a guarantor
By:
	Name: Richard J. Kaplan
	Title: Assistant Secretary

S-4

CREDIT SUISSE FIRST BOSTON, acting through its Cayman Islands Branch (successor to DLJ Capital Funding, Inc.), as a Lender, Syndication Agent and Adminstrative Agent
By:
	Name:
	Title:
By:
	Name:
	Title:
		, as a Lender
By:
	Name:
	Title:

S-5

EX-10.12

Exhibit 10.12

U.S. $80,000,000

CREDIT AGREEMENT

Dated as of December 22, 2003

AMONG

DECRANE AIRCRAFT HOLDINGS, INC.,

as Borrower,

THE LENDERS LISTED HEREIN,

as Lenders,

CREDIT SUISSE FIRST BOSTON,

Acting through its Cayman Islands Branch,

as Syndication Agent,

and

as Administrative Agent,

SOLE LEAD ARRANGER AND BOOK RUNNER:

CREDIT SUISSE FIRST BOSTON,

Acting through its Cayman Islands Branch

DECRANE AIRCRAFT HOLDINGS, INC.

CREDIT AGREEMENT

TABLE OF CONTENTS

Section 1.		DEFINITIONS
	1.1	Defined Terms.
	1.2	Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement.
	1.3	Other Definitional Provisions and Rules of Construction.
Section 2.		AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
	2.1	Commitments; Making of Loans; Notes.
	2.2	Interest on the Loans.
	2.3	Fees.
	2.4	Repayments, Prepayments and Reductions in Loan Commitments; General Provisions Regarding Payments.
	2.5	Use of Proceeds.
	2.6	Special Provisions Governing Eurodollar Rate Loans.
	2.7	Increased Costs; Taxes; Capital Adequacy.
	2.8	Obligation of Lenders to Mitigate; Replacement of Lender.
Section 3.		CONDITIONS TO LOANS
	3.1	Loan Party Documents.
	3.2	Use of Proceeds.
	3.3	Related Agreements.
	3.4	No Material Adverse Change.
	3.5	Lien Searches.
	3.6	Solvency Certificate.
	3.7	Representations and Warranties.
	3.8	Necessary Governmental Authorizations and Consents.
	3.9	Financial Statements.
	3.10	Fees.
	3.11	Completion of Proceedings.
	3.12	Security Interests in Personal and Mixed Property.
	3.13	Notice of Borrowing.
	3.14	As of the Closing Date:
Section 4.		REPRESENTATIONS AND WARRANTIES
	4.1	Organization, Powers, Qualification, Good Standing, Business and Subsidiaries.
	4.2	Authorization of Borrowing, etc.
	4.3	Financial Condition.
	4.4	No Material Adverse Change; No Restricted Junior Payments.
	4.5	Title to Properties; Liens; Real Property.
	4.6	Litigation; Adverse Facts.
	4.7	Payment of Taxes.
	4.8	Governmental Regulation.
	4.9	Securities Activities.
	4.10	Employee Benefit Plans.
	4.11	Environmental Protection.

i

	4.12	Employee Matters.
	4.13	Solvency.
	4.14	Matters Relating to Collateral.
	4.15	Disclosure.
Section 5.		AFFIRMATIVE COVENANTS
	5.1	Financial Statements and Other Reports.
	5.2	Legal Existence, etc.
	5.3	Payment of Taxes and Claims; Tax Consolidation.
	5.4	Maintenance of Properties; Insurance; Application of Net Insurance/Condemnation Proceeds.
	5.5	Inspection Rights.
	5.6	Compliance with Laws, etc.
	5.7	Execution of Subsidiary Guaranty and Personal Property Collateral Documents by Certain Subsidiaries and Future Subsidiaries; IP Collateral.
	5.8	Future Leased Property and Future Acquisitions of Real Property; Future Acquisition of Other Property.
	5.9	PTO and CO Cover Sheets, Etc.
	5.10	Mortgages.
Section 6.		NEGATIVE COVENANTS
	6.1	Indebtedness.
	6.2	Liens and Related Matters.
	6.3	Investments.
	6.4	Contingent Obligations.
	6.5	Restricted Junior Payments.
	6.6	Financial Covenants.
	6.7	Restriction on Fundamental Changes; Asset Sales and Acquisitions.
	6.8	Consolidated Capital Expenditures.
	6.9	Fiscal Year.
	6.10	Sales and Lease-Backs.
	6.11	Sale or Discount of Receivables.
	6.12	Transactions with Stockholders and Affiliates.
	6.13	Issuance of Subsidiary Equity.
	6.14	Conduct of Business.
	6.15	Amendments of Documents Relating to Indebtedness.
Section 7.		EVENTS OF DEFAULT
	7.1	Failure to Make Payments When Due.
	7.2	Default in Other Agreements.
	7.3	Breach of Certain Covenants.
	7.4	Breach of Warranty.
	7.5	Other Defaults Under Loan Documents.
	7.6	Involuntary Bankruptcy; Appointment of Receiver, etc.
	7.7	Voluntary Bankruptcy; Appointment of Receiver, etc.
	7.8	Judgments and Attachments.
	7.9	Dissolution.
	7.10	Employee Benefit Plans.
	7.11	Invalidity of Guaranties; Failure of Security; Repudiation of Obligations.
Section 8.		THE AGENTS
	8.1	Appointment.
	8.2	Powers and Duties; General Immunity.
	8.3	Successor Agents.
	8.4	Collateral Documents.

ii

	8.5	Non-Reliance on Agents and Other Lenders.
Section 9.		MISCELLANEOUS
	9.1	Assignments and Participations in Loans.
	9.2	Expenses.
	9.3	Indemnity.
	9.4	Set-Off; Security Interest in Deposit Accounts.
	9.5	Ratable Sharing.
	9.6	Amendments and Waivers.
	9.7	Independence of Covenants.
	9.8	Notices.
	9.9	Survival of Representations, Warranties and Agreements.
	9.10	Failure or Indulgence Not Waiver; Remedies Cumulative.
	9.11	Marshalling; Payments Set Aside.
	9.12	Severability.
	9.13	Obligations Several; Independent Nature of Lenders’ Rights.
	9.14	Headings.
	9.15	APPLICABLE LAW.
	9.16	Successors and Assigns.
	9.17	Consent to Jurisdiction and Service of Process.
	9.18	Waiver of Jury Trial.
	9.19	Confidentiality.
	9.20	Counterparts; Effectiveness.
	9.21	Maximum Amount.

iii

DECRANE AIRCRAFT HOLDINGS, INC.
CREDIT AGREEMENT

This CREDIT AGREEMENT is dated as of December 22, 2003, and entered into by and among DECRANE AIRCRAFT HOLDINGS, INC., a Delaware corporation (“Company”), THE LENDERS LISTED ON SCHEDULE I ATTACHED HERETO (each individually referred to herein as a “Lender” and collectively as “Lenders”), and CREDIT SUISSE FIRST BOSTON, acting through its Cayman Islands Branch (“CSFB”), as administrative agent for Lenders (in such capacity, “Administrative Agent”), and as syndication agent for Lenders (in such capacity, “Syndication Agent”).

R E C I T A L S

WHEREAS, Company has requested that Lenders make the Loans referenced herein and has agreed to secure all of the Obligations hereunder and under the other Loan Documents by granting to Administrative Agent, on behalf of Lenders, a Lien on substantially all of its personal property and its real property, including a pledge of all of the capital stock of its Domestic Subsidiaries and a pledge of 65% of the capital stock of its Foreign Subsidiaries that are owned by Company or a Domestic Subsidiary; and

WHEREAS, Parent has agreed to guarantee the Obligations hereunder and under the other Loan Documents and secure its guaranty by granting to Administrative Agent, on behalf of Lenders, a Lien on and a pledge of all of the capital stock of Company;

WHEREAS, each of Company’s Domestic Subsidiaries has agreed to guarantee the Obligations hereunder and under the other Loan Documents and secure its guaranty by granting to Administrative Agent, on behalf of Lenders, a Lien on substantially all of its personal property and real property, including a pledge of all of the capital stock of each of its Domestic Subsidiaries and 65% of the capital stock of each of its direct Foreign Subsidiaries;

NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, Company, Lenders, Syndication Agent and Administrative Agent agree as follows:

Section 1.DEFINITIONS

1.1Defined Terms.

The following terms used in this Agreement shall have the following meanings:

“Accreted Amount” has the meaning assigned to that term in subsection 2.2A.

“Acquired Controlled Person” means any Person (i) in which Company or any of its Subsidiaries has made an Investment permitted under subsection 6.3(vii) and (ii) as to which Company or such Subsidiary exercises control.  For purposes hereof, “control” means the power to appoint a majority of the board of directors (or other equivalent governing body) of such Person or to otherwise direct or cause the direction of the management or policies of such Person, whether by contractual arrangement or otherwise.

1

“Adjusted Eurodollar Rate” means, with respect to a Eurodollar Rate Loan for the relevant Interest Period, the sum of (i) the quotient of (a) the Eurodollar Base Rate applicable to such Interest Period, divided by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to such Interest Period.  The Eurodollar Rate shall be rounded to the next higher multiple of 1/100 of 1% if the rate is not such a multiple.

“Administrative Agent” has the meaning assigned to that term in the introduction to this Agreement and also means and includes any successor Administrative Agent appointed pursuant to subsection 8.3A.

“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by Administrative Agent.

“Affected Lender” has the meaning assigned to that term in subsection 2.6C.

“Affiliate”, as applied to any Person, means any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling”, “controlled by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise.

“Affiliated Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

“Agents” means, collectively, Syndication Agent and Administrative Agent.

“Agreement” means this Credit Agreement dated as of December 22, 2003, as it may be amended, restated, supplemented or otherwise modified from time to time.

“Arranger” means CSFB, as sole lead arranger and as book runner of the credit facilities described herein.

“Asset Sale” means the sale, lease, assignment or other transfer (whether voluntary or involuntary) for value (collectively, a “transfer”) by Company or any of its Subsidiaries to any Person other than Company or any of its Wholly-Owned Subsidiaries of (i) any of the equity ownership of any of Company’s Subsidiaries, (ii) substantially all of the assets of any division or line of business of Company or any of its Subsidiaries, or (iii) any other assets (whether tangible or intangible) of Company or any of its Subsidiaries (other than (a) inventory and obsolete or worn out equipment sold in the ordinary course of business, (b) Cash Equivalents, and (c) any such other assets to the extent that the aggregate value of such assets transferred in any single transaction or related series of transactions is equal to $250,000 or less).

“Assignment Agreement” means an Assignment Agreement in substantially the form of Exhibit I annexed hereto.

“Assumed Indebtedness”means Indebtedness of a Person which (i) is in existence at the time such Person becomes a Subsidiary of Company, or (ii) is assumed in connection with an Investment in or acquisition of such Person, and has not been incurred or created by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Subsidiary of Company.

2

“Authorized Officer” means, relative to any Loan Party, its chief executive officer, president, treasurer, chief financial officer or chief accounting officer and any of its other officers whose signatures and incumbency shall have been certified to Administrative Agent and Lenders.

“Bankruptcy Code”means Title 11 of the United States Code entitled “Bankruptcy”, as now and hereafter in effect, or any successor statute.

“Base Rate” means, for any day, a rate of interest per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of the Federal Funds Effective Rate for such day plus ½% per annum.

“Base Rate Loans” means Floating Rate Loans bearing interest at rates determined by reference to the Base Rate as provided herein.

“Business Day” means (i) with respect to any borrowing, payment or rate selection of Eurodollar Base Rate, a day (other than a Saturday or Sunday) on which banks generally are open in New York and Los Angeles for the conduct of substantially all of their commercial lending activities and on which dealings in United States dollars are carried on in the London interbank market and (ii) for all other purposes, a day (other than a Saturday or Sunday) on which banks generally are open in New York and Los Angeles for the conduct of substantially all of their commercial lending activities.

“Capital Lease”, as applied to any Person, means any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person and the stated maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty.

“Cash” means money, currency or a credit balance in a Deposit Account.

“Cash Equivalents” means, as at any date of determination, (i) marketable securities (a) issued or directly and unconditionally guaranteed as to interest and principal by the United States Government or (b) issued by any agency of the United States the obligations of which are backed by the full faith and credit of the United States, in each case maturing within one year after such date; (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof, in each case maturing within one year after such date and having, at the time of the acquisition thereof, the highest rating obtainable from either Standard & Poor’s Ratings Group (“S&P”) or Moody’s Investors Service, Inc. (“Moody’s”); (iii) commercial paper maturing no more than 270 days from the date of creation thereof and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody’s; (iv) certificates of deposit or bankers’ acceptances maturing within one year after such date and issued or accepted by any Lender or by any commercial bank (including a U.S. branch of a foreign bank) that is a member of the Federal Reserve and has a combined capital and surplus and undivided profits of at least $500,000,000); (v) repurchase agreements which (a) are entered into with any entity referred to in clauses (iii) or (iv) above or any other financial institution whose unsecured long-term debt (or the unsecured long-term debt of whose holding company) is rated at least A- or better by S&P or A3 or better by Moody’s and maturing not more than one year after such time; and (b) are secured by a fully perfected security interest in securities of a type referred to in clauses (i) or (ii) above and which have a market value at the time such repurchase agreement is entered into of not less than 100% of the repurchase obligation of such counterparty entity with whom such repurchase agreement has been entered into; (vi) short-term tax exempt securities that are rated not lower than MIG-1/1+ or either Moody’s or S&P with provisions for liquidity or maturity accommodations of 183 days or less; (vii) shares of any money market mutual fund that (a) has at least 95% of its assets invested continuously in the types of investments referred to in

3

clauses (i) through (vi) and as to which withdrawals are permitted at least every 90 days; and (viii) in the case of any Subsidiary of Company 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 (i) through (vii) above.

“Certificate re Non-Bank Status” means a certificate substantially in the form of Exhibit II annexed hereto delivered by a Lender to Administrative Agent pursuant to subsection 2.7B(iv).

“Change in Control” means (i) the failure of Parent at any time to own, directly or indirectly, free and clear of all Liens and encumbrances (other than Liens created under the Loan Documents, Liens securing obligations under the First Lien Credit Agreement and obligations under Interest Rate Agreements that constitute Hedge Agreements secured on a pari passu basis by the collateral securing the obligations under the First Lien Credit Agreement and Liens described in clauses (i) and (iv) of the definition of “Permitted Encumbrances”), all right, title and interest in 100% of the capital stock of Company, other than the Company Preferred Stock; (ii) the failure of the DLJMB and the Affiliates of any entity included in the definition of “DLJMB” to own at least 51% (on a fully diluted basis) of the economic and voting interest in the voting stock of Parent; (iii) the failure of DLJMB and the Affiliates of any entity included in the definition of “DLJMB” at any time to have the right to designate or nominate at least 51% of the Board of Directors of Parent; or (iv) the occurrence of a “Change in Control” as defined under the First Lien Credit Agreement or any agreement governing any Subordinated Indebtedness or Permitted Indebtedness issued by Company or the PIK Preferred Stock or PIK Notes issued by Parent.

“Change of Control Premium” shall mean the greater of (i) 1.0% of the aggregate principal amount of the Loans being prepaid and (ii) the prepayment premium applicable pursuant to subsection 2.4B(iv).

“Closing Date” means the date on or before January 15, 2004 on which the Loans are made.

“Closing Date Mortgaged Property” means the owned property listed on Schedule 5.8.

“CO” means the United States Copyright Office or any successor or substitute office in which filings are necessary or, in the opinion of Administrative Agent, desirable in order to create or perfect Liens on any IP Collateral.

“Collateral” means, collectively, all of the real, personal and mixed property (including capital stock) in which Liens are purported to be granted pursuant to the Collateral Documents as security for the Obligations.

“Collateral Documents” means the Parent Pledge Agreement, the Security Agreement, the Pledge Agreement and the Mortgages, and all other instruments or documents delivered by any Loan Party pursuant to this Agreement or any of the other Loan Documents in order to grant to Administrative Agent, on behalf of Lenders, a Lien on any real, personal or mixed property of that Loan Party as security for the Obligations.

“Commitment” means the commitment of a Lender to make a Loan to Company on the Closing Date pursuant to subsection 2.1A, and “Commitments” means such commitments of all Lenders in the aggregate.

“Company” has the meaning assigned to that term in the introduction to this Agreement.

4

“Company Excess Cash Flow Amount” means, at any date, the portion of Consolidated Excess Cash Flow for each Fiscal Year ending prior to such date not required to be applied to prepay the Loans in accordance with subsection 2.4B(ii)(d) and not required to prepay Indebtedness under the First Lien Credit Agreement (if a First Lien Credit Agreement is then in effect).

“Company Preferred Stock” means the Senior Exchangeable Preferred Stock, which accrues dividends at the rate of 16.0% per annum and matures in 2009, issued by Company.

“Compliance Certificate” means a certificate substantially in the form of Exhibit III annexed hereto delivered to Agents and Lenders by Company pursuant to subsection 5.1(iii).

“Consolidated Capital Expenditures” means, for any period, the sum of the aggregate of all expenditures (whether paid in cash or other consideration or accrued as a liability and including that portion of Capital Leases which is capitalized on the consolidated balance sheet of Company and its Subsidiaries) by Company and its Subsidiaries during that period that, in conformity with GAAP, are included in “additions to property, plant or equipment” or comparable items reflected in the consolidated statement of cash flows of Company and its Subsidiaries; provided that Consolidated Capital Expenditures shall not include any such expenditures (x) made from the proceeds of (i) Net Insurance/Condemnation Proceeds as permitted under subsection 6.7(vii); (ii) proceeds from Asset Sales permitted pursuant to subsection 6.7(ix); or (iii) proceeds from asset dispositions permitted by subsection 6.7(iii), or dispositions of assets excluded from the definition of Asset Sales pursuant to clause (c) of the definition of “Asset Sale”; or (y) that constitute an Investment made under subsection 6.3 (other than subsection 6.3(vi)).

“Consolidated Current Assets” means, as at any date of determination, the total assets of Company and its Subsidiaries on a consolidated basis which may properly be classified as current assets in conformity with GAAP, excluding Cash and Cash Equivalents.

“Consolidated Current Liabilities” means, as at any date of determination, the total liabilities of Company and its Subsidiaries on a consolidated basis which may properly be classified as current liabilities in conformity with GAAP, excluding the current portion of any Indebtedness that by its terms or by the terms of any instrument or agreement relating thereto matures more than one year from, or is renewable or extendable at the option of Company or a Subsidiary from, the date of creation thereof.

“Consolidated EBITDA” means, for any period, subject to subsection 1.2(b), the sum (without duplication) of the amounts for such period of (i) Consolidated Net Income, (ii) any amount deducted on account of minority interests in determining Consolidated Net Income, (iii) Consolidated Interest Expense, (iv) any non-capitalized transaction costs incurred in connection with actual or proposed financings, acquisitions or divestitures (including, but not limited to, financing and refinancing fees and costs incurred in connection with the Transaction), (v) all amounts deducted on account of income taxes in determining Consolidated Net Income, (vi) total depreciation expense, (vii) total amortization expense, (viii) the amount deducted in determining Consolidated Net Income representing any net loss (or less any net gain) realized in connection with any sale, lease, conveyance or other disposition of any asset (other than in the ordinary course of business and other than from Company or any of its Subsidiaries to Company or any of its Subsidiaries), (ix) the amount deducted in determining Consolidated Net Income representing any extraordinary or non-recurring loss, (x) foreign currency translation and transaction losses (or minus foreign currency translation and transaction gains) and (xi) any other non-cash items reducing Consolidated Net Income less (a) other items increasing Consolidated Net Income constituting extraordinary gains and (b) Restricted Junior Payments of the type referred to in clause (iii)(x) of subsection 6.5 made during such period, all of the foregoing as determined on a consolidated basis for Company and its Subsidiaries in conformity with GAAP.

5

“Consolidated Excess Cash Flow” means, for any period, an amount (if positive) equal to (i) the sum, without duplication, of the amounts for such period of (a) Consolidated EBITDA and (b) the Consolidated Working Capital Adjustment minus (ii) the sum, without duplication, of the amounts for such period of (a) mandatory repayments of the Loans and scheduled, mandatory and optional repayments of other Consolidated Total Debt (excluding repayments of loans except to the extent the related commitments are permanently reduced in connection with such repayments) in each case to the extent actually made during such period, (b) Consolidated Capital Expenditures paid in cash (without duplication, net of any proceeds of any related financings with respect to such expenditures), (c) Consolidated Interest Expense paid in cash, (d) the amount of taxes based on income of Company and its Subsidiaries paid or payable in cash during such period, (e) the amount paid for Permitted Acquisitions permitted and actually made under subsection 6.7(vi) and Investments permitted and actually made under subsection 6.3(xii) but only to extent paid in cash from Company’s or its Subsidiaries’ cash balances, (f) any payments with respect to Earn-Outs actually paid during such period, (g) gains on any sale, lease, conveyance, or other disposition of any asset (other than in the ordinary course of business), and (h) any distributions with respect to minority interests made during such period.

“Consolidated Interest Coverage Ratio” means, at the end of any Fiscal Quarter, subject to subsection 1.2(b), the ratio computed for the period consisting of such Fiscal Quarter and each of the three immediately preceding Fiscal Quarters of Consolidated EBITDA to the cash portion of Consolidated Interest Expense other than commitment fees to the extent included therein (net of cash interest income).

“Consolidated Interest Expense” means, for any period, total interest expense (including that portion attributable to Capital Leases in accordance with GAAP and capitalized interest) of Company and its Subsidiaries on a consolidated basis with respect to all outstanding Indebtedness of Company and its Subsidiaries, including all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing and net costs under Interest Rate Agreements determined in accordance with GAAP, but excluding, to the extent included in such total interest expense, up-front fees and expenses and the amortization of all deferred financing costs.

 “Consolidated Leverage Ratio” means, at the end of any Fiscal Quarter, subject to subsection 1.2(b), the ratio of (a) Consolidated Total Debt (less Cash and Cash Equivalents) as of the last day of such Fiscal Quarter to (b) Consolidated EBITDA for the consecutive four Fiscal Quarters ending on the last day of such Fiscal Quarter.

“Consolidated Net Income” means, for any period, the net income (or loss) of Company and its Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP.

“Consolidated Total Debt” means, as at any date of determination, the aggregate stated balance sheet amount of all Indebtedness and Contingent Obligations with respect to letters of credit (other than letters of credit issued in connection with trade payables) of Company and its Subsidiaries, determined on a consolidated basis in accordance with GAAP.

“Consolidated Working Capital” means, as at any date of determination, the excess (or deficit) of Consolidated Current Assets over Consolidated Current Liabilities.

“Consolidated Working Capital Adjustment” means, for any period on a consolidated basis, the amount (which may be a negative number) by which Consolidated Working Capital as of the beginning of such period exceeds (or is less than) Consolidated Working Capital as of the end of such period.

6

“Contingent Obligation”, as applied to any Person, means any direct or indirect liability, contingent or otherwise, of that Person (i) with respect to any Indebtedness of another if the primary purpose or intent thereof by the Person incurring the Contingent Obligation is to provide assurance to the obligee of such Indebtedness of another that such Indebtedness of another will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such Indebtedness will be protected (in whole or in part) against loss in respect thereof, (ii) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings, or (iii) under Hedge Agreements.  Contingent Obligations shall include (a) the direct or indirect guaranty, endorsement (otherwise than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another, (b) the obligation to make take-or-pay or similar payments if required regardless of non-performance by any other party or parties to an agreement, and (c) any liability of such Person for the obligation of another through any agreement (contingent or otherwise) (X) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or (Y) to maintain the solvency or any balance sheet item, level of income or financial condition of another if, in the case of any agreement described under subclauses (X) or (Y) of this sentence, the primary purpose or intent thereof is as described in the preceding sentence.  The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if less, the amount to which such Contingent Obligation is specifically limited.

“Contractual Obligation”, as applied to any Person, means any provision of any Security issued by that Person or of any material indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject.

“Control Change Notice” has the meaning assigned to that term in subsection 2.4B(iii).

“Control Change Payment Date” has the meaning assigned to that term in subsection 2.4B(iii).

“CSFB” has the meaning assigned to that term in the introduction to this Agreement.

“Currency Agreement” means any foreign exchange contract, currency swap agreement, futures contract, option contract, synthetic cap or other similar agreement or arrangement to which Company or any of its Subsidiaries is a party.

“Declaration Notice” has the meaning assigned to that term in subsection 2.4B(iii).

“Default Rate Accreted Amount” has the meaning assigned to that term in subsection 2.2E.

“Deposit Account” means a demand, time, savings, passbook or like account with a bank, savings and loan association, credit union or like organization, other than an account evidenced by a negotiable certificate of deposit.

“DLJMB” means DLJ Merchant Banking Partners II, L.P., DLJ Offshore Partners II, C.V., DLJ Diversified Partners, L.P., DLJMB Funding II, Inc., DLJ First ESC, L.P., DLJ ESC II, L.P., UK Investment Plan 1997 Partners, DLJ Merchant Banking Partners II-A, L.P., DLJ Diversified Partners-A, L.P., DLJ EAB Partners, L.P., DLJ Millenium Partners, L.P., DLJ Millenium Partners-A, L.P., MBP II Plan Investors, L.P. and Global Technology Partners, L.L.C.

“Dollars” and the sign “$” mean the lawful money of the United States of America.

7

“Domestic Subsidiary” means a Subsidiary organized under the laws of the United States or any state or territory thereof or the District of Columbia.

“Earn-outs” means any obligations by Company or any of its Subsidiaries to pay any amounts constituting the payment of deferred purchase price with respect to any acquisition of a business (whether through the purchase of assets or shares of capital stock), the amount of which payments is calculated on the basis of, or by reference to, bona fide financial or other operating performance of such business or specified portion thereof or any other similar arrangement.

“Eligible Assignee” means (A) (i) a commercial bank organized under the laws of the United States or any state thereof; (ii) a savings and loan association or savings bank organized under the laws of the United States or any state thereof; (iii) a commercial bank organized under the laws of any other country or a political subdivision thereof; provided that (x) such bank is acting through a branch or agency located in the United States or (y) such bank is organized under the laws of a country that is a member of the Organization for Economic Cooperation and Development or a political subdivision of such country; and (iv) any other entity which extends credit or buys or invests in loans as one of its businesses including insurance companies, mutual funds and lease financing companies; and (B) any Lender, any Affiliate of any Lender and any Affiliated Fund of any Lender; provided that no Affiliate of Company (other than DLJMB and its Subsidiaries and CSFB) shall be an Eligible Assignee.

“Employee Benefit Plan” means any “employee benefit plan” as defined in Section 3(3) of ERISA which is or was maintained or contributed to by Company, any of its Subsidiaries or any of their respective ERISA Affiliates.

“Environmental Claim” means any investigation, notice, notice of violation, claim, action, suit, proceeding, demand, abatement order or other order or directive, by any governmental authority or any other Person, arising (i) pursuant to or in connection with any actual or alleged violation of any Environmental Law, (ii) in connection with any Hazardous Materials or any actual or alleged Hazardous Materials Activity, or (iii) in connection with any actual or alleged damage, injury, threat or harm to natural resources or the environment.

“Environmental Laws” means any and all current or future statutes, ordinances, orders, rules, regulations, judgments, Governmental Authorizations, or any other requirements of governmental authorities relating to (i) environmental matters, including those relating to any Hazardous Materials Activity, (ii) the generation, use, storage, transportation or disposal of Hazardous Materials, or (iii) the effect of the environment on human, plant or animal health or welfare, in any manner applicable to Company or any of its Subsidiaries or any Facility, including the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. §9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. §1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. §6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. §1251 et seq.), the Clean Air Act (42 U.S.C. §7401 et seq.), the Toxic Substances Control Act (15 U.S.C. §2601 et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. §136 et seq.), the Oil Pollution Act (33 U.S.C. §2701 et seq.) and the Emergency Planning and Community Right-to-Know Act (42 U.S.C. §11001 et seq.), each as amended or supplemented, any analogous present or future state or local statutes or laws, and any regulations promulgated pursuant to any of the foregoing.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor thereto.

“ERISA Affiliate” means, as applied to any Person, (i) any corporation which is a member of a controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of

8

which that Person is a member; (ii) any trade or business (whether or not incorporated) which is a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Internal Revenue Code of which that Person is a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is a member.  Any former ERISA Affiliate of Company or any of its Subsidiaries shall continue to be considered an ERISA Affiliate of Company or such Subsidiary within the meaning of this definition with respect to the period such entity was an ERISA Affiliate of Company or such Subsidiary and with respect to liabilities arising after such period for which Company or such Subsidiary could be liable under the Internal Revenue Code or ERISA.

“ERISA Event” means (i) a “reportable event” within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which the provision for 30-day notice to the PBGC has been waived by regulation); (ii) the failure to meet the minimum funding standard of Section 412 of the Internal Revenue Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(d) of the Internal Revenue Code) or the failure to make by its due date a required installment under Section 412(m) of the Internal Revenue Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (iv) the withdrawal by Company, any of its Subsidiaries or any of their respective ERISA Affiliates from any Pension Plan with two or more contributing sponsors or the termination of any such Pension Plan resulting in liability pursuant to Section 4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to terminate any Pension Plan, or the occurrence of any event or condition which could reasonably constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (vi) the imposition of liability on Company, any of its Subsidiaries or any of their respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the withdrawal of Company, any of its Subsidiaries or any of their respective ERISA Affiliates in a complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential liability therefor, or the receipt by Company, any of its Subsidiaries or any of their respective ERISA Affiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A or 4042 of ERISA; (viii) the occurrence of an act or omission which could reasonably give rise to the imposition on Company, any of its Subsidiaries or any of their respective ERISA Affiliates of fines, penalties, taxes or related charges under Chapter 43 of the Internal Revenue Code or under Section 409, Section 502(c), (i) or (l), or Section 4071 of ERISA in respect of any Employee Benefit Plan; (ix) the assertion of a material claim (other than routine claims for benefits) against any Employee Benefit Plan other than a Multiemployer Plan or the assets thereof, or against Company, any of its Subsidiaries or any of their respective ERISA Affiliates in connection with any Employee Benefit Plan; (x) receipt from the Internal Revenue Service of notice of the failure of any Pension Plan (or any other Employee Benefit Plan intended to be qualified under Section 401(a) of the Internal Revenue Code) to qualify under Section 401(a) of the Internal Revenue Code, or the failure of any trust forming part of any Pension Plan to qualify for exemption from taxation under Section 501(a) of the Internal Revenue Code; or (xi) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with respect to any Pension Plan.

“Eurodollar Base Rate” means, with respect to a Eurodollar Rate Loan for the relevant Interest Period, the rate per annum determined by Adminis­trative Agent at approximately 11:00 A.M. (London time) on the date which is two (2) Business Days prior to the beginning of the relevant Interest Period (as specified in the Notice of Borrowing or the applicable Notice of Continuation) by reference to the British Bankers’ Association Interest Settlement Rates for deposits in Dollars (as set forth by any service selected

9

by Administrative Agent which has been nominated by the British Bankers’ Association as an authorized information vendor for the purpose of displaying such rates) for a period equal to such Interest Period.

“Eurodollar Rate Loans” means Floating Rate Loans bearing interest at rates determined by reference to the Adjusted Eurodollar Rate as provided herein.

“Event of Default” means each of the events set forth in Section 7.

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute.

“Excluded Equity Proceeds” means any proceeds received by Parent, Company or any of its Subsidiaries from the issuance or sale or exercise of their respective equity Securities, in each case pursuant to any such sale or issuance or exercise constituting or resulting from (i) capital contributions to Company, or equity Securities issuances by Parent, Company or any of its Subsidiaries, including without limitation, the issuance of the PIK Preferred Stock and any such issuances as payment of accrued dividends on the PIK Preferred Stock (excluding any such contributions or issuance resulting from a public offering or a widely distributed private offering of common equity exempted from the registration requirements of Section 5 of the Securities Act of 1933, as amended (“Section 5”) other than any such issuances resulting from or in connection with any resale by DLJMB of the PIK Preferred Stock, or any subsequent registration thereof under Section 5); (ii) any subscription agreements, incentive plan or similar arrangements with any officer, employee or director of Parent, Company or any of its Subsidiaries; (iii) any loan made by Company or any of its Subsidiaries pursuant to subsection 6.3(x); (iv) the sale of any equity Securities of Parent to any officer, director or employee of Parent, Company or any of their Subsidiaries; provided such proceeds do not exceed $5,000,000 in the aggregate; (v) the exercise of any options or warrants issued to any officer, employee or director of Parent, Company or any of its Subsidiaries or to any purchasers of the PIK Preferred Stock; or (vi) issuances by any Subsidiary of Company to Company or any other Subsidiary of Company or by Company to Parent or any Subsidiary of Company.

“Facilities” means any and all real property (including all buildings, fixtures or other improvements located thereon) now, hereafter or heretofore owned, leased, operated or used by Company or any of its Subsidiaries or any of their respective predecessors.

“Federal Funds Effective Rate” means, for any day, an interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10:00 A.M. (New York time) on such day on such transactions received by Administrative Agent from three Federal funds brokers of recognized standing selected by Administrative Agent in its sole discretion.

“Financial Plan” has the meaning assigned to that term in subsection 5.1(x).

“First Closing Date” means August 28, 1998.

“First Lien Collateral Agent” means the collateral agent under the First Lien Credit Agreement.

“First Lien Credit Agreement” means (i) the Third Amended and Restated Credit Agreement, dated as of May 11, 2000, among Company, the lenders party thereto and Credit Suisse First Boston, as

10

administrative agent and as syndication agent, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, in each case, as the same has been amended through the Closing Date and as the same may hereafter be amended, restated, supplemented or otherwise modified from time to time in accordance with the provisions of subsection 6.1(xi) and subsection 6.15, and (ii) any replacement agreements designated by Company as a “First Lien Credit Agreement” existing at any time to refund, refinance, replace or renew (including subsequent or successive refinancings, replacements and renewals) any obligations under the documents described in clause (i) above in accordance with the provisions of subsection 6.1(xi) and subsection 6.15, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith; provided that in no event shall more than two agreements be existing in the aggregate at any one time under clauses (i) and (ii).

“First Lien Leverage Ratio” means, as of any date, the ratio of (a) Net Senior Debt minus Indebtedness under this Agreement and minus (without duplication) any Permitted Indebtedness as of the last day of a Fiscal Quarter to (b) Consolidated EBITDA for the consecutive four Fiscal Quarters ending on the last day of such Fiscal Quarter.

“First Priority” means, with respect to any Lien purported to be created in any Collateral pursuant to any Collateral Document, that such Lien is a first priority Lien, subject to no Liens that rank prior to such Lien other than (a) Permitted Encumbrances, (b) Liens securing the obligations under the First Lien Credit Agreement and obligations under Interest Rate Agreements that constitute Hedge Agreements secured on a pari passu basis with obligations under the First Lien Credit Agreement, (c) Liens permitted pursuant to subsection 6.2A(iii), (d) Liens permitted pursuant to subsection 6.2A(iv), (e) Liens permitted pursuant to subsection 6.2A(vi) or (viii) and (f) Liens permitted under subsection 6.2 that by operation of law rank prior to such Lien.

“Fiscal Quarter” means a fiscal quarter of any Fiscal Year.

“Fiscal Year” means the fiscal year of Company and its Subsidiaries ending on December 31 of each calendar year.

“Fixed Rate Loan Commitment” means the commitment of a Lender to make Fixed Rate Loans to Company pursuant to subsection 2.1A, and “Fixed Rate Loan Commitments” means such commitments of all Lenders in the aggregate.

“Fixed Rate Loan Exposure” means, with respect to any Fixed Rate Loan Lender as of any date of determination (i) prior to the funding of the Fixed Rate Loans, that Lender’s Fixed Rate Loan Commitment and (ii) after the funding of the Fixed Rate Loans, the outstanding principal amount of the Fixed Rate Loan of that Lender.

“Fixed Rate Loan Lender” means any Lender who holds a Fixed Rate Loan Commitment, or who has made a Fixed Rate Loan hereunder and any assignee of such Lender pursuant to subsection 9.1B.

“Fixed Rate Loans” means the Fixed Rate Loans made by Fixed Rate Loan Lenders to Company pursuant to subsection 2.1A.

“Fixed Rate Notes” means (i) the promissory notes of Company issued pursuant to subsection 2.1D on the Closing Date and (ii) any promissory notes issued by Company pursuant to the last sentence of subsection 9.1B(i) in connection with assignments of the Fixed Rate Loans of any Fixed Rate Loan Lenders, in each case substantially in the form of Exhibit V-1 annexed hereto, as they may be amended, supplemented or otherwise modified from time to time.

11

“Floating Rate Loan Commitment” means the commitment of a Lender to make a Floating Rate Loan to Company pursuant to subsection 2.1A, and “Floating Rate Loan Commitments” means such commitments of all Lenders in the aggregate.

“Floating Rate Loan Exposure” means, with respect to any Floating Rate Loan Lender as of any date of determination (i) prior to the funding of the Floating Rate Loans, that Lender’s Floating Rate Loan Commitment and (ii) after the funding of the Floating Rate Loans, the outstanding principal amount of the Floating Rate Loan of that Lender.

“Floating Rate Loan Lender” means any Lender who holds a Floating Rate Loan Commitment or who has made a Floating Rate Loan hereunder, and any assignee of such Lender pursuant to subsection 9.1B.

“Floating Rate Loans” means the Floating Rate Loans made by Floating Rate Loan Lenders to Company pursuant to subsection 2.1A.

“Floating Rate Notes” means (i) the promissory notes of Company issued pursuant to subsection 2.1D on the Closing Date and (ii) any promissory notes issued by Company pursuant to the last sentence of subsection 9.1B(i) in connection with assignments of the Floating Rate Loans of any Floating Rate Loan Lenders, in each case substantially in the form of Exhibit V-2 annexed hereto, as they may be amended, supplemented or otherwise modified from time to time.

“Flood Hazard Property” means a Mortgaged Property located in an area designated by the Federal Emergency Management Agency as having special flood or mud slide hazards.

“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.

“Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

“Funding and Payment Office” means (i) the office of Administrative Agent located at 11 Madison Avenue, New York, New York 10010 or (ii) such other office of Administrative Agent as may from time to time hereafter be designated as such in a written notice delivered by Administrative Agent to Company and each Lender.

“GAAP” means, subject to the limitations on the application thereof set forth in subsection 1.2, generally accepted accounting principles set forth in 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, in each case as the same are applicable to the circumstances as of the date of determination.

“Governmental Authorization” means any permit, license, authorization, plan, directive, consent order or consent decree of or from any federal, state or local governmental authority, agency or court.

“Guaranties” means the Parent Guaranty and the Subsidiary Guaranty.

“Hazardous Materials” means (i) any chemical, material or substance at any time defined as or included in the definition of “hazardous substances”, “hazardous wastes”, “hazardous materials”, “extremely hazardous waste”, “acutely hazardous waste”, “radioactive waste”, “biohazardous waste”,

12

“pollutant”, “toxic pollutant”, “contaminant”, “restricted hazardous waste”, “infectious waste”, “toxic substances”,  or any other term or expression intended to define, list or classify substances by reason of properties harmful to health, safety or the indoor or outdoor environment (including harmful properties such as ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, “TCLP toxicity” or “EP toxicity” or words of similar import under any applicable Environmental Laws); (ii) any oil, petroleum, petroleum fraction or petroleum derived substance; (iii) any drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas or geothermal resources; (iv) any flammable substances or explosives; (v) any radioactive materials; (vi) any asbestos-containing materials; (vii) urea formaldehyde foam insulation; (viii) electrical equipment which contains any oil or dielectric fluid containing polychlorinated biphenyls; (ix) pesticides; and (x) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority or which may or could pose a hazard to the health and safety of the owners, occupants or any Persons at the Facilities or to the indoor or outdoor environment.

“Hazardous Materials Activity” means any activity, event or occurrence involving any Hazardous Materials, including the use, manufacture, possession, storage, holding, presence, Release, discharge, generation, transportation, processing, construction, treatment, abatement, removal, remediation, disposal, disposition or handling of any Hazardous Materials, and any corrective action or response action with respect to any of the foregoing.

“Hedge Agreement” means an Interest Rate Agreement or a Currency Agreement designed to hedge against fluctuations in interest rates or currency values, respectively.

“Immaterial Subsidiary” means each Subsidiary of Company that (a) accounted for no more than 3% of the consolidated gross revenues of Company and its Subsidiaries for the most recently completed Fiscal Quarter with respect to which, pursuant to subsection 5.1(i) or 5.1(ii), financial statements have been, or are required to have been, delivered by Company on or before the date as of which any such determination is made, as reflected in such financial statements; and (b) has assets which represent no more than 3% of the consolidated gross assets of Company and its Subsidiaries as of the last day of the most recently completed Fiscal Quarter with respect to which, pursuant to subsection 5.1(i) or 5.1(ii), financial statements have been, or are required to have been, delivered by Company on or before the date as of which any such determination is made, as reflected in such financial statements.

“Impermissible Qualification” means, relative to the opinion or certification of any independent public accountant as to any  financial statement of Company, any qualification or exception to such opinion or certification (i) which is of a “going concern” or similar nature, (ii) which relates to the limited scope of examination of matters relevant to such financial statement (except, in the case of matters relating to any acquired business or assets, in respect of the period prior to the acquisition by Company of such business or asset), or (iii) which relates to the treatment or classification of any item in such financial statement and which, as a condition to its removal, would require an adjustment to such item the effect of which would be to cause Company to be in default of any of its obligations under subsection 6.6.

“Incremental Facility”  means Permitted Indebtedness (plus any amounts paid in kind or otherwise accreted to the original principal amount to satisfy interest obligations) issued under this Agreement pursuant to subsection 6.1(x), which shall provide for (x) no offers to purchase (other than offers to purchase made with respect to all Loans) and (y) no prepayments, amortization, redemptions or repayments except (i) on a pro rata basis with, and on the same (or later) dates as required with respect to, the Loans made on the Closing Date or (ii) only after the Loans made on the Closing Date have been paid in full.

13

“Indebtedness”, as applied to any Person, means (i) all indebtedness for borrowed money, (ii) that portion of obligations with respect to Capital Leases that is properly classified as a liability on a balance sheet in conformity with GAAP, (iii) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money, (iv) any obligation owed for all or any part of the deferred purchase price of property or services (excluding any such obligations incurred under ERISA), which purchase price is (a) except in the case of accounts payable arising in the ordinary course of business, due more than six months from the date of incurrence of the obligation in respect thereof or (b) evidenced by a note or similar written instrument (including in respect of Earn-Outs, but solely to the extent included as liabilities in accordance with GAAP), and (v) all obligations of the types referred to in clauses (i) through (iv) above, secured by any Lien on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person.  Obligations under Interest Rate Agreements and Currency Agreements constitute (X) in the case of Hedge Agreements, Contingent Obligations, and (Y) in all other cases, Investments, and in neither case constitute Indebtedness.

“Indemnitee” has the meaning assigned to that term in subsection 9.3.

“Intellectual Property” means all patents, trademarks, tradenames, copyrights, technology, know-how and processes used in or necessary for the conduct of the business of Company and its Subsidiaries as currently conducted that are material to the condition (financial or otherwise), business or operations of Company and its Subsidiaries, taken as a whole.

“Intercreditor Agreement” means the Intercreditor Agreement, dated as of the Closing Date, among Administrative Agent, Company and the First Lien Collateral Agent, which shall be satisfactory in form and substance to Administrative Agent, as amended, restated, supplemented or otherwise modified from time to time.

“Interest Period” has the meaning assigned to that term in subsection 2.2B.

“Interest Rate Agreement” means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement to which Company or any of its Subsidiaries is a party.

“Interest Rate Determination Date” means, with respect to any Interest Period, the second Business Day prior to the first day of such Interest Period.

“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter, and any successor statute.

“Investment” means (i) any direct or indirect purchase or other acquisition by Company or any of its Subsidiaries of, or of a beneficial interest in, any Securities of any other Person (including any Subsidiary of Company), (ii) any direct or indirect redemption, retirement, purchase or other acquisition for value, by any Subsidiary of Company from any Person other than Company or any of its Subsidiaries, of any equity Securities of such Subsidiary, or (iii) any direct or indirect loan, advance (other than advances to employees for moving, entertainment and travel expenses, drawing accounts and similar expenditures in the ordinary course of business) or capital contribution by Company or any of its Subsidiaries to any other Person (other than a Wholly-Owned Subsidiary of Company).  The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment.

14

“IP Collateral” means, collectively, the Intellectual Property Collateral under the Security Agreement.

“Leasehold Property” means any leasehold interest of any Loan Party as lessee under any lease of real property.

“Lender” and “Lenders” means the persons identified as “Lenders” and listed on Schedule I attached to this Agreement, together with their successors and permitted assigns pursuant to subsection 9.1.

“Lien” means any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing.

“Loan” or “Loans” means one or more of the Fixed Rate Loans or Floating Rate Loans or any combination thereof.

“Loan Documents” means this Agreement, the Notes, the Guaranties, the Collateral Documents and the Intercreditor Agreement.

“Loan Party” means each of Parent, Company and any of Company’s Subsidiaries from time to time executing a Loan Document, and “Loan Parties” means all such Persons, collectively.

“Margin Stock” has the meaning assigned to that term in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time.

“Material Adverse Effect” means (i) a material adverse effect upon the business, operations, properties, assets, financial condition or prospects of Company and its Subsidiaries taken as a whole or (ii) the material impairment of the ability of the Loan Parties to perform, or of Agents or Lenders to enforce, the Obligations.

“Material Contract” means any contract or other arrangement to which Company or any of its Subsidiaries is a party (other than the Loan Documents) for which breach, nonperformance, cancellation or failure to renew could reasonably be expected to have a Material Adverse Effect.

“Maturity Date” means the earlier of (i) June 30, 2008 and (ii) the date that all Loans shall become due and payable in full hereunder, whether by acceleration or otherwise.

“Mortgage” means (i) a security instrument (whether designated as a deed of trust or a mortgage or by any similar title) executed and delivered by any Loan Party, substantially in such form as may be reasonably approved by Agents in their sole discretion, in each case with such changes thereto as may be recommended by Administrative Agent’s local counsel based on local laws or customary local mortgage or deed of trust practices, or (ii) at the option of Administrative Agent, in the case of any future Mortgaged Property, an amendment to an existing Mortgage or a new Mortgage, in form satisfactory to Administrative Agent, adding such future Mortgaged Property to the Real Property Assets encumbered by such existing Mortgage, in either case as such security instrument or amendment may be amended, restated, supplemented or otherwise modified from time to time.  “Mortgages” means all such instruments, including any future Mortgages, collectively.

15

“Mortgaged Property” means the Closing Date Mortgaged Property or a property mortgaged in the future pursuant to subsection 5.8.

“Multiemployer Plan” means any Employee Benefit Plan which is a “multiemployer plan” as defined in Section 3(37) of ERISA.

“Net Asset Sale Proceeds” means, with respect to any Asset Sale, Cash payments (including any Cash received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) received from such Asset Sale, net of any bona fide direct costs incurred in connection with such Asset Sale, including (i) income taxes and all other governmental costs and expenses reasonably estimated to be actually payable in connection with such Asset Sale (including, in the event of any Asset Sale with respect to non-U.S. assets, any such taxes, costs, and expenses resulting from repatriating such proceeds to the U.S.), (ii) payment of the outstanding principal amount of, premium or penalty, if any, and interest on any Indebtedness (other than the Loans) that is secured by a Lien on the stock or assets in question and that is required to be repaid under the terms thereof as a result of such Asset Sale, (iii) all reasonable and customary fees and expenses with respect to legal, investment banking, brokerage, accounting and other professional fees, sales commissions and disbursements, (iv) reserves for purchase price adjustments and retained liabilities reasonably expected to be payable by Company and its Subsidiaries in cash in connection therewith and (v) solely with respect to any Asset Sale consummated by a Subsidiary, the pro rata portion of any such Cash payments required to be distributed to any shareholders of such Subsidiary or any other Subsidiary that, directly or indirectly, holds the capital stock of such Subsidiary (but excluding in each case Company and its Subsidiaries).

“Net Insurance/Condemnation Proceeds” means any Cash payments or proceeds received by Company or any of its Subsidiaries (i) under any casualty insurance policy in respect of a covered loss thereunder or (ii) as a result of the taking of any assets of Company or any of its Subsidiaries by any Person pursuant to the power of eminent domain, condemnation or otherwise, or pursuant to a sale of any such assets to a purchaser with such power under threat of such a taking, in each case net of any actual and reasonable documented costs incurred by Company or any of its Subsidiaries in connection with the adjustment or settlement of any claims of Company or such Subsidiary in respect thereof, but excluding (x) any such payments or proceeds thereunder required to be paid to a creditor (other than the holders of the Loans) secured by such assets that is required to be repaid under the terms thereof as a result of the relevant covered loss or taking, (y) any income taxes and all other taxes, governmental costs and expenses reasonably estimated to be actually payable in connection with the receipt of such Net Insurance/Condemnation Proceeds and (z) solely with respect to any Net Insurance/Condemnation Proceeds received by a Subsidiary, the pro rata portion of any such Cash payments required to be distributed to any shareholders of such Subsidiary or any other Subsidiary that, directly or indirectly, holds the capital stock of such Subsidiary (but excluding in each case Company and its Subsidiaries).

“Net Securities Proceeds” has the meaning set forth in subsection 2.4B(ii)(c).

“Net Senior Debt” means, at any date, Consolidated Total Debt less Subordinated Indebtedness less Cash and Cash Equivalents held by Company and its Subsidiaries, in each case at such date.

“Net Senior Debt Ratio” means, at the end of any Fiscal Quarter, subject to subsection 1.2(b), the ratio of (a) Net Senior Debt as of the last day of such Fiscal Quarter to (b) Consolidated EBITDA for the consecutive four Fiscal Quarters ending on the last day of such Fiscal Quarter.

“Net Senior Debt Ratio Amount” means an amount of Indebtedness under the First Lien Credit Agreement (not to exceed $10,000,000 in the aggregate during the term of this Agreement) that, at the time of incurrence, results in the Net Senior Debt Ratio being less than or equal to 2.00:1.00 (calculated

16

based on the most recently ended four Fiscal Quarter period for which financial statements have been delivered pursuant to subsection 5.1 but giving pro forma effect to such incurrence as if it occurred on the last day of such period).

“Net Yield” has the meaning set forth in subsection 2.2G.

“Non-Consenting Lender” means any Lender that, in response to any request by Company or Administrative Agent to a departure from, waiver of or amendment to any provision of any Loan Document that requires the agreement of all Lenders, which departure, waiver or amendment received the consent of the Requisite Lenders, shall not have given its consent to such departure, waiver or amendment.

“Non-Wholly-Owned Subsidiary” means any Subsidiary of Company that is not a Wholly-Owned Subsidiary.

“Notes” means one or more of the Fixed Rate Notes or Floating Rate Notes or any combination thereof.

“Notice of Borrowing” means a notice substantially in the form of Exhibit VI annexed hereto delivered by Company to Administrative Agent pursuant to subsection 2.1B.

“Notice of Continuation” means a notice substantially in the form of Exhibit XIV annexed hereto delivered by Company to Administrative Agent pursuant to subsection 2.2D with respect to a continuation of the applicable basis for determining the interest rate with respect to the Floating Rate Loans specified therein.

“Obligations” means all obligations of every nature of each Loan Party from time to time owed to Agents, Lenders or any of them under the Loan Documents, whether for principal, interest (including interest which, but for the filing of a petition in bankruptcy with respect to such Loan Party, would have accrued on any Obligation, whether or not a claim is allowed against such Loan Party for such interest in the related bankruptcy proceeding), fees, premium, expenses, indemnification or otherwise.

“Officer’s Certificate” means, as applied to any Person, a certificate executed on behalf of such Person by its chief executive officer, president, treasurer or its chief financial officer (or if there is no chief financial officer, its chief accounting officer).

“Operating Lease” means, as applied to any Person, any lease (including leases that may be terminated by the lessee at any time) of any property (whether real, personal or mixed) that is not a Capital Lease in accordance with GAAP other than any such lease under which that Person is the lessor.

“Organizational Authorizations” means, with respect to any Person, resolutions of its Board of Directors, general partners or members of such Person, and such other Persons, groups or committees (including, without limitation, managers and managing committees), if any, required by the Organizational Certificate or Organizational Documents of such Person to authorize or approve the taking of any action or the entering into of any transaction.

“Organizational Certificate” means, with respect to any Person, the certificate or articles of incorporation, partnership or limited liability company or any other similar or equivalent organizational, charter or constitutional certificate or document filed with the applicable governmental authority in the jurisdiction of its incorporation, organization or formation, which, if such Person is a partnership or limited liability company, shall include such certificates, articles or other certificates or documents in respect of each partner or member of such Person.

17

“Organizational Documents” means, with respect to any Person, the by-laws, partnership agreement, limited liability company agreement, operating agreement, management agreement or other similar or equivalent organizational, charter or constitutional agreement or arrangement, which, if such Person is a partnership or limited liability company, shall include such by-laws, agreements or arrangements in respect of each partner or member of such Person.

“Original Closing Date” means May 11, 2000.

“Parent” means DeCrane Holdings Co., a Delaware corporation.

“Parent Guaranty” means the Parent Guaranty executed and delivered by Parent on the Closing Date, substantially in the form of Exhibit VII annexed hereto, as such Parent Guaranty may be amended, restated, supplemented or otherwise modified from time to time.

“Parent P-I-K Securities” means the PIK Notes and the PIK Preferred Stock.

“Parent Pledge Agreement” means the Pledge Agreement executed and delivered by Parent on the Closing Date, substantially in the form of Exhibit VIII annexed hereto, as such Parent Pledge Agreement may be amended, restated, supplemented or otherwise modified from time to time.

“PBGC” means the Pension Benefit Guaranty Corporation or any successor thereto.

“Pension Plan” means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code or Section 302 of ERISA.

“Permitted Acquisition” means the acquisition of a business (whether through the purchase of assets or of shares of capital stock) by Company or one of its Subsidiaries (w) which is in a line of business similar or related to the lines of business of Company and its Subsidiaries, (x) for total consideration, for acquisitions made after the Closing Date (including without limitation, cash purchase price, deferred or financed purchase price and the assumption of Indebtedness, including Assumed Indebtedness, and other liabilities), of not more than $35,000,000 for any single acquisition or series of related acquisitions and, which consideration, when aggregated with the consideration for all other acquisitions made after the Original Closing Date, does not exceed $50,000,000; provided that such aggregate total consideration for Permitted Acquisitions of or by Subsidiaries that are not Subsidiary Guarantors shall not exceed an aggregate of $30,000,000 plus the Company Excess Cash Flow Amount; and provided further that such aggregate total consideration for Permitted Acquisitions of or by Non-Wholly-Owned Subsidiaries that are not Subsidiary Guarantors shall not exceed an aggregate of $10,000,000plus the Company Excess Cash Flow Amount, (y) at a time at which no Event of Default or Potential Event of Default shall exist or shall occur as a result of giving effect to such proposed acquisition, and (z) after giving effect to such acquisition, including without limitation giving effect to the incurrence or assumption of any Indebtedness or any other costs and expenditures or the making of any distributions and other payments in connection with or otherwise relating to such Permitted Acquisition, Company shall be in pro forma compliance with each of the financial covenants set forth in subsection 6.6 for the immediately preceding four Fiscal Quarter period prior to such date of determination.

For purposes of calculating on any date usage of each dollar basket set forth in this definition:

(i)Earn-outs paid or payable under any agreement entered into on or prior to the Closing Date shall be excluded from any such calculation on any date; and

18

(ii)with respect to any acquisition consummated after the Closing Date, Earn-outs shall be included in any such calculation on any date on if, and only to the extent that, such Earn-outs have been actually paid by Company or any of its Subsidiaries on or prior to such date; provided that if on any date any such calculation is made any such dollar basket is exceeded as a result of the inclusion of any Earn-out, any acquisition consummated on or prior to such date and constituting a “Permitted Acquisition” shall continue to constitute a “Permitted Acquisition”, but such dollar basket shall be deemed to be fully utilized for purposes of determining whether any proposed new acquisition is a “Permitted Acquisition”; and

(iii)equity Securities of Parent issued with respect to any acquisition consummated after April 1, 2003 shall be excluded from any such calculation on any date.

Notwithstanding the foregoing, no acquisition otherwise permitted hereby by Company or a Subsidiary shall be a Permitted Acquisition if any consideration therefor consists of any Cash, Indebtedness or other assets other than equity Securities of Parent, Net Securities Proceeds of equity Securities of Parent that are not required to be used to prepay the Loans pursuant to subsection 2.4B or Earn-outs unless, after giving effect to such transaction, the First Lien Leverage Ratio is equal to or less than 2.5:1.00 for the four Fiscal Quarter period for which financial statements have been delivered pursuant to subsection 5.1 ending immediately prior to the date of closing of such acquisition, as evidenced by an Officer’s Certificate of Company delivered on such date of closing to Syndication Agent showing the calculations therefor.

“Permitted Acquisition Compliance Certificate” means an Officer’s Certificate substantially in the form of Exhibit IX annexed hereto delivered to Agents by Company pursuant to subsection 6.7(vi).

“Permitted Encumbrances” means the following types of Liens:

(i)Liens for taxes, assessments or governmental charges or claims the payment of which is not, at the time, required by subsection 5.3;

(ii)Liens of landlords (except as may be waived or released as more particularly described in subsection 5.8), Liens of banks and rights of set-off, statutory Liens of carriers, warehousemen, mechanics, repairmen, workmen, contractors and materialmen, and other Liens imposed by law, in each case incurred in the ordinary course of business (a) for amounts not yet overdue or (b) for amounts that are overdue and that (in the case of any such amounts overdue for a period in excess of 30 days) are being contested in good faith by appropriate proceedings, so long as such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made for any such contested amounts;

(iii)Liens incurred or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, trade contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money), so long as no foreclosure, sale or similar proceedings have been commenced with respect to any portion of the Collateral on account thereof;

(iv)any attachment or judgment Lien not constituting an Event of Default under subsection 7.8;

(v)leases or subleases granted to third parties and not interfering in any material respect with the ordinary conduct of the business of Company or any of its Subsidiaries;

19

(vi)easements, rights-of-way, restrictions, encroachments, and other minor defects or irregularities in title, in each case which do not and will not materially detract from the value or impair the use by Company or any of its Subsidiaries in the ordinary conduct of the business of Company or any of its Subsidiaries;

(vii)any (a) interest or title of a lessor or sublessor under any permitted lease, (b) restriction or encumbrance to which the interest or title of such lessor or sublessor may be subject to, or (c) subordination of the interest of the lessee or sublessee under such lease to any restriction or encumbrance referred to in the preceding clause (b);

(viii)Liens arising from filing UCC financing statements relating solely to leases not prohibited by this Agreement;

(ix)Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;

(x)any zoning or similar law or right reserved to or vested in any governmental office or agency to control or regulate the use of any real property;

(xi)Liens securing obligations (other than obligations representing Indebtedness for borrowed money) under operating, reciprocal easement or similar agreements entered into in the ordinary course of business of Company and its Subsidiaries;

(xii)licenses of patents, trademarks and other intellectual property rights granted by Company or any of its Subsidiaries in the ordinary course of business and not interfering in any material respect with the ordinary conduct of the business of Company or such Subsidiary; and

(xiii)the general and special exceptions approved by Administrative Agent, which exceptions appear on the mortgagee title insurance policies with respect to the owned and leased properties to be encumbered by a Mortgage, pursuant to subsections 5.8B, 5.8C and 5.10.

“Permitted Indebtedness”  means up to $20,000,000 in aggregate principal amount of Indebtedness (plus any amounts paid in kind or otherwise accreted to the original principal amount to satisfy interest obligations): (i) constituting the Incremental Facility or (ii) (a) issued pursuant to documentation containing covenants, defaults, remedies and other material terms no more restrictive than such terms set forth in this Agreement or otherwise in form and substance reasonably satisfactory to Administrative Agent, (b) which shall provide for no scheduled redemptions, scheduled prepayments (excluding requirements to prepay or purchase upon asset sales, change of control events, equity contributions and other similar prepayment events and excluding any requirement to prepay upon an acceleration), sinking fund installment payments or maturities prior to the Maturity Date, (c) which shall not bear cash interest in excess of 12%per annum, and (d) which may be secured by Liens on all or a portion of the Collateral that are junior in priority to the Liens granted under the Loan Documents, pursuant to an intercreditor agreement in form and substance reasonably satisfactory to Administrative Agent.

“Person” means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments (whether federal, state or local, domestic or foreign, and including political subdivisions thereof) and agencies or other administrative or regulatory bodies thereof.

20

“PIK Notes” means Senior Pay-in-Kind Notes, if any, issued by Parent, in exchange for PIK Preferred Stock which notes shall (i) provide for the payment of interest by accretion of the original face amount thereof or by the issuance of additional PIK Notes for a period of not less than five years after the First Closing Date, (ii) not provide for any scheduled redemptions or prepayments or any sinking fund installment payments or maturities prior to a date which is seven and one-half years after the First Closing Date, and (iii) have terms and conditions not less favorable to Parent and Lenders than those set forth in the draft “Description of Exchange Debentures” dated August 27, 1998, a copy of which has been distributed to Lenders.

“PIK Preferred Stock” means Pay-in-Kind Preferred Stock issued by Parent, providing for the payment of dividends thereon by the issuance of additional shares of such Pay-in-Kind Preferred Stock or by accretion of the original face amount thereof for a period of not less than five years from the First Closing Date, which Pay-in-Kind Preferred Stock is unsecured and unguaranteed, as amended from time to time to the extent permitted under the Parent Guaranty.

“Pledge Agreement” means the Pledge Agreement executed and delivered by Company and each Subsidiary Guarantor on the Closing Date, substantially in the form of Exhibit IV annexed hereto, as such Pledge Agreement may thereafter be amended, restated, supplemented or otherwise modified from time to time.

 “Pledged Collateral” means, collectively, at any time, the “Pledged Collateral” as defined in the Pledge Agreement and the Parent Pledge Agreement.

“Potential Event of Default” means a condition or event that, after notice or lapse of time or both, would constitute an Event of Default.

“Prime Rate” means the rate of interest per annum announced from time to time by CSFB as its prime commercial lending rate in effect at its principal office in New York City.  The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer.  CSFB or any other Lender may make commercial loans or other loans at rates of interest at, above or below the Prime Rate.

“Property Reinvestment Application” means the application of Net Asset Sale Proceeds or Net Insurance/Condemnation Proceeds, as the case may be, to the acquisition by Company or its Subsidiaries of tangible or intangible property or assets (other than property or assets that constitute current assets under GAAP, unless the acquisition thereof is incidental to the acquisition of a materially greater amount of non-current assets) that is to be used in the business of Company and its Subsidiaries.

“Pro Rata Share” means (i) with respect to all payments, computations and other matters relating to the Fixed Rate Loan Commitments or the Fixed Rate Loan of any Lender, the percentage obtained by dividing (x) the Fixed Rate Loan Exposure of that Lender by (y) the aggregate Fixed Rate Loan Exposure of all Lenders; (ii) with respect to all payments, computations and other matters relating to the Floating Rate Loan Commitments or the Floating Rate Loan of any Lender, the percentage obtained by dividing (1) the Floating Rate Loan Exposure of that Lender by (2) the aggregate Floating Rate Loan Exposure of all Lenders; and (iii) for all other purposes with respect to each Lender, the percentage obtained by dividing (x) the sum of the Fixed Rate Loan Exposure of that Lender plus the Floating Rate Loan Exposure of that Lender by (y) the sum of the aggregate Fixed Rate Loan Exposure of all Lenders plus the aggregate Floating Rate Loan Exposure of all Lenders, in any such case as the applicable percentage may be adjusted by assignments permitted pursuant to subsection 9.1.

21

“PTO” means the United States Patent and Trademark Office or any successor or substitute office in which filings are necessary or, in the opinion of Administrative Agent, desirable in order to create or perfect Liens on any IP Collateral.

“Quarterly Date” means the date which is 30 days after the Closing Date and each three-month anniversary thereof.

“Real Property Asset” means, at any time of determination, any interest then owned by any Loan Party in any real property.

“Regulation D” means Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time.

“Related Agreements” means, collectively, the Fourth Amendment to the First Lien Credit Agreement dated as of December 10, 2003 and all agreements and documents executed in connection therewith.

“Related Parties” means, with respect to any Person, such Person’s Affiliates and the directors, officers, employees, agents and advisors of such Person and of such Person’s Affiliates.

“Release” means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Materials into the indoor or outdoor environment (including the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Materials), including the movement of any Hazardous Materials through the air, soil, surface water or groundwater.

“Requisite Lenders” means on any date, Lenders having or holding more than 50% of the sum of (i) the aggregate Fixed Rate Loan Exposure of all Lenders plus (ii) the aggregate Floating Rate Loan Exposure of all Lenders, in each case on such date.

“Reserve Requirement” means, with respect to an Interest Period, the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D on Eurocurrency liabilities.

“Response Date” has the meaning assigned to that term in subsection 2.4B(iii).

“Restricted Junior Payment” means (i) any distribution, direct or indirect, on account of any class of stock of Company now or hereafter outstanding, except a distribution payable solely in shares of that class or a junior class of stock payable solely to holders of that class, (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any class of stock of Company now or hereafter outstanding, (iii) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of stock of Company now or hereafter outstanding, and (iv) any payment or prepayment of principal of, premium, if any, or interest on, or redemption, purchase, retirement, defeasance (including in-substance or legal defeasance), sinking fund or similar payment with respect to, any Subordinated Indebtedness.

“Securities” means any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as “securities” or any certificates of interest,

22

shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing.

“Securities Act” means the Securities Act of 1933, as amended from time to time, and any successor statute.

“Security Agreement” means the Security Agreement executed and delivered on the Closing Date by Company and each then existing Subsidiary Guarantor or executed and delivered or supplemented by any additional Subsidiary Guarantor from time to time thereafter in accordance with subsection 5.7, substantially in the form of Exhibit X annexed hereto, as such Security Agreement may thereafter be amended, restated, supplemented or otherwise modified from time to time.

“Senior Subordinated Note Indenture” means the Indenture, dated as of October 5, 1998, executed by Company and State Street Bank and Trust Company, as trustee, pursuant to which the Senior Subordinated Notes are issued, as such Indenture has been amended through and as of the Closing Date and as such Indenture may hereafter be amended from time to time to the extent permitted under subsection 6.15.

“Senior Subordinated Notes” means the senior subordinated notes issued by Company pursuant to the Senior Subordinated Note Indenture, as such notes may be amended from time to time to the extent permitted under subsection 6.15.  “Senior Subordinated Notes” shall also refer to the registered Securities, if any, having the same terms and conditions as the notes described above which are issued by Company in exchange for such notes upon exercise of the customary registration rights accompanying such notes.

“Solvency Certificate” means an  Officer’s Certificate substantially in the form of Exhibit XI annexed hereto.

“Solvent” means, with respect to any Person, that as of the date of determination (i) the then fair value of the property of such Person is greater than the total amount of liabilities (including contingent liabilities) of such Person; (ii) the then fair saleable value of the property of such Person is not less than the amount that will be required to pay the probable liabilities on such Person’s then existing debts as they become absolute and matured considering all financing alternatives and potential asset sales reasonably available to such Person; (iii) such Person’s capital is not unreasonably small in relation to its business; and (iv) such Person does not intend to incur, or believe (nor should it reasonably believe) that it will incur, debts beyond its ability to pay such debts as they become due.  For purposes of this definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“Subordinated Indebtedness” means the Senior Subordinated Notes and any other Indebtedness of Company subordinated in right of payment to the Obligations pursuant to documentation containing maturities, amortization schedules, covenants, defaults, remedies, subordination provisions and other material terms in form and substance satisfactory to Agents and Requisite Lenders.

“Subsidiary” means, with respect to any Person, any corporation, partnership, limited liability company, association, joint venture or other business entity of which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) constituting members of the governing body of such entity is at the time owned and controlled, directly or indirectly, by that Person or one or more of the other

23

Subsidiaries of that Person or a combination thereof.  For purposes of this Agreement and the other Loan Documents, any Acquired Controlled Person shall be deemed to be a “Subsidiary” of Company for purposes of subsections 4.1, 4.5, 4.6, 4.7, 4.9, 4.10, 5.4A and the first sentence of subsections 5.4B, 5.6, 6.1, 6.2A, 6.2C, 6.3, 6.4, 6.5, 6.7, 6.10, 6.11, 6.12 and 6.14 and, to the extent (and only to the extent) that it relates to any of the foregoing subsections, Section 7.

“Subsidiary Guarantor” means any Subsidiary of Company that executes and delivers the Subsidiary Guaranty on the Closing Date or executes and delivers a counterpart thereto from time to time thereafter pursuant to subsection 5.7.

“Subsidiary Guaranty” means the Subsidiary Guaranty executed and delivered by existing Subsidiaries of Company on the Closing Date and to be executed and delivered by additional Subsidiaries of Company from time to time thereafter in accordance with subsection 5.7, substantially in the form of Exhibit XII annexed hereto, as such Subsidiary Guaranty may hereafter be amended, restated, supplemented or otherwise modified from time to time.

“Supplemental Collateral Agent” has the meaning assigned to that term in subsection 8.1B.

“Syndication Agent” has the meaning assigned to that term in the introduction to this Agreement.

“Tax” or “Taxes” means any present or future tax, levy, impost, duty, charge, fee, deduction or withholding of any nature and whatever called, imposed by any taxing authority, from or through which payments originate or are made or deemed made by or to Company, but excluding any income, excise, stamp or franchise taxes and other similar taxes, fees, duties, withholdings or other charges imposed on any Lender or any Agent as a result of a present or former connection between the applicable lending office (or, in the case of any Agent, the office through which it performs any of its actions as Agent) of such Lender or Agent, and the jurisdiction of the governmental authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from such Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or taken any action to enforce, this Agreement or the other Loan Documents).

“Title Company” means one or more title insurance companies selected by Company and reasonably satisfactory to Agents.

“Transaction” means, collectively, (i) repayment of a portion of Indebtedness in respect of the First Lien Credit Agreement on the Closing Date, (ii) the making of the Loans on the Closing Date and (iii) any other transactions contemplated in Section 3 of this Agreement.

“Transaction Costs” means the fees, costs and expenses payable by any Loan Party in connection with the Transaction.

“UCC” means the Uniform Commercial Code (or any similar or equivalent legislation) as in effect in any applicable jurisdiction.

“Wholly-Owned Subsidiary” means any Subsidiary of Company all of the equity interests (except directors’ qualifying shares) and voting interests of which are owned by Company and/or one or more of Company’s other Wholly-Owned Subsidiaries.

24

1.2          Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement.

(a)Unless otherwise specified, all accounting terms used herein or in any other Loan Document shall be interpreted, all accounting determinations and computations hereunder or thereunder shall be made, and all financial statements required to be delivered hereunder or thereunder (including under subsection 6.6) shall be prepared, in accordance with GAAP, as in effect in the United States on the Closing Date and, unless expressly provided herein, shall be computed or determined on a consolidated basis and without duplication.

(b)For purposes of computing the Consolidated Interest Coverage Ratio, the Consolidated Leverage Ratio and the Net Senior Debt Ratio (and any financial calculations required to be made or included within such ratios) as of the end of any Fiscal Quarter and for purposes of computing Consolidated EBITDA (but not for purposes of computing Consolidated Excess Cash Flow for any period), as at the end of any Fiscal Quarter, all components of such ratios (other than Consolidated Capital Expenditures) or Consolidated EBITDA for the period of four Fiscal Quarters ending at the end of such Fiscal Quarter shall include or exclude, as the case may be, without duplication, such components of such ratios or Consolidated EBITDA attributable to any business or assets that have been acquired or disposed of by Company or any of its Subsidiaries (including through mergers or consolidations) after the first day of such period of four Fiscal Quarters and prior to the end of such period, as determined in good faith by Company on a pro forma basis for such period of four Fiscal Quarters as if such acquisition or disposition had occurred on such first day of such period (including, whether or not such inclusion would be permitted under GAAP or Regulation S-X of the Securities and Exchange Commission, cost savings that would have been realized had such acquisition occurred on such day).

1.3Other Definitional Provisions and Rules of Construction.

A.Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference.

B.References to “Sections” and “subsections” shall be to Sections and subsections, respectively, of this Agreement unless otherwise specifically provided.

C.The use in any of the Loan Documents of the word “include” or “including”, when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as “without limitation” or “but not limited to” or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter.

Section 2.AMOUNTS AND TERMS OF COMMITMENTS AND LOANS

2.1Commitments; Making of Loans; Notes.

A.Commitments.  Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Company herein set forth, (i) each Fixed Rate Loan Lender having a Fixed Rate Loan Commitment severally agrees to lend to Company on the Closing Date an amount not exceeding its Pro Rata Share of the aggregate amount of the Fixed

25

Rate Loan Commitments, which Pro Rata Share is set forth opposite its name on Schedule 2.1 attached hereto, and (ii) each Floating Rate Loan Lender having a Floating Rate Loan Commitment severally agrees to lend to Company on the Closing Date an amount not exceeding its Pro Rata Share of the aggregate amount of the Floating Rate Loan Commitments, in each case to be used for the purposes identified in subsection 2.5A, which Pro Rata Share is set forth opposite its name on Schedule 2.1 attached hereto. The amounts of each Fixed Rate Loan Lender’s Fixed Rate Loan Commitment and each Floating Rate Loan Lender’s Floating Rate Loan Commitment are set forth opposite such Lender’s name on Schedule 2.1 annexed hereto.  The aggregate amount of the Commitments on the Closing Date is $80,000,000.  Each Lender’s Commitment (i) shall expire immediately and without further action on January 15, 2004, if the Loans are not made on or before that date, and (ii) to the extent unused, shall expire on the close of business on the Closing Date.  Company may make only one borrowing under the Commitments on the Closing Date.  Amounts borrowed under this subsection 2.1A and subsequently repaid or prepaid may not be reborrowed.

B.Borrowing Mechanics. Loans made on the Closing Date shall be in an aggregate minimum amount of $1,000,000 and multiples of $100,000 in excess of that amount.  Company shall deliver to Administrative Agent a Notice of Borrowing no later than 12:00 Noon (New York time) at least one Business Day in advance of the proposed Closing Date.  The Notice of Borrowing shall specify (i) the proposed Closing Date (which shall be a Business Day), (ii) the amount and type of Loans requested and (iii) in the case of Floating Rate Loans, the initial Interest Period requested therefor.

Company shall notify Administrative Agent prior to the funding of the Loans in the event that any of the matters to which Company is required to certify in the Notice of Borrowing as being true and correct on the Closing Date is not true and correct as of the Closing Date, and the acceptance by Company of the proceeds of the Loans shall constitute a certification by Company, as of the Closing Date, as to the matters to which Company is required to certify in the Notice of Borrowing as being true and correct on the Closing Date.

C.Disbursement of Funds.  All Loans shall be made by Lenders simultaneously and proportionately to their respective Pro Rata Shares of the Commitments, it being understood that no Lender shall be responsible for any default by any other Lender in that other Lender’s obligation to make a Loan requested hereunder nor shall the Commitment of any Lender to make the Loan requested be increased or decreased as a result of a default by any other Lender in that other Lender’s obligation to make a Loan requested hereunder.  Promptly after receipt by Administrative Agent of the Notice of Borrowing pursuant to subsection 2.1B, Administrative Agent shall notify each Lender of the proposed borrowing.  Each Lender shall make the amount of its Loan available to Administrative Agent not later than 1:00 P.M. (New York time) on the Closing Date, in same day funds in Dollars, at the Funding and Payment Office.  Upon satisfaction or waiver of the conditions precedent specified in Section 3, Administrative Agent shall promptly make the proceeds of the Loans available to Company on the Closing Date, by causing an amount of same day funds in Dollars equal to the proceeds of all the Loans received by Administrative Agent from Lenders to be credited to such account or accounts as may be designated in writing to Administrative Agent by Company.

Unless Administrative Agent shall have been notified by any Lender prior to the Closing Date for any Loans that such Lender does not intend to make available to Administrative Agent the amount of such Lender’s Loan requested on the Closing Date, Administrative Agent may assume that such Lender has made such amount available to Administrative Agent on the Closing Date and Administrative Agent may, in its sole discretion, but shall not be obligated to, make available to Company a corresponding

26

amount on the Closing Date.  If such corresponding amount is not in fact made available to Administrative Agent by such Lender, Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from the Closing Date until the date such amount is paid to Administrative Agent, at the Federal Funds Effective Rate for three Business Days and thereafter at the interest rate applicable to the Loans.  If such Lender does not pay such corresponding amount forthwith upon Administrative Agent’s demand therefor, Administrative Agent shall promptly notify Company and Company shall immediately pay such corresponding amount to Administrative Agent together with interest thereon, for each day from the Closing Date until the date such amount is paid to Administrative Agent, at the rate payable under this Agreement for Loans of the type made on the Closing Date on which, and with respect to which, Administrative Agent made available such amount.  Nothing in this subsection 2.1C shall be deemed to relieve any Lender from its obligation to fulfill its Commitments hereunder or to prejudice any rights that Company may have against any Lender as a result of any default by such Lender hereunder.

Unless Administrative Agent shall have been notified by Company prior to the date on which it is scheduled to make payment to Administrative Agent of a payment of principal, interest or fees to Administrative Agent for the account of Lenders that Company does not intend to make available to Administrative Agent such amount on such date, Administrative Agent may assume that Company has made such amount available to Administrative Agent on such date and Administrative Agent may, in its sole discretion, but shall not be obligated to, make available to Lenders a corresponding amount on such date.  If such corresponding amount is not in fact made available to Administrative Agent by Company, Administrative Agent shall be entitled to recover such corresponding amount on demand from Company together with interest thereon, for each day from such scheduled payment until the date such amount is paid to Administrative Agent, at the interest rate applicable to the relevant Loans.  If Company does not pay such corresponding amount forthwith upon Administrative Agent’s demand therefor, Administrative Agent shall promptly notify Lenders and Lenders shall immediately pay such corresponding amount to Administrative Agent together with interest thereon, for each day from the scheduled payment date until the date such amount is paid to Administrative Agent, at the rate payable under this Agreement for Loans of the type made on such scheduled payment date on which, and with respect to which, Administrative Agent made available such amount.

D.Notes.  Company shall execute and deliver on the Closing Date (i) to each Fixed Rate Loan Lender (or to Administrative Agent for that Lender) that has so requested at least one Business Day prior to the Closing Date a Fixed Rate Note substantially in the form of Exhibit V-1 annexed hereto to evidence that Lender’s Fixed Rate Loan, in the principal amount of that Lender’s Fixed Rate Loan and with other appropriate insertions, and (ii) to each Floating Rate Loan Lender (or to Administrative Agent for that Lender) that has so requested at least one Business Day prior to the Closing Date a Floating Rate Note substantially in the form of Exhibit V-2 annexed hereto to evidence that Lender’s Floating Rate Loan, in the principal amount of that Lender’s Floating Rate Loan and with other appropriate insertions.

E.Register.  (a)  Each Lender may maintain in accordance with its usual practice an account or accounts evidencing the Indebtedness of Company to such Lender resulting from each Loan made by such Lender to Company, including the amounts of principal and interest payable and paid (including Accreted Amounts and Default Rate Accreted Amounts and the increase to outstanding principal resulting from Accreted Amounts and Default Rate Accreted Amounts as provided in subsection 2.2A and subsection 2.2E) to such Lender from time to time hereunder.  In the case of a Lender that does not request, pursuant to the preceding paragraph, execution and delivery of a Note or Notes evidencing the Loans made by such Lender to Company, such account or accounts shall, to the extent not inconsistent with the notations made by Administrative Agent in the Register (as defined below), be conclusive and binding on

27

Company absent manifest error; provided, however, that the failure of any Lender to maintain such account or accounts shall not limit or otherwise affect any Obligations of Company or any other Loan Party.

(b) (i)  Company hereby designates Administrative Agent to serve as its agent, solely for the purpose of this subsection (b)(i), to maintain a register (the “Register”) on which Administrative Agent will record each Lender’s Commitments, the Loans made by each Lender to Company, the Interest Period, if any, with respect thereto, the Accreted Amounts and Default Rate Accreted Amounts, if any, with respect thereto and the increase to outstanding principal resulting from Accreted Amounts and Default Rate Accreted Amounts as provided in subsection 2.2A and subsection 2.2E, and each repayment in respect of the principal amount of the Loans of each Lender to Company and annexed to which Administrative Agent shall retain a copy of each Assignment Agreement delivered to Administrative Agent pursuant to subsection 9.1.  Failure to make any recordation, or any error in such recordation, shall not affect Company’s obligations in respect of such Loans.  The entries in the Register shall be conclusive, in the absence of manifest error, and Company, Administrative Agent and Lenders shall treat each Person in whose name a Loan (and as provided in subsection (b)(ii) below, the Note evidencing such Loan, if any) is registered as the owner thereof for all purposes of this Agreement notwithstanding notice or any provision herein to the contrary.

(ii)Company agrees that, upon the request by any Lender which becomes a party to this Agreement after the date hereof to Administrative Agent, Company will execute and deliver to such Lender a Note evidencing the Loans made by such Lender to Company.  Each Lender agrees that before assigning its Loans, or any part thereof (other than by granting participations therein), that Lender will make a notation on any applicable Note of all Loans evidenced by that Note, all principal payments previously made thereon and of the date to which interest thereon has been paid and Accreted Amounts and Default Rate Accreted Amounts, if any, with respect thereto and the increase to outstanding principal resulting from Accreted Amounts and Default Rate Accreted Amounts as provided in subsection 2.2A and subsection 2.2E; provided that the failure to make (or any error in the making of) a notation of any Loan made under such Note shall not limit or otherwise affect such disposition or the obligations of Company hereunder or under such Note with respect to any Loan or any payments of principal or interest on such Note.

2.2Interest on the Loans.

A.Rate of Interest.  Subject to the provisions of subsection 2.2E, (i) each Fixed Rate Loan shall bear interest on the unpaid principal amount thereof (including any Accreted Amounts and Default Rate Accreted Amounts as provided below) from the date made through maturity (whether by acceleration or otherwise) at a rate equal to 15.0% per annum and (ii) each Floating Rate Loan shall bear interest on the unpaid principal amount thereof (including any Accreted Amounts and Default Rate Accreted Amounts as provided below) from the date made through maturity (whether by acceleration or otherwise) at a rate equal to (a) (1) the Adjusted Eurodollar Rate for the Interest Period applicable to such Floating Rate Loan plus 8.5% per annum or (2) if required to be a Base Rate Loan as provided herein, at the sum of the Base Rate plus 7.5% per annum, plus (b)3.0% per annum.  Until payment in full of all obligations under the First Lien Credit Agreement described in clause (i) of the definition thereof, termination of all commitments to extend credit thereunder and expiration, surrender or cash collateralization of all letters of credit thereunder, 3.0% per annum of the interest payable on the Loans(such amount being hereinafter referred to as the “Accreted Amount” for such period) shall accrete as described below and shall not be payable in cash; provided that after payment in full of all obligations under the First Lien Credit Agreement described in clause (i) of the definition thereof, termination of all commitments to extend credit thereunder and expiration, surrender or cash

28

collateralization of all letters of credit thereunder, accretion of up to 3.0% per annum of the interest payable on the Loans shall be at the option of Company.  Company may exercise such option by delivering written notice thereof to Administrative Agent (who shall deliver such notice to each Lender) at least ten Business Days prior to each applicable Quarterly Date and on each other date on which interest is required to be paid on Loans, setting forth notice of such election to accrete interest and the percentage of such interest shall so accrete.  Any such election must be made with respect to all Loans.  On the Quarterly Date which falls in July 2004 and on each Quarterly Date thereafter which falls in January and July, and on each other date on which interest is required to be paid on Loans in connection with any prepayment, any Accreted Amounts (other than Accreted Amounts that have been so added on any prior Quarterly Date or other such date) shall be added to the outstanding principal amount of the Loans.

B.Interest Periods.  In connection with each Floating Rate Loan, Company may, pursuant to the Notice of Borrowing or the applicable Notice of Continuation, as the case may be, select an interest period (each an “Interest Period”) to be applicable to such Loan, which Interest Period shall be, at Company’s option, either a three, six, or, if available to each Lender, nine or twelve month period; provided that:

(i)the initial Interest Period for each Floating Rate Loan shall commence on the Closing Date and shall end on the date which is 30 days after the Closing Date and each Interest Period shall, in any event, end on a Quarterly Date;

(ii)in the case of immediately successive Interest Periods applicable to a Floating Rate Loan, each successive Interest Period shall commence on the day on which the next preceding Interest Period expires;

(iii)if an Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided that, if any Interest Period would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day;

(iv)any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (v) of this subsection 2.2B, end on the last Business Day of a calendar month;

(v)no Interest Period with respect to any portion of the Floating Rate Loans shall extend beyond June 30, 2008;

(vi)there shall be outstanding at any time no more than four Interest Periods with respect to the Floating Rate Loans; and

(vii)in the event Company fails to specify an Interest Period for any Floating Rate Loan in the applicable Notice of Continuation, Company shall be deemed to have selected an Interest Period of three months.

C.Interest Payments.  Subject to the provisions of subsection 2.2E and the accretion of interest in accordance with subsection 2.2A, interest on each Loan shall be payable in arrears on and to each Quarterly Date, upon any prepayment of that Loan (to the extent accrued on the amount being prepaid) and at maturity.

29

D.Continuation. Subject to the provisions of subsection 2.6, Company shall, upon the expiration of any Interest Period applicable to a Eurodollar Rate Loan, continue all of such Loan as a Eurodollar Rate Loan.

Company shall deliver a Notice of Continuation to Administrative Agent no later than 12:00 noon (New York time) at least three Business Days in advance of the proposed continuation date.  Each Notice of Continuation shall specify (i) the proposed continuation date (which shall be a Business Day), (ii) the amount of the Loan to be continued, (iii) the requested Interest Period, and (iv) that no Potential Event of Default or Event of Default has occurred and is continuing as of the date of the proposed continuation.  In lieu of delivering the above-described Notice of Continuation, Company may give Administrative Agent telephonic notice by the required time of any proposed continuation under this subsection 2.2D; provided that such notice shall be promptly confirmed in writing by delivery of a Notice of Continuation to Administrative Agent on or before the proposed continuation date.  Upon receipt of written or telephonic notice of any proposed continuation under this subsection 2.2D, Administrative Agent shall promptly transmit such notice by telefacsimile or telephone to each Lender.

Neither Administrative Agent nor any Lender shall incur any liability to Company in acting upon any telephonic notice referred to above that Administrative Agent believes in good faith to have been given by a duly authorized officer or other person authorized to act on behalf of Company or for otherwise acting in good faith under this subsection 2.2D, and upon continuation of the applicable basis for determining the interest rate with respect to any Loans in accordance with this Agreement pursuant to any such telephonic notice Company shall have effected a continuation hereunder.

Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice of Continuation for continuation of a Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and Company shall be bound to effect a continuation in accordance therewith or to pay the amounts payable pursuant to subsection 2.6D as a result of the failure to effect such continuation.

E.Default Rate. Upon the occurrence and during the continuation of any Event of Default, at the request of Administrative Agent, the outstanding principal amount of all Loans and, to the extent permitted by applicable law, any interest payments thereon not paid when due and any fees and other amounts then due and payable hereunder, shall thereafter bear interest (including post-petition interest in any proceeding under the Bankruptcy Code or other applicable bankruptcy laws) payable upon demand at a rate that is 2.0% per annum in excess of the interest rate otherwise payable under this Agreement with respect to the applicable Loans (or, in the case of any such fees and other amounts, at a rate which is 2.0% per annum in excess of the interest rate otherwise payable under this Agreement for Base Rate Loans).  Any such 2.0% per annum payable under this subsection 2.2E with respect to any applicable Loans (such amount being hereinafter referred to as the “Default Rate Accreted Amount” for any applicable period) shall accrete.  On each date on which amounts are required to be paid in respect of Loans hereunder, all Default Rate Accreted Amounts under this subsection 2.2E shall be added to the outstanding principal amount of the Loans.  Payment or acceptance of the increased rates of interest provided for in this subsection 2.2E is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of any Agent or any Lender.

F.Computation of Interest.  Interest on the Loans shall be computed on the basis of a 360-day year and for the actual number of days elapsed in the period during which it accrues.  In computing interest on any Loan, the date of the making of such Loan or the first day of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan required to be

30

converted from a Eurodollar Rate Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate Loan, as the case may be, shall be included, and the date of payment of such Loan (if payment is received prior to 2:00 P.M. (New York time)) or the expiration date of an Interest Period applicable to such Loan, as the case may be, shall be excluded, provided that if a Loan is repaid on the same day on which it is made, one day’s interest shall be paid on that Loan.

G.Interest Rate on Incremental Facility.  In the event that the Net Yield applicable to the Incremental Facility is in excess of the per annum rate of interest applicable to Fixed Rate Loans or Floating Rate Loans pursuant to subsection 2.2A or the per annum rate of interest payable in cash applicable to the Incremental Facility is in excess of the per annum rate of interest payable in cash on the Fixed Rate Loans or the Floating Rate Loans pursuant to subsection 2.2A, then (x) the per annum rate of interest payable in cash for all Fixed Rate Loans or Floating Rate Loans, as applicable, shall automatically be increased to any extent required so that the per annum rate of interest payable in cash for all Fixed Rate Loans or Floating Rate Loans, as applicable, is equal to the per annum rate of interest payable in cash for the Incremental Facility, and (y) the per annum rate of interest for all Fixed Rate Loans or Floating Rate Loans, as applicable, shall automatically be increased to any extent required so that the per annum rate of interest for all Fixed Rate Loans or Floating Rate Loans, as applicable, is equal to the Net Yield for the Incremental Facility, in each case without any action or consent of Company, any Agent or any Lender.  In no event will the per annum rate of interest payable in cash in respect of the Fixed Rate Loans or the Floating Rate Loans, as applicable, be less than the per annum rate of interest payable in cash in respect of the Incremental Facility.  “Net Yield” for purposes of loans constituting the Incremental Facility incurred pursuant to subsection 6.1(x) shall mean the sum of (a) the per annum rate of interest applicable to such loans at the date such Incremental Facility is incurred plus (b) any original issue discount offered to lenders in respect of such Incremental Facility amortized equally over the period from the date such Incremental Facility is incurred to the maturity date applicable to such Incremental Facility; provided, that such original issue discount shall not be amortized over a period of greater than three years.  All determinations by Administrative Agent as to the Net Yield or other matters set forth in this subsection 2.2G shall be conclusive and binding on all parties hereto absent manifest error.

2.3Fees.

Company agrees to pay to Arranger and Agents such other fees in the amounts and at the times separately agreed upon between Company, Agents and Arranger.

2.4Repayments, Prepayments and Reductions in Loan Commitments; General Provisions Regarding Payments.

A.Scheduled Payment of Loans.

Company shall pay in full the outstanding amount of the Loans and all other Obligations owing hereunder no later than the Maturity Date.

B.Prepayments.

(i)  Voluntary Prepayments.  After payment in full of all obligations under the First Lien Credit Agreement described in clause (i) of the definition thereof, termination of all commitments to extend credit thereunder and expiration, surrender or cash collateralization of all letters of credit thereunder, Company may, upon three Business Days’ prior written or telephonic notice by 12:00 Noon (New York time) on the date required and, if given by telephone, promptly

31

confirmed in writing to Administrative Agent (and Administrative Agent will promptly notify each Lender thereof), at any time and from time to time prepay any Loans on any Business Day in whole or in part in an aggregate minimum amount of $1,000,000 and multiples of $100,000 in excess of that amount, subject in the case of prepayments of Eurodollar Rate Loans to compliance with subsection 2.6D if such prepayment is made on a date prior to the expiration of the applicable Interest Period.  Notice of prepayment having been given as aforesaid, the principal amount of the Loans specified in such notice shall become due and payable on the prepayment date specified therein.  Any such voluntary prepayment shall be applied as specified in subsection 2.4C.

(ii)  Mandatory Prepayments.  After payment in full of all obligations in respect of the First Lien Credit Agreement, termination of all commitments to extend credit thereunder and expiration, surrender or cash collateralization of all letters of credit thereunder, the Loans shall be prepaid in the amounts and under the circumstances set forth below, all such prepayments to be applied as set forth below or as more specifically provided in subsection 2.4C:

(a)Prepayments from Net Asset Sale Proceeds.  No later than 30 calendar days following the date of receipt by Company or any of its Subsidiaries of any Net Asset Sale Proceeds in respect of any Asset Sale (other than any Asset Sale permitted under subsections 6.7(iv) and 6.7(viii) or an Asset Sale to Company or a Subsidiary Guarantor), Company shall prepay the Loans in an aggregate amount equal to such Net Asset Sale Proceeds; provided that if Company states in the Officer’s Certificate delivered pursuant to subsection 2.4B(ii)(e) that Company or the applicable Subsidiary intends to apply, within 365 days after the receipt of such Net Asset Sale Proceeds, all or a portion (as specified in such Officer’s Certificate) of such Net Asset Sale Proceeds to a Property Reinvestment Application Company shall not be required to prepay the Loans by such amount to be applied to a Property Reinvestment Application; provided further that to the extent such amount of Net Asset Sale Proceeds is not applied to a Property Reinvestment Application within such 365-day period, Company shall, on the last day of such 365-day period prepay the Loans in an aggregate amount equal to such amount of Net Asset Sale Proceeds not so applied to a Property Reinvestment Application.

(b)Prepayments from Net Insurance/Condemnation Proceeds.  No later than the first Business Day following the date of receipt by Administrative Agent or by Company or any of its Subsidiaries after the Closing Date of any Net Insurance/Condemnation Proceeds in excess of $250,000 with respect to any loss or taking or series of related losses or takings, Company shall prepay the Loans in an aggregate amount equal to the amount of such Net Insurance/Condemnation Proceeds; provided, however, that (i) no such prepayment shall be required to the extent under the terms of any lease or other agreement existing on the date hereof such Net Insurance/Condemnation Proceeds are required to be used to replace, rebuild or repair the asset so damaged, destroyed or taken and (ii) if Company states in the Officer’s Certificate delivered pursuant to subsection 2.4B(ii)(e) that Company or the applicable Subsidiary intends to apply, within 365 days after the receipt of such Net Insurance/Condemnation Proceeds, all or a portion (as specified in such Officer’s Certificate) of such Net Insurance/Condemnation Proceeds to a Property Reinvestment Application, Company shall not be required to prepay Loans by such amount to be applied to a Property Reinvestment Application; provided further that to the extent such amount of Net

32

Insurance/Condemnation Proceeds is not applied to a Property Reinvestment Application within such 365-day period, Company shall, on the last day of such 365-day period prepay the Loans in an aggregate amount equal to such amount of such Net Insurance/Condemnation Proceeds not so applied to a Property Reinvestment Application.

(c)Prepayments Due to Issuance of Debt or Equity Securities.  On the date of receipt by Parent, Company or any of its Subsidiaries of the cash proceeds (any such cash proceeds, net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith, including investment banking, legal, brokerage, accounting fees and expenses, being “Net Securities Proceeds”), from the issuance of equity Securities of Parent, Company or any of its Subsidiaries after the Closing Date (other than Excluded Equity Proceeds) or of debt Securities of Company or any of its Subsidiaries after the Closing Date (other than the proceeds of the issuance of Indebtedness permitted by subsection 6.1), Company shall prepay the Loans in an aggregate amount equal to such Net Securities Proceeds in the case of the proceeds of debt Securities and in an aggregate amount equal to 50% of such Net Securities Proceeds in the case of the proceeds of equity Securities; provided the amount of such prepayment hereunder in respect of Net Securities Proceeds constituting the proceeds of the issuance and sale of equity Securities shall be limited to the amount necessary to reduce the amount of Indebtedness included in the calculation of the Consolidated Leverage Ratio to the amount that would result, on a pro forma basis after giving effect to such prepayment, in a Consolidated Leverage Ratio of 3.50:1.00 or less at the end of the Fiscal Quarter then most recently ended and (ii) no such prepayment in respect of Net Securities Proceeds constituting the proceeds of the issuance and sale of equity Securities shall be required to be made at such times as the Consolidated Leverage Ratio at the end of the most recent Fiscal Quarter (as evidenced by an Officer’s Certificate delivered to Administrative Agent) is equal to or less than 3.50:1.00.

(d)Prepayments from Consolidated Excess Cash Flow.  In the event that there shall be Consolidated Excess Cash Flow for any Fiscal Year, Company shall, no later than the fifth Business Day after the delivery of financial statements for such Fiscal Year, prepay the Loans in an aggregate amount equal to 75% of such Consolidated Excess Cash Flow less the aggregate amount of all voluntary prepayments of Loans actually made in such Fiscal Year pursuant to subsection 2.4B(i); provided that (i) the amount of such prepayment hereunder in respect of Excess Cash Flow shall be limited to the amount necessary to reduce the amount of Indebtedness included in the calculation of the Consolidated Leverage Ratio to the amount that would result, on a pro forma basis after giving effect to such prepayment, in a Consolidated Leverage Ratio of 3.50:1.00 or less at the end of the Fiscal Quarter then most recently ended and (ii) if as of the last day of such Fiscal Year, the Consolidated Leverage Ratio (as evidenced by an Officer’s Certificate delivered to Administrative Agent is equal to or less than 3.50:1.00, no prepayments of any Loans need be made.

(e)Calculations of Net Proceeds Amounts; Additional Prepayments Based on Subsequent Calculations.  Concurrently with any prepayment of the Loans pursuant to subsections 2.4B(ii)(a)-(d) and on the date any such prepayment would have been required to be made pursuant to subsections

33

2.4B(ii)(a) or 2.4B(ii)(b) but for the application of the provisos to such subsections, Company shall deliver to Administrative Agent an Officer’s Certificate demonstrating the calculation of the amount (the “Net Proceeds Amount”) of the applicable Net Asset Sale Proceeds, Net Insurance/Condemnation Proceeds or Net Securities Proceeds, or the applicable Consolidated Excess Cash Flow, as the case may be (and which, in the case of Consolidated Excess Cash Flow, may be the Officer’s Certificate delivered pursuant to subsection 5.1(iii) with respect to the financial statements for the Fiscal Year to which such excess cash flow relates if such Officer’s Certificate contains the required information). In the event that Company shall subsequently determine that the actual Net Proceeds Amount was greater than the amount set forth in such Officer’s Certificate, Company shall promptly make an additional prepayment of the Loans in an amount equal to the amount of such excess, and Company shall concurrently therewith deliver to Administrative Agent an Officer’s Certificate demonstrating the derivation of the additional Net Proceeds Amount resulting in such excess.

(f)Company shall not be required to make any prepayment of Loans otherwise required by subsections 2.4B(ii)(a), (b), (c) or (d) unless and until the aggregate principal amount of the Loans to be prepaid is at least equal to $250,000.

(iii) Prepayment upon Change of Control.  Upon the occurrence of a Change of Control, Company will give written notice (a “Control Change Notice”) of such fact to Administrative Agent and all Lenders no more than five days after the Change of Control.  The Control Change Notice shall (i) describe the facts and circumstances of such Change of Control in reasonable detail, (ii) make reference to this subsection 2.4B(iii) and state that, unless such Lender makes a declaration of its intent to have its Loans prepaid as provided below, the principal amount of such Loans shall not be prepaid, (iii) specify the date of prepayment, which will be no earlier than 5 days nor later than 15 days from the date such notice is mailed (the “Control Change Payment Date”), and (iv) specify the date (the “Response Date”) by which such Lender must respond to such Control Change Notice pursuant to this subsection 2.4B(iii) in order to have its Loans prepaid (which shall not be earlier than 5 Business Days after delivery of the Control Change Notice), together with accrued interest thereon and the Change of Control Premium, on the Control Change Payment Date.

All Loans of such Lender shall be prepaid, together with accrued interest thereon and the Change of Control Premium, on the Control Change Payment Date if such Lender delivers to Company a written notice (the “Declaration Notice”) to prepay such Lender’s Loans (which notice may provide, at such Lender’s option, for a partial prepayment of such Lender’s Loans).  Company shall prepay, and shall cause its Subsidiaries to distribute to Company sufficient funds to prepay, in full on the Control Change Payment Date all Loans for which a Declaration Notice has been issued, together with accrued interest and the Change of Control Premium thereon.  Such Declaration Notice shall only be effective if provided to Company on or prior to the Response Date.  In the event that a Control Change Notice is given and any Lender fails to provide a Declaration Notice within the time period set forth above, the Loans of such Lender shall not be prepaid.

All prepayments on the Loans pursuant to this subsection 2.4B(iii) shall be made by the payment in cash of the aggregate principal amount remaining unpaid on such Loans, and accrued interest thereon to the date of such prepayment, together with the Change of Control Premium.

34

(iv)Call Protection.  In the event that for any reason the Loans are prepaid in whole or in part prior to the date falling three years after the Closing Date, Company shall pay to Lenders a prepayment premium on the principal amount so prepaid as follows:

Relevant period	Prepayment premium as a percentage of the principal amount so prepaid
On or prior to the first anniversary of the Closing Date	3.0	%
On or prior to the second anniversary of the Closing Date and after the first anniversary of the Closing Date	2.0	%
On or prior to the third anniversary of the Closing Date and after the second anniversary of the Closing Date	1.0	%
After the third anniversary of the Closing Date	0.0	%

C.General Provisions Regarding Payments.

(i)  Manner and Time of Payment.  All payments by Company of principal, interest, premium, fees and other Obligations hereunder and under the Notes shall be made in Dollars in same day funds, without defense, setoff or counterclaim, free of any restriction or condition, and delivered to Administrative Agent not later than 2:00 P.M. (New York time) on the date due at the Funding and Payment Office for the account of Lenders; funds received by Administrative Agent after that time on such due date shall be deemed to have been paid by Company on the next succeeding Business Day; provided that Accreted Amounts and Default Rate Accreted Amounts shall be paid by increasing the principal amount of the Loans shall be paid as provided in subsection 2.2A or subsection 2.2E, as applicable.

(ii)  Application of Payments to Principal, Interest and Premium.  All payments in respect of the principal amount of any Loan shall include payment of accrued interest and premium, if any is due, on the principal amount being repaid or prepaid, and all such payments (and, in any event, any payments in respect of any Loan on a date when interest is due and payable with respect to such Loan) shall be applied to the payment of any premium and interest before application to principal.  Any mandatory prepayments of the Loans pursuant to subsection 2.4B(ii) shall be applied to prepay the Fixed Rate Loans and the Floating Rate Loans on a pro rata basis (in accordance with the respective outstanding principal amounts thereof).

(iii)  Apportionment of Payments.  Aggregate principal, premium and interest payments in respect of Loans shall be apportioned among all outstanding Loans to which such payments relate, in each case proportionately to Lenders’ respective Pro Rata Shares.  Administrative Agent shall promptly distribute to each Lender, at its primary address set forth below its name on the appropriate signature page hereof or at such other address as such Lender may request, its Pro

35

Rata Share of all such payments received by Administrative Agent when received by Administrative Agent pursuant to subsection 2.3.

(iv)  Payments on Business Days.  Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest hereunder.

D.Application of Proceeds of Collateral and Payments Under Guaranties.

(i)  Application of Proceeds of Collateral.  Subject to the terms of the Intercreditor Agreement (to the extent then in effect), all proceeds received by Administrative Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral under any Collateral Document shall be applied, upon the occurrence and during the continuance of an Event of Default (except as otherwise agreed by Administrative Agent and the Requisite Lenders), against, the applicable Secured Obligations (as defined in such Collateral Document) in the following order of priority:

(a)to the payment of all costs and expenses of such sale, collection or other realization, including reasonable fees and expenses of Administrative Agent and its agents and counsel, and all other expenses and liabilities made or incurred by Administrative Agent in connection therewith, and all amounts for which Administrative Agent is entitled to indemnification under such Collateral Document and all advances made by Administrative Agent thereunder for the account of the applicable Loan Party, and to the payment of all costs and expenses paid or incurred by Administrative Agent in connection with the exercise of any right or remedy under such Collateral Document, all in accordance with the terms of this Agreement and such Collateral Document;

(b)thereafter, to the extent of any excess such proceeds, to the payment of all other such Secured Obligations then due and payable for the ratable benefit of the holders thereof; and

(c)thereafter, to the extent of any excess such proceeds, to the payment to or upon the order of such Loan Party or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct.

(ii)  Application of Payments Under Guaranties.  All payments received by Administrative Agent under any of the Guaranties at any time at which an Event of Default has occurred and is continuing, shall (except as otherwise agreed by Administrative Agent and the Requisite Lenders) be applied promptly from time to time by Administrative Agent in the following order of priority:

(a)to the payment of the costs and expenses of any collection or other realization under the Guaranties, including reasonable fees and expenses of Administrative Agent and its agents and counsel, and all expenses, liabilities and advances made or incurred by Administrative Agent in connection therewith, all in accordance with the terms of this Agreement and such Guaranty;

(b)thereafter, to the extent of any excess such payments, to the payment of all other Guarantied Obligations (as defined in such Guaranty) then due and payable for the ratable benefit of the holders thereof; and

36

(c)thereafter, to the extent of any excess such payments, to the payment to Parent or to the applicable Subsidiary Guarantor or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct.

2.5Use of Proceeds.

A.Loans.  The proceeds of the Loans shall be applied by Company to permanently prepay not less than forty percent (40%) of the principal amount of term loan Indebtedness outstanding in respect of the First Lien Credit Agreement on the Closing Date (prior to giving effect to the application of proceeds described herein), to permanently reduce revolving commitments in respect of the First Lien Credit Agreement on the Closing Date in an aggregate amount not less than $16,000,000 and to repay revolving loans outstanding on the Closing Date in respect of the First Lien Credit Agreement after giving effect to the foregoing, and the remaining amount of the proceeds of the Loans shall be used to pay for fees and expenses relating to the transactions contemplated hereunder and for working capital and general and other corporate purposes of Company and its Subsidiaries.

B.Margin Regulations.  No borrowing and no portion of the proceeds of any borrowing under this Agreement shall be used by Company or any of its Subsidiaries in any manner that is in violation of Regulation U or Regulation X of the Board of Governors of the Federal Reserve System in effect on the date or dates of such borrowing and such use of proceeds.

2.6Special Provisions Governing Eurodollar Rate Loans.

Notwithstanding any other provision of this Agreement to the contrary, the following provisions shall govern with respect to Eurodollar Rate Loans as to the matters covered:

A.Determination of Applicable Interest Rate.  As soon as practicable after 11:00 A.M. (London time) on each Interest Rate Determination Date, Administrative Agent shall determine (which determination shall, absent manifest error, be final, conclusive and binding upon all parties) the interest rate that shall apply to the Eurodollar Rate Loans for which an interest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to Company and each Floating Rate Lender.

B.Inability to Determine Applicable Interest Rate.  In the event that Administrative Agent shall have determined (which determination shall be final and conclusive and binding upon all parties hereto), on any Interest Rate Determination Date with respect to any Eurodollar Rate Loans, that deposits in U.S. Dollars for the relevant Interest Period are not available to Administrative Agent in the London interbank market or by reason of circumstances affecting the London interbank market adequate and fair means do not exist for ascertaining the interest rate applicable to such Loans on the basis provided for in the definition of Adjusted Eurodollar Rate, Administrative Agent shall on such date give notice (by telefacsimile or by telephone confirmed in writing) to Company and each Floating Rate Lender of such determination, whereupon (i) no Loans may be continued as, or converted to, Eurodollar Rate Loans until such time as Administrative Agent notifies Company and Floating Rate Lenders that the circumstances giving rise to such notice no longer exist and (ii) any Notice of Continuation given by Company with respect to the Loans in respect of which such determination was made shall be deemed to be rescinded by Company, and the Loans requested to be continued shall instead be converted to Base Rate Loans.

37

C.Illegality or Impracticability of Eurodollar Rate Loans.  In the event that on any date any Floating Rate Lender shall have determined (which determination shall be final and conclusive and binding upon all parties hereto but shall be made only after consultation with Company and Administrative Agent) that the making, maintaining or continuation of its Eurodollar Rate Loans has become unlawful as a result of the introduction of, or any change  in or in the interpretation of, any law, treaty, governmental rule, regulation, guideline or order (whether or not having the force of law even though the failure to comply therewith would not be unlawful), in each case after the date hereof, then, and in any such event, such Floating Rate Lender shall be an “Affected Lender” and it shall on that day give notice (by telefacsimile or by telephone confirmed in writing) to Company and Administrative Agent of such determination (which notice Administrative Agent shall promptly transmit to each other Floating Rate Lender).  Thereafter (a) the obligation of the Affected Lender to continue Loans as Eurodollar Rate Loans shall be suspended until such notice shall be withdrawn by the Affected Lender (which such Affected Lender shall do promptly upon obtaining actual knowledge that the circumstance giving rise to such suspension no longer exist), (b) to the extent such determination by the Affected Lender relates to a Eurodollar Rate Loan then being requested to be continued by Company pursuant to a Notice of Continuation, the Affected Lender shall convert such Loan to a Base Rate Loan (with interest thereon being payable on the same date or dates on which interest is payable in respect of the corresponding Loans of Floating Rate Lenders that are not Affected Lenders), (c) the Affected Lender’s obligation to maintain its outstanding Eurodollar Rate Loans (the “Affected Loans”) shall be terminated at the earlier to occur of the expiration of the Interest Period then in effect with respect to the Affected Loans or when required by law, and (d) the Affected Loans shall automatically convert into Base Rate Loans on the date of such termination (with interest thereon being payable on the same date or dates on which interest is payable in respect of the corresponding Loans of Floating Rate Lenders that are not Affected Lenders).  Nothing in this subsection 2.6C shall affect the obligation of any Floating Rate Lender other than an Affected Lender to maintain Loans as Eurodollar Rate Loans in accordance with the terms of this Agreement.

D.Compensation For Breakage or Non-Commencement of Interest Periods.  Company shall compensate each Lender, upon written request by that Lender (which request shall set forth the basis for requesting such amounts), for all reasonable losses, expenses and liabilities (including any interest paid by that Lender to lenders of funds borrowed by it to make or carry its Eurodollar Rate Loans and any loss, expense or liability sustained by that Lender in connection with the liquidation or re-employment of such funds but excluding any loss of margin for any period after any failure to borrow, continue or convert any Eurodollar Loans, or any prepayment of Eurodollar Loans described below) which that Lender may sustain: (i) if for any reason (other than a default by that Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date specified therefor in the Notice of Borrowing, or a conversion to or continuation of any Eurodollar Rate Loan does not occur on a date specified therefor in a Notice of Continuation or a telephonic request for conversion or continuation, (ii) if any prepayment (including any prepayment pursuant to subsection 2.4B(i)) or other principal payment or any conversion of any of its Eurodollar Rate Loans occurs on a date prior to the last day of an Interest Period applicable to that Loan, or (iii) if any prepayment of any of its Eurodollar Rate Loans is not made on any date specified in a notice of prepayment given by Company.

E.Booking of Eurodollar Rate Loans.  Any Lender may make, carry or transfer Eurodollar Rate Loans at, to, or for the account of any of its branch offices or the office of an Affiliate of that Lender; provided that Company shall not be liable for any additional amounts pursuant to subsection 2.7 as a result thereof nor shall any such action, by itself, cause such Lender to become an Affected Lender.

38

F.Assumptions Concerning Funding of Eurodollar Rate Loans.  Calculation of all amounts payable to a Lender under this subsection 2.6 and under subsection 2.7A shall be made as though that Lender had actually funded each of its relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit bearing interest at the rate obtained pursuant to clause (i) of the definition of Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar Rate Loan and having a maturity comparable to the relevant Interest Period and through the transfer of such Eurodollar deposit from an offshore office of that Lender to a domestic office of that Lender in the United States of America; provided, however, that each Lender may fund each of its Eurodollar Rate Loans in any manner it sees fit and the foregoing assumptions shall be utilized only for the purposes of calculating amounts payable under this subsection 2.6 and under subsection 2.7A.

2.7Increased Costs; Taxes; Capital Adequacy.

A.Compensation for Increased Costs and Taxes.  Subject to the provisions of subsection 2.7B (which shall be controlling with respect to the matters covered thereby), in the event that any Lender shall determine (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation of order), or any determination of a court or governmental authority, in each case that becomes effective after the date hereof (in the case of each Lender listed on the signature pages hereof and in the case of any other Lender if such change shall have affected a class of Lenders generally) or after the date of the Assignment Agreement pursuant to which such Lender became a Lender (in the case of any other Lender if such change shall not have affected a class of Lenders generally), or compliance by such Lender with any guideline, request or directive issued or made after the date hereof by any central bank or other governmental or quasi-governmental authority (whether or not having the force of law):

(i)imposes, modifies or holds applicable any reserve (including any marginal, emergency, supplemental, special or other reserve), special deposit, compulsory loan, FDIC insurance or similar requirement against assets held by, or deposits or other liabilities in or for the account of, or advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Lender (other than any such reserve or other requirements with respect to Eurodollar Rate Loans that are reflected in the definition of Adjusted Eurodollar Rate); or

(ii)imposes any other condition (other than with respect to a tax matter) on or affecting such Lender (or its applicable lending office) or its obligations hereunder or the London interbank market;

and the result of any of the foregoing is to increase the cost to such Lender of agreeing to make, making or maintaining Eurodollar Rate Loans hereunder or to reduce any amount received or receivable by such Lender (or its applicable lending office) with respect thereto; then, in any such case, Company shall pay to such Lender, within 15 days after receipt of the statement referred to in the next sentence, such additional amount or amounts as may be necessary to compensate such Lender for any such increased cost or reduction in amounts received or receivable hereunder.  Such Lender shall promptly deliver to Company (with a copy to Administrative Agent) a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to such Lender under this subsection 2.7A, which statement shall be conclusive and binding upon all parties hereto absent manifest error.

39

B.Withholding of Taxes.

(i)  Payments to Be Free and Clear.  All sums payable by Company under this Agreement and the other Loan Documents shall (except to the extent required by law) be paid free and clear of, and without any deduction on account of, any Tax.

(ii)  Grossing-up of Payments.  If Company is required by law to make any deduction or withholding on account of any such Tax from any sum paid or payable by Company to Administrative Agent or any Lender under any of the Loan Documents:

(a)Company shall pay any such Tax before the date on which penalties attach thereto, such payment to be made for its own account;

(b)the sum payable by Company in respect of which the relevant deduction, withholding or payment is required shall be increased to the extent necessary to ensure that, after the making of that deduction, withholding or payment, Administrative Agent or such Lender, as the case may be, receives on the due date a net sum equal to what it would have received had no such deduction, withholding or payment been required or made; and

(c)within 30 days after paying any sum from which it is required by law to make any deduction or withholding, or within 30 days after the due date of payment of any Tax which it is required by clause (a) above to pay (whichever is later), Company shall deliver to Administrative Agent evidence available to Company reasonably satisfactory to Administrative Agent of such deduction, withholding or payment and of the remittance thereof to the relevant taxing or other authority;

provided that no such additional amount shall be required to be paid to any Lender or Agent under clause (b) above except to the extent that any change after the date hereof (in the case of each Lender and Agent listed on the signature pages hereof) or after the date of the Assignment Agreement pursuant to which such Lender became a Lender (in the case of each other Lender) in any such requirement for a deduction, withholding or payment as is mentioned therein shall result in an increase in the rate of such deduction, withholding or payment from that in effect at the date of this Agreement or at the date of such Assignment Agreement, as the case may be, in respect of payments to such Lender or Agent.

(iii)  If any Taxes are directly asserted against either of Agents or any Lender with respect to any payment received by such Agents or such Lender under the Agreement, such Agents or such Lender may pay such Taxes and Company will promptly pay to such Person such additional amount (including any penalties, interest or expenses) as is necessary in order that the net amount received by such Person shall equal the amount of such Taxes paid by such Person; provided, however, that Company shall not be obligated to make payment to Lenders or Agents (as the case may be) pursuant to this sentence in respect of penalties or interest attributable to any Taxes, if written demand therefor has not been made by such Lenders or Agents within 60 days from the date on which such Lenders or Agents knew of the imposition of Taxes by the relevant taxing authority or for any additional imposition which may arise from the failure of Lenders or Agents to apply payments in accordance with the applicable tax law after Company has made the payments required hereunder; provided, further, however, that Company shall not be required to pay any such additional amounts except to the extent that any change after the date hereof (in the case of each Lender and Agent listed on the signature pages hereof) or after the date of the Assignment Agreement pursuant to which such Lender became a Lender (in the case of each other Lender) in any such requirement for the deduction, withholding or payment of Taxes shall result in an increase in the rate of such deduction, withholding or payment from that in effect at

40

the date of this Agreement or at the date of such Assignment Agreement, as the case may be, in respect of payments to such Lender or Agent.  After a Lender or an Agent (as the case may be) learns of the imposition of Taxes, such Lender or Agent will act in good faith to notify Company of their obligations hereunder as soon as reasonably possible.

(iv)  Evidence of Exemption from U.S. Withholding Tax.

(a)Each Lender and Agent that is not (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States, or any state or other political subdivision thereof, (iii) an estate that is subject to U.S. federal income taxation regardless of the source of its income or (iv) a trust, if any only if (A) a court within the United States is able to exercise primary supervision over the administration of the trust and (B) one or more U.S. persons has the authority to control all substantial decisions of the trust (for purposes of this subsection 2.7B(iv), any such Person referred to in clauses (i) through (iv) being a “Non-US Lender or Agent”) shall deliver to Administrative Agent and to Company on or prior to the Closing Date (in the case of each Lender and Agent listed on the signature pages hereof) or on or prior to the date of the Assignment Agreement pursuant to which it becomes a Lender (in the case of each other Lender), and at such other times as may be necessary in the determination of Company or Administrative Agent (each in the reasonable exercise of its discretion), (1) two or more (as Company or Administrative Agent reasonably request) original copies of Internal Revenue Service Form W-8BEN or W-8EC1 (or any successor forms), properly completed and duly executed by such Lender, together with any other certificate or statement of exemption required under the Internal Revenue Code or the regulations issued thereunder to establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to any payments to such Lender of principal, interest, fees or other amounts payable under any of the Loan Documents or (2) if such Lender is not a “bank” or other Person described in Section 881(c)(3) of the Internal Revenue Code and cannot deliver either Internal Revenue Service Form W-8BEN or W-8EC1 pursuant to clause (1) above, a Certificate re Non-Bank Status, together with two or more (as Company or Administrative Agent reasonably request) original copies of Internal Revenue Service Form W-8 (or any successor form), properly completed and duly executed by such Lender, together with any other certificate or statement of exemption required under the Internal Revenue Code or the regulations issued thereunder to establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to any payments to such Lender of interest payable under any of the Loan Documents.

(b)Each Lender required to deliver any forms, certificates or other evidence with respect to United States federal income tax withholding matters pursuant to subsection 2.7B(iv)(a) hereby agrees, from time to time after the initial delivery by such Lender of such forms, certificates or other evidence, whenever a lapse in time or change in circumstances renders such forms, certificates or other evidence obsolete or inaccurate in any material respect, that such Lender shall on or before the date that any such form, certification or other evidence becomes obsolete or inaccurate (1) deliver to Administrative Agent and to Company two or more (as Company or Administrative Agent may reasonably request) new original copies of Internal Revenue Service Form W-8BEN or W-8EC1, or a Certificate re Non-Bank Status and two or more (as Company or Administrative Agent may reasonably request) new original copies of Internal Revenue Service Form W-8, as the case may be, properly completed and duly executed by such Lender, together with any other certificate or statement of exemption required in order to confirm or establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to payments to such Lender under the Loan Documents or (2) notify Administrative Agent and Company of its inability to deliver any such forms, certificates

41

or other evidence.  Each Lender and each Agent agrees, to the extent reasonable and without material cost to it, to provide to Company and Administrative Agent such other applicable forms or certificates that would reduce or eliminate any Tax.

(c)Company shall not be required to pay any additional amount to any Non-US Lender or Agent under subsection 2.7B(ii) or 2.7B(iii) if such Lender or Agent shall have failed to satisfy the requirements of clause (a) or (b)(1) of this subsection 2.7B(iv); provided that if such Lender shall have satisfied the requirements of subsection 2.7B(iv)(a) on the Closing Date (in the case of each Lender listed on the signature pages hereof) or on the date of the Assignment Agreement pursuant to which it became a Lender (in the case of each other Lender), nothing in this subsection 2.7B(iv)(c) shall relieve Company of its obligation to pay any additional amounts pursuant to subsection 2.7B(ii) in the event that, as a result of any change in any applicable law, treaty or governmental rule, regulation or order, or any change in the interpretation, administration or application thereof, such Lender is no longer properly entitled to deliver forms, certificates or other evidence at a subsequent date establishing the fact that such Lender is not subject to withholding as described in subsection 2.7B(iv)(a).

(v)  If Company determines in good faith that a reasonable basis exists for contesting the imposition of a Tax with respect to a Lender or an Agent, if requested by Company, the relevant Lender or Agent, as the case may be, shall reasonably cooperate with Company in challenging such Tax at Company’s expense; provided, however, that nothing in this subsection 2.7B(v) shall require any Lender to submit to Company or any other Person any tax returns or any part thereof, or to prepare or file any tax returns other than as such Lender in its sole discretion shall determine.

(vi)  If a Lender or an Agent shall receive a refund (including any offset or credits) from a taxing authority (as a result of any error in the imposition of Taxes by such taxing authority) of any Taxes paid by Company pursuant to subsection 2.7B(ii) and 2.7B(iii) above, such Lender or Agent (as the case may be) shall promptly pay Company the amount so received, with interest, if any, from the taxing authority with respect to such refund, net of any tax liability incurred by such Lender or Agent that is attributable to the receipt of such refund and such interest; provided that such Lender or Agent, as the case may be, shall be entitled to use reasonable methods to calculate the allocation of any such refund payable to Company so long as such method does not result in a materially reduced amount being paid to Company as compared to similarly situated borrowers.

(vii)  Each Lender and each Agent agrees, to the extent reasonable and without material cost to it, to cooperate with Company to minimize any amounts payable by Company under this subsection 2.7B; provided, however, that nothing in this subsection 2.7B shall require any Lender to take any action which, in the sole discretion of such Lender, is inconsistent with its internal policy and legal and regulatory restrictions.

C.Capital Adequacy Adjustment.  If any Lender shall have determined that the adoption, effectiveness, phase-in or applicability after the date hereof (in the case of each Lender listed on the signature pages hereof and in the case of any other Lender if such change shall have affected a class of Lenders generally) or after the date of the Assignment Agreement pursuant to which such Lender became a Lender (in the case of any other Lender if such change shall not have affected a class of Lenders generally) of any law, rule or regulation (or any provision thereof) regarding capital adequacy, or any change after such date therein or in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its applicable lending office) with any guideline, request or directive regarding

42

capital adequacy (whether or not having the force of law) of any such governmental authority, central bank or comparable agency issued after such date, has or would have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of, or with reference to, such Lender’s Loans or Commitments or other obligations hereunder with respect to the Loans to a level below that which such Lender or such controlling corporation could have achieved but for such adoption, effectiveness, phase-in, applicability, change or compliance (taking into consideration the policies of such Lender or such controlling corporation with regard to capital adequacy), then from time to time, within 15 days after receipt by Company from such Lender of the statement referred to in the next sentence, Company shall pay to such Lender such additional amount or amounts as will compensate such Lender or such controlling corporation for such reduction.  Such Lender shall deliver to Company (with a copy to Administrative Agent) a written statement, setting forth in reasonable detail the basis of the calculation of such additional amounts, which statement shall be conclusive and binding upon all parties hereto absent manifest error; provided that such Lender may not impose materially greater costs on Company than on similarly situated borrowers by the virtue of the methodology applied to calculate such additional amounts.

D.Period of Recovery.  Company shall not be obligated to compensate any Lender for any costs or additional amounts with respect to which such Lender may request compensation pursuant to this subsection 2.7 to the extent such costs have accrued, or have been incurred, prior to 180 days prior to the date on which such Lender demands compensation therefor hereunder.

2.8Obligation of Lenders to Mitigate; Replacement of Lender.

A.Mitigation.  Each Lender agrees that, as promptly as practicable after the officer of such Lender responsible for administering the Loans of such Lender, becomes aware of the occurrence of an event or the existence of a condition that would cause such Lender to become an Affected Lender or that would entitle such Lender to receive payments under subsection 2.7, it will, to the extent not inconsistent with the internal policies of such Lender and any applicable legal or regulatory restrictions, use reasonable efforts (i) to make, issue, fund or maintain the Commitments of such Lender or the affected Loans of such Lender through another lending office of such Lender, or (ii) take such other measures as such Lender may deem reasonable, if as a result thereof the circumstances which would cause such Lender to be an Affected Lender would cease to exist or the additional amounts which would otherwise be required to be paid to such Lender pursuant to subsection 2.7 would be reduced and if, as determined by such Lender in its sole discretion, the making, issuing, funding or maintaining of such Commitments or Loans through such other lending office or in accordance with such other measures, as the case may be, would not otherwise materially adversely affect such Commitments or Loans or the interests of such Lender; provided that such Lender will not be obligated to utilize such other lending office pursuant to this subsection 2.8 unless Company agrees to pay all incremental expenses incurred by such Lender as a result of utilizing such other lending office as described in clause (i) above.  A certificate as to the amount of any such expenses payable by Company pursuant to this subsection 2.8 (setting forth in reasonable detail the basis for requesting such amount) submitted by such Lender to Company (with a copy to Administrative Agent) shall be conclusive absent manifest error.

B.Replacement of Lender.  If Company receives a notice of amounts due pursuant to subsection 2.7A, subsection 2.7B or subsection 2.7C from a Lender or a Lender becomes an Affected Lender or a Non-Consenting Lender (any such Lender, a “Subject Lender”), so long as Company has obtained a commitment from another Lender or an Eligible

43

Assignee to purchase at par the Subject Lender’s Loans and assume all other obligations of the Subject Lender hereunder, upon written notice to the Subject Lender and Administrative Agent, Company may require the Subject Lender to assign all of its Loans to such other Lender or Eligible Assignee pursuant to the provisions of subsection 9.1B; provided that, prior to or concurrently with such replacement (i) Company has paid to the Lender giving such notice all amounts under subsection 2.6D and subsection 2.7 (if applicable) through such date of replacement, (ii) Company or the applicable assignee has paid to Administrative Agent the processing fee required to be paid by subsection 9.1B(iv) and (iii) all of the requirements for such assignment contained in subsection 9.1B, including, without limitation, the consent of Agents (if required) and the receipt by Administrative Agent of an executed Assignment Agreement and other supporting documents, have been fulfilled.

Section 3.CONDITIONS TO LOANS

The obligations of Lenders to make the Loans on the Closing Date are subject to prior or concurrent satisfaction of the following conditions:

3.1Loan Party Documents.  On or before the Closing Date, Company shall, and shall cause each other Loan Party to, deliver to Lenders (or to Administrative Agent for Lenders with sufficient originally executed copies, where appropriate, for each Lender) the following with respect to Company or such other Loan Party, as the case may be, each, unless otherwise noted, dated the Closing Date:

(i)  Certified copies of the Organizational Certificate of such Person, together with a good standing certificate from the Secretary of State of its jurisdiction of incorporation, organization or formation, as applicable, and each other state in which such Person does a material amount of business and is qualified as a foreign entity to do business and, to the extent applicable and generally available, a certificate or other evidence of good standing as to payment of any applicable franchise or similar taxes from the appropriate taxing authority of each of such jurisdictions, each dated a recent date prior to the Closing Date;

(ii)  Copies of the Organizational Documents of such Person, certified as of the Closing Date by an Authorized Officer of such Person or such Person’s corporate secretary or assistant secretary;

(iii)  Organizational Authorizations of such Person approving and authorizing the execution, delivery and performance of the Loan Documents to which it is a party, and the consummation of the transactions contemplated by the foregoing, certified as of the Closing Date by an Authorized Officer of such Person or such Person’s corporate secretary or assistant secretary as being in full force and effect without modification or amendment;

(iv)  Signature and incumbency certificates with respect to each Authorized Officer of such Person executing any Loan Document or authorized to execute any notice, request or other document that may be delivered pursuant thereto;

(v)  Executed originals of the Credit Agreement, any Notes requested by any Lender at least one Business Day prior to the Closing Date, the Intercreditor Agreement, the Parent Guaranty, the Parent Pledge Agreement, the Pledge Agreement, the Security Agreement and the Subsidiary Guaranty, executed by Parent, Company and each of Company’s Domestic Subsidiaries, as applicable; and

44

(vi)  Such other documents as Agents may reasonably request.

3.2Use of Proceeds.

(i)  Repayment of Existing Indebtedness under the First Lien Credit Agreement. Contemporaneously with the application of the proceeds of the Loans to be made on the Closing Date, Company shall have used the proceeds of such Loans to permanently prepay not less than forty percent (40%) of the principal amount of term loan Indebtedness outstanding in respect of the First Lien Credit Agreement on the Closing Date (prior to giving effect to the application of proceeds described herein), to permanently reduce revolving commitments in respect of the First Lien Credit Agreement on the Closing Date in an aggregate amount not less than $16,000,000, to repay revolving loans outstanding on the Closing Date in respect of the First Lien Credit Agreement after giving effect to the foregoing, and to pay for Transaction Costs.  There shall be no existing Indebtedness of Company or its Subsidiaries outstanding after consummation of the Closing Date transactions other than Indebtedness permitted under subsection 6.1.

(ii)  Compliance with Laws.  The making of the Loans requested on the Closing Date shall not violate Regulation U or Regulation X of the Board of Governors of the Federal Reserve System.

3.3Related Agreements.Agents shall have received copies of the Related Agreements in effect on the Closing Date.

3.4No Material Adverse Change.No material adverse change in the financial condition, operations, assets, business, properties or prospects of Company and its Subsidiaries, taken as a whole, since June 30, 2003, shall have occurred.  There shall exist no pending or threatened material litigation, proceedings or investigations which could reasonably be expected to have a Material Adverse Effect.

3.5Lien Searches.Delivery to Administrative Agent of the results of a recent search of all effective UCC financing statements and fixture filings and all judgment and tax lien filings which may have been made with respect to any personal or mixed property of Company and any of its Domestic Subsidiaries, together with copies of all such filings disclosed by such search.

3.6Solvency Certificate.Company shall have delivered to Arranger and Agents a Solvency Certificate dated the Closing Date.

3.7Representations and Warranties.Company shall have delivered to Agents an Officer’s Certificate, in form and substance reasonably satisfactory to Agents, to the effect that the representations and warranties in Section 4 hereof are true, correct and complete in all material respects on and as of the Closing Date to the same extent as though made on and as of that date (or, to the extent such representations and warranties specifically relate to an earlier date, that such representations and warranties were true, correct and complete in all material respects on and as of such earlier date).

3.8Necessary Governmental Authorizations and Consents.  Company shall have obtained all Governmental Authorizations and all consents of other Persons, in each case that are necessary or advisable in connection with all transactions contemplated by the Loan Documents, and each of the foregoing shall be in full force and effect, in each case other than those the failure to obtain or maintain which, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.

45

3.9Financial Statements.Lenders shall have received (i) unaudited financial statements of Company and its Subsidiaries for the Fiscal Quarter ended September 30, 2003, (ii) pro forma consolidated balance sheets of Company and its Subsidiaries as of September 30, 2003, giving pro forma effect to the Closing Date transactions and (iii) projected financial statements (including balance sheets and statements of operations and cash flows) of Company and its Subsidiaries through and including December 31, 2008.

3.10Fees.Company shall have paid to Agents, Lenders and Arranger the fees payable on the Closing Date.

3.11Completion of Proceedings.All documents executed or submitted pursuant hereto by or on behalf of Company or any of its Subsidiaries or any other Loan Parties shall be reasonably satisfactory in form and substance to Agents and their counsel; Agents and their counsel shall have received all information, approvals, opinions, documents or instruments that Agents or their counsel shall have reasonably requested.

3.12Security Interests in Personal and Mixed Property.Administrative Agent shall have received evidence satisfactory to it that each Loan Party shall have taken or caused to be taken all such actions, executed and delivered or caused to be executed and delivered all such agreements, documents and instruments, and made or caused to be made all such filings and recordings (other than the filing or recording of items described in clause (iii) below) that may be necessary or, in the opinion of Agents, desirable in order to create in favor of Administrative Agent, for the benefit of Lenders, a valid and (upon such filing and recording) perfected First Priority security interest in the entire personal and mixed property Collateral.  Such actions shall include the following:

(i)  Schedules to Collateral Documents.  Delivery to Administrative Agent of accurate and complete schedules to all of the applicable Collateral Documents;

(ii)  Stock Certificates and Instruments.  Delivery to the First Lien Collateral Agent (pursuant to the terms of the Intercreditor Agreement) of (a) certificates (which certificates shall be accompanied by irrevocable undated stock powers, duly endorsed in blank) representing all capital stock pledged pursuant to the Parent Pledge Agreement and the Pledge Agreement and (b) all promissory notes or other instruments evidencing any Collateral;

(iii)  UCC Financing Statements and Fixture Filings.  Delivery to Administrative Agent of UCC financing statements and, where appropriate, fixture filings, with respect to all personal and mixed property Collateral of such Loan Party, for filing in all jurisdictions as may be necessary or, in the opinion of Administrative Agent, desirable to perfect the First Priority security interests created in such Collateral pursuant to the Collateral Documents; and

(iv)  Opinions of Local Counsel.  Delivery to Agents of an opinion of counsel (which counsel shall be reasonably satisfactory to Agents) under the laws of the states ofCalifornia and Arkansas with respect to the creation and perfection of the security interests in favor of Administrative Agent in such Collateral, in each case in form and substance reasonably satisfactory to Agents and dated the Closing Date.

B.Opinions of Counsel to Loan Parties.  Lenders and their respective counsel shall have received originally executed copies of a written opinion of Davis Polk & Wardwell, special New York counsel for Loan Parties, and Spolin Silverman Cohen & Bartlett LLP, counsel

46

for Loan Parties, each in form and substance reasonably satisfactory to Agents and dated the Closing Date.

3.13Notice of Borrowing.Administrative Agent shall have received, in accordance with the provisions of subsection 2.1B, an executed Notice of Borrowing signed by an Authorized Officer of Company.

3.14As of the Closing Date:

(i)  The representations and warranties contained herein and in the other Loan Documents shall be true, correct and complete in all material respects on and as of the Closing Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true, correct and complete in all material respects on and as of such earlier date; and

(ii)  No event shall have occurred and be continuing or would result from the consummation of the borrowing contemplated by the Notice of Borrowing that would constitute an Event of Default or a Potential Event of Default.

Section 4.REPRESENTATIONS AND WARRANTIES

In order to induce Lenders and Agents to enter into this Agreement and to make the Loans, Company represents and warrants to each Lender and Agents, on the Closing Date, that the following statements are true, correct and complete:

4.1Organization, Powers, Qualification, Good Standing, Business and Subsidiaries.

A.Organization and Powers.  Each Loan Party is duly organized, validly existing and, to the extent applicable, in good standing under the laws of its jurisdiction of incorporation, formation or organization as specified in Schedule 4.1 annexed hereto except to the extent that the failure to be in good standing has not had and will not have a Material Adverse Effect.  Each Loan Party has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and as proposed to be conducted, to enter into the Loan Documents and the Related Agreements to which it is a party and to carry out the transactions contemplated thereby.

B.Qualification and Good Standing.  Each Loan Party is qualified to do business and in good standing in every jurisdiction where its assets are located and wherever necessary to carry out its business and operations, except in jurisdictions where the failure to be so qualified or in good standing has not had and will not have a Material Adverse Effect.

C.Subsidiaries.  All of the Subsidiaries of Company as of the Closing Date are identified in Schedule 4.1 annexed hereto. Each of the Subsidiaries of Company identified in Schedule 4.1 is duly organized, validly existing and in good standing under the laws of its respective jurisdiction of incorporation, formation or organization set forth therein, has all requisite power and authority to own and operate its properties and to carry on its business as now conducted and as proposed to be conducted, and is qualified to do business and in good standing in every jurisdiction where its assets are located and wherever necessary to carry out its business and operations, in each case except where failure to be so qualified or in good standing or a lack

47

of such power and authority has not had and will not have a Material Adverse Effect.  Schedule 4.1 correctly sets forth the ownership interest of Company and each of its Subsidiaries, as of the Closing Date, in each of the Subsidiaries of Company identified therein.

4.2Authorization of Borrowing, etc.

A.Authorization of Borrowing.  The execution, delivery and performance of the Loan Documents and the Related Agreements have been duly authorized by all necessary actions on the part of each Loan Party that is a party thereto.

B.No Conflict.  The execution, delivery and performance by Loan Parties of the Loan Documents and the Related Agreements and the consummation of the transactions contemplated by the Loan Documents and the Related Agreements do not and will not (i) violate any provision of (x) any law or any governmental rule or regulation applicable to Company or any of its Subsidiaries, (y) the Organizational Certificate or Organizational Documents of Company or any of Company’s Subsidiaries or (z) any order, judgment or decree of any court or other agency of government binding on Company or any of Company’s Subsidiaries, (ii) conflict with, result in a breach of or constitute a default under the First Lien Credit Agreement in effect on the date hereof or the Senior Subordinated Note Indenture or any of the documents executed in connection with any of the foregoing, (iii) conflict with, result in a breach of or constitute a default under any Contractual Obligation of Company or any of its Subsidiaries not referred to in the immediately preceding clause (ii), where such conflict, breach or default in the aggregate have had or could reasonably be expected to have a Material Adverse Effect, (iv) result in or require the creation or imposition of any Lien upon any of the properties or assets of  Company or any of Company’s Subsidiaries (other than any Liens created under any of the Loan Documents in favor of Administrative Agent on behalf of Lenders), or (v) require any approval of or consent of any Person under any Contractual Obligation of Company or any of Company’s Subsidiaries, except for such approvals or consents which will be obtained on or before the Closing Date or such approvals or consents the failure of which to obtain has not had and could not reasonably be expected to have a Material Adverse Effect.

C.Governmental Consents.  The execution, delivery and performance by Loan Parties of the Loan Documents and the Related Agreements and the consummation of the transactions contemplated by the Loan Documents and the Related Agreements do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any federal, state or other governmental authority or regulatory body other than any such registrations, consents, approvals, notices or other actions (x) that have been made, obtained or taken on or prior to the date on which such registrations, consents, approvals, notices or other actions are required to be made, obtained or taken, as the case may be, and are in full force and effect or (y) the failure of which to make, obtain or take has not had and could not reasonably be expected to have a Material Adverse Effect.

D.Binding Obligation.  Each of the Loan Documents and the Related Agreements has been duly executed and delivered by each Loan Party that is a party thereto and is the legally valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.

48

4.3Financial Condition.

Company has heretofore delivered to Lenders, at Lenders’ request, the following financial statements and information:  (i) the audited consolidated balance sheets of Company and its Subsidiaries as at December 31, 2001 and 2002, and the related consolidated statements of income, stockholders’ equity and cash flows of Company and its Subsidiaries for the Fiscal Years ended December 31, 2001 and 2002, and (ii) the unaudited consolidated balance sheet of Company and its Subsidiaries as of September 30, 2003 and the related unaudited consolidated statements of income, stockholders’ equity and cash flows of Company and its Subsidiaries for the nine months then ended.  All such statements were prepared in conformity with GAAP and fairly present, in all material respects, the financial position (on a consolidated basis) of the entities described in such financial statements as at the respective dates thereof and the results of operations and cash flows (on a consolidated basis) of the entities described therein for each of the periods then ended, subject, in the case of any such unaudited financial statements, to no footnote disclosure and changes resulting from normal year-end adjustments.

4.4No Material Adverse Change; No Restricted Junior Payments.

Since June 30, 2003, no event or change has occurred which constitutes, either in any case or in the aggregate, a Material Adverse Effect.  Neither Company nor any of its Subsidiaries has directly or indirectly declared, ordered, paid or made, or set apart any sum or property for, any Restricted Junior Payment except as permitted by subsection 6.5.

4.5Title to Properties; Liens; Real Property.

A.Title to Properties; Liens.  Except to the extent that failure to do so has not had and  could not reasonably be expected to have a Material Adverse Effect, Company and its Subsidiaries have (i) good, sufficient and legal title to (in the case of fee interests in real property), (ii) valid leasehold interests in (in the case of leasehold interests in real or personal property), or (iii) good title to (in the case of all other personal property), all of their respective properties and assets.  Except as permitted by this Agreement, all such properties and assets are free and clear of Liens.

B.Real Property.  As of the Closing Date, Schedule 4.5 annexed hereto contains a true, accurate and complete list of (i) all real property owned by Company or any Domestic Subsidiary and (ii) all material leases, subleases or assignments of leases (together with all amendments, modifications, supplements, renewals or extensions of any thereof) affecting each Real Property Asset of any Loan Party, regardless of whether such Loan Party is the landlord or tenant (whether directly or as an assignee or successor in interest) under such lease, sublease or assignment.

4.6Litigation; Adverse Facts.

Except as set forth in Schedule 4.6 annexed hereto, there are no actions, suits, proceedings, arbitrations or governmental investigations (whether or not purportedly on behalf of Company or any of its Subsidiaries) at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign (including any Environmental Claims) that are pending or, to the knowledge of Company, threatened against or affecting Company or any of its Subsidiaries or any property of Company or any of its Subsidiaries and that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.  Neither Company nor any of its Subsidiaries is in violation of any applicable laws (including Environmental Laws) which violations, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.

49

4.7Payment of Taxes.

Except to the extent permitted by subsection 5.3, all tax returns and reports of Company and its Subsidiaries required to be filed by any of them have been timely filed, and all taxes shown on such tax returns to be due and payable and all assessments, fees and other governmental charges upon Company and its Subsidiaries and upon their respective properties, assets, income, businesses and franchises which are due and payable have been paid when due and payable, except any such taxes or charges which are being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP have been established.

4.8Governmental Regulation.

Neither Company nor any of its Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or the Investment Company Act of 1940.

4.9Securities Activities.

Neither Company nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock.

4.10Employee Benefit Plans.

A.Company, each of its Subsidiaries and each of their respective ERISA Affiliates are in substantial compliance with all applicable material provisions and requirements of ERISA and the regulations and published interpretations thereunder with respect to each Employee Benefit Plan, and have performed all their obligations under each Employee Benefit Plan except to the extent that any such noncompliance or nonperformance could not reasonably be expected to have a Material Adverse Effect.  Each Employee Benefit Plan which is intended to qualify under Section 401(a) of the Internal Revenue Code is so qualified except as could not reasonably be expected to have a Material Adverse Effect.

B.No ERISA Event has occurred or is reasonably expected to occur that could reasonably be expected to result in a Material Adverse Effect.

C.Except to the extent required under Section 4980B of the Internal Revenue Code, no Employee Benefit Plan provides health or welfare benefits (through the purchase of insurance or otherwise) for any retired or former employee of Company, any of its Subsidiaries or any of their respective ERISA Affiliates, except as could not reasonably be expected to result in a Material Adverse Effect.

D.As of the most recent valuation date for any Pension Plan, the amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA), individually or in the aggregate for all Pension Plans (excluding for purposes of such computation any Pension Plans with respect to which assets exceed benefit liabilities) could not reasonably be expected to have a Material Adverse Effect

E.As of the most recent valuation date for each Multiemployer Plan for which the actuarial report is available, the potential liability of Company, its Subsidiaries and their respective ERISA Affiliates for a complete withdrawal from such Multiemployer Plan (within the meaning of Section 4203 of ERISA), when aggregated with such potential liability for a complete

50

withdrawal from all Multiemployer Plans, based on information available pursuant to Section 4221(e) of ERISA could not reasonably be expected to have a Material Adverse Effect.

4.11Environmental Protection.

Except as set forth in Schedule 4.11 annexed hereto and except as to matters that, in the aggregate, would not reasonably be expected to have a Material Adverse Effect:

(i)  neither Company nor any of its Subsidiaries nor any of their respective Facilities or operations are subject to any outstanding written order, consent decree or settlement agreement with any Person relating to (a) any current Environmental Law, (b) any Environmental Claim, or (c) any Hazardous Materials Activity;

(ii)  neither Company nor any of its Subsidiaries has received any letter or request for information under Section 104 of the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. § 9604) or any comparable state law;

(iii)  there are and, to Company’s knowledge, have been no conditions, occurrences, or Hazardous Materials Activities at the Facilities or otherwise relating to the operation of Company or any of its Subsidiaries which could reasonably be expected to form the basis of an Environmental Claim against Company or any of its Subsidiaries;

(iv)  neither Company’s nor its Subsidiaries’ operations involve the transportation, storage or disposal of Hazardous Materials so as to require a permit for such operations under RCRA Part B (42 U.S.C. §6925 and 40 C.F.R. 270.1 et seq.) or involve transporting hazardous materials generated by a third party for disposal; and

(v)compliance with all current requirements pursuant to or under Environmental Laws will not, individually or in the aggregate, have a reasonable possibility of giving rise to a  Material Adverse Effect.

4.12Employee Matters.

There is no strike or work stoppage in existence or threatened affecting Company or any of its Subsidiaries that could reasonably be expected to have a Material Adverse Effect.

4.13Solvency.

On the Closing Date, after giving effect to the consummation of the Transactions, each Loan Party is Solvent.

4.14Matters Relating to Collateral.

A.Creation, Perfection and Priority of Liens.  The execution and delivery of the Collateral Documents by Loan Parties, together with actions taken pursuant to subsections 3.12, 5.8 and 5.9, are effective or, in the case of subsections 5.8 and 5.9 at the time of taking such actions, will be effective, once taken, to create in favor of Administrative Agent, for the benefit of Lenders, as security for the respective Secured Obligations (as defined in the applicable Collateral Document in respect of any Collateral), a valid and perfected First Priority Lien on the Collateral covered thereby.

51

B.Governmental Authorizations.  No authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for either (i) the pledge or grant by any Loan Party of the Liens purported to be created in favor of Administrative Agent pursuant to any of the Collateral Documents or (ii) the exercise by Administrative Agent of any rights or remedies in respect of any Collateral (whether specifically granted or created pursuant to any of the Collateral Documents or created or provided for by applicable law), except for filings or recordings contemplated by subsection 4.14A and except as may be required, in connection with the disposition of any Pledged Collateral, by laws generally affecting the offering and sale of securities.

C.Absence of Third-Party Filings.  On and after the Closing Date, except (a) such as may have been filed in favor of Administrative Agent or with respect to Liens permitted by this Agreement (including, without limitation, Liens securing obligations under the First Lien Credit Agreement) or (b) precautionary filings in respect of operating leases, (i) no effective UCC financing statement, fixture filing or other instrument similar in effect covering all or any part of the Collateral is on file in any filing or recording office and (ii) no effective filing covering all or any part of the IP Collateral is on file in the PTO, in each case other than filings in respect of which Administrative Agent shall have received appropriate termination statements or releases.

D.Margin Regulations.  The pledge of the Pledged Collateral pursuant to the Collateral Documents does not violate Regulation U or X of the Board of Governors of the Federal Reserve System.

E.Information Regarding Collateral.  All information supplied to Administrative Agent by or on behalf of any Loan Party with respect to any of the Collateral (in each case taken as a whole with respect to all Collateral) is accurate and complete in all material respects.

4.15Disclosure.

No representation or warranty of any Loan Party contained in any Loan Document or in any other document, certificate or written statement furnished to Lenders by or on behalf of Company or any of its Subsidiaries for use in connection with the transactions contemplated by this Agreement (including the Confidential Information Memorandum dated November, 2003) contains any untrue statement of a material fact or omits to state a material fact (known to Company, in the case of any document not furnished by it) necessary in order to make the statements contained herein or therein not materially misleading in light of the circumstances in which the same were made.  Any term or provision of this Section to the contrary notwithstanding, insofar as any of the representations and warranties described above includes assumptions, estimates, projections or opinions, no representation or warranty is made herein with respect thereto; provided, however, that to the extent any such assumptions, estimates, projections or opinions are based on factual matters, Company has reviewed such factual matters and nothing has come to its attention in the context of such review which would lead it to believe that such factual matters were not or are not true and correct in all material respects or that such factual matters omit to state any material fact necessary to make such assumptions, estimates, projections or opinions not misleading in any material respect.

Section 5.AFFIRMATIVE COVENANTS

Company covenants and agrees that, so long as any of the Commitments hereunder shall remain in effect and until payment in full of all of the Loans and other Obligations, unless Requisite Lenders

52

shall otherwise give prior written consent, Company shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 5.

5.1Financial Statements and Other Reports.

Company will maintain, and cause each of its Subsidiaries to maintain, a system of accounting established and administered in accordance with sound business practices to permit preparation of financial statements in conformity with GAAP.  Company will deliver to Administrative Agent (for distribution to Lenders):

(i)  Quarterly Financials:  as soon as available and in any event within 60 days after the end of each Fiscal Quarter, the consolidated balance sheet of Company and its Subsidiaries as at the end of such Fiscal Quarter and the related consolidated statements of income and stockholders’ equity of Company and its Subsidiaries for such Fiscal Quarter and statements of income, stockholders’ equity and cash flows for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter, setting forth in each case in comparative form the corresponding figures for the corresponding periods of the previous Fiscal Year (it being understood that the foregoing requirement may be satisfied by delivery of Company’s report as filed with the Securities and Exchange Commission on Form 10-Q, if any) together with, if any pro forma financial information has been used in connection with determining compliance with this Agreement, a reconciliation of such pro forma financial information with the financial information contained in such financial statements, all in reasonable detail and certified by the president, chief executive officer, treasurer, or chief financial officer of Company that they fairly present, in all material respects, the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments;

(ii)  Year-End Financials:  as soon as available and in any event within 105 days after the end of each Fiscal Year, (a) the consolidated balance sheet of Company and its Subsidiaries as at the end of such Fiscal Year and the related consolidated statements of income, stockholders equity and cash flows of Company and its Subsidiaries for such Fiscal Year, setting forth in each case in comparative form the corresponding figures for the previous Fiscal Year (it being understood that the foregoing requirement may be satisfied by delivery of Company’s report to the Securities and Exchange Commission on Form 10-K, if any) together with, if any pro forma financial information has been used in connection with determining compliance with this Agreement, a reconciliation of such pro forma financial information with the financial information contained in such financial statements, all in reasonable detail and reported on by independent certified public accountants of recognized national standing selected by Company and satisfactory to Agents, which report shall state (without Impermissible Qualification) that such consolidated financial statements fairly present, in all material respects, the consolidated financial position of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (except as otherwise disclosed in such financial statements) and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards;

(iii)  Officer’s and Compliance Certificates:  together with each delivery of financial statements pursuant to subdivisions (i) and (ii) above, (a) an Officer’s Certificate of Company stating that the signers have reviewed the relevant terms of this Agreement and that no condition or event that constitutes an Event of Default or Potential Event of Default exists, or, if any such condition or event existed or exists, specifying the nature and period of existence thereof and

53

what action Company has taken, is taking and proposes to take with respect thereto and (b) a Compliance Certificate executed by the president, chief executive officer, treasurer, or chief financial officer of Company;

(iv)  Accountants’ Certification:  together with each delivery of consolidated financial statements of Company and its Subsidiaries pursuant to subdivision (ii) above, a written statement by the independent certified public accountants giving the report thereon (a) stating that their audit examination has included a review of the terms of subsections 6.1, 6.2, 6.3, 6.4, 6.5, 6.6, 6.7 and 6.8 of this Agreement as they relate to accounting matters, and (b) stating whether, in connection with their audit examination, any condition or event that constitutes an Event of Default or Potential Event of Default has come to their attention and, if such a condition or event has come to their attention, specifying the nature and period of existence thereof; provided that such accountants shall not be liable by reason of any failure to obtain knowledge of any such Event of Default or Potential Event of Default that would not be disclosed in the course of their audit examination;

(v)  SEC Filings and Press Releases:  promptly upon their becoming available, copies of (a) all financial statements, reports, notices and proxy statements sent or made available generally by Parent or Company to its security holders (other than DLJMB or Parent, respectively), and (b) all regular and periodic reports and all registration statements (other than on Form S-8 or a similar form) and prospectuses, if any, filed by Parent or any of its Subsidiaries with any national securities exchange or with the Securities and Exchange Commission;

(vi)  Events of Default, etc.: promptly and in any event within seven Business Days after the president, chief executive officer, treasurer, assistant treasurer, controller, chief financial officer or any other Authorized Officer of Company obtains knowledge of any condition or event that constitutes an Event of Default or Potential Event of Default, an Officer’s Certificate specifying the nature and period of existence of such Event of Default or Potential Event of Default and what action Company has taken, is taking and proposes to take with respect thereto;

(vii)  Litigation or Other Proceedings:  (a) promptly upon the president, chief executive officer, treasurer, assistant treasurer, controller, chief financial officer or any other Authorized Officer of Company obtaining knowledge of (X) the institution of, or non-frivolous threat of, any action, suit, proceeding (whether administrative, judicial or otherwise), governmental investigation or arbitration against or affecting Company or any of its Subsidiaries or any property of Company or any of its Subsidiaries (collectively, “Proceedings”) not previously disclosed in writing by Company to Lenders or (Y) any material development in any Proceeding that, in any case:

(1)has a reasonable possibility of giving rise to a Material Adverse Effect; or

(2)seeks to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the transactions contemplated hereby,

written notice thereof and (b) promptly after request by Agents, such other information as may be reasonably requested by Agents to enable Agents and their respective counsel to evaluate any of such Proceedings;

(viii)  ERISA Events:  promptly upon becoming aware of the occurrence of or forthcoming occurrence of any ERISA Event that could reasonably be expected to result in a

54

Material Adverse Effect, a written notice specifying the nature thereof, what action Company, any of its Subsidiaries or any of their respective ERISA Affiliates has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto;

(ix)  ERISA Notices:  with reasonable promptness, copies of all notices received by Company, any of its Subsidiaries or any of their respective ERISA Affiliates from a Multiemployer Plan sponsor concerning an ERISA Event that could reasonably be expected to result in a Material Adverse Effect;

(x)  Financial Plans:  as soon as practicable and in any event no later than 30 days after the beginning of each Fiscal Year, a consolidated budget for such Fiscal Year, in the form prepared by Company consistent with its past practices (the “Financial Plan”);

(xi)  New Subsidiaries:  promptly upon any Person becoming a Subsidiary of Company, a written notice setting forth with respect to such Person (a) the date on which such Person became a Subsidiary of Company and (b) all of the data required to be set forth in Schedule 4.1 with respect to all Subsidiaries of Company (it being understood that such written notice shall be deemed to supplement Schedule 4.1 for all purposes of this Agreement);

(xii)  UCC Search Report:  as promptly as practicable after the date of delivery to Administrative Agent of any UCC financing statement delivered by any Loan Party pursuant to subsection 3.12or 5.8A, copies of completed UCC searches evidencing the proper filing, recording and indexing of all such UCC financing statements and listing all other effective financing statements that name such Loan Party as debtor, together with copies of all such other financing statements not previously delivered to Administrative Agent by or on behalf of Company or such Loan Party; and

(xiii)  Other Information:  with reasonable promptness, such other information and data with respect to Company or any of its Subsidiaries as from time to time may be reasonably requested by any Lender.

5.2Legal Existence, etc.

Except as permitted under subsection 6.7, Company will, and will cause each of its Subsidiaries to, at all times preserve and keep in full force and effect its legal existence and all rights and franchises material to its business except where failure to keep in full force and effect such rights and franchises could not reasonably be expected to have a Material Adverse Effect; provided, however that neither Company nor any of its Subsidiaries shall be required to preserve the existence of any Subsidiary if Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of Company and its Subsidiaries, and that the loss thereof is not disadvantageous in any material respect to Company or Lenders.

5.3Payment of Taxes and Claims; Tax Consolidation.

Company will, and will cause each of its Subsidiaries to, pay all material taxes, assessments and other governmental charges imposed upon it or any of its properties or assets or in respect of any of its income, businesses or franchises before any penalty accrues thereon, and all material claims (including claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a Lien upon any of its properties or assets, prior to the time when any penalty or fine shall be incurred with respect thereto; provided that no such charge or claim need be paid if it is

55

being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, so long as such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor.

5.4Maintenance of Properties; Insurance; Application of Net Insurance/Condemnation Proceeds.

A.Maintenance of Properties.  Except to the extent that the failure to do so would not reasonably be expected to have a Material Adverse Effect, Company will, and will cause each of its Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition, ordinary wear and tear excepted, all material properties used or useful in the business of Company and its Subsidiaries (including all Intellectual Property) and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof unless Company determines in good faith that the continued maintenance of any of its Properties is no longer economically desirable.

B.Insurance.  Company will maintain or cause to be maintained, with financially sound and reputable insurers, such public liability insurance, third party property damage insurance, business interruption insurance and casualty insurance with respect to liabilities, losses or damage in respect of the assets, properties and businesses of Company and its Subsidiaries as may customarily be carried or maintained under similar circumstances by corporations of established reputation engaged in similar businesses, in each case in such amounts (giving effect to self-insurance), with such deductibles, covering such risks and otherwise on such terms and conditions as shall be customary for corporations similarly situated in the industry.  Without limiting the generality of the foregoing, Company will maintain or cause to be maintained (i) flood insurance with respect to each Flood Hazard Property that is located in a community that participates in the National Flood Insurance Program, in each case in compliance with any applicable regulations of the Board of Governors of the Federal Reserve System, and (ii) replacement value casualty insurance on the Collateral under such policies of insurance, with such insurance companies, in such amounts, with such deductibles, and covering such risks as are at all times satisfactory to Agents in their commercially reasonable judgment.  Each such policy of insurance shall (a) as soon as practicable after the Closing Date but in no event later than thirty (30) days after the Closing Date (or such longer period as Administrative Agent shall agree) name Administrative Agent for the benefit of Lenders as an additional insured thereunder as its interests may appear and (b) in the case of each casualty insurance policy, contain a loss payable clause or endorsement, satisfactory in form and substance to Administrative Agent, that names Administrative Agent for the benefit of Lenders as a loss payee thereunder for any covered loss in excess of $250,000 and provides for at least 30 days prior written notice to Administrative Agent of any modification or cancellation of such policy unless, in the case of this clause (b), if any First Lien Credit Agreement is then in effect, the insurer will not issue such loss payable clauses or endorsements naming Administrative Agent for the benefit of Lenders as a loss payee, in which case Company shall deliver to Administrative Agent such loss payable clauses or endorsements naming Administrative Agent for the benefit of Lenders as a loss payee promptly upon payment in full of all obligations under the First Lien Credit Agreement, termination of all commitments to extend credit thereunder and expiration, surrender or cash collateralization of all letters of credit thereunder.

C.Evidence of Insurance.  Upon request of Administrative Agent, Company shall deliver to Administrative Agent a certificate from Company’s insurance broker or other evidence satisfactory to it that all insurance required to be maintained pursuant to subsection 5.4B

56

is in full force and effect and that Administrative Agent on behalf of Lenders has been named as an additional insured and/or a loss payee thereunder to the extent required under subsection 5.4B.

5.5Inspection Rights.

Company shall, and shall cause each of its Subsidiaries to, permit any authorized representatives designated by any Lender to visit and inspect any of the properties of Company or of any of its Subsidiaries, to inspect, copy and take extracts from its and their financial and accounting records, and to discuss its and their affairs, finances and accounts with its and their officers and, after notice to Company and provision of an opportunity to participate in such discussions, independent public accountants, all upon reasonable notice and at such reasonable times and intervals during normal business hours and as often as may reasonably be requested, but, unless an Event of Default shall have occurred and be continuing, not more frequently than once in each Fiscal Year, unless otherwise consented to by Company.  Subject to subsection 9.2, the cost and expenses of each such visit shall be borne by the applicable Lender.

5.6Compliance with Laws, etc.

A.General.  Company shall comply, and shall cause each of its Subsidiaries to comply, in all material respects, with the requirements of all applicable laws, rules, regulations and orders of any governmental authority (including all Environmental Laws), noncompliance with which could reasonably be expected to cause, individually or in the aggregate, a Material Adverse Effect.

B.Environmental Covenant.

Company will and will cause each of its Subsidiaries to:

(i)  Use and operate all of its Facilities and properties in compliance with all Environmental Laws, keep all necessary permits, approvals, certificates, licenses and other Governmental Authorizations relating to environmental matters in effect and remain in compliance therewith, and handle all Hazardous Materials in compliance with all applicable Environmental Laws, in each case except where the failure to comply with the terms of this clause would not reasonably be expected to have a Material Adverse Effect;

(ii)  Promptly notify Agents and provide copies of all written claims, complaints, notices or inquiries relating to the condition of its Facilities or relating to compliance with Environmental Laws which relate to environmental matters which would have, or would reasonably be expected to have, a Material Adverse Effect, and promptly cure and have dismissed with prejudice any material actions and proceedings relating to compliance with Environmental Laws, except to the extent being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP have been set aside on its books; and

(iii)  Provide such information and certificates which Agents may reasonably request from time to time to evidence compliance with this Section 5.6.

5.7Execution of Subsidiary Guaranty and Personal Property Collateral Documents by Certain Subsidiaries and Future Subsidiaries; IP Collateral.

A.Execution of Subsidiary Guaranty and Personal Property Collateral Documents. In the event that any Person becomes a Subsidiary of Company after the Closing

57

Date (other than a Foreign Subsidiary and other than a Domestic Subsidiary that is a Non-Wholly-Owned Subsidiary), Company will promptly notify Administrative Agent of that fact and cause such Subsidiary to execute and deliver to Administrative Agent a supplement to the Pledge Agreement, a counterpart of the Subsidiary Guaranty and an acknowledgement to the Security Agreement and to take all such further actions and execute all such further documents and instruments (including actions, documents and instruments comparable to those described in subsection 3.12) as may be necessary or, in the opinion of Agents, desirable to create in favor of Administrative Agent, for the benefit of Lenders, a valid and perfected First Priority Lien on all of the personal and mixed property assets of such Subsidiary described in the applicable forms of Collateral Documents; provided that no such Subsidiary shall be required to pledge pursuant to the Pledge Agreement more than 65% of the total combined voting power of all classes of securities of any Foreign Subsidiary held by such Subsidiary entitled to vote.

B.Subsidiary Charter Documents, Legal Opinions, Etc.  Company shall deliver to Administrative Agent, together with such Loan Documents, (i) certified copies of such Subsidiary’s Organizational Certificate, together with a good standing certificate from the Secretary of State of the jurisdiction of its incorporation, organization or formation, as applicable, and each other state in which such Person is qualified as a foreign entity to do business and, to the extent generally available, a certificate or other evidence of good standing as to payment of any applicable franchise or similar taxes from the appropriate taxing authority of each of such jurisdictions, each to be dated a recent date prior to their delivery to Administrative Agent, (ii) a copy of such Subsidiary’s Organizational Document, certified by its secretary or an assistant secretary as of a recent date prior to their delivery to Administrative Agent, (iii) a certificate executed by the secretary or an assistant secretary of such Subsidiary as to (a) the fact that the attached Organizational Authorizations of such Subsidiary approving and authorizing the execution, delivery and performance of such Loan Documents are in full force and effect and have not been modified or amended and (b) the incumbency and signatures of the officers of such Subsidiary executing such Loan Documents, and (iv) a favorable opinion of counsel to such Subsidiary, in form and substance satisfactory to Agents and their respective counsel, as to (a) the due organization and good standing of such Subsidiary, (b) the due authorization, execution and delivery by such Subsidiary of such Loan Documents, (c) the enforceability of such Loan Documents against such Subsidiary and (d) such other matters (including matters relating to the creation and perfection of Liens in any Collateral pursuant to such Loan Documents) as Agents may reasonably request, all of the foregoing to be satisfactory in form and substance to Agents and their respective counsel.

C.IP Collateral.  If any Subsidiary (other than a Foreign Subsidiary and Domestic Subsidiaries that are Non-Wholly-Owned Subsidiaries) becomes an owner of any Intellectual Property after the Closing Date, Company shall cause such Subsidiary to promptly execute and deliver to Administrative Agent an acknowledgement to the Security Agreement and all cover sheets and executed grants of trademark security interest, grants of patent security interest and grants of copyright security interest and such other documents or instruments required to be filed with the PTO and the CO as Administrative Agent shall deem appropriate and take such further action and execute such further documents and instruments as may be necessary, or in the opinion of Administrative Agent, desirable to create in favor of Administrative Agent, for the benefit of Lenders, a valid and perfected First Priority Lien on such Intellectual Property.

5.8Future Leased Property and Future Acquisitions of Real Property; Future Acquisition of Other Property.

58

A.In connection with any Leasehold Property, Company shall, and shall cause each of its Subsidiaries (other than Foreign Subsidiaries and Domestic Subsidiaries that are Non-Wholly-Owned Subsidiaries) to use its (and their) commercially reasonable efforts (which shall not require the expenditure of cash (other than the payment of the respective attorneys fees of Company and the lessor) or the making of any material concessions under the relevant lease) to deliver to Administrative Agent a waiver for the benefit of Administrative Agent in form and substance reasonably satisfactory to Administrative Agent executed by the lessor of any real property that is to be leased by Company or such Subsidiary for a term in excess of one year in any state which by statute grants such lessor a “landlord’s” (or similar) Lien which is superior to Administrative Agent’s and which grants to Administrative Agent a license to enter the leased property and remove any and all personal property, if the value of such personal property of Company or its Subsidiaries to be held at such leased property exceeds (or it is anticipated that the value of such personal property will, at any point in time during the term of such leasehold term, exceed) $2,000,000.

B.In the event that Company or any of its Subsidiaries (other than Foreign Subsidiaries or Domestic Subsidiaries that are Non-Wholly-Owned Subsidiaries) shall acquire any real property having a value as determined in good faith by Administrative Agent in excess of $2,000,000 (or in the case of leased property, in the event that Company is able to deliver the waivers and consents described in subsection 5.8C in connection with the leases described therein), Company or the applicable Subsidiary shall, promptly after such acquisition or consent, execute a Mortgage and provide Administrative Agent with (i) evidence of the completion (or satisfactory arrangements for the completion) of all recordings and filings of such Mortgage as may be necessary or, in the reasonable opinion of Administrative Agent, desirable effectively to create a valid, perfected First Priority Lien, subject to the Liens permitted by subsection 6.2, against the property purported to be covered thereby, (ii) mortgagee’s title insurance policy or policies in favor of Administrative Agent and Lenders in amounts and in form and substance and issued by insurers, reasonably satisfactory to Agents, with respect to the property purported to be covered by such Mortgage, insuring that title to such property is indefeasible and that the interests created by the Mortgage constitute valid First Priority Liens thereon free and clear of all defects and encumbrances other than as permitted by subsection 6.2 or as approved by Agents, and such policies shall include, to the extent available, such endorsements as Agents shall reasonably request and shall be accompanied by evidence of the payment in full of all premiums thereon, and (iii) such other approvals, opinions, or documents as Agents may reasonably request.

C.As soon as reasonably practical after the Closing Date, Company or its applicable Subsidiary shall, in the event Company or any of its Subsidiaries (other than Foreign Subsidiaries or Domestic Subsidiaries that are Non-Wholly-Owned Subsidiaries) shall become a lessee under any lease of real property covering 10,000 square feet of building space and having an unexpired lease term (including options to extend such lease term) of three years or longer, Company or the applicable Subsidiary shall, use its commercially reasonable efforts (which shall not require the expenditure of cash (other than the payment of the respective attorneys fees of Company and the lessor) or the making of any material concessions under the relevant lease) to cause the lessor to agree (during the negotiation of such lease if such lease is entered into after the Closing Date), for the benefit of Administrative Agent (i) to the matters set forth in subsection 5.8A, (ii) that without any further consent of such lessor or any further action on the part of the Loan Party holding the lessee’s interest in such property, such lessee’s interest in such property may be encumbered pursuant to a Mortgage and may be assigned to the purchaser at a foreclosure sale or in a transfer in lieu of such a sale (and to a subsequent third party assignee if any Agent, any Lender, or an Affiliate of either so acquires such lessee’s interest in such property), and (iii) that such lessor shall not terminate such lease as a result of a default by such Loan Party

59

thereunder without first giving Agents notice of such default and at least 60 days (or, if such default cannot reasonably be cured by Agents within such period, such longer period as may reasonably be required) to cure such default.

5.9PTO and CO Cover Sheets, Etc.

Company will deliver to Administrative Agent no later than ten (10) days after the Closing Date (or such longer period as Administrative Agent shall agree) instruments or documents, in appropriate form for filing with the PTO and/or the CO, sufficient to create and perfect a security interest in all IP Collateral owned as of the Closing Date by Company and its Subsidiaries (other than Foreign Subsidiaries and Domestic Subsidiaries that are Non-Wholly-Owned Subsidiaries), which instruments or documents shall reflect that such security interest is junior in priority to the security interest granted in such IP Collateral under the First Lien Credit Agreement while any First Lien Credit Agreement is then in effect.

5.10Mortgages.

A.With respect to the Closing Date Mortgaged Property, as soon as practicable after the Closing Date but in no event later than thirty (30) days after the Closing Date (or such longer period as Administrative Agent shall agree), Company shall deliver to Administrative Agent counterparts of the Mortgage covering the Closing Date Mortgaged Property, dated as of the date of such delivery, duly executed by the applicable Subsidiary in appropriate form for recording, together with such other documents and instruments in appropriate form for filing of such Mortgage as may be necessary or, in the reasonable opinion of Administrative Agent, desirable effectively to create a valid, perfected, First Priority Lien, subject to Liens permitted by subsection 6.2, against the properties purported to be covered thereby.

B.As soon as practicable after delivery of the Mortgage pursuant to subsection 5.10A, Company shall deliver to Administrative Agent (i) mortgagee’s title insurance policies in favor of Agents and Lenders in amounts and in form and substance and issued by insurers, reasonably satisfactory to Administrative Agent, with respect to the property purported to be covered by such Mortgage, insuring that title to such property is indefeasible and that the interests created by such Mortgage constitute valid First Priority Liens thereon free and clear of all defects and encumbrances other than as permitted by subsection 6.2 or as approved by Administrative Agent, and such policies shall also include, to the extent available, such endorsements as Administrative Agent shall reasonably request and shall be accompanied by evidence of the payment in full of all premiums thereon, unless, in the case of this clause (i), if any First Lien Credit Agreement is then in effect, the insurer will not issue such title insurance policies in favor of Agents and Lenders described above, in which case Company shall deliver to Administrative Agent such title insurance policies and other items described above promptly upon payment in full of all obligations under the First Lien Credit Agreement, termination of all commitments to extend credit thereunder and expiration, surrender or cash collateralization of all letters of credit thereunder, and (ii) such other approvals, opinions or documents as Administrative Agent may reasonably request.

Section 6.NEGATIVE COVENANTS

Company covenants and agrees that, so long as any of the Commitments hereunder shall remain in effect and until payment in full of all of the Loans and other Obligations, unless Requisite Lenders shall otherwise give prior written consent, Company shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 6.

60

6.1Indebtedness.

Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or otherwise become or remain liable with respect to, any Indebtedness, except:

(i)  Company may become and remain liable with respect to the Obligations;

(ii)  Company and its Subsidiaries may become and remain liable with respect to any obligations constituting Indebtedness and actually arising pursuant to Contingent Obligations permitted pursuant to subsection 6.4;

(iii)  Company and its Subsidiaries may become and remain liable with respect to Indebtedness in respect of Capital Leases and other purchase money Indebtedness incurred to finance the acquisition or improvement of fixed assets, in an aggregate amount not exceeding $7,500,000;

(iv)  Intercompany Indebtedness (i) of Company or any Domestic Subsidiary of Company owing to Company or any Subsidiary of Company, and (ii) of any Foreign Subsidiary of Company owing to (x) any other Foreign Subsidiary or (y) Company or any Domestic Subsidiary of Company; provided that in respect of any such Indebtedness (other than any such Indebtedness incurred to finance a Permitted Acquisition) described in this clause (ii)(y), the aggregate principal amount of such Indebtedness, when taken together with the aggregate amount at such time of all outstanding Investments in Foreign Subsidiaries made pursuant to subsection 6.3(xii), shall not exceed at any time outstanding $10,000,000; provided further that (x) if requested by Administrative Agent, all intercompany Indebtedness shall be evidenced by promissory notes which shall be delivered to the First Lien Collateral Agent pursuant to the Intercreditor Agreement (to the extent then in effect) or the applicable intercreditor agreement then in effect (if any) or, if no First Lien Credit Agreement is then in effect, to Administrative Agent, as Collateral hereunder, and (y) all intercompany Indebtedness owed by Company or by a Subsidiary Guarantor to any Subsidiary of Company that is not a Subsidiary Guarantor shall be subordinated in right of payment to the payment in full of the Obligations pursuant to the terms of an intercompany subordination agreement in the form of Exhibit XIII attached hereto;

(v)  Company and its Subsidiaries, as applicable, may remain liable with respect to Indebtedness described in Schedule 6.1 annexed hereto and refinancings and replacements thereof in a principal amount not exceeding the principal amount of the indebtedness so refinanced or replaced and with an average life to maturity of not less than the then average life to maturity of the Indebtedness so refinanced or replaced;

(vi)  Company may become and remain liable with respect to up to $100,000,000 in aggregate principal amount of Indebtedness evidenced by the Senior Subordinated Notes;

(vii)  Indebtedness of Tri-Star Electronics Europe SA incurred pursuant to a working capital facility not to exceed U.S.$2,000,000 (or the equivalent thereof in Swiss Francs) at any time outstanding (except if such excess is caused solely by changes in exchange rates and is eliminated within five Business Days of its occurrence) and other Indebtedness of Foreign Subsidiaries in an aggregate outstanding principal amount which does not exceed $10,000,000 at any time outstanding;

(viii)  Assumed Indebtedness of Company and its Subsidiaries in an aggregate principal amount at any time outstanding not to exceed $5,000,000;

61

(ix)  Company and its Subsidiaries may become and remain liable with respect to other Indebtedness in an aggregate principal amount not to exceed $10,000,000 at any time outstanding;

(x)Company may become and remain liable with respect to Permitted Indebtedness; provided that Company causes an opinion of counsel in form and substance reasonably satisfactory to Administrative Agent to be delivered to Administrative Agent to the effect that the incurrence and performance of the terms of the Permitted Indebtedness do not conflict with or violate the terms of this Agreement, the First Lien Credit Agreement or the Senior Subordinated Note Indenture at or prior to the incurrence of the Permitted Indebtedness; provided further that (A) after giving effect to the incurrence of Permitted Indebtedness, Company and its Subsidiaries shall be in pro forma compliance with the provisions of Section 6 of this Agreement; (B) an aggregate amount equal to (I) at least 80% of Net Securities Proceeds from the issuance of Permitted Indebtedness shall be applied to the permanent prepayment of term Indebtedness under the First Lien Credit Agreement (and, if necessary, after all such term Indebtedness has been repaid in full, to the permanent reduction of revolving Indebtedness thereunder) and an aggregate amount equal to the remaining Net Securities Proceeds from the issuance of Permitted Indebtedness shall be applied to the repayment of outstanding revolving loans under the First Lien Credit Agreement (to the extent any First Lien Credit Agreement is then in effect) no later than the first Business Day following the receipt thereof (but with no concurrent commitment reduction), or (II) if no First Lien Credit Agreement is then in effect, the Net Securities Proceeds shall be used for working capital and general and other corporate purposes of Company and its Subsidiaries; (C) Permitted Indebtedness in respect of the Incremental Facility shall be incurred not more than one time during the term of this Agreement, and other Permitted Indebtedness shall be incurred not more than one time during the term of this Agreement; and (D), in the case of Permitted Indebtedness issued pursuant to the Incremental Facility, such Permitted Indebtedness shall be issued on terms to be agreed upon by Company, Agents and the lenders under such Incremental Facility (which may be Lenders and/or other Eligible Assignees), and the Incremental Facility may be implemented and conforming amendments made to this Agreement and other Loan Documents to reflect its implementation and the terms thereof without the consent of any Lender not a lender under such Incremental Facility, including, without limitation, conforming amendments: (w) to provide for the Incremental Facility to share ratably in the Collateral and in the other benefits of this Agreement and the other Loan Documents (including the accrued interest in respect thereof) with the Loans made on the Closing Date, (x) to Sections 1 and 2 to provide, among other things, for the Incremental Facility to share ratably with the Loans made on the Closing Date in the application of prepayments, (y) to provide an amortization schedule for the Incremental Facility (provided that no amortization shall be paid in respect of the Incremental Facility prior to the Maturity Date), and (z) to include appropriately the Lenders holding the Incremental Facility in any determination of Lenders, Requisite Lenders and Pro Rata Share and the loans constituting the Incremental Facility as Loans, it being understood that no Lender or Agent is committed or obligated to participate in such Incremental Facility unless it agrees to do so in the document or agreement implementing such Incremental Facility; notwithstanding anything in this Agreement expressed or implied to the contrary (including, without limitation in subsection 9.6), nothing herein shall be construed to require consent from Lenders that are not lenders under such Incremental Facility to the incurrence of Indebtedness under the Incremental Facility in compliance with this subsection 6.1(x), and this subsection 6.1(x) shall supersede any provisions in subsection 9.6 to the contrary; and

(xi)  Company and the Subsidiary Guarantors may become and remain liable with respect to obligations owed under the First Lien Credit Agreement; provided that the aggregate outstanding principal amount of Indebtedness under this clause (xi) plus the aggregate amount of letters of credit outstanding under subsection 6.4(ii)(A) (and undrawn) shall not exceed the lesser

62

of (a) the then aggregate amount of outstanding principal amounts of Indebtedness and unutilized commitments in respect of the First Lien Credit Agreement, plus $10,000,000, plus the Net Senior Debt Ratio Amount, and (b) $[81,000,000] plus $10,000,000 plus the Net Senior Debt Ratio Amount, minus  the aggregate amount of all repayments and prepayments of any term Indebtedness thereunder, and the aggregate amount of all permanent reductions of revolving credit commitments thereunder.

6.2Liens and Related Matters.

A.Prohibition on Liens.  Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or permit to exist any Lien on or with respect to any property or asset of any kind (including any document or instrument in respect of goods or accounts receivable) of Company or any of its Subsidiaries, whether now owned or hereafter acquired, or any income or profits therefrom, except:

(i)  Permitted Encumbrances;

(ii)  Liens granted pursuant to the Collateral Documents, and Liens created under the First Lien Credit Agreement securing payment of any obligations in respect of Hedge Agreements owed to any Person that, at the time such Hedge Agreement was entered into, was a lender or an Affiliate of a lender under the First Lien Credit Agreement;

(iii)  Liens existing as of the Original Closing Date and described in Schedule 6.2 annexed hereto and Liens securing extensions, renewals or replacements of the Indebtedness or other obligations which such identified Liens secure; provided that no such extension, renewal or replacement shall increase the obligations secured by such Lien or extend such Lien to additional assets;

(iv)  Liens securing Indebtedness permitted pursuant to subsection 6.1(iii); provided that the principal amount of such Indebtedness does not exceed at the time of acquisition or leasing of the related asset the fair market value of the asset so acquired or leased and that such Lien is limited solely to the asset so acquired or leased in connection with the incurrence of such Indebtedness;

(v)  Liens on the assets of any Foreign Subsidiary securing the repayment of the Indebtedness permitted pursuant to subsection 6.1(iv)(ii), 6.1(vii) or 6.1(ix);

(vi)  Liens in the nature of trustees’ Liens granted pursuant to any indenture governing any Indebtedness permitted by subsection 6.1, in each case in favor of the trustee under such indenture and securing only obligations to pay compensation to such trustee, to reimburse its expenses and to indemnify it under the terms thereof;

(vii)  Liens of sellers of goods to Company and any of its Subsidiaries arising solely under Article 2 of the UCC or similar provisions of applicable law in the ordinary course of business, covering only the goods sold and securing only the unpaid purchase price for such goods and related expenses;

(viii)  Liens securing Assumed Indebtedness of Company and its Subsidiaries permitted pursuant to subsection 6.1(viii), provided, however, that (i) any such Liens attach only to the property of the Subsidiary acquired, or the property acquired, in connection with such Assumed Indebtedness and shall not attach to any assets of Company or any of its Subsidiaries theretofore

63

existing and (ii) the Assumed Indebtedness and other secured Indebtedness of Company and its Subsidiaries secured by any such Lien shall not exceed 100% of the fair market value of the assets being acquired in connection with such Assumed Indebtedness;

(ix)  Liens securing reimbursement obligations in respect of trade letters of credit, which Liens are limited to the goods purchased with, or whose purchase was supported by, such letters of credit;

(x)  Other Liens securing Indebtedness and other obligations in an aggregate amount not to exceed $7,500,000 at any time outstanding;

(xi)Liens securing Permitted Indebtedness not incurred pursuant to the Incremental Facility, such Liens to be subordinated to the Liens securing the Obligations subject to an intercreditor agreement in form and substance reasonably satisfactory to Administrative Agent; and

(xii)Liens securing obligations under the First Lien Credit Agreement, such Liens to be subject to the Intercreditor Agreement or, in the case of any First Lien Credit Agreement described in clause (ii) of the definition thereof, an intercreditor agreement substantially similar to the Intercreditor Agreement or otherwise reasonably satisfactory to Administrative Agent; provided that such Liens shall also secure the Obligations.

Nothing in this subsection 6.2 shall prohibit the sale, assignment, transfer, conveyance or other disposition of any Margin Stock owned by Company or any of its Subsidiaries at its fair value (as determined in good faith by its Board of Directors) so long as proceeds are held as Cash or Cash Equivalents or the creation, incurrence, assumption or existence of any Lien on or with respect to any Margin Stock.

B.No Further Negative Pledges.  Except (x) with respect to specific property encumbered to secure payment of particular Indebtedness or to be sold pursuant to an executed agreement with respect to an Asset Sale and (y) customary limitations in respect of Company and its Subsidiaries contained in any agreement with respect to Indebtedness incurred in reliance on subsection 6.1(ii), (iv), (vi), (vii), (viii), (x) or (xi), and (z) restrictions or limitations contained in any partnership agreement or joint venture agreement to which Company or any of its Subsidiaries are a party on the ability to create or assume Liens on any assets of the relevant partnership or joint venture, neither Company nor any of its Subsidiaries shall enter into any agreement (other than an agreement prohibiting only the creation of Liens securing Subordinated Indebtedness) prohibiting the creation or assumption of any Lien upon any of its properties or assets, whether now owned or hereafter acquired.

C.No Restrictions on Subsidiary Distributions to Company or Other Subsidiaries.  Except (x) as provided herein, (y) customary limitations and prohibitions in any agreement with respect to Indebtedness incurred in reliance on subsection 6.1(iv)(ii)(x), (vi), (vii), (viii), (x) or (xi) and (z) any such encumbrance or restriction contained in any partnership or joint venture agreement to which Company or any of its Subsidiaries is a party, Company will not, and will not permit any of its Subsidiaries to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any such Subsidiary to (i) pay dividends or make any other distributions on any of such Subsidiary’s capital stock owned by Company or any other Subsidiary of Company, (ii) repay or prepay any Indebtedness owed by such Subsidiary to Company or any other Subsidiary of Company, or (iii) make loans or advances to Company or any other Subsidiary of Company.

64

6.3Investments.

Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, make or own any Investment in any Person, except:

(i)  Company and its Subsidiaries may make and own Investments in Cash Equivalents (as determined on the date of acquisition thereof);

(ii)  (a) Company and its Subsidiaries may continue to own the Investments owned by them as of the Closing Date in any Subsidiaries of Company; (b) Company and its Domestic Subsidiaries may make additional Investments in Company or Subsidiary Guarantors subject to compliance with subsections 5.7 and 5.8; and (c) any Foreign Subsidiary may make additional Investments in any other Foreign Subsidiary;

(iii)  Company and its Subsidiaries may make intercompany loans to the extent permitted under subsection 6.1(iv) and incur Contingent Obligations permitted by subsection 6.4;

(iv)  Company and its Subsidiaries may continue to own the Investments owned by them as of the Original Closing Date and described in Schedule 6.3 annexed hereto and extensions or renewals thereof, provided that no such extension or renewal shall be made in reliance on this clause (v) if it would (x) increase the amount of such Investment at the time of such renewal or extension or (y) result in a Potential Event of Default or an Event of Default hereunder;

(v)  Company and its Subsidiaries may make and own Investments received in connection with Asset Sales permitted pursuant to subsection 6.7(x);

(vi)  Investments constituting Consolidated Capital Expenditures (and any capital expenditures excluded from the definition of Consolidated Capital Expenditures pursuant to clause (y) thereof);

(vii)  Investments made by Company or any of its Subsidiaries in Permitted Acquisitions in accordance with subsection 6.7(vi);

(viii)  Investments arising under or in connection with Interest Rate Agreements and Currency Agreements entered into in the ordinary course of business and not for speculative purposes;

(ix)  Company and its Subsidiaries may make and own Investments received in connection with the bankruptcy or reorganization or suppliers and customers and in settlement of delinquent obligations of and other disputes with customers and suppliers arising in the ordinary course of business;

(x)  Company and its Subsidiaries may (x) continue to own Investments in the form of loans made prior to the Closing Date to officers, directors and employees of Company and its Subsidiaries for the sole purpose of purchasing common stock of Parent (or purchases of such loans made by others), and (y) make and own Investments in the form of loans to Global Technology Partners made after the First Closing Date in an aggregate principal amount not to exceed $1,000,000 for the sole purpose of purchasing common stock of Parent;

(xi)  Company and its Subsidiaries may make and own Investments solely from the proceeds of capital contributions by Parent to Company or sales of equity Securities by Company

65

to Parent, in each case only to the extent proceeds from such capital contribution or sale (x) are not required to be applied to repay the Loans pursuant to subsection 2.4(B)(ii)(c), (y) arise from the issuance by Parent of its equity Securities, and (z) are received after the Closing Date for the purpose of making an Investment identified in a notice delivered to Agents on or prior to the date such capital contribution or sale or repayment is made, so long as immediately before and after giving effect to any such Investment, no Potential Event of Default or Event of Default has occurred and is continuing; and

(xii)  Company and its Subsidiaries may make and own other Investments in an aggregate amount not to exceed at any time $5,000,000; provided that such Investments are with respect to businesses similar or related to the businesses engaged in by Company and its Subsidiaries.

6.4Contingent Obligations.

Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create or become or remain liable with respect to any Contingent Obligation, except:

(i)  Company and its Subsidiaries of Company may become and remain liable with respect to Contingent Obligations in respect of the Obligations;

(ii)  Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations in respect of (A) letters of credit issued under the First Lien Credit Agreement and (B) other letters of credit in an aggregate amount at any time not to exceed $2,000,000 for Company and its Domestic Subsidiaries and $2,000,000 for Company’s Foreign Subsidiaries;

(iii)  Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations under Interest Rate Agreements and Currency Agreements entered into in the ordinary course of business and not for speculative purposes;

(iv)  Company and its Domestic Subsidiaries may become and remain liable with respect to Contingent Obligations in respect of any Indebtedness of Company or any of its Domestic Subsidiaries permitted by subsection 6.1; provided that any such Contingent Obligations in respect of the Subordinated Indebtedness permitted pursuant to subsection 6.1(vi) are subordinated to the payment of the Obligations to the same extent as such Subordinated Indebtedness;

(v)  Company and its Subsidiaries, as applicable, may remain liable with respect to Contingent Obligations described in Schedule 6.4 annexed hereto and extensions or renewals thereof, so long as such extension or renewal does not increase the amount of the Contingent Obligation being renewed or extended, as the case may be;

(vi)  Company and its Subsidiaries may become and remain liable with respect to other Contingent Obligations; provided that the maximum aggregate liability, contingent or otherwise, of Company and its Subsidiaries in respect of all such Contingent Obligations shall at no time exceed $2,000,000.

6.5Restricted Junior Payments.

Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart any sum for any Restricted Junior Payment; provided that so long as no

66

Potential Event of Default or Event of Default shall have occurred and be continuing or would occur as a result thereof (except in the case of Restricted Junior Payments permitted by subsections 6.5(i) and (iii) below):

(i)  Company may (a) make payments of regularly scheduled interest in respect of the Senior Subordinated Notes, in each case in accordance with the terms of and to the extent required by (and subject to the subordination provisions contained therein) the Senior Subordinated Indenture, and (b) to make payments to the holders of the Senior Subordinated Notes in the form of equity Securities that the subordination provisions applicable thereto permit such holders to accept prior to the repayment in full of the Obligations;

(ii)  Company may make dividend payments to Parent to the extent necessary to permit Parent to (x) pay corporate and other general administrative expenses (including fees in respect of advisory services) in an aggregate amount which does not exceed $1,000,000 in any Fiscal Year and (y) make payments in respect of taxes imposed on Company and its Subsidiaries; and

(iii)  Company may purchase, redeem, or otherwise acquire or retire Subordinated Indebtedness in an amount up to but not exceeding $20,000,000 (as calculated from the First Closing Date) with proceeds from the issuance of Subordinated Indebtedness permitted by subsection 6.1 or equity Securities of Company.

6.6Financial Covenants.

A.Maximum Net Senior Debt Ratio.  Company shall not permit the Net Senior Debt Ratio as of the last day of any Fiscal Quarter, beginning with the Fiscal Quarter ending March 31, 2004, occurring during any period set forth below to exceed the correlative ratio indicated:

Period	Maximum Net Senior Debt Ratio
1st Fiscal Quarter, 2004	7.75	x
2nd Fiscal Quarter, 2004	8.45	x
3rd Fiscal Quarter, 2004	8.25	x
4th Fiscal Quarter, 2004	7.10	x
1st Fiscal Quarter, 2005	6.65	x
2nd Fiscal Quarter, 2005	6.30	x
3rd Fiscal Quarter, 2005	6.05	x
4th Fiscal Quarter, 2005	6.00	x
1st Fiscal Quarter, 2006	5.80	x
2nd Fiscal Quarter, 2006	5.60	x
3rd Fiscal Quarter, 2006	5.30	x
4th Fiscal Quarter, 2006	5.10	x
1st Fiscal Quarter, 2007 and thereafter	5.00	x

67

B.Minimum Interest Coverage Ratio.  Company shall not permit the Consolidated Interest Coverage Ratio as of the last day of any Fiscal Quarter, beginning with the Fiscal Quarter ending March 31, 2004, occurring during any period set forth below to be less than the correlative ratio indicated:

Period	Minimum Consolidated Interest Coverage Ratio
1st Fiscal Quarter, 2004	0.85	x
2nd Fiscal Quarter, 2004 through 3rd Fiscal Quarter, 2004	0.80	x
4th Fiscal Quarter, 2004	0.85	x
1st Fiscal Quarter, 2005	0.90	x
2nd Fiscal Quarter, 2005	0.95	x
3rd Fiscal Quarter, 2005 through 1st Fiscal Quarter, 2006	1.00	x
2nd Fiscal Quarter, 2006 through 3rd Fiscal Quarter, 2006	1.05	x
4th Fiscal Quarter, 2006 and thereafter	1.10	x

6.7Restriction on Fundamental Changes; Asset Sales and Acquisitions.

Company shall not, and shall not permit any of Company’s Subsidiaries to, enter into any transaction of merger or consolidation, or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease or sub-lease (as lessor or sublessor), transfer or otherwise dispose of, in one transaction or a series of transactions, all or any part of its business, property or assets, whether now owned or hereafter acquired, or acquire by purchase or otherwise all or substantially all the business, property or fixed assets of, or stock or other evidence of beneficial ownership of, any Person or any division or line of business of any Person, except:

(i)  (a) any Domestic Subsidiary of Company may be merged with or into Company or any Subsidiary Guarantor, or be liquidated, wound up or dissolved, or all or any part of its business, property or assets may be conveyed, sold, leased, transferred or otherwise disposed of, in one transaction or a series of transactions, to Company or any Subsidiary Guarantor; provided that, in the case of such a merger, Company or such Subsidiary Guarantor shall be the continuing or surviving corporation and (b) any Foreign Subsidiary may be merged with or into another

68

Foreign Subsidiary or, so long as the surviving corporation of such merger is Company or a Domestic Subsidiary, with or into Company or any Domestic Subsidiary, or be liquidated, wound up or dissolved, or all or any part of its business, property or assets may be conveyed, sold, leased, transferred or otherwise disposed of in one transaction or a series of transactions, to Company, a Subsidiary Guarantor or another Foreign Subsidiary; provided that, notwithstanding the above, a Subsidiary may only liquidate or dissolve into, or merge with and into, another Subsidiary if, after giving effect to such combination or merger, Company continues to own (directly or indirectly), and Administrative Agent continues to have pledged to it pursuant to the Pledge Agreement, a percentage of the issued and outstanding equity Securities (on a fully diluted basis) of the Subsidiary surviving such combinations or merger that is equal to or in excess of the percentage of the issued and outstanding shares of equity Securities (on a fully diluted basis) of the Subsidiary that does not survive such combinations or merger that was (immediately prior to the combination or merger) owned by Company or pledged to Administrative Agent;

(ii)  Company and its Subsidiaries may make Consolidated Capital Expenditures permitted under subsection 6.8;

(iii)  Company and its Subsidiaries may dispose of obsolete, worn out or surplus property in the ordinary course of business;

(iv)  Company and its Subsidiaries may consummate any transfer, conveyance or other disposal that constitutes (a) an Investment permitted under subsection 6.3, (b) a Lien permitted under subsection 6.2, (c) a Restricted Junior Payment permitted under subsection 6.5 or (d) a sale and leaseback transaction permitted by subsection 6.10;

(v)  Company and its Subsidiaries may sell or otherwise dispose of assets in transactions that do not constitute Asset Sales;

(vi)  (x) Company and its Subsidiaries may make Permitted Acquisitions; provided that such Permitted Acquisitions result in Company or the relevant Subsidiary acquiring a majority controlling interest in the Person (or its assets and businesses) acquired, or increasing any such controlling interest maintained by it in such Person or result in the Person acquired becoming an Acquired Controlled Person with respect to Company and its Subsidiaries; and (y) no later than five Business Days prior to the consummation thereof, Company delivers to Administrative Agent a Permitted Acquisition Compliance Certificate demonstrating compliance with the requirements of the definition of “Permitted Acquisition” and copies of all acquisition agreements executed and delivered in connection therewith to the extent available and requested by Administrative Agent; and provided, further, that reasonably promptly following the consummation of such Permitted Acquisition, Company shall have complied with the provisions of subsections 5.7 and 5.8 with respect thereto to the extent applicable;

(vii)  Company and its Subsidiaries may sell or otherwise dispose of assets as a result of any taking of assets described in clause (ii) of the definition of “Net Insurance/Condemnation Proceeds”, so long as the Net Insurance/Condemnation Proceeds resulting therefrom are applied or reinvested as required by subsection 2.4B(ii)(b);

(viii)  Company and its Subsidiaries may sell or discount overdue accounts receivable in the ordinary course of business, but only in connection with the compromise or collection thereof;

(ix)  Company and its Subsidiaries may make Asset Sales to Non-Wholly-Owned Subsidiaries that are not Subsidiary Guarantors of assets having a fair market value of not in

69

excess of $10,000,000 in the aggregate for all such Asset Sales made after the First Closing Date; provided that (x) the consideration for such assets shall be in an amount at least equal to the fair market value thereof, and (y) any Investment in such Non-Wholly-Owned Subsidiaries resulting from such Asset Sale shall be permitted by subsection 6.3(xii) or as a Permitted Acquisition pursuant to subsection 6.3(vii); and

(x) Company and its Subsidiaries may make Asset Sales not permitted by the foregoing clauses (i) through (ix) to the extent the Asset Sales under this clause (x) do not constitute a sale of all or substantially all of Company’s assets or all or substantially all of its Subsidiaries’ assets on a consolidated basis; provided that (x) the consideration received for such assets shall be in an amount at least equal to the fair market value thereof; (y) at least 90% of the consideration received therefor is in the form of cash or Cash Equivalents; and (z) the proceeds of such Asset Sale are (1) applied or reinvested as and within the times required by subsection 2.4B(ii)(a), (2) applied to permanent repayment of Indebtedness in respect of the First Lien Credit Agreement no later than 365 days after receipt thereof or (3) reinvested no later than 365 days after receipt thereof in tangible or intangible property or assets (other than property or assets that constitute current assets under GAAP, unless the acquisition thereof is incidental to the acquisition of a materially greater amount of non-current assets) that is to be used in the business of Company and its Subsidiaries.

6.8Consolidated Capital Expenditures.

(i)  Company will not, and will not permit any of its Subsidiaries to, make or commit to make Consolidated Capital Expenditures in any Fiscal Year, beginning with the Fiscal Year ending December 31, 2003, except Consolidated Capital Expenditures which do not aggregate in excess of the corresponding amount set forth below opposite such Fiscal Year:

Fiscal Year	Consolidated Capital Expenditures
Fiscal Year ending December 31, 2003	$	5,000,000
Fiscal Year ending December 31, 2004	$	5,000,000
Fiscal Year ending December 31, 2005 and each Fiscal Year thereafter	$	7,000,000

provided that (a) if the aggregate amount of Consolidated Capital Expenditures actually made in any such Fiscal Year shall be less than the limit with respect thereto set forth above (before giving effect to any increase therein pursuant to this proviso) (the “Base Amount”), then the amount of such shortfall (up to an amount equal to 50% of the Base Amount for such Fiscal Year, without giving effect to this proviso) may be added to the amount of such Consolidated Capital Expenditures permitted for the immediately succeeding Fiscal Year and any such amount carried forward to a succeeding Fiscal Year shall be deemed to be used prior to Company and its Subsidiaries using the amount of capital expenditures permitted by this section in such succeeding Fiscal Year, without giving effect to such carryforward and (b) for any Fiscal Year (or portion thereof) following any acquisition of a business (whether through the purchase of assets or of shares of capital stock) permitted under subsection 6.7, the Base Amount for such Fiscal Year (or portion) shall be increased, for each such acquisition, by an amount equal to the product of (A) the lesser of (x) $5,000,000 and (y)4% of revenues of the business acquired in such acquisition for the period of four Fiscal Quarters most recently ended on or prior to the date of such business acquisition multiplied by (B) (x) in the case of any partial Fiscal Year, a fraction, the numerator of which is the number of days

70

remaining in such Fiscal Year after the date of such business acquisition and the denominator of which is 365 (or 366 in a leap year), and (y) in the case of any full Fiscal Year, 1.

(ii)  The parties acknowledge and agree that the permitted Consolidated Capital Expenditure level set forth in clause (i) above shall be exclusive of the amount of Consolidated Capital Expenditures actually made with the proceeds of a cash capital contribution to Company (including the proceeds of issuance of equity securities) made by Parent from the issuance by Parent of its equity Securities after the Closing Date and specifically identified in a certificate delivered by an Authorized Officer of Company to Administrative Agent on or about the time such capital contribution is made; provided that, to the extent any such cash capital contributions constitute Net Securities Proceeds after the Closing Date, only that portion of such Net Securities Proceeds which is not required to be applied as a prepayment pursuant to Section 2.4B(ii)(c) (or pursuant to the First Lien Credit Agreement) may be used for Consolidated Capital Expenditures pursuant to this clause (ii).

6.9Fiscal Year.

Company shall not change its Fiscal Year-end from December 31 of each calendar year.

6.10Sales and Lease-Backs.

Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, become or remain liable as lessee or as a guarantor or other surety with respect to any lease, whether an Operating Lease or a Capital Lease, of any property (whether real, personal or mixed), whether now owned or hereafter acquired, (i) which Company or any of its Subsidiaries has sold or transferred or is to sell or transfer to any other Person (other than Company or any of its Subsidiaries) or (ii) which Company or any of its Subsidiaries intends to use for substantially the same purpose as any other property which has been or is to be sold or transferred by Company or any of its Subsidiaries to any Person (other than Company or any of its Subsidiaries) in connection with such lease; provided that Company and its Subsidiaries may become and remain liable as lessee, guarantor or other surety with respect to any such lease if the property which is subject to such lease was acquired by Company or any of its Subsidiaries within 180 days of such sale or transfer of such property by Company or any of its Subsidiaries.

6.11Sale or Discount of Receivables.

Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, sell with recourse, or discount or otherwise sell for less than the face value thereof, any of its notes or accounts receivable; provided that Company and its Subsidiaries may sell or discount overdue accounts receivable in the ordinary course business, but only in connection with the compromise or collection thereof.

6.12Transactions with Stockholders and Affiliates.

Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any holder of 5% or more of the voting Securities of Parent or Company or with any Affiliate of Parent or Company on terms that are less favorable to Company or that Subsidiary, as the case may be, than those that might be obtained at the time from Persons who are not such a holder or Affiliate; provided that the foregoing restriction shall not apply to (i) any transaction between Company and any of its Wholly-Owned Subsidiaries or between any of its Wholly-Owned Subsidiaries; (ii) reasonable and customary fees paid to members of the Boards of Directors of Company and its Subsidiaries consistent with past practice; (iii) any Restricted Junior Payment permitted under subsection

71

6.5; (iv) the entry into and performance of obligations under arrangements with CSFB and its Affiliates for underwriting, investment banking and advisory services on usual and customary terms (including payments of the fee in respect of advisory services contemplated in subsection 6.5(ii)); (v) the payment of reasonable and customary fees and reimbursement of expenses payable to directors of Parent consistent with past practice; (vi) employment arrangements with respect to the procurement of services of directors, officers and employees in the ordinary course of business and the payment of reasonable fees in connection therewith; (vii) the issuance of equity Securities to Global Technology Partners, L.L.C. described in subsection 6.3; and (viii) the execution, delivery and performance of the agreements listed on Schedule 6.12 or any intercreditor agreement executed in connection with any Permitted Indebtedness not incurred pursuant to the Incremental Facility.

6.13Issuance of Subsidiary Equity.

Company shall not permit any of its Subsidiaries directly or indirectly to issue any shares of its capital stock or other equity Securities except to Company, another Subsidiary of Company, to qualify directors if required by applicable law or in proportion to its existing equity Securities of any class.

6.14Conduct of Business.

From and after the Closing Date, Company shall not, and shall not permit any of its Subsidiaries to, engage in any business other than (i) the businesses engaged in by Company and its Subsidiaries on the Closing Date and similar or related businesses and (ii) such other lines of business as may be consented to by Requisite Lenders.

6.15Amendments of Documents Relating to Indebtedness.

A.Company shall not, and shall not permit any of its Subsidiaries to, amend or otherwise change the terms of any Subordinated Indebtedness, or make any payment consistent with an amendment thereof or change thereto, if the effect of such amendment or change is to increase the interest rate on such Subordinated Indebtedness, change (to earlier dates) any dates upon which payments of principal or interest are due thereon, change any event of default or condition to an event of default with respect thereto (other than to eliminate any such event of default or increase any grace period related thereto), change the redemption, prepayment or defeasance provisions thereof, change the subordination provisions thereof (or of any guaranty thereof), or change any collateral therefor (other than to release such collateral), or if the effect of such amendment or change, together with all other amendments or changes made, is to increase materially the obligations of the obligor thereunder to the detriment of Lenders or to confer any additional rights on the holders of such Subordinated Indebtedness (or a trustee or other representative on their behalf)which would be adverse to Lenders.

B.Company shall not, and shall not permit any of its Subsidiaries to, designate any Indebtedness (other than any Indebtedness in respect of the Loan Documents and Indebtedness in respect of the First Lien Credit Agreement) as “Designated Senior Debt” (as defined in the Senior Subordinated Note Indenture) without the prior written consent of Requisite Lenders.

C.Company shall not, and shall not permit any of its Subsidiaries to, amend or otherwise change the terms of any Permitted Indebtedness that does not constitute the Incremental Facility, or make any amendment thereof or change thereto, if the effect of such amendment or change is to increase the interest rate on such Permitted Indebtedness, change (to earlier dates) any dates upon which payments of principal or interest are due thereon, change any

72

event of default or condition to an event of default with respect thereto (other than to eliminate any such event of default or increase any grace period related thereto), change the redemption, prepayment or defeasance provisions thereof, change the subordination provisions thereof (or of any guaranty thereof), or change any collateral therefor (other than to release such collateral or to include collateral in which a security interest is granted to secure the Obligations), or if the effect of such amendment or change, together with all other amendments or changes made, is to increase materially the obligations of the obligor thereunder to the detriment of Lenders or to confer any additional rights on the holders of such Permitted Indebtedness (or a trustee or other representative on their behalf) which would be adverse to Lenders.

D.Company shall not, and shall not permit any of its Subsidiaries to, amend or otherwise change the terms of the First Lien Credit Agreement or documents related thereto or entered into in connection therewith to (i) increase the maximum stated principal amount of Indebtedness or commitments permitted to remain outstanding thereunder other than in connection with Indebtedness permitted to be incurred pursuant to subsection 6.1(xi) or (ii) restrict Company’s ability to make interest payments required hereunder.

Section 7.EVENTS OF DEFAULT

If any of the following conditions or events (each, an “Event of Default”) shall occur:

7.1Failure to Make Payments When Due.

Failure by Company to pay any installment of principal of any Loan when due, whether at stated maturity, by acceleration, by notice of voluntary prepayment, by mandatory prepayment or otherwise; or failure by Company to pay any interest or premium on any Loan or any fee or any other amount due under this Agreement within five days after the date due; or

7.2Default in Other Agreements.

(i)Failure of Company or any of its Subsidiaries to pay when due any principal of or interest on or any other amount payable in respect of one or more items of Indebtedness (other than Indebtedness referred to in subsection 7.1) or Contingent Obligations in either an individual or an aggregate principal amount of $5,000,000 or more, in each case beyond the end of any grace period provided therefor (other than pursuant to a Change of Control); or (ii) breach or default by Company or any of its Subsidiaries with respect to any other material term of (a) one or more items of Indebtedness or Contingent Obligations in the individual or aggregate principal amounts referred to in clause (i) above or (b) any loan agreement, mortgage, indenture or other agreement relating to such item(s) of Indebtedness or Contingent Obligation(s), if the effect of such breach or default is to cause, or to permit the holder or holders of that Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such holder or holders) to cause, that Indebtedness or Contingent Obligation(s) to become or be declared due and payable prior to its stated maturity or the stated maturity of any underlying obligation, as the case may be; provided that, with respect to any breach or default under the First Lien Credit Agreement (other than any breach or default resulting from failure to pay amounts due thereunder), (x) if such breach or default is a Change of Control, such event shall not constitute an Event of Default under this Agreement, and (y) any other breach or default thereunder shall only constitute an Event of Default under this clause (ii) of subsection 7.2 if such breach or default occurs and is not cured or waived upon the earlier of (I) 45 days after the occurrence of such breach or default or (II) Indebtedness under a First Lien Credit Agreement becoming due and payable prior to its stated maturity; or

73

7.3Breach of Certain Covenants.

Failure of Company to perform or comply with any term or condition contained in subsection 2.4B(iii), 2.5, 5.2 (solely with respect to the continued existence of Company) or 5.1(vi) or Section 6 of this Agreement; or

7.4Breach of Warranty.

Any representation, warranty, certification or other statement made by Company or any of its Subsidiaries in any Loan Document or in any statement or certificate at any time given by Company or any of its Subsidiaries in writing pursuant hereto or thereto or in connection herewith or therewith shall be false in any material respect on the date as of which made; or

7.5Other Defaults Under Loan Documents.

Any Loan Party shall default in the performance of or compliance with any term contained in this Agreement or any of the other Loan Documents, other than any such term referred to in any other subsection of this Section 7, and such default shall not have been remedied or waived within 30 days after receipt by Company and such Loan Party of notice from Administrative Agent at the direction of the Requisite Lenders of such default; or

7.6Involuntary Bankruptcy; Appointment of Receiver, etc.

(i)  A court having jurisdiction in the premises shall enter a decree or order for relief in respect of Company or any of its Subsidiaries (other than any Immaterial Subsidiary) in an involuntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, which decree or order is not stayed; or any other similar relief shall be granted under any applicable federal or state law; or (ii) an involuntary case shall be commenced against Company or any of its Subsidiaries (other than any Immaterial Subsidiary) under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over Company or any of its Subsidiaries (other than any Immaterial Subsidiary), or over all or a substantial part of its property, shall have been entered; or there shall have occurred the involuntary appointment of an interim receiver, trustee or other custodian of Company or any of its Subsidiaries (other than any Immaterial Subsidiary) for all or a substantial part of its property; or a warrant of attachment, execution or similar process shall have been issued against any substantial part of the property of Company or any of its Subsidiaries (other than any Immaterial Subsidiary), and any such event described in clauses (i) or (ii) shall continue for 60 days unless dismissed, bonded or discharged; or

7.7Voluntary Bankruptcy; Appointment of Receiver, etc.

(i)  Company or any of its Subsidiaries (other than any Immaterial Subsidiary) shall have an order for relief entered with respect to it or commence a voluntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; or Company or any of its Subsidiaries (other than any Immaterial Subsidiary) shall make any assignment for the benefit of creditors; or (ii) Company or any of its

74

Subsidiaries (other than any Immaterial Subsidiary) shall be unable, or shall fail generally, or shall admit in writing its inability, to pay its debts as such debts become due; or the Board of Directors of Company or any of its Subsidiaries (other than any Immaterial Subsidiary) (or any committee thereof) shall adopt any resolution or otherwise authorize any action to approve any of the actions referred to in clause (i) above or this clause (ii); or

7.8Judgments and Attachments.

Any money judgment, writ or warrant of attachment involving either in any individual case or in the aggregate at any time an amount in excess of $5,000,000 (in either case not adequately covered by insurance as to which a responsible insurance company is not denying its liability with respect thereto) shall be entered or filed against Company or any of its Subsidiaries or any of their respective assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of 60 days; or

7.9Dissolution.

Any order, judgment or decree shall be entered against Company or any of its Subsidiaries (other than any Immaterial Subsidiary) decreeing the dissolution or split up of Company or that Subsidiary (except as permitted under subsections 5.2 and 6.7) and such order shall remain undischarged or unstayed for a period in excess of 60 days; or

7.10Employee Benefit Plans.

There shall occur one or more ERISA Events which individually or in the aggregate results in or might reasonably be expected to result in liability of Company, any of its Subsidiaries or any of their respective ERISA Affiliates in excess of $5,000,000 since the First Closing Date; or there shall exist an amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA), individually or in the aggregate for all Pension Plans (excluding for purposes of such computation any Pension Plans with respect to which assets exceed benefit liabilities), which exceeds $5,000,000; or

7.11Invalidity of Guaranties; Failure of Security; Repudiation of Obligations.

At any time after the execution and delivery thereof, (i) any Guaranty for any reason, other than the satisfaction in full of all Obligations, shall cease to be in full force and effect (other than in accordance with its terms) or shall be declared to be null and void, (ii) any Collateral Document shall cease to be in full force and effect (other than by reason of a release of Collateral thereunder in accordance with the terms hereof or thereof, the satisfaction in full of the Obligations or any other termination of such Collateral Document in accordance with the terms hereof or thereof) or shall be declared null and void, or Administrative Agent shall not have or shall cease to have a valid and perfected Lien in any Collateral purported to be covered thereby, in each case for any reason other than the failure of any Agent or any Lender to take any action within its control or except to the extent that any such event is covered by a lender’s title insurance policy and the relevant insurer promptly after the occurrence thereof shall have acknowledged in writing that the same is covered by such title insurance policy, or (iii) any Loan Party shall contest the validity or enforceability of any Loan Document in writing;

THEN (i) upon the occurrence of any Event of Default described in subsection 7.6 or 7.7 (with respect to Company or any Subsidiary Guarantor), each of (a) the unpaid principal amount of and accrued interest on the Loans (including Accreted Amounts and any Default Rate Accreted Amounts), (b) an amount as liquidated damages for the loss of the bargain evidenced hereby (and not as a penalty) equal to the amount that would be payable as a prepayment premium by Company (in the event of a prepayment of all outstanding Loans) pursuant to subsection 2.4B(iv) determined as of the date of the occurrence of

75

any Event of Default, and (c) all other Obligations shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by Company, and (ii) upon the occurrence and during the continuation of any other Event of Default, Administrative Agent shall, upon the written request or with the written consent of Requisite Lenders, by written notice to Company, declare all or any portion of the amounts described in clauses (a) through (c) above to be, and the same shall forthwith become, immediately due and payable.

Notwithstanding anything contained in the preceding paragraph, if at any time within 60 days after an acceleration of the Loans pursuant to clause (ii) of such paragraph Company shall pay all arrears of interest and all payments on account of principal which shall have become due otherwise than as a result of such acceleration (with interest on principal and, to the extent permitted by law, on overdue interest, at the rates specified in this Agreement) and all Events of Default and Potential Events of Default (other than non-payment of the principal of and accrued interest on the Loans, in each case which is due and payable solely by virtue of acceleration) shall be remedied or waived pursuant to subsection 9.6, then Requisite Lenders, by written notice to Company, may at their option rescind and annul such acceleration and its consequences; but such action shall not affect any subsequent Event of Default or Potential Event of Default or impair any right consequent thereon.  The provisions of this paragraph are intended merely to bind Lenders to a decision which may be made at the election of Requisite Lenders and are not intended, directly or indirectly, to benefit Company, and such provisions shall not at any time be construed so as to grant Company the right to require Lenders to rescind or annul any acceleration hereunder or to preclude Administrative Agent or Lenders from exercising any of the rights or remedies available to them under any of the Loan Documents, even if the conditions set forth in this paragraph are met.

Section 8.THE AGENTS

8.1Appointment.

A.Appointment of Agents.  Each Lender hereby irrevocably appoints CSFB as the Administrative Agent and Syndication Agent hereunder and under the other Loan Documents and authorizes CSFB, in such capacities, to take such actions on its behalf and to exercise such powers as are delegated to CSFB in such capacities by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto.  Each Agent agrees to act upon the express conditions contained in this Agreement and the other Loan Documents, as applicable.  In performing its functions and duties under this Agreement, each Agent shall act solely as an agent of the Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for Company or any of its Subsidiaries.  The provisions of this Section are solely for the benefit of Agents and Lenders, and Company shall not have rights as a third party beneficiary of any of such provisions.

B.Appointment of Supplemental Collateral Agents.  It is the purpose of this Agreement and the other Loan Documents that there shall be no violation of any law of any jurisdiction denying or restricting the right of banking corporations or associations to transact business as agent or trustee in such jurisdiction.  It is recognized that in case of litigation under this Agreement or any of the other Loan Documents, and in particular in case of the enforcement of any of the Loan Documents, or in case Administrative Agent deems that by reason of any present or future law of any jurisdiction Administrative Agent may not exercise any of the rights, powers or remedies granted herein or in any of the other Loan Documents or take any other action which may be desirable or necessary in connection therewith, it may be necessary that Administrative Agent appoint an additional individual or institution as a separate trustee, co-trustee, collateral agent or collateral co-agent (any such additional individual or institution

76

being referred to herein individually as a “Supplemental Collateral Agent” and collectively as “Supplemental Collateral Agents”).

In the event that Administrative Agent appoints a Supplemental Collateral Agent with respect to any Collateral, (i) each and every right, power, privilege or duty expressed or intended by this Agreement or any of the other Loan Documents to be exercised by or vested in or conveyed to Administrative Agent with respect to such Collateral shall be exercisable by and vest in such Supplemental Collateral Agent to the extent, and only to the extent, necessary to enable such Supplemental Collateral Agent to exercise such rights, powers and privileges with respect to such Collateral and to perform such duties with respect to such Collateral, and every covenant and obligation contained in the Loan Documents and necessary to the exercise or performance thereof by such Supplemental Collateral Agent shall run to and be enforceable by either Administrative Agent or such Supplemental Collateral Agent, and (ii) the provisions of this Section 8 and of subsection 9.2 that refer to Administrative Agent shall inure to the benefit of such Supplemental Collateral Agent and all references therein to Administrative Agent shall be deemed to be references to Administrative Agent and/or such Supplemental Collateral Agent, as the context may require.

Should any instrument in writing from Company or any other Loan Party be required by any Supplemental Collateral Agent so appointed by Administrative Agent for more fully and certainly vesting in and confirming to him or it such rights, powers, privileges and duties, Company shall, or shall cause such Loan Party to, execute, acknowledge and deliver any and all such instruments promptly upon request by Administrative Agent.  In case any Supplemental Collateral Agent, or a successor thereto, shall die, become incapable of acting, resign or be removed, all the rights, powers, privileges and duties of such Supplemental Collateral Agent, to the extent permitted by law, shall vest in and be exercised by Administrative Agent until the appointment of a new Supplemental Collateral Agent.

8.2Powers and Duties; General Immunity.

A.Exculpatory Provisions.  Agents shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents.  Without limiting the generality of the foregoing, Agents (i) shall not be subject to any fiduciary or other implied duties, regardless of whether a Default or an Event of Default has occurred and is continuing, (ii) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Agents are required to exercise as directed in writing by the Requisite Lenders (or such other number or percentage of the relevant Lenders as shall be necessary under the circumstances as provided in subsection 9.6), provided that no Agent shall be required to take any action that, in its opinion or the opinion of its counsel, may expose such Agent to liability or that is contrary to any Loan Document or applicable law, and (iii) shall not, except as expressly set forth herein and in the other Loan Documents have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to Company or any of its Affiliates that is communicated to or obtained by the person serving as an Agent or any of its Affiliates in any capacity.  No Agent shall be liable for any action taken or not taken by it with the consent or at the request of the Requisite Lenders (or such other number or percentage of Lenders as shall be necessary under the circumstances as provided in subsection 9.6) or in the absence of its own gross negligence or willful misconduct as determined by a final, non-appealable judgment of a court of competent jurisdiction.  No Agent shall be deemed to have knowledge of any Default or Event of Default unless and until notice thereof is given to such Agent by Company or a Lender.  Agents shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in

77

connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default or Event of Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement or any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Section 3 or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to Agents.

B.Action on Instructions of Lender.  Each Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and under any other Loan Document in accordance with written instructions signed by the Requisite Lenders (or if required by the terms of subsection 9.6, all Lenders), and such instructions and any action taken or failure to act pursuant thereto shall be binding on all Lenders.  Lenders hereby acknowledge that each Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement or any other Loan Document unless it shall be requested in writing to do so by the Requisite Lenders.  Each Agent shall be fully justified in failing or refusing to take any action hereunder and under any other Loan Document unless it shall first be indemnified to its satisfaction by Lenders in proportion to their Pro Rata Share against any and all liability, cost and expense that it may incur by reason of taking or continuing to take any such action.

C.Employment of Agents and Counsel.  Each Agent may execute any of its duties as Administrative Agent or Syndication Agent, as the case may be, hereunder and under any other Loan Document by or through employees, agents, and attorneys-in-fact and shall not be answerable to Lenders, except as to money or securities received by it or its authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care.  Each Agent shall be entitled to advice of counsel concerning the contractual arrangement between Agents and Lenders and all matters pertaining to each Agent’s duties hereunder and under any other Loan Document.

D.Reliance by Agents.  Agents shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person.  Agents also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon.  In determining compliance with any condition hereunder to the making of such Loan that by its terms must be fulfilled to the satisfaction of a Lender, Agents may presume that such condition is satisfactory to such Lender unless Agents shall have received notice to the contrary from such Lender prior to the making of such Loan.  Agents may consult with legal counsel (who may be counsel for Company), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

E.Agents’ Reimbursement and Indemnification.  Lenders agree to reimburse and indemnify each Agent ratably in proportion to the outstanding Loans held by them (or, if the Loans have been repaid, in proportion to the outstanding Loans held by them immediately prior to such repayment) (i) for any amounts not reimbursed by Company for which any Agent is entitled to reimbursement by Company under the Loan Documents, (ii) for any other expenses incurred by any Agent on behalf of Lenders, in connection with the preparation, execution, delivery, administration and enforcement of the Loan Documents (including, without limitation, for any expenses incurred  by any Agent in connection with any dispute between Agents, Agents  and any Lender or between two or more of Lenders) and (iii) for any liabilities, obligations, losses,

78

damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against any Agent in any way relating to or arising out of the Loan Documents or any other document delivered in connection therewith or the transactions contemplated thereby (including, without limitation, for any such amounts incurred by or asserted against any Agent in connection with any dispute between Agents, Agents and any Lender or between two or more of Lenders), or the enforcement of any of the terms of the Loan Documents or of any such other documents; provided that (i) no Lender shall be liable for any of the foregoing to the extent any of the foregoing is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of any Agent and (ii) any indemnification required pursuant to subsection 2.7 shall, notwithstanding the provisions of this subsection, be paid by the relevant Lender in accordance with the provisions thereof.  The obligations of Lenders under this subsection shall survive payment of the Obligations and termination of this Agreement.

F.Rights as a Lender.  The Persons serving as Agents hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not an Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Persons serving as the Agents hereunder in their individual capacity.  Such Persons and their Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with Company or any Subsidiary or other Affiliate thereof as if such Persons were not Agents hereunder and without any duty to account therefor to the Lenders.

G.Delegation of Duties.  Each Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by such Agent.  Agents and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties.  The exculpatory provisions of subsection 8.2 shall apply to any such sub-agent and to the Related Parties of such Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as such Agent.

8.3Successor Agents.

A.Successor Agents.  Administrative Agent and/or Syndication Agent may at any time give notice of its resignation to Lenders and Company.  Upon receipt of any such notice of resignation, the Requisite Lenders shall have the right, subject, so long as no Event of Default has occurred and is continuing, to the consent of Company, in consultation with Company, to appoint a successor Administrative Agent and/or Syndication Agent, as applicable, which shall be a bank with an office in New York, or an Affiliate of any such bank with an office in New York.  If no such successor shall have been so appointed by the Requisite Lenders and shall have accepted such appointment within 10 days after the retiring Administrative Agent and/or Syndication Agent as the case may be, gives notice of its resignation, then the retiring Administrative Agent may on behalf of the Lenders, appoint a successor Administrative Agent and/or Syndication Agent, as applicable, meeting the qualifications set forth above and subject, so long as no Event of Default has occurred and is continuing, to the consent of Company, provided that if Administrative Agent and/or Syndication Agent, as applicable, shall notify Company and Lenders that no such successor is willing to accept such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (1) the retiring Administrative Agent and/or Syndication Agent, as applicable, shall be discharged from its duties and obligations

79

hereunder and under the other Loan Documents and (2) all payments, communications and determinations provided to be made by, to or through Administrative Agent and/or Syndication Agent, as applicable, shall instead be made by or to each Lender directly, until such time as the Requisite Lenders appoint a successor Administrative Agent and/or Syndication Agent, as applicable, as provided for above in this paragraph.  Upon the acceptance of a successor’s appointment as Administrative Agent and/or Syndication Agent, as applicable hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Administrative Agent and/or Syndication Agent, as applicable, and the retiring Administrative Agent and/or Syndication Agent, as applicable shall be discharged from all of its duties and obligations hereunder or under the Loan Documents.  The fees payable by Company to a successor Administrative Agent and/or Syndication Agent, as applicable, shall be the same as those payable to its predecessor unless otherwise agreed between Company and such successor.  After the retiring Administrative Agent’s and/or Syndication Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Section 8 and subsection 9.2 shall continue in effect for the benefit of such retiring Administrative Agent and/or Syndication Agent, as applicable, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Administrative Agent and/or Syndication Agent, as applicable was acting in such capacity.

8.4Collateral Documents.

Each Lender hereby further authorizes Administrative Agent to enter into each Collateral Document as secured party on behalf of and for the benefit of Lenders and the other beneficiaries named therein and agrees to be bound by the terms of each Collateral Document; provided that Administrative Agent shall not enter into or consent to any amendment, modification, termination or waiver of any provision contained in any Collateral Document without the prior consent of the Requisite Lenders (or, if required pursuant to subsection 9.6, all Lenders); provided further, however, that, without further written consent or authorization from any Lender, Administrative Agent may execute any documents or instruments necessary to effect the release of any asset constituting Collateral from the Lien of the applicable Collateral Document in the event that such asset is sold or otherwise disposed of in a transaction effected in accordance with subsection 6.7 or to the extent otherwise required by any Collateral Document or the Intercreditor Agreement.  Anything contained in any of the Loan Documents to the contrary notwithstanding, each Lender agrees that no Lender shall have any right individually to realize upon any of the Collateral under any Collateral Document, it being understood and agreed that all rights and remedies under the Collateral Documents may be exercised solely by Administrative Agent for the benefit of Lenders and the other beneficiaries named therein in accordance with the terms thereof and subject to the terms of the Intercreditor Agreement.  Each Lender hereby further authorizes Administrative Agent to enter into such amendments to and amendments and restatements of and any other modifications to each Collateral Document, the Intercreditor Agreement, any other applicable intercreditor agreement relating to any First Lien Credit Agreement or Permitted Indebtedness and any other documents and instruments as secured party on behalf of and for the benefit of Lenders and the other beneficiaries named therein, in each case as shall be necessary or advisable in connection with the Intercreditor Agreement and the incurrence of Permitted Indebtedness to effectuate the terms thereof and hereof, and each Lender hereby agrees to be bound by the terms thereof.

8.5Non-Reliance on Agents and Other Lenders.

Each Lender acknowledges that it has, independently and without reliance upon any Agent or any other Lender or any of their Related Parties and based on such documents and information as it

80

has deemed appropriate, made its own credit analysis and decision to enter into this Agreement.  Each Lender also acknowledges that it will, independently and without reliance upon the any Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.

Section 9.MISCELLANEOUS

9.1Assignments and Participations in Loans.

A.General.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that Company may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender and Administrative Agent and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in accordance with the provisions of subsection 9.1B, (ii) by way of participation in accordance with the provisions of subsection 9.1C or (iii) by way of pledge or assignment of a security interest subject to the restrictions of subsection 9.1E (and any other attempted assignment or transfer by any party hereto shall be null and void).  Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection 9.1C and, to the extent expressly contemplated hereby, the Related Parties of each of Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

B.Assignments.

Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement; provided that:

(i)except in the case of an assignment of all the Loans at the time owing to it or in the case of an assignment to a then existing Lender or an Affiliate of a then existing Lender or an Approved Fund with respect to the assigning Lender, the aggregate amount of Loans subject to each such assignment (determined as of the date the Assignment Agreement with respect to such assignment is delivered to Administrative Agent or, if “Trade Date” is specified in the Assignment Agreement, as of the Trade Date) shall not be less than $1,000,000 or an integral multiple of $1,000,000 in excess thereof, unless each of Administrative Agent and, so long as no Event of Default has occurred and is continuing, Company otherwise consent (each such consent not to be unreasonably withheld or delayed and such approval to be deemed to have been given if a response is not received within five Business Days from the date on which request for approval was received by the applicable Person);

(ii)(A) except in the case of assignments made in connection with the primary syndication of the Loans by Agents within five Business Days of the Closing Date and except in the case of an assignment of Loans to a then existing Lender or an Affiliate of a then existing Lender or an Approved Fund with respect to the assigning Lender, the consent of Company (which consent shall only be required if no Event of Default has occurred and is continuing and which consent shall not be unreasonably withheld or delayed) shall be required; and (B) the consent of Administrative Agent (which consent shall not be unreasonably withheld or delayed) shall be required;

81

(iii)each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loans assigned; and

(iv)the parties to each assignment shall (1) electronically execute and deliver to Administrative Agent an Assignment Agreement via an electronic settlement system acceptable to Administrative Agent (which initially shall be ClearPar, LLC) or (2) manually execute and deliver to Administrative Agent an Assignment Agreement, together with a processing and recordation fee of $3,500 (for which Company shall not be liable); and the Eligible Assignee, if it shall not be a Lender, shall deliver to Administrative Agent an Administrative Questionnaire and if required, applicable tax forms.

Subject to acceptance and recording thereof by Administrative Agent, from and after the effective date specified in each Assignment Agreement, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment Agreement, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment Agreement, be released from its obligations under this Agreement (and, in the case of an Assignment Agreement covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of subsection 2.7 with respect to facts and circumstances occurring prior to the effective date of such assignment.  Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection 9.1C.

C.Participations.  Any Lender may at any time, without the consent of, or notice to, Company or Administrative Agent, sell participations to any Person (other than a natural person or Company or any of Company’s Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of the Loans owing to it); provided that

(i)such Lender’s obligations under this Agreement shall remain unchanged;

(ii)such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations; and

(iii)Company, Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.

Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any  provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver with respect to any action (i) effecting the extension of the final maturity of the Loan allocated to such participation, (ii) effecting a reduction of the principal amount of or affecting the rate of interest payable on any Loan allocated to such participation, (iii) releasing all or substantially all of the Collateral, or (iv) releasing all or substantially all of the guarantors from their obligations under the Guaranties, and all amounts payable by Company hereunder.  Subject to subsection 9.1D, Company agrees that each Participant shall be entitled to the benefits of subsection 2.7 to the same extent as if it were a

82

Lender and had acquired its interest by assignment pursuant to subsection 9.1B.  To the extent permitted by law, each Participant also shall be entitled to the benefits of subsection 9.4 as though it were a Lender, provided such Participant agrees to be subject to subsection 9.5 as though it were a Lender.

D.Limitations Upon Participant Rights.  A Participant shall not be entitled to receive any greater payment under subsection 2.7 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with Company’s prior written consent.

E.Certain Pledges.  Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including without limitation any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.  Notwithstanding anything to the contrary contained herein, any Lender that is a Fund may create a security interest in all or any portion of the Loans owing to it and the Notes, if any, held by it to the trustee for holders of obligations owed, or securities issued, by such Fund as security for such obligations or securities, provided that unless and until such trustee actually becomes a Lender in compliance with the other provisions of this subsection 9.1, (i) no such pledge shall release the pledging Lender from any of its obligations under this Agreement and (ii) such trustee shall not be entitled to exercise any of the rights of a Lender under this Agreement and the Notes even though such trustee may have acquired ownership rights with respect to the pledged interest through foreclosure or otherwise.

F.Information.  Each Lender may furnish any information concerning Company and its Subsidiaries in the possession of that Lender from time to time to assignees and participants (including prospective assignees and participants), subject to subsection 9.19.

G.Representations of Lenders.  Each Lender listed on the signature pages hereof hereby represents and warrants (i) that it is an Eligible Assignee described in clause (A) of the definition thereof; (ii) that it has experience and expertise in the making of loans such as the Loans; and (iii) that it will make its Loans for its own account in the ordinary course of its business and without a view to distribution of such Loans within the meaning of the Securities Act or the Exchange Act or other federal securities laws (it being understood that, subject to the provisions of this subsection 9.1, the disposition of such Loans or any interests therein shall at all times remain within its exclusive control).  Each Lender that becomes a party hereto pursuant to an Assignment Agreement shall be deemed to agree that the representations and warranties of such Lender contained in Section 2(c) of such Assignment Agreement are incorporated herein by this reference.

9.2Expenses.

Whether or not the transactions contemplated hereby shall be consummated, Company agrees to pay promptly (i) all the actual and reasonable costs and expenses of Agents with respect to the preparation of the Loan Documents and any consents, amendments, waivers or other modifications thereto; (ii) the reasonable fees, expenses and disbursements of a single counsel to Agents and Arranger (including the costs of local or foreign counsel, to the extent required) in connection with the negotiation, preparation, execution and administration of the Loan Documents and any consents, amendments, waivers or other modifications thereto and any other documents or matters requested by Company; (iii) all the actual costs and reasonable expenses of creating and perfecting Liens in favor of Administrative Agent on behalf of

83

Lenders pursuant to any Collateral Document, including filing and recording fees, expenses and taxes, stamp or documentary taxes, search fees, title insurance premiums, and reasonable fees, expenses and disbursements of counsel to Agents and of counsel providing any opinions that Syndication Agent, Administrative Agent or Requisite Lenders may request in respect of the Collateral Documents or the Liens created pursuant thereto; (iv) the custody or preservation of any of the Collateral; (v) all other actual and reasonable costs and expenses incurred by Arranger, Syndication Agent or Administrative Agent (including the reasonable fees, expenses and disbursements of any auditors, accountants or appraisers and any environmental or other consultants, advisors and agents  employed or retained by Syndication Agent, Administrative Agent or their respective counsel) in connection with the syndication of the Commitments and the negotiation, preparation and execution of the Loan Documents and any consents, amendments, waivers or other modifications thereto and the transactions contemplated thereby; and (vi) after the occurrence of an Event of Default, all costs and expenses, including reasonable attorneys’ fees and costs of settlement, incurred by Agents and Lenders in enforcing any Obligations of or in collecting any payments due from any Loan Party hereunder or under the other Loan Documents by reason of such Event of Default (including in connection with the sale of, collection from, or other realization upon any of the Collateral or the enforcement of the Guaranties or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a “work-out” or pursuant to any insolvency or bankruptcy proceedings).

9.3Indemnity.

In addition to the payment of expenses pursuant to subsection 9.2, whether or not the transactions contemplated hereby shall be consummated, Company agrees to defend (subject to Indemnitees’ selection of counsel), indemnify, pay and hold harmless Arranger, Agents and Lenders, and the officers, directors, trustees, employees, agents and affiliates of Arranger, Agents and Lenders (collectively called the “Indemnitees”), from and against any and all Indemnified Liabilities (as hereinafter defined); provided that Company shall not have any obligation to any Indemnitee hereunder with respect to any Indemnified Liabilities to the extent such Indemnified Liabilities arise from the gross negligence or willful misconduct of that Indemnitee as determined by a final judgment of a court of competent jurisdiction or to the extent that such Indemnified Liabilities are Environmental Liabilities that arise solely out of the actions of Administrative Agent or Lenders occurring after Administrative Agent or Lenders shall have foreclosed on, or otherwise dispossessed Company and its Subsidiaries of, the applicable Facility.

As used herein, “Indemnified Liabilities” means, collectively, any and all liabilities, obligations, losses, damages (including natural resource damages), penalties, actions, judgments, suits, claims (including Environmental Claims), costs (including the costs of any investigation, study, sampling, testing, abatement, cleanup, removal, remediation or other response action necessary to remove, remediate, clean up or abate any Hazardous Materials Activity), expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened by any Person, whether or not any such Indemnitee shall be designated as a party or a potential party thereto, and any fees or expenses incurred by Indemnitees in enforcing this indemnity), whether direct, indirect or consequential and whether based on any federal, state or foreign laws, statutes, rules or regulations (including securities and commercial laws, statutes, rules or regulations and Environmental Laws), on common law or equitable cause or on contract or otherwise, that may be imposed on, incurred by, or asserted against any such Indemnitee, in any manner relating to or arising out of (i) this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby (including Lenders’ agreement to make the Loans hereunder or the use or intended use of the proceeds thereof, or any enforcement of any of the Loan Documents (including any sale of, collection from, or other realization upon any of the Collateral or the enforcement of the Guaranties) or (ii) any Environmental Claim or any Hazardous

84

Materials Activity relating to or arising from, directly or indirectly, any past or present activity, operation, land ownership, or practice of Company or any of its Subsidiaries.

To the extent that the undertakings to defend, indemnify, pay and hold harmless set forth in this subsection 9.3 may be unenforceable in whole or in part because they are violative of any law or public policy, Company shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Indemnitees or any of them.

9.4Set-Off; Security Interest in Deposit Accounts.

In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence of any Event of Default referred to in subsections 7.6 or 7.7 or, with the consent of the Requisite Lenders, upon the occurrence of any other Event of Default, each Lender is, to the fullest extent permitted by applicable law, hereby authorized by Company at any time or from time to time, without notice to Company or to any other Person, any such notice being hereby expressly waived, subject to the terms of the Intercreditor Agreement, to set off and to appropriate and to apply any and all deposits (general or special, including Indebtedness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts) and any other Indebtedness at any time held or owing by that Lender to or for the credit or the account of Company against and on account of the obligations and liabilities then due of Company to that Lender under this Agreement and the other Loan Documents, including all claims of any nature or description arising out of or connected with this Agreement or any other Loan Document, irrespective of whether or not that Lender shall have made any demand hereunder.  Company hereby further grants to each Agent and each Lender a security interest in all deposits and accounts maintained with such Agent or such Lender as security for the Obligations.

9.5Ratable Sharing.

Lenders hereby agree among themselves that if any of them shall, whether by voluntary payment (other than a voluntary prepayment of Loans made and applied in accordance with the terms of this Agreement), by realization upon security, through the exercise of any right of set-off or banker’s lien, by counterclaim or cross action or by the enforcement of any right under the Loan Documents or otherwise, or as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code, receive payment or reduction of a proportion of the aggregate amount of principal, interest, premium, fees and other amounts then due and owing to that Lender hereunder or under the other Loan Documents (collectively, the “Aggregate Amounts Due” to such Lender) which is greater than the proportion received by any other Lender in respect of the Aggregate Amounts Due to such other Lender, then the Lender receiving such proportionately greater payment shall (i) notify Administrative Agent and each other Lender of the receipt of such payment and (ii) apply a portion of such payment to purchase participations (which it shall be deemed to have purchased from each seller of a participation simultaneously upon the receipt by such seller of its portion of such payment) in the Aggregate Amounts Due to the other Lenders so that all such recoveries of Aggregate Amounts Due shall be shared by all Lenders in proportion to the Aggregate Amounts Due to them; provided that if all or part of such proportionately greater payment received by such purchasing Lender is thereafter recovered from such Lender upon the bankruptcy or reorganization of Company or otherwise, those purchases shall be rescinded and the purchase prices paid for such participations shall be returned to such purchasing Lender ratably to the extent of such recovery, but without interest.  Company expressly consents to the foregoing arrangement and agrees, to the fullest extent that it may do so under applicable law, that any holder of a participation so purchased may exercise any and all rights of banker’s lien, set-off or counterclaim with respect to any and all monies owing by Company to that holder with respect thereto as fully as if that holder were owed the amount of the participation held by that holder.

85

9.6Amendments and Waivers.

No amendment, modification, termination or waiver of any provision of this Agreement or of the Notes, and no consent to any departure by Company therefrom, shall in any event be effective without the written concurrence of Requisite Lenders; provided that no such amendment, modification, termination, waiver or consent which would:

(a)modify any requirement hereunder that any particular action be taken by all Lenders or by Requisite Lenders shall be effective unless consented to by each Lender;

(b)modify this subsection 9.6, change the definitions of “Requisite Lenders” or “Pro Rata Share” (except in accordance with subsection 6.1(x)(B)), increase any Commitments (except in accordance with subsection 6.1(x)(B)), reduce any fees described in subsection 2.3 (other than the fees to Agents referred to in subsection 2.3), release any material Subsidiary Guarantor from its obligations under the Guaranty, Parent from its obligations under the Parent Guaranty, or all or substantially all of the collateral security (except in each case as otherwise specifically provided for in the Loan Documents), or extend the Maturity Date, shall be made without the consent of each Lender adversely affected thereby;

(c)extend the time of payment of, or reduce the amount of, any interest on or premium payable in respect of any Loan or reduce the principal amount of or rate of interest on or any premium payable in respect of any Loan (which shall in each case include the conversion of all or any part of the Obligations into equity of any Loan Party), shall be made without the consent of the Lender which has made such Loan; or

(d)affect adversely the interests, rights or obligations of any Agent, unless consented to by such Agent.

Administrative Agent may, but shall have no obligation to, with the concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of that Lender.  Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given.  No notice to or demand on Company in any case shall entitle Company to any other or further notice or demand in similar or other circumstances.  Any amendment, modification, termination, waiver or consent effected in accordance with this subsection 9.6 shall be binding upon each Lender at the time outstanding, each future Lender and, if signed by Company, on Company.

Notwithstanding anything in this subsection 9.6 to the contrary, this Agreement and the other Loan Documents may be amended (or amended and restated) with the written approval of Administrative Agent, Company and the lenders under the Incremental Facility (and no other Lenders) to implement the Incremental Facility pursuant to and in accordance with subsection 6.1(x).

9.7Independence of Covenants.

All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of an Event of Default or Potential Event of Default if such action is taken or condition exists.

86

9.8Notices.

Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and may be personally served, telexed or sent by telefacsimile or United States mail or courier service and shall be deemed to have been given when delivered in person or by courier service, upon receipt of telefacsimile, or three Business Days after depositing it in the United States mail with postage prepaid and properly addressed; provided that notices to Agents shall not be effective until received.  For the purposes hereof, the address of each party hereto shall be as set forth under such party’s name on the signature pages hereof or (i) as to Company and Agents, such other address as shall be designated by such Person in a written notice delivered to the other parties hereto and (ii) as to each other party, such other address as shall be designated by such party in a written notice delivered to Administrative Agent.

9.9Survival of Representations, Warranties and Agreements.

A.All representations, warranties and agreements made herein shall survive the execution and delivery of this Agreement and the making of the Loans hereunder.

B.Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of Company set forth in subsections 2.6D, 2.7, 9.2, 9.3 and 9.4 and the agreements of Lenders set forth in subsections 8.2C, 8.4 and 9.5 shall survive the payment of the Loans and the termination of this Agreement.

9.10Failure or Indulgence Not Waiver; Remedies Cumulative.

No failure or delay on the part of any Agent or any Lender in the exercise of any power, right or privilege hereunder or under any other Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege.  All rights and remedies existing under this Agreement and the other Loan Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available.

9.11Marshalling; Payments Set Aside.

None of Agents or Lenders shall be under any obligation to marshal any assets in favor of Company or any other party or against or in payment of any or all of the Obligations.  To the extent that Company makes a payment or payments to Administrative Agent or Lenders (or to Administrative Agent for the benefit of Lenders), or any of Agents or Lenders enforce any security interests or exercise their rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, any other state or federal law, common law or any equitable cause, then, to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor or related thereto, shall be revived and continued in full force and effect as if such payment or payments had not been made or such enforcement or setoff had not occurred.

9.12Severability.

In case any provision in or obligation under this Agreement or the Notes shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions

87

or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

9.13Obligations Several; Independent Nature of Lenders’ Rights.

The obligations of Lenders hereunder are several and no Lender shall be responsible for the obligations or Commitments of any other Lender hereunder.  Nothing contained herein or in any other Loan Document, and no action taken by Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising out of this Agreement and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose.

9.14Headings.

Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect.

9.15APPLICABLE LAW.

THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

9.16Successors and Assigns.

This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of Lenders (it being understood that Lenders’ rights of assignment are subject to subsection 9.1).  Neither Company’s rights or obligations hereunder nor any interest therein may be assigned or delegated by Company without the prior written consent of all Lenders.

9.17Consent to Jurisdiction and Service of Process.

ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST COMPANY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS THEREUNDER, MAY, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK.  BY EXECUTING AND DELIVERING THIS AGREEMENT, COMPANY, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY:

(I)ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND TO THE EXTENT PERMITTED UNDER APPLICABLE LAW VENUE OF SUCH COURTS;

(II)TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;

88

(III)AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO COMPANY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SUBSECTION 9.8;

(IV)AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER COMPANY IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT;

(V)AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST COMPANY IN THE COURTS OF ANY OTHER JURISDICTION; AND

(VI)AGREES THAT THE PROVISIONS OF THIS SUBSECTION 9.17 RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.

9.18Waiver of Jury Trial.

EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED.  The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including contract claims, tort claims, breach of duty claims and all other common law and statutory claims.  Each party hereto acknowledges that this waiver is a material inducement to enter into a business relationship, that each has already relied on this waiver in entering into this Agreement, and that each will continue to rely on this waiver in their related future dealings.  Each party hereto further warrants and represents that it has reviewed this waiver with its legal counsel and that it knowingly and voluntarily waives its jury trial rights following consultation with legal counsel.  THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION 9.18 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER.  In the event of litigation, this Agreement may be filed as a written consent to a trial by the court.

9.19Confidentiality.

Each Lender, Agent and Arranger shall hold all non-public information obtained in connection with this Agreement or obtained by it based on a review of the books and records of Company or any of its Subsidiaries in accordance with such Lender’s, Agent’s or Arranger’s customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices, or if the lender is not a bank, in accordance with safe and sound financial services industry practices, it being understood and agreed by Company that in any event a Lender may make disclosures to Affiliates

89

and professional advisors of such Lender or disclosures reasonably required by (a) any bona fide assignee, transferee or participant in connection with the contemplated assignment or transfer by such Lender of any Loans or any participations therein or (b) by any direct or indirect contractual counterparties in swap agreements or such contractual counterparties’ professional advisors; provided that such contractual counterparty or professional advisor to such contractual counterparty agrees in writing to keep such information confidential to the same extent required of Lenders hereunder, or disclosures required or requested by any governmental agency or representative thereof or pursuant to legal process; provided further that, (x) unless specifically prohibited by applicable law or court order, each Lender, Agent and Arranger shall promptly notify Company of any request by any governmental agency or representative thereof (other than any request by the National Association of Insurance Commissioners or any request in connection with any examination of the financial condition of such Lender by any governmental agency) for disclosure of any such non-public information prior to disclosure of such information and (y) prior to any such disclosure pursuant to this subsection 9.19 each Lender, each Agent and Arranger, as the case may be, shall require any such bona fide transferee, participant and assignee to agree to be bound by this subsection 9.19 and to require such Person to require any other Person to whom such Person discloses any such non-public information to be similarly bound by this subsection 9.19; and provided further that in no event shall any Lender be obligated or required to return any materials furnished by Company or any of its Subsidiaries except as may be required by an order of a court of competent jurisdiction and to the extent set forth therein.

Notwithstanding anything herein to the contrary, each Agent, Arranger and each Lender may disclose to any and all persons, without limitation of any kind, any information with respect to the U.S. federal income tax treatment and U.S. federal income tax structure of the transactions contemplated hereby and all materials of any kind (including opinions or other tax analyses) that are provided to such Agent, Arranger or such Lender relating to such tax treatment and tax structure.

9.20Counterparts; Effectiveness.

This Agreement and any amendments, waivers, consents or supplements hereto or in connection herewith may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document.  This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto and receipt by Company and Agents of written or telephonic notification of such execution and authorization of delivery thereof.

9.21Maximum Amount.

A.It is the intention of Company and Lenders to conform strictly to the usury and similar laws relating to interest from time to time in force, and all agreements between the Loan Parties and their respective Subsidiaries and Lenders, whether now existing or hereafter arising and whether oral or written, are hereby expressly limited so that in no contingency or event whatsoever, whether by acceleration of maturity hereof or otherwise, shall the amount paid or agreed to be paid in the aggregate to Lenders as interest (whether or not designated as interest, and including any amount otherwise designated but deemed to constitute interest by a court of competent jurisdiction) hereunder or under the other Loan Documents or in any other agreement given to secure the Indebtedness or obligations of Company to Lenders, or in any other document evidencing, securing or pertaining to the Indebtedness evidenced hereby, exceed the maximum amount permissible under applicable usury or such other laws (the “Maximum Amount”).  If under any circumstances whatsoever fulfillment of any provision hereof, or any of the other Loan

90

Documents, at the time performance of such provision shall be due, shall involve exceeding the Maximum Amount, then, ipso facto, the obligation to be fulfilled shall be reduced to the Maximum Amount.  For the purposes of calculating the actual amount of interest paid and/or payable hereunder in respect of laws pertaining to usury or such other laws, all sums paid or agreed to be paid to the holder hereof for the use, forbearance or detention of the Indebtedness of Company evidenced hereby, outstanding from time to time shall, to the extent permitted by applicable law, be amortized, pro-rated, allocated and spread from the date of disbursement of the proceeds of the Notes until payment in full of all of such Indebtedness, so that the actual rate of interest on account of such Indebtedness is uniform through the term hereof.  The terms and provisions of this subsection shall control and supersede every other provision of all agreements between Company or any endorser of the Notes and Lenders.

B.If under any circumstances any Lender shall ever receive an amount which would exceed the Maximum Amount, such amount shall be deemed a payment in reduction of the principal amount of the Loans and shall be treated as a voluntary prepayment under subsection 2.4B(i) and shall be so applied in accordance with subsection 2.4 hereof or if such excessive interest exceeds the unpaid balance of the Loans and any other Indebtedness of Company in favor of such Lender, the excess shall be deemed to have been a payment made by mistake and shall be refunded to Company.

[Remainder of page intentionally left blank]

91

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

DECRANE AIRCRAFT HOLDINGS, INC.
By:
	Name:	Richard J. Kaplan
	Title:	Senior Vice President, Chief Financial Officer, Secretary and Treasurer
Notice Address:			2361 Rosecrans Avenue, Suite 180
			El Segundo, CA  90245
			Tel: 310.725.9123
			Fax: 310.643.0746
			Attention: Richard. J Kaplan

S-1

CREDIT SUISSE FIRST BOSTON,
Acting through its Cayman Islands Branch, as a Lender and as Administrative Agent and Syndication Agents
By:
	Name:
	Title:
By:
	Name:
	Title:
Notice Address:		Eleven Madison Avenue
		New York, New York 10010
		Tel: 212.325.9936
		Fax: 212.325.8304
		Attn:  Agency Group

S-2

[Name of Lender]
By:
	Name:
	Title:
Notice Address:

S-2

EX-12.1

Exhibit 12.1

DeCrane Aircraft Holdings, Inc.

Computation of Earnings to Fixed Charges Ratios

	Year Ended December 31,
(Dollars in thousands)	2003			2002			2001			2000			1999
Earnings:
Income (loss) from continuing operations before provision for income taxes, cumulative effect of change in accounting principle and extraordinary item	$	(66,434	)	$	(10,383	)	$	(21,481	)	$	9,936		$	(8,050	)
Fixed charges	27,188			26,403			30,638			28,212			16,622
Total earnings (loss)	$	(39,246	)	$	16,020		$	9,157		$	38,148		$	8,572
Fixed Charges:
Interest expense, including amortization of debt discounts and issuance costs (1)	$	26,219		$	25,376		$	29,645		$	27,181		$	15,889
Interest component of rentals (2)	969			1,027			993			1,031			733
Total fixed charges	$	27,188		$	26,403		$	30,638		$	28,212		$	16,622
Ratio of Earnings to Fixed Charges:
Ratio	—			—			—			1.4		x	—
Deficiency	$	66,434		$	10,383		$	21,481		$	—		$	8,050

(1)       None capitalized.

(2)       Reflects one-third of rental expense under operating leases considered to represent interest costs.

EX-18

Exhibit 18

[PricewaterhouseCoopers Letterhead]

March 25, 2004

Board of Directors

DeCrane Aircraft Holdings, Inc.

2361 Rosecrans Avenue, Suite 180

El Segundo, CA 90245

Dear Directors:

We are providing this letter to you for inclusion as an exhibit to your Form 10-K filing pursuant to Item 601 of Regulation   S-K.

We have audited the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003 and issued our report thereon dated March 25, 2004.  Note 1 to the financial statements describes a change in accounting principle from deferring certain program costs in inventory and charging cost of sales over the expected production cycle of the individual program to not including such costs in inventory.  It should be understood that the preferability of one acceptable method of accounting over another for program costs has not been addressed in any authoritative accounting literature, and in expressing our concurrence below we have relied on management’s determination that this change in accounting principle is preferable.  Based on our reading of management’s stated reasons and justification for this change in accounting principle in the Form 10-K, and our discussions with management as to their judgment about the relevant business planning factors relating to the change, we concur with management that such change represents, in the Company’s circumstances, the adoption of a preferable accounting principle in conformity with Accounting Principles Board Opinion No. 20.

Very truly yours,

PricewaterhouseCoopers LLP

EX-21.1

EXHIBIT 21.1

LIST OF SUBSIDIARIES OF REGISTRANT

Subsidiaries of DeCrane Aircraft Holdings, Inc.

AUDIO INTERNATIONAL, INC., an Arkansas corporation.

CARL F. BOOTH & CO., LLC, a Delaware limited liability company.

CUSTOM WOODWORK & PLASTICS, LLC, a Delaware limited liability company.

DAH-IP HOLDINGS, INC., a Delaware corporation.

DAH-IP INFINITY, INC., a Delaware corporation.

DECRANE AIRCRAFT SEATING COMPANY, INC., a Wisconsin corporation.

DECRANE CABIN INTERIORS, LLC, a Delaware limited liability company.

DECRANE CABIN INTERIORS - CANADA, Inc., a Delaware corporation.

HOLLINGSEAD INTERNATIONAL, INC., a California corporation.

PATS AIRCRAFT, LLC, a Delaware limited liability company.

PCI NEWCO, INC., a Delaware corporation.

PPI HOLDINGS, INC., a Kansas corporation.

PRECISION PATTERN, INC., a Kansas corporation.

THE INFINITY PARTNERS, LTD., a Texas limited partnership.

EX-31.1

Exhibit 31.1

CERTIFICATIONS PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

Chief Executive Officer Certification

I, R. Jack DeCrane, certify that:

1.I have reviewed this Annual Report on Form 10-K of DeCrane Aircraft Holdings, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)(Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986)

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 25, 2004
	/s/  R. JACK DECRANE
	R. Jack DeCrane
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

Chief Financial Officer Certification

I, Richard J. Kaplan, certify that:

1.I have reviewed this Annual Report on Form 10-K of DeCrane Aircraft Holdings, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)(Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986)

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 25, 2004
	/s/  RICHARD J. KAPLAN
	Richard J. Kaplan
	Senior Vice President, Chief Financial Officer,
	Secretary and Treasurer

EX-32

Exhibit 32

CERTIFICATIONS PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Chief Executive Officer and Chief Financial Officer Certification

The certification set forth below is being submitted in connection with the Annual Report on Form 10-K (the “Report”) for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

R. Jack DeCrane, the Chief Executive Officer and Richard J. Kaplan, the Chief Financial Officer of DeCrane Aircraft Holdings, Inc., each certifies that, to the best of his knowledge:

1.         the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

2.         the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of DeCrane Aircraft Holdings, Inc.

Date: March 25, 2004
	/s/  R. JACK DECRANE
	R. Jack DeCrane
	Chief Executive Officer
	/s/  RICHARD J. KAPLAN
	Richard J. Kaplan
	Senior Vice President, Chief Financial Officer, Secretary and Treasurer