DeCrane Aircraft Holdings Inc. Announces Filing of Tender Offer Disclosure Document Regarding Subsequent Developments.

EL SEGUNDO, Calif.--(BUSINESS WIRE)--August 20, 1998--DeCrane Aircraft Holdings Inc. (Nasdaq:DAHX)(the "Company"), a leading manufacturer of avionics components and an avionics systems integrator for the commercial and high-end corporate aircraft industry, Thursday announced that it has filed with the Securities and Exchange Commission an amendment to its Schedule 14D-9 to report subsequent developments with respect to the cash tender offer (the "Offer") by DeCrane Acquisition Co. (the "Purchaser"), a wholly owned subsidiary of DLJ Merchant Banking Partners II L.P. ("DLJ"), to purchase all of the outstanding shares (the "Shares") of DeCrane Aircraft Holdings at $23.00 per Share, to be followed by a merger (the "Merger") in which any remaining Shares would be converted into the right to receive $23.00 per Share in cash, without interest thereon.

The Company is in the process of mailing the amendment (including the Form 10-Q) to its stockholders, but stockholders and other interested parties may obtain a copy of the amendment directly from the Company or from the Web site of the Securities and Exchange Commission at http://www.sec.gov.

The amendment includes the following information, which updates and supplements the information provided in the Company's Schedule 14D-9 (its original tender offer filing):

On July 17, 1998, following the announcement of the Merger Agreement between the Company and the Purchaser with respect to the Offer and the Merger, an independent third party ("Potential Bidder 1") advised the Company of its interest in pursuing an alternative transaction with the Company.

Potential Bidder 1 indicated its interest was in pursuing a possible merger that would qualify as a pooling of interests transaction, but its interest was subject, among other things, to a satisfactory due diligence review.

Accordingly, on July 23, 1998, the Company, after receiving the advice of counsel, obtained a confidentiality agreement from Potential Bidder 1 on terms substantially identical to the confidentiality agreement between the Company and DLJ.

Potential Bidder 1 then began its due diligence investigation. Recently, however, Potential Bidder 1 informed Warburg Dillon Read LLC ("WDR"), the financial advisor to the Special Committee of the Company's Board of Directors, that it had concluded, as a result of recent stock market conditions affecting the market value of its own shares, that it was not in a position to pursue an acquisition of the Company.

On or about Aug. 4, 1998, another independent third party ("Potential Bidder 2") advised the Company that it might be interested in making an offer to purchase the Shares for cash. On the advice of counsel, the Board of Directors decided to authorize the Company to furnish information to Potential Bidder 2, subject to an appropriate confidentiality agreement.

Such an agreement was executed and information was furnished, but Potential Bidder 2 subsequently indicated to WDR that it believed that it was not in a position to pursue the transaction.

On Aug. 5, 1998, the Company and R. Jack DeCrane, its chief executive officer, were served in an action filed in state court in California by Robert A. Rankin, the Company's chief financial officer and secretary, claiming that he is due additional compensation in the form of stock options and claiming fraud, negligence and breach of contract in connection therewith.

Rankin has advised the Company that his claim for additional compensation is justified based on his opinion that the Company's common stock is worth $29.00 per Share. The action seeks not less than $1.5 million plus punitive damages and costs.

The action is in the early stages of development and discovery has not yet been conducted; the Company intends to vigorously defend against the claim. Rankin has been placed on administrative leave with pay. John R. Hinson, the Company's vice president for planning and business development, has been appointed as the interim chief financial officer and acting secretary of the Company.

On July 21, 1998, an action entitled Taam Associates Inc. v. DeCrane, et al. (the "Action"), was commenced in Delaware Court of Chancery on behalf of a purported class of shareholders of the Company against the Company, its directors and various officers, DLJ and the Purchaser, alleging, among other things, that the directors had breached their fiduciary duties by entering into the Merger Agreement without engaging in an auction or "active market check" and, therefore, did not adequately inform themselves in agreeing to terms that are unfair and inadequate from the standpoint of the Company's stockholders.

On July 24, 1998, the plaintiffs thereafter amended the complaint. The amended class action complaint alleges, among other things, that the Company's initial Schedule 14D-9 failed to disclose adequately (i) material information regarding the equity participation of management following the Merger, (ii) the claimed failure to adequately shop the Company, (iii) complete financial information, (iv) the claimed unreasonableness of the termination fees, (v) details regarding the Company's financial projections, and (vi) details regarding WDR's analysis.

The amended complaint seeks a preliminary and permanent injunction barring defendants from proceeding with the Merger, or if the Merger is consummated, an order rescinding it or awarding damages, together with interest; and an award of attorneys' and litigation expenses.

Plaintiff stipulated to the dismissal without prejudice of the claims against those defendants who were officers, but not directors, of the Company. Although defendants have not been required to answer the amended complaint, if required to answer the amended complaint, the Company would deny, and understands that other defendants would deny, the allegations of wrongdoing and would assert various defenses.

Without admitting any wrongdoing in the Action, in order to avoid the burden and expense of further litigation, the Company, DLJ, the Purchaser and the individual defendants reached an agreement in principle with the plaintiffs which contemplates settlement of the Action.

The Company, DLJ, the Purchaser and the individual defendants and the plaintiff entered into a memorandum of understanding (the "Memorandum of

Understanding"), pursuant to which the parties would, subject to certain facts being confirmed through discovery which has not been completed, enter into a settlement agreement which would be subject to approval by the Court of Chancery.

The Memorandum of Understanding contemplates that the settlement would provide: (a) that the Company promptly amend the Schedule 14D-9 dated July 22, 1998, to include information regarding the financial results of the Company for the quarter ended June 30, 1998, and to provide further disclosure (1) concerning further contacts and negotiations with other potential acquirors of the Company, (2) regarding the analysis presented to and considered by the Special Committee in evaluating the Merger Agreement, (3) the Special Committee's conclusions regarding the later assertions by Rankin relating to the fairness opinion described below, and (4) regarding financial projections disclosed to DLJ or other potential acquirors of the Company; (b) that the Company will use its reasonable best efforts to mail such amendment to the Company's stockholders as soon as practicable; and (c) reasonably promptly following the execution of the Memorandum of Understanding by the parties, the Company shall publicly disclose the terms of the proposed settlement set forth therein in a manner deemed reasonable by the Company; and (d) for a complete release and settlement of all claims, whether asserted directly, derivatively or otherwise, against defendants, or any of their affiliates, directors, officers, employees or agents arising out of the facts set forth in the complaint.

The released claims will include any claims that could be raised as a result of the matters described in the amendment filed Thursday.

The Company, DLJ, the Purchaser and the individual defendants and the plaintiffs agreed that the settlement outlined above is fair, in the best interest of the Company's stockholders, and confers a substantial benefit on the Company and its stockholders.

Pursuant to the Memorandum of Understanding, a draft of the amended Schedule 14D-9 was provided to plaintiff's lead counsel to review and comment upon prior to the initial filing with the Securities and Exchange Commission.

The Memorandum of Understanding contemplates that, in connection with the benefit conferred, plaintiff's counsel will apply to the Court of Chancery for an award of attorney's fees and litigation expenses in an amount not exceeding $375,000, which application the defendants have agreed not to oppose.

Following the execution and delivery of the Merger Agreement and the delivery to the Company by WDR of its fairness opinion, Robert A. Rankin, the Company's chief financial officer (who has brought suit against the Company in a compensation dispute, as described above) advised the Company, its counsel and WDR that he had "serious concerns about the accuracy and reliability of" the fairness opinion.

He questioned the accuracy of the presentation of certain financial data to the Board of Directors related to the fairness opinion, whether the appropriate comparable transactions had been used by WDR and certain other aspects of WDR's presentation.

WDR informed the members of the Board of Directors that, in its judgment, the purported concerns raised by Rankin had no material impact on its analysis and WDR again reviewed its selection of the comparable transactions and the other aspects of its methodology. The Board of Directors and the Company's senior management agreed with WDR's assessment of Rankin's concerns.

Also subsequent to the delivery of the fairness opinion, WDR and the Special Committee became aware that certain members of senior management, at the end of June 1998, had prepared a set of projected consolidated income and cash-flow statements and balance sheets of the Company for the five-year period ending Dec. 31, 2002 (the "Five-Year Projections") and that the Five-Year Projections had been included in materials made available to DLJ and the Purchaser, subsequent to the Merger Agreement, and to Potential Bidder 1 and Potential Bidder 2.

The Five-Year Projections (which are different from the projections described in the Offer) assumed an internal growth rate in the Company's operating income of more than 20 percent, significantly higher than the Company Projections.

As a result, the Five-Year Projections showed a significantly higher earnings before interest and taxes ("EBIT") than that relied on by WDR in preparing the discounted cash-flow calculations used in its analysis.

The members of the Special Committee reviewed the Five-Year Projections and conducted extensive interviews of DeCrane, the chief executive officer; and R.G. MacDonald and John R. Hinson, respectively, the vice chairman of the board and the interim chief financial officer of the Company.

DeCrane, MacDonald and Hinson confirmed that the Five-Year Projections do not represent the views of senior management because (i) they employed assumptions as to the future development of certain of the Company's operations and certain of the Company's markets that are overly optimistic and an internal growth rate significantly greater than historical experience, with the result that EBIT amounts were also significantly greater, and (ii) the management of the Company's business units had not participated in their preparation.

Attorneys representing Rankin in litigation wrote to counsel for the Special Committee and, through Company counsel, were invited to submit any additional information for the Committee's consideration. The Special Committee discussed with WDR the results of its investigation at a meeting with WDR.

The Special Committee concluded that the Five-Year Projections (which had been delivered to WDR after it rendered its fairness opinion) were not reliable or representative of the Company management's views of the Company and that they did not provide a basis for questioning the fairness opinion.

The Special Committee advised the other members of the Board of Directors to that effect, and they agreed. The Special Committee also discussed with WDR at the same meeting the condition of the equity markets since July 16, 1998.

The amendment filed Thursday also described the principal financial analyses performed by Warburg Dillon Read LLC to arrive at its fairness opinion and included as an exhibit DeCrane's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1998.

In addition, the amendment disclosed that, on or about June 10, 1998, two officers of the company purchased 100 Shares each, and that a director had indicated an intention to donate to four charities, before the expiration of the Offer, 5,220 Shares in the aggregate.

The Company understands that DLJ and the Purchaser plan to extend the deadline stated in the original Offer from midnight (Eastern time) on Tuesday, Aug. 25, 1998, to midnight (Eastern time) on Thursday, Aug. 27, 1998, in a separate announcement.

    CONTACT: DeCrane Aircraft Holdings Inc., El Segundo
              John Hinson, 310/725-9123 (Investor Relations)
                          or
              Financial Relations Board, Los Angeles
              310/442-0599
              Karen Taylor (General Information)
              Moira Conlon (Investor/Analyst Contact)
              Michaelle Burstin (Media Contact)