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Award Agreement under the DeCrane Holdings Co. Management Incentive Plan Date of Grant: December 20, 1999 Name of Optionee: -------------------------- Number of Shares: -------------------------- Exercise Price: $23.00/share Expiration Date: December 20, 2009 DeCrane Holdings Co., a Delaware corporation (the "COMPANY"), hereby grants to the above-named optionee (the "OPTIONEE") a performance-based vesting option (the "OPTION") to purchase from the Company, for the price per share set forth above, the number of shares of Common Stock, $0.01 par value (the "SHARES"), of the Company set forth above pursuant to the DeCrane Holdings Co. Management Incentive Plan (the "PLAN"). The Options are not intended to be treated as incentive stock options under the Code. Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan. The terms and conditions of the Option granted hereby, to the extent not controlled by the terms and conditions contained in the Plan, are as follows: 1. EXERCISE PRICE. The price at which each Share subject to this Option may be purchased shall be the price set forth above. 2. NUMBER OF SHARES; EXERCISE. The number of Shares for which the Option may be exercised are set forth above. To the extent this Option has become vested in accordance with Section 3 below, the Option may be exercised at any time until the Expiration Date, subject to the terms of the Plan and of Section 7 below. 3. VESTING. (a) GENERAL. (i) The Option shall be immediately vested and exercisable with respect to 10% of the Shares subject thereto. (ii) To the extent not previously vested in accordance with the provisions of this Section 3, the Option shall become fully vested and exercisable on the earlier of: (x) the eighth anniversary of the Date of Grant, provided the Optionee is then in the employ of the Company or a Subsidiary; or (y) upon a Change in Control provided that the internal rate of return realized by the DLJ Entities in respect of such Change in Control exceeds the targets set forth on Schedule 1 to the Plan. (b) PERFORMANCE CONDITIONS. (i) The Option shall be considered to be a "GROWTH-BASED OPTION" to the extent of 90% of the Shares subject thereto. A portion of this Growth-Based Option shall become vested and exercisable on the thirtieth day following the availability of audited financial statements of the Company for each of the four fiscal years of the Company commencing with the fiscal year ending December 31, 1999 (each such day, a "VESTING DATE"), provided, in the case of Operating Company Participants, the operating company to which such Optionee's employment primarily relates (the "OPERATING COMPANY") has achieved such Operating Company's Target EBITDA for such fiscal year as set forth in Schedule 2 or Schedule 3 to the Plan, as applicable, or, in the case of Corporate Participants, provided that the Total Consolidated EBITDA achieved for such year equals the Total Target Consolidated EBITDA for such year as set forth in Schedule 3 to the Plan. Schedule 2 and Schedule 3 set forth the total portion of the Growth-Based Option that will be treated as vested and exercisable as of each Vesting Date based on achievement of the specified percentages of the relevant Target EBITDA and Schedule 3 sets forth the Total Target Consolidated EBITDA, as the case may be, in each case for each fiscal year. (ii) If the Target EBITDA value referred to in clause (b)(i) for any Operating Company is exceeded in any fiscal year, an amount equal to all or a portion of the excess of actual EBITDA over such target EBITDA shall be taken into account in respect of the immediately preceding fiscal year solely for purposes of determining whether such Operating Company's Target EBITDA for such preceding fiscal year has A-2 been attained; provided, however, that any such excess EBITDA in any fiscal year that is taken into account as provided herein shall not be taken into account, directly or indirectly, for any purpose in respect of any other preceding fiscal year or any fiscal year commencing after such immediately preceding fiscal year. (iii) If the Target EBITDA value referred to in clause (b)(i) for any Operating Company is exceeded in any fiscal year, an amount equal to all or a portion of the excess of actual EBITDA over such target EBITDA, provided that such excess has not been taken into account in respect of the immediately preceding fiscal year pursuant to Clause (b)(ii), shall be taken into account in the immediately succeeding fiscal year solely for purposes of determining whether such Operating Company's Target EBITDA for such succeeding fiscal year has been attained; provided, however, that any such excess EBITDA in any fiscal year shall not be taken into account, directly or indirectly, for any purpose in respect of any fiscal year commencing after such immediately succeeding fiscal year. (iv) The Target EBITDA for the Operating Companies may be reallocated among such Companies provided that: (x) the Board and management of the Company agree on such reallocation and (y) the Target Total Divisional EBITDA (Rev.) set forth on Schedule 3 remains unchanged. In the event that the Company acquires any business during such period, the Target Total Consolidated EBITDA (Rev.) on Schedule 3 shall be increased by the EBITDA projected for such business for the year of acquisition and for each subsequent year, as projected for each such year at the time of its acquisition. The Committee shall have the discretion to adjust the corporate elimination in Schedule 3 to reflect such acquisition. 4. MANNER OF EXERCISE. The Optionee (or his representative, devisee or heir, as applicable) may exercise any portion of this Option which has become exercisable in accordance with the terms hereof as to all or any of the Shares then available for purchase by delivering to the Company written noticespecifying: (i) the number of whole Shares to be purchased together with payment in full of the aggregate Exercise Price of such shares; (ii) the address to which dividends, notices, reports, etc. are to be sent; and (iii) the Optionee's social security number. A-3 Payment shall be in cash, by certified or bank cashier's check payable to the order of the Company, free from all collection charges, or in unencumbered Shares (provided such shares shall have been held by the Optionee for at least six months unless the Committee determines in its sole discretion that such six-month holding period is not necessary to comply with any accounting, legal or regulatory requirement) having a Fair Market Value equal to the full amount of the Exercise Price therefor, or such other form as may be permitted by the Committee. Only one stock certificate will be issued unless the Optionee otherwise requests in writing. Shares purchased upon exercise of the Option will be issued in the name of the Optionee or the Optionee's Permitted Transferee. No Shares shall be issued hereunder unless and until the Optionee (or his representative, devisee or heir, as applicable) executes and agrees to be bound by the Investors' Agreement. The Optionee shall not be entitled to any rights as a stockholder of the Company in respect of any Shares covered by this Option until such Shares shall have been paid for in full and issued to the Optionee. 5. CERTIFICATES. Certificates issued in respect of Shares acquired upon exercise of the Option shall, unless the Committee otherwise determines, be registered in the name of the Optionee or its Permitted Transferee. When the Optionee ceases to be bound by the provisions of the Investors' Agreement, the Company shall deliver such certificates to the Optionee or its Permitted Transferee upon request. Such stock certificate shall carry such appropriate legends, and such written instructions shall be given to the Company's transfer agent, as may be deemed necessary or advisable by counsel to the Company in order to comply with the requirements of the Securities Act of 1933, any state securities laws or any other applicable laws or the Investors' Agreement. 6. NONTRANSFERABILITY. This Option is personal to the Optionee and may be exercised only by the Optionee or his or her representative in the event of the Optionee's Disability or death. This Option shall not be transferable other than by will or the laws of descent and distribution. Notwithstanding the foregoing, this Option may be transferred to a trust solely for the benefit of the Optionee or the Optionee's immediate family (which shall be deemed to include the Optionee's spouse, parents, siblings, children, stepchildren andgrandchildren). 7. FORFEITURE OF OPTION; RIGHT OF REPURCHASE. (a) If the Optionee's employment with the Company and its Subsidiaries shall terminate for any reason other than by the Company or its Subsidiary for Cause, then (i) to the extent not yet vested as of the date of termination of employment, the Option shall immediately be forfeited; and (ii) to the extent vested as of the date of termination of employment, the Option may be A-4 retained and exercised, in accordance with the terms of the Plan and this Award Agreement, during the six month period following such termination. (b) If the Optionee's employment with the Company and its Subsidiaries shall be terminated by the Company or its Subsidiary for Cause, then the entire Option shall immediately be forfeited, and all Shares previously acquired upon exercise of the Option shall be subject to a right of repurchase by the Company from the Participant or his or her Permitted Transferee at a price equal to the Exercise Price. 8. SALE OF UNDERLYING SHARES. The Optionee's right and obligation to sell any Shares acquired upon exercise of the Option (in the case of Optionees who are party thereto) shall be subject to the terms of the Investors'Agreement. 9. EMPLOYMENT RIGHTS. This Option does not confer on the Optionee any right to continue in the employ of the Company or any Subsidiary or interfere in any way with the right of the Company or any Subsidiary to determine the terms of the Optionee's employment. 10. TERMS OF PLAN; INTERPRETATIONS. This Option and the terms and conditions herein set forth are subject in all respects to the terms and conditions of the Plan, which shall be controlling. All interpretations or determinations of the Committee and/or the Board shall be binding and conclusive upon the Optionee and his legal representatives on any question arising hereunder. The Optionee acknowledges that he has received and reviewed a copy of the Plan. 11. DELEGATION. Optionee acknowledges that any powers, rights or responsibilities of the Board and/or the Committee set forth herein may be delegated to and exercised by any subcommittee thereof as permitted under thePlan. 12. NOTICES. All notices hereunder to the party shall be delivered or mailed to the following addresses: If to the Company: DeCrane Holdings Co. c/o DLJ Merchant Banking Partners II, L.P. 277 Park Avenue New York, New York 10172 Attention: Thompson Dean Fax: (212) 892-7272 A-5 and DeCrane Holdings Co. 2361 Rosecrans Avenue Suite 180 El Segundo, CA 90245 Attention: R. Jack DeCrane Fax: (310) 643-0746 with a copy to: Davis Polk & Wardwell 450 Lexington Avenue New York, New York 10017 Attention: George R. Bason, Jr., Esq. Fax: (212) 450-4800 If to the Optionee: To the person and at the address specified on the signature page. Such addresses for the service of notices may be changed at any time provided notice of such change is furnished in advance to the other party. 13. ENTIRE AGREEMENT. This Agreement, together with the Plan and (in the case of Optionees who are party thereto) the Investors Agreement, contains the entire understanding of the parties hereto in respect of the subject matter contained herein. This Agreement, the Plan and the Investors' Agreement supersede all prior agreements and understandings between the parties hereto with respect to the subject matter hereof. 14. GOVERNING LAW. This Award Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without application of the conflict of laws principles thereof. 15. COUNTERPARTS. This Award Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. A-6 IN WITNESS WHEREOF, the undersigned have caused this Award Agreement to be duly executed as of the date first above written. DeCRANE HOLDINGS CO. By: --------------------------- Name: Title: OPTIONEE: ------------------------------ Name: Address: c/o DeCrane Holdings Co. 2361 Rosecrans Avenue Suite 180 El Segundo, CA 90245