Exhibit 10.21

AVIALL, INC.

FREE-STANDING APPRECIATION RIGHTS AGREEMENT

This FREE-STANDING APPRECIATION RIGHTS AGREEMENT (the “Agreement”) is made as of
____________, 200__ (the “Date of Grant”) by and between Aviall, Inc., a
Delaware corporation (the “Company”), and ___________________ (the “Grantee”).
This Agreement is intended to comply with the provisions governing stock
appreciation rights under Internal Revenue Service Notice 2005-1 and the
proposed Treasury Regulations issued on September 29, 2005, in order to exempt
this Agreement and any payments made hereunder from application of Section 409A
of the Code.

 

  1. Grant of Appreciation Rights. Pursuant to the Aviall, Inc. 1998 Stock
Incentive Plan (the “Plan”), the Company hereby grants to the Grantee, as of the
Date of Grant, rights relating to any appreciation in value from a grant price
(the “Base Price”) of $__________ per share (which is equal to or greater than
the Market Value per Share as of the Date of Grant) associated with _________
Common Shares of the Company (the “Appreciation Rights”), all upon and subject
to the terms and conditions set forth in this Agreement.

 

  2. Term. The term of the Appreciation Rights shall commence on the Date of
Grant and, unless earlier terminated in accordance with Section 5 hereof:

 

  (i) ¨ Appreciation Rights shall expire on the date that is six (6) years from
the Date of Grant;

 

  (ii) ¨ Appreciation Rights shall expire on the date that is seven (7) years
from the Date of Grant; and

 

  (iii) ¨ Appreciation Rights shall expire on the date that is eight (8) years
from the Date of Grant.

 

  3. Subject to Plan. The Appreciation Rights and this Agreement are subject to
the terms and conditions of the Plan, and the terms of the Plan shall control to
the extent not otherwise inconsistent with the provisions of this Agreement.
Except as otherwise provided herein, the capitalized terms used herein that are
defined in the Plan shall have the same meanings assigned to them in the Plan.
The Appreciation Rights are subject to any rules promulgated pursuant to the
Plan by the Board (or a duly appointed committee thereof) and communicated to
the Grantee in writing.

 

  4. Vesting; Right to Exercise. Subject to the provisions of Sections 2 and 5
hereof, the Grantee shall become vested in installments of Appreciation Rights
awarded to the Grantee and such Appreciation Rights shall become fully
exercisable in accordance with the following schedule:

 

  a. ¨ Appreciation Rights shall vest and become exercisable on the first
anniversary of the Date of Grant provided the Grantee is employed by the Company
or a Subsidiary on that date;

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  b. ¨ Appreciation Rights shall vest and become exercisable on the second
anniversary of the Date of Grant provided the Grantee is employed by the Company
or a Subsidiary on that date; and

 

  c. ¨ Appreciation Rights shall vest and become exercisable on the third
anniversary of the Date of Grant provided the Grantee is employed by the Company
or a Subsidiary on that date.

Notwithstanding the foregoing, the vesting of Appreciation Rights under this
Agreement shall automatically accelerate and be exercisable in full upon (i) the
Grantee’s death if such death occurs while the Grantee is employed by the
Company or one of its Subsidiaries, (ii) the Grantee’s permanent and total
disability, if the Grantee becomes permanently and totally disabled while an
employee, or (iii) the occurrence of a Change in Control. For the purposes of
this Agreement, “permanent and total disability” shall be defined by
Section 22(e)(3) of the Code. Notwithstanding anything to the contrary contained
herein, in the event of the Grantee’s voluntary Retirement, the Appreciation
Rights shall continue to vest and become exercisable on the anniversary dates
set forth in Sections 4.a., 4.b., and 4.c., regardless of whether the Grantee is
employed on such date. For purposes of this Agreement, the “Retirement” shall
mean the Grantee’s voluntary retirement under a retirement plan of the Company
or one of its Subsidiaries at or after the earliest retirement age provided for
in such retirement plan or retirement at any earlier age with the consent of the
Board.

 

  5. Forfeiture.

 

  a. Notwithstanding the foregoing, except as otherwise provided in this
Agreement, unexercised Appreciation Rights that are unvested on the date of the
Grantee’s termination of employment shall terminate on that date and unexercised
Appreciation Rights that are vested shall terminate on the first to occur of the
following:

 

  (i) 5 p.m. on the date that is set forth in Section 2 hereof;

 

  (ii) 5 p.m. on the date that is one (1) year following the date of the
Grantee’s death or permanent and total disability while in the employ of the
Company or one of its Subsidiaries or during the ninety (90) day period
specified in Section 5.a.(iv) hereof; or

 

  (iii) 5 p.m. on the date that is ninety (90) days after the Grantee’s
termination of employment for any reason other than due to Retirement, death or
permanent and total disability.

 

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  b. In the event that the Grantee’s employment is terminated for cause, all
Appreciation Rights, this Agreement and the term shall terminate at the time of
such employment termination, notwithstanding any other provision of this
Agreement to the contrary. For purposes of this provision, “cause” shall mean
any of the following acts.

 

  (i) the Grantee’s willful breach or habitual neglect of assigned duties
related to the Company, including compliance with Company policies;

 

  (ii) conviction (including any plea of nolo contendere) of the Grantee of any
felony or crime involving dishonesty or moral turpitude;

 

  (iii) any act of personal dishonesty knowingly taken by the Grantee in
connection with his or her responsibilities as an employee and intended to
result in personal enrichment of the Grantee or any other person;

 

  (iv) bad faith conduct that is materially detrimental to the Company;

 

  (v) inability of the Grantee to perform the Grantee’s duties due to alcohol or
illegal drug use;

 

  (vi) the Grantee’s failure to comply with any legal written directive of the
Board;

 

  (vii) any act or omission of the Grantee which is of substantial detriment to
the Company because of the Grantee’s intentional failure to comply with any
statute, rule or regulation, except any act or omission believed by the Grantee
in good faith to have been in or not opposed to the best interest of the Company
(without intent of the Grantee to gain, directly or indirectly, a profit to
which the Grantee was not legally entitled) and except that “cause” shall not
mean bad judgment or negligence other than habitual neglect of duty; or

 

  (viii) any other act or failure to act or other conduct which is determined by
the Board, in its sole discretion, to be demonstrably and materially injurious
to the Company, monetarily or otherwise.

 

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  c. For the purposes of this Agreement, the continuous employment of the
Grantee with the Company shall not be deemed to have been interrupted, and the
Grantee shall not be deemed to have ceased to be an employee of the Company, by
reason of the transfer of his or her employment among the Company and its
Subsidiaries or a leave of absence of not more than ninety (90) days approved by
the Chief Executive Officer of the Company.

 

  6. Transferability and Who May Exercise.

 

  a. Except as otherwise provided in Section 6.b. hereof and subject to the
terms and conditions set forth in Sections 2, 4, and 5, the Appreciation Rights
granted under this Agreement, and any interest in or right associated with such
Appreciation Rights, are not assignable or transferable by the Grantee except by
will or by the laws of descent and distribution and, during the lifetime of the
Grantee, may only be exercised by the Grantee or, in the event of his legal
incapacity, by his guardian or legal representative. If the Grantee dies prior
to the dates specified in Section 5 above without having exercised all of his or
her then-vested Appreciation Rights as of his or her date of death, then the
following persons may exercise the exercisable portion of the Appreciation
Rights on behalf of the Grantee at any time prior to the earliest of the dates
specified in Section 5 hereof: the personal representative of his or her estate
or any person who acquired the right to exercise the Appreciation Rights by
bequest or inheritance or by reason of the death of the Grantee; provided that
the Appreciation Rights shall remain subject to the other terms of this
Agreement, the Plan and all applicable laws, rules, and regulations.

 

  b. Notwithstanding the provisions of Section 6.a. hereof, the Appreciation
Rights granted under this Agreement, and any interest in or right associated
with such Appreciation Rights, shall be transferable by the Grantee, without
payment of consideration therefor by the transferee, to any one or more members
of the Grantee’s Immediate Family (or to one or more trusts established solely
for the benefit of one or more members of the Grantee’s Immediate Family or to
one or more partnerships in which the only partners are members of the Grantee’s
Immediate Family); provided, however, that (i) no such transfer shall be
effective unless reasonable prior notice thereof is delivered to the Company and
such transfer is thereafter effected in accordance with any terms and conditions
that shall have been made applicable thereto by the Company or the Board and
(ii) any such transferee shall be subject to the same terms and conditions
hereunder as the Grantee.

 

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  7. Notice of Exercise. The Grantee may exercise vested and exercisable
Appreciation Rights at any time prior to the termination of the Appreciation
Rights in accordance with Section 5 above by the delivery of written notice to
the Company setting forth the number of vested and exercisable Appreciation
Rights which are to be exercised and the date of exercise thereof (the “Exercise
Date”). On or as promptly as administratively practicable after the Exercise
Date, the Company shall deliver to the Grantee the number of whole Common Shares
equal to the amount obtained by dividing the product of (i) 100% of the Spread
of a Common Share at the time of exercise and (ii) the total number of
Appreciation Rights exercised, by the Market Value per Share on the Exercise
Date with a cash settlement to be made for any fractional Common Shares;
provided, however, that the Company, in lieu of delivering Common Shares to the
Grantee, in its sole and absolute discretion, may elect to pay the Grantee an
amount in cash equal to the product of (i) 100% of the Spread of a Common Share
at the time of exercise and (ii) the total number of Appreciation Rights
exercised. By execution of this Agreement, Grantee hereby agrees to comply with
all regulations and requirements of any regulatory authority having control of,
or supervision over, the issuance of Common Shares and in connection with the
exercise of any Appreciation Rights granted under this Agreement, to execute any
documents that the Board shall, in its sole discretion, deem necessary or
advisable.

 

  8. No Fractional Shares. Appreciation Rights may be exercised only with
respect to whole Common Shares, and no fractional Common Share shall be issued.

 

  9. Representations, Etc. The spouse of the Grantee individually is bound by,
and such spouse’s interest, if any, in any Appreciation Rights is subject to,
the terms of this Agreement. Nothing in this Agreement shall create a community
property interest where none otherwise exists.

 

  10. Simultaneous Death. If the Grantee and his or her spouse both suffer a
common accident or casualty which results in their respective deaths within
sixty (60) days of each other, it shall be conclusively presumed, for the
purpose of this Agreement, that the Grantee died first and the spouse died
thereafter.

 

  11. No Rights as Shareholder. The Grantee will have no rights as a shareholder
of the Company with respect to any Appreciation Rights.

 

  12. Adjustment of Number of Shares and Related Matters. The number of
Appreciation Rights, and the Base Price thereof, shall be subject to adjustment
in accordance with Section 10 of the Plan and Section 20 below.

 

  13. Grantee’s Acknowledgments. The Grantee acknowledges receipt of a copy of
the Plan, and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts the Appreciation Rights subject to all
the terms and provisions thereof. The Grantee hereby agrees to accept as
binding, conclusive, and final all decisions or interpretations of the Board (or
any duly appointed committee thereof) upon any questions arising under the Plan
or this Agreement.

 

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  14. Law Governing. This Agreement shall be governed by, construed, and
enforced in accordance with the laws of the State of Texas (excluding any
conflict of laws rule or principle of Texas law that might refer the governance,
construction, or interpretation of this agreement to the laws of another state).

 

  15. No Right to Continue Service or Employment. Nothing herein shall be
construed to confer upon the Grantee the right to continue in the employ or to
provide services to the Company or any Subsidiary, whether as an employee or as
a consultant or as a non-employee director, or interfere with or restrict in any
way the right of the Company or any Subsidiary to discharge the Grantee as an
employee, consultant or non-employee director at any time.

 

  16. Legal Construction. In the event that any one or more of the terms,
provisions, or agreements that are contained in this Agreement shall be held by
a court of competent jurisdiction to be invalid, illegal, or unenforceable in
any respect for any reason, the invalid, illegal, or unenforceable term,
provision, or agreement shall not affect any other term, provision, or agreement
that is contained in this Agreement, and this Agreement shall be construed in
all respects as if the invalid, illegal, or unenforceable term, provision, or
agreement had never been contained herein.

 

  17. Covenants and Agreements as Independent Agreements. Each of the covenants
and agreements that is set forth in this Agreement shall be construed as a
covenant and agreement independent of any other provision of this Agreement. The
existence of any claim or cause of action of the Grantee against the Company
and/or Subsidiary, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of the covenants and
agreements that are set forth in this Agreement.

 

  18. Entire Agreement. This Agreement together with the Plan supersede any and
all other prior understandings and agreements, either oral or in writing,
between the parties with respect to the Appreciation Rights specifically granted
hereby and constitute the sole and only agreements between the parties with
respect thereto. All prior negotiations and agreements between the parties with
respect to the subject matter hereof are merged into this Agreement. Each party
to this Agreement acknowledges that no representations, inducements, promises,
or agreements, orally or otherwise, have been made by any party or by anyone
acting on behalf of any party, which are not embodied in this Agreement or the
Plan and that any agreement, statement or promise that is not contained in this
Agreement or the Plan shall not be valid or binding or of any force or effect.

 

  19. Parties Bound. The terms, provisions, and agreements that are contained in
this Agreement shall apply to, be binding upon, and inure to the benefit of the
parties and their respective heirs, executors, administrators, legal
representatives, and permitted successors and assigns, subject to the limitation
on assignment expressly set forth herein.

 

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  20. Modification. No change or modification of this Agreement shall be valid
or binding upon the parties unless the change or modification is in writing and
signed by the parties; provided, however, that the Company may change or modify
the terms of this Agreement, including, without limitation, the Base Price,
without the Grantee’s consent or signature if the Company determines, in its
sole discretion, that such change or modification is necessary for purposes of
compliance with or exemption from the requirements of Section 409A of the Code
or any regulations or other guidance issued thereunder. Notwithstanding the
preceding sentence, the Company may amend the Plan or revoke the Appreciation
Rights to the extent permitted by the Plan.

 

  21. Headings. The headings that are used in this Agreement are used for
reference and convenience purposes only and do not constitute substantive
matters to be considered in construing the terms and provisions of this
Agreement.

 

  22. Gender and Number. Words of any gender used in this Agreement shall be
held and construed to include any other gender, and words in the singular number
shall be held to include the plural, and vice versa, unless the context requires
otherwise.

 

  23. Notice. Any notice required or permitted to be delivered hereunder shall
be deemed to be delivered only when actually received by the Company or by the
Grantee, as the case may be, at the addresses set forth below, or at such other
addresses as they have theretofore specified by written notice delivered in
accordance herewith:

 

  a. Notice to the Company shall be addressed and delivered as follows:

Aviall, Inc.

P. O. Box 619048

Dallas, TX 75261-9048

Attn: Secretary

Facsimile: (972) 586-1010

 

  b. Notice to the Grantee shall be addressed and delivered as set forth on the
signature page.

 

  24. Tax and Withholding. To the extent that the Company shall be required to
withhold any federal, state, local or foreign taxes in connection with the
exercise of the Appreciation Right, and the amounts available to the Company for
such withholding are insufficient, it shall be a condition to the exercise of
the Appreciation Right that the Grantee shall pay such taxes or make provisions
that are satisfactory to the Company for the payment thereof. The Grantee may
elect to satisfy all or any part of any such withholding obligation by
surrendering to the Company a portion of the Common Shares that are issued or
transferred or the cash that is payable to the Grantee upon the exercise of the
Appreciation Right. Any Common Shares surrendered by the Grantee in accordance
with the immediately preceding sentence shall be credited against any such
withholding obligation at the Market Value per Share of such Common Shares on
the date of such surrender.

 

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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
duly authorized officer, and the Grantee, to evidence his or her consent and
approval of all the terms hereof, has duly executed this Agreement, as of the
____ day of _________________, 200___.

 

AVIALL, INC.

By: 

    

GRANTEE

By: 

    

Grantee’s Address for Notices:

     

 

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