Exhibit 10.4

HAWKER BEECHCRAFT, INC.

NONQUALIFIED STOCK OPTION AGREEMENT

(Time-Vesting)

THIS AGREEMENT (the “Agreement”), is made effective as of ******* **, 20** (the
“Date of Grant”), between Hawker Beechcraft, Inc., a Delaware corporation (the
“Company”), and ******** **** (the “Participant”).

RECITALS:

WHEREAS, the Company has adopted the Hawker Beechcraft, Inc. 2007 Stock Option
Plan (the “Plan”), which Plan is incorporated herein by reference and made a
part of this Agreement. Capitalized terms not otherwise defined herein shall
have the meanings given thereto in the Plan; and

WHEREAS, the Committee has determined that it would be in the best interests of
the Company and its shareholders to grant an Option to the Participant pursuant
to the Plan and the terms set forth herein.

NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth,
the parties agree as follows:

1. Grant of the Option. The Company hereby grants to the Participant the right
and option to purchase, pursuant to Section 6 of the Plan and the terms and
conditions hereinafter set forth, all or any part of an aggregate of ********
Shares, subject to adjustment as set forth in the Plan. The Option Price shall
be $**.** per share which the Company and the Participant agree is not less than
the Fair Market Value of the Shares as of the date hereof. The Option is granted
pursuant to and is governed in all respects by the Plan. This Option is not
intended to constitute an incentive stock option under Section 422 of the Code.

2. Vesting; Termination of Employment.

(a) Subject to Section 2(b) hereof and the earlier termination or cancellation
of the Option as set forth herein or in the Plan, the Option shall vest and
become exercisable as follows, in each case so long as the Participant’s
Employment has not theretofore terminated:

(i) Prior to the first (1st) anniversary of the Date of Grant, no portion of the
Option shall vest or be exercisable;

(ii) On and after the first (1st) anniversary of the Date of Grant, the Option
shall vest and be exercisable with respect to an aggregate of *******.* Shares;

(iii) On and after the second (2nd) anniversary of the Date of Grant, the Option
shall vest and be exercisable with respect to an aggregate of *******.* Shares;

(iv) On and after the third (3rd) anniversary of the Date of Grant, the Option
shall vest and be exercisable with respect to an aggregate of ******.* Shares;

 

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(v) On and after the fourth (4th) anniversary of the Date of Grant, the Option
shall vest and be exercisable with respect to an aggregate of *******.* Shares;
and

(vi) On and after the fifth (5th) anniversary of the Date of Grant, the Option
shall vest and be exercisable with respect to an aggregate of ******* Shares.

The portion of the Option which has become vested and exercisable as described
herein is hereinafter referred to as the “Vested Portion.”

(b) If the Participant’s Employment is terminated for Cause, the Option shall,
whether or not then vested, be automatically canceled without payment of
consideration therefor.

(c) If the Participant’s Employment is terminated by the Company Group without
Cause, or due to the Participant’s death or Disability, the Participant shall be
vested in an additional 20% of the Shares originally subject to the Option, to a
maximum amount of unvested Options at the time of termination. The Option shall,
to the extent not previously vested or vesting as described in this
Section 2(c), be automatically canceled without payment of consideration
therefor, and the Vested Portion of the Option shall remain exercisable for the
periods set forth in Sections 3(a)(i) or (ii) as applicable.

(d) Upon termination of the Participant’s Employment for any reason other than
those set forth in Paragraph (b) or (c) of this Section 2, the Option shall, to
the extent not previously vested, be automatically canceled without payment of
consideration therefor, and the Vested Portion of the Option shall remain
exercisable for the period set forth in Section 3(a)(ii).

(e) Upon the occurrence of a Transaction, the Option shall, to the extent not
then vested, automatically become fully vested and exercisable.

(f) In the event of a Transaction the Committee may either (i) cancel the Option
and make payment in connection with such cancellation equal to the excess, if
any, of the Fair Market Value of the Shares subject to such Option over the
aggregate Option Price of such Option or (ii) provide for the issuance of
substitute options or other awards that will preserve, as nearly as practicable,
the economic terms of the Option, in each case as determined by the Committee in
good faith and, in each case, in compliance, to the extent applicable, with
Section 409A of the Code as determined by the Board.

3. Exercise of Option.

(a) Period of Exercise.

(i) In the case of termination of the Participant’s Employment due to the
Participant’s death or Disability, subject to any provisions of the Plan and
this Agreement to the contrary, the Participant (or his heir or legatee, if
applicable) may exercise all or any part of the Vested Portion of the Option at
any time prior to earliest to occur of (x) the tenth (10th) anniversary of the
Date of Grant and (y) the first (1st) anniversary of the date of termination of
Employment.

 

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(ii) In the case of termination of the Participant’s Employment for any reason
other than the Participant’s death or Disability, subject to any provisions of
the Plan and this Agreement to the contrary, the Participant may exercise all or
any part of the Vested Portion of the Option at any time prior to the earliest
to occur of (x) the tenth (10th) anniversary of the Date of Grant and (y) 5:00
pm (Eastern time) on the ninetieth (90th) day following the date of the
Participant’s termination of Employment.

(b) Method of Exercise.

(i) Subject to Section 3(a), the Vested Portion of the Option may be exercised
by delivering to the Company at its principal office written notice of intent to
so exercise; provided that the Option may be exercised with respect to whole
Shares only. Such notice shall specify the number of Shares for which the Option
is being exercised (the “Purchased Shares”) and shall be accompanied by payment
in full of the Option Price in cash or by check or wire transfer; provided,
however, that payment of such aggregate exercise price may instead be made, in
whole or in part, by (i) the delivery to the Company of a certificate or
certificates representing Shares, duly endorsed or accompanied by a duly
executed stock power, which delivery effectively transfers to the Company good
and valid title to such Shares, free and clear of any pledge, commitment, lien,
claim or other encumbrance (such shares to be valued on the basis of the
aggregate Fair Market Value thereof on the date of such exercise), or (ii) by a
reduction in the number of Purchased Shares to be issued upon such exercise
having a Fair Market Value on the date of exercise equal to the aggregate Option
Price in respect of the Purchased Shares, provided that the Company is not then
prohibited from purchasing or acquiring such Shares. The Participant shall not
have any rights to dividends or other rights of a stockholder with respect to
Shares subject to the Option until the Participant has given written notice of
exercise of the Option, paid in full for such Shares, satisfied any applicable
withholding requirements and, if applicable, satisfied any other conditions
imposed by the Committee or pursuant to the Plan or this Agreement.

(ii) Notwithstanding any other provision of the Plan or this Agreement to the
contrary, the Option may not be exercised prior to the completion of any
registration or qualification of the Option or the Shares under applicable state
and federal securities or other laws, or under any ruling or regulation of any
governmental body or national securities exchange (collectively, the “Legal
Requirements”) that the Committee shall in its sole discretion determine to be
necessary or advisable, unless an exemption to such registration or
qualification is available and satisfied. The Committee may establish additional
procedures as it deems necessary or desirable in connection with the exercise of
the Option or the issuance of any Shares upon such exercise to comply with any
Legal Requirements. Such procedures may include but are not limited to the
establishment of limited periods during which the Option may be exercised or
that following receipt of the notice of exercise, and prior to the completion of
the exercise, the Participant will be required to affirm the exercise of the
Option following receipt of any disclosure deemed necessary or desirable by the
Committee.

(iii) Upon the Committee’s determination that the Option has been validly
exercised as to any of the Shares, and that the Participant has paid in full for
such Shares and satisfied any applicable withholding requirements, the Company
shall issue certificates in the Participant’s name for such Shares.

 

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(iv) In the event of the Participant’s death, the Vested Portion of the Option
shall remain exercisable by the Participant’s executor or administrator, or the
person or persons to whom the Participant’s rights under this Agreement shall
pass by will or by the laws of descent and distribution as the case may be, to
the extent set forth in Section 3(a)(i) (and the term “Participant” shall be
deemed to include such heir or legatee). Any such heir or legatee of the
Participant shall take rights herein granted subject to the terms and conditions
hereof.

(v) In consideration of the grant of this Option, the Participant agrees that,
as a condition to the exercise of any option to purchase Shares (whether this
Option or any other option), the Participant shall, with respect to such Shares,
have become a party to the Shareholders Agreement.

4. Participant Covenants. In consideration of and as a condition to the grant of
the Option, the Participant agrees to the following covenants.

(a) Unauthorized Disclosure. The Participant agrees and understands that in the
Participant’s position with the Company Group, the Participant has been and will
be exposed to and has and will receive information relating to the confidential
affairs of the Company and its Affiliates, including, without limitation,
technical information, intellectual property, business and marketing plans,
strategies, customer information, software, other information concerning the
products, promotions, development, financing, expansion plans, business policies
and practices of the Company and its Affiliates and other forms of information
considered by the Company and its Affiliates to be confidential or in the nature
of trade secrets (including, without limitation, ideas, research and
development, know-how, formulas, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information and
business and marketing plans and proposals) (collectively, the “Confidential
Information”). The Participant agrees that at all times during the Participant’s
Employment with the Company and thereafter, the Participant shall not disclose
such Confidential Information, either directly or indirectly, to any Person
without the prior written consent of the Company and shall not use or attempt to
use any such information in any manner other than in connection with his
Employment with the Company Group, unless required by law to disclose such
information, in which case the Participant shall provide the Company with
written notice of such requirement as far in advance of such anticipated
disclosure as possible. This confidentiality covenant has no temporal,
geographical or territorial restriction. Upon termination of the Participant’s
Employment with the Company Group, the Participant shall promptly supply to the
Company all property, keys, notes, memoranda, writings, lists, files, reports,
customer lists, correspondence, tapes, disks, cards, surveys, maps, logs,
machines, technical data and any other tangible product or document which has
been produced by, received by or otherwise submitted to the Participant during
or prior to the Participant’s Employment with the Company Group, and any copies
thereof in his (or capable of being reduced to his) possession.

(b) Non-Competition. By and in consideration of the Company’s entering into this
Agreement and granting the Option hereunder, and in further consideration of the
Participant’s exposure to the Confidential Information of the Company and its
Affiliates, the Participant agrees that the Participant shall not, during the
Participant’s Employment with the Company Group and for a period of twenty-four
(24) months thereafter (the “Restriction Period”), directly or indirectly, own,
manage, operate, join, control, be employed by, or

 

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participate in the ownership, management, operation or control of, or be
connected in any manner with, including, without limitation, holding any
position as a stockholder, director, officer, consultant, independent
contractor, employee, partner, or investor in, any Restricted Enterprise (as
defined below); provided, that in no event shall ownership of one percent
(1%) or less of the outstanding securities of any class of any issuer whose
securities are registered under the Securities Exchange Act of 1934, as amended,
standing alone, be prohibited by this Section 4(b), so long as the Participant
does not have, or exercise, any rights to manage or operate the business of such
issuer other than rights as a stockholder thereof. For purposes of this
paragraph, “Restricted Enterprise” shall mean any Person that is actively
engaged in any geographic area in (i) the ownership of a type certificate of, or
the design, manufacture, sale, or marketing of, general aviation aircraft of
whatever description, including, without limitation, of whatever size, range,
engine type, or intended use, or of military trainer aircraft, or the design,
manufacture, distribution, sale, or marketing of airframe components for general
aviation aircraft or military trainer aircraft, or the provision of line fixed
base operations or maintenance, repair, and/or overhaul services for general
aviation aircraft or military trainer aircraft or (ii) any other business
proposed to be conducted by the Company or any of its subsidiaries in the
Company’s business plan as in effect at that time. During the Restriction
Period, upon request of the Company, the Participant shall notify the Company of
the Participant’s then-current employment status.

(c) Non-Solicitation of Employees. During the Restriction Period, the
Participant shall not directly or indirectly contact, induce or solicit (or
assist any Person to contact, induce or solicit) for employment any person who
is, or within twelve (12) months prior to the date of such solicitation was, an
employee of the Company or any of its Affiliates.

(d) Interference with Business Relationships. During the Restriction Period, the
Participant shall not directly or indirectly contact, induce or solicit (or
assist any Person to contact, induce or solicit) any customer or client of the
Company or its subsidiaries to terminate its relationship or otherwise cease
doing business in whole or in part with the Company or its subsidiaries, or
directly or indirectly interfere with (or assist any Person to interfere with)
any material relationship between the Company or its subsidiaries and any of its
or their customers or clients so as to cause harm to the Company or its
Affiliates

(e) Proprietary Rights. The Participant shall disclose promptly to the Company
any and all inventions, discoveries, and improvements (whether or not patentable
or registrable under copyright or similar statutes), and all patentable or
copyrightable works, initiated, conceived, discovered, reduced to practice, or
made by him, either alone or in conjunction with others, during the
Participant’s Employment with the Company and related to the business or
activities of the Company and its Affiliates (the “Developments”). Except to the
extent any rights in any Developments constitute a work made for hire under the
U.S. Copyright Act, 17 U.S.C. § 101 et seq. that are owned ab initio by the
Company and/or its applicable affiliate, the Participant assigns all of his
right, title and interest in all Developments (including all intellectual
property rights therein) to the Company or its nominee without further
compensation, including all rights or benefits therefor, including without
limitation the right to sue and recover for past and future infringement. The
Participant acknowledges that any rights in any Developments constituting a work
made for hire under the U.S. Copyright Act, 17 U.S.C § 101 et seq. are owned
upon creation by the Company and/or its applicable Affiliate as the
Participant’s employer. Whenever requested to do so by the Company, the
Participant shall

 

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execute any and all applications, assignments or other instruments which the
Company shall deem necessary to apply for and obtain trademarks, patents or
copyrights of the United States or any foreign country or otherwise protect the
interests of the Company and its Affiliates therein. These obligations shall
continue beyond the end of the Participant’s Employment with the Company with
respect to inventions, discoveries, improvements or copyrightable works
initiated, conceived or made by the Participant while employed by the Company,
and shall be binding upon the Participant’s employers, assigns, executors,
administrators and other legal representatives. In connection with his execution
of this Agreement, the Participant has informed the Company in writing of any
interest in any inventions or intellectual property rights that he holds as of
the date hereof. If the Company is unable for any reason, after reasonable
effort, to obtain the Participant’s signature on any document needed in
connection with the actions described in this Section 4(e), the Participant
hereby irrevocably designates and appoints the Company and its duly authorized
officers and agents as the Participant’s agent and attorney in fact to act for
and on the Participant’s behalf to execute, verify and file any such documents
and to do all other lawfully permitted acts to further the purposes of this
Section 4(e) with the same legal force and effect as if executed by the
Participant.

5. No Right to Continued Employment. The granting of the Option evidenced hereby
and this Agreement shall impose no obligation on the Company or any other member
of the Company Group to continue the Employment of the Participant and shall not
lessen or affect the Company’s or such other member’s right to terminate the
Employment of such Participant.

6. Legend on Certificates. The certificates representing the Shares purchased
upon the exercise of the Option shall be subject to such stop transfer orders
and other restrictions as the Committee may deem advisable under the Plan or the
rules, regulations, and other requirements of the Securities and Exchange
Commission and any stock exchange upon which such Shares are listed, and any
applicable Federal or state laws, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference to such
restrictions.

7. Transferability. The Option and the Participant’s other rights and
obligations under the Plan and this Agreement may not be assigned, alienated,
pledged, attached, sold or otherwise transferred or encumbered by the
Participant without the prior written consent of the Company otherwise than by
will or by the laws of descent and distribution, and any such purported
assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall
be void and unenforceable against the Company or any of its Affiliates; provided
that the designation of a beneficiary shall not constitute an assignment,
alienation, pledge, attachment, sale, transfer or encumbrance. No such permitted
transfer of the Option to heirs or legatees of the Participant shall be
effective to bind the Company unless the Committee shall have been furnished
with written notice thereof and a copy of such evidence as the Committee may
deem necessary to establish the validity of the transfer and the acceptance by
the transferee or transferees of the terms and conditions hereof. During the
Participant’s lifetime, the Option is exercisable only by the Participant.

8. Withholding. Whenever Shares are to be issued upon exercise of the Option,
the Company shall have the right to require the Participant to remit to the
Company cash sufficient to satisfy all federal, state and local withholding tax
requirements prior to issuance of the Shares

 

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and the delivery of any certificate or certificates for such Shares. The
Participant may satisfy such tax withholding obligation by surrendering to the
Company at the time of exercise Purchased Shares (valued in the manner provided
in Section 3(b)(i) above), provided that the Company is not then prohibited from
purchasing or acquiring such Shares.

9. Securities Laws. Upon the acquisition of any Shares pursuant to the exercise
of the Option, the Participant will make or enter into such written
representations, warranties and agreements as the Committee may reasonably
request in order to comply with applicable securities laws or with this
Agreement.

10. Notices. Any notice necessary under this Agreement shall be addressed to the
Company in care of its Secretary at the principal executive office of the
Company and to the Participant at the address appearing in the personnel records
of the Company for the Participant or to either party hereto at such other
address as either party may hereafter designate in writing to the other. Any
such notice shall be deemed effective upon receipt thereof by the addressee.

11. Choice of Law. This agreement shall be governed by and construed in
accordance with the laws of the state of New York without regard to principles
of conflicts of laws.

12. Option Subject to Plan. By entering into this Agreement, the Participant
agrees and acknowledges that the Participant has received and read a copy of the
Plan. The Option is subject to the Plan. The terms and provisions of the Plan,
as it may be amended from time to time, are hereby incorporated herein by
reference. In the event of a conflict between any term or provision contained
herein and a term or provision of the Plan, the applicable terms and provisions
of the Plan will govern and prevail.

13. Signature in Counterparts. This Agreement may be signed in counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement, effective
as of the Date of Grant.

 

HAWKER BEECHCRAFT, INC. By:  

 

Name:   Title:  

 

Agreed and acknowledged

as of the Date of Grant:

 

Name: