Exhibit 10.23


 


AAR CORP.


 


NON-EMPLOYEE DIRECTOR
NON-QUALIFIED STOCK OPTION AGREEMENT


(“Agreement”)


 


1.  Subject to the provisions set
forth herein and the terms and conditions of the AAR CORP. Stock Benefit Plan (“Plan”),
the terms of which are hereby incorporated by reference, and in consideration
of the agreements of «Name» (“Grantee”)
herein provided, AAR CORP., a Delaware corporation (“Company”), hereby grants
to the Grantee an option entitling the Grantee to purchase from the Company
common stock of the Company, par value $1.00 per share (“Common Stock”), in the
number of shares at the purchase price per share, and on the schedule, set
forth below (“Option”).


 


	
  Number of
  Shares

  	
   

  	
   

  	
   

  
	
  Subject
  to Option:

  (subject to adjustment pursuant to the terms of this Agreement.)

  	
   

  	
  3,500

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Option
  Price Per Share:

  (subject to adjustment pursuant to the terms of this Agreement.)

  	
   

  	
  $

  	
  «Price»

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date
  of Grant:

  	
   

  	
  «Date»

  	
   

  
					



 


Option Vesting Schedule:


 


	
  Number of Shares Becoming

  	
   

  	
  Date First

  	
   

  
	
  Subject to Exercise

  	
   

  	
  Exercisable

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  First 875 shares of Grant

  	
   

  	
  «IncrDate1»

  	
   

  
	
  Second 875 shares of Grant

  	
   

  	
  «IncrDate2»

  	
   

  
	
  Third 875 shares of Grant

  	
   

  	
  «IncrDate3»

  	
   

  
	
  Fourth 875 shares of Grant

  	
   

  	
  «IncrDate4»

  	
   

  



 


Each
of the above option increments shall expire on «Expiry»
(“Expiration Date” of the Option) or upon the earlier expiration of the Option
as provided in this Agreement.


 





















 


In the event the Grantee’s membership on
the Board terminates within one year following a Change in Control whether or
not such Change in Control has the prior written approval of a majority of the
Continuing Directors, and notwithstanding any conditions or restrictions
contained in this Agreement, the Option shall become immediately exercisable on
the date of such termination with respect to all shares of Common Stock covered
thereby, whether vested or not, and not previously purchased upon exercise of
the Option and shall remain so exercisable until the Option expires as provided
in paragraph 1 or 3 herein.


 


For purposes of this Agreement, the following terms have the meaning
set forth below:


 


(a)           “Permitted
Assignment” means an assignment in writing approved by the Company, and
otherwise meeting the requirements of the Plan document, of all or any portion
of this award to (i) Grantee’s spouse or lineal descendent(s), (ii) the trustee
of a trust for the primary benefit of Grantee’s spouse or lineal descendent(s),
(iii) a partnership of which the Grantee’s spouse or lineal descendent(s) are
the only partners, or (iv) a tax exempt organization as defined in Section
501(c)(3) of the Internal Revenue Code, for which the Grantee does not receive
any consideration.


 


(b)           “Retirement”
means the voluntary termination of membership on the Board at or after age 65
with not less than five (5) consecutive years of service as a non-employee
director of the Company.


 


2





















 


2.             The exercise of the Option is conditioned upon
the acceptance by the Grantee of the terms hereof as evidenced by the Grantee’s
execution of this Agreement and return of an executed copy to the Secretary of
the Company within thirty (30) days from the date of the cover letter from the
Secretary transmitting original copies to the Grantee for execution.


 


3.             (a)           If the Grantee’s service on the Board is
terminated for any reason, other than for Retirement, death or Disability, the
Option of Grantee shall terminate on the earlier to occur of (i) three months
after termination of service on the Board or (ii) the date that the Option
expires in accordance with its terms.


 


(b)           If the Grantee’s service on the Board is
terminated by reason of Retirement, the Option shall remain exercisable by the
retired Grantee until the Option expires by its terms and may be exercised by
the retired Grantee in the same manner and to the same extent as if he had
continued service on the Board during that period; provided, however, that if
the Grantee dies before the Option expires, the Option shall be exercisable
only by the Successor of the deceased Grantee (as defined in the Plan) to the
extent that the deceased Grantee was entitled at the date of the Grantee’s
death.


 


(c)           If (i) the Grantee’s service on the Board is
terminated by reason of death or (ii) the Grantee dies within three months
after the termination of his service on the Board, the Option shall expire on
the earlier to occur of one year after Grantee’s death or the Expiration Date
of the Option; provided, however, that during such period, the Option shall be
exercisable only by the Successor of the deceased Grantee to


 


3





















 


the
extent, if any, that the deceased Grantee was entitled at the date of the
Grantee’s death.


 


(d)           If the Grantee’s service on the Board is
terminated by reason of Disability, the Option shall expire on the earlier to
occur of one year after termination of service on the Board or the date the
Option expires in accordance with its terms, and during said period the Option
may be exercised by the disabled Grantee with respect to the same number of
shares, in the same manner and to the same extent as if the Grantee had
continued service on the Board during such period.


 


(e)           If at any time prior to expiration of this
Option, the Grantee, without the Company’s express written consent, directly or
indirectly, alone or as a member of a partnership, group or joint stock venture
or as an employee, officer, director, or stockholder of any corporation, or in
any capacity engages in any activity which is competitive with any of the
businesses conducted by the Company or its Affiliated Companies from time to
time or at any time during the Grantee’s term of employment, the Grantee shall
forfeit and return all Award Shares not previously released from the
restrictions of Section 1 hereof.


 


4.             Written notice of an election to exercise any
portion of the Option, specifying the portion thereof being exercised and the
exercise date, shall be given by the Grantee, or the Grantee’s personal
representative in the event of the Grantee’s death or disability necessitating
a Court approved personal representative, by delivering such notice to the
Secretary of the Company, accompanying such notice with (i) payment in full of
the purchase price of any shares to be purchased, which may be made in cash, or
in


 


4





















 


the
form of a certified check or a cashier’s check issued by a federally insured
bank or federally insured savings and loan association, in all cases made
payable to AAR CORP., and as set forth in the Plan, or by surrendering a number
of shares of Common Stock of the Company with a Fair Market Value (as defined
in the Plan) on the date of exercise equal to the purchase price, or by
directing the Company to withhold such number of shares otherwise issuable upon
exercise of such Option having an aggregate Fair Market Value on the date of
exercise equal to the purchase price, or by any combination of the above, and
(ii) payment of an amount sufficient to satisfy any applicable withholding
requirements as provided for in Section 13 below.  Any exercise of the Option shall be effective
as of the later of the dates specified in such notice and the date the notice
and accompanying payment are actually received by the Secretary of the Company.


 


5.             Any exercise of an Option shall be subject to
action by the Board taken at any time in its sole discretion (i) to effect,
amend or maintain any necessary registration of the Plan or the shares of
Common Stock issuable upon exercise of the Option under the Securities Act of
1933, as amended, or the securities laws of any applicable jurisdiction, (ii)
to permit any action to be taken in order to (A) list such shares on a stock
exchange if the shares are then listed on such exchange or (B) comply with
restrictions or regulations incident to the maintenance of a public market for
its shares of Common Stock, including any rules or regulations of any stock
exchange on which such shares are listed, or (iii) to determine that such
shares and the Plan are exempt from such registration or that no action of the
kind referred to in (ii)(B) above needs to be taken; and the Company shall not
be obligated by virtue of any terms and conditions of the Option, or


 


5





















 


any
provision of this Agreement or the Plan, to recognize an exercise of the Option
or to sell or issue shares of Common Stock in violation of the Securities Act
of 1933 or the law of any government having jurisdiction thereof.  Any such postponement shall not extend the
Expiration Date of the Option, and neither the Company nor its directors or
officers shall have any obligation or liability to the Grantee or to any other
person with respect to any shares as to which the Option shall lapse because of
such postponement.  If deemed necessary
by the Committee, the Grantee may be required to represent at the time of each
exercise of the Option that the shares purchased are being acquired for
investment and not with a view to distribution; and the Company may place a
legend on the related stock certificate to indicate that the stock may not be
sold or otherwise disposed of except in accordance with the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder,
including, but not limited to Rule 144.


 


6.             Notwithstanding any provision of this Agreement
to the contrary, the Company shall not be obliged to issue or transfer any of
its Common Stock to Grantee upon exercise of the Option, if the Committee or
the Board of Directors of the Company determines that the issuance or transfer
of such Common Stock, or payment of such amount of cash, would be in violation
of any covenant in any of the Company’s loan agreements or other contracts.


 


7.             Any increase or decrease in the number of
outstanding shares of Common Stock of the Company occurring through stock splits,
stock dividends, stock consolidations, spin offs, other distributions of assets
to shareholders or assumption or conversion of outstanding Options due to an
acquisition after the Date of Grant of the


 


6





















 


Option
shall be reflected proportionately in the number of shares of Common Stock
subject to the Option; and a proportionate reduction or increase, as
applicable, shall be made in the Option Price Per Share hereunder.  Any fractional shares resulting from such
adjustment shall be eliminated.  If
changes in capitalization other than those considered above shall occur, the
Board of Directors of the Company shall make such adjustment in the number or
class of shares purchasable upon exercise of the Option and in the Option Price
Per Share as the Board in its discretion may consider appropriate, and all such
adjustments shall be conclusive upon all persons.


 


8.             The Option may be exercised only by the Grantee
during the Grantee’s lifetime and may not be transferred other than by a
Permitted Assignment, will or the applicable laws of descent or
distribution.  The Option shall not
otherwise be transferred, assigned, pledged or hypothecated for any purpose
whatsoever and is not subject, in whole or in part, to execution, attachment,
or similar process.  Any attempted
assignment, transfer, pledge or hypothecation or other disposition of the
Option, other than in accordance with the terms set forth herein, shall be void
and of no effect.


 


9.             Neither the Grantee nor any other person entitled
to exercise the Option under the terms hereof shall be, or have any of the
rights or privileges of, a stockholder of the Company in respect of any of the
shares of Common Stock issuable on exercise of the Option, unless and until such
shares shall have been actually issued.


 


10.           In the event the Option shall be exercised in
part, the Company may require that this Agreement be delivered by the Grantee
to the Company for the purpose of making appropriate notation thereon, or of
otherwise reflecting, in such manner as the


 


7





















 


Company
shall determine, such partial exercise. 
In the event the Option shall be exercised in whole, this Agreement
shall be surrendered to the Company for cancellation. In the event that a
change in the number or designation of the Common Stock shall be made, the
Company may require the Grantee to surrender this Agreement to the Company for
the purpose of making appropriate notation thereon, or of otherwise reflecting,
such change in the number or designation of the Common Stock.


 


11.           When the Option expires as herein provided, such
expiration shall occur at the Company’s close of business on the date of
expiration.


 


12.           Nothing in the Option shall constitute or be evidence
of any agreement or understanding, express or implied, that the Company shall
retain a director for any period of time, or at any particular rate of
compensation.  The execution of this
agreement by the Grantee conclusively evidences the Grantee’s intent to
continue to serve as a director of the Company for the remainder of the Grantee’s
term during which the Option was granted.


 


13.           Upon any exercise of the Option, the Grantee
shall remit to the Company an amount necessary to satisfy applicable withholding
requirements including those arising under state and federal income tax
laws.  If the Grantee does not remit such
amount, the Company may withhold all or a portion of any compensation then or
in the future owed to the Grantee as necessary to satisfy such requirements.


 


The
Grantee may satisfy the income tax withholding obligation in connection with
such Option in whole or in part by (i) directing the Company to withhold a
portion of the shares otherwise distributable to the Grantee or (ii) transferring
to the Company shares of


 


8





















 


Common Stock of the Company
previously acquired by the Grantee having a Fair Market Value (as defined in
the Plan) on the date such shares are transferred to the Company equal to the
amount of such withholding or lesser portion thereof as may be desired by the
Grantee.  A Grantee’s election pursuant
to the preceding sentence must be made on or prior to the date as of which
income is realized by the Grantee in connection with such Option and must be
irrevocable.  In lieu of a separate
election on each Taxable Date (as defined in the Plan), the Grantee may file a
blanket election with the Committee which shall govern all future Taxable Dates
until revoked by the Grantee.


 


14.           The Option shall be exercised in accordance with
such administrative regulations as the Committee shall from time to time adopt.


 


15.           The Option, and this Agreement, shall be
construed, administered and governed in all respects under and by the laws of
the State of Illinois.


 


16.           This Agreement has been examined by the parties
hereto, and accordingly the rule of construction that ambiguities be construed
against a party which causes a document to be drafted shall have no application
in the construction or interpretation hereof. 
If any part of this Agreement is held invalid for any reason, the
remainder hereof shall nevertheless remain in full force and effect.


 


17.           This Agreement constitutes the entire agreement
between the parties concerning the subject matter hereof and any prior
understanding or representation of any kind antedating this Agreement
concerning such subject matter shall not be binding upon either party except to
the extent incorporated herein.  No
consent, waiver, modification or amendment hereof, or additional obligation
assumed by


 


9





















 


either
party in connection herewith, shall be binding unless evidenced by a writing
signed by both parties and referring specifically hereto.  No consent, waiver, modification or amendment
with respect hereto shall be construed as applicable to any past or future
events other than the one in respect of which it was specifically made.


 


18.           This Agreement shall be construed consistent with
the provisions of the Plan and in the event of any conflict between the terms
of this Agreement and the terms of the Plan, the terms of the Plan shall
control.


 


19.           Capitalized terms used herein and not defined
herein will have the meaning set forth in the Plan.


 


IN WITNESS WHEREOF, this Agreement has been executed for the Company by
its duly authorized officer on the 23rd day of August, 2004.


 


	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  AAR
  CORP.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
  Howard
  A. Pulsifer

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
  Vice President and Secretary

  
										



 


The
undersigned hereby accepts the foregoing Option and the terms and conditions
thereof on this             
day of                               ,
2004.


 


 


	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Director

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
  «Name»

  	
   

  	
   

  
										



 


10