AAR CORP. NON-QUALIFIED STOCK OPTION AGREEMENT

Exhibit 10.20

AAR CORP.

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 __________ (“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 in (a) and (b) below (“Option”).

(a)                                   Option

Option Vesting Schedule :

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

(b)                                  Reload Option

In the event a Change in Control occurs, 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 Change in Control 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.

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

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(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 employment with the Company and/or a subsidiary of the Company is terminated for any reason, other than for Retirement, death, Disability, or termination of employment for Cause, the Option of Grantee shall terminate on the earlier to occur of (i) three months after termination of employment or (ii) the date that the Option expires in accordance with its terms.

(b)                                  If the Grantee’s employment with the Company and/or a subsidiary of the Company 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 the Retired Grantee had continued employment 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 to the extent that the deceased Grantee was entitled at the date of the Grantee’s death.

(c)  If (i) the Grantee’s employment with the Company and/or a subsidiary of the Company is terminated by reason of death or (ii) the Grantee dies within three months after the termination of employment with the Company or a subsidiary, except if the termination of employment was for Cause, 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 the extent that the deceased Grantee was entitled at the date of the Grantee’s death.

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(d)  If the Grantee’s employment is terminated by reason of Disability, the Option shall expire on the earlier to occur of one year after termination of employment 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 employment during such period.

(e)                                   The Option shall expire immediately upon termination of employment of the Grantee through discharge for Cause.

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 (in cash, or in 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 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 S