Document:

Exhibit 10.36

    Exhibit
      10.36

    
 

    INTERACTIVE
      INTELLIGENCE, INC.

     

    NONQUALIFIED
      STOCK OPTION AGREEMENT

    UNDER
      2006 EQUITY INCENTIVE PLAN

     

    This
      Agreement ("Agreement"), effective as of the ____ day of ______________, 20__
      ("Grant Date"), is by and between Interactive Intelligence, Inc. ("Company")
      and
      _____________ ("Grantee").

     

    The
      Grantee now serves the Company or a Subsidiary as an Employee, a Non-Employee
      Director or a consultant, and in recognition of the Grantee's valued services,
      the Company, through the Committee, desires to provide an opportunity for the
      Grantee to increase his or her stock ownership in the Company pursuant to the
      provisions of the Interactive Intelligence, Inc. 2006 Equity Incentive Plan
      (the
      "Plan").

     

    In
      consideration of the terms and conditions of this Agreement and the Plan, the
      terms of which are incorporated as a part of this Agreement, the parties agree
      as follows:

     

    1. Grant
      of Option.
      As of
      the date indicated above, the Company hereby grants to the Grantee the right
      and
      option ("Option") to purchase all or any part of an aggregate of ______________
      Shares.

     

    2. Non-Qualified
      Status.
      This
      Option is a nonqualified stock option and is not intended to qualify as an
      incentive stock option under Code Section 422.

     

    3. Exercise
      Price.
      The
      Exercise Price of each Share covered by this Option is $__________ per
      Share.

     

    4. Vesting
      of Option.
      Subject
      to the terms of the Plan and this Agreement, including paragraph 5 below, the
      Grantee will vest in and be entitled to exercise this Option at the time the
      Committee selects below:

     

    ______
      (a)  this
      Option shall become exercisable as to _________ [insert
      fraction, such as 1/4]
      of the
      Shares on a cumulative basis, on each of the __________________ [insert
      anniversary dates, such as first, second, third and fourth]
      anniversaries of the Grant Date (time-based vesting (graded));

     

    ______
      (b)  on
      __________ ___, 2____ (time-based vesting (cliff));

     

    ______
      (c)  on
      the
      date or dates the Grantee achieves the Performance Measures, as specified in
      Attachment A to this Agreement (performance-based vesting);

     

    ______
      (d)  this
      Option shall become exercisable as to [insert
      fraction, such as 1/4]
      of the
      Shares on a cumulative basis, on each of _____________________ [insert
      dates, such as January 1, 20__, January 1, 20__, January 1, 20___ and January
      1,
      20___]
      (combination vesting).

     

    5. Term
      of Option.
      This
      Option expires at the close of business on __________ ___, 20___ (not to exceed
      ten years from the Grant Date), unless it expires earlier pursuant to the
      following rules:

     

    (a) Upon
      termination of the Grantee's employment or service for Cause, this Option will
      terminate immediately and the Grantee will (if the Committee, in its sole
      discretion, exercises its rights under this section within ten (10) days of
      the
      termination) repay to the Company within then (10) days of the Committee’s
      written demand the amount of any gain the Grantee had realized upon any exercise
      within the 90-day period prior to the termination of this Option;

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b) Upon
      termination of the Grantee’s employment or service due to death or Disability,
      the Grantee or the Grantee’s beneficiary, as the case may be, may exercise this
      Option to the extent the Grantee was entitled to exercise this Option on the
      date of termination, but only within the one (1)-year period immediately
      following the Grantee’s termination due to death or Disability, and in no event
      after the date this Option expires in accordance with its terms;
      and

     

    (c) Upon
      termination by the Company of the Grantee's employment or service without Cause,
      or upon termination of employment or service by the Grantee for a reason other
      than death or Disability, or upon the Grantee’s Retirement, the Grantee may
      exercise this Option to the extent that the Grantee was entitled to exercise
      this Option at the date of termination, but only within the one (1) month period
      immediately following the Grantee’s termination, and in no event after the date
      this Option expires in accordance with its terms.

     

    (d) For
      Options with combination vesting, if the performance target[s],
      as
      specified in Attachment A to this Agreement, [FOR
      A SINGLE PERFORMANCE TARGET: is not achieved in full, this Option will
      terminate,
      effective
      as of the date on which the Audit Committee of the Company approves the
      Company's financial results for fiscal year ______.][FOR MULTIPLE PERFORMANCE
      TARGETS: are achieved in part, the number of Shares underlying this Option
      shall
      be reduced by that pro rata portion of this Option for which the performance
      targets are not achieved (which number of Shares shall be forfeited), effective
      as of the date on which the Audit Committee of the Company approves the
      Company's financial results for fiscal year ______ (the "Determination Date").
      If none of the performance targets were achieved, this entire Option will
      terminate, effective as of the Determination Date.]

     

    6. Exercise.
      The
      Grantee may exercise this Option, to the extent vested, by delivering a written
      notice to the Company, specifying the number of Shares for which he or she
      is
      exercising the Option, and specifying the method of payment for the Exercise
      Price. The Grantee may pay the Exercise Price by any of the following
      means:

     

    (a) in
      cash
      or its equivalent;

     

    (b) by
      tendering (either actually or constructively by attestation) Shares having
      an
      aggregate Fair Market Value at the time of exercise equal to the Exercise Price
      that the Grantee has held for at least __________ (___) months; 

     

    (c) Cashless
      Exercise; or

     

    (d) by
      a
      combination of any of the permitted methods of payment in subparagraphs (a),
      (b), and (c) above.

     

    7. Non-Assignability.
      Except
      as provided in the Plan or this Agreement, this Option is not assignable or
      transferable by the Grantee otherwise than by will or by the laws of descent
      and
      distribution and is exercisable, during the Grantee's lifetime, only by the
      Grantee or his or her guardian or legal representative.

     

    8. Change
      in Control.
      Upon
      the occurrence of a Change in Control, Section 19 of the Plan will govern this
      Option.

     

    9. Withholding.
      Prior
      to the delivery of any Shares pursuant to this Option, the Company has the
      right
      and power to deduct or withhold, or require the Grantee to remit to the Company,
      an amount sufficient to satisfy all applicable tax withholding requirements.
      The
      Company may permit or require the Grantee to satisfy all or part of the tax
      withholding obligations in connection with this Option by (a) having the Company
      withhold otherwise deliverable Shares, or (b) delivering to the Company
      Shares already owned for a period of at least six (6) months (or such longer
      or
      shorter period as may be required to avoid a charge to earnings for financial
      accounting purposes), in each case having a value equal to the amount to be
      withheld, which shall not exceed the amount determined by the applicable minimum
      statutory tax withholding rate (or such other rate as will not result in a
      negative accounting impact). For these purposes, the value of the Shares to
      be
      withheld or delivered will be equal to the Fair Market Value as of the date
      that
      the taxes are required to be withheld.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    10. Notices.
      All
      notices and other communications required or permitted under this Agreement
      shall be written and delivered personally or sent by registered or certified
      first-class mail, postage prepaid and return receipt required, addressed as
      follows: if to the Company, to the Company's executive offices in Indianapolis,
      Indiana, and if to the Grantee or his or her successor, to the address last
      furnished by the Grantee to the Company. Notwithstanding the foregoing, though,
      the Company may authorize notice by any other means it deems desirable or
      efficient at a given time, such as notice by facsimile or electronic
      mail.

     

    11. No
      Employment or Service Rights.
      Neither
      the Plan nor this Agreement confers upon the Grantee any right to continue
      in
      the employ or service of the Company or interferes in any way with the right
      of
      the Company to terminate the Grantee's employment or service at any
      time.

     

    12. Defined
      Terms.
      All of
      the defined terms, or terms that begin with capital letters and have a special
      meaning for purposes of this Agreement, have the meaning ascribed to them in
      this Agreement. All defined terms to which this Agreement does not ascribe
      a
      meaning have the meaning ascribed to them in the Plan.

     

    13. Plan
      Controlling.
      The
      terms and conditions set forth in this Agreement are subject in all respects
      to
      the terms and conditions of the Plan, which are controlling. All determinations
      and interpretations of the Committee are binding and conclusive upon the Grantee
      and his or her legal representatives. The Grantee agrees to be bound by the
      terms and provisions of the Plan.

     

    [SIGNATURES
      APPEAR ON THE FOLLOWING PAGE]

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Company and the Grantee have executed this Agreement as
      of
      the date first above written.
 

     

    ________________________________

     

    [GRANTEE
      SIGNATURE]

     

     

    Print
      Name: ______________________

     

    

     

     

    INTERACTIVE
      INTELLIGENCE, INC.

     

    

     

    By:______________________________

     

     Print
      Name: _______________________

     

     Title:_____________________________

     

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ATTACHMENT
      A

     

    TO

     

    NONQUALIFIED
      STOCK OPTION AGREEMENT

     

    COMBINATION
      VESTING 

     

    

     

    Performance
      Target(s):

     

    [If
      multiple performance targets, also set forth the portions of the Option Shares
      associated with each.]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ATTACHMENT
      A

     

    TO

     

    NONQUALIFIED
      STOCK OPTION AGREEMENT

     

    PERFORMANCE-BASED
      VESTING

     

    I. Performance
      Measures and Beginning of Performance Period

     

    Pursuant
      to the terms of the Plan and paragraph 4 of this Agreement, the Grantee will
      vest in this Option only upon the achievement, under the terms applicable in
      part II below and within the Performance Period that begins on the date
      specified in this part I, of the following Performance Measures: [specify
      the applicable Performance Measures and the first day of the Performance
      Period]:

     

    _________________________________________________________________

     

    _________________________________________________________________

     

    _________________________________________________________________

     

    _________________________________________________________________

     

    _________________________________________________________________

     

    _________________________________________________________________

     

    II. Performance
      Period (Vesting Schedule)

     

    The
      Performance Period, or vesting schedule, that the Committee selects below
      applies to the Grantee's Option:

     

    _____1. Prorated
      Vesting.
      The
      Performance Period for this Option is _____ years (at least one), beginning
      on
      the date specified in part I above. After the Performance Period expires, the
      Committee will determine the percentage of achievement for the Performance
      Measures in part I above. Based upon that determination, the Grantee will vest
      in a percentage of Shares subject to this Option in accordance with the
      following schedule [below
      is an example]:

    
      
         

        
          	
                  PERCENTAGE
                    ACHIEVEMENT OF

                  PERFORMANCE
                    MEASURES

                	
                  PERCENTAGE
                    OF SHARES

                  THAT
                    VEST

                
	
                  Below
                    85%

                	
                  0%

                
	
                  At
                    least 85% but less than 90%

                	
                  25%

                
	
                  At
                    least 90% but less than 95%

                	
                  50%

                
	
                  At
                    least 95% but less than 100%

                	
                  75%

                
	
                  At
                    least 100%

                	
                  100%

                

        

         

      

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    _____2. Graded
      Vesting.
      The
      Performance Period for this Option is _____ years (more than one), with the
      first year beginning on the date specified in part I above and each subsequent
      year beginning on its anniversary. After each year of the Performance Period,
      as
      specified below, the Committee will determine whether the Performance Measures
      applicable to the period were achieved, as specified in part I above. Based
      upon
      that determination, the Committee will determine whether the Grantee vested
      in
      the correlating fraction of this Option for that period, all in accordance
      with
      the following schedule [below
      is an example]:

    
       

      
        	
                YEAR
                  OF THE PERFORMANCE PERIOD

              	
                FRACTION
                  OF SHARES

                THAT
                  VEST

              
	
                The
                  first year

              	
                1/3

              
	
                The
                  second year

              	
                1/3

              
	
                The
                  third year

              	
                1/3

              

      

      
 

    

    _____3. Cliff
      Vesting.
      The
      Performance Period for this Option is _____ years (at least one), beginning
      on
      the date specified in part I above. After the Performance Period expires, the
      Committee will determine whether the Performance Measures specified in part
      I
      above were achieved. If the Performance Measures were achieved in full, the
      Grantee will vest in this entire Option. If the Performance Measures were not
      achieved in full, the Grantee will forfeit this entire Option.Exhibit
10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT
is made and entered into February 20, 2007, by and between Willis Lease Finance
Corporation, a Delaware corporation (“Employer”), and
Lee G. Beaumont (“Employee”).

RECITALS

WHEREAS, Employee entered Employer’s employ on May 27,
2006 and was promoted to Chief Operating Officer on August 28, 2006.

WHEREAS, Employer desires
that Employee continue to be employed by Employer in the position,
compensation, amenities and other benefits set forth herein;

WHEREAS, Employee desires
to continue to be employed by Employer and in the position of Executive Vice
President and Chief Operating Officer on the terms and conditions set forth
herein; and

WHEREAS, Employee
acknowledges that he has had an opportunity to consider this Agreement and
consult with independent advisors of his choosing with regard to the terms of
this Agreement, and enters this Agreement voluntarily and with a full
understanding of its terms.

AGREEMENT

NOW, THEREFORE, in
consideration of the foregoing recitals, the mutual promises of the parties and
the mutual benefits they will gain by the performance thereof, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:

1.             Employment. 
Employer hereby employs Employee and Employee hereby accepts employment,
upon the terms and conditions hereinafter set forth, as the Executive Vice
President and Chief Operating Officer of Employer.

2.             Term.

(a)           The term of Employee’s employment
under this Agreement shall be for a one year period commencing on August 28,
2006 and ending on August 27, 2007, (as may be extended hereunder, the “Employment Term”), unless otherwise terminated pursuant to
the terms hereof.  Each full twelve month
period Employee is employed by Employer shall be referred to herein as an “Employment Year.”

(b)           After the expiration of the initial
Employment Term and until the Termination Date (as defined below in Section 7),
Employee’s employment will automatically renew for a period of one year, each
year, on the same terms and conditions as are set forth

 1
 

herein, unless either party gives the other written
notice of nonrenewal at least twelve months prior to the end of the last
applicable Employment Year.  Employee
shall be entitled to the payments set forth in Section 7 or Section 8 hereof in
the event either party gives the other such a notice of nonrenewal.

(c)           Upon the occurrence of a Change in
Control, this Agreement shall be automatically extended for a period equal to
the greater of: (I) the remaining Employment Term, or (II) the eighteen month
period  commencing
on the date of the Change in Control event and ending on the eighteen month
anniversary of the Change in Control event (the “Change in Control Extension”). 
“Change in Control” means the occurrence
of any of the following events: (i) any “person” (as such term is used in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended),
other than Charles F. Willis, IV or an Affiliate (as defined in Section 12) of
Charles F. Willis, IV, is or becomes the “beneficial owner” (as defined in Rule
13d-3 under said Act), directly or indirectly, of securities of Employer
representing at least fifty percent of the total voting power represented by Employer’s
then outstanding voting securities; or (ii) the stockholders of Employer
approve a merger or consolidation of Employer with any other corporation, other
than a merger or consolidation which would result in the voting securities of
Employer outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent of the total voting power represented
by the voting securities of Employer or such surviving entity outstanding
immediately after such a merger or consolidation, or the stockholders of
Employer approve a plan of complete liquidation or dissolution of Employer or
an agreement for the sale or disposition by Employer of all or substantially
all of Employer’s assets, provided, however, that if such merger,
consolidation, liquidation, dissolution, sale or disposition does not
subsequently close, a Change in Control shall not be deemed to have occurred;
or (iii) individuals who are directors of Employer as of the date hereof
cease for any reason to constitute a majority of Employer’s Board of Directors
(the “Board”) unless such change(s) is
approved by a majority of the directors of Employer as of the date thereof.

3.             Duties.

(a)           Employee shall in good faith perform
those duties and functions as are required by his position and such other
duties as may be determined and assigned to him from time to time by the Chief
Executive Officer (“CEO”) or his/her designate(s).  Notwithstanding the foregoing or any other
provision in this Agreement, Employer shall have the right to modify from time
to time the title and duties assigned to Employee so long as such title and
duties are consistent with the usual and customary expectations of the type of
position and function of Employee.

(b)           Employee agrees to serve Employer
faithfully and to the best of his ability; to devote his full time and
attention, with undivided loyalty, during normal business hours to the business
and affairs of Employer, except during reasonable vacation periods and periods
of illness and incapacity; and to perform such duties as the CEO or his/her
designate(s) may assign, such duties to be of a character and dignity
appropriate to an Executive Vice President. 
Employee shall not engage in any other business or job activity during
the Employment Term without Employer’s prior written consent.  Notwithstanding the foregoing, 

 2
 

Employee may engage in civic and not-for-profit
activities so long as such activities do not materially interfere with Employee’s
performance of his duties hereunder.

4.             Compensation. 
Employer agrees to provide as compensation to Employee the following
salary, incentive, and benefits in exchange for the services described in
Section 3 of this Agreement:

(a)           Base Salary.  Employer agrees to pay to Employee during the
Employment Term an annual base salary in the amount of Three Hundred Fifty
Thousand Dollars ($350,000) per Employment Year less payroll deductions and all
required withholdings, or such higher amount as the Compensation Committee of
the Board shall from time to time determine. 
Employee’s base salary shall be paid not less frequently than
semi-monthly in accordance with Employer’s usual payroll practices.  The Compensation Committee of the Board will
review Employee’s base salary no less than once annually, and shall have sole
discretion to increase or decrease (subject to the next sentence hereof) the
base salary.  Employee’s base salary only
may be decreased in connection with a salary reduction program approved by the
Compensation Committee of the Board, which affects all executive officers of
Employer.

(b)           Incentive Compensation.  In addition to Employee’s base salary,
Employee shall participate in and, to the extent earned or otherwise payable thereunder,
receive periodic incentive cash bonuses pursuant to any incentive plans
currently maintained or hereafter established by Employer and applicable to an
employee of Employee’s position. 
Employee’s entitlement to incentive bonuses is discretionary and shall
be determined by the Compensation Committee of the Board in good faith based
upon the extent to which Employee’s individual performance objectives and
Employer’s performance objectives were achieved during the applicable bonus
period.  Employee is eligible to receive
a target bonus of up to 85% of Employee’s base salary (“Incentive Bonus”).  The Compensation Committee of the Board will
annually set the Employer’s performance targets and approve the incentive
compensation plan.

5.             Benefits
and Prerequisites.

(a)           Benefits.   Employer shall provide Employee such
employment benefits, equipment and support as are generally available to
executive officers of Employer, including without limitation reimbursement of
reasonable expenses incurred in performing his duties under this Agreement
(including, but not limited to, expenses for entertainment, long distance
telephone calls, lodging, meals, transportation and travel), coverage under
medical, dental, long-term disability and group life insurance plans, and
rights and benefits for which Employee is eligible under Employer’s 401(k) and
employee stock purchase plans.

(b)           Vacation and Sick Pay.  Employee shall be eligible for vacation and
sick leave in accordance with the policies of Employer in effect from time to
time during the Employment Term. 
Employee shall be entitled to a period of annual vacation time equal to
four weeks during each Employment Year, to accrue pro rata during the course of
the Employment Term.  All accrued
vacation and sick pay shall be paid to Employee in a lump sum payment on the
date of a Change in Control or termination of employment with Employer.

 3
 

(c)           Stock Appreciation Award.                In addition to the Incentive
Bonus described in Section 4(b), Employer will grant Employee 50,000 incentive
bonus units based upon the appreciation in the value of Employer’s common stock
over a one-year period under an Agreement substantially in the form of Exhibit
A attached hereto.

(d)           Company Automobile.        Employer shall also provide Employee
with the use of an automobile as approved by the CEO.  In addition, Employer will reimburse Employee
for expenses related to such automobile, including repairs and insurance.

6.             Relocation
Reimbursement.                Employer
shall reimburse Employee in the amount of $35,000, against receipts, for
Employee’s expenses incurred in connection with his relocation to Sausalito,
California.

7.             Termination/Nonrenewal by Employer.  The date on which Employee’s employment by
Employer ceases, under any of the following circumstances, shall be defined
herein as the “Termination Date.”  The employment of Employee may be terminated
by Employer or Employer may decide not to renew this Agreement for any reason
or no reason, with or without cause or justification, subject to the following:

(a)           Termination For Cause.  If (i) Employee’s employment is
terminated by Employer for Cause (as defined below), or (ii) Employer
gives Employee a notice of nonrenewal pursuant to Section 2(b) hereof for
Cause, Employer’s total liability to Employee or his heirs shall be limited to
payment of any unpaid base salary and any annual incentive compensation to
which Employee is entitled as of the Termination Date, and accrued vacation and
sick pay, and Employee shall not be entitled to any further compensation or
benefits provided under this Agreement, including, without limitation, any
severance payments.  “Cause” includes, but shall not be limited to:  (1) Employee’s conviction of or plea of
nolo contendere to any felony or gross misdemeanor charges brought in any court
of competent jurisdiction; (2) any fraud, misrepresentation or gross
misconduct by Employee against Employer; and (3) Employee’s breach of this
Agreement.

(b)           Termination Without Cause.  If (i) Employee’s employment is
terminated by Employer without Cause, or (ii) Employer provides Employee
with a notice of nonrenewal pursuant to Section 2(b) hereof without Cause,
Employer will (A) in the case of termination, provide not less than twelve
months notice of termination or an amount equal to twelve months of Employee’s
base salary in lieu of notice, or (B) in the case of nonrenewal, provide
notice of nonrenewal at least twelve months prior to the end of the last
applicable Employment Year or an amount equal to twelve months base salary in
lieu of notice.  In addition, in each of
the foregoing scenarios, Employee will be paid the severance which is described
in Section 9 below.

8.             Termination/Nonrenewal
by Employee.  The employment of
Employee may be terminated by Employee or Employee may decide not to renew this
Agreement for any reason or no reason, with or without cause or justification,
subject to the following:

(a)           Voluntary Resignation.  If (i) Employee’s employment terminates
by reason of Employee’s voluntary resignation (and is not a resignation for
Good Reason), or (ii) Employee gives Employer a notice of nonrenewal
pursuant to Section 2(b) hereof (which is

 4
 

not given for Good Reason), Employer’s total liability
to Employee shall be limited to payment of any unpaid base salary and any
annual incentive compensation to which Employee is entitled as of the
Termination Date, and accrued vacation and sick pay, and Employee shall not be
entitled to any further compensation or benefits provided under this Agreement,
including, without limitation, any severance payments.

(b)           Resignation for Good Reason.  If (i) Employee’s employment terminates
by reason of Employee’s voluntary resignation for Good Reason, or
(ii) Employee provides Employer with a notice of nonrenewal pursuant to
Section 2(b) hereof for Good Reason, Employee will be paid the severance which
is described in Section 9 below.  “Good Reason” means: 
Employee’s voluntary termination following (i) a reduction in
compensation which is not in proportion to any salary reduction program
approved by the Compensation Committee of the Board which affects all executive
officers of Employer; (ii) a reduction in material benefits; (iii) a
material reduction in Employee’s position, title, duties and status;
(iv) requiring Employee to work at a location more than 25 “road” miles
from the location of Employer’s corporate headquarters as of the date of this
Agreement; or (v) any willful and material breach by Employer of its
obligations under this Agreement.

9.             Severance Payment.

(a)           Amount.  In the event severance is payable hereunder,
such severance shall be in an amount equal to

(i)            one times Employee’s annual base
salary at the time of termination, pursuant to Section 7(b) or Section 8(b), or
if during a Change in Control Extension, one and one half times Employee’s base
salary at the time of termination, plus

 (ii)          any
unpaid base salary and any annual incentive compensation to which Employee is
entitled as of the Termination Date, and accrued vacation and sick pay, plus

(iii)          if during a Change in Control
Extension, an amount equal to the average annual incentives paid to Employee
attributable to the two years prior to the year of termination, plus

(iv)          accelerated vesting of any stock
options scheduled to vest during the two years following the Termination Date,
plus

(v)           distribution of unpaid deferred
compensation, plus

 (vi)         continued
coverage under all group benefit plans (e.g., medical, dental and life
insurance) for a period of twelve months following the Termination Date, or if
during a Change in Control Extension, for a period of eighteen months following
the Termination Date, in each case at the same cost to Employee as prior to the
Termination Date.

(b)           Payment.  All cash components of the above-described
severance payments, other than annual incentive compensation, shall be paid in
a lump sum within thirty

 5
 

days of the date of termination of Employee’s
employment; provided that, only to the extent required by Section 409A of the
Code, such payments shall be made in a lump sum six months after the date of
termination.  Payment of annual
incentive, which may be due under a Bonus Plan but which has not yet been
determined, shall be paid at the time payments are made to other participants
under such Bonus Plan.

(c)           Limitation
on Payments.  If any payment or benefit Employee would
receive from Employer or otherwise (“Payment”)
would (i) constitute a “parachute payment” within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended (the “Code”), and (ii) but for this
sentence, be subject to the excise tax imposed by Section 4999 of the Code (the
“Excise Tax”), then such Payment
shall be reduced to the Reduced Amount. 
The “Reduced Amount” shall
be either (x) the largest portion of the Payment that would result in no
portion of the Payment being subject to the Excise Tax or (y) the largest
portion, up to and including the total, of the Payment, whichever amount, after
taking into account all applicable federal, state and local employment taxes,
income taxes, and the Excise Tax (all computed at the highest applicable
marginal rate), results in Employee’s receipt, on an after-tax basis, of the
greater amount of the Payment notwithstanding that all or some portion of the
Payment may be subject to the Excise Tax. 
If a reduction in payments or benefits constituting “parachute payments”
is necessary so that the Payment equals the Reduced Amount, reduction shall
occur in the following order unless Employee elects in writing a different
order (provided, however, that such election
shall be subject to Company approval if made on or after the date on which the
event that triggers the Payment occurs): 
reduction of cash payments; cancellation of accelerated vesting of stock
awards; and reduction of employee benefits. 
In the event that acceleration of vesting of stock award compensation is
to be reduced, such acceleration of vesting shall be cancelled in the reverse
order of the date of grant of Employee’s stock awards unless Employee elects in
writing a different order for cancellation.

The
accounting firm engaged by Employer for general audit purposes as of the day
prior to the effective date of the event that triggers the Payment shall
perform the foregoing calculations.  If
the accounting firm so engaged by Employer is serving as accountant or auditor
for the individual, entity or group effecting the “change in ownership” as described in Section 280G(b)(2)(A)(i)
of the Code, Employer shall appoint a nationally recognized accounting firm to
make the determinations required hereunder. 
Employer shall bear all expenses with respect to the determinations by
such accounting firm required to be made hereunder.

The
accounting firm engaged to make the determinations hereunder shall provide its
calculations, together with detailed supporting documentation, to Employer and
Employee within fifteen (15) calendar days after the date on which Employee’s
right to a Payment is triggered (if requested at that time by Employer or
Employee) or such other time as requested by Employer or Employee.  If the accounting firm determines that no
Excise Tax is payable with respect to a Payment, either before or after the
application of the Reduced Amount, it shall furnish Employer and Employee with
an opinion reasonably acceptable to Employee that no Excise Tax will be imposed
with respect to such Payment.  Any good
faith determinations of the accounting firm made hereunder shall be final,
binding and conclusive upon Employer and Employee.

10.           Benefits
Upon Termination.  Except as
otherwise expressly provided by this Agreement and without limiting any rights
granted to Employee hereunder, all insurance benefits

 6
 

provided under Section 5 of this Agreement shall be
extended, at Employee’s election and cost, to the extent permitted by Employer’s
insurance policies and benefit plans, for one year after Employee’s Termination
Date, except (a) as required by law (e.g., COBRA health insurance
continuation election) or (b) in the event of a termination described in
Section 7 or 8.

11.           Death/Disability.

(a)           In the event (during the Employment
Term) of Employee’s death, (i) this Agreement shall terminate,
(ii) Employer shall pay to Employee’s estate or heirs any unpaid base
salary and any annual incentive compensation to which Employee may be entitled
as of the Termination Date, and (iii) Employee’s estate and heirs shall
not be entitled to any severance payments hereunder.  In addition, the stock options scheduled to
vest during the two (2) years
following the date of Employee’s death shall receive accelerated vesting and
shall become exercisable upon Employee’s death. 
Employee’s estate shall have the right to exercise such options for the
shorter of (i) two years from the date of death, and (ii) the term of
the option.

(b)           In the event (during the Employment
Term) of Employee’s long term disability (as defined in Employee’s Group
Disability Plan) and the passing of the Elimination Period (as defined in
Employee’s Group Disability Plan), (i) this Agreement shall terminate,
(ii) Employer shall pay to Employee any unpaid base salary and any annual
incentive compensation to which Employee is entitled as of the Termination
Date, and (iii) Employee shall not be entitled to any severance payments
hereunder.  In addition, the stock
options scheduled to vest during the two years after the date of Employee’s
disability shall receive accelerated vesting and shall become exercisable upon
the termination of this Agreement due to Employee’s disability.  Employee shall have the right to exercise
such options for the shorter of (i) two years from the date of disability,
and (ii) the term of the option.

12.           Maintenance
of Confidentiality and Duty of Loyalty.

(a)           General.  Employee acknowledges that, pursuant to his
employment with Employer, he will necessarily have access to trade secrets and
information that is confidential and proprietary to Employer in connection with
the performance of his duties.  In
consideration for the disclosure to Employee of, and the grant to Employee of
access to such valuable and confidential information and in consideration of
his employment, Employee shall comply in all respects with the provisions of
this Section 12.

(b)           Nondisclosure.  During the Employment Term and for a period
of three years thereafter,
Confidential and Proprietary Information of Employer of which Employee gains
knowledge during the Employment Term shall be used by Employee only for the
benefit of Employer in connection with Employee’s performance of his employment
duties, and Employee shall not, and shall not allow any other person that gains
access to such information in any manner to, without the prior written consent
of Employer, disclose, communicate, divulge or otherwise make available, or
use, any such information, other than for the immediate benefit of
Employer.  For purposes of this
Agreement, the term “Confidential and Proprietary
Information” means information not generally known to the public and
which is proprietary to Employer and relates to Employer’s existing or
reasonably foreseeable business or operations, including but not limited to
trade secrets, business plans, advertising or public relations

 7
 

strategies, financial information, budgets, personnel
information, customer information and lists, and information pertaining to
research, development, manufacturing, engineering, processing, product designs
(whether or not patented or patentable), purchasing and licensing, and which
may be embodied in reports or other writings or in blue prints or in other
tangible forms such as equipment and models. 
Employee will refrain from any acts or omissions that would jeopardize
the confidentiality or reduce the value of any Employer Confidential and
Proprietary Information.

(c)           Covenant of Loyalty.  During the Employment Term, Employee shall
not, on his own account or as an employee, agent, promoter, consultant,
partner, officer, director, or as a more than 1% shareholder of any other
person, firm, entity, partnership or corporation, own, operate, lease,
franchise, conduct, engage in, be connected with, have any interest in, or
assist any person or entity engaged in any business in the continental United
States that is in any way competitive with or similar to the business that is
conducted by Employer or is in the same general field or industry as
Employer.  Without limiting the
generality of the foregoing, Employee does hereby covenant that he will not,
during the Employment Term:

(i)            solicit, accept or receive any
compensation from any customer of Employer or any business competitive to that
of Employer; or

(ii)           contact, solicit or call upon any
customer or supplier of Employer on behalf of any person or entity other than
Employer for the purpose of selling, providing or performing any services of
the type normally provided or performed by Employer; or

(iii)          induce or attempt to induce any person
or entity to curtail or cancel any business or contracts which such person or
entity has with Employer; or

(iv)          induce or attempt to induce any person
or entity to terminate, cancel or breach any contract which such person or
entity has with Employer, or receive or accept any benefits from such
termination, cancellation or breach.

(d)           No Solicitation.  During the Employment Term and for a period
of two  years thereafter, Employee agrees
not to interfere with the business of Employer or any Affiliate of Employer by
directly or indirectly soliciting, attempting to solicit, inducing or otherwise
causing any employee of Employer or any Affiliate of Employer to terminate his
or her employment with Employer in order to become an employee, consultant or
independent contractor to or for any other person or entity.

(e)           Injunctive Relief.  Employee expressly agrees that the covenants
set forth in this Section 12 are reasonable and necessary to protect Employer
and its legitimate business interests, and to prevent the unauthorized
dissemination of Confidential and Proprietary Information to competitors of
Employer.  Employee also agrees that
Employer will be irreparably harmed and that damages alone cannot adequately
compensate Employer if there is a violation of this Section 12 by
Employee, and that injunctive relief against Employee is essential for the
protection of Employer.  Therefore, in
the event of any such breach, it is agreed that, in addition to any other
remedies available, Employer shall be entitled as a matter of right to

 8
 

injunctive relief in any court of competent
jurisdiction, plus attorneys’ fees actually incurred in seeking such
relief.  Furthermore, Employee agrees
that Employer shall not be required to post a bond or other collateral security
with the court if Employer seeks injunctive relief.  To the extent any provision of this
Section 12 is deemed unenforceable by virtue of its scope or limitation,
Employee and Employer agree that the scope and limitation provisions shall
nevertheless be enforceable to the fullest extent permissible under the laws
and public policies applied in such jurisdiction where enforcement is sought.

13.           Affiliate.  “Affiliate”
means a person that, directly or indirectly, through one or more intermediaries
controls, is controlled by or is under common control with the first mentioned
person.

14.           Notices.  Any notice which either party may wish or be
required to give to the other party pursuant to this Agreement shall be in
writing and shall be either personally served or deposited in the United States
mail, registered or certified, and with proper postage prepaid.  Mailed notices to Employee shall be addressed
to Employee at the home address which Employee most recently communicated to
Employer in writing.  In the case of
Employer, mailed notices shall be addressed to its corporate headquarters, and
all notices shall be directed to the attention of corporate counsel.  Notice given by personal service shall be
deemed effective upon service.  Notice
given by registered or certified mail shall be deemed effective three (3) days
after deposit in the mail.

15.           Binding Effect.  This Agreement shall be binding upon and
inure to the benefit of the parties hereto, their respective legal
representatives, and their successors and assigns.  As used in this Agreement, the term “successor” shall include any person, firm, corporation or
other business entity which at any time, whether by merger, purchase,
consolidation, or otherwise, acquired all or substantially all of the assets or
business of Employer.  This Agreement
shall be deemed to be willfully breached by Employer if any such successor does
not absolutely and unconditionally assume all of Employer’s obligations under
this Agreement and agree expressly to perform the obligations in the same
manner and to the same extent as Employer would be required to perform such
obligations in the absence of the succession. 
Employee may not assign any of his duties hereunder and he may not
assign any of his rights hereunder without the written consent of Employer,
which shall not be unreasonably withheld.

16.           Entire Agreement.  This Agreement contains the entire agreement
of the parties and supersedes and replaces all prior agreements and
understandings between the parties relating to the subject matter hereof.

17.           Governing Law.  This Agreement shall be governed by and
construed in accordance with the internal laws (without reference to choice or
conflict of laws) of the State of California.

18.           Arbitration.  Employer and Employee agree that, to the
extent permitted by law and to the extent that the enforceability of this
Agreement is not thereby impaired, any and all disputes, controversies or
claims between Employee and Employer, except disputes concerning the use or
disclosure of trade secrets, proprietary and/or confidential information, or
otherwise arising under Section 12 hereof, shall be determined exclusively
by final and binding arbitration

 9
 

in the County of San Francisco, California, in
accordance with the employment rules of the American Arbitration Association
then in effect.  The controversy or claim
shall be submitted to three arbitrators, one of whom shall be chosen by
Employer, one of whom shall be chosen by Employee, and the third of whom shall
be chosen by the two arbitrators so selected. 
The party desiring arbitration shall give written notice to the other
party of its desire to arbitrate the particular matter in question, naming the
arbitrator selected by it.  If the other
party shall fail within a period of 15 days after such notice shall have been
given to reply in writing naming the arbitrator selected by it, then the party
not in default may apply to the American Arbitration Association for the
appointment of the second arbitrator.  If
the two arbitrators chosen as above shall fail within 15 days after their
selection to agree upon a third arbitrator, then either party may apply to the
American Arbitration Association for the appointment of an arbitrator to fill
the place so remaining vacant.  Employer
shall pay the fees of the arbitrators so selected.  The decision of any two of the arbitrators
shall be final and binding upon the parties hereto and shall be delivered in
writing signed in triplicate by the concurring arbitrators to each of the
parties hereto.  The parties agree that
both parties will be allowed to engage in adequate discovery consistent with
the nature of the claims in dispute.  The
arbitrators shall have the authority to entertain a motion to dismiss and/or a
motion for summary judgment by any party and shall apply the standards
governing such motions under the Federal Rules of Civil Procedure.  The arbitrators shall have discretion to
award monetary and other damages, or no damages, and to fashion such other
relief as the arbitrators deem appropriate. 
The arbitrators also shall have discretion to award the prevailing party
reasonable costs and attorneys’ fees incurred in bringing or defending an
action under this Section 18, as permitted by applicable law.  Judgment on the award rendered by the
arbitrators may be entered in any court having jurisdiction.

Nothing in this
Section 18 shall limit the Employer’s ability to seek injunctive relief
for any violation of Employee’s obligations concerning nondisclosure, loyalty
and nonsolicitation as set forth in Section 12 hereof.  Any such injunctive relief proceeding shall
be without prejudice to any rights Employer or Employee may have under this
Agreement to obtain relief in arbitration with respect to such matters.

19.           Severability.  Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability shall
not affect any other provision or any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provisions had never been contained herein.

20.           Amendments and Waivers.  This Agreement may be modified only by a
written instrument duly executed by each party hereto.  No breach of any covenant, agreement,
warranty or representation shall be deemed waived unless expressly waived in
writing by the party who might assert such breach.  No waiver of any right hereunder shall
operate as a waiver of any other right or of the same or a similar right on
another occasion.

21.           Counterparts.  This Agreement may be executed by the parties
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute but one and
the same instrument.

 10
 

22.           Section Headings.  The headings of each Section, subsection or
other subdivision of this Agreement are for reference only and shall not limit
or control the meaning thereof.

IN WITNESS WHEREOF, the
parties hereto have executed this Agreement as of the date first above written.

	
  

  	
  “Employer”

  
	
   

  	
   

  
	
   

  	
  WILLIS LEASE FINANCE CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Thomas C. Nord

  
	
   

  	
   

  	
  Thomas C. Nord

  
	
   

  	
   

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  “Employee”

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lee G. Beaumont

  
	
   

  	
   

  	
  Lee G. Beaumont

  
	
   

  	
   

  	
   

  

 

 11

WILLIS
LEASE FINANCE CORPORATION

INCENTIVE BONUS AGREEMENT

THIS
INCENTIVE BONUS AGREEMENT (this “Agreement”) is
made and entered into February 20, 2007 (the “Grant Date”)
by and between Willis Lease Finance Corporation, a Delaware corporation (the “Company”), and Lee G. Beaumont (“Executive”).

RECITALS

WHEREAS, the Compensation Committee of the Board of
Directors of the Company (the “Committee”)
desires to grant to Executive an incentive bonus award pursuant to the terms
and conditions of this Agreement, the value of which is based upon the
appreciation in the value of the Company’s common stock (the “Common Stock”) over a specified period of time; and

WHEREAS, Executive desires to accept such award
subject to the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the premises and
of the mutual covenants and agreements contained herein, the Company and
Executive, intending to be legally bound, hereby agree as follows:

1.             Grant.

(a)           The Company hereby grants to
Executive an award of 50,000 incentive bonus units (the “Award”),
subject to the terms and conditions set forth herein.  Each incentive bonus unit represents the
right to receive from the Company on the Settlement Date (as defined below) a
cash payment equal to the Settlement Value (as defined below).

(b)           For purposes of this Agreement, the
term “Settlement Date” shall mean either
(i) the first anniversary of the Grant Date or (ii) in the event that
prior to the first anniversary of the Grant Date the vesting of the Award is
accelerated pursuant to Section 5(c)(i) or Section 5(c)(iii) hereof,
the effective date of the Corporate Transaction or Change in Control (each as
defined below).

(c)           For purposes of this Agreement, the
term “Settlement Value” shall mean:

(i)            if the Settlement Date is not the
effective date of a Corporate Transaction or Change in Control, the excess, if
any, of the Fair Market Value (as defined below) on the Settlement Date of one
share of the Common Stock (subject to adjustment as set forth in Section 5
hereof) over the Base Price (as defined below) or

(ii)           if the Settlement Date is the
effective date of a Corporate Transaction and/or Change in Control, the excess
of the total value (as determined by the Committee) of all consideration
payable in respect of one share of the Common Stock (subject to adjustment as
set forth in Section 5 hereof) in the Corporate Transaction over the Base
Price.

 A-1
 

(d)           For purposes of this Agreement, the
term “Fair Market Value” on any date shall
mean the closing price per share of Common Stock on the date in question, as
the price is reported by the NASDAQ Global Market or any successor system;
provided, however, if there is no closing price for the Common Stock on the
date in question, then the Fair Market Value shall be the closing price on the
last preceding date for which such quotation exists.

(e)           For purposes of this Agreement, the
term “Base Price” shall mean the Fair Market
Value of one share of the Common Stock on August 28, 2006 (subject to
adjustment pursuant to Section 5 hereof).

2.             Vesting;
Settlement.  The Award shall vest and
become nonforfeitable on the Settlement Date, subject to Executive’s continuous
employment with the Company through the Settlement Date.  So long as Executive remains continuously
employed by the Company through the Settlement Date, within the first payroll
cycle of the Company following the Settlement Date, Executive will be entitled
to receive a cash payment from the Company equal to the Settlement Value
multiplied by the number of incentive bonus units subject to the Award as set
forth in Section 1(a) hereof, less any applicable tax withholdings as
described in Section 7 hereof. 
Executive acknowledges and agrees that if, on the Settlement Date, the Fair
Market Value of the Common Stock is less than or equal to the Base Price, the
Award shall be forfeited without consideration.

3.             Status
of Executive.  Executive shall not
have any rights to receive shares of Common Stock pursuant to the Award, nor
shall Executive have any rights as a stockholder with respect to any shares of
Common Stock as a result of the Award.

4.             Termination of Employment.  Except as otherwise provided in this
Section 7, the Award shall automatically terminate without receipt of
consideration by Executive in the event that Executive’s employment with the
Company terminates for any reason prior to the Settlement Date.

5.             Certain Transactions and Events.

(a)           In General.  Except as provided in this Section 5, no
change in the capital structure of the Company, merger, consolidation, other
corporate reorganization or reclassification, sale or other disposition of
assets of the Company, sale or other disposition of a subsidiary or operating
division or other portion of the Company, change in control of the ownership of
Company or a subsidiary or affiliate of the Company, issuance by the Company of
shares of any class of securities or securities convertible into shares of any
class of securities, exchange or conversion of securities, or other transaction
or event shall require or be the occasion for any adjustments of the type
described in this Section 5.  In
addition, the existence of the Award shall in no way limit, restrict or
otherwise affect the right of the Company to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or otherwise dispose of, transfer or augment all or
any part of its business or assets.

(b)           Changes in Capital Structure.  If any change is made to the Common Stock by
reason of any stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the 

 A-2
 

Company’s receipt of consideration, appropriate
adjustments shall be made by the Committee to the number and/or class of
securities with respect to which the Award is granted and the Base Price.  Such adjustments are to be effected in a
manner which shall preclude the enlargement or dilution of rights and benefits
under the Award.

(c)           Corporate Transaction.

(i)            In the event of any Corporate
Transaction, the vesting and settlement of the Award shall automatically
accelerate so that the Award shall, immediately prior to the effective date of
the Corporate Transaction, become fully vested. 
However, the vesting and settlement of the Award shall not so accelerate
if and to the extent: (i) the Award is, in connection with the Corporate
Transaction, either to be assumed by the successor corporation (or parent
thereof) or to be replaced with a comparable cash incentive right with respect
to shares of the capital stock of the successor corporation (or parent thereof)
or (ii) the Award is to be replaced with another cash incentive program of
the successor corporation which preserves the Settlement Value as determined at
the time of the Corporate Transaction and provides for subsequent payout in
accordance with the same payment schedule set forth above.  The determination of award comparability
under clause (i) or (ii) above shall be made by the Committee as constituted
prior to the consummation of the Corporate Transaction.

(ii)           If the Award is assumed in connection
with a Corporate Transaction, the Award shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply to the number and class
of securities with respect to a holder of the Common Stock with respect to
which the Award relates would have received upon consummation of such Corporate
Transaction had such shares been outstanding immediately prior to such
Corporate Transaction.  Appropriate
adjustments to reflect such Corporate Transaction shall also be made to the
Settlement Value as determined at the time of the Corporate Transaction,
provided that both (A) such Settlement Value in the aggregate under the Award
and (B) the ratio of the Base Price to the Settlement Value as of the time of
the Corporate Transaction, shall remain the same both immediately prior to and
following any such adjustment made as of the time of the Corporate
Transaction.  Any such adjustment may
result in fractional units and/or fractional cents per unit, neither of which
shall be subject to rounding to a whole unit or whole cent.

(iii)          Notwithstanding anything herein to the
contrary, the Committee shall have the discretion, at any time while the Award
remains outstanding, to provide for the automatic acceleration of the vesting
and settlement of the Award upon the occurrence of a Change in Control.

(d)           For purposes of this Agreement, the
term “Corporate Transaction” shall mean
either of the following stockholder-approved transactions to which the Company
is a party:

(i)            a merger, consolidation or other
transaction involving the Company in which securities possessing more than
fifty percent (50%) of the total combined voting power of the Company’s
outstanding securities are transferred to a person or persons different from
the persons holding those securities on the Grant Date, or

(ii)           the sale, transfer or other
disposition of all or substantially all of the Company’s assets or a complete
liquidation or dissolution of the Company.

 A-3
 

(iii)          For purposes of this Agreement, the
term “Change in Control” shall mean the
occurrence of any of the following events: (i) any “person” (as such term
is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended), other than Charles F. Willis, IV or an Affiliate (as defined in
Section 12) of Charles F. Willis, IV, is or becomes the “beneficial owner” (as
defined in Rule 13d-3 under said Act), directly or indirectly, of securities of
Employer representing at least fifty percent of the total voting power
represented by Employer’s then outstanding voting securities; or (ii) the
stockholders of Employer approve a merger or consolidation of Employer with any
other corporation, other than a merger or consolidation which would result in
the voting securities of Employer outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty percent of the total
voting power represented by the voting securities of Employer or such surviving
entity outstanding immediately after such a merger or consolidation, or the
stockholders of Employer approve a plan of complete liquidation or dissolution
of Employer or an agreement for the sale or disposition by Employer of all or
substantially all of Employer’s assets, provided, however, that if such merger,
consolidation, liquidation, dissolution, sale or disposition does not
subsequently close, a Change in Control shall not be deemed to have occurred;
or (iii) individuals who are directors of Employer as of the date hereof
cease for any reason to constitute a majority of Employer’s Board of Directors
(the “Board”) unless such change(s) is
approved by a majority of the directors of Employer as of the date thereof.

6.             Limitations
on Transfer.  The Award shall not be
assignable or transferable other than as expressly set forth in this Section
6.  The Award may, in connection with
Executive’s estate plan, be assigned in whole or in part during Executive’s
lifetime to one or more members of Executive’s immediate family or to a trust
established exclusively for one or more such family members.  The terms applicable to the assigned portion
shall be the same as those in effect for the Award immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as
the Committee may deem appropriate.

7.             Tax
Withholding.  The Company shall
deduct from all payments pursuant to the Award any federal, state or local
withholding taxes, social security contributions and any other amounts which
may be required to be deducted or withheld by the Company pursuant to any
federal, state or local laws, rules or regulations.

8.             Effect
of Subsequent Stock Option Grant.  In
the event that prior to the Settlement Date (i) Executive receives a grant
of a stock option (a “Substitute Option”)
from the Company covering a number of shares at least equal to the number of
incentive bonus units subject to the Award (as set forth in Section 1(a))
and (ii) the Committee determines at the time such Substitute Option is
granted (the “Substitution Date”) that the
Substitute Option is intended to replace the Award with respect to future
increases (or decreases) in the value of the Common Stock, the Award shall be
deemed frozen effective as of the Substitution Date such that, notwithstanding
anything in Section 1 hereof to the contrary, from and after the
Substitution Date the Settlement Value shall be no greater than the Settlement
Value as determined on the Substitution Date, but otherwise shall reflect
fluctuations of the Fair Market Value of the Common Stock between the
Substitution Date and the Settlement Date. 
Notwithstanding anything herein to the contrary, in the event that the
Fair Market Value of the Common Stock on the Substitution Date is less than or
equal to the Base Price, the Award shall be forfeited without consideration.

 A-4
 

9.             Committee
Authority.  Any question concerning
the interpretation of this Agreement, any adjustments required to be made under
this Agreement, and any controversy that may arise under this Agreement shall
be determined by the Committee in its sole and absolute discretion.  All decisions hereunder by the Committee hereunder
shall be final, binding and conclusive.

10.           Amendment.  The Committee may modify or amend the Award
at any time and from time to time; provided, however, that no modification or
amendment shall impair any existing contractual rights of Executive unless the
Executive consents to the modification or amendment.  

11.           Entire
Agreement.  This Agreement sets forth
the entire agreement and understanding between the parties as to the subject
matter hereof and supersedes all prior oral and written and all contemporaneous
or subsequent oral discussions, agreements and understandings of any kind or
nature, including the Original Award Agreement.

12.           Successors
and Assigns.  Subject to the
limitations set forth in this Agreement, the benefits and obligations of this
Agreement will be binding on the executors, administrators, heirs, legal
representatives, successors, and assigns of the parties.

13.           Governing
Law.  This Agreement shall be
governed by, and construed in accordance with, the laws of the State of
California, excluding those laws that direct the application of the laws of
another jurisdiction.

14.           Tax
Treatment.  Executive acknowledges
that the Company has made no warranties or representations to Executive with
respect to the income tax consequences of the transactions contemplated by this
Agreement, including the grant, vesting or settlement of the Award, and
Executive is not relying on the Company or its representatives for an
assessment of such tax consequences.

15.           Counterparts.  
This Agreement may be executed in counterparts, each of which shall be
deemed an original, and all of which, taken together, shall constitute one and
the same instrument.

16.           No Right to Continued Employment.  THIS IS NOT
AN EMPLOYMENT CONTRACT.  THIS AGREEMENT
IS NOT TO BE INTERPRETED AS A GUARANTEE OR CONTRACT OF CONTINUING EMPLOYMENT
WITH THE COMPANY OR ANY SUBSIDIARY OR AFFILIATE.

 A-5
 

IN WITNESS WHEREOF, the
parties hereto have executed this Agreement as of the date first above written.

	
   

  	
  

  	
  WILLIS LEASE FINANCE CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
  Lee G. Beaumont

  	
   

  	
   

  	
  Name:

  	
  Thomas C. Nord

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  

 

 A-6

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