Document:

Exhibit 10.1

 

EMPLOYMENT
AGREEMENT

 

THIS EMPLOYMENT
AGREEMENT (this “Agreement”) is made and entered
into as of the 19th day of September, 2005, by and between Willis Lease Finance
Corporation, a Delaware corporation (“Employer”), and
Thomas C. Nord (“Employee”).

 

RECITALS

 

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 Senior
Vice President and General Counsel 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 Senior Vice President and General Counsel of Employer.

 

2.             Term.

 

(a)           The term of Employee’s
employment under this Agreement shall be for a one year period commencing on January 1,
2005 (“Start Date”) and ending on January 1,
2006, (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),
Employee’s employment will automatically renew for a period of one year, each
year, on the same terms and conditions as are set forth herein, unless either
party gives the other written notice of nonrenewal at least six (6) 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 13) 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 (50%) 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 (50%) 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,
including but not limited to responsibility for managing the legal function
within Employer, 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 the Senior Vice President and General Counsel.  Employee shall not engage in any other
business or job activity during the Employment Term without Employer’s prior
written consent.  Notwithstanding the
foregoing, 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.

 

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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 Two
Hundred Twenty Thousand, Five Hundred Dollars ($220,500) 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,
which presently is the 2005 Incentive Compensation Plan.  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 50% of Employee’s
base salary (“Incentive Bonus”).  The first 70% of the Incentive Bonus shall be
conditioned upon Employer’s performance. 
The remaining 30% shall be conditioned upon individual performance as
more fully described in the applicable Incentive Compensation Plan.  The Compensation Committee of the Board will
annually set the Employer’s performance targets and approve the incentive
compensation plan.

 

(c)           Professional
Associations.  Employer agrees to pay
the fees associated with Employee’s membership in the State Bar of California
and other professional associations pertinent to his employment.

 

5.             Benefits
and Perquisites.

 

(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 

 

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Employment Term. 
Employee shall be entitled to a period of annual vacation time equal to
four (4) 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.

 

6.             Stock
Options.

 

(a)           Employee shall continue
to be eligible to participate in Employer’s Stock Option Plan (“Plan”) on the same terms as are generally available to
executive officers of Employer and on terms which are in accordance with
comparative market practices.

 

(b)           The parties agree that
any additional grant of stock options under the Plan or any similar plan is
subject to the discretion of the Compensation Committee of the Board based upon
the duties of Employee’s position, the extent to which Employee’s individual
performance objectives and Employer’s profitability objectives and other
financial and non-financial objectives were achieved during the applicable
period, and comparative market practices.

 

(c)           In addition to any
rights Employee may have under the Plan or specific option grants under the
Plan, all stock options granted to Employee which would have otherwise vested
during the two year period following the occurrence of a Change in Control
shall immediately vest and become exercisable in the event of a Change in
Control.

 

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 six (6) months notice of termination or an amount equal to six (6) months
of Employee’s base salary in lieu of notice, or (B) in the case of
nonrenewal, provide notice of nonrenewal at least six (6) months prior to
the end of the last applicable Employment Year or an 

 

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amount equal to six 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 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-half
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 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 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)          distribution
of unpaid deferred compensation, plus

 

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(v)           accelerated
vesting of the stock options scheduled to vest during the two (2) years following the
Termination Date, plus

 

(vi)          continued
coverage under all group benefit plans (e.g., medical, dental and life
insurance) for a period of six months following the Termination Date, or if
during a Change in Control Extension, for a period of twelve 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 shall be paid in a lump sum within thirty (30) 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.

 

(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 

 

6

 

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 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 (2) 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 (2) 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 (2) 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 (3) 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 

 

7

 

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
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 three (3) 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.

 

8

 

(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 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.

 

9

 

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 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.

 

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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.

 

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.

 

11

 

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

 

	
   

  	
  “Employer”

  
	
   

  	
   

  
	
   

  	
  WILLIS LEASE FINANCE CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/   Donald A. Nunemaker

  	
   

  
	
   

  	
   

  	
  Donald A. Nunemaker

  
	
   

  	
   

  	
  Chief Operating Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  “Employee”

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/   Thomas C. Nord

  	
   

  
	
   

  	
   

  	
  Thomas C. Nord

  

 

12Exhibit 10.3

 

MEDICALCV, INC.

DIRECTOR STOCK OPTION AGREEMENT

PURSUANT TO 2005 DIRECTOR STOCK OPTION PLAN

 

Number of shares subject to option: 

 

Date of grant: 

 

OPTION
AGREEMENT dated as of                            ,
by and between MedicalCV, Inc., a Minnesota corporation (the “Company”),
and                             ,
an individual eligible to receive options under the Plan (“Optionee”).  Unless otherwise defined herein, capitalized
terms shall have the meaning set forth in the Company’s 2005 Director Stock
Option Plan.

 

1.             Non-Qualified Stock Option.  The Option evidenced by this Agreement is not
intended to, and did not at the date of grant, qualify as an “incentive stock
option” within the meaning of Section 422 of the United States Internal
Revenue Code of 1986, as amended.

 

2.             Grant of Option. 
Pursuant to the provisions of the Plan, the Company grants to the
Optionee, subject to the terms and conditions of the Plan and this Agreement,
the right and option to purchase from the Company all or a part of an aggregate
of                    shares of Common Stock (the “Shares”)
at the purchase price of $                   per share (the “Option”).

 

3.             Terms and Conditions.  It is understood and agreed that the Option
evidenced hereby is subject to the following terms and conditions:

 

(a)           Expiration Date.  The Option expires ten years after the date
of grant specified above.

 

(b)           Exercise of Option.  Subject to the Plan and the other terms of
this Agreement regarding the exercisability of the Option, the Option shall be
exercisable in full beginning on the earlier of (1) the first anniversary
of the date the Option was granted or (2) the Optionee having served one
term-year as a member of the Board of the Company since the date the Option was
granted.  Any exercise must be
accompanied by a written notice to the Company specifying the number of shares
of Common Stock as to which the Option is being exercised.

 

(c)           Payment of Purchase Price Upon
Exercise.  At the time of any
exercise, the exercise price of the Shares as to which the Option is being
exercised shall be paid in United States dollars by certified check or bank
draft, by tendering shares of Common Stock owned by the person exercising the
Option and having a fair market value equal to the cash exercise price
applicable to such Option, or by a combination of United States dollars and
Common Stock, all as set forth in Section 5(e)(iii) of the Plan.

 

 

(d)           Nontransferability.  The Option shall not be transferable other
than by will or by the laws of descent and distribution.  During the lifetime of the Optionee, the
Option shall be exercisable only by the Optionee.  No transfer of the Option by the Optionee by
will or by the laws of descent and distribution shall be effective to bind the
Company unless the Company is furnished with written notice thereof and a copy
of the will or such other evidence as the Board may determine necessary to
establish the validity of the transfer.

 

(e)           No Rights as Shareholder.  The Optionee shall have no rights as a shareholder
of the Company with respect to any Shares prior to the date of issuance to the
Optionee of a certificate for such Shares.

 

(f)            Compliance with Law and
Regulations.  The Option and the
obligation of the Company to sell and deliver Shares hereunder are subject to
all applicable laws, rules and regulations and to such approvals by any
government or regulatory agency as may be required.  The Option shall not be exercisable, and the
Company shall not be required to issue or deliver any certificates for Shares
prior to the completion of any registration or qualification of the Shares
under any federal or state law, or any rule or regulation of any
government body which the Company shall, in its sole discretion, determine to
be necessary or advisable.  Moreover, the
Option may not be exercised if its exercise or the receipt of Shares pursuant
thereto would be contrary to applicable law.

 

(g)           Income Taxes.  The Optionee understands that, upon exercise
of this Option, Optionee will recognize income for tax purposes in an amount
equal to the excess of the then fair market value of the Shares over the
exercise price.  The Optionee is wholly
responsible for the payment of any taxes incurred as a consequence of the
exercise of this Option and any subsequent sale of the Shares.

 

4.             Termination of Status as a Director.  Upon the termination of Optionee’s status as
a Director for any reason prior to the expiration of the Option, the Option may
be exercised, to the extent that the Optionee shall have been entitled to do so
on the date of his or her termination, at any time or from time to time, but
not later than the expiration of the Option or one year after the Optionee’s
termination, whichever date is earlier.

 

5.             Suspension or Termination of Option for Misconduct.  If the Board reasonably believes that the
Optionee has committed an act of misconduct, it may suspend the Optionee’s
right to exercise the Option pending a determination by the Board.  If the Board determines that the Optionee has
committed an act of embezzlement, fraud, dishonesty, nonpayment of an
obligation owed to the Company, breach of fiduciary duty or deliberate
disregard of the Company’s rules resulting in loss, damage or injury to
the Company, or if the Optionee makes an unauthorized disclosure of any Company
trade secret or confidential information, engages in any conduct constituting
unfair competition with respect to the Company, or induces any party to breach
a contract with the Company, neither the Optionee nor the Optionee’s estate
shall be entitled to exercise any option whatsoever.  In making such determination, the Board shall
act fairly and shall give the Optionee an opportunity to appear and present
evidence on the Optionee’s behalf at a hearing before the Board.

 

 

6.             Optionee Bound by Plan.  The Optionee hereby acknowledges receipt of a
copy of the Plan and agrees to be bound by all the terms and provisions
thereof.  In the event of any question or
inconsistency between this Agreement and the Plan, the terms and conditions of
the Plan shall govern.

 

7.             Notices. 
Any notice hereunder to the Company shall be addressed to it at its
principal executive offices, located at MedicalCV, Inc., 9725 South Robert
Trail, Inver Grove Heights, MN 55077, Attention: Chief Financial Officer; and
any notice hereunder to the Optionee shall be addressed to the Optionee at the
address last appearing in the records of the Company; subject to the right of
either party to designate at any time hereunder in writing some other address.

 

8.             Counterparts. 
This Agreement may be executed in two counterparts each of which shall
constitute one and the same instrument.

 

9.             Governing Law. 
This Agreement shall be governed by and construed in accordance with the
laws of the State of Minnesota, except to the extent preempted by federal law,
without regard to the principles of comity or the conflicts of law provisions
of any other jurisdiction.

 

IN
WITNESS WHEREOF, the Company has caused this
Agreement to be executed by a duly authorized officer and the Optionee has
executed this Agreement, both as of the day and year first above written.

 

	
   

  	
  MEDICALCV, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Its

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  OPTIONEE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name
  and address of Optionee (type or print):

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