exv10w5






Exhibit 10.5




EMPLOYMENT AGREEMENT




     THIS EMPLOYMENT AGREEMENT (the “Agreement”) dated as of December 1, 2008, by and between
National Retail Properties, Inc., with its principal place of business at 450 South Orange Avenue,
Suite 900, Orlando, Florida 32801 (the “Company”), and Paul E. Bayer, residing at the address set
forth on the signature page hereof (“Executive”).



     WHEREAS, Executive is party and subject to an existing Employment Agreement, dated January 2,
2007 with the Company (the “Existing Employment Agreement”);



     WHEREAS, the Company desires to continue to employ Executive, and Executive desires to
continue to be employed by the Company; and



     WHEREAS, the Company and Executive desire to terminate the Existing Employment Agreement and
enter into this Agreement, which sets forth the terms and conditions of Executive’s continuing
employment by the Company.



     Accordingly, the parties hereto agree as follows:



     1. Term. The Company hereby employs Executive, and Executive hereby accepts such
employment, for a term (as the same may be extended, the “Term”) commencing as of the date hereof
and continuing until January 2, 2011, unless terminated earlier in accordance with the provisions
of Section 4. On January 2, 2011, the Term shall automatically be extended for successive two-year
periods in accordance with the terms of this Agreement (subject to termination as aforesaid) unless
either party notifies the other party of non-renewal in writing, in accordance with Section 8, 180
days prior to the expiration of the initial period or any subsequent renewal period.



 









 





     2. Duties. During the Term, Executive shall be employed by the Company as Executive
Vice President, and, as such, Executive shall faithfully perform for the Company the duties of said
office and shall perform such other duties of an executive, managerial or administrative nature as
shall be specified and designated from time to time by the Board of Directors of the Company (the
“Board”) or the Chief Executive Officer of the Company, which duties shall not be materially
inconsistent with the duties performed by executives holding similar offices with real estate
investment trusts. Executive shall devote substantially all of his business time and effort to the
performance of his duties hereunder, except that Executive may devote reasonable time and attention
to civic, charitable, business or social activities so long as such activities do not interfere
with Executive’s employment duties. Executive shall comply with the policies, standards, and
regulations established from time to time by the Company.



     3. Compensation.



          3.1 Salary. For purposes of this Agreement, a “Contract Year” shall mean each
calendar year during the Term. During the first full Contract Year of the Term, the Company shall
pay Executive a base salary at the rate of $215,000.00 per annum (beginning on January 1, 2009), in
accordance with the customary payroll practices of the Company applicable to senior executives, but
not less frequently than monthly. The Compensation Committee of the Board shall review Executive’s
base salary each Contract Year during the Term and may increase such amount as it may deem
advisable (such salary, as the same may be increased, the “Annual Salary”).




          3.2 Bonus and Incentive Compensation. Executive will be entitled to participate in
the Company’s Annual Bonus Program (the “Bonus Plan”) as follows:




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          (a) Annual Bonus Compensation. Executive shall be eligible to receive a bonus each
Contract Year (“Annual Bonus”) as the Compensation Committee of the Board of Directors shall
determine. Executive’s Annual Bonus shall be determined in accordance with the Company’s executive
compensation policies as in effect from time to time during the Term and shall be based, in part,
on his achieving his individual performance goals for the year and, in part, on the Company’s
achieving its performance goals for the year.




          (b) Equity Incentive Awards. Executive shall be eligible to participate each Contract
Year in the Company’s equity incentive plans pursuant to the Company’s 2007 Performance Incentive
Plan or such other plans or programs as the Compensation Committee shall determine.




          3.3 Benefits — In General. Except with respect to benefits of a type otherwise
provided for under Section 3.4, Executive shall be permitted during the Term to participate in any
group life, hospitalization or disability insurance plans, health programs, retirement plans,
fringe benefit programs and similar benefits that may be available to other senior executives of
the Company generally, on the same terms as such other executives, in each case to the extent that
Executive is eligible under the terms of such plans or programs.




          3.4 Specific Benefits. Without limiting the generality of Section 3.3, the Company
shall make available to Executive the fringe benefits set forth on Attachment “A” to this
Agreement. Executive shall be entitled to 20 days of paid time off (“PTO”) per Contract Year.
Unless otherwise required by law, no more than 10 days of unused PTO may be carried forward (on a
“first-in, first-out” basis) to the immediately following year (but not thereafter).




          3.5 Expenses. The Company shall pay or reimburse Executive for all ordinary and
reasonable out-of-pocket expenses incurred by Executive during the Term in the




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performance of Executive’s services under this Agreement; provided that such expenses are
incurred and accounted for by Executive in accordance with the policies and procedures established
from time to time by the Company.




     4. Termination of Employment.



          4.1 Termination upon Death or Disability. If Executive dies during the Term, the
obligations of the Company to or with respect to Executive shall terminate in their entirety except
as otherwise provided under this Section 4.1. If Executive becomes eligible for disability
benefits under the Company’s long-term disability plans and arrangements (or, if none, if Executive
by virtue of ill health or other disability is unable to perform substantially and continuously the
duties assigned to him for at least 120 consecutive or non-consecutive days out of any consecutive
12-month period), the Company shall have the right, to the extent permitted by law, to terminate
the employment of Executive upon notice in writing to Executive; provided that the Company will
have no right to terminate Executive’s employment if, in the reasonable opinion of a qualified
physician acceptable to the Company, it is substantially certain that Executive will be able to
resume Executive’s duties on a regular full-time basis within 30 days of the date Executive
receives notice of such termination. Upon death or other termination of employment by virtue of
disability in accordance with this Section 4.1, Executive (or Executive’s estate or beneficiaries
in the case of the death of Executive) shall have no right to receive any compensation or benefit
hereunder on and after the effective date of the termination of employment other than (i) Annual
Salary and other benefits earned and accrued under this Agreement prior to the date of termination
(and reimbursement under this Agreement for expenses incurred prior to the date of termination);
(ii) a cash payment equal to the prorated portion of the Annual Bonus at the “target” level for the
Contract Year or partial Contract Year




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in which Executive’s employment hereunder terminates; (iii) elimination of any exclusively
time-based vesting conditions on any restricted stock, stock option or other equity awards in the
Company he had been granted which he then continues to hold, to the extent then unvested (it being
expressly understood and agreed that any performance-based vesting conditions (whether or not in
tandem with such time-based vesting conditions) will continue in effect in accordance with their
terms, except as may otherwise be provided to the contrary in the applicable award agreements);
(iv) in the event of Executive’s death, (A) a cash payment equal to two months of Executive’s
Annual Salary payable no later than 10 days after such termination, and (B) continuation to
Executive’s spouse and dependents of fully paid health insurance benefits under the Company’s
health plans and programs applicable to senior executives of the Company generally (if and as in
effect from time to time) during the one year following the date of termination; and (v) Executive
(or, in the case of his death, his estate and beneficiaries) shall have no further rights to any
other compensation or benefits hereunder on or after the termination of employment, or any other
rights hereunder.




          4.2 Termination by the Company for Cause; Termination by Executive without Good
Reason.




          (a) For purposes of this Agreement, “Cause” shall mean Executive’s:





	 	(i)	 	conviction of (or pleading nolo contendere to),
or an indictment or information is filed against Executive and is not
discharged or otherwise resolved within 12 months thereafter, and said
indictment or information charged Executive with a felony, any crime of
moral turpitude, fraud or any act of dishonesty, or any crime which is
likely to result in material injury, either monetarily or otherwise, to
the Company or any of its majority-owned subsidiaries;
	 
	 	(ii)	 	the continued failure by Executive
substantially to perform his duties or to carry out the lawful written
directives of the Board of Directors;




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	 	(iii)	 	material breach of a fiduciary duty, including
disclosure of any conflicts of interests that are known to Executive,
or with reasonable diligence should be known, relating to Executive’s
employment with the Company, or otherwise engaging in gross misconduct
or willful or gross neglect (in connection with the performance of his
duties) which is materially injurious, either monetarily or otherwise,
to the Company or any of its majority-owned subsidiaries; or
	 
	 	(iv)	 	material breach of any of Section 6 or any
other provisions of this Agreement




provided, that the Company shall not be permitted to terminate Executive for Cause except on
written notice given to Executive at any time following the occurrence of any of the events
described in clause (i), (ii), (iii) or (iv) above. Notwithstanding the foregoing, Executive shall
not be deemed to have been terminated for Cause under clause (ii) or (iv) above unless the Company
provided written notice to Executive setting forth in reasonable detail the reasons for the
Company’s intention to terminate for Cause, Executive has been provided the opportunity, together
with counsel, not later than 14 days following such notice to be heard before the Board and
Executive failed within 30 days (or, if later, five business days after such hearing) to cure the
event or deficiency set forth in the written notice.




          (b) The Company may terminate Executive’s employment hereunder for Cause, and Executive may
terminate his employment at any time upon 60 days prior written notice to the Company. If the
Company terminates Executive for Cause, or Executive terminates his employment and the termination
by Executive is not covered by Section 4.3, (i) Executive shall receive Annual Salary and other
benefits (but, in all events, and without increasing Executive’s rights under any other provision
hereof, excluding any Annual Bonus not yet paid) earned and accrued under this Agreement prior to
the termination of employment (and reimbursement under this Agreement for expenses incurred prior
to the termination of employment), and (ii) Executive




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shall have no further rights to any other compensation or benefits hereunder on or after the
termination of employment, or any other rights hereunder.




          4.3 Termination by the Company without Cause; Termination by Executive for Good
Reason.




          (a) For purposes of this Agreement, “Good Reason” shall mean, unless otherwise consented to by
Executive:





	 	(i)	 	a material reduction in Executive’s position,
authority, duties or responsibilities;
	 
	 	(ii)	 	a reduction in Annual Salary of Executive;
	 
	 	(iii)	 	the relocation of Executive’s office to more
than 50 miles from the Company’s principal place of business in
Orlando, Florida;
	 
	 	(iv)	 	the Company’s material breach of this
Agreement; or
	 
	 	(v)	 	the Company’s failure to obtain an agreement
from any successor to the business of the Company by which the
successor assumes and agrees to perform this Agreement.




Notwithstanding the foregoing, Good Reason under clause (i), (ii), (iii) or (iv) above shall not be
deemed to exist unless notice of termination on account thereof (specifying a termination date no
later than 15 days from the date of such notice) is given by Executive to the Company no later than
30 days after the time at which Executive first becomes or should have become aware of the event or
condition purportedly giving rise to Good Reason; and, in such event, the Company shall have 30
days from the date notice of such a termination is given to cure such event or condition and, if
the Company does so, such event or condition shall not constitute Good Reason hereunder.




          (b) The Company may terminate Executive’s employment at any time for any reason or no reason
upon 30 days’ prior written notice to Executive and Executive may terminate Executive’s employment
with the Company for Good Reason. If the Company terminates




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Executive’s employment and the termination is not covered by Sections 4.1, 4.2 or 4.4 or
Executive terminates his employment for Good Reason:





	 	(i)	 	Executive shall (subject, in the case of the
following clauses (C), (D), (E) and (H), to Executive’s delivery of a
general release reasonably acceptable to the Company which shall have
become irrevocable) be entitled to:






	 	(A)	 	any accrued but unpaid Annual
Salary and PTO due to Executive as of the termination of
employment;
	 
	 	(B)	 	reimbursement under this
Agreement for expenses incurred but unpaid prior to the
termination of employment;
	 
	 	(C)	 	a cash payment equal to 200% of
Executive’s Annual Salary, payable in equal installments over a
12–month period in accordance with the Company’s usual and
customary payroll practices, commencing on the first payday
following Executive’s termination; provided, however, that, in
the event of such a termination upon or after a Change of
Control, such payment shall be paid to Executive in a single sum
no later than 10 days following delivery of the release
referenced above and the release having become irrevocable; and
provided, further, that no payments shall be made less than six
months after termination to the extent required to comply with
Section 409A of the Code (in which case any payments deferred
under this provision shall be paid upon the six-month
anniversary of termination);
	 
	 	(D)	 	a cash payment equal to 200% of
Executive’s average Annual Bonus for the three Contract Years
immediately preceding the date of termination, payable in equal
installments over a 12-month period in accordance with the
Company’s usual and customary payroll practices, commencing on
the first payday following Executive’s termination; provided,
however, that, in the event of such a termination upon or after
a Change of Control, such payment shall be paid to Executive in
a single sum no later than 10 days following delivery of the
release referenced above and the release’s having become
irrevocable; and provided, further, that no payments shall be
made less than six months after termination to the extent
required to comply with Section 409A of the Code (in which case
any payments deferred under this provision shall be paid upon
the six-month anniversary of termination);




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	 	(E)	 	any payment due under Section 5
hereof;
	 
	 	(F)	 	vesting of any restricted stock,
stock options or other equity awards in the Company Executive
had been granted which Executive then continues to hold, to the
extent then unvested;
	 
	 	(G)	 	for a period of one year after
termination, such health benefits under the Company’s health
plans and programs applicable to senior executives of the
Company generally (if and as in effect from time to time) as
Executive would have received under this Agreement (and at such
costs to Executive as would have applied in the absence of such
termination); provided, however, that the Company shall in no
event be required to provide any benefits otherwise required by
this clause (G) after such time as Executive becomes entitled to
receive benefits of the same type from another employer or
recipient of Executive’s services (such entitlement being
determined without regard to any individual waivers or other
similar arrangements); and
	 
	 	(H)	 	in the event of such a
termination upon or after a Change of Control, a prorated Annual
Bonus at the “target” level for the Contract Year or partial
Contract Year in which Executive’s employment hereunder
terminates;






	 	 	 	provided that the amounts referred to in clauses (A), (B), (E) and
(H) shall be paid to Executive in a single sum no later than 10 days
following delivery of the release referenced above, except to the
extent that a six-month delay is necessary to avoid tax under Section
409A of the Code; and
	 
	 	 	(ii)	Executive shall have no further rights to any
other compensation or benefits hereunder on or after the termination of
employment, or any other rights hereunder.





          4.4 Natural Termination. In the event that Executive’s employment by the Company
pursuant to this Agreement terminates at the scheduled expiration of the Term because of a
non-renewal of the Term as a result of a decision by the Company not to renew as contemplated by
and in accordance with the last sentence of Section 1 (and not theretofore under Section 4.1, 4.2
or 4.3),




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	 	(i)	 	Executive shall (subject, in the case of the
following clauses (C), (D) and (F), to Executive’s delivery of a
general release reasonably acceptable to the Company which shall have
become irrevocable) be entitled to:






	 	(A)	 	any accrued but unpaid Annual
Salary and PTO due to Executive as of the termination of
employment;
	 
	 	(B)	 	reimbursement under this
Agreement for expenses incurred but unpaid prior to the
termination of employment;
	 
	 	(C)	 	a cash payment equal to 200% of
Executive’s Annual Salary in the case of expiration of the
initial Term, or 100% of Executive’s Annual Salary in the case
of expiration of a renewal of the Term, payable in equal
installments over a 12–month period in accordance with the
Company’s usual and customary payroll practices, commencing on
the first payday following termination of this Agreement;
provided, however, that no payments shall be made less than six
months after termination to the extent required to comply with
Section 409A of the Code (in which case any payments deferred
under this provision shall be paid upon the six-month
anniversary of termination);
	 
	 	(D)	 	any payment due under Section 5
hereof;
	 
	 	(E)	 	for a period of one year after
termination, such health benefits under the Company’s health
plans and programs applicable to senior executives of the
Company generally (if and as in effect from time to time) as
Executive would have received under this Agreement (and at such
costs to Executive as would have applied in the absence of such
termination upon expiration); provided, however, that the
Company shall in no event be required to provide any benefits
otherwise required by this clause (E) after such time as
Executive becomes entitled to receive benefits of the same type
from another employer or recipient of Executive’s services (such
entitlement being determined without regard to any individual
waivers or other similar arrangements);
	 
	 	(F)	 	a prorated Annual Bonus at the
“target” level for the Contract Year or partial Contract Year in
which Executive’s employment hereunder terminates; and
	 
	 	(G)	 	only in the case of expiration of
the initial Term, elimination of any exclusively time-based
vesting




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	 	 	 	conditions on any restricted stock, stock option or other
equity awards in the Company Executive had been granted which
Executive then continues to hold, to the extent then unvested
(it being expressly understood and agreed that any
performance-based vesting conditions (whether or not in
tandem with such time-based vesting conditions) will continue
in effect in accordance with their terms, except as may
otherwise be provided to the contrary in the applicable award
agreements);






	 	 	 	provided that the amounts referred to in clauses (A), (B), (D) and
(F) shall be paid to Executive in a single sum no later than 10 days
following delivery of the release referenced above, except to the
extent that a six-month delay is necessary to avoid tax under Section
409A of the Code; and
	 
	 	(ii)	 	Executive shall have no further rights to any
other compensation or benefits hereunder on or after the termination of
employment, or any other rights hereunder.





     5. Certain Additional Payments by the Company.



          (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below,
in the event it shall be determined that any payment or distribution by the Company to or for the
benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard to any additional payments required
under this Section 5) (a “Payment”) would be subject to the excise tax imposed by Section 4999 of
the Code or any interest or penalties are incurred by Executive with respect to such excise tax
(such excise tax, together with any such interest and penalties, are hereinafter collectively
referred to as the “Excise Tax”), then Executive shall be entitled to receive an additional payment
(a “Gross-Up Payment”) in an amount such that after payment by Executive of all taxes (including
any interest or penalties imposed with respect to such taxes), including, without limitation, any
income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed
upon the Gross-Up Payment, and taking




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into account any withholding obligation on the part of the Company, Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.




          (b) Subject to the provisions of Section 5(c), all determinations required to be made under
this Section 5, including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be used in arriving at such determination, shall be made by
the Company’s regular independent accounting firm (the “Accounting Firm”) which shall provide
detailed supporting calculations both to the Company and Executive within 15 business days of the
receipt of notice from Executive that there has been a Payment, or such earlier time as is
requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by
the Company. Any Gross-Up Payment, as determined pursuant to this Section 5, shall be paid by the
Company to Executive, net of any of the Company’s federal or state withholding obligations with
respect to such Payment, within five days of the receipt of the Accounting Firm’s determination.
Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a
result of the uncertainty in the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will
not have been made by the Company should have been made (each, an “Underpayment”), consistent with
the calculations required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 5(c) and Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive.




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          (c) Executive shall notify the Company in writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the Company of a Gross-Up Payment (or an
additional Gross-Up Payment). Such notification shall be given as soon as practicable but no later
than 10 business days after Executive is informed in writing of such claim and shall apprise the
Company of the nature of such claim and the date on which such claim is requested to be paid.
Executive shall not pay such claim prior to the expiration of the 30-day period following the date
on which it gives such notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company notifies Executive in writing
prior to the expiration of such period that it desires to contest such claim, Executive shall:





	 	(i)	 	give the Company any information reasonably
requested by the Company relating to such claim,
	 
	 	(ii)	 	take such action in connection with contesting
such claim as the Company shall reasonably request in writing from time
to time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the
Company,
	 
	 	(iii)	 	cooperate with the Company in good faith in
order to effectively contest such claim, and
	 
	 	(iv)	 	permit the Company to participate in any
proceedings relating to such claim; provided, however, that the Company
shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest
and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation
of the foregoing provisions of this Section 5(c), the Company shall
control all proceedings taken in connection with such contest (to the
extent applicable to the Excise Tax and the Gross-Up Payment) and, at
its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either
direct Executive to pay the tax claimed and sue for a




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	 	 	 	refund or contest the claim in any permissible manner, and Executive
agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Company shall determine;
provided, however, that if the Company directs Executive to pay such
claim and sue for a refund, the Company shall advance the amount of
such payment to Executive, on an interest-free basis and shall
indemnify and hold Executive harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest or penalties with
respect thereto) imposed with respect to such advance or with respect
to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to
payment of taxes for the taxable year of Executive with respect to
which such contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company’s control of the
contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.





          (d) If, after the receipt by Executive of an amount advanced by the Company pursuant to
Section 5(c), Executive becomes entitled to receive any refund with respect to such claim,
Executive shall (subject to the Company’s complying with the requirements of Section 5(c)) promptly
pay (in no more than five business days) to the Company the amount of such refund (together with
any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by
Executive of an amount advanced by the Company pursuant to Section 5(c), a determination is made
that Executive shall not be entitled to any refund with respect to such claim and the Company does
not notify Executive in writing of its intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall offset, to the extent thereof, the
amount of Gross-Up Payment required to be paid.




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     6. Non-Competition, Non-Solicitation, and Confidentiality; Certain Other Covenants.



          6.1 Disclosure of Confidential Information. Executive acknowledges that the Company
will provide Executive with confidential and proprietary information regarding the business in
which the Company or any of its current or future subsidiaries or affiliates (collectively, other
than the Company, the “Company Affiliates”) are involved, and the Company and the Company
Affiliates will provide Executive with trade secrets, as defined in Section 688.002(4) of the
Florida Statutes, of the Company and the Company Affiliates (hereinafter all such confidential
information and trade secrets referred to as the “Confidential Information”). For purposes of this
Agreement, “Confidential Information” includes, but is not limited to:




          (a) Information related to the business of the Company and the Company Affiliates, including
but not limited to marketing strategies and plans, sales procedures, operating policies and
procedures, pricing and pricing strategies, business and strategic plans, financial statements and
projections, accounting and tax positions and procedures, and other business and financial
information of the Company and the Company Affiliates;




          (b) Information regarding the customers of the Company and the Company Affiliates which
Executive acquired as a result of his employment with the Company, including but not limited to,
customer contracts, customer lists, work performed for customers, customer contacts, customer
requirements and needs, data used by the Company and the Company Affiliates to formulate customer
proposals, customer financial information and other information regarding the customer’s business;




          (c) Information regarding the vendors of the Company and the Company Affiliates which
Executive acquired as a result of his employment with the Company, including




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but not limited to, product and service information and other information regarding the
business activities of such vendors;




          (d) Training materials developed by and utilized by the Company and the Company Affiliates;




          (e) Any other information which Executive acquired as a result of his employment with the
Company and which Executive has a reasonable basis to believe the Company or the Company
Affiliates, as the case may be, would not want disclosed to a business competitor or to the general
public; and




          (f) Information which:





	 	(i)	 	is proprietary to, about or created by the
Company or the Company Affiliates;
	 
	 	(ii)	 	gives the Company or any of the Company
Affiliates some competitive advantage, the opportunity of obtaining
such advantage or the disclosure of which could be detrimental to the
interests of the Company or the Company Affiliates;
	 
	 	(iii)	 	is not typically disclosed to non-executives
by the Company or otherwise is treated as confidential by the Company
or the Company Affiliates; or
	 
	 	(iv)	 	is designated as Confidential Information by
the Company or from all the relevant circumstances should reasonably be
assumed by Executive to be confidential to the Company or any Company
Affiliates;




provided, however, that Confidential Information shall not include information which (x) at the
time of receipt or thereafter becomes publicly known through no wrongful act of Executive, (y) is
obtainable in the public domain, or (z) if Executive gives prior notice to the Company of any
disclosure of information described in the following provisions of this clause (z), can be and is
demonstrated by Executive as not having been developed by use of or reference to other




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Confidential Information and as not having been acquired or developed by Executive in connection
with Executive’s employment or affiliation with the Company.




          6.2 Covenant Not to Compete. While employed by the Company and, in the event of a
termination of Executive’s employment (other than in the event of a Change of Control and
subsequent termination by the Company without Cause or by Executive for Good Reason or a
termination due to non-renewal of the Term by the Company at the first time on or after the Change
of Control that the Term is up for renewal), for a period of one year thereafter, in consideration
of the obligations of the Company hereunder, including without limitation its disclosure of
Confidential Information to Executive, Executive shall not, directly or indirectly, for
compensation or otherwise, engage in or have any interest in any sole proprietorship, partnership,
corporation, company, association, business or any other person or entity (whether as an employee,
officer, corporation, business or any creditor, consultant or otherwise) that, directly or
indirectly, competes with the Company’s “Business” (as defined below) in any and all states in
which the Company or any Company Affiliate conducts such business while Executive is employed by
the Company or any Company Affiliate; provided, however, Executive may continue to hold securities
of the Company or any Company Affiliate or continue to hold or acquire, solely as an investment,
shares of capital stock or other equity securities of any company if (x) he currently holds an
interest in such stock or other securities, and before the date hereof has disclosed to the Board
in detail (I) the applicable company (or companies) and (II) the specific stock or other equity
securities of the entity he owns, or (y) the stock or other securities are traded on any national
securities exchange or are regularly quoted in the over-the-counter market, so long as Executive
does not control, acquire a controlling interest in, or become a member of a group which exercises
direct or indirect control of more than 5% of any class of




17









 







capital stock of such corporation. For purposes of this Agreement, the Company’s “Business”
is defined so as to consist of the development, acquisition, ownership, management, and sale of a
diversified portfolio of high-quality, freestanding net-lease properties leased to retail,
restaurant, convenience-store and similar businesses, and such other businesses conducted by the
Company after the date hereof, and from time to time during the Term, that shall become material
and substantial with respect to the Company’s then-overall business.




          6.3 Non-Solicitation of Clients. While employed by the Company and, in the event of a
termination of Executive’s employment (other than in the event of a Change of Control and
subsequent termination by the Company without Cause or by Executive for Good Reason or a
termination due to non-renewal of the Term by the Company at the first time on or after the Change
of Control that the Term is up for renewal), for a period of one year thereafter, in consideration
of the obligations of the Company hereunder, including without limitation its disclosure of
Confidential Information to Executive, Executive shall not, directly or indirectly, for himself or
as principal, agent, independent contractor, consultant, director, officer, member, or employee of
any other person, firm, corporation, partnership, company, association, business or other entity,
solicit, attempt to contract with, or enter into a contractual or business relationship of any kind
pertaining to any aspect of the Company’s Business, or any other business conducted by the Company
or any Company Affiliate at the time of termination of employment or at any time in the prior
12-month period, with any person or entity with which the Company or any Company Affiliate has any
contractual or business relationship, or engaged in negotiations toward such a contract, in the
previous 12 months, if such solicitation, attempt to contract with, or entering into a contractual
or business relationship would have a material




18









 







adverse effect on the Company’s operations, financial condition, prospects or relationship
with such person or entity.




          6.4 Non-Solicitation of Employees. While employed by the Company and, in the event of
a termination of Executive’s employment (other than in the event of a Change of Control and
subsequent termination by the Company without Cause or by Executive for Good Reason or a
termination due to non-renewal of the Term by the Company at the first time on or after the Change
of Control that the Term is up for renewal), for a period of one year thereafter, in consideration
of the obligations of the Company hereunder, including without limitation its disclosure of
Confidential Information to Executive, Executive shall not directly or indirectly, for himself or
as principal, agent, independent contractor, consultant, director, officer, member, or employee of
any other person, firm, corporation, partnership, company, association or other entity, either
(i) hire, attempt to employ, contact with respect to hiring, solicit with respect to hiring or
enter into any contractual arrangement with any employee or former employee of the Company or any
Company Affiliate, or (ii) induce or otherwise advise or encourage any employee of the Company or
any Company Affiliate to leave his or her employment; unless, in each such case, such employee or
former employee has not been employed by the Company or a Company Affiliate for a period in excess
of six months at the time of such solicitation, attempt to employ, contact, employment or
inducement.




          6.5 Confidentiality. While employed by the Company and after Executive’s employment
terminates, in consideration of the obligations of the Company hereunder, including without
limitation its disclosure of Confidential Information to Executive, Executive shall keep secret and
retain in strictest confidence, shall not disclose to any third-party, and shall not use for his
benefit or the benefit of others, except in connection with the business affairs of the




19









 







Company, any Company Affiliate, or any of their officers or directors (collectively, the
“Benefited Persons”), all confidential and proprietary information and trade secrets relating to
the business of the Company or any of the other Benefited Persons (but not if expressly excluded
from being Confidential Information under the proviso of Section 6.1(f)), including, without
limitation, the Confidential Information, unless such disclosure is required by a valid subpoena or
other legal mandate or otherwise by rule of law or other valid order of a court or government body
or agency. In the event disclosure so is required, Executive shall provide the Company with
written notice of same at least five business days prior to the date on which Executive is required
to make the disclosure. Notwithstanding the foregoing, the express terms of this Section 6.5 shall
not apply in the event of a Change of Control and subsequent termination by the Company without
Cause or by Executive for Good Reason or a termination due to non-renewal of the Term by the
Company at the first time on or after the Change of Control that the Term is up for renewal.




          6.6 Tangible Items. All files, records, documents, manuals, books, forms, reports,
memoranda, studies, data, calculations, recordings, or correspondence, whether visually
perceptible, machine-readable or otherwise, in whatever form they may exist, and all copies,
abstracts and summaries of the foregoing, and all physical items related to the business of the
Company, whether of a public nature or not, and whether prepared by Executive or not, are and shall
remain the exclusive property of the Company , and shall not be removed from its premises, except
as required in the course of Executive’s employment by the Company, without the prior written
consent of the Company. Such items, including any copies or other reproductions thereof, shall be
promptly returned by Executive to the Company at any time upon the written request of the Company.
Notwithstanding the foregoing, the express terms of this Section 6.6




20









 







shall not apply in the event of a Change of Control and subsequent termination by the Company
without Cause or by Executive for Good Reason or a termination due to non-renewal of the Term by
the Company at the first time on or after the Change of Control that the Term is up for renewal.




          6.7 Remedies.




          (a) The Company and Executive acknowledge and agree that a breach by Executive of any of the
covenants contained in this Section 6 will cause immediate and irreparable harm and damage to the
Company and any other Benefited Person, and that monetary damages will be inadequate to compensate
the Company, and any other Benefited Person, as the case may be, for such breach. Accordingly,
Executive acknowledges that the Company and any other Benefited Person affected shall, in addition
to any other remedies available to it at law or in equity, be entitled to an injunction from any
court of competent jurisdiction enjoining and restraining any violation of said covenants by
Executive or any of his affiliates, associates, partners or agents, either directly or indirectly,
without the necessity of proving the inadequacy of legal remedies or irreparable harm.




          (b) Except with regard to Section 6.7(a), all disputes between the parties or any claims
concerning the performance, breach, construction or interpretation of this Agreement, or in any
manner arising out of this Agreement, shall be submitted to binding arbitration in accordance with
the Commercial Arbitration Rules, as amended from time to time, of the American Arbitration
Association (the “AAA”), which arbitration shall be carried out in the manner set forth below:





	 	(i)	 	Within 15 days after written notice by one
party to the other party of its demand for arbitration, which demand
shall set forth the name and address of its designated arbitrator, the
other party shall appoint its designated arbitrator and so notify the
demanding party.





21









 





	 	 	 	Within 15 days thereafter, the two arbitrators so appointed shall
appoint the third arbitrator. If the two appointed arbitrators
cannot agree on the third arbitrator, then the AAA shall appoint an
independent arbitrator as the third arbitrator. The dispute shall be
heard by the arbitrators within 90 days after appointment of the
third arbitrator. The decision of any two or all three of the
arbitrators shall be binding upon the parties without any right of
appeal. The decision of the arbitrators shall be final and binding
upon the Company, its successors and assigns, and upon Executive, his
heirs, personal representatives, and legal representatives.






	 	(ii)	 	The arbitration proceedings shall take place in
Orlando, Florida, and the judgment and determination of such
proceedings shall be binding on all parties. Judgment upon any award
rendered by the arbitrators may be entered into any court having
competent jurisdiction without any right of appeal.
	 
	 	(iii)	 	Each party shall pay its or his own expenses
of arbitration, and the expenses of the arbitrators and the arbitration
proceeding shall be shared equally. However, if in the opinion of a
majority of the arbitrators, any claim or defense was unreasonable, the
arbitrators may assess, as part of their award, all or any part of the
arbitration expenses of the other party (including reasonable
attorneys’ fees) and of the arbitrators and the arbitration proceeding.





          6.8 Change of Control. For the purposes of this Agreement, “Change of Control” shall
be a change of control under the applicable definition contained in Section 2 of the Company’s 2007
Performance Incentive Plan, or successor thereto of comparable import; provided, however, that in
no event shall a Change of Control for purposes of this Agreement be deemed to have arisen merely
by virtue of a “person” or “group” (which terms shall have the meaning they have when used in
Section 13(d) of the Securities Exchange Act of 1934, as amended) having become a direct or
indirect owner of Company securities (such that a Change of Control would, without regard to this
proviso, otherwise have been deemed to have occurred), if Executive is or is a member of such
person or group.




     7. Severability. As the provisions of this Agreement are independent of and severable
from each other, the Company and Executive agree that if, in any action before any court or



22









 







agency legally empowered to enforce this Agreement, any term, restriction, covenant, or
promise hereof is found to be unreasonable or otherwise unenforceable, then such decision shall not
effect the validity of the other provisions of this Agreement, and such invalid term, restriction,
covenant, or promise shall also be deemed modified to the extent necessary to make it enforceable.



     8. Notice. For purposes of this Agreement, notices, demands and all other
communications provided for in the Agreement shall be in writing and shall be deemed to have been
duly given when received if delivered in person, the next business day if delivered by overnight
commercial courier (e.g., Federal Express), or the third business day if mailed by United States
certified mail, return receipt requested, postage prepaid, to the following addresses:



          (a) If to the Company, to:





National Retail Properties, Inc.

450 South Orange Avenue, Suite 900

Orlando, Florida 32801

Attn: Chairman of the Compensation Committee

           of the Board of Directors




with a copy to:

National Retail Properties, Inc.

450 South Orange Avenue, Suite 900

Orlando, Florida 32801

Attn: General Counsel




and




Pillsbury Winthrop Shaw Pittman LLP

2300 N Street, N.W.

Washington, DC 20037

Attn: Jeffrey B. Grill, Esq.



          (b) If to Executive, to:





Paul E. Bayer

at the address set forth on the signature page hereof



23









 




Either party may change its address for notices in accordance with this Section 8 by providing
written notice of such change to the other party.




     9. Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Florida.



     10. Benefits; Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective heirs, personal representatives, legal
representatives, successors and permitted assigns. Executive shall not assign this Agreement.
However, the Company is expressly authorized to assign this Agreement to a Company Affiliate upon
written notice to Executive, provided that (i) the assignee assumes all of the obligations of the
Company under this Agreement, (ii) Executive’s role when viewed from the perspective of Company
Affiliates in the aggregate is comparable to such role immediately before the assignment, and (iii)
the Company, for so long as an affiliate of the assignee, remains secondarily liable for the
financial obligations hereunder.



     11. Attorney’s Fees. The Company agrees to reimburse Executive for his reasonable
legal fees incurred in reviewing this Agreement. In the event of any legal proceeding relating to
this Agreement or any term or provision thereof, the losing party shall be responsible to pay or
reimburse the prevailing party for all reasonable attorneys’ fees incurred by the prevailing party
in connection with such proceeding, except that, in the event of an arbitration, the provisions of
Section 6.7(b)(iii) shall apply.



     12. Entire Agreement Amendment. This Agreement, including its incorporated Attachment
“A,” constitutes the entire agreement between the parties, and all prior understandings, agreements
or undertakings between the parties concerning Executive’s



24









 







employment or the other subject matters of this Agreement (including without limitation the
Existing Employment Agreement) are superseded in their entirety by this Agreement.



     13. Waivers and Amendments. This Agreement may be amended, superseded, canceled,
renewed or extended, and the terms hereof may be waived, only by a written instrument signed by the
parties or, in the case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any waiver on the part of any party of any such right, power or privilege nor any single or
partial exercise of any such right, power or privilege, preclude any other or further exercise
thereof or the exercise of any other such right, power or privilege.



     14. No Duty to Mitigate. Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other employment or otherwise,
nor will any payments hereunder be subject to offset in the event Executive does mitigate (except
as otherwise provided in clause (i)(G) of the second sentence of Section 4.3(b) or clause (i)(E) of
Section 4.4).



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



     16. Tax Advice. Executive confirms and represents to the Company that he has had the
opportunity to obtain the advice of legal counsel, financial and tax advisers, and such other
professionals as he deems necessary for entering into this Agreement, and he has not relied upon
the advice of the Company or the Company’s officers, directors, or employees.



     17. Interpretation. As both parties having had the opportunity to consult with legal
counsel, no provision of this Agreement shall be construed against or interpreted to the



25









 







disadvantage of any party by reason of such party having, or being deemed to have, drafted,
devised, or imposed such provision.



[Signature Page Follows]




26









 








     IN WITNESS WHEREOF, the parties hereto have signed their names as of the day and year first
above written.



	 	 	 	 	 
	 	 	NATIONAL RETAIL PROPERTIES, INC.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Robert C. Legler
	 

	 	 	 	 
	 

	 	Name:
	 	Robert C. Legler
	 

	 	Title:
	 	Chairman of the Compensation Committee
	 
	 	 	 	 
	 	 	/s/ Paul E. Bayer
	 	 	 
	 

	 	Paul E. Bayer






27









 






ATTACHMENT “A”




Additional Fringe Benefits





	•	 	$500/month car allowance






	•	 	Long-term disability coverage providing benefits equal to two-thirds of Annual Salary






	•	 	Life insurance benefits with a face amount equal to Annual Salary (provided that, if at any
time the Company cannot obtain such insurance at rates which are reasonable for the provision
by the Company of such a benefit, the Company may then self-insure such benefits)






28