Document:

EXHIBIT 10.46

 

Exhibit 10.46

EXECUTION COPY

September 10, 2007

Mr. Joseph Drake

2795 McConnell Drive

Los Angeles, CA 90064

			
	RE:	 	Employment Agreement

Dear Mr. Drake:

     On behalf of Lions Gate Films, Inc. (the “Company”), this letter agreement (this
“Agreement”) is to confirm the terms of your employment by the Company. We refer to you
herein as “Employee”. The terms of Employee’s employment are as follows:

1. TERM, TITLE, POSITION AND RESPONSIBILITIES.

	 	a.	 	Term. The term of this Agreement will begin on the date first
written above and end on the fifth (5th) anniversary thereof (the
“Term”).
	 
	 	b.	 	Title and Position. During the Term of this Agreement, Employee will
serve as Co-Chief Operating Officer and President of Lions Gate Motion Picture Group
of the Company and in such capacity (the “Position”) shall be in charge of the
motion picture group, which consists of theatrical production, theatrical
distribution, theatrical physical services, theatrical acquisitions and
co-productions, and theatrical marketing and publicity, domestically and
internationally (excluding all aspects of home entertainment) of Lions Gate
Entertainment Corp. (“Parent”) and its subsidiaries, including Mandate
Pictures, LLC and any of its subsidiaries (collectively, the “Motion Picture
Group”). During the Term, Employee will serve as the chief executive officer of
Mandate Pictures, LLC, Mandate Holdings, LLC and Mandate Distribution, LLC.
	 
	 	c.	 	Responsibilities and Approval Rights. Employee shall have the
powers, authority and responsibilities, and shall render such services, as are
customarily associated with the Position and as may be reasonably and lawfully
requested by the Company. Employee shall have the following specific
management-related approval rights:

	 	i.	 	Hiring and Firing Approval Rights.

	 	(1)	 	During the initial six (6) month period
following the date of this Agreement (the “Initial Period”),
Employee and the

 

 

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	 	 	 	Chief Executive Officer of Parent (“CEO”) shall
exclusively have mutual approval rights regarding the ability to
hire and fire personnel directly or indirectly reporting to
Employee. For purposes of this Agreement, personnel “directly or
indirectly” reporting to Employee means personnel within the
Motion Picture Group who report directly to Employee, their direct
reports within the Motion Picture Group, and so on.

	 	(2)	 	After the Initial Period, Employee shall
have the exclusive right to hire and fire personnel directly or
indirectly reporting to Employee.

	 	ii.	 	Overhead and Third Party Service Providers. Employee
shall, subject to a budget approved by the CEO, have the exclusive right to
approve overhead expenditures and hire and fire third party service providers
with respect to the Motion Picture Group. With respect to this subparagraph,
the budget for the Motion Picture Group shall be in accordance with past
practices of the Company.
	 
	 	iii.	 	Reporting. Employee shall directly report to the
CEO, currently Jon Feltheimer. All employees of Parent and its subsidiaries
who are employed in the Motion Picture Group shall report directly or
indirectly to Employee.
	 
	 	iv.	 	Greenlighting and Acquisition.

	 	(1)	 	All greenlight and acquisition decisions
shall be mutual, in that neither Parent nor any of its subsidiaries
shall greenlight or acquire any motion picture
(“Greenlight/Acquisition”) unless the CEO has first
meaningfully consulted with Employee and they have together agreed on
such Greenlight/Acquisition; provided, that if after such
consultation they cannot reach such an agreement, the CEO shall have
the final approval decision with respect to such
Greenlight/Acquisition.
	 
	 	(2)	 	Prior to the consultation and approval
described in clause (1) above, the Company agrees that all
Greenlight/Acquisition budgets, projections, reports and analyses of
Parent or any of its subsidiaries shall be generated by or submitted
for review by Employee and thereafter submitted to the CEO by
Employee or by a designee of Employee.

 

 

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	 	(3)	 	No Greenlight/Acquisition pitch,
presentation, proposal or decision from internal staff of Parent or
any of its subsidiaries shall occur unless it shall have first
received the approval of Employee. CEO and Employee shall
communicate to all of the staff of Parent and its subsidiaries
(including the Company) that all creative and financial decisions
related to the Motion Picture Group (including
Greenlight/Acquisitions) will be subject to Employee’s review and
must be directed through Employee before being presented for
approval. Employee and CEO agree that all information related to the
Motion Picture Group that is submitted by third parties, including,
without limitation, persons in public relations, marketing,
distribution, business affairs, finance and legal, must be directed
through Employee.

	 	 	 	Notwithstanding anything to the contrary herein, a breach of this
subsection (iv) shall not be a breach of this Agreement.

	 	d.	 	Service. During the Term, Employee shall devote Employee’s full
business time, energy and ability exclusively to the business, affairs and interests
of the Company, Parent, and its subsidiaries and matters related thereto, shall use
Employee’s reasonable efforts and abilities to promote their interests, and shall
perform the services contemplated by this Agreement in accordance with policies
generally applicable to senior executives of Parent and its subsidiaries.
Notwithstanding the foregoing, Employee shall be entitled to serve as a director of
Ghost House Mobile, LLC and to engage in passive investment activities, charitable
activities, political activities, and/or other activities to which the Company agrees
in writing, so long as the activities do not directly conflict or interfere with the
duties owed hereunder or meaningfully detract from the business time devoted by
Employee to the Company.

2. COMPENSATION.

	 	a.	 	Salary. Employee shall have an annual base salary of Eight Hundred
and Fifty Thousand Dollars ($850,000) (the “Base Salary”) during the Term of
this Agreement, payable in accordance with the Company’s normal payroll practices in
effect from time to time.
	 
	 	b.	 	Payroll. Nothing in this Agreement shall limit the Company’s right
to modify its payroll practices, as it deems necessary, so long as such changes are
generally applicable to senior executives of Parent and its subsidiaries.
	 
	 	c.	 	Bonuses.

 

 

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	 	i.	 	Discretionary Bonus. With respect to the first three
(3) years of the Term, Employee will be eligible for a discretionary bonus of
up to Two Hundred Thousand Dollars ($200,000) per year based on Parent’s
fiscal year (April 1 to March 31) (“Fiscal Year”) with proration for partial
years, as recommended by the CEO, payable at the same time bonuses are paid to
other senior executives of Parent and its subsidiaries, but no later than the
last calendar day of the next Fiscal Year after the Fiscal Year in which such
bonus was earned. With respect to the final two (2) years of the Term,
Employee will be eligible for an uncapped discretionary bonus (with proration
for partial years), as recommended by the CEO, payable at the same time
bonuses are paid to other senior executives of Parent and its subsidiaries,
but no later than the last calendar day of the next Fiscal Year after the
Fiscal Year in which such bonus was earned.
	 
	 	ii.	 	EBITDA Bonus. Employee shall be entitled to receive
an annual bonus (“EBITDA Bonus”) on Parent’s attainment of an EBITDA
target (the “E Target”), in the following amounts: 

	 	(1)	 	If Parent exceeds the E Target by at least
five percent (5%) but less than fifteen percent (15%), Employee shall
receive an EBITDA Bonus equal to One Hundred Thousand Dollars
($100,000).
	 
	 	(2)	 	If Parent exceeds the E Target by at least
fifteen percent (15%), Employee shall receive an EBITDA Bonus equal
to Two Hundred Thousand Dollars ($200,000).

	 	 	 	Within sixty (60) days after the beginning of each fiscal year of Parent,
the Compensation Committee of Parent (“CCLG”) shall set such
fiscal year’s E Target. The Company shall notify Employee in writing of
such E Target for the fiscal year in which the E Target applies promptly
after the E Target is set by the CCLG. Notwithstanding the foregoing, the
E Target shall not be greater than the E Target for Steve Beeks (or his
successor). Parent’s fiscal year commences April 1 of each year. Parent
shall establish a reserve amount for uncollectible receivables equal to
two percent (2%) (the “E Reserve”). The E Target shall include
the E Reserve. For each portion of a fiscal year that Employee is
employed by the Company, Employee shall be entitled to a pro-rata portion
of the EBITDA Bonus. Any bonus payable to Employee hereunder shall be
paid within thirty (30) days following the end of the audit for the
applicable fiscal year (or, if earlier, when EBITDA bonuses are paid to
other senior executives of Parent and its subsidiaries), but

 

 

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	 	 	 	in no event later than the last calendar day of the Fiscal year following
the Fiscal year in which the EBITDA Bonus is earned.

3. OFFICE. Employee’s office shall be located at the Company’s corporate headquarters, currently
located at 2700 Colorado Avenue, Suite 200, Santa Monica, CA 90404. Employee shall not be required
to locate outside of Los Angeles County without his prior written consent.

4. BENEFITS. In addition to those benefits set forth in Section 5 and elsewhere in this
Agreement, as an employee of the Company, Employee will be eligible to receive and participate in,
on terms and conditions that are no less favorable on an item-by-item basis (i.e. a “most favored
nation” or “MFN” basis), all other benefits (including all benefit plans and programs) Steve Beeks
(or his successor) receives or participates in, including as such benefits are increased, enlarged
or amended after the date hereof, provided that such benefits shall in no event be reduced or
diminished except as provided in Section 5(d). Furthermore, in terms of benefits, if Steve
Beeks receives (including pursuant to any amendment or extension of any existing agreement that he
has) any other rights not contemplated herein, or any rights that are superior to any rights
contemplated herein, Employee will receive such rights on an MFN basis with Steve Beeks. To the
extent that any reimbursements due to Employee or in-kind benefits provided to Employee under
Section 4 or Section 5 of this Agreement constitute “deferred compensation” under Section 409A of
the Internal Revenue Code of 1986, as amended (the “Code”), the programs or plans under
which such reimbursements are paid or such in-kind benefits are provided shall be structured
following the date hereof in accordance with Treasury Regulations Section 1.409A-3(i)(1)(iv) to
meet the requirements of a specified date or fixed schedule of payments with respect to such
reimbursements or benefits.

5. VACATION AND TRAVEL.

	 	a.	 	Employee will not have or accrue a specific number of vacation days, but will
instead be permitted to take vacations in the reasonable discretion of Employee so
long as such vacations do not interfere with the demands and requirements of
Employee’s duties and responsibilities under this Agreement. Notwithstanding the
foregoing, if Steve Beeks (or his successor) is permitted to accrue vacation time, the
Employee shall be permitted to accrue vacation time on a similar basis.
	 
	 	b.	 	Employee will be eligible to be reimbursed for any business expenses in
accordance with the Company’s Travel and Entertainment policy (and in any event no
worse than on an MFN basis with Steve Beeks or his successor).
	 
	 	c.	 	In addition, Employee shall be entitled to (i) business or first class travel
in accordance with the policies generally applicable to senior executives of Parent
and its subsidiaries, (ii) all customary “perqs” of division heads

 

 

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	 	 	 	within Parent, (iii) a cell phone, which shall be provided by the Company; (iv) a
reserved parking space, and (v) reimbursement for all expenses reasonably incurred
in connection with his employment in accordance with the Company’s business expense
reimbursement policy.

	 	d.	 	The Company reserves the right to modify, suspend or discontinue any and all
of the above referenced benefits, plans, practices, policies and programs (including
those in Section 4) at any time (whether before or after termination of
employment) without notice to or recourse by Employee so long as action is taken in
general with respect to Steve Beeks (or his successor) and all other similarly
situated persons at Parent and its subsidiaries as Employee and does not single out
Employee.

6. STOCK AND OPTIONS GRANTS.

	 	a.	 	Grant of Time-Based RSUs.

	 	i.	 	Time-Based Grant. Effective as of the date hereof,
Parent shall grant to Employee (the “Time-Based Grant”) 262,500
restricted share units (the “Time-Based RSUs”) of Parent, in
accordance with the terms and conditions of the Lions Gate Entertainment Corp.
Restricted Share Unit Award Agreement being entered by Parent and Employee
concurrently herewith.
	 
	 	ii.	 	Vesting. Subject to Section 6(e) and
(f), and subject to Section 6(a)(iii) below, the Time-Based
RSUs shall vest as follows:

	 	(1)	 	the first 105,000 Time-Based RSUs will vest
on the second (2nd) anniversary of this Agreement; and
	 
	 	(2)	 	the remaining 157,500 Time-Based RSUs will
vest in three (3) equal annual installments commencing upon the third
(3rd) anniversary of this Agreement.

	 	iii.	 	Continuance of Employment. Other than as set forth
elsewhere herein, the vesting schedule in Section 6(a)(ii) above
requires continued employment or service through each applicable vesting date
as a condition to the vesting of the applicable installment of the Time-Based
Grant and the rights and benefits under this Agreement.

	 	b.	 	Grant of Performance RSUs.

	 	i.	 	Performance Grant. Effective as of the date hereof,
Parent shall grant to Employee (the “Performance Grant”) 262,500
restricted

 

 

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	 	 	 	shares units (the “Performance RSUs”, and with the Time-Based
RSUs, the “RSUs”) of Parent in accordance with the terms and
conditions of the Lions Gate Entertainment Corp. Performance Share Unit
Award Agreement being entered by Parent and Employee concurrently
herewith.

	 	ii.	 	Vesting. Subject to Section 6(e) and
(f), and subject to Section 6(b)(iii) below, the Performance
RSUs shall be eligible to vest on the following schedule (“Performance
Vesting Dates”):

	 	(1)	 	the first 105,000 Performance RSUs will
vest on the second (2nd) anniversary of this Agreement;
and
	 
	 	(2)	 	the remaining 157,500 Performance RSUs will
vest in three (3) equal annual installments commencing upon the third
(3rd) anniversary of this Agreement.
	 
	 	 	 	The vesting of the Performance RSUs on such Performance Vesting
Dates shall be subject to satisfaction of fiscal year performance
targets approved in advance by the CCLG (at the same time as such
targets are set for Steve Beeks (or his successor), but in any
event within the first sixty (60) days of the applicable vesting
period); provided, however, that the CCLG will set
partial fiscal year targets for the stub periods at the beginning
and end of the Term (and the Company agrees that the partial
targets for the stub period at the beginning of the Term will be
set promptly after the date hereof). The Performance RSUs shall
vest on a sliding scale basis if the Company’s performance targets
have not been fully met for a particular fiscal year. For purpose
of example only, if seventy-five percent (75%) of the Company’s
fiscal year performance targets have been met for a particular
vesting period, seventy-five percent (75%) of the Performance RSUs
for that vesting period would vest. Notwithstanding the
foregoing, the CCLG may, in its sole discretion, provide that any
or all of the Performance RSUs scheduled to vest on any such
Performance Vesting Date shall be deemed vested as of such date
even if the applicable performance targets are not met.
Furthermore, the CCLG may, in its sole discretion, provide that
any of the Performance RSUs scheduled to vest on any such
Performance Vesting Date that does not vest because the applicable
performance targets are not met may vest on any future Performance
Vesting Date if the performance targets applicable to such
Performance Vesting Date are exceeded. If the CCLG accelerates
the vesting of any RSUs for Steve

 

 

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	 	 	 	Beeks (or his successor) (other than in the event of death), it
shall accelerate the vesting of a comparable portion of RSUs for
Employee.

	 	iii.	 	Continuance of Employment. Other than as set forth
elsewhere herein, the vesting schedule in Section 6(b)(ii) above
requires continued employment or service through each applicable vesting date
as a condition to the vesting of the applicable installment of the Performance
Grant and the rights and benefits under this Agreement.

	 	c.	 	Grant of Options.

	 	i.	 	Options. Effective as of the date hereof, Parent
shall grant Employee the right (the “Option”) to purchase 500,000
common shares of Parent, in accordance with the terms and conditions of the
Lions Gate Entertainment Corp. Nonqualified Stock Option Agreement being
entered by Parent and Employee concurrently herewith.
	 
	 	ii.	 	Vesting. Subject to Section 6(e) and
(f), and subject to Section 6(c)(iii) below, the Option shall
vest in five (5) equal annual installments with the first (1st)
vesting date on the first (1st) anniversary of this Agreement.
	 
	 	iii.	 	Continuance of Employment. Other than as set forth
elsewhere herein, the vesting schedule in Section 6(c)(ii) above
requires continued employment or service through each applicable vesting date
as a condition to the vesting of the applicable installment of the Option and
the rights and benefits under this Agreement.

	 	d.	 	Registration. The shares underlying the Time-Based RSUs, Performance
RSUs and Options shall be registered with the Securities and Exchange Commission for
resale on a registration statement on Form S-8, or a successor form thereto, to be
filed by Parent within ninety (90) days of the date of this Agreement.
	 
	 	e.	 	Acceleration of Grants and Options upon Death of Employee. In the
event that Employee dies during the Term of this Agreement, all RSUs and the Option
granted pursuant to Sections 6(a)-(c) of this Agreement shall
accelerate and immediately become fully vested.
	 
	 	f.	 	Change of Control.

	 	i.	 	If a Change of Control (as defined below) occurs during the
Term of this Agreement and concludes on or after the first (1st)

 

 

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	 	 	 	anniversary of the commencement date of the Term, all RSUs and the Option
granted pursuant to Sections 6(a)-(c) of this Agreement
shall accelerate and immediately become fully vested.

	 	ii.	 	For the purposes of this Agreement, “Change of
Control” shall mean,

	 	(1)	 	if any person, other than a trustee or
other fiduciary holding securities of Parent under an employee
benefit plan of Parent, becomes the beneficial owner, directly or
indirectly, of securities of Parent representing thirty-three percent
(33%) or more of the outstanding shares of common stock of Parent as
a result of one or more related transactions in the context of a
merger, consolidation, sale or other disposition of equity interests
or assets of Parent;
	 
	 	(2)	 	if, as a result of one or more related
transactions in the context of a merger, consolidation, sale or other
disposition of equity interests or assets of Parent, there is a sale
or disposition of thirty-three percent (33%) or more of Parent’s
assets (or consummation of any transaction, or series of related
transactions, having similar effect);
	 
	 	(3)	 	if, as a result of one or more related
transactions in the context of a merger, consolidation, sale or other
disposition of equity interests or assets of Parent, there occurs a
change or series of changes in the composition of the Board of
Directors (the “Board”) as a result of which half or less
than half of the directors are incumbent directors;
	 
	 	(4)	 	if, as a result of one or more related
transactions in the context of a merger, consolidation, sale or other
disposition of equity interests or assets of Parent, a shareholder or
group of shareholders acting in concert obtain control of
thirty-three percent (33%) or more of the outstanding shares;
	 
	 	(5)	 	if, as a result of one or more related
transactions in the context of a merger, consolidation, sale or other
disposition of equity interests or assets of Parent, a shareholder or
group of shareholders acting in concert obtain control of half of the
Board;
	 
	 	(6)	 	if there is a dissolution or liquidation of
Parent; or

 

 

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	 	(7)	 	if there is any transaction or series of
related transactions that has the substantial effect of any or more
of the foregoing.

	 	iii.	 	If Steve Beeks (or his successor) is afforded a definition of
“Change of Control” that is more favorable to Steve Beeks than the definition
above, then the definition above shall be modified to reflect such other
definition on an MFN basis with Steve Beeks (or his successor).

7. HANDBOOK. Employee agrees that the Company Employee Handbook outlines other policies, which
will apply to Employee’s employment, and Employee acknowledges receipt of such handbook. Please
note, however, that the Company retains the right to revise, modify or delete any policy or benefit
plan it deems appropriate, so long as such changes are generally applicable to senior executives of
Parent and its subsidiaries.

8. TERMINATION.

	 	a.	 	The employment and the Term shall terminate upon the happening of any one or
more of the following events:

	 	i.	 	The mutual written agreement between the Company and
Employee;
	 
	 	ii.	 	The death of Employee;
	 
	 	iii.	 	Employee having become so physically or mentally disabled as
to be incapable, even with reasonable accommodation, of satisfactorily
performing Employee’s duties hereunder for a period of twelve (12) consecutive
weeks or sixteen (16) weeks in any year, provided that the disability is not
cured within ten (10) days of receiving written notice of the proposed
termination;
	 
	 	iv.	 	The determination on the part of the Company that “cause”
exists for termination of this Agreement; “cause” being defined as any of the
following (provided that if Steve Beeks (or his successor) is afforded a
definition of “cause” that is more favorable to Steve Beeks than the
definition below, then the definition below shall be modified to reflect such
other definition on an MFN basis with Steve Beeks (or his successor)):

	 	(1)	 	Employee’s conviction of a felony or plea
of nolo contendere to a felony, except in connection with a traffic
violation;

 

 

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	 	(2)	 	commission, by act or omission, of any
material act of dishonesty in the performance of Employee’s duties
hereunder;
	 
	 	(3)	 	material breach of this Agreement by
Employee; or
	 
	 	(4)	 	any act of material misconduct by Employee
having a substantial adverse effect on the business or reputation of
the Company, which shall include, but not be limited to theft, fraud
or other illegal conduct, refusal or unwillingness to perform
employment duties, sexual harassment, violation of any fiduciary
duty, and violation of any duty of loyalty.

	 	 	 	Prior to terminating Employee’s employment for “cause,” the Company shall
provide Employee with written notice of the grounds for the proposed
termination. If the grounds for termination are subject to cure, Employee
shall have fifteen (15) days after receiving such notice in which to cure
such grounds to the extent such cure is possible. If no cure is possible
or Employee has failed to cure, Employee’s employment shall terminate upon
the fifteenth (15th) day following notice of termination.
	 
	 	v.	 	Termination by the Company “without cause”;
	 
	 	 	 	Termination by the Company “without cause” shall be defined as Employee
being terminated by the Company for any reason other than as set forth in
subparagraphs (a)(i)-(iv) above.
	 
	 	vi.	 	Termination by Employee for “good reason”;
	 
	 	 	 	Termination by Employee for “good reason” shall be defined as any of the
following (provided that if Steve Beeks (or his successor) is afforded a
definition of “good reason” that is more favorable to Steve Beeks than the
definition below, then the definition below shall be modified to reflect
such other definition on an MFN basis with Steve Beeks (or his
successor)): (i) material diminution in position, authority or duties of
Employee; (ii) material change in any of reporting relationships, except
as set forth below in the last sentence of this paragraph; (iii) reduction
in Base Salary, RSUs, Option, or benefits (except, with respect to
benefits only, to the extent there is a comparable reduction in benefits
for all Parent employees), (iv) material breach by the Company of this
Agreement, provided, that if the grounds for termination for “good reason”
are subject to cure, the Company

 

 

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	 	 	 	shall have fifteen (15) days after receiving notice from Employee in which
to cure such grounds to the extent such cure is possible; and (v) material
change in Employee’s position, authority or duties following a significant
merger, acquisition or similar transaction involving Parent or the Company
or any significant subsidiary of Parent (“Significant
Transaction”). Notwithstanding clause (ii) above, the insertion in
the reporting structure of one (1) Chief Operating Officer or similar
intermediary between the CEO and Employee in connection with a Significant
Transaction will not in and of itself constitute “Good Reason” unless
accompanied by a material diminution in position, authority or duties of
Employee or any of the other elements of the definition of “Good Reason.”

	 	b.	 	Payments on Termination.

	 	i.	 	In the event of a termination pursuant to Section
8(a)(v) “without cause” or pursuant to Section 8(a)(vi) for “good
reason”, (a) Employee shall be entitled to receive (A) accrued but unpaid Base
Salary, (B) theretofore unreimbursed expenses, and (C) the following:

	 	 	 	(A) a lump sum payment of fifty percent (50%) of each EBITDA Bonus
(on the basis that Parent exceeds the E Target by five percent
(5%)) that would have been earned through the conclusion of the
Term, if any, as if this Agreement had not been terminated and (B)
a lump-sum payment equal to fifty percent (50%) of the balance of
the Base Salary still owing to Employee under Section 2
hereof at the time of termination as if this Agreement had not
been terminated, in each case payable within ten (10) business
days of such separation (subject to Section 8(f)), but in no event
will this payment be less than the greater of either (X) six (6)
months’ Base Salary or (Y) the amount Employee would receive from
Parent’s severance policy for non-contract employees that is
currently in effect at the time of termination.
	 
	 	 	 	In addition, (A) all unvested Options that would vest on the next
vesting date, and fifty percent (50%) of the Options that would
vest on the subsequent vesting date, will vest upon such
termination, (B) all Performance RSUs that would vest on the next
vesting date will vest if earned (provided that any performance
components directly tied to Employee’s individual performance will
be ignored), (C) if termination is during the first year of the
Term, seventy-

 

 

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	 	 	 	five percent (75%) of the Time-Based RSUs that would vest on the
next vesting date will vest upon such termination, and (D) if
termination is after the first (1st) year of the Term,
all Time-Based RSUs that would vest on the next vesting date, and
fifty percent (50%) of the Time-Based RSUs that would vest on the
subsequent vesting date, will vest upon such termination.

	 	ii.	 	Death or Disability or Cause: Neither the Company
nor Employee shall have any remaining duties or obligations hereunder in
connection with a termination pursuant to Section 8(a)(ii),
(iii) or (iv), except that: (A) on termination for death
pursuant to Section 8(a)(ii), Employee shall be entitled to receive
all accrued but unpaid Base Salary, a pro rated Discretionary Bonus for the
portion of the year employed, theretofore unreimbursed expenses, and accrued
vacation pay, if any, and all Options and RSUs would vest upon such
termination; (B) on termination for Disability pursuant to Section
8(a)(iii), Employee shall be entitled to receive such compensation, and to
receive such other benefits (including vesting of Options and RSUs), in each
case on an MFN basis with all other employees of Parent, the Company and their
subsidiaries other than the CEO and Vice Chairman, currently Jon Feltheimer
and Michael Burns, respectively, that such persons would be entitled to
receive on termination for disability, and (C) on termination for “cause”
pursuant to Section 8(a)(iv), Employee shall be entitled to receive
accrued but unpaid Base Salary, theretofore unreimbursed expenses, and accrued
vacation pay, if any. Payments made under this Section 8(b)(ii) shall be in
accordance with the following: (x) on termination for death, the Company will
make such payments as soon as practicable following the Employee’s death but
no later than 120 days following Employee’s death; and (y) on termination for
Disability, subject to Section 8(f) of this Agreement, the Company will make
such payments, or such payments shall commence, as soon as practicable after
the Employee’s separation from service, but no later than 120 days following
Employee’s separation from service.
	 
	 	iii.	 	If, in connection with a Change of Control, Employee’s
employment is terminated by the Company within six (6) months of the Change of
Control for any reason other than “cause” or is terminated by Employee for
“good reason” within six (6) months of the Change of Control Employee shall be
entitled to receive (A) accrued but unpaid Base Salary, (B) theretofore
unreimbursed expenses, (C) payment of each EBITDA Bonus (on the basis that
Parent exceeded the E Target by five percent (5%)) that would

 

 

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	 	 	 	have been earned through the conclusion of the Term as if this Agreement
had not been terminated, (D) accrued vacation pay, if any, and (E) a
lump-sum payment in the amount equal to the greater of (x) two (2) times
Employee’s then Base Salary or (y) fifty percent (50%) of Employee’s then
Base Salary that would have been earned through the conclusion of the Term
as if this Agreement had not been terminated. Subject to Section 8(f) of
this Agreement, such payments under this Section 8(b)(iii) shall be made
no later than the tenth (10th) business day after such separation.

	 	c.	 	Surviving Provisions. Notwithstanding the foregoing, the parties
shall continue to be bound by Sections 10, 11, 12, 13,
14, 15, 16, and 17 if the employment or the Term is
terminated for any reason.
	 
	 	d.	 	Excess Parachute Payments. Employee is entitled to receive on an MFN
basis no less favorable treatment than any other existing senior executive of Parent
and its subsidiaries in connection with benefits provided under this Agreement that
would be subject to an excise tax under Section 4999 of the Internal Revenue Code.
Any tax gross-up payment under this Section shall be paid to Employee by the end of
Employee’s taxable year following the taxable year in which Employee pays the related
taxes. Additionally, to the extent Employee is entitled to the reimbursement of
expenses incurred due to a tax audit or litigation addressing the existence or amount
of a tax liability, such reimbursement shall be made to Employee by the end of
Employee’s taxable year following the taxable year in which the taxes that are the
subject of the audit or litigation are paid or, if no such taxes are paid, the end of
the taxable year following the taxable year in which the audit is completed or there
is a final and nonappealable settlement or other resolution of the litigation.”
	 
	 	e.	 	Offset. The Company has no right to offset against any amounts owed
to or other rights of Employee, his estate or his permitted successors or assigns.
	 
	 	f.	 	Section 409A Compliance. Notwithstanding any other provisions of the
Agreement, any payment or benefit otherwise required to be made after Employee’s
termination of employment that the Company reasonably determines is subject to Section
409A(a)(2)(B)(i) of the Code, shall not be paid or payment commenced until the later
of (a) six months after the date of Employee’s “separation from service” (within the
meaning of Section 409A of the Code) and (b) the payment date or commencement date
specified in the Agreement or other applicable document for such payment(s). On the
earliest date on which such payments can be made or commenced without violating the
requirements of Section

 

 

Mr. Joseph Drake

September 10, 2007

Page 15 of 20

	 	 	 	409A(a)(2)(B)(i) of the Code, Employee shall be paid, in a single cash lump sum, an
amount equal to the aggregate amount of all payments delayed pursuant to the
preceding sentence. In addition, Employee and the Company agree to cooperate to
make such amendments to the terms of the Agreement as may be necessary to avoid the
imposition of penalties and additional taxes under Section 409A of the Code with
respect to any payments or benefits under the Agreement.

9. EXCLUSIVITY AND SERVICE. Employee hereby agrees to comply with all reasonable requirements,
directions and requests, and with all reasonable rules and regulations made by the Company in
connection with the regular conduct of its business, in any case that are generally applicable to
senior executives of Parent and its subsidiaries. Except only as otherwise provided in this
Agreement, Employee further agrees to render services during Employee’s employment hereunder
whenever, wherever and as often as the Company may reasonably require in a competent, conscientious
and professional manner, and as instructed by the Company in all matters, including those involving
artistic taste and judgment, but there shall be no obligation on the Company to cause or allow
Employee to render any services, or to include all or any of Employee’s work or services in any
motion picture or other property or production.

10. INTELLECTUAL PROPERTY. Employee agrees that the Company shall own all rights of every kind and
character throughout the universe, in perpetuity to any material and/or idea suggested or submitted
by Employee or suggested or submitted to Employee by a third party that occurs during the Term or
any other period of employment with the Company, its parent, affiliates, or subsidiaries that are
within the scope of Employee’s employment and responsibilities hereunder. Employee agrees that
during the Term and any other period of employment with the Company, its parent, affiliates, or
subsidiaries, the Company shall own all other results and proceeds of Employee’s services that are
related to Employee’s employment and responsibilities. Employee shall promptly and fully disclose
all intellectual property generated by Employee during the Term and any other period of employment
with the Company, its parent, affiliates, or subsidiaries in connection with Employee’s employment
hereunder.

     All copyrightable works that Employee creates in connection with Employee’s obligations under
this Agreement and any other period of employment with the Company, its parent, affiliates, or
subsidiaries shall be considered “work made for hire” and therefore the property of the Company.
To the extent any work so produced or other intellectual property so generated by Employee is not
deemed to be a “work made for hire,” Employee hereby assigns and agrees to assign to the Company
(or as otherwise directed by the Company) Employee’s full right, title and interest in and to all
such works and other intellectual property. Employee agrees to execute any and all applications
for domestic and foreign copyrights or other proprietary rights and to do such other acts
(including without limitation the execution and delivery of instruments of further assurance or
confirmation) requested by the Company to assign the intellectual property to the Company and to
permit the Company to enforce any copyrights or other

 

 

Mr. Joseph Drake

September 10, 2007

Page 16 of 20

proprietary rights to the intellectual property. Employee further agrees not to charge the Company
for time spent in complying with these obligations. This Section 10 shall apply only to
that intellectual property which related at the time of conception to the Company’s then current or
anticipated business or resulted from work performed by Employee for the Company. Employee hereby
acknowledges receipt of written notice from the Company pursuant to California Labor Code Section
2872 that this Agreement (to the extent it requires an assignment or offer to assign rights to any
invention of Employee) does not apply to an invention which qualifies fully under California Labor
Code Section 2870.

11. ASSIGNMENT AND DELEGATION. Employee shall not assign any of Employee’s rights or delegate any
of Employee’s duties granted under this Agreement. Any such assignment or delegation shall be
deemed void ab initio.

12. TRADE SECRETS. The parties acknowledge and agree that during the Term of this Agreement and in
the course of the discharge of Employee’s duties hereunder and at any other period of employment
with the Company, its parent, affiliates, or subsidiaries, Employee shall have and has had access
to information concerning the operation of the Company and its affiliated entities, including,
without limitation, financial, personnel, sales, planning and other information that is owned by
the Company and regularly used in the operation of the Company’s business and (to the extent that
such confidential information is not subsequently disclosed) that this information constitutes the
Company’s trade secrets. Notwithstanding the above, the parties acknowledge and agree that trade
secrets shall not include any information that Employee can demonstrate (i) was publicly available
at the time of its disclosure to Employee, (ii) was already in Employee’s possession at the time of
disclosure, (iii) was rightfully received by Employee from a third party not subject to obligations
of confidentiality, or (iv) was independently developed by Employee without use of any trade
secrets.

     Employee agrees that Employee shall not disclose any such trade secrets, directly or
indirectly, to any other person or use them in any way, either during the Term of this Agreement or
at any other time thereafter, except as is required in the course of Employee’s employment for the
Company. Employee shall not use any such trade secrets in connection with any other employment
and/or business opportunities following the Term. In addition, Employee hereby expressly agrees
that Employee will not disclose any confidential matters of the Company that are not trade secrets
prior to, during or after Employee’s employment including the specifics of this Agreement.
Employee shall not use any such confidential information in connection with any other employment
and/or business opportunities following the Term. In addition, in order to protect the
Confidential Information, Employee agrees that during the Term and for a period of one (1) year
thereafter, Employee will not, directly or indirectly, induce or entice any other executive or
employee of the Company to leave such employment excluding such Employee’s executive assistant.

 

 

Mr. Joseph Drake

September 10, 2007

Page 17 of 20

13. ARBITRATION. Any dispute, controversy or claim arising out of or in respect of this Agreement
(or its validity, interpretation or enforcement), the employment relationship or the subject matter
hereof shall at the request of either party be submitted to and settled by binding arbitration
conducted before a single arbitrator in Los Angeles in accordance with the Federal Arbitration Act,
to the extent that such rules do not conflict with any provisions of this Agreement. Said
arbitration shall be under the jurisdiction of Judicial Arbitration and Mediation Services, Inc.
(“JAMS”) in Los Angeles, California. All such actions must be brought within the statute of
limitations period applicable to the claim as if that claim were being filed with the judiciary or
forever be waived. Failure to institute an arbitration proceeding within such period shall
constitute an absolute bar to the institution of any proceedings respecting such controversy or
claim, and a waiver thereof. The arbitrator shall have the authority to award damages and remedies
in accordance with applicable law. Any award, order, or judgment pursuant to such arbitration
shall be deemed final and binding and may be entered and enforced in any state or federal court of
competent jurisdiction. Each party agrees to submit to the jurisdiction of any such court for
purposes of the enforcement of any such award, order, or judgment. The Company shall pay for the
administrative costs of such hearing and proceeding.

14. NOTICES. All notices to be given pursuant to this Agreement shall be effected by mail or
personal delivery in writing as follows:

Company:

Lions Gate Films, Inc.

2700 Colorado Avenue, Suite 200

Santa Monica, CA 90404

Attn: General Counsel

Employee:

Joseph Drake

2795 McConnell Drive

Los Angeles, CA 90064

15. WAIVER. Failure to require compliance with any provision or condition provided for under this
Agreement at any one time, or several times, shall not be deemed a waiver or relinquishment of such
provision or condition at any other time.

16. INDEMNIFICATION. Except with respect to claims resulting from Employee’s willful misconduct or
acts outside the scope of his employment hereunder, Employee shall be indemnified by the Company
and by Parent (whether during or after the Term) in respect of all claims arising from or in
connection with his position or services as an officer of the Company to the maximum extent
permitted in accordance with Parent’s Certificate of Incorporation, its Bylaws and under applicable
law, and shall

 

 

Mr. Joseph Drake

September 10, 2007

Page 18 of 20

be covered by Parent’s applicable directors and officers insurance policy, which coverage shall be
no less favorable than that accorded any other officer or director or Parent.

			
	17.	 	INTEGRATION, AMENDMENT, SEVERABILITY, AND INTERPRETATION

	 	a.	 	This Agreement expresses the binding and entire Agreement between Employee
and the Company with respect to the subject matter hereof and shall replace and
supersede all prior arrangements and representations, either oral or written, as to
the subject matter hereof.
	 
	 	b.	 	All modifications or amendments to the Agreement must be made in writing and
signed by both parties.
	 
	 	c.	 	If any portion of this Agreement is held unenforceable under any applicable
statute or rule of law then such portion only shall be deemed omitted and shall not
affect the validity of enforceability of any other provision of this Agreement.
	 
	 	d.	 	This Agreement shall be governed by the laws of the State of California.
	 
	 	e.	 	As used herein, (i) the term “or” is not exclusive; (ii) words in the
singular include the plural, and words in the plural include the singular; (iii)
“herein,” “hereof,” and other similar words refer to this Agreement as a whole and not
to any particular section, subsection, paragraph, clause, or other subdivision; (iv)
“including” will be deemed to be followed by “, but not limited to,”; and (v) “shall,”
“will,” or “agrees” are mandatory, and “may” is permissive. The headings and
subheadings in this Agreement are only for convenience and are not to be considered in
construing this Agreement. This Agreement has been negotiated by the parties with the
assistance of their respective counsel, and the language used in this Agreement
expresses their mutual intent. Any rule of construction to the effect that
ambiguities are to be resolved against the drafting party will not apply in
interpreting this Agreement.

[Remainder of Page Intentionally Left Blank]

 

 

     Please acknowledge your confirmation of the above terms by signing below where indicated and
returning this letter to me.

	 	 	 	 	 
	 	Very truly yours,

Lions Gate Films, Inc.

 	 
	 	/s/ Wayne Levin
 	 
	 	Name:  	Wayne Levin 	 
	 	Title:  	Vice President 	 
	 

AGREED AND ACCEPTED

AS OF SEPTEMBER 10, 2007:

	 	 
	/s/ Joseph Drake 	 
	Joseph Drake	 

[Joe Drake Employment Agreement]exv4w1

 

Exhibit 4.1

NATIONAL RETAIL PROPERTIES, INC.

as Issuer

to

U.S. BANK NATIONAL ASSOCIATION

as Trustee

Supplemental Indenture No. 8

Dated as of September 10, 2007

 

Supplementing the Indenture dated as of March 25, 1998

 

$250,000,000

of

6.875% Notes due 2017

 

 

          SUPPLEMENTAL INDENTURE NO. 8, dated as of September 10, 2007 (the “Supplemental Indenture No.
8”), between NATIONAL RETAIL PROPERTIES, INC., a corporation duly organized and existing under the
laws of the State of Maryland (herein called the “Company”), and U.S. BANK NATIONAL ASSOCIATION (as
successor trustee to Wachovia Bank, National Association, (formerly First Union National Bank)), a
national banking association duly organized and existing under the laws of the United States of
America, as Trustee (herein called the “Trustee”).

RECITALS OF THE COMPANY

          The Company and the Trustee are parties to an Indenture, dated as of March 25, 1998 (the
“Original Indenture”), as supplemented by Supplemental Indenture No. 1 dated as of March 25, 1998,
Supplemental Indenture No. 3 dated as of September 20, 2000, Supplemental Indenture No. 4 dated as
of May 30, 2002 and Supplemental Indenture No. 5 dated as of June 18, 2004, Supplemental Indenture
No. 6 dated as of November 17, 2005, Seventh Supplemental Indenture dated as of September 13, 2006
(together with the Original Indenture, Supplemental Indenture No.1, Supplemental Indenture Nos. 3
through 6, the Seventh Supplemental Indenture and this Supplemental Indenture No. 8, collectively,
the “Indenture”), a form of which has been filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, as an exhibit to the Company’s Registration Statement on
Form S-3 (Registration No. 333-132095), providing for the issuance from time to time of Debt
Securities of the Company (the “Securities”).

          The Company has heretofore issued, pursuant to the Indenture, (a) $100,000,000 aggregate
principal amount of 7-1/8% Notes due 2008, (b) $100,000,000 aggregate principal amount of 8.125%
Notes due 2004, (c) $20,000,000 aggregate principal amount of 8.50% Notes due 2010, (d) $50,000,000
aggregate principal amount of 7.75% Notes due 2012, (e) $150,000,000 aggregate principal amount of
6.25% Notes dues 2014, (f) $150,000, 000 aggregate principal amount of 6.15% Notes due 2015 and (g)
$172,500,000 aggregate principal amount of 3.95% Convertible Senior Notes due 2026.

          The Company has commenced an offering of 6.875% Notes due 2017 (the “6.875% Notes”).

          Section 3.1 of the Original Indenture provides for various matters with respect to any series
of Securities issued under the Indenture to be established in an indenture supplemental to the
Indenture.

          Section 9.1(7) of the Original Indenture provides for the Company and the Trustee to enter
into an indenture supplemental to the Original Indenture to establish the

2

 

form or terms of Securities of any series as permitted by Sections 2.1 and 3.1 of the Original
Indenture.

          The Pricing Committee of the Board of Directors of the Company has duly adopted resolutions
authorizing the Company to execute and deliver this Supplemental Indenture No. 8.

          All the conditions and requirements necessary to make this Supplemental Indenture No. 8, when
duly executed and delivered, a valid and legally binding agreement in accordance with its terms and
for the purposes herein expressed, have been performed and fulfilled.

          NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE NO. 8 WITNESSETH:

          For and in consideration of the premises and the purchase of each of the series of Securities
provided for herein by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Securities, as follows:

ARTICLE ONE

RELATION TO INDENTURE; DEFINITIONS

          SECTION 1.1. Relation to Indenture.

          This Supplemental Indenture No. 8 constitutes an integral part of the Indenture.

          SECTION 1.2. Definitions.

          For all purposes of this Supplemental Indenture No. 8, the following terms shall have the
meanings specified except as otherwise expressly provided for or unless the context otherwise
requires. Capitalized terms used but not defined herein shall have the respective meanings
assigned to them in the Indenture. All references herein to Articles and Sections, unless
otherwise specified, refer to the corresponding Articles and
Sections of this Supplemental Indenture No. 8.

          “6.875% Notes” has the meaning given in the Recitals of the Company.

          “Acquired Indebtedness” means Indebtedness of a Person (i) existing at the time such Person
becomes a Subsidiary or (ii) assumed in connection with the acquisition of assets from such Person,
in each case, other than Indebtedness incurred in connection with, or in contemplation of, such
Person becoming a Subsidiary or such acquisition. Acquired Indebtedness shall be deemed to be
incurred on the date of the

3

 

related acquisition of assets from any Person or the date the acquired Person becomes a
Subsidiary.

          “Annual Debt Service Charge” for any period means the aggregate interest expense for such
period in respect of, and the amortization during such period of any original issue discount of,
Indebtedness of the Company and its Subsidiaries and the amount of dividends which are payable
during such period in respect of any Disqualified Stock.

          “Business Day” means any day, other than a Saturday or Sunday, that is neither a legal holiday
nor a day on which banking institutions in the City of New York or in the City of St. Paul are
authorized or required by law, regulation or executive order to close.

          “Capital Stock” means, with respect to any Person, any capital stock (including preferred
stock), shares, interests, participations or other ownership interests (however designated) of such
Person and any rights (other than debt securities convertible into or exchangeable for corporate
stock), warrants or options to purchase any thereof.

          “Consolidated Income Available for Debt Service” for any period means Earnings from Operations
of the Company and its Subsidiaries plus amounts which have been deducted, and minus amounts which
have been added, for the following (without duplication): (i) interest on Indebtedness of the
Company and its Subsidiaries, (ii) provision for taxes of the Company and its Subsidiaries based on
income, (iii) amortization of debt discount, (iv) provisions for gains and losses on properties and
property depreciation and amortization, (v) the effect of any noncash charge resulting from a
change in accounting principles in determining Earnings from Operations for such period and (vi)
amortization of deferred charges.

          “Corporate Trust Office” means the office of the Trustee at which, at any particular time, its
corporate trust business for this transaction shall be principally administered, which office at
the date hereof is located at 225 Water Street, Seventh Floor, Jacksonville, Florida 32202, and for
purposes of the Place of Payment provisions of Sections 3.5 and 10.2 of the Original Indenture, is
located at 60 Livingston Avenue, St. Paul, Minnesota 55107.

          “Disqualified Stock” means, with respect to any Person, any Capital Stock of such Person which
by the terms of such Capital Stock (or by the terms of any security into which it is convertible or
for which it is exchangeable or exercisable), upon the happening of any event or otherwise (i)
matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise (other
than Capital Stock which is redeemable solely in exchange for common stock), (ii) is convertible
into or exchangeable or exercisable for Indebtedness or Disqualified Stock or (iii) is redeemable
at the option of the holder thereof, in whole or in part (other than Capital Stock which is
redeemable solely in exchange for Capital Stock which is not Disqualified Stock or the redemption

4

 

price of which may, at the option of such Person, be paid in Capital Stock which is not
Disqualified Stock), in each case on or prior to the Stated Maturity of the 6.875% Notes.

          “Earnings from Operations” for any period means net earnings excluding gains and losses on
sales of investments, extraordinary items and property valuation losses, net as reflected in the
financial statements of the Company and its Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP.

          “Encumbrance” means any mortgage, lien, charge, pledge or security interest of any kind.

          “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder by the Commission.

          “GAAP” means generally accepted accounting principles as used in the United States applied on
a consistent basis as in effect from time to time; provided that solely for purposes of any
calculation required by the financial covenants contained herein, “GAAP” shall mean generally
accepted accounting principles as used in the United States on the date hereof, applied on a
consistent basis.

          “Indebtedness” of the Company or any Subsidiary means any indebtedness of the Company or any
Subsidiary, whether or not contingent, in respect of (i) borrowed money or evidenced by bonds,
notes, debentures or similar instruments whether or not such indebtedness is secured by any
Encumbrance existing on property owned by the Company or any Subsidiary, (ii) indebtedness for
borrowed money of a Person other than the Company or a Subsidiary which is secured by any
Encumbrance existing on property owned by the Company or any Subsidiary, to the extent of the
lesser of (x) the amount of indebtedness so secured and (y) the fair market value (as determined in
good faith by the Board of Directors of the Company) of the property subject to such Encumbrance,
(iii) the reimbursement obligations, contingent or otherwise, in connection with any letters of
credit actually issued or amounts representing the balance deferred and unpaid of the purchase
price of any property or services, except any such balance that constitutes an accrued expense or
trade payable, or all conditional sale obligations or obligations under any title retention
agreement, (iv) the principal amount of all obligations of the Company or any Subsidiary with
respect to redemption, repayment or other repurchase of any Disqualified Stock, or (v) any lease of
property by the Company or any Subsidiary as lessee which is reflected on the Company’s
consolidated balance sheet as a capitalized lease in accordance with GAAP, and also includes, to
the extent not otherwise included, any obligation by the Company or any Subsidiary to be liable
for, or to pay, as obligor, guarantor or otherwise (other than for purposes of collection in the
ordinary course of business), Indebtedness of another Person (other than the Company or any
Subsidiary) (it being understood that Indebtedness shall be deemed to be incurred by the Company or
any Subsidiary whenever the Company or such Subsidiary shall create, assume, guarantee or otherwise
become liable in respect thereof).

5

 

          “Make-Whole Amount” means, in connection with any optional redemption or accelerated payment
of any 6.875% Note, the excess, if any, of (i) the aggregate present value as of the date of such
redemption or accelerated payment of each dollar of principal being redeemed or paid and the amount
of interest (exclusive of interest accrued to the date of redemption or accelerated payment) that
would have been payable in respect of such dollar if such redemption or accelerated payment had not
been made, determined by discounting, on a semi-annual basis, such principal and interest at the
Reinvestment Rate (determined on the third Business Day preceding the date such notice of
Redemption is given or declaration of acceleration is made) from the respective dates on which such
principal and interest would have been payable if such redemption or accelerated payment had not
been made, over (ii) the aggregate principal amount of the 6.875% Notes being redeemed or paid.

          “Redemption Price” has the meaning specified in Section 2.5 hereof.

          “Reinvestment Rate” means 0.40 percent (forty one-hundredths of one percent) plus the
arithmetic mean of the yields under the respective headings “This Week” and “Last Week” published
in the Statistical Release under the caption “Treasury constant maturities” for the maturity
(rounded to the nearest month) corresponding to the remaining life to maturity, as of the payment
date of the principal being redeemed or paid. If no maturity exactly corresponds to such maturity,
yields for the two published maturities most closely corresponding to such maturity shall be
calculated pursuant to the immediately preceding sentence and the Reinvestment Rate shall be
interpolated or extrapolated from such yields on a straight-line basis, rounding in each of such
relevant periods to the nearest month. For such purposes of calculating the Reinvestment Rate, the
most recent Statistical Release published prior to the date of determination of the Make-Whole
Amount shall be used.

          “Statistical Release” means the statistical release designated “H.15(519)” or any successor
publication which is published weekly by the Federal Reserve System and which establishes yields on
actively traded United States government securities adjusted to constant maturities or, if such
statistical release is not published at the time of any determination of the Make-Whole Amount,
then such other reasonably comparable index which shall be designated by the Company.

          “Subsidiary” means, with respect to any Person, any corporation or other entity of which a
majority of (i) the voting power of the voting equity securities or (ii) the outstanding equity
interests of which are owned, directly or indirectly, by such Person. For the purposes of this
definition, “voting equity securities” means equity securities having voting power for the election
of directors, whether at all times or only so long as no senior class of security has such voting
power by reason of any contingency.

          “Total Assets” as of any date means the sum of (i) the Undepreciated Real Estate Assets and
(ii) all other assets of the Company and its Subsidiaries determined on a
consolidated basis in accordance with GAAP (but excluding accounts receivable and intangibles).

6

 

          “Total Unencumbered Assets” means the sum of (i) those Undepreciated Real Estate Assets not
subject to an Encumbrance for borrowed money and (ii) all other assets of the Company and its
Subsidiaries not subject to an Encumbrance for borrowed money, all determined on a consolidated
basis in accordance with GAAP (but excluding accounts receivable and intangibles).

          “Undepreciated Real Estate Assets” as of any date means the cost (original cost plus capital
improvements) of real estate assets of the Company and its Subsidiaries on such date, before
depreciation and amortization, determined on a consolidated basis in accordance with GAAP.

          “Unsecured Indebtedness” means Indebtedness which is not secured by any Encumbrance upon any
of the properties of the Company or any Subsidiary.

ARTICLE TWO

THE SERIES OF NOTES

          SECTION 2.1. Title of the Securities.

          There shall be a series of Securities designated the “6.875% Notes due 2017.”

          SECTION 2.2. Limitation on Aggregate Principal Amount.

          (a) The aggregate principal amount of the 6.875% Notes shall initially have an aggregate
principal amount equal to $250,000,000, provided that the Company may, without the consent of the
Holders of any then Outstanding 6.875% Notes, “reopen” this series of Securities so as to increase
the aggregate principal amount of 6.875% Notes Outstanding in compliance with the procedures set
forth in the Indenture, including Sections 3.1 and 3.3 thereof, so long as any such additional
Notes have the same tenor and terms (including, without limitation, rights to receive accrued and
unpaid interest) as the 6.875% Notes then Outstanding.

          (b) Nothing contained in this Section 2.2 or elsewhere in this Supplemental Indenture No. 8,
or in the 6.875% Notes, is intended to or shall limit execution by the Company or authentication or
delivery by the Trustee of 6.875% Notes under the circumstances contemplated by Sections 3.3, 3.4,
3.5, 3.6, 9.6, 11.7 and 13.5 of the Original Indenture.

7

 

          SECTION 2.3. Interest and Interest Rates; Maturity Date of 6.875% Notes.

          (a) The 6.875% Notes will bear interest at a rate of 6.875% per annum, from September 10, 2007
or from the immediately preceding Interest Payment Date to which interest has been paid or duly
provided for, payable semi-annually in arrears on April 15 and October 15 of each year, commencing
April 15, 2008 (each, an “Interest Payment Date”), to the Person in whose name such 6.875% Note is
registered in the Security Register at the close of business on April 1 or October 1 (whether or
not a Business Day), as the case may be, next preceding such Interest Payment Date (each, a
“Regular Record Date”). Interest on the 6.875% Notes will be computed on the basis of a 360-day
year comprised of twelve 30-day months.

          (b) The interest so payable on any 6.875% Note which is not punctually paid or duly provided
for on any Interest Payment Date (“Defaulted Interest”) shall forthwith cease to be payable to the
Person in whose name such 6.875% Note is registered on the relevant Regular Record Date, and such
Defaulted Interest shall instead be payable either (i) to the Person in whose name such 6.875% Note
is registered on the Special Record Date for the payment of such Defaulted Interest to be fixed by
the Trustee, notice of which shall be given to the Holder of such 6.875% Note not less than 10 days
prior to such Special Record Date or (ii) may be paid at any time in any other lawful manner in
accordance with the Indenture.

          (c) If any Interest Payment Date or Stated Maturity falls on a day that is not a Business Day,
the required payment shall be made on the next Business Day as if it were made on the date such
payment was due and no interest shall accrue on the amount so payable for the period from and after
such Interest Payment Date or Stated Maturity, as the case may be.

          (d) The 6.875% Notes will mature on October 15, 2017.

          SECTION 2.4. Limitations on Incurrence of Indebtedness.

          (a) The Company will not, and will not permit any Subsidiary to, incur any Indebtedness if,
immediately after giving effect to the incurrence of such additional Indebtedness and the
application of the proceeds thereof, the aggregate principal amount of all outstanding Indebtedness
of the Company and its Subsidiaries (determined on a consolidated basis in accordance with GAAP) is
greater than 60% of the sum of (without duplication) (i) the Total Assets of the Company and its
Subsidiaries as of the end of the calendar quarter covered in the Company’s Annual Report on Form
10-K or Quarterly Report on Form 10-Q, as the case may be, most recently filed with the Commission
(or, if such filing is not permitted under the Exchange Act, with the Trustee) prior to the
incurrence of such additional Indebtedness and (ii) the purchase price of any real estate assets or
mortgages receivable acquired, and the amount of any securities offering proceeds received (to the
extent such proceeds were not used to acquire real estate assets
or mortgages receivable or used to reduce Indebtedness), by the Company or any

8

 

Subsidiary since the
end of such calendar quarter, including those proceeds obtained in connection with the incurrence
of such additional Indebtedness.

          (b) In addition to the limitation set forth in subsection (a) of this Section 2.4, the Company
will not, and will not permit any Subsidiary to, incur any Indebtedness if the ratio of
Consolidated Income Available for Debt Service to the Annual Debt Service Charge for the four
consecutive fiscal quarters most recently ended prior to the date on which such additional
Indebtedness is to be incurred shall have been less than 1.5:1, on a pro forma basis after giving
effect thereto and to the application of the proceeds therefrom, and calculated on the assumption
that (i) such Indebtedness and any other Indebtedness incurred by the Company and its Subsidiaries
since the first day of such four-quarter period and the application of the proceeds therefrom,
including to refinance other Indebtedness, had occurred at the beginning of such period; (ii) the
repayment or retirement of any other Indebtedness by the Company and its Subsidiaries since the
first day of such four-quarter period had been repaid or retired at the beginning of such period
(except that, in making such computation, the amount of Indebtedness under any revolving credit
facility shall be computed based upon the average daily balance of such Indebtedness during such
period); (iii) in the case of Acquired Indebtedness or Indebtedness incurred in connection with any
acquisition since the first day of such four-quarter period, the related acquisition had occurred
as of the first day of such period with the appropriate adjustments with respect to such
acquisition being included in such pro forma calculation; and (iv) in the case of any acquisition
or disposition by the Company or its Subsidiaries of any asset or group of assets since the first
day of such four-quarter period, whether by merger, stock purchase or sale, or asset purchase or
sale, such acquisition or disposition or any related repayment of Indebtedness had occurred as of
the first day of such period with the appropriate adjustments with respect to such acquisition or
disposition being included in such pro forma calculation.

          (c) In addition to the limitations set forth in subsections (a) and (b) of this Section 2.4,
the Company will not, and will not permit any Subsidiary to, incur any Indebtedness secured by any
Encumbrance upon any of the property of the Company or any Subsidiary if, immediately after giving
effect to the incurrence of such additional Indebtedness and the application of the proceeds
thereof, the aggregate principal amount of all outstanding Indebtedness of the Company and its
Subsidiaries (determined on a consolidated basis in accordance with GAAP) which is secured by any
Encumbrance on property of the Company or any Subsidiary is greater than 40% of the sum of (without
duplication) (i) the Total Assets of the Company and its Subsidiaries as of the end of the calendar
quarter covered in the Company’s Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as
the case may be, most recently filed with the Commission (or, if such filing is not permitted under
the Exchange Act, with the Trustee) prior to the incurrence of such additional Indebtedness and
(ii) the purchase price of any real estate assets or mortgages receivable acquired, and the amount
of any securities offering proceeds received (to the extent that such proceeds were not used to
acquire real estate
assets or mortgages receivable or used to reduce Indebtedness), by the Company or any

9

 

Subsidiary
since the end of such calendar quarter, including those proceeds obtained in connection with the
incurrence of such additional Indebtedness.

          (d) The Company and its Subsidiaries may not at any time own Total Unencumbered Assets equal
to less than 150% of the aggregate outstanding principal amount of the Unsecured Indebtedness of
the Company and its Subsidiaries on a consolidated basis.

          (e) For purposes of this Section 2.4, Indebtedness shall be deemed to be “incurred” by the
Company or a Subsidiary whenever the Company or such Subsidiary shall create, assume, guarantee or
otherwise become liable in respect thereof.

          SECTION 2.5. Redemption.

          The 6.875% Notes may be redeemed at any time at the option of the Company, in whole or in
part, at a redemption price equal to the sum of (i) the principal amount of the 6.875% Notes being
redeemed plus accrued interest thereon to the Redemption Date and (ii) the Make-Whole Amount, if
any, with respect to such 6.875% Notes (the “Redemption Price”).

          SECTION 2.6. Place of Payment.

          The Place of Payment where the 6.875% Notes may be presented or surrendered for payment, where
the 6.875% Notes may be surrendered for registration of transfer or exchange and where notices and
demands to and upon the Company in respect of the 6.875% Notes and the Indenture may be served
shall be in the City of St. Paul, Minnesota, and the office or agency for such purpose shall
initially be located at U.S. Bank National Association, 60 Livingston Avenue, St. Paul, Minnesota
55107.

          SECTION 2.7. Method of Payment.

          Payment of the principal of and interest on the 6.875% Notes will be made at the office or
agency of the Company maintained for that purpose (which shall initially be an office or agency of
the Trustee), in such coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts; provided, however, that, at the option of the
Company, payments of principal and interest on the Notes (other than payments of principal and
interest due at Stated Maturity) may be made (i) by check mailed to the address of the Person
entitled thereto as such address shall appear in the Security Register or (ii) by wire transfer to
an account maintained by the Person entitled thereto located within the United States, provided,
that such Person owns 6.875% Notes in an aggregate principal amount of at least $1,000,000 and such
Person makes a written request therefor for the appropriate Interest Payment Date.

          SECTION 2.8. Currency.

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          Principal and interest on the 6.875% Notes shall be payable in Dollars.

          SECTION 2.9. Registered Securities; Global Form.

          The 6.875% Notes shall be issuable and transferable in fully registered form as Registered
Securities, without coupons. The 6.875% Notes shall each be issued in the form of one or more
permanent Global Securities. The depository for the 6.875% Notes shall initially be The Depository
Trust Company (“DTC”). The 6.875% Notes shall not be issuable in definitive form except as
provided in Section 3.5 of the Original Indenture.

          SECTION 2.10. Form of Notes.

          The 6.875% Notes shall be substantially in the form attached as Exhibit A hereto.

          SECTION 2.11. Registrar and Paying Agent.

          The Trustee shall initially serve as Registrar and Paying Agent for the 6.875% Notes.

          SECTION 2.12. Defeasance.

          The provisions of Sections 14.2 and 14.3 of the Original Indenture, together with the other
provisions of Article XIV of the Original Indenture, shall be applicable to the 6.875% Notes. The
provisions of Section 14.3 of the Original Indenture shall apply to the covenants set forth in
Section 2.4 of this Supplemental Indenture No. 8 and to those covenants specified in Section 14.3
of the Original Indenture.

          SECTION 2.13. Waiver of Certain Covenants.

          Notwithstanding the provisions of Section 10.11 of the Original Indenture, the Company may
omit in any particular instance to comply with any term, provision or condition set forth in
Sections 10.4 to 10.8, inclusive, of the Original Indenture, with Section 2.4 of this Supplemental
Indenture No. 8 and with any other term, provision or condition with respect to the 6.875% Notes
(except any such term, provision or condition which could not be amended without the consent of all
Holders of the 6.875% Notes), if before or after the time for such compliance the Holders of at
least a majority in principal amount of all outstanding 6.875% Notes or such series thereof, as
applicable, by Act of such Holders, either waive such compliance in such instance or generally
waive compliance with such covenant or condition. Except to the extent so expressly waived,
and until such waiver shall become effective, the obligations of the Company and the duties of the
Trustee in respect of any such term, provision or condition shall remain in full force and effect.

11

 

          SECTION 2.14. Acceleration of Maturity; Recission and Annulment.

          If an Event of Default with respect to Securities of any series at the time Outstanding occurs
and is continuing, then in every such case the Trustee or the Holders of not less than 25% in
principal amount of the Outstanding Securities of that series may declare the principal of, and the
Make-Whole Amount, if any, on, all the Securities of that series to be due and payable immediately,
by a notice in writing to the Company (and to the Trustee if given by the Holders), and upon any
such declaration such principal or specified portion thereof shall become immediately due and
payable. If an Event of Default with respect to the Securities of any series set forth in Sections
5.1(1), 5.1(2) and 5.1(6) of the Original Indenture occurs and is continuing, then in every such
case all the Securities of that series shall become immediately due and payable, without notice to
the Company, at the principal amount thereof plus accrued interest to the date the Securities of
that series are paid plus the Make-Whole Amount, if any, on the Securities of that series.

          SECTION 2.15. Event of Default.

          For purposes of determining whether an Event of Default with respect to the 6.875% Notes has
occurred and as permitted under Section 3.1(15) of the Original Indenture, the dollar threshold
references in Sections 5.1(5) and 5.1(8) of the Original Indenture shall be increased from
$10,000,000 to $25,000,000.

          If an Event of Default pursuant to Section 5.1(6) or 5.1(7) of the Original Indenture shall
have occurred, the principal amount of and the Make-Whole Amount on all outstanding notes shall
become due and payable without any declaration or other act on the part of the Trustee or of the
Holders.

ARTICLE THREE

MISCELLANEOUS PROVISIONS

          SECTION 3.1. Ratification of Original Indenture.

          Except as expressly modified or amended hereby, the Original Indenture continues in full force
and effect and is in all respects confirmed and preserved.

          SECTION 3.2. Fiscal Year.

          The Company shall notify the Trustee of its fiscal year and any change thereof.

          SECTION 3.3. Governing Law.

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          This Supplemental Indenture No. 8 and each 6.875% Note shall be governed by and construed in
accordance with the laws of the State of New York. This Supplemental Indenture No. 8 is subject to
the provisions of the Trust Indenture Act of 1939, as amended, and shall, to the extent applicable,
be governed by such provisions.

          SECTION 3.4. Counterparts.

          This Supplemental Indenture No. 8 may be executed in any number of counterparts, each of which
so executed shall be deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.

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     IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture No. 8 to be
duly executed by their respective officers hereunto duly authorized, all as of the day and year
first written above.

	 	 	 	 	 
	 	NATIONAL RETAIL PROPERTIES, INC.,

as Issuer

 	 
	 	By:  	 	 
	 	 	Kevin B. Habicht 	 
	 	 	Executive Vice President,

Chief Financial Officer,

Assistant Secretary and Treasurer 	 
	 
	 	U.S. BANK NATIONAL ASSOCIATION

as Trustee

 	 
	 	By:  	 	 
	 	 	Terence Rawlins 	 
	 	 	Vice President 	 
	 

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Exhibit A

Form of 6.875% Notes

15

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