Document:

Exhibit 10.25

 

EMPLOYMENT AGREEMENT

 

THIS
EMPLOYMENT AGREEMENT (“Agreement”), made and entered into,
effective as of the 3rd day of January, 2005 by and between Joseph
Staples (“Employee”) and Interactive Intelligence, Inc. (“Company”), an Indiana
corporation.

 

WITNESSETH:

 

WHEREAS,
the Employee possesses certain skills which the Company wishes to utilize in
its business, and the Employee wishes to provide certain services to the
Company upon the terms and conditions set forth in this Agreement;

 

NOW, THEREFORE,
in consideration of the premises and of the mutual promises and agreements
contained herein and other good and valuable consideration, the receipt, legal
adequacy and sufficiency of which are hereby acknowledged, the parties agree as
follows:

 

Section 1.  Employment.  The Company engages the Employee to serve the
Company, and the Employee agrees to serve the Company as an employee in such
capacities as the Board of Directors of the Company may, from time to time,
determine, upon the terms and conditions hereinafter set forth.

 

Section 2.  Term; Renewal.  The term of the Employee’s employment under
this Agreement shall be for an initial term commencing and ending on the dates
set forth on the Addendum attached hereto and incorporated herein by reference
(“Addendum”), which term shall automatically renew for successive one (1) year
terms, on the same terms and conditions set forth herein unless either the
Company or the Employee gives written notice to the other, at least thirty (30)
days prior to the expiration of the initial term or any renewal term, that the
term will not renew.

 

Section 3.  Title, Services and Duties.

(a)  During the
term of employment hereunder, the Employee shall serve in the capacities
described on the Addendum and shall perform the duties and responsibilities
described on the Addendum or as are normally associated with such a position in
the Company’s industry and as may be delegated to the Employee by the President
or the Company’s Board of Directors.

 

(b)  During such employment, the Employee shall
devote substantially all of the Employee’s business time, attention, energy and
skill to the business of the Company, and shall perform such services in a
faithful, competent and diligent manner at the direction of the President and
of the Company’s Board of Directors.

 

(c)  During the Employee’s employment, the Company
shall provide the Employee with such office facilities and support services as
the Company determines in its business judgment to be appropriate for the
Employee to perform the Employee’s duties and responsibilities hereunder.

 

 

(d)  The
Employee shall comply with all policies and procedures adopted by the Company
from time to time, including without limitation, policies regarding
reimbursement for business expenses incurred on behalf of the Company, and
compliance with applicable laws.

 

Section 4.  Compensation as Employee.  At all times during the initial term or
any renewal term of this Agreement, the Company shall pay the Employee an
annual salary in the amount set forth in the Addendum, payable at the usual
payroll payment dates of the Company, and any other options or benefits set
forth in the Addendum.  All amounts paid
hereunder by Company to the Employee shall be subject to all applicable local,
state and federal withholding taxes.  The
Company may increase or decrease the salary set forth herein from time to time,
in its sole discretion, but any decrease may only be made upon fifteen (15)
days prior notice.

 

Section 5.  Termination and Severance Payments

(a)  In the event that the employment of the
Employee is terminated for cause or in the event that the Employee resigns
his/her employment with the Company, the Employee shall be paid any salary and
any other benefits which have then accrued and to which the Employee is
entitled to at such time.  However, in
such event, the Employee shall not be entitled to any severance compensation as
set forth in subparagraph (b) below.

 

(b) In
the event that the employment of the Employee is terminated by the Company for
any reason other than for cause, in addition to receiving all accrued salary
and benefits to which the Employee is entitled to at such time, the Company
further agrees to pay the Employee as severance pay an amount equal to the
Employee’s salary as in effect at such time for an additional three (3) months
from the date of termination, with payments to be made on the Company’s usual
payroll payment dates.

 

(c)  All amounts paid under Subsections (a) or (b)
hereof to the Employee shall be subject to all applicable local, state or
federal withholding taxes, if any.

 

Section 6.  Employee Benefits.

(a)  The Employee shall be limited each calendar
year to a vacation benefit for the amount of time shown in the Addendum
(prorated from the date of commencement to the end of that applicable calendar
year).  All vacation benefits must be
fully utilized in the calendar year in which accrued, provided that (i) no
vacation may be taken during the first six (6) months of the initial term hereof
without the prior written consent of the Company, (ii) the Employee must comply
with procedures adopted from time to time by the Company with respect to the
scheduling of vacations, and (iii) if because of the Company’s requirements,
the Company does not approve the Employee’s requested vacation schedule and
thus prevents the Employee from fully utilizing all of the Employee’s vacation
in the year earned, the Company and the Employee shall in good faith make
arrangements for either the carryover of such unused vacation to the next
calendar year or such other arrangements as are mutually satisfactory.

 

(b)  During the term of the Employee’s employment
hereunder, the Employee shall be entitled to participate, upon the same terms
and conditions applicable to employees generally in any life, health,
hospitalization or any other insurance program, or any other pension or benefit
plan which the Company may from time to time provide or make available to the
Company’s

 

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employees and for which
the Employee is eligible and qualified; provided that if the inclusion of the
Employee under any such program or plan causes or would cause either such
program or plan to be terminated or the Company to incur a materially
disproportionate additional cost, the Company may elect to provide benefits of
a substantially similar nature which avoids such adverse effects.

 

Section 7.  Covenant Not to Compete.

(a)  During the Employee’s service hereunder and
for a period of twelve (12) months thereafter, regardless of the reason or
method of termination, the Employee will not, directly or indirectly, for the
Employee’s own benefit or the benefit of any other person or entity:

 

(i)                                     solicit
in any manner, seek to obtain, or service the business of any customer of the
Company, other than for the Company;

(ii)                                  become
an owner of any business, if such business competes with the Company;

(iii)                               become employed by or
serve as an agent, independent contractor or representative of any of the
following direct competitors of the Company – Altigen, Apropos, Artisoft,
Aspect, Avaya, Cisco, Concerto, Telephony at Work – unless such employment or
service is in a business unit that does not compete with the Company.

(iv)                              solicit
the employment of or hire any employee of the Company, or encourage any
employee to terminate his or her employment with the Company; or

(v)                                 prepare
in any manner to compete with the Company.

 

(b)  For
purposes of this Agreement, a “customer” shall be deemed to be any person,
business, partnership, proprietorship, firm, organization or corporation which
has done business with the Company or which has been solicited or serviced in
any manner, directly or indirectly, by the Company within twelve (12) months
prior to the date of the termination of the Employee, and the phrase “service
the business of any customer” means the development, modification, enhancement
or improvement of any product or service offered by the Company or which is
reasonably related to the products or services offered by the Company.  The Employee hereby acknowledges that, by
virtue of the Employee’s position and access to information, the Employee will
have advantageous familiarity and personal contacts with the Company’s
customers, wherever located, and that the restrictions contemplated hereby are reasonable
for the protection of the Company’s goodwill and customer base, and the Company’s
efforts in the development of such customers.

 

(c)  If the Employee does not comply with the
provisions of this Section 7, the twelve (12) month period of non-competition
provided herein shall be tolled and deemed not to run during any period(s) of
noncompliance, the intention of the parties being to provide twelve (12) full
months of non-competition by the Employee after the termination or expiration
of this Agreement.

 

Section 8.  Covenant Not to Disclose Confidential
Information.

(a)  The term “Confidential Information” as used
herein shall mean any and all software programs, customer lists, trade secrets
and information, know-how, skills, knowledge, ideas, knowledge of customer’s
commercial requirements, pricing methods, sales and marketing techniques,
dealer relationships and agreements, financial information, intellectual
property, codes, algorithms, research, development, research and development
programs, processes,

 

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documentation,
inventions, or devices used in or pertaining to the Company’s business (i)
which relate in any way to the Company’s business, products or processes; or
(ii) which are discovered, conceived, developed or reduced to practice by the
Employee, either alone or with others either (x) during the term of this
Agreement; or (y) at the Company’s expense; or (z) on the Company’s premises or
with the Company’s equipment.

 

(b)  During the course of his/her services
hereunder, the Employee may become knowledgeable about, or become in possession
of, Confidential Information.  If such
Confidential Information were to be divulged or become known to any competitor
of the Company or to any other person outside the employ of the Company, or if
the Employee were to consent to be employed by any competitor of the Company or
to engage in competition with the Company, the Company would be harmed.  In addition, the Employee has or may develop
relationships with the Company’s customers which could be used to solicit the
business of such customers away from the Company.  The parties have entered into this Agreement
to guard against such potential harm.

 

(c)  The Employee shall not, directly or
indirectly, use any Confidential Information for any purpose other than the
benefit of the Company or communicate, deliver, exhibit or provide any
Confidential Information to any person, firm, partnership, corporation,
organization or entity, except other employees or agents of the Company as
required in the normal course of the Employee’s service as an employee or
except as the President or any authorized officer of the Company may direct in
writing.  The covenant contained in this Section 8
shall be binding upon the Employee during the term of this Agreement and
following the termination hereof, for the shorter of the period until either
(i) until such Confidential Information becomes obsolete; or (ii) until such
Confidential Information becomes generally known in the Company’s trade or
industry by means other than a breach of this covenant.

 

(d)  The Employee agrees that all Confidential
Information and all records, documents and materials relating to all of such
Confidential Information, shall be and remain the sole and exclusive property
of the Company.

 

Section 9.  Remedies.

(a)  The Employee agrees that the Company will
suffer irreparable damage and injury and will not have an adequate remedy at
law in the event of any breach by the Employee of any provision of Sections 7 or
8 hereof.  Accordingly, in the event of a
breach or of a threatened or attempted breach by the Employee of Sections 7 or
8 hereof, in addition to all other remedies to which the Company is entitled
under law, in equity, or otherwise, the Company shall be entitled to a
temporary restraining order and permanent injunction (without the necessity of
showing any actual damage) or a decree of specific performance of the
provisions of Sections 7 or 8 hereof and no bond or other security shall be
required in that connection.  The Company
shall be entitled to recover from the Employee, reasonable attorneys’ fees and
expenses incurred in any action wherein the Company successfully enforces the
provisions of Sections 7 or 8 hereof against the breach or threatened breach of
those provisions by the Employee.

 

(b)  The Employee acknowledges and agrees that in
the event of termination of this Agreement for any reason whatsoever, the
Employee can obtain other engagements or employment of a kind and nature
similar to that contemplated herein and that the issuance of an

 

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injunction to enforce the
provisions of Sections 7 or 8 hereof will not prevent the Employee from earning
a livelihood.

 

(c)  The covenants on the part of the Employee
contained in Sections 7 or 8 hereof are essential terms and conditions to the
Company entering into this Agreement, and shall be construed as independent of
any other provision in this Agreement. 
The existence of any claim or cause of action the Employee has against
the Company, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of these covenants.

 

Section 10.  Inventions.

(a)
The Employee shall disclose fully to the Company all inventions (as defined
below) conceived or discovered by the Employee, whether solely or jointly with
others during the term of this Agreement. 
Such inventions shall belong solely to the Company and shall not belong
to the Employee.  During the term of this
Agreement, the Employee shall assign to the Company, exclusively and free from
any royalty obligation or any other legal or equitable title or right of the
Employee, all such inventions referred to above and all patents, trademarks,
copyrights, and maskworks, and any and all applications and rights pertaining
thereto on a worldwide basis.  The
Employee shall assist the Company, during and subsequent to the term hereof, in
every proper way, but without any further compensation or additional
consideration, to transfer and assign such inventions to and for the Company’s
benefit and enjoyment and to cooperate as may be reasonably requested to
perfect the Company’s ownership therein and, if requested by the Company, to
prosecute or direct in prosecuting any application for or registration with
respect to any patent or other applicable intellectual property right,
including, but not in limitation thereof, the execution and delivery of
applications for the registration of one or more intellectual property rights and
assignments of the same as may be deemed necessary or desirable by the Company
in any office selected by the Company. 
The judgment of the Company with respect to the registrability of any
particular item of intellectual property shall be final and conclusive as
between the Employee and the Company.

 

(b)  Any
improvements made upon such inventions by the Employee subsequent to the term
hereof shall be presumed to have been developed during the term hereof and by
and for the benefit of the Company and accordingly shall be the property of the
Company.

 

(c)  The Employee agrees to execute such other
standard forms relating to the invention or development of inventions and other
intellectual properties as the Company may require of its consultants and
employees generally.

 

(d)  Prior inventions of the Employee, if any, as
listed on the Addendum, are excluded from the scope of this Agreement.

 

(e)  For purposes of this Agreement, “inventions”
includes all inventions, creations, developments, software programs,
algorithms, routines, patterns, components, compilations, devices, or
improvements of any kind or nature, whether or not trade secret, patented,
patentable, copyrighted or copyrightable, which the Employee had made or
conceived or developed or may make, conceive or develop, either solely or
jointly with others, while in the employ of the Company or with the use of the
Company’s time, materials, equipment or facilities or relating in any way to
the Company’s actual, anticipated, or subsequently arising business, products,

 

5

 

services or activities,
or arising out of or suggested by any task assigned to be performed by the
Employee, solely or jointly with others, for or on behalf of the Company.

 

Section 11.  Surrender of Records.  Upon termination of the Employee’s employment
for any reason, the Employee shall immediately surrender to the Company any and
all records, notes, documents, forms, manuals, photographs, instructions,
lists, drawings, blueprints, programs, diagrams or other written, printed or
electronic material (including any and all copies made at any time whatsoever)
in his or her possession or control which pertain to the business of the
Company.

 

Section 12.  Termination.  During the initial term or any renewal term,
the employment of the Employee may be terminated at will for any reason by
either the Company or the Employee, with at least ten (10) days prior written
notice by the terminating party delivered to the other setting forth whether
such termination was for cause or without cause to determine whether the
Employee is entitled to any severance payment pursuant to Section 5
above.  Notwithstanding the foregoing,
this Agreement shall be terminated immediately, without any notice or waiting
period, upon the Employee’s death.  This
Agreement may be terminated at any time by mutual agreement of the parties.

 

Section 13.  Parties Bound.  All provisions of this Agreement shall inure
to the benefit of and be binding upon the parties hereto, their heirs, personal
representatives, successors and assigns.

 

Section 14.  Effect and Modification.  This Agreement comprises the entire agreement
between the parties with respect to the subject matter hereof and supersedes
all other earlier agreements relating to the subject matter hereof.  No statement or promise, except as herein set
forth, has been made with respect to the subject matter of this Agreement.  No modification or amendment hereof shall be
effective unless in writing and signed by the Employee and an officer of the
Company (other than the Employee).

 

Section 15.  Non-Waiver.  The Company’s or the Employee’s failure or
refusal to enforce all or any part of, or the Company’s or the Employee’s
waiver of any breach of this Agreement, shall not be a waiver of the Company’s
or the Employee’s continuing or subsequent rights under this Agreement, nor
shall such failure or refusal or waiver have any affect on the subsequent
enforceability of this Agreement.

 

Section 16.  Non-Assignability.  This Agreement contemplates that the Employee
will personally provide the services described herein, and accordingly, the
Employee may not assign the Employee’s rights or obligations hereunder, whether
by operation of law or otherwise, in whole or in part, without the prior
written consent of the Company.

 

Section 17.  Notice.  Any notice, request, instruction or other
document to be given hereunder to any party shall be in writing and delivered
by hand, telegram, registered or certified United States mail return receipt
requested, or other form of receipted delivery, with all expenses of delivery
prepaid, as follows:

 

6

 

	
  If to the
  Employee:

  	
  To the most recent address the Company has on its
  records.

  Employees most recent address (please fill in):

  
	
   

  	
  8684
  S. Willow Green Circle

  
	
   

  	
  Sandy,
  UT 84093

  
	
   

  	
   

  
	
  If
  to the Company:

  	
  Interactive
  Intelligence, Inc.

  
	
   

  	
  7601
  Interactive Way

  
	
   

  	
  Indianapolis,
  IN 46278

  
	
   

  	
  Attn:
  Donald E. Brown, M.D., President

  

 

Any notice to the
employee shall also be sufficient, if sent to the most recent address of the
employee on the Company’s books and records.

 

Section 18.  Governing Law.  This Agreement is being delivered in and
shall be governed by the laws of the State of Indiana.  All actions or proceedings shall be tried in
the state or federal courts whose venue includes Marion County or Hamilton
County, Indiana.

 

Section 19.  Prior Agreements.

(a)  The Employee represents and warrants to the
Company that the Employee is not a party to or otherwise bound by any agreement
that would restrict in any way the performance by the Employee of the Employee’s
duties, services and obligations under this Agreement, that the Employee has
disclosed to the Company all employment type agreements to which the Employee
has been bound, including without limitation employment agreements, consulting
agreements, non-compete agreements or covenants, confidentiality or
non-disclosure agreements or covenants, and intellectual property assignment
agreements, and that the Company will not have any liability to any third party
arising out of the Employee entering into this Agreement or performing
hereunder.

 

IN
WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.

 

 

	
   

  	
  /s/ Joseph A.
  Staples

  	
   

  
	
   

  	
  Printed: Joseph
  Staples

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  INTERACTIVE
  INTELLIGENCE, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephen R.
  Head

  	
   

  
	
   

  	
   

  	
  Stephen
  R. Head, Chief Financial Officer

  	
   

  

 

7

 

ADDENDUM TO EMPLOYMENT AGREEMENT

BETWEEN INTERACTIVE INTELLIGENCE, INC.

AND

JOSEPH STAPLES, DATED, JANUARY 3, 2005

 

This Addendum relates to
the Employment Agreement between Interactive Intelligence, Inc. and, Joseph
Staples, dated January 3, 2005. This Addendum is incorporated therein by
reference and shall be an integral part of the Employment Agreement.

 

	
  1.  Name of Employee:

  	
  Joseph Staples

  	
   

  
	
   

  	
   

  	
   

  
	
  2.  Initial Term:

  	
  Two (2) Years

  	
   

  
	
   

  	
   

  	
   

  
	
  3.  Date of Commencement:

  	
  January 3,
  2005

  	
   

  
	
   

  	
   

  	
   

  
	
  4.  Date Initial Term Ends:

  	
  January 3,
  2007

  	
   

  
	
   

  	
   

  	
   

  
	
  5.  Title:

  	
  Senior Vice
  President of Worldwide Marketing

  	
   

  
	
   

  	
   

  	
   

  
	
  6.  Job Description:

  	
  Marketing

  	
   

  
	
   

  	
   

  	
   

  
	
  7.  Initial Compensation:

  	
  $185,000 per
  year

  	
   

  
	
   

  	
   

  	
   

  
	
  8.  Stock Options:

  	
   

  	
   

  
	
  • Plan

  	
  Incentive Stock
  Option Plan (“Qualified”)

  	
   

  
	
  • Number

  	
  75,000
  (Seventy-Five Thousand) shares

  	
   

  
	
  • Exercise Price

  	
  Price in effect
  as of the grant date

  	
   

  
	
   

  	
   

  	
   

  
	
  9.  Amount of Vacation:

  	
  Two (2) weeks
  per calendar year

  	
   

  
	
   

  	
  Three (3) weeks
  per calendar year after 90 days of employment

  	
   

  
	
   

  	
   

  	
   

  
	
  10. Other
  Benefits:

  	
  Medical, Vision
  and Dental Insurance, 401k Plan,

  	
   

  
	
   

  	
  Long Term
  Disability, Cafeteria 125 Plan

  	
   

  
	
   

  	
   

  	
   

  
	
  11. Prior
  Inventions:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date: January 3,
  2005

  	
  /s/ JAS

  	
   

  	
  /s/ SRH

  	
   

  	
   

  
	
   

  	
  Initials

  	
   

  	
  Initials

  	
   

  	
   

  

 

 

(#31613 and 40525)

 

8Exhibit 10.1

 

RESTRICTED STOCK AGREEMENT

 

THIS AGREEMENT is made between Thomas A.
Lewis (the “Employee”) and Realty Income Corporation, a Maryland corporation
(the “Company”), as of January 1, 2005 (the “Effective Date”).

 

RECITALS

 

(1)           Pursuant to the 2003 Incentive Award
Plan of Realty Income Corporation (the “Plan”), the Company has granted to
Employee an award of 90,000 shares of restricted common stock of the Company
(the “Shares”).

 

(2)           As a condition to Employee’s grant of
restricted stock, Employee must execute this Restricted Stock Agreement, which
sets forth the rights and obligations of the parties with respect to the
Shares.

 

(3)           The
Plan’s terms are hereby incorporated herein by reference.  Capitalized terms not defined herein shall
have the meanings ascribed to them in the Plan.

 

1.             Forfeiture;
Vesting.

 

(a)           Except as provided in Subsections 1(c)
and (d), if Employee’s employment with the Company is terminated for any reason,
including, but not limited to for Cause (as defined below), death, and
disability, all unvested Shares (the “Unvested Shares”) as of the date of such
termination shall immediately be forfeited and shall be transferred to the
Company; provided that as to Shares that would have vested at the subsequent
Vesting Date (as hereinafter defined), such Shares shall vest on a prorated
basis based on the number of days elapsed from the prior Vesting Date through
the date of termination and rounding down to the nearest Share.

 

(b)           Except as provided in Subsections
1(c) and (d), the Unvested Shares issued hereunder shall become vested over ten
(10) years in 10% installments on each anniversary of the Effective Date (each
such anniversary, a “Vesting Date”), conditioned upon Employee’s continued
service as an Employee, Consultant or Director of the Company as of each such
Vesting Date.

 

(c)           Notwithstanding the provisions of
Section 1(b) hereof, in the event of a Change in Control all Unvested
Shares shall immediately become vested immediately prior to the consummation of
such Change in Control.

 

(d)           Notwithstanding the provisions of Subsections
1(a) and(b) hereof, in the event of Employee’s termination of employment
without Cause or Employee’s Constructive Termination (each as defined below),
in either case within eighteen months following a merger or consolidation of
the Company with or into another corporation in a transaction that is not a
Change in Control (a “Non-CIC Merger”), then all Unvested Shares (or any
unvested rights to cash or other property for which the Unvested Shares were substituted
or exchanged in connection with the Non-CIC Merger) shall immediately become
vested.

 

 

(e)           For purposes of this Agreement, “Cause,”
“Change in Control” and “Good Reason” shall have the following defined
meanings:

 

(i)            “Cause” means (a) theft, dishonesty
or falsification of any employment or Company records; (b) malicious or
reckless disclosure of the Company’s confidential or proprietary information;
(c) commission of any immoral or illegal act or any gross or willful
misconduct, where the Company reasonably determines that such act or misconduct
has (1) seriously undermined the ability of the Company’s management to entrust
Employee with important matters or otherwise work effectively with Employee,
(2) contributed to the Company’s loss of significant revenues or business
opportunities, or (3) significantly and detrimentally effected the business or
reputation of the Company or any of its subsidiaries; and/or (d) Employee’s
failure or refusal to work diligently to perform tasks or achieve goals reasonably
requested by the Board, provided
such breach, failure or refusal continues after the receipt of reasonable
notice in writing of such failure or refusal and an opportunity to correct the
problem.  “Cause” shall not mean a
physical or mental disability.

 

(ii)           “Change in Control” shall mean the
occurrence of any of the following:

 

(a)           an acquisition in one transaction or
a series of related transactions (other than directly from the Company or
pursuant to awards granted under the Plan or compensatory options or other
similar awards granted by the Company) of the Company’s voting securities by
any individual or entity (a “Person”), immediately after which such Person has
beneficial ownership of fifty percent (50%) or more of the combined voting
power of the Company’s then outstanding voting securities (other than a
Non-Control Transaction, as defined below);

 

(b)           the individuals who, immediately
prior to the Effective Date, are members of the Board (the “Incumbent Board”),
cease for any reason to constitute at least a majority of the members of the
Board; provided, however, that if the election,
or nomination for election, by the Company’s common stockholders, of any new
director was approved by a vote of at least a majority of the Incumbent Board,
such new director shall, for purposes of this Agreement, be considered as a
member of the Incumbent Board; provided further, however,
that no individual shall be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an actual or
threatened “Election Contest” (as described in Rule 14a-11 promulgated under
the Securities Exchange Act of 1934, as amended) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board (a “Proxy Contest”) including by reason of any agreement intended to
avoid or settle any Election Contest or Proxy Contest; or

 

(c)           the consummation of

 

(iii)          a merger, consolidation or
reorganization involving the Company unless:

 

(A)          the stockholders of the Company,
immediately before such merger, consolidation or reorganization, own, directly
or indirectly,

 

2

 

immediately following such merger,
consolidation or reorganization, more than fifty percent (50%) of the combined
voting power of the outstanding voting securities of the corporation resulting
from such merger or consolidation or reorganization (the “Surviving Corporation”)
in substantially the same proportion as their ownership of the Company’s voting
securities immediately before such merger, consolidation or reorganization,

 

(B)           the individuals who were members of
the Incumbent Board immediately prior to the execution of the agreement
providing for such merger, consolidation or reorganization constitute at least
a majority of the members of the board of directors of the Surviving
Corporation, or a corporation beneficially owning, directly or indirectly, a
majority of the voting securities of the Surviving Corporation, and

 

(C)           no Person, other than (i) the Company, (ii) any employee benefit plan
(or any trust forming a part thereof) that, immediately prior to such merger,
consolidation or reorganization, was maintained by the Company, the Surviving
Corporation, or any related entity or (iii) any Person who, together with its
Affiliates, immediately prior to such merger, consolidation or reorganization
had beneficial ownership of fifty percent (50%) or more of the Company’s then
outstanding voting securities, owns, together with its Affiliates, beneficial
ownership of fifty percent (50%) or more of the combined voting power of the
Surviving Corporation’s then outstanding voting securities.

 

(A transaction described in clauses (A)
through (C) above is referred to herein as a “Non-Control Transaction”);

 

(d)           a complete
liquidation or dissolution of the Company; or

 

(e)           an agreement for the
sale or other disposition of all or substantially all of the assets or business
of the Company to any Person.

 

For purposes of this Agreement, “Affiliate” shall mean, with respect to
any Person, any other Person that, directly or indirectly, controls, is
controlled by, or is under common control with, such Person.  Neither the Company nor any Person controlled
by the Company shall be deemed to be an Affiliate of any holder of Common
Stock.

 

(iii)    “Constructive
Termination” means Employee’s resignation of employment within sixty (60) days
of one or more of the following events which remains uncured thirty (30) days
after Employee’s delivery of written notice thereof:

 

(a)         the
delegation to Employee of duties or the reduction of Employee’s duties, either
of which substantially reduces the nature, responsibility, or character of
Employee’s position immediately prior to such delegation or reduction;

 

(b)        a
material reduction by the Company in Employee’s base salary in effect
immediately prior to such reduction;

 

3

 

(c)         a
material reduction by the Company in the kind or level of employee benefits or
fringe benefits to which Employee was entitled prior to such reduction; or the
taking of any action by the Company that would adversely affect Employee’s
participation in any plan, program or policy generally applicable to employees
of equivalent seniority;  and

 

(d)        the
Company’s relocation of Employee’s principal office location to a place more
than forty (40) miles from the Company’s present headquarters location (except
that reasonably required travel on the Company’s business shall not be
considered a relocation).

 

2.             Transfer
of Shares.  Unless permitted by the
Administrator, Unvested Shares or any interest or right therein or part thereof
shall not be liable for the debts, contracts or engagements of the Employee or
his or her successors in interest and shall not be subject to disposition by
transfer, alienation, anticipation, pledge, encumbrance, assignment or any
other means whether such disposition be voluntary or involuntary or by
operation of law by judgment, levy, attachment, garnishment or any other legal
or equitable proceedings (including bankruptcy), and any attempted disposition
thereof shall be null and void and of no effect; provided,
however, that this Section 2 shall not
apply to vested Shares and shall not prevent transfers by will or by applicable
laws of descent and distribution.  In the
case of a permitted transfer of Unvested Shares, the transferee or other
recipient shall receive and hold the Unvested Shares so transferred subject to
the provisions of this Agreement, and there shall be no further transfer of
such Shares except in accordance with the terms of this Section.  Any transferee shall acknowledge the same by
signing a copy of this Agreement. 
Transfer or sale of the Shares is subject to restrictions on transfer
imposed by any applicable state and federal securities laws.  The Unvested Shares will be held in book
entry form by the Company’s Stock Transfer Agent, The Bank of New York.  As Shares vest annually, the Transfer Agent
will be given instructions to issue a certificate to the Employee for the
vested Shares.

 

3.             Change
in Control Adjustment.  In addition
to the actions permitted under Section 11.3 of the Plan upon a Change in
Control the Administrator may, in its sole discretion, provide that the
Unvested Shares be assumed by the successor or survivor corporation or other
entity, or a parent or subsidiary thereof, or be substituted for by similar
options, rights or awards covering cash or the stock or other equity interests
of the successor or survivor corporation or other entity, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kind of
shares or cash payment rights.

 

4.             Dividends
and Voting Rights.  Employee shall be
entitled to any and all distributions on the Shares, payable from the Effective
Date.  Employee shall have all voting
rights with respect to Shares.

 

5.             Ownership
Rights, Duties.  This Agreement shall
not affect in any way the ownership, voting rights or other rights or duties of
Employee, except as specifically provided herein.

 

4

 

6.             Legends.  The certificate evidencing the Shares issued
shall be endorsed with any legend required under applicable federal and state
securities laws and the Company’s Articles of Incorporation.

 

7.             Adjustment
for Stock Splits, Etc.  All
references to the number of Shares in this Agreement shall be appropriately
adjusted to reflect any stock split, stock dividend or other recapitalization
or change in the Shares which may be made by the Company after the date of this
Agreement in accordance with the Plan.  
Any and all shares of Common Stock received by the Employee with respect
to such Shares as a result of stock dividends, stock splits or any other form
of recapitalization shall also be subject to this Agreement.

 

8.             Notices.  Notices required hereunder shall be given in
person or by registered mail to the address of the Employee shown on the
records of the Company, and to the Company at its principal executive office.

 

9.             Survival
of Terms.  This Agreement shall apply
to and bind Employee and the Company and their respective permitted assignees
and transferees, heirs, legatees, executors, administrators and legal
successors, including without limitation the Company’s acquirer in a Change in
Control.

 

10.           Tax
Withholding.  Notwithstanding
anything to the contrary in this Agreement, the Company shall be entitled to
require payment in cash or deduction from other compensation payable to the
Employee of any sums required by federal, state or local tax law to be withheld
with respect to the issuance, lapsing of restrictions on or exercise of the
Shares.  The Company may, in its
discretion, allow the Employee to deliver shares of Common Stock owned by the
Employee duly endorsed for transfer to the Company with an aggregate Fair Market
Value on the date of delivery equal to the statutory minimum sums to be
withheld.  The Company shall not be
obligated to deliver any new certificate representing vested Shares to the
Employee or his or her legal representative unless and until the Employee or
his or her legal representative shall have paid or otherwise satisfied in full
the amount of all federal, state and local taxes applicable to the taxable
income of the Employee resulting from the grant of the Shares or their vesting.

 

11.           No
Section 83(b) Elections. 
Because such election could have an impact on the Company’s ability to
continue as a real estate investment trust under the Code (defined below),
Employee agrees that Employee will not file an election under
Section 83(b) of the Internal Revenue Code of 1986, as amended (the “Code”),
with respect to the Shares.  If Employee
does file a Section 83(b) election then such election shall cause the
forfeiture of all of the Shares, without proration (notwithstanding
Section 1(a)).

 

12.           Representations.  Employee has reviewed with his or her own tax
advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement.  Employee is relying solely on such advisors
and not on any statements or representations of the Company or any of its
agents.  Employee understands that he/she
(and not the Company) shall be responsible for his/her own tax liability that
may arise as a result of the grant of Shares or the transactions contemplated
by this Agreement.

 

5

 

13.           Governing
Law.  This Agreement shall be
governed by and construed and enforced in accordance with California law,
without giving effect to the principles of conflict of laws thereof.

 

Employee represents that he/she has read this
Agreement and is familiar with its terms and provisions.  Employee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Company’s Board of
Directors or the Compensation Committee thereof upon any questions arising
under this Agreement.

 

IN WITNESS WHEREOF, this Agreement is deemed
made as of the date first set forth above.

 

	
   

  	
  “COMPANY”

  
	
   

  	
   

  
	
   

  	
  REALTY INCOME CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Michael R. Pfeiffer

  
	
   

  	
  Title:

  	
  Executive Vice President, General Counsel

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  “EMPLOYEE”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  
				

 

 

6

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