Performance Incentive Plan

12 Months Ended

Dec. 31, 2012

Performance Incentive Plan [Abstract]

Performance Incentive Plan

Performance Incentive Plan:

In June 2007, NNN filed a registration statement on Form S-8 with the Commission which permits the issuance of up to 5,900,000 shares of common stock pursuant to NNN’s 2007 Performance Incentive Plan (the “2007 Plan”). The 2007 Plan replaced NNN’s previous Performance Incentive Plan. The 2007 Plan allows NNN to award or grant to key employees, directors and persons performing consulting or advisory services for NNN or its affiliates, stock options, stock awards, stock appreciation rights, Phantom Stock Awards, Performance Awards and Leveraged Stock Purchase Awards, each as defined in the 2007 Plan.

The following summarizes NNN’s stock-option compensation activity for each of the years ended December 31:

	Number of Shares
	2012		2011		2010
Outstanding, January 1	5,000		7,500		12,154
Options granted	—		—		—
Options exercised	(5,000	)	(2,500	)	(4,654	)
Options surrendered	—		—		—
Outstanding, December 31	—		5,000		7,500
Exercisable, December 31	—		5,000		7,500

The following represents the weighted average option exercise price information for each of the years ended December 31:

	2012		2011		2010
Outstanding, January 1	$	14.57	$	14.11	$	13.72
Granted during the year	—		—		—
Exercised during the year	14.57		13.20		13.08
Outstanding, December 31	—		14.57		14.11
Exercisable, December 31	—		14.57		14.11

There were no options outstanding or exercisable at December 31, 2012.

One-third of the option grant to each individual becomes exercisable at the end of each of the first three years of service following the date of the grant and the options’ maximum term is 10 years. During the years ended December 31, 2012, 2011 and 2010, NNN received proceeds totaling $73,000, $33,000 and $61,000, respectively, in connection with the exercise of options. NNN issued new common stock to satisfy share option exercises. The total intrinsic value of options exercised during the years ended December 31, 2012, 2011 and 2010, was $61,000, $24,000 and $43,000, respectively.

Pursuant to the 2007 Plan, NNN has granted and issued shares of restricted stock to certain officers, directors and key associates of NNN. The following summarizes the restricted stock activity for the year ended December 31, 2012:

	Number of Shares		Weighted Average Share Price
Non-vested restricted shares, January 1	900,573		$	19.18
Restricted shares granted	398,578		26.87
Restricted shares vested	(309,874	)	22.08
Restricted shares forfeited	(19,500	)	23.62
Restricted shares repurchased	(5,165	)	22.40
Non-vested restricted shares, December 31	964,612		$	23.40

During the years ended December 31, 2012, 2011 and 2010 a total of 19,500, 5,215 and 15,310, respectively, of restricted shares were forfeited.

Compensation expense for the restricted stock which is not contingent upon NNN’s performance goals is determined based upon the fair value at the date of grant and is recognized as the greater of the amount amortized over a straight lined basis or the amount vested over the vesting periods. Vesting periods for officers and key associates of NNN range from three to five years and generally vest yearly. NNN recognizes compensation expense on a straight-line basis for awards with only service conditions.

During the years ended December 31, 2012 and 2010, NNN granted 185,915 and 91,000, respectively, performance based shares subject to its earnings based growth after a three years period relative to its peers. The shares were granted to certain executive officers and had weighted average grant price of $26.85 and $23.11, respectively, per share. Once the performance criteria are met and the actual number of shares earned is determined, the shares vest immediately. For the 2010 grant, NNN considers the likelihood of meeting the performance criteria based upon management’s estimates and analysis of future earnings based growth relative to its peers from which it determines the amounts to be recognized. For the 2012 grant, the conditions are based on market conditions, and the fair value is determined at the grant date. Compensation expense is recognized over the requisite service period for both grants.

The following summarizes other grants made during the year ended December 31, 2012, pursuant to the 2007 Plan.

	Shares	Weighted Average   Share Price
Other share grants under the 2007 Plan:
Directors’ fees	16,078	$	28.78
Deferred Directors’ fees	18,622	28.80
	34,700	$	28.79
Shares available under the 2007 Plan for grant, end of period	4,281,900

The total compensation cost for share-based payments for the years ended December 31, 2012, 2011 and 2010, totaled $8,131,000, $6,390,000 and $5,310,000, respectively, of such compensation expense. At December 31, 2012, NNN had $9,433,000 of unrecognized compensation cost related to non-vested share-based compensation arrangements under the 2007 Plan. This cost is expected to be recognized over a weighted average period of 2.6 years. In addition, NNN recognized performance based long term incentive cash compensation of $1,684,000, $1,702,000 and $446,000 for the years ended December 31, 2012, 2011 and 2010 respectively.