Notes Payable – Convertible:

Each of NNN’s outstanding series of convertible notes is summarized in the table below (dollars in thousands, except conversion price):



Terms	2026 Notes⁽¹⁾⁽²⁾				2028 Notes^(1)(3)(4)
Issue Date	September 2006				March 2008
Net Proceeds	$	168,650			$	228,576
Stated Interest Rate	3.950		%		5.125		%
Effective Interest Rate ⁽⁶⁾	5.840		%		7.192		%
Debt Issuance Costs	$	3,850			$	5,459		⁽⁵⁾
Earliest Conversion Date ⁽⁷⁾	—				April 2013
Earliest Put Option Date	—				June 2013
Maturity Date	—				June 2028
Original Principal	$	172,500			$	234,035
Repurchases	(33,800		)		(11,000		)
Settled	(138,700		)		—
Outstanding principal balance at March 31, 2013	$	—		⁽⁸⁾	$	223,035


⁽¹⁾	Debt issuance costs include underwriting discounts and commissions, legal and accounting fees, rating agency fees and printing expenses. These costs have been deferred and are being amortized over the period to the earliest put option date of the holders using the effective interest method.


⁽²⁾	The conversion rate per $1 principal amount was 42.6237 shares of NNN’s common stock, which is equivalent to a conversion price of $23.4611 per share of common stock.


⁽³⁾	The conversion rate per $1 principal amount was 39.5149 shares of NNN’s common stock, which is equivalent to a conversion price of $25.3069 per share of common stock.


⁽⁴⁾	NNN repurchased $11,000 in 2009 for a purchase price of $8,588 resulting in a gain of $1,867.


⁽⁵⁾	Includes $219 of note costs which were written off in connection with the repurchase of $11,000 of the 2028 Notes.


⁽⁶⁾	With the adoption of the accounting guidance on convertible debt securities in 2009, the effective interest rates for the 2026 Notes and the 2028 Notes are 5.840% and 7.192%, respectively.


⁽⁷⁾	Prior to the earliest respective conversion date, the notes are only convertible in limited circumstances pursuant to the terms of the notes. In March 2013, certain market conditions for the 2028 Notes were satisfied, making the 2028 Notes convertible during the calendar quarter beginning April 1, 2013.


⁽⁸⁾	In January 2013, NNN settled the remaining principal balance of $15,537.

Each series of convertible notes represents a senior, unsecured obligation of NNN and is subordinated to all secured indebtedness of the Company. Each note is redeemable at the option of NNN, in whole or in part, at a redemption price equal to the sum of (i) the principal amount of the notes being redeemed plus accrued and unpaid interest thereon through but not including the redemption date and (ii) the make whole amount, if any, as defined in the applicable supplemental indenture relating to the notes.

The carrying values of the Company’s convertible debt and equity components are summarized in the table below (dollars in thousands):



	March 31, 2013			December 31, 2012
Carrying value of equity component	$	(20,720	)	$	(22,193	)
Principal amount of convertible debt	223,035			238,572
Remaining unamortized debt discount	(951		)	(2,072		)
Net carrying value of convertible debt	$	201,364		$	214,307

As of March 31, 2013, the remaining amortization period for the 2028 Notes debt discount was approximately three months and the 2026 Notes debt discount had been fully amortized.

NNN recorded the following in interest expense relating to the 2026 Notes and the 2028 Notes (dollars in thousands):



	Quarter Ended March 31,
	2013		2012
Noncash interest charges	$	1,122	$	1,044
Contractual interest expense	2,858		4,227
Amortization of debt costs	305		—
Total interest expense	$	4,285	$	5,271

The if-converted value of the 2028 Notes exceeded the principal amount by $95,739,000 as of March 31, 2013. As of December 31, 2012, the if-converted values which exceeded the principal amount were $5,125,000 and $51,764,000 for the 2026 Notes and the 2028 Notes, respectively.

As of December 31, 2012, $15,537,000 of the principal amount of 2026 Notes were outstanding. In January 2013, the Company paid approximately $20,565,000 in aggregate settlement value for the $15,537,000 of settled notes. The difference between the amount paid and the principal amount of the settled notes of $5,028,000 was recognized as a decrease to additional paid-in capital.