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⁾
Maturity Date	—			June 2028
Original Principal	$	172,500		$	234,035
Repurchases	(33,800		)	(11,000		)
Settled	(138,700		)	(91		)
Outstanding principal balance at June 30, 2013	$	—		$	222,944


⁽¹⁾	Debt issuance costs include underwriting discounts and commissions, legal and accounting fees, rating agency fees and printing expenses. These costs were deferred and amortized using the effective interest method and are fully amortized at June 30, 2013.


⁽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 39.5360 shares of NNN’s common stock, which is equivalent to a conversion price of $25.2934 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.

Each series of convertible notes represents a senior, unsecured obligation of NNN and is subordinated to all secured indebtedness of the Company. Each series of notes 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. In June 2013, NNN called all of the outstanding 5.125% convertible senior notes due 2028 (the "2028 Notes") for redemption on July 11, 2013.

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



	June 30, 2013			December 31, 2012
Principal amount of convertible debt	$	222,944		$	238,572
Carrying value of equity component	(20,711		)	(22,193		)
Remaining unamortized debt discount	—			(2,072		)
Net carrying value of convertible debt	$	202,233		$	214,307

As of June 30, 2013, the debt discount for both the 2028 Notes and the 2026 Notes 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 June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Contractual interest expense	$	2,516	$	4,227	$	5,374	$	8,455
Noncash interest charges	950		1,063		2,072		2,107
Amortization of debt costs	260		284		566		560
Total interest expense	$	3,726	$	5,574	$	8,012	$	11,122

The if-converted value of the 2028 Notes exceeded the principal amount by $80,268,000 as of June 30, 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 $20,702,000 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 and $137,000 was recorded as interest expense.

In March 2013, the market price condition on the 2028 Notes was satisfied, and the 2028 Notes became convertible during the quarter beginning April 1, 2013. As of June 30, 2013, $91,000 principal amount of 2028 Notes had been surrendered for conversion, and $222,944,000 principal amount of 2028 Notes remained outstanding.

On June 5, 2013, NNN notified the remaining holders of the 2028 Notes that the Company would redeem all outstanding 2028 Notes on July 11, 2013. The Company also announced that holders could elect to convert all or a portion of the 2028 Notes into cash and shares of the Company's common stock.