Performance Incentive Plan:

In May 2017, NNN filed a registration statement on Form S-8 with the Commission which permits the issuance of up to 1,800,000 shares of common stock pursuant to NNN’s 2017 Performance Incentive Plan (the “2017 Plan”). The 2017 Plan replaced NNN’s previous 2007 Performance Incentive Plan (the "2007 Plan"). The 2017 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 2017 Plan.

There were no stock options outstanding or exercisable at December 31, 2018.

Pursuant to the 2017 Plan, NNN has granted and issued shares of restricted stock to certain officers and key associates of NNN. The following summarizes the restricted stock activity for the year ended December 31, 2018:



	Number of Shares		Weighted Average Share Price
Non-vested restricted shares, January 1	735,323		$	42.65
Restricted shares granted	291,281		37.06
Restricted shares vested	(175,243	)	40.43
Restricted shares forfeited	(67,153	)	41.00
Restricted shares repurchased	(2,644	)	40.43
Non-vested restricted shares, December 31⁽¹⁾	781,564		41.21


⁽¹⁾	Includes grants made in 2015 and 2016 pursuant to the 2007 Plan to NNN's retired CEO. The performance criteria will be complete January 1, 2019 and 2020, respectively.

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 annually. NNN recognizes compensation expense on a straight-line basis for awards with only service conditions.

During the years ended December 31, 2018 and 2017, NNN granted 175,626 and 169,495, respectively, performance based shares subject to its total stockholder return after a three year period relative to its peers. The shares were granted to certain executive officers and had weighted average grant price of $37.06 and $43.73, respectively, per share. Once the performance criteria are met and the actual number of shares earned is determined, the shares vest immediately. For the 2018 and 2017 grants, the conditions are based on market conditions, and the fair value was determined at the grant date (for a fair value share price of $23.70 and $25.77, respectively). Compensation expense is recognized over the requisite service period for both grants.

The following summarizes other grants made during the year ended December 31, 2018, pursuant to the 2017 Plan.



	Shares	Weighted Average Share Price
Other share grants under the 2017 Plan:
Directors’ fees	15,712	$	41.75
Deferred directors’ fees	24,869	41.89
	40,581	41.84
Shares available under the 2017 Plan for grant, end of period	1,471,231

The total compensation expense for share-based payments for the years ended December 31, 2018, 2017 and 2016 totaled $9,282,000, $12,971,000 and $10,758,000, respectively. At December 31, 2018, NNN had $11,029,000 of unrecognized compensation cost related to non-vested share-based compensation arrangements under the 2017 Plan. This cost is expected to be recognized over a weighted average period of 2.3 years. In addition, NNN recognized no performance based long-term incentive cash compensation expense for the years ended December 31, 2018, 2017 and 2016.