Notes Payable – Convertible:

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



Terms	2026 Notes^(1)(2)(4)				2028 Notes^(2)(5)(6)
Issue Date	September 2006				March 2008
Net Proceeds	$	168,650			$	228,576
Stated Interest Rate ⁽⁸⁾	3.950		%		5.125		%
Debt Issuance Costs	$	3,850		⁽³⁾	$	5,459		⁽⁷⁾
Earliest Conversion Date ⁽⁹⁾	September 2025				June 2027
Earliest Put Option Date	September 2016				June 2013
Maturity Date	September 2026				June 2028
Original Principal	$	172,500			$	234,035
Repurchases	(33,800		)		(11,000		)
Outstanding principal balance at December 31, 2011	$	138,700			$	223,035


⁽¹⁾	NNN repurchased $8,800 and $25,000 in 2009 and 2008, respectively, for a purchase price of $6,994 and $19,188, respectively, resulting in a gain of $1,565 and $4,961, respectively.


⁽²⁾	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.


⁽³⁾	Includes $463 of note costs which were written off in connection with the repurchase of $33,800 of the 2026 Notes.


⁽⁴⁾	The conversion rate per $1 principal amount was 42.2959 shares of NNN’s common stock, which is equivalent to a conversion price of $23.6430 per share of common stock.


⁽⁵⁾	The conversion rate per $1 principal amount was 39.4084 shares of NNN’s common stock, which is equivalent to a conversion price of $25.3753 per share of common stock.


⁽⁶⁾	NNN repurchased $11,000 in 2009 for a purchase price of $8,588 resulting in a gain of $1,867.


⁽⁷⁾	Includes $219 of note costs which were written off in connection with the repurchase of $11,000 of the 2028 Notes, respectively.


⁽⁸⁾	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.


⁽⁹⁾	Prior to the earliest respective conversion date, the notes are only convertible in limited circumstances pursuant to the terms of the notes.

Each series of convertible notes represents senior, unsecured obligations of NNN and are 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 amounts of the Company’s convertible debt and equity balances are summarized in the table below as of December 31 (dollars in thousands):



	2011			2010
Carrying value of equity component	$	(33,873	)	$	(33,873	)
Principal amount of convertible debt	361,735			361,735
Remaining unamortized debt discount	(6,363		)	(12,201		)
Net carrying value of convertible debt	$	321,499		$	315,661

As of December 31, 2011, the remaining amortization period for the 2028 Notes debt discount was approximately 18 months. The 2026 Notes debt discount has been fully amortized.

The adjusted effective interest rates for the liability components of the 2026 Notes and the 2028 Notes were 5.840% and 7.192%, respectively. The Company recorded noncash interest charges of $5,837,000, $6,154,000 and $5,809,000 for the years ended December 31, 2011, 2010 and 2009, respectively, relating to the 2026 Notes and 2028 Notes. The Company recorded contractual interest expense of $16,909,000, $16,909,000 and $17,046,000 for the years ended December 31, 2011, 2010 and 2009, respectively, relating to the 2026 Notes and 2028 Notes.

The if-converted values which exceed the principal amount as of December 31, 2011, are $16,057,000 and $8,831,000 for the 2026 Notes and the 2028 Notes, respectively. As of December 31, 2010, the if-converted values which exceed the principal amount are $15,601,000 and $9,611,000 for the 2026 Notes and the 2028 Notes, respectively.