NNN is obligated to comply with financial and other covenants in its debt instruments that could restrict its operating activities, and the failure to comply with such covenants could result in defaults that accelerate the payment of such debt. 

As of December 31, 2013, NNN had approximately $1,570,059,000 of outstanding indebtedness, of which approximately $9,475,000 was secured indebtedness. NNN’s unsecured debt instruments contain various restrictive covenants which include, among others, provisions restricting NNN’s ability to: 

• incur or guarantee additional debt, 

• make certain distributions, investments and other restricted payments, 

• enter into transactions with certain affiliates, 

• create certain liens, 

• consolidate, merge or sell NNN’s assets, and 

• pre-pay debt. 

NNN’s secured debt instruments generally contain customary covenants, including, among others, provisions: 

• requiring the maintenance of the property securing the debt, 

• restricting its ability to sell, assign or further encumber the properties securing the debt, 

• restricting its ability to incur additional debt, 

• restricting its ability to amend or modify existing leases, and 

• establishing certain prepayment restrictions. 

NNN’s ability to meet some of its debt covenants, including covenants related to the condition of the property or payment of real estate taxes, may be dependent on the performance by NNN’s tenants under their leases. 

In addition, certain covenants in NNN’s debt instruments, including its Credit Facility, require NNN, among other things, to: 

• limit certain leverage ratios, 

• maintain certain minimum interest and debt service coverage ratios, and 

• limit investments in certain types of assets. 

NNN’s failure to comply with certain of its debt covenants could result in defaults that accelerate the payment under such debt and limit the dividends paid to NNN’s common and preferred stockholders which would likely have a material adverse impact on NNN’s financial condition and results of operations. In addition, these defaults could impair its access to the debt and equity markets. 

The market value of NNN’s equity and debt securities is subject to various factors that may cause significant fluctuations or volatility. 

As with other publicly traded securities, the market price of NNN’s equity and debt securities depends on various factors, which may change from time-to-time and/or may be unrelated to NNN’s financial condition, operating performance or prospects that may cause significant fluctuations or volatility in such prices. These factors, among others, include: 

• general economic and financial market conditions, 

• level and trend of interest rates, 

• NNN’s ability to access the capital markets to raise additional capital, 

• the issuance of additional equity or debt securities, 

• changes in NNN’s funds from operations or earnings estimates, 

• changes in NNN’s debt ratings or analyst ratings, 

• NNN’s financial condition and performance, 

• market perception of NNN compared to other REITs, and 

• market perception of REITs compared to other investment sectors. 

