Spirit Realty Capital Inc.

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Spirit Realty Capital Inc. Securities Settlement

The lawsuit was settled for additional disclosures in the proxy statement mailed to shareholders. The following is a summary of the proceedings in the lawsuit: ‘On January 22, 2013, Spirit Realty Capital, Inc. (Spirit or the Company) announced that it had signed an agreement and plan of merger, dated January 22, 2013 (the Merger Agreement) among Spirit, Spirit Realty, L.P. (Spirit Partnership), Cole Credit Property Trust II, Inc. (Cole), and Cole Operating Partnership II, LP (Cole Partnership), with Cole continuing as the surviving corporation and the merger of Cole Partnership with and into Spirit Partnership, with Spirit Partnership continuing as the surviving limited partnership (the Merger). Following the announcement of the Merger Agreement, in a letter dated February 7, 2013 (the Demand Letter), plaintiffs in the Action (Plaintiffs) made a demand upon the Spirit Board of Directors (the Board) (i) describing the alleged factual basis for their allegation of wrongdoing by officers and directors of Spirit; (ii) asserting how such alleged wrongdoing is allegedly harmful to Spirit and its shareholders; and (iii) requesting that the Spirit Board take certain remedial action which would allegedly ensure that the proposed Merger consideration is fair to Spirit and its shareholders. The Demand Letter also requested that the Spirit Board provide Plaintiffs or their counsel with various documents relating to the proposed Merger. On March 5, 2013, Plaintiffs filed the instant Action as a putative class action and derivative lawsuit purportedly on behalf of the public stockholders of Spirit against Spirit, the Spirit Board, Spirit Partnership, Cole, and Cole Partnership. The Action alleged that the Spirit Board breached its fiduciary duties by engaging in an unfair process leading to the Merger Agreement, agreeing to the Merger Agreement at an opportunistic and unfair price, allowing draconian and preclusive deal protection devices in the Merger Agreement, retaining a self-interested and conflicted financial advisor, and engaging in self-interested and otherwise conflicted actions. Plaintiffs further alleged that Cole, Cole Partnership, and the Spirit Partnership aided and abetted those breaches of fiduciary duty. Plaintiffs also alleged a cause of action for declaratory relief. Plaintiffs alleged that by reason of Defendants conduct, the named plaintiffs and the class members had suffered and would suffer irreparable harm for which they had no adequate remedy at law, and requested that the Court grant appropriate relief for such alleged harm. On April 2, 2013, Spirit and Cole jointly filed a definitive proxy statement (the Definitive Proxy) with the Securities and Exchange Commission (SEC). On April 26, 2013, plaintiffs in the Action filed an amended complaint, which added allegations that the disclosures made to the stockholders in the Definitive Proxy were materially incomplete or misleading. On May 13, 2013, the Parties entered into a stipulation for a protective order relating to discovery material, and completed an agreed-upon production of confidential documents to counsel for Plaintiffs in the Action (Plaintiffs Counsel). On May 20, 2013, Plaintiffs sent a written settlement demand to Defendants. Following extensive arm length negotiations concerning Plaintiffs demands for further disclosure to Spirit stockholders and a possible settlement of the Action, on June 4, 2013, the Parties hereto entered into a Memorandum of Understanding (the MOU) containing the terms for the Parties agreement-in-principle to resolve the Action and provide for the release of all asserted claims brought purportedly on behalf of a Class of Spirit stockholders (defined below) and purportedly on behalf of Spirit. As part of the MOU, Spirit agreed to make certain additional disclosures (the Supplemental Disclosures) related to the Merger in a supplemental prospectus to be filed with the SEC pursuant to Rule 424(b)(3). Spirit and Cole jointly filed the supplemental prospectus with the Supplemental Disclosures on June 4, 2013 (the Supplemental Prospectus). Plaintiffs Counsel proposed, reviewed, commented on, and approved the supplemental disclosures. On June 12, 2013, at a special meeting of Spirit stockholders, the stockholders voted in favor of the approval of the Merger, which was thereafter consummated on July 17, 2013. Plaintiffs have further confirmed the fairness, adequacy, and reasonableness of the Settlement Agreement by review of several thousand pages of confidential, non-public, and public documents, and by conducting an interview of Peter Mavoides, Spirit President and Chief Operating Officer. Defendants have denied, and continue to deny, all allegations of wrongdoing, fault, liability, or damage to any of Plaintiffs in the Action or the Class (as hereinafter defined), deny that they engaged in any wrongdoing, deny that they committed, aided, or abetted any violation of law, deny that they acted improperly in any way, state that they acted properly at all times, and have committed no violation of federal or state law, including without limitation with respect to the adequacy of any disclosure related to the Merger, or any breach of duty whatsoever in connection with the Merger or any public disclosures, but wish to settle solely because it will eliminate the uncertainty, distraction, burden, and expense of further litigation. Plaintiffs Counsel believe that they brought their claims in good faith and continue to believe that such claims had legal merit, but believe that the Supplemental Disclosures allowed Spirit stockholders to make fully informed decisions with regard to the Merger and extinguished any disclosure based claim. Plaintiffs Counsel also believe that their efforts in prosecuting the Action have resulted in relief for Spirit stockholders which, under the circumstances, is fair, reasonable, adequate, and in the best interests of all members of the Class. The parties have signed the Stipulation.’

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