Company: NXDT
Filing Date: 2025-01-21
Form Type: 424B3
Source: 0001437749-25-001494
Chunk: 43

Company: NEXPOINT DIVERSIFIED REAL ESTATE TRUST
Filing Date: 2025-01-21
Form: 424B3
Chunk 43
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 by the NHT Parties in three installments (the “Settlement Payments”) to Condor, and the NHT Parties’ settlement liability was satisfied in full and the NHT Parties were released from all further claims or liabilities in connection with the Merger Agreement in accordance with the Settlement Agreement. The first payment of $2,250,000 was made within two business days of the execution of the Settlement Agreement, the second payment of $2,500,000 was made on October 23, 2020, and the third payment of $2,250,000 was made on December 30, 2020.

The REIT entered into an indemnification agreement with, inter alia, the Advisor pursuant to which the Advisor or funds advised by it or its affiliates agreed to fully fund the Settlement Payments (other than the first payment, which was paid out of funds that were being held in escrow for the Condor Transaction) and indemnify the REIT and its subsidiaries for any losses incurred in relation to the Settlement Agreement. In exchange for funding a portion of the Settlement Payments, CDOR Option Sub LLC (“CDOR Option Sub”), a subsidiary of the REIT, issued two convertible promissory notes on October 23, 2020, and December 30, 2020, in the aggregate amount of $4,750,000 to NFRO REIT Sub, LLC (“NFRO”), the entity that funded the Settlement Payments (the “CDOR Loans”).

Each of the CDOR Loans is unsecured, has a 20-year term and bears an interest rate of 2.25% per year (which were market interest rates at the time of their issuance). The principal and interest owing under the CDOR Loans is convertible into membership interests of CDOR Option Sub at the option of the holder at any time or may be repaid in full at the discretion of CDOR Option Sub.

The CDOR Loans were provided by NFRO, an entity managed or controlled (directly or indirectly) by Mr. Dondero, the REIT’s controlling Unitholder. Mr. Dondero, through the entities he manages or controls, holds an approximate 79.5% interest in the outstanding Units of the REIT. As a result, the REIT treated the CDOR Loans as a “related party transaction” under MI 61-101, which subjects the CDOR Loans to the formal valuation (the “Formal Valuation Requirement”) and minority approval requirements set forth in Part 5