Exhibit 10.5

PLEDGE AND SECURITY AGREEMENT

(Equity Issuance Proceeds)

THIS PLEDGE AND SECURITY AGREEMENT (this “Agreement”) is dated as of April 7,
2016 and is made by NEXPOINT MULTIFAMILY OPERATING PARTNERSHIP, L.P., a Delaware
limited partnership having an address at 300 Crescent Court, Suite 700, Dallas,
Texas 75201, (“Pledgor”) and KEYBANK NATIONAL ASSOCIATION, a national banking
association having a principal place of business at 225 Franklin Street, 18th
Floor, Boston, Massachusetts 02110, as agent (in such capacity, “Agent”) for
itself and any other lenders who become Lenders under the Bridge Credit
Agreement (as hereinafter defined) (collectively referred to as “Lenders” and
each individually referred to as a “Lender”).

RECITALS

Pursuant to the terms of that certain Revolving Credit Agreement dated as of
even date herewith among Highland Capital Management L.P., a Delaware limited
partnership and Pledgor (jointly and severally, the “Borrower”), Agent and
Lenders (as may be amended from time to time the “Credit Agreement”), Lenders
have severally agreed to make revolving loans (the “Revolving Loans”) to
Borrower upon the terms and subject to the conditions set forth therein, such
loan to be evidenced by Notes issued by Borrower to Lenders thereunder. It is a
condition precedent to the obligation of Lenders to make the Revolving Loans
available under the Credit Agreement that Pledgor shall have executed and
delivered this Agreement to Agent for the ratable benefit of Lenders.

NOW, THEREFORE, in consideration of the premises and to induce Agent and Lenders
to enter into the Credit Agreement and to induce Lenders to make their
respective loans to Borrower under the Credit Agreement, Pledgor hereby agrees
with Agent for the ratable benefit of Lenders as follows:

1. Pledge; Grant of Security Interest. Pledgor hereby grants, assigns,
transfers, grants a security interest in, sets over and delivers unto Agent, for
the ratable benefit of Lenders, as collateral security for the prompt and
complete payment and performance when due (whether at stated maturity, by
acceleration or otherwise), of the Obligations, a security interest in, to and
under all of Pledgor’s right, title and interest, whether now owned or hereafter
acquired and whether now existing or hereafter arising (all of which shall be
collectively called the “Collateral”) in any and all of the following:

(a) all future purchase price, subscription, and other payments and
contributions, in each case, in cash (“Gross Equity Issuance Proceeds”) from the
subscribers and partnership interests (collectively, the “Stockholders”) in
exchange for each equity issuance by Pledgor (“Equity Issuance”), after
deduction of net sales commissions and other reasonable expenses approved by the
Agent in its reasonable discretion (collectively, the “Net Equity Issuance
Proceeds”); provided, however, with respect to any subscription payments payable
by any investor pursuant to the associated offering documents for Equity
Interests in Pledgor (“Shares”), such pledge shall not be deemed effective until
Pledgor has accepted the subscription (consistent with Section 7(j) hereof); and

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(b) all Proceeds and products of the foregoing.

2. Defined Terms. Unless otherwise defined herein, terms which are defined in
the Credit Agreement and used herein shall have the same meanings given to them
in the Credit Agreement. The following terms shall have the following meanings:

“Certificate” means the Certificate of Limited Partnership of Pledgor filed with
the State of Maryland, Department of Assessments and Taxation, Charter Division
on                     .

“Events of Default” shall mean (i) the occurrence and continuance of an Event of
Default as defined in the Credit Agreement (after taking into account all
applicable grace periods); or (ii) the failure of Pledgor to pay and perform all
of Pledgor’s obligations to Agent and Lenders hereunder unless such failure is
cured or remedied within the applicable grace period, if any, set forth or
referred to herein or in the Credit Agreement.

“Obligations” shall mean all obligations of Pledgor and Borrower to Agent or any
Lender, whether now existing or hereafter arising, direct or indirect, absolute
or contingent, under any one or more of this Agreement and the other Loan
Documents.

“Organizational Documents” means the Certificate, the By-Laws of Pledgor and the
Prospectus of Pledgor (and all supplements thereto, amendments and replacements
thereof, and any new prospectus relating to any offering of Shares).

“Proceeds” means all “proceeds” as such term is defined in Section 9-102(a)(64)
of the Uniform Commercial Code in effect in the State of New York on the date
hereof and, in any event, shall include, without limitation, all dividends or
other income from the Net Equity Issuance Proceeds, collections thereon or
distributions with respect thereto.

3. Absolute Assignment; License Back. The parties intend that this Agreement
shall be a present, absolute and unconditional assignment and shall, upon the
occurrence and during the continuance of an Event of Default, give Agent the
right to collect the Net Equity Issuance Proceeds and to apply such Net Equity
Issuance Proceeds to payment of the principal and interest and all other sums
payable on the Obligations in accordance with the terms of the Credit Agreement.
Prior to the occurrence and continuance of an Event of Default, Agent hereby
grants to Pledgor the right, subject to the provisions set forth herein, to
collect all Net Equity Issuance Proceeds and the Proceeds thereof so long as
Pledgor complies with the terms of the Credit Agreement and this Agreement.
Pledgor shall promptly provide written notice to Agent in the event that any
Collateral is realized by Pledgor as a result of the remedies available pursuant
to the Organizational Documents after the occurrence and continuance of an Event
of Default.

 

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4. Representations and Warranties. Pledgor hereby represents and warrants that:

(a) Pledgor is and shall be the owner of the Collateral free and clear of all
pledges, liens, security interests and other encumbrances of any nature
whatsoever, except in favor of Agent.

(b) Pledgor has the corporate power and authority to pledge the Collateral and
to grant the security interest in the Collateral as herein provided.

(c) There are no restrictions on the transfer of the Collateral to Agent
hereunder or with respect to any subsequent transfer thereof or realization
thereupon by Agent except as set forth in the Organizational Documents.

(d) The execution, delivery and performance of this Agreement by Pledgor does
not and shall not result in the violation of any mortgage, indenture, material
contract, instrument, agreement, judgment, decree, order, statute, rule or
regulation to which Pledgor is subject or by which it is bound.

(e) Pledgor shall not suffer or permit any lien or encumbrance to exist on or
with respect to the Collateral except in favor of Agent or as may be permitted
by the Credit Agreement.

(f) This Agreement (i) has been duly authorized, executed and delivered by
Pledgor and (ii) constitutes the legal, valid and binding obligation of Pledgor
enforceable in accordance with the terms hereof, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization,
receivership, fraudulent conveyance, moratorium or similar laws affecting
creditors’ rights generally, and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).

(g) There is no material litigation or administrative proceeding now pending, or
to the best of its knowledge threatened, against Pledgor which if adversely
decided could materially impair the ability of Pledgor to pay or perform
Pledgor’s obligations hereunder.

(h) Pledgor is a duly formed and validly existing corporation under the laws of
the State of Maryland. Pledgor is duly qualified in each jurisdiction where the
nature of its business is such that qualification is required and has all
requisite power and authority to conduct its business and to own its property,
as now conducted or owned, and as contemplated by this Agreement to the extent
that failure to do so could reasonably be expected to have a Material Adverse
Effect (as defined in the Credit Agreement) on the ability of Pledgor to pay and
perform its obligations hereunder or under the other Loan Documents. The
organizational number of Pledgor is                     ; the taxpayer
identification number of Pledgor is                     . All required entity
actions and proceedings have been duly taken so as to authorize the execution
and delivery by Pledgor of the Loan Documents to which it is a party.

5. Use of Net Equity Issuance Proceeds. Promptly upon receipt by the Pledgor of
any Net Equity Issuance Proceeds, the Pledgor shall pay such amounts to the
Agent for application to the Obligations as provided under the terms of the
Credit Agreement.

 

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6. Call for Equity Issuance Proceeds.

(a) Agent has the right at any time following the occurrence of, and during the
continuance of, an Event of Default to direct any third party holding any
Collateral to transfer to Agent all Collateral then or thereafter held by such
third party for the purposes set forth in and subject to the terms of the Credit
Agreement and the Loan Documents.

(b) Upon the occurrence and during the continuance of an Event of Default, this
Agreement shall constitute an irrevocable direction to and full authority to
such third party to pay all Net Equity Issuance Proceeds to Agent in accordance
with the terms of the Credit Agreement and the Loan Documents. Pledgor hereby
irrevocably authorizes any third party to rely upon and comply with any notice
or demand by Agent for the payment to Agent of any Net Equity Issuance Proceeds
due or to become due. Agent shall promptly after any such notice or demand is
sent to such third party send a copy thereof to Pledgor.

7. Covenants. Pledgor covenants and agrees that:

(a) Pledgor shall keep the Collateral free and clear of all liens, encumbrances,
attachments, security interest pledges and charges except for this Agreement and
as otherwise permitted by the Credit Agreement.

(b) Pledgor shall faithfully perform and discharge in all material respects all
obligations of Pledgor under the Organizational Documents. Pledgor shall appear
in and defend, at no cost to Agent, any action or proceeding arising under or in
any manner connected with the Organizational Documents or the Collateral in
which Pledgor is named as a party.

(c) Nothing contained herein shall be construed to impose any liability or
obligation on Agent under or with respect to the Organizational Documents.
Pledgor shall indemnify and hold Agent and Lenders harmless from and against any
and all reasonable actual and out-of-pocket liabilities, losses, damages and
reasonable costs and expenses which Agent and Lenders may incur by reason of the
Organizational Documents or by reason of this Agreement, and from and against
any and all claims and demands whatsoever which may be asserted against Agent
and Lenders by Stockholders or any other third party by reason of any alleged
obligations to be performed or discharged by Agent or Lenders under the
Organizational Documents or this Agreement unless due to its gross negligence or
willful wrongdoing or breach of this Agreement or the Organizational Documents.
Should Agent and Lenders incur any such liability, loss, damage, cost or expense
except if due to their gross negligence or willful misconduct or breach of this
Agreement or the Organizational Documents, Pledgor shall within ten
(10) Business Days after written demand reimburse Agent and Lenders for the
amount thereof together with all reasonable costs and expenses and reasonable
attorneys’ fees incurred by Agent and Lenders. If the foregoing sums are not
paid within ten (10) Business Days, they shall bear interest from the date of
demand until paid at the default rate set forth in the Credit Agreement. Pledgor
shall have the right to defend (as appropriate) and settle any claim made by
Stockholders or any third party (other than any Agent, Lenders or participants)
relating to a possible indemnification obligation to Agent or any of the Lenders
under this Agreement. Agent, on behalf of the Lenders shall promptly, upon
discovery of any such claim made by Stockholders or another third party against
Agent of any of the Lenders, give notice to Pledgor of such claim which notice
shall set forth such claim in reasonable detail.

 

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(d) Pledgor shall execute all such instruments, documents and papers, and will
do all such acts as Agent may reasonably request from time to time to carry into
effect the provisions and intent of this Agreement including, without
limitation, the execution of notifications to obligors on the Collateral,
direction letters with any applicable broker dealer or other intermediary, and
will use commercially reasonable efforts to do all such other acts as Agent may
reasonably request with respect to the perfection and protection of the pledge
and security interest granted herein and the assignment effected hereby.

(e) Pledgor shall not sell, assign, transfer or otherwise dispose of the
Collateral or any interest therein to any other person, firm, corporation or
entity except as permitted by the Credit Agreement and the other Loan Documents.

(f) While an Event of Default exists, Pledgor shall deliver to Agent, if and
when received by Pledgor, any item representing or constituting any of the
Collateral received by Pledgor; and if, under any circumstance whatsoever, any
of such proceeds should be paid to or come into the hands of Pledgor, Pledgor
shall hold the same in trust for prompt delivery to Agent to be held as
additional Collateral.

(g) Pledgor shall comply with all Legal Requirements applicable to the
Collateral to the extent that such matter could reasonably be expected to
materially impair the ability of Borrower and the Pledgor to pay and perform
their obligations under the Loan Documents.

(h) Pledgor shall not make any amendments or waive any provisions of any of the
Organizational Documents which would materially and adversely affect the
Collateral without the prior written consent of Agent, not to be unreasonably
withheld or delayed.

8. Rights of Agent. Pledgor hereby grants to Agent the following rights:

(a) Upon any sale or transfer by Agent of the Credit Agreement and the
indebtedness evidenced thereby, subject to the requirements of the Credit
Agreement, Agent may assign or transfer its rights and interest under this
Agreement in whole or in part to the purchaser or transferee, who shall
thereupon become vested with all powers and rights given to Agent in respect
thereto, and Agent and Lenders shall be thereafter forever relieved and fully
discharged from any liability or responsibility thereafter arising or accruing
in connection therewith.

(b) Pledgor shall furnish to Agent at any time and from time to time such other
duly executed documents or instruments relating to the creation or continuation
of a perfected security interest in the Net Equity Issuance Proceeds as Agent
may reasonably require. So long as any Obligations remain due and owing
hereunder and an Event of Default is continuing, Agent or any of its officers
are hereby irrevocably made, constituted and appointed the true and lawful
attorney for Pledgor to execute, after twenty (20) Business Days notice to
Pledgor (except in the case where Agent believes its security is in imminent
risk of impairment, then no such notice shall be required) in the name of
Pledgor any financing statements, continuation statements or any other documents
which Agent may deem reasonably necessary to perfect the security interest
created hereunder.

 

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(c) Prior to or contemporaneously with the delivery hereof, Pledgor shall
deliver to Agent appropriate financing statements for filing under the Uniform
Commercial Code of the appropriate jurisdictions as Agent may reasonably request
and shall during the term of this Agreement take all other action as Agent shall
reasonably request in order to perfect Agent’s security interest in the Equity
Issuance Proceeds.

9. Rights After Event of Default. If an Event of Default has occurred and is
continuing, subject to Sections 3 and 5 of this Agreement:

(a) Agent may exercise, in addition to all other rights and remedies granted in
this Agreement and in any other instrument or agreement securing, evidencing or
relating to the Obligations, all rights and remedies of a secured party under
the Uniform Commercial Code of the appropriate jurisdiction to the extent of its
interest in the Collateral as set forth in this Agreement.

(b) The rights of Agent hereunder shall not be conditioned or contingent upon
the pursuit by Agent of any right or remedy against any other person which may
be or become liable in respect of all or any part of the Obligations or against
any other collateral security therefor, guaranty thereof or right of offset with
respect thereto. Agent shall not be liable for any failure to demand, collect or
realize upon all or any part of the Collateral or for any delay in doing so, nor
shall it be under any obligation to sell or otherwise dispose of any Collateral
upon the request of Pledgor or any other person or to take any other action
whatsoever with regard to the Collateral or any part thereof.

All of the foregoing rights and remedies of Agent are cumulative, and Agent
shall also have upon the occurrence of any Event of Default all other rights and
remedies provided under the other Loan Documents and any other agreement between
Pledgor, Borrower, Agent, Lenders, or otherwise available at law or in equity or
by statute.

10. ERISA and REIT Limitation. Notwithstanding anything contained herein to the
contrary or in the Credit Agreement, Agent shall not acquire or take any other
action with respect to the interests of Pledgor or Stockholders (i) to the
extent that such acquisition or such other action constitutes a non-exempt
“prohibited transaction” (as such term is defined in Section 4975 of the
Internal Revenue Code or Section 406 of ERISA) or (ii) to the extent that such
action causes the Pledgor to no longer qualify as a REIT.

11. Limitation on Duties Regarding Collateral. Agent’s sole duty with respect to
the custody, safekeeping and physical preservation of the Collateral in its
possession, under Section 9-207 of the Uniform Commercial Code or otherwise,
shall be to deal with it in the same manner as Agent deals with similar
securities and property for its own account. Neither Agent, any Lender, nor any
of their respective directors, officers, employees shall be liable for failure
to demand, collect or realize upon any of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of Pledgor or any other person or to take any other
action whatsoever with regard to the Collateral or any part thereof.

 

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12. No Waiver. Failure of Agent to avail itself of any terms, covenants or
conditions of this Agreement for any period of time or for any reason shall not
constitute a waiver thereof.

13. Additional Rights. Agent may take or release other security, may release any
party primarily or secondarily liable for any Obligations secured hereby, may
grant extensions, renewals or indulgences with respect to such Obligations, may
amend, modify or cancel all or any of the terms of the Obligations, and may
apply any other security therefor held by Agent to the satisfaction of such
Obligations without prejudice to any of Agent’s rights hereunder or under the
other Loan Documents. The rights of Agent to collect the Obligations and to
enforce any other security therefor held by Agent may be exercised by Agent
either prior to, simultaneously with or subsequent to any action by Agent
hereunder. Agent shall have the full right, power and authority to enforce this
Agreement or any of the terms, covenants or conditions hereof, at any time or
times that Agent shall deem fit.

14. Amendments. Any change, amendment, modification, abridgment, cancellation or
discharge of this Agreement or any term or provision hereof shall be in writing
signed by Agent and Pledgor.

15. Termination. Upon the date of payment to Agent of the full amount of all
Obligations, this Agreement shall be void and of no further effect except that
Section 7(d) shall continue to survive and Agent shall, within five (5) Business
Days of Pledgor’s written demand, execute and deliver to Pledgor in recordable
form all necessary documents, if any, for the removal of this Agreement and any
related financing statement from the public record.

16. Successors and Assigns. The terms and conditions of this Agreement shall be
binding upon Pledgor, and its successors and assigns, and shall inure to the
benefit of Agent and its successors and assigns as permitted pursuant to the
Credit Agreement.

17. Notices. Notices required or permitted to be given hereunder and all other
communications hereunder shall be in writing and shall be sent or delivered in
accordance with the Credit Agreement and shall be deemed to have been given when
sent or delivered in accordance with the terms of the Credit Agreement.

18. Severability. If any provision hereof is determined to be illegal or
unenforceable for any reason, the remaining provisions hereof shall not be
affected thereby.

19. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.

20. Waiver of Trial by Jury. PLEDGOR AND AGENT EACH WAIVE THE RIGHT TO A TRIAL
BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT
MATTER OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS RELATED TO ANY OF

 

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THE LOAN DOCUMENTS. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY MADE
BY PLEDGOR AND AGENT AND EACH ACKNOWLEDGES THAT NEITHER THE OTHER NOR ANY PERSON
ACTING ON BEHALF OF THE OTHER HAS OR HAVE MADE ANY REPRESENTATIONS OF FACT TO
INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS
EFFECT. PLEDGOR AND AGENT EACH FURTHER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED
(OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE MAKING OF THIS WAIVER BY
INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD
THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL. PLEDGOR AND AGENT EACH
FURTHER ACKNOWLEDGES THAT IT HAS READ AND UNDERSTANDS THE MEANING OF THIS WAIVER
PROVISION.

21. Inconsistency. In the event of any inconsistency or conflict between the
terms and provisions of this Agreement and the terms and provisions of the
Credit Agreement, the terms and provisions of the Credit Agreement shall
prevail.

22. Counterparts. This Agreement may be executed by different parties hereto on
any number of separate counterparts, each of which, when so executed and
delivered, shall be an original, and all such counterparts shall together
constitute one and the same instrument.

[SIGNATURE PAGE FOLLOWS]

 

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WITNESS the due execution hereof as of the day and year first above written.

 

PLEDGOR: NEXPOINT MULTIFAMILY OPERATING PARTNERSHIP, L.P., a Delaware limited
partnership By:   NexPoint Multifamily Realty Trust, Inc., its General Partner
By:  

/s/ Matt McGraner

Name:   Matt McGraner Title:   COO, EVP – Investments AGENT: KEYBANK NATIONAL
ASSOCIATION By:  

/s/ Christopher T. Neil

Name:   Christopher T. Neil Title:   Senior Relationship Manager

 

[Signature Page to Equity Proceeds Pledge]