Document:

Exhibit 10.2

ADVISORY AGREEMENT

BY AND AMONG

NEXPOINT Residential Trust, INC.,

NEXPOINT Residential Trust OPERATING PARTNERSHIP, L.P.

AND

NEXPOINT REAL ESTATE ADVISORS, L.P.

 

 

 

 

 

Table of Contents

 

	
 
	
 
	
Page

	
1.
	
Definitions
	
1

	
2.
	
Appointment
	
3

	
3.
	
Duties of the Advisor
	
3

	
4.
	
Authority of Advisor
	
5

	
5.
	
No Partnership or Joint Venture
	
5

	
6.
	
Bank Accounts
	
6

	
7.
	
Records; Access; Confidentiality
	
6

	
8.
	
Limitations on Activities
	
6

	
9.
	
Compensation
	
6

	
10.
	
Expenses
	
7

	
11.
	
Other Services
	
7

	
12.
	
Other Activities of the Advisor
	
7

	
13.
	
Term and Termination
	
8

	
14.
	
Payments and Duties Upon Termination
	
8

	
15.
	
Limitation of Liability, Exculpation and Indemnification by the Company and Operating Partnership
	
8

	
16.
	
Indemnification by the Advisor
	
9

	
17.
	
Notices
	
10

	
18.
	
Modification
	
10

	
19.
	
Severability
	
10

	
20.
	
Governing Law; Arbitration
	
11

	
21.
	
Entire Agreement
	
11

	
22.
	
No Waiver
	
11

	
23.
	
Pronouns and Plurals
	
11

	
24.
	
Headings
	
11

	
25.
	
Execution in Counterparts
	
11

 

 

 

 

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ADVISORY AGREEMENT

THIS ADVISORY AGREEMENT (this “Agreement”), dated as of March 16, 2015, is entered into by and among NexPoint Residential Trust, Inc., a Maryland corporation (the “Company”), NexPoint Residential Trust Operating Partnership, L.P., a Delaware limited partnership (the “Operating Partnership”), and NexPoint Real Estate Advisors, L.P., a Delaware limited partnership (the “Advisor”).

RECITALS

A. The Company is a Maryland corporation created in accordance with Maryland General Corporation Law and intends to elect to qualify as a REIT for U.S. federal income tax purposes.

B. The Company is the sole member of the general partner, and is the initial limited partner, of the Operating Partnership.

C. The Company and the Operating Partnership desire to avail themselves of the experience, sources of information, advice, assistance and certain facilities of the Advisor and its Affiliates and to have the Advisor undertake the duties and responsibilities set forth in this Agreement, on behalf of, and subject to the supervision of the Board of Directors of the Company, all as provided in this Agreement.

D. The Advisor is willing to render such services, subject to the supervision of the Board of Directors of the Company, on the terms and conditions set forth in this Agreement.

E. The Board of Directors, including a majority of the Independent Directors, have approved this Agreement.

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the parties hereto, intending to be legally bound, hereby agree as follows:

1. Definitions.  As used in this Agreement, the following terms have the definitions set forth below:

“1940 Act” means the Investment Company Act of 1940, as amended.

“Administrative Fee” means an annual fee, payable monthly, in an amount equal to 0.20% of the Average Real Estate Assets, determined in accordance with Section 9(b).

“Advisor” means NexPoint Real Estate Advisors, L.P., a Delaware limited partnership.

“Affiliate” or “Affiliated” means with respect to any Person, (i) any Person directly or indirectly controlling, controlled by or under common control with such other Person; (ii) any executive officer, director, trustee or general partner of such other Person; and (iii) any legal entity for which such Person acts as an executive officer, director, trustee or general partner.  For purposes of this definition, the terms “controls,” “is controlled by,” or “is under common control with” shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of an entity, whether through ownership or voting rights, by contract or otherwise.

“Articles of Incorporation” means the Articles of Amendment and Restatement of the Company, as hereafter amended from time to time.

“Average Real Estate Assets” means the average of the aggregate book value of Real Estate Assets before reserves for depreciation or other non-cash reserves, computed by taking the average of the book values of Real Estate Assets at the end of each month (or partial month) (i) for which any fee under this Agreement is calculated or (ii) during the year for which any Expense reimbursement under this Agreement is calculated.

“Board of Directors” or “Board” means the Board of Directors of the Company.

“Bylaws” means the bylaws of the Company, as amended and as the same are in effect from time to time.

“Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto.  Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended and any successor provision thereto, as interpreted by any applicable regulations as in effect from time to time.

 

 

“Contributed Assets” means all of the Real Estate Assets described in the information statement filed as an exhibit to the Registration Statement as properties to be owned or subject to probable acquisition by the Company or the Operating Partnership upon completion of the Spin-Off.

“Director” means a member of the Board of Directors.

“Distribution Date” means the “distribution date,” as such term is defined in the information statement included in the Registration Statement.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Highland” means Highland Capital Management, L.P., a Delaware limited partnership.

“Independent Director” means a Director who would not be an “interested person” (as defined in the 1940 Act) of the Company.

“Investment Guidelines” means the investment guidelines and other investment parameters for Investments, financing activities and other operations established from time to time by the Board or as disclosed in the Registration Statement.

“Investments” means any investments by the Company or the Operating Partnership in Real Estate Assets or any other asset.

“Joint Ventures” means any joint venture or partnership arrangements (other than between the Company and the Operating Partnership) in which the Company or the Operating Partnership or any of their subsidiaries is a co-venturer, member or partner, which are established to own Investments.

“Loans” means any indebtedness or obligations in respect of borrowed money or evidenced by bonds, notes, debentures, deeds of trust, letters of credit or similar instruments, including mortgages and mezzanine loans.

“Management Fee” means an annual fee, payable monthly, in an amount equal to 1.00% of the Average Real Estate Assets, determined in accordance with Section 9(b).

“New Assets” means all of the Average Real Estate Assets other than the Contributed Assets.

“NYSE” means the New York Stock Exchange.

“Offering” means any public or private offering of equity or debt securities of the Company that is consummated subsequent to the date of this Agreement, excluding Shares offered under any employee benefit plan of the Company and Shares distributed in the Spin-Off.

“Offering Expenses” means any and all expenses (other than underwriters’ discounts) paid or to be paid by the Company in connection with an Offering, including, without limitation, the Company’s legal, accounting, printing, mailing and filing fees and other documented offering expenses.

“Operating Expenses” means all out-of-pocket expenses of the Advisor in performing services for the Company, including the expenses incurred by the Advisor in connection with any provision by the Advisor of legal, accounting, financial and due diligence services performed by the Advisor that outside professionals or outside consultants would otherwise perform.  Operating Expenses also include the Company’s pro rata share of rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses of the Advisor required for the Company’s operations.  Operating Expenses do not include expenses for the administrative services described on Exhibit A to this Agreement.

“OP Units” means units of limited partnership interest in the Operating Partnership.

“Person” means an individual, corporation, partnership, joint venture, association, company (whether of limited liability or otherwise), trust, bank or other entity, or government or any agency or political subdivision of a government.

“Real Estate Assets” means any investment by the Company or the Operating Partnership (including, without limitation, reserves for capital expenditures) in unimproved and improved Real Property (including, without limitation, fee or leasehold interests, options and leases) either directly, through a direct or indirect subsidiary of the Company or the Operating Partnership or through a Joint Venture.

 

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“Real Property” means real property owned from time to time by the Company or the Operating Partnership, either directly, through a direct or indirect subsidiary of the Company or the Operating Partnership or through a Joint Venture, which consists of (i) land only, (ii) land, including the buildings located thereon, (iii) buildings only, (iv) real estate-related securities (including preferred stock), mortgage, bridge or mezzanine loans, or (v) such investments the Board or the Advisor designate as Real Property to the extent such investments could be classified as Real Property.

“Registration Statement” means the Company’s Registration Statement on Form 10 (No. 001-36663), as amended from time to time.

“REIT” means a “real estate investment trust” within the meaning of Sections 856 through 860 of the Code.

“Securities Act” means the Securities Act of 1933, as amended.

“Shares” means the shares of the Company’s common stock, par value $0.01 per share.

“Spin-Off” has the meaning given in the information statement filed as an exhibit to the Registration Statement.

“Stockholders” means the registered holders of the Shares.

“VWAP” means volume-weighted average price.

2. Appointment.  The Company and the Operating Partnership hereby appoint the Advisor to serve as their advisor to perform the services set forth herein on the terms and conditions set forth in this Agreement, and the Advisor hereby accepts such appointment.

3. Duties of the Advisor.  The Advisor, in its capacity as manager of the assets and the day-to-day operations of the Company and the Operating Partnership, at all times will be subject to the supervision of the Company’s Board of Directors and will have only such functions and authority as the Company may delegate to it including, without limitation, the functions and authority identified herein and delegated to the Advisor hereby.  The Advisor will be responsible for the day-to-day operations of the Company and will perform (or cause to be performed) such services and activities relating to the assets and operations of the Company as may be appropriate, including, without limitation:

(a) serve as the Company’s and the Operating Partnership’s investment and financial advisor;

(b) provide the daily management for the Company and the Operating Partnership and perform and supervise the various administrative functions necessary for the day-to-day management of the operations of the Company and the Operating Partnership, including the administrative services described on Exhibit A to this Agreement;

(c) investigate, select, and, on behalf of the Company and the Operating Partnership, engage and conduct business with such Persons as the Advisor deems necessary to the proper performance of its obligations hereunder, including, but not limited to, consultants, accountants, correspondents, lenders, technical advisors, attorneys, brokers, underwriters, corporate fiduciaries, escrow agents, depositaries, custodians, agents for collection, insurers, insurance agents, banks, builders, developers, property owners, real estate management companies, real estate operating companies, securities investment advisors, mortgagors, the registrar and the transfer agent and any and all agents for any of the foregoing, including Affiliates of the Advisor, and Persons acting in any other capacity deemed by the Advisor necessary or desirable for the performance of any of the foregoing services, including, but not limited to, entering into contracts in the name of the Company and the Operating Partnership with any of the foregoing;

(d) consult with the officers and Directors of the Company and assist the Directors in the formulation and implementation of the Company’s financial policies, and, as necessary, furnish the Board with advice and recommendations with respect to the making of investments consistent with the investment objectives and policies of the Company and in connection with any borrowings proposed to be undertaken by the Company or the Operating Partnership;

(e) subject to the provisions of Section 4 hereof, (i) participate in formulating an investment strategy and asset allocation framework, (ii) locate, analyze and select potential Investments, (iii) structure and negotiate the terms and conditions of transactions pursuant to which acquisitions and dispositions of Investments will be made; (iv) research, identify, review and recommend acquisitions and dispositions of Investments to the Board and make Investments on behalf of the Company and the Operating Partnership in compliance with the investment objectives and policies of the Company; (v) negotiate the terms of and arrange for financing and refinancing and make other changes in the asset or capital structure of, and dispose of, reinvest the proceeds from the sale of, or otherwise deal with, Investments; (vi) negotiate and enter into leases and service contracts for Real Estate Assets and, to the 

 

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extent necessary, perform all other operational functions for the maintenance and administration of such Real Estate Assets; (vii) actively oversee and manage Investments for purposes of meeting the Company’s investment objectives and reviewing and analyzing financial information for each of the Investments and the overall portfolio; (viii) select Joint Venture partners, structure and negotiate corresponding agreements and oversee and monitor these relationships; (ix) engage, oversee, supervise and evaluate property managers who perform services for the Company or the Operating Partnership; (x) engage, oversee, supervise and evaluate Persons with whom the Advisor contracts to perform certain of the services required to be performed under this Agreement; (xi) manage accounting and other record-keeping functions for the Company and the Operating Partnership, including reviewing and analyzing the capital and operating budgets for the Real Estate Assets and generating an annual budget for the Company; and (xii) recommend various liquidity events to the Board when appropriate;

(f) upon request, but no less than quarterly, provide the Board with periodic reports regarding prospective investments;

(g) negotiate the terms of and make investments in, and dispositions of, Investments within the discretionary limits and authority as granted by the Board;

(h) within the discretionary limits and authority as granted by the Board, negotiate on behalf of the Company and the Operating Partnership with banks or other lenders for Loans to be made to the Company and the Operating Partnership, and negotiate on behalf of the Company and the Operating Partnership with investment banking firms and broker-dealers or negotiate private sales of Shares or obtain Loans for the Company and the Operating Partnership, but in no event in such a manner so that the Advisor shall be acting as broker-dealer or underwriter; provided, further, that any fees and costs payable to third parties incurred by the Advisor in connection with the foregoing shall be the responsibility of the Company or the Operating Partnership;

(i) at least quarterly, and at any other time reasonably requested by the Board, obtain reports (which may, but are not required to, be prepared by the Advisor or its Affiliates), where appropriate, concerning the value of Investments or contemplated investments of the Company and the Operating Partnership;

(j) at least quarterly, and at any other time reasonably requested by the Board, make reports to the Board of its performance of services to the Company and the Operating Partnership under this Agreement (including reports with respect to potential conflicts of interest involving the Advisor or any of its Affiliates), the composition and characteristics of the Company’s portfolio, and compliance with the Company’s Investment Guidelines and other policies approved from time to time by the Board;

(k) provide the Company and the Operating Partnership with all necessary cash management services;

(l) deliver to, or maintain on behalf of, the Company copies of all appraisals obtained in connection with the investments in any Real Estate Assets as may be required to be obtained by the Board;

(m) notify the Board of all proposed transactions outside of the Advisor’s delegated authority before they are completed and obtain Board approval of same;

(n) negotiate and effect any private placement of OP Units, tenancy-in-common (TIC) or other interests in Investments as may be approved by the Board;

(o) perform investor-relations and Stockholder communications functions for the Company;

(p) render such services as may be reasonably determined by the Board of Directors consistent with the terms and conditions herein;

(q) maintain the Company’s accounting and other records and assist the Company in filing all reports required to be filed by it with the Securities and Exchange Commission, the Internal Revenue Service and other regulatory agencies;

(r) do all things necessary to assure its ability to render the services described in this Agreement;

(s) advise the Company and the Operating Partnership regarding the maintenance of the Company’s qualification as a REIT and monitor the Company’s compliance with the various REIT qualification requirements and other rules set forth in the Code and any applicable treasury regulations promulgated under the Code, as amended from time to time, and use its commercially reasonable efforts to cause the Company to maintain its qualification as a REIT for U.S. federal income tax purposes;

 

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(t) advise the Company and the Operating Partnership regarding the maintenance of their exemptions from the status of an investment company required to register under the 1940 Act, and monitor compliance with the requirements for maintaining such exemptions and using commercially reasonable efforts to cause them to maintain such exemptions from such status;

(u) assist the Company and the Operating Partnership in qualifying to do business in all applicable jurisdictions in which the Company, the Operating Partnership or their subsidiaries do business, and ensure that the Company, the Operating Partnership and their respective subsidiaries obtain and maintain all applicable licenses;

(v) assist the Company and the Operating Partnership in complying with all regulatory requirements applicable to them with respect to their business activities, including preparing or causing to be prepared all financial statements required under applicable regulations and contractual undertakings and all reports and documents, if any, required under the Exchange Act, the Securities Act or the NYSE;

(w) if requested by the Company, provide, or cause another qualified third party to provide, such internal audit, compliance and control services as may be required for the Company, the Operating Partnership and their subsidiaries to comply with applicable law (including the Securities Act and the Exchange Act), regulation (including Securities and Exchange Commission regulations) and the rules and requirements of the NYSE or such other securities exchange on which the Shares are listed, and as otherwise requested by the Board;

(x) handle and resolve on behalf of the Company and the Operating Partnership (including their respective subsidiaries) all routine claims, disputes or controversies, including all routine litigation, arbitration, settlement or other proceedings or negotiations, in which the Company, the Operating Partnership or their respective subsidiaries may be involved or to which they may become subject, subject to such limitations or parameters as may be imposed from time to time by the Board; and

(y) use commercially reasonable efforts to cause the Company, the Operating Partnership and their respective subsidiaries to comply with all applicable laws.

Notwithstanding the foregoing, to the extent such duties may be delegated by an investment company consistent with Section 15 of the 1940 Act, the Advisor may delegate any of the foregoing duties to any Person so long as the Advisor remains responsible for the performance of the duties set forth in this Section 3; provided, however, that the delegation by the Advisor of any of the foregoing duties to another Person shall not result in an increased Administrative Fee, Management Fee or additional expenses payable hereunder.

4. Authority of Advisor.

(a) Pursuant to the terms of this Agreement (including the restrictions included in this Section 4 and in Section 8), and subject to the continuing and exclusive authority of the Board over the management of the Company, the Company, acting on the authority of the Board of Directors, hereby delegates to the Advisor the authority to perform the services described in Section 3.

(b) Notwithstanding anything herein to the contrary, the Advisor shall obtain the prior approval of the Board, any particular Directors specified by the Board or any committee of the Board, as the case may be, in connection with (i) any Investment for which the portion of the consideration paid out of the Company’s Equity (defined below) equals or exceeds $50,000,000, (ii) any investment that is inconsistent with the Company’s publicly disclosed Investment Guidelines as in effect from time to time, or, if none are then publicly disclosed, as otherwise adopted by the Board from time to time, or (iii) any engagement of Affiliated service providers on behalf of the Company or the Operating Partnership, which engagement terms will be negotiated on an arm’s length basis.  “Equity” means the Company’s cash on hand, exclusive of the proceeds of any debt financing incurred or to be incurred in connection with the relevant Investment.

(c) If a transaction requires approval by the Independent Directors, the Advisor will deliver to the Independent Directors all documents and other information required by them to properly evaluate the proposed transaction.

(d) For the period and on the terms and conditions set forth in this Agreement, the Company, the Operating Partnership and each of their respective subsidiaries hereby constitutes, appoints and authorizes the Advisor as its true and lawful agent and attorney-in-fact, in its name, place and stead, to negotiate, execute, deliver and enter into agreements, instruments and authorizations on their behalf, on such terms and conditions as the Advisor, acting in its sole and absolute discretion, deems necessary or appropriate (subject to any limitations imposed by the Board).  This power of attorney is deemed to be coupled with an interest.

5. No Partnership or Joint Venture.  The parties to this Agreement are not partners or joint venturers with each other and nothing herein shall be construed to make them partners or joint venturers or impose any liability as such on either of them.

 

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6. Bank Accounts.  The Advisor may establish and maintain one or more bank accounts in its own name for the account of the Company or the Operating Partnership or in the name of the Company and the Operating Partnership and may collect and deposit into any such account or accounts, and disburse from any such account or accounts, any money on behalf of the Company or the Operating Partnership, consistent with the authority granted under Section 4 and in such other circumstances as the Board may approve, provided that no funds shall be commingled with the funds of the Advisor; and the Advisor shall upon request render appropriate accountings of such collections and payments to the Board and to the auditors of the Company.

7. Records; Access; Confidentiality.  The Advisor shall maintain appropriate books of accounts and records of all its activities hereunder and make such records available for inspection by the Directors and by counsel, auditors and authorized agents of the Company, at any time and from time to time.  The Advisor shall at all reasonable times have access to the books and records of the Company and the Operating Partnership.  The Advisor shall keep confidential any and all information obtained in connection with the services rendered under this Agreement and shall not disclose any such information (or use the same except in furtherance of its duties under this Agreement) to unaffiliated third parties except (i) with the prior written consent of the Board, (ii) to legal counsel, accountants or other professional advisors or consultants engaged by the Company, (iii) to appraisers, financing sources and others in the ordinary course of the Company’s business, (iv) to governmental officials having jurisdiction over the Company and the Operating Partnership (including their respective subsidiaries), (v) in connection with any governmental or regulatory filings of the Company, the Operating Partnership or of their subsidiaries, or disclosure or presentations to Company investors, (vi) as required by law or legal process to which the Advisor or any Person to whom disclosure is permitted hereunder is a party, or (vii) to the extent such information is otherwise publicly available through the actions of a Person other than the Advisor not resulting from Advisor’s violation of this Section 7.  The confidentiality provisions of this Section 7 shall survive for a period of one year after the expiration or earlier termination of this Agreement.

8. Limitations on Activities.  Notwithstanding anything herein to the contrary, the Advisor shall not intentionally or with gross negligence, reckless disregard or bad faith take any action that, would (a) adversely affect the maintenance of the Company’s qualification as a REIT under the Code, unless the Board has determined that the maintenance of the Company’s REIT qualification is not in the best interests of the Company and its Stockholders, (b) subject the Company to regulation under the 1940 Act, except to the extent the Company and the Advisor have undertaken in this Agreement and the Articles of Incorporation to comply with Section 15 of the 1940 Act in connection with the entry into, continuation of, or amendment of this Agreement or any advisory agreement (c) be contrary to or inconsistent with the Company’s Investment Guidelines or (d) violate any law, rule, regulation or statement of policy of any governmental body or agency having jurisdiction over the Company or its Shares, or otherwise not be permitted by the Articles of Incorporation or Bylaws, except if such action shall be ordered by the Board, in which case the Advisor shall notify promptly the Board of the Advisor’s judgment of the potential impact of such action and shall refrain from taking such action until it receives further clarification or instructions from the Board.  In such event, the Advisor shall have no liability for acting in accordance with the specific instructions of the Board so given.  The Advisor shall comply in all material respects with all applicable law and regulations, including, without limitation, applicable provisions of the Investment Advisers Act of 1940, as amended, and the regulations promulgated thereunder.

9. Compensation.

(a) During the term hereof, as the same may be extended from time to time, the Company shall pay the Advisor the Administrative Fee and the Management Fee.  The Advisor shall compute each installment of the Administrative Fee and the Management Fee as promptly as possible after the end of the month with respect to which such installment is payable.  The accrued fees will be payable monthly as promptly as possible after the end of each month during which this Agreement is in effect.  A copy of the computations made by the Advisor to calculate such installment shall thereafter, for informational purposes only, promptly be delivered to the Board.  The Administrative Fee and the Management Fee shall be paid in cash unless the Advisor elects, in its sole discretion, to receive all or a portion of the Administrative Fee and the Management Fee in Shares; provided, that (i) such election to receive all or a portion of the fees in Shares shall be made by notice to the Board (the “Election Notice”) at the time the Advisor delivers to the Board the computation of the Administrative Fee and the Management Fee for such month and (ii) the Advisor’s ability receive Shares in payment of all or a portion of the Administrative Fee and the Management Fee shall be subject to Section 9(c).  To the extent that the Advisor elects to receive Shares in payment of all or a portion of the Administrative Fee or the Management Fee for any particular month, the number of Shares payable to the Advisor for such month shall equal (A) the dollar amount of the portion of the monthly installment of the Administrative Fee and the Management Fee payable in Shares (as set forth in the Election Notice) divided by (B) the VWAP per Share for the 10 trading days prior to the end of the month for which the Management Fee will be paid.  The Management Fee shall be payable independent of the performance of the Company, the Operating Partnership or the Investments.

(b) In calculating the Administrative Fee and the Management Fee, the Company will categorize the Average Real Estate Assets into either Contributed Assets or New Assets.  The Administrative Fee on the Contributed Assets may not exceed $890,000 in any calendar year.  The Management Fee on the Contributed Assets may not exceed $4,500,000 in any calendar year.  The Administrative Fee and the Management Fee on the portion of the Average Real Estate Assets categorized as New Assets will not be subject to any 

 

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maximum amount in any calendar year.  The Adviser may waive a portion of its fees.  If this Agreement becomes effective subsequent to the first day of a month or shall terminate before the last day of a month, compensation for such month shall be computed in a manner consistent with the calculation of the fees payable on a monthly basis.

(c) The Advisor’s ability to receive Shares in payment of all or a portion of the Administrative Fee or the Management Fee due to the Advisor under this Agreement shall be subject to the following:  (i) the ownership of such Shares by the Advisor shall not violate the limit on ownership of Shares set forth in the Articles of Incorporation or otherwise raise a material risk to the status of the Company as a REIT, after giving effect to any exception from such limit that the Board may grant to the Advisor or its Affiliates; and (ii) the Company’s issuance of such Shares to the Advisor shall comply with all applicable restrictions under the U.S. federal securities laws and the rules of the NYSE.

(d) The Company agrees to provide reasonable registration rights to the Advisor and its Affiliates in a form of registration rights agreement to be mutually agreed.

10. Expenses.

(a) In addition to the compensation paid to the Advisor pursuant to Section 9, the Company or the Operating Partnership shall pay directly or reimburse the Advisor for all of the documented Operating Expenses and Offering Expenses (together, “Expenses”) paid or incurred by the Advisor or its Affiliates in connection with the services it provides to the Company and the Operating Partnership pursuant to this Agreement.  Any Expenses payable by the Company or reimbursable to the Advisor pursuant to this Agreement shall not be in amounts greater than those which would be payable to outside professionals or consultants engaged to perform such services pursuant to agreements negotiated on an arm’s length basis.  Reimbursement of Operating Expenses under this Section 10, plus Administrative Fees and Management Fees under Section 9, may not exceed 1.5% of Average Real Estate Assets for any calendar year or portion thereof, provided, however, that this limitation will not apply to legal, accounting, financial, due diligence and other service fees incurred in connection with extraordinary litigation and mergers and acquisitions and other events outside the Company’s ordinary course of business or any out-of-pocket acquisition or due diligence expenses incurred in connection with the acquisition or disposition of Real Estate Assets.

(b) The Advisor shall prepare a statement documenting all Expenses incurred during each month, and shall deliver such statement to the Company within 15 business days after the end of each month.  Expenses incurred by the Advisor on behalf of the Company and the Operating Partnership and payable pursuant to this Section 10 shall be reimbursed no later than the 15th business day immediately following the date of delivery of such statement of Expenses to the Company.

11. Other Services.  Should the Board request that the Advisor or any director, officer or employee thereof render services for the Company and the Operating Partnership other than set forth in Section 3, such services shall be separately compensated at such customary rates and in such customary amounts as are agreed upon by the Advisor and the Board, including a majority of the Independent Directors, subject to the limitations contained in the Articles of Incorporation, and shall not be deemed to be services pursuant to the terms of this Agreement.

12. Other Activities of the Advisor.  Except as set forth in this Section 12, nothing herein contained shall prevent the Advisor or any of its Affiliates from engaging in or earning fees from other activities, including, without limitation, the rendering of advice to other Persons (including other REITs) and the management of other programs advised, sponsored or organized by Highland or its Affiliates; nor shall this Agreement limit or restrict the right of any director, officer, member, partner, employee, or stockholder of the Advisor or its Affiliates to engage in or earn fees from any other business or to render services of any kind to any other partnership, corporation, firm, individual, trust or association and earn fees for rendering such services; provided, however, that the Advisor must devote sufficient resources to the Company’s business to discharge its obligations to the Company under this Agreement.  The Advisor may, with respect to any investment in which the Company is a participant, also render advice and service to each and every other participant therein, and earn fees for rendering such advice and service.  Specifically, it is contemplated that the Company may enter into Joint Ventures or other similar co-investment arrangements with certain Persons, and pursuant to the agreements governing such Joint Ventures or arrangements, the Advisor may be engaged to provide advice and service to such Persons, in which case the Advisor will earn fees for rendering such advice and service.

The Board acknowledges that the Advisor and its Affiliates are subject to various conflicts of interest, including without limitation, those set forth in the Registration Statement and the Advisor’s Form ADV. The Advisor shall report to the Board the existence of any condition or circumstance, existing or anticipated, of which it has knowledge, which creates or is reasonably likely to create a conflict of interest between the Advisor’s obligations to the Company and its obligations to or its interest in any other partnership, corporation, firm, individual, trust or association.  

 

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13. Term and Termination.

(a) Duration. This Agreement shall become effective on the date first set forth above, such date being the date on which this Agreement has been executed following: (1) the approval of the Company’s Board of Directors, including approval by a vote of a majority of the Independent Directors, cast in person at a meeting called for the purpose of voting on such approval, in each case in accordance with Section 15 of the 1940 Act, regardless of whether the 1940 Act is otherwise applicable to the Company; (2) the approval by a “vote of a majority of the outstanding voting securities” (as defined in the 1940 Act) of the Company and (3) the approval by a “vote of a majority of the outstanding voting securities” (as defined in the 1940 Act) of NexPoint Credit Strategies Fund.  Unless terminated as herein provided, this Agreement shall remain in full force and effect until the date that is two years after the effective date of this Agreement. Subsequent to such initial period of effectiveness, this Agreement shall continue in full force and effect, subject to paragraph 13(c), so long as such continuance is approved at least annually (a) by either the Company’s Board of Directors or by a “vote of a majority of the outstanding voting securities” (as defined in the 1940 Act) of the Company and (b) in either event, by the vote of a majority of the Independent Directors, cast in person at a meeting called for the purpose of voting on such approval, in accordance with Section 15 of the 1940 Act.

(b) Amendment. No provision of this Agreement may be amended, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the amendment, waiver, discharge or termination is sought. Any amendment of this Agreement shall comply with, and be approved in accordance with, the requirements of Section 15 of the 1940 Act and any applicable rules thereunder, regardless of whether the 1940 Act is otherwise applicable to the Company.

(c) Termination. This Agreement may be terminated at any time, without payment of any penalty, by vote of the Board of Directors, or by a “vote of a majority of the outstanding voting securities” (as defined in the 1940 Act) of the Company, or by the Advisor, in each case on not more than 60 days’ nor less than 30 days’ prior written notice to the other party.

(d) Automatic Termination. This Agreement shall automatically and immediately terminate in the event of its “assignment” (as defined in the 1940 Act).

14. Payments and Duties Upon Termination.

(a) Amounts Owed.  After the Effective Termination Date, the Advisor shall be entitled to receive from the Company or the Operating Partnership within 30 days after the effective date of such termination all amounts then accrued and owing to the Advisor.

(b) Advisor’s Duties.  The Advisor shall promptly upon termination of this Agreement:

(i) pay over to the Company and the Operating Partnership all money collected and held for the account of the Company and the Operating Partnership pursuant to this Agreement, after deducting any accrued compensation and reimbursement for its expenses to which it is then entitled;

(ii) deliver to the Board a full accounting, including a statement showing all payments collected by it and a statement of all money held by it, covering the period following the date of the last accounting furnished to the Board;

(iii) deliver to the Board all assets, including all Investments, and documents of the Company and the Operating Partnership then in the custody of the Advisor; and

(iv) reasonably cooperate with the Company and the Operating Partnership, at the Company’s expense, to provide an orderly management transition.

15. Limitation of Liability, Exculpation and Indemnification by the Company and Operating Partnership.

(a) Whether or not expressly provided in this Agreement, every provision of this Agreement relating to the conduct or affecting the liability of or affording protection to the Advisor or any of its respective Affiliates and their respective partners, members, officers, directors, employees and agents (including parties acting as agents for the execution of transactions) (each, a “Covered Person” and collectively, “Covered Persons”) shall be subject to the provisions of this Section.

(b) To the fullest extent permitted by law, no Covered Person shall be liable to the Company and the Operating Partnership (including but not limited to (i) any act or omission by any Covered Person in connection with the conduct of the business of the Company or the Operating Partnership, that is determined by such Covered Person in good faith to be in or not opposed to the best interests of the Company or the Operating Partnership, (ii) any act or omission by any Covered Person based on the suggestions of any 

 

8

 

professional advisor of the Company or the Operating Partnership whom such Covered Person believes is authorized to make such suggestions on behalf of the Company or the Operating Partnership, (iii) any act or omission by the Company or the Operating Partnership, or (iv) any mistake, negligence, misconduct or bad faith of any broker or other agent of the Company or the Operating Partnership selected by the Covered Person with reasonable care), unless any act or omission by such Covered Person constitutes bad faith, fraud, willful misfeasance, intentional misconduct, gross negligence or reckless disregard of its duties (as determined by a non-appealable judgment of a court or arbitration proceeding of competent jurisdiction).

(c) A Covered Person may consult with legal counsel or accountants selected by such Covered Person and any act or omission by such Covered Person on behalf of the Company or the Operating Partnership or in furtherance of the business of the Company or the Operating Partnership in good faith in reliance on and in accordance with the advice of such counsel or accountants shall be full justification for the act or omission, and such Covered Person shall be fully protected in so acting or omitting to act if the counsel or accountants were selected with reasonable care.

(d) To the fullest extent permitted by law, the Company or the Operating Partnership shall indemnify and save harmless Covered Persons, from and against any and all claims, liabilities, damages, losses, costs and expenses, including amounts paid in satisfaction of judgments, in compromises and settlements, as fines and penalties and legal or other costs and expenses of investigating or defending against any claim or alleged claim, of any nature whatsoever, known or unknown, liquidated or unliquidated, that are incurred by any Covered Person and arise out of or in connection with the business or investments of the Company or the Operating Partnership, or the performance by the Covered Person of its responsibilities hereunder, provided that the Covered Person shall not be entitled to indemnification hereunder to the extent the Covered Person’s conduct constitutes bad faith, fraud, willful misfeasance, intentional misconduct, gross negligence or reckless disregard of its duties (as determined by a non-appealable judgment of a court or arbitration proceeding of competent jurisdiction).  The termination of any proceeding by settlement, judgment, order or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the Covered Person’s conduct constituted bad faith, fraud, willful misfeasance, intentional misconduct, gross negligence or reckless disregard of its duties.

(e) Expenses incurred by a Covered Person in defense or settlement of any claim that shall be subject to a right of indemnification hereunder, shall be advanced by the Company or the Operating Partnership prior to the final disposition thereof upon receipt of an undertaking by or on behalf of the Covered Person to repay the amount advanced to the extent that it shall be determined ultimately that the Covered Person is not entitled to be indemnified hereunder.

(f) The right of any Covered Person to the indemnification provided herein shall be cumulative of, and in addition to, any and all rights to which the Covered Person may otherwise be entitled by contract or as a matter of law or equity and shall be extended to the Covered Person’s successors, assigns and legal representatives.

(g) The provisions of this Section are expressly intended to confer benefits upon Covered Persons and such provisions shall remain operative and in full force and effect regardless of the expiration or any termination of this Agreement.

(h) No Covered Person shall be liable hereunder for any settlement of any action or claim effected without its written consent thereto.

16. Indemnification by the Advisor.  

(a) The Advisor shall indemnify and hold harmless the Company and the Operating Partnership from all claims, liabilities, damages, losses, costs and expenses, including amounts paid in satisfaction of judgments, in compromises and settlements, as fines and penalties and legal or other costs and expenses of investigating or defending against any claim or alleged claim, of any nature whatsoever, known or unknown, liquidated or unliquidated, that are incurred by reason of the Advisor’s bad faith, fraud, willful misfeasance, intentional misconduct, gross negligence or reckless disregard of its duties; provided, however, that the Advisor shall not be held responsible for any action of the Board in following or declining to follow any written advice or written recommendation given by the Advisor.

(b) Notwithstanding anything in this Agreement to the contrary, the aggregate maximum amount that the Advisor may be liable to the Company or the Operating Partnership pursuant to this Agreement shall, to the extent not prohibited by law, never exceed the amount of the Management Fees received by the Advisor under this Agreement prior to the date that the acts or omissions giving rise to a claim for indemnification or liability shall have occurred.  In no event shall the Advisor be liable for special, exemplary, punitive, indirect, or consequential loss, or damage of any kind whatsoever, including without limitation lost profits.  The foregoing limitations shall not apply to the extent such damages are determined in a final binding non-appealable court or arbitration proceeding to result from the bad faith, fraud, willful misfeasance, intentional misconduct, gross negligence or reckless disregard of its duties of the Advisor.

 

9

 

(c) The provisions of this Section are expressly intended to confer benefits upon the Company and the Operating Partnership and such provisions shall remain operative and in full force and effect regardless of the expiration or any termination of this Agreement.

17. Notices.  Any notice, report or other communication required or permitted to be given hereunder shall be in writing unless some other method of giving such notice, report or other communication is required by the Articles of Incorporation, the Bylaws, or accepted by the party to whom it is given, and shall be given by being delivered by hand, by courier or overnight carrier or by registered or certified mail to the addresses set forth below:

 

		
	
To the Company:
	
NexPoint Residential Trust, Inc.

300 Crescent CourtSuite 700

Dallas, Texas 75201

Attention:  Brian Mitts

with a copy to:

Jones Day

2727 N. Harwood Street

Dallas, Texas 75201

Attention:  Charles T. Haag

	
To the Operating Partnership:
	
NexPoint Operating Partnership, LP

300 Crescent Court

Suite 700

Dallas, Texas 75201

Attention:  Brian Mitts

with a copy to:

Jones Day

2727 N. Harwood Street

Dallas, Texas 75201

Attention:  Charles T. Haag

 

	
To the Advisor:
	
NexPoint Real Estate Advisors, L.P.

300 Crescent Court

Suite 700

Dallas, Texas 75201

Attention:  Brian Mitts

with a copy to:

Highland Capital Management, L.P.

300 Crescent Court

Suite 700

Dallas, Texas 75201

Attention:  Thomas Surgent

Any party may at any time give notice in writing to the other parties of a change in its address for the purposes of this Section 17.

18. Modification.  This Agreement shall not be amended, supplemented, modified, terminated, or discharged, in whole or in part, except by an instrument in writing signed by the parties hereto, or their respective successors or assignees.

19. Severability.  The provisions of this Agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.

 

10

 

20. Governing Law; Arbitration.  The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of New York as at the time in effect, without regard to the principles of conflicts of laws thereof.  In the event there is an unresolved legal dispute between the parties and/or any of their respective officers, directors, partners, employees, agents, Affiliates or other representatives that involves legal rights or remedies arising from this Agreement, the parties agree to submit their dispute to binding arbitration under the authority of the Federal Arbitration Act; provided, however, that Highland or such applicable Affiliate thereof may pursue a temporary restraining order and/or preliminary injunctive relief in connection with any confidentiality covenants or agreements binding on the other party, with related expedited discovery for the parties, in a court of law, and, thereafter, require arbitration of all issues of final relief. The arbitration will be conducted by the American Arbitration Association, or another, mutually agreeable arbitration service. A panel of three arbitrators will preside over the arbitration and will together deliberate, decided and issue the final award. The arbitrators shall be duly licensed to practice law in the State of Texas. The discovery process shall be limited to the following: Each side shall be permitted no more than (i) two party depositions of six hours each (Each deposition is to be taken pursuant to the Texas Rules of Civil Procedure); (ii) one non-party deposition of six hours; (iii) twenty-five interrogatories; (iv) twenty-five requests for admission; (v) ten requests for production (In response, the producing party shall not be obligated to produce in excess of 5,000 total pages of documents. The total pages of documents shall include electronic documents); (vi) one request for disclosure pursuant to the Texas Rules of Civil Procedure. Any discovery not specifically provided for in this paragraph, whether to parties or non-parties, shall not be permitted. The arbitrators shall be required to state in a written opinion all facts and conclusions of law relied upon to support any decision rendered. The arbitrators will not have the authority to render a decision that contains an outcome determinative error of state or federal law, or to fashion a cause of action or remedy not otherwise provided for under applicable state or federal law. Any dispute over whether the arbitrators have failed to comply with the foregoing will be resolved by summary judgment in a court of law. In all other respects, the arbitration process will be conducted in accordance with the American Arbitration Association's dispute resolution rules or other mutually agreeable, arbitration service rules. The party initiating arbitration shall pay all arbitration costs and arbitrator's fees, subject to a final arbitration award on who should bear costs and fees. All proceedings shall be conducted in Dallas, Texas, or another mutually agreeable site. Each party shall bear its own attorneys fees, costs and expenses, including any costs of experts, witnesses and/or travel, subject to a final arbitration award on who should bear costs and fees. The duty to arbitrate described above shall survive the termination of this Agreement. Except as otherwise provided above, the parties hereby waive trial in a court of law or by jury. All other rights, remedies, statutes of limitation and defenses applicable to claims asserted in a court of law will apply in the arbitration.

21. Entire Agreement.  This Agreement contains the entire agreement and understanding among the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof.  The express terms hereof control and supersede any course of performance or usage of the trade inconsistent with any of the terms hereof.

22. No Waiver.  Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence.  No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.

23. Pronouns and Plurals.  Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa.

24. Headings.  The titles of Sections and Subsections contained in this Agreement are for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation hereof.

25. Execution in Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument.  This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories.

 

 

 

 

11

 

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above.

 

	
 
	
NEXPOINT RESIDENTIAL TRUST, INC.

	
 
	
 

	
 
	
By:
	
/s/ Brian Mitts

	
 
	
 
	
Name: Brian Mitts

	
 
	
 
	
Title: Chief Financial Officer, Executive VP-Finance and Treasurer

	
 
	
 
	
 
	
 

	
 
	
NEXPOINT RESIDENTIAL TRUST OPERATING PARTNERSHIP, L.P.

	
 
	
 

	
 
	
By: NexPoint Residential Trust Operating Partnership GP, LLC., its general partner

	
 
	
 
	
 
	
 

	
 
	
By: NexPoint Residential Trust, Inc., its sole member

	
 
	
 
	
 
	
 

	
 
	
 
	
By:
	
/s/ Brian Mitts

	
 
	
 
	
Name: Brian Mitts

	
 
	
 
	
Title: Chief Financial Officer, Executive VP-Finance and Treasurer

	
 
	
 
	
 
	
 

	
 
	
NEXPOINT REAL ESTATE ADVISORS, L.P.

	
 
	
 

	
 
	
By:
	
/s/ Brian Mitts

	
 
	
 
	
Name: Brian Mitts

	
 
	
 
	
Title: Chief Financial Officer and Executive VP-Finance

 

 

 

 

[Signature Page to Advisory Agreement]

 

EXHIBIT A

Description of Administration Services.

Advisor will perform the following administration services:

	
(i)
	
Prepare monthly transaction listings;

	
(ii)
	
Supply various normal and customary portfolio and Company statistical data as requested on an ongoing basis;

	
(iii)
	
Prepare for execution and file the Company’s Federal and state tax returns: prepare a fiscal tax provision in coordination with the annual audit; prepare an excise tax provision; and prepare all relevant 1099 calculations;

	
(iv)
	
Coordinate contractual relationships and communications between the Company and its contractual service providers;

	
(v)
	
Coordinate printing of the Company’s annual shareholder reports;

	
(vi)
	
Prepare income and capital gain distributions;

	
(vii)
	
Prepare the quarterly and annual financial statements;

	
(viii)
	
Monitor the Company’s compliance with the Internal Revenue Code of 1986, as amended, SEC reporting requirements;

	
(ix)
	
Prepare, coordinate with the Company’s counsel and coordinate the filing with the SEC: quarterly reports on Form 10-Q; annual reports on Form 10-K, in each case based upon information provided by the Company; assist in the preparation of Forms 3, 4 and 5 pursuant to Section 16 of the 1934 Act for the officers and directors of the Company, such filings to be based on information provided by those persons;

	
(x)
	
Assist in the preparation of notices of meetings of shareholders, coordinate preparation of proxy statements, including obtaining information required to be disclosed by applicable regulations and the engagement of proxy solicitors on behalf of the Company;

	
(xi)
	
Assist in obtaining directors’ and officers’/errors and omissions insurance policies for the Company, including evaluation of insurance carriers, recommending appropriate coverage levels and evaluating the costs thereof, as such policies are approved by the Company’s Board of Directors;

	
(xii)
	
Draft agendas and resolutions for quarterly and special board meetings;

	
(xiii)
	
Coordinate the preparation, assembly and posting of board materials;

	
(xiv)
	
Attend board meetings and draft minutes thereof;

	
(xv)
	
Maintain the Company’s calendar to assure compliance with various filing and board approval deadlines;

	
(xvi)
	
Assist the Company in the handling of SEC examinations and responses thereto;

	
(xvii)
	
If the chief executive officer or chief financial officer of the Company is required to provide a certification as part of the Company’s Form 10-Q or Form 10-K filing pursuant to regulations promulgated by the SEC under Section 302 of the Sarbanes-Oxley Act of 2002, Advisor will provide (to such person or entity as agreed between the Company and Advisor) a sub-certification in support of certain matters set forth in the aforementioned certification, such sub-certification to be in such form and relating to such matters as agreed between the Company and Advisor from time to time. Advisor shall be required to provide the subcertification only during the term of the Agreement and only if it receives such cooperation as it may request to perform its investigations with respect to the sub-certification. For clarity, the sub-certification is not itself a certification under the Sarbanes-Oxley Act of 2002 or under any other regulatory requirement;

	
(xviii)
	
Prepare and coordinate the Company’s state notice filings;

	
(xix)
	
Furnish the Company office space in the offices of Advisor, or in such other place or places as may be agreed from time to time, and all necessary office facilities, simple business equipment, supplies, utilities and telephone service for managing the affairs of the Company;

	
(xx)
	
Perform clerical, bookkeeping and other administrative services not provided by the Company’s other service providers;

	
(xxi)
	
Determine or oversee the determination of the Company’s Average Real Estate value in accordance with the Company’s policies as adopted from time to time by the Board of Directors;

	
(xxii)
	
Oversee the maintenance by the Company’s custodian and transfer agent and dividend disbursing agent of certain books and records of the Company and maintain (or oversee maintenance by such other persons as approved by the Board of Directors) such other books and records required by law or for the proper operation of the Company;

 

A-1

 

	
(xxiii)
	
Prepare such information and reports as may be required by any stock exchange or exchanges on which the Company’s shares are listed;

	
(xxiv)
	
Determine the amounts available for distribution as dividends and distributions to be paid by the Company to its shareholders; calculate, analyze and prepare a detailed income analysis and forecast future earnings for presentation to the Board of Directors; prepare and arrange for dividend notices to shareholders, as applicable, and provide the Company’s dividend disbursing agent and custodian with such information as is required for such parties to effect the payment of dividends and distributions and to implement the Company’s dividend reinvestment plan, if any;

	
(xxv)
	
Serve as liaison between the Company and each of its service providers;

	
(xxvi)
	
Assist in monitoring and tracking the daily cash flows of the individual assets of the Company, as well as security position data of portfolio investments; assist in resolving any identified discrepancies with the appropriate third party, including the Company’s custodian, administrative agents and other service providers, through various means including researching available data via agent notices, financial news and data services, and other sources;

	
(xxvii)
	
Monitor compliance with leverage tests under the Company’s credit facility, if any, and communicate with leverage providers and rating agencies;

	
(xxviii)
	
Coordinate negotiation and renewal of credit agreements for presentation to the Board of Directors;

	
(xxix)
	
Coordinate negotiations of agreements with counterparties and the Company’s custodian for derivatives and similar transactions, as applicable;

	
(xxx)
	
Provide assistance with the closing of Real Estate Asset purchases and dispositions;

	
(xxxi)
	
Coordinate and oversee the provision of legal services to the Company;

	
(xxxii)
	
Cooperate with the Company’s independent registered public accounting firm in connection with audits and reviews of the Company’s financial statements, including interviews and other meetings, as necessary;

	
(xxxiii)
	
Provide Secretary and any Assistant Secretaries, Treasurer and any Assistant Treasurers and other officers for the Company as requested;

	
(xxxiv)
	
Develop or assist in developing guidelines and procedures to improve overall compliance by the Company;

	
(xxxv)
	
Determine and monitor expense accruals for the Company;

	
(xxxvi)
	
Authorize expenditures and approve bills for payment on behalf of the Company;

	
(xxxvii)
	
Monitor the number of shares of the Company registered and assist in the registration of additional shares, as necessary;

	
(xxxviii)
	
Exercise or procure the exercise of any rights of the Company with respect to any class action proceedings or other legal action concerning investments of the Company;

	
(xxxix)
	
Prepare such reports as the Board of Directors of the Company may request from time to time; and

	
(xl)
	
Perform such additional administrative duties relating to the administration of the Company as may subsequently be agreed upon in writing between the Company and Advisor.

 

A-2Exhibit 10.3

REGISTRATION RIGHTS AGREEMENT 

THIS REGISTRATION RIGHTS AGREEMENT, dated as of March 16, 2015, is entered into by and between NexPoint Residential Trust, Inc., a Maryland corporation (“NXRT”) and NexPoint Real Estate Advisors, L.P., a Delaware limited partnership (the “Advisor”). 

RECITALS 

A. In connection with the separation and distribution of NXRT (the “Transaction”) from NexPoint Credit Strategies Fund, a Delaware statutory trust (“NHF”), NXRT will enter into an Advisory Agreement (the “Advisory Agreement”) with the Advisor pursuant to which the Advisor will serve as the external advisor to NXRT, and may receive shares of common stock of NXRT (“NXRT Common Stock”), par value $0.01 per share, as compensation for such services. 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, the parties hereto agree as follows: 

ARTICLE I
DEFINITIONS 

Section 1.1  Definitions.  In addition to the definitions set forth above, the following terms, as used herein, have the following meanings: 

“Advisor” has the meaning set forth in the introductory paragraph.

“Advisory Agreement” has the meaning set forth in the introductory paragraph.

“Affiliate” of any Person means any other Person directly or indirectly controlling or controlled by or under common control with such Person. For the purposes of this definition, “control” when used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing. 

“Agreement” means this Registration Rights Agreement, as it may be amended, supplemented or restated from time to time. 

“Business Day” means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in Dallas, Texas or New York, New York are authorized or required by law, regulation or executive order to close. 

“Charter” means the Articles of Amendment and Restatement of NXRT as filed with the Secretary of State of the State of Maryland on March 12, 2015, as the same may be amended, modified or restated from time to time. 

“Commission” means the Securities and Exchange Commission. 

“Confidential Information” means Confidential Information as defined in Section 2.9. 

“Demand Registration” shall have the meaning set forth in Section 2.1(b) of this Agreement. 

“Exchange Act” means the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder.  

“Holder” means any Initial Holder who is the owner of any Registrable Security or any assignee or transferee of such Initial Holder (x) to the extent permitted under the Charter and (y) provided such assignee or transferee agrees in writing to be bound by all the provisions hereof. 

“Immediate Family” of any individual means such individual’s estate and heirs or current spouse, or former spouse, parents, parents-in-law, children (whether natural or adoptive or by marriage), siblings and grandchildren and any trust or estate, all of the beneficiaries of which consist of such individual or any of the foregoing. 

 

 

“Initial Holder” means the Advisor.

“Inspector” has the meaning set forth in Section 2.2(g).

“Notice and Questionnaire” means a written notice, substantially in the form attached as Exhibit A, delivered by a Holder to NXRT (i) notifying NXRT of such Holder’s desire to include Registrable Securities in a registration statement, (ii) containing all information about such Holder required to be included in such registration statement in accordance with applicable law, including Item 507 of Regulation S-K promulgated under the Securities Act, as amended from time to time, or any similar successor rule thereto, and (iii) pursuant to which such Holder agrees to bound by the terms and conditions hereof. 

“NXRT” has the meaning set forth in the introductory paragraph.

“NXRT Common Stock” has the meaning set forth in the introductory paragraph.

“Ownership Limit Provisions” mean the various provisions of NXRT’s Charter restricting the ownership of shares of NXRT Common Stock by Persons to specified percentages of the outstanding shares of NXRT Common Stock. 

“Person” means an individual or a corporation, partnership, limited liability company, association, trust, or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. 

“Piggyback Registration” shall have the meaning set forth in Section 2.1(a) of this Agreement. 

“Records” has the meaning set forth in Section 2.2(g).

“Registrable Securities” means shares of NXRT Common Stock at any time beneficially owned by the Advisor which are issuable or issued as compensation for the Advisor’s services under the Advisory Agreement and any additional shares of NXRT Common Stock issued as a dividend, distribution or exchange for, or in respect of such shares until: 

(i) a registration statement covering such shares has been declared effective by the Commission and such shares have been disposed of pursuant to such effective registration statement; 

(ii) such shares have been publicly sold under Rule 144; 

(iii) all such shares held by such Person may be sold in one transaction pursuant to Rule 144; or 

(iv) such shares have been otherwise transferred in a transaction that constitutes a sale thereof under the Securities Act, NXRT has delivered a new certificate or other evidence of ownership for such shares not bearing the Securities Act restricted stock legend and such shares may be resold or otherwise transferred by such transferee without subsequent registration under the Securities Act; 

provided, however, that “Registrable Securities” for purposes of the indemnification obligations contained in Sections 2.7 and 2.8 shall mean all shares that are registered on an applicable registration statement, notwithstanding that such shares may not otherwise be “Registrable Securities” by operation of clause (iii) above. 

“Registration Expenses” has the meaning set forth in Section 2.3. 

“Restricted Shares” means shares of NXRT Common Stock issued under an NXRT’s registration statement which if sold by the holder thereof would constitute “restricted securities” as defined under Rule 144. 

“Rule 144” means Rule 144 promulgated under the Securities Act or any similar successor rule thereto that may be promulgated by the Commission. 

“Securities Act” means the Securities Act of 1933 and the rules and regulations promulgated thereunder. 

“Selling Holder” means a Holder who is selling Registrable Securities pursuant to a registration statement under the Securities Act. 

“Suspension Notice” means any written notice delivered by NXRT pursuant to Section 2.9 with respect to the suspension of rights under a registration statement or any prospectus contained therein. 

 

2

 

“Transaction” has the meaning set forth in the introductory paragraph.

“Underwriter” means a securities dealer who purchases any Registrable Securities as principal and not as part of such dealer’s market-making activities. 

ARTICLE II
REGISTRATION RIGHTS 

Section 2.1  Registration.  

(a) Piggyback Registration.  If NXRT proposes to file a registration statement (or a prospectus supplement pursuant to a then-existing shelf registration statement) under the Securities Act with respect to a proposed underwritten equity offering by NXRT for its own account or for the account of any of its respective securityholders of any class of security other than a registration statement on Form S-4 or S-8 (or any substitute form that may be adopted by the Commission) filed in connection with an exchange offer or offering of securities solely to NXRT’s existing securityholders, then NXRT shall give written notice of such proposed filing to the Holders of Registrable Securities as soon as practicable (but in no event less than 10 days before the anticipated filing date of the applicable preliminary prospectus or, if applicable, prospectus supplement; provided that in the case of a “bought deal” or an offering in which there is no (or very limited) marketing, seven days before pricing, and such notice shall offer such Holders the opportunity to register such number of shares of Registrable Securities as each such Holder may request (a “Piggyback Registration”). NXRT shall use commercially reasonable efforts to cause the managing Underwriter or Underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggyback Registration to be included on the same terms and conditions as any similar securities of NXRT included therein. 

(b) Demand Registration.  

(i) Request for Registration. Commencing on or after the date that is one year after the consummation of the Transaction, Holders of Registrable Securities may make a written request for registration under the Securities Act of all or part of its Registrable Securities (a “Demand Registration”); provided, that NXRT shall not be obligated to effect more than one Demand Registration in any twelve month period and not more than two such Demand Registrations during the term of the Advisory Agreement (if such Advisory Agreement is extended), the Holders will be entitled to one additional Demand Registration per year that the Advisory Agreement is extended); and provided, further, that Holders making such written request shall propose the sale of at least 100,000 shares of Registrable Securities (such number to be adjusted successively in the event NXRT effects any stock split, stock consideration or recapitalization after the date hereof) or such lesser number of Registrable Securities if such lesser number is all of the Registrable Shares owned by the Holders. Any such request will specify the number of shares of Registrable Securities proposed to be sold and will also specify the intended method of disposition thereof. Within 10 days after receipt of such request, NXRT will give written notice of such registration request to all other Holders of Registrable Securities and include in such registration all such Registrable Securities with respect to which NXRT has received written requests for inclusion therein within 10 Business Days after the receipt by the applicable Holder of NXRT’s notice. Each such request will also specify the number of shares of Registrable Securities to be registered and the intended method of disposition thereof. 

(ii) Effective Demand Registration. A registration will not count as a Demand Registration until it has become effective and has remained effective and available for at least 180 days (or such shorter period in which all Registrable Securities included in such registration have been sold).

(iii) Priority on Demand Registrations. If the Holders of a majority of shares of the Registrable Securities to be registered in a Demand Registration so elect by written notice to NXRT, the offering of such Registrable Securities pursuant to such Demand Registration shall be in the form of an underwritten offering. NXRT shall select the book-running managing Underwriter in connection with any such Demand Registration; provided that such managing Underwriter must be reasonably satisfactory to the Holders of a majority of the shares of the Registrable Securities. NXRT may select any additional investment banks and managers to be used in connection with the offering; provided that such additional investment bankers and managers must be reasonably satisfactory to the Holders of a majority of the shares of the Registrable Securities. To the extent 10% or more of the Registrable Securities so requested to be registered are excluded from the offering in accordance with Section 2.1(c), the Holders of such Registrable Securities shall have the right to one additional Demand Registration under this Section in such twelve-month period with respect to the Registrable Securities 

 

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(c) Reduction of Offering.  Notwithstanding anything contained herein, if the managing Underwriter or Underwriters of an offering described in Section 2.1(a) or (b) deliver a written opinion to NXRT and the Holders of the Registrable Securities included in such offering that (i) the size of the offering that the Holders, NXRT and such other persons intend to make or (ii) the kind of securities that NXRT and such other Persons intend to include in such offering are such that the success of the offering would be materially and adversely affected by inclusion of the Registrable Securities requested to be included, then: 

(i) if the size of the offering is the basis of such Underwriter’s opinion, the amount of securities to be offered for the accounts of Holders shall be reduced pro rata (according to the number of Registrable Securities proposed for registration) to the extent necessary to reduce the total amount of securities to be included in such offering to the amount recommended by such managing Underwriter or Underwriters; provided that, in the case of a Piggyback Registration, if securities are being offered for the account of other Persons as well as NXRT, then with respect to the Registrable Securities intended to be offered by Holders, the proportion by which the amount of such class of securities intended to be offered by Holders is reduced shall not exceed the proportion by which the amount of such class of securities intended to be offered by such other Persons is reduced, if NXRT has the right to reduce such other Person’s allocation; and 

(ii) if the combination of securities to be offered is the basis of such Underwriter’s opinion, (x) the Registrable Securities to be included in such offering shall be reduced as described in clause (i) above (subject to the proviso in clause (i)) or (y) if the actions described in clause (x) would, in the judgment of the managing Underwriter, be insufficient to substantially eliminate the adverse effect that inclusion of the Registrable Securities requested to be included would have on such offering, such Registrable Securities will be excluded from such offering. 

(d) Selling Holders Become Party to Agreement.  Each Holder acknowledges that by participating in its registration rights pursuant to this Agreement, such Holder will be deemed a party to this Agreement and will be bound by its terms, notwithstanding such Holder’s failure to deliver a Notice and Questionnaire; provided, that any Holder that has not delivered a duly completed and executed Notice and Questionnaire shall not be entitled to be named as a Selling Holder in, or have the Registrable Securities held by it covered by, a registration statement. 

Section 2.2  Registration Procedures; Filings; Information.  Subject to Section 2.9 hereof, in connection with any requests that Registrable Securities be registered pursuant to Section 2.1(b) hereof, NXRT will use its commercially reasonable efforts to effect the registration of the Registrable Securities covered thereby in accordance with the intended method of disposition thereof as quickly as reasonably practicable. In connection with any such request: 

(a) NXRT will, as expeditiously as possible, prepare and file with the Commission a registration statement on any form for which NXRT then qualifies or which counsel for NXRT shall deem appropriate and which form shall be available for the sale of the Registrable Securities to be registered thereunder in accordance with the intended method of distribution thereof; provided that if NXRT shall furnish to the Holders making a request for a Demand Registration pursuant to Section 2.1(b) a certificate signed by either its Chairman or President stating that in his or her good faith judgment it would be significantly disadvantageous to NXRT or its shareholders for such a registration statement to be filed as expeditiously as possible, NXRT shall have a period of not more than 180 days within which to file such registration statement measured from the date of receipt of the request. 

(b) NXRT will, if requested, prior to filing a registration statement or prospectus or any amendment or supplement thereto, furnish to each Selling Holder and each Underwriter, if any, of the Registrable Securities covered by such registration statement copies of such registration statement as proposed to be filed, and thereafter furnish to such Selling Holder or Underwriter, if any, such number of conformed copies of such registration statement, each amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference therein), the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as such Selling Holder or Underwriter may reasonably request to facilitate the disposition of the Registrable Securities owned by such Selling Holder. 

(c) After the filing of a registration statement, NXRT will promptly notify each Selling Holder of Registrable Securities covered by such registration statement of any stop order issued or threatened by the Commission and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered. 

 

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(d) NXRT will use its commercially reasonable efforts to (i) register or qualify the Registrable Securities under such other securities or “blue sky” laws of such jurisdictions in the United States (where an exemption does not apply) as any Selling Holder or managing Underwriter or Underwriters, if any, reasonably (in light of such Selling Holder’s intended plan of distribution) requests and (ii) cause such Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of NXRT and do any and all other acts and things that may be reasonably necessary or advisable to enable such Selling Holder to consummate the disposition of the Registrable Securities owned by such Selling Holder; provided that NXRT will not be required to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph (d), (B) subject itself to taxation in any such jurisdiction or (C) consent to general service of process in any such jurisdiction. 

(e) NXRT will immediately notify each Selling Holder of such Registrable Securities, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of (i) NXRT’s receipt of any notification of the suspension of the qualification of any Registrable Securities covered by a registration statement for sale in any jurisdiction; or (ii) the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and promptly make available to each Selling Holder any such supplement or amendment. 

(f) NXRT will enter into customary agreements (including an underwriting agreement, if any, in customary form) and take such other actions as are reasonably required to expedite or facilitate the disposition of such Registrable Securities pursuant to a Demand Registration. 

(g) NXRT will make available for inspection by any Selling Holder of such Registrable Securities, any Underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other professional retained by any Selling Holder or Underwriter (collectively, the “Inspectors”), all financial and other records, pertinent corporate documents and documents relating to the properties of NXRT (collectively, the “Records”) as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause NXRT’s directors and the employees of the Advisor to supply all information reasonably requested by any Inspectors in connection with such registration statement. Records which NXRT determines, in good faith, to be confidential and which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such registration statement or (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction. Each Selling Holder of such Registrable Securities agrees that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of NXRT unless and until such is made generally available to the public. Each Selling Holder of such Registrable Securities further agrees that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to NXRT and allow NXRT, at its expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential. 

(h) NXRT will furnish to each Selling Holder and to each Underwriter, if any, a signed counterpart, addressed to such Selling Holder or Underwriter, of (i) an opinion or opinions of counsel to NXRT and (ii) if eligible under applicable auditing standards, a comfort letter or comfort letters from NXRT’s independent public accountants, each in customary form and covering such matters of the type customarily covered by opinions or comfort letters, as the case may be, as the Holders of a majority of the Registrable Securities included in such offering or the managing Underwriter or Underwriters therefor reasonably requests. 

(i) NXRT will otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the Commission, and make available to its securityholders, as soon as reasonably practicable, an earnings statement covering a period of 12 months, beginning within three months after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 of the Commission promulgated thereunder (or any successor rule or regulation hereafter adopted by the Commission). 

(j) NXRT will use its commercially reasonable efforts to cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by NXRT are then listed. 

(k) In addition to the Notice and Questionnaire, NXRT may require each Selling Holder of Registrable Securities to promptly furnish in writing to NXRT such information regarding such Selling Holder, the Registrable Securities held by it and the intended method of distribution of the Registrable Securities as NXRT may from time to time reasonably request and such other information as may be legally required in connection with such registration. No Holder may include Registrable Securities in any registration statement pursuant to this Agreement unless and until such Holder has furnished to NXRT such information. Each holder further agrees to furnish as soon as reasonably practicable to NXRT all information required to be disclosed to make information previously furnished to NXRT by such Holder not materially misleading. 

 

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(l) Each Selling Holder agrees that, upon receipt of any notice from NXRT of the happening of any event of the kind described in Section 2.2(c) or 2.2(e) or upon receipt of a Suspension Notice, such Selling Holder will discontinue disposition of Registrable Securities pursuant to a registration statement covering such Registrable Securities until such Selling Holder’s receipt of written notice from NXRT that such disposition may be made and, in the case of clause (ii) of Section 2.2(e) or, if applicable, Section 2.9, copies of any supplemented or amended prospectus contemplated by clause (ii) of Section 2.2(e) or, if applicable, prepared under Section 2.9, and, if so directed by NXRT, such Selling Holder will deliver to NXRT all copies, other than permanent file copies then in such Selling Holder’s possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice. Each Selling Holder of Registrable Securities agrees that it will immediately notify NXRT at any time when a prospectus relating to the registration of such Registrable Securities is required to be delivered under the Securities Act of the happening of an event as a result of which information previously furnished by such Selling Holder to NXRT in writing for inclusion in such prospectus contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances in which they were made. 

Section 2.3  Registration Expenses.  In connection with any registration statement required to be filed hereunder, NXRT shall pay the following registration expenses incurred in connection with the registration hereunder (the “Registration Expenses”): (i) all fees and expenses of compliance with securities or “blue sky” laws (including registration and filing fees and reasonable fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities), (ii) printing expenses, (iii) internal expenses (including, without limitation, all salaries and expenses of the Advisor’s officers and employees performing legal or accounting duties), (iv) the fees and expenses incurred in connection with the listing of the Registrable Securities, (v) reasonable fees and disbursements of counsel for NXRT and customary fees and expenses for independent certified public accountants retained by NXRT (including the expenses of any comfort letters or costs associated with the delivery by independent certified public accountants of a comfort letter or comfort letters requested pursuant to Section 2.2(h) hereof), and (vi) the reasonable fees and expenses of any special experts retained by NXRT in connection with such registration. NXRT shall have no obligation to pay any fees, discounts or commissions attributable to the sale of Registrable Securities, any out-of-pocket expenses of the Holders (or the agents who manage their accounts), or any transfer taxes relating to the registration or sale of the Registrable Securities. 

Section 2.4  Indemnification by NXRT.  NXRT agrees to indemnify and hold harmless each Selling Holder of Registrable Securities, its officers, directors and agents, and each Person, if any, who controls such Selling Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities that arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any registration statement or prospectus relating to the Registrable Securities (as amended or supplemented if NXRT shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or that arise out of or are based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except insofar as such losses, claims, damages or liabilities arise out of or are based upon any such untrue statement or omission or alleged untrue statement or omission included in reliance upon and in conformity with information furnished in writing to NXRT by such Selling Holder or on such Selling Holder’s behalf expressly for inclusion therein. NXRT also agrees to indemnify any Underwriters of the Registrable Securities, their officers and directors and each Person who controls such underwriters within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act on substantially the same basis as that of the indemnification of the Selling Holders provided in this Section 2.4, provided that the foregoing indemnity with respect to any preliminary prospectus shall not inure to the benefit of any Underwriter of the Registrable Securities from whom the person asserting any such losses, claims, damages or liabilities purchased the Registrable Securities which are the subject thereof if such person did not receive a copy of the prospectus (or the prospectus as supplemented) at or prior to the confirmation of the sale of such Registrable Securities to such person in any case where such delivery is required by the Securities Act and the untrue statement or omission of a material fact contained in such preliminary prospectus was corrected in the prospectus (or the prospectus as supplemented). The indemnity provided for in this Section 2.4 shall remain in full force and effect regardless of any investigation made by or on behalf of any Selling Holder. 

Section 2.5  Indemnification by Holders of Registrable Securities.  Each Selling Holder agrees, severally but not jointly, to indemnify and hold harmless NXRT, its officers, directors and agents and each Person, if any, who controls NXRT within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from NXRT to such Selling Holder, but only with respect to information relating to such Selling Holder included in reliance upon and in conformity with information furnished in writing by such Selling Holder or on such Selling Holder’s behalf expressly for use in any registration statement or prospectus relating to the Registrable Securities, or any amendment or supplement thereto, or any preliminary prospectus. 

In case any action or proceeding shall be brought against NXRT or its officers, directors or agents or any such controlling person, in respect of which indemnity may be sought against such Selling Holder, such Selling Holder shall have the rights and duties given to NXRT, and NXRT or its officers, directors or agents or such controlling person shall have the rights and duties given to such Selling Holder, by Section 2.4. Each Selling Holder also agrees to indemnify and hold harmless Underwriters of the Registrable 

 

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Securities, their officers and directors and each Person who controls such Underwriters within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act on substantially the same basis as that of the indemnification of NXRT provided in this Section 2.5. 

The obligations of any Selling Holder pursuant to this Section 2.5 will be limited to an amount equal to the net proceeds to such Selling Holder (after deducting any discounts and commissions) from the disposition pursuant to such registration. 

Section 2.6  Conduct of Indemnification Proceedings.  In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to Section 2.4 or 2.5, such person (an “Indemnified Party”) shall promptly notify the person against whom such indemnity may be sought (an “Indemnifying Party”) in writing and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Party, and shall assume the payment of all fees and expenses; provided, however, that the failure of any Indemnified Party to give such notice will not relieve such Indemnifying Party of any obligations under this Article II, except to the extent such Indemnifying Party is materially prejudiced by such failure. In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the Indemnified Party and the Indemnifying Party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the Indemnifying Party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) at any time for all such Indemnified Parties, and that all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate firm for the Indemnified Parties, such firm shall be designated in writing by (i) in the case of Persons indemnified pursuant to Section 2.4 hereof, the Selling Holders which owned a majority of the Registrable Securities sold under the applicable registration statement and (ii) in the case of Persons indemnified pursuant to Section 2.5, NXRT. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent, or if there be a final judgment for the plaintiff, the Indemnifying Party shall indemnify and hold harmless such Indemnified Parties from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified Party shall have requested an Indemnifying Party to reimburse the Indemnified Party for fees and expenses of counsel as contemplated by the third sentence of this paragraph, the Indemnifying Party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 Business Days after receipt by such Indemnifying Party of the aforesaid request and (ii) such Indemnifying Party shall not have reimbursed the Indemnified Party in accordance with such request prior to the date of such settlement. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability arising out of such proceeding. 

Section 2.7  Contribution.  If the indemnification provided for in Section 2.4 or 2.5 hereof is unavailable to an Indemnified Party or insufficient in respect of any losses, claims, damages or liabilities referred to herein, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities (i) as between NXRT and the Selling Holders on the one hand and the Underwriters on the other, in such proportion as is appropriate to reflect the relative fault of NXRT and each Selling Holder on the one hand and of the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations and (ii) between NXRT on the one hand and each Selling Holder on the other, in such proportion as is appropriate to reflect the relative fault of NXRT and each Selling Holder in connection with such statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of NXRT and the Selling Holders on the one hand and of the Underwriters on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by NXRT and the Selling Holders or by the Underwriters. The relative fault of NXRT on the one hand and of each Selling Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. 

NXRT and the Selling Holders agree that it would not be just and equitable if contribution pursuant to this Section 2.7 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages or liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the 

 

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provisions of this Section 2.7, no Underwriter shall be required to contribute any amount in excess of the amount by which the total commissions and discounts received by such Underwriter in connection with the sale of the securities underwritten by it and distributed to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and no Selling Holder shall be required to contribute any amount in excess of the amount by which the net proceeds from the sale of the securities of such Selling Holder to the public exceeds the amount of any damages which such Selling Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Selling Holder’s obligations to contribute pursuant to this Section 2.7 are several in proportion to the net proceeds of the offering received by such Selling Holder bears to the total net proceeds of the offering received by all the Selling Holders and not joint. 

Section 2.8  Rule 144.  NXRT covenants that it will (a) make and keep public information regarding NXRT available as those terms are defined in Rule 144, (b) file in a timely manner any reports and documents required to be filed by it under the Securities Act and the Exchange Act, (c) furnish to any Holder forthwith upon request (i) a written statement by NXRT as to its compliance with the reporting requirements of Rule 144 (at any time more than 90 days after the completion of the Transaction), the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), and (ii) a copy of the most recent annual or quarterly report of NXRT and such other reports and documents so filed by NXRT, and (d) take such further action as any Holder may reasonably request, all to the extent required from time to time to enable Holders to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144. 

Section 2.9  Suspension of Use of Registration Statement.  

(a) If the Board of Directors of NXRT determines in its good faith judgment that the filing of a registration statement under Section 2.1 or the use of any related prospectus would be materially detrimental to NXRT because such action would require the disclosure of material information that NXRT has a bona fide business purpose for preserving as confidential or the disclosure of which would impede NXRT’s ability to consummate a significant transaction (“Confidential Information”), and that NXRT is not otherwise required by applicable securities laws or regulations to disclose, upon written notice of such determination by NXRT to the Holders, the rights of the Holders to offer, sell or distribute any Registrable Securities pursuant to a registration statement or to require NXRT to take action with respect to the registration or sale of any Registrable Securities pursuant to a registration statement shall be suspended until the earlier of (i) the date upon which NXRT notifies the Holders in writing that suspension of such rights for the grounds set forth in this Section 2.9(a) is no longer necessary and (ii) 180 days; provided, however, no such 180-day period shall be successive with respect to the same Confidential Information. NXRT agrees to give the notice under (i) above as promptly as practicable following the date that such suspension of rights is no longer necessary.  

(b) If all reports required to be filed by NXRT pursuant to the Exchange Act have not been filed by the required date without regard to any extension, or if the consummation of any business combination by NXRT has occurred or is probable for purposes of Rule 3-05 or Article 11 of Regulation S-X promulgated under the Securities Act or any successor rule, upon written notice thereof by NXRT to the Holders, the rights of the Holders to offer, sell or distribute any Registrable Securities pursuant to a registration statement or to require NXRT to take action with respect to the registration or sale of any Registrable Securities pursuant to a registration statement shall be suspended until the date on which NXRT has filed such reports or obtained and filed the financial information required by Rule 3-05 or Article 11 of Regulation S-X to be included or incorporated by reference, as applicable, in a registration statement, and NXRT shall notify the Holders as promptly as practicable when such suspension is no longer required. 

Section 2.10  Additional Shares.  NXRT, at its option, may register under a registration statement and any filings with any state securities commissions filed pursuant to this Agreement, any number of unissued shares of NXRT Common Stock or any shares of NXRT Common Stock owned by any other stockholder or stockholders of NXRT. 

Section 2.11  Holdback Agreements.  

(a) Restrictions on Public Sale by Holder of Registrable Securities. To the extent not inconsistent with applicable law, each Holder whose securities are included in a registration statement agrees not to effect any sale or distribution of the issue being registered or a similar security of NXRT, or any securities convertible into or exchangeable or exercisable for such securities, including a sale pursuant to Rule 144 under the Securities Act, during the 14 days prior to, and during the 90-day period beginning on, the effective date of such registration statement (except as part of such registration), if and to the extent requested in writing by NXRT in the case of a non-underwritten public offering or if and to the extent requested in writing by the managing Underwriter or Underwriters in the case of an underwritten public offering. 

 

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(b) Restrictions on Public Sale by NXRT and Others. NXRT agrees that any agreement entered into after the date of this Agreement pursuant to which NXRT issues or agrees to issue any privately placed securities shall contain a provision under which holders of such securities agree not to effect any sale or distribution of any securities similar to those being registered in accordance with Section 2.1(a) or (b) hereof, or any securities convertible into or exchangeable or exercisable for such securities, during the 14 days prior to, and during the 90‐day period beginning on, the effective date of any registration statement (except as part of such registration statement where the Holders of a majority of the Registrable Securities to be included in such registration statement consent or as part of registration statements filed on Form S‐4 or Form S‐8 as set forth in Section 2.1(a)), if and to the extent requested in writing by NXRT in the case of a non-underwritten public offering or if and to the extent requested in writing by the managing Underwriter or Underwriters in the case of an underwritten public offering, in each case including a sale pursuant to Rule 144 under the Securities Act (except as part of any such registration, if permitted); provided, however, that the provisions of this paragraph (b) shall not prevent the conversion or exchange of any securities pursuant to their terms into or for other securities. 

ARTICLE III
MISCELLANEOUS 

Section 3.1  Remedies.  In addition to being entitled to exercise all rights provided herein and granted by law, including recovery of damages, the Holders shall be entitled to specific performance of the rights under this Agreement. NXRT agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. 

Section 3.2  Amendments and Waivers.  The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, in each case without the written consent of NXRT and the Holders of a majority of the Registrable Securities; provided, however, that the effect of any such amendment will be that the consenting Holders will not be treated more favorably than all other Holders (without regard to any differences in effect that such amendment or waiver may have on the Holders due to the differing amounts of Registrable Shares held by such Holders). No failure or delay by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon any breach thereof shall constitute waiver of any such breach or any other covenant, duty, agreement or condition. 

Section 3.3  Notices .  All notices and other communications in connection with this Agreement shall be made in writing by hand delivery, registered first-class mail, facsimile or air courier guaranteeing overnight delivery: 

(i) if to NXRT:

    NexPoint Residential Trust, Inc.
    300 Crescent Court, Suite 700
    Dallas, TX 75201
    Fax:  972-628-4147
    Attention:  Corporate Secretary

    with a copy to:

    Charlie Haag
    Jones Day
    2727 North Harwood Street
    Dallas, TX  75201
    Fax:  214-969-5100

(ii) if to any Holder, initially to the address indicated in such Holder’s Notice and Questionnaire or, if no Notice and Questionnaire has been delivered, to such other address as any Holder shall have specified in writing.

All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; when received if deposited in the mail, postage prepaid, if mailed; if sent by facsimile, when receipt acknowledged; and on the next Business Day, if timely delivered to an air courier guaranteeing overnight delivery. 

Section 3.4  Successors and Assigns.  This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties. Any Holder may assign its rights under this Agreement without the consent of NXRT in connection with a transfer of such Holder’s Registrable Securities; provided, that the Holder satisfies all applicable transfer provisions for the Registrable Securities, and notifies NXRT of such proposed transfer and assignment and the transferee or assignee of such rights assumes in writing the obligations of such Holder under this Agreement. 

 

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Section 3.5  Counterparts.  This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Each party shall become bound by this Agreement immediately upon affixing its signature hereto. 

Section 3.6  Governing Law .  This Agreement shall be governed by and construed in accordance with the internal laws of the State of Texas without regard to the choice of law provisions thereof. 

Section 3.7  Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. 

Section 3.8  Entire Agreement.  This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by NXRT with respect to the Registrable Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 

Section 3.9  Headings.  The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 

Section 3.10  No Third Party Beneficiaries.  Nothing express or implied herein is intended or shall be construed to confer upon any person or entity, other than the parties hereto and their respective successors and assigns, any rights, remedies or other benefits under or by reason of this Agreement. 

Section 3.11  Termination.  The obligations of the parties hereunder shall terminate (i) with respect to a Holder when it no longer holds Registrable Securities, and (ii) with respect to NXRT when there are no longer any Registrable Securities; except, in each case, for any obligations under Sections 2.1(b), 2.3, 2.4, 2.5, 2.6 and 2.7 and Article III that, by their terms, are intended to survive for a specific period of time. 

[Signature Page Follows]

 

 

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. 

 

	
NEXPOINT RESIDENTIAL TRUST, INC. 

	
 

	
By:
	
/s/ Brian Mitts

	
 
	
Name: Brian Mitts

	
 
	
Title: Chief Financial Officer, Executive VP- Finance and Treasurer

 

	
NEXPOINT REAL ESTATE ADVISORS, L.P. 

	
 

	
By:
	
/s/ Brian Mitts

	
 
	
Name: Brian Mitts

	
 
	
Title: Chief Financial Officer and Executive VP-Finance

 

 

 

[Signature Page to Registration Rights Agreement]

 

Exhibit A 

Form of Notice and Questionnaire 

The undersigned holder of shares of common stock, par value $0.01 per share (“Common Stock”), of NexPoint Residential Trust, Inc. (the “Company”) (the “Registrable Securities”), understands that the Company has filed or intends to file with the Securities and Exchange Commission (the “Commission”) one or more registration statements for the registration and sale of the Registrable Securities in accordance with the terms of the Registration Rights Agreement (the “Registration Rights Agreement”), dated March 16, 2015, among the Company and the holders listed on the signature page thereto. A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below. All capitalized terms not otherwise defined herein shall have the meanings set forth in the Registration Rights Agreement. 

Each owner of Registrable Securities is entitled to the benefits of the Registration Rights Agreement. In order to sell or otherwise dispose of any Registrable Securities pursuant to a registration statement, a beneficial owner of Registrable Securities generally will be required to be named as a selling security holder in a prospectus, deliver a prospectus to purchasers of Registrable Securities and be bound by those provisions of the Registration Rights Agreement applicable to such Holder (including certain indemnification provisions as described below). To be included in the registration statement, this Notice and Questionnaire must be completed, executed and delivered to the Company at the address set forth herein on or prior to the tenth business day before the effectiveness of the registration statement. We will give notice of the filing and effectiveness of the initial registration statement by issuing a press release and by mailing a notice to the Holders at their addresses set forth in the register of the registrar. 

Owners that do not complete this Notice and Questionnaire and deliver it to the Company as provided below will not be named as selling security holders in the prospectus and therefore will not be permitted to sell any Registrable Securities pursuant to the registration statement. Owners are encouraged to complete and deliver this Notice and Questionnaire prior to the effectiveness of the initial registration statement so that such beneficial owners may be named as selling security holders in the related prospectus at the time of effectiveness. 

Certain legal consequences arise from being named as selling security holders in a registration statement and the related prospectus. Accordingly, Holders of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling security holder in a registration statement and the related prospectus. 

NOTICE 

The undersigned owner (the “Selling Security Holder”) of Registrable Securities hereby elects to include in the prospectus forming a part of a registration statement the Registrable Securities beneficially owned by it and listed below in Item 3 (unless otherwise specified under Item 3). The undersigned, by signing and returning this Notice and Questionnaire, understands that it will be bound by the terms and conditions of this Notice and Questionnaire and the Registration Rights Agreement. 

Pursuant to the Registration Rights Agreement, the undersigned has agreed to indemnify and hold harmless the Company and its directors, officers and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against certain losses arising in connection with statements concerning the undersigned made in a registration statement or the related prospectus in reliance upon the information provided in this Notice and Questionnaire. 

The undersigned hereby provides the following information to the Company and represents and warrants to the Company that such information is accurate and complete:  

 

 

 

 

QUESTIONNAIRE 

	
1.
	
(a) Full Legal Name of Selling Security Holder: 

(b) Full Legal Name of registered holder (if not the same as (a) above) through which Registrable Securities listed in Item (3) below are held: 

(c) Full Legal Name of DTC Participant (if applicable and if not the same as (b) above) through which Registrable Securities listed in Item (3) below are held: 

(d) List below the individual or individuals who exercise voting and/or dispositive powers with respect to the Registrable Securities listed in Item (3) below: 

	
2.
	
Address for Notices to Selling Security Holder: 

Telephone: 

Fax: 

E-mail address: 

Contact Person: 

	
3.
	
Beneficial Ownership of Registrable Securities: 

Type and number of Registrable Securities beneficially owned:                                                     .

Type and number of Registrable Securities to be included in a registration statement:                  .

	
4.
	
Beneficial Ownership of Securities of the Company Owned by the Selling Security Holder: 

Except as set forth below in this Item (4), the undersigned is not the beneficial or registered owner of any securities of the Company, other than the Registrable Securities listed above in Item (3). 

Type and amount of other securities beneficially owned by the Selling Security Holder:              .

	
5.
	
Relationship with the Company 

Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (5% or more) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years. 

State any exceptions here: 

	
6.
	
Plan of Distribution 

Discuss the plan of distribution below:

 

 

 

 

ACKNOWLEDGEMENTS 

The undersigned acknowledges that it understands its obligation to comply with the provisions of the Securities Exchange Act of 1934 and the rules thereunder relating to stock manipulation, particularly Regulation M thereunder (or any successor rules or regulations), in connection with any offering of Registrable Securities pursuant to the Registration Rights Agreement. The undersigned agrees that neither it nor any person acting on its behalf will engage in any transaction in violation of such provisions. 

The Selling Security Holder hereby acknowledges its obligations under the Registration Rights Agreement to indemnify and hold harmless certain persons set forth therein. Pursuant to the Registration Rights Agreement, NXRT has agreed under certain circumstances to indemnify the Selling Security Holders against certain liabilities. 

In accordance with the undersigned’s obligation under the Registration Rights Agreement to provide such information as may be required by law for inclusion in a registration statement, the undersigned agrees to promptly notify NXRT of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof at any time while the registration statement remains effective. All notices hereunder and pursuant to the Registration Rights Agreement shall be made in writing at the address set forth below. 

In the event that the undersigned transfers all or any portion of the Registrable Securities listed in Item 3 above after the date on which such information is provided to NXRT, the undersigned agrees to notify the transferee(s) at the time of transfer of its rights and obligations under this Notice and Questionnaire and the Registration Rights Agreement. 

By signing this Notice and Questionnaire, the undersigned consents to the disclosure of the information contained herein in its answers to Items (1) through (6) above and the inclusion of such information in a registration statement and the related prospectus. The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of a registration statement and the related prospectus. 

Once this Notice and Questionnaire is executed by the Selling Security Holder and received by the Company, the terms of this Notice and Questionnaire and the representations and warranties contained herein shall be binding on, shall inure to the benefit of and shall be enforceable by the respective successors, heirs, personal representatives and assigns of the Company and the Selling Security Holder with respect to the Registrable Securities beneficially owned by such Selling Security Holder and listed in Item 3 above. 

This Notice and Questionnaire shall be governed by, and construed in accordance with, the laws of the State of Texas. 

IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent. 

 

	
Holder:
	
 

	
 
	
 

	
By:
	
 

	
Name:
	
 

	
Title:
	
 

	
 
	
 

	
Dated:
	
 

 

 

 

 

 

Please return the completed and executed Notice and Questionnaire to:

NexPoint Residential Trust, Inc.

300 Crescent Court, Suite 700

Dallas, TX 75201

Tel: (972) 628-4100

Fax: (972) 628-4147

Attention: Corporate Secretary

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