UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement pursuantPursuant to Section14(a) of the
Securities Exchange Act of 1934
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Filed by a Party other than the Registrant ☐
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☐ | Preliminary Proxy Statement |
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☒ | Definitive Proxy Statement |
☐ | Definitive Additional Materials |
☐ | Soliciting Material Pursuant to |
NexPoint Real Estate Finance, Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Otherother than the Registrant)
Payment of Filing Fee (Check the appropriate box)all boxes that apply):
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☒ | No fee |
☐ | Fee paid previously with preliminary |
☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and |
300 Crescent Court
April 8, 2022Suite 700
Dallas, Texas 75201
Dear NREF Stockholder:
You are cordially invited to attend the annual meetinga Special Meeting of stockholdersStockholders of NexPoint Real Estate Finance, Inc. The meeting will be held(the “Company”) on Tuesday, May 10, 2022, beginningFriday, January 26, 2024, at 10:309:00 a.m. Central Time. DueTime to consider a proposal (the “Proposal”) to approve the continuing public health impactamendment and restatement of the COVID-19 pandemic, the annual meetingNexPoint Real Estate Finance, Inc. 2020 Long Term Incentive Plan, as described below. The Special Meeting will be held exclusively through a virtual format. You will not be able to attend the annual meeting in person.person. The Board of Directors believes that the Proposal is in the best interest of stockholders because it believes it will ensure we are able to continue to align the interests of management with stockholders. Details regarding the business to be conducted at the Special Meeting are more fully described in the accompanying Notice of Special Meeting of Stockholders and Proxy Statement.
If your shares are held by a financial intermediary (such as a broker-dealer), and you want to participate in, but not vote at the annual meeting, please email AST Fund Solutions, LLC (“AST”) at attendameeting@astfinancial.com, with “NREF Meeting” in the subject line and provide your full name, address and proof of ownership as of April 4, 2022 from your financial intermediary. AST will then email you the annual meeting registration link. Please be aware if your shares are held through a financial intermediary, and you wish to vote at the annual meeting, you must first obtain a legal proxy from your financial intermediary. You may forward an email from your financial intermediary containing the legal proxy or attach an image of the legal proxy via email to AST at attendameeting@astfinancial.com and put “NREF Legal Proxy” in the subject line. AST will then email you the registration link along with a proxy voting control number.
If you are a stockholder of record and wish to attend and vote at the meeting, please send an email to AST at attendameeting@astfinancial.com with “NREF Meeting” in the subject line and provide your name and address in the body of the email. AST will then email you the registration link for the annual meeting. If you would like to vote during the annual meeting, you may do so by entering the control number found on your proxy card.
Requests to attend the annual meeting must be received by AST no later than 2:00 p.m. Central Time on May 9, 2022. On the date of the annual meeting, stockholders are encouraged to log on 15 minutes before the meeting start time. Please contact AST at (877) 283-0325 with any questions regarding accessing the annual meeting.
Information about the meeting, nominees for the election of directors and the other matters to be voted on at the meeting is presented in the following notice of annual meeting and proxy statement. We hope that you will planbe able to virtually attend the annual meeting.
It is important that your shares be represented.Special Meeting. Whether or not you plan to virtually attend, the meeting, please vote using the internet or telephone procedures described on the notice of internet availability of proxy materials or the proxy card or sign, date and promptly mail a proxy card in the provided, pre-addressed postage-paid envelope. Ifpostage paid envelope to assure that your shares are represented at the Special Meeting. Thank you would like to vote duringfor being a stockholder and for your continued investment in the annual meeting, you may do so by entering the control number found on your proxy card.Company.
November 22, 2023 James D. Dondero |
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NEXPOINT REAL ESTATE FINANCE, INC.
NOTICE OF ANNUALSPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 26, 2024
To be held on May 10, 2022
The 2022 annual meetingA Special Meeting of stockholdersStockholders of NexPoint Real Estate Finance, Inc., a Maryland corporation (the “Company”), will be held virtually, on May 10, 2022, beginningFriday, January 26, 2024, at 10:309:00 a.m. Central Time. Due to the continuing public health impact of the COVID-19 pandemic, the annual meeting will be held exclusively through a virtual format. You will not be able to attend the annual meeting in person. The meeting will be heldTime (the “Special Meeting”), for the following purposes:
1. To approve the amendment and restatement of the NexPoint Real Estate Finance, Inc. 2020 Long Term Incentive Plan. |
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Information concerningThe Board of Directors unanimously recommends that you vote “FOR” the matters toapproval of the proposal.
No other business may be voted uponpresented or transacted at the meeting is set forth in the accompanying proxy statement. We have also provided you or made available to you the Company’s 2021 annual report. Holders of record of the Company’s common stock as of theSpecial Meeting.
The close of business on April 4, 2022 areNovember 20, 2023 has been fixed as the record date for the determination of stockholders entitled to notice of, and to vote at, the meeting.Special Meeting and any adjournment or postponements thereof.
While you will not be able to attend the annual meetingSpecial Meeting in person, we have structured our virtual annual meetingSpecial Meeting to provide stockholders with the same rights as if the meeting were held in person, including the ability to vote shares electronically during the meeting and ask questions in accordance with the rules of conduct for the meeting. To promote fairness and efficient conduct of the meeting, we will respond to no more than two questions from any single stockholder.
If your shares of the Company are held by a financial intermediary (such as a broker-dealer), and you want to participate in, but not vote at the annual meeting,Special Meeting, please email ASTEquiniti Fund Solutions, LLC (“AST”EQ”) at attendameeting@astfinancial.com,attendameeting@equiniti.com with “NREF Meeting” in the subject line and provide your full name, address and proof of ownership as of April 4, 2022November 20, 2023 from your financial intermediary. ASTEQ will then email you the annual meeting registration link. Please be aware if your shares are held through a financial intermediary, and you wish to vote at the annual meeting,Special Meeting, you must first obtain a legal proxy from your financial intermediary. You may forward an email from your financial intermediary containing the legal proxy or attach an image of the legal proxy via email to ASTEQ at attendameeting@astfinancial.comattendameeting@equiniti.com and put “NREF Legal Proxy” in the subject line. ASTEQ will then email you the registration link along with athe proxy voting control number.
If you are a stockholder of record of the Company and wish to attend and vote at the annual meeting, please send an email to ASTEQ at attendameeting@astfinancial.comattendameeting@equiniti.com with “NREF Meeting” in the subject line and provide your name and address in the body of the email. ASTEQ will then email you the registration link for the annual meeting.Special Meeting. If you would like to vote during the annual meeting,Special Meeting, you may do so by entering the control number found on your proxy card.
Requests to attend the annual meetingSpecial Meeting must be received by ASTEQ no later than 2:00 p.m. Central Time on May 9, 2022.Thursday, January 25, 2024. On the date of the annual meeting,Special Meeting, stockholders are encouraged to log on 15 minutes before the meeting start time. Please contact EQ at (877) 283-0325 with any questions regarding accessing the Special Meeting.
Your voteInformation about the meeting and the matter to be voted on at the meeting is very important. Whether or notpresented in the following proxy statement. We hope that you will plan to virtually attend the meeting,Special Meeting.
Please call EQ at (877) 283-0325 for directions on how to attend the Special Meeting.
The Board of Directors is requesting your vote. Your vote is important regardless of the number of shares that you own. Whether or not you expect to be present at the Special Meeting, please vote using the internet or telephone procedures described on the proxy card or sign, date and promptly mail a proxy card in the provided pre-addressed, postage-paidpostage paid envelope. If you would likedesire to vote duringin person at the annual meeting,Special Meeting, you may do so by entering the control number found onrevoke your proxy card.at any time before it is exercised.
Please contact AST at (877) 283-0325 with any questions regarding accessing the annual meeting.
By Order of the Board of Directors, | |||
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Dallas, Texas
April 8, 2022
Brian Mitts Chief Financial Officer, Executive VP-Finance, Secretary and Treasurer November 22, 2023
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NexPoint Real Estate Finance, Inc.NEXPOINT REAL ESTATE FINANCE, INC.
300 Crescent Court, Suite 700PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
JANUARY 26, 2024
Dallas, Texas 75201November 22, 2023
PROXY STATEMENT
This proxy statement provides information in connection with the solicitationThe Board of proxies by the board of directorsDirectors (the “Board”) of NexPoint Real Estate Finance, Inc., a Maryland corporation (the “Company”“Company,” “we,” “us,” or “our”), for use at the Company’s 2022 annual meeting of stockholders or any postponement or adjournment thereof (the “Annual Meeting”). This proxy statement also provides information you will need in order to consider and act upon the matters specified in the accompanying notice of annual meeting. Thisis providing this proxy statement and accompanying proxy card to you in connection with the solicitation of proxies by the Board for a special meeting of our stockholders to be held virtually on Friday, January 26, 2024, at 9:00 a.m., Central time, and any adjournment or postponements thereof (the “Special Meeting”). We are being mailedfirst making these proxy materials available to stockholders on or about April 13, 2022.November 27, 2023.
Record holdersThe Board has fixed November 20, 2023 as the record date (the “Record Date”) for the determination of the Company’s common stock asstockholders entitled to receive notice of, the close of business on April 4, 2022 are entitled toand vote at, the AnnualSpecial Meeting. Each record holderAs of the Record Date, 17,231,913 shares of common stock on that date isof the Company (“Shares”), par value $0.01 per share, were issued and outstanding. Stockholders of the Company are entitled to one vote at the Annual Meeting for each share of common stockShare held. As of April 4, 2022, there were 14,794,255 shares of common stock outstanding.
You cannot vote your shares unless you virtually attend the Annual Meeting or you have previously given your proxy. You can vote by proxy in oneThe mailing address of three convenient ways:our principal executive offices is 300 Crescent Court, Suite 700, Dallas, Texas 75201.
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THE NOTICE OF SPECIAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT ARE | ||
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You may revoke your proxy at any time prior to the vote at the Annual Meeting by:
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Unless revoked as described above, all properly executed proxies will be voted at the Annual Meeting in accordance with your directions on the proxy. If you hold your shares through a broker, bank, trust or other nominee, please refer to the information forwarded by your broker, bank, trust or other nominee for procedures on revoking your proxy. If a properly executed proxy gives no specific instructions, the shares of common stock represented by your proxy will be voted:
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If you own shares of common stock held in “street name” and you do not instruct your broker how to vote your shares using the instructions your broker provides you, your shares will be voted in the ratification of the appointment of KPMG as the Company’s independent registered public accounting firm for 2022, but not for any other proposal. To be sure your shares are voted in the manner you desire, you should instruct your broker on how to vote your shares.
Holders of a majority of the outstanding shares of the Company’s common stock must be present, either in person (virtually) or by proxy, to constitute a quorum necessary to conduct the Annual Meeting. Abstentions and broker non-votes are counted for purposes of determining the presence of a quorum.
The following table sets forthNew York Stock Exchange (“NYSE”) rules do not allow a broker, bank or other nominee who holds Shares on your behalf to vote on the voting requirements, whether broker discretionary voting is allowed and the treatmentLong Term Incentive Plan Proposal (described below) without your instructions.
You can vote in advance in one of abstentions and broker non-votes for each of the matters to be voted on at the Annual Meeting.three ways:
by internet | The web address and instructions for voting BY INTERNET can be found on the enclosed proxy card. You will be required to provide your control number located on the proxy card. |
by phone | The toll-free number for voting BY TELEPHONE can be found on the enclosed proxy card. You will be required to provide your control number located on the proxy card. |
by mail | Sign, date and promptly return your proxy card if you are a stockholder of record to authorize a proxy BY MAIL. |
PROPOSAL 1: APPROVAL OF AN AMENDMENT AND RESTATEMENT OF THE NEXPOINT REAL ESTATE FINANCE, INC. 2020 LONG TERM INCENTIVE PLAN
Executive Summary and Selected Plan Information
Introduction | We are asking our stockholders to approve an amendment and restatement of the NexPoint Real Estate Finance, Inc. 2020 Long Term Incentive Plan (the “Existing LTIP”, and as amended and restated, the “Amended LTIP”). On November 6, 2023, the Compensation Committee of the Board (the “Compensation Committee”) recommended that the Board approve the Amended LTIP, and the Board unanimously approved and determined that the Amended LTIP was advisable and in the best interests of the Company and the Company’s stockholders. The Board subsequently directed that a proposal (the “Long Term Incentive Plan Proposal” or the “Proposal”) to approve the amendment and restatement of the Existing LTIP be submitted for consideration by our stockholders at a Special Meeting. The Amended LTIP is based on the Existing LTIP with updates to, among other things, increase the total number of our authorized Shares available for grant, clarify dividends and dividend equivalents payable in connection with the Shares underlying an award under the Amended LTIP are only payable at the time the award vests (or if latter, is settled) and extend the termination date of the Amended LTIP to the tenth anniversary of the effective date of the Amended LTIP, which will be the date the Amended LTIP is approved by our stockholders. Our Board believes that the effective use of equity and equity-linked long-term incentive compensation awards is vital to our ability to attract, retain, reward, and motivate our key employees and directors. Stockholder approval of the Amended LTIP will allow us to continue to provide these incentives. If we do not obtain approval of the Amended LTIP, then once we exhaust the share reserve under the Existing LTIP, we will lose access to an important compensation tool that is key to our ability to attract, motivate, reward, and retain our key management and directors. | |||||||
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Expected Duration and Impact on Dilution (as measured through burn rate and overhang) | The Company recognizes the impact of dilution on our stockholders and has evaluated the request for Shares under the Amended LTIP very carefully in the context of the need to motivate, retain and ensure our leadership team is focused on our strategic and long-term growth priorities. Equity is an important component of a compensation program that aligns with our strategy of achieving long-term, sustainable growth. | |||||||
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Attendance at the Annual Meeting will be limited to stockholders of record and beneficial owners who provide proof of beneficial ownership as of the record date in the manner described in the accompanying notice of annual meeting.
While you will not be able to attend the annual meeting in person, we have structured our virtual annual meeting to provide stockholders the same rights as if the meeting were held in person, including the ability to vote shares electronically during the meeting and ask questions in accordance with the rules of conduct for the meeting. To promote fairness and efficient conduct of the meeting, we will respond to no more than two questions from any single stockholder.
The Company pays the costs of soliciting proxies. We have engaged American Stock Transfer & Trust Company, LLC (our “Proxy Solicitor”) to serve as our proxy solicitor for the Annual Meeting at a base fee of $3,500 plus reimbursement of reasonable expenses. Our Proxy Solicitor will provide advice relating to the content of solicitation materials, solicit banks, brokers, institutional investors, and hedge funds to determine voting instructions, monitor voting, and deliver executed proxies to our voting tabulator. The Company may request banks, brokers, and other custodians, nominees, and fiduciaries to forward copies of these proxy materials to the beneficial holders and to request instructions for the execution of proxies. The Company may reimburse these persons for their related expenses. Proxies are solicited to provide all record holders of the Company’s common stock an opportunity to vote on the matters to be presented at the Annual Meeting, even if they cannot attend the meeting in person.
Due to the continuing public health impact of the COVID-19 pandemic, the Annual Meeting will be held exclusively through a virtual format. Please see the other information herein, including the accompanying notice of annual meeting, about how to access the Annual Meeting. As always, we encourage you to vote your shares prior to the Annual Meeting.
PROPOSAL 1 –ELECTION OF DIRECTORS
Common measures for the use of stock incentive plans include the burn rate and the overhang rate. The burn rate measures the annual dilution from equity awards granted during a particular year. We have previously issued awards under the Existing LTIP. The three-year average burn rate from fiscal year 2020 to 2022 is 3.7%. The following table provides information regarding our annual burn rate over the past three completed fiscal years. The amounts shown in the table reflect awards granted and Shares outstanding. |
At the Annual Meeting, six directors will be elected to serve one-year terms expiring at our annual stockholders meeting in 2023 and until their respective successors are duly elected and qualified. This section contains information relating to the six director nominees. The director nominees were selected by our nominating and corporate governance committee and approved by the Board for submission to the stockholders. The nominees for election are Messrs. Dondero, Mitts, Constantino, and Kavanaugh, Dr. Laffer and Ms. Wood. All currently serve as directors.
Year | Total Shares Granted (#) | Weighted Avg. Shares Outstanding (#) | Burn Rate (%) | ||||||
2020 | 290,851 | 5,206,101 | 5.6% | ||||||
2021 | 234,586 | 6,601,046 | 3.6% | ||||||
2022 | 276,940 | 14,686,467 | 1.9% |
The Board unanimously recommends a vote FOR the election of each of the nominees.
Nominees to be elected for terms expiring at the Annual Meeting in 2023
James Dondero, age 59, has served as our President and as chairman of our Board since February 2020. Mr. Dondero has also served as President and chairman of the board of directors of NexPoint Residential Trust, Inc. (“NXRT”) since May 2015. Additionally, Mr. Dondero was President and a member of the board of directors of VineBrook Homes Trust, Inc. (“VineBrook”) from February 2019 to August 2021. Mr. Dondero is also: founder and president of NexPoint Advisors, L.P. (our “Sponsor”), an investment advisor registered with the Securities and Exchange Commission (the “SEC”); and chairman of NexBank, SSB (“NexBank”). Mr. Dondero co-founded Highland Capital Management, L.P. (“Highland”) in 1993 with Mark Okada and served as President from 2004 to 2020. Mr. Dondero has over 30 years of experience investing in credit and equity markets and has helped pioneer credit asset classes. Mr. Dondero has also served as the Chief Executive Officer of NexPoint Hospitality Trust, Inc. (“NHT”), a publicly traded hospitality real estate investment trust (a “REIT”) listed on the TSX Venture Exchange, since December 2018. Mr. Dondero also served as a director of Jernigan Capital, Inc. (“JCAP”), a self-storage lending real estate investment trust, from August 2016 to November 2020. Mr. Dondero currently serves on the boards of directors of Metro-Goldwyn-Mayer and SeaOne Holdings, LLC. He also serves as President and Principal Executive Officer of NexPoint Capital, Inc. (“NexPoint Capital”), NexPoint Strategic Opportunities Fund (“NHF”), NexPoint Real Estate Strategies Fund (“NRESF”) and NexPoint Diversified Real Estate Trust (“NXDT”), all of which are affiliates of our Manager. On October 16, 2019, Highland filed for Chapter 11 bankruptcy protection with the United States Bankruptcy Court for the District of Delaware. Mr. Dondero was selected to serve on our Board because of his prior service as a director and his experience as an executive officer.
Brian Mitts, age 51, has served as our Chief Financial Officer, Executive VP-Finance, Secretary and Treasurer since February 2020. Mr. Mitts has served as a member of our Board since June 2019. Mr. Mitts also served as our President and Treasurer from June 2019 until February 2020. Mr. Mitts is also a member of the investment committee of our Manager. Mr. Mitts co-founded NexPoint Real Estate Advisors, L.P. (“NREA”), which is the parent of our Manager, as well as NXRT and other real estate businesses with Mr. McGraner and Mr. Dondero. Currently, Mr. Mitts leads our financial reporting and accounting teams and is integral in financing and capital allocation decisions. Prior to co-founding NREA and NXRT, Mr. Mitts was Chief Operations Officer of Highland Funds Asset Management, L.P., the external advisor of open-end and closed-end funds where he managed the operations of these funds and helped develop new products. Mr. Mitts was also a co-founder of our Sponsor. He has worked for NREA or its affiliates since 2007. Mr. Mitts has also served as a director of NXRT since September 2014 and as the Chief Financial Officer, Executive Vice President-Finance and Treasurer of NXRT since March 2015. In February 2019, Mr. Mitts was also appointed Secretary of NXRT. From September 2014 to March 2015, Mr. Mitts served as President and Treasurer of NXRT. Mr. Mitts has also served as the Chief Financial Officer, Executive VP-Finance, Treasurer and Corporate Secretary of NHT since December 2018. In addition, he has served as a director of VineBrook since July 2018, as Chief Financial Officer, Treasurer and Assistant Secretary of VineBrook since November 2018, and as Interim President since September 2021. From July 2018 to October 2018, Mr. Mitts served as President and Treasurer of VineBrook. Since November 2020, Mr. Mitts has also served as Chief Financial Officer, Secretary and Treasurer of NSP. Mr. Mitts was selected to serve on our Board because of his prior service as a director and his experience as an executive officer.
The overhang rate is a measure of potential dilution to holders of Shares. As of November 20, 2023, there were 17,231,913 of our Shares outstanding, 815,737 Shares subject to outstanding equity awards, 77,302 Shares remaining under the Existing LTIP and 5,038,382 common limited partnership units of the Operating Partnership (defined below) (the “OP Units”) that were redeemable, subject to certain requirements, for cash or, at the election of the Company, Shares on a one-for-one basis. If the Company’s overhang rate is calculated including the potential impact of the redemption of the OP Units, then (a) if we exclude the impact of the new share request, the Company’s overhang rate as of November 20, 2023 is 34.4% on a fully diluted basis, and (b) if the Company includes the new share request of 2,308,000 Shares, the Company’s overhang rate with respect to Shares will be approximately 47.4% on a fully diluted basis. If the Company’s overhang rate is calculated excluding the potential impact of the redemption of the OP Units, then (a) if we exclude the impact of the new share request, the Company’s overhang rate as of November 20, 2023 is 4.73% on a fully diluted basis, and (b) if the Company includes the new share request of 2,308,000 Shares, the Company’s overhang rate with respect to Shares will be approximately 18.13% on a fully diluted basis. The Company believes this is a reasonable level of dilution and provides the Company with the appropriate flexibility to ensure meaningful equity awards in future years to executives and other key employees to better align their interests with the interests of stockholders. | ||
Governance Highlights and Best Practices of the Amended LTIP | The Amended LTIP incorporates certain compensation governance provisions that reflect best and prevalent practices. These include: ● Minimum one-year vesting period, subject to certain exceptions described in the Amended LTIP. ● Annual limit of $350,000 equity compensation that may be paid or awarded to a non-employee director (as such term is used under the Amended LTIP) with respect to his or her service as a director during any fiscal year. ● Prohibition on discounted option rights and stock appreciation rights (“SARs”). ● No repricing of option rights or SARs and no cash buyout of underwater option rights and SARs without stockholder approval. ● No dividends or dividend equivalents paid out currently on unvested awards. ● No dividends or dividend equivalents on option rights or SARs. ● No evergreen features. ● “Double-trigger” vesting for change in control benefits. ● No tax “gross-ups” for excise taxes payable in connection with a change in control. ● Clawback provisions. | |
Plan Term | The Amended LTIP will expire on the tenth anniversary of the date the Amended LTIP was approved by the Company’s stockholders, unless earlier terminated by the Compensation Committee. Awards granted under the Amended LTIP prior to such expiration date shall continue to be controlled by its terms. |
Edward ConstantinoBoard Recommendation
The Board is recommending that the Company’s stockholders vote in favor of the Amended LTIP. The Amended LTIP affords the Compensation Committee the ability to design compensatory awards that are responsive to the Company’s needs and includes authorization for a variety of awards designed to advance the interests and long-term success of the Company by attracting, retaining and motivating (i) officers and certain key employees of the Company and any of its affiliates or subsidiaries, including NexPoint Real Estate Advisors VII, L.P. (our “Manager”) and NexPoint Real Estate Finance Operating Partnership, L.P. (our “Operating Partnership”) (together, the “Company Group”), age 75,(ii) certain persons who provide services to the Company Group, and (iii) the non-employee directors of the Company.
If the Amended LTIP is approved by stockholders, it will be effective as of the day of the Special Meeting. If the Amended LTIP is not approved by our stockholders, no awards will be made under the Amended LTIP and the Existing LTIP will remain in effect in its current form until its expiration date.
In evaluating this Proposal, stockholders should consider all of the information in this Proposal.
The Board has servedunanimously recommended that stockholders vote “FOR” the approval of the amendment and restatement of the NexPoint Real Estate Finance, Inc. 2020 Long Term Incentive Plan.
Summary of Material Terms of the Amended LTIP
The following description of the Amended LTIP and the above executive summary are only a summary of the Amended LTIP’s principal terms and provisions and are qualified in their entirety by reference to the full copy of the Amended LTIP, attached as Appendix A to this proxy statement.
Purpose
The Amended LTIP is designed to provide competitive incentives intended to attract, retain, incentivize and reward eligible participants.
Eligibility for Participation
Certain individuals selected by the Compensation Committee who are an officer or other key employee of the Company Group (or have agreed to serve in such capacity within 90 days of the grant date), a memberperson providing services to the Company Group (provided he or she satisfy the applicable definitions under the general instructions to Form S-8) or a non-employee director of the Company at the time of an award’s grant are eligible to participate in the Amended LTIP. As of November 20, 2023, there were approximately 13 employees of our Board since February 2020. Mr. Constantino has also served as a memberCompany Group and 5 non-employee directors of the boardCompany expected to participate in the Amended LTIP. As of directors of NXRT since March 2015, as a member ofNovember 20, 2023, there were zero consultants expected to participate in the board of directors of VineBrook since February 2019 and as a member ofAmended LTIP.
Plan Administration
The Amended LTIP will generally be administered by the board of trustees of NXDT, a closed-end mutual fund, since March 2020. Mr. Constantino has over 40 years of audit, advisory and tax experience working for two major accounting firms, Arthur Andersen LLP and KPMG. Mr. Constantino retired from KPMG in late 2009, where he was an audit partner in charge of the firm’s real estate and asset management businesses. Mr. Constantino is, and since 2010 has been, a member of the board of directors of Patriot Bank N.A. (“Patriot”). Mr. Constantino has also served as a consultant for the law firm Skadden, Arps, Slate, Meagher & Flom LLP. He is a licensed CPA, a member of the American Institute of Certified Public Accountants and a member of the New York State Society of Public Accountants. He is currently a memberCompensation Committee (or its successor), or any other committee of the Board of Trustees and partdesignated by the Board to administer the Amended LTIP. As plan administrator, the Compensation Committee has broad authority to determine the terms of the Financeawards granted under the Amended LTIP (subject to the terms thereof) and Investmentto make all other determinations it deems necessary or advisable to administer the Amended LTIP properly. The interpretation and construction by the Compensation Committee at St. Francis College in Brooklyn Heights, New York. He is also a Board member and Audit Committee Chair of ARC Trust, Inc. and ARC Trust III, Inc. Mr. Constantino was selected to serve on our Board because of his extensive accounting experience, particularly in the real estate field.
Scott Kavanaugh, age 61, has served as a memberany provision of the Board since February 2020. Mr. Kavanaugh has also served as a memberAmended LTIP or of any award agreement or related document, and any determination by the Compensation Committee pursuant to any provision of the boardAmended LTIP or of directors of NXRT since March 2015any such agreement, notification or document, will be final and as a member of the board of directors of VineBrook since December 2018. Mr. Kavanaugh is, and since December 2009 has been the CEO of First Foundation Inc. (“FFI”), a financial services company. From June 2007 until December 2009, he served as President and Chief Operating Officer of FFI. Mr. Kavanaugh has been the Vice-Chairman of FFI since June 2007. He also is, and since September 2007 has been, the Chairman and CEO of FFI’s wholly owned banking subsidiary, First Foundation Bank. Mr. Kavanaugh was a founding stockholder and served as an Executive Vice President and Chief Administrative Officer and a member of the board of directors of Commercial Capital Bancorp, Inc., the parent holding company of Commercial Capital Bank, from 1999 until 2003. From 1998 until 2003, Mr. Kavanaugh served as the Executive Vice President and Chief Operating Officer and a director of Commercial Capital Mortgage. From 1993 to 1998, Mr. Kavanaugh was a partner and head of trading for fixed income and equity securities at Great Pacific Securities, Inc., a west coast-based regional securities firm. Mr. Kavanaugh is, and since 2009 has been, a member of the board of directors of Colorado Federal Savings Bank and its parent holding company, Silver Queen Financial Services, Inc. Mr. Kavanaugh also served as a member of the boards of directors of NexBank and its parent holding company, NexBank Capital, from 2014 until 2015. Mr. Kavanaugh was selected to serve on the Board because of his expertise in investment management and his experience as both an executive officer and a director of multiple companies.
Dr. Arthur Laffer, age 81, has served as a member of the Board since February 2020. Dr. Laffer has also served as a member of the board of NXRT since May 2015 and as a member of the board of directors of VineBrook since December 2018. Dr. Laffer is the founder and chairman of Laffer Associates, an economic research and consulting firm and served as the chairman and director of Laffer Investments, a registered investment advisor, from 1999 to 2019. Dr. Laffer served as a director of GEE Group, Inc., a provider of specialized staffing solutions, from 2014 to 2020. Dr. Laffer also served as a director of EVO Transportation and Energy Services, Inc. from 2018-2019. A former member of President Reagan’s Economic Policy Advisory Board during the 1980s, Dr. Laffer’s economic acumen and influence have earned him the distinction in many publications as The Father of Supply-Side Economics. He has served on several boards of directors of public and private companies, including staffing company MPS Group, Inc., which was sold to Adecco Group for $1.3 billion in 2009. Dr. Laffer has served as a director of VerifyMe, Inc. since 2019. Dr. Laffer was previously a consultant to Secretary of the Treasury William Simon, Secretary of Defense Donald Rumsfeld, and Secretary of the Treasury George Shultz. In the early 1970s, Dr. Laffer was the first to hold the title of Chief Economist at the Office of Management and Budget under Mr. Shultz. Additionally, Dr. Laffer was formerly the Distinguished University Professor at Pepperdine University and a member of the Pepperdine University board of directors. He also served as Charles B. Thornton Professor of Business Economics at the University of Southern California and as Associate Professor of Business Economics at the University of Chicago. Dr. Laffer was selected to serve on the Board because of his expertise in economics and his experience as a director of multiple companies.
Catherine Wood, age 66, has served as a member of the Board since July 2020. In addition, she has served as a member of the board of directors of NXRT and the board of directors of VineBrook since July 2020. Ms. Wood is currently Chief Executive Officer, Chief Investment Officer, and a board member of ARK Investment Management LLC (“ARK”), an SEC-registered investment advisor, which she founded in January 2014. Ms. Wood is also currently Chief Executive Officer, Chief Investment Officer, and a board member of ARK ETF Trust. Prior to ARK, Ms. Wood spent 12 years at AllianceBernstein as Chief Investment Officer of Global Thematic Strategies. Ms. Wood joined Alliance from Tupelo Capital Management, a hedge fund she co-founded. Prior to her tenure at Tupelo Capital, Ms. Wood worked for 18 years at Jennison Associates LLC as Chief Economic Officer and several other positions. Ms. Wood started her career in Los Angeles at The Capital Group as an Assistant Economist. Ms. Wood received her Bachelor of Science, summa cum laude, in Finance and Economics from the University of Southern California. Ms. Wood was selected to serve on the Board because of her experience as it relates to disruptive technologies, business models and processes, which provides a unique and important perspective to the Board.conclusive.
The Compensation Committee may also delegate all or any part of its authority under the Amended LTIP: (i) to a subcommittee of the Compensation Committee; (ii) if permitted by applicable law and with respect to the committee’s administrative duties and powers, to one or more committee members, officers, agents or advisors of the Company as it deems advisable; and (iii) by resolution to one or more officers of the Company with respect to selecting eligible employee participants (provided they are not subject to Section 16 of the Securities Exchange Act of 1934 (the “Exchange Act”) reporting requirements) and determining award size, subject to certain additional limitations in the Amended LTIP.
PROPOSAL 2 –RATIFICATION OF APPOINTMENT OFKPMG LLP AS THE COMPANY’S INDEPENDENTREGISTERED PUBLIC ACCOUNTING FIRM FOR 2022Shares Available for Awards
The audit committee has appointed KPMGSubject to adjustment as provided in the Company’s independent registered public accounting firmAmended LTIP, the number of Shares available under the Amended LTIP shall not exceed 3,627,734 Shares, which includes the 1,319,734 shares previously approved under the Existing LTIP.
Share Recycling Provisions
If any award granted under the Existing LTIP or the Amended LTIP is cancelled or forfeited, expires or is settled for 2022. The Board is asking stockholderscash (in whole or in part), the Shares subject to ratify this appointment. SEC regulations and New York Stock Exchange (“NYSE”) listing requirements requiresuch award will again be available for issuance under the Company’s independent registered public accounting firmAmended LTIP. However, none of the following Shares will be added back to be engaged, retained and supervisedthe Shares authorized for grant under the Amended LTIP: (a) Shares withheld by the audit committee. However,Company, tendered or otherwise used in payment of the Board considers the selectionexercise price of an independent registered public accounting firmoption right; (b) Shares withheld by the Company or tendered or otherwise used to satisfy tax withholding obligations; (c) Shares subject to a SAR that are not actually issued in connection with its settlement of Shares on exercise thereof; and (d) Shares that are reacquired by the Company on the open market or otherwise using option rights proceeds.
Allowances for Conversion Awards and Assumed Plans
Shares issued or transferred under awards granted under the Amended LTIP in substitution for or conversion of, or in connection with an assumption of, stock or stock-based awards held by awardees of an entity engaging in a corporate acquisition or merger transaction with the Company or any of its subsidiaries will not count against (or be an important matter to stockholders. Accordingly,added back to) the Board considers a proposalaggregate share limit or other Amended LTIP limits described above (“Substitute Awards”). Additionally, shares available under certain plans that we or our subsidiaries may assume in connection with corporate transactions from another entity may be available for stockholders to ratifycertain awards under the Amended LTIP, under the circumstances further described in the Amended LTIP, but will not count against the aggregate share limit or other Amended LTIP limits described above (“Assumed Plan Awards”).
Minimum Vesting Requirement
Notwithstanding anything else contained in this appointment to be an opportunity for stockholders to provide inputProposal to the audit committeecontrary, except in the case of Substitute Awards, Assumed Plan Awards and cash incentive awards, awards that are granted under the Board onAmended LTIP will be subject to a key corporate governance issue.minimum vesting period of one year from the date of grant (“Minimum Vesting Requirement”). Notwithstanding the foregoing, the award may provide for acceleration of vesting in the event of a participant’s retirement, death or disability or in the event of a double-trigger change in control of the Company (as described below). The Compensation Committee may grant awards covering up to 5% of the maximum number of Shares reserved for issuance under the Amended LTIP (subject to adjustment as provided in the Amended LTIP) for issuances under the Amended LTIP, without regard to the Minimum Vesting Requirement.
RepresentativesTypes of KPMG are expected to virtually attendAwards Under the Annual Meeting and will have the opportunity to make a statement. They will also be available to respond to appropriate questions.Amended LTIP
Selection. KPMG served as the Company’s independent registered public accounting firm for 2021 and 2020, and has been selected by the audit committee to serve as the Company’s independent registered public accounting firm for 2022.
Audit and Non-Audit Fees. The following table presents fees for audit services rendered by KPMG for the audit of the Company’s annual financial statements for 2021 and 2020, and fees billed for other services rendered by KPMG.
DECEMBER 31, 2021 | DECEMBER 31, 2020 | |||||||
Audit Fees (1) | $ | 672,000 | $ | 606,000 | ||||
Audit-Related Fees | — | — | ||||||
Tax Fees | 135,575 | — | ||||||
All Other Fees | — | — | ||||||
Total | $ | 807,575 | $ | 606,000 |
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Pursuant to the charterAmended LTIP, the Company may grant option rights (including “incentive stock options” (“ISOs”) as defined in Section 422 of the audit committee,Internal Revenue Code of 1986, as amended (the “Code”)), SARs, restricted stock, restricted stock units (“RSUs”), performance shares, performance units, cash incentive awards, profits interest units and certain other awards based on or related to our Shares.
Each grant of an award under the audit committee is responsible forAmended LTIP will be evidenced by an award agreement or agreements which will contain such terms and provisions as the oversight of our accounting, reporting and financial practices. The audit committee has the responsibility to select, appoint, engage, oversee, retain, evaluate and terminate our external auditors; pre-approve all audit and non-audit services to be provided,Compensation Committee may determine, consistent with all applicable laws,the Amended LTIP. Each award may be subject to us by our external auditors; and establishtime-based, service-based or performance-based vesting. Any award under the fees and other compensation to be paid to our external auditors.
The audit committee has adoptedAmended LTIP may provide for acceleration of vesting in the event of a policy to pre-approve all audit and permitted non-audit services provided by our principal independent accountants. All audit and non-audit services for 2021 were pre-approved byparticipant’s retirement, death or disability or in the audit committee.
The Board unanimously recommendsevent of a vote FOR the ratificationdouble-trigger change in control of the appointmentCompany (as described below). A brief description of KPMG as the Company’s independent registered public accounting firm for 2022.types of awards which may be granted under the Amended LTIP is set forth below.
THE BOARD, ITS COMMITTEES AND ITS COMPENSATION
Board of Directors
The Board presently consists of six members, four of whom are non-management directors. Each director serves a one-year term expiring at each annual meeting of stockholders and lasting until his or her respective successor is duly elected and qualified.
Director Compensation in 2021
Directors who are officers of the Company do not receive compensation for their service as directors.
We provide the following compensation for non-management directors:
Option Rights |
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Each grant of a SAR will be evidenced by an award agreement which specifies the applicable terms and conditions of such award, including any vesting and forfeiture provisions (whether based on service, performance or otherwise), as specified by the Compensation Committee. A SAR may be paid in cash, Shares or any combination thereof. Except with respect to Substitute Awards and Assumed Plan Awards, the base price of a SAR may not be less than the fair market value of a Share on the date of grant. The term of a SAR may not extend more than ten years from the date of grant. SARs granted under the Amended LTIP may not provide for dividends or dividend equivalents. | ||||
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We also reimburse directors for all expenses incurred in attending Board and committee meetings.
Director Compensation Table
The following table provides information regarding the compensation of our non-management directors for the year ended December 31, 2021.
NAME | FEES EARNED OR | STOCK | TOTAL | |||||||||
Edward Constantino | $ | 35,000 | $ | 57,355 | $ | 92,355 | ||||||
Scott Kavanaugh | $ | 37,500 | $ | 57,355 | $ | 94,855 | ||||||
Dr. Arthur Laffer | $ | 27,500 | $ | 57,355 | $ | 84,855 | ||||||
Catherine Wood | $ | 20,000 | 57,355 | $ | 77,355 |
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Mr. Mitts, who serves as a director and our Chief Financial Officer, Executive VP-Finance, Secretary and Treasurer, is an executive officer who does not receive any additional compensation for services provided as a director. Due to the fact that Mr. Mitts is not a named executive officer, his employee compensation is omitted from the table above and the Summary Compensation Table herein.
Director Independence
The Board will review at least annually the independence of each director. During these reviews, the Board will consider transactions and relationships between each director (and his or her immediate family and affiliates) and the Company and its management to determine whether any such transactions or relationships are inconsistent with a determination that the director is independent. This review will be based primarily on responses of the directors to questions in a directors’ and officers’ questionnaire regarding employment, business, familial, compensation and other relationships with the Company and our management. Our Board has determined that each of Edward Constantino, Scott Kavanaugh, Dr. Arthur Laffer and Catherine Wood is independent in accordance with NYSE listing standards. As required by NYSE, our independent directors will meet in regularly scheduled executive sessions at which only independent directors are present.
Corporate Governance
We believe that good corporate governance is important to ensure that, as a public company, we will be managed for the long-term benefit of our stockholders. We and our Board have reviewed the corporate governance policies and practices of other public companies, as well as those suggested by various authorities in corporate governance. We have also considered the provisions of the Sarbanes-Oxley Act and SEC and NYSE rules.
Based on this review, we have established and adopted charters for the audit committee, compensation committee and nominating and corporate governance committee, as well as corporate governance guidelines and a code of business conduct and ethics applicable to all of our directors, officers and employees.
Our committee charters, code of business conduct and ethics and corporate governance guidelines are available on our website nref.nexpoint.com in the Governance section. Copies of these documents are also available upon written request to our Corporate Secretary at c/o NexPoint Real Estate Finance, Inc., 300 Crescent Court, Suite 700, Dallas, Texas 75201, Attn: Corporate Secretary. We will post information regarding any amendment to, or waiver from, our code of business conduct and ethics on our website in the Governance section.
Furthermore, our insider trading policy prohibits our directors and certain employees, including all of our executive officers, from engaging in hedging transactions with respect to our securities, including entering into options, warrants, puts, calls or similar instruments or selling our securities short.
The Board periodically reviews its corporate governance policies and practices. Based on these reviews, the Board may adopt changes to policies and practices that are in the best interest of our stockholders and as appropriate to comply with any new SEC or NYSE rules.
Board Leadership Structure and Board’s Role in Risk Oversight
James Dondero, our President, serves as Chairman of the Board. The Board believes that combining these positions is the most effective leadership structure for the Company at this time. As President, Mr. Dondero is involved in day-to-day operations and is familiar with the opportunities and challenges that the Company faces at any given time. With this insight, he is able to assist the Board in setting strategic priorities, lead the discussion of business and strategic issues and translate Board recommendations into Company operations and policies.
The Board has appointed Scott Kavanaugh as its lead independent director. His key responsibilities in this role include:
Any grant of restricted stock shall require that any or all dividends or distributions paid on the restricted stock during the period of such restrictions shall be automatically deferred and paid on a contingent basis based on the participant earning the restricted stock with respect to which such dividends are paid. | |||
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Profits Interest Units | A profits interest unit is a unit of the Operating Partnership which is intended to constitute a “profits interest” within the meaning of Internal Revenue Service (“IRS”) Revenue Procedures 93-27 and 2001-43. Profits interest units are a form of appreciation award that is valued by reference to the value of a limited partnership interest in the Operating Partnership. Each grant of profits interest units shall be evidenced by an award agreement setting forth the award’s applicable terms and conditions, including the applicable vesting and forfeiture provisions (whether based on service, performance or otherwise), as determined by the Compensation Committee. | ||
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A profits interest unit may only be issued to a participant for the performance of services to, or for the benefit of, the Operating Partnership in the participant’s capacity as a |
Other Awards |
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RiskAdjustments; Corporate Transactions
If there is inherentany change in the Company’s capitalization (including resulting from a stock split) or a corporate transaction (including a merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization, redomestication, partial or complete liquidation or other distribution of assets, or issuance of rights or warrants to purchase securities), the Compensation Committee will adjust the number and kind of Shares or other securities permitted to be delivered under the Amended LTIP, adjust the terms of outstanding awards, including the number and kind of Shares or other securities subject to outstanding awards, in each case as and to the extent the Compensation Committee determines an adjustment to be appropriate and equitable, to prevent dilution or enlargement of rights.
In the event of any such transaction or event, or in the event of a change in control of the Company, the Compensation Committee may provide in substitution for any or all outstanding awards under the Amended LTIP such alternative consideration (including cash), if any, as it may in good faith determine to be equitable under the circumstances and will require in connection therewith the surrender of all awards so replaced in a manner that complies with every business and we face a numberSection 409A of risks. Management is responsible for the day-to-day management of risks, while the Board, as a whole and through our audit committee, is responsible for overseeing our management and operations, including overseeing its risk assessment and risk management functions. Code.
“Double-Trigger” Accelerated Vesting upon Change in Control
The Board has delegated responsibility for reviewing our policiesAmended LTIP includes “double-trigger” acceleration provisions with respect to risk assessment and risk management to our audit committee through its charter. The Board has determined that this oversight responsibility can be most efficiently performed by our audit committee as partthe vesting of its overall responsibility for providing independent, objective oversightawards in connection with respect to our accounting and financial reporting functions, internal and external audit functions and systems of internal controls over financial reporting and legal, ethical and regulatory compliance. Our audit committee regularly reports to the Board with respect to its oversight of these areas.
Board Meetings
The Board held five meetings during the fiscal year ended December 31, 2021. Each director serving on the Boarda change in 2021 attended at least 75%control of the total numberCompany. Under the Amended LTIP, the vesting of meetings ofawards will accelerate in connection with a change in control only where either (a) within a specified period the Board andparticipant’s service is involuntarily terminated by the total number of meetings ofCompany for reasons other than for cause or the committees on which he or she served during the time they served on the Board. Under our corporate governance guidelines, each director is expected to devote the time necessary to appropriately dischargeparticipant terminates his or her responsibilities and to rigorously prepareemployment or service for attend and participategood reason or (b) the award is not assumed or converted into a replacement award in all Board meetings and meetings of committees on which he or she serves.
Director Attendance at Annual Meetings of Stockholders
The Company’s directors are encouraged to attend our annual meeting of stockholders, but we do not currently have a policy relating to directors’ attendance at these meetings. All ofmanner described in the Company’s directors at the time of the 2021 annual meeting of stockholders attended the 2021 annual meeting.award agreement.
Board Committees
Our Board has an audit committee, a compensation committee and a nominating and corporate governance committee. The composition and responsibilities of each committee are described below. Members will serve on these committees until their resignation or until otherwise determined by the Board.
Audit Committee
Our audit committee consists of Mr. Constantino, Mr. Kavanaugh, Dr. Laffer and Ms. Wood, with Mr. Constantino serving as chair of the committee. The Board has determined that each of Mr. Constantino, Mr. Kavanaugh and Dr. Laffer qualify as an “audit committee financial expert” as that term is defined by the applicable SEC regulations and NYSE corporate governance listing standards. The Board has also determined that each of Mr. Constantino, Mr. Kavanaugh, Dr. Laffer and Ms. Wood is “financially literate” as that term is defined by the NYSE corporate governance listing standards and is independent as defined by NYSE rules and SEC requirements relating to the independence of audit committee members. Our Board has determined that Mr. Constantino’s simultaneous service on the audit committees of more than two other public companies would not impair his ability to effectively serve on our audit committee. Our Board also determined that Mr. Constantino’s service on the other companies’ audit committees did not hinder his ability to serve on our audit committee as he is currently retired and not serving in an executive officer capacity for another company. The audit committee met five times during the fiscal year ended December 31, 2021. Our audit committee charter details the principal functions of the audit committee, including oversight related to:
our accounting and financial reporting processes;
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The audit committee is also responsible for engaging an independent registered public accounting firm, reviewing withAmended LTIP includes a definition of “change in control.” In general, except as may be otherwise prescribed by the independent registered public accounting firmCompensation Committee in any award agreement, a change in control will be deemed to have occurred if: (a) individuals who constitute the plans and resultsBoard on the effective date of the audit engagement, approving professional services provided by the independent registered public accounting firm, including all audit and non-audit services, reviewing the independenceAmended LTIP cease for any reason to constitute at least a majority of the independent registered public accounting firm, consideringBoard, unless their replacements are approved as described in the rangeAmended LTIP (subject to certain exceptions described in the Amended LTIP); (b) a person or group becomes the beneficial owner of audit and non-audit fees and reviewing35% or more of the adequacythen-outstanding Shares or the combined voting power of our internal accounting controls. The audit committee also preparesthen-outstanding securities entitled to vote generally in the audit committee report required by SEC regulationselection of directors, subject to certain exceptions; (c) the Company closes a reorganization, merger, consolidation, significant sale or purchase of assets, in each case which causes the persons or groups who are the beneficial owners of 35% or more of the then-outstanding Shares or the combined voting power of our then-outstanding securities entitled to vote generally in the election of directors to cease to be included in our annual proxy statement. A copysuch beneficial owners of the audit committee charter is available underentity resulting from such transaction, in substantially the Governance sectionsame proportions of ownership as immediately prior to such transaction, as further described in the Amended LTIP; (d) the Company’s website at nref.nexpoint.com.stockholders approve its complete liquidation or dissolution; or (e) the Manager is terminated.
Compensation CommitteeManagement Objectives
Our compensation committee consistsThe Amended LTIP permits the Company to grant awards subject to the achievement of Dr. Laffer, Mr. Kavanaugh, Mr. Constantino and Ms. Wood, with Dr. Laffer servingcertain specified management objectives. Management objectives are defined as chairthe measurable performance objective or objectives established pursuant to the Amended LTIP for participants who have received grants of performance shares, performance units or cash incentive awards or, when so determined by the Compensation Committee, option rights, SARs, restricted stock, RSUs, dividend equivalents or other awards. Management objectives may be described in terms of company-wide objectives or objectives that are related to the performance of the committee.individual participant or of one or more of the subsidiaries, divisions, departments, regions, functions or other organizational units within the Company or its subsidiaries. The Board has determined that each of Dr. Laffer, Mr. Kavanaugh, Mr. Constantino and Ms. Wood is independent as defined by NYSE rules and SEC requirements relatingmanagement objectives may be made relative to the independenceperformance of compensation committee members. The compensation committee met five times during the fiscal year ended December 31, 2021. Our compensation committee charter details the principalother companies or subsidiaries, divisions, departments, regions, functions or other organizational units within such other companies, and may be made relative to an index or one or more of the compensation committee, including:performance objectives themselves.
Forfeiture and Recoupment Any award agreement may provide for the cancellation or forfeiture, or the forfeiture and repayment to the Company of any proceeds, gains or other economic benefit that the participant actually or constructively receives related to a Share-based or cash-based award under the Amended LTIP (including any related dividends, dividend equivalents or amounts received on the resale of Shares related to the award), or other provisions intended to have a similar effect, upon such terms and conditions as may be determined by the Compensation Committee from time to time. In addition, notwithstanding anything in the Amended LTIP to the contrary, the Amended LTIP and all awards issued thereunder (including any dividends, dividend equivalents, proceeds, gains or other economic benefit Participant actually or constructively receives related to the award or amounts received on the resale of Shares related to the award) shall be subject to any compensation recovery and/or recoupment policy adopted by the Company to comply with applicable law, including, without limitation, Section 10D of the Exchange Act, any applicable rules or regulations promulgated by the Securities and Exchange Commission or any national securities exchange or national securities association on which our Shares may be traded, or to comport with good corporate governance practices, as such policies may be amended from time to time. Effective Date and Term of the Amended LTIP |
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The compensation committee hasAmended LTIP will become effective on the sole authoritydate it is approved by the Company’s stockholders and will terminate as to retainfuture awards on the tenth anniversary thereof, unless earlier terminated by the Compensation Committee.
Amendment and terminate compensation consultantsTermination of the Amended LTIP
The Board may amend the Amended LTIP at any time, but no amendment, alteration or termination of the Amended LTIP may materially and adversely impair the rights of any participant with respect to assistoutstanding awards without the participant’s consent or permit the Board to amend awards in violation of the Amended LTIP’s prohibition on repricing underwater option rights and SARs. In addition, the Board would need stockholder approval of an amendment if it (a) would materially increase the benefits accruing to participants under the Amended LTIP, (b) would materially increase the number of securities which may be issued under the Amended LTIP, (c) would materially modify the requirements for participation in the evaluationAmended LTIP, or (d) must otherwise be approved by the Company’s stockholders in order to comply with applicable law or the rules of our compensationthe stock exchange(s) on which the Shares are traded. Stockholder approval will be obtained to increase the Share Reserve (subject to adjustment as described above), and for any amendment that would require such approval to comply with any rules of the sole authority to approvestock exchange(s) on which the fees andShares are traded or other retention terms of such compensation consultants.applicable law. The committeeBoard may, in its discretion, delegate specific duties and responsibilities to a subcommittee or an individual committee member, toterminate the extent permitted by applicable law. The committee is also able to retain independent counsel and other independent advisors to assist it in carrying out its responsibilities. A copyAmended LTIP at any time. Termination of the compensation committee charter is availableAmended LTIP will not affect the rights of participants or their successors under any awards outstanding and not exercised in full on the Governance sectiondate of the Company’s website at nref.nexpoint.com.termination.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee consists of Mr. Kavanaugh, Mr. Constantino, Dr. Laffer and Ms. Wood, with Mr. Kavanaugh serving as chair of the committee. The Board has determined that each of Mr. Kavanaugh, Mr. Constantino, Dr. Laffer and Ms. Wood is independent as defined by NYSE rules. The nominating and corporate governance committee met five times during the fiscal year ended December 31, 2021. Our nominating and corporate governance committee charter details the principal functions of the nominating and corporate governance committee, including:
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Material U.S. Federal Income Tax Consequences
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The nominatingfollowing discussion of certain relevant United States federal income tax effects applicable to certain awards granted under the Amended LTIP is only a summary of certain of the United States federal income tax consequences applicable to United States residents under the Amended LTIP, and corporate governance committeereference is made to the Code for a complete statement of all relevant federal tax provisions. No consideration has been given to the sole authorityeffects of foreign, state, local and other laws (tax or other) on the Amended LTIP or on a participant, which laws will vary depending upon the particular jurisdiction or jurisdictions involved. In particular, participants who are stationed outside the United States may be subject to retainforeign taxes as a result of the Amended LTIP.
Tax Consequences to Participants
Nonqualified Option Rights: An optionee subject to United States federal income tax will generally not recognize taxable income for United States federal income tax purposes upon the grant of a nonqualified stock option. Rather, at the time of exercise of the nonqualified stock option, the optionee will recognize ordinary income, and terminate any search firmthe Company will be entitled to assista deduction, in an amount equal to the excess of the fair market value of the Shares on the date of exercise over the exercise price. If the Shares acquired upon the exercise of a nonqualified stock option are later sold or exchanged, then the difference between the amount received upon such sale or exchange and the fair market value of such shares on the date of such exercise will generally be taxable as long-term or short-term capital gain or loss (if the shares are a capital asset of the optionee), depending upon the length of time such shares were held by the optionee.
Incentive Stock Options: An optionee subject to United States federal income tax will generally not recognize taxable income for United States federal income tax purposes upon the grant of an ISO (within the meaning of Section 422 of the Code) and the Company will not be entitled to a deduction at that time. If the ISO is exercised during employment or within 90 days following the termination thereof (or within one year following termination, in the identificationcase of director candidatesa termination of employment due to retirement, death or disability, as such terms are defined in the Amended LTIP), the optionee will not recognize any income and the sole authorityCompany will not be entitled to set the fees and other retention terms of such search firms.a deduction. The committee is also able to retain independent counsel and other independent advisors to assist it in carrying out its responsibilities. A copyexcess of the nominating and corporate governance committee charter is available under the Governance sectionfair market value of the Company’s website at nref.nexpoint.com.Shares on the exercise date over the exercise price, however, is includible in computing the optionee’s alternative minimum taxable income.
CodeGenerally, if an optionee disposes of Business Conductshares acquired by exercising an ISO either within two years after the date of grant or one year after the date of exercise, the optionee will recognize ordinary income, and Ethicsthe Company will be entitled to a deduction, in an amount equal to the excess of the fair market value of the shares on the date of exercise (or the sale price, if lower) over the exercise price. The balance of any gain or loss will generally be treated as a capital gain or loss to the optionee. If the Shares are disposed of after the two-year and one-year periods described above, the Company will not be entitled to any deduction, and the entire gain or loss for the optionee will be treated as a capital gain or loss.
We have adoptedSARs: A participant subject to United States federal income tax who is granted a written code of business conduct and ethics that applies to our directors and executive officers, who are employees of our Manager. Among other matters, our code of business conduct and ethics is designed to deter wrongdoing and to promote:
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A copy of our code of business conduct and ethics is available under the Governance sectionSAR will not recognize ordinary income for United States federal income tax purposes upon receipt of the Company’s website at nref.nexpoint.com. WeSAR. At the time of exercise, however, the participant will also providerecognize ordinary income equal to the value of any cash received and the fair market value on the date of exercise of any Shares received. The Company will not be entitled to a copydeduction upon the grant of a SAR, but generally will be entitled to a deduction for the amount of income the participant recognizes upon the participant’s exercise of the SAR. The participant’s tax basis in any person, without charge,Shares received will be the fair market value on the date of exercise and, if the shares are later sold or exchanged, then the difference between the amount received upon written request to our Corporate Secretary at c/o NexPoint Real Estate Finance, Inc., 300 Crescent Court, Suite 700, Dallas, Texas 75201, Attn: Corporate Secretary. Wesuch sale or exchange and the fair market value of the shares on the date of exercise will post information regarding any amendment to,generally be taxable as long-term or waiver from, our codeshort-term capital gain or loss (if the shares are a capital asset of business conduct and ethics on our website under the Governance section.participant) depending upon the length of time such shares were held by the participant.
QualificationsRestricted Stock: A participant subject to United States federal income tax generally will not be taxed upon the grant of a restricted stock award, but rather will recognize ordinary income for Director Nominees
The nominating and corporate governance committee is responsible for reviewing withUnited States federal income tax purposes in an amount equal to the Board, at least annually, the appropriate skills and experience required for membersfair market value of the Board. This assessment includes factors such as judgment, skill, diversity, integrity, experience with businesses and other organizationsshares at the time the restricted stock is no longer subject to a substantial risk of comparable size,forfeiture (within the interplaymeaning of the candidate’s experience withCode). The Company generally will be entitled to a deduction at the experiencetime when, and in the amount that, the participant recognizes ordinary income on account of other Board members,the lapse of the restrictions. A participant’s tax basis in the shares will equal the fair market value of those shares at the time the restrictions lapse, and the extent to whichparticipant’s holding period for capital gains purposes will begin at that time. Any cash dividends paid on the candidate wouldshares before the restrictions lapse will be a desirable additiontaxable to the Board and any committeesparticipant as additional compensation (and not as dividend income). Under Section 83(b) of the Board.Code, a participant may elect to recognize ordinary income at the time the restricted stock is awarded in an amount equal to their fair market value at that time, notwithstanding the fact that such shares are subject to restrictions and a substantial risk of forfeiture. If such an election is made, no additional taxable income will be recognized by such participant at the time the restrictions lapse, the participant will have a tax basis in the restricted stock equal to their fair market value on the date of their award, and the participant’s holding period for capital gains purposes will begin at that time. The Company generally will be entitled to a tax deduction at the time when, and to the extent that, ordinary income is recognized by such participant.
Board DiversityRestricted Stock Units: A participant subject to United States federal income tax who is granted an RSU will not recognize ordinary income for United States federal income tax purposes upon the receipt of the RSU, but rather will recognize ordinary income in an amount equal to the fair market value of the Shares at the time of settlement, and the Company will have a corresponding deduction at that time.
The nominatingPerformance Shares, Performance Units, Other Share-Based and corporate governance committeeCash-Based Awards: In the case of other stock-based and other cash-based awards, depending on the form of the award, a participant subject to United States federal income tax will not be taxed upon the grant of such an award, but, rather, will recognize ordinary income for United States federal income tax purposes when such an award vests or otherwise is free of restrictions. In any event, the Company will be entitled to a deduction at the time when, and in the amount that, a participant recognizes ordinary income.
Profits Interest Units: A participant subject to United States federal income tax who is granted a profits interest unit generally is not expected to recognize taxable income at the time of grant or the vesting of those units, provided that (a) the award qualify as “profits interests” within the meaning of IRS Revenue Procedures 93-27 and 2001-43; (b) the participant does not havedispose of the units within two years of issuance; and (c) certain other requirements are met. Participants generally would make the election provided for under Section 83(b) of the Code, recognizing zero income at the time of grant, in which case the profits interest units could be disposed of within two years of issuance. As a formal policy regardingholder of profits interest units, however, a participant will be required to report on his or her income tax return his or her allocable share of the considerationOperating Partnership’s income, gains, losses, deductions and credits in accordance with the Partnership Agreement, regardless of diversity for director candidates. The nominating and corporate governance committee does, however, consider diversitywhether the Operating Partnership actually makes a distribution of cash to the grantee. Distributions of money by the Operating Partnership to the participant, will generally be taxable to the grantee to the extent that such distributions exceed the participant’s tax basis in the Operating Partnership. Any such gain generally will be capital gain, but a portion may be treated as partordinary income, depending on the assets of its overall selection strategy. The nominating and corporate governance committee considers diversity in its broadest sense, including diversity in professional and life experiences, education, skills, perspectives and leadership, as well as other individual qualities and attributesthe Operating Partnership at that contributetime. Generally, no deduction is available to Board heterogeneity, such as race, ethnicity, sexual orientation, gender and national origin. Importantly, the nominating and corporate governance committee focuses on howCompany upon the experiences and skill setsgrant, vesting or disposition of each director nominee complements those of fellow directors and director nominees to create a balanced Board with diverse viewpoints and deep expertise.the units.
Tax Withholding: The Company believes thathas the inclusionright to deduct or withhold, or require a participant to remit to the Company, an amount sufficient to satisfy federal, state, and local taxes (including employment taxes) required by law to be withheld with respect to any exercise, lapse of diversityrestriction or other taxable event arising as onea result of many factors considered in selecting director nominees is consistent withgrants under the Company's goal of creating a board of directors that best serves our needs and those of our stockholders.plans.
Below is a summaryCertain Tax Code Limitations on Deductibility: Section 162(m) of the experience and skills, gender, age and tenureCode generally limits the deductible amount of total annual compensation paid by a public company to each “covered employee” to no more than $1 million. In addition, our directors, and whetherability to obtain a deduction for future payments could be limited by Section 280G of the directorsCode, which provides that certain payments made in connection with a change in control are racially or ethnically diverse.not deductible by the Company (and may be subject to additional taxes for the grantee).
Section 409A: Some awards under the plans may be considered to be deferred compensation subject to Section 409A of the Code. Failure to satisfy the applicable requirements under this provision for awards considered deferred compensation would result in the acceleration of income and additional income tax liability to the recipient, including certain penalties. |
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The aggregate number of shares and aggregate total dollar value of potential future awards under the Amended LTIP that may be made to any of our named executive officers or to our executive officers, non-executive officer employees or non-employee directors as a group is subject to the discretion of the Compensation Committee and is not yet determinable. Grants under the Existing LTIP in 2022 to our named executive officers and non-employee directors are described in the “Compensation of Executive Officers and Directors” section below.
If the Amended LTIP is approved by our stockholders and becomes effective, we intend to file a Registration Statement on Form S-8 relating to the issuance of Shares under the Amended LTIP with the SEC pursuant to the Securities Act of 1933, as amended, as soon as practicable after approval of the Amended LTIP by our stockholders.
Equity Compensation Plans Information
The following table provides certain information as of the end of fiscal year 2022, which is our most recently completed fiscal year, with respect to compensation plans (including any individual compensation arrangements, of which there were none) under which our equity securities are authorized for issuance, aggregated as follows:
Plan category |
be issued upon exercise of outstanding options, warrants and rights |
average exercise price of outstanding options, warrants and rights |
remaining available for future issuance under equity compensation plans (excluding securities issuable upon exercise of outstanding options, warrants and rights) |
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| 577,360 shares of the Company’s common stock (1) | - |
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Total | 577,360 shares of the Company’s common stock | |||||||||||||
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(1) | Represents RSUs issued under our Existing LTIP. |
Under the Company’s bylaws, the Long Term Incentive Plan Proposal requires the affirmative vote of our Board also reflects our commitment to diversity. We believe that multiple and varied pointsa majority of view facilitate more balanced, wide-ranging discussion in the boardroom, and contribute to a more effective decision-making process.votes cast.
Our nominatingFor more information, see “Voting Information—Quorum, Abstentions and corporate governance committee will evaluate the diversity-related information it received in 2022 and determine how to address any diversity-related issues by the Company’s annual meeting of stockholders in 2023. The nominating and corporate governance committee will evaluate qualified candidates to add to the Board if its review of the Board’s current diversity reveals a deficiency of diversity characteristics that it believes should be addressed through the addition of a new director(s).
Director Candidate Recommendations by Stockholders
The nominating and corporate governance committee will review and evaluate any director nominations submitted by stockholders, including reviewing the qualifications of, and making recommendations to the Board regarding, director nominations submitted by stockholders. See “Communications with the Board of Directors” below for additional information on how to submit a director nomination to the Board.
Communications with the Board of Directors
Any stockholder or other interested party who wishes to communicate directly with the Board or any of its members may do so by writing to: Board of Directors, c/o NexPoint Real Estate Finance, Inc., 300 Crescent Court, Suite 700, Dallas, Texas 75201, Attn: Corporate Secretary. The mailing envelope should clearly indicate whether the communication is intended for the Board as a group, the non-management directors or a specific director.Broker Non-Votes.”
EXECUTIVE OFFICERS & SIGNIFICANT EMPLOYEESTHE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE LONG TERM INCENTIVE PLAN PROPOSAL.
The following sets forth information regarding the executive officers of the Company as of March 26, 2022:VOTING INFORMATION
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Information regarding Mr. DonderoLong Term Incentive Plan Proposal
Under the Company’s bylaws, the Long Term Incentive Plan Proposal requires the affirmative vote of a majority of votes cast.
For more information, see “—Quorum, Abstentions and Mr. Mitts is included above under “Proposal 1—Election of Directors.Broker Non-Votes.”
Matthew Goetz Voting Methodshas served as our Senior VP-Investments
You may send in your proxy by one of the following methods:
1. If you received your proxy card(s) by mail, complete, sign and Asset Management since February 2020. Mr. Goetz has also served asreturn the Senior VP-Investments and Asset Management of NXRT since March 2015. Mr. Goetz is also a director at our Sponsor and was previously a Senior Financial Analyst at Highland from 2014 to 2017. With over ten years of real estate, private equity and equity trading experience, his primary responsibilities are to asset manage, source acquisitions, manage risk and develop potential business opportunities for our Sponsor, including fundraising, private investments and joint ventures. Before joining Highland in June 2014, Mr. Goetz was a Senior Financial Analyst in CBRE’s Debt and Structured Finance group from May 2011 to June 2014 where he underwrote over $7 billion and more than 30 million square feet of multifamily, office, and retail commercial real estate. In his time at CBRE, a commercial real estate services firm, Mr. Goetz and his team closed over $2.5 billion in debt and equity financing. Prior to joining CBRE’s Debt and Structured Finance group, he held roles as an Analyst and Senior Analyst for CBRE’s Recovery and Restructuring Services group from September 2009 to May 2011 where he assistedenclosed proxy card promptly in the asset managementpostage paid envelope.
2. Call the toll-free number listed on the front of the enclosed proxy card. Have your control number (located on the enclosed proxy card) available for reference. The automatic system will prompt you on how to vote.
3. Log on to the website listed on the front of the enclosed proxy card. Have your control number (located on the enclosed proxy card) available for reference. The system will prompt you with instructions on how to vote.
In addition, stockholders of record may vote in person (virtually) at the Special Meeting. If your shares are held by a bank, broker or other nominee (that is, in “street name”), you are considered the beneficial owner of your shares and dispositionyou should refer to the instructions provided by your bank, broker or nominee regarding how to vote. In addition, because a beneficial owner is not the stockholder of over 3,000 real estate owned assets valuedrecord, you may not vote shares held by a bank, broker or nominee in street name at more than $750 million. He also provided commercial real estate consulting servicesthe Special Meeting unless you obtain a “legal proxy” from the bank, broker or nominee that holds your shares, giving you the right to banks, special servicers, hedge funds, and private equity groups.vote the shares at the Special Meeting.
Matt McGraner has served as our Executive VPQuorum, Abstentions and Chief Investment Officer since February 2020. Mr. McGraner served as our Secretary from June 2019Broker Non-Votes
A quorum of stockholders is required to February 2020. Mr. McGraner has also served astake action at the Executive VP and Chief Investment Officer of NXRT since March 2015, as Executive VP, Chief Investment Officer and Secretary of VineBrook since February 2019 and as a memberSpecial Meeting. The presence in person (virtually) or by proxy of the boardholders of directors and President of NSP since November 2020. From September 2014 to March 2015, Mr. McGraner served as NXRT’s Secretary and from October 2018 to February 2019, Mr. McGraner served as Chief Executive Officer, President and Secretary of VineBrook. Mr. McGraner has also served as Chief Investment Officer of NHT since December 2018 and as a Managing Director at our Sponsor since 2016. With over ten years of real estate, private equity and legal experience, his primary responsibilities are to lead the operationsmajority of the real estate platformShares shall constitute a quorum for the Special Meeting. Our Shares represented by valid proxies or in person (virtually) will count for the purpose of determining the presence of a quorum for the Special Meeting. Votes cast by proxy or in person (virtually) at our Sponsor,the Special Meeting will be tabulated by the inspector of election appointed for the Special Meeting. Abstentions will be counted as well as sourceShares present for purposes of determining whether a quorum is present at the Special Meeting. However, abstentions are not considered votes cast and execute investments, manage riskwill have no effect on the Proposal. Broker non-votes will not be deemed present for purposes of determining whether a quorum is present and develop potential business opportunities, including fundraising, private investments and joint ventures. Mr. McGraner is also a licensed attorney and was formerly an associate at Jones Day from 2011 to 2013, with a practice primarily focusedwill have no effect on private equity, real estate and mergers and acquisitions. While at Jones Day, Mr. McGraner led the acquisition and financing of over $200 million of real estate investments and advised on $16.3 billion of M&A and private equity transactions. Since 2013, Mr. McGraner has led the acquisition and financing of approximately $11.8 billion of real estate investments.Proposal.
Dennis Charles Revocation of Proxy“D.C.” Sauter, Jr. has served as our General Counsel since April 2020. Mr. Sauter has also served as
Any proxies may be revoked at any time before they are exercised at the General CounselSpecial Meeting by timely filing with us a written notice of NXRT since February 2020. Previously, Mr. Sauter wasrevocation, by timely delivering to us a partnerduly executed proxy bearing a later date, by voting over the Internet or by telephone at a later time in the real estate sectionmanner provided on the proxy card or by attending the Special Meeting and voting at the meeting. Votes provided over the Internet, by telephone or by mail must be received by 5:00 p.m. Eastern Time on January 25, 2024. If you hold shares in the name of Wick Phillips Gould & Martin, LLPa brokerage firm, bank, nominee or other institution, you must provide a legal proxy from that institution in Dallas, Texas from January 2014 until joining our Sponsororder to revoke your shares at the Special Meeting. Being present in February 2020, where he specialized in acquisitions, construction, financing, joint venturesperson (virtually) at the Special Meeting alone does not revoke a previously executed and complex leasing for REITs, private developers, and institutional investors. Mr. Sauter’s primary responsibility is to manage our legal matters, including corporate governance, real estate transactions and capital markets transactions. He received his Bachelor of Arts degree from the University of Texas at Austin and his Juris Doctor from Southern Methodist University Dedman School of Law. He has been a licensed attorney and member of the State Bar of Texas since 2001.returned proxy.
Paul Richards has servedUnless revoked as our VP of Originations and Investments since February 2020. Mr. Richards has also served as Vice President of Asset Management of NHT since March 2019. Mr. Richards is alsodescribed above, all properly executed proxies will be voted at the Special Meeting in accordance with your directions on the proxy. If a director at our Sponsor. His primary responsibilities are to research and conduct due diligence on new investment ideas, perform valuation and benchmark analysis, monitor and manage investments inproperly executed proxy gives no specific instructions, the existing real estate portfolio, and provide industry support for our Sponsor’s real estate team. Mr. Richards was previously employed with Deloitte & Touche LLP’s state and local tax practice where he served as a tax consultant specializing in state strategic tax reviews, voluntary disclosure agreements, state tax exposure research, and overall state tax compliance.
David Willmore has served as our VP of Finance since February 2020. Mr. Willmore has also served as VP of Finance at NXRT since February 2020. He was previously Senior Manager at NXRT from April 2019 to February 2020 and a Senior Manager at Highland from February 2017 to March 2019. With over ten years of accounting, auditing, and financial reporting experience, his primary responsibilities are to implementShares represented by your proxy will be voted FOR the financial and operational strategies of our Sponsor’s public and private REITs as well as ensure timely and accurate accounting and reporting. As a Senior Manager at Highland, Mr. Willmore was responsible for the accounting, reporting and operations of Highland’s hedge fund, separate management accounts and private equity businesses consisting of approximately 20 different fund structures with combined assets under management of $2.4 billion. Before joining Highland in October 2011, Mr. Willmore began his career at Deloitte & Touche LLP as an auditor in the Audit and Enterprise Risk Services Group.
Delinquent Section 16(a) Reports
Section 16(a)approval of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our directors, executive officers and persons who own more than 10% of the shares of our common stock to file an initial report of ownership on Form 3 and changes in ownership on Form 4 or Form 5 with the SEC. The SEC rules require us to disclose late filings of initial reports of stock ownership and changes in stock ownership by our directors, executive officers and 10% stockholders.Amended LTIP.
Based solely on a review of copies of Forms 3, 4 and 5 filed with the SEC, we believe that during the fiscal year ended December 31, 2021, all Section 16(a) filing requirements applicable to our directors, executive officers and 10% stockholders were completed in a timely manner, except that Mr. Constantino had one late form 4 filing in which one transaction was reported late, Mr. Dondero had one late form 4 filing in which one transaction was reported late, Mr. Kavanaugh had one late form 4 filing in which one transaction was reported late, Dr. Laffer had one late form 4 filing in which one transaction was reported late, Mr. Mitts had one late form 4 filing in which one transaction was reported late, Ms. Wood had one late form 4 filing in which one transaction was reported late, Mr. McGraner had one late form 4 filing in which one transaction was reported late, and Mr. Goetz had one late form 4 filing in which one transaction was reported late.
COMPENSATION OF EXECUTIVE COMPENSATIONOFFICERS AND DIRECTORS
Overview of Executive Compensation Program
We are externally managed by our Manager through the Management Agreement.management agreement, dated February 6, 2020 and amended as of July 17, 2020 and November 3, 2021 (the “Management Agreement”), by and between the Company and the Manager. Our Manager conducts substantially all of our operations and provides asset management services for our real estate investments. Because our Management Agreement provides that our Manager is responsible for managing our affairs, our named executive officers, who are employees of our Manager, have not received, nor do we expect they will in the future receive, any cash compensation from us for their services as our named executive officers. Similarly, we do not provide our named executive officers with pension benefits, perquisites or other personal benefits. Instead, we pay our Manager the fees described below under “Certain Relationships and Related Party Transactions—below. Our Management Agreement.” For the year ended December 31, 2021, we paid approximately $2.3 million in fees to our Manager. Our compensation committeeCompensation Committee does not make determinations with respect to compensation paid by our Manager or its affiliates.
Executive Compensation in 2021
As described above, our named executive officers are employed by our Manager. As such, we did not provide any of our named executive officers with any cash compensation, pension benefits or nonqualified deferred compensation plans. We have reported the management fee that we pay to our Manager under “—Overview of Executive Compensation Program” above.
Summary Compensation Table
The following table sets forth the compensation paid to or accrued by those named executive officers during the fiscal year presented.
NAME AND PRINCIPAL POSITION | YEAR | STOCK | TOTAL | ||||||
James Dondero | 2021 | $ | 1,228,500 | $ | 1,228,500 | ||||
President | 2020 | $ | 850,500 | $ | 850,500 | ||||
Matt McGraner | 2021 | $ | 1,228,500 | $ | 1,228,500 | ||||
Chief Investment Officer and Executive VP | 2020 | $ | 1,155,000 | $ | 1,155,000 | ||||
Matthew Goetz | 2021 | $ | 697,500 | $ | 697,500 | ||||
Senior VP-Investments and Asset Management | 2020 | $ | 577,600 | $ | 577,600 |
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Outstanding Equity Awards at Fiscal Year-End
The following table contains information regarding outstanding equity awards held by our named executive officers as of December 31, 2021.
STOCK AWARDS | ||||||||
NUMBER OF UNITS OF THAT | MARKET UNITS THAT ($)(1) | |||||||
James Dondero | 116,030 | (2) | $ | 2,233,578 | ||||
Matt McGraner | 134,888 | (3) | $ | 2,596,594 | ||||
Matthew Goetz | 71,737 | (4) | $ | 1,380,937 |
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Pension Benefits
We do not provide any of our officers with pension benefits.
Nonqualified Deferred Compensation
We do not provide any of our officers with any nonqualified deferred compensation plans.
Potential Payments Upon Termination of Employment or Change in Control
In the event any officer’s employment with our Manager is terminated involuntarily by the Manager for reasons other than for cause, by the officer for good reason, or otherwise due to such officer’s death, disability or retirement, all outstanding restricted stock units granted that have not previously vested or been forfeited, will vest. If a change in control occurs and the award is not assumed or converted into a replacement award in a manner described in the award agreement, all outstanding awards held by our officers that have not previously vested or been forfeited, will vest. See “—Outstanding Equity Awards at Fiscal Year-End” above for the market value of outstanding equity awards as of December 31, 2021 that would have vested if any of the events described above occurred on December 31, 2021.
In general, except as may be otherwise prescribed by the compensation committee in any award agreement, the NexPoint Real Estate Finance, Inc. 2020 Long Term Incentive Plan (the “2020 LTIP”) provides that a change of control will be deemed to have occurred if: (a) individuals who constitute the Board on the effective date of the 2020 LTIP cease for any reason to constitute at least a majority of the Board, unless their replacements are approved as described in the 2020 LTIP (subject to certain exceptions described in the 2020 LTIP); (b) a person or group becomes the beneficial owner of 35% or more of the then-outstanding shares of our common stock or the combined voting power of our then-outstanding securities entitled to vote generally in the election of directors, subject to certain exceptions; (c) the Company closes a reorganization, merger, consolidation, significant sale or purchase of assets or other similar transaction resulting in a substantial change in its ownership or leadership, in each case which causes the persons or groups who are the beneficial owners of 35% or more of the then-outstanding shares of our common stock or the combined voting power of our then-outstanding securities entitled to vote generally in the election of directors to cease to be such beneficial owners of the entity resulting from such transaction, in substantially the same proportions of ownership as immediately prior to such transaction, as further described in the 2020 LTIP; (d) the Company’s stockholders approve its complete liquidation or dissolution; or (e) the Manager is terminated.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table provides certain information as of the end of our most recently completed fiscal year with respect to compensation plans (including any individual compensation arrangements, of which there are none) under which our equity securities are authorized for issuance, aggregated as follows:
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The following is a summary of transactions that occurred on or were in effect after January 1, 2020 to which we have been a party in which the amount involved exceeded the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years and in which any of our executive officers, directors or beneficial holders of more than 5% of our capital stock had or will have a direct or indirect material interest.
Formation Transaction
The Company commenced operations on February 11, 2020 upon the closing of its initial public offering of shares of its common stock (the “IPO”). Prior to the closing of the IPO, the Company engaged in a series of transactions (the “Formation Transaction”) through which it acquired an initial portfolio consisting of senior pooled mortgage loans backed by single family rental (“SFR”) properties, the junior most bonds of multifamily CMBS securitizations (the “CMBS B-Pieces”), mezzanine loan and preferred equity investments in real estate companies and properties in other structured real estate investments within the multifamily, SFR and self-storage asset classes (the “Initial Portfolio”). The Initial Portfolio was acquired from affiliates (the “Contribution Group”) of our Sponsor, pursuant to a contribution agreement with the Contribution Group through which the Contribution Group contributed their interest in the Initial Portfolio to special purpose entities owned by subsidiary partnerships of the OP (“Subsidiary Ops”) in exchange for units of limited partnership interests in the Subsidiary OPs (“SubOP Units”).
Our Management Agreement
We are externally managed by our Manager pursuant to our Management Agreement. Our Manager was organized on June 7, 2019 and is an affiliate of our Sponsor. Below is a summary of the terms of our Management Agreement.
Duties of Our Manager
We are externally managed by our Manager through the Management Agreement. Pursuant to the Management Agreement, subject to the overall supervision of our Board, our Manager manages our day-to-day operations, and provides investment management services to us. Under the terms of this agreement, our Manager will, among other things:
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Management Fee
As consideration for the Manager’s services, we pay our Manager an annual management fee (the “Annual Fee”) of 1.5% of Equity (as defined below), paid monthly, in cash or shares of our common stock at the election of our Manager (the “Annual Fee”).
Manager. Under the Management Agreement, as amended, “Equity” means (a) the sum of (1) total stockholders’ equity immediately prior to the closing of the IPO,our initial public offering (the “IPO”), plus (2) the net proceeds received by us from all issuances of our equity securities in and after the IPO, plus (3) our cumulative Earnings Available for Distribution (EAD) (as defined below)(“EAD”) from and after the IPO to the end of the most recently completed calendar quarter, (b) less (1) any distributions to holders of our common stock from and after the IPO to the end of the most recently completed calendar quarter and (2) all amounts that we have paid to repurchase for cash the shares of our equity securities from and after the IPO to the end of the most recently completed calendar quarter. In our calculation of Equity, we will adjust our calculation of EAD to remove the compensation expense relating to awards granted under one or more of our long-term incentive plans that is added back in our calculation of EAD. Additionally, for the avoidance of doubt, Equity does not include the assets contributed to us in our formation transaction completed prior to the Formation Transaction.
“EAD”the IPO. “EAD” means the net income (loss) attributable to our common stockholders computed in accordance with GAAP,generally accepted accounting principles in the United States (“GAAP”), including realized gains and losses not otherwise included in net income (loss), excluding any unrealized gains or losses or other similar non-cash items that are included in net income (loss) for the applicable reporting period, regardless of whether such items are included in other comprehensive income (loss), or in net income (loss) and adding back amortization of stock-based compensation. Net income (loss) attributable to common stockholders may also be adjusted for the effects of certain GAAP adjustments and transactions that may not be indicative of our current operations, in each case after discussions between the Manager and the independent directors of our Board and approved by a majority of the independent directors of our Board.
Incentive As discussed above, compensation expense, including any incentive compensation that may be payable to our executive officers and certain other employees of our Manager or its affiliates pursuant to a long-term incentive plan adopted by us and approved by our stockholders. As discussed above, compensation expensestockholders, is not considered when determining EAD, in that we add back compensation expense to net income in the calculation of EAD. However, compensation expense is considered when determining Equity, in that we will adjust our calculation of EAD to remove the compensation expense that is added back in our calculation of EAD.
For the fiscal year ended December 31, 2021, the Company incurred an Annual Fee of $2.32022, we paid approximately $3.2 million paidentirelyin cash.fees to our Manager.
Reimbursement
WeIn addition, we are required to pay directly or reimburse our Manager for all of the documented “operating expenses” (all out-of-pocket expenses of our Manager in performing services for us, including but not limited to the expenses incurred by our Manager in connection with any provision by our Manager of legal, accounting, financial and due diligence services performed by our Manager that outside professionals or outside consultants would otherwise perform, compensation expenses under any long-term incentive plan adopted by us and approved by our stockholders and our pro rata share of rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses of our Manager required for our operations) and “Offering Expenses” (any and all expenses (other than underwriters’ discounts) paid or to be paid by us in connection with an offering of our securities, including, without limitation, our legal, accounting, printing, mailing and filing fees and other documented offering expenses) paid or incurred by our Manager or its affiliates in connection with the services it provides to us pursuant to the Management Agreement. However, our Manager is responsible, and we will not reimburse our Manager or its affiliates, for the salaries or benefits to be paid to personnel of our Manager or its affiliates who serve as our officers, except that we pay 50% of the salary of our VP of Finance is allocated to us and we may grant equity awards to our officers under a long-term incentive plan adopted by us and approved by our stockholders. Direct payment of operating expenses by us, which includes compensation expense relating to equity awards granted under our long-term incentive plan, together with reimbursement of operating expenses to our Manager, plus the Annual Fee, may not exceed 2.5% of equity book value for any calendar year or portion thereof, provided, however, that this limitation will not apply to Offering Expenses, legal, accounting, financial, due diligence and other service fees incurred in connection with extraordinary litigation and mergers and acquisitions and other events outside the ordinary course of our business or any out-of-pocket acquisition or due diligence expenses incurred in connection with the acquisition or disposition of certain real estate-related investments. To the extent total corporate general and administrative (“G&A”) expenses would otherwise exceed 2.5% of equity book value, our Manager will waive all or a portion of the Annual Fee to keep our total corporate G&A expenses at or below 2.5% of equity book value. For the fiscal year ended December 31, 2021,2022, the Company did not reimburse the Manager for any expenses.
For more information about the Management Agreement, please refer to the Company’s Schedule 14A, filed with the SEC on April 11, 2023, under the heading “Certain Relationships and Related Party Transactions.”
We have historically provided and anticipate providing equity incentive awards to our officers in the future, subject to the discretion of the Compensation Committee.
Expense CapExecutive Compensation in 2022
PursuantAs described above, our named executive officers are employed by our Manager. We do not have agreements with any of our executive officers regarding their cash compensation, nor do we or our Compensation Committee make any decisions regarding their cash compensation, employee benefits, or other types of compensation paid to our executive officers by our Manager or its affiliates. Our Compensation Committee only reviews and approves the termsequity-based awards to be paid or made by us to our named executive officers based on recommendations from our President. During 2022, we did not provide any of our named executive officers with any cash compensation, pension benefits or nonqualified deferred compensation plans. We have reported the Management Agreement, direct paymentmanagement fee that we pay to our Manager under “-Overview of operating expensesExecutive Compensation Program” above.
Summary Executive Compensation Table
The following table sets forth the compensation paid to or accrued by the Company, which includes compensation expense relating to equity awards granted under the 2020 LTIP, together with reimbursement of operating expenses to the Manager, plus the Annual Fee, may not exceed 2.5% of equity book value (the “Expense Cap”) for any calendar year or portion thereof, provided, however, that this limitation will not apply to Offering Expenses, legal, accounting, financial, due diligence and other service fees incurred in connection with extraordinary litigation and mergers and acquisitions and other events outside the ordinary course of business or any out-of-pocket acquisition or due diligence expenses incurred in connection with the acquisition or disposition of certain real estate-related investments. Forour named executive officers during the fiscal year ended December 31, 2021, operating expenses did not exceed the Expense Cap.years presented.
NAME AND PRINCIPAL POSITION | YEAR | STOCK | TOTAL | ||||||
James Dondero | 2022 | $ | 1,405,471 | $ | 1,405,471 | ||||
President | 2021 | $ | 1,228,500 | $ | 1,228,500 | ||||
Matt McGraner | 2022 | $ | 1,405,471 | $ | 1,405,471 | ||||
Chief Investment Officer and Executive VP | 2021 | $ | 1,228,500 | $ | 1,228,500 | ||||
Matthew Goetz (2) | 2022 | $ | 888,247 | $ | 888,247 | ||||
Former Senior VP-Investments and Asset Management | 2021 | $ | 697,500 | $ | 697,500 |
(1) | The amounts reported in the “Stock Awards” column represent the aggregate grant date fair value of RSUs, calculated in accordance with Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) Topic 718. Pursuant to SEC rules, the amounts shown in this column exclude the impact of estimated forfeitures related to service-based vesting conditions. See Note 11 to our consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 for information regarding the assumptions made in determining these values. |
(2) | On November 9, 2023, Mr. Goetz resigned from his position as Senior VP- Investments and Assets of the Company. Mr. Goetz’s resignation was not a result of any disagreement with the Company on any matter relating to its operations, policies or practices. |
Term of the Management AgreementOutstanding Equity Awards at Fiscal Year-End
The Management Agreement has an initial term of three years, and is automatically renewed thereafter for a one-year term unless earlier terminated. We have the right to terminate the Management Agreement on 30 days’ written notice for cause (as defined in the Management Agreement). We may terminate the Manager for cause upon the occurrence of any one of the following: (i) the Manager or any of its agents or assignees is convicted of a felony or material violation of securities laws that has a material adverse effect on our business or the ability of the Manager to perform it duties under the terms of the Management Agreement; (ii) an order for relief in an involuntary bankruptcy case relating to the Manager or the Manager authorizing or filing a voluntary bankruptcy petition; (iii) the dissolution of the Manager; (iv) the Manager’s fraud, misappropriation of funds or embezzlement against us; (v) the Manager’s bad faith, willful misconduct, gross negligence or reckless disregard in the performance of its duties under the Management Agreement or (vi) the Manager’s material breach of any material provision of the Management Agreement that continues for a period of 30 days after written notice thereof, unless the Manager has taken certain actions to cure such material breach within 30 days of the written notice. The Management Agreement can be terminated by us or our Manager without cause with 180 days’ written notice to the other party. Our Manager may also terminate the agreement with 30 days’ written notice if we have materially breached the agreement and such breach has continued for 30 days. In addition, the Management Agreement shall terminate in the event of an assignment (as defined in Section 202(a)(1) of the Investment Advisers Act of 1940) of the Management Agreement. A termination fee will be payable to our Manager by us upon termination of the Management Agreement for any reason, including non-renewal, other than a termination by us for cause. The termination fee will be equal to three times the average Annual Fee earnedfollowing table contains information regarding outstanding equity awards held by our Manager during the two-year period immediately preceding the most recently completed calendar quarter prior to the effective termination date; provided, however, if the Management Agreement is terminated prior to the two-year anniversarynamed executive officers as of the date of the Management Agreement, the management fee earned during such period will be annualized for purposes of calculating the average annual management fee.December 31, 2022.
Modification
STOCK AWARDS | |||||||||
NUMBER OF UNITS OF THAT | MARKET UNITS THAT ($)(1) | ||||||||
James Dondero | 151,868 | (2) | $ | 2,413,183 | |||||
Matt McGraner | 164,440 | (3) | $ | 2,612,952 | |||||
Matthew Goetz | 94,578 | (4) | $ | 1,502,844 |
The Management Agreement may only be amended, supplemented, modified, terminated, or discharged in writing signed by the Company and our Manager, or their respective successors or assignees.
(1) | Market value is based on the closing price of our common stock as of December 30, 2022 ($15.89), the last trading day of the year. |
Limitation on Receiving Shares
(2) | Consists of RSUs granted on June 24, 2020, February 22, 2021 and February 21, 2022. With respect to the RSUs granted on June 24, 2020, as of December 31, 2022, there were 35,115 RSUs not vested, which vested one-half on May 8, 2023 and will vest one-half on May 8, 2024. With respect to the RSUs granted on February 22, 2021, as of December 31, 2022, there were 47,518 RSUs not vested, which vested one-third on February 22, 2023, and will vest one-third on February 22, 2024 and one-third on February 22, 2025. With respect to the RSUs granted on February 21, 2022, as of December 31, 2022, there were 69,235 RSUs not vested, which vested one-fourth on February 21, 2023 and will vest one-fourth on February 21, 2024, one-fourth on February 21, 2025 and one-fourth on February 21, 2026. |
The ability of our Manager to receive shares of our common stock as payment for all or a portion of the management fee due under the terms of our Management Agreement will be subject to the following limitations: (a) the ownership of shares of common stock by our Manager may not violate the ownership limitations set forth in our charter or otherwise raise a material risk to the status of the Company as a REIT, after giving effect to any exception from such ownership limitations that our Board may grant to our Manager or its affiliates; and (b) compliance with all applicable restrictions under the U.S. federal securities laws and the NYSE rules.
(3) | Consists of RSUs granted on June 24, 2020, February 22, 2021 and February 21, 2022. With respect to the RSUs granted on June 24, 2020, as of December 31, 2022, there were 47,687 RSUs not vested, which vested one-half on May 8, 2023 and will vest one-half on May 8, 2024. With respect to the RSUs granted on February 22, 2021, as of December 31, 2022, there were 47,518 RSUs not vested, which vested one-third on February 22, 2023, and will vest one-third on February 22, 2024 and one-third on February 22, 2025. With respect to the RSUs granted on February 21, 2022, as of December 31, 2022, there were 69,235 RSUs not vested, which vested one-fourth on February 21, 2023 and will vest one-fourth on February 21, 2024, one-fourth on February 21, 2025 and one-fourth on February 21, 2026. |
Liability and Indemnification of Manager
Under the terms of the Management Agreement, our Manager will indemnify and hold harmless us, our subsidiaries and NexPoint Real Estate Finance Operating Partnership, L.P. (the “OP”) 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 our Manager’s bad faith, fraud, willful misfeasance, intentional misconduct, gross negligence or reckless disregard of its duties; provided, however, that our Manager will not be held responsible for any action of our Board in following or declining to follow any written advice or written recommendation given by our Manager. However, the aggregate maximum amount that our Manager may be liable to us pursuant to the Management Agreement will, to the extent not prohibited by law, never exceed the amount of the management fees received by our Manager under the Management Agreement prior to the date that the acts or omissions giving rise to a claim for indemnification or liability have occurred. In addition, our Manager will not be liable for special, exemplary, punitive, indirect, or consequential loss, or damage of any kind whatsoever, including without limitation lost profits. The limitations described in the preceding two sentences will not apply, however, 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 our Manager’s duties.
(4) | Consists of RSUs granted on June 24, 2020, February 22, 2021 and February 21, 2022. With respect to the RSUs granted on June 24, 2020, as of December 31, 2022, there were 23,843 RSUs not vested, which vested one-half on May 8, 2023 and will vest one-half on May 8, 2024. With respect to the RSUs granted on February 22, 2021, as of December 31, 2022, there were 26,979 RSUs not vested, which vested one-third on February 22, 2023, and will vest one-third on February 22, 2024 and one-third on February 22, 2025. With respect to the RSUs granted on February 21, 2022, as of December 31, 2022, there were 43,756 RSUs not vested, which vested one-fourth on February 21, 2023 and will vest one-fourth on February 21, 2024, one-fourth on February 21, 2025 and one-fourth on February 21, 2026. |
Other ActivitiesPotential Payments Upon Termination of Manager and its Affiliates
Our Manager and its affiliates expect to engageEmployment or Change in other business ventures, and as a result, their resources will not be dedicated exclusively to our business. However, pursuant to the Management Agreement, our Manager is required to devote sufficient resources to our administration to discharge its obligations under the Management Agreement.
Registration Rights AgreementControl
In connection with the IPO, we entered into a registration rights agreementevent any officer’s employment with our Manager with respectis terminated involuntarily by the Manager for reasons other than for cause, by the officer for good reason, or otherwise due to (1)such officer’s death, disability or retirement, all currentoutstanding RSUs granted that have not previously vested or been forfeited, will vest. If a change in control occurs and future shares of our common stock ownedthe award is not assumed or converted into a replacement award in a manner described in the award agreement, all outstanding awards held by our Manager and affiliates of our Manager, including our Sponsor and its affiliates and (2) shares of our common stockofficers that have not previously vested or been forfeited, will vest. See “—Outstanding Equity Awards at any time beneficially owned by our Manager which are issuable or issued as compensation for our Manager’s services under the Management Agreement and any additional shares of our common stock issued as a dividend, distribution or exchange for, or in respect of such shares. Pursuant to the registration rights agreement, if we propose to file a registration statement (or a prospectus supplement pursuant to a then-existing shelf registration statement) under the Securities Act of 1933, as amended (the “Securities Act”) with respect to a proposed underwritten equity offering by us for our own account orFiscal Year-End” above for the account of any of our 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 SEC) filed in connection with an exchange offer or offering of securities solely to our existing securityholders, then we will give written notice of such proposed filing to the holders of registrable securitiesand such notice will offer such holders the opportunity to register such number of shares of registrable securities as each such holder may request. We will 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 such a registration to be included on the same terms and conditions as any similar securities included therein.
In addition, holders of registrable securities may make a written request for registration under the Securities Act of all or part of their registrable securities, or a demand registration. However, we will not be obligated to effect more than one such registration in any 12-month period and not more than two such registrations during the term of the Management Agreement. If the Management Agreement is extended, the holders will be entitled to one additional demand registration per year that the Management Agreement is extended. Holders making such written request must propose the sale of at least 100,000 shares of registrable securities (as adjusted for stock splits or recapitalizations) or such lesser number of registrable securities if such lesser number is all of the registrable securities owned by the holders. Any such request must specify the number of shares of registrable securities proposed to be sold and will also specify the intended method of disposition. Within 10 days after receipt of such request, we 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 we have received written requests for inclusion therein within 10 business days after the receipt by the applicable holder of our notice.
Notwithstanding the foregoing, any registration will be subject to cutback provisions, and we will be permitted to suspend the registration or sale of registrable securities in certain situations.
Indemnification Agreements
We have entered into indemnification agreements with each of our directors and executive officers. Each indemnification agreement provides that, subject to limited exceptions, and among other things, we will indemnify the director or executive officer to the fullest extent permitted by law for claims arising in his or her capacity as our director or officer. Insofar as the foregoing provisions permit indemnification of directors, officers or persons controlling us for liability arising under the Securities Act, we have been informed that, in the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Connections at Buffalo Pointe Contribution
On May 29, 2020, the OP entered into a contribution agreement (the “Buffalo Pointe Contribution Agreement”) with entities affiliated with executive officers of the Company and the Manager (the “BP Contributors”) whereby the BP Contributors contributed their respective preferred membership interests in NexPoint Buffalo Pointe Holdings, LLC (“Buffalo Pointe”), to the OP for total consideration of $10.0 million paid in common limited partnership units in the OP (“OP Units”). A total of 564,334.09 OP Units were issued to the BP Contributors, which was calculated by dividing the total consideration of $10.0 million by the combined bookmarket value of the Company’s common stock and the SubOP Units, on a per share or unit basis, as of the end of the first quarter, or $17.72 per OP Unit. Buffalo Pointe owns a stabilized multifamily property located in Houston, Texas with 90.6% occupancyoutstanding equity awards as of December 31, 2021. The preferred equity investment pays current interest at a rate of 6.5%, deferred interest at a rate of 4.5%, has a loan-to-value ratio of 82.9% and a maturity date of May 1, 2030.
Pursuant to the OP’s limited partnership agreement and the Buffalo Pointe Contribution Agreement, the BP Contributors2022 that would have the right to cause our OP to redeem their OP Units for cash or, at our election, shares of our common stock on a one-for-one basis, subject to adjustment, as provided and subject to the limitations in our OP’s limited partnership agreement, provided the OP Units have been outstanding for at least one year and our stockholders have approved the issuance of shares of common stock to the BP Contributors.
Share Repurchase Program
On March 9, 2020, the Board authorized a share repurchase program (the “Share Repurchase Program”) through which the Company may repurchase an indeterminate number of shares of our common stock at an aggregate market value of up to $10.0 million in shares of its common stock, par value $0.01 per share, during a two-year period that is set to expire on March 9, 2022. On September 28, 2020, the Board authorized the expansion of the Share Repurchase Program to include the Company’s Series A Preferred Stock (the “Series A Preferred Stock”) with the same period and repurchase limit. The Company may utilize various methods to affect the repurchases, and the timing and extent of the repurchases will depend upon several factors, including market and business conditions, regulatory requirements and other corporate considerations, including whether the Company’s common stock is trading at a significant discount to net asset value ("NAV") per share. Repurchases under this program may be discontinued at any time. From inception through December 31, 2021, the Company has repurchased 327,422 shares of its common stock, par value $0.01 per share, at a total cost of approximately $4.8 million, or $14.61 per share. These repurchased shares of common stock are classified as treasury stock and reduce the number of shares of the Company’s common stock outstanding and, accordingly, are considered in the weighted-average number of shares outstanding during the period. On March 3, 2021, the Company cancelled 40,435 shares of common stock, reducing the total classified as treasury stock to 286,987.
The audit committee has approved and ratified, subject to the prior authorization of our Board, repurchases from related party affiliates of the Company through the Share Repurchase Program, including accounts advised by affiliates of our Sponsor. As of December 31, 2021, the Company has not repurchased shares of common stock or Series A Preferred Stock under the Share Repurchase Program from its officers, directors, Manager or Sponsor, or affiliates ofvested if any of the foregoing.
Equity Commitment Letter
On August 3, 2020, a subsidiary of the OP (“REIT Sub”) entered into an equity commitment letter (the “Equity Commitment Letter”) in connection with a proposed transaction (the “Proposed Transaction”) involving affiliates of the Manager. Pursuant to the Equity Commitment Letter, REIT Sub has committed to provide an aggregate equity contribution of approximately $227.0 million (the “Equity Commitment”) to finance the Proposed Transaction, subject to certain reductions for any additional equity or debt financing. The Company is neither a party to the Equity Commitment Letter nor guaranteeing the obligations of REIT Sub under the Equity Commitment Letter. The Proposed Transaction closedevents described above occurred on November 6, 2020 and, accordingly, the Equity Commitment Letter, and REIT Sub’s obligation to fund $227.0 million, was terminated pursuant to its terms.
SubOP Units Issuance
On JulyDecember 31, 2020, the Board deemed approved an issuance and sale of 523,388 SubOP Units of NREF OP IV, L.P. to GAF, 11,340 common partnership units to NRESF, 45,796 common partnership units to NXDT and 45,796 common partnership units to Highland Income Fund (“HFRO”), at a price per common partnership unit equal to $18.33.
Preferred Stock Offering
On July 24, 2020, we issued 2,000,000 shares of our Series A Preferred Stock at a price to the public of $24.00 per share, for gross proceeds of $48.0 million before deducting underwriting discounts and commissions and other estimated offering expenses. The Series A Preferred Stock has a $25.00 per share liquidation preference.2022.
In connection withgeneral, except as may be otherwise prescribed by the Series A Preferred Stock offering, oneCompensation Committee in any award agreement, the Existing LTIP provides that a change of control will be deemed to have occurred if following the effective date of the Subsidiary OPs purchased 455,000 sharesExisting LTIP: (a) individuals who constitute the Board on the effective date of the Series A Preferred StockExisting LTIP cease for any reason to constitute at the public offering price of $24.00 per share. On August 4, 2020, prior to settlement of the purchase, the underwriter sold 100,000 shares of the Series A Preferred Stock atleast a price of $23.50 per share to an unaffiliated third-party investor as part of the primary offering. The Company reimbursed the underwriter for the differential between the $24.00 per share issue price and the $23.50 per share price paid by the third-party investor. We used the net proceeds of the Series A Preferred Stock offering to make investments in a CMBS B-Piece and CMBS I/O Strips.
Jernigan Capital Acquisition
On November 6, 2020, a subsidiary of the Company and affiliates of our Manager completed a merger with JCAP, taking the entity private, and converting the Company's preferred stock investment into common shares of NSP, the surviving entity. See Note 5 to our consolidated financial statements.
Reserved Shares
In connection with the Series A Preferred Stock offering, the underwriters at our request reserved for sale to our Sponsor and its affiliates, at the public offering price of $24.00, up to 200,000 shares of Series A Preferred Stock for which no underwriting discounts or commissions would be applied. Excluding the Subsidiary OP purchase discussed above, the Sponsor and its affiliates have not purchased shares of the Series A Preferred Stock under this reservation in the fiscal year ended December 31, 2021.
Notes Offering
On April 20, 2021, the Company issued $75.0 million aggregate amount of its 5.75% Notes at a price equal to 99.5% par value for proceeds of approximately $73.1 million after original issue discount and underwriting fees. An account advised by NexAnnuity Asset Management, L.P., an affiliate of the Manager, purchased $2.5 million par value of the 5.75% Notes. The Company used the net proceeds of the notes offering to acquire a CMBS B-Piece.
OP Unit and SubOP Unit Redemptions
At the 2021 annual meeting of the Company, the Company’s stockholders approved the potential issuance of 13,758,905.9 shares of the Company’s common stock to related parties in connection with the redemption of their OP Units or SubOP Units that may be redeemed for OP Units. On September 8, 2021, the Company redeemed approximately 1,479,132 OP Units for cash and issued 1,479,132 shares of common stock to the redeeming unitholders for the same cash amount.
On January 7, 2022, the OP redeemed 8,496,144.16 SubOP Units for cash and issued 3,721,571.74 Class B OP Units and 4,774,572.42 Class C OP Units to the redeeming unitholders for the same cash amount. Following the issuance of OP Units, on January 7, 2022, the Company redeemed 4,774,572.42 Class C OP Units for cash and issued 4,774,570 shares of common stock to the redeeming unitholders for the same cash amount. An aggregate of approximately $178.8 million was paid by the redeeming unitholders in connection with the issuance of the OP Units and an aggregate of approximately $100.5 million was paid by the redeeming unitholders in connection with the issuance of the shares. No selling commissions or fees were paid in connection with the issuances. Additionally, on February 14, 2022, the Company redeemed 395,003.86 Class C OP Units and issued 395,003 shares of common stock to the redeeming unitholder for the same cash amount.
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES
The following is a discussion of certain of our investment, financing and other policies. These policies have been determined by the Board and, in general, may be amended and revised from time to time at the discretionmajority of the Board, without notice to or a vote of our stockholders. We intend to disclose any changesunless their replacements are approved as described in our investment policies in our next required periodic report.
If our Board determines that additional funding is required, we may raise such funds through additional public and private offerings of common and preferred equity or debt securities or the retention of cash flowExisting LTIP (subject to the distribution requirements applicable to REITs and our desire to minimize our U.S. federal income tax obligations) or a combination of these methods. In the event that our Board determines to raise additional equity or debt capital, it has the authority, without stockholder approval, to cause us to issue additional shares of common stock, shares of preferred stock or debt securities in any manner and on such terms and for such consideration as it deems appropriate, at any time, and has similarly broad authority to incur debt.
In addition, we may finance the acquisition of investments using the various sources of financing discussed below under “—Investment Policies.” Our investment guidelines, the assets in our portfolio and the decision to utilize, and the appropriate levels of, leverage are periodically reviewed by our Board as part of their oversight of our Manager
We may offer equity or debt securities in exchange for property and may repurchase or otherwise reacquire shares of our stock. Subject to the requirements for qualification as a REIT, we maycertain exceptions described in the future invest in debt securitiesExisting LTIP); (b) a person or group becomes the beneficial owner of other REITs, other entities engaged in real estate-related activities35% or securities of other issuers, including for the purpose of exercising control over these entities. We do not intend that our investments in securities will require us to register as an investment company under the Investment Company Act, and we would intend to divest such securities before any such registration would be required.
We engage in the purchase and sale of investments. Consistent with our investment guidelines, we may in the future make loans to third parties in the ordinary course of business for investment purposes and may underwrite securities of other issuers.
Our annual reports will be available to our stockholders, including our audited financial statements. We are subject to the information reporting requirementsmore of the Exchange Act. Pursuant to those requirements, we will be required to file annual and periodic reports, proxy statements and other information, including audited financial statements, with the SEC.
Our Board may change any of these policies without prior notice to you or a vote of our stockholders.
Investment Policies
We invest in interests in real estate.
Investments in Interests in Real Estate
We conduct all of our investment activities through the OP. Our primary investment objective is to generate attractive, risk-adjusted returns for stockholders over the long term. We intend to achieve this objective primarily by originating, structuring and investing in first-lien mortgage loans, mezzanine loans, preferred equity, preferred and common stock, as well as multifamily CMBS securitizations. We concentrate on investments in real estate sectors where our senior management team has operating expertise, including in the multifamily, SFR, self-storage, life science, hospitality and office sectors predominantly in the top 50 metropolitan statistical areas. In addition, we target lending or investing in properties that are stabilized or have a “light transitional” business plan, meaning a property that requires limited deferred funding to support leasing or ramp-up of operations and for which most capital expenditures are for value-add improvements. Through active portfolio management the Company seeks to take advantage of market opportunities to achieve a superior portfolio risk-mix that delivers attractive total returns.
We may also participate with third parties in property ownership, through joint ventures, funds or other types of co-ownership. We also may acquire interests in real estate in exchange for the issuance of common stock, units, preferred stock or options to purchase stock. These types of investments may permit us to own interests in larger assets without unduly restricting our diversification and, therefore, provide us with flexibility in structuring our portfolio. We will not, however, enter into a joint venture or other partnership arrangement to make an investment that would not otherwise meet our investment policies.
Dispositions. We may dispose of some of our investments if, based upon management’s periodic review of our investments, the Manager or the Board determines that such action would be in the best interest of us and our stockholders.
Financings and Leverage Policy. In the future, we anticipate using a number of different sources to finance our acquisitions, developments and operations, including, but not limited to, cash flows from operations, asset sales, seller financing, issuance of debt securities, private financings (such as bank credit facilities, which may or may not be secured by our assets), common or preferred equity issuances or any combination of these sources, to the extent available to us, or other sources that may become available from time to time. Any debt that we incur may be recourse or non-recourse and may be secured or unsecured. We also may take advantage of joint venture or other partnering opportunities as such opportunities arise in order to acquire properties that would otherwise be unavailable to us or if we believe joint ventures or other partnering structures are more favorable to us compared with owning the properties outright. We may use the proceeds of our borrowings to acquire assets, to refinance existing debt or for general corporate purposes.
While we do not have any formal restrictions or policy with respect to our debt-to-equity leverage ratio, we currently expect that our leverage will not exceed a ratio of 3-to-l. We believe this leverage ratio is prudent given that leverage typically exists at the asset level. The amount of leverage we may employ for particular assets depends upon the availability of particular types of financing and our Manager’s assessment of the credit, liquidity, price volatility and other risks of those assets and financing counterparties. Our decision to use leverage to finance our assets is at the discretion of our Manager, subject to review by our Board, and is not subject to the approval of our stockholders. We generally intend to match leverage terms and interest rate type to that of the underlying investment financed. We are not restricted by our governing documents or otherwise in the amount of leverage that we may use.
Lending Policies. We do not have a policy limiting our ability to make loans to other persons. We may consider offering purchase money financing in connection with the sale of investments where the provision of that financing will increase the value to be received by us for the investment sold. We also may make loans to joint ventures in which we participate. Any loan we make will be consistent with maintaining our status as a REIT.
Equity Capital Policies. To the extent that the Board determines to obtain additional capital, we may issue debt or equity securities, including additional units or senior securities of the OP, retain earnings (subject to provisions in the Internal Revenue Code of 1986, as amended, requiring distributions of income to maintain REIT qualification) or pursue a combination of these methods. As long as the OP is in existence, we will generally contribute the proceeds of all equity capital raised by us to the OP in exchange for additional interests in the OP, which will dilute the ownership interests of the limited partners in the OP.
Existing stockholders will have no preemptive rights to common or preferred stock or units issued in any securities offering by us, and any such offering might cause a dilution of a stockholder’s investment in us. We may in the future issue shares of common stock or units in connection with acquisitions of investments.
We may, under certain circumstances and subject to there being funds legally available, purchasethen-outstanding shares of our common stock or otherthe combined voting power of our then-outstanding securities entitled to vote generally in the open marketelection of directors, subject to certain exceptions; (c) the Company closes a reorganization, merger, consolidation, significant sale or purchase of assets or other similar transaction resulting in private transactions with our stockholders, provided that those purchasesa substantial change in its ownership or leadership, in each case which causes the persons or groups who are approved by the Board. Any repurchasesbeneficial owners of 35% or more of the then-outstanding shares of our common stock or otherthe combined voting power of our then-outstanding securities would onlyentitled to vote generally in the election of directors to cease to be takensuch beneficial owners of the entity resulting from such transaction, in conformity with applicable federal and state laws andsubstantially the applicable requirements for qualificationsame proportions of ownership as a REIT.immediately prior to such transaction, as further described in the Existing LTIP; (d) the Company’s stockholders approve its complete liquidation or dissolution; or (e) the Manager is terminated.
ConflictsSummary of InterestDirector Compensation
The Board presently consists of seven members, five of whom are non-management directors. Each director serves a one-year term expiring at each annual meeting of stockholders and lasting until his or her respective successor is duly elected and qualified.
Directors who are officers of the Company do not receive compensation for their service as directors.
We provide the following briefly summarizescompensation for non-management directors:
• each non-management director receives an annual director’s fee payable in cash equal to $20,000 and an annual grant of RSUs;
• the material potential and actual conflicts of interest which may arise from the overall investment activitychair of our Manager, its clients and its affiliates, but is not intendedaudit committee receives an additional annual fee payable in cash equal to be an exhaustive list of all such conflicts. The scope of$15,000;
• the activities of the affiliateschair of our Manager andCompensation Committee receives an additional annual fee payable in cash equal to $7,500;
• the funds and clients advised by affiliateschair of our Manager may give risenominating and corporate governance committee receives an additional annual fee payable in cash equal to conflicts of interest or other restrictions and/or limitations imposed on us$7,500; and
• the lead independent director receives an additional annual fee payable in the future that cannot be foreseen or mitigated at this time.cash equal to $10,000.
We also reimburse directors for all expenses incurred in attending Board and committee meetings.
Management AgreementDirector Compensation Table
Under our Management Agreement, our Manager is entitled to fees that are structured in a manner intended to provide incentives to our Manager to perform in our best interest and inThe following table provides information regarding the best interestcompensation of our stockholders. However, because performance is only one aspect of our Manager’s compensation, our Manager’s interests are not wholly aligned with those of our stockholders. In that regard, our Manager could be motivated to recommend riskier or more speculative investments that would entitle our Manager to a higher fee. For example, because management fees payable to our Manager are based in part onnon-management directors for the amount of equity raised, our Manager may have an incentive to raise additional equity capital in order to increase its fees. Externally managed REITs may also have conflicts of interest with their advisors that are not common with self-managed REITs. These conflicts as they relate to us and our Manager are discussed in the following sections.year ended December 31, 2022.
Other Accounts and Relationships
As part of their regular business, our Manager, its affiliates and their respective officers, directors, trustees, stockholders, members, partners and employees and their respective funds and investment accounts (collectively, the “Related Parties”) hold, purchase, sell, trade or take other related actions both for their respective accounts and for the accounts of their respective clients, on a principal or agency basis, subject to applicable law with respect to loans, securities and other investments and financial instruments of all types. The Related Parties also provide investment advisory services, among other services, and engage in private equity, real estate and capital markets-oriented investment activities. The Related Parties are not restricted in their performance of any such services or in the types of debt, equity, real estate or other investments which they may make. The Related Parties may have economic interests in or other relationships with respect to investments made by us. In particular, the Related Parties may make and/or hold an investment, including investments in securities, that may compete with, be pari passu, senior or junior in ranking to an, investment, including investments in securities, made and/or held by us or in which partners, security holders, members, officers, directors, agents or employees of such Related Parties serve on boards of directors or otherwise have ongoing relationships. Each of such ownership and other relationships may result in restrictions on transactions by us and otherwise create conflicts of interest for us. In such instances, the Related Parties may in their discretion make investment recommendations and decisions that may be the same as or different from those made with respect to our investments. In connection with any such activities described above, the Related Parties may hold, purchase, sell, trade or take other related actions in securities or investments of a type that may be suitable for us. The Related Parties are not required to offer such securities or investments to us or provide notice of such activities to us. In addition, in managing our portfolio, our Manager may take into account its relationship or the relationships of its affiliates with obligors and their respective affiliates, which may create conflicts of interest. Furthermore, in connection with actions taken in the ordinary course of business of our Manager in accordance with its fiduciary duties to its other clients, our Manager may take, or be required to take, actions which adversely affect our interests.
The Related Parties have invested and may continue to invest in investments that would also be appropriate for us. Such investments may be different from those made on our behalf. Neither our Manager nor any Related Party is necessarily prohibited from making or maintaining such investments, even if they are not favorable to us, subject to their fiduciary duties and disclosure obligations, and subject to our Manager’s allocation policy set forth below. The investment policies, fee arrangements and other circumstances applicable to such other parties may vary from those applicable to us. Our Manager and/or any Related Party may also provide advisory or other services for a customary fee with respect to investments made or held by us, and neither our stockholders nor we have any right to such fees. Our Manager and/or any Related Party may also have ongoing relationships with, render services to or engage in transactions with other clients, including HFRO, NXDT, NRESF, NexPoint Capital and Highland Global Allocation Fund (“GAF”) as well as VineBrook, NXRT, NSP and NHT and other REITs, who make investments of a similar nature to ours, Delaware Statutory Trusts and with companies whose securities or properties are acquired by us. In connection with the foregoing activities our Manager and/or any Related Party may from time to time come into possession of material nonpublic information that limits the ability of our Manager to affect a transaction for us, and our investments may be constrained as a consequence of our Manager’s inability to use such information for advisory purposes or otherwise to effect transactions that otherwise may have been initiated on our behalf. In addition, officers or affiliates of our Manager and/or Related Parties may possess information relating to our investments that is not known to the individuals at our Manager responsible for monitoring our investments and performing the other obligations under the Management Agreement.
The Related Parties currently provide services to HFRO, NXDT, NRESF, NexPoint Capital, GAF, VineBrook, NXRT, NSP, NHT, Delaware Statutory Trusts, and may in the future provide services to other REITs, funds or other entities that compete with us for similar investments.
Although the professional staff of our Manager will devote as much time to our business and investments as our Manager deems appropriate to perform its duties in accordance with the Management Agreement and in accordance with reasonable commercial standards, the staff may have conflicts in allocating its time and services among us and any Related Parties’ other accounts. The Management Agreement places restrictions on our Manager’s ability to buy and sell investments for us. Accordingly, during certain periods or in certain circumstances, our Manager may be unable to buy or sell investments or to take other actions that it might consider to be in our best interest as a result of such restrictions.
The directors, officers, employees and agents of the Related Parties, and our Manager may, subject to applicable law, serve as directors (whether supervisory or managing), officers, employees, partners, agents, nominees or signatories, and receive arm’s length fees in connection with such service, for us or any Related Party, or for any of our investments or any affiliate thereof, and neither we nor our stockholders have the right to any such fees.
The Related Parties serve or may serve as officers, directors or principals of entities that operate in the same or a related line of business as us, or of other investment funds managed by our Manager or its affiliates. In serving in these multiple capacities, they may have obligations to other clients or investors in those entities, the fulfillment of which may not be in our best interest. We may compete with other entities managed by our Manager and its affiliates for capital and investment opportunities.
There is no limitation or restriction on our Manager or any of its Related Parties with regard to acting as investment manager (or in a similar role) to other parties or persons. This and other future activities of our Manager and/or its Related Parties may give rise to additional conflicts of interest. Such conflicts may be related to obligations that our Manager or its affiliates have to other clients.
Subject to prior approval of our Board, certain Related Parties, including NexBank and Governance Re among others, may provide banking, agency, insurance and other services to us and its operating affiliates for customary fees, and neither we, nor our subsidiaries will have a right to any such fees.
Allocation Policy
If a potential investment is appropriate for either us or another entity managed by our Manager or its affiliates, such as HFRO, which as of December 31, 2021 has approximately $1.1 billion of assets under management, NXDT, which as of December 31, 2021 has approximately $983.2 million of assets under management, NRESF, which as of December 31, 2021 has approximately $24.3 million of assets under management, NexPoint Capital, which as of December 31, 2021 has approximately $64.6 million of assets under management, GAF, which as of December 31, 2021 has approximately $295.6 million of assets under management, VineBrook, which as of December 31, 2021 has an enterprise value of approximately $2.3 billion,NXRT, which as of December 31, 2021 has an enterprise value of approximately $3.6 billion,and NHT, which as of December 31, 2021 has an enterprise value of approximately $346.5 million,our Manager and its affiliates, including their respective personnel, have an allocation policy that provides that opportunities will be allocated among those accounts for which participation in their respective opportunity is considered most appropriate, taking into account the following objective factors.
First, the allocation policy looks to the investment objectives of the REITs managed by our Manager and its affiliates. For example, our targeted investments differ from the targeted investments of NXRT, which generally are direct ownership of well-located middle-income multifamily properties with value-add potential. We believe that most investment opportunities will be more appropriate for us, NXRT or other entities based on the differences in our primary investment objectives. We expect we will remain the primary vehicle in which investments are made in first-lien mortgage loans, multifamily CMBS B-Pieces, preferred equity and mezzanine loans. Our Manager is not required to offer to us any opportunities that do not meet our investment objectives and criteria. Personnel of our Manager and its affiliates may invest in any such investment opportunities not required to be presented to us.
To the extent the opportunity is consistent with the investment objectives of more than one REIT managed by our Manager and its affiliates, the allocation policy then looks to other factors, such as:
NAME | FEES EARNED OR | STOCK | TOTAL | |||||||||
Edward Constantino | $ | 35,000 | $ | 63,255 | $ | 98,255 | ||||||
Scott Kavanaugh | $ | 37,500 | $ | 63,255 | $ | 100,755 | ||||||
Dr. Arthur Laffer | $ | 27,500 | $ | 63,255 | $ | 90,755 | ||||||
Dr. Carol Swain | $ | 8,242 | $ | 0 | $ | 8,242 | ||||||
Catherine Wood | $ | 20,000 | $ | 63,255 | $ | 83,255 |
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Our Manager will allocate investment opportunities acrossMr. Mitts, who serves as a director and our Chief Financial Officer, Executive VP-Finance, Secretary and Treasurer, is an executive officer who does not receive any additional compensation for services provided as a director. Due to the entities for which such opportunities are appropriate, consistent with its internal conflict of interest and allocation policies. Our Manager will seek to allocate investment opportunities among such entities infact that Mr. Mitts is not a manner thatnamed executive officer, his employee compensation is fair and equitable over time and consistent with its allocation policy. However, there is no assurance that such investment opportunities will be allocated to us fairly or equitably inomitted from the short-term or over time, and there can be no assurance that we will be able to participate in all such investment opportunities that are suitable for us.
Cross Transactions and Principal Transactions
As further described below, our Manager may affect client cross-transactions where our Manager causes a transaction to be affected between us and another client advised by our Manager or any of its affiliates. Our Manager may engage in a client cross-transaction involving us any time that our Manager believes such transaction to be fair to ustable above and the other client of our Manager or its affiliates in accordance with our Manager’s internal written cross-transaction policies and procedures.
As further described below, our Manager may effect principal transactions where we may make and/or hold an investment, including an investment in securities, in which our Manager and/or its affiliates have a debt, equity or participation interest, in each case in accordance with applicable law and with our Manager’s internal written policies and procedures for principal transactions, which may include our Manager obtaining our consent and approval prior to engaging in any such principal transaction between us and our Manager or its affiliates.
Our Manager may direct us to acquire or dispose of investments in cross trades between us and other clients of our Manager or its affiliates in accordance with applicable legal and regulatory requirements. In addition, we may make and/or hold an investment, including an investment in securities, in which our Manager and/or its affiliates have a debt, equity or participation interest, and the holding and sale of such investments by us may enhance the profitability of our Manager’s own investments in such companies. Moreover, we, along with our principals and persons or entities controlling, controlled by or under common control with the Manager, may invest in assets originated by, or enter into loans, borrowings and/or financings with our Manager or its affiliates, including but not limited to NexBank, including in primary and secondary transactions with respect to which our Manager or a Related Party may receive customary fees from the applicable issuer, and neither we nor our subsidiaries have the right to any such fees. In each such case, our Manager and principals and persons or entities controlling, controlled by or under common control with the Manager may have a potentially conflicting division of loyalties and responsibilities regarding us and the other parties to such investment. Under certain circumstances, our Manager and its affiliates may determine that it is appropriate to avoid such conflicts by selling an investment at a fair value that has been calculated pursuant to our Manager’s valuation procedures to another fund managed or advised by our Manager or principals and persons or entities controlling, controlled by or under common control with the Manager. In addition, our Manager may enter into agency cross-transactions where it or any of its affiliates acts as broker for us and for the other party to the transaction, to the extent permitted under applicable law. Our Manager may obtain our written consent as provided herein if any such transaction requires the consent of our Board.
herein.
Participation in Creditor Committees, Underwriting and Other Activities
Our Manager and/or its Related Parties may participate in creditors or other committees with respect to the bankruptcy, restructuring or workout or foreclosure of our investments. In such circumstances, our Manager may take positions on behalf of itself or Related Parties that are adverse to our interests.
Our Manager and/or its Related Parties may act as an underwriter, arranger or placement agent, or otherwise participate in the origination, structuring, negotiation, syndication or offering of investments purchased by us. Such transactions are on an arm’s-length basis and may be subject to arm’s-length fees. There is no expectation for preferential access to transactions involving investments that are underwritten, originated, arranged or placed by our Manager and/or its Related Parties and neither we nor our stockholders have the right to any such fees.
Material Non-Public Information
There are generally no ethical screens or information barriers among our Manager and certain of its affiliates of the type that many firms implement to separate persons who make investment decisions from others who might possess material, non-public information that could influence such decisions. If our Manager, any of its personnel or its affiliates were to receive material non-public information about an investment or issuer, or have an interest in causing us to acquire a particular investment, our Manager may be prevented from causing us to purchase or sell such asset due to internal restrictions imposed on our Manager. Notwithstanding the maintenance of certain internal controls relating to the management of material non-public information, it is possible that such controls could fail and result in our Manager, or one of its investment professionals, buying or selling an asset while, at least constructively, in possession of material non-public information. Inadvertent trading on material non-public information could have adverse effects on our Manager’s reputation, result in the imposition of regulatory or financial sanctions, and as a consequence, negatively impact our Manager’s ability to perform its investment management services to us. In addition, while our Manager and certain of its affiliates currently operate without information barriers on an integrated basis, such entities could be required by certain regulations, or decide that it is advisable, to establish information barriers. In such event, our Manager’s ability to operate as an integrated platform could also be impaired, which would limit our Manager’s access to personnel of its affiliates and potentially impair its ability to manage our investments.
Other Benefits to Our Manager
Our long-term incentive plan provides us with the ability to grant awards to directors and officers of, and certain consultants to, us, our Manager and its affiliates and other entities that provide services to us. The management team of our Manager may receive awards under the long-term incentive plan and will benefit from the compensation provided by these awards. Any compensation payable under such plan is subject to the 2.5% of equity book value determined in accordance with GAAP described above under “Certain Relationships and Related Party Transactions—Our Management Agreement—Expense Cap.”
In addition to the compensation provided to our Manager by the Management Agreement and any long-term incentive plan, our Manager may also receive reputational benefits from our future growth through capital-raising transactions and acquisitions. Our Manager will also have an incentive to raise capital and cause us to acquire additional assets, which would then contribute to the management fee. The reputational benefit to our Manager from our future growth could assist our Manager and its affiliates in pursuing other real estate investments. These investments could be made through other entities managed by our Manager or its affiliates, and there can be no assurance that we will be able to participate in all such investment opportunities.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERSOWNERS AND MANAGEMENT
The tables below set forth the beneficial ownership information of our common stock and 8.50% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”) as of February 28, 2022September 30, 2023 for:
each person known to us to be the beneficial owner of more than 5% of our shares of common stock or Series A Preferred Stock;
each of our named executive officers;
each of our directors; and
all of our executive officers and directors as a group.
Unless otherwise noted below, the address of the persons and entities listed onin the table is the address of our Manager’s office, 300 Crescent Court, Suite 700, Dallas, Texas 75201. We have determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of common stockShares or Series A Preferred Stock reflected as beneficially owned, subject to applicable community property laws.
Beneficial ownership and percentage of beneficial ownership is based on 14,393,81717,231,913 shares of our common stock and 1,645,0002,000,000 shares of our Series A Preferred Stock outstanding on February 28, 2022.September 30, 2023. Shares of common stock that a person has the right to acquire within 60 days of February 28, 2022 upon the vesting of restricted stock unitsSeptember 30, 2023 are deemed to be outstanding and beneficially owned by the person for the purpose of computing the percentage of beneficial ownership of that person and any group of which that person is a member, but are not deemed outstanding for the purpose of computing the percentage of beneficial ownership for any other person.
COMMON STOCK | SERIES A PREFERRED STOCK | |||||||||||||||
NAME | BENEFICIALLY OWNED | PERCENT OF CLASS | BENEFICIALLY OWNED | PERCENT OF CLASS | ||||||||||||
5% Stockholders: | ||||||||||||||||
James Dondero (1) | 6,662,021 | 46.3 | % | 8,500 | * | |||||||||||
Named Executive Officers and Directors | ||||||||||||||||
James Dondero (1) | 6,662,021 | 46.3 | % | 8,500 | * | |||||||||||
Matt McGraner (2) | 59,479 | * | — | — | ||||||||||||
Matthew Goetz (3) | 53,923 | * | — | — | ||||||||||||
Scott Kavanaugh | 7,871 | * | — | — | ||||||||||||
Edward Constantino | 23,621 | * | — | — | ||||||||||||
Dr. Arthur Laffer | 47,571 | * | — | — | ||||||||||||
Catherine Wood | 9,190 | * | — | — | ||||||||||||
Brian Mitts (4) | 42,930 | * | — | — | ||||||||||||
All Directors and Executive Officers as a group (9 persons) (5) | 6,907,585 | 48.0 | % | 8,500 | * |
COMMON STOCK | SERIES A PREFERRED STOCK | |||||||||||||||
NAME | BENEFICIALLY OWNED | PERCENT OF CLASS | BENEFICIALLY OWNED | PERCENT OF CLASS | ||||||||||||
5% Stockholders: | ||||||||||||||||
James Dondero (1) | 8,860,087.54 | 51.4 | % | 49,321 | 2.5 | % | ||||||||||
Named Executive Officers and Directors | ||||||||||||||||
James Dondero (1) | 8,860,087.54 | 51.4 | % | 49,321 | 2.5 | % | ||||||||||
Matt McGraner (2) | 142,695 | * | - | - | ||||||||||||
Matthew Goetz (3) | 89,164 | * | - | - | ||||||||||||
Scott Kavanaugh | 10,987 | * | - | - | ||||||||||||
Edward Constantino | 26,737 | * | - | - | ||||||||||||
Dr. Arthur Laffer | 50,687 | * | - | - | ||||||||||||
Dr. Carol Swain | 0 | - | - | - | ||||||||||||
Catherine Wood | 15,906 | * | - | - | ||||||||||||
Brian Mitts (4) | 51,707 | * | - | - | ||||||||||||
All Directors and Executive Officers as a group (10 persons) (5) | 9,246,170.54 | 53.7 | % | 49,321 | 2.5 | % |
* | Indicates ownership of less than 1%. |
(1) | James D. Dondero, |
Name of Reporting Person | Sole Voting | Shared Voting | Sole Dispositive | Shared Dispositive | Sole Voting | Shared Voting | Sole Dispositive | Shared Dispositive | ||||||||||||||||||||||||
James D. Dondero | 33,397 | 6,628,624 | 33,397 | 6,628,624 | 101,661 | 8,758,426.54 | 101,661 | 8,758,426.54 | ||||||||||||||||||||||||
NexPoint Advisors, L.P. | 0 | 763,485 | 0 | 763,485 | 0 | 2,863,486.13 | 0 | 2,863,486.13 | ||||||||||||||||||||||||
Highland Capital Management Fund Advisors, L.P. | 0 | 5,694,670 | 0 | 5,694,670 | ||||||||||||||||||||||||||||
Highland Income Fund | 0 | 4,372,285 | 0 | 4,372,285 | ||||||||||||||||||||||||||||
NexPoint Diversified Real Estate Trust | 0 | 2,100,000 | 0 | 2,100,000 | ||||||||||||||||||||||||||||
NexPoint Real Estate Opportunities, LLC | 0 | 2,100,000 | 0 | 2,100,000 | ||||||||||||||||||||||||||||
NexPoint Asset Management, L.P. | 0 | 5,694,671.40 | 0 | 5,694,671.40 | ||||||||||||||||||||||||||||
Highland Opportunities and Income Fund | 0 | 4,372,286.06 | 0 | 4,372,286.06 | ||||||||||||||||||||||||||||
Nancy Marie Dondero | 167,071 | 0 | 167,071 | 0 | 169,262.01 | 0 | 184,542.08 | 0 |
The shares of common stock held by Mr. Dondero are held indirectly through NexPoint and NexPoint Asset Management, a proprietary account and a trust. The shares held by NexPoint are held indirectly through directly or indirectly managed or advised entities, including NXDT and NREO. Mr. Dondero is the sole member of the general partner of NexPoint and may be deemed to be an indirect beneficial owner of shares held by NexPoint. The shares held by NexPoint Asset Management are held indirectly through advised accounts, including HFRO. Mr. Dondero is also the sole stockholder and director of the general partner of NexPoint Asset Management and may be deemed to be an indirect beneficial owner of shares held by NexPoint Asset Management. The shares held by the trust includes shares with respect to which Mr. Dondero has the right to acquire beneficial ownership and he does not serve as trustee of such trust. Such shares also include shares held by a company which is an indirect wholly owned subsidiary of such trust, and a limited liability company in which such trust owns a majority interest. Mr. Dondero disclaims beneficial ownership of all such shares except to the extent of his pecuniary interest therein. The shares held by Ms. Dondero are held by the trust described above for which she is the trustee. Ms. Dondero is the sister of Mr. Dondero and disclaims beneficial ownership of such shares. 2,100,000 shares of our common stock are pledged by NREO.
With respect to the shares of Series A Preferred Stock described above, 29,810 shares are held by the trust described above and 19,511 shares are held by Drugcrafters, L.P., for which Mr. Dondero is the sole managing member of its general partner. Mr. Dondero has shared voting and dispositive power with respect to the shares of Series A Preferred Stock described above. Mr. Dondero disclaims beneficial ownership of all such shares except to the extent of his pecuniary interest therein. |
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(2) | Mr. McGraner has sole voting and dispositive power with respect to |
(3) | Mr. Goetz has sole voting and dispositive power with respect to |
(4) | Mr. Mitts has sole voting and dispositive power with respect to |
(5) | In computing the aggregate number of shares beneficially owned and the aggregate percentage ownership by all directors and executive officers as a group, 1,800 shares which may be deemed to be beneficially owned by Mr. Dondero and Mr. McGraner, in each case have not been counted more than once. |
AUDIT COMMITTEE REPORTSOLICITATION OF PROXIES
It is expected that the solicitation of proxies will be primarily by mail and telephone. The audit committee reviewedcosts of soliciting proxies will be borne by the Company. The Manager and discussed with both managementits personnel, and the Company’s independent registered public accounting firm, KPMG, the audited financial statementspersonnel of the Manager’s affiliates, as well as our directors and officers, may assist in the solicitation of proxies by telephone, facsimile or email and will receive no additional compensation in connection therewith. We have retained EQ to provide stockholder meeting services, including the distribution of this proxy statement and related materials to stockholders as well as assisting the Company in soliciting proxies for the year ended December 31, 2021 prior to their issuance.Special Meeting at an approximate cost of $6,500. These reviews included discussion with the independent registered public accounting firm of matters required tocosts will be discussedpaid by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) and the SEC. The audit committee also discussed with its independent registered public accounting firm matters relating to its independence and received the written disclosures and letter from KPMG required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the audit committee concerning independence.Company.
Based on these reviews and discussions, all of the members of the Company’s audit committee at the time of this report, whose names are listed below, recommended to the Board that it approve the inclusion of the Company’s audited financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for filing with the SEC.
Members of the Audit Committee
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STOCKHOLDER NOMINATIONS AND PROPOSALS FOR THE 2023 ANNUAL MEETING OF STOCKHOLDERS
Pursuant to the bylaws, because the Special Meeting is a special meeting of our stockholders, only the business stated in the notice of meeting attached to this proxy statement shall be conducted at the Special Meeting. At this time, the Board knows of no other matter which will be brought before the Special Meeting.
In order to be included in the Company’s proxy materials for the 20232024 annual meeting of stockholders, a stockholder proposal must be received in writing by the Company at 300 Crescent Court, Suite 700, Dallas, Texas 75201 by December 14, 202217, 2023 and otherwise comply with all requirements of the SEC for stockholder proposals.
In addition, the Company’s Bylawsbylaws provide that any stockholder who desires to make a director nomination or a proposal of other business at an annual meeting without including the nomination or proposal in the Company’s proxy materials must give timely written notice of the proposal to the Company’s Secretary. To be timely, the notice must be delivered to the above address not less than 120 nor more than 150 calendar days prior to the first anniversary of the date of the proxy statement for the preceding year’s annual meeting. In the event the annual meeting is advanced or delayed by 30 calendar days of the date of the anniversary of the preceding year’s annual meeting, the notice must be received not earlier than 150 calendar days prior to the date of the annual meeting and not later than 5:00 p.m., Eastern Time, on the later of the 120th calendar day prior to such annual meeting and the tenth calendar day following the day on which public announcement of the date of the annual meeting is first made. To be timely, a notice must be received no earlier than November 9, 202217, 2023 and no later than December 9, 2022.17, 2023. The notice must also describe the stockholder proposal in reasonable detail and provide certain other information required by the Company’s Bylaws.bylaws. A copy of the Company’s Bylawsbylaws is available upon request from the Company’s Secretary.
In addition to satisfying the foregoing requirements under our Bylaws,bylaws, to comply with the universal proxy rules, (once effective), stockholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than March 11, 2023.10, 2024 and comply with the disclosure and procedural requirements in connection with stockholder nominations of directors in our bylaws.
MULTIPLE STOCKHOLDERS SHARING ONE ADDRESSHOUSEHOLDING OF MEETING MATERIALS
In accordance with Rule 14a-3(e)(1) underSome banks, brokers and other record holders may participate in the Exchange Act, one setpractice of “householding” proxy materials will be delivered to two or morestatements and annual reports. This means that, unless stockholders who share an address, unless the Company has receivedgive contrary instructions, fromonly one or morecopy of this proxy statement may be sent to multiple stockholders of the stockholders.same Company in each household. The CompanyManager will deliver promptly upon written or oral requestdeliver a separate copy of either document to you, if you call or write to the proxy materials to a stockholderManager at a sharedthe following address to which a single copy of the proxy materials was delivered. Requests for additional copies of the proxy materials, and requests that in the future separate proxy materials be sent to stockholders who share an address, should be directed by writing to Investor Relations at c/oor telephone number: NexPoint Real Estate Finance, Inc.Advisors VII, L.P., 300 Crescent Court, Suite 700, Dallas, Texas 75201 Attn: Investor Relations or by callingtelephone at (214) 276-6300. In addition, stockholders who share a single address but
If you want to receive multipleseparate copies of thea proxy materials may request thatstatement in the future, theyor if you are receiving multiple copies and would like to receive a singleonly one copy by contactingper household, you should contact your bank, broker or other record holder, or you may contact the Manager at the above address or telephone number.
At this time, our Board knows of no other matter which will be brought before the Special Meeting. Pursuant to the bylaws, only the business stated in the notice of meeting attached to this proxy statement shall be conducted at the Special Meeting.
By order of the Board,
Brian Mitts
Chief Financial Officer, Executive VP-Finance, Secretary and Treasurer
Dallas, Texas
November 22, 2023
IMPORTANT If your shares are held in your own name, please complete a proxy over the internet or by telephone in the manner provided on the website indicated in the proxy card that you received in the mail; you may also request, complete and return a proxy card today. If your shares are held in “street name,” you should provide instructions to your broker, bank, nominee or the other institution holding your shares on how to vote your shares. You may provide instructions to your broker, bank, nominee or other institution over the internet or by telephone if your broker, bank, nominee or other institution offers these options, or you may return a proxy card or voting instruction form to your broker, bank, nominee or other institution and contact the person responsible for your account to ensure that a proxy is voted on your behalf. |
APPENDIX A: AMENDED AND RESTATED 2020 LONG TERM INCENTIVE PLAN
NEXPOINT REAL ESTATE FINANCE, INC.
2020 LONG TERM INCENTIVE PLAN
(as amended and restated effective January [26], 2024)
1. Purpose. The purpose of this NexPoint Real Estate Finance, Inc. 2020 Long Term Incentive Plan (the “Plan”) is to enable the Company atand its Affiliates and Subsidiaries to attract and retain directors, officers and other key employees and advisors and to provide to such persons incentives and rewards for performance. This Plan constitutes an amendment and restatement (the “Amendment and Restatement”) of the addressNexPoint Real Estate Finance, Inc. 2020 Long Term Incentive Plan, as originally adopted effective January 31, 2020 (the “Original Plan”), subject to shareholder approval of the Amendment and phone numberRestatement.
2. Definitions. As used in this Plan:
(a) “Affiliate” means any corporation, partnership, joint venture or other entity, directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with the Company as determined by the Committee or the Board, as applicable, in its discretion. For purposes of this Plan, “Affiliate” includes the Manager and the Operating Partnership.
(b) “Amendment and Restatement” has the meaning set forth in the prior sentence.preamble.
(c) “Appreciation Right” means a right granted pursuant to Section 5 of this Plan.
(d) “Award Agreement” means an agreement, certificate, resolution or other type or form of writing or other evidence approved by the Committee that sets forth the terms and conditions of the awards granted under the Plan. An Award Agreement may be in an electronic medium, may be limited to notation on the books and records of the Company and, unless otherwise determined by the Committee, need not be signed by a representative of the Company or a Participant.
(e) “Base Price” means the price to be used as the basis for determining the Spread upon the exercise of an Appreciation Right.
(f) “Board” means the Board of Directors of the Company.
(g) “Cash Incentive Award” means a cash award granted pursuant to Section 8 of this Plan.
(h) “Change in Control” has the meaning set forth in Section 13 of this Plan.
(i) “Code” means the Internal Revenue Code of 1986, as amended from time to time.
(j) “Committee” means the Compensation Committee of the Board or any other committee of the Board designated by the Board to administer the Plan pursuant to Section 11 of this Plan consisting solely of no fewer than two “non-employee directors” (within the meaning of Rule 16b-3 promulgated under the Exchange Act) and, to the extent of any delegation by the Committee to a subcommittee pursuant to Section 11 of this Plan, such subcommittee.
(k) “Company” means NexPoint Real Estate Finance, Inc., a Maryland corporation, and its successors.
(l) “Date of Grant” means the date specified by the Committee on which an award under this Plan will become effective (which date will not be earlier than the date on which the Committee takes action with respect thereto).
(m) “Director” means a member of the Board.
(n) “Effective Date” means the date the Amendment and Restatement is approved by the Shareholders of the Company.
(o) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, as such law, rules and regulations may be amended from time to time.
(p) “Incentive Stock Option” means an Option Right that is intended to qualify as an “incentive stock option” under Section 422 of the Code or any successor provision.
(q) “Management Objectives” means the measurable performance objective or objectives established pursuant to this Plan for Participants who have received grants of Performance Shares, Performance Units, Profits Interest Units or Cash Incentive Awards or, when so determined by the Committee, Option Rights, Appreciation Rights, Restricted Stock, Restricted Stock Units, dividend equivalents or other awards pursuant to this Plan. Management Objectives may be described in terms of Company-wide objectives or objectives that are related to the performance of the individual Participant or of one or more of the Subsidiaries, Affiliates, divisions, departments, regions, functions or other organizational units within the Company or its Subsidiaries. The Management Objectives may be made relative to the performance of other companies or subsidiaries, divisions, departments, regions, functions or other organizational units within such other companies, and may be made relative to an index or one or more of the performance objectives themselves. The Committee may grant awards subject to Management Objectives which may be based on one or more, or a combination, of metrics chosen by the Committee (including relative or growth achievement regarding such metrics), including without limitation any of the following:
(i) Profits (e.g., operating income, earnings before interest and taxes, earnings before taxes, net income, earnings per share, residual or economic earnings, economic profit – these profitability metrics could be measured before certain specified special items and/or subject to accounting principles generally accepted in the United States of America);
(ii) Cash Flow (e.g., earnings before interest, taxes, depreciation and amortization (“EBITDA”), free cash flow, free cash flow with or without specific capital expenditure target or range, including or excluding divestments and/or acquisitions, total cash flow, cash flow in excess of cost of capital or residual cash flow or cash flow return on investment);
(iii) Returns (e.g., profits or cash flow returns on: assets, invested capital, net capital employed, and equity; total shareholder return; stock price appreciation);
(iv) Profit Margins (e.g., profits divided by revenues, gross margins and material margins divided by revenues);
(v) Liquidity Measures (e.g., debt-to-capital, debt-to-EBITDA, total debt ratio); and
(vi) REIT Operating Metrics (e.g., core earnings, cash available for distributions, adjusted cash available for distributions, funds from operations, net operating income, book value per share).
(r) “Manager” means NexPoint Real Estate Advisors VII, L.P., or any subsequent external manager to the Company hired to perform similar services.
(s) “Market Value per Share” means, as of any particular date, the closing price of a Share as reported for that date on the New York Stock Exchange or, if the Shares are not then listed on the New York Stock Exchange, on any other national securities exchange on which the Shares are listed, or if there are no sales on such date, on the next preceding trading day during which a sale occurred. If there is no regular public trading market for the Shares, then the Market Value per Share shall be the fair market value as determined in good faith by the Committee. The Committee is authorized to adopt another fair market value pricing method provided such method is stated in the Award Agreement and is in compliance with the fair market value pricing rules set forth in Section 409A of the Code.
(t) “Original Plan” has the meaning set forth in the preamble.
(u) “Original Adoption Date” means January 31, 2020.
(v) “Operating Partnership” means NexPoint Real Estate Finance Operating Partnership, L.P., a Delaware limited partnership.
(w) “OP Interests” means limited partnership interests in the Operating Partnership that may be exchanged or redeemed for Shares on a one-for-one basis, or any profits interest in the Operating Partnership that may be exchanged or converted into such limited partnership interests.
(x) “Optionee” means the Participant named in an Award Agreement evidencing an outstanding Option Right.
(y) “Option Price” means the purchase price payable on exercise of an Option Right.
(z) “Option Right” means the right to purchase Shares upon exercise of an option granted pursuant to Section 4 of this Plan.
(aa) “Overall Share Limit” means 3,627,734 Shares, which is the sum of 2,308,000 Shares plus the 1,319,734 Shares previously approved under the Original Plan.
(bb) “Participant” means a person who is selected by the Committee to receive benefits under this Plan and who is at the time (i) an officer or other key employee of the Company or any Affiliate or Subsidiary, including a person who has agreed to commence serving in such capacity within 90 days of the Date of Grant, (ii) a person who provides services to the Company or any Affiliate or Subsidiary (provided that such person satisfies the applicable definitions under the general instructions to Form S-8), or (iii) a non-employee Director.
(cc) “Partnership Agreement” means the Second Amended and Restated Limited Partnership Agreement of the Operating Partnership, as amended from time to time.
(dd) “Performance Period” means, in respect of a Cash Incentive Award, Performance Share or Performance Unit, a period of time established pursuant to Section 8 of this Plan within which the Management Objectives relating to such Cash Incentive Award, Performance Share or Performance Unit are to be achieved.
(ee) “Performance Share” means a bookkeeping entry that records the equivalent of one Share awarded pursuant to Section 8 of this Plan.
(ff) “Performance Unit” means a bookkeeping entry awarded pursuant to Section 8 of this Plan that records a unit equivalent to $1.00 or such other value as is determined by the Committee.
(gg) “Person” means any individual, entity or group, within the meaning of Section 3(a)(9) of the Exchange Act as used in Section 13(d)(3) or 14(d)(2) of the Exchange Act.
(hh) “Plan” has the meaning set forth in the preamble.
(ii) “Profits Interest Units” means, to the extent authorized by the Partnership Agreement, a unit of the Operating Partnership that is granted pursuant to Section 9 of this Plan and is intended to constitute a “profits interest” within the meaning of the Code.
(jj) “Restricted Stock” means Shares granted or sold pursuant to Section 6 of this Plan as to which neither the substantial risk of forfeiture nor the prohibition on transfers has expired.
(kk) “Restricted Stock Units” means an award made pursuant to Section 7 of this Plan of the right to receive Shares, cash or a combination thereof at the end of a specified period.
(ll) “Restriction Period” means the period of time during which Restricted Stock Units are subject to restrictions, as provided in Section 7 of this Plan.
(mm) “Shareholder” means an individual or entity that owns one or more Shares.
(nn) “Shares” means the shares of common stock, par value $0.01 per share, of the Company or any security into which such shares of common stock may be changed by reason of any transaction or event of the type referred to in Section 12 of this Plan.
(oo) “Spread” means the excess of the Market Value per Share on the date when an Option Right or Appreciation Right is exercised over the Option Price or Base Price provided for in the related Option Right or Appreciation Right, respectively.
(pp) “Subsidiary” means a corporation, company or other entity (i) more than 50 percent of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, or (ii) which does not have outstanding shares or securities (as may be the case in a partnership, joint venture, limited liability company, or unincorporated association), but more than 50 percent of whose ownership interest representing the right generally to make decisions for such other entity is, now or hereafter, owned or controlled, directly or indirectly, by the Company; provided, however, that for purposes of determining whether any person may be a Participant for purposes of any grant of Incentive Stock Options, “Subsidiary” means any corporation (as defined in Treasury Regulation §1.421-1(i)) in which at the time the Company owns or controls, directly or indirectly, more than 50 percent of the total combined Voting Power represented by all classes of stock issued by such corporation.
(qq) “Treasury Regulations” means the regulations promulgated under the Code by the U.S. Department of the Treasury, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).
(rr) “Voting Power” means at any time, the combined voting power of the then-outstanding securities entitled to vote generally in the election of Directors in the case of the Company, or members of the board of directors or similar body in the case of another entity.
OTHER MATTERS3. Shares Available Under the Plan.
The Board does not know of any other matters that are to be presented for action at the Annual Meeting. If any other matters properly come before the Annual Meeting or any adjournment or postponement thereof, it is intended that the enclosed proxy will be voted in the discretion of the persons voting the proxy.
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(a) Maximum Shares Available Under Plan.
(i) Subject to adjustment as provided in Section 12 of this Plan and the share counting rules set forth in Section 3(b) of this Plan, the number of Shares available under the Plan for awards of (A) Option Rights or Appreciation Rights, (B) Restricted Stock, (C) Restricted Stock Units, (D) Performance Shares or Performance Units, (E) Profits Interest Units, (F) awards contemplated by Section 10 of this Plan, or (G) dividend equivalents paid with respect to awards made under the Plan will not exceed in the aggregate, the Overall Share Limit.
Dallas, Texas
April 8, 2022 (ii) Shares available for issuance under the Plan may consist, in whole or in part, of authorized but unissued Shares, treasury shares or Shares that shall have been or may be reacquired by the Company in the open market, in private transactions or otherwise.
(iii) Subject to the share counting rules set forth in Section 3(b), the aggregate number of Shares available for issuance or transfer under Section 3(a)(i) of this Plan will be reduced by one Share for every one Share subject to an award granted under this Plan.
(b) Share Counting Rules.
(i) If any award granted under this Plan is cancelled or forfeited, expires or is settled for cash (in whole or in part), the Shares subject to such award will, to the extent of such cancellation, forfeiture, expiration, or cash settlement, again be available under Section 3(a)(i) above.
(ii) Subject to Section 12 hereof, each Profits Interest Unit issued pursuant to an Award Agreement shall count as one Share for purposes of calculating the aggregate number of Shares available for issuance under this Plan as set forth in Section 3(a)(i) above.
(iii) Shares underlying awards that are subject to the achievement of Management Objectives shall be counted against the aggregate number of Shares available under Section 3(a)(i) above based on the target value of such awards unless and until such time as such awards become vested and settled in Shares.
(iv) Notwithstanding anything to the contrary contained herein: (A) Shares withheld by the Company, tendered or otherwise used in payment of the Option Price of an Option Right will not be added back to the aggregate number of Shares available under Section 3(a)(i) above; (B) Shares withheld by the Company or otherwise used to satisfy a tax withholding obligation will not be added (or added back, as applicable) to the aggregate number of Shares available under Section 3(a)(i) above; (C) Shares subject to an Appreciation Right that are not actually issued in connection with its settlement of Shares on exercise thereof will not be added back to the aggregate number of Shares available under Section 3(a)(i) above; and (D) Shares reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of Option Rights will not be added back to the aggregate number of Shares available under Section 3(a)(i) above.
(c) Limit on Incentive Stock Options. Notwithstanding anything in this Section 3 or elsewhere in this Plan to the contrary, and subject to adjustment as provided in Section 12 of this Plan, the aggregate number of Shares actually issued or transferred by the Company upon the exercise of Incentive Stock Options will not exceed the Overall Share Limit.
(d) Individual Participant Limits. Notwithstanding anything in this Section 3 or elsewhere in this Plan to the contrary, and subject to adjustment as provided in Section 12 of this Plan, no non-employee Director will be entitled to compensation, including cash fees and awards granted under the Plan, having an aggregate maximum value as of their respective Dates of Grant in excess of $350,000.
(e) Exception to Minimum Vesting Requirement. Notwithstanding anything in this Plan to the contrary, up to 5% of the maximum number of Shares available for awards under this Plan as provided for in Section 3(a) of this Plan, as may be adjusted under Section 12 of this Plan, may be used for awards granted under Section 4 through Section 10 of this Plan that do not at the Date of Grant comply with the applicable one-year minimum vesting requirements set forth in such sections of this Plan.
4. Option Rights. The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the granting to Participants of Option Rights. Each such grant may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions:
(a) Each grant will specify the number of Shares to which it pertains subject to the limitations set forth in Section 3 of this Plan.
(b) Each grant will specify an Option Price per share, which (except with respect to awards under Section 23 of this Plan) may not be less than the Market Value per Share on the Date of Grant, or, in the case of grants of Incentive Stock Options to Shareholders holding at least 10% of the then-outstanding Shares, shall not be less than 110% of Market Value per Share on the Date of Grant.
(c) Each grant will specify whether the Option Price will be payable (i) in cash or by check acceptable to the Company or by wire transfer of immediately available funds, (ii) by the actual or constructive transfer to the Company of Shares owned by the Optionee (or other consideration authorized pursuant to Section 4(d) of this Plan) having a value at the time of exercise equal to the total Option Price, (iii) subject to any conditions or limitations established by the Committee, the Company’s withholding of Shares otherwise issuable upon exercise of an Option Right pursuant to a “net exercise” arrangement, (iv) by a combination of such methods of payment, or (v) by such other methods as may be approved by the Committee.
(d) To the extent permitted by law, any grant may provide for deferred payment of the Option Price from the proceeds of sale through a bank or broker on a date satisfactory to the Company of some or all of the Shares to which such exercise relates.
(e) Successive grants may be made to the same Participant whether or not any Option Rights previously granted to such Participant remain unexercised.
(f) Each grant will specify the period or periods of continuous service by the Optionee with the Company or any Subsidiary that is necessary before the Option Rights or installments thereof will become exercisable; provided, that, except as otherwise described in this subsection, no grant of Option Rights may become exercisable sooner than after one year. A grant of Option Rights may provide for the earlier exercise of such Option Rights, including in the event of the retirement, death or disability of a Participant or in the event of a Change in Control only where either (i) within a specified period the Participant’s service is involuntarily terminated for reasons other than for cause or the Participant terminates his or her employment or service for good reason or (ii) such Option Rights are not assumed or converted into replacement awards in a manner described in the Award Agreement.
(g) Any grant of Option Rights may specify Management Objectives that must be achieved as a condition to the exercise of such rights.
(h) Option Rights granted under this Plan may be (i) options, including, without limitation, Incentive Stock Options, that are intended to qualify under particular provisions of the Code, (ii) options that are not intended to qualify as Incentive Stock Options, or (iii) combinations of the foregoing. Incentive Stock Options may only be granted to Participants who meet the definition of “employees” under Section 3401(c) of the Code.
(i) No Option Right will be exercisable more than 10 years from the Date of Grant; provided, that, in the case of Incentive Stock Options granted to 10% Shareholders, no such Option Right shall be exercisable more than 5 years from the Date of Grant.
(j) Option Rights granted under this Plan may not provide for any dividends or dividend equivalents thereon.
(k) Each grant of Option Rights will be evidenced by an Award Agreement. Each Award Agreement will be subject to this Plan and will contain such terms and provisions, consistent with this Plan, as the Committee may approve.
5. Appreciation Rights.
(a) The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the granting to any Participant of Appreciation Rights. An Appreciation Right will be a right of the Participant to receive from the Company an amount determined by the Committee, which will be expressed as a percentage of the Spread (not exceeding 100 percent) at the time of exercise.
(b) Each grant of Appreciation Rights may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions:
(i) Each grant may specify that the amount payable on exercise of an Appreciation Right will be paid by the Company in cash, Shares or any combination thereof.
(ii) Any grant may specify that the amount payable on exercise of an Appreciation Right may not exceed a maximum specified by the Committee at the Date of Grant.
(iii) Any grant may specify waiting periods before exercise and permissible exercise dates or periods.
(iv) Each grant may specify the period or periods of continuous service by the Participant with the Company or any Subsidiary that is necessary before the Appreciation Rights or installments thereof will become exercisable; provided, that, except as otherwise described in this subsection, no grant of Appreciation Rights may become exercisable sooner than after one year. A grant of Appreciation Rights may provide for the earlier exercise of such Appreciation Rights, including in the event of the retirement, death or disability of a Participant or in the event of a Change in Control only where either (A) within a specified period the Participant’s service is involuntarily terminated for reasons other than for cause or the Participant terminates his or her employment or service for good reason or (B) such Appreciation Rights are not assumed or converted into replacement awards in a manner described in the Award Agreement.
(v) Any grant of Appreciation Rights may specify Management Objectives that must be achieved as a condition of the exercise of such Appreciation Rights.
(vi) Each grant of Appreciation Rights will be evidenced by an Award Agreement, which Award Agreement will describe such Appreciation Rights, and contain such other terms and provisions, consistent with this Plan, as the Committee may approve.
(c) Appreciation Rights granted under this Plan may not provide for any dividends or dividend equivalents thereon.
(d) Each grant will specify in respect of each Appreciation Right a Base Price, which (except with respect to awards under Section 23 of this Plan) may not be less than the Market Value per Share on the Date of Grant;
(e) Successive grants may be made to the same Participant regardless of whether any Appreciation Rights previously granted to the Participant remain unexercised; and
(f) No Appreciation Right granted under this Plan may be exercised more than 10 years from the Date of Grant.
6. Restricted Stock. The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the grant or sale of Restricted Stock to Participants. Each such grant or sale may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions:
(a) Each such grant or sale will constitute an immediate transfer of the ownership of Shares to the Participant in consideration of the performance of services, entitling such Participant to voting, dividend and other ownership rights, but subject to the substantial risk of forfeiture and restrictions on transfer hereinafter referred to.
(b) Each such grant or sale may be made without additional consideration or in consideration of a payment by such Participant that is less than the Market Value per Share at the Date of Grant.
(c) Each such grant or sale will provide that the Restricted Stock covered by such grant or sale will be subject to a “substantial risk of forfeiture” within the meaning of Section 83 of the Code for a period to be determined by the Committee at the Date of Grant or until achievement of Management Objectives referred to in subparagraph (e) below. If the elimination of restrictions is based only on the passage of time rather than the achievement of Management Objectives, the period of time will be no shorter than one year.
(d) Each such grant or sale will provide that during or after the period for which such substantial risk of forfeiture is to continue, the transferability of the Restricted Stock will be prohibited or restricted in the manner and to the extent prescribed by the Committee at the Date of Grant (which restrictions may include, without limitation, rights of repurchase or first refusal in the Company or provisions subjecting the Restricted Stock to a continuing substantial risk of forfeiture in the hands of any transferee).
(e) Any grant of Restricted Stock may specify Management Objectives that, if achieved, will result in termination or early termination of the restrictions applicable to such Restricted Stock; provided, however, that notwithstanding subparagraph (c) above, restrictions relating to Restricted Stock that vest upon the achievement of Management Objectives may not terminate sooner than after one year.
(f) Notwithstanding anything to the contrary contained in this Plan (including minimum vesting requirements), any grant or sale of Restricted Stock may provide for the earlier termination of restrictions on such Restricted Stock, including in the event of the retirement, death or disability of a Participant or in the event of a Change in Control only where either (i) within a specified period the Participant’s service is involuntarily terminated for reasons other than for cause or the Participant terminates his or her employment or service for good reason or (ii) such Restricted Stock is not assumed or converted into replacement awards in a manner described in the Award Agreement.
(g) Any such grant or sale of Restricted Stock shall require that any or all dividends or other distributions, whether in cash or additional Shares, paid thereon during the period of such restrictions shall be automatically deferred and paid on a contingent basis based on the Participant’s earning of the Restricted Stock with respect to which such dividends are paid.
(h) Each grant or sale of Restricted Stock will be evidenced by an Award Agreement and will contain such terms and provisions, consistent with this Plan, as the Committee may approve. Unless otherwise directed by the Committee, (i) all certificates representing Restricted Stock will be held in custody by the Company until all restrictions thereon will have lapsed, together with a stock power or powers executed by the Participant in whose name such certificates are registered, endorsed in blank and covering such shares or (ii) all Restricted Stock will be held at the Company’s transfer agent in book entry form with appropriate restrictions relating to the transfer of such Restricted Stock.
7. Restricted Stock Units. The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the granting or sale of Restricted Stock Units to Participants. Each such grant or sale may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions:
(a) Each such grant or sale will constitute the agreement by the Company to deliver Shares or cash, or a combination thereof, to the Participant in the future in consideration of the performance of services, but subject to the fulfillment of such conditions (which may include the achievement of Management Objectives) during the Restriction Period as the Committee may specify.
(b) If a grant of Restricted Stock Units specifies that the Restriction Period will terminate only upon the achievement of Management Objectives or that the Restricted Stock Units will be earned based on the achievement of Management Objectives, then, notwithstanding anything to the contrary contained in subparagraph (d) below, the applicable Restriction Period may not be a period of less than one year.
(c) Each such grant or sale may be made without additional consideration or in consideration of a payment by such Participant that is less than the Market Value per Share at the Date of Grant.
(d) If the Restriction Period lapses only by the passage of time rather than the achievement of Management Objectives as provided in subparagraph (b) above, each such grant or sale will be subject to a Restriction Period of not less than one year.
(e) Notwithstanding anything to the contrary contained in this Plan (including minimum vesting requirements), any grant or sale of Restricted Stock Units may provide for the earlier lapse or other modification of the Restriction Period, including in the event of the retirement, death or disability of a Participant or in the event of a Change in Control only where either (i) within a specified period the Participant’s service is involuntarily terminated for reasons other than for cause or the Participant terminates his or her employment or service for good reason or (ii) such Restricted Stock Units are not assumed or converted into replacement awards in a manner described in the Award Agreement.
(f) During the Restriction Period, the Participant will have no right to transfer any rights under his or her award and will have no rights of ownership in the Shares deliverable upon payment of the Restricted Stock Units and will have no right to vote them or to receive dividends thereon. The Committee may, at or after the Date of Grant, provide for the payment of dividend equivalents or other distributions on Shares underlying the Restricted Stock Units to the holder thereof either in cash or in additional Shares, subject in all cases to deferral and payment on a contingent basis based on the Participant’s earning of the Restricted Stock Units with respect to which such dividend equivalents are paid.
(g) Each grant or sale of Restricted Stock Units will specify the time and manner of payment of the Restricted Stock Units that have been earned. Each grant or sale will specify that the amount payable with respect thereto will be paid by the Company in Shares or cash, or a combination thereof.
(h) Each grant or sale of Restricted Stock Units will be evidenced by an Award Agreement and will contain such terms and provisions, consistent with this Plan, as the Committee may approve.
8. Cash Incentive Awards, Performance Shares and Performance Units. The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the granting of Cash Incentive Awards, Performance Shares and Performance Units. Each such grant may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions:
(a) Each grant will specify the number or amount of Performance Shares or Performance Units, or amount payable with respect to Cash Incentive Awards, to which it pertains, which number or amount may be subject to adjustment to reflect changes in compensation or other factors.
(b) The Performance Period with respect to each Cash Incentive Award, Performance Share or Performance Unit will be such period of time (with respect to each Performance Share or Performance Unit not less than one year) as will be determined by the Committee at the time of grant, which may be subject to earlier lapse or other modification, including in the event of the retirement, death or disability of a Participant or in the event of a Change in Control only where either (i) within a specified period the Participant’s service is involuntarily terminated for reasons other than for cause or the Participant terminates his or her employment or service for good reason or (ii) such Cash Incentive Awards, Performance Shares or Performance Units are not assumed or converted into replacement awards in a manner described in the Award Agreement.
(c) Each grant of Cash Incentive Awards, Performance Shares or Performance Units will specify Management Objectives which, if achieved, will result in payment or early payment of the award, and each grant may specify in respect of such specified Management Objectives a minimum acceptable level or levels of achievement and may set forth a formula for determining the number of Performance Shares or Performance Units, or amount payable with respect to Cash Incentive Awards, that will be earned if performance is at or above the minimum or threshold level or levels, or is at or above the target level or levels, but falls short of maximum achievement of the specified Management Objectives.
(d) Each grant will specify the time and manner of payment of Cash Incentive Awards, Performance Shares or Performance Units that have been earned. Any grant may specify that the amount payable with respect thereto may be paid by the Company in cash, in Shares, in Restricted Stock or Restricted Stock Units or in any combination thereof.
(e) Any grant of Cash Incentive Awards, Performance Shares or Performance Units may specify that the amount payable or the number of Shares, shares of Restricted Stock or Restricted Stock Units with respect thereto may not exceed a maximum specified by the Committee at the Date of Grant.
(f) No award under this Section 8 shall be entitled to dividends. The Committee may, at the Date of Grant of Performance Shares (but not any other award under this Section 8), provide for the payment of dividend equivalents to the holder thereof either in cash or in additional Shares, subject in all cases to deferral and payment on a contingent basis based on the Participant’s earning of the Performance Shares with respect to which such dividend equivalents are paid.
(g) Each grant of Cash Incentive Awards, Performance Shares or Performance Units will be evidenced by an Award Agreement and will contain such other terms and provisions, consistent with this Plan, as the Committee may approve.
9. Profits Interest Units. The Committee may, from time to time and upon such terms and condition as it may determine, authorize the granting of Profits Interest Units. Each such grant may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions:
(a) Each grant will specify the number of Profits Interest Units to which it pertains, subject to the limitations set forth in Section 3 of this Plan.
(b) Profits Interest Units may only be issued to a Participant for the performance of services to or for the benefit of the Operating Partnership (i) in the Participant’s capacity as a partner of the Operating Partnership, (ii) in anticipation of the Participant becoming a partner of the Operating Partnership (to the extent not already a partner), or (iii) as otherwise determined by the Committee, provided that the Profits Interest Units are intended to constitute “profits interests” within the meaning of the Code, including, to the extent applicable, Revenue Procedure 93-27, 1993-2 C.B. 343 and Revenue Procedure 2001-43, 2001-2 C.B. 191.
(c) Any grant of Profits Interest Units may specify Management Objectives that must be achieved as a condition to the vesting of such Profits Interest Units. Upon vesting, such Profits Interest Units shall become nonforfeitable, except for events that constitute cause.
(d) Each grant will specify the period or periods of continuous employment or service by the Participant with the Company or any Subsidiary that is necessary before the Profits Interest Units or installments thereof will vest; provided no grant of Profits Interest Units may become exercisable sooner than after one year.
(e) Notwithstanding anything to the contrary contained in this Plan (including minimum vesting requirements), any grant of Profits Interest Units may provide for the earlier vesting of such Profits Interest Units, including in the event of the retirement, death or disability of a Participant or in the event of a Change in Control only where either (i) within a specified period the Participant’s service is involuntarily terminated for reasons other than for cause or the Participant terminates his or her employment or service for good reason or (ii) such Profits Interest Units are not assumed or converted into replacement awards in a manner described in the Award Agreement.
(f) Each grant of Profits Interest Units will be evidenced by an Award Agreement. Each Award Agreement will be subject to this Plan and will contain such terms and provisions, consistent with this Plan, as the Committee may approve.
(g) Profits Interest Units granted under this Plan may not provide for any dividends or dividend equivalents thereon; provided, that Profits Interest Units may be eligible to receive distributions from the Operating Partnership in accordance with the Partnership Agreement.
10. Other Awards.
(a) Subject to applicable law and the applicable limits set forth in Section 3 of this Plan, the Committee may grant to any Participant Shares or such other awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Shares or factors that may influence the value of such Shares, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into Shares, purchase rights for Shares, awards with value and payment contingent upon performance of the Company or specified Subsidiaries, Affiliates or other business units thereof or any other factors designated by the Committee, awards valued by reference to the book value of the Shares or the value of securities of, or the performance of specified Subsidiaries or Affiliates or other business units of the Company, dividend equivalents and awards that are membership interests in a Subsidiary or Operating Partnership, and OP Interests. The Committee will determine the terms and conditions of such awards; provided, that, dividend equivalents relating to dividends paid on Shares may only be granted with respect to Restricted Stock Units and Performance Shares. Shares delivered pursuant to an award in the nature of a purchase right granted under this Section 10 will be purchased for such consideration, paid for at such time, by such methods, and in such forms, including, without limitation, Shares, other awards, notes or other property, as the Committee determines.
(b) Cash awards, as an element of or supplement to any other award granted under this Plan, may also be granted pursuant to this Section 10.
(c) The Committee may grant Shares as a bonus, or may grant other awards in lieu of obligations of the Company or a Subsidiary to pay cash or deliver other property under this Plan or under other plans or compensatory arrangements, subject to such terms as will be determined by the Committee in a manner that complies with Section 409A of the Code.
(d) If the earning or vesting of, or elimination of restrictions applicable to, an award granted under this Section 10 (including dividend equivalents) is based only on the passage of time rather than the achievement of Management Objectives, the period of time shall be no shorter than one year. If the earning or vesting of, or elimination of restrictions applicable to, awards granted under this Section 10 (including dividend equivalents) is based on the achievement of Management Objectives, the earning, vesting or restriction period may not terminate sooner than after one year.
(e) Notwithstanding anything to the contrary contained in this Plan (including minimum vesting requirements), any grant of an award under this Section 10 may provide for the earning or vesting of, or earlier elimination of restrictions applicable to, such award, including in the event of the retirement, death or disability of a Participant or in the event of a Change in Control only where either (i) within a specified period the Participant’s service is involuntarily terminated for reasons other than for cause or the Participant terminates his or her employment or service for good reason or (ii) such awards are not assumed or converted into replacement awards in a manner described in the Award Agreement.
(f) No award under this Section 10 shall be entitled to dividends paid on Shares. The Committee may provide for the payment of dividend equivalents to the holder of an award granted under this Section 10 either in cash or in additional Shares, subject in all cases to deferral and payment on a contingent basis based on the Participant’s earning of the award with respect to which such dividend equivalents are paid.
11. Administration of this Plan.
(a) This Plan will be administered by the Committee. The Committee may from time to time delegate all or any part of its authority under this Plan to a subcommittee thereof. To the extent of any such delegation, references in this Plan to the Committee will be deemed to be references to such subcommittee.
(b) The interpretation and construction by the Committee of any provision of this Plan or of any Award Agreement (or related documents) and any determination by the Committee pursuant to any provision of this Plan or of any such agreement, notification or document will be final and conclusive. No member of the Committee shall be liable for any such action or determination made in good faith. In addition, the Committee is authorized to take any action it determines in its sole discretion to be appropriate subject only to the express limitations contained in this Plan, and no authorization in any provision of this Plan is intended or may be deemed to constitute a limitation on the authority of the Committee.
(c) To the extent permitted by law, the Committee may delegate to one or more of its members or to one or more officers of the Company, or to one or more agents or advisors, such administrative duties or powers as it may deem advisable, and the Committee, the subcommittee, or any person to whom duties or powers have been delegated as aforesaid, may employ one or more persons to render advice with respect to any responsibility the Committee, the subcommittee or such person may have under the Plan. The Committee may, by resolution, authorize one or more officers of the Company to do one or both of the following on the same basis as the Committee: (i) designate employees to be recipients of awards under this Plan; and (ii) determine the size of any such awards; provided, however, that (A) the Committee will not delegate such responsibilities to any such officer for awards granted to an employee who is an officer, Director, or more than 10% Beneficial Owner (as defined in Section 13 below) of any class of the Company’s equity securities that is registered pursuant to Section 12 of the Exchange Act, as determined by the Committee in accordance with Section 16 of the Exchange Act; (B) the resolution providing for such authorization sets forth the total number of Shares such officer(s) may grant; and (C) the officer(s) will report periodically to the Committee regarding the nature and scope of the awards granted pursuant to the authority delegated.
12. Adjustments. The Committee shall make or provide for such adjustments in the numbers of Shares covered by outstanding Option Rights, Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units and Profits Interest Units granted hereunder and, if applicable, in the number of Shares covered by other awards granted pursuant to Section 10 hereof, in the Option Price and Base Price provided in outstanding Option Rights and Appreciation Rights, respectively, in the kind of shares covered thereby, in Cash Incentive Awards, and in other award terms, as the Committee, in its sole discretion, exercised in good faith, shall determine is equitably required to prevent dilution or enlargement of the rights of Participants or Optionees that otherwise would result from (a) any stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Company, (b) any merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization, redomestication, partial or complete liquidation or other distribution of assets, issuance of rights or warrants to purchase securities, or (c) any other corporate transaction or event having an effect similar to any of the foregoing. Moreover, in the event of any such transaction or event or in the event of a Change in Control, the Committee may provide in substitution for any or all outstanding awards under this Plan such alternative consideration (including cash), if any, as it, in good faith, may determine to be equitable in the circumstances and shall require in connection therewith the surrender of all awards so replaced in a manner that complies with Section 409A of the Code. In addition, for each Option Right or Appreciation Right with an Option Price or Base Price, respectively, greater than the consideration offered in connection with any such transaction or event or Change in Control, the Committee may in its discretion elect to cancel such Option Right or Appreciation Right without any payment to the person holding such Option Right or Appreciation Right. The Committee shall also make or provide for such adjustments in the numbers of shares specified in Section 3 of this Plan as the Committee in its sole discretion, exercised in good faith, shall determine is appropriate to reflect any transaction or event described in this Section 12; provided, however, that any such adjustment to the number specified in Section 3(c) will be made only if and to the extent that such adjustment would not cause any Option Right intended to qualify as an Incentive Stock Option to fail to so qualify.
13. Change in Control. For purposes of this Plan, except as may be otherwise prescribed by the Committee in an Award Agreement made under this Plan, a “Change in Control” will be deemed to have occurred upon the occurrence of any of the following events:
(i) individuals who, on the Effective Date, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of such Board, provided that any person becoming a Director after the Effective Date and whose election or nomination for election was approved by a vote of at least a majority of the Incumbent Directors then on the Board shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a Director of the Company as a result of an actual or threatened election contest with respect to the election or removal of Directors (“Election Contest”) or other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board (“Proxy Contest”), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest, shall be deemed an Incumbent Director;
(ii) any Person becomes a Beneficial Owner (as such term is defined in the Rule 13d-3 of the General Rules and Regulations under the Exchange Act), directly or indirectly, of either (A) 35%or more of the then-outstanding shares of common stock of the Company (“Company Common Stock”) or (B) securities of the Company representing 35% or more of the combined Voting Power of the Company’s then outstanding securities eligible to vote for the election of directors (the “Company Voting Securities”); provided, however, that for purposes of this subsection (ii), the following acquisitions of Company Common Stock or Company Voting Securities shall not constitute a Change in Control: (w) an acquisition directly from the Company, (x) an acquisition by the Company or a Subsidiary, (y) an acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, or (z) an acquisition pursuant to a Non-Qualifying Transaction (as defined in subsection (iii) below);
(iii) the consummation of a reorganization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or a Subsidiary (a “Reorganization”), or the sale or other disposition of all or substantially all of the Company’s assets (a “Sale”) or the acquisition of assets or stock of another corporation or other entity (an “Acquisition”), unless immediately following such Reorganization, Sale or Acquisition: (A) all or substantially all of the individuals and entities who were the Beneficial Owners, respectively, of the outstanding Company Common Stock and outstanding Company Voting Securities immediately prior to such Reorganization, Sale or Acquisition beneficially own, directly or indirectly, more than 35% of, respectively, the then outstanding shares of common stock and the combined Voting Power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Reorganization, Sale or Acquisition (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company’s assets or stock either directly or through one or more subsidiaries) (the “Surviving Entity”) in substantially the same proportions as their ownership, immediately prior to such Reorganization, Sale or Acquisition, of the outstanding Company Common Stock and the outstanding Company Voting Securities, as the case may be, and (B) no Person (other than (x) the Company or any Subsidiary, (y) the Surviving Entity or its ultimate parent entity, or (z) any employee benefit plan (or related trust) sponsored or maintained by any of the foregoing) is the Beneficial Owner, directly or indirectly, of 35%or more of the total common stock or 35% or more of the total Voting Power of the outstanding voting securities eligible to elect directors of the Surviving Entity, and (C) at least a majority of the members of the board of directors of the Surviving Entity were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Reorganization, Sale or Acquisition (any Reorganization, Sale or Acquisition which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a “Non-Qualifying Transaction”);
(iv) approval by the Shareholders of the Company of a complete liquidation or dissolution of the Company; or
(v) termination of the Manager.
14. Forfeiture and Recoupment Provisions. Any Award Agreement may provide for the cancellation or forfeiture, or the forfeiture and repayment to the Company of any proceeds, gains or other economic benefit Participant actually or constructively receives related to a Share-based or cash-based award under the Plan (including any related dividends, dividend equivalents or amounts received on the resale of Shares related to the award), or other provisions intended to have a similar effect, upon such terms and conditions as may be determined by the Committee from time to time. In addition, notwithstanding anything in this Plan to the contrary, the Plan and all Share-based and cash-based awards (including any dividends, dividend equivalents, proceeds, gains or other economic benefit Participant actually or constructively receives related to the award or amounts received on the resale of Shares related to the award) issued hereunder shall be subject to any compensation recovery and/or recoupment policy adopted by the Company to comply with applicable law, including, without limitation, Section 10D of the Exchange Act, any applicable rules or regulations promulgated by the Securities and Exchange Commission or any national securities exchange or national securities association on which the Shares may be traded, or to comport with good corporate governance practices, as such policies may be amended from time to time.
15. Non U.S. Participants. In order to facilitate the making of any grant or combination of grants under this Plan, the Committee may provide for such special terms for awards to Participants who are foreign nationals or who are employed by the Company or any Subsidiary outside of the United States of America or who provide services to the Company or any Subsidiary under an agreement with a foreign nation or agency, as the Committee may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Moreover, the Committee may approve such supplements to or amendments, restatements or alternative versions of this Plan (including, without limitation, sub-plans) as it may consider necessary or appropriate for such purposes, without thereby affecting the terms of this Plan as in effect for any other purpose, and the secretary or other appropriate officer of the Company may certify any such document as having been approved and adopted in the same manner as this Plan. No such special terms, supplements, amendments or restatements, however, will include any provisions that are inconsistent with the terms of this Plan as then in effect unless this Plan could have been amended to eliminate such inconsistency without further approval by the Shareholders.
16. Transferability.
(a) Except as otherwise determined by the Committee, no Option Right, Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit, Profits Interest Unit, Cash Incentive Award, award contemplated by Section 10 of this Plan or dividend equivalents paid with respect to awards made under this Plan will be transferable by the Participant except (i) if it is made by the Participant for no consideration to Immediate Family Members or to a bona fide trust, partnership or other entity controlled by and for the benefit of one or more Immediate Family Members (“Immediate Family Members” mean the Participant’s spouse, children, stepchildren, parents, stepparents, siblings (including half brothers and sisters), in-laws, and other individuals who have a relationship to the Participant arising because of legal adoption; however, no transfer may be made to the extent that transferability would cause Form S-8 or any successor form thereto not to be able to register Shares related to an award) or (ii) by will or the laws of descent and distribution. In no event will any such award granted under the Plan be transferred for value. Except as otherwise determined by the Committee, Option Rights and Appreciation Rights will be exercisable during the Participant’s lifetime only by him or her or, in the event of the Participant’s legal incapacity to do so, by his or her guardian or legal representative acting on behalf of the Participant in a fiduciary capacity under state law or court supervision.
(b) The Committee may specify at the Date of Grant that part or all of the Shares that are (i) to be issued or transferred by the Company upon the exercise of Option Rights or Appreciation Rights, upon the termination of the Restriction Period applicable to Restricted Stock Units or upon payment under any grant of Performance Shares, Performance Units or Profits Interest Units or (ii) no longer subject to the substantial risk of forfeiture and restrictions on transfer referred to in Section 6 of this Plan, will be subject to further restrictions on transfer.
17. Withholding Taxes. To the extent that the Company is required to withhold federal, state, local or foreign taxes in connection with any payment made or benefit realized by a Participant or other person under this Plan, and the amounts available to the Company for such withholding are insufficient, it will be a condition to the receipt of such payment or the realization of such benefit that the Participant or such other person make arrangements satisfactory to the Company for payment of the balance of such taxes required to be withheld, which arrangements (in the discretion of the Committee) may include relinquishment of a portion of such benefit. If a Participant’s benefit is to be received in the form of Shares, and such Participant fails to make arrangements for the payment of tax, then, unless otherwise determined by the Committee, the Company will withhold Shares having a value equal to the amount required to be withheld. Notwithstanding the foregoing, when a Participant is required to pay the Company an amount required to be withheld under applicable income and employment tax laws, the Participant may elect, unless otherwise determined by the Committee, to satisfy the obligation, in whole or in part, by having withheld, from the Shares required to be delivered to the Participant, Shares having a value equal to the amount required to be withheld or by delivering to the Company other Shares held by such Participant. The Shares used for tax withholding will be valued at an amount equal to the market value of such Shares on the date the benefit is to be included in Participant’s income. In no event will the market value of the Shares to be withheld and delivered pursuant to this Section 17 to satisfy applicable withholding taxes in connection with the benefit exceed the minimum amount of taxes required to be withheld, unless (i) an additional amount can be withheld and not result in adverse accounting consequences and (ii) is permitted by the Committee. Participants will also make such arrangements as the Company may require for the payment of any withholding tax obligation that may arise in connection with the disposition of Shares acquired upon the exercise of Option Rights.
18. Compliance with Section 409A of the Code.
(a) To the extent applicable, it is intended that this Plan and any grants made hereunder be exempt from the provisions of Section 409A of the Code (or, to the extent Section 409A of the Code applies, compliant with such section), so that the income inclusion provisions of Section 409A(a)(1) of the Code do not apply to the Participants. This Plan and any grants made hereunder will be administered in a manner consistent with this intent. Any reference in this Plan to Section 409A of the Code will also include any regulations or any other formal guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service.
(b) Neither a Participant nor any of a Participant’s creditors or beneficiaries will have the right to subject any deferred compensation (within the meaning of Section 409A of the Code) payable under this Plan and grants hereunder to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment. Except as permitted under Section 409A of the Code, any deferred compensation (within the meaning of Section 409A of the Code) payable to a Participant or for a Participant’s benefit under this Plan and grants hereunder may not be reduced by, or offset against, any amount owing by a Participant to the Company or any of its Subsidiaries.
(c) If, at the time of a Participant’s separation from service (within the meaning of Section 409A of the Code), (i) the Participant will be a specified employee (within the meaning of Section 409A of the Code and using the identification methodology selected by the Company from time to time) and (ii) the Company makes a good faith determination that an amount payable hereunder constitutes deferred compensation (within the meaning of Section 409A of the Code) the payment of which is required to be delayed pursuant to the six-month delay rule set forth in Section 409A of the Code in order to avoid taxes or penalties under Section 409A of the Code, then the Company will not pay such amount on the otherwise scheduled payment date but will instead pay it, without interest, on the fifth business day of the seventh month after such separation from service.
(d) Solely with respect to any award that constitutes nonqualified deferred compensation subject to Section 409A of the Code and that is payable on account of a Change in Control (including any installments or stream of payments that are accelerated on account of a Change in Control), a Change in Control shall occur only if such event also constitutes a “change in the ownership,” “change in effective control,” and/or a “change in the ownership of a substantial portion of assets” of the Company as those terms are defined under Treasury Regulation §1.409A-3(i)(5), but only to the extent necessary to establish a time and form of payment that complies with Section 409A of the Code, without altering the definition of Change in Control for any other purposes in respect of such award.
(e) Notwithstanding any provision of this Plan and grants hereunder to the contrary, in light of the uncertainty with respect to the proper application of Section 409A of the Code, the Company reserves the right to make amendments to this Plan and grants hereunder as the Company deems necessary or desirable to avoid the imposition of taxes or penalties under Section 409A of the Code. In any case, a Participant will be solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on a Participant or for a Participant’s account in connection with this Plan and grants hereunder (including any taxes and penalties under Section 409A of the Code), and neither the Company nor any of its Affiliates will have any obligation to indemnify or otherwise hold a Participant harmless from any or all of such taxes or penalties.
19. Amendments.
(a) The Board may at any time and from time to time amend this Plan in whole or in part; provided, however, that if an amendment to this Plan (i) would materially increase the benefits accruing to Participants under this Plan, (ii) would materially increase the number of securities which may be issued under this Plan, (iii) would materially modify the requirements for participation in this Plan, or (iv) must otherwise be approved by the Shareholders in order to comply with applicable law or the rules of the New York Stock Exchange or, if the Shares are not traded on the New York Stock Exchange, the principal national securities exchange upon which the Shares are traded or quoted, then, such amendment will be subject to Shareholder approval and will not be effective unless and until such approval has been obtained.
(b) Except in connection with a corporate transaction or event described in Section 12 of this Plan or in connection with a Change in Control, the terms of outstanding awards may not be amended to reduce the Option Price of outstanding Option Rights or the Base Price of outstanding Appreciation Rights, or cancel outstanding “underwater” Option Rights or Appreciation Rights in exchange for cash, other awards or Option Rights or Appreciation Rights with an Option Price or Base Price, as applicable, that is less than the Option Price of the original Option Rights or Base Price of the original Appreciation Rights, as applicable, without Shareholder approval. This Section 19(b) is intended to prohibit the repricing of “underwater” Option Rights and Appreciation Rights and will not be construed to prohibit the adjustments provided for in Section 12 of this Plan. Notwithstanding any provision of this Plan to the contrary, this Section 19(b) may not be amended without approval by the Shareholders.
(c) If permitted by Section 409A of the Code, but subject to the paragraph that follows, notwithstanding the Plan’s minimum vesting requirements, and including in the case of termination of employment by reason of death, disability or retirement, or in the case of unforeseeable emergency or other special circumstances or in the event of a Change in Control, to the extent a Participant holds an Option Right or Appreciation Right not immediately exercisable in full, or any Restricted Stock as to which the substantial risk of forfeiture or the prohibition or restriction on transfer has not lapsed, or any Restricted Stock Units as to which the Restriction Period has not been completed, or any Cash Incentive Awards, Performance Shares, Performance Units or Profits Interest Units which have not been fully earned, or any other awards made pursuant to Section 10 subject to any vesting schedule or transfer restriction, or who holds Shares subject to any transfer restriction imposed pursuant to Section 16(b) of this Plan, the Committee may, in its sole discretion, accelerate the time at which such Option Right, Appreciation Right or other award may be exercised or the time at which such substantial risk of forfeiture or prohibition or restriction on transfer will lapse or the time when such Restriction Period will end or the time at which such Cash Incentive Awards, Performance Shares, Performance Units or Profits Interest Units will be deemed to have been fully earned or the time when such transfer restriction will terminate or may waive any other limitation or requirement under any such award.
(d) Subject to Section 19(b) hereof, the Committee may amend the terms of any award theretofore granted under this Plan prospectively or retroactively. Subject to Section 12 above, no such amendment will materially and adversely impair the rights of any Participant without his or her consent. The Board may, in its discretion, terminate this Plan at any time. Termination of this Plan will not affect the rights of Participants or their successors under any awards outstanding hereunder and not exercised in full on the date of termination.
20. Governing Law. This Plan and all grants and awards and actions taken hereunder will be governed by and construed in accordance with the internal substantive laws of the State of Maryland.
21. Effective Date/Termination. The Plan is effective as of the Original Adoption Date and the Amendment and Restatement will be effective as of the Effective Date. In the event that the Company’s shareholders do not approve the Amendment and Restatement, awards granted under the Original Plan will continue to be subject to the terms and conditions of the Original Plan as in effect immediately prior to the date the Amendment and Restatement is approved by the Board. In addition, in the event that the Company’s shareholders do not approve the Amendment and Restatement, any Shares available for grant under the Original Plan as of the Effective Date will continue to be available for grant pursuant to the terms of the Original Plan. No grant will be made under this Plan after the tenth anniversary of the Effective Date, but all grants made on or prior to such date will continue in effect thereafter subject to the terms thereof and of this Plan.
22. Miscellaneous Provisions.
(a) The Company will not be required to issue any fractional Shares pursuant to this Plan. The Committee may provide for the elimination of fractions or for the settlement of fractions in cash.
(b) This Plan will not confer upon any Participant any right with respect to continuance of employment or other service with the Company or any Subsidiary, nor will it interfere in any way with any right the Company or any Subsidiary would otherwise have to terminate such Participant’s employment or other service at any time.
(c) Except with respect to Section 22(e), to the extent that any provision of this Plan would prevent any Option Right that was intended to qualify as an Incentive Stock Option from qualifying as such, that provision will be null and void with respect to such Option Right. Such provision, however, will remain in effect for other Option Rights and there will be no further effect on any provision of this Plan.
(d) No award under this Plan may be exercised by the holder thereof if such exercise, and the receipt of cash or stock thereunder, would be, in the opinion of counsel selected by the Company, contrary to law or the regulations of any duly constituted authority having jurisdiction over this Plan.
(e) Absence on leave approved by a duly constituted officer of the Company or any of its Subsidiaries will not be considered interruption or termination of service of any employee for any purposes of this Plan or awards granted hereunder.
(f) No Participant will have any rights as a shareholder with respect to any shares subject to awards granted to him or her under this Plan prior to the date as of which he or she is actually recorded as the holder of such shares upon the stock records of the Company.
(g) The Committee may condition the grant of any award or combination of awards authorized under this Plan on the surrender or deferral by the Participant of his or her right to receive a cash bonus or other compensation otherwise payable by the Company or a Subsidiary to the Participant.
(h) Except with respect to Option Rights and Appreciation Rights, the Committee may permit Participants to elect to defer the issuance of Shares under the Plan pursuant to such rules, procedures or programs as it may establish for purposes of this Plan and which are intended to comply with the requirements of Section 409A of the Code. The Committee also may provide that deferred issuances and settlements include the payment or crediting of dividend equivalents or interest on the deferral amounts.
(i) If any provision of this Plan is or becomes invalid, illegal or unenforceable in any jurisdiction, or would disqualify this Plan or any award under any law deemed applicable by the Committee, such provision will be construed or deemed amended or limited in scope to conform to applicable laws or, in the discretion of the Committee, it will be stricken and the remainder of this Plan will remain in full force and effect.
23. Stock-Based Awards in Substitution for Option Rights or Awards Granted by Other Company. Notwithstanding anything in this Plan to the contrary:
(a) Awards may be granted under this Plan in substitution for or in conversion of, or in connection with an assumption of, stock options, stock appreciation rights, restricted stock, restricted stock units or other stock or stock-based awards held by awardees of an entity engaging in a corporate acquisition or merger transaction with the Company or any Subsidiary. Any conversion, substitution or assumption will be effective as of the close of the merger or acquisition, and, to the extent applicable, will be conducted in a manner that complies with Section 409A of the Code. The awards so granted may reflect the original terms of the awards being assumed or substituted or converted for and need not comply with other specific terms of this Plan, and may account for Shares substituted for the securities covered by the original awards and the number of shares subject to the original awards, as well as any exercise or purchase prices applicable to the original awards, adjusted to account for differences in stock prices in connection with the transaction.
(b) In the event that a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary merges has shares available under a pre-existing plan previously approved by Shareholders and not adopted in contemplation of such acquisition or merger, the shares available for grant pursuant to the terms of such plan (as adjusted, to the extent appropriate, to reflect such acquisition or merger) may be used for awards made after such acquisition or merger under the Plan; provided, however, that awards using such available shares may not be made after the date awards or grants could have been made under the terms of the pre-existing plan absent the acquisition or merger, and may only be made to individuals who were not employees or directors of the Company or any Subsidiary prior to such acquisition or merger. Any operation of this Plan in connection with such available shares shall comply with the rules of the applicable national securities exchange on which the Shares are listed.
(c) Any Shares that are issued or transferred by, or that are subject to any awards that are granted by, or become obligations of, the Company under Sections 23(a) or 23(b) above will not reduce the Shares available for issuance or transfer under the Plan or otherwise count against the limits contained in Section 3 of the Plan. In addition, no Shares that are issued or transferred by, or that are subject to any awards that are granted by, or become obligations of, the Company under Sections 23(a) or 23(b) above will be added to the aggregate limit contained in Section 3(a)(i) of the Plan.
24. REIT Status. This Plan shall be interpreted and construed in a manner consistent with the Company’s status as a real estate investment trust (a “REIT”). No award shall be granted or awarded, and with respect to any award granted under this Plan, such award shall not vest, be exercisable or be settled: (i) to the extent that the grant, vesting, exercise or settlement could cause the Participant or any other person to be in violation of the share ownership limit or any other limitation on ownership or transfer prescribed by the Company’s charter, or (ii) if, in the discretion of the Committee, the grant, vesting, exercise or settlement of the award could impair the Company’s status as a REIT.
[Remainder Intentionally Left Blank]
The foregoing is hereby acknowledged as being the 2024 Long Term Incentive Plan as adopted by the Board on November 6, 2023, and by the Shareholders on ___________, 2024.
NEXPOINT REAL ESTATE FINANCE, INC. | ||
By: | ||
Name: Brian Mitts | ||
Title: Chief Financial Officer, Executive VP | ||
Finance, Treasurer and Secretary |