February 29, 2024
registration statement. ☐ ☒ ☐ ☐ ☐ ☐ ☐
UNDERUNDERexactExact name of registrant as specified in its charter) Maryland 27-1200777
incorporation or organization)
Identification Number)
West Palm Beach, Florida 33401
(561) 802-4477
Chief Executive Officer
222 Lakeview Avenue, Suite 200
West Palm Beach, Florida 33401
(561) 802-4477
Hunton Andrews Kurth LLP
Riverfront Plaza, East Tower
951 E. Byrd Street
Richmond, Virginia 23219
(804) 788-8200public:public: From time to time after the effective date of this Registration Statement.¨x¨¨Formform is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the Securities and Exchange Commission pursuant to Rule 462(e) under the Securities Act, check the following box. ¨Formform is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. ¨ Large accelerated filer ¨ ☐ Accelerated filer x ☒ Non-accelerated filer ¨ ☐ Smaller reporting company ¨ ☐ Emerging growth company ¨ ☐ ¨
FEBRUARY 29, 2024
Dividend Reinvestment
We will provide the specific terms of any securities we may offer in supplements to this prospectus. You should read this prospectus and any applicable prospectus supplement carefully before you invest in these securities. This prospectus relatesmay not be used to upoffer and sell any securities unless accompanied by a prospectus supplement describing the amount of and terms of the offering of those securities.
The Plan provides our shareholders with a simple and convenient method of reinvesting cash dividends and distributions and purchasing common shares. By participating in the Plan, you may purchase common shares by reinvesting some or all of the cash dividends and distributions that you receive on your common shares, subject to a minimum reinvestment percentage of 10%. You may also make optional cash purchases of common shares of between $50 and $10,000 per month and, with our prior approval, in excess of $10,000 per month. Highlights of the Plan include:
Our common shares are listed on the New York Stock Exchange, or the NYSE, under the trading symbol “CLDT.“CLDT,” and our 6.625 Series A Cumulative Redeemable Preferred Shares, $0.01 par value per share, or our Series A Preferred Shares, are listed on the NYSE under the symbol “CLDT-PA.” On December 22, 2023,February 26, 2024, the closing price of our common shares on the NYSE was $10.79$10.26 per share and the closing price of our Series A Preferred Shares on the NYSE was $21.85 per share.
We have not yet determined whether any of the other securities that may be offered by this prospectus will be listed on any exchange, inter-dealer quotation system or over-the-counter system. If we decide to seek a listing for any of those securities, that will be disclosed in a prospectus supplement.
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Certain Documents By Reference.”
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You will not know the price of our common shares at the time you make an investment decision.
Although we describe generally in this prospectus how the price of any common shares you purchasewill be determined, you will not know the price of the common shares you are purchasing under the Plan at the time you authorize the investment or elect to have your dividends reinvested.
The price of our common shares may fluctuate between the time you make an investment decision and the time our common shares are purchased or sold by you.
The price of our common shares may fluctuate between the time you decide to purchase commonshares under the Plan and the time of actual purchase. In addition, during this time period, you may becomeaware of additional information that might affect your investment decision.
If you instruct the Plan Administrator (as defined below) to sell common shares under the Plan, you may not be able todirect the time or price at which your shares are sold. The price of our common shares may decline betweenthe time you decide to sell common shares and the time of actual sale.
We cannot determine precisely the number of common shares that ultimately may be sold pursuant to the Plan, the extent to which shares will be purchased directly from us rather than
DIVIDEND REINVESTMENT AND DIRECT SHARE PURCHASE PLAN
Details of the Plan are set forth below in question and answer format. Further questions and correspondence should be directed to either Chatham Lodging Trust or the plan administrator, Equiniti Trust Company, LLC (the “Plan Administrator” or “EQ”) through one of the methods identified below:
To Chatham Lodging Trust:
Chatham Lodging Trust222 Lakeview Avenue, Suite 200West Palm Beach, Florida 33401(561) 802-4477www.chathamlodgingtrust.com
To the Plan Administrator:
Internet:
shareowneronline.com
Available 24 hours a day, 7 days a week for access to your account information and answers for many common questions and general inquiries.
Email:
Login to your account at shareowneronline.com and select Contact Us.
Telephone
1-800-468-9716 Toll-Free
(651) 450-4064 outside the United States
Customer Care Specialists are available Monday through Friday, from 8:00 a.m. to 8:00 p.m. Eastern Time.
You may also access your account information 24 hours a day, 7 days a week using our automated voice response system.
Written correspondence:
EQ Shareowner ServicesP.O. Box 64856St. Paul, MN 55164-0856
Certified and overnight delivery
EQ Shareowner Services1110 Centre Pointe Curve, Suite 101Mendota Heights, MN 55120-4100
The Company may replace the Plan Administrator at any time upon written notice to the Plan Administrator and may designate another qualified administrator as successor Plan Administrator for all or a part of the Plan Administrator’s functions under the Plan. All participants would be notified of any such change. If the Company changes the Plan Administrator, references in this prospectus to Plan Administrator shall be deemed to be references to the successor Plan Administrator, unless the context requires otherwise.
Purpose
The purpose of the dividend reinvestment component of the Plan is to provide our shareholders with a simple and convenient method of investing cash dividends and distributions in additional common shares. The optional cash purchase component of the Plan permits current shareholders and prospective investors to purchase common shares on a weekly basis in amounts, subject to certain exceptions, ranging from $50 to $10,000, subject to an aggregate monthly limit of $10,000 or, with our prior approval, in excess of $10,000 (see Question 14). Participants in the Plan may have cash dividends and distributions automatically reinvested without charges for recordkeeping, and may take advantage of the custodial and reporting services provided by the Plan Administrator, at no additional cost. The Plan is intended to benefit long-term investors who want to increase their investment in our common shares over time.
We will pay all administrative costs associated with the reinvestment of dividends under the Plan. There are no transaction or processing fees, expenses or service charges under the Plan in connection with purchases under the dividend reinvestment portion of the Plan; however, if you enroll in the plan through a broker, bank or other nominee, they may charge you a fee for participating on your behalf. If the Plan purchases shares with reinvested dividends in market transactions instead of directly from us, we will pay any brokerage fees or commissions on such purchases.
With respect to the optional cash purchase portion of the Plan, we generally will pay all administrative costs. There are generally no transaction or processing fees, commissions, expenses or service charges under the Plan in connection with purchases under the optional cash purchase portion of the Plan; however, a participant will be responsible for paying certain fees associated with the sale of any shares held in his or her Plan account and for certain other administrative matters. See “Summary of Plan Options and Fees” in this prospectus for a summary of the fees that apply to your participation in the Plan and the sale of your shares.
Administration
The Plan Administrator administers the Plan for participants, keeps records, sends statement of accounts to participants, and performs other dutiesAny further details relating to the Plan, including the safekeepinguse of the shares purchased for each participant. The Plan Administrator also acts as the dividend disbursing agent, transfer agent and registrar for our common shares.
Participation and Enrollment
You may participate in the Plan if: (a) you are a “registered holder”; that is, your shares are registered in your name on our books, (b) you are a “beneficial owner”; that is, your shares are registered in a name other than your name (for example, in the name of a broker, bank or other nominee) (see Question 8), or (c) you are a new investor.
If you live outside the United States, you should first determine if there are any laws or governmental regulations that would prohibit your participation in the Plan, or affect the terms of the Plan. We have the right to terminate participation of any shareholder if we deem it advisable under any foreign laws or regulations. Tax consequences of Plan participation may vary under foreign laws or regulations, and you should determine the tax treatment of Plan features before you decide to invest through the Plan.
The Plan is intended for the benefit of our investors and not for persons or entities who engage in transactions that cause or are designed to cause aberrations in the price or trading volume of our common shares. Notwithstanding anything in the Plan to the contrary, we reserve the right to exclude from participation in the Plan at any time any persons or entities, as determined in our sole discretion.
The Plan is an “opt-in” plan. If you are a registered holder of our common shares, you may join the Plan by signing an Account Authorization Form and returning it to the Plan Administrator or by going online to the Plan Administrator’s website, shareowneronline.com. If you are enrolling for dividend reinvestment, the Account Authorization Form must be received by the Plan Administrator prior to the dividend record date in order to take effect as of the related dividend payment. A dividend record date is, with respect to any dividend or other distribution authorized by our Board of Trustees and declared by us, the date set by our Board of Trustees for determining shareholders of record entitled to receive the dividend or other distribution.
If you are a beneficial holder of our common shares, you should follow the procedure described in the answer to Question 8.
You may join the Plan in any of the following ways:
If you are an existing, registered shareowner:
* If you need your Authentication ID to continue, select Authentication ID and Please send my Authentication ID, then click Send ID. For security, this number is required when logging in the first time.” For security, this number is required for first time sign on.
If you are a new investor:
If you are enrolling by making an optional cash purchase of less than $10,000, the Account Authorization Form and investment funds must be received by the Plan Administrator at least one business day before the date such funds are to be invested for a particular week (see Question 12). Account Authorization Forms may be obtained at any time by telephone, online at shareowneronline.com or written request to the Plan Administrator.
If you are a beneficial owner, that is your shares are held on the books of the Plan Administrator in the name of a broker, bank or other nominee (a “Nominee”), your distributions will be reinvested automatically by the Nominee in additional shares under the Plan only if your Nominee provides such a service and you elect to participate in the Plan. Many Nominees do not provide such a service and routinely request dividends and other distributions to be paid in cash on all shares registered in their names. Therefore, if your shares are held for your account by a Nominee and you would like to participate in the Plan, then, in addition to enrolling in the Plan as provided in Question 7, you must either make appropriate arrangements for your Nominee to participate on your behalf, or you must become a shareholder of record by having a part or all of your shares transferred to your own name. If your shares are held in the name of a Nominee, you should contact the Nominee for details.
Reinvestment of Dividends under the Plan
As a participant, when our Board of Trustees authorizes, and the Company declares, a cash dividend or distribution, on the payment date for such cash dividend or distribution you will have credited to your Plan account the number of whole and fractional shares (computed to three decimal places) that could be obtained, at the price determined in accordance with the answer to Question 13, with the cash, net of any applicable withholding taxes, that would have been paid to you if you were not a participant enrolled in the dividend reinvestment portion of the Plan. See Question 11 for more information regarding the dividend reinvestment options available to you under the Plan. Such shares will be acquired by the Plan Administrator for participants either (i) directlyproceeds from the Company through the issuanceoffering of common shares or (ii) through open market transactions. Open market purchases may be made on any securities exchange where the common shares are traded, in the over-the-counter market or in privately negotiated transactions with third persons, and may be on such terms as to price, delivery and otherwise as we may determine. We will determine, in our sole discretion, in accordance with applicable law, whether the Plan Administrator will acquire these shares from us or on the open market. Dividends will be invested beginning on the dividend or other distribution payment date, subject to certain exceptions as required by applicable law. If the common shares are to be newly issued shares, such shares will be issued or delivered on the dividend or distribution payment date. If our common shares are to be purchased by the Plan Administrator in the open market, the Plan Administrator will make every effort to invest any dividends it receives promptly beginning on each dividend or distribution payment date, and in no event later than 30 days from such date, except where reinvestment of such funds at a later date is necessary or advisable under any applicable securities laws.
If you would rather receive a cash dividend, you should not enroll in the dividend reinvestment portion of the Plan. If you are enrolled in the dividend reinvestment portion of the Plan and no longer desire to reinvest dividends, you must notify the Plan Administrator by telephone or in writing that you would like to terminate your participation in the dividend reinvestment portion of the Plan. You may terminate your participation in the dividend reinvestment portion of the Plan, and the Plan generally, at any time. The procedure for terminating participation in the Plan is explained in the answer to Question 28.
A shareholder that desires to participate in the dividend reinvestment portion of the Plan has the option to reinvest all or a portion of the cash dividends payable on common shares held in the Plan in the manner described below. A participant can make or change its selection of either option set forth immediately below by completing and submitting to the Plan Administrator an Account Authorization Form and indicating your preference for full or partial dividend reinvestment, by accessing your Plan account at the Plan Administrator’s website, shareowneronline.com, or by calling the Plan Administrator and changing your election. Changes to your election must be received by the Plan Administrator prior to the dividend payment date.
Full Dividend Reinvestment. All cash dividends payable on shares held in the Plan, along with any shares held in physical certificate form or through book-entry Direct Registration Shares (“DRS”), will be used to purchase additional common shares. The participant will not receive cash dividends from us on shares held in the Plan or held in physical certificate form or through book-entry DRS; instead, all dividends payable on these shares will be reinvested pursuant to the Plan. Whole and fractional shares will be allocated to the Plan account. (RD)
Partial Dividend Reinvestment by Percentage. A participant may elect to reinvest a portion of the cash dividends payable on shares held in the Plan or held in physical certificate form or through book-entry DRS and to receive the remainder in cash, subject to a minimum reinvestment percentage of 10%. The reinvestment percentage elected by the participant will be applied to the total number of common shares held in the Plan, along with any shares held in physical certificate form or through book-entry DRS. (RX)
Purchase of Shares under the Plan
Participants may make optional cash purchases on a weekly basis of $50 to $10,000, subject to an aggregate monthly limit of $10,000, in aggregate per month or, with our prior approval, in excess of $10,000 in any month. Question 19 describes the process for making optional cash purchases in excess of $10,000 in any month.
Participants may make payment for an optional cash purchase of $50 to $10,000 in one of three ways:
Participants will not earn interest on funds held by the Plan Administrator. During the period that an optional cash investment is pending, the collected funds in the possession of the Plan Administrator may be invested in certain Permitted Investments. For purposes of this Plan, “Permitted Investments” shall mean the Plan Administrator may hold the funds uninvested or invested in select Wells Fargo deposit products. The risk of any loss from such Permitted Investments shall be the responsibility of the Plan Administrator. Investment income from such Permitted Investments shall be retained by the Plan Administrator.
Purchase Price of Shares for Optional Cash Purchase from $50 to $10,000. The price at which our authorized and unissued common shares will be purchased from us will be the average of the high and low price per share paid on the last day on which our common shares were traded preceding the investment date as reported on the consolidated tape for the NYSE listed securities administered by the Consolidated Tape Association. The purchase price of shares purchased in the open market will be the weighted average price per share of all shares purchased for a particular investment period.
Purchase Price of Shares for Optional Cash Purchases in Excess of $10,000. Shares purchased pursuant to an approved Request for Waiver will be purchased directly from us as described herein. If we grant the request to purchase shares pursuant to a Request for Waiver, there will be a “Pricing Period,” which will generally consist of one to 12 consecutive separate days as determined by us in our sole discretion during which our common shares are traded on the NYSE following our grant of the Request for Waiver; however, we do not expect that any part of a Pricing Period will occur during the period that commences on the date we go “ex-dividend” and ends on the dividend record date for our common shares. We expect that if we grant your request to purchase shares pursuant to a Request for Waiver, the dates of the Pricing Periodprospectus will be set forth in the approved Request for Waiver. Each of these separate days will be a “Purchase Date,” and an equal proportion of your optional cash purchase will be invested on each trading day during such Pricing Period, subject to the qualifications listed below. The purchase price for shares acquired on a particular Purchase Date will be equal to 100% (subject to change as provided below) of the composite volume weighted average price, rounded to four decimal places, as traded on the composite exchanges during regular NYSE hours on the Purchase Date. The Plan Administrator will apply all optional cash purchases made pursuant to a Request for Waiver for which good funds are received on or before the first business day before the Pricing Period to the purchase of common shares on each Purchase Date of the applicable Pricing Period. The Purchase Price may be subject to a Threshold Price and may be reduced by the “Waiver Discount,” each as more fully described below.
Threshold Price. We may establish for a Pricing Period a minimum price, or the “Threshold Price,” applicable to optional cash purchases made pursuant to a Request for Waiver. At least three business days prior to the first day of the applicable Pricing Period, we will determine whether to establish a Threshold Price, and if the Threshold Price is established, its amount, and will so notify the Plan Administrator. prospectus supplement.
Pricing Period Extension Feature. We may elect to activate for any particular Pricing Period a pricing period extension feature which will provide that the initial Pricing Period will be extended by the number of days that the Threshold Price is not satisfied, or on which no common shares are quoted on the composite exchanges, subject to a maximum of five trading days. If we elect to activate the pricing period extension feature and the Threshold Price is satisfied for any additional day that has been added to the initial Pricing Period, that day will be included as one of the trading days for the Pricing Period in lieu of the day on which the Threshold Price was not met or trades of our common shares were not reported. For example, if the determined Pricing Period is 10 days, and the Threshold Price is not satisfied for three out of those 10 days in the initial Pricing Period, and we had previously announced at the time of the Request for Waiver acceptance that the pricing period extension feature was activated, then the Pricing Period will automatically be extended, and if the Threshold Price is satisfied on the next three trading days (or a subset thereof), then those three days (or a subset thereof) will become Purchase Days in lieu of the three days on which the Threshold Price was not met. As a result, because there were 10 trading days during the initial and extended Pricing Period on which the Threshold Price was satisfied, all of the optional cash purchase will be invested.
Waiver Discount. Each month, at least three business days prior to the first day of the applicable Pricing Period, and at the same time the Threshold Price is determined, if any, we may establish a discount from the market price applicable to optional cash purchases made pursuant to a Request for Waiver. This discount (or the Waiver Discount) may be between 0% and 5% of the purchase price, and may vary each month and for each Pricing Period. The Waiver Discount will be established at our sole discretion after a review of current market conditions, the level of participation in the Plan, the attractiveness of obtaining such additional funds through the sale of common shares as compared to other sources of funds and current and projected capital needs. Under no circumstances will the price of the common shares purchased from us pursuant to the Plan be at a price less than 95% (taking into account the Waiver Discount and any discount, brokerage fees or commissions paid by us on your behalf in connection with the purchase) of the composite volume weighted average price, rounded to four decimal places, or other common shares as quoted and obtained from Reuters, or the “Minimum Purchase Price.” If the methods by which the Plan Administrator calculates the purchase price for any common shares to be purchased pursuant to the Plan would result in a price lower than the Minimum Purchase Price, the purchase price for those shares shall be the Minimum Purchase Price. You may obtain the Waiver Discount applicable to the next month by contacting us via email at cldtpurchases@cl-trust.com. Setting a Waiver Discount for a particular month shall not affect the setting of a Waiver Discount for any subsequent month. The Waiver Discounts will apply only to optional cash purchases of more than $10,000 (or other applicable maximum monthly amount). The Waiver Discounts will apply to the entire optional cash purchase and not just the portion of the optional cash purchase that exceeds $10,000.
We may alter, amend, supplement or waive, in our sole discretion, the time periods and/or other parameters relating to optional cash purchases in excess of $10,000 made by one or more participants in the Plan or new investors, at any time andoffer from time to time, prior to the granting of any request for waiver or within a Pricing Period as determined by us.
Initial and Optional Cash Purchases up to $10,000. We expect that any initial, recurring, or one-time optional cash investment will be invested generally within five (5) trading days, and in no event, more than 35 trading days, except where postponement is necessary to comply with Regulation M under the Exchange Act or other applicable provisions of securities law. In making purchases for the participant’s account, the Plan Administrator may commingle a participant’s funds with those of other participants of the Plan. Purchases may be subject to certain fees and conditions (see “Summary of Plan Options and Fees” here). Once a participant has placed an order, a refund request for an optional cash investment made by check must be received in writing by the Plan Administrator not less than two (2) trading days before such amount is to be invested. No interest will be paid on funds pending investment held by the Plan Administrator.
Optional Cash Purchases in Excess of $10,000. If we grant the request to purchase shares pursuant to a Request for Waiver, there will be a “Pricing Period,” which will generally consist of one to 12 consecutive separate days as determined by us in our sole discretion during which our common shares are traded on the NYSE following our grant of the Request for Waiver. If we grant your request to purchase shares pursuant to a Request for Waiver, the dates of the Pricing Period will be set forth in the approved Request for Waiver. Each of these separate days will be a “Purchase Date.” See the answer to Question 13 for additional information regarding the specific dates in the Pricing Period when shares will be purchased under the Plan.
Dishonored Payments. If any check, draft or automatic withdrawal that is tendered or ordered by a participant as payment to the Plan Administrator to purchase common shares is dishonored, refused or returned, such participant agrees that the purchased shares when credited to the participant’s account may be sold, on the Plan Administrator’s order, without the participant’s consent or approval, to satisfy the amount owing on the purchase. The “amount owing” will include the purchase price paid, any purchase and sale transaction fees, any brokerage commissions and the Plan Administrator’s return fee. If the sale proceeds of purchased shares are insufficient to satisfy the amount owing, such participant authorizes the Plan Administrator to sell additional shares then credited to the participant’s account as necessary to cover the amount owing, without the participant’stime. As further consent or authorization. The Plan Administrator may sell shares to cover an amount owing as a result of the participant’s order in any manner consistent with applicable securities laws. Any sale for that purpose on a national securities market will be considered to be commercially reasonable. A participant grants the Plan Administrator a security interest in all shares credited to such participant’s account, including securities subsequently acquired and held or tendered for deposit, for purposes of securing any amount owing as described in this paragraph.
Return of Unsubscribed Funds. We will return a portionprospectus, these summary descriptions are not meant to be complete descriptions of each optional cash purchase in excesssecurity. The particular terms of $10,000 for each trading day of a Pricing Period or extended Pricing Period, if applicable, for which the Threshold Price is not met or for each day in which no common shares are traded on the New York Stock Exchange. We refer to this portion of the optimal cash purchase as “unsubscribed funds.” Any unsubscribed fundsany security will be returned within five business days after the last day of the Pricing Period, or if applicable, the extended Pricing Period, without interest. The amount returned will be based on the number of days during which the Threshold Price was not met compared to the number of daysdescribed in the Pricing Period or extended Pricing Period. For example, the returned amount in a 10 day Pricing Period will equal one-tenth (1/10) of the total amount of such optional cash purchase (not just the amount exceeding $10,000) for each trading day that the Threshold Price is not met or for each trading day in which sales are not reported. Setting a Threshold Price for a Pricing Period will not affect the setting of a Threshold Price for any other Pricing Period. We may waive our right to set a Threshold Price for any particular Pricing Period. Neither we nor the Plan Administrator is required to give you notice of the Threshold Price for any Pricing Period.
All optional cash purchases or reinvested dividends will be used to purchase, in our sole discretion, either newly issued shares directly from us or shares on the open market. Open market purchases may be made on any securities exchange where the common shares are traded, in the over-the-counter market or in privately negotiated transactions with third persons, and may be on such terms as to price, delivery and otherwise as we may determine.
No. Interest will not be paid on funds deposited by you in your Plan account pending investment or return to you.
No. Funds held in your Plan account pending investment or return are not treated as a bank deposit or account and are not insured by the Federal Deposit Insurance Corporation, or the FDIC, or any other governmental agency or instrumentality.
The common shares are not insured by the FDIC or any other government agency, are not deposits or other obligations of, and are not guaranteed by the Plan Administrator or us, and are subject to investment risks, including possible loss of principal amount invested. Common shares held in the Plan are not subject to protection under the Securities Investor Protection Act of 1970.
Participants may make optional cash purchases in excess of $10,000 in any month with our prior approval, by the following process:
Request for Waiver. Cash purchases of more than $10,000 in any month may be made only pursuant to our acceptance of a request to make such a purchase. If participants wish to make an optional cash purchase in excess of $10,000 (or other maximum amount established by us) for any month, participants must obtain our prior written approval with a form, or a “Request for Waiver,” and a copy of such written approval must accompany any such optional cash purchase. We have sole discretion to grant any approval for optional cash purchases in excess of the allowable maximum amount. Unless the participant has complied with these procedures, any amount submitted for investment over $10,000 will be returned without interest. Participants may make a Request for Waiver by contacting us at (561) 802-4477. Completed Request for Waiver Forms should be submitted to us via email to cldtpurchases@cl-trust.com no later than three business days prior to the applicable Pricing Period. We will notify the participant as to whether the Request for Waiver has been granted or denied, either in whole or in part, within one business day of the receipt of the request. If the Request for Waiver is granted in part, we will advise the participant of the maximum amount that will be accepted in connection with the purchase. If the request is approved, the Plan Administrator must receive the funds for the purchase prior to or on the applicable date specified by the Plan Administrator for the relevant Pricing Period (which typically will be one business day prior to the applicable Pricing Period). If a response is not received in connection with the Request for Waiver, the participant should assume that the request has been denied. We may alter, amend,accompanying prospectus supplement or waive, in our sole discretion, the time periods and/or other parameters relating to optional cash purchases in excess of $10,000 made by one or more participants in the Plan or new investors, at any time and from time to time, prior to the granting of any Request for Waiver. For more information regarding a particular Pricing Period (including applicable Pricing Period start dates), please contact us at (561) 802-4477. Participants may make payment for an optional cash purchase in excess of $10,000 in accordance with the instructions contained in the Request for Waiver.
Purchase Price of Shares for Optional Cash Purchases in Excess of $10,000. Shares purchased pursuant to an approved Request for Waiver will be purchased directly from us as described herein. If we grant the request to purchase shares pursuant to a Request for Waiver, there will be a Pricing Period, which will generally consist of one to 12 consecutive separate days as determined by us in our sole discretion during which our common shares are traded on the NYSE following our grant of the Request for Waiver; however, we do not expect that any part of a Pricing Period will occur during the period that commences on the date we go “ex-dividend” and ends on the dividend record date for our common shares. We expect that if we grant your request to purchase shares pursuant to a Request for Waiver, the dates of the Pricing Period will be set forth in the approved Request for Waiver. Each of these separate days will be a Purchase Date, and an equal proportion of your optional cash purchase will be invested on each trading day during such Pricing Period, subject to the qualifications listed below. The purchase price for shares acquired on a particular Purchase Date will be equal to 100% (subject to change as provided below) of the composite volume weighted average price, rounded to four decimal places, as traded on the composite exchanges during regular NYSE hours on the Purchase Date. The Plan Administrator will apply all optional cash purchases made pursuant to a Request for Waiver for which good funds are received on or before the first business day before the Pricing Period to the purchase of common shares on each Purchase Date of the applicable Pricing Period. The Purchase Price may be subject to a Threshold Price and may be reduced by the Waiver Discount, each as more fully described below.
Threshold Price. We may establish for a Pricing Period a minimum price, or the “Threshold Price,” applicable to optional cash purchases made pursuant to a Request for Waiver. At least three business days prior to the first day of the applicable Pricing Period, we will determine whether to establish a Threshold Price, and if the Threshold Price is established, its amount, and will so notify the Plan Administrator. This determination will be made by us in our discretion after a review of current market conditions, the level of participation in the Plan, and our current and projected capital needs. If established for any Pricing Period, the Threshold Price will be stated as a dollar amount that equals the composite volume weighted average price, rounded to four decimal places, of our common shares as traded on the composite exchanges during regular NYSE hours on the Purchase Date. Except as provided below, we will exclude from the Pricing Period any trading day that the unsolicited composite volume weighted average price is less than the Threshold Price. We also will exclude from the Pricing Period and from the determination of the purchase price any day in which no common shares are quoted on the composite exchanges. For example, if the Threshold Price is not met for two of the trading days in a 10 day Pricing Period, then we will return 20% of the funds you submitted in connection with your Request for Waiver unless we have activated the pricing period extension feature for the Pricing Period which is described below. See Question 15 for more information relating to the return of unsubscribed funds.
Pricing Period Extension Feature. We may elect to activate for any particular Pricing Period a pricing period extension feature which will provide that the initial Pricing Period will be extended by the number of days that the Threshold Price is not satisfied, or on which no common shares are quoted on the composite exchanges, subject to a maximum of five trading days. If we elect to activate the pricing period extension feature and the Threshold Price is satisfied for any additional day that has been added to the initial Pricing Period, that day will be included as one of the trading days for the Pricing Period in lieu of the day on which the Threshold Price was not met or trades of our common shares were not reported. For example, if the determined Pricing Period is 10 days, and the Threshold Price is not satisfied for three out of those 10 days in the initial Pricing Period, and we had previously announced at the time of the Request for Waiver acceptance that the pricing period extension feature was activated, then the Pricing Period will automatically be extended, and if the Threshold Price is satisfied on the next three trading days (or a subset thereof), then those three days (or a subset thereof) will become Purchase Days in lieu of the three days on which the Threshold Price was not met. As a result, because there were 10 trading days during the initial and extended Pricing Period on which the Threshold Price was satisfied, all of the optional cash purchase will be invested.
Waiver Discount. Each month, at least three business days prior to the first day of the applicable Pricing Period, and at the same time the Threshold Price is determined, if any, we may establish a discount from the market price applicable to optional cash purchases made pursuant to a Request for Waiver. This discount (or the Waiver Discount) may be between 0% and 5% of the purchase price, and may vary each month and for each Pricing Period. The Waiver Discount will be established at our sole discretion after a review of current market conditions, the level of participation in the Plan, the attractiveness of obtaining such additional funds through the sale of common shares as compared to other sources of funds and current and projected capital needs. Under no circumstances will the price of the common shares purchased from us pursuant to the Plan be at a price less than 95% (taking into account the Waiver Discount and any discount, brokerage fees or commissions paid by us on your behalf in connection with the purchase) of the composite volume weighted average price, rounded to four decimal places, or other common shares as quoted and obtained from Reuters, or the “Minimum Purchase Price.” If the methods by which the Plan Administrator calculates the purchase price for any common shares to be purchased pursuant to the Plan would result in a price lower than the Minimum Purchase Price, the purchase price for those shares shall be the Minimum Purchase Price. You may obtain the Waiver Discount applicable to the next month by contacting us via email at cldtpurchases@cl-trust.com. Setting a Waiver Discount for a particular month shall not affect the setting of a Waiver Discount for any subsequent month. The Waiver Discounts will apply only to optional cash purchases of more than $10,000 (or other applicable maximum monthly amount). The Waiver Discounts will apply to the entire optional cash purchase and not just the portion of the optional cash purchase that exceeds $10,000.
From time to time, financial intermediaries, including brokers and dealers, and other personsoffering material. The accompanying prospectus supplement may engage in positioning transactions in order to benefit from any waiver discounts applicable to investments made pursuant to requests for waiver for Large Cash Purchases underadd, update or change the Plan. Those transactions may cause fluctuations in the trading volume of our common shares. Financial intermediaries and such other persons who engage in positioning transactions may be deemed to be underwriters. We have no arrangements or understandings, formal or informal, with any person relating to the sale of common shares to be received under the Plan. We reserve the right to modify, suspend or terminate participation in the Plan by otherwise eligible persons to eliminate practices that are inconsistent with the purpose of the Plan.
We may alter, amend, supplement or waive, in our sole discretion, the time periods and/or other parameters relating to optional cash purchases in excess of $10,000 made by one or more participants in the Plan or new investors, at any time and from time to time, prior to the granting of any request for waiver or within a Pricing Period as determined by us.
Reports to Participants
The Plan Administrator will maintain a separate Plan account for each participant. All shares issued to participants under the Plan will be credited to their Plan account. The Plan Administrator will mail to each participant a statement confirming the issuance of shares after the allocation of shares is made. The statement will show the amount of the dividend or distribution, the price at which shares were credited, the number of full and fractional shares credited, the number of shares previously credited and the cumulative total of shares credited. In addition, participants will receive copies of our annual and quarterly reports to shareholders, proxy statements and dividend income information for tax purposes. Participants may also view year-to-date transaction activity in their Plan account under the Plan for the current year, as well as activity in prior years, by accessing their Plan account at shareowneronline.com.
Voting of Shares
Participants in the Plan will receive voting materials and have the sole right to vote the common shares held for them in the Plan. In the event a participant does not provide direction for voting, the Plan shares will not be voted.
The participant is encouraged to read the information contained in the voting materials carefully. Votes may be submitted online, by telephone or by returning the signed, dated proxy card. A participant’s shares will be voted in accordance with the most recent submitted instructions.
Certificates for Shares/Safekeeping
No. Certificates for shares issued under the Plan will not be furnished. For your convenience, the Plan Administrator will maintain the shares purchased for your Plan Account in non-certificated, “book-entry” form. A participant requesting termination may elect to retain his or her shares or to sell all or a portion of his or her shares in the Plan account. If a participant chooses to retain the Plan shares, they will be converted and held in book-entry DRS. Any fractional shares will be sold and a check will be sent to the participant for the proceeds. See “Summary of Plan Options and Fees” in this prospectus.
Common shares that you buy under the Plan will be maintained in your Plan Account in book-entry, rather than certificate, form. A participant may deposit any other common shares that he or she holds in certificate form into his or her Plan Account for “safekeeping” to be held in book-entry form. To deposit shares, send the certificate(s) to the Plan Administrator, at the address provided on page 3 of this prospectus, by registered or certified mail, with return receipt requested, or some other form of traceable mail, and properly insured for at least 5% of the current value. Do not sign the certificate(s) or complete the assignment section. When submitting certificate(s) for deposit into the Plan account, be sure to include a written request to have the certificate(s) deposited. Shares that are deposited will thereafter be credited to the Plan account. The advantages of holding shares in your Plan Account include protection against certificate loss, theft and damage.
Instructions for Mailing Certificates. Regardless of the mailing method used, you bear the full risk of loss if the certificates are lost or stolen. Please do not endorse your certificates prior to mailing.
Participants may sell or transfer shares in their Plan account by contacting the Plan Administrator. Shares may be sold through a market order or a batch order, depending on how the sale request is submitted.
Market Order. A market order is a request to sell shares promptly at the current market price. Market order sales may be requested through the Plan Administrator’s website, shareowneronline.com, or by calling the Plan Administrator directly at (800) 468-9716 (within the United States and Canada). Market order sale requests received at shareowneronline.com or by telephone will be placed promptly upon receipt during market hours (normally 9:30 a.m. to 4:00 p.m., Eastern Time). Any orders received after 4:00 p.m., Eastern Time, or any order received prior to 4:00 p.m., Eastern Time for which all or a portion of the order remains unsold at the market close will be placed promptly on the next day the market is open. The price shall be the market price of the sale obtained by the Plan Administrator’s broker, less a service charge of $25 and sale trading commission, currently $0.12 per share. Once a market order is placed, a market order request cannot be canceled by the participant.
Batch Order. A batch order is an accumulation of all sales requests for a security submitted together as a collective request. Batch orders are submitted on each market day, assuming there are sale requests to be processed. Sale instructions for batch orders received by the Plan Administrator will be processed no later than five business days after the date on which the order is received (except where deferral is required under applicable federal or state laws or regulations), assuming the applicable market is open for trading and sufficient market liquidity exists. Batch order sales may be requested through the Plan Administrator’s website, shareowneronline.com, or by calling the Plan Administrator directly at (800) 468-9716 (within the United States and Canada). The Plan Administrator will cause a participant’s shares to be sold on the open market within five business days of receipt of a request. To maximize cost savings for batch order sale requests, the Plan Administrator will combine each selling participant’s shares with those of other selling participants. In every case of a batch order sale, the price paid to each selling program participant shall be the weighted average sale price obtained by the Plan Administrator’s broker for each aggregate order placed by the Plan Administrator and executed by the broker, less a service charge of $15 and sale trading commission, currently $0.12 per share. A check for the proceeds of the sale of shares (in U.S. dollars), less applicable taxes and fees, will generally by mailed by first class mail as soon as administratively possible after the settlement date. Once a batch order is placed, a batch order request cannot be canceled by the participant.
Day Limit Order (online or telephone). Sale requests for a Day Limit Order will be promptly submitted by the Plan Administrator to a broker. The sale will be executed when and if the market price of our common shares reaches, or exceeds, the specified price on the day the order was placed. The request will be automatically canceled if the price is not met by the end of the trading day. Once a Day Limit Order is placed, a Day Limit Order request cannot be canceled by the participant.
Good-’Til-Date (GTD) or Good-’Til-Canceled GTC) Limit Orders (online or telephone). Requests to sell shares with a GTD and GTC Limit Order will be promptly submitted by the Plan Administrator to a broker. The sale will be executed when and if the market price of our common shares reaches, or exceeds, the specified price at any time while the order remains open (up to the date requested or 90 days for GTC Limit Orders). The request will be automatically canceled if the price is not met by the end of the order period. A GTD or GTC Limit Order may be canceled by the applicable stock exchange or the participant.
Stop Order (online or telephone). Requests to sell shares will be promptly submitted by the Plan Administrator to a broker for a Stop Order. The sale will be executed when the market price of our common shares reach a specified price, at which time the order becomes a Market Order and the sale will be at the prevailing market price when the trade is executed. The price specified in the order must be below the current market price (generally used to limit a market loss).
The Plan Administrator may, for various reasons, require a transaction request to be submitted in writing. Participants should contact the Plan Administrator to determine if their particular request, including any sales request, must be submitted in writing. The Plan Administrator reserves the right to decline to process a sale if it determines, in its sole discretion, that supporting legal documentation is required. In addition, no one will have any authority or power to direct the time or price at which shares for the Plan are sold and no one, other than the Plan Administrator, will select the broker(s) through or from whom sales are to be made.
Participants should be aware that the market price of our common shares may rise or fall during the period between a request for sale, its receipt by the Plan Administrator and the ultimate sale on the open market. Instructions sent to the Plan Administrator to sell shares are binding and may not be rescinded. If a participant prefers to have complete control as to the exact timing and sales prices, participants can request to transfer the shares to a broker.
First-In, First-Out Method Used to Determine Tax Basis of Shares Sold. The Plan assumes that each participant will use the first-in, first-out (“FIFO”) method when determining the tax basis of any shares sold. Participants may designate their preference for a different method of determining the tax basis of shares by identifying this preference in writing to the Plan Administrator. Participants may designate their preference for specific identification cost at any time.
To authorize a transfer or gift of shares, a participant must submit a Stock Power Form with instructions to transfer ownership of shares to the Plan Administrator. The Form can be found on our website at shareowneronline.com. For additional assistance regarding the transfer of Plan shares, contact the Plan Administrator. The Stock Power Form will require a “Medallion Signature Guarantee” by a financial institution. A Medallion Signature Guarantee is a special guarantee for securities and may be obtained through a financial institution such as a broker, bank, savings and loan association, or credit union who participates in the Medallion Signature Guarantee program. The guarantee ensures that the individual requesting the transfer of securities is the owner of those securities. Most banks and brokers participate in the Medallion Signature Guarantee program.
If a participant’s request to transfer all Plan shares in a Plan account is received between a dividend record date and payable date, the request will be processed and a separate dividend check will be mailed to the participant.
A participant can also gift shares from a Plan account to a non-participant by making an initial cash investment to establish a Plan account in the recipient’s name. An optional cash investment can also be submitted on behalf of an existing Plan participant. If a participant’s investments or transfers are made to an existing Plan account, dividends on the shares credited to such investments or transfers will be invested in accordance with the elections made by the existing account owner.
Dividends and Share splits
Any share dividends or share splits we distribute on our common shares with respect to both certificated and book-entry (whole and fractional) shares will be credited automatically to the participant’s Plan account.
U.S. Federal Tax Consequences of Acquiring Shares Under the Plan
The U.S. federal tax treatment of dividend reinvestment and share purchase programs is not entirely clear. You are encouraged to consult your tax advisor with specific reference to your own tax situation and potential changes in the applicable law as to all federal, state, local, foreign and other tax matters in connection with the reinvestment of dividends and purchase of common shares under the Plan, your tax basis and holding period for common shares acquired under the Plan and the character, amount and tax treatment of any gain or loss realized on the disposition of common shares. The following is a brief summary of the material U.S. federal income tax considerations applicable to the Plan, is for general information only, and does not constitute tax advice.
The information in this section is based on the Internal Revenue Code of 1986, as amended, or the Code, existing, temporary and proposed Treasury regulations under the Code, the legislative history of the Code, current administrative rulings and practices of the Internal Revenue Service, or IRS, and court decisions, all as of the date hereof. We cannot assure you that new laws, interpretations of law, or court decisions, any of which may take effect retroactively, will not cause any statement in this section to be inaccurate. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below. We have not sought and will not seek an advance ruling from the IRS regarding any matter in this prospectus.
If you participate in the dividend reinvestment feature under the Plan, you will be treated for U.S. federal income tax purposes as having received, on the investment date, a distribution in an amount equal to the sum of (a) the fair market value of the common shares on the date the shares were acquired with reinvested dividends, (b) your pro rata share of any brokerage commissions paid by us in connection with the purchase of common shares by the Plan Administrator from parties other than us, either on the open market or in privately negotiated transactions and (c) any cash distributions actually received by you with respect to common shares not included in the Plan. The tax basis of common shares purchased under the Plan will be equal to the fair market value of the shares on the date the shares were acquired plus your pro rata share of any brokerage fees paid by us.
The treatment of any discount associated with direct share purchase programs is not entirely clear, with most of the guidance being private letter rulings issued by the IRS on which other taxpayers are not entitled to rely. The treatment may vary between persons who participate only in the direct share purchase plan and persons who participate in both the dividend reinvestment plan and the direct share purchase plan. A participant in both plans may be treated as receiving a distribution with respect to the optional cash payment, which is taxed as described below, in an amount equal to (i) any excess of the fair market value of the common shares on the investment date over the amount of the optional cash payment, plus (ii) the amount of any brokerage commissions, mark-ups, and other fees or expenses incurred by the REIT on the participant’s behalf in connection with purchases on the open market. You should consult your tax advisors regarding the treatment of any direct share purchases made at a discount. Common shares acquired through the optional share purchase feature under the Plan should have a tax basis equal to the amount of the payment plus the total amount of distributions, if any, you are treated as receiving as described above.
Distributions that you receive as a result of dividend reinvestment and/or optional share purchases will be taxable as dividends and/or as a distribution that reduces the basis in your shares or is treated as gain from the sale of common shares as discussed in “Material U.S. Federal Income Tax Considerations-Taxation of Taxable U.S. Shareholders” and “-Taxation of Non-U.S. Shareholders” in this prospectus.
Your holding period for shares acquired pursuant to either program under the Plan will begin on the day following the investment date. Dividends received by corporate shareholders will not be eligible for the dividends received deduction.
You will not realize any taxable income for certificates received for whole shares credited to your account or upon termination of participation in the Plan. You will realize gain or loss upon the sale or exchange of common shares acquired under the Plan. You will also realize gain or loss upon receipt, following termination of participation in the Plan, of a cash payment for any fractional share equivalent credited to your account. The amount of any such gain or loss will be the difference between the amount that you received for the shares or fractional share equivalent and the tax basis thereof. See “Material U.S. Federal Income Tax Considerations—Taxation of Taxable U.S. Shareholders—Taxation of U.S. Shareholders on the Disposition of Our Common Shares “ and “—Taxation of Non-U.S. Shareholders— Taxation of Non-U.S. Shareholders on the Disposition of Our Common Shares” in this prospectus.
Withholding taxes or backup withholding will apply to dividends that are subject to the dividend reinvestment feature of the Plan in the same manner as withholding taxes and backup withholding apply to cash dividends. See “Material U.S. Federal Income Tax Considerations-Information Reporting Requirements and Withholding, Shares Held Offshore” and “-Taxation of Non-U.S. Shareholders” in this prospectus. In the case of participants that are subject to withholding tax or backup withholding in respect of amounts deemed to be received under the Plan, we or the Plan Administrator will reinvest dividends less the amount of tax required to be withheld.
Foreign shareholders who elect to make optional cash purchases only will continue to receive regular cash dividends on common shares registered in their names in the same manner as if they were not participating in the Plan. Funds for optional cash purchases must be in U.S. dollars and will be invested in the same way as payments from other participants.
All costs of administering the Plan, except for costs related to your voluntary selling of common shares, will be paid by us. Consistent with the conclusion reached by the IRS in a private letter ruling issued to another REIT, we intend to take the position that these costs do not constitute a distribution which is either taxable to you or which would reduce your basis in your shares. However, since the private letter ruling was not issued to us, we have no legal right to rely on its conclusions. Thus, it is possible that the IRS might view your share of the costs as constituting a taxable dividend to you and/or a distribution which reduces the basis in your common shares or is treated as gain from the sale of common shares. For this or other reasons, we may in the future take a different position with respect to the costs of administering the Plan.
Modification and Termination
You can terminate your participation in the Plan at any time by contacting the Plan Administrator. You can submit your request for termination by telephone or through the mail (see Contact Information). For your convenience, a Transaction Request Form is attached to your account statement. Complete the Transaction Request Form by filling in the required fields and indicating your intention to terminate your participation in the Plan. Following termination, all future dividends will be paid to you in cash.
Retain shares - If you elect to keep your shares, the whole shares held in your Plan balance will be moved to book-entry DRS. Any fractional shares will be sold at the market price and you will receive a check (less any fees) for the proceeds.
Sell shares - If you choose to sell all of your shares, your sale proceeds, less applicable taxes and transaction fees, will be remitted to you via check, or you can choose to have them directly deposited into your bank account.
If you terminate your participation in the Plan but do not indicate your preference to retain or sell your shares, the Plan shares will be moved to book-entry DRS until the Plan Administrator receives further instructions.
The Plan Administrator reserves the right to terminate participation in the Plan if a participant does not have at least one whole share in the Plan. Upon termination, the participant may receive the cash proceeds from the sale of any fractional share, less any transaction fee and brokerage commission.
We, along with the Plan Administrator, may amend, suspend or terminate the Plan at any time. Any such amendment, suspension or termination will be effective upon a designated date and notice of such amendment, suspension or termination will be sent to all participants as soon as administratively possible.
If the Plan is terminated, whole shares will continue to be held in your Plan account.
Plan Administrator Responsibilities
Neither we, the Plan Administrator nor its nominee shall have any responsibility beyond the exercise of ordinary care for any action taken or omitted pursuant to the Plan, nor shall we or they have any duties, responsibilities or liabilities except such as are expressly set forth herein.
In administering the Plan, neither we, the Plan Administrator nor any independent agent selected by the Plan Administrator shall be liable for any good faith act or omission to act, including, but not limited to any claim of liability (i) arising out of the failure to terminate a participant’s account upon such participant’s death prior to receipt of a notice in writing of such death, (ii) with respect to the prices or times at which common share are purchased or sold, or (iii) as to the value of the common shares acquired for participants. Buying and selling common shares are subject to investment risk. The price may fall or rise during the period between a request for investment or sale, its receipt by the Plan Administrator, and the ultimate transaction. Any decision to purchase or sell securities through the Plan must be made by the participant based upon his or her own research and judgment. The price risk will be borne solely by the participant.
The Plan Administrator is acting solely as our agent and owes no duties, fiduciary or otherwise, to any other person by reason of the Plan, and no implied duties, fiduciary or otherwise, shall be read into the Plan. The Plan Administrator undertakes to perform such duties and only such duties as are expressly set forth herein, to be performed by it, and no implied covenants or obligations shall be read into the Plan against the Plan Administrator or us.
In the absence of negligence or willful misconduct on its part, the Plan Administrator, whether acting directly or through agents or attorneys, shall not be liable for any action taken, suffered, or omitted or for any error of judgment made by it in the performance of its duties hereunder. In no event shall the Plan Administrator be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profit), even if the Plan Administrator has been advised of the likelihood of such loss or damage and regardless of the form of action.
The Plan Administrator shall: (i) not be required to and shall make no representations and have no responsibilities as to the validity, accuracy, value or genuineness of any signatures or endorsements, other than its own; and (ii) not be obligated to take any legal action hereunder that might, in its judgment, involve any expense or liability, unless it has been furnished with reasonable indemnity.
The Plan Administrator shall not be responsible or liable for any failure or delay in the performance of its obligations under the Plan arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control, including, without limitation, acts of God; earthquakes; fires; floods; wars; civil or military disturbances; sabotage; epidemics; riots; interruptions, loss or malfunctions of utilities; computer (hardware or software) or communications services; accidents; labor disputes; acts of civil or military authority or governmental actions; it being understood that the Plan Administrator shall use reasonable efforts which are consistent with accepted practices in the stock investment plan industry to resume performance as soon as administratively possible under the circumstances.
The Plan Administrator is authorized to choose a broker at its sole discretion to facilitate purchases and sales of our common shares by Plan participants. The Plan Administrator will furnish the name of the registered broker utilized in share transactions within a reasonable time upon written request from a participant.
The Code imposes certain reporting obligations upon brokers and other middlemen. As a result, the Plan Administrator will be required to report to the IRS and the participant any sales of share by the Plan Administrator on behalf of a participant.
The Plan Administrator may, for various reasons, require a transaction request to be submitted in writing. Contact the Plan Administrator to determine if a particular request, including any sales request, must be submitted in writing.
Any notice, instruction, request, election or direction that is required or permitted under the Plan shall become effective when received in good order by the Plan Administrator. Such notice, instruction, request, election or direction shall be mailed to the address set forth herein.
Except as otherwise expressly provided herein, participants may not sell, pledge, hypothecate or otherwise assign or transfer the participant’s account any interest therein or any cash or shares credited to the participant’s account. No attempt at any such sale, pledge, hypothecation or other assignment or transfer shall be effective. Nothing herein shall affect a share owner’s rights in respect to shares for which certificate(s) have been received.
The terms and conditions of the Plan and the authorization form shall be governed by the laws of the State of New York.
Additional questions about the Plan should be directed to the Plan Administrator. If your shares are held by a Nominee, contact your Nominee for more information. They can contact the Plan Administrator directly for instructions on how to participate on your behalf.
Summary of Plan Options
Optional Cash Purchase Portion of the Plan: | |||
Minimum one-time initial purchase for new investors | $ | 250.00 | * |
Minimum optional cash purchase amount | $ | 50.00 | |
Minimum recurring automatic investment amount | $ | 50.00 | |
Maximum optional cash purchase amount | $ | 10,000/month | ** |
* May also be satisfied by making five minimum recurring automatic investments of $50.00 each.** With our prior approval, maximum optional cash purchases may exceed $10,000 monthly.
Dividend Reinvestment Portion of the Plan:Dividend reinvestment options_______________________ Full or Partial Reinvestment
Summary of Transaction and Processing Fees
Investment Fees: | |||
Initial enrollment fee (for new investors only) | Company Paid | ||
Dividend reinvestment | Company Paid | ||
Fee for optional cash purchase via check | Company Paid | ||
Fee for optional cash purchase via one-time automatic investment | Company Paid | ||
Fee for optional cash purchase via recurring automatic investment | Company Paid | ||
Purchase trading commission per share for dividend reinvestment | Company Paid | ||
Purchase trading commission per share for optional cash purchases | Company Paid | ||
Fees Payable by Participants in Connection With the Sale of Shares from a Plan Account: | |||
Batch Order | $ | 15.00 | |
Market Order | $ | 25.00 | |
Limit Order per transaction | $ | 30.00 | |
Stop Order | $ | 30.00 | |
Sale trading commission per share | $ | 0.12 | |
Direct deposit of sale proceeds | $ | 5.00 | |
Other Fees Payable Under the Plan: | |||
Certificate deposit | Company Paid | ||
Returned check / Rejected automatic bank withdrawal (per item) | $ | 35.00 | |
Prior year duplicate statements (per year) | $ | 15.00 |
Power to Reclassify Our Unissued Shares of Beneficial Interest
Our board of trustees, in its sole discretion, may prospectively or retroactively exempt a person from certain of the limits described in the paragraph above and may establish or increase an excepted holder percentage limit for such person. The person seeking an exemption must provide to our board of trustees such representations, covenants and undertakings as our board of trustees may deem appropriate in order to conclude that granting the exemption will not cause us to lose our status as a REIT. Our board of trustees may not grant such an exemption to any person if such exemption would result in our failing to qualify as a REIT. Our board of trustees may require a ruling from the Internal Revenue Service, or the IRS, or an opinion of counsel, in either case in form and substance satisfactory to the board of trustees, in its sole discretion, in order to determine or ensure our status as a REIT. Our board of trustees may impose such conditions or restrictions as it deems appropriate in connection with granting an exemption.
In addition, shares of beneficial interest held in the trust will be deemed to have been offered for sale to us, or our designee, at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in the transfer to the trust or, if the event causing the shares to be held in trust did not involve a purchase of the shares at market price, the market price of the shares on the day of the event causing the shares to be held in trust and (ii) the market price on the date we, or our designee, accept the offer, which we may reduce by the amount of dividends and other distributions paid to the proposed transferee and owed by the proposed transferee to the trustee. We will have the right to accept the offer until the trustee has sold the shares. Upon a sale to us, the interest of the charitable beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds of the sale to the proposed transferee and the charitable beneficiary and any dividends or other distributions held by the trustee shall be paid to the charitable beneficiary.
Business Combinations
With respect to special meetings of shareholders, only the business specified in our notice of meeting may be brought before the meeting. Nominations of individuals for election to our board of trustees at a special meeting may be made only (1) by or at the direction of our board of trustees or (2) provided that our board of trustees has determined that trustees will be elected at such meeting, by a shareholder of record at the time of giving notice and who is entitled to vote at the meeting in the election of each individual so nominated and has complied with the advance notice provisions set forth in our bylaws. Such shareholder may nominate one or more individuals, as the case may be, for election as a trustee if the shareholder’s notice containing the information required by our bylaws is delivered to the secretary not earlier than the 120th day prior to such special meeting and not later than 5:00 p.m., eastern time, on the later of (1) the 90th day prior to such special meeting or (2) the tenth day following the day on which public announcement is first made of the date of the special meeting and the proposed nominees of our board of trustees to be elected at the meeting.
The MRL permits a Maryland real estate investment trust to indemnify and advance expenses to its trustees, officers, employees and agents to the same extent as permitted for directors and officers of Maryland corporations. The MGCL permits a Maryland corporation to indemnify its present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made a party or threatened to be made a party by reason of their service in those or other capacities unless it is established that (a) the act or omission of the director or officer was material to the matter giving rise to the proceeding and (i) was committed in bad faith or (ii) was a result of active and deliberate dishonesty, (b) the director or officer actually received an improper personal benefit in money, property or services or (c) in the case of any criminal proceeding, the director or officer has reasonable cause to believe that the act or omission was unlawful. However, a Maryland corporation may not indemnify for an adverse judgment in a suit by or in the right if the corporation or if the director or officer was adjudged to be liable on the basis that a personal benefit was improperly received, unless in either case a court orders indemnification and then only for expenses. The MGCL requires us, as a condition to advancing expenses, to obtain (a) a written affirmation by the trustee or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification and (b) a written statement by or on his or her behalf to repay the amount paid or reimbursed by us if it shall ultimately be determined that the standard of conduct was not met.
WE URGE YOU TO CONSULT YOUR TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO YOU OF THE PURCHASE, OWNERSHIP AND SALE OF OUR SECURITIES AND OF OUR ELECTION TO BE TAXED AS A REIT. SPECIFICALLY, YOU ARE URGED TO CONSULT YOUR TAX ADVISOR REGARDING THE FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND ELECTION, AND REGARDING POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
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Qualified REIT Subsidiaries.A corporation that is a “qualified REIT subsidiary” is not treated as a corporation separate from its parent REIT. All assets, liabilities, and items of income, deduction, and credit of a “qualified REIT subsidiary” are treated as assets, liabilities, and items of income, deduction, and credit of the REIT. A “qualified REIT subsidiary” is a corporation, other than a TRS, all of the stock of which is owned by a REIT. Thus, in applying the requirements described herein, any “qualified REIT subsidiary” that we own will be ignored, and all assets, liabilities, and items of income, deduction, and credit of such subsidiary will be treated as our assets, liabilities, and items of income, deduction, and credit.
A domestic TRS will pay income tax at regular corporate rates on any income that it earns. In addition, the TRS rules limit the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. In addition, overall limitations on the deductibility of net interest expense by businesses could apply to our TRSs. Further, the rules impose a 100% excise tax on transactions between a TRS and its parent REIT or the REIT’s tenants that are not conducted on an arm’s-length basis. We have one TRS, Chatham TRS Holding, Inc., whose wholly owned subsidiaries are the lessees of our wholly owned hotel properties.
Rents from Real Property.Rent that we receive from our real property will qualify as “rents from real property,” which is qualifying income for purposes of the 75% and 95% gross income tests, only if the following conditions are met:
As described above, in order for the rent that we receive to constitute “rents from real property,” several other requirements must be satisfied. One requirement is that percentage rent must not be based in whole or in part on the income or profits of any person. Percentage rent, however, will qualify as “rents from real property” if it is based on percentages of receipts or sales and the percentages:
Our TRS lessees lease our hotel properties, which we believe constitute qualified lodging facilities. Our TRS lessees engage independent third-party hotel managers that qualify as “eligible independent contractors,” to operate the related hotels on behalf of such TRS lessees.
Failure to Satisfy Gross Income Tests.If we fail to satisfy one or both of the gross income tests for any taxable year, we nevertheless may qualify as a REIT for that year if we qualify for relief under certain provisions of the U.S. federal income tax laws. Those relief provisions are available if:
For purposes of the 5% asset test, the 10% vote test and the 10% value test, the term “securities” does not include shares in another REIT, debt of a “publicly offered REIT,” equity or debt securities of a qualified REIT subsidiary or TRS, mortgage loans that constitute real estate assets, or equity interests in a partnership. The term “securities,” however, generally includes debt securities issued by a partnership or another REIT other than a “publicly offered REIT,” except that for purposes of the 10% value test, the term “securities” does not include:
We will monitor the status of our assets for purposes of the various asset tests and will manage our portfolio in order to comply at all times with such tests. If we fail to satisfy the asset tests at the end of a calendar quarter, we will not lose our REIT qualification if:
If we cease to be a “publicly offered REIT,” then in order for our distributions to be counted as satisfying the annual distribution requirement for REITs and to provide us with the REIT-level tax deduction, such distributions must not have been “preferential dividends.” A dividend is not a preferential dividend if that distribution is (i) pro rata among all outstanding shares within a particular class and (ii) in accordance with the preferences among different classes of shares as set forth in our organizational documents.
Recordkeeping Requirements
Under the Tax Cuts and Jobs Act, or TCJA, for taxable years beginning before January 1, 2026, individuals, trusts and estates may deduct a portion of certain pass-through income, including ordinary REIT dividends that are not “capital gain dividends” or “qualified dividend income,” subject to complex limitations.
Taxation of U.S. Shareholders on the Disposition of Our Common Shares.A U.S. shareholder who is not a dealer in securities generally must treat any gain or loss realized upon a taxable disposition of our shares as long-term capital gain or loss if the U.S. shareholder has held our shares for more than one year and otherwise as short-term capital gain or loss. In general, a U.S. shareholder will realize gain or loss in an amount equal to the difference between the sum of the fair market value of any property and the amount of cash received in such disposition and the U.S. shareholder’s adjusted tax basis. A shareholder’s adjusted tax basis generally will equal the U.S. shareholder’s acquisition cost, increased by the excess of net capital gains deemed distributed to the U.S. shareholder (discussed above) less tax deemed paid on such gains and reduced by any returns of capital. However, a U.S. shareholder must treat any loss upon a sale or exchange of shares held by such shareholder for six months or less as a long-term capital loss to the extent of capital gain dividends and any other actual or deemed distributions from us that such U.S. shareholder treats as long-term capital gain. All or a portion of any loss that a U.S. shareholder realizes upon a taxable disposition of our shares may be disallowed if the U.S. shareholder purchases other shares within 30 days before or after the disposition.
requirements.
For any year in which we qualify as a REIT, a non-U.S. shareholder will incur tax on distributions that are attributable to gain from our sale or exchange of a USRPI under the Foreign Investment in Real Property Act of 1980, or FIRPTA. A USRPI includes certain interests in real property and stock in certain corporations at least 50% of whose assets consist of USRPIs. Under FIRPTA, subject to exceptions discussed below, a non-U.S. shareholder is taxed on distributions attributable to gain from sales of USRPIs as if such gain were effectively connected with a U.S. business of the non-U.S. shareholder. A non-U.S. shareholder thus would be taxed on such a distribution at the normal capital gains rates applicable to U.S. shareholders, subject to applicable alternative minimum tax and a special alternative minimum tax in the case of a nonresident alien individual. A non- U.S. corporate shareholder not entitled to treaty relief or exemption also may be subject to the branch profits tax on such a distribution. We would be required to withhold on any distribution that we could designate as a capital gain dividend. A non-U.S. shareholder may receive a credit against its tax liability for the amount we withhold.
If the applicable class of our shares is regularly traded on an established securities market, an additional exception to the tax under FIRPTA is available with respect to that class of shares, even if we do not qualify as a domestically controlled qualified investment entity at the time the non-U.S. shareholder sells the shares. Under that exception, the gain from such a sale by such a non-U.S. shareholder will not be subject to tax under FIRPTA if:
Shareholders.Shareholders. Subject to the exception discussed below, any distribution to a “qualified shareholder” who holds REIT shares directly or indirectly (through one or more partnerships) will not be subject to U.S. federal income taxation under FIRPTA and thus will not be subject to special withholding rules under FIRPTA. While a “qualified shareholder” generally will not be subject to FIRPTA withholding on REIT distributions, the portion of REIT distributions attributable to certain investors of a “qualified shareholder” (i.e.(i.e., non-U.S. persons who hold interests in the “qualified shareholder” (other(other than interests solely as a creditor), and directly or indirectly hold more than 10% of the shares of such REIT (whether or not by reason of the investor’s ownership in the “qualified shareholder”)) may be subject to FIRPTA withholding. REIT distributions received by a “qualified shareholder” that are exempt from FIRPTA withholding may still be subject to regular U.S. withholding tax.U. S.U.S. federal income taxation under FIRPTA. As with distributions, the portion of amounts realized attributable to certain investors in a “qualified shareholder” (i.e.(i.e., non-U.S. persons who hold interests in the “qualified shareholder” (other(other than interests solely as a creditor), and directly or indirectly hold more than 10% of the shares of such REIT (whether
A qualified collective investment vehicle is a foreign person that (i) would be eligible for a reduced rate of withholding under the comprehensive income tax treaty described above, even if such entity holds more than 10% of the shares of such REIT, (ii) is publicly traded, is treated as a partnership under the Code, is a withholding foreign partnership, and would be treated as a “United States real property holding corporation” if it were a domestic corporation, or (iii) is designated as such by the Secretary of the Treasury and is either (a) fiscally transparent within the meaning of section 894, or (b) required to include dividends in its gross income, but is entitled to a deduction for distributions to its investors.
Offshore.
Backup withholding generally will not apply to payments of dividends made by us or our paying agents, in their capacities as such, to a non-U.S. shareholder provided that the non-U.S. shareholder furnishes to us or our paying agent the required certification as to its non-U.S. status, such as providing a valid IRS Form W-8BEN, IRS Form W-8BEN-E, or IRS Form W-8ECI, or certain other requirements are met. Notwithstanding the foregoing, backup withholding may apply if either we or our paying agent has actual knowledge, or reason to know, that the holder is a U.S. person that is not an exempt recipient. Payments of the net proceeds from a disposition or a redemption effected outside the U.S. by a non-U.S. shareholder made by or through a foreign office of a broker generally will not be subject to information reporting or backup withholding. However, information reporting (but not backup withholding) generally will apply to such a payment if the broker has certain connections with the U.S. unless the broker has documentary evidence in its records that the beneficial owner is a non-U.S. shareholder and specified conditions are met or an exemption is otherwise established. Payment of the net proceeds from a disposition by a non-U.S. shareholder of our shares made by or through the U.S. office of a broker generally is subject to information reporting and backup withholding unless the non-U.S. shareholder certifies under penalties of perjury that it is not a U.S. person and satisfies certain other requirements, or otherwise establishes an exemption from information reporting and backup withholding.
We have not requested, and do not intend to request, a ruling from the IRS that the Partnerships will be classified as partnerships for U.S. federal income tax purposes. If for any reason a Partnership were taxable as a corporation, rather than as a partnership, for U.S. federal income tax purposes, we likely would not be able to qualify as a REIT unless we qualified for certain relief provisions. See “-“— Gross Income Tests” and “-“— Asset Tests.” In addition, any change in a Partnership’s status for tax purposes might be treated as a taxable event, in which case we might incur tax liability without any related cash distribution. See “-“— Distribution Requirements.” Further, items of income and deduction of such Partnership would not pass through to its partners, and its partners would be treated as shareholders for tax purposes. Consequently,
Basis in Partnership Interest.Our adjusted tax basis in our partnership interest in our operating partnership generally is equal to:
Sale of a Partnership’s Property
The Plan allows
In connection with the administrationtrading market for any of the Plan, we may be requested to approve investments made pursuant to Requests for Waiver by or on behalf of participants or other investors who may be engaged in the securities business. Persons who acquire common shares through the Plan and resell them shortly after acquiring them, including coverage of short positions, under certain circumstances, may be participating in a distribution of securities that would require compliancesecurities.
Our common shares may not be available under the Plan in all states or jurisdictions. We are not making an offer to sell our common shares in any jurisdiction where the offer or sale is not permitted.
Dividend Reinvestment
and
Direct Share Purchase Plan
Up to $50,000,000
PROSPECTUS
Distribution
.SEC registration fee | $ | 7,380 | ||
Printing fees | 8,000 | |||
Legal fees and expenses | 60,000 | |||
Accounting fees and expenses | 80,000 | |||
Total | $ | 155,380 |
| | | Amount to be Paid | | |||
SEC registration fee | | | | $ | 73,800 | | |
Printing fees | | | | | ** | | |
Legal fees and expenses | | | | | ** | | |
Accounting fees and expenses | | | | | ** | | |
Transfer agent fees | | | | | ** | | |
Miscellaneous expenses | | | | | ** | | |
Total | | | | | ** | | |
Officers
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We have entered into indemnification agreements with our trustees and our executive officers providing for procedures for indemnification by us to the fullest extent permitted by law and advancements by us of certain expenses and costs relating to claims, suits or proceedings arising from their service to us.
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(2)
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February 29, 2024.
| Signature | | | Title | | ||||
| /s/ JEFFREY H. FISHER Jeffrey H. Fisher
| | | Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) | | ||||
| /s/ JEREMY B. WEGNER Jeremy B. Wegner
| | | Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) | | ||||
| /s/ EDWIN B. BREWER, JR. Edwin B. Brewer, Jr.
| | | Trustee | | ||||
| /s/ DAVID GRISSEN David Grissen
| | | Trustee | | ||||
| /s/ ETHEL ISAACS WILLIAMS Ethel Isaacs Williams
| | | Trustee | | ||||
| /s/ MARY ELIZABETH HIGGINS Mary Elizabeth Higgins
| | | Trustee | | ||||
| /s/ ROBERT PERLMUTTER Robert Perlmutter
| | | Trustee | | ||||
| /s/ ROLF E. RUHFUS Rolf E. Ruhfus
| | | Trustee | |