UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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LIGHTSTONE
VALUE PLUS REIT I, INC.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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LIGHTSTONE VALUE PLUS REIT I, INC.
QUESTIONS ABOUT THE CHARTER AMENDMENTS PROPOSAL
What are the roll-up provisions in the Company’s charter and
why are they being voted on?
The Company’s charter imposes certain procedural protections
for stockholders relating to “roll up transactions,” which are defined as transactions involving the acquisition, merger,
conversion or consolidation of the Company with another unrelated entity if Company’s stockholders would receive of securities of
another entity as a result, even if the securities received were freely and publicly traded on a national securities exchange such as
the New York Stock Exchange (NYSE) or traded through NASDAQ.
In a roll up transaction, stockholders who vote against the transaction
must be given the choice of
| ● | accepting the securities of the roll-up entity or |
| ● | either (a) remaining stockholders of the Company and preserving their interests in the Company or (b) receiving cash in an amount
equal to their proportionate share of the appraised value of the Company. |
In addition, among other things, the Company is prohibited from participating
in any proposed roll-up transaction in which certain stockholder rights are less than currently provided to stockholders.
The roll-up provisions limit the Company’s future to engage in
transactions to dispose of its assets and dissolve because buyers or merger partners who would prefer to provide securities as part or
all of the purchase price would be less likely to complete a transaction given the uncertainties that the roll-up provisions would require.
The roll-up provisions would apply even if the potential buyer would pay the Company’s securities that could be freely sold on NYSE
or NASDAQ.
In addition, another potential exit strategy would be for the Company
to sell all of its assets in one or more transactions and then to liquidate and dissolve the Company. In order to complete the liquidation,
the Company may have to convert to a liquidation trust, with beneficial interest in the trust being distributed to stockholder in exchange
for their shares as the Company completes the winding-up of the Company’s assets and liabilities and final distribution of sale
proceeds to stockholders. If the distribution to the liquidating trust were to be deemed a “roll up transaction” under the
Company’s charter, the Company might be restricted in its ability to convert to a liquidating trust because the Company might not
have the ability to offer stockholders the right to remain a stockholder in the Company or to receive cash for their shares.
In order to protect the Company’s ability to merge or consolidate
with another entity or to utilize a liquidating trust structure, the board of directors recommends an amendment to the charter to remove
the roll-up provisions.
Why is the Company seeking to amend the exculpation and indemnification
provisions in the charter?
Although the Company’s charter currently provides for exculpation
of our officers directors and provides for indemnification of our officers and directors of the Advisor and its affiliate, it contains
certain limitations that under the NASAA REIT Guidelines, which are no longer applicable to us. The Company seeks to conform our charter
more closely to those of competitor REITs that are listed on an exchange in order to increase our ability to retain and recruit qualified
and experience officers and directors. Exchange listed companies generally provide that they may exculpate and indemnity their officers
and directors to the maximum extent provided by governing law.
Maryland law, which governs the Company, permits a Maryland corporation
to include in its charter a provision limiting the liability of directors and officers to the corporation and its stockholders for money
damages, except for liability resulting from (1) actual receipt of an improper benefit or profit in money, property or services or (2)
active and deliberate dishonesty established by a final judgment and which is material to the cause of action.
Maryland law also 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 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 the 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 had reasonable cause to believe that the act or omission was unlawful. In addition, Maryland law permits a Maryland
corporation to advance reasonable expenses to a director or officer upon receipt of (x) a written affirmation by the director or officer
of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification and (y) a written undertaking
by him or her or on his or her behalf to repay the amount paid or reimbursed if it is ultimately determined that the standard of conduct
was not met.
These amended provisions will provide our directors and officers with
broader and more comprehensive exculpation and indemnification rights. Consistent with these amendments, the requirement that any director
and officer insurance purchased by the Company be consistent with the restrictions on indemnification imposed by the NASAA REIT Guidelines
would be removed.
Although we believe that this change will improve our ability to retain
and attract qualified directors and officers, the proposed charter amendment does increase the risk that we and our stockholders will
not be able to recover monetary damages from our directors if they fail to meet the statutory standard of conduct as a result of negligence
or misconduct (as to our non-independent directors) and gross negligence or intentional misconduct (as to our independent directors) or
from our officers if they fail to satisfy their duties under Maryland law. Also, the proposed charter amendment would provide for indemnification
of our directors and officers and permit indemnification of the Advisor and its affiliates in circumstances where indemnification is currently
limited by our charter. The reduced ability to recover from directors and officers and the increased right to indemnification would be
true not only for their future acts or omissions but also for acts or omissions prior to the date of the charter amendment. The proposed
charter amendment also increases the risk that we will incur significant defense costs that would otherwise have to be borne by our directors
or officers.
In addition to providing our directors and officers with additional
rights with respect to exculpation and indemnification, removing these limitations from our charter will also permit us to indemnify our
Advisor to the maximum extent permitted by Maryland law, including for acts or omissions prior to the date of the charter amendment. To
date, we have not agreed to expand the indemnification of our Advisor beyond that permitted by the NASAA REIT Guidelines; however, the
proposed charter amendment does increase the risk that we might agree (i) to indemnify the Advisor for certain losses that we would not
be permitted to indemnify the Advisor for under our current charter and (ii) to advance and bear the Advisor’s defense costs in
circumstances where our current charter would not permit such advancement.
Why is the Company seeking to reduce the quorum requirement for
stockholder meetings?
The Company’s current charter establishes a quorum as 50% of
its outstanding shares for meeting of the stockholders. If the quorum proposal is approved by stockholders, the quorum requirement would
be removed from the charter and included only in the Company’s bylaws. Under Maryland law, if a company has securities registered
with the SEC under the Securities Exchange Act of 1934 (Exchange Act and has three or more independent directors, the bylaws of the company
may provide that the quorum for any meeting of a stockholders meeting be not less than one-third of the votes entitled to be cast at the
meeting. The board of directors expects to then amend the bylaws so that a quorum is 35% of all votes entitled to be cast at a stockholder
meeting.
The board of directors believes a lower quorum threshold to transact
business at a stockholder meeting will facilitate the holding of stockholder meetings to elect directors and to approve ratification of
auditors and other important matters related to the Company, and reduce the cost and administrative burden in connection with obtaining
a quorum at stockholder meetings.
Some transactions, including amending the Company’s charter or
approving a sale of substantially all of the Company’s assets or other business combination or approving a plan of liquidation,
require by law the vote of a simple majority of shares outstanding in favor of the transaction. A reduction in the quorum required to
hold a stockholders’ meeting would not affect the threshold for approval of any matter required by Maryland law to be approved by
a greater number than the quorum requirement to hold meetings.
However, by removing the quorum requirement from the Company’s
charter and including it in the bylaws, the board of directors will have the exclusive power to change the quorum requirement.
What are the reports will the Company provide to stockholders if
the Company is no longer required to provide NASAA REIT Guideline reports?
As a reporting company under the Exchange Act, the Company prepares
and files with the SEC quarterly reports that contain unaudited financial statements of the Company and a discussion of its operating
results and an annual report that contains the Company’s audited financial statements and a discussion regarding its business, properties,
and financial and operating results for the period. The Company also files current reports with the SEC if certain material events occur
between quarterly or annual reports. A copy of the annual report is mailed to stockholders each spring and is also available free of charge
electronically on the SEC’s website www.sec.gov and on the website maintained by the Company’s advisor for us at www.lightstonecapitalmarkets.com.
The quarterly and current reports are not mailed to stockholders but are available electronically free of charge on www.sec.gov and www.lightstonecapitalmarkets.com.
In addition to these current, quarterly and annual reports that the
Company files with the SEC, the Company’s charter currently requires the Company to distribute to stockholders annually report with
certain non GAAP information required under the NASAA REIT Guidelines that is not required under the SEC reports, including the ratio
of the cost of raising capital during the period to the capital raised, the total operating expenses of the Company stated as a percentage
of average invested assets and as a percentage of net income, and a report from the independent directors that the policies being followed
by the Company are in the best interests of our stockholders and the basis for such determination. If the reporting charter amendment
is approved, the Company would no longer be required to distribute this additional information. The metrics require the Company to provide
non GAAP financial that the Company does not use to evaluate its operating performance. In addition, the Company is no longer raising
capital through securities offerings.
Why is the Company seeking to change stockholder access to the stockholder
list?
The Company’s current charter requires the Company to provide
to any stockholder, regardless of the amount of stock owned by the stockholder or the length of time that the stockholder has been a stockholder,
a copy of stockholder list, including the names, addresses and phone numbers as well as the number of shares owned by each stockholder.
Even though the Company may require any stockholder requesting the list to represent that he does not intend to use the list for commercial
purposes, the Company does not believe that it is in the best interest of stockholders to be required to provide such a list of personal
information to a person who owns an insignificant number of share or has recently acquired the shares. The charter amendment would require
the Company to provide to any stockholder any information to which the stockholder would be entitled to inspect and copy under Maryland
law. Maryland law provide that the Company need only provide a stockholder list to persons who have been a stockholder of record for at
least six month of at least 5% of the outstanding shares of common stock. In addition, the stockholder list would contain only the names,
addresses and number of shares owned. The Company would not be required to provide phone numbers of its stockholders.
If the provision in the charter regarding the directors’ fiduciary
obligations is removed, will the directors continue to owe the Company any duties of care or loyalty?
Under Maryland law, each director of a company is required to perform
his duties in good faith, in a manner the director reasonably believes to be in the best interest of the company and with the care that
an ordinarily prudent person in a like position would use under similar circumstances.
GENERAL QUESTIONS
How do stockholders vote?
Proxy cards have been mailed to the stockholders, and instructions
on how to vote are on the proxy card, including how to vote by Internet at www.proxy-direct.com, by telephone, by calling toll free (800)
337-3503, or by mail using the pre-addressed, postage-paid envelope provided with the Company’s Proxy Statement.
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