SCHEDULE: Star Equity, Gyrodyne Reach Board Settlement

Star Equity Fund, LP and Gyrodyne, LLC have entered into a settlement agreement, leading to the withdrawal of Star Equity's director nominations and changes to Gyrodyne's board structure and governance.

Summary

• Star Equity Fund, LP, and its affiliates, holding 7.1% of Gyrodyne, LLC's common stock, entered into a Settlement Agreement with Gyrodyne on October 16, 2025.
• Star Equity agreed to irrevocably withdraw its June 4, 2025 notice to nominate two candidates, Hannah M. Bible and Matthew R. Sullivan, for election to Gyrodyne's Board at the 2025 Annual Meeting.
• Gyrodyne agreed to nominate only one director, Richard B. Smith, for election to the Board at the 2025 Annual Meeting and to reduce the Board size from five to four directors.
• The agreement includes provisions for identifying a mutually acceptable independent replacement director if any of the four 'Continuing Directors' (Jan H. Loeb, Nader G.M. Salour, Richard B. Smith, Ronald J. Macklin) resigns or ceases to be a director, with Star Equity having replacement rights for the first such vacancy.
• Gyrodyne committed not to increase Board fees and to limit the aggregate fee paid to the Chairman of the Board to $65,000.
• Star Equity agreed to vote with the Board's recommendation at the 2025 Annual Meeting and any shareholder meetings until December 31, 2026, with exceptions for extraordinary transactions and special meetings where Institutional Shareholder Services Inc. (ISS) recommendations differ.
• The initial Termination Date for the agreement is December 31, 2026, extendable to December 31, 2027, if Nader G.M. Salour and Jan H. Loeb are re-nominated and agree to stand for election at the 2026 annual meeting.
• Star Equity is subject to standstill provisions until the Termination Date, restricting further nominations, proxy solicitations, or attempts to influence the Board or management.
• Gyrodyne will reimburse Star Equity $25,000 for expenses incurred in connection with the Annual Meeting and the settlement.

Sentiment

Score: 6

Explanation: The settlement agreement represents a pragmatic resolution to a potential proxy contest. While Star Equity withdrew its direct nominations, it secured concessions regarding board size, director fees, and future replacement director rights, along with expense reimbursement. Gyrodyne avoided a costly proxy fight and gained a period of stability through the standstill agreement. This outcome is generally neutral to slightly positive as it reduces uncertainty and potential disruption.

Positives

• The settlement avoids a potentially costly and distracting proxy contest for both parties.
• Gyrodyne's Board size will be reduced from five to four directors, potentially streamlining decision-making.
• Board fees will not increase, and the Chairman's fee is capped at $65,000, which could be seen as a positive for cost control and shareholder value.
• Star Equity will be reimbursed $25,000 for expenses incurred.
• Star Equity gains influence over future director appointments in specific scenarios related to 'Continuing Director' vacancies.

Negatives

• Star Equity withdrew its nominations, meaning its preferred candidates will not join the Board at the 2025 Annual Meeting.
• Star Equity is subject to standstill provisions until at least December 31, 2026, limiting its ability to influence the company's governance or strategy during this period.
• Star Equity commits to voting with the Board's recommendation on most matters, reducing its independent voting power.

Risks

• Failure to agree on a mutually acceptable Replacement Director could lead to a further reduction in Board size, potentially impacting governance stability.
• The standstill agreement limits Star Equity's ability to respond to unforeseen negative developments at Gyrodyne until the Termination Date.
• Potential for future disagreements if the conditions for extending the Termination Date are not met or if a breach of the agreement occurs.

Future Outlook

The settlement agreement outlines a governance framework for Gyrodyne until at least December 31, 2026, with a potential extension to December 31, 2027, contingent on the re-nomination of specific directors. This period includes restrictions on Star Equity's activist activities and specific agreements regarding Board composition and fees.

Management Comments

• The letter agreement is intended to memorialize the understandings and agreements reached between Gyrodyne, LLC and Star Equity Fund, LP relating to Star Equity's notice of intent to nominate two candidates for election to the Board at the 2025 annual meeting of shareholders.

Industry Context

This settlement reflects a common outcome in shareholder activism, where an activist investor, after nominating directors, reaches an agreement with the company to avoid a proxy fight. Such agreements often involve board representation changes, governance reforms, and standstill provisions, aiming to align shareholder and company interests without the disruption of a contested election.

Comparison to Industry Standards

• NA

Management Changes

Corporate Governance

Legal Proceedings

• NA

Related Party Transactions

• NA

Stakeholder Impact

• Shareholders: Reduced uncertainty from a potential proxy fight, potential for improved governance through board changes and fee caps, but also a standstill agreement limiting activist influence from a major shareholder for a period.
• Board of Directors: Reduced size, specific nomination for 2025, and a structured process for future vacancies.
• Management: Gains a period of stability from activist pressure due to the standstill agreement.

Next Steps

• Gyrodyne to nominate Richard B. Smith for election at the 2025 Annual Meeting.
• Gyrodyne to reduce Board size from five to four directors following the 2025 Annual Meeting.
• Gyrodyne to file a Current Report on Form 8-K within four business days of the agreement.
• Star Equity to file an amendment to its Schedule 13D within two business days of the agreement.
• Board and Star Equity to engage in good faith discussions to identify a mutually acceptable independent Replacement Director if a 'Continuing Director' resigns or ceases to be a director.
• Potential extension of the Termination Date to December 31, 2027, if Nader G.M. Salour and Jan H. Loeb are re-nominated and agree to stand for election at the 2026 annual meeting.

Key Dates

Recommendation

The settlement agreement resolves a potential proxy contest, removing immediate uncertainty and providing a period of stability for Gyrodyne. While Star Equity secured some governance concessions, its activist influence is curtailed by the standstill provisions. The agreement's terms, including board size reduction and fee caps, are generally neutral to slightly positive for long-term shareholder value. However, without further operational or financial updates, the filing primarily addresses governance rather than fundamental business performance, warranting a 'hold' as investors await more substantive developments.

Keywords

Gyrodyne, Star Equity Fund, SEC Filing, Schedule 13D, Activist Investor, Settlement Agreement, Corporate Governance, Board of Directors, Proxy Contest, Shareholder Activism, Director Nomination, Standstill Agreement