Silver Star Properties REIT, Inc. Answers Questions Regarding Poison Pill Previously Adopted and Executed

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Feb 27, 2024, 16:06 ET

HOUSTON, Feb. 27, 2024 /PRNewswire/ --

Why did the Company adopt a shareholder rights plan?

On August 18, 2023, the Executive Committee of the Board of Directors (the "EC") adopted a shareholder rights plan (the "Rights Plan") as a protective measure to protect (i) the efforts and strategic business plans, thoroughly and deliberately considered, of the EC and management and (ii) the interests of all of the Company's shareholders. A shareholder rights plan is fundamentally a protective and defensive measure. It is not meant to benefit or to harm the shareholders or their leadership. That being said, a shareholder rights plan does have "teeth." Such plans are commonly referred to as "poison pills."

The shareholder Rights Plan is intended to protect the Company and its shareholders from a hostile change of control by a person or group of persons seeking directly to disregard the basic judgment of the Board of Directors.

What triggers the "poison pill"?

The Rights Plan provides several protective measures which the Board of Directors can implement if it determines that a person or group acquires more than 10% of the Company's outstanding shares, a person or group who owns more than 10% of the Company's outstanding shares acquires more shares, or a person or group who own or control 10% or more of the Company's outstanding shares begin to act together with at least one additional shareholder to influence other shareholders contrary to the business judgment of the Board of Directors. The Rights Plan calls such persons "Acquiring Persons." The protective measures are designed to have a dilutive effect on the interests of the Acquiring Persons. The dilution inures to the benefit of everyone else. Certain actions or inactions by Acquiring Persons may trigger the poison pill.

Who are these "Acquiring Persons?"

The Hartman Group owns more than 10% of the Company's outstanding shares. The Board has determined that Allen Hartman, the Hartman Family Protection Trust, Hartman vREIT XXI, Inc., Hartman XX Holdings, Inc., Lisa Hartman, Margaret Hartman, Victoria Hartman Massey and Charlotte Hartman (collectively, the "Hartman Group") are "Acquiring Persons" within the Meaning of the Rights Plan. The Company has also placed the additional shares of several other shareholders who may be Acquiring Persons in escrow pending a determination as to their status.

What has the Hartman Group done to trigger the Pill?

The Hartman Group has acted contrary to what the Board of Directors has determined to be in the best interest of the Company and its shareholders. By filing suit in Maryland court, the Hartman Group has sought to force liquidation of the Company assets. Forced liquidation of the Company is not what the Board of Directors believes is in the best interest of the shareholders. The Hartman Group has also threatened to launch a hostile proxy contest and solicited shareholders to withhold and revoke consents for the Board in its recent consent solicitation. The Board believes that the Hartman Group has done so at least in part because Silver Star would not agree to Hartman's threats and buyout demands. Because the Hartman Group further seeks to take control of the Company, the Hartman Group has taken actions adverse to the Company.

What is the effect of the Pill?

The impact from the implementation of the Rights Plan is that the Shareholders have received additional shares that has had the effect of diluting the Hartman Group. Shareholders other than the Acquiring Persons will receive approximately 7.5 % accretion in their ownership percentage.

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Forward-Looking Statements: This press release contains certain forward-looking statements. Because such statements include risks, uncertainties, and contingencies, actual results may differ materially from those expressed or implied by such forward-looking statements, and you should not place undue reliance on any such statements. Several important factors could cause actual results to differ materially from the forward-looking statements contained in this material. Forward-looking statements in this press release speak only as of the date on which such statements were made, and the company undertakes no obligation to update any such statements that may become untrue because of subsequent events. Such forward-looking statements are subject to the safe harbor protection for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

SOURCE Silver Star Properties REIT, Inc.