Northstar Healthcare Announces Equity Financing

TORONTO and HOUSTON, July 30 /CNW/ - Northstar Healthcare Inc. ("Northstar" or the "Company")(TSX:NHC) today announced that it plans to complete a non-brokered private placement (the "Private Placement") of common shares to Canada Healthcare Acquisition Inc. (the "Investor"), a corporation indirectly controlled by Dr. Donald L. Kramer, M.D., a former CEO and former director of Northstar.

In connection with the Private Placement, the Investor will subscribe for $5 million in Northstar common shares; in addition, Healthcare Ventures, Ltd. ("Ventures"), an entity controlled by Dr. Kramer, will exchange for Northstar common shares all of its Class B special units in Northstar Subco, LLC, and all of its Class B Special Units of Northstar Healthcare Acquisitions, LLC. The Investor has agreed to advance to Northstar $1 million of the aggregate subscription price of the Private Placement on or before Wednesday, August 4, 2010 (the "Advance"). Upon completion of the Private Placement and after giving effect to this exchange, the Investor will own or control, directly and indirectly, approximately 56.2% of the outstanding common shares of the Corporation. After giving effect to the issuance of 14.6 million common shares at approximately $0.343 per share pursuant to the Private Placement, along with the issuance of 4.2 million common shares in exchange for Class B units, approximately 33 million common shares of Northstar will be outstanding on a fully-diluted basis.

The terms of the Private Placement were negotiated between the Investor and a special committee of Northstar's board of directors (the "Special Committee"), consisting solely of independent directors and formed for the purpose of considering a full range of strategic alternatives. The Special Committee received independent legal and financial advice in respect of the Private Placement.

Closing of the Private Placement, which is subject to certain conditions, including the receipt of approval from The Toronto Stock Exchange, is expected to occur by August 31, 2010 or as soon as practicable thereafter. The proceeds of the Private Placement will be used for working capital and general corporate purposes.

Immediately following Northstar's board of directors' meeting scheduled for mid-August, 2010, two of Northstar's current directors will resign, and will be replaced by two nominees of the Investor. On closing of the Private Placement, the remaining three current directors will resign.

"I am confident that this cash infusion will provide Northstar with the time and financial flexibility necessary to implement critical corporate initiatives, designed to return Northstar to profitability," said Dr. Kramer. "We will move quickly to execute a new business plan, including the re-syndication of the Palladium centre and the initiation of new marketing programs. I believe there are a number of growth opportunities that can be cultivated in the Texas market and we will actively explore all options."

The current moratorium on Northstar's arbitration and litigation claims against Dr. Kramer, Ventures and related entities (and their counterclaims and defamation claims against Northstar, its subsidiaries and their respective officers, directors and managers) will remain in place through closing of the Private Placement. Northstar has agreed that it will not initiate or participate in any private placement of Common Shares prior to the closing of the Private Placement, and that, following receipt of the Advance, Northstar will not complete, or enter into any agreement to complete, any material divestitures or alternate transactions prior to the closing of the Private Placement. These exclusivity rights in favour of the Investor will terminate if the Private Placement has not closed by September 30, 2010.

    
    Application for Exemption
    -------------------------
    

The Special Committee has recommended, and the board of directors of Northstar has unanimously approved entering into the Private Placement and concluded that (i) Northstar is in serious financial difficulty; (ii) the Private Placement is designed to improve Northstar's financial condition; and (iii) the terms of the Private Placement are reasonable for Northstar in the circumstances.

Northstar will apply to the TSX, pursuant to Section 604(e) of the TSX Company Manual, for an exemption from the requirement to seek shareholder approval for the Private Placement (which would otherwise be required because the Private Placement, if completed, will result in a change in control of Northstar), on the basis of Northstar's serious financial hardship.

Northstar is also relying on the financial hardship exemption from the requirement for a formal valuation and minority approval contained in Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions in connection with a related party transaction.

    
    About Northstar Healthcare Inc.
    -------------------------------
    

Northstar owns and/or manages ambulatory surgery centres in the United States, focusing initially on Houston and other metropolitan areas in Texas. The Company currently holds interests in two ambulatory surgery centres in Houston - a 70% partnership interest in The Palladium for Surgery - Houston and a 60% partnership interest in Medical Ambulatory Surgical Suites.

    
    Forward-looking statements
    --------------------------
    

This news release may contain forward-looking statements (within the meaning of applicable securities laws) relating to business of the Company and the environment in which it operates. Forward-looking statements are identified by words such as "believe", "anticipate", "expect", "intend", "plan", "will", "may" and other similar expressions. This information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information. Forward-looking information in this news release includes, without limitation, statements made in respect of Northstar's application to the TSX pursuant to Section 604 of the TSX Company Manual, statements regarding the ability to return Northstar to profitability, statements regarding any proposed new business plan and future growth opportunities, and other statements regarding management's beliefs, intentions, results, performance, goals, achievements, future events, plans and objects.

All forward-looking statements in this news release are qualified by these cautionary statements. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, should not be unduly relied upon and will not necessarily be accurate indications of whether or not such results will be achieved. Factors that could cause actual results to differ materially from the results discussed in the forward-looking statements, include, but are not limited to the failure of Northstar to complete the Private Placement, including by reason of its inability to obtain an exemption from the TSX from the requirement to seek shareholder approval for the Private Placement, the failure of any proposed new business plan and growth opportunities, and actual future market conditions being different than anticipated by the board of directors of Northstar. Forward-looking information is based on various material factors or assumptions, which are based on information currently available to Northstar. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking information may include, but are not limited to: the financial and operating attributes of Northstar as at the date hereof, the successful completion of the Private Placement, the views of Northstar's board of directors regarding the benefits associated with the Private Placement, and the successful attainment of goals related to any proposed new business plan and future growth opportunities. Readers are cautioned that the preceding list of material factors or assumptions is not exhaustive. Although the forward-looking statements contained in this news release are based upon what management believes are reasonable assumptions, Northstar cannot assure readers that actual results will be consistent with these forward-looking statements.

The forward-looking statements contained in this news release are made as of the date of this news release and should not be relied upon as representing Northstar's views as of any date subsequent to the date of this news release. Northstar assumes no obligation to update or revise these forward-looking statements to reflect new information, events, circumstances or otherwise, except as required by applicable law.

%SEDAR: 00025141E

For further information: Philip Koven, Tel: [phone] Ext. 235, E-mail: [email protected]