Northstar issues response to Canada Healthcare Acquisition's unsolicited offer

Jun 11 2010

Arbitration Panel Denies Dr. Kramer's Motion for Summary Judgment

Northstar Healthcare Inc. ("Northstar" or the "Company") (TSX:NHC) today announced it has issued a Directors' Circular in response to the unsolicited offer (the "Offer") by Canada Healthcare Acquisition Inc. (the "Offeror"), a corporation indirectly controlled by Dr. Donald L. Kramer, a former CEO and former director of Northstar, to acquire all the issued and outstanding common shares of the Company for Cdn $0.95 per common share. Northstar's Directors' Circular was mailed to Northstar shareholders today and has been filed on SEDAR (www.sedar.com). Shareholders are urged to read the Directors' Circular in its entirety.

The board of directors of Northstar (the "Board"), with the benefit of advice from the special committee of independent directors established by the Board (the "Special Committee"), its legal advisors and Canaccord Genuity Corp., the financial advisor to the Board, is carefully reviewing and considering the Offer and identifying and assessing other available alternatives. Based upon its initial review of the Offer and a recommendation from the Special Committee, the Board has unanimously determined to advise shareholders not to tender their common shares to the Offer until further communication is received from the Board. The Board of Directors intends to communicate further with shareholders on or before July 19, 2010.

The following is a summary of the principal reasons for the Board's initial advice:

- The Offer is highly conditional for the benefit of Dr. Kramer. Some of the conditions are not subject to materiality thresholds or other objective criteria but rather provide Dr. Kramer with a broad range of grounds upon which he may decline to proceed with the Offer even if a sufficient number of shares are tendered to the Offer to satisfy the Offer's minimum acceptance condition. - Strategic alternatives are being pursued by Northstar with the intention to generate value for shareholders that is superior to the Offer. Tendering shares to the Offer before the Board and its advisors have had an opportunity to fully explore all available strategies may preclude the possibility of a financially superior transaction. - Representatives of Dr. Kramer and Northstar are scheduled to meet to discuss the Offer further. At this time, it is impossible to predict whether any supported offer or transaction will emerge from these discussions.

The Offer remains open for acceptance until 5:00 p.m. (Toronto time) on July 26, 2010, unless extended or withdrawn, and is subject to a number of conditions. Accordingly, there is no necessity for shareholders to take any action with respect to the Offer at this time and the Board is not making a recommendation at this time.

In addition, Northstar also announced that the arbitration panel presiding over the arbitration between Northstar and Dr. Kramer denied Dr. Kramer's Motion for Summary Judgment. The panel's decision denying the motion means that, barring unforeseen events, Northstar will obtain a hearing on the merits of its claim. The panel denied Northstar's motion to dismiss the six counterclaims filed by Dr. Kramer against it, four of which had already been withdrawn by Dr. Kramer in response to Northstar's motion, without prejudice to being able to bring them in a separate proceeding. Further explanation of both decisions of the arbitration panel can be found in the Directors' Circular.