Item 1.01 Entry into a Material Definitive Agreement.
Termination Agreement
OnOctober 21, 2022 , the Company entered into a Termination Agreement (the "Termination Agreement") with the Advisor,NRF Holdco, LLC , aDelaware limited liability company ("Sponsor"), andNorthStar Healthcare Income Operating Partnership, LP , aDelaware limited partnership and a subsidiary of the Company ("NHI OP"), which provides for the immediate termination of the Advisory Agreement. The Termination Agreement also provides for, among other things, the final settlement of any amounts owing under the Advisory Agreement, the transition of employees from the Advisor to the Company (including the Company's assumption of certain related employee liabilities), the survival of certain indemnification and other obligations and certain amendments to joint venture agreements between affiliates of NHI and the Advisor. No payment will be made by the Company to the Advisor in connection with the Internalization. In addition, in connection with the termination of the Advisory Agreement, the Company's revolving line of credit from an affiliate of its Sponsor was terminated. No amounts were outstanding under this line of credit at the time of termination. Transition Services Agreement In connection with the Internalization, onOctober 21, 2022 , the Company, NHI OP and the Advisor entered into a Transition Services Agreement (the "TSA") to facilitate an orderly transition of the Company's management of its operations. TheTSA provides for, among other things, the Advisor to provide certain services for a transition period of up to six months following the Internalization, with NHI having the option to extend the initial term once for up to three months at a 20% surcharge.Treasury and accounts payable services will be provided for 12 months and will continue until either party provides at least six months' notice of termination. The services primarily include technology, insurance, legal, treasury and accounts payable services. The Company will pay the Advisor's costs for providing the services, including the allocated cost of employee wages and compensation and actually incurred out-of-pocket expenses. The terms of the agreements described under this Item 1.01, and the transactions contemplated thereby, were negotiated and unanimously approved by a committee of independent members of the board of directors (the "Board") of the Company (the "Special Committee"), all of whom are independent and disinterested members of the Board. The Special Committee was formed inAugust 2020 in order to evaluate strategic alternatives available to the Company. The foregoing descriptions of the Termination Agreement, theTSA and the transactions contemplated thereby do not purport to be complete and are qualified in their entirety by reference to the Termination Agreement andTSA , copies of which are filed herewith as Exhibit 10.1 and Exhibit 10.2, respectively, and incorporated by reference herein. The Termination Agreement and theTSA have been included to provide you with information regarding their terms. They are not intended to provide any other factual information about the Company or the other parties thereto or any of their respective businesses. Each of the Advisory Agreement and the relationship between the Company and the Advisor is more fully described in the Proxy Statement under the heading "Certain Relationships and Related Transactions," which information is incorporated by reference in this Item 1.01.
Item 1.02 Termination of a Material Definitive Agreement.
The information set forth in Item 1.01 with respect to the termination of the Advisory Agreement is incorporated by reference into this Item 1.02.
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Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Resignation and Appointment of Officers
In connection with the Internalization, each ofAnn B. Harrington ,Paul V. Varisano andDouglas W. Bath provided notice of their respective resignations as Interim Chief Executive Officer, President, General Counsel and Secretary, Chief Financial Officer and Treasurer and Chief Investment Officer, effective immediately upon on the Internalization. Each ofMs. Harrington ,Mr. Varisano andMr. Bath will continue to be employed by an affiliate of the Advisor and are resigning as a result of the termination of the Advisory Agreement, and not due to any disagreement with the Company on any matter relating to the Company's operations, policies or practices. Effective upon the Internalization, the Board appointedKendall K. Young as the Company's Chief Executive Officer and President and as a member of the Board to fill an existing vacancy.Mr. Young , age 61, previously served as Executive Vice President and Head ofSenior Housing for Healthpeak Properties (NYSE: PEAK) from 2010 through 2019, where he was responsible for the senior housing platform. Prior to that role,Mr. Young was the Global Head of Asset Management for real estate atStrategic Value Partners from 2007 to 2010, a Managing Director and Global Head of Asset Management in Merrill Lynch's Global Principal Investing business from 2005 to 2007 and a Managing Director withGE Capital Real Estate from 1992 to 2005.Mr. Young holds a Bachelor of Arts degree in Business Administration from theUniversity of Southern California and a Masters of Business Administration from theUniversity of California Irvine .Mr. Young will receive an annual base salary of$425,000 , subject to annual review commencing inJune 2023 .Mr. Young will initially be eligible for annual cash incentive compensation at 50% (threshold), 100% (target) and 150% (maximum) of 80% of his annual base salary, subject to annual review commencing in 2023. For 2022,Mr. Young's target annual cash incentive compensation opportunity will be$135,000 . As soon as practicable following commencement of his employment,Mr. Young will also be granted a one-time, long-term incentive award having a total target award value of$3,800,000 that, subject to his continued employment with the Company throughDecember 31, 2025 , will vest 25% on such date and the remaining 75% will vest on such date if and to the extent certain performance criteria are to be achieved. If, prior to the vesting date, (a) his employment is terminated because of his death or disability, by the Company without cause or by him for good reason, a pro rata portion of the award will vest or (b) a change of control occurs, the award will vest and be paid following the change of control based on the level of achievement of the performance goal as of the change of control.Mr. Young will also receive severance if his employment is terminated by the Company without cause or by him for good reason, or due to his death or disability, equal to continued payment of his annual base salary for twelve months following termination (if such termination occurs prior toDecember 31, 2024 only), and a prorated amount of the target annual cash incentive compensation (regardless of when such termination occurs). The Company andMr. Young have entered into a Restrictive Covenant Agreement that subjectsMr. Young to noncompetition and noninterference restrictions during employment, as well as nonsolicitiation restrictions during employment and for a period of twelve months following termination ofMr. Young's employment for any reason, and certain confidentiality and nondisparagement restrictions during employment and thereafter. In addition, effective upon the Internalization, the Board appointedNicholas R. Balzo as the Company's Chief Financial Officer, Treasurer and Secretary.Mr. Balzo , age 35, has previously served as Chief Accounting Officer of the Sponsor fromMarch 2022 until the Internalization and, fromMarch 2021 toMarch 2022 , Senior Vice President ofDigitalBridge Group Inc. (formerly Colony Capital, Inc. andNorthStar Asset Management Group Inc. ), the Sponsor's predecessor (the "Prior Sponsor"), whereMr. Balzo was responsible for oversight of finance and accounting for the Company. Prior to this role,Mr. Balzo served in various accounting and finance roles at the Prior Sponsor since joining in 2014. Before joining the Prior Sponsor,Mr. Balzo was in the assurance practice ofBaker Tilly US, LLP .Mr. Balzo , a Certified Public Accountant, earned a Bachelor of Science in Accounting and Master of Business Administration fromSt. John's University.
As soon as practicable following commencement of his employment,
3 -------------------------------------------------------------------------------- throughDecember 31, 2025 , will vest 25% on such date and the remaining 75% will vest on such date if and to the extent certain performance criteria are to be achieved. If, prior to the vesting date, (a) his employment is terminated because of his death or disability, by the Company without cause or by him for good reason, a pro rata portion of the award will vest or (b) a change of control occurs, the award will vest and be paid following the change of control based on the level of achievement of the performance goal as of the change of control.Mr. Balzo will also receive severance if his employment is terminated by the Company without cause or by him for good reason equal to continued payment of his annual base salary for twelve months following termination, and a prorated amount of the target annual cash incentive compensation. In addition,Mr. Balzo received a retention award from an affiliate of the Advisor, which will be assumed by the Company effective as of the Internalization, which provides that, subject to his continued service throughJune 30, 2023 , he will receive a cash bonus equal to 20% of his then-current base salary, payable within 30 days of such date. The Company andMr. Balzo have entered into a Restrictive Covenant Agreement that subjectsMr. Balzo to noncompetition restrictions during employment and for a period of six months following a termination ofMr. Balzo's employment for cause or byMr. Balzo without good reason, as well as noninterference restrictions and nonsolicitiation restrictions during employment and for a period of twelve months following termination ofMr. Balzo's employment for any reason, and certain confidentiality and nondisparagement restrictions during employment and thereafter. The foregoing descriptions of the employment arrangements withMr. Young andMr. Balzo are qualified in their entirety by the text of the offer letters and the Restrictive Covenant Agreements and, in respect ofMr. Balzo , the Retention Award Letter, copies of which are filed as Exhibits 10.3, 10.4, 10.5, 10.6 and 10.7. Item 8.01 Other Events.
In connection with the Internalization, the Company changed its principal place
of business to
The Company issued a press release onOctober 21, 2022 announcing that it had entered into the Termination Agreement. A copy of that press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein. In addition, onOctober 21, 2022 , the Company posted an investor presentation regarding the Internalization on its website at www.northstarhealthcarereit.com under "Investor Relations-Investor Communications ." The information contained on the Company's website is not incorporated by reference herein.
Cautionary Statement Regarding Forward-Looking Statements.
This Current Report on Form 8-K may contain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," or "potential" or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and contingencies, many of which are beyond the Company's control, and may cause actual results to differ significantly from those expressed in any forward-looking statement. Among others, the following uncertainties and other factors could cause actual results to differ from those set forth in the forward-looking statements: the Company's ability to successfully manage the transition to self-management and to retain its senior executives; operating costs and business disruption may be greater than expected; the ability to realize substantial efficiencies as well as anticipated strategic and financial benefits of the Internalization; the operating performance of its investments, its financing needs, the effects of its current strategies and investment activities and its ability to effectively deploy capital. The foregoing list of factors is not exhaustive. Additional information about these and other factors can be found in in Part I, Item 1A of the Company's Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 , the Company's Quarterly Report on Form 10-Q for the quarter endedJune 30, 2022 as well as in the Company's other filings with theSecurities and Exchange Commission (the "SEC"). The Company cautions investors not to unduly rely on any forward-looking statements. The forward-looking statements speak only as of the date of this Current Report on Form 8-K. The Company is under no duty to update any of these forward-looking 4 -------------------------------------------------------------------------------- statements after the date of this Current Report on Form 8-K, nor to conform prior statements to actual results or revised expectations, and the Company does not intend to do so.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. Description 10.1 * Termination Agreement, dated October 2
1 , 2022, by and among
NorthStar Healthcare Income, Inc. , NorthStar
LP,CNI NSHC Advisors, LLC andNRF Holdco, LLC . 10.2 * Transition Services Agreement, dated October
2 1 , 2022, by and among
NorthStar Healthcare Income, Inc. , NorthStar
and CNI NSHC Advisors, LLC. 10.3 Offer Letter, dated October 2 1 , 2022, from NorthStar Healthcare Income, Inc. to Kendall Young 10.4 Restrictive Covenant Agreement, dated October 2 1 , 2022, between NorthStar Healthcare Income, Inc. and Kendall Young 10.5 Offer Letter, dated October 2 1 , 2022, from NorthStar Healthcare Income, Inc. to Nicholas Balzo 10.6 Restrictive Covenant Agreement, dated October 2 1 , 2022, between NorthStar Healthcare Income, Inc. and Nicholas Balzo 10.7 Retention Award Letter, dated July 29, 2022,
from
Healthcare Income, Inc. to Nicholas Balzo 99.1 Press Release, dated October 21 , 2022 104 Cover Page Interactive Data File (embedded within
the Inline XBRL document)
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* Certain schedules and similar attachments have been omitted in reliance on Instruction 4 of Item 1.01 of Form 8-K and Item 601(a)(5) of Regulation S-K.The Company will provide, on a supplemental basis, a copy of any omitted schedule or attachment to theSEC or its staff upon request. 5
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