Item 1.01.
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Entry into a Material Definitive Agreement
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As previously disclosed in Colony NorthStar,
Inc.s (Colony NorthStar) Current Report on Form
8-K
filed with the Securities and Exchange Commission (the SEC) on August 28, 2017 (the Signing
8-K),
Colony Capital Operating Company, LLC (CLNS OP), a Delaware limited liability company and the operating partnership of Colony NorthStar, and NRF RED REIT Corp., a Maryland corporation and
indirect subsidiary of CLNS OP (RED REIT), entered into a Master Combination Agreement (the Original Combination Agreement) on August 25, 2017 with (i) NorthStar Real Estate Income Trust, Inc., a Maryland corporation
(NorthStar I), (ii) NorthStar Real Estate Income Trust Operating Partnership, LP, a Delaware limited partnership and the operating partnership of NorthStar I (NorthStar I OP), (iii) NorthStar Real Estate Income II,
Inc., a Maryland corporation (NorthStar II), (iv) NorthStar Real Estate Income Operating Partnership II, LP, a Delaware limited partnership and the operating partnership of NorthStar II (NorthStar II OP), (v) Colony
NorthStar Credit Real Estate, Inc., a Maryland corporation and wholly owned subsidiary of Colony NorthStar (Colony NorthStar Credit), and (vi) Credit RE Operating Company, LLC, a Delaware limited liability company and wholly owned
subsidiary of Colony NorthStar Credit (Colony NorthStar Credit OP), pursuant to which a select portfolio of Colony NorthStar assets and liabilities will combine with substantially all of the assets and liabilities of NorthStar I and all
of the assets and liabilities of NorthStar II in
an all-stock combination
transaction (the Combination).
On November 20, 2017, the parties entered into that certain Amended and Restated Master Combination Agreement (the Amended and Restated
Combination Agreement), which amends and restates the Original Combination Agreement to, among other things, (i) modify (A) the classification of the shares of Colony NorthStar Credit common stock to be issued in the REIT Mergers (as
defined below) in respect of shares of NorthStar I common stock and shares of NorthStar II common stock issued and outstanding immediately prior to the REIT Mergers and (B) the form of Articles of Amendment and Restatement, which is attached as
Exhibit B to the Amended and Restated Combination Agreement, to provide for alternative authorized share classes and conversion provisions in the event of a Listing (as defined below) or an IPO (as defined below) and (ii) remove the references
to (A) the merger of NorthStar I OP with and into Colony NorthStar Credit OP and (B) the merger of NorthStar II OP with and into Colony NorthStar Credit OP. The Amended and Restated Combination Agreement supersedes, in its entirety, the
Original Combination Agreement, which was previously filed as Exhibit 2.1 to the Signing
8-K.
As
described in further detail below, the Amended and Restated Combination Agreement modifies the liquidity restrictions on the shares of Colony NorthStar Credit common stock to be received by NorthStar I stockholders and NorthStar II stockholders in
the Combination so that (i) in the event of a Listing (as defined below) (without an IPO (as defined below)), the shares to be received will be immediately tradable, and (ii) in the event of an IPO, 15% and 85% of the shares to be received will
become tradable 30 days and 180 days, respectively, following the closing date of the IPO. The Original Combination Agreement had provided that 10%, 45% and 45% of the shares of Colony NorthStar Credit common stock to be received by NorthStar I
stockholders and NorthStar II stockholders in the Combination would become tradable 30 days, 180 days and one year, respectively, following a Listing or IPO, as applicable (except that, in the case of a Listing (without an IPO), the 10% of such
shares would become immediately tradable).
The Amended and Restated Combination Agreement does not change the NorthStar I Exchange Ratio
(as defined below) but amends the classification of the shares of Colony NorthStar Credit common stock to be issued in the merger of NorthStar I with and into Colony NorthStar Credit (the NorthStar I Merger) as contemplated by the
Original Combination Agreement and provides that, at the effective time of the NorthStar I Merger, each share of NorthStar I common stock issued and outstanding immediately prior to the effective time of the NorthStar I Merger automatically will be
converted into the right to receive 0.3532 (the NorthStar I Exchange Ratio) shares of (i) in the event of a listing (without an initial public offering) of the Colony NorthStar Credit common stock on a national securities exchange
(a Listing), Colony NorthStar Credit Class A common stock, and cash in lieu of fractional shares, and (ii) in the event of the initial public offering of Colony NorthStar Credit on a national securities exchange (an
IPO), Colony NorthStar Credit common stock classified as follows: (a) 0.0530 shares of Colony NorthStar
Credit Class B-1 common
stock; and (b) 0.3002 shares of Colony NorthStar
Credit Class B-2 common
stock, and cash in lieu of fractional shares, and each share of NorthStar I common stock will no longer be outstanding, will automatically be cancelled and will cease to exist.
As of September 30, 2017, approximately 21,000 shares of NorthStar I restricted common stock will automatically vest in connection with the NorthStar I Merger and the holders will be entitled to receive the same equity exchange as the other
holders of NorthStar I common stock as described in the preceding sentence.
The Amended and Restated Combination Agreement does not
change the NorthStar II Exchange Ratio (as defined below) but amends the classification of the shares of Colony NorthStar Credit common stock to be issued in the merger of NorthStar II with and into Colony NorthStar Credit (the NorthStar II
Merger and together with the NorthStar I Merger, the REIT Mergers) as contemplated by the Original Combination Agreement and provides that, at the effective time of the NorthStar II Merger, each share of NorthStar II common stock
issued and outstanding immediately prior to the effective time of the NorthStar II Merger automatically will be converted into the right to receive 0.3511 (the NorthStar II Exchange Ratio) shares of (i) in the event of a Listing,
Colony NorthStar Credit Class A common stock, and cash in lieu of fractional shares, and (ii) in the event of an IPO, Colony
NorthStar Credit common stock classified as follows: (a) 0.0527 shares of Colony NorthStar Credit
Class B-1
common stock; and (b) 0.2984 shares
of Colony NorthStar Credit
Class B-2
common stock, and cash in lieu of fractional shares, and each share of NorthStar II common stock will no longer be outstanding, will automatically be cancelled and
will cease to exist. As of September 30, 2017, approximately 31,000 shares of NorthStar II restricted common stock will automatically vest in connection with the NorthStar II Merger and the holders will be entitled to receive the same equity
exchange as the other holders of NorthStar II common stock as described in the preceding sentence.
The Amended and Restated Combination
Agreement also amends the form of Articles of Amendment and Restatement attached as Exhibit B thereto, and provides, in the alternative, that (i) in the event of an IPO, Colony NorthStar Credit will be authorized to issue shares of Colony
NorthStar Credit Class A common stock, shares of Colony NorthStar Credit
Class B-1
common stock, shares of Colony NorthStar Credit
Class B-2
common stock
and shares of Colony NorthStar Credit preferred stock, and in respect of the shares of Colony NorthStar Credit Class B common stock, (x) each share of Colony NorthStar Credit
Class B-1
common
stock will convert into one (1) share of Colony NorthStar Credit Class A common stock upon the close of trading on the date that is thirty (30) days following the closing date of an IPO (the IPO Date); and
(y) each share of Colony NorthStar
Credit Class B-2 common
stock will convert into one (1) share of Colony NorthStar Credit Class A common stock upon the close of trading on the
date that is one hundred eighty (180) days following the IPO Date, and (ii) in the event of a Listing, Colony NorthStar Credit will be authorized to issue shares of Colony NorthStar Credit Class A common stock, shares of Colony
NorthStar Credit
Class B-3
common stock and shares of Colony NorthStar Credit preferred stock, and in respect of the shares of Colony NorthStar Credit
Class B-3
common stock, each such share will convert into one (1) share of Colony NorthStar Credit Class A common stock upon the close of trading on the date that is the one (1) year
anniversary of the date of Listing.
The Amended and Restated Combination Agreement further provides that, instead of the mergers of each
of NorthStar I OP and NorthStar II OP with and into Colony NorthStar Credit OP, following the NorthStar I Merger and the NorthStar II Merger contemplated by the Original Combination Agreement, Colony NorthStar Credit will contribute and convey to
Colony NorthStar Credit OP the equity interests of each of NorthStar I OP and NorthStar II OP then owned by Colony NorthStar Credit in exchange for ownership interests in Colony NorthStar Credit OP.
A copy of the Amended and Restated Combination Agreement is attached hereto as Exhibit 2.1 and is incorporated herein by reference. The
foregoing description of the Amended and Restated Combination Agreement describes only the material amendments made to the Original Combination Agreement, is not complete and is qualified in its entirety by reference to the full text of the Amended
and Restated Combination Agreement. The Amended and Restated Combination Agreement has been filed to provide information to investors regarding its terms. It is not intended to provide any other factual information about NorthStar I, NorthStar II,
RED REIT, CLNS OP or any other parties to the Amended and Restated Combination Agreement, their respective businesses, or the actual conduct of their respective businesses during the period prior to the consummation of the Combination. The Amended
and Restated Combination Agreement and this summary should not be relied upon as disclosure about NorthStar I, NorthStar II, RED REIT, CLNS OP or any other parties to the Amended and Restated Combination Agreement. None of NorthStar Is,
NorthStar IIs or Colony NorthStars stockholders or any other third parties should rely on the representations, warranties and covenants in the Amended and Restated Combination Agreement or any descriptions thereof as characterizations of
the actual state of facts or conditions of NorthStar I, NorthStar II, RED REIT, CLNS OP or any other parties to the Amended and Restated Combination Agreement or any of their respective subsidiaries or affiliates. The representations and warranties
contained in the Amended and Restated Combination Agreement are the product of negotiations among the parties thereto and that the parties made to, and solely for the benefit of, each other as of specified dates. The assertions embodied in those
representations and warranties are subject to qualifications and limitations agreed to by the respective parties and are also qualified in important part by confidential disclosure schedules delivered in connection with the Amended and Restated
Combination Agreement. The representations and warranties may have been made for the purpose of allocating contractual risk between the parties to the agreements instead of establishing these matters as facts, and may be subject to standards of
materiality applicable to the contracting parties that differ from those applicable to investors.