NxStage Medical, Inc.
NxStage Medical, Inc. (Form: PREM14A, Received: 09/06/2017 17:00:55)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934

 

 

Filed by the Registrant ☑

Filed by a Party other than the Registrant ☐

Check the appropriate box:

 

Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material under §240.14a-12

NxStage Medical, Inc.

 

(Name of Registrant as Specified In Its Charter)

N/A

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

No fee required.

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

  (1) Title of each class of securities to which transaction applies:

Common stock, par value $0.001 per share

 

 

  (2) Aggregate number of securities to which transaction applies:

As of August 28, 2017, (A) 66,130,088 shares of common stock (B) 4,251,176 shares of common stock subject to outstanding options, (C) 546,091 shares of common stock subject to issuance pursuant to restricted stock units, (D) 214,794 shares of common stock subject to issuance pursuant to performance shares (assuming performance conditions associated with such performance shares were deemed to have been achieved at maximum performance levels) and (E) 19,213 shares of common stock issuable in respect of NxStage’s 2005 Employee Stock Purchase Plan for the period ended December 31, 2017, estimated as of August 28, 2017.

 

 

  (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

Solely for purposes of calculating the filing fee, the underlying value of the transaction was calculated as the sum of (A) 66,130,088 shares of common stock multiplied by the proposed per share merger consideration of $30.00, (B) 4,251,176 shares of common stock subject to outstanding options multiplied by $12.91 (the difference between $30.00 and the average per share exercise price of $17.09), (C) 546,091 shares of common stock subject to issuance pursuant to restricted stock units multiplied by $30.00, (D) 214,794 shares of common stock subject to issuance pursuant to performance shares multiplied by the proposed per share merger consideration of $30.00 and (E) 19,213 shares of common stock issuable in respect of NxStage’s 2005 Employee Stock Purchase Plan for the period ended December 31, 2017 multiplied by the proposed per share merger consideration of $30.00.

 

 

  (4) Proposed maximum aggregate value of transaction:

$2,062,188,262.16

 

 

  (5) Total fee paid:

$239,007.62, determined, in accordance with Section 14(g) of the Securities Exchange Act of 1934, as amended, by multiplying 0.0001159 by the proposed maximum aggregate value of the transaction of $2,062,188,262.16

 

 

Fee paid previously with preliminary materials.                                 

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

  (1) Amount Previously Paid:

 

 

 

  (2) Form, Schedule or Registration Statement No.:

 

 

 

  (3) Filing Party:

 

 

 

  (4) Date Filed:

 

 

 

 

 


PRELIMINARY PROXY STATEMENT — SUBJECT TO COMPLETION

DATED September 6, 2017

                    , 2017

Dear Stockholder:

You are cordially invited to attend a special meeting of stockholders of NxStage Medical, Inc., which we refer to as NxStage, to be held on                     , 2017, at                     , at                     , local time, which we refer to as the special meeting.

On August 7, 2017, NxStage entered into an Agreement and Plan of Merger with Fresenius Medical Care Holdings, Inc., which we refer to as Fresenius, and Broadway Renal Services, Inc., a wholly-owned subsidiary of Fresenius, which we refer to as Merger Sub. We refer to the Agreement and Plan of Merger, as it may be amended from time to time, as the merger agreement. Pursuant to the merger agreement and in accordance with the General Corporation Law of the State of Delaware, as amended, which we refer to as the DGCL, Merger Sub will be merged with and into NxStage, with NxStage surviving the merger as a wholly-owned subsidiary of Fresenius. At the special meeting you will be asked to consider and vote upon a proposal to adopt the merger agreement.

If the merger is completed, each holder of shares of NxStage common stock, par value $0.001 per share, issued and outstanding immediately prior to such time (other than shares of NxStage common stock owned by (i) NxStage, (ii) Fresenius, Merger Sub or any wholly-owned subsidiary of Fresenius, or (iii) stockholders who properly exercise and perfect their respective demands for appraisal of such shares and have neither effectively withdrawn nor lost their rights to such appraisal under the DGCL) will be entitled to receive, with respect to each such share of NxStage common stock, $30.00 in cash, without interest. The $30.00 per share cash consideration represents a premium of (1) approximately 30% to NxStage’s closing share price on August 4, 2017, the last trading day prior to the public announcement of the execution of the merger agreement and (2) approximately 18% over NxStage’s volume weighted average trading price for the 180-day period ended August 4, 2017.

We are soliciting proxies from our stockholders for use at the special meeting or any postponement or adjournment thereof to consider and vote upon proposals to: (i) adopt the merger agreement, (ii) to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to NxStage’s named executive officers in connection with the merger, and (iii) to approve an adjournment of the special meeting, if necessary, to solicit additional proxies, in the event that there are insufficient votes to approve the proposal to adopt the merger agreement at the special meeting. We urge all stockholders to read the accompanying proxy statement and the documents included with the accompanying proxy statement carefully and in their entirety.

The NxStage board of directors, after considering the reasons more fully described in the accompanying proxy statement, has unanimously (i) determined that the merger agreement and the merger are fair to and in the best interests of NxStage’s stockholders, (ii) approved and declared advisable the merger agreement and the merger in accordance with the DGCL, and (iii) resolved to recommend that NxStage’s stockholders vote to adopt the merger agreement.

The NxStage board of directors recommends that NxStage stockholders vote (i) “FOR” the proposal to adopt the merger agreement, (ii) “FOR” the proposal to approve, by a non-binding, advisory vote, the compensation that may be paid or become payable to NxStage’s named executive officers in connection with the merger and (iii) “FOR” the proposal to adjourn the special meeting, if necessary, to solicit additional proxies if, at the time of the special meeting, there are insufficient votes to adopt the merger agreement.

The affirmative vote of at least a majority of the issued and outstanding shares of NxStage common stock entitled to vote thereon is required to approve the proposal to adopt the merger agreement. The approval and adoption of such proposal is necessary to complete the merger. The affirmative vote of at least a majority of the votes cast at the special meeting is required to approve the proposal to approve, by a non-binding, advisory vote, the compensation that may be paid or become payable to NxStage’s named executive officers in connection with the merger. The affirmative vote of at least a majority of the votes cast at the special meeting is required to approve the proposal to adjourn the special meeting, if necessary, to solicit additional proxies if, at the time of the special meeting, there are insufficient votes to adopt the merger agreement.


Your vote is very important.     Whether or not you plan to attend the special meeting, please take the time to complete, date, sign and return the enclosed proxy card in the accompanying prepaid reply envelope, or submit your proxy by telephone or through the Internet. We ask that you do so as promptly as possible to ensure that your shares may be represented and voted at the special meeting or any adjournment or postponement thereof. Any proxy may be revoked by providing written notice to the Secretary of NxStage at 350 Merrimack St., Lawrence, MA 01843, delivering a duly executed proxy bearing a later date or voting in person at the special meeting or any adjournment or postponement thereof.

If your shares of NxStage common stock are held in “street name” by your bank, brokerage firm or other nominee, your bank, brokerage firm or other nominee, as applicable, will not be permitted to vote your shares without instructions from you. You should instruct your bank, brokerage firm or other nominee as to how to vote your shares by following the procedures provided by your bank, brokerage firm or other nominee. You also will not be able to vote your shares in person at the special meeting or any adjournment or postponement thereof unless you obtain a legal proxy form from your broker, bank or other nominee, naming you as proxy.

The accompanying proxy statement provides you with detailed information about the special meeting and the merger agreement. A copy of the merger agreement is attached as Annex A to the accompanying proxy statement. We encourage you to read the entire proxy statement and its annexes, including the merger agreement, carefully.

If you have any questions or need assistance voting your shares, please call Georgeson LLC, our proxy solicitor, at 888-658-5755 or by emailing NxStage@Georgeson.com.

Thank you in advance for your cooperation and continued support.

Sincerely,

Jeffrey H. Burbank

Chief Executive Officer

Dated:                     , 2017

Neither the U.S. Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved of the transactions described in this letter or the accompanying proxy statement, including the merger, or determined if the information contained in this letter or the accompanying proxy statement is accurate or adequate. Any representation to the contrary is a criminal offense.

The accompanying proxy statement is dated                     , 2017 and, together with the enclosed form of proxy card, is first being mailed to NxStage stockholders on or about                     , 2017.

 


PRELIMINARY PROXY STATEMENT — SUBJECT TO COMPLETION

DATED September 6, 2017

N X STAGE MEDICAL, INC.

350 Merrimack St.

Lawrence, MA 01843

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To Be Held on                     , 2017

Notice is hereby given that a special meeting of stockholders of NxStage Medical, Inc., a Delaware corporation, which we refer to as NxStage, will be held on                     , 2017, at                     , at                     , local time, which we refer to as the special meeting, for the following purposes:

 

    Proposal 1:     To adopt the Agreement and Plan of Merger, dated August 7, 2017, as it may be amended from time to time, by and among NxStage, Fresenius Medical Care Holdings, Inc., a New York corporation, which we refer to as Fresenius, and Broadway Renal Services, Inc., a Delaware corporation and wholly-owned subsidiary of Fresenius, which we refer to as Merger Sub, pursuant to which Merger Sub would merge with and into NxStage;

 

    Proposal 2:     To approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to NxStage’s named executive officers in connection with the merger, as described in the accompanying proxy statement; and

 

    Proposal 3:     To approve an adjournment of the special meeting, if necessary, to solicit additional proxies, in the event that there are insufficient votes to approve Proposal 1 at the special meeting.

The approval of the proposal to adopt the merger agreement requires the affirmative vote of the holders of at least a majority of the issued and outstanding shares of NxStage common stock entitled to vote thereon. The approval of the proposal to approve, by a non-binding, advisory vote, the compensation that may be paid or become payable to NxStage’s named executive officers in connection with the merger requires the affirmative vote of at least a majority of the votes cast at the special meeting. The approval of the proposal to adjourn the special meeting, if necessary, to solicit additional proxies if, at the time of the special meeting, there are insufficient votes to adopt the merger agreement requires the affirmative vote of at least a majority of the votes cast at the special meeting. The failure of any stockholder of record to submit a signed proxy card, grant a proxy electronically over the Internet or by telephone or to vote in person by ballot at the special meeting will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement, but will not have any effect on the outcome of the adjournment proposal or the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by NxStage to its named executive officers in connection with the merger, but will reduce the number of votes cast and therefore increase the relative influence of those stockholders voting with respect to such proposals. If you hold your shares in “street name,” the failure to instruct your broker, bank or other nominee on how to vote your shares will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement, but will not have any effect on the outcome of the adjournment proposal or the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable to NxStage’s named executive officers in connection with the merger, but will reduce the number of votes cast and therefore increase the relative influence of those stockholders voting with respect to such proposals. Abstentions will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement, but will not have any effect on the adjournment proposal or the proposal to approve, by non-binding, advisory vote, compensation that will or may become payable by NxStage to its named executive officers in connection with the merger but will reduce the number of votes cast and therefore increase the relative influence of those stockholders voting with respect to such proposals.

Only NxStage stockholders of record at the close of business on                     , 2017, the record date, are entitled to notice of, and to vote at, the special meeting and any postponement or adjournment thereof.

Your vote is very important. Whether or not you plan to attend the special meeting, please take the time to complete, date, sign and return the enclosed proxy card in the accompanying prepaid reply envelope, or submit your voting instructions by telephone or through the Internet. We ask that you do so as promptly as possible to ensure that your shares may be represented and voted at the special meeting.


You may revoke a submitted proxy by providing written notice to the Secretary of NxStage at 350 Merrimack St., Lawrence, MA 01843, delivering a duly executed proxy bearing a later date or voting in person at the special meeting or any adjournment or postponement thereof.

The NxStage board of directors, after considering the reasons more fully described in the accompanying proxy statement, has unanimously (i) determined that the merger agreement and the merger are fair to and in the best interests of NxStage’s stockholders, (ii) approved and declared advisable the merger agreement and the merger in accordance with the DGCL, and (iii) resolved to recommend that NxStage’s stockholders vote to adopt the merger agreement.

NxStage stockholders who do not vote in favor of the proposal to adopt the merger agreement will have the right to seek appraisal of the fair value of their shares of NxStage common stock if they deliver a demand for appraisal before the vote is taken on the merger agreement and comply with all applicable requirements of Section 262 of the DGCL, which is summarized herein and reproduced in its entirety in Annex C to the accompanying proxy statement.

We encourage you to read the accompanying proxy statement, including all documents incorporated by reference into the accompanying proxy statement, and annexes to the accompanying proxy statement, carefully and in their entirety. If you have any questions concerning the merger, the special meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of NxStage common stock, please contact our proxy solicitor:

 

 

LOGO

 

1290 Avenue of the Americas, 9th Floor

New York, NY 10104

Call Toll Free: 888-658-5755

Email: NxStage@Georgeson.com

The NxStage board of directors recommends that NxStage stockholders vote (i) “FOR” the proposal to adopt the merger agreement, (ii) “FOR” the proposal to approve, by a non-binding, advisory vote, the compensation that may be paid or become payable to NxStage’s named executive officers in connection with the merger and (iii) “FOR” the proposal to adjourn the special meeting, if necessary, to solicit additional proxies if, at the time of the special meeting, there are insufficient votes to adopt the merger agreement.

By Order of the Board of Directors,

Winifred L. Swan

Secretary

Dated:                     , 2017


TABLE OF CONTENTS

 

SUMMARY

     1  

Parties Involved in the Merger

     1  

Certain Effects of the Merger on NxStage

     1  

Effect on NxStage if the Merger is Not Completed

     2  

The Merger Consideration

     2  

The Special Meeting

     2  

Recommendation of the NxStage Board of Directors and Reasons for the Merger

     3  

Opinion of Piper Jaffray & Co.

     4  

Financing of the Merger

     4  

Interests of Certain Directors and Executive Officers of NxStage

     4  

Treatment of NxStage Equity Awards

     5  

Treatment of NxStage ESPP

     5  

Appraisal Rights

     5  

U.S. Federal Income Tax Consequences of the Merger

     6  

Regulatory Approvals for the Merger

     6  

No Solicitation

     6  

Adverse Recommendation Change

     7  

Conditions to Closing of the Merger

     8  

Termination of the Merger Agreement

     8  

Termination Fee & Reverse Termination Fee

     9  

Market Prices and Dividend Data

     9  

QUESTIONS AND ANSWERS ABOUT THE MERGER

     10  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     18  

PARTIES INVOLVED IN THE MERGER

     19  

THE SPECIAL MEETING

     20  

Date, Time and Place

     20  

Purpose of the Special General Meeting

     20  

Record Date; Shares Entitled to Vote; Quorum

     20  

Vote Required; Abstentions and Broker Non-Votes

     20  

Shares Held by NxStage’s Directors and Executive Officers

     21  

Voting of Proxies

     21  

Revocability of Proxies

     22  

NxStage Board of Directors’ Recommendation

     22  

Solicitation of Proxies

     22  

Anticipated Date of Completion of the Merger

     23  

Householding of Special General Meeting Materials

     23  

Assistance

     23  

THE MERGER

     24  

Certain Effects of the Merger on NxStage

     24  

Effect on NxStage if the Merger is Not Completed

     24  

Merger Consideration

     24  

Background of the Merger

     25  

Recommendation of the NxStage Board of Directors and Reasons for the Merger

     33  

Opinion of Piper Jaffray

     38  


Certain Financial Forecasts

     47  

Interests of Certain Directors and Executive Officers of NxStage

     49  

Financing of the Merger

     54  

Closing and Effective Time of the Merger

     54  

U.S. Federal Income Tax Consequences of the Merger

     54  

Regulatory Approvals for the Merger

     56  

THE MERGER AGREEMENT

     58  

Explanatory Note Regarding the Merger Agreement

     58  

Effects of the Merger; Closing; Effective Time

     58  

Governing Documents; Directors and Officers

     59  

Effect on the Capital Stock, Equity Awards and the ESPP

     59  

Exchange and Payment Procedures

     60  

Representations and Warranties

     62  

Conduct of Business Pending the Merger

     66  

No Solicitation

     69  

Discussions; Notice of Acquisition Proposals

     69  

Adverse Recommendation Change

     70  

Special Meeting for Stockholder Approval

     71  

Efforts to Close the Merger

     72  

Indemnification, Exculpation and Insurance of Directors and Executive Officers

     74  

Employee Matters

     74  

Other Covenants

     76  

Conditions to the Closing of the Merger

     77  

Termination of the Merger Agreement

     78  

Expenses

     81  

Amendment

     81  

Governing Law

     81  

Specific Enforcement

     82  

PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

     83  

PROPOSAL 2: ADVISORY, NON-BINDING VOTE ON MERGER-RELATED EXECUTIVE COMPENSATION ARRANGEMENTS

     84  

PROPOSAL 3: ADJOURNMENT OF THE SPECIAL GENERAL MEETING

     87  

MARKET PRICES AND DIVIDEND DATA

     88  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     89  

APPRAISAL RIGHTS

     91  

FUTURE STOCKHOLDER PROPOSALS

     96  

WHERE YOU CAN FIND MORE INFORMATION

     97  

MISCELLANEOUS

     99  

Annex A : Agreement and Plan of Merger

     A-1  

Annex B : Opinion of Piper Jaffray & Co.

     B-1  

Annex C : Section  262 of the General Corporation Law of the State of Delaware

     C-1  


SUMMARY

This summary highlights selected information from this proxy statement related to the merger of Broadway Renal Services, Inc. with and into NxStage Medical, Inc., with NxStage Medical, Inc. surviving as a wholly-owned subsidiary of Fresenius Medical Care Holdings, Inc., and may not contain all of the information that is important to you. We have included page references in parentheses to direct you to more complete descriptions of the topics presented in this summary. To understand the merger more fully and for a more complete description of the legal terms of the merger, you should read carefully this entire proxy statement, the annexes to this proxy statement, including the merger agreement attached as Annex A, and the documents we incorporate by reference in this proxy statement. You may obtain the documents and information incorporated by reference in this proxy statement without charge by following the instructions under “Where You Can Find More Information” beginning on page 97.

Except as otherwise specifically noted in this proxy statement or as context otherwise requires, “NxStage,” “we,” “our,” “us” and similar words in this proxy statement refer to NxStage Medical, Inc. including, in certain cases, our subsidiaries. Throughout this proxy statement, we refer to Fresenius Medical Care Holdings, Inc. as Fresenius and Broadway Renal Services, Inc. as Merger Sub. In addition, throughout this proxy statement we refer to the Agreement and Plan of Merger, dated as of August 7, 2017, as it may be amended from time to time, among NxStage, Fresenius and Merger Sub, as the merger agreement.

Parties Involved in the Merger (Page 19)

NxStage Medical, Inc. , a Delaware corporation, is a leading medical technology company, headquartered in Lawrence, Massachusetts, that develops, manufactures and markets innovative products for the treatment of end-stage renal disease and acute kidney failure. NxStage has also established a small number of dialysis clinics committed to the development of innovative care delivery models for patients with end-stage renal disease.

Shares of NxStage common stock are currently listed on the Nasdaq Global Select Market (NXTM). Upon completion of the merger, NxStage will be a wholly-owned subsidiary of Fresenius.

Fresenius Medical Care Holdings, Inc. , a New York corporation, is a premier health care company focused on providing the highest quality care to people with renal and other chronic conditions. Through its industry-leading network of dialysis facilities, outpatient cardiac and vascular labs, and urgent care centers, as well as the United States’ largest practice of hospitalist and post-acute providers, Fresenius provides coordinated health care services at pivotal care points for hundreds of thousands of chronically ill patients. As the world’s largest fully vertically integrated renal company, it offers specialty pharmacy and laboratory services, and manufactures and distributes the most comprehensive line of dialysis equipment, disposable products, and renal pharmaceuticals.

Broadway Renal Services, Inc. , a Delaware corporation and wholly-owned subsidiary of Fresenius, was formed by Fresenius for the purpose of entering into the merger agreement and completing the transactions contemplated by the merger agreement. Upon completion of the merger, Merger Sub will cease to exist.

Certain Effects of the Merger on NxStage (Page 24)

Upon the terms and subject to the conditions of the merger agreement, Merger Sub will merge with and into NxStage, with NxStage continuing as the surviving company and a wholly-owned subsidiary of Fresenius. Throughout this proxy statement, we use the term surviving company to refer to NxStage as the surviving company following the merger. If the merger is completed, you will not own any shares of the surviving company.

The time at which the merger will become effective, which we refer to as the effective time of the merger, will occur upon the date and time of filing of the certificate of merger with the Secretary of State of the State of Delaware, or such later date and time as is agreed to in writing by NxStage and Fresenius and specified in the certificate of merger.

 



 

1


Effect on NxStage if the Merger is Not Completed (Page 24)

If the merger agreement is not adopted by NxStage stockholders, or if the merger is not completed for any other reason, NxStage stockholders will not receive the per share merger consideration (defined below) for the shares of NxStage common stock, par value $0.001 per share, that they hold. Instead, NxStage will remain a public company, shares of NxStage common stock will continue to be listed and traded on Nasdaq and registered under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, and we will continue to file periodic reports with the Securities and Exchange Commission. Under specified circumstances, NxStage may be required to pay Fresenius a termination fee upon the termination of the merger agreement, as described under “The Merger Agreement — Termination of the Merger Agreement — Termination Fee.” Under specified circumstances, Fresenius may be required to pay NxStage a reverse termination fee upon the termination of the merger agreement, as described under “The Merger Agreement — Termination of the Merger Agreement — Reverse Termination Fee.”

The Merger Consideration (Page 24)

In the merger, each issued and outstanding shares of NxStage common stock (other than shares of NxStage common stock owned by (i) NxStage, or (ii) Fresenius, Merger Sub or any wholly-owned subsidiary of Fresenius, or (iii) stockholders who properly exercise and perfect their respective demands for appraisal of such shares and have neither effectively withdrawn nor lost their rights to such appraisal under the General Corporation Law of the State of Delaware, as amended, which we refer to as the DGCL; collectively we refer to all such shares in this proxy statement as excluded shares) will be converted automatically into the right to receive $30.00 in cash, without interest, which amount we refer to as the per share merger consideration, and, without any action by the holders of such shares of NxStage common stock, such shares of NxStage common stock will cease to be outstanding, will be canceled and will cease to exist, and each holder of a certificate formerly representing shares of NxStage common stock or person entered as the owner in book-entry in respect of shares immediately prior to the effective time, will cease to have any rights with respect thereto other than the right to receive the per share merger consideration. As described further in “The Merger Agreement — Exchange and Payment Procedures” beginning on page 60, at or prior to the effective time of the merger, Fresenius will deposit or cause to be deposited sufficient funds to pay the aggregate per share merger consideration with a designated paying agent. Following completion of the merger, once a NxStage stockholder has provided the paying agent with his or her share certificates or book-entry shares, as applicable, and the other items specified by the paying agent, the paying agent will promptly pay the stockholder the per share merger consideration.

After the merger is completed, under the terms of the merger agreement, you will have the right to receive the per share merger consideration, but you no longer will have any rights as a NxStage stockholder as a result of the merger (except that stockholders who properly exercise appraisal rights will have the right to receive a payment for the “fair value” of their shares as determined pursuant to an appraisal proceeding as contemplated by Delaware law, as described below under “The Merger Agreement — Exchange and Payment Procedures —Dissenting Shares” beginning on page 62).

The Special Meeting (Page 20)

Date, Time and Place

The special meeting of our stockholders to vote on the proposal to adopt the merger agreement, among other matters, will be held on                     , 2017, at             , at             , local time.

Record Date; Shares Entitled to Vote

You are entitled to vote at the special meeting if you owned shares of NxStage common stock at the close of business on                     , 2017, the record date for the special meeting. You will have one vote at the special meeting for each share of NxStage common stock you owned at the close of business on the record date.

 



 

2


Purpose

At the special meeting, we will ask our stockholders of record on the record date to vote on proposals to: (i) adopt the merger agreement, (ii) approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to NxStage’s named executive officers in connection with the merger, as described in this proxy statement and (iii) approve an adjournment of the special meeting, if necessary, to solicit additional proxies, in the event that there are insufficient votes to approve the proposal to adopt the merger agreement at the special meeting.

Quorum

As of the record date, there were approximately              shares of NxStage common stock issued and outstanding and entitled to vote at the special meeting. A quorum of stockholders is necessary to hold a special meeting. The presence in person or represented by proxy, of the holders of at least a majority of the shares of NxStage common stock issued and outstanding as of the record date and entitled to vote at the special meeting will constitute a quorum for purposes of the special meeting. As a result, at least              shares of NxStage common stock must be represented in person or by proxy at the special meeting to have a quorum.

Required Vote

Approval of the proposal to adopt the merger agreement requires the affirmative vote of the holders of at least a majority of the issued and outstanding shares of NxStage common stock entitled to vote thereon. The approval of the proposal to approve, by a non-binding, advisory vote, the compensation that may be paid or become payable to NxStage’s named executive officers in connection with the merger requires the affirmative vote of at least a majority of the votes cast at the special meeting. The approval of the proposal to adjourn the special meeting, if necessary, to solicit additional proxies if, at the time of the special meeting, there are insufficient votes to approve adoption of the merger agreement requires the affirmative vote of at least a majority of the votes cast at the special meeting.

Share Ownership of Our Directors and Executive Officers

As of the record date, our directors and executive officers beneficially owned and were entitled to vote, in the aggregate,             shares of NxStage common stock (excluding any shares of NxStage common stock that would be delivered upon exercise or conversion of equity-based awards), representing approximately     % of the outstanding shares of NxStage common stock. Our directors and executive officers have informed us that they currently intend to vote all of their shares of NxStage common stock (i) “ FOR ” the proposal to adopt the merger agreement, (ii) “ FOR ” the proposal to approve on a non-binding, advisory basis, the compensation that may be paid or become payable to NxStage’s named executive officers in connection with the merger, as described in this proxy statement, and (iii) “ FOR ” the proposal to approve an adjournment of the special meeting, if necessary, to solicit additional proxies, in the event that there are insufficient votes to approve the proposal to adopt the merger agreement at the special meeting.

Recommendation of the NxStage Board of Directors and Reasons for the Merger (Page 33)

The board of directors of NxStage, after considering various reasons described in the section entitled “The Merger — Recommendation of the NxStage Board of Directors and Reasons for the Merger” beginning on page 33, has (1) determined that the merger agreement and the merger are fair to and in the best interests of NxStage’s stockholders, (2) approved and declared advisable the merger agreement and the merger in accordance with the DGCL, and (3) resolved to recommend that NxStage’s stockholders vote to adopt the merger agreement. Accordingly, the NxStage board of directors recommends that NxStage stockholders vote (i) “ FOR ” the proposal to adopt the merger agreement, (ii) “ FOR ” the proposal to approve, by a non-binding, advisory vote, the compensation that may be paid or become payable to NxStage’s named executive officers in connection with the merger, and (iii) “ FOR ” the proposal to adjourn the special meeting, if necessary, to solicit additional proxies if, at the time of the special meeting, there are insufficient votes to adopt the merger agreement at the special meeting.

 



 

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Opinion of Piper Jaffray & Co. (Page 38)

In connection with the merger, NxStage’s financial advisor, Piper Jaffray & Co., delivered to the NxStage board of directors a written opinion, dated August 5, 2017, as to the fairness, from a financial point of view and as of the date of the opinion, of the per share merger consideration to be received by holders of shares of NxStage common stock. The full text of the written opinion, which describes, among other things, the assumptions made, procedures followed, factors considered and limitations on the review undertaken, is attached as Annex B to this proxy statement and is incorporated by reference herein in its entirety. Piper Jaffray provided its opinion to the NxStage board of directors for the benefit and use of the NxStage board of directors in connection with and for purposes of its evaluation of the per share merger consideration from a financial point of view. Piper Jaffray’s opinion does not address any other aspect of the merger, and no opinion or view was expressed as to the relative merits of the merger in comparison to other strategies or transactions that might be available to NxStage or in which NxStage might engage or as to the underlying business decision of NxStage to proceed with or effect the merger. Neither Piper Jaffray’s opinion nor the summary of its opinion and the related analyses set forth in this proxy statement is intended to be, and they do not constitute, a recommendation to any holders of NxStage common stock as to how such holders should vote or act with respect to the merger or any other matter.

Financing of the Merger (Page 54)

Fresenius expects to finance the merger through cash on hand, available lines of credit and other sources of immediately available funds. The obligations of Fresenius and Merger Sub under the merger agreement are not conditioned upon their ability to obtain financing.

Interests of Certain Directors and Executive Officers of NxStage (Page 49)

When considering the recommendation of the NxStage board of directors that you vote to approve the proposal to adopt the merger agreement, you should be aware that our directors and executive officers may have interests in the merger that may be deemed to be different from, or in addition to, your interests as a stockholder. The NxStage board of directors was aware of and considered these interests, among other matters, in evaluating and overseeing the negotiation of the merger agreement, in approving the merger agreement and the merger and in recommending that the merger agreement be adopted by the NxStage stockholders. As described in more detail below, these interests may include, for one or more of our directors and executive officers:

 

    Accelerated vesting of NxStage equity awards in connection with, or prior to, the merger, and the settlement of such awards in exchange for cash in the amounts included in this proxy statement;

 

    Deemed performance of the outstanding NxStage performance share awards granted in 2017 at maximum performance levels;

 

    Potential payment of annual cash bonuses for 2017 at target levels, regardless of actual performance, and potential payment of annual cash bonuses for 2018, in the aggregate, at up to 110% of aggregate 2017 bonuses;

 

    Payment of enhanced severance upon certain qualifying terminations of employment;

 

    Potential payment of an additional amount in respect of taxes imposed under Section 4999 of the Internal Revenue Code of 1986, as amended, which we refer to as the Code, including taxes in respect of such additional amount;

 

    Payment of retention bonuses; and

 

    Continued indemnification and directors’ and officers’ liability insurance to be provided by the surviving company.

If the proposal to adopt the merger agreement is approved by our stockholders and the merger occurs, under the terms of the merger agreement, any NxStage common stock held by our directors and executive officers will be treated in the same manner as issued and outstanding NxStage common stock held by all other NxStage stockholders entitled to receive the per share merger consideration.

 



 

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See the section of this proxy statement titled “The Merger — Interests of Certain Directors and Executive Officers” for a more detailed discussion of the interests of NxStage’s directors and executive officers in the merger.

Treatment of NxStage Equity Awards (Page 59)

Each NxStage stock option, restricted stock unit, restricted share and performance share that is outstanding and unvested as of immediately prior to the effective time of the merger will vest in full. In addition, the outstanding NxStage performance share awards granted in 2017 shall be deemed earned at maximum performance levels, subject to the holder’s continued employment through the applicable determination date of the award. At the effective time of the merger, each NxStage outstanding stock option, restricted stock unit and performance share (based on achievement of applicable performance conditions at maximum levels as described above) will be canceled in exchange for a cash payment equal to (i) the number of shares of NxStage stock subject to such award, multiplied by (ii) the per share merger consideration of $30.00, less, in the case of a stock option, the per share exercise price of such stock option. Restricted shares will be treated like all other shares of common stock outstanding at the time of the merger, as described under “— Certain Effects of the Merger on NxStage” above. Payments in respect of NxStage equity awards will be reduced by applicable tax withholding.

Treatment of NxStage ESPP (Page 60)

Any outstanding offering period under the NxStage 2005 Employee Stock Purchase Plan, which we refer to as the ESPP, will be terminated immediately prior to the effective time of the merger and each outstanding and unexercised option thereunder will be canceled in exchange for a cash payment equal to (i) the number of shares subject to such option, multiplied by (ii) the excess, if any, of (A) the per share merger consideration of $30.00, less (B) the option price per share, subject to applicable tax withholding. The ESPP will terminate as of, and contingent upon, the effective time of the merger and any remaining balances in any participant’s account under the ESPP will be returned to the participant. The merger agreement also requires the NxStage board of directors to adopt resolutions providing that no new offering period under the ESPP commences after the date the merger agreement was signed (August 7, 2017), and the current offering period ends on December 31, 2017, so if the merger occurs after that date there will not be any outstanding options under the ESPP at the effective time of the merger.

Appraisal Rights (Page 91)

If the merger agreement is adopted by NxStage stockholders and the merger is completed, stockholders who do not vote in favor of the adoption of the merger agreement and who properly exercise and perfect demands for appraisal of their shares will be entitled to appraisal rights in connection with the merger under Section 262 of the DGCL. This means that such holders of NxStage common stock will be entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of their shares of NxStage common stock, exclusive of any elements of value arising from the accomplishment or expectation of the merger, together with interest to be paid upon the amount determined to be fair value, if any, as determined by the court (or, in certain circumstances described herein, on the difference between the amount determined to be the fair value and the amount paid to each stockholder entitled to appraisal prior to the entry of judgment in the appraisal proceeding). Stockholders who wish to seek appraisal of their shares are encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights. The appraisal process is complex.

Stockholders considering seeking appraisal should be aware that the fair value of their shares as determined pursuant to Section 262 of the DGCL could be more than, the same as or less than the value of the consideration they would receive pursuant to the merger if they did not seek appraisal of their shares.

To exercise appraisal rights, a stockholder must submit a written demand for appraisal to NxStage before the vote is taken on the proposal to adopt the merger agreement, must not submit a blank proxy or otherwise vote in favor of the proposal to adopt the merger agreement and must continue to hold the shares of NxStage common

 



 

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stock of record through the effective time of the merger. Failure to follow the procedures specified under the DGCL may result in the loss or waiver of appraisal rights. The DGCL requirements for exercising appraisal rights are described in further detail in this proxy statement, and Section 262 of the DGCL regarding appraisal rights is reproduced and attached as Annex C to this proxy statement. If you hold your shares of NxStage common stock through a broker, bank or other nominee, and you wish to exercise appraisal rights, you should consult with your broker, bank or other nominee to determine the appropriate procedures for the making of a demand for appraisal by such broker, bank or nominee. See “The Merger Agreement — Exchange and Payment Procedures — Dissenting Shares” for a more detailed description of the appraisal rights available to NxStage stockholders.

U.S. Federal Income Tax Consequences of the Merger (Page 54)

The receipt of cash for shares of NxStage common stock pursuant to the merger generally will be a taxable transaction for U.S. federal income tax purposes. The receipt of cash by a U.S. holder (as defined under “The Merger — U.S. Federal Income Tax Consequences of the Merger”) in exchange for a U.S. holder’s shares of NxStage common stock pursuant to the merger generally will result in the recognition of gain or loss in an amount measured by the difference between the cash such U.S. holder receives pursuant to the merger and such U.S. holder’s adjusted tax basis in the shares of NxStage common stock surrendered pursuant to the merger. A Non-U.S. holder (as defined under “The Merger — U.S. Federal Income Tax Consequences of the Merger”) generally will not be subject to U.S. federal income tax with respect to the exchange of shares of NxStage common stock for cash pursuant to the merger unless such Non-U.S. holder has certain connections to the United States. Stockholders should refer to the discussion in the section entitled “The Merger — U.S. Federal Income Tax Consequences of the Merger” and consult their own tax advisors concerning the U.S. federal income tax consequences relating to the merger in light of their particular circumstances and any consequences arising under the laws of any state, local or foreign taxing jurisdiction.

Regulatory Approvals for the Merger (Page 56)

The merger agreement generally requires each party to use its reasonable best efforts to take all actions necessary to obtain all consents and clearances required under any antitrust law, except that Fresenius is not required (i) to litigate against a governmental entity or (ii) to divest or to take any other actions with respect to any assets or business of Fresenius or any of its subsidiaries or NxStage, other than with respect to limited categories of NxStage assets. The merger cannot be completed until the applicable waiting period (and any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which we refer to as the HSR Act, has expired, the applicable approvals under the competition laws of Germany have been obtained, and any waiting period entered into with antitrust authorities has terminated.

On                     , 2017, Fresenius and NxStage filed notifications of the proposed merger with the Federal Trade Commission and the Department of Justice under the HSR Act.

The German Act Against Restraints of Competition of 1958, which we refer to as the German ARC, imposes a pre-merger notification requirement on all transactions that qualify as concentrations and meet certain specified financial thresholds, which the merger meets. Accordingly, consummation of the merger is conditioned upon the clearance by the Bundeskartellamt, the German antitrust authority. Clearance can be granted explicitly or is also considered granted if, after the Bundeskartellamt has been notified of a proposed transaction, the applicable waiting periods expire without any decision by the Bundeskartellamt. Fresenius notified the Bundeskartellamt of the proposed transaction on                      , 2017.

No Solicitation (Page 69)

Except as otherwise provided in the merger agreement, from the date of the merger agreement until the earlier of the effective time of the merger or the termination of the merger agreement, NxStage will not directly or indirectly:

 

    solicit, initiate or knowingly encourage or knowingly facilitate the submission of any competing acquisition proposal;

 



 

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    participate in any negotiations regarding, or furnish to any person any nonpublic information relating to NxStage or any of its subsidiaries in connection with any competing acquisition proposal or any proposal or offer that would reasonably be expected to lead to a competing acquisition proposal;

 

    engage in discussions with any person with respect to any competing acquisition proposal or any proposal or offer that would reasonably be expected to lead to a competing acquisition proposal;

 

    approve or recommend, propose publicly to approve or recommend any competing acquisition proposal;

 

    withdraw, change, amend, modify or qualify, or otherwise propose publicly to withdraw, change, amend, modify or qualify, in a manner adverse to Fresenius, or fail to make or include in the proxy statement when required by the merger agreement, the recommendation of NxStage’s board of directors to NxStage’s stockholders in favor of the proposal to adopt the merger agreement; or

 

    enter into any letter of intent or any agreement or commitment providing for any competing acquisition proposal.

At any time before obtaining NxStage stockholder approval for the proposal to adopt the merger agreement, in the event that NxStage receives a written competing acquisition proposal from any third party that did not result from a material breach of the no solicitation provision of the merger agreement, and, if the NxStage board of directors determines in good faith, after consultation with its financial advisor and outside legal counsel, that (a) such competing acquisition proposal constitutes or would reasonably be expected to lead to a superior proposal and (b) the failure to do so would be inconsistent with the fiduciary duties of the NxStage board of directors to NxStage’s stockholders under applicable law, then NxStage and its representatives may:

 

    furnish, pursuant to (but only pursuant to) an acceptable confidentiality agreement, information (including non-public information) with respect to NxStage and its subsidiaries to the third party that has made such competing acquisition proposal; and

 

    engage in or otherwise participate in discussions or negotiations with the third party that has made such competing acquisition proposal. See “The Merger Agreement — No Solicitation.”

Adverse Recommendation Change (Page 70)

Under the merger agreement, generally, the NxStage board of directors may not:

 

    withdraw, change, amend, modify or qualify, or otherwise propose publicly to withdraw, change, amend, modify or qualify, in a manner adverse to Fresenius, the NxStage board of directors’ recommendation that the holders of NxStage common stock vote “FOR” the proposal to adopt the merger agreement;

 

    fail to make or include in this proxy statement when required by the merger agreement, the NxStage board of directors’ recommendation that the holders of NxStage common stock vote “FOR” the proposal to adopt the merger agreement; or

 

    approve or recommend, propose publicly to approve or recommend any competing acquisition proposal to the NxStage stockholders.

Subject to certain notice obligations to Fresenius and certain obligations to discuss and negotiate in good faith any revisions proposed by Fresenius to the merger agreement in response to such notice, at any time before obtaining NxStage stockholder approval for the proposal to adopt the merger agreement, the NxStage board of directors may:

 

    enter into an acquisition agreement related to a superior proposal if NxStage receives a competing acquisition proposal that the NxStage board of directors determines in good faith, after consultation with its outside legal counsel, that the failure to take such action would be inconsistent with its fiduciary duties to NxStage stockholders under applicable law and after consultation with its outside financial advisors and outside legal counsel, that such competing acquisition proposal would continue to constitute a superior proposal even if changes proposed by Fresenius in response to such notice were given effect; or

 



 

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    make an adverse recommendation change in response to an event occurring after the date of the merger agreement that was not known to or reasonably foreseeable by the NxStage board of directors as of the date of the merger agreement if the NxStage board of directors determines in good faith after consultation with its outside legal counsel that the failure to effect an adverse recommendation change would be inconsistent with the directors’ fiduciary duties to NxStage stockholders under applicable law and that failure to effect an adverse recommendation change would continue to be inconsistent with the directors’ fiduciary duties to NxStage stockholders under applicable law even if changes proposed by Fresenius in response to such notice were given effect.

Conditions to Closing of the Merger (Page 77)

The respective obligations of NxStage, Fresenius and Merger Sub to consummate the merger are subject to the satisfaction or waiver of certain conditions, including (i) the adoption of the merger agreement by NxStage stockholders, (ii) the absence of any governmental order or law preventing the merger or making the consummation of the merger illegal, (iii) receipt of regulatory approvals, including the expiration or termination of the applicable waiting periods (and any extension thereof) under the HSR Act, clearance under the German ARC, and termination of any waiting period entered into with antitrust authorities, and (iv) other customary closing conditions. See “The Merger Agreement — Conditions to Closing of the Merger.”

Termination of the Merger Agreement (Page 78)

In general, the merger agreement may be terminated at any time prior to the effective time of the merger, whether before or after approval of the proposal to adopt the merger agreement by the NxStage stockholders, in the following ways:

 

    By mutual written consent of NxStage and Fresenius;

 

    By either NxStage or Fresenius:

 

    If any governmental entity has issued a final and nonappealable order, decree or ruling, or has taken any other action, having the effect of permanently restraining, enjoining or otherwise prohibiting the merger or making consummation of the merger illegal;

 

    If the merger has not been consummated by August 7, 2018, which we refer to as the end date, which end date may be extended in certain circumstances by up to 180 days if necessary to obtain required antitrust approvals; or

 

    If NxStage’s stockholders fail to approve the proposal to adopt the merger agreement, at the special meeting, or any adjournment or postponement thereof, at which a vote on such proposal is taken.

 

    By NxStage:

 

    Prior to obtaining NxStage stockholder approval, to accept a superior proposal and enter into a definitive agreement relating to such superior proposal promptly following such termination, subject to NxStage’s obligation to pay to Fresenius a termination fee under the merger agreement; or

 

    Any time prior to closing, if (i) Fresenius commits a material breach of any of its covenants or (ii) there is an inaccuracy in Fresenius’s or Merger Sub’s representations and warranties that would reasonably be expected to prevent or materially delay consummation of the merger or performance of Fresenius’s or Merger Sub’s material obligations under the merger agreement, in each case which is not, or is not capable of being, cured within 30 calendar days following Fresenius’s receipt of written notice of such breach or inaccuracy.

 

    By Fresenius:

 

   

Upon the NxStage board of directors effecting a change of its recommendation, failing to publicly reaffirm its recommendation in response to a competing proposal, or entering into a competing

 



 

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acquisition agreement, provided that Fresenius must exercise its termination right by the earlier of (x) the 20th business day following the triggering event and (y) the business day prior to the special meeting;

 

    Upon a willful breach by NxStage of its no solicitation obligations; provided that Fresenius must exercise its termination right by the earlier of (x) the 20 th business day following the triggering event and (y) the business day prior to the special meeting; or

 

    If (i) NxStage commits a material breach of any of its covenants or (ii) there is an inaccuracy in NxStage’s representations and warranties that would reasonably be expected to prevent or materially delay consummation of the merger or performance of NxStage’s material obligations under the merger agreement, in each case which is not, or is not capable of being, cured within 30 calendar days following Fresenius’s receipt of written notice of such breach or inaccuracy.

Termination Fee & Reverse Termination Fee (Page 9)

Under the merger agreement, NxStage may be required to pay to Fresenius a termination fee of $60 million if the merger agreement is terminated under certain specified circumstances. In no event will NxStage be required to pay the termination fee more than once. In the event that Fresenius receives the termination fee, such payment will be the sole and exclusive monetary remedy of Fresenius and Merger Sub under the merger agreement and in connection with the transactions contemplated by the merger agreement, except in the event of any losses or damages incurred or suffered by Fresenius, Merger Sub or any of their affiliates as a result of a breach of the merger agreement involving fraud or willful breach by NxStage or its affiliates.

Under the merger agreement, Fresenius may be required to pay to NxStage a reverse termination fee of $100 million if the merger agreement is terminated under certain specified circumstances. In no event will Fresenius be required to pay the termination fee more than once. In the event that NxStage receives the reverse termination fee, such payment will be the sole and exclusive monetary remedy of NxStage under the merger agreement and in connection with the transactions contemplated by the merger agreement, except in the event of any losses or damages incurred or suffered by NxStage or any of its affiliates as a result of a breach of the merger agreement involving fraud or willful breach by Fresenius or Merger Sub or their affiliates.

Notwithstanding the foregoing, nothing in the merger agreement shall limit any rights, obligations or remedies that any party may have under the confidentiality agreement entered into by Fresenius and NxStage for matters arising before or after the termination of the merger agreement.

Market Prices and Dividend Data (Page 9)

The closing price of shares of NxStage common stock listed on Nasdaq on August 4, 2017, the last trading day prior to the public announcement of the execution of the merger agreement, was $23.14 per share of NxStage common stock. If the merger is completed, for each share of NxStage common stock you own you will be entitled to receive $30.00 in cash, without interest, less any applicable withholding or transfer taxes. The per share merger consideration of $30.00 per share of NxStage common stock represents a premium of (i) approximately 30% to NxStage’s closing share price on August 4, 2017, the last trading day prior to the public announcement of the execution of the merger agreement, and (ii) approximately 18% over NxStage’s volume weighted average trading price for the 180-day period ended August 4, 2017.

On                     , 2017, the most recent practicable date before this proxy statement was mailed to our stockholders, the closing price for shares of NxStage common stock on Nasdaq was $         per share of NxStage common stock. You are encouraged to obtain current market quotations for shares of NxStage common stock in connection with voting your shares of NxStage common stock.

Under the terms of the merger agreement, from the date of the merger agreement until the earlier of the termination of the merger agreement and the effective time of the merger, we may not declare or pay any cash dividend or other distribution on our shares of NxStage common stock without Fresenius’s written consent.

 



 

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QUESTIONS AND ANSWERS ABOUT THE MERGER

The following questions and answers are intended to address briefly some commonly asked questions regarding the merger, the merger agreement and the special meeting. These questions and answers may not address all questions that may be important to a NxStage stockholder. We encourage you to read carefully the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to or incorporated by reference in this proxy statement. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under “Where You Can Find More Information” beginning on page 97.

 

Q. What is the proposed transaction and what effects will it have on NxStage?

 

A. The proposed transaction is the acquisition of NxStage by Fresenius pursuant to the merger agreement. If the proposal to adopt the merger agreement is approved by NxStage stockholders and the other closing conditions under the merger agreement are satisfied or waived, Merger Sub will merge with and into NxStage, with NxStage being the surviving company. As a result of the merger, NxStage will become a wholly-owned subsidiary of Fresenius and will no longer be a publicly held company, and you, as a holder of shares of NxStage common stock, will no longer have any interest in the future earnings or growth of NxStage. In addition, following the merger, shares of NxStage common stock will be delisted from Nasdaq and deregistered under the Exchange Act, and NxStage will no longer file periodic reports with the SEC on account of shares of NxStage common stock.

 

Q. What will I receive if the merger is completed?

 

A. Upon completion of the merger, for each share of NxStage common stock that you own (unless you have properly exercised, and not withdrawn a demand for (or lost your rights to) appraisal rights under the DGCL) you will be entitled to receive $30.00 in cash, without interest, less any applicable withholding or transfer taxes. Please do NOT return your share certificate(s) with your proxy.

 

Q. How does the per share merger consideration compare to the market price of shares of NxStage common stock on the last trading day prior to announcement of the execution of the merger agreement?

 

A. The per share merger consideration represents an approximately 30% premium to NxStage’s closing share price on August 4, 2017, the last trading day prior to the public announcement of the execution of the merger agreement, an approximately 18% premium to the volume-weighted average price for the 180-day period ended August 4, 2017, and an approximately 19% premium to the volume-weighted average price for the 1-year period ended August 4, 2017.

 

Q. What am I being asked to vote on at the special meeting?

 

A. You are being asked to consider and vote on proposals (i) to adopt the merger agreement, which provides for the acquisition of NxStage by Fresenius, (ii) to approve a proposal to approve, by non-binding, advisory vote, certain compensation arrangements for NxStage’s named executive officers in connection with the merger and (iii) to approve a proposal to adjourn the special meeting, if necessary, to solicit additional proxies if, at the time of the special meeting, there are an insufficient number of votes in favor of adopting the merger agreement.

 

Q. How does the NxStage board of directors recommend that I vote?

 

A. The NxStage board of directors recommends that you vote “ FOR ” approval of the proposal to adopt the merger agreement, “ FOR ” approval of the proposal to approve, by non-binding, advisory vote, the compensation that may be paid or become payable to NxStage’s named executive officers in connection with the merger, and “ FOR ” approval of the proposal to adjourn the special meeting, if necessary, to solicit additional proxies if, at the time of the special meeting, there are an insufficient number of votes in favor of adopting the merger agreement.

 

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Q. When do you expect the merger to be completed?

 

A. We are working towards completing the merger as soon as possible. Assuming timely satisfaction of the necessary closing conditions, we currently expect the closing of the merger to occur in 2018.

 

Q. What happens if the merger is not completed?

 

A. If the merger agreement is not adopted by the NxStage stockholders or if the merger is not completed for any other reason, the NxStage stockholders will not receive any payment for their shares of NxStage common stock in connection with the merger. Instead, NxStage will remain an independent public company and shares of NxStage common stock will continue to be listed and traded on Nasdaq. Under specified circumstances, NxStage may be required to pay Fresenius a termination fee upon the termination of the merger agreement, as described under “The Merger Agreement — Termination of the Merger Agreement — Termination Fee” beginning on page 80. Under specified circumstances, Fresenius may be required to pay NxStage a reverse termination fee upon the termination of the merger agreement, as described under “The Merger Agreement — Termination of the Merger Agreement — Reverse Termination Fee” beginning on page 81.

 

Q. What conditions must be satisfied to complete the merger?

 

A. The respective obligations of NxStage, Fresenius and Merger Sub to consummate the merger are subject to the satisfaction or waiver of certain conditions, including (i) the adoption of the merger agreement by NxStage stockholders, (ii) the absence of any governmental order or law preventing the merger or making the consummation of the Merger illegal, (iii) receipt of regulatory approvals, including the expiration or termination of the applicable waiting periods (and any extension thereof) under the HSR Act, clearance under the German ARC, and termination of any waiting period entered into with antitrust authorities, and (iv) other customary closing conditions.

 

Q. What are the material U.S. federal income tax consequences of the merger?

 

A. The receipt of cash for shares of NxStage common stock pursuant to the merger generally will be a taxable transaction for U.S. federal income tax purposes. The receipt of cash by a U.S. holder (as defined under “The Merger — U.S. Federal Income Tax Consequences of the Merger” beginning on page 54) in exchange for such U.S. holder’s shares of NxStage common stock pursuant to the merger generally will result in the recognition of gain or loss in an amount measured by the difference between the cash such U.S. holder receives pursuant to the merger and such U.S. holder’s adjusted tax basis in the shares of NxStage common stock surrendered pursuant to the merger. A Non-U.S. holder (as defined under “The Merger — U.S. Federal Income Tax Consequences of the Merger” beginning on page 54) generally will not be subject to U.S. federal income tax with respect to the exchange of shares of NxStage common stock for cash pursuant to the merger unless such Non-U.S. holder has certain connections to the United States.

Stockholders should refer to the discussion in the section entitled “The Merger — U.S. Federal Income Tax Consequences of the Merger,” beginning on page 54 and consult their own tax advisors concerning the U.S. federal income tax consequences relating to the merger in light of their particular circumstances and any consequences arising under the laws of any state, local or foreign taxing jurisdiction.

 

Q. Why am I receiving this proxy statement and proxy card or voting instruction form?

 

A. You are receiving this proxy statement and proxy card or voting instruction form because you owned shares of NxStage common stock as of the record date for the determination of stockholders entitled to vote at the special meeting. This proxy statement describes matters on which we urge you to vote and is intended to assist you in deciding how to vote your shares of NxStage common stock with respect to such matters

 

Q. When and where is the special meeting?

 

A. The special meeting of NxStage stockholders will be held at                     on                     , 2017 at                     , local time.

 

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Q. Why am I being asked to consider and vote on a proposal to approve, by non-binding, advisory vote, certain compensation arrangements for NxStage’s named executive officers in connection with the merger?

 

A. Under the Exchange Act and SEC rules, we are required to seek a non-binding, advisory vote with respect to the compensation that may be paid or become payable to NxStage’s named executive officers that is based on or otherwise relates to the merger, or “golden parachute” compensation.

 

Q. What will happen if NxStage’s stockholders do not approve the golden parachute compensation?

 

A. Approval of the compensation that may be paid or become payable to NxStage’s named executive officers in connection with the merger is not a condition to completion of the merger. The vote is an advisory vote and will not be binding on NxStage or the surviving company in the merger. Because the merger-related compensation to be paid to the named executive officers in connection with the merger is based on contractual arrangements with the named executive officers and the merger agreement, such compensation may be payable, regardless of the outcome of this advisory vote, if the merger agreement is adopted (subject only to the contractual obligations applicable thereto).

 

Q. What vote is required for NxStage’s stockholders to approve the proposal to adopt the merger agreement?

 

A. Approval of the proposal to adopt the merger agreement requires the affirmative vote of the holders of at least a majority of the issued and outstanding shares of NxStage common stock entitled to vote thereon.

 

Q. What vote is required for NxStage’s stockholders to approve the proposal to approve, by non-binding, advisory vote, certain compensation arrangements for NxStage’s named executive officers in connection with the merger?

 

A. The approval of the proposal to approve, by a non-binding, advisory vote, the compensation that may be paid or become payable to NxStage’s named executive officers in connection with the merger requires the affirmative vote of at least a majority of the votes cast at the special meeting.

 

Q. What vote is required for NxStage’s stockholders to approve the proposal to adjourn the special meeting, if necessary, to solicit additional proxies if, at the time of the special meeting, there are an insufficient number of votes in favor of adopting the merger agreement?

 

A. The approval of the proposal to adjourn the special meeting, if necessary, to solicit additional proxies if, at the time of the special meeting, there are insufficient votes to approve adoption of the merger agreement requires the affirmative vote of at least a majority of the votes cast at the special meeting.

 

Q. Do any of NxStage’s directors or executive officers have interests in the merger that may differ from or be in addition to my interests as a stockholder?

 

A. In considering the recommendation of the NxStage board of directors with respect to the proposal to adopt the merger agreement, you should be aware that our directors and executive officers may have interests in the merger that may be different from, or in addition to, the interests of our stockholders generally. The NxStage board of directors was aware of and considered these interests to the extent such interests existed at the time, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending that the merger agreement be adopted by the NxStage stockholders. See “The Merger — Interests of Certain Directors and Executive Officers in the Merger” beginning on page 49 and “Proposal 2: Advisory, Non-Binding Vote on Merger-Related Executive Compensation Arrangements” beginning on page 84.

 

Q. What is the difference between holding shares of NxStage common stock as a stockholder of record and as a beneficial owner?

 

A.

If on                     , 2017, your shares of NxStage common stock were registered directly in your name with our transfer agent, then you are a stockholder “of record.” If you are a stockholder of record, you may vote

 

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  in person at the special meeting, or submit a proxy by mail or over the Internet. Whether or not you plan to attend the special meeting, we urge you to submit your proxy to ensure your vote is counted. You may still attend the special meeting and vote in person if you have already submitted a proxy. Voting in person will revoke your proxy.

If on                     , 2017, your shares of NxStage common stock were held not in your name, but rather in an account at a brokerage firm, bank, dealer, or other similar organization, then your shares of NxStage common stock are held in “street name” and you are the beneficial owner of the shares of NxStage common stock. If you are a beneficial owner of shares of NxStage common stock registered in the name of your broker, bank, or other agent, you should have received a proxy card and voting instructions with these proxy materials from that organization rather than from us. Please complete and mail that proxy card to ensure that your vote is counted. Alternatively, you may submit your proxy over the Internet, as instructed by your broker or bank. To vote in person at the special meeting, you must obtain a valid proxy from your broker, bank, or other agent. Follow the instructions from your broker or bank included with these proxy materials or contact your broker or bank to request such a proxy form.

 

Q. If my shares of NxStage common stock are held in “street name” by my bank, brokerage firm or other nominee, will my bank, brokerage firm or other nominee vote my shares of NxStage common stock for me?

 

A. Your bank, brokerage firm or other nominee will only be permitted to vote your shares of NxStage common stock if you instruct your bank, brokerage firm or other nominee how to vote. You should follow the procedures provided by your bank, brokerage firm or other nominee regarding the voting of your shares of NxStage common stock. Banks, brokerage firms or other nominees who hold shares in “street name” for customers have the authority to vote on “routine” proposals when they have not received instructions from beneficial owners. However, banks, brokerage firms and other nominees are precluded from exercising their voting discretion with respect to approving non-routine matters, such as the proposals to be considered at the special meeting, and, as a result, absent specific instructions from the beneficial owner of such shares of NxStage common stock, banks, brokerage firms or other nominees are not empowered to vote those shares of NxStage common stock on non-routine matters. If you do not instruct your bank, brokerage firm or other nominee to vote your shares of NxStage common stock, your shares of NxStage common stock will not be voted, which we refer to as broker non-votes.

 

Q. Who can vote at the special meeting?

 

A. Only stockholders of record at the close of business on                     , 2017, the record date for the determination of stockholders entitled to notice of, and to vote at, the special meeting, are entitled to notice of, and to vote at, the special meeting or any adjournment or postponement of the meeting. On the record date,             shares of NxStage common stock were issued and outstanding, each of which is entitled to one vote upon each of the matters to be presented at the meeting.

If you are a beneficial owner of shares of NxStage common stock registered in the name of your broker, bank, or other nominee, you should have received a proxy card and voting instructions with these proxy materials from that organization rather than from us. Please complete and mail that proxy card to ensure that your vote is counted. Alternatively, you may submit a proxy over the Internet, as instructed by your broker or bank. To vote in person at the special meeting, you must obtain a valid proxy from your broker, bank, or other nominee. Follow the instructions from your broker or bank included with these proxy materials or contact your broker or bank to request such a proxy form.

 

Q. How many votes do I have?

 

A. Each holder of shares of NxStage common stock is entitled to cast one vote on each matter properly brought before the special meeting for each share of NxStage common stock that such holder owned as of the record date of                     , 2017. As of the close of business on the record date, there were                      shares of NxStage common stock outstanding and entitled to vote, held by              holders of record.

 

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Q. What is the quorum requirement?

 

A. Under the Second Amended and Restated By-Laws of NxStage, which we refer to as the by-laws, the presence in person or represented by proxy, of the holders of at least a majority of the issued and outstanding shares of NxStage common stock as of the record date and entitled to vote at the special meeting will constitute a quorum for purposes of the special meeting.

 

Q. How do I vote?

 

A. If you are a stockholder of record, you may have your shares of NxStage common stock voted on matters presented at the special meeting in any of the following ways:

 

    In Person .    You may attend the special meeting and cast your vote there.

 

    Over the Internet.     Go to the website www.investorvote.com/NXTM and, using the vote control number printed on your proxy card, access your account and submit a proxy for your shares. You must specify how you want your shares voted or your Internet proxy cannot be completed. Your shares will be voted according to your instructions.

 

    By Telephone .    Call 1-800-652-VOTE (8683)  from the United States and Canada, and follow the instructions on your enclosed proxy card. You must specify how you want your shares voted and confirm your voting instructions at the end of the call or your telephone vote cannot be completed. Your shares will be voted according to your instructions..

 

    In Writing .    You can submit your proxy by completing, signing, dating and returning the proxy card in the enclosed postage-paid envelope.

The control number provided on your proxy card is designed to verify your identity when submitting a proxy by telephone or Internet. The Internet and telephone voting facilities for the submission of proxies for stockholders of record will close at 11:59 p.m., Eastern Time on                     , 2017.

If you are a beneficial owner, please refer to the instructions provided by your bank, brokerage firm or other nominee to see which of the above choices are available to you. Please note that if you are a beneficial owner and wish to vote in person at the special meeting, you must provide a legal proxy from your bank, brokerage firm or other nominee at the special meeting.

 

Q. What effect do abstentions and “broker non-votes” have on the proposals?

 

A. Abstentions will be counted toward the presence of a quorum at the special meeting, but “broker non-votes” will not be counted toward the presence of a quorum at the special meeting. Abstentions and “broker non-votes” will not be considered votes cast on any proposal brought before the special meeting. Because the affirmative vote of the holders of at least a majority of the outstanding shares of our common stock is required to approve the proposal to adopt the merger agreement, the failure of any stockholder of record to submit a signed proxy card, grant a proxy electronically over the Internet or by telephone or to vote in person by ballot at the special meeting will have the same effect as a vote “ AGAINST ” the proposal to adopt the merger agreement, and any abstention or “broker non-vote” with respect to such proposal will have the same effect as a vote “ AGAINST ” the proposal to adopt the merger agreement.

Because the vote required to approve (i) the proposal to approve, by a non-binding, advisory vote, the compensation that may be paid or become payable to NxStage’s named executive officers in connection with the merger and (ii) the proposal to adjourn the special meeting, if necessary, to solicit additional proxies if, at the time of the special meeting, there are an insufficient number of votes in favor of adopting the merger agreement is, in each case, the affirmative vote of at least a majority of the votes cast at the special meeting, an abstention or a “broker non-vote” with respect to such proposals will not have the effect of a vote for or against the relevant proposal, but will reduce the number of votes cast and therefore increase the relative influence of those stockholders voting with respect to such proposals.

 

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Q. How can I change or revoke my proxy?

 

A. If you own shares of NxStage common stock in your own name, you may revoke any prior proxy or voting instructions, regardless of how your proxy or voting instructions were originally submitted, by:

 

    sending a written statement to that effect to the Secretary of NxStage at 350 Merrimack Street, Lawrence, MA 01843, which must be received by us by 5:00 p.m., Eastern Time on the business day immediately prior to the date of the special meeting;

 

    submitting a properly signed proxy card or voting instruction form dated a later date;

 

    submitting a later dated proxy or providing new voting instructions via the Internet or by telephone; or

 

    attending the meeting in person and voting your shares of NxStage common stock.

If you hold shares of NxStage common stock in “street name” by your bank, broker or other nominee, please follow the instructions provided by your bank, broker or other nominee as to how to revoke or change your previously provided voting instructions.

 

Q. What is a proxy?

 

A. A proxy is your legal designation of another person, referred to as a “proxy,” to vote your shares of NxStage common stock. The written document describing the matters to be considered and voted on at the special meeting is called a “proxy statement.” The document used to designate a proxy to vote your shares of NxStage common stock is called a “proxy card.”

 

Q. If a stockholder gives a proxy, how are the shares of NxStage common stock voted?

 

A. Regardless of the method you choose to submit your proxy, the individuals named on the enclosed proxy card will vote your shares of NxStage common stock in the way that you indicate. When completing the Internet or telephone processes or the proxy card, you may specify whether your shares of NxStage common stock should be voted for or against or to abstain from voting on all, some or none of the specific items of business to come before the special meeting.

If you own shares of NxStage common stock that are registered in your own name and return a signed proxy card or grant a proxy via the Internet or by telephone, but do not indicate how you wish your shares of NxStage common stock to be voted, the shares of NxStage common stock represented by your properly signed proxy will be voted “ FOR ” approval of the proposal to adopt the merger agreement, “ FOR ” approval of the proposal to approve, by non-binding, advisory vote, certain compensation arrangements for NxStage’s named executive officers in connection with the merger and “ FOR ” approval of the proposal to adjourn the special meeting, if necessary, to solicit additional proxies if, at the time of the special meeting, there are an insufficient number of votes in favor of adopting the merger agreement.

 

Q. What do I do if I receive more than one proxy or set of voting instructions?

 

A. If you received more than one proxy card, your shares of NxStage common stock are likely registered in different names or with different addresses or are in more than one account. You must separately vote the shares of NxStage common stock shown on each proxy card that you receive in order for all of your shares of NxStage common stock to be voted at the meeting.

 

Q. What happens if I sell my shares of NxStage common stock before the special meeting?

 

A. The record date for stockholders entitled to vote at the special meeting is earlier than both the date of the special meeting and the consummation of the merger. If you transfer your shares of NxStage common stock after the record date but before the special meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you transfer your shares of NxStage common stock and each of you notifies NxStage in writing of such special arrangements, you will retain your right to vote such shares of NxStage common stock at the special meeting but will transfer the right to receive the per share merger consideration to the person to whom you transfer your shares of NxStage common stock.

 

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Q. What happens if I sell my shares of NxStage common stock after the special meeting but before the effective time of the merger?

 

A. If you transfer your shares of NxStage common stock after the special meeting but before the effective time of the merger, you will have transferred the right to receive the per share merger consideration to the person to whom you transfer your shares of NxStage common stock. In order to receive the per share merger consideration, you must hold your shares of NxStage common stock through the completion of the merger.

 

Q. Who is paying for this proxy solicitation?

 

A. NxStage has engaged Georgeson LLC, which we refer to as Georgeson, to assist in the solicitation of proxies for the special meeting. NxStage estimates that it will pay Georgeson a fee of $12,500. NxStage has agreed to reimburse Georgeson for certain fees and expenses and will also indemnify Georgeson and its members, officers, directors, employees, agents and affiliates against any and all claims, costs, damages, liabilities, judgments and expenses, including fees, costs and expenses of counsel retained by Georgeson that directly relate to or arise out of Georgeson’s performance of the services.

 

Q. What do I need to do now?

 

A. Even if you plan to attend the special meeting, after carefully reading and considering the information contained in this proxy statement, please promptly submit your proxy to ensure that your shares of NxStage common stock are represented at the special meeting. If you hold your shares of NxStage common stock in your own name as the stockholder of record, you may submit a proxy to have your shares of NxStage common stock voted at the special meeting in one of three ways: (i) over the Internet, by going to the website www.investorvote.com/NXTM and, using the vote control number printed on your proxy card, accessing your account and submitting a proxy for your shares, (ii) by telephone, by calling 1-800-652-VOTE (8683)  from the United States and Canada and following the instructions on your enclosed proxy card, or (iii) in writing by completing, signing, dating and returning the proxy card in the enclosed postage-paid envelope accompanying your proxy card. If you decide to attend the special meeting and vote in person, your vote by ballot will revoke any proxy previously submitted. If you are a beneficial owner, please refer to the instructions provided by your bank, brokerage firm or other nominee to see which of the above choices are available to you.

 

Q. Should I send in my share certificates now?

 

A. No. If the proposal to adopt the merger agreement is approved, after the completion of the merger, you will be sent a letter of transmittal describing how you may exchange your shares of NxStage common stock for the per share merger consideration. If your shares of NxStage common stock are held in “street name” through a bank, brokerage firm or other nominee, you should contact your bank, brokerage firm or other nominee for instructions as to how to effect the surrender of your “street name” shares of NxStage common stock in exchange for the per share merger consideration. Please do NOT return your share certificate(s) with your proxy.

 

Q. Am I entitled to exercise appraisal rights under Section 262 of the DGCL instead of receiving the per share merger consideration for my shares of NxStage common stock?

 

A.

Yes. If the merger agreement is adopted by NxStage’s stockholders and the merger is completed, stockholders who do not vote (whether in person or by proxy) in favor of the adoption of the merger agreement and who properly exercise and perfect their demand for appraisal of their shares will be entitled to appraisal rights in connection with the merger under Section 262 of the DGCL. This means that such holders of NxStage common stock will be entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of the shares of NxStage common stock, exclusive of any elements of value arising from the accomplishment or expectation of the merger, together with interest to be paid upon the amount determined to be fair value, if any, as determined by the court (or, in certain circumstances described herein, on the difference between the amount determined to be the fair

 

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  value and the amount paid to each stockholder entitled to appraisal prior to the entry of judgment in the appraisal proceeding). Stockholders who wish to seek appraisal of their shares are in any case encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights due to the complexity of the appraisal process. The DGCL requirements for exercising appraisal rights are described in further detail in this proxy statement, and Section 262 of the DGCL regarding appraisal rights is reproduced and attached as Annex C to this proxy statement. See “The Merger Agreement — Exchange and Payment Procedures — Dissenting Shares” beginning on page 62.

 

Q. Who can help answer any other questions I might have?

 

A. If you have additional questions about the merger, need assistance in submitting your proxy or voting your shares of NxStage common stock, or need additional copies of this proxy statement or the enclosed proxy card, please contact Georgeson, our proxy solicitor, by calling toll-free at 888-658-5755, or by e-mailing NxStage@Georgeson.com.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement, and the documents to which we refer you in this proxy statement, contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. All statements other than statements of historical facts included in this proxy statement regarding our strategies, prospects, financial condition, costs, plans and objectives are forward-looking statements. When used in this proxy statement, the words “expect”, “anticipate”, “intend”, “plan”, “believe”, “seek”, “estimate”, “potential”, “continue”, “predict”, “may”, “will” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Because these forward-looking statements involve risks and uncertainties, actual results could differ materially from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, the risks detailed in our filings with the SEC, including in our most recent filing on Form 10-Q and subsequent periodic and interim reports, factors and matters described or incorporated by reference in this proxy statement, and the following factors:

 

    the expected timing and likelihood of completion of the proposed merger;

 

    the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement, including a termination of the merger agreement under circumstances that could require us to pay a termination fee;

 

    the possibility that NxStage’s stockholders may not approve the proposal to adopt the merger agreement;

 

    the risk that the parties may not be able to satisfy the conditions to the closing of the merger, including required regulatory approvals, in a timely manner or at all;

 

    the failure of the merger to close for any other reason;

 

    risks related to disruption of management time from ongoing business operations due to the proposed merger;

 

    limitations placed on our ability to operate the business by the merger agreement;

 

    the outcome of any legal proceedings instituted against NxStage and/or others relating to the merger agreement and the merger;

 

    the risk that any announcements relating to the proposed merger could have adverse effects on the market price of shares of NxStage common stock;

 

    the risk that the proposed merger and its announcement could have an adverse effect on the ability of NxStage to retain and hire key personnel and maintain relationships with its suppliers, licensees, partners and customers, and on its operating results and businesses generally;

 

    the potential impact on Fresenius’s status as a key customer of NxStage if the merger is not consummated; and

 

    the fact that NxStage’s stockholders would forego the opportunity to realize the potential long-term value of the successful execution of NxStage’s current strategy as an independent company.

These forward-looking statements are also qualified by, and should be read together with, the “Forward-Looking Statements,” the “Risk Factors” and the other statements in our most recent report on Form 10-Q and subsequent periodic and interim report filings, in each case as filed with the SEC and available at www.sec.gov (see “Where You Can Find More Information” beginning on page 97). No assurance can be given that these are all of the factors that could cause actual results to vary materially from the forward-looking statements.

Except as required by applicable law, we undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. NxStage stockholders are advised, however, to consult any future disclosures we make on related subjects as may be detailed in our other filings made from time to time with the SEC.

 

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PARTIES INVOLVED IN THE MERGER

NxStage Medical, Inc. , a Delaware corporation, is a leading medical technology company, headquartered in Lawrence, Massachusetts, that develops, manufactures and markets innovative products for the treatment of end-stage renal disease and acute kidney failure. NxStage has also established a small number of dialysis clinics committed to the development of innovative care delivery models for patients with end-stage renal disease.

Shares of NxStage common stock are currently listed on the Nasdaq Global Select Market (NXTM). Upon completion of the merger, NxStage will be a wholly-owned subsidiary of Fresenius.

Fresenius Medical Care Holdings, Inc. , a New York corporation, is a premier health care company focused on providing the highest quality care to people with renal and other chronic conditions. Through its industry-leading network of dialysis facilities, outpatient cardiac and vascular labs, and urgent care centers, as well as the United States’ largest practice of hospitalist and post-acute providers, Fresenius provides coordinated health care services at pivotal care points for hundreds of thousands of chronically ill patients. As the world’s largest fully vertically integrated renal company, it offers specialty pharmacy and laboratory services, and manufactures and distributes the most comprehensive line of dialysis equipment, disposable products, and renal pharmaceuticals.

Broadway Renal Services, Inc. , a Delaware corporation and wholly-owned subsidiary of Fresenius, was formed by Fresenius for the purpose of entering into the merger agreement and completing the transactions contemplated by the merger agreement. Upon completion of the merger, Merger Sub will cease to exist.

 

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THE SPECIAL MEETING

The enclosed proxy is solicited on behalf of the NxStage board of directors for use at the special meeting or at any adjournments or postponements thereof.

Date, Time and Place

We will hold the special meeting on                     , 2017, at                     , at                      , local time.

Purpose of the Special Meeting

At the special meeting, we will ask our stockholders of record as of the record date to vote on proposals to (i) adopt the merger agreement, (ii) approve, by a non-binding, advisory vote, the compensation that may be paid or become payable to NxStage’s named executive officers in connection with the merger and (iii) adjourn the special meeting, if necessary, to solicit additional proxies if, at the time of the special meeting, there are insufficient votes to adopt the merger agreement.

Record Date; Shares Entitled to Vote; Quorum

Only stockholders of record as of the close of business on                     , 2017, are entitled to notice of the special meeting and to vote at the special meeting or at any adjournments or postponements thereof.

As of the record date, there were approximately              shares of NxStage common stock outstanding and entitled to be voted at the special meeting.

A quorum of stockholders is necessary to hold a special meeting. The presence in person or represented by proxy, of the holders of at least a majority of the issued and outstanding shares of NxStage common stock as of the record date and entitled to vote at the meeting will constitute a quorum for purposes of the special meeting. As a result,             shares of NxStage common stock must be represented by proxy or in person and entitled to vote at the special meeting to have a quorum.

In the event that a quorum is not present at the special meeting, it is expected that the meeting would be adjourned or postponed to a later date to solicit additional proxies.

Vote Required; Abstentions and Broker Non-Votes

Approval of the proposal to adopt the merger agreement requires the affirmative vote of the holders of at least a majority of the issued and outstanding shares of NxStage common stock entitled to vote thereon. The approval and adoption of such proposal is necessary to complete the merger.

Abstentions will be counted toward the presence of a quorum at the special meeting, but “broker non-votes” will not be counted toward the presence of a quorum at the special meeting. Abstentions and “broker non-votes” will not be considered votes cast on any proposal brought before the special meeting. Because the affirmative vote of the holders of at least a majority of the outstanding shares of our common stock is required to approve the proposal to adopt the merger agreement, the failure of any stockholder of record to submit a signed proxy card, grant a proxy electronically over the Internet or by telephone or to vote in person by ballot at the special meeting will have the same effect as a vote “ AGAINST ” the proposal to adopt the merger agreement, and any abstention or “broker non-vote” with respect to such proposal will have the same effect as a vote “ AGAINST ” the proposal to adopt the merger agreement.

The approval of the proposal to approve, by a non-binding, advisory vote, the compensation that may be paid or become payable to NxStage’s named executive officers in connection with the merger requires the affirmative vote of at least a majority of the votes cast at the special meeting.

Abstentions from voting by a NxStage stockholder, the failure of any NxStage stockholder to submit a vote and, if applicable, “broker non-votes” will not be considered votes cast in respect of the proposal to approve, by a non-binding, advisory vote, the compensation that may be paid or become payable to NxStage’s named executive officers in connection with the merger. Such proposal requires the affirmative vote of at least a majority of the

 

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votes cast at the special meeting, and so abstentions and “broker non-votes” will not have the effect of a vote “ FOR ” or “ AGAINST ” the proposal, but will reduce the number of votes cast and therefore increase the relative influence of those stockholders voting with respect to such proposal. Brokers, banks and other nominees do not have discretionary authority to vote on the proposal absent instructions from the beneficial owner. While the NxStage board of directors intends to consider the vote resulting from this proposal, the vote is advisory only and therefore not binding on NxStage or Fresenius and, if the merger is approved by NxStage stockholders and consummated, and the other relevant conditions relating to payment are met, the compensation will be payable even if the proposal is not approved.

The approval of the proposal to adjourn the special meeting, if necessary, to solicit additional proxies if, at the time of the special meeting, there are insufficient votes to adopt the merger agreement requires the affirmative vote of at least a majority of the votes cast at the special meeting.

Abstentions from voting by a NxStage stockholder, the failure of any NxStage stockholder to submit a vote and, if applicable, broker non-votes will not be considered votes cast in respect of the proposal to adjourn the special meeting, and so will not have the effect of a vote “ FOR ” or “ AGAINST ” the proposal, but will reduce the number of votes cast and therefore increase the relative influence of those stockholders voting with respect to such proposal.

Since none of the proposals to be considered at the special meeting is considered routine, brokers, banks and other nominees will not have discretionary authority to vote on any of the proposals without instructions from the beneficial owner.

Shares Held by NxStage’s Directors and Executive Officers

At the close of business on                     , 2017, our directors and executive officers beneficially owned and were entitled to vote, in the aggregate,             shares of NxStage common stock (excluding any shares of NxStage common stock that would be delivered upon exercise or conversion of equity-based awards), which represented approximately     % of issued and outstanding shares of NxStage common stock on that date. The directors and executive officers have informed NxStage that they currently intend to vote all of their shares of NxStage common stock (i) “ FOR ” the proposal to adopt the merger agreement, (ii) “ FOR ” the proposal to approve, by a non-binding, advisory vote, the compensation that may be paid or become payable to NxStage’s named executive officers in connection with the merger and (iii) “ FOR ” the proposal to adjourn the special meeting, if necessary, to solicit additional proxies if, at the time of the special meeting, there are insufficient votes to adopt the merger agreement.

Voting of Proxies

Except as provided below, holders of shares of NxStage common stock have one vote for each share of NxStage common stock held by them and are entitled to vote on all the proposals voted on at the special meeting or any postponement or adjournment thereof.

If your shares of NxStage common stock are registered in your name with our transfer agent, Computershare Investor Services, you may cause your shares to be voted by returning a signed proxy card, or you may vote in person at the special meeting. Additionally, you may submit electronically over the Internet or by phone a proxy authorizing the voting of your shares of NxStage common stock by following the instructions on your proxy card. You must have the enclosed proxy card available, and follow the instructions on the proxy card, in order to submit a proxy electronically over the Internet or by telephone. Based on your proxy cards or Internet and telephone proxies, the proxy holders will vote your shares of NxStage common stock according to your directions.

If you plan to attend the special meeting and wish to vote in person, you will be given a ballot at the meeting. If your shares of NxStage common stock are registered in your name, you are encouraged to submit a proxy even if you plan to attend the special meeting in person. If you attend the special meeting and vote in person, your vote by ballot will revoke any proxy previously submitted.

Voting instructions are included on your proxy card. All shares of NxStage common stock represented by properly executed proxies received in time for the special meeting will be voted at the special meeting in

 

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accordance with the instructions of the stockholder. Properly executed proxies that do not contain voting instructions will be voted (i) “ FOR ” the proposal to adopt the merger agreement, (ii) “ FOR ” the proposal to approve, by a non-binding, advisory vote, the compensation that may be paid or become payable to NxStage’s named executive officers in connection with the merger and (iii) “ FOR ” the proposal to adjourn the special meeting, if necessary, to solicit additional proxies if, at the time of the special meeting, there are insufficient votes to adopt the merger agreement. No proxy that is specifically marked against the proposal to adopt the merger agreement will be voted in favor of the proposal to approve, by a non-binding, advisory vote, the compensation that may be paid or become payable to NxStage’s named executive officers in connection with the merger, unless it is specifically marked “ FOR ” the approval of such proposal, and will be treated as an abstention unless it is specifically marked “ AGAINST ” the approval of such proposal.

If your shares of NxStage common stock are held in “street name” by your bank, broker or other nominee, you should instruct your bank, broker or other nominee how to vote your shares using the instructions provided by your bank, broker or other nominee.

If you fail to submit a proxy or to vote in person at the special meeting and you are a record holder, your shares will not be counted for purposes of quorum or as votes cast at the special meeting. If your shares of NxStage common stock are held in “street name” and you do not provide your bank, broker or other nominee with voting instructions, your shares will be treated as “broker non-votes” as described below. If you choose to vote in person at the special meeting and your shares of NxStage common stock are held in “street name,” you must first obtain a legal proxy form from your broker, bank or other nominee and bring such executed form with you to the meeting.

Revocability of Proxies

You may revoke a submitted proxy by (i) sending a written statement to that effect to the Secretary of NxStage at 350 Merrimack Street, Lawrence, MA 01843, which must be received by us by 5:00 p.m., Eastern Time on the business day immediately prior to the date of the special meeting; (ii) submitting a properly signed proxy card or voting instruction form dated a later date; (iii) submitting a later dated proxy or providing new voting instructions via the Internet or by telephone; or (iv) attending the meeting in person and voting your shares of NxStage common stock.

If your shares of NxStage common stock are held in “street name” by your bank, broker or other nominee, please follow the instructions provided by your bank, broker or other nominee as to how to revoke your previously provided voting instructions.

NxStage Board of Directors’ Recommendation

The NxStage board of directors, after considering various reasons described in the section entitled “The Merger — Recommendation of the NxStage Board of Directors and Reasons for the Merger” beginning on page 33, has (1) determined that the merger, on the terms and subject to the conditions set forth in the merger agreement, is in the best interests of NxStage and its stockholders, (2) approved and declared advisable the merger agreement and the merger in accordance with the DGCL and (3) resolved that the proposal to adopt the merger agreement be submitted to NxStage’s stockholders for their consideration at the special meeting. Accordingly, the NxStage board of directors recommends that NxStage stockholders vote (i) “ FOR ” the proposal to adopt the merger agreement, (ii) “ FOR ” the proposal to approve, by a non-binding, advisory vote, the compensation that may be paid or become payable to NxStage’s named executive officers in connection with the merger, and (iii) “ FOR ” the proposal to adjourn the special meeting, if necessary, to solicit additional proxies if, at the time of the special meeting, there are insufficient votes to adopt the merger agreement.

Solicitation of Proxies

The expense of soliciting proxies in the enclosed form will be borne by NxStage. We have retained Georgeson, a proxy solicitation firm, to solicit proxies in connection with the special meeting at a cost of approximately $12,500 plus expenses. We have agreed to indemnify Georgeson against losses arising out of its provision of such services on our behalf. In addition, we may reimburse brokers, banks and other custodians,

 

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nominees and fiduciaries representing beneficial owners of shares for their expenses in forwarding soliciting materials to such beneficial owners. Proxies may also be solicited by some of our directors, officers and employees, personally or by telephone, facsimile or other means of communication. No additional compensation will be paid for such services.

Anticipated Date of Completion of the Merger

Assuming timely satisfaction of necessary closing conditions, including the approval by our stockholders of the proposal to adopt the merger agreement, we anticipate that the merger will be consummated in 2018.

Householding of Special Meeting Materials

We may send a single copy of this proxy statement to any household at which two or more stockholders reside in accordance with SEC rules, unless we have received contrary instructions. Each stockholder in the household will continue to receive a separate proxy card. This process, known as “householding,” reduces the volume of duplicate information received at your household and helps to reduce our expenses.

If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate proxy statement, please notify your broker or direct your written request to: Investor Relations, NxStage Medical, Inc., 350 Merrimack Street, Lawrence, MA 01843, or contact our Investor Relations department at www.nxstage.com. We will promptly deliver upon written request a separate copy of this proxy statement to a stockholder at a shared address to which a single copy of this proxy statement was delivered. Stockholders who currently receive multiple copies of this proxy statement at their addresses and would like to request “householding” of their communications should contact their broker.

Assistance

If you have additional questions about the merger, need assistance in submitting your proxy or voting your shares of NxStage common stock, or need additional copies of this proxy statement or the enclosed proxy card, please contact Georgeson, our proxy solicitor, by calling toll-free at 888-658-5755, or by e-mailing NxStage@Georgeson.com.

 

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THE MERGER

This discussion of the merger is qualified in its entirety by reference to the merger agreement, which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. You should read the entire merger agreement carefully as it is the legal document that governs the merger.

Certain Effects of the Merger on NxStage

Upon the terms and subject to the conditions of the merger agreement, Merger Sub will merge with and into NxStage, with NxStage continuing as the surviving company and a wholly-owned subsidiary of Fresenius. NxStage expects to de-list shares of NxStage common stock from Nasdaq and de-register them under the Exchange Act as soon as reasonably practicable following the effective time of the merger, and thereafter we would no longer be a publicly traded company or file periodic reports with the SEC. If the merger is consummated, you will not own any shares of the capital stock of the surviving company.

The time at which the merger will become effective will occur upon the date and time of filing of the certificate of merger with the Secretary of State, or such later date and time as is agreed in writing by NxStage and Fresenius and specified in the certificate of merger.

Effect on NxStage if the Merger is Not Completed

If the merger agreement is not adopted by NxStage stockholders, or if the merger is not completed for any other reason, NxStage stockholders will not receive any payment for their shares of NxStage common stock. Instead, NxStage will remain a public company, the shares of NxStage common stock will continue to be listed and traded on Nasdaq and registered under the Exchange Act and we will continue to file periodic reports with the SEC.

Furthermore, if the merger is not consummated, and depending on the circumstances that would have caused the merger not to be consummated, it is likely that the price of shares of NxStage common stock will decline significantly. If that were to occur, it is uncertain when, if ever, the price of shares of NxStage common stock would return to the price at which they trade as of the date of this proxy statement.

Accordingly, if the merger is not consummated, there can be no assurance as to the effect of these risks and opportunities on the future value of your shares of NxStage common stock. If the merger is not consummated, the NxStage board of directors will continue to evaluate and review NxStage’s business operations, properties, dividend policy and capitalization, among other things, make such changes as are deemed appropriate and continue to seek to enhance stockholder value. If the merger agreement is not adopted by NxStage stockholders, or if the merger is not consummated for any other reason, there can be no assurance that any other transaction acceptable to NxStage will be offered or that NxStage’s business, prospects or results of operation will not be adversely impacted.

In addition, under specified circumstances, NxStage may be required to pay Fresenius a termination fee upon the termination of the merger agreement, as described under “The Merger Agreement — Termination of the Merger Agreement — Termination Fee” beginning on page 80. Under specified circumstances, Fresenius may be required to pay NxStage a reverse termination fee upon the termination of the merger agreement, as described under “The Merger Agreement — Termination of the Merger Agreement — Reverse Termination Fee” beginning on page 81.

Merger Consideration

Pursuant to the merger, each issued and outstanding share of NxStage common stock (other than excluded shares) will be converted automatically into the right to the per share merger consideration and, without any action by the holders of such shares, will cease to be outstanding, be canceled and cease to exist, and each holder of a certificate formerly representing any shares of NxStage common stock or person entered as the owner in book-entry in respect of a share immediately prior to the effective time, will cease to have any rights with respect thereto other than the right to receive the per share merger consideration.

 

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After the merger is completed, under the terms of the merger agreement, you will have the right to receive the per share merger consideration, but you no longer will have any rights as a NxStage stockholder as a result of the merger (except that stockholders who properly exercise their right of appraisal will have the right to receive a payment for the “fair value” of their shares as determined pursuant to an appraisal proceeding as contemplated by Delaware law, as described below under “The Merger Agreement — Dissenting Shares” beginning on page 62).

Background of the Merger

The NxStage board of directors and management regularly review NxStage’s operations, financial condition and performance, capital structure, and strategic plans. As part of these reviews, the NxStage board of directors has periodically evaluated strategic opportunities to maximize stockholder value, including acquisitions, dispositions and other financial and strategic alternatives. NxStage management has also discussed such opportunities with third parties from time to time, including with certain strategic partners and potential acquirors.

NxStage and Fresenius have a long-standing commercial relationship, and Fresenius is one of NxStage’s largest customers. During the course of their commercial relationship, NxStage and Fresenius have discussed various strategic options. At the end of 2016 and into 2017, NxStage and Fresenius were negotiating an extension of their existing product purchase agreement for equipment and supplies intended for use in home hemodialysis therapies, as well as a potential joint venture involving NxStage’s dialysis clinic business. In the course of the negotiations, Jeffrey Burbank, Chief Executive Officer of NxStage, had periodic discussions with William Valle, Chief Executive Officer of Fresenius.

On January 26, 2017, the NxStage board of directors held a regularly scheduled, in-person meeting attended by representatives from Piper Jaffray, a financial advisor with extensive experience in the medical device industry and mergers and acquisitions transactions and familiarity with NxStage. At the request of the NxStage board of directors and as a follow-up to the board’s annual strategy meeting in 2016, a representative of Piper Jaffray presented materials to the board regarding recent strategic transactions among publicly traded medical device companies.

During the week of February 6, Mr. Burbank and Mr. Valle arranged an in-person meeting for February 13 to discuss the parties’ product purchase agreement and the potential joint venture involving NxStage’s dialysis clinic business.

On February 13, 2017, Mr. Burbank and Mr. Valle held an in-person meeting at Mr. Valle’s office to discuss the key terms of the parties’ product purchase agreement for equipment and supplies intended for use in home hemodialysis therapies. During the meeting, Mr. Valle expressed Fresenius’ potential interest in a broader strategic relationship but did not propose specific terms of such arrangement.

On February 17, 2017, the NxStage board of directors met and discussed Mr. Burbank’s February 13 meeting with Mr. Valle and Mr. Valle’s statement that Fresenius may have interest in a broader strategic relationship with NxStage. The NxStage board of directors asked questions and, after discussing potential next steps, authorized Mr. Burbank to continue his dialog with Mr. Valle. Between February 17 and May 31, Mr. Burbank and Mr. Valle spoke periodically about the parties’ product purchase agreement for equipment and supplies intended for use in home hemodialysis therapies but did not discuss a potential merger transaction.

On April 27, 2017, the NxStage board of directors held a regularly scheduled, in-person meeting attended by members of NxStage management and a representative of Ropes & Gray LLP, which we refer to as Ropes & Gray, NxStage’s outside legal counsel. At the request of the NxStage board of directors, a representative of Ropes & Gray described the legal, corporate governance and other key issues that would be raised in the event NxStage received an offer to acquire the company.

During the week of May 22, 2017, Mr. Valle contacted Mr. Burbank to schedule a meeting but did not propose an agenda.

On May 31, 2017, Mr. Burbank attended a meeting with Rice Powell, Chairman and Chief Executive Officer of the Management Board of Fresenius’s parent company, and Mr. Valle. During the meeting, Messrs. Powell and Valle expressed Fresenius’s potential interest in acquiring NxStage but did not propose a purchase

 

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price. They also told Mr. Burbank that Fresenius would provide a draft non-disclosure agreement and a written, non-binding indication of interest following the meeting. Mr. Burbank stated that he would update the NxStage board of directors about this meeting, and that the NxStage board of directors would evaluate Fresenius’s indication of interest promptly after receiving it.

On June 1, 2017, Fresenius delivered a proposed non-disclosure agreement to NxStage, which contemplated a 75-day exclusivity period and a one-year standstill period that would terminate in the event NxStage entered into a definitive agreement providing for a change of control of NxStage or if the NxStage board of directors recommended acceptance of a third-party tender offer to NxStage stockholders. Between June 1 and June 19, 2017, NxStage and Fresenius management, together with representatives of Ropes & Gray and Robinson Bradshaw & Hinson, PC, which we refer to as Robinson Bradshaw, outside legal counsel to Fresenius, exchanged multiple drafts of a non-disclosure agreement and negotiated the key terms, including the standstill period.

On June 2, 2017, the NxStage board of directors held a meeting attended by members of NxStage management. Mr. Burbank summarized the key topics discussed at his May 31 meeting with Messrs. Powell and Valle, including that in anticipation of submitting a non-binding indication of interest with respect to the acquisition of NxStage, Fresenius had engaged a financial advisor and begun due diligence, and that Fresenius intended to present a formal indication of interest regarding a potential transaction soon. Mr. Burbank shared that Fresenius’s stated rationale for seeking a transaction with NxStage at this time included Fresenius’s belief in the benefits of home hemodialysis, which it believes is currently under-penetrated among patients, as well as Fresenius’s excitement regarding NxStage’s critical care technology. Mr. Burbank responded to questions from the directors regarding the meeting and then led a discussion concerning the key risks and opportunities related to a potential transaction, including that the Fresenius representatives had stated that Fresenius may seek alternatives to insourcing home hemodialysis equipment and supplies from NxStage if a transaction did not occur. The directors discussed that assertion by the Fresenius representatives, as the loss of Fresenius as a customer would adversely impact NxStage’s revenue and growth. The directors also discussed the potential reaction to a transaction from NxStage’s other customers and the impact of information leaks on NxStage employees and customers. Mr. Burbank then noted the potential to accelerate certain of NxStage’s pipeline programs if a transaction were to occur, the potential for greater penetration of home hemodialysis at Fresenius clinics as well as other customers domestically and worldwide, as well as how the proposed transaction would remove the risks faced by NxStage as a standalone company and NxStage’s ability to meet its long-term objectives, on a risk-adjusted basis. Mr. Burbank noted that NxStage’s negotiations to obtain a long-term product purchase agreement for equipment and supplies intended for use in home hemodialysis therapies with Fresenius had been unsuccessful to date, and the parties’ current agreement is renewable on a month-to-month basis and can be terminated by either party on 30 days’ notice. In addition, Mr. Burbank discussed the uncertainties and risks faced by NxStage and NxStage’s ability to meet its long-term objectives and deliver value to its stockholders as a standalone business. The directors also discussed general market, regulatory and political uncertainties and how these could impact NxStage’s future stock price. Mr. Burbank noted that NxStage’s financial performance for the second quarter of 2017 was unlikely to meet market expectations, and that NxStage may need to lower guidance for the full year. Winnie Swan, Senior Vice President, General Counsel and Corporate Secretary of NxStage, then described the terms of the draft non-disclosure agreement delivered by Fresenius on June 1, including the request for an exclusivity period. Following discussion, the directors determined that it would be premature to enter into exclusive negotiations at this time. The directors and management discussed next steps, and the NxStage board of directors authorized Mr. Burbank to continue his dialog with Mr. Valle. The directors also discussed the merits of engaging Piper Jaffray as NxStage’s financial advisor in connection with the potential transaction given Piper Jaffray’s understanding of NxStage’s business and their expertise in medical devices, in particular, and mergers and acquisitions, in general. The NxStage board of directors directed management to work towards formally engaging Piper Jaffray as NxStage’s financial advisor and to work with Piper Jaffray to evaluate and respond to the anticipated indication of interest from Fresenius.

On June 13, 2017, Mr. Valle delivered a non-binding indication of interest, which we refer to a the June 13 Letter, to Mr. Burbank proposing that Fresenius acquire NxStage for an all-cash purchase price of between $27.00 and $29.00 per share without a financing condition, which represented a premium of between

 

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approximately 15% and 24% to the closing price of NxStage’s stock on June 12, 2017. The June 13 Letter also reiterated Fresenius’s expectation that NxStage would agree to negotiate exclusively with Fresenius for 75 days.

On June 14, 2017, the NxStage board of directors held a meeting attended by Ms. Swan. During the meeting, Ms. Swan summarized the terms proposed in the June 13 Letter, which had been circulated prior to the meeting, and Ms. Swan and Mr. Burbank discussed recent interactions between representatives of NxStage and Fresenius and the valuation of NxStage reflected in the June 13 Letter. The directors asked questions about, and discussed, Fresenius’s proposal and the parties’ interactions, as well as the most effective methods for engaging with Fresenius and maximizing the potential transaction value. Following the discussion, the NxStage board of directors determined that, while NxStage was not currently for sale, management should inform the NxStage board of directors of potential alternatives to NxStage’s existing strategic plan, including a potential strategic transaction with Fresenius, and authorized the NxStage management team and its advisors to continue negotiating a potential transaction with Fresenius. The NxStage board of directors also established a special transaction committee, which we refer to as the Transaction Committee, comprised of Mr. Burbank and three independent directors — Robert Funari, Earl Lewis and Reid Perper — to oversee the evaluation of potential strategic transactions and report on developments to the full board. The NxStage board of directors delegated authority to the Transaction Committee to approve the terms of an engagement with a financial advisor; to determine whether to contact additional parties regarding a potential strategic transaction with NxStage; to approve a non-disclosure agreement, including any standstill or exclusivity arrangements, between NxStage and any third parties; and to take other actions in connection with potential strategic transactions.

On June 14, 2017, following the meeting of the full NxStage board of directors, the members of the Transaction Committee held an initial meeting attended by Ms. Swan. Mr. Burbank addressed some considerations related to Fresenius’s proposal, including that Fresenius management had indicated that it might pursue alternatives to insourcing home hemodialysis equipment and supplies from NxStage if a transaction did not occur, which would have an adverse impact on NxStage’s revenue and growth as well as that second quarter 2017 financial performance was unlikely to meet market expectations, and that NxStage may need to lower guidance for the full year. Mr. Burbank and the other members of the Transaction Committee also discussed potential customer sentiment concerning a strategic transaction between Fresenius and NxStage, the benefits of establishing a new, long-term commercial relationship with Fresenius, and management’s preparations for potential due diligence.

On June 15, 2017, the Transaction Committee held a meeting attended by members of the NxStage management team and representatives from Piper Jaffray and Ropes & Gray. During the meeting, Mr. Burbank again summarized recent interactions with Fresenius, including the receipt by NxStage of the June 13 Letter and Fresenius’s request for a 75-day exclusivity period, as well as the status of the commercial arrangements between NxStage and Fresenius. The Transaction Committee discussed potential responses to the June 13 Letter with the goal of increasing Fresenius’s proposed price per share and agreeing on revised terms for the parties’ product purchase agreement for equipment and supplies intended for use in home hemodialysis therapies. Following the discussion, the Transaction Committee directed members of the NxStage management team to enter into a non-disclosure agreement with Fresenius that included a one-year standstill period but not include any exclusivity period. The Transaction Committee also directed NxStage management and its advisors to contact their Fresenius counterparts to discuss increasing the price per share, NxStage’s requested extension of Fresenius’s product purchase agreement for equipment and supplies intended for use in home hemodialysis therapies, and the diligence process and, following the execution of a non-disclosure agreement, to provide Fresenius with information that would assist Fresenius’s valuation of the business and support an increase of the proposed purchase price. The Transaction Committee then discussed with representatives from Piper Jaffray the possibility of contacting third parties to assess their interest in pursuing an alternative strategic transaction with NxStage, including the timing, risks and benefits, and probability of success of such outreach. The Transaction Committee also solicited input from Mr. Burbank based on his prior interactions with third parties. Following this discussion, the Transaction Committee determined that, based in part on discussions with Mr. Burbank and representatives of Piper Jaffray regarding the potential risks and benefits of contacting third parties, NxStage and representatives of Piper Jaffray should not reach out to other third parties regarding potential alternative transactions at that time.

On June 16, 2017, NxStage delivered to Fresenius a revised proposed non-disclosure agreement that did not provide for an exclusivity period.

 

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On June 17, 2017, Mr. Burbank met with Mr. Powell to discuss next steps in negotiating a potential strategic transaction between NxStage and Fresenius. Mr. Burbank explained that the NxStage board of directors would require Fresenius to increase the purchase price above that proposed in the June 13 Letter. Mr. Burbank also proposed that following the execution of a non-disclosure agreement, NxStage would share and present certain non-public information about the business in order to support a proposed price per share above the $27.00 to $29.00 range presented in the June 13 Letter.

Later on June 17, 2017, representatives from Bank of America Merrill Lynch, which we refer to as BofA Merrill Lynch, Fresenius’s financial advisor, and Piper Jaffray discussed issues related to the potential transaction, including the purchase price proposed by Fresenius in the June 13 Letter, the need to protect the existing commercial arrangements between NxStage and Fresenius, and Fresenius’s due diligence requirements.

On June 18, 2017, Mr. Burbank had a call with Mr. Valle to discuss the potential transaction with Fresenius, including Fresenius’s due diligence requirements, the protection of the existing commercial relationship between Fresenius and NxStage, the importance of providing for deal certainty in any definitive documentation, and the need for Fresenius to increase the purchase price above that proposed in the June 13 Letter.

On June 19, 2017, NxStage and Fresenius executed a non-disclosure agreement that included a one-year standstill but no exclusivity period. NxStage and Fresenius subsequently amended the non-disclosure agreement to permit specific Fresenius employees and advisors to receive competitively sensitive information regarding certain NxStage products, intellectual property, manufacturing facilities and operations, regulatory matters and financial information, subject to specific restrictions on use of such information.

Also on June 19, 2017, the Transaction Committee held a meeting attended by members of NxStage management and representatives from Piper Jaffray and Ropes & Gray. During the meeting, Mr. Burbank and representatives from Piper Jaffray summarized recent developments in the interactions with Fresenius, including their recent meetings and calls with Fresenius management and representatives of BofA Merrill Lynch, respectively, noting that, consistent with the Transaction Committee’s prior guidance, they emphasized NxStage’s focus on Fresenius increasing its proposed purchase price, achieving deal certainty, and protecting the parties’ commercial relationship. Mr. Burbank also noted that Fresenius’s management expressed its unwillingness to establish terms for a new long-term commercial agreement with NxStage for the purchase of equipment and supplies intended for use in home hemodialysis therapies but may engage on new parameters for the parties’ existing commercial agreement. The Transaction Committee and other meeting participants then discussed potential strategies to negotiate favorable terms for the parties’ existing commercial agreement for the purchase of equipment and supplies intended for use in home hemodialysis therapies and next steps with respect to the potential strategic transaction, including the NxStage management team’s preparation for a management meeting with Fresenius.

On June 21, 2017, members of the NxStage management team made a presentation about NxStage’s business to members of the Fresenius management team. The presentation included certain financial projections prepared by the NxStage management team in the ordinary course in connection with its long-range planning activities and other non-public information about NxStage’s products and operations. Following the meeting, Fresenius delivered additional due diligence requests to NxStage, and members of NxStage management and its representatives provided responses on a rolling basis.

Between June 22, 2017 and June 27, 2017, representatives from Piper Jaffray and BofA Merrill Lynch participated in several calls to discuss potential transaction terms, diligence requests and responses, and the negotiation process and timeline. Mr. Burbank and Mr. Valle also discussed the June 21 management meeting and Fresenius’s intent to deliver a revised indication of interest.

On June 28, 2017, the Transaction Committee held a meeting attended by members of NxStage management and representatives from Piper Jaffray and Ropes & Gray. Mr. Burbank described the June 21 management meeting and the ongoing diligence process, provided an update regarding the negotiation of amended pricing for the parties’ existing commercial agreement for the purchase of equipment and supplies intended for use in home hemodialysis therapies, and summarized potential next steps in the negotiations. Mr. Burbank reported that he and representatives from Piper Jaffray had communicated to Fresenius and BofA Merrill Lynch, respectively, that the per share price proposed in the June 13 Letter was too low and that, following the June 21 management

 

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meeting, Mr. Valle had expressed Fresenius’s intent to deliver a revised indication of interest proposing a $30.00 per share purchase price, but that no further increases should be expected. Representatives of Piper Jaffray informed the Transaction Committee that BofA Merrill Lynch had indicated that Fresenius was willing to increase its proposed purchase price only if NxStage agreed to negotiate exclusively with Fresenius for a period of time. The members of the Transaction Committee discussed potential responses to the renewed request for exclusivity and asked questions about the status of the process with Fresenius. The members also discussed with representatives of Ropes & Gray and Piper Jaffray various considerations for determining whether to pursue a possible sale of NxStage rather than continuing as a stand-alone organization. Representatives of Piper Jaffray then presented a preliminary financial analysis regarding the proposed transaction and the valuation of NxStage, describing the assumptions underlying the analysis, noting the valuation implications of the different assumptions, and explaining the methodologies Piper Jaffray had employed to assess NxStage’s financial value as a stand-alone organization. Such financial analysis was based on certain non-public, unaudited and prospective financial information prepared by NxStage management based on NxStage’s long-range financial plan. The members of the Transaction Committee asked questions regarding the financial analysis and discussed the strategic rationale for Fresenius to pursue the transaction and the potential synergies it could achieve. The members of the Transaction Committee and NxStage management also discussed the uncertainty and risks faced by NxStage and NxStage’s ability, on a risk-adjusted basis, to meet its long-term objectives and to deliver value to its stockholders as a standalone business. The members of the Transaction Committee weighed the certainty of the price per share offered by Fresenius compared to the uncertainty that trading prices for shares of NxStage common stock would approach the per share merger consideration in the foreseeable future, including after considering not just risks unique to NxStage and its long-range plan but also uncertainties in the market, regulatory and political landscape. Mr. Burbank highlighted the risks associated with NxStage failing to complete a transaction and having its business relationship with Fresenius deteriorate. He also discussed his expectations for NxStage’s financial performance in the second quarter of 2017, noting that NxStage may need to reduce year-end guidance on its upcoming earnings call due to lower than anticipated revenues and higher than expected losses. Mr. Burbank noted how the performance and revised guidance could adversely impact NxStage’s stock price and Fresenius’s willingness to enter into a definitive agreement on the terms discussed to date. Mr. Burbank and representatives of Piper Jaffray then discussed potential alternative strategic transactions for NxStage and identified certain third parties with a potential strategic rationale and potentially sufficient financial resources to complete a strategic transaction with NxStage. Mr. Burbank and representatives of Piper Jaffray shared their perspectives, based on their experience in the medical device industry and past discussions with third parties, including the potential bidders identified by Piper Jaffray as having a potential strategic rationale and potential financial capacity to complete a strategic transaction with NxStage, of the low likelihood that a strategic party would make a proposal for a per share price that was competitive with what Fresenius had proposed, and the low likelihood that financial buyers would be interested in an acquisition at such a valuation. The Transaction Committee then directed Piper Jaffray to present its financial analysis to the full NxStage board of directors and NxStage management to continue to negotiate a potential transaction with Fresenius.

On June 29, 2017, Fresenius delivered a revised non-binding indication of interest to NxStage, which we refer to as the June 29 Letter. The June 29 Letter included Fresenius’s proposal to acquire NxStage for an all-cash purchase price of $30.00 per share, but noted that its proposal was contingent upon NxStage negotiating exclusively with Fresenius for 45 days. The increased proposed purchase price represented a premium of approximately 18% to the closing price of NxStage’s stock on June 28, 2017.

On June 30, 2017, the NxStage board of directors held a meeting attended by members of NxStage management and representatives of Piper Jaffray and Ropes & Gray. Mr. Burbank summarized the terms of the June 29 Letter, which had been circulated in advance of the meeting, and recent interactions with Fresenius, including Fresenius’s renewed request for exclusivity. A representative of Ropes & Gray described the directors’ fiduciary duties in the context of a potential strategic transaction and responded to related questions from the directors. The directors and advisors also discussed potential conflicts of interest, and the Board agreed that it was aware of no relationships or other potential conflicts of any of the directors or the advisors that would undermine their independence. Mr. Burbank then led a discussion among the participants at the meeting about key open issues reflected in the June 29 Letter, as well as other issues that had been discussed by the Transaction Committee, including the price per share, the risk allocation between the parties related to regulatory approvals,

 

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and the commercial arrangement between NxStage and Fresenius. Piper Jaffray then presented a preliminary financial analysis regarding the proposed transaction and the valuation of NxStage, and the members of the NxStage board of directors asked questions and discussed the financial analysis. The members of the NxStage board of directors and management discussed with representatives of Piper Jaffray and Ropes & Gray Fresenius’s request to negotiate exclusively, including the risks and benefits of agreeing not to contact third parties and likelihood that any third parties would have interest in a strategic transaction and the financial capacity to pay at least $30.00 per share. Members of NxStage management and representatives of Piper Jaffray shared their views that, based on recent interactions with the third parties that were the most likely to be interested in acquiring NxStage at a premium price and their experience in the industry, no other party was likely to submit a proposal that provided for a purchase price of $30.00 per share or higher. Following the discussion, the NxStage board of directors, including the members of the Transaction Committee, determined, based on their knowledge of the industry and Fresenius, discussions with management of NxStage, representatives of Piper Jaffray and Ropes & Gray, and the circumstances existing at the time, that NxStage should not reach out to additional parties to conduct a market check. The NxStage board of directors also authorized NxStage management to propose to Fresenius that NxStage would negotiate exclusively with Fresenius until July 24, 2017, provided that the purchase price would be at least $31.00 per share, the termination fee payable by NxStage in certain circumstances would be at or below 3%, and Fresenius would agree to take all actions necessary to obtain regulatory clearance or, if Fresenius would not agree to such a commitment, NxStage would receive a reverse termination fee from Fresenius equal to at least 5% of NxStage’s enterprise value in the event that necessary regulatory approvals were not obtained.

On June 30, 2017, following the meeting of the NxStage board of directors, Mr. Burbank delivered to Mr. Valle a draft exclusivity agreement, which we refer to as the June 30 Exclusivity Proposal. The draft provided that NxStage would negotiate exclusively with Fresenius through July 24, 2017, so long as any definitive transaction documentation entered into by NxStage and Fresenius would include (i) an all-cash purchase price of at least $31.00 per share, (ii) a maximum termination fee payable by NxStage not to exceed 2% of NxStage’s enterprise value, and (iii) a commitment by Fresenius to take any actions necessary to obtain regulatory clearance for the transaction.

On July 2, 2017, Robinson Bradshaw returned to NxStage a revised draft exclusivity agreement, which we refer to as the July 2 Exclusivity Proposal, which proposed (i) an exclusivity period through July 31, 2017, (ii) an all-cash purchase price of $30.00 per share, (iii) an agreement by NxStage to a customary no-shop provision, (iv) a maximum termination fee payable by NxStage of 4% of its enterprise value, and (v) no commitment by Fresenius to take any actions necessary to obtain regulatory clearance for the transaction.

On July 3, 2017, representatives of Piper Jaffray had a call with members of Fresenius management and representatives of BofA Merrill Lynch to discuss the terms of the July 2 Exclusivity Proposal. Following the call, Karen Gledhill, Senior Vice President and General Counsel of Fresenius, delivered to Ms. Swan a revised draft exclusivity agreement, which we refer to as the July 3 Exclusivity Proposal, which proposed an exclusivity period through July 24, 2017, with an extension through July 31 if NxStage did not meet certain diligence milestones. The July 3 Exclusivity Proposal also lowered the proposed termination fee payable by NxStage to 2.5% of its enterprise value, but did not include any commitment by Fresenius regarding regulatory clearance, which continued to be discussed between representatives of NxStage and Fresenius, including the possibility of introducing a reverse break-up fee if regulatory approvals were not obtained.

On July 4, 2017, the NxStage board of directors held a meeting attended by members of NxStage management and representatives of Piper Jaffray and Ropes & Gray. Mr. Burbank summarized the status of negotiations regarding the exclusivity letter, which had been circulated in advance of the meeting, and identified the key open items in the agreement, including the per share price, the length of exclusivity, the size of the termination fee payable by NxStage, the efforts Fresenius would commit to take to obtain regulatory approvals, and the size of a potential reverse break-up fee. Mr. Burbank noted that Fresenius had indicated that it would not continue diligence until these key terms were resolved. Mr. Burbank also noted that Fresenius had agreed to a 1.5% price increase under the parties’ existing product purchase agreement for equipment and supplies intended for use in home hemodialysis therapies, effective April 1, 2017, but stated that he did not believe Fresenius would negotiate a favorable long-term commercial agreement at this time. The members of the NxStage board of

 

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directors expressed their support for the terms of the proposed revised commercial agreement with Fresenius and asked questions regarding the various provisions in the iterations of the exclusivity letter and other interactions with Fresenius and the participants discussed potential responses. Following discussion about the existing risks to the business, alternative strategic options, and the possibility that third parties could make, and NxStage could pursue, superior proposals after the signing of a definitive agreement, the NxStage board of directors authorized NxStage management to continue negotiating the exclusivity letter, provided guidance about the terms the board would be willing to accept, including a price range of $30.00 to $31.00 per share, a termination fee of up to 3% of NxStage’s enterprise value, and a reverse termination fee of 5% or more of NxStage’s enterprise value if Fresenius would not agree to take all actions necessary to obtain regulatory approvals. The NxStage board of directors also authorized NxStage management to execute an exclusivity agreement provided that the key terms were resolved within the ranges the board had deemed acceptable.

On July 5, 2017, Ms. Swan called Ms. Gledhill to discuss key issues in the proposed exclusivity agreement. Following their conversation, Ms. Swan delivered a revised draft of the proposed exclusivity agreement to Ms. Gledhill, which modified the July 3 Exclusivity Proposal to provide for a proposed exclusivity period through July 31, 2017 and that any definitive transaction documentation entered into by NxStage and Fresenius would include (i) an all-cash purchase price of between $30.00 to $31.00 per share, (ii) a termination fee payable by NxStage of not more than 3% of its enterprise value, (iii) a commitment by Fresenius to take any actions necessary to obtain regulatory clearance for the proposed transaction, and (iv) a reverse termination fee of not less than 5% of NxStage’s enterprise value payable by Fresenius if any regulatory authority did not approve the proposed transaction.

Later on July 5, 2017, representatives of BofA Merrill Lynch delivered to representatives of Piper Jaffray a further revised version of the proposed exclusivity agreement, which provided that (i) Fresenius would only be required to take actions with respect to specified assets to obtain regulatory clearance for the transaction and (ii) the outside date for regulatory approval of the transaction would be 12 months from the signing of definitive transaction documentation, subject to extension, at Fresenius’s option, for up to 180 days to obtain antitrust approvals.

On July 7, 2017, following additional discussions among the parties and their advisors, NxStage and Fresenius executed an exclusivity agreement, which we refer to as the Exclusivity Agreement, which provided for an exclusivity period through July 31, 2017 and that any definitive transaction documentation entered into by NxStage and Fresenius would include (i) an all-cash purchase price of between $30.00 to $31.00 per share, (ii) a customary no-shop provision, (iii) a termination fee of 3% of NxStage’s enterprise value payable by NxStage in certain circumstances, (iv) a commitment by Fresenius to divest specified assets if necessary to obtain regulatory clearance for the transaction, and (v) a reverse termination fee of 5% of NxStage’s enterprise value payable by Fresenius if regulatory approval is not received prior to an outside date that is 12 months from the signing of definitive transaction documentation, subject to extension, at Fresenius’s option, for up to 180 days to obtain antitrust approvals.

On July 9, 2017, NxStage granted Fresenius access to a data room that included non-public information about its business and continued to provide additional non-public information about the business as requested by Fresenius. Additionally, between July 8 and July 25, members of NxStage and Fresenius management and their advisors held a number of diligence meetings and facility tours during which NxStage management provided non-public information about products, products under development, intellectual property, regulatory matters, reimbursement, manufacturing facilities and operations, and finances.

On July 11, 2017, representatives of Robinson Bradshaw delivered a draft merger agreement to Ropes & Gray.

On July 14, 2017, the NxStage board of directors held a meeting attended by Ms. Swan. Mr. Burbank described the key terms of an engagement letter for Piper Jaffray that had been circulated in advance of the meeting. The directors asked questions about the engagement letter and, following discussions, authorized NxStage management to enter into the engagement letter. Mr. Burbank then updated the directors about the final terms of the Exclusivity Agreement, and he and Ms. Swan described Fresenius’s diligence to date. Ms. Swan noted that an initial draft of the merger agreement had been received and was under review by Ropes & Gray, but did not discuss its proposed terms. The directors asked questions and discussed negotiating strategy and next steps in the negotiations.

 

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Later on July 14, 2017, NxStage entered into an engagement letter with Piper Jaffray to provide financial advisory services in support of the NxStage board of directors’ evaluation of potential strategic transactions, in light of Piper Jaffray’s knowledge and expertise with respect to NxStage, the medical device industry, and mergers and acquisitions transactions.

On July 19, 2017, representatives of Ropes & Gray returned a revised draft of the merger agreement to Robinson Bradshaw. The draft identified certain key open items related to deal certainty, including the levels of effort required to obtain regulatory approvals and the material adverse effect definition, the circumstances in which a termination or reverse termination fee would be payable by the applicable party, and the circumstances in which the NxStage board of directors would be permitted to change its recommendation to NxStage stockholders regarding adoption of a final merger agreement with Fresenius. Between July 19 and August 5, 2017, representatives of NxStage and Fresenius exchanged further drafts and negotiated the terms of the proposed merger agreement.

On July 26, 2017, members of NxStage and Fresenius management and representatives from the legal advisors to each party held an in-person meeting to negotiate open issues in the proposed merger agreement. Also on July 26, 2017, Brian Silva, Chief Human Resources Officer, Senior Vice President, Administration, of Fresenius, notified Darren Scandone, Senior Vice President, Human Resources of NxStage, via telephone call that Fresenius expected Mr. Burbank and Joseph Turk, Jr., President of NxStage, to amend their current employment agreements to include certain non-compete provisions before any merger agreement was signed.

On July 26, 2017, the compensation committee of the NxStage board of directors held an in-person meeting attended by members of NxStage management and representatives of Ropes & Gray to discuss certain terms in the merger agreement related to NxStage employee benefits and executive compensation. A representative from Ropes & Gray summarized the status of the merger agreement negotiations and the key opens issues relating to compensation and employee benefits, including the nature of restrictions on NxStage’s ability to grant equity awards and cash bonuses, and to make certain hiring or firing decisions without Fresenius’s consent between signing the merger agreement and closing the transaction. The compensation committee of the NxStage board of directors then discussed the proposed terms and provided guidance regarding the negotiation of the open items.

On July 27, 2017, the NxStage board of directors held an in-person meeting attended by members of NxStage management and representatives of Piper Jaffray and Ropes & Gray. Mr. Burbank noted that Fresenius’s supervisory board had expressed its intention to approve an acquisition of NxStage, pending its satisfaction of the final negotiations and limited remaining diligence. A representative from Ropes & Gray reviewed the directors’ fiduciary duties and summarized the status of negotiations of the draft merger agreement and key open issues, including the definition of material adverse effect and the jurisdictions in which antitrust approval would be required before closing, the circumstances in which the NxStage board of directors could change its recommendation to stockholders, and the circumstances in which a termination fee would be payable by NxStage. Mr. Burbank and the representative from Ropes & Gray led a discussion among the directors about the potential timeline to finalize the merger agreement and announce a transaction. Representatives of Piper Jaffray then reviewed Piper Jaffray’s preliminary financial analysis of the proposed per share merger consideration. The members of the NxStage board of directors asked questions about the terms of the merger agreement, the financial analysis and the status of the transaction, and the participants discussed strategies for completing negotiations. The NxStage board of directors provided guidance on certain open items in the merger agreement, noting that Mr. Burbank should continue seeking a purchase price of $31.00 per share but permitting him to accept $30.00 per share if necessary, and authorized NxStage management to continue negotiating with Fresenius, including extending the exclusivity period under the Exclusivity Agreement by one week if negotiations had not concluded by July 31, 2017.

Between July 27, 2017 and August 4, 2017, Mr. Burbank had several conversations with Mr. Valle and Brian Gauger, Chief Development Officer of Fresenius, about open issues in the draft merger agreement, including the per share purchase price. At the conclusion of these discussions, the parties agreed to all merger agreement terms, including the $30.00 price per share, pending each of their boards’ approvals.

On July 31, 2017, NxStage and Fresenius executed an amendment to the Exclusivity Agreement extending the exclusivity period to August 7, 2017.

 

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On August 3, 2017, NxStage delivered to Fresenius draft amendments to the employment agreements of Messrs. Burbank and Turk that included a non-competition provision consistent with Fresenius’s request on July 26. The non-competition restrictions would survive for 12 months following termination of their respective employment, and which provided for an increase in the amount of severance payments prior to a change of control and, in the case of Mr. Turk, following a change of control. The parties to the agreements negotiated the terms of the amendments between August 3 and August 6.

On August 3, 2017, Fresenius also delivered to Messrs. Burbank, Turk and Dennis Treu, Vice President and Senior Member, Technical Staff at NxStage, draft retention agreements that would become effective following the consummation of the merger and provided for certain bonuses and severance compensation in exchange for agreeing to remain an employee of, and not to compete against, the surviving company for specified periods. The parties to the agreements negotiated the terms of the retention agreements on August 5 and August 6.

On August 5, 2017, the compensation committee of the NxStage board of directors held a telephonic meeting attended by Ms. Swan, Matthew Towse, Chief Financial Officer of NxStage, and Aras Lapinskas, Vice President and Associate General Counsel of NxStage, and representatives of Piper Jaffray and Ropes & Gray. Messrs. Burbank and Turk recused themselves from the meeting. Ms. Swan summarized the key terms of the proposed amendments to the employment agreements of Messrs. Burbank and Turk and the retention agreements proposed by Fresenius for certain executives, noting that NxStage would not be a party to such retention agreements. A representative of Ropes & Gray then reviewed the proposed terms of the merger agreement and the changes to the merger agreement since the July 26 meeting of the compensation committee. After discussing the terms and asking questions about the negotiation process, the compensation committee of the NxStage board of directors approved the compensation and benefits matters described in the merger agreement and the amendments to the employment agreements of Messrs. Burbank and Turk.

On August 5, 2017, immediately following the compensation committee meeting, the NxStage board of directors held a telephonic meeting at which members of NxStage management and representatives of Piper Jaffray and Ropes & Gray were present. A representative of Ropes & Gray reviewed the proposed terms of the merger agreement and the changes to the merger agreement since the July 27 meeting of the NxStage board of directors, and the representatives of Ropes & Gray summarized the directors’ fiduciary duties with respect to the potential transaction. Representatives of Piper Jaffray then reviewed with the NxStage board of directors their financial analysis of the per share merger consideration and delivered to the NxStage board of directors an oral opinion, which was confirmed by delivery of a written opinion dated August 5, 2017, to the effect that, as of that date and based on and subject to various assumptions and limitations described in its opinion, the $30.00 per share merger consideration, was fair, from a financial point of view, to holders of shares of NxStage common stock. After further discussion, the NxStage board of directors unanimously determined that the merger agreement and the merger described therein were fair to and in the best interests of NxStage’s stockholders, approved and declared advisable the merger agreement and the merger, and resolved to recommend that NxStage’s stockholders vote to adopt the merger agreement.

Early in the morning on August 7, 2017, NxStage and Fresenius executed the merger agreement.

During the morning on August 7, 2017, NxStage and Fresenius issued a joint press release announcing the entry into the merger agreement.

Recommendation of the NxStage Board of Directors and Reasons for the Merger

The NxStage board of directors recommends that NxStage stockholders vote (i) “FOR” the proposal to adopt the merger agreement, (ii) “FOR” the proposal to approve, by a non-binding, advisory vote, the compensation that may be paid or become payable to NxStage’s named executive officers in connection with the merger and (iii) “FOR” the proposal to adjourn the special meeting of NxStage stockholders, if necessary, to solicit additional proxies if, at the time of the special meeting, there are insufficient votes to adopt the merger agreement.

 

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At a meeting held on August 5, 2017, the NxStage board of directors unanimously (i) determined that the merger agreement and the merger are fair to and in the best interests of NxStage’s stockholders, (ii) approved and declared advisable the merger agreement and the merger in accordance with the DGCL, and (iii) resolved to recommend that NxStage’s stockholders vote to adopt the merger agreement.

In reaching its recommendation that NxStage stockholders vote for the proposal to adopt the merger agreement, the NxStage board of directors consulted with NxStage management, Piper Jaffray, and Ropes & Gray and considered a number of reasons, including the following non-exhaustive list of reasons (not included in any relative order of importance) that the NxStage board of directors believes support its determination and recommendation:

 

    Business and Financial Condition of NxStage.     The NxStage board of directors considered NxStage’s current and historical financial condition, results of operations, business, competitive position, properties, assets and prospects, as well as NxStage’s long-range plan. The NxStage board of directors weighed the certainty of realizing a compelling value for shares of NxStage’s common stock in the merger compared to the uncertainty that trading values would approach the per share merger consideration in the foreseeable future and the risk and uncertainty associated with NxStage and its business. The NxStage board of directors also believed that the acquisition of NxStage by Fresenius for $30.00 per NxStage share in cash was more favorable to NxStage’s stockholders than the risk-adjusted value of remaining an independent public company, because of, among other things, the uncertainty in the market, regulatory and political landscape. The NxStage board of directors also considered that NxStage’s significant commercial relationship with Fresenius increased concerns that a failed transaction could lead to a deterioration in the parties commercial relationship and a decrease in Fresenius’s orders from NxStage or lead Fresenius to consider an alternative source for home hemodialysis equipment and supplies, which could have a material negative impact NxStage’s future revenue growth, particularly with respect to sales of products intended for use in home hemodialysis therapies.

 

    Implied Premium.     The NxStage board of directors considered that the per share merger consideration represented an approximately 47% premium to its 52-week low on May 9, 2017 and 3% discount to NxStage’s 52-week high on May 2, 2017. In addition, the NxStage board of directors considered that the per share merger consideration represented an approximately 18% premium to the volume-weighted average trading price for the 180-day trading period leading up to August 4, 2017, the last trading day before NxStage entered into the merger agreement, an approximately 19% premium to the volume-weighted average trading price for the one-year trading period leading up to August 4, 2017, and an approximately 30% premium over NxStage’s closing share price on August 4, 2017. The NxStage board of directors considered that, in its view, it had obtained Fresenius’s best and final offer and that, as of the date of the merger agreement, the per share merger consideration represented the highest per share merger consideration reasonably obtainable.

 

    Per Share Merger Consideration.     The NxStage board of directors considered the fact that 100% of the merger consideration will be payable in cash at the closing of the merger, which provides NxStage stockholders with immediate liquidity and a high degree of certainty of value.

 

    Negotiation Process and Procedural Fairness.     The NxStage board of directors considered the enhancements that NxStage and its advisors were able to obtain as a result of robust arm’s-length negotiations with Fresenius, including the increase in the offer price proposed by Fresenius from the time of its initial proposal to the end of the negotiations, a lower termination fee than initially proposed by Fresenius, and the ability of NxStage to terminate the merger agreement to accept a superior proposal.

 

    Potentially Interested Counterparties.     The NxStage board of directors considered in its judgment, after discussing with Piper Jaffray and senior management of NxStage, and with the benefit of the investor and industry expertise of the members of the NxStage board of directors, (i) that no other party was likely to have interest in and the ability to complete a transaction with NxStage on the financial terms proposed by Fresenius, and (ii) should any such potential counterparty be interested in pursuing a transaction on more favorable terms, such counterparty would be able to pursue such an offer for NxStage, and the NxStage board of directors would be able to respond to and accept such an offer, pursuant to the terms of the merger agreement.

 

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    Strategic Alternatives.     The NxStage board of directors considered, after discussions with Piper Jaffray, possible alternatives to the merger, including the execution of senior management’s standalone plan and the risks associated with this alternative. The NxStage board of directors determined not to pursue strategic alternatives in light of its belief that the merger is more favorable to NxStage’s stockholders than such alternatives. The NxStage board of directors also considered its belief that the value offered to holders of shares of NxStage common stock in the merger was more favorable to holders of NxStage common stock than the risk-adjusted value of remaining an independent public company.

 

    Certain Management Projections.     The NxStage board of directors considered certain prospective forecasts for NxStage prepared by senior management of NxStage, which reflect an application of various commercial assumptions of NxStage’s senior management. For further discussion, see the section entitled “— Certain Financial Forecasts” beginning on page 47.

 

    Piper Jaffray’s Fairness Opinion and Related Analyses.     The NxStage board of directors considered the opinion of Piper Jaffray, dated August 5, 2017, to the NxStage board of directors as to the fairness, from a financial point of view and as of the date of the opinion, of the per share merger consideration to be received pursuant to the merger by holders of shares of NxStage common stock, based upon and subject to the various assumptions and limitations set forth therein and as more fully described below in the section entitled “Opinion of Piper Jaffray & Co.” beginning on page 38.

 

    Likelihood of Completion.     The NxStage board of directors considered the likelihood that the merger would be completed based on, among other things (not listed in any relative order of importance):

 

    the fact that the conditions to the closing of the merger are specific and limited in scope;

 

    the business reputation and capabilities of Fresenius, and the NxStage board of directors’ conclusion that Fresenius is willing to devote the resources necessary to close the merger in an expeditious manner;

 

    Fresenius’s financial condition and ability to complete the transaction without requiring additional financing;

 

    Fresenius’s obligation under the merger agreement to use its reasonable best efforts to obtain the regulatory approvals necessary to consummate the transaction; and

 

    NxStage’s ability, under certain circumstances specified in the merger agreement, to seek specific performance to prevent breaches of the merger agreement by Fresenius and/or Merger Sub and to enforce the terms of the merger agreement.

 

    Other Terms of the Merger Agreement.     The NxStage board of directors considered other terms of the merger agreement, which are more fully described in the section entitled “The Merger Agreement” beginning on page 58. Certain provisions of the merger agreement that the NxStage board of directors considered important included:

 

    Ability to Respond to Unsolicited Acquisition Proposals .    At any time before obtaining NxStage stockholder approval for the proposal to adopt the merger agreement, in the event that NxStage receives a written acquisition proposal from any third party that did not result from a material breach of the no solicitation provision of the merger agreement, and if the NxStage board of directors determines in good faith, after consultation with financial advisors and outside legal counsel, that (a) such acquisition proposal constitutes or would reasonably be expected to lead to a superior proposal and (B) the failure to do so would be inconsistent with the fiduciary duties of the NxStage board of directors to NxStage’s stockholders under applicable law, then NxStage and its representatives may:

 

    furnish, pursuant to (but only pursuant to) an acceptable confidentiality agreement, information (including non-public information) with respect to NxStage and its subsidiaries to the third party that has made such proposal; and

 

    engage in or otherwise participate in discussions or negotiations with the third party that has made such proposal.

 

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    Change of Recommendation.     Subject to certain notice obligations to Fresenius and certain obligations to discuss and negotiate in good faith any revisions proposed by Fresenius to the merger agreement in response to such notice, at any time before obtaining NxStage stockholder approval for the proposal to adopt the merger agreement, the NxStage board of directors may:

 

    enter into an acquisition agreement related to a superior proposal if the NxStage board of directors determines in good faith, after consultation with its outside financial advisors and outside legal counsel, that the failure to take such action would be inconsistent with its fiduciary duties to NxStage stockholders under applicable law and, after consultation with its outside financial advisors and outside legal counsel, that such superior proposal would continue to constitute a superior proposal even if changes proposed by Fresenius in response to such notice were given effect; or

 

    make an adverse recommendation change in response to an event occurring after the date of the merger agreement that was not known to or reasonably foreseeable by the NxStage board of directors as of the date of the merger agreement if the NxStage board of directors determines in good faith after consultation with its outside legal counsel that the failure to effect an adverse recommendation change would be inconsistent with the directors’ fiduciary duties to NxStage stockholders under applicable law and that failure to effect an adverse recommendation change would continue to be inconsistent with the directors’ fiduciary duties to NxStage stockholders under applicable law even if changes proposed by Fresenius in response to such notice were given effect.

 

    Material Adverse Effect.     The number and type of matters that are specifically excluded from being considered in determining whether a material adverse effect has occurred, as well as the fact that after August 7, 2018, nothing shall constitute a material adverse effect on NxStage unless due to a material breach of the merger agreement by NxStage.

 

    End Date.     The end date under the merger agreement on which either party, subject to certain exceptions, can terminate the merger agreement allows for sufficient time to consummate the merger, while minimizing the length of time during which NxStage would be required to operate subject to the restrictions on interim operations set forth in the merger agreement.

 

    Cooperation.     The merger agreement requires Fresenius to use its reasonable best efforts to consummate the merger, and sets forth agreed actions with respect to Fresenius’s obligations to obtain requisite approvals to consummate the merger.

 

    Appraisal Rights.     NxStage stockholders have a right to demand appraisal of their shares of NxStage common stock and receive payment of the “fair value” of such shares of NxStage common stock pursuant to Section 262 of the DGCL in lieu of the per share merger consideration if they comply with Section 262 of the DGCL. Additionally, the merger agreement does not include any closing conditions related to the exercise of appraisal rights by NxStage stockholders.

 

    Stockholder Approval.     Holders of at least a majority of outstanding shares of NxStage’s common stock must vote in favor of a proposal to adopt the merger agreement.

 

    Reverse Termination Fee .      The NxStage board of directors considered the fact that Fresenius will be required to pay a reverse termination fee to NxStage of $100 million if NxStage or Fresenius terminate the merger agreement:

 

    if the end date and any applicable extension has passed and approval under applicable antitrust laws remains the only unsatisfied closing condition; or

 

    if a court or other governmental entity issues a final, nonappealable order or takes any other action that permanently prohibits the merger from taking place or makes the consummation of the merger otherwise illegal and approval under applicable antitrust laws remains the only unsatisfied closing condition.

 

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The NxStage board of directors also considered a variety of potentially negative reasons in its deliberations concerning the merger agreement and the merger, including the following (not included in any relative order of importance):

 

    No Ongoing Equity Interest in NxStage.     The merger would preclude NxStage’s stockholders from having the opportunity to directly participate in the future performance of NxStage’s assets and any potential future appreciation of the value of shares of NxStage common stock.

 

    Transaction Process.     After reviewing the pros and cons of doing so, having been advised that no other party was likely to have interest in and the ability to complete a transaction with NxStage on the financial terms proposed by Fresenius, and weighing Fresenius’s insistence upon having an exclusive negotiation period, the NxStage board of directors, in its business judgment, decided not to solicit inquiries from third parties concerning potential interest in acquiring NxStage before entering into the merger agreement.

 

    Inability to Solicit Other Takeover Proposals.     The merger agreement includes a covenant prohibiting NxStage from directly or indirectly soliciting, seeking, initiating, encouraging, facilitating, or taking actions that would lead to other potential acquisition proposals. The NxStage board of directors also considered the fact that the right afforded to Fresenius under the merger agreement to re-negotiate the merger agreement in light of acquisition proposals that the NxStage board of directors determines in good faith, after consultation with financial advisors and outside legal counsel, are superior proposals may discourage other parties that might otherwise have an interest in a business combination with, or an acquisition of, NxStage.

 

    NxStage Termination Fee.     The NxStage board of directors considered the fact that NxStage may be required to pay a termination fee if the merger agreement is terminated under certain circumstances, including to accept a superior proposal, and that the amount of the termination fee is comparable to termination fees in transactions of a similar size, was reasonable, would not likely deter competing bids and would not likely be required to be paid unless NxStage entered into a more favorable transaction. The NxStage board of directors also recognized that the provisions in the merger agreement relating to these fees were insisted upon by Fresenius as a condition to entering into the merger agreement.

 

    Effect of Announcement.     The NxStage board of directors considered the effect of the public announcement of the transaction on NxStage’s operations, including its relationships with customers, distributors, vendors, and employees, as well as its ability to attract and retain key personnel while the proposed transaction is pending and the possibility of any suit, action or proceeding in respect of the merger agreement or the transactions contemplated thereby.

 

    Interim Operating Covenants.     The NxStage board of directors considered that the merger agreement imposes restrictions on the conduct of NxStage’s business prior to the consummation of the merger, requiring NxStage to use its commercially reasonable efforts to conduct its business in the ordinary course, and that may limit NxStage from taking specified actions, subject to specific limitations.

 

    Risks the Merger May Not Be Completed.     The NxStage board of directors considered the fact that all conditions to the parties’ obligations to consummate the merger may not be satisfied. The NxStage board of directors also considered the risks and costs to NxStage if the merger is not consummated, including the diversion of management and employee attention, potential employee attrition, the potential effect on vendors, distributors, customers, partners, licensees and others that do business with NxStage, the negative impact a failed transaction could have on NxStage’s commercial relationship with Fresenius and, therefore, NxStage’s future revenues, including by leading Fresenius to consider an alternative source for home hemodialysis equipment and supplies, and the potential effect on the trading price of the NxStage common stock.

 

    Transaction Costs.     The NxStage board of directors considered the fact that significant costs are involved in connection with entering into and completing the merger and substantial time and effort of management is required to complete the merger, potentially resulting in disruptions to the operation of NxStage’s business.

 

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    Potential Conflicts of Interest.     The NxStage board of directors considered the potential conflict of interest created by the fact that certain of NxStage’s executive officers and directors may have financial interests in the transactions contemplated by the merger agreement, including the merger, that may be different from or in addition to those of other NxStage stockholders, as more fully described in the section entitled “— Interests of Certain Directors and Executive Officers of NxStage” beginning on page 49.

 

    Regulatory Approval.     The NxStage board of directors considered the risks associated with the potential need to make antitrust filings, and obtain antitrust consents and approvals, in the United States and Germany.

 

    Tax Treatment.     The NxStage board of directors considered the fact that receipt of the per share merger consideration generally would be taxable to NxStage’s stockholders that are U.S. holders for U.S. federal income tax purposes.

The NxStage board of directors believed that, overall, the potential benefits of the merger to NxStage stockholders outweighed the risks, and that the merger represented the most attractive alternative for NxStage stockholders.

The foregoing discussion of reasons considered by the NxStage board of directors in connection with the merger is not intended to be exhaustive, but summarized the material reasons considered. In light of the variety of reasons considered in connection with its evaluation of the merger, the NxStage board of directors did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific reasons considered in reaching its determination and recommendation. Moreover, each member of the NxStage board of directors applied their own personal business judgment to the process and may have given different weight to different reasons. The NxStage board of directors did not undertake to make any specific determination as to whether any reason, or any particular aspect of any reason, supported or did not support their ultimate determination and recommendation.

Opinion of Piper Jaffray & Co.

NxStage retained Piper Jaffray to act as financial advisor to the NxStage board of directors, and, if requested, to render to the NxStage board of directors an opinion as to the fairness, from a financial point of view, of the merger consideration of $30.00 in cash per share to be received by the holders of shares of NxStage common stock, other than (i) NxStage or any wholly-owned subsidiary of NxStage, or (ii) Fresenius, Merger Sub or any wholly owned subsidiary of Fresenius, or (iii) stockholders who properly exercise and perfect their respective demands for appraisal of shares of NxStage common stock and have neither effectively withdrawn nor lost their rights to such appraisal under the DGCL.

The full text of the Piper Jaffray written opinion dated August 5, 2017, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken by Piper Jaffray in rendering its opinion, is attached as  Annex  B . Stockholders are urged to, and should, carefully read the Piper Jaffray opinion in its entirety and this summary is qualified in its entirety by reference to the written opinion. The Piper Jaffray opinion addresses only the fairness, from a financial point of view and as of the date of the opinion, of the merger consideration of $30.00 in cash per share to be received by the holders of shares of NxStage common stock (other than (i) NxStage or any wholly-owned subsidiary of NxStage, (ii) Fresenius, Merger Sub or any wholly-owned subsidiary of Fresenius, or (iii) stockholders who properly exercise and perfect their respective demands for appraisal of shares of NxStage common stock and have neither effectively withdrawn nor lost their rights to such appraisal under the DGCL) in the merger. Piper Jaffray’s opinion was directed to the NxStage board of directors in connection with its consideration of the merger and was not intended to be, and does not constitute, a recommendation to any holders of shares of NxStage common stock as to how such holders should vote or act with respect to the merger or any other matter.

In connection with rendering the opinion described above and performing its related financial analyses, Piper Jaffray, among other things:

 

    reviewed and analyzed the financial terms of a draft dated August 5, 2017 of the merger agreement;

 

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    reviewed and analyzed certain financial and other data with respect to NxStage that was publicly available;

 

    reviewed and analyzed certain information, including financial forecasts, relating to the business, earnings, cash flow, assets, liabilities and prospects of NxStage that were publicly available, as well as those that were furnished to Piper Jaffray by NxStage;

 

    conducted discussions with members of senior management and representatives of NxStage concerning the immediately preceding matters described above, as well as NxStage’s business and prospects before and after giving effect to the merger;

 

    reviewed the current and historical reported prices and trading activity of shares of NxStage common stock and similar information for certain other companies deemed by Piper Jaffray to be comparable to NxStage;

 

    compared the financial performance of NxStage with that of certain other publicly-traded companies that Piper Jaffray deemed relevant;

 

    reviewed the financial terms, to the extent publicly available, of certain business combination transactions that Piper Jaffray deemed relevant; and

 

    conducted a discounted cash flow analysis on NxStage based on projections that were prepared by NxStage management.

In addition, Piper Jaffray conducted such other analyses, examinations and inquiries and considered such other financial, economic and market criteria as Piper Jaffray deemed necessary in arriving at its opinion.

The following is a summary of the material financial analyses performed by Piper Jaffray in connection with the preparation of its fairness opinion, which analyses were reviewed with the NxStage board of directors at a meeting held on August 5, 2017.

This summary includes information presented in tabular format, which tables must be read together with the text of each analysis summary and considered as a whole in order to fully understand the financial analyses presented by Piper Jaffray. The tables alone do not constitute a complete summary of the financial analyses. The order in which these analyses are presented below, and the results of these analyses, should not be taken as any indication of the relative importance or weight given to these analyses by Piper Jaffray or the NxStage board of directors. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before August 4, 2017, and is not necessarily indicative of current market conditions.

For purposes of its analyses, and unless the context indicates otherwise, Piper Jaffray calculated (i) NxStage’s implied equity value based on diluted shares of common stock and common stock equivalents outstanding, including options, restricted stock units and performance shares calculated using the treasury stock method, and (ii) enterprise value, which we refer to as EV, to be implied equity value, plus debt (including capital lease obligations and noncontrolling interests), which in the case of NxStage was approximately $14 million, as of June 30, 2017, less cash and cash equivalents, which, in the case of NxStage, was approximately $63 million, as of June 30, 2017.

 

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Historical Trading Analysis

Piper Jaffray reviewed the historical closing prices and trading volumes for shares of NxStage common stock over the one-year period ended August 4, 2017, in order to provide background information on the prices at which shares of NxStage common stock has historically traded. The following table summarizes some of these historical closing prices as well as the premium that the merger consideration reflects as compared to the referenced closing prices:

 

     Closing Price per Share      Premium  

Price on August 4, 2017

   $ 23.14        30

1 day prior price (August 3, 2017)

   $ 23.13        30

1 week prior price (July 28, 2017)

   $ 23.65        27

4 weeks prior price (July 7, 2017)

   $ 25.06        20

52-week high (May 2, 2017)

   $ 30.80        (3 )% 

Merger Consideration

   $ 30.00        0

Piper Jaffray also noted that the volume-weighted average trading price for the 180-day period ended August 4, 2017 was $25.51, the volume-weighted average trading price for the one-year period ended August 4, 2017 was $25.15, and the 52-week low was $20.45 on May 9, 2017.

Selected Public Companies Analysis

Piper Jaffray reviewed projected financial data of NxStage for the years ended December 31, 2017 and December 31, 2018, and compared such data to corresponding historical balance sheet data and consensus Wall Street research forecasts for public companies in the medical technology industry that Piper Jaffray believed were comparable to NxStage’s financial profile. For the purpose of such comparison, Piper Jaffray selected public companies that it considered to be medical technology companies with revenue for the last twelve month period for which financial information was publicly available, which we refer to as LTM, between $100 million and $1 billion, and projected revenue growth between 10% and 20% in calendar year 2017 and calendar year 2018.

Based on these criteria, Piper Jaffray selected the following seven companies:

 

    AtriCure, Inc.

 

    Cantel Medical Corporation

 

    Cardiovascular Systems, Inc.

 

    Cutera, Inc.

 

    Inogen, Inc.

 

    Insulet Corporation

 

    K2M Group Holdings, Inc.

For the selected public companies analysis, Piper Jaffray compared calendar year, which we refer to as calendar year or CY, projected 2017 and 2018 implied EV/revenue, EV/gross profit and EV/earnings before interest, taxes, depreciation and amortization, as adjusted to add back stock-based compensation and non-recurring adjustments, which we refer to as Adjusted EBITDA, multiples for NxStage based on the merger consideration on the one hand, to the corresponding implied EV multiples for the selected public companies derived from their closing prices per share on August 4, 2017 and their cash and debt outstanding amounts as indicated in public filings as of such date on the other hand. Projected CY 2017 and CY 2018 revenue, gross profit and Adjusted EBITDA for NxStage were based on estimates provided by NxStage management. Projected CY 2017 and CY 2018 revenue, gross profit and Adjusted EBITDA for the selected public companies were based on Wall Street consensus estimates. Piper Jaffray determined that EV/Adjusted EBITDA multiples were not meaningful to its valuation analysis, and therefore omitted them, if they were negative or greater than 40.0x.

 

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The analysis indicated the following multiples for the selected public companies:

 

     EV to Revenue      EV to Gross Profit      EV to Adjusted EBITDA (1)  

Company

   CY 2017      CY 2018      CY 2017      CY 2018      CY 2017      CY 2018  

AtriCure, Inc.

     4.7x        4.1x        6.5x        5.7x        NM        NM  

Cantel Medical Corporation

     4.0x        3.6x        8.4x        7.4x        20.1x        17.2x  

Cardiovascular Systems, Inc.

     4.7x        4.1x        5.8x        5.0x        NM        NM  

Cutera, Inc.

     2.4x        2.1x        2.9x        2.6x        30.1x        21.9x  

Inogen, Inc.

     8.2x        7.0x        17.0x        14.4x        39.9x        33.4x  

Insulet Corporation

     7.2x        6.2x        12.1x        10.2x        NM        NM  

K2M Group Holdings, Inc.

     4.1x        3.6x        6.2x        5.4x        NM        NM  

 

(1) “NM” refers to multiples determined to be non-meaningful for the reasons discussed above.

 

            Selected Medical Technology Public Companies  
     NxStage (1)      High      75 th %      Mean      Median      25 th %      Low  

EV to projected CY 2017 revenue

     4.8x        8.2x        5.9x        5.0x        4.7x        4.0x        2.4x  

EV to projected CY 2018 revenue

     4.1x        7.0x        5.2x        4.4x        4.1x        3.6x        2.1x  

EV to projected CY 2017 gross profit

     11.3x        17.0x        10.2x        8.4x        6.5x        6.0x        2.9x  

EV to projected CY 2018 gross profit

     9.0x        14.4x        8.8x        7.3x        5.7x        5.2x        2.6x  

EV to projected CY 2017 Adjusted EBITDA

     55.2x        39.9x        35.0x        30.0x        30.1x        25.1x        20.1x  

EV to projected CY 2018 Adjusted EBITDA

     31.1x        33.4x        27.7x        24.2x        21.9x        19.6x        17.2x  

 

(1) Based on the merger consideration of $30.00 per share.

Based on this analysis, Piper Jaffray noted that, with respect to NxStage, the EV/revenue multiples fell between the mean and median range of implied EV/revenue multiples for the selected public companies, the EV/gross profit multiples fell between the “High” and the 75th percentile range of implied EV/gross profit multiples for the selected public companies, the EV/CY 2017 Adjusted EBITDA multiple exceeded the “High” of the implied EV/CY 2017 Adjusted EBITDA multiple for the selected public companies, and the EV/CY 2018 Adjusted EBITDA multiple fell between the “High” and the 75th percentile range of the implied EV/CY 2018 Adjusted EBITDA multiples for the selected public companies. In addition, Piper Jaffray observed that the range of implied per share values for common stock based on the mean and median for each analysis yielded the following, as compared to the merger consideration:

 

     Implied Per Share Value of
NxStage Common Stock

CY 2017 revenue

   $28.99-$31.10

CY 2018 revenue

   $29.49-$31.79

CY 2017 gross profit

   $18.06-$22.79

CY 2018 gross profit

   $19.45-$24.41

CY 2017 Adjusted EBITDA

   $16.99-$17.05

CY 2018 Adjusted EBITDA

   $21.60-$23.69

Merger consideration

   $30.00

Selected M&A Transaction Analysis

Piper Jaffray reviewed merger and acquisition, which we refer to as M&A, transactions involving target companies in the medical technology industry that Piper Jaffray believed were comparable to NxStage’s financial profile. Piper Jaffray selected transactions that were announced after January 1, 2010 for which it believed the targets to have been primarily medical technology companies with LTM revenue between $100 million and $1 billion, and projected revenue growth for the 12 month period immediately following the LTM period, which we refer to as FTM, between 10% and 20%.

 

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Based on these criteria, Piper Jaffray selected the following 11 transactions:

 

Target

  

Acquiror

  

Date of Transaction

Announcement

Spectranetics Corporation

   Philips Medical Systems    June 28, 2017

Vention Medical Advanced Technologies

   Nordson Medical    February 20, 2017

ZELTIQ Aesthetics Inc.

   Allergan plc    February 13, 2017

Vascular Solutions, Inc.

   Teleflex Incorporated    December 2, 2016

LDR Holding Corporation

   Zimmer Biomet Holdings, Inc.    June 7, 2016

Given Imaging Ltd.

   Covidien plc    December 8, 2013

Conceptus, Inc.

   Bayer Healthcare LLC    April 29, 2013

ZOLL Medical Corporation

   Asahi Kasei Corporation    March 12, 2012

SonoSite, Inc.

   FujiFilm Holdings    December 15, 2011

AGA Medical Holdings Inc.

   St. Jude Medical Inc.    October 18, 2010

ev3 Inc.

   Covidien plc    June 1, 2010

For the selected M&A transactions analysis, Piper Jaffray compared implied EV/LTM revenue, EV/LTM gross profit and EV/LTM Adjusted EBITDA multiples for NxStage, based on the merger consideration, to the corresponding multiples for each selected transaction, as well as NxStage’s implied multiples of EV/FTM revenue, EV/FTM gross profit and EV/LTM Adjusted EBITDA multiples, based on the merger consideration, to the corresponding multiples for each selected transaction. LTM revenues, LTM gross profit and LTM Adjusted EBITDA for NxStage were based on preliminary historical financial data for the 12 months ended March 31, 2017. Projected FTM revenues, FTM gross profit and FTM Adjusted EBITDA for NxStage were for the 12 months beginning after March 31, 2017 and were based on estimates of NxStage’s management. FTM revenues, FTM gross profit and FTM Adjusted EBITDA for the selected transactions were based on selected Wall Street research. Piper Jaffray determined that EV/Adjusted EBITDA transaction multiples were not meaningful, and therefore omitted them, if they were negative or greater than 40.0x.

The analysis indicated the following multiples for the selected transactions:

 

Target

 

Acquiror

  EV / LTM
Revenue
    EV / FTM
Revenue
    EV / LTM
Gross
Profit (1)
    EV / FTM
Gross
Profit (1)
    EV / LTM
Adj.
EBITDA (2)
    EV / FTM
Adj.
EBITDA (1)(2)
 

Spectranetics Corporation

  Philips Medical Systems     7.8x       7.1x       10.4x       9.5x       NM       NM  

Vention Medical Advanced Technologies

  Nordson Medical     4.7x       4.2x       NA       NA       14.7x       NA  

ZELTIQ Aesthetics Inc.

  Allergan plc     6.8x       5.8x       9.6x       8.2x       NM       NM  

Vascular Solutions, Inc.

  Teleflex Incorporated     6.2x       5.5x       9.5x       8.3x       NM       NA  

LDR Holding Corporation

  Zimmer Biomet Holdings, Inc.     6.1x       5.3x       7.4x       6.3x       NM       NM  

Given Imaging Ltd.

  Covidien plc     4.8x       4.2x       6.2x       5.4x       29.8x       20.1x  

Conceptus, Inc.

  Bayer Healthcare LLC     7.9x       6.8x       9.4x       8.1x       31.9x       28.5x  

ZOLL Medical Corporation

  Asahi Kasei Corporation     3.9x       3.4x       6.8x       5.8x       25.0x       NA  

SonoSite, Inc.

  FujiFilm Holdings     3.2x       2.8x       4.6x       3.9x       24.2x       NA  

AGA Medical Holdings Inc.

  St. Jude Medical Inc.     6.0x       5.2x       7.0x       6.0x       24.1x       17.3x  

ev3 Inc.

  Covidien plc     5.4x       4.6x       7.2x       6.1x       25.4x       19.0x  

 

(1) “NA” refers to multiples that were not publically available.

 

(2) “NM” refers to multiples determined to be non-meaningful for the reasons discussed above.

 

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            Selected Medical Technology M&A Transactions  
     NxStage (1)      High      75 th %      Mean      Median      25 th %      Low  

EV to LTM revenue

     5.4x        7.9x        6.5x        5.7x        6.0x        4.7x        3.2x  

EV to FTM revenue

     4.7x        7.1x        5.6x        5.0x        5.2x        4.2x        2.8x  

EV to LTM gross profit

     12.8x        10.4x        9.5x        7.8x        7.3x        6.8x        4.6x  

EV to FTM gross profit

     10.6x        9.5x        8.2x        6.8x        6.2x        5.8x        3.9x  

EV to LTM Adjusted EBITDA

     81.5x        31.9x        27.6x        25.0x        25.0x        24.2x        14.7x  

EV to FTM Adjusted EBITDA

     45.3x        28.5x        22.2x        21.2x        19.6x        18.6x        17.3x  

 

(1) Based on the merger consideration of $30.00 per share.

Based on this analysis, Piper Jaffray noted that, with respect to NxStage, the EV/revenue multiples fell between the mean 25th percentile and the mean range of implied EVs for the selected M&A transactions, the EV/gross profit multiples exceeded the “High” of the implied EVs for the selected M&A transactions, and the EV/Adjusted EBITDA multiples exceeded the “High” of the implied EVs for the selected M&A transactions. In addition, Piper Jaffray observed that the range of implied per share values for common stock based on the mean and median for each analysis, yielded the following, as compared to the merger consideration:

 

     Implied Per Share Value of
NxStage Common Stock

LTM revenue

   $31.78-$33.52

FTM revenue

   $32.00-$33.21

LTM gross profit

   $17.71-$18.85

FTM gross profit

   $18.27-$19.72

LTM Adjusted EBITDA

   $9.97-$9.98

FTM Adjusted EBITDA

   $13.73-$14.82

Merger consideration

   $30.00

Premiums Paid Analysis

Piper Jaffray reviewed publicly available information for selected completed or pending M&A transactions to determine the premiums paid in such transactions over recent trading prices of the target companies prior to announcement of the transaction. Piper Jaffray selected transactions for which Piper Jaffray considered the target to be a US listed public medical technology company, and applied, among others, the following criteria:

 

    M&A transactions between public target and acquirer;

 

    transactions announced since January 1, 2006;

 

    enterprise value of target greater than $500 million and less than $5 billion; and

 

    excludes transactions for which the consideration was 100% equity.

Based on these criteria, Piper Jaffray selected 44 transactions, and the table below shows a comparison of premiums paid in the selected transactions over certain time periods to the premium that would be paid to the holders of common stock based on the merger consideration of $30.00 per share.

The analysis indicated the following premiums:

 

          Selected Transactions  
    NxStage (1)     High     75 th %     Mean     Median     25 th %     Low  

Premium 1 day prior (to announcement of merger)

    30 % (2)       149     34     32     26     16     (1 )% 

Premium 1 week prior (to announcement of merger)

    27 % (3)       219     34     34     27     19     3

Premium 4 weeks prior (to announcement of merger)

    20 % (4)       301     43     43     33     26     9

Premium to 52 week high

    (3 )% (5)       59     22     7     10     (2 )%      (38 )% 

 

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(1) Based on the merger consideration of $30.00.

 

(2) Based on the closing price per share of $23.13 on August 3, 2017.

 

(3) Based on the closing price per share of $23.65 on July 28, 2017.

 

(4) Based on the closing price per share of $25.06 on July 7, 2017.

 

(5) Based on the high price per share of $30.80 on May 2, 2017.

The premiums paid analysis showed that the premiums over the market prices for one day and one week prior to the announcement of the merger for common stock implied by the merger consideration fell between the mean and median range of premiums paid in the selected transactions for the corresponding periods. The premiums paid analysis also showed that the premiums over the market prices for four weeks prior to the announcement of the merger and the 52-week closing high for common stock implied by the merger consideration fell between the “Low” and the 25th percentile range of premiums paid in the selected transactions for the corresponding periods. In addition, Piper Jaffray observed that the range of implied per share values for NxStage common stock, based on the mean and median for each analysis yielded the following, as compared to the merger consideration.

 

     Implied Per Share Value of
NxStage Common Stock

Premium 1 day prior (to announcement of merger)

   $29.16-$30.47

Premium 1 week prior (to announcement of merger)

   $29.99-$31.72

Premium 4 weeks prior (to announcement of merger)

   $33.40-$35.90

Premium 52 week high

   $33.07-$33.97

Merger consideration

   $30.00

Discounted Cash Flows Analysis

Using a discounted cash flows analysis, Piper Jaffray calculated an estimated range of theoretical EVs for NxStage based on the net present value of (i) projected unlevered free cash flows from June 30, 2017 to December 31, 2026 and (ii) a projected terminal value at December 31, 2026 based upon perpetuity growth rates ranging from 3.0% to 4.0%, discounted back to June 30, 2017. The unlevered free cash flows for each year and terminal year value were calculated from certain non-public, unaudited and prospective financial information provided by NxStage management, which was provided to Piper Jaffray by NxStage and is described under “—Certain Financial Forecasts.” Piper Jaffray calculated the range of net present values for unlevered free cash flows for such periods based on a range of discount rates ranging from 10.5% to 12.5%, based on its estimation of NxStage’s weighted average cost of capital.

This analysis resulted in implied per share values for common stock ranging from $21.71 to $31.45. Piper Jaffray observed that the merger consideration was within the range of implied per share values derived from this analysis.

Other Information — Company Analyst Price Targets

Piper Jaffray also noted for the NxStage board of directors the following additional information that was not relied upon in rendering its opinion, but was provided for informational purposes.

Piper Jaffray reviewed selected Wall Street research equity analyst per share target prices for shares of NxStage common stock as of August 4, 2017. The range of these target prices was $27.00 to $33.00, with an average target price of $30.38.

Miscellaneous

The summary set forth above does not contain a complete description of the analyses performed by Piper Jaffray and reviewed with the NxStage board of directors, but summarizes the material analyses performed by Piper Jaffray in rendering its opinion. The preparation of a fairness opinion is not necessarily susceptible to

 

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partial analysis or summary description. Piper Jaffray believes that its analyses and the summary set forth above must be considered as a whole and that selecting portions of its analyses or of the summary, without considering the analyses as a whole or all of the factors included in its analyses, would create an incomplete view of the processes underlying the analyses set forth in the Piper Jaffray opinion. In arriving at its opinion, Piper Jaffray considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis. Instead, Piper Jaffray made its determination as to fairness on the basis of its experience and financial judgment after considering the results of all of its analyses. In addition, the ranges of valuations resulting from any particular analysis described above should not be taken to be Piper Jaffray’s view of the actual value of common stock.

None of the selected companies or transactions used in the analyses above is directly comparable to NxStage or the merger. Accordingly, an analysis of the results of the comparisons is not purely mathematical; rather, it involves considerations and judgments concerning differences in historical and projected financial and operating characteristics of the selected companies and target companies in the selected transactions and other factors that could affect the public trading value or transaction value of the companies involved.

Piper Jaffray performed its analyses for purposes of providing its opinion to the NxStage board of directors. In performing its analyses, Piper Jaffray made numerous assumptions with respect to industry performance, general business and economic conditions and other matters. Certain of the analyses performed by Piper Jaffray are based upon financial projections of future results furnished to Piper Jaffray by NxStage management, which are not necessarily indicative of actual future results and may be significantly more or less favorable than actual future results. These financial projections are inherently subject to uncertainty because, among other things, they are based upon numerous factors or events beyond the control of the parties or their respective advisors. Neither Piper Jaffray nor NxStage assumes responsibility if future results are materially different from projected financial results.

Piper Jaffray’s opinion was one of many factors taken into consideration by the NxStage board of directors in making the determination to approve the merger agreement. While Piper Jaffray provided advice to the NxStage board of directors during NxStage’s negotiations with Fresenius, the NxStage board of directors determined the amount of merger consideration and Piper Jaffray did not recommend any specific amount or type of merger consideration.

Piper Jaffray relied upon and assumed, without assuming liability or responsibility for independent verification, the accuracy and completeness of all information that was publicly available or was furnished, or otherwise made available, to Piper Jaffray or discussed with or reviewed by Piper Jaffray. Piper Jaffray further relied upon the assurances of the management of NxStage that the financial information provided to Piper Jaffray by the management of NxStage was prepared on a reasonable basis in accordance with industry practice, and that the management of NxStage was not aware of any information or facts that would make any information provided to Piper Jaffray incomplete or misleading. Without limiting the generality of the foregoing, for the purpose of its opinion, Piper Jaffray assumed that with respect to financial forecasts, estimates and other forward-looking information reviewed by Piper Jaffray, that such information was reasonably prepared based on assumptions reflecting the best currently available estimates and judgments of the management of NxStage as to the expected future results of operations and financial condition of NxStage. Piper Jaffray expressed no opinion as to any such financial forecasts, estimates or forward-looking information or the assumptions on which they were based. Piper Jaffray relied, with consent of the NxStage board of directors, on advice of the outside counsel, and independent accountants to NxStage, and on the assumptions of the management of NxStage, as to all accounting, legal, tax and financial reporting matters with respect to NxStage and the merger agreement.

In arriving at its opinion, Piper Jaffray assumed that the executed merger agreement was in all material respects identical to the last draft reviewed by Piper Jaffray. Piper Jaffray relied upon and assumed, without independent verification, that (i) the representations and warranties of all parties to the merger agreement and all other related documents and instruments that are referred to therein are true and correct, (ii) each party to such agreements will fully and timely perform all of the covenants and agreements required to be performed by such party, (iii) the merger will be consummated pursuant to the terms of the merger agreement without amendments thereto and (iv) all conditions to the consummation of the merger will be satisfied without waiver by any party of

 

45


any conditions or obligations thereunder. Additionally, Piper Jaffray assumed that all the necessary regulatory approvals and consents required for the merger will be obtained in a manner that would not adversely affect NxStage or the contemplated benefits of the merger.

In arriving at its opinion, Piper Jaffray did not perform any appraisals or valuations of any specific assets or liabilities (fixed, contingent or other) of NxStage, and Piper Jaffray was not furnished or provided with any such appraisals or valuations, nor did Piper Jaffray evaluate the solvency of NxStage under any state or federal law relating to bankruptcy, insolvency or similar matters. The analyses performed by Piper Jaffray in connection with its opinion were going concern analyses. Piper Jaffray expressed no opinion regarding the liquidation value of NxStage or any other entity. Without limiting the generality of the foregoing, Piper Jaffray undertook no independent analysis of any pending or threatened litigation, regulatory action, possible unasserted claims or other contingent liabilities, to which NxStage or any of its affiliates is a party or may be subject, and at NxStage’s direction and with its consent, Piper Jaffray’s opinion made no assumption concerning, and therefore did not consider, the possible assertion of claims, outcomes or damages arising out of any such matters. Piper Jaffray also assumed that neither NxStage nor Fresenius is party to any material pending transaction, including without limitation, any financing, recapitalization, acquisition or merger, divestiture or spin-off, other than the merger.

Piper Jaffray’s opinion was necessarily based upon the information available to it and facts and circumstances as they existed and were subject to evaluation on the date of its opinion. Events occurring after the date of its opinion could materially affect the assumptions used in preparing its opinion. Piper Jaffray did not express any opinion as to the price at which shares of NxStage common stock may trade following announcement of the merger or at any future time. Piper Jaffray did not undertake to reaffirm or revise its opinion or otherwise comment upon any events occurring after the date of its opinion and does not have any obligation to update, revise or reaffirm its opinion.

Piper Jaffray’s opinion addressed solely the fairness, from a financial point of view, to holders of common stock of the proposed merger consideration set forth in the merger agreement and did not address any other terms or agreement relating to the merger or any other terms of the merger agreement. Piper Jaffray was not requested to opine as to, and its opinion does not address, the basic business decision to proceed with or effect the merger, the merits of the merger relative to any alternative transaction or business strategy that may be available to NxStage, Fresenius’s ability to fund the merger consideration, or any other terms contemplated by the merger agreement or the fairness of the merger to any other class of securities, creditor or other constituency of NxStage. Furthermore, Piper Jaffray expressed no opinion with respect to the amount or nature of compensation to any officer, director or employee of any party to the merger, or any class of such persons, relative to the merger consideration or with respect to the fairness of any such compensation.

Information about Piper Jaffray

As a part of its investment banking business, Piper Jaffray is regularly engaged in the valuation of businesses in the medical technology and other industries and their securities in connection with mergers and acquisitions, underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for corporate and other purposes. The NxStage board of directors selected Piper Jaffray to be its financial advisor and render its fairness opinion in connection with the merger on the basis of such experience and its familiarity with NxStage.

Piper Jaffray acted as a financial advisor to NxStage in connection with the merger and will receive a fee, currently estimated to be approximately $23 million from NxStage. Approximately 96% of such fee is contingent upon the consummation of the merger, and $1 million of such fee has been earned by Piper Jaffray for rendering its fairness opinion and is creditable against the total fee. The opinion fee was not contingent upon the consummation of the merger or the conclusions reached in Piper Jaffray’s opinion. NxStage has also agreed to indemnify Piper Jaffray against certain liabilities and reimburse Piper Jaffray for certain expenses in connection with its services. In the ordinary course of its business, Piper Jaffray and its affiliates may actively trade securities of NxStage and Fresenius for its own account or the account of its customers and, accordingly, may at any time hold a long or short position in such securities. In the ordinary course of its business, Piper Jaffray also publishes research on the common stock of NxStage. Piper Jaffray may also, in the future, provide investment

 

46


banking and financial advisory services to NxStage or Fresenius or entities that are affiliated with NxStage or Fresenius, for which Piper Jaffray would expect to receive compensation. Piper Jaffray has not acted as financial advisor to NxStage in the two years prior to the issuance of its fairness opinion, other than in connection with the merger. Piper Jaffray has not received fees or other compensation from Fresenius in the two years prior to the issuance of its fairness opinion.

Consistent with applicable legal and regulatory requirements, Piper Jaffray has adopted policies and procedures to establish and maintain the independence of Piper Jaffray’s research department and personnel. As a result, Piper Jaffray’s research analysts may hold opinions, make statements or recommendations and/or publish research reports with respect to NxStage and the merger and other participants in the merger that differ from the opinions of Piper Jaffray’s investment banking personnel.

 

Certain Financial Forecasts

NxStage does not, as a matter of course, publicly disclose detailed long-term projections about its future financial performance due to, among other reasons, the unpredictability of the underlying assumptions and estimates, though NxStage has in the past provided investors with annual financial guidance, which it may update from time to time during the relevant year. However, in connection with the NxStage board of directors’ evaluation of a potential transaction with Fresenius and other potential strategic alternatives, NxStage management provided the NxStage board of directors with certain non-public, unaudited and prospective financial information, which we refer to as the Management Forecast. NxStage management also provided the Management Forecast to Piper Jaffray in connection with the rendering of its fairness opinion to the NxStage board of directors and in performing the related financial analyses.

The Management Forecast was not prepared with a view to public disclosure and is included in this proxy statement only because such information was made available as described above. The Management Forecast was not prepared with a view to compliance with generally accepted accounting principles as applied in the United States, which we refer to as GAAP, the published guidelines of the SEC regarding projections and forward-looking statements or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Furthermore, Ernst & Young LLP, NxStage’s independent auditor, has not examined, reviewed, compiled or otherwise applied procedures to, the Management Forecast and, accordingly, assumes no responsibility for, and expresses no opinion on, the Management Forecast. The Management Forecast included in this proxy statement has been prepared by, and is the responsibility of, NxStage management. The Management Forecast was prepared solely for internal use of the NxStage board of directors and its advisors, and is subjective in many respects.

Although a summary of the Management Forecast is presented with numerical specificity, it reflects numerous assumptions and estimates as to future events made by our management that our management believed were reasonable at the time the Management Forecast was prepared, taking into account the relevant information available to management at the time. However, this information is not fact and should not be relied upon as being necessarily indicative of actual future results. Important factors that may affect actual results and cause the Management Forecast not to be achieved include, but are not limited to, assumptions with respect to revenue growth, including with respect to expansion of the number of patients prescribed to receive home therapy with the NxStage System One, assumptions with respect to the purchasing patterns of significant customers, including Fresenius, reimbursement rates for dialysis therapies, including particularly for home dialysis and dialysis prescribed more than three times per week, assumptions with respect to product development timelines and regulatory approvals, including particularly when new products under development will be available for commercial introduction and sale, general economic conditions, accuracy of certain accounting assumptions, changes in actual or projected cash flows, competitive pressures and changes in tax laws. For additional information on reasons that may cause NxStage’s future results to materially vary, see “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 18.

In addition, the Management Forecast, which is a forward-looking statement, does not take into account any circumstances or events occurring after the date that they were prepared and does not account for the consummation of the merger. As a result, there can be no assurance that the Management Forecast will be

 

47


realized, and actual results may be materially better or worse than those contained in the Management Forecast. The inclusion of this information should not be regarded as an indication that the NxStage board of directors, NxStage, Piper Jaffray or any other recipient of this information considered, or now considers, the Management Forecast to be material information of NxStage or predictive of actual future results. Nor should it be construed as financial guidance, and it should not be relied upon as such. The summary of the Management Forecast is not included in this proxy statement in order to induce any stockholder to vote in favor of the proposal to adopt the merger agreement or any of the other proposals to be voted on at the special meeting, or to influence any stockholder to make any investment decision with respect to the merger, including whether to seek appraisal rights with respect to NxStage common stock.

The Management Forecast should be evaluated, if at all, in conjunction with the historical financial statements and other information regarding NxStage contained in our public filings with the SEC.

Except to the extent required by applicable federal securities laws, we do not intend, and expressly disclaim any responsibility, to update or otherwise revise the Management Forecast to reflect circumstances existing after the date when NxStage prepared the Management Forecast or to reflect the occurrence of future events or changes in general economic or industry conditions.

In light of the foregoing factors and the uncertainties inherent in the Management Forecast, stockholders are cautioned not to rely on the Management Forecast included in this proxy statement.

Certain of the measures included in the Management Forecast may be considered non-GAAP financial measures, as noted below. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by NxStage may not be comparable to similarly titled amounts used by other companies.

The following table reflects selected measures from, or generated using, the Management Forecast prepared by NxStage management and, at NxStage’s direction, used by Piper Jaffray in connection with the rendering of its fairness opinion to the NxStage board of directors and in performing the related financial analyses summarized under “— Opinion of NxStage’s Financial Advisor.” Fresenius received the Management Forecast for the fiscal years ending December 31, 2017-2022 prior to signing the merger agreement.

 

    Six Months
Ending
December 31,
    Fiscal Year Ending December 31,  

(Dollars in millions) (1)

  2017     2017     2018     2019     2020     2021     2022     2023     2024     2025     2026  

Revenue

  $ 219     $ 415     $ 487     $ 594     $ 729     $ 852     $ 978     $ 1,115     $ 1,249     $ 1,374     $ 1,457  

Cost of Goods Sold

    124       236       265       321       389       445       502       568       631       688       724  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross Profit

    95       178       223       273       340       407       477       548       619       686       733  

Total Operating Expenses

    89       177       193       210       229       254       282       309       344       370       383  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income

    6       2       30       63       110       153       195       239       275       316       350  

Income Tax Expense (2)

    0       0       0       0       0       0       (65     (84     (96     (111     (123
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

After-tax Operating Income

    6       2       30       63       110       153       130       155       179       205       228  

Adj. EBITDA (3)

    24       36       65       100       148       193       237       284       323       367       404  

Unlevered Free Cash Flow (4)

    13       4       28       56       92       131       106       143       170       202       233  

Revenue Growth

    11 %       13 %       17 %       22 %       23 %       17 %       15 %       14 %       12 %       10 %       6 %  

Gross Margin

    43 %       43 %       46 %       46 %       47 %       48 %       49 %       49 %       50 %       50 %       50 %  

Operating Margin

    3 %       0 %       6 %       11 %       15 %       18 %       20 %       21 %       22 %       23 %       24 %  

Adj. EBITDA Margin

    11 %       9 %       13 %       17 %       20 %       23 %       24 %       25 %       26 %       27 %       28 %  

 

(1) Totals may not foot due to rounding.

 

(2) Taxable income offset by current $371 million federal net operating losses balance from 2017-2022; 35% tax rate thereafter.

 

(3)

Adjusted EBITDA is calculated based on operating income adding back depreciation and amortization, stock-based compensation, and non-recurring adjustments. Adjusted EBITDA is a non-GAAP financial

 

48


  measure and should not be considered as an alternative to operating income or net income as a measure of operating performance or cash flow or as a measure of liquidity. A reconciliation of operating income to Adjusted EBITDA is provided in the following table (totals may not foot due to rounding):

 

    Six Months
Ending
December 31,
    Fiscal Year Ending December 31,  

(Dollars in millions)

  2017     2017     2018     2019     2020     2021     2022     2023     2024     2025     2026  

Operating Income

  $ 6     $ 2     $ 30     $ 63     $ 110     $ 153     $ 195     $ 239     $ 275     $ 316     $ 350  

Depreciation & Amortization (5)

    12       23       23       25       25       26       28       31       34       37       40  

Stock-based Compensation

    6       11       12       12       13       13       14       14       14       14       14  

Non-recurring Adjustments

    0       0       0       0       0       0       0       0       0       0       0  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adj. EBITDA

    24       36       65       100       148       193       237       284       323       367       404  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(4) Unlevered free cash flow is calculated as after-tax operating income adding back depreciation and amortization and stock-based compensation, deducting capital expenditures (including additions to field equipment), and adjusting for changes in working capital and net deferred revenue and costs. Unlevered free cash flow is a non-GAAP financial measure and should not be considered as an alternative to operating income or net income as a measure of operating performance or cash flow or as a measure of liquidity. A reconciliation of after-tax operating income to unlevered free cash flow is provided in the following table (totals may not foot due to rounding):

 

    Six Months
Ending
December 31,
    Fiscal Year Ending December 31,  

(Dollars in millions)

  2017     2017     2018     2019     2020     2021     2022     2023     2024     2025     2026  

After-tax Operating Income

  $ 6     $ 2     $ 30     $ 63     $ 110     $ 153     $ 130     $ 155     $ 179     $ 205     $ 228  

Depreciation & Amortization (5)

    12       23       23       25       25       26       28       31       34       37       40  

Stock-based Compensation

    6       11       12       12       13       13       14       14       14       14       14  

Capital Expenditures

    (13     (27     (26     (29     (33     (37     (40     (40     (40     (40     (40

(Increase) in Working Capital

    0       (7     (12     (19     (24     (18     (21     (14     (13     (12     (8

Change in Deferred Revenue/Costs (5)

    1       2       3       4       1       (6     (5     (4     (3     (2     0  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Unlevered Free Cash Flow

    13       4       28       56       92       131       106       143       170       202       233  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(5) Certain cash flow line items in the Management Forecast are classified differently when compared to NxStage’s historical financial statements. For example, amortization of deferred costs historically is included in depreciation and amortization in NxStage’s historical Statements of Cash Flow. For the Management Forecast, those amounts are included in Change in Deferred Revenue/Costs.

 

Interests of Certain Directors and Executive Officers of NxStage

NxStage’s directors and executive officers may have interests in the merger that may be deemed to be different from, or in addition to, the interests of NxStage stockholders generally. The NxStage board of directors was aware of and considered these interests, among other matters, in evaluating and overseeing the negotiation of the merger agreement, in approving the merger agreement and the merger and in recommending that the merger agreement be adopted by the NxStage stockholders.

 

49


If the proposal to adopt the merger agreement is approved by our stockholders and the merger closes, under the terms of the merger agreement, any NxStage common stock held by our directors and executive officers will be treated in the same manner as issued and outstanding NxStage common stock held by all other NxStage stockholders entitled to receive the per share merger consideration.

NxStage Equity Awards

NxStage directors and executive officers hold equity and/or one or more of the following equity awards: stock options and performance shares. In connection with the merger, each NxStage equity award that is outstanding and unvested as of immediately prior to the effective time of the merger will vest in full, with any applicable performance conditions deemed achieved at maximum levels.

Stock Options

Each NxStage stock option that is outstanding and unexercised as of immediately prior to the effective time of the merger will be canceled in exchange for the right to receive an amount in cash (without interest, and less applicable tax withholdings) equal to the product of (i) the total number of shares of NxStage stock subject to such stock option as of immediately prior to the effective time of the merger, multiplied by (ii) the excess, if any, of the per share merger consideration of $30.00 over the exercise price per share of such stock option.

The following table sets forth the approximate number of shares underlying NxStage stock subject to NxStage stock options and the approximate cash amounts (on a pre-tax basis) that each NxStage director and executive officer is expected to receive in respect thereof. The amounts listed in the table below are based on the number of shares of NxStage stock underlying NxStage stock options held by NxStage directors and executive officers as of August 28, 2017, the latest practicable date to determine such amounts before the filing of this proxy statement, and exclude any additional grants that may be made following such date, and the per share merger consideration of $30.00 per share. Depending on when the merger occurs, certain stock options that are now unvested and included in the table below may vest or be forfeited pursuant to their terms, independent of the merger.

 

Name

   Shares Subject
to Unvested
NxStage
Stock Options
(#)
     Merger
Consideration
Payable for
Unvested
NxStage
Stock Options
($)
     Shares
Subject
to Vested
NxStage
Stock
Options

(#)
     Merger
Consideration
Payable for
Vested
NxStage
Stock Options
($)
     Total ($) (1)  

Jeffrey H. Burbank

     413,908      $ 4,255,013        648,923      $ 9,809,177      $ 14,064,189  

Joseph E. Turk, Jr.

     254,260      $ 2,531,185        202,541      $ 2,831,442      $ 5,362,628  

Reid S. Perper

     11,733      $ 84,712        81,078      $ 1,165,934      $ 1,250,646  

Craig W. Moore

     11,733      $ 84,712        81,078      $ 1,165,934      $ 1,250,646  

Earl R. Lewis

     11,733      $ 84,712        62,882      $ 867,519      $ 952,232  

Matthew W. Towse

     137,257      $ 1,409,583        136,890      $ 1,927,860      $ 3,337,444  

Winifred L. Swan

     110,243      $ 1,133,720        133,536      $ 2,013,003      $ 3,146,724  

Daniel A. Giannini

     11,733      $ 84,712        81,078      $ 1,165,934      $ 1,250,646  

Robert G. Funari

     11,733      $ 84,712        88,251      $ 1,300,284      $ 1,384,996  

Robert S. Brown (2)

     38,392      $ 468,157        25,407      $ 281,300      $ 749,457  

Jean K. Mixer

     11,733      $ 84,712        81,078      $ 1,165,934      $ 1,250,646  

James J. Peters

     22,459      $ 202,376        10,721      $ 102,947      $ 305,323  

Heyward R. Donigan

     20,919      $ 160,680        5,508      $ 41,446      $ 202,126  

 

(1) Totals may not foot due to rounding.

 

(2) Mr. Brown’s last day of employment as President of NxStage Kidney Care, Inc. was April 28, 2017.

 

50


Restricted Stock Units

Each NxStage restricted stock unit award that is outstanding as of immediately prior to the effective time of the merger will be canceled in exchange for the right to receive an amount in cash (without interest, and less applicable tax withholdings) equal to the product of (i) the total number of shares deliverable under such restricted stock unit as of immediately prior to the effective time of the merger, multiplied by (ii) the per share merger consideration of $30.00.

NxStage executive officers and non-employee directors held no restricted stock units as of August 28, 2017, the latest practicable date to determine such amounts before the filing of this proxy statement, which excludes any additional grants that may be made following such date.

Restricted Shares

Each NxStage restricted share that is outstanding as of immediately prior to the effective time of the merger will be treated in the same manner as a share of NxStage common stock, as described “— Merger Consideration” above (less applicable tax withholdings).

NxStage executive officers and non-employee directors held no restricted shares as of August 28, 2017, the latest practicable date to determine such amounts before the filing of this proxy statement, which excludes any additional grants that may be made following such date.

Performance Shares

Each NxStage 2017 performance share award that is outstanding as of immediately prior to the effective time of the merger, determined based on deemed achievement of applicable performance conditions at maximum levels, will be canceled in exchange for the right to receive an amount in cash (without interest, and less applicable tax withholdings) equal to the product of (i) the total number of performance shares as of immediately prior to the effective time of the merger, multiplied by (ii) the per share merger consideration of $30.00.

The following table sets forth the approximate number of NxStage performance shares and the approximate cash amounts (on a pre-tax basis) that each NxStage executive officer is expected to receive in respect thereof. No NxStage performance shares are held by any NxStage non-employee director as of the date of this proxy statement and therefore the NxStage non-employee directors are not listed in the table below. The amounts listed in the table below are based on the number of unvested performance shares of NxStage stock held by NxStage executive officers as of August 28, 2017, the latest practicable date to determine such amounts before the filing of this proxy statement, and exclude any additional grants that may be made following such date, deemed achievement of applicable performance conditions at maximum levels, and the per share merger consideration of $30.00 per share. Depending on when the merger occurs, certain performance shares that are now unvested and included in the table below may vest in accordance with the NxStage board of directors’ resolutions described above and their otherwise applicable terms or be forfeited pursuant to their terms, independent of the merger.

 

Name

   Unvested NxStage
Performance Shares
(#)
     Merger Consideration Payable
for Unvested NxStage
Performance Shares ($)
 

Jeffrey H. Burbank

     52,392        1,571,760  

Joseph E. Turk, Jr.

     34,928        1,047,840  

Matthew W. Towse

     17,464        523,920  

Winifred L. Swan

     13,971        419,130  

Robert S. Brown (1)

     0        0  

 

(1) Mr. Brown’s last day of employment as President of NxStage Kidney Care, Inc. was April 28, 2017.

Potential Annual Bonus Payments

NxStage may (but is not required to) pay annual cash bonuses, including to NxStage’s executive officers, for 2017 assuming achievement of applicable performance metrics at target levels, regardless of actual

 

51


performance and may pay annual cash bonuses for 2018 in the aggregate up to 110% of the aggregate 2017 annual cash bonus payments. As a result, each executive officer may receive an annual cash bonus for 2017 paid at target levels and an annual cash bonus for 2018 in an amount to be determined by NxStage, subject to the aggregate 110% limit described in the preceding sentence (with any executive officer eligible to receive an individual annual cash bonus in excess of such limit). If 2017 annual cash bonuses for each executive officer were paid at target levels and 2018 annual cash bonuses for each executive officer were paid at 110% of the 2017 levels, NxStage’s executive officers would receive the following payments in March 2018 and March 2019, respectively:

 

Name

   2017 Annual Bonus
at Target

($)
     2018 Annual Cash Bonus at 110%
of 2017 Annual Cash Bonus (2)

($)
 

Jeffrey H. Burbank

     772,500        849,750  

Joseph E. Turk, Jr.

     309,000        339,900  

Matthew W. Towse

     227,910        250,701  

Winifred L. Swan

     177,675        195,443  

Robert S. Brown (1)

     0        0  

 

(1) Mr. Brown’s last day of employment as President of NxStage Kidney Care, Inc. was April 28, 2017.

 

(2) NxStage may pay its executive officers 2018 annual cash bonuses in the aggregate up to 110% of the aggregate 2017 annual cash bonuses. The amounts in the table assume that each officer (other than Mr. Brown) will receive 110% of such officers’ 2017 annual cash bonus, which may be greater than or less than the actual 2018 annual cash bonus amount received by such officer.

Employment and Retention Arrangements

Each NxStage executive officer is party to an employment agreement with NxStage that provides for certain payments and benefits following a qualifying termination of the executive officer’s employment with NxStage. In addition, in connection with the merger, Fresenius entered into a retention and noncompete agreement with each of Messrs. Burbank and Turk that will become effective following the merger and that provides for retention payments and for certain payments and benefits following a qualifying termination of employment with NxStage or Fresenius following the effective time of the merger. As used below, the terms “change of control,” “cause” and “good reason” have the meanings set forth in the applicable employment or retention agreements.

Employment Agreements for Mr. Towse and Ms. Swan

Under their employment agreements, if NxStage terminates the employment of Mr. Towse or Ms. Swan without cause either (1) following a change of control or (2) unless NxStage can reasonably demonstrate that such termination was not in connection with such change of control, at any time during the period beginning three months prior to the public announcement by NxStage or the acquiring company of such change of control and ending on such change of control, or if the Mr. Towse or Ms. Swan, as the case may be, resigns for good reason within twelve months following a change of control, he or she will be entitled to the following severance payments and benefits:

 

    a lump sum severance payment equal to (1) in the case of Ms. Swan, 1.25 times her then-current base salary and 1.25 times the greater of her annual bonus for the fiscal year preceding her termination or her target bonus for the then-current fiscal year, or (2) in the case of Mr. Towse, one times his then-current base salary and the greater of one times his annual bonus for the fiscal year preceding his termination or his target bonus for the then-current fiscal year;

 

    continued medical coverage for (1) in the case of Ms. Swan, 15 months, or (2) in the case of Mr. Towse, 12 months; and

 

    full vesting and acceleration of stock options and stock awards held at the time his or her employment is terminated and a period of 90 days to exercise stock options.

 

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In addition, Ms. Swan is entitled to a gross-up amount on payments and benefits received under the employment agreement or otherwise to compensate her for any excise taxes imposed by Section 4999 of the Code, including any taxes imposed on the gross-up amount.

Employment and Retention Agreements with Messrs. Burbank and Turk

Under their current employment agreements, if NxStage terminates the employment of Mr. Burbank or Mr. Turk without cause at any time during the period beginning three months prior to the public announcement by NxStage or the acquiring company of a change of control and ending on such change of control, unless NxStage can reasonably demonstrate that such termination was not in connection with such change of control, he will be entitled to the following severance payments and benefits:

 

    Severance, payable partially in installments over the 12-month period following termination of employment and partially in a lump sum, equal to (1) in the case of Mr. Burbank, 2 times his then-current base salary and the greater of 2 times his annual bonus for the fiscal year preceding his termination or his target bonus for the then-current fiscal year, or (2) in the case of Mr. Turk, 1.5 times his then-current base salary and the greater of 1.5 times his annual bonus for the fiscal year preceding his termination or his target bonus for the then-current fiscal year;

 

    continued medical coverage for (1) in the case of Mr. Burbank, 24 months, or (2) in the case of Mr. Turk, 18 months; and

 

    full vesting and acceleration of stock options and stock awards held at the time his employment is terminated and a period of 90 days to exercise stock options.

In addition, Mr. Burbank and Mr. Turk are each entitled to a gross-up amount on payments and benefits received under their current employment agreements or otherwise to compensate them for any excise taxes and associated penalties imposed by Section 4999 of the Code, including any taxes imposed on the gross-up amount.

Fresenius required, as a condition to its signing the merger agreement, that Messrs. Burbank and Turk enter into retention and noncompete agreements with Fresenius that will become effective following the merger. Pursuant to the retention and noncompete agreements, Messrs. Burbank and Turk will be entitled to receive a retention bonus of $4,500,000 and $3,000,000, respectively, payable on the first payroll date following the third anniversary of the effective time of the merger, subject to the executive’s continued employment through such time or upon an earlier termination of employment without cause or resignation for good reason. In addition, in lieu of the severance that would have been payable under their existing employment agreements described above, in the event Mr. Burbank’s or Mr. Turk’s employment is terminated without cause or he resigns for any reason, in each case, following the effective time of the merger, he will be entitled to a lump sum severance payment equal to two times his then-current base salary and two times his target bonus for the then-current fiscal year.

For further information with respect to the arrangements between NxStage and its executive officers, see the information included under “Proposal 2: Advisory, Non-Binding Vote on Merger-Related Executive Compensation Arrangements” beginning on page 84.

Benefit Arrangements

As described under “The Merger Agreement — Employee Benefit Matters,” the merger agreement requires Fresenius or the surviving company to assume, honor and fulfill all existing employee benefit plans and agreements between NxStage or any of its subsidiaries and any current or former employee, director or consultant in accordance with their terms (other than any equity plan and the ESPP) and to provide certain commitments regarding the value of compensation and benefits for one year following the effective time of the merger to employees of NxStage or any of its subsidiaries who remain employed following the merger, including NxStage’s executive officers.

Indemnification, Exculpation and Insurance of Directors and Executive Officers

As described under “The Merger Agreement — Indemnification, Exculpation and Insurance of Directors and Executive Officers,” for not less than six years from and after the effective time of the merger, Fresenius

 

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shall cause the surviving company to indemnify and hold harmless all past and present directors and officers of NxStage and NxStage subsidiaries, against any costs or expenses, judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any actual or threatened claim, action, investigation, suit or proceeding in respect of acts or omissions occurring or alleged to have occurred at or prior to the effective time of the merger in connection with such persons serving as an officer or director of NxStage or any of NxStage subsidiaries or serving at the request of NxStage or any of NxStage subsidiaries as a director, officer, employee or agent of another person, to the fullest extent provided pursuant to NxStage certificate of incorporation and by-laws or the organizational documents of any NxStage subsidiary or any other agreement in existence on the date of the merger agreement.

Fresenius and NxStage agreed that for six years after the effective time of the merger, all rights of all past and present directors and officers of NxStage and NxStage subsidiaries to elimination or limitation of liability, indemnification and advancement of expenses for acts or omissions occurring or alleged to have occurred at or prior to the effective time of the merger provided in NxStage certificate of incorporation and by-laws or the organizational documents of any NxStage subsidiary or any other agreement shall survive the merger and shall continue in full force and effect.

Fresenius shall cause the surviving company to provide, for an aggregate period of not less than six years from the effective time of the merger, NxStage’s current directors and officers an insurance and indemnification policy that provides coverage for events occurring prior to the effective time of the merger that is no less favorable than NxStage’s existing policy as of the date of the merger agreement. However, the surviving company shall not be required to pay an annual premium for such insurance in excess of three hundred percent (300%) of the last annual premium paid prior to the date of the merger agreement or, if less, the cost of a policy providing coverage on the same terms as NxStage’s existing policy as of the date of the merger agreement. At NxStage’s option, in lieu of the foregoing insurance coverage, NxStage or the surviving company may at or prior to the effective time of the merger substitute therefor a single premium tail coverage with respect to such insurance with an annual cost not in excess of three hundred percent (300%) of the last annual premium paid prior to the date of the merger agreement.

 

Financing of the Merger

Fresenius expects to finance the merger through cash on hand, available lines of credit and other sources of immediately available funds. The obligations of Fresenius and Merger Sub under the merger agreement are not conditioned upon their ability to obtain financing (or upon any cooperation by NxStage in respect of any financing).

 

Closing and Effective Time of the Merger

The closing of the merger is expected to take place no later than the second business day following the satisfaction or (to the extent permitted by applicable law) waiver of all the conditions precedent set forth in the merger agreement that are capable of satisfaction prior to the closing (described in the section of this proxy statement titled “The Merger Agreement — Effects of the Merger; Closing; Effective Time” beginning on page 58) unless otherwise agreed to in writing by NxStage and Fresenius.

The merger will become effective upon the date and time of filing of the certificate of merger with the Secretary of State, or such later date and time as agreed in writing by NxStage and Fresenius.

 

U.S. Federal Income Tax Consequences of the Merger

The following discussion is a summary of the U.S. federal income tax consequences of the merger that are relevant to holders of shares of NxStage common stock whose shares are converted into the right to receive cash pursuant to the merger. This discussion is based upon the Code, Treasury Regulations promulgated under the Code, court decisions, published positions of the Internal Revenue Service, which we refer to as the IRS, and other applicable authorities, all as in effect on the date of this proxy statement and all of which are subject to change or differing interpretations, possibly with retroactive effect. This discussion is limited to holders who hold their shares of NxStage common stock as “capital assets” within the meaning of the Code (generally,

 

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property held for investment purposes). This summary does not describe any of the tax consequences arising under the laws of any state, local or foreign tax jurisdiction and does not consider any aspects of U.S. federal tax law other than income taxation (e.g., state, gift or alternative minimum tax or the Medicare net investment income surtax). In addition, this summary does not address the U.S. federal income tax consequences to holders of shares who exercise appraisal rights under Section 262 of the DGCL. For purposes of this discussion, a “holder” means either a U.S. holder or a non-U.S. holder (each as defined below) or both, as the context may require.

This discussion is for general information only and does not address all of the tax consequences that may be relevant to holders in light of their particular circumstances, including:

 

    Holders who may be subject to special treatment under U.S. federal income tax laws, such as: financial institutions, tax-exempt organizations, S corporations or any other entities or arrangements treated as partnerships or pass-through entities for U.S. federal income tax purposes, insurance companies, mutual funds, dealers in stocks and securities, traders in securities that elect to use the mark-to-market method of accounting for their securities, regulated investment companies, real estate investment trusts, or certain expatriates or former long-term residents of the United States;

 

    Holders holding the shares as part of a hedging, constructive sale or conversion, straddle or other risk reducing transaction;

 

    Holders that received their NxStage common stock in a compensatory transaction; or

 

    U.S. holders whose “functional currency” is not the U.S. dollar.

If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of NxStage common stock, the tax treatment of a partner in such partnership will generally depend upon the status of the partner and the activities of the partnership. Partnerships holding the shares of NxStage common stock and partners therein should consult their tax advisors regarding the consequences of the merger.

We have not sought, and do not intend to seek, any ruling from the IRS with respect to the statements made and the conclusions reached in the following summary. No assurance can be given that the IRS will agree with the views expressed in this summary, or that a court will not sustain any challenge by the IRS in the event of litigation.

A HOLDER SHOULD CONSULT ITS OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE MERGER IN LIGHT OF ITS PARTICULAR CIRCUMSTANCES AND ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION.

U.S. Holders

For purposes of this discussion, a “U.S. holder” is a beneficial owner of shares of NxStage common stock who or that is for U.S. federal income tax purposes:

 

    An individual who is a citizen or resident of the United States;

 

    A corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, or any state thereof or the District of Columbia;

 

    An estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

 

    A trust (i) that is subject to the primary supervision of a court within the United States and the control of one or more United States persons as defined in the Code or (ii) that has a valid election in effect under applicable Treasury Regulations promulgated under the Code to be treated as a United States person.

The receipt of cash by a U.S. Holder in exchange for shares of NxStage common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. In general, such U.S. Holder’s gain or loss will be equal to the difference, if any, between the amount of cash received and the U.S. Holder’s adjusted

 

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tax basis in the shares surrendered pursuant to the merger. A U.S. Holder’s adjusted tax basis generally will equal the amount that such U.S. Holder paid for the shares. Such gain or loss generally will be capital gain or loss and will be long-term capital gain or loss if such U.S. Holder’s holding period in such shares is more than one year at the time of the completion of the merger. A reduced tax rate on capital gain generally will apply to long-term capital gain of a non-corporate U.S. Holder. There are limitations on the deductibility of capital losses.

Non-U.S. holders

For purposes of this discussion, the term “non-U.S. holder” means a beneficial owner of shares of NxStage common stock who or that is not a U.S. holder or an entity or arrangement treated as a partnership or other pass-through entity for U.S. federal income tax purposes.

Any gain realized by a non-U.S. holder pursuant to the merger generally will not be subject to U.S. federal income tax unless:

 

    The gain is effectively connected with a trade or business of such non-U.S. holder in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment maintained by such non-U.S. holder in the United States), in which case such gain generally will be subject to U.S. federal income tax at rates generally applicable to U.S. persons, and, if the Non-U.S. holder is a corporation, such gain may also be subject to the branch profits tax at a rate of 30% (or a lower rate under an applicable tax treaty);

 

    Such non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of that disposition, and certain other specified conditions are met, in which case such gain will be subject to U.S. federal income tax at a rate of 30% (or a lower rate under an applicable tax treaty); or

 

    NxStage is or has been a “United States real property holding corporation” as such term is defined in the Code, which we refer to as a USRPHC, at any time within the shorter of the five-year period preceding the merger and such Non-U.S. holder’s holding period with respect to the applicable NxStage common stock, or the relevant period, and, if NxStage common stock is regularly traded on an established securities market (within the meaning of the Code), such Non-U.S. holder owns directly or is deemed to own pursuant to attribution rules more than 5% of NxStage common stock at any time during the relevant period, in which case such gain will be subject to U.S. federal income tax at rates generally applicable to U.S. persons. NxStage believes that it is not, and has not been, a USRPHC at any time during the five-year period preceding the anticipated date of completion of the merger.

Backup Withholding and Information Reporting

A holder may be subject to information reporting and backup withholding with respect to the amount of cash received pursuant to the merger. Backup withholding of tax generally applies if a holder (i) fails to provide an accurate taxpayer identification number or (ii) in certain circumstances, fails to comply with applicable certification requirements. Certain penalties apply for failure to provide correct information and for failure to include reportable payments in income. In order to avoid backup withholding, U.S. Holders generally must complete the IRS Form W-9 that will be included in the letter of transmittal and non-U.S. holders generally must complete an appropriate IRS Form W-8 in accordance with the instructions to the appropriate form.

Backup withholding is not an additional tax. Any amount withheld under the backup withholding rules will be allowed as a refund or credit against the holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.

 

Regulatory Approvals for the Merger

General

The merger agreement generally requires each party to use its reasonable best efforts to take all actions necessary to obtain all consents and clearances required under any antitrust law, except that Fresenius is not

 

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required (i) to litigate against a governmental entity or (ii) to divest or to take any other actions with respect to any assets or business of Fresenius or any of its subsidiaries or NxStage, other than, if necessary to obtain antitrust clearances, with respect to certain NxStage assets. The merger cannot be completed until the applicable waiting period (and any extension thereof) under the HSR Act, the applicable approvals under the competition laws of Germany have been obtained, and any waiting period entered into with antitrust authorities has terminated.

Although we expect that all required regulatory clearances and approvals will be obtained, we cannot assure you that these regulatory clearances and approvals will be timely obtained, obtained at all or that the granting of these regulatory clearances and approvals will not involve the imposition of additional conditions on the completion of the merger, including the requirement to divest assets, or require changes to the terms of the merger agreement.

HSR Act and U.S. Antitrust Matters

Under the HSR Act and the rules promulgated thereunder by the FTC, the merger cannot be completed until NxStage and Fresenius each file a Notification and Report Form with the Premerger Notification Office of the FTC and the DOJ under the HSR Act and the applicable waiting period has expired or been terminated. A transaction notifiable under the HSR Act may not be completed until the expiration of a 30 calendar day waiting period following the parties’ filing of their respective HSR Act notification forms or the early termination of that waiting period. NxStage and Fresenius filed their respective HSR Act notifications on                     , 2017, requesting early termination of the applicable waiting period.

At any time before or after consummation of the merger, notwithstanding the termination of the waiting period under the HSR Act, the Antitrust Division of the DOJ or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the completion of the merger, seeking divestiture of substantial assets of the parties or requiring the parties to license, or hold separate, assets or terminate existing relationships and contractual rights. At any time before or after the completion of the merger, and notwithstanding the termination of the waiting period under the HSR Act, any state could take such action under the antitrust laws as it deems necessary or desirable in the public interest. Such action could include seeking to enjoin the completion of the merger or seeking divestiture of substantial assets of the parties. Private parties may also seek to take legal action under the antitrust laws under certain circumstances.

German Antitrust Matters

The German ARC, imposes a pre-merger notification requirement on all transactions that qualify as concentrations and meet certain specified financial thresholds, which the merger meets. Accordingly, consummation of the merger is conditional upon the merger being cleared by the Bundeskartellamt. Clearance can be granted explicitly or is also considered granted if, after the Bundeskartellamt has been notified of a proposed transaction, the applicable waiting periods expire without any decision by the Bundeskartellamt. Fresenius notified the Bundeskartellamt of the proposed transaction on                     , 2017.

 

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THE MERGER AGREEMENT

This section describes the material terms of the merger agreement. The description of the merger agreement in this section and elsewhere in this proxy statement is qualified in its entirety by reference to the complete text of the merger agreement, a copy of which is attached as Annex A and is incorporated by reference into this proxy statement. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. We encourage you to read the merger agreement carefully and in its entirety.

Explanatory Note Regarding the Merger Agreement

The merger agreement, a copy of which is attached as Annex A , and this summary of its terms are included to provide you with information regarding its terms. Factual disclosures about NxStage contained in this proxy statement or in NxStage’s public reports filed with the SEC may supplement, update or modify the factual disclosures about NxStage contained in the merger agreement. Any material facts in NxStage’s public reports previously filed with the SEC that are incorporated by reference into this proxy statement that contradict the factual disclosures about NxStage contained in the representations and warranties in the merger agreement shall modify such factual disclosures. The representations, warranties and covenants made in the merger agreement by NxStage, Fresenius and Merger Sub were made solely to the parties to, and solely for the purposes of, the merger agreement and as of specific dates and were qualified and subject to important limitations agreed to by NxStage, Fresenius and Merger Sub in connection with negotiating the terms of the merger agreement. In particular, in your review of the representations and warranties contained in the merger agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purposes of establishing the circumstances in which a party to the merger agreement may have the right not to consummate the merger if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to the merger agreement, rather than establishing matters as facts. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to stockholders and reports and documents filed with the SEC and in some cases were qualified by the matters contained in the company disclosure schedule that NxStage provided to Fresenius in connection with the merger agreement, which we refer to as the disclosure schedule, which disclosures were not reflected in the merger agreement. Moreover, information concerning the subject matter of the representations and warranties may have changed since the date of the merger agreement. Investors should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts of NxStage, Fresenius and Merger Sub or any of their respective subsidiaries or affiliates.

Effects of the Merger; Closing; Effective Time

Merger

Subject to the terms and conditions of the merger agreement, and in accordance with the DGCL, at the effective time, (i) Merger Sub shall be merged with and into NxStage such that the separate corporate existence of Merger Sub shall thereupon cease, (ii) NxStage shall be the surviving company, and (iii) the merger shall have the effects set forth in the merger agreement and the applicable provisions of the DGCL. As a result of the merger, the surviving company shall become a wholly-owned subsidiary of Fresenius.

Closing

Subject to the satisfaction or waiver of all of the conditions precedent set forth in the merger agreement, the closing of the merger shall take place no later than the second business day after satisfaction or waiver of all of the conditions precedent set forth in the merger agreement that are capable of satisfaction prior to the closing. The date on which the closing actually occurs is referred to in the merger agreement as the closing date.

Effective Time

On the terms and subject to the conditions set forth in the merger agreement (a) NxStage and Merger Sub, on the closing date, shall file or cause to be filed a certificate of merger with the Secretary of State, in such forms

 

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as required by the relevant provisions of the DGCL and (b) NxStage, Fresenius and Merger Sub shall take any further actions that may be required by law to make the merger effective. The effective time of the merger shall occur on the date and time of filing of the certificate of merger with the Secretary of State, or such later date as is agreed to in writing by Fresenius and NxStage and specified in the certificate of merger.

Governing Documents; Directors and Officers

Certificate of Incorporation and By-Laws

At the effective time, the certificate of incorporation of NxStage shall, by virtue of the merger, be amended and restated in its entirety and shall be the certificate of incorporation for the surviving company until thereafter changed or amended by applicable law. At the effective time, the by-laws of NxStage shall be amended and restated in their entirety and shall be the by-laws of the surviving company until thereafter changed or amended by applicable law.

Directors and Officers of the Surviving Company

The directors of Merger Sub immediately prior to the effective time shall, from and after the effective time, be the directors of the surviving company, and the officers of Merger Sub immediately prior to the effective time shall, from and after the effective time, be the officers of the surviving company, in each case until their respective successors shall have been duly elected, designated or qualified, or until their earlier death, resignation, removal or disqualification in accordance with the DGCL, certificate of incorporation and the by-laws.

Effect on the Capital Stock, Equity Awards and the ESPP

Effect on NxStage Common Stock

As of the effective time, by virtue of the merger and without any action on the part of Fresenius, Merger Sub, NxStage or any NxStage stockholder:

 

    any shares of NxStage common stock then held by NxStage (or held in NxStage’s treasury) shall be canceled and shall cease to exist, and no consideration shall be delivered in exchange therefor;

 

    any shares of NxStage common stock then held by Fresenius, Merger Sub or any other wholly-owned subsidiary of Fresenius shall be canceled and shall cease to exist, and no consideration shall be delivered in exchange therefor;

 

    except as provided above, each shares of NxStage common stock then issued and outstanding (including any restricted shares but not including any shares held by stockholders properly exercising appraisal rights) shall be converted into the right to receive a cash amount equal to $30.00, without interest thereon, subject to any withholding of taxes required by applicable law; and

 

    each share of common stock, $0.001 par value per share, of Merger Sub then issued and outstanding shall be converted into one fully paid and nonassessable share of common stock of the surviving company.

Treatment of NxStage Equity Awards

Certain NxStage directors and executive officers hold equity and/or one or more of the following equity awards: stock options, restricted stock units, restricted shares and performance shares. In connection with the execution of the merger agreement, the NxStage board of directors adopted resolutions providing that each outstanding NxStage 2017 performance share award will be deemed earned at maximum performance levels as of the applicable determination date, subject to the holder’s continued employment through such date. In connection with the merger, each NxStage equity award that is outstanding and unvested as of immediately prior to the effective time of the merger will vest in full, with any applicable performance conditions deemed achieved at maximum levels.

Stock Options

Each NxStage stock option that is outstanding and unexercised as of immediately prior to the effective time of the merger will be canceled in exchange for the right to receive an amount in cash (without interest, and less applicable tax withholdings) equal to the product of (i) the total number of shares of NxStage stock subject to

 

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such stock option as of immediately prior to the effective time of the merger, multiplied by (ii) the excess, if any, of the per share merger consideration of $30.00 over the exercise price per share of such stock option.

Restricted Stock Units

Each NxStage restricted stock unit award that is outstanding as of immediately prior to the effective time of the merger will be canceled in exchange for the right to receive an amount in cash (without interest, and less applicable tax withholdings) equal to the product of (i) the total number of shares deliverable under such restricted stock unit as of immediately prior to the effective time of the merger, multiplied by (ii) the per share merger consideration of $30.00.

Restricted Shares

Each NxStage restricted share that is outstanding as of immediately prior to the effective time of the merger will be treated in the same manner as a share, as described under “— Effect on NxStage Common Stock” above (less applicable tax withholdings).

Performance Shares

Each NxStage 2017 performance share award that is outstanding as of immediately prior to the effective time of the merger will be determined based on deemed achievement of applicable performance conditions at maximum levels and will be canceled in exchange for the right to receive an amount in cash (without interest, and less applicable tax withholdings) equal to the product of (i) the total number of the holder’s performance shares as of immediately prior to the effective time of the merger, multiplied by (ii) the per share merger consideration of $30.00.

Treatment of NxStage ESPP

Any outstanding offering period under the NxStage 2005 Employee Stock Purchase Plan, which we refer to as the ESPP, will be terminated immediately prior to the effective time of the merger and each outstanding and unexercised option thereunder will be canceled in exchange for a cash payment equal to (i) the number of shares subject to such option, multiplied by (ii) the excess, if any, of (A) the per share merger consideration of $30.00, less (B) the option price per share, subject to applicable tax withholding. The ESPP will terminate as of, and contingent upon, the effective time of the merger and any remaining balances in any participant’s account under the ESPP will be returned to the participant. The merger agreement also requires the NxStage board of directors to adopt resolutions providing that no new offering period under the ESPP commences after the date the merger agreement was signed (August 7, 2017), and the current offering period ends on December 31, 2017, so if the merger occurs after that date there will not be any outstanding options under the ESPP at the effective time of the merger.

Exchange and Payment Procedures

Prior to the closing date, Fresenius shall designate              as paying agent for the holders of shares of NxStage common stock in connection with the merger and to receive the consideration to which holders of shares of NxStage common stock shall become entitled pursuant to the merger agreement, as described in the previous section. Prior to the closing date, Fresenius shall deposit or cause to be deposited with the paying agent sufficient funds to pay the aggregate merger consideration payable in respect of all outstanding shares of NxStage common stock (such funds being hereinafter referred to as the payment fund). With respect to any shares held by stockholders properly exercising appraisal rights, Fresenius shall only be required to deposit or cause to be deposited with the paying agent funds sufficient to pay the aggregate merger consideration payable in respect of such dissenting shares if the holder thereof fails to perfect or effectively withdraws or loses its right to appraisal under the DGCL. To the extent the payment fund diminishes for any reason below the level required to make prompt payment of the amounts described in the preceding sentences, Fresenius and Merger Sub shall, or shall cause the surviving company to, promptly replace or restore the lost portion of such fund so as to ensure that it is maintained at a level sufficient to make such payments.

Promptly after the effective time (and in any event within two (2) business days after the effective time), Fresenius shall cause the paying agent to mail to each holder of record of shares of NxStage common stock

 

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entitled to receive the merger consideration pursuant to the previous section a form of letter of transmittal, together with instructions thereto.

Upon (A) surrender to the paying agent of certificates representing shares of NxStage common stock (or affidavits of loss in lieu thereof), together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be reasonably required pursuant to such instructions, or (B) receipt of an “agent’s message” by the paying agent (or such other evidence, if any, of transfer as the paying agent may reasonably request) in the case of book-entry shares, the holder of such certificates or book-entry shares, as applicable, shall be entitled to receive the merger consideration for each share formerly evidenced by such certificates or book-entry shares, as applicable, and such certificates and book-entry shares, as applicable, shall then be canceled. No interest shall accrue or be paid on the applicable merger consideration payable upon the surrender of any certificates or book-entry shares for the benefit of the holder thereof.

If the payment of any merger consideration is to be made to a person other than the person in whose name the surrendered certificates formerly evidencing shares are registered on the stock transfer books of the company, it shall be a condition of payment that the certificate so surrendered shall be endorsed properly or otherwise be in proper form for transfer and that the person requesting such payment shall have paid all transfer and other similar taxes required by reason of the payment of the applicable merger consideration to a person other than the registered holder of the certificate surrendered, or shall have established to the satisfaction of the surviving company that such taxes either have been paid or are not applicable. Payment of the applicable merger consideration with respect to book-entry shares shall only be made to the person in whose name such book-entry shares are registered.

At any time following the date that is 12 months after the effective time, the surviving company shall be entitled to require the paying agent to deliver to it any funds which had been made available to the paying agent and not disbursed to holders of certificates or book-entry shares (including all interest and other income received by the paying agent in respect of all funds made available to it). Thereafter, such holders shall be entitled to look only to the surviving company (subject to abandoned property, escheat and other similar law) as general creditors thereof with respect to the applicable merger consideration that may be payable upon due surrender of the certificates or book-entry shares held by them. Notwithstanding the foregoing, neither the surviving company nor the paying agent shall be liable to any holder of certificates or book-entry shares for the applicable merger consideration delivered in respect of such share to a public official pursuant to any applicable abandoned property, escheat or other similar law. If any certificate or book-entry share has not been surrendered or transferred prior to the date on which the applicable merger consideration in respect thereof would otherwise escheat to or become the property of any governmental entity, then any such merger consideration in respect of such certificate or book-entry share shall become, to the extent permitted by applicable law, the property of the surviving company, free and clear of any claims or interest of any person previously entitled thereto.

The paying agent shall invest the cash in the payment fund as directed by Fresenius in:

 

    short-term direct obligations of or guaranteed by the United States of America;

 

    short-term commercial paper obligations;

 

    certificates of deposit, bank repurchase agreements or banker’s acceptances of commercial banks with capital exceeding $5 billion; or

 

    money market funds having a rating in the highest investment category granted by a recognized rating agency at the time of the investment.

Any and all interest or other amounts earned with respect to such funds shall be paid to Fresenius or its designee, except as otherwise provided in the merger agreement. The payment fund shall not be used for any other purpose. The surviving company shall (and Fresenius shall cause the surviving company to) pay all charges and expenses, including those of the paying agent, in connection with the exchange of shares of NxStage common stock and the payment of the merger consideration in respect of such shares.

Each of NxStage, Fresenius, the surviving company, and Merger Sub shall be entitled to deduct and withhold, or cause the paying agent to deduct and withhold, from the consideration otherwise payable pursuant to

 

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the merger agreement, any amounts as are required to be withheld or deducted with respect to such consideration under any applicable provisions of federal, state, local or foreign tax law (including the Code). The gross amounts payable in respect of any NxStage equity award granted in respect of service as an employee shall be first paid to the surviving company, and thereafter amounts payable pursuant the merger agreement shall be paid by the surviving company to the holder of such NxStage equity award, subject to any withholdings. To the extent that amounts are so withheld and timely remitted to the appropriate governmental entity, such withheld amounts shall be treated for all purposes of the merger agreement as having been paid to the person in respect of which such deduction and withholding was made.

Lost, Stolen or Destroyed Certificates

If any certificate has been lost, stolen or destroyed, then, upon the making of an effective affidavit (in form and substance reasonably acceptable to Fresenius and the paying agent) of that fact by the person claiming such certificate to be lost, stolen or destroyed to the paying agent (and, if required by Fresenius or the paying agent, the posting by such person of a bond, in such reasonable and customary amount and upon such terms as may be reasonably required by Fresenius the paying agent, as indemnity against any claim that may be made against it with respect to such certificate), Fresenius shall cause the paying agent to issue in exchange for such lost, stolen or destroyed certificate a check in the amount (after giving effect to any required tax withholdings as described in the previous section ) equal to the merger consideration payable in respect of the shares formerly represented by such lost, stolen or destroyed certificate

Dissenting Shares

All shares of NxStage common stock outstanding immediately prior to the effective time, and held by holders who are entitled to appraisal rights under Section 262 of the DGCL and who have properly exercised and perfected their respective demands for appraisal of such common shares, in the time and manner provided for in Section 262 of the DGCL, and, as of the effective time, have neither effectively withdrawn nor lost their rights to receive such appraisal and payment, which we refer to as the dissenting shares, shall not be converted into the right to receive merger consideration, but shall, by virtue of the merger, be entitled only to such consideration as shall be determined pursuant to Section 262 of the DGCL.

If a dissenting stockholder fails to exercise, effectively withdraws, has lost or otherwise waives any right to appraisal, such holder’s dissenting shares shall be deemed to have converted as of the effective time into the right to receive solely the merger consideration for each such share, and such shares will not be considered dissenting shares.

NxStage shall give Fresenius (i) written notice of any demands for appraisal of dissenting shares, appraisal withdrawals and any other instruments received by NxStage relating to rights to be paid the fair value of the dissenting shares and (ii) to the extent permitted by applicable law, the right to participate in any negotiations with respect to any demands for appraisal under the DGCL. NxStage shall not, without the prior written consent of Fresenius, voluntarily make or agree to make any payment with respect to, offer to settle or settle any such demands, or approve any withdrawal of any such demands for appraisal. The notice contemplated by Section 262 of the DGCL is part of this proxy statement.

Representations and Warranties

Representations and Warranties of NxStage

We have made representations and warranties in the merger agreement that are subject, in some cases, to specified exceptions and qualifications contained in reports filed or furnished by NxStage under the Exchange Act or the Securities Act, since December 31, 2015 to the date of the merger agreement (including all exhibits and information incorporated by reference, but excluding all cautionary, forward-looking and predictive disclosures) or in the disclosure schedule. These representations and warranties relate to, among other things:

 

    NxStage’s and its subsidiaries’ due organization, valid existence and good standing under their respective jurisdictions of organization, and their respective corporate power and authority to carry out their respective businesses as conducted at the date of the merger agreement, except where the failure to be so qualified or in good standing would have, or reasonably be expected to have, a material adverse effect on NxStage;

 

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    NxStage’s corporate power and authority related to the merger agreement;

 

    NxStage’s ownership of its subsidiaries and their respective ownership interests in any other person or legal entity;

 

    NxStage board of directors approval and the submission of the merger agreement to the stockholders for a requisite affirmative vote of at least a majority of the issued and outstanding shares of NxStage common stock entitled to vote thereon;

 

    NxStage’s capital structure in respect of, among other things, shares of NxStage common stock and the number of shares of NxStage common stock reserved for issuance under NxStage’s equity incentive plans and the ESPP;

 

    required governmental filings, consents, approvals, authorizations, registrations, permits and other filings;

 

    the absence of violations of, or conflicts with, NxStage’s organizational documents, certain contracts and applicable law as a result of NxStage’s entry into and performance under the merger agreement;

 

    NxStage’s SEC filings since January 1, 2016, the consolidated financial statements included therein and NxStage’s internal disclosure controls and procedures over financial reporting and accounting;

 

    NxStage’s compliance in all material respects with certain rules and the Sarbanes-Oxley Act of 2002, the Securities Act, and the Exchange Act;

 

    NxStage’s lack of outstanding indebtedness;

 

    the absence of a material adverse effect (as described below) since December 31, 2016 or of certain other changes;

 

    the conducting of business in the ordinary course consistent with past practice;

 

    the absence of undisclosed liabilities, other than liabilities incurred in the ordinary course of business or disclosed on its consolidated balance sheet as of March 31, 2017, expressly permitted by the merger agreement, expressly discharged or paid in full in the ordinary course of business, or that would not reasonably be expected to have a material adverse effect on NxStage;

 

    the absence of investigations, reviews, claims, actions, suits or proceedings pending that would be expected to result in a material adverse effect;

 

    NxStage’s and its subsidiaries’ compliance with applicable healthcare regulations;

 

    material intellectual property of NxStage and its subsidiaries and any actions arising out of the infringement of any intellectual property, except as would not reasonably be expected to have a material adverse effect;

 

    environmental matters of NxStage and its subsidiaries;

 

    certain material contracts to which NxStage or its subsidiaries is party, the validity, binding nature and effectiveness of such material contracts and the absence of default by NxStage or its subsidiaries under any such contract;

 

    certain employment and labor matters of NxStage and its subsidiaries, including labor organizations, trade unions, collective bargaining agreements, and strikes;

 

    employee benefits and compensation plans, programs and arrangements of NxStage and its subsidiaries;

 

    real and personal property of NxStage and its subsidiaries;

 

    tax matters of NxStage and its subsidiaries;

 

    the absence of any undisclosed broker’s, finder’s, investment banker or similar fees;

 

    receipt of the fairness opinion from Piper Jaffray;

 

    the inapplicability of certain anti-takeover statutes or regulations or any anti-takeover provision in NxStage’s governance documents to NxStage, shares of NxStage common stock or the merger; and

 

    insurance policies of NxStage and its subsidiaries.

 

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NxStage Material Adverse Effect

Many of our representations and warranties are qualified by, among other things, exceptions relating to the absence of a “material adverse effect,” which means any change, development, circumstance, condition, state of facts, event or occurrence that, individually or in the aggregate, would prevent or reasonably be expected to prevent NxStage’s ability to consummate the merger, or any change, development, circumstance, condition, state of facts, event or occurrence that, individually or in the aggregate, has a material adverse effect on the assets, liabilities, condition (financial or otherwise), business or results of operation of NxStage and its subsidiaries, taken as a whole; provided, however:

 

    That none of the following, and no change, effect, development, circumstance, condition, state of facts, event or occurrence arising out of, or resulting from, the following, shall constitute or be taken into account, individually or in the aggregate, in determining whether a material adverse effect has occurred or may occur:

 

    any change generally affecting United States or global economic, political or market conditions;

 

    any change generally affecting the medical device industry;

 

    any change in U.S. generally accepted accounting principles, or GAAP, or interpretation thereof;

 

    any change in any law or enforcement of existing laws;

 

    any pronouncements, approvals, issuances or regulations of the FDA or other governmental entity regulating healthcare matters;

 

    any changes in Medicare regulations, policies, practices or rates, or how such regulations, polices, practices or rates are implemented through Medicare Administrative Contractors, relating to any current or future products or services of NxStage or its subsidiaries;

 

    any change in the trading price or trading volume of shares of NxStage common stock, in and of itself (it being understood that the changes, developments, circumstances, conditions, state of facts, event or occurrence giving rise or contributing to such changes that are not otherwise excluded from the definition of material adverse effect may be taken into account);

 

    any pronouncements, approvals, issuances or regulations of the FDA or other governmental entity with respect to any pending or future submission by NxStage to such governmental entity or the issuance of any deficiencies or requests for additional information or submissions before such governmental entity will consider such submissions, but only to the extent any pronouncements, orders, issuances or requests related to NxStage’s submissions with respect to its FDA filing for its System One solo use indication without caregiver support or its phosphate-containing dialysate submission;

 

    any recall of any NxStage or subsidiary product pursuant to a recall or withdrawal of the type specified by the company in the disclosure schedule;

 

    any effects relating to any current or potential products and services of any competitors of NxStage or its subsidiaries;

 

    any action taken by any party to the merger agreement;

 

    any natural disaster or other act of God;

 

    any act of war, terrorism or sabotage;

 

    any action taken by NxStage or its subsidiaries that is pursuant to and in compliance with the merger agreement, including the covenants therein;

 

    the announcement, pendency and performance of the merger agreement and the merger (including compliance with any covenants in the agreement, any action to be taken by NxStage with the consent or at the request of Fresenius or due to Fresenius withholding any consent), including any adverse change in relationships with its customers, suppliers, patients, employees or other third parties proximately caused by such announcement, pendency or performance;

 

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    Any material change from the past practices of Fresenius and its subsidiaries, in their capacity as customers of NxStage and its subsidiaries, with respect to dollar volume or timing of their orders (it being understood that the changes, developments, circumstances, conditions, state of facts, event or occurrence giving rise or contributing to such changes that are not otherwise excluded from the definition of material adverse effect may be taken into account);

 

    any reduction in NxStage’s revenue or the failure to meet any internal or published projections, estimates or expectations of revenue, earnings, or other financial performance results of operations, in and of itself (it being understood that the changes, developments, circumstances, conditions, state of facts, event or occurrence giving rise or contributing to such changes that are not otherwise excluded from the definition of material adverse effect may be taken into account); or

 

    The initiation or settlement of any legal proceedings arising out of or related to the merger agreement or merger commenced by or involving any government entity or any current or former share of NxStage common stock holder (on their own or on behalf of NxStage).

 

    That any change, development, circumstance, condition, state of facts, event or occurrence referred to in the below list may be taken into account in determining whether or not there has been or may be a material adverse effect to the extent such change, development, circumstance, condition, state of facts, event or occurrence has a materially disproportionate impact on NxStage and its subsidiaries, taken as a whole, as compared to other entities operating in the medical device industry:

 

    any change generally affecting United States or global economic, political or market conditions;

 

    any change generally affecting the medical device industry;

 

    any change in GAAP or interpretation thereof;

 

    any change in any law or enforcement of existing laws;

 

    any pronouncements, approvals, issuances or regulations of the FDA or other governmental entity regulating healthcare matters;

 

    any natural disaster or other act of God; and

 

    any act of war, terrorism or sabotage.

 

    That following August 7, 2018, no change, development, circumstance, condition, state of facts, event or occurrence will constitute a material adverse effect unless due to a material breach by NxStage.

Representations and Warranties of Fresenius and Merger Sub

The merger agreement also contains customary representations and warranties made by Fresenius and Merger Sub that are subject, in some cases, to specified exceptions and qualifications contained in the merger agreement. The representations and warranties of Fresenius and Merger Sub relate to, among other things:

 

    their due organization, valid existence and good standing under their respective jurisdictions of organization and their respective corporate power and authority to carry out their respective businesses;

 

    their corporate power and authority related to the merger agreement;

 

    required governmental filings, consents, approvals, authorizations, registrations, permits and other filings;

 

    the absence of violations of, or conflicts with Fresenius’s or Merger Sub’s organizational documents, certain contracts and applicable law as a result of Fresenius’s and Merger Sub’s entry into and performance under the merger agreement;

 

    the absence of certain investigations or reviews pending or threatened against Fresenius or Merger Sub that would reasonably be expected to prevent or materially delay or adversely affect their ability to consummate the merger;

 

    capitalization, ownership and conduct of business of Merger Sub;

 

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    Fresenius having sufficient funds necessary for the payment of the aggregate per share cash merger consideration;

 

    Fresenius, Merger Sub and their affiliates not being or having been during the prior three years owners, beneficially or otherwise, of any shares of NxStage capital stock or any contracts or obligations convertible into or exercisable or exchangeable for shares of NxStage capital stock; and

 

    the absence of any undisclosed broker’s, finder’s or investment banker.

Conduct of Business Pending the Merger

NxStage agreed that from the date of the merger agreement until the earlier of the effective time of the merger or the time, if any that the merger agreement is terminated in accordance with its terms, unless Fresenius gives its consent (which cannot be unreasonably withheld, delayed or conditioned) or unless otherwise required or expressly contemplated by the merger agreement or as required by applicable law or as set forth in the disclosure schedule, NxStage shall, and shall use its commercially reasonable efforts to cause each of its subsidiaries to, conduct its business in all material respects in the ordinary course of business consistent with past practice including by using its commercially reasonable efforts to:

 

    preserve substantially intact its and their present business organizations;

 

    keep available the services of its and their current executive officers and key employees; and

 

    preserve its and their present relationships with material customers, suppliers, licensors, licensees, distributors, wholesalers, lessors and others persons with whom it and they have material business relations.

Except as otherwise required or expressly contemplated by the merger agreement, as Fresenius consent (which shall not be unreasonably withheld, conditioned or delayed), as required by applicable law, or as set forth in the disclosure schedule, NxStage will not, and will not permit its subsidiaries to:

 

    amend or otherwise change the NxStage by-laws or certificate of incorporation, or otherwise alter its corporate structure through merger, liquidation, reorganization or otherwise;

 

    issue, sell, pledge, dispose of or encumber, or authorize the issuance, sale, pledge, disposition or encumbrance of, any shares of capital stock of any class, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of capital stock, or any other ownership interest (including any phantom interest), except for any (A) shares of NxStage common stock issuable pursuant to any company equity awards outstanding as of August 7, 2017 and set forth in the disclosure schedule or granted after August 7, 2017 to the extent allowed under the merger agreement and (B) shares of NxStage common stock issuable pursuant to rights outstanding under the ESPP;

 

    amend the terms of, redeem, repurchase or otherwise acquire, directly or indirectly, or permit any subsidiary to amend the terms of, redeem, repurchase or otherwise acquire, directly or indirectly, any of its securities or any securities of its subsidiaries (other than the retention or acquisition of shares of NxStage common stock tendered by current or former employees or directors of NxStage in order to pay taxes or the exercise price due in connection with the exercise or vesting of any company equity award or in connection with the ESPP);

 

    incur any indebtedness or guarantee any indebtedness for borrowed money or issue or sell any debt securities or guarantee any debt securities or other obligations of others (except (i) pursuant to existing contracts, including NxStage’s existing revolving credit facility pursuant to its current credit agreement dated as of June 9, 2014, or (ii) such incurrences of indebtedness, guarantees of indebtedness, issuance or sales of debt securities which are prepayable (or callable) at any time without penalty and do not exceed $25,000,000 in the aggregate);

 

   

accelerate, amend or change the period (or permit any acceleration, amendment or change) of exercisability or vesting of any company equity awards or authorize material (individually or in the aggregate) cash payments in exchange for company equity awards, except to the extent (A) required

 

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under any company equity awards or contracts existing as of August 7, 2017 or subsequently issued as permitted under the merger agreement or (B) in connection with an employee’s termination in accordance with the merger agreement, but only to the extent permitted in, and subject to, the terms and conditions specified in the disclosure schedule;

 

    (i) declare, set aside, make or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of any of its capital stock, except that a wholly-owned subsidiary may declare and pay a dividend to its parent or (ii) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, or propose to do any of the foregoing;

 

    sell, assign, lease, license, sublicense, transfer, pledge, encumber, grant or dispose of (whether by merger, consolidation, sale or otherwise) any material property or assets of NxStage or any of its subsidiaries (other than (w) the disposition of used or excess equipment and the purchase of supplies and equipment, (x) the sale, assignment, transfer, license, sublicense, lapse or expiration of any non-exclusive licenses with respect to any intellectual property, in either case in the ordinary course of business consistent with past practice, (y) sales of inventory in the ordinary course of business and in a manner consistent with past practice, and (z) dispositions of obsolete or worthless assets), or enter into any material commitment or transaction outside the ordinary course of business;

 

    (i) acquire (by merger, consolidation, or acquisition of stock or assets) any person, corporation, partnership or other business organization or business or division thereof or property or assets for a fair market value in excess of $25,000,000 in the aggregate for all such transactions, (ii) enter into, terminate or amend any contract that would be required to be listed in the disclosure schedule or grant any release or relinquishment of any material rights under any such contract, except that NxStage may enter into, amend and terminate customer contracts in the ordinary course of business consistent with past practice, provided that any such new customer contracts are terminable at NxStage’s option on no more than twelve (12) months’ notice, (iii) authorize any capital expenditures or purchase of fixed assets except for capital expenditures or purchases in aggregate less than $2,000,000 in excess of the capital expenditure budgets for any of the fiscal years ending December 31, 2017, December 31, 2018 and December 31, 2019 set forth in the disclosure schedule, or (iv) enter into or amend any contract, agreement, commitment or arrangement to effect any of the matters prohibited by the merger agreement;

 

    forgive any loans to its employees, officers, directors or affiliates, or forgive any material loans to any other person;

 

   

other than as required by company benefit plans existing on the August 7, 2017, (i) materially increase the compensation or benefits payable or to become payable to current directors, officers, employees or consultants (that are natural persons or personal services entities) of NxStage or any of its subsidiaries, (ii) enter into any employment, consulting, change of control, severance or retention agreement or arrangement with any director, officer, employee or consultant (except for employment or severance agreements entered into with current or future employees of NxStage or its subsidiaries who have, or will have, an annual base salary below $300,000, which we will refer to as non-management employees, but only to the extent permitted in, and subject to, the terms and conditions specified in the disclosure schedule), (iii) hire or terminate employment (other than for cause) of any employees other than non-management employees (other than the hiring of employees or officers to replace any employees or officers who leave NxStage or any of its subsidiaries after August 7, 2017 or in fulfillment of job requisitions open on the date of the merger agreement, but only to the extent permitted in, and subject to, the terms and conditions specified in the disclosure schedule), (iv) loan or advance any money or other property to any employee, director or consultant, other than routine advances for business expenses, (v) grant any cash bonus or any cash incentive compensation, except that NxStage may (A) grant equity-based awards settled in cash as set forth in clause (vii) below (B) pay cash bonuses for 2017 assuming the achievement of performance metrics at “target,” as established by the board of directors (or a committee thereof) on or before August 7, 2017, regardless of actual performance, and (C) pay cash bonuses for 2018 the amount of which shall not exceed, in the aggregate, 110% of 2017 bonuses, (vi) establish, adopt,

 

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enter into, materially amend or terminate any collective bargaining agreement or company benefit plan (or any plan, trust, fund, policy or arrangement that would be a company benefit plan if it were in existence as of August 7, 2017) except for the retention plan described in the disclosure schedule, routine amendments, renewals to health and welfare plans, or as would not result in a material increase in benefits or in cost to NxStage and its subsidiaries or (vii) grant any equity or equity-based compensation, except that NxStage may grant equity-based awards (including equity-based awards settled in cash) to the extent permitted in, and subject to, the terms and conditions specified in the disclosure schedule; provided, however, that notwithstanding the foregoing, any action that is not prohibited by the terms of the merger agreement shall, unless otherwise expressly provided in the merger agreement, be permissible only if undertaken in the ordinary course of business consistent with past practice and the terms provided under NxStage’s or any of its subsidiaries’ employment and compensation plans, policies, agreements and arrangements, as applicable, existing on August 7, 2017;

 

    take any action, other than as required by applicable law or GAAP, to change materially any accounting policies or procedures (with Fresenius to be provided prompt written notice of change required by applicable law or GAAP); provided that NxStage shall be permitted to select any alternative policies or procedures permitted by applicable law or GAAP in connection with such changes;

 

    make or change any material tax election inconsistent with past practices, change any tax accounting period for purposes of a material tax or material method of tax accounting, file any amended tax return in respect of a material tax item, enter into any closing agreement with respect to any material tax, surrender any right to claim a material tax refund or settle or compromise any material tax liability or agree to an extension or waiver of the statute of limitations with respect to a material amount of taxes;

 

    enter into any material partnership arrangements, joint development agreements or strategic alliances;

 

    except with respect to matters involving any ordinary course commercial contracts with Fresenius, initiate any litigation, action, suit, proceeding, claim or arbitration or settle or agree to settle any litigation, action, suit, proceeding, claim or arbitration, in each case, with an amount in controversy (considering the value of all requested relief, including injunctive relief, declaratory relief, damages and penalties) of greater than $2,000,000 (provided that any litigation, action, suit, proceeding, claim or arbitration arising in connection with the merger agreement shall only be settled in accordance with the applicable provisions of the merger agreement);

 

    fail to use its commercially reasonable efforts to maintain in full force and effect the existing insurance policies or to replace such insurance policies with comparable insurance policies covering NxStage, its subsidiaries and their respective properties, assets and businesses or substantially equivalent policies;

 

    adopt or implement any stockholder rights plan; or

 

    take, or agree in writing or otherwise to take, any of the actions described in any of the foregoing, or enter into any agreement or arrangement that (A) materially limits or otherwise restricts NxStage or any successor thereto, or that would, after the effective time, materially limit or restrict the surviving company and its affiliates or any successor thereto, in each case, from engaging or competing in any line of business in which it is engaged or actively plans to engage or in any material geographic area or (B) would, after the effective time, limit or otherwise restrict Fresenius or its affiliates (other than the surviving company and its subsidiaries) from engaging or competing in any line of business or any geographic area.

Under the merger agreement, Fresenius and Merger Sub have agreed not to take any action or fail to take any action that is intended to, or would reasonably be expected to, individually or in the aggregate, result in any conditions to the merger not being satisfied or prevent, materially delay or materially impede the ability of Fresenius or Merger Sub to consummate the merger or other transactions contemplated by the merger agreement. Immediately following execution of the merger agreement, Fresenius, as the sole stockholder of Merger Sub, duly executed and delivered to Merger Sub a written consent adopting and approving the merger agreement and the merger.

 

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No Solicitation

Under the merger agreement NxStage is generally not permitted to solicit or discuss acquisition proposals with third parties, subject to certain exceptions.

Except as otherwise provided in the merger agreement, from the date of the merger agreement until the earlier of the effective time of the merger or the termination of the merger agreement, NxStage will not directly or indirectly:

 

    solicit, initiate or knowingly encourage or knowingly facilitate the submission of any competing acquisition proposal;

 

    participate in any negotiations regarding, or furnish to any person any nonpublic information relating to NxStage or any of its subsidiaries in connection with any competing acquisition proposal or any proposal or offer that would reasonably be expected to lead to a competing acquisition proposal;

 

    engage in discussions with any person with respect to any competing acquisition proposal or any proposal or offer that would reasonably be expected to lead to a competing acquisition proposal;

 

    approve or recommend, propose publicly to approve or recommend any competing acquisition proposal; or

 

    enter into any letter of intent or any agreement or commitment providing for any competing acquisition proposal.

NxStage shall, and shall cause its subsidiaries and each director and office of NxStage and its subsidiaries to, and shall instruct (and use its reasonable best efforts to cause) each of its other representatives to:

 

    immediately cease and cause to be terminated any solicitation, encouragement, discussion or negotiation with any person or groups that may be ongoing with respect to any competing acquisition proposal or potential competing acquisition proposal; and

 

    immediately terminate access by any such person or group to any physical or electronic data rooms relating to a potential competing acquisition proposal.

Discussions; Notice of Competing Acquisition Proposals

Notwithstanding anything to the contrary above, if at any time prior to obtaining NxStage stockholder approval, NxStage or any of its representatives receives an unsolicited written competing acquisition proposal that the NxStage board of directors determines in good faith is bona fide from any person or group of persons, which competing acquisition proposal did not result from a material breach of NxStage’s no solicitation covenants, and the NxStage board of directors determines in good faith, after consultation with its financial advisors and outside legal counsel, that (i) such competing acquisition proposal constitutes or would reasonably be expected to lead to a superior proposal and (ii) the failure to take any action described in clauses (A) or (B) below would be inconsistent with the directors’ fiduciary duties to NxStage stockholders under applicable law, then NxStage and its representatives may (A) furnish, pursuant to an acceptable confidentiality agreement, information (including non-public information) with respect to NxStage and its subsidiaries to the person or group of persons who has made such acquisition proposal; provided, that NxStage shall promptly provide or make available to Fresenius any such information that is provided or made available to any person or legal entity given such access that was not previously provided to Fresenius or its representatives and (B) engage in or otherwise participate in discussions or negotiations with the person or group of persons making such acquisition proposal.

NxStage shall notify Fresenius orally and in writing promptly (but in any event within one business day) after receipt of any competing acquisition proposal (or any proposal or offer that would reasonably be expected to lead to a competing acquisition proposal), which notice shall include the identity of the person making such proposal or offer and copies of all proposals, offers and drafts of proposed agreements relating thereto. NxStage also must notify Fresenius orally and in writing promptly (but in any event within one business day) of any change to the financial or other material terms and conditions of any competing acquisition proposal and

 

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otherwise keep Fresenius reasonably informed of the status of any such competing acquisition proposal. NxStage shall notify Fresenius orally and in writing promptly (but in any event within one business day) after receipt of any request for non-public information relating to it or any NxStage subsidiary or for access to its or any of its subsidiaries’ properties, books or records by any person in connection with a competing acquisition proposal or a proposal or offer that would reasonably be expected to lead to a competing acquisition proposal. Neither NxStage nor any of its subsidiaries may enter into any confidentiality or similar agreement that would prohibit it from providing such information to Fresenius.

Adverse Recommendation Change

Except as set forth in the merger agreement, the NxStage board of directors shall not:

 

    withdraw, change, amend, modify or qualify, or otherwise propose publicly to withdraw, change, amend, modify or qualify, in a manner adverse to Fresenius, the NxStage board of directors’ recommendation that the holders of NxStage common stock vote “FOR” the proposal to adopt the merger agreement;

 

    fail to make or include in this proxy statement when required by the merger agreement, the NxStage board of directors’ recommendation that the holders of NxStage common stock vote “FOR” the proposal to adopt the merger agreement; or

 

    approve or recommend, propose publicly to approve or recommend any competing acquisition proposal to the NxStage stockholders.

Notwithstanding anything to the contrary above, at any time before obtaining NxStage stockholder approval for the proposal to adopt the merger agreement, the NxStage board of directors make an adverse recommendation change in response to an event occurring after the date of the merger agreement that was not known to or reasonably foreseeable by the NxStage board of directors as of the date of the merger agreement if the NxStage board of directors determines in good faith after consultation with its outside legal counsel that the failure to effect an adverse recommendation change would be inconsistent with the directors’ fiduciary duties to NxStage stockholders under applicable law even if changes proposed by Fresenius in pursuant to the notice requirements described below were given effect. However, prior to taking any such action:

 

    NxStage shall provide Fresenius with three business days’ prior written notice advising Fresenius that it intends to effect such a change of recommendation and specifying, in reasonable detail, the reasons therefor (including the material facts and circumstances related to the applicable intervening event);

 

    During such three business day period, NxStage shall negotiate, and cause its representatives to negotiate, with Fresenius and its representatives in good faith (to the extent Fresenius wishes to negotiate) to enable Fresenius to determine whether to propose revisions to the terms of the merger agreement such that it would obviate the need for the NxStage board of directors to make such a change of recommendation; and

 

    NxStage shall consider in good faith any proposal by Fresenius to amend the terms and conditions of the merger agreement in a manner that would obviate the need for the NxStage board of directors to effect such a change of recommendation.

Notwithstanding anything to the contrary above, at any time before obtaining NxStage stockholder approval for the proposal to adopt the merger agreement, the NxStage board of directors may enter into an acquisition agreement related to a superior proposal if the NxStage board of directors determines in good faith, after consultation with its outside legal counsel, that the failure to take such action would be inconsistent with its fiduciary duties to NxStage stockholders under applicable law and after consultation with its outside financial advisors and outside legal counsel, that such competing acquisition proposal would continue to constitute a superior proposal even if changes proposed by Fresenius pursuant to the notice requirements described below were given effect. However, prior to taking any such action:

 

   

NxStage shall provide Fresenius with three business days’ prior written notice (provided that any change or amendment to the financial terms of any competing acquisition proposal shall require NxStage to provide a new notice and an additional two business day period) advising Fresenius that the NxStage

 

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board of directors intends to take such action and contemporaneously providing to Fresenius a copy of the superior proposal, a copy of any proposed agreement providing for such superior proposal (including any financing commitments related thereto) (or, in each case, if not provided in writing to NxStage or any of its representatives, a written summary of the terms thereof);

 

    During such three business day period (or any subsequent two business day period), NxStage shall negotiate, and cause its representatives to negotiate, with Fresenius and its representatives in good faith (to the extent Fresenius wishes to negotiate) to enable Fresenius to determine whether to propose revisions to the terms of the merger agreement or any other agreement related to the transactions contemplated under the merger agreement such that such competing acquisition proposal would no longer constitute a superior proposal; and

 

    NxStage shall consider in good faith any proposal by Fresenius to amend the terms and conditions of the merger agreement or any other agreement related to the transactions contemplated under the merger agreement such that such competing acquisition proposal would no longer constitute a superior proposal.

In this proxy statement, a “competing acquisition proposal” means any proposal or offer made by a person or group (other than a proposal or offer by Fresenius or any of its subsidiaries) at any time, including any amendment or modification to any existing proposal or offer, relating to, whether in one transaction or a series of related transactions (or which is otherwise structured to permit) (i) such person or group to acquire direct or indirect beneficial ownership of more than twenty percent (20%) of the assets (as determined on a book value basis) of, equity interest in, or businesses of, NxStage (whether pursuant to a merger, consolidation or other business combination, sale of shares of capital stock, sale of assets, tender offer or exchange offer or otherwise, including any single or multi-step transaction or series of related transactions), or (ii) a merger, consolidation, recapitalization or other transaction that results in the stockholders of NxStage immediately preceding such transaction holding less than eighty percent (80%) of the equity interests of the surviving or resulting entity of such transaction, in each case other than the transactions contemplated by the merger agreement.

In this proxy statement, a “superior proposal” means a written competing acquisition proposal that the NxStage board of directors determines in good faith to be bona fide (with references to 20% and 80% being deemed to be replaced with references to 50%), not resulting from a material breach of NxStage’s no solicitation covenants, which the NxStage board of directors or a duly authorized committee thereof determines in good faith after consultation with NxStage’s outside legal and financial advisors to be more favorable to the stockholders of NxStage than the transactions contemplated under the merger agreement, taking into account all relevant factors (including the financing (including availability thereof) and regulatory aspects of such competing acquisition proposal, the identity of the person(s) making the proposal, the likelihood and timing of consummation thereof (as compared to the transactions contemplated under the merger agreement) and all other terms and conditions of such competing acquisition proposal and the merger agreement (including any changes to the terms of the merger agreement proposed by Fresenius in response to such competing acquisition proposal or otherwise and whether such proposed changes are irrevocable)).

Special Meeting for Stockholder Approval

Subject to the merger agreement and notwithstanding any adverse recommendation change, NxStage, in consultation with Fresenius, shall as promptly as practicable call, give notice of, convene and hold a special meeting of NxStage’s stockholders for the purpose of seeking the approval of a proposal to adopt the merger agreement and, to the extent required under applicable SEC rules, seek the approval from NxStage’s stockholders on a non-binding, advisory basis of certain compensation that may become payable to NxStage’s named executed officers in connection with the completion of the merger. NxStage shall comply in all material respects with Delaware law, NxStage’s certificate of incorporation and by-laws, the Exchange Act and the rules and regulations of Nasdaq in connection with the special meeting, including preparing and delivering the proxy statement to the NxStage’s stockholders.

 

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NxStage shall not change the date of, postpone or adjourn the special meeting without Fresenius’ prior written consent (which consent shall not be unreasonably withheld, delayed or conditioned), except:

 

    to ensure that any required supplement or amendment to the proxy statement is provided to NxStage’s stockholders within a reasonable amount of time in advance of the special meeting;

 

    if the NxStage board of directors determines in good faith that it is necessary to do so in order to solicit additional proxies in order to obtain the vote of at least a majority of shares of common stock outstanding as of the record date in favor of the proposal to adopt the merger agreement, whether or not a quorum is present; or

 

    as may be required by applicable law.

Fresenius may cause NxStage to postpone or adjourn the special meeting by prior written notice to NxStage, provided that Fresenius shall require no more than one such postponement or adjournment, which shall last no more than ten business days.

NxStage agreed that, unless the merger agreement is terminated in accordance with its terms, NxStage’s obligations to hold the special meeting shall not be affected by the commencement, public proposal, public disclosure or communication to NxStage of any competing acquisition proposal or by the making of any adverse recommendation change by the NxStage board of directors; provided, however, that if the public announcement of an adverse recommendation change or the delivery of notice by NxStage occurs less than 10 business days prior to the special meeting, NxStage shall be entitled to postpone the special meeting to a date not more than 10 business days after such event.

Efforts to Close the Merger

Subject to the terms and conditions of the merger agreement, NxStage, Fresenius and Merger Sub shall use their respective reasonable best efforts to promptly take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under the merger agreement and applicable laws to consummate and make effective as reasonably promptly as practicable after the date of the merger agreement the transactions contemplated thereunder. This includes preparing and filing with the appropriate governmental entities as reasonably promptly as practicable all applications, notices, petitions, filings, ruling requests, and other documents necessary to consummate the transactions contemplated under the merger agreement and to obtain as reasonably promptly as practicable all consents and clearances necessary to be obtained from any governmental entities in order to consummate the transactions contemplated under the merger agreement.

Antitrust Filings and Related Actions

NxStage, Fresenius and Merger Sub agreed to:

 

    at a mutually agreed upon time, make an appropriate and complete filing of a Notification and Report Form pursuant to the HSR Act with respect to the transactions contemplated under the merger agreement;

 

    at a mutually agreed upon time, make all other filings that are required to be made in order to consummate the transactions contemplated under the merger agreement pursuant to other applicable laws;

 

    supplying as promptly as practicable any additional information or documentation that may be requested pursuant to the HSR Act or any other law; and

 

    using their reasonable best efforts to take all other actions necessary, proper or advisable to cause the expiration or termination of the applicable waiting periods under the HSR Act and any other law as soon as possible, including promptly complying with any “second request” for information or similar request from the FTC, DOJ, or other governmental entity.

In connection with the foregoing, NxStage and Fresenius shall:

 

    cooperate in all respects with the other in connection with any communication, filing or submission and in connection with any investigation or other inquiry, including any proceeding initiated by a private party;

 

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    keep the other party and/or its counsel promptly informed of any communication received by such party from, or given by such party to, the FTC, the DOJ or any other U.S. or other governmental entity and of any communication received or given in connection with any proceeding by a private party, in each case regarding any of the transactions contemplated under the merger agreement;

 

    to the extent practicable, consult with each other in advance of any scheduled meeting or conference with the FTC, the DOJ or any other governmental entity or, in connection with any proceeding by a private party, with any other person, and to the extent permitted by the FTC, the DOJ or any other governmental entity or other person, give the other party and/or its counsel the opportunity to attend and participate in such meetings and conferences; and

 

    permit the other party and/or its counsel to review in advance any submission, filing or communication (and documents submitted therewith) intended to be given by it to the FTC, the DOJ or any other governmental entity; provided that Fresenius and NxStage may, as each deems advisable and necessary, reasonably designate any competitively sensitive material to be provided pursuant to the foregoing as restricted information to be shared only with such persons or its outside counsel and subject to such terms as provided in the confidentiality agreement between Fresenius and NxStage.

With regard to any governmental entity that regulates, administers or enforces any laws related to antitrust, competition, fair trade or similar matters, neither NxStage not its subsidiaries or affiliates shall, without Fresenius’s written consent, in its sole discretion, discuss or commit to any divestiture transaction, or discuss or commit to alter their businesses or commercial practices in any way, or otherwise take or commit to take any action that limits Fresenius’s freedom of action with respect to, or Fresenius’s ability to retain any of the businesses, product lines or assets (whether tangible or intangible) of, NxStage or any of its subsidiaries or affiliates or otherwise receive the full benefits of the merger agreement.

Notwithstanding anything to contrary herein, Fresenius is not required (i) to litigate against a governmental entity or (ii) to divest or hold separate, to enter into any licensing or similar arrangement, or take any other action with respect to, any assets (whether tangible or intangible) or operations relating to any business of Fresenius or any of its subsidiaries or NxStage, other than, if necessary to obtain antitrust clearances, with respect to certain NxStage assets.

Subject to Fresenius’s undertakings described above, the final determination of the appropriate strategy and course of action with respect to the actions contemplated above shall be made by Fresenius; provided, however, that Fresenius shall keep NxStage apprised of its strategy and course of action and shall give NxStage reasonable opportunity to comment on such strategy and course of action, and Fresenius shall consider such comments (that are provided in a timely manner) in good faith. Fresenius shall be permitted to take the lead in all joint meetings and communications with any governmental entity in connection with obtaining any necessary governmental approvals described above. Fresenius agrees that, at any time in an investigation, if a governmental entity suggests or proffers a settlement of the investigation to permit the transactions contemplated by the merger agreement to close, Fresenius shall promptly (and in any event within one business day) communicate the terms of the offer to NxStage. Fresenius, in its sole discretion, may accept or reject any settlement of the investigation proposed by any governmental entity, provided that Fresenius complies with its obligations described above.

Takeover Statutes

NxStage, Fresenius and Merger Sub shall, to the extent permitted by applicable law, use reasonable best efforts to (i) take all action necessary so that no “business combination,” “control share acquisition,” “fair price,” “supermajority,” “moratorium” “interested party,” “affiliate transactions” or other takeover or anti-takeover statute or similar law, which we refer to as the takeover statutes, or, in the case of NxStage, any similar provision of its articles of incorporation or by-laws, is or becomes applicable to the transactions contemplated by the merger agreement; and (ii) if any such takeover statute or similar provision of NxStage’s certificate of incorporation or by-laws, is or becomes applicable to any of the foregoing, to take all action necessary so that the transactions contemplated by the merger agreement may be consummated as promptly as practicable on the terms contemplated by the merger agreement and otherwise to eliminate or minimize the effect of such takeover statute on such transactions.

 

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Indemnification, Exculpation and Insurance of Directors and Executive Officers

For not less than six years from and after the effective time of the merger, Fresenius shall cause the surviving company to indemnify and hold harmless all past and present directors and officers of NxStage and NxStage subsidiaries (which we refer to, collectively, as the indemnified parties, against any costs or expenses (including advancement of expenses to the extent provided in NxStage certificate of incorporation and by-laws), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any actual or threatened claim, action, investigation, suit or proceeding in respect of acts or omissions occurring or alleged to have occurred at or prior to the effective time of the merger (including acts or omissions occurring in connection with the adoption of the merger agreement, the consummation of the transactions contemplated by the merger agreement) whether asserted or claimed prior to, at or after the effective time of the merger, in connection with such persons serving as an officer or director of NxStage or any of NxStage subsidiaries or serving at the request of NxStage or any of NxStage subsidiaries as a director, officer, employee or agent of another person, to the fullest extent provided pursuant to NxStage certificate of incorporation and by-laws or the organizational documents of any NxStage subsidiary or any other agreement in existence on the date of the merger agreement.

Fresenius, NxStage and Merger Sub agreed that for six years after the effective time of the merger, all rights to elimination or limitation of liability, indemnification and advancement of expenses for acts or omissions occurring or alleged to have occurred at or prior to the effective time of the merger existing in favor of the indemnified parties as provided in NxStage certificate of incorporation and by-laws or the organizational documents of any NxStage subsidiary or any other agreement shall survive the merger and shall continue in full force and effect.

Fresenius shall cause the surviving company to provide, for an aggregate period of not less than six years from the effective time of the merger, NxStage’s current directors and officers an insurance and indemnification policy that provides coverage for events occurring prior to the effective time of the merger, which we refer to as the D&O insurance, that is no less favorable than NxStage’s existing policy as of the date of the merger agreement (or, if insurance coverage that is no less favorable is unavailable, the best available coverage). However, the surviving company shall not be required to pay an annual premium for the D&O insurance in excess of three hundred percent (300%) of the last annual premium paid prior to the date of the merger agreement or, if less, the cost of a policy providing coverage on the same terms as NxStage’s existing policy as of the date of the merger agreement. At NxStage’s option, in lieu of the foregoing insurance coverage, NxStage or the surviving company may at or prior to the effective time of the merger substitute therefor a single premium tail coverage with respect to D&O insurance with an annual cost not in excess of three hundred percent (300%) of the last annual premium paid prior to the date of the merger agreement.

If any indemnified party notifies Fresenius on or prior to the sixth anniversary of the effective time of the merger of a matter in respect of which such person may seek indemnification pursuant to the merger agreement, the provisions thereof requiring the surviving company to indemnify and advance expenses shall continue in effect with respect to such matter until the final disposition of all claims, actions, investigations, suits and proceedings relating thereto.

In the event Fresenius or the surviving company or any of their respective successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving company or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any person, then, and in each such case, proper provision shall be made so that the successors and assigns of Fresenius or the surviving company, as the case may be, shall assume the indemnification obligations set forth in the merger agreement. The indemnification rights and obligations under the merger agreement shall survive consummation of the merger and, following the effective time of the merger, shall not be terminated or amended in a manner that is adverse to any indemnified party without the written consent of such indemnified party. Such provisions are intended to be, following the effective time of the merger, for the benefit of, and shall be enforceable by, each indemnified party, his or her heirs and his or her legal representatives.

Employee Matters

Fresenius or the surviving company will assume, honor and fulfill all NxStage benefit plans (excluding equity plans and the NxStage ESSP) and agreements between NxStage or any of its subsidiaries, on the one hand,

 

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and any current or former employee, director or consultant, on the other hand, in accordance with their terms as in effect immediately prior to the date of the merger agreement or as entered into or amended after the date of the merger agreement as specifically permitted or required by the merger agreement.

For a period of one year following the effective time of the merger, Fresenius shall provide, or cause to be provided, to those employees of NxStage or any NxStage subsidiary who continue to be employed by Fresenius or the surviving company or any of their respective subsidiaries following the effective time of the merger, which are considered continuing employees, during their period of active employment by the surviving company (or any affiliate thereof):

 

    base salary (or wages) and annual cash bonus opportunities that, in each case, are not less favorable than those provided by NxStage immediately prior to the effective time of the merger; and

 

    employee benefits (excluding equity or equity-based compensation) that, in the aggregate, are substantially comparable to those provided by NxStage immediately prior to the effective time of the merger.

With respect to any accrued but unused personal, sick or vacation time to which any continuing employee is entitled pursuant to the personal, sick or vacation policies applicable to such continuing employee immediately prior to the effective time of the merger, Fresenius shall, or shall cause the surviving company to and instruct its affiliates to, as applicable (and without duplication of benefits), assume the liability for such accrued personal, sick or vacation time and, allow such continuing employee to use such accrued personal, sick or vacation time in accordance with the practice and policies of NxStage as in effect immediately prior to the effective time of the merger.

All continuing employees shall be immediately eligible to continue to participate in the surviving company’s health and welfare benefit plans (to the same extent such continuing employees were eligible to participate under NxStage’s health and welfare benefit plans immediately prior to the effective time of the merger). However, nothing shall limit the right of Fresenius or the surviving company to amend or terminate any such health or welfare benefit plan or migrate the continuing employees to a successor health or welfare benefit plan at any time). If Fresenius or the surviving company terminates any such health or welfare benefit plan or migrates the continuing employees to a successor health or welfare benefit plan, then the continuing employees shall be immediately eligible to participate in the surviving company’s health and welfare benefit plans for similarly situated employees to the extent that coverage under such plans is replacing comparable coverage under a health and welfare benefit plan in which such continuing employee participated immediately before the effective time of the merger.

To the extent that service is relevant for eligibility, vesting or allowances (including paid time off) under any employee benefit plan, program or arrangement of Fresenius or any of its affiliates, then Fresenius shall use its reasonable best efforts to:

 

    waive all limitations as to pre-existing conditions, exclusions and waiting periods with respect to participation and coverage requirements applicable to the continuing employees, to the extent that such conditions, exclusions and waiting periods would not apply under a similar employee benefit plan in which such employees participated immediately prior to the effective time of the merger;

 

    ensure that any new health or welfare benefit plan shall, for purposes of eligibility, deductibles, co-payments and out-of-pocket maximums and allowances (including paid time off), credit continuing employees for service and amounts paid immediately prior to the commencement of participation in such new health or welfare benefit plan to the same extent that such service and amounts paid were recognized prior to such commencement of participation under the corresponding NxStage health or welfare benefit plan; and

 

    cause service rendered to NxStage and its subsidiaries (or any predecessor) to be credited to the same extent as such service was recognized under a similar employee benefit plan in which such employees participated immediately prior to the effective time of the merger.

At the request of Fresenius made at least ten business days prior to the closing of the merger, the NxStage board of directors (or the appropriate committee thereof) shall take such corporate action as is necessary to

 

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terminate any 401(k) plans maintained by NxStage or any of its subsidiaries, effective as of the day prior to, and contingent upon, the closing of the merger. Following the effective time of the merger and as soon as practicable following the termination of any NxStage 401(k) plans, the assets thereof shall be distributed to the participants. Fresenius or the surviving company shall permit the continuing employees who are then actively employed to make rollover contributions of “eligible rollover distributions” (within the meaning of Section 401(a)(31) of the Code), including loans, in the form of cash or promissory notes, in an amount equal to the full account balance (including loans) distributed to such continuing employees from NxStage 401(k) plans to Fresenius’s or the surviving company’s applicable 401(k) plan.

Nothing in the merger agreement shall confer upon any continuing employee any right to continue in the employ or service of Fresenius, the surviving company or any affiliate of Fresenius, or shall interfere with or restrict in any way the rights of Fresenius, the surviving company or any affiliate of Fresenius, to discharge or terminate the services of any continuing employee at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written agreement between Fresenius, the surviving company, NxStage or any affiliate of Fresenius and the continuing employee or any severance, benefit or other applicable plan or program covering such continuing employee.

The foregoing provisions are solely for the benefit of NxStage, Fresenius and Merger Sub and no current or former employee or any other individual associated therewith shall be regarded for any purpose as a third party beneficiary of the merger agreement or have the right to enforce the provisions thereof.

Other Covenants

Access to Information; Confidentiality; Notice of Certain Events

Prior to closing of the merger, to the extent permitted by applicable law and subject to the restrictions set forth in the merger agreement, NxStage shall, and shall cause its subsidiaries to:

 

    afford Fresenius and its representatives during normal business hours and upon reasonable advance notice to all of their respective books, contracts and records (including tax returns); and

 

    furnish to Fresenius and its representatives all information (financial or otherwise) concerning its business, properties and personnel they may reasonably request.

Notwithstanding anything in the merger agreement to the contrary, NxStage shall not be required to provide Fresenius, Merger Sub or their representatives with access to or to disclose information:

 

    that NxStage, its subsidiaries or their respective representatives are prohibited from providing under the terms of a confidentiality agreement with a third party entered into prior to the date of the merger agreement or entered into after the date thereof in the ordinary course of business and not otherwise in breach thereof (provided, however, that NxStage shall use commercially reasonable efforts to obtain the required consent of such third party to such access or disclosure or make appropriate substitute arrangements to permit reasonable disclosure not in violation of any such confidentiality agreement);

 

    the disclosure of which would violate any applicable law or legal duty (provided, however, that NxStage shall use commercially reasonable efforts to make appropriate substitute arrangements to permit reasonable disclosure not in violation of any such law or duty); or

 

    that would jeopardize any attorney-client, attorney work product or other legal privilege (provided, however, that NxStage shall use commercially reasonable efforts to allow for such access or disclosure to the maximum extent that does not result in a loss of any such attorney-client, attorney work product or other legal privilege).

Fresenius must use commercially reasonable efforts to minimize any disruption to NxStage’s businesses that may result from the requests for access, data and information pursuant to the merger agreement.

Each party shall give prompt notice to the other party:

 

   

of any written notice or other communication received by such party from any governmental entity in connection with the merger agreement of the transactions contemplated thereunder, or from any person

 

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alleging that the consent of such person is or may be required in connection with the transactions contemplated by the merger agreement, if the subject matter of such communication or the failure of such party to obtain such consent could be material to NxStage, the surviving company or Fresenius;

 

    of any legal proceeding commenced or, to any party’s knowledge, threatened against, such party or any of its subsidiaries or affiliates or otherwise relating to, involving or affecting such party or any of its subsidiaries or affiliates, in each case in connection with, arising from or otherwise relating to the merger agreement or the transactions contemplated thereunder;

 

    of any notice or other communication received by NxStage from any person requesting the convening of a meeting of the NxStage stockholders; and

 

    upon becoming aware of the occurrence or impending occurrence of any event or circumstance relating to it or any of NxStage’s subsidiaries which would reasonably be expected to have a material adverse effect on NxStage.

Transaction Litigation

Each party to the merger agreement shall provide the other party prompt oral notice (but in any event within two business days) of any litigation brought or threatened by any stockholder of that party against such party, any of its subsidiaries or any of their respective directors or officers relating to the merger agreement or any of the transactions contemplated thereunder. NxStage shall give Fresenius the opportunity to participate (at Fresenius’s expense) in the defense, prosecution or settlement of any such litigation. NxStage shall not offer to settle any such litigation, nor shall any such settlement be agreed to without Fresenius’s prior written consent, which consent shall not be unreasonably withheld, delayed or conditioned (unless such settlement only requires NxStage to provide additional disclosure).

Conditions to the Closing of the Merger

Conditions to Each Party’s Obligation to Effect the Merger

The respective obligations of NxStage, Fresenius and Merger Sub to effect the merger are subject to the satisfaction or waiver on or prior to the closing date of the following conditions:

 

    NxStage stockholder approval shall have been obtained;

 

    no temporary restraining order, preliminary or permanent injunction or other order preventing the consummation of the merger shall have been issued by any governmental entity of competent jurisdiction and remain in effect, and no law shall have been enacted or deemed applicable to the merger that makes consummation of the merger illegal; and

 

    (i) any waiting period (and any extension thereof) applicable to the transactions contemplated under the merger agreement under the HSR Act shall have been terminated or shall have expired, (ii) each other consent, approval or clearance with respect to, or termination or expiration of any applicable waiting period (and any extensions thereof) imposed under German antitrust laws shall have been obtained, received or deemed to have been received or shall have terminated or expired, as the case may be and (iii) any waiting period entered into with any antitrust authorities shall have terminated.

Conditions to Obligation of Fresenius and Merger Sub

The obligation of Fresenius and Merger Sub to consummate the merger is further subject to the satisfaction or waiver on or prior to the closing date of the following conditions:

 

    NxStage’s representations and warranties pertaining to due incorporation, valid existence, good standing, corporate power and authority, and finders and brokers in the merger agreement shall be true and correct in all material respects at and as of the closing date as if made on and as of such date, with the understanding, for the sake of clarity, that any “Company Material Adverse Effect” or other materiality qualifications in such representations and warranties shall continue in effect and shall not be disregarded;

 

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    NxStage’s representations and warranties pertaining to capital structure and equity awards in the merger agreement shall be true and correct in all but de minimis respects as of the date of the merger agreement, and at and as of the closing date as if made on and as of such date;

 

    NxStage’s representations and warranties pertaining to the absence of certain changes or events in the merger agreement shall be true and correct in all respects as of the date of the merger agreement, and at and as of the closing date as if made at and as of such time;

 

    all other representations and warranties of NxStage contained in the merger agreement shall have been true and correct in all respects as of the date of the merger agreement, and at and as of the closing date as if made on and as of such date, except where the failure of such other representations and warranties to not be so true and correct would not reasonably be expected to result, individually or in the aggregate, in a “Company Material Adverse Effect” (it being understood that, for purposes of determining the accuracy of such representations and warranties, all “Company Material Adverse Effect” qualifications and other materiality qualifications contained in such representations and warranties shall be disregarded);

 

    NxStage shall have performed or complied in all material respects with all covenants and obligations that NxStage is required to comply with or to perform under the merger agreement at or prior to the closing of the merger;

 

    Fresenius shall have received a certificate signed on behalf of NxStage by its Chief Executive Officer or Chief Financial Officer to the effect that the conditions set forth above have been satisfied; and

 

    no Company Material Adverse Effect shall have occurred since the date of the merger agreement.

Conditions to Obligation of NxStage

The obligations of NxStage to consummate the merger are further subject to the satisfaction or waiver on or prior to the closing date of the following conditions:

 

    the representations and warranties of Fresenius and Merger Sub set forth in the merger agreement shall have been true and correct in all respects as of the date of the merger agreement, and at and as of the closing date as if made on and as of such date except where the failure of such other representations and warranties to not be so true and correct prevents or materially delays consummation, or would reasonably be expected to prevent or materially delay consummation, by Fresenius or Merger Sub of the merger or performance by Fresenius or Merger Sub of any of their material obligations under the merger agreement (it being understood that, for purposes of determining the accuracy of such representations and warranties, all “Fresenius Material Adverse Effect” qualifications and other materiality qualifications contained in such representations and warranties shall be disregarded and the truth and correctness of those representations or warranties that address matters only as of a specific date shall be measured only as of such date);

 

    Fresenius and Merger Sub shall have performed or complied in all material respects with all covenants and obligations that they are required to comply with or to perform under the merger agreement at or prior to the closing or the merger; and

 

    Fresenius shall have received a certificate signed by an officer of Fresenius to the effect that the conditions set forth above have been satisfied.

Termination of the Merger Agreement

Termination

The merger agreement may be terminated at any time prior to the effective time, whether before or after receipt of the NxStage stockholder approval, by mutual written consent of NxStage and Fresenius.

The merger agreement may be terminated at any time prior to the effective time, whether before or after receipt of the NxStage stockholder approval, by either NxStage or Fresenius:

 

   

if a court of competent jurisdiction or other governmental entity has issued a final and nonappealable order, decree or ruling, or has taken any other action, having the effect of permanently restraining,

 

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enjoining or otherwise prohibiting the merger or making consummation of the merger illegal; provided that this right to terminate the merger agreement shall not be available to a party whose breach of their obligation to use its reasonable best efforts to take all actions necessary to consummate the merger was the primary cause of, or resulted in, the issuance of order, decree or ruling or taking of such action;

 

    if the merger is not consummated on or before August 7, 2018, which date may be extended, in the sole discretion of Fresenius, (A) for 90 days, if antitrust approval remains outstanding, but all other closing conditions described in the merger agreement have otherwise been satisfied or waived to the extent possible before the effective time of the merger, and (B) for an additional 90 days, if antitrust approval remains outstanding after the expiration of the first extension and Fresenius is engaged in litigation with a governmental entity regarding antitrust clearance (provided that if (x) Fresenius voluntarily withdraws from such litigation and, at the time of such withdrawal, such litigation has not been conclusively resolved in a manner that permits consummation of the merger or (y) such litigation has been definitively concluded in a manner that does not permit the consummation of the merger, the date of such cessation or definitive conclusion shall become the end date); and provided that a party shall not be permitted to terminate the merger agreement pursuant to the foregoing is such party’s breach of any provision of the merger agreement has been the primary cause of, or resulted in, such the failure to consummate the merger on or before the end date; or

 

    if the NxStage stockholder approval shall not have been obtained upon a vote taken there on at the special meeting of NxStage stockholders, including any adjournment or postponement thereof.

The merger agreement may also be terminated by NxStage, if:

 

    at any time prior to the effective time, whether before or after receipt of the NxStage stockholder approval, if Fresenius or Merger Sub has breached any representation, warranty, covenant or agreement contained in the merger agreement, or if any representation or warranty of Fresenius or Merger Sub has become untrue, in each case, such that the conditions set forth in sections “— Conditions to Each Party’s Obligation to Effect the Merger,” beginning on page 77, and “— Conditions to Obligation of Fresenius and Merger Sub,” beginning on page 77, of the merger agreement, as the case may be, would not be satisfied as of the closing date; and such breach is not, or is not capable of being, cured within 30 calendar days following Fresenius’s receipt of written notice of such breach or inaccuracy; or

 

    prior to the receipt of the NxStage stockholder approval, to accept a superior proposal and enter into acquisition agreement relating to such superior proposal, if NxStage has complied with, and the NxStage board of directors, or a duly authorized committee thereof, has authorized NxStage to enter into a such acquisition agreement in compliance with the requirements described in section “— Adverse Recommendation Change,” beginning on page 7 (provided that NxStage pays the $60 million termination fee concurrently with such termination).

The merger agreement may also be terminated at any time prior to the effective time, whether before or after receipt of the NxStage stockholder approval by Fresenius, if:

 

    NxStage has breached any representation, warranty, covenant or agreement contained in the merger agreement, or if any representation or warranty of NxStage has become untrue, in each case, such that the conditions set forth in sections “— Conditions to Each Party’s Obligation to Effect the Merger,” beginning on page 77, and “— Conditions to Obligation of NxStage,” beginning on page 78, as the case may be, would not be satisfied as of the closing date; and such breach is not, or is not capable of being, cured within 30 calendar days following Fresenius’s receipt of written notice of such breach or inaccuracy; or

 

   

if (i) the NxStage board of directors or any committee thereof fails to include the its recommendation in favor of the adoption of the merger agreement in the proxy statement when mailed or, prior to the time obtained the required approval of the NxStage stockholders, changes its recommendation, (ii) NxStage enters into an agreement for a competing acquisition proposal, (iii) the NxStage board of directors or any committee thereof fails to publicly recommend against any tender offer or exchange offer subject to Regulation 14D under the Exchange Act that constitutes a competing acquisition proposal (including by

 

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taking no position with respect to the acceptance of such tender offer or exchange offer by NxStage’s stockholders) within ten business days after the commencement of such tender offer or exchange offer, (iv) the NxStage board of directors has failed to publicly reaffirm its recommendation in favor of adopting the merger agreement within ten business days after the date a competing acquisition proposal has been publicly announced or (v) NxStage has committed a willful breach of any of its obligations described in section “— No Solicitation” beginning on page 6; provided, that in each case, Fresenius must exercise its termination right on or before the earlier of (x) the 20th business day following the occurrence of such event and (y) the business day prior to special meeting.

Effect of Termination

In the event of termination of the merger agreement by either Fresenius or NxStage as provided in section “— Termination of the Merger Agreement,” beginning on page 8, of the merger agreement, the merger agreement shall forthwith become null and void and have no effect, and there shall be no liability or obligation on the part of NxStage, Fresenius or Merger Sub, other than under the confidentiality agreement between NxStage and Fresenius, the confidentiality obligations under the merger agreement, the termination provisions of the merger agreement, and all provisions under the final article of the merger agreement (including but not limited to provisions regarding amendment, extension and waiver). However, the foregoing shall not relieve any party from liability for fraud or a willful breach of its representations, warranties, covenants or agreements set forth in the merger agreement prior to such termination; provided further, that nothing in the merger agreement shall limit any rights, obligations or remedies that any party may have under the confidentiality agreement between NxStage and Fresenius for matters arising before or after the termination of the merger agreement.

Termination Fee

NxStage shall pay to Fresenius a termination fee of $60 million:

 

    if Fresenius terminates upon the NxStage board of directors effecting a change of its recommendation to NxStage stockholders in favor of adopting the merger agreement or failing to publicly reaffirm its recommendation in response to a competing acquisition proposal or upon a willful breach by NxStage of its no solicitation obligations;

 

    if NxStage terminates the merger agreement in order to enter into a definitive written agreement providing for a superior proposal; or

 

    if:

 

    (i) either party terminates after reaching the outside date or for failure to obtain the required NxStage stockholder approval or (ii) Fresenius terminates for breach by NxStage of any of its representations, warranties, covenants or agreements contained in the merger agreement;

 

    at the time of termination an alternative proposal has been publicly made and not withdrawn within 10 days prior to the termination; and

 

    within 12 months of such termination, NxStage consummates any competing acquisition proposal or enters into a definitive agreement providing for any competing acquisition proposal; provided that NxStage will not be required to pay a fee if Fresenius is required to pay the reverse termination fee due to failure to obtain required antitrust approvals as described in the section “— Termination of the Merger Agreement — Reverse Termination Fee” beginning on page 9.

In the event that Fresenius receives the termination fee, such payment will be the sole and exclusive monetary remedy of Fresenius and Merger Sub under the merger agreement and the transactions contemplated by the merger agreement, except in the event of any losses or damages incurred or suffered by Fresenius, Merger Sub or any of their affiliates as a result of a breach of the merger agreement involving fraud or willful breach by NxStage or its affiliates; provided that nothing in the merger agreement shall limit any rights, obligations or remedies that any party may have under the confidentiality agreement entered into by Fresenius and NxStage for matters arising before or after the termination of the merger agreement.

 

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Reverse Termination Fee

Fresenius shall pay a reverse termination fee to NxStage of $100 million if NxStage or Fresenius terminate the merger agreement:

 

    if the end date and any applicable extension has passed and approval under applicable antitrust laws remains the only unsatisfied closing condition; or

 

    if a court or other governmental entity issues a final, nonappealable order or takes any other action that permanently prohibits the merger from taking place or makes the consummation of the merger otherwise illegal and approval under applicable antitrust laws remains the only unsatisfied closing condition.

In no event will Fresenius be required to pay the termination fee more than once. In the event that NxStage receives the termination fee, such payment will be the sole and exclusive monetary remedy of NxStage under the merger agreement and the transactions contemplated by the merger agreement, except in the event of any losses or damages incurred or suffered by NxStage or any of its affiliates as a result of a breach of the merger agreement involving fraud or willful breach by Fresenius or Merger Sub or their affiliates; provided that nothing in the merger agreement shall limit any rights, obligations or remedies that any party may have under the confidentiality agreement entered into by Fresenius and NxStage for matters arising before or after the termination of the merger agreement.

Expenses

Except as expressly provided for in the merger agreement, all fees and expenses incurred in connection with the merger and the other transactions contemplated by the merger agreement shall be paid by the party incurring such fees or expenses, whether or not such transactions are consummated. Notwithstanding the foregoing, Fresenius shall pay all filing fees related to the filings required by the HSR Act or any other antitrust laws to be made in order to consummate the transactions contemplated by the merger agreement.

Amendment

The merger agreement may be amended by the parties, in writing signed on behalf of each of the parties, at any time before or after receipt of NxStage stockholder approval. However, after receipt of NxStage stockholder approval, no amendment that requires further stockholder approval under applicable law with be made without such required further approval.

Extension; Waiver

At any time prior to the effective time, the parties may:

 

    extend the time for the performance of any of the obligations or other acts of the other parties;

 

    waive any inaccuracies in the representations and warranties contained in the merger agreement or in any document delivered pursuant to the merger agreement; or

 

    subject to applicable law, waive compliance with any agreements or conditions contained in the merger agreement.

Any agreement on the part of a party to any such waiver shall be valid only if set forth in a written instrument executed and delivered by a duly authorized officer on behalf of such party. The failure of any party to the merger agreement to assert any of its rights under the merger agreement or otherwise shall not constitute a waiver of such rights.

Governing Law

The merger agreement and any legal proceeding arising out of or relating to the merger agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to the laws that might otherwise govern under applicable principles of conflicts of law.

 

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NxStage, Fresenius and Merger Sub waived, to the fullest extent permitted by law, any right to a trial by jury in respect to any dispute arising out of or in connection with the merger agreement or any transaction contemplated thereby.

Specific Enforcement

Each party to the merger agreement acknowledged and agreed that any breach or threatened by it of the merger agreement would cause irreparable damage to the other parties to the merger agreement and that no party to the merger agreement will have an adequate remedy at law. Therefore, it was agreed that each party shall be entitled to specific performance and injunctive relief to prevent breaches or threatened breaches of the merger agreement, including in the case of NxStage, the right to specific performance and injunctive relief to cause Fresenius and Merger Sub to effect the closing.

 

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PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

In this proposal, NxStage is asking its stockholders to adopt the merger agreement. Approval of this proposal is a condition to consummation of the merger.

The NxStage board of directors has unanimously (i) determined that the merger agreement and the merger are fair to and in the best interests of NxStage’s stockholders, (ii) approved and declared advisable the merger agreement and the merger in accordance with the DGCL, and (iii) resolved to recommend that NxStage’s stockholders vote to adopt the merger agreement.

Vote Required and NxStage Board of Directors Recommendation

Approval of the proposal to adopt the merger agreement requires the affirmative approval of at least a majority of the issued and outstanding shares of NxStage common stock entitled to vote thereon.

THE NXSTAGE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE PROPOSAL TO ADOPT THE MERGER AGREEMENT.

 

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PROPOSAL 2: ADVISORY, NON-BINDING VOTE ON MERGER-RELATED EXECUTIVE

COMPENSATION ARRANGEMENTS

This section sets forth the information required by Item 402(t) of Regulation S-K regarding the compensation for each named executive officer of NxStage that is based on or otherwise relates to the merger. This compensation is referred to as “golden parachute” compensation by the applicable SEC disclosure rules, and in this section we use such term to describe the merger-related compensation payable to our named executive officers. The “golden parachute” compensation payable to these individuals is subject to a non-binding advisory vote of NxStage’s stockholders, as described below in this section.

The estimated value of the payments and benefits that NxStage’s named executive officers will or may be entitled to receive in connection with the merger is quantified below in accordance with Item 402(t) of Regulation S-K. The estimated values are based on (i) an assumption that the completion of the merger occurred on August 28, 2017, the latest practicable date before the filing of this proxy statement, and exclude any additional grants that may occur following such date, (ii) a per share cash merger consideration of $30.00, (iii) salary and target bonus levels as of the date of this proxy statement, (iv) the number of unvested NxStage stock options, restricted stock units, restricted shares and performance shares held by each of the named executive officers as of August 28, 2017, the latest practicable date to determine such amounts before the filing of this proxy statement, and exclude any additional grants that may occur following such date, with the number of unvested performance shares based on achievement of applicable performance conditions at maximum levels, and (v) a termination of each named executive officer’s employment without “cause” or by the executive officer for “good reason” immediately following the completion of the merger as described in such named executive officer’s employment agreement with NxStage. Depending on when the merger occurs, certain equity awards that are now unvested and included in the table below may vest or be forfeited pursuant to their terms, independent of the merger. In addition, the amounts indicated below are estimates based on multiple assumptions that may or may not actually occur, including assumptions described in this proxy statement, and do not reflect compensation actions that may occur before completion of the merger. As a result, the actual amounts, if any, to be received by a named executive officer may materially differ from the amounts set forth below. All dollar amounts have been rounded to the nearest whole dollar. As of the date of this proxy statement, Messrs. Burbank and Turk have entered into new agreements with Fresenius effective following the merger, but it has not yet been determined which of the NxStage named executive officers currently employed by NxStage are expected to continue in employment with Fresenius following the effective time of the merger.

Golden Parachute Compensation

 

Name

   Cash
($) (2)
   Equity
($) (3)
   Perquisites/
Benefits
($) (4)
   Tax
Reimbursement
($) (5)
   Other
($) (6)
   Total
($)

Jeffrey H. Burbank

       2,832,500        5,286,773        19,429        0        0        8,138,702

Joseph E. Turk, Jr.

       1,081,500        3,579,025        14,572        0        0        4,675,097

Matthew W. Towse

       607,760        1,933,503        9,715        0        0        2,550,978

Winifred L. Swan

       666,281        1,552,850        12,143        0        0        2,231,275

Robert S. Brown (1)

       0        468,157        0        0        0        468,157

 

(1) Mr. Brown’s last day of employment as President of NxStage Kidney Care, Inc. was April 28, 2017.

 

(2)

The estimated amounts shown in this column represent severance payments pursuant to each executive officer’s employment agreement with NxStage, which are equal to (i) for Mr. Burbank, two times his then-current base salary and two times his target bonus for 2017, or (ii) for Mr. Turk, 1.5 times his then-current base salary and 1.5 times his target bonus for 2017 (iii) in the case of Ms. Swan, 1.25 times her then-current base salary and 1.25 times her target bonus for 2017, and (iv) in the case of Mr. Towse, his then-current base salary and his annual bonus for 2017. Such employment agreements with NxStage provide that the foregoing severance payments are payable in the event the executive officer resigns for good reason within twelve months following the effective time of the merger or the executive officer’s employment terminated without

 

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  cause at any time following the effective time of the merger. For additional information, including the severance benefits payable to the executive prior to the effective time of the merger, see “The Merger —Interests of Certain Directors and Executive Officers of NxStage — Employment and Retention Agreements” beginning on page 52. Fresenius required, as a condition to its signing the merger agreement, that Messrs. Burbank and Turk enter into retention and noncompete agreements with Fresenius that will become effective following the merger. Pursuant to the retention and noncompete agreements with Fresenius, Messrs. Burbank and Turk will be entitled to receive a retention bonus of $4,500,000 and $3,000,000, respectively, payable on the first payroll date following the third anniversary of the effective time of the merger, subject to the executive’s continued employment through such time or upon an earlier termination of employment without cause or resignation for good reason. In addition, in lieu of the severance that would have been payable under their employment agreements with NxStage, in the event Mr. Burbank’s or Mr. Turk’s employment is terminated without cause or he resigns for any reason, in each case, following the effective time of the merger, he will be entitled to a lump sum severance payment equal to two times his then-current base salary and two times his target bonus for the then-current fiscal year, which as of the date of this proxy statement would total $2,832,500 for Mr. Burbank and $1,442,000 for Mr. Turk.

 

(3) As described further in the section titled “The Merger — Interests of Certain Directors and Executive Officers of NxStage — NxStage Equity Awards” beginning on page 50, the estimated amounts shown in this column represent the aggregate value of the named executive officers’ outstanding unvested NxStage stock options, restricted stock units, restricted shares and performance shares as of August 28, 2017, the latest practicable date to determine such amounts before the filing of this proxy statement, with the value of NxStage performance shares included assuming applicable performance conditions are achieved at maximum levels. Payments in respect of unvested NxStage equity awards stock units are “single-trigger” benefits in that they will be payable shortly following the effective time of the merger, whether or not the named executive officer’s employment is later terminated.

 

(4) Represents the estimated value of continued medical coverage under NxStage benefit plans for a period of 24 months, for Mr. Burbank, 18 months, for Mr. Turk, 15 months, for Ms. Swan, and 12 months, for Mr. Towse, in each case, following the named executive officer’s termination of employment.

 

(5) Represents the estimated amount of the tax gross-up for Messrs. Burbank and Turk and Ms. Swan pursuant to each executive officer’s employment agreement with NxStage to compensate them for any excise tax imposed under Section 4999 of the Code and any federal, state, local, employment or excise taxes imposed on the gross-up payment. Any change in the assumptions described at the beginning of this proposal may produce different results.

 

(6) As described further in the section titled “The Merger — Interests of Certain Directors and Executive Officers of NxStage — Potential Annual Bonus Payments” beginning on page 51, in connection with the merger each named executive officer may receive an annual cash bonus for 2017 paid at target levels and an annual cash bonus for 2018 in an amount to be determined by NxStage, subject to an aggregate limit of 110% the aggregate 2017 annual cash bonus payments (with any individual executive officer potentially receiving a bonus in excess of such amount). Because the table above assumes a termination of employment immediately following the completion of the merger, no amounts in respect of 2017 or 2018 bonuses are included.

Merger-Related Compensation Proposal

Pursuant to Section 14A of the Exchange Act and Rule 14a-21(c) thereunder, NxStage is seeking a non-binding, advisory stockholder approval of the compensation of NxStage’s named executive officers that is based on or otherwise relates to the merger as disclosed above in this section. The proposal gives NxStage’s stockholders the opportunity to express their views on the merger-related compensation of NxStage’s named executive officers.

 

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Accordingly, NxStage is requesting stockholders to adopt the following resolution, on a non-binding, advisory basis:

“RESOLVED, that the compensation that will or may be paid or become payable to NxStage’s named executive officers, in connection with the merger, and the agreements or understandings pursuant to which such compensation will or may be paid or become payable, in each case as disclosed pursuant to Item 402(t) of Regulation S-K in “Advisory, Non-Binding Vote on Merger-Related Executive Compensation Arrangements” on page 84 of this proxy statement, are hereby APPROVED.”

Vote Required and NxStage Board of Directors Recommendation

The vote on this proposal is a vote separate and apart from the vote to adopt the merger agreement. Accordingly, you may vote not to approve this proposal on merger-related named executive officer compensation and vote to adopt the merger agreement and vice versa. Because the vote is advisory in nature, it will not be binding on NxStage, regardless of whether the merger agreement is adopted. Approval of the non-binding, advisory proposal with respect to the compensation that will or may be received by NxStage’s named executive officers in connection with the merger is not a condition to completion of the merger, and failure to approve this advisory matter will have no effect on the vote to adopt the merger agreement. Because the merger-related named executive officer compensation to be paid in connection with the merger is based on contractual arrangements with the named executive officers and the merger agreement, such compensation will or may be payable, regardless of the outcome of this advisory vote, if the merger agreement is adopted (subject only to the contractual conditions applicable thereto).

Approval of the advisory vote on the compensation that may be received by NxStage’s named executive officers in connection with the merger requires the affirmative vote of a majority of votes cast.

THE NXSTAGE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE APPROVAL, ON A NON-BINDING ADVISORY BASIS, OF THE COMPENSATION THAT MAY BE PAID OR BECOME PAYABLE TO NXSTAGE’S NAMED EXECUTIVE OFFICERS IN CONNECTION WITH THE MERGER.

 

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PROPOSAL 3: ADJOURNMENT OF THE SPECIAL MEETING

The Adjournment Proposal

We are asking you to approve a proposal to approve one or more adjournments of the special meeting to a later date or dates, if necessary, to solicit additional proxies if there are insufficient votes to approve adoption of the merger agreement at the time of the special meeting. If our stockholders approve the adjournment proposal, we could adjourn the special meeting and any adjourned session of the special meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from stockholders that have previously returned properly executed proxies voting against adoption of the merger agreement. Among other things, approval of the adjournment proposal could mean that, even if we had received proxies representing a sufficient number of votes against adoption of the merger agreement such that the proposal to adopt the merger agreement would be defeated, we could adjourn the special meeting without a vote on the adoption of the merger agreement and seek to convince the holders of those shares to change their votes to votes in favor of adoption of the merger agreement. Additionally, we may seek to adjourn the special meeting if a quorum is not present at the special meeting.

Vote Required and NxStage Board of Directors Recommendation

Approval of the proposal to approve one or more adjournments of the special meeting requires the affirmative vote of at least a majority of votes cast.

The NxStage board of directors believes that it is in the best interests of NxStage and its stockholders to be able to adjourn the special meeting, if necessary, for the purpose of soliciting additional proxies in respect of the proposal to approve the adoption of the merger agreement if there are insufficient votes to approve adoption of the merger agreement at the time of the special meeting.

THE NXSTAGE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE PROPOSAL TO APPROVE ONE OR MORE ADJOURNMENTS OF THE SPECIAL MEETING IN CONNECTION WITH THE MERGER.

 

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MARKET PRICES AND DIVIDEND DATA

Shares of NxStage common stock are listed for trading on Nasdaq under the symbol “NXTM.” The table below shows the high and low sales price of NxStage, for the periods indicated, as reported on Nasdaq.

 

     NxStage Common Stock Prices  
             High                      Low          

FY 2017 — Quarter Ended

     

September 30 (through September 5, 2017)

   $ 29.93      $ 22.74  

June 30

   $ 30.80      $ 21.66  

March 31

   $ 29.99      $ 25.04  

FY 2016 — Quarter Ended

     

December 31

   $ 26.83      $ 21.11  

September 30

   $ 26.07      $ 21.35  

June 30

   $ 21.69      $ 16.12  

March 31

   $ 21.79      $ 13.49  

FY 2015 — Quarter Ended

     

December 31

   $ 22.60      $ 14.91  

September 30

   $ 18.50      $ 13.47  

June 30

   $ 19.63      $ 14.14  

March 31

   $ 19.19      $ 16.14  

The closing price of shares of NxStage common stock listed on Nasdaq on August 4, 2017, the last trading day prior to the public announcement of the execution of the merger agreement, was $23.14 per share of NxStage common stock. If the merger is completed, for each share of NxStage common stock you own you will be entitled to receive $30.00 in cash, without interest, less any applicable withholding or transfer taxes. The per share merger consideration of $30.00 per share of NxStage common stock represents a premium of (i) approximately 30% to NxStage’s closing share price on August 4, 2017, the last trading day prior to the public announcement of the execution of the merger agreement, and (ii) approximately 18% over NxStage’s volume weighted average trading price for the 180-day period ended August 4, 2017.

On                     , 2017, the most recent practicable date before this proxy statement was mailed to our stockholders, the closing price for shares of NxStage common stock on Nasdaq was $         per share of NxStage common stock. You are encouraged to obtain current market quotations for shares of NxStage common stock in connection with voting your shares of NxStage common stock.

Under the terms of the merger agreement, from the date of the merger agreement until the earlier of the termination of the merger agreement and the effective time of the merger, we may not declare or pay any cash dividend or other distribution on our shares of NxStage common stock without Fresenius’s written consent.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table and accompanying notes provide information about the beneficial ownership of our common stock by:

 

    each person known by us to be the beneficial owner of more than 5% of our common stock;

 

    each of our named executive officers;

 

    each of our directors and nominees for director; and

 

    all of our directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under these rules, beneficial ownership includes any shares as to which the person has sole or shared voting and investment power and also includes any shares that the person has the right to acquire within 60 days after August 28, 2017, which we refer to as the ownership date, through the exercise of any stock option, warrant or right, through conversion of any security, or pursuant to the automatic termination of power of attorney or revocation of trust, discretionary account or similar arrangement. Unless otherwise indicated, the persons identified have sole voting and investment power with respect to the shares of our common stock set forth below. The inclusion in this table of any shares deemed beneficially owned does not constitute an admission of beneficial ownership of those shares.

 

     Shares
Beneficially Owned 1
    Percentage of
Outstanding Shares 2
 

FMR LLC.

245 Summer Street

Boston, MA 02210

     7,344,802 (3)       11.1

The Vanguard Group, Inc.

100 Vanguard Blvd.

Malvern, PA 19355

     4,861,529 (4)       7.4

BlackRock, Inc.

55 East 52nd Street

New York, NY 10055

     4,337,294 (5)       6.6

Deerfield Mgmt, L.P.

780 Third Avenue, 37th Floor

New York, NY 10017

     4,258,196 (6)       6.4

Jeffrey H. Burbank

     1,621,260       2.4

Joseph E. Turk, Jr.

     295,858       *  

Reid S. Perper

     211,315       *  

Craig W. Moore

     178,628       *  

Earl R. Lewis

     174,275       *  

Matthew W. Towse

     172,386       *  

Winifred L. Swan

     155,234       *  

Daniel A. Giannini

     146,878       *  

Robert G. Funari

     114,008       *  

Jean K. Mixer

     90,390       *  

Robert S. Brown (7)

     48,929       *  

James J. Peters

     14,303       *  

Heyward R. Donigan

     12,496       *  

All current directors and executive officers as a group (12 persons)

     3,187,031       4.7

 

* Represents beneficial ownership of less than one percent.

 

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(1) Includes the following shares which such person has the right to acquire within 60 days of the ownership date upon exercise of outstanding stock options:

 

Name

   Option Shares  

Jeffrey H. Burbank

     682,174  

Joseph E. Turk, Jr.

     220,955  

Reid S. Perper

     83,685  

Craig W. Moore

     83,685  

Earl R. Lewis

     65,489  

Matthew W. Towse

     147,965  

Winifred L. Swan

     142,464  

Daniel A. Giannini

     83,685  

Robert G. Funari

     90,858  

Jean K. Mixer

     83,685  

Robert S. Brown

     35,323  

James J. Peters

     14,303  

Heyward R. Donigan

     8,914  

All current directors and executive officers as a group (12 persons)

     1,707,862  

 

(2) The calculation of percentages is based upon 66,130,088 shares of our common stock outstanding on the ownership date plus, for each individual listed in footnote (1), the option shares listed across from such individual’s name.

 

(3) Based solely on information as of December 31, 2016 contained in a Schedule 13G/A filed on February 14, 2017 by FMR LLC and Abigail P. Johnson, which indicates that FMR LLC and Abigail P. Johnson have sole investment power over the shares listed and FMR LLC has sole voting power over 61,517 shares.

 

(4) Based solely on information as of December 31, 2016 contained in a Schedule 13G/A filed on February 10, 2017 by The Vanguard Group, Inc., which indicates that The Vanguard Group, Inc. has sole voting power over 126,075 shares, sole investment power over 4,728,905 shares, shared voting power over 10,949 shares and shared investment power over 132,624 shares.

 

(5) Based solely on information as of December 31, 2016 contained in a Schedule 13G/A filed on January 25, 2017 by BlackRock, Inc., which indicates that BlackRock, Inc. has sole voting power over 4,178,500 shares.

 

(6) Based solely on information as of December 31, 2016 contained in a Schedule 13G/A filed on February 14, 2017 by the following persons which are indicated in such filing to have shared voting and investment power over the shares listed next to their names: Deerfield Mgmt, L.P. (4,258,196 shares); Deerfield Management Company, L.P. (4,258,196 shares); James E. Flynn (4,258,196 shares); Deerfield International Master Fund, L.P. (2,208,423 shares); Deerfield Partners, L.P. (1,733,598 shares); and Deerfield Special Situations Fund, L.P. (316,175 shares). Other than the shares listed next to Deerfield Mgmt, L.P., Deerfield Management Company, L.P., and James E. Flynn, the shares listed next to each entity above represent less than 5% of our common stock outstanding on the ownership date.

 

(7) Mr. Brown’s last day of employment as President of NxStage Kidney Care, Inc. was April 28, 2017.

 

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APPRAISAL RIGHTS

If the merger agreement is adopted by NxStage’s stockholders, stockholders who do not vote in favor of the proposal to adopt the merger agreement and who properly exercise and perfect their demand for appraisal of their shares will be entitled to appraisal rights in connection with the merger under Section 262 of the DGCL, which we refer to as Section 262.

The following discussion is not a complete statement of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262, which is attached to this proxy statement as Annex C . The following summary does not constitute any legal or other advice nor does it constitute a recommendation that stockholders exercise their appraisal rights under Section 262. Only a holder of record of shares of NxStage common stock is entitled to demand appraisal rights for the shares registered in that holder’s name. A person having a beneficial interest in shares of common stock of NxStage held of record in the name of another person, such as a bank, broker, fiduciary, depositary or other nominee, must act promptly to cause the record holder to follow the steps summarized below properly and in a timely manner to perfect appraisal rights. If you hold your shares of NxStage common stock through a broker, bank or other nominee and you wish to exercise appraisal rights, you should consult with your broker, bank or the other nominee.

Under Section 262, holders of shares of common stock of NxStage who do not vote in favor of the proposal to adopt the merger agreement, who continuously are the record holders of such shares through the effective time of the merger, and who otherwise follow the procedures set forth in Section 262 will be entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of the shares of NxStage common stock, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with interest to be paid upon the amount determined to be fair value, if any, as determined by the court (or, in certain circumstances described herein, on the difference between the amount determined to be the fair value and the amount paid to each stockholder entitled to appraisal prior to the entry of judgment in the appraisal proceeding).

Under Section 262, where a merger agreement is to be submitted for adoption at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, must notify each of its stockholders entitled to appraisal rights that appraisal rights are available and include in the notice a copy of Section 262. This proxy statement constitutes NxStage’s notice to its stockholders that appraisal rights are available in connection with the merger, and the full text of Section 262 is attached to this proxy statement as Annex C . In connection with the merger, any holder of common stock of NxStage who wishes to exercise appraisal rights, or who wishes to preserve such holder’s right to do so, should review Annex C carefully. Failure to strictly comply with the requirements of Section 262 in a timely and proper manner may result in the loss of appraisal rights under the DGCL. A stockholder who loses his, her or its appraisal rights will be entitled to receive the per share merger consideration described in the merger agreement. Moreover, because of the complexity of the procedures for exercising the right to seek appraisal of shares of common stock, NxStage believes that if a stockholder considers exercising such rights, such stockholder should seek the advice of legal counsel.

Stockholders wishing to exercise the right to seek an appraisal of their shares of NxStage common stock must do ALL of the following:

 

    The stockholder must not vote in favor of the proposal to adopt the merger agreement. Because a proxy that does not contain voting instructions will, unless revoked, be voted in favor of the merger agreement, a stockholder who submits a proxy and who wishes to exercise appraisal rights must vote against the proposal to adopt the merger agreement or abstain;

 

    The stockholder must deliver to NxStage a written demand for appraisal before the vote on the proposal to adopt the merger agreement at the special meeting;

 

    The stockholder must continuously hold the shares from the date of making the demand through the effective time of the merger. A stockholder will lose appraisal rights if the stockholder transfers the shares before the effective time of the merger; and

 

   

The stockholder or the surviving company must file a petition in the Delaware Court of Chancery requesting a determination of the fair value of the shares within 120 days after the effective time of the

 

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merger. The surviving company is under no obligation to file any petition and has no present intention of doing so.

Filing Written Demand

Any holder of shares of common stock of NxStage wishing to exercise appraisal rights must deliver to NxStage, before the vote on the adoption of the merger agreement at the special meeting at which the proposal to adopt the merger agreement will be submitted to the stockholders, a written demand for the appraisal of the stockholder’s shares, and that stockholder must not submit a blank proxy or vote in favor of the proposal to adopt the merger agreement. A holder of shares of common stock of NxStage wishing to exercise appraisal rights must hold of record the shares on the date the written demand for appraisal is made and must continue to hold the shares of record through the effective time of the merger. A proxy that is submitted and does not contain voting instructions will, unless revoked, be voted in favor of the proposal to adopt the merger agreement, and it will constitute a waiver of the stockholder’s right of appraisal and will nullify any previously delivered written demand for appraisal. Therefore, a stockholder who submits a proxy and who wishes to exercise appraisal rights must submit a proxy containing instructions to vote against the proposal to adopt the merger agreement or abstain from voting on the proposal to adopt the merger agreement. Neither voting against the proposal to adopt the merger agreement nor abstaining from voting or failing to vote on the proposal to adopt the merger agreement will, in and of itself, constitute a written demand for appraisal satisfying the requirements of Section 262. The written demand for appraisal must be in addition to and separate from any proxy or vote on the proposal to adopt the merger agreement. A proxy or vote against the proposal to adopt the merger agreement will not constitute a demand. A stockholder’s failure to make the written demand prior to the taking of the vote on the proposal to adopt the merger agreement at the special meeting of NxStage’s stockholders will constitute a waiver of appraisal rights.

Only a holder of record of shares of NxStage common stock is entitled to demand appraisal rights for the shares registered in that holder’s name. A demand for appraisal in respect of shares of common stock of NxStage should be executed by or on behalf of the holder of record, and must reasonably inform NxStage of the identity of the holder and state that the person intends thereby to demand appraisal of the holder’s shares in connection with the merger. If the shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, such demand must be executed by or on behalf of the record owner, and if the shares are owned of record by more than one person, as in a joint tenancy and tenancy in common, the demand should be executed by or on behalf of all joint owners. An authorized agent, including an authorized agent for two or more joint owners, may execute a demand for appraisal on behalf of a holder of record; however, the agent must identify the record owner or owners and expressly disclose that, in executing the demand, the agent is acting as agent for the record owner or owners.

STOCKHOLDERS WHO HOLD THEIR SHARES IN BROKERAGE OR BANK ACCOUNTS OR OTHER NOMINEE FORMS, AND WHO WISH TO EXERCISE APPRAISAL RIGHTS, SHOULD CONSULT WITH THEIR BROKERS, BANKS AND NOMINEES, AS APPLICABLE, TO DETERMINE THE APPROPRIATE PROCEDURES FOR THE BROKER, BANK OR OTHER NOMINEE HOLDER TO MAKE A DEMAND FOR APPRAISAL OF THOSE SHARES. A PERSON HAVING A BENEFICIAL INTEREST IN SHARES HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A BROKER, BANK OR OTHER NOMINEE, MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW PROPERLY AND IN A TIMELY MANNER THE STEPS NECESSARY TO PERFECT APPRAISAL RIGHTS.

All written demands for appraisal pursuant to Section 262 should be mailed or delivered to:

NxStage Medical, Inc.

350 Merrimack St.

Lawrence, MA 01843

Attention: Secretary

Any holder of common stock of NxStage may withdraw his, her or its demand for appraisal and accept the consideration offered pursuant to the merger agreement by delivering to NxStage a written withdrawal of the

 

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demand for appraisal within 60 days after the effective date of the merger. However, any such attempt to withdraw the demand made more than 60 days after the effective time of the merger will require written approval of the surviving company. No appraisal proceeding in the Delaware Court of Chancery will be dismissed without the approval of the Delaware Court of Chancery, and such approval may be conditioned upon such terms as the Delaware Court of Chancery deems just; provided, however that any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party shall have the right to withdraw such stockholder’s demand for appraisal and to accept the terms offered in the merger within 60 days after the effective date of the merger.

Notice by the Surviving Company

If the merger is completed, within 10 days after the effective time of the merger, the surviving company will notify each holder of common stock of NxStage who has made a written demand for appraisal pursuant to Section 262, and who has not voted in favor of the proposal to adopt the merger agreement, that the merger has become effective and the effective date thereof.

Filing a Petition for Appraisal

Within 120 days after the effective time of the merger, but not thereafter, the surviving company or any holder of common stock of NxStage who has complied with Section 262 and is entitled to appraisal rights under Section 262 may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery, with a copy served on the surviving company in the case of a petition filed by a stockholder, demanding a determination of the fair value of the shares held by all stockholders entitled to appraisal. The surviving company is under no obligation to and has no present intention to file a petition, and holders should not assume that the surviving company will file a petition or initiate any negotiations with respect to the fair value of shares of common stock of NxStage. Accordingly, any holders of common stock of NxStage who desire to have their shares appraised should initiate all necessary action to perfect their appraisal rights in respect of shares of common stock of NxStage within the time and in the manner prescribed in Section 262. The failure of a holder of common stock of NxStage to file such a petition within the period specified in Section 262 could nullify the stockholder’s previous written demand for appraisal.

Within 120 days after the effective time of the merger, any holder of common stock of NxStage who has complied with the requirements for exercise of appraisal rights will be entitled, upon written request, to receive from the surviving company a statement setting forth the aggregate number of shares not voted in favor of the proposal to adopt the merger agreement and with respect to which NxStage has received demands for appraisal, and the aggregate number of holders of such shares. The surviving company must mail this statement to the requesting stockholder within 10 days after receipt of the written request for such a statement or within 10 days after the expiration of the period for delivery of demands for appraisal, whichever is later. A beneficial owner of shares held either in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file a petition seeking appraisal or request from the surviving company the foregoing statement. As noted above, however, the demand for appraisal can only be made by a stockholder of record.

If a petition for an appraisal is duly filed by a holder of shares of common stock of NxStage and a copy thereof is served upon the surviving company, the surviving company will then be obligated within 20 days to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached. After notice to the stockholders as required by the court, the Delaware Court of Chancery is empowered to conduct a hearing on the petition to determine those stockholders who have complied with Section 262 and who have become entitled to appraisal rights thereunder. The Delaware Court of Chancery may require the stockholders who demanded payment for their shares to submit their stock certificates to the Delaware Register in Chancery for notation thereon of the pendency of the appraisal proceedings, and if any stockholder fails to comply with the direction, the Delaware Court of Chancery may dismiss such stockholder from the proceedings. The Delaware Court of Chancery shall dismiss the appraisal proceeding unless (a) the total number of shares entitled to appraisal exceeds 1% of the outstanding shares of common stock eligible for appraisal or (b) the value of the consideration provided in the merger for such total number of shares of common stock exceeds $1 million.

 

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Determination of Fair Value

After determining the holders of common stock of NxStage entitled to appraisal, the Delaware Court of Chancery will appraise the “fair value” of the shares of common stock of NxStage, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with interest, if any, to be paid upon the amount determined to be the fair value (or, in certain circumstances described below, on the difference between the amount determined to be the fair value and the amount paid to each stockholder entitled to appraisal prior to the entry of judgment in the appraisal proceeding). In determining fair value, the Delaware Court of Chancery will take into account all relevant factors. Unless the court in its discretion determines otherwise for good cause shown, interest from the effective date of the merger through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective date of the merger and the date of payment of the judgment. At any time before the entry of judgment in the proceedings, the surviving company may pay to each stockholder entitled to appraisal an amount in cash, in which case interest shall accrue thereafter only upon the sum of (1) the difference, if any, between the amount paid and the fair value of the shares as determined by the Delaware Court of Chancery, and (2) interest theretofore accrued, unless paid at that time.

In Weinberger v. UOP, Inc. , the Supreme Court of Delaware discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court stated that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained as of the date of the merger that throw any light on future prospects of the merged corporation. Section 262 provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger.” In Cede  & Co. v. Technicolor, Inc. , the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger , the Supreme Court of Delaware also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.”

Stockholders considering seeking appraisal should be aware that the fair value of their shares as so determined by the Delaware Court of Chancery could be more than, the same as or less than the consideration they would receive pursuant to the merger if they did not seek appraisal of their shares and that an opinion of an investment banking firm as to the fairness from a financial point of view of the consideration payable in a merger is not an opinion as to, and does not in any manner address, fair value under Section 262. Although NxStage believes that the per share merger consideration is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court of Chancery, and stockholders should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same as, the per share merger consideration. Neither NxStage nor Fresenius anticipates offering more than the per share merger consideration to any stockholder of NxStage exercising appraisal rights, and each of NxStage and Fresenius reserves the right to assert, in any appraisal proceeding, that for purposes of Section 262, the “fair value” of a share of common stock of NxStage is less than the per share merger consideration. If a petition for appraisal is not timely filed, then the right to an appraisal will cease. The costs of the appraisal proceedings (which do not include attorneys’ fees or the fees and expenses of experts) may be determined by the Delaware Court of Chancery and taxed upon the parties as the Delaware Court of Chancery deems equitable under the circumstances. Upon application of a stockholder, the Delaware Court of Chancery may also order that all or a portion of the expenses incurred by a stockholder in connection with an appraisal, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts, be charged pro rata against the value of all the shares entitled to be appraised.

If any stockholder who demands appraisal of shares of common stock of NxStage under Section 262 fails to perfect, or loses or successfully withdraws, such holder’s right to appraisal, the stockholder’s shares of common

 

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stock of NxStage will be deemed to have been converted at the effective time of the merger into the right to receive, without interest, the per share merger consideration applicable to the shares, less applicable withholding taxes. A stockholder will fail to perfect, or effectively lose or withdraw, the holder’s right to appraisal if no petition for appraisal is filed within 120 days after the effective time of the merger or if the stockholder delivers to the surviving company a written withdrawal of the holder’s demand for appraisal and an acceptance of the per share merger consideration in accordance with Section 262.

From and after the effective time of the merger, no stockholder who has demanded appraisal rights will be entitled to vote the common stock of NxStage for any purpose, or to receive payment of dividends or other distributions on the stock, except dividends or other distributions on the holder’s shares of common stock of NxStage, if any, payable to stockholders of NxStage of record as of a time prior to the effective time of the merger; provided, however, that if no petition for an appraisal is filed, or if the stockholder delivers to the surviving company a written withdrawal of the demand for an appraisal and an acceptance of the merger, either within 60 days after the effective time of the merger or thereafter with the written approval of the corporation, then the right of such stockholder to an appraisal will cease. Once a petition for appraisal is filed with the Delaware Court of Chancery, however, the appraisal proceeding may not be dismissed as to any stockholder of NxStage without the approval of the court; provided, however that any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party shall have the right to withdraw such stockholder’s demand for appraisal and to accept the terms offered in the merger within 60 days after the effective date of the merger.

Failure to comply strictly with all of the procedures set forth in Section 262 may result in the loss of a stockholder’s statutory appraisal rights. Consequently, any stockholder of NxStage wishing to exercise appraisal rights is encouraged to consult legal counsel before attempting to exercise those rights.

 

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FUTURE STOCKHOLDER PROPOSALS

If the merger is completed, we will not have public stockholders and there will be no public participation in any future meeting of stockholders. However, if the merger is not completed, we intend to hold an annual meeting of stockholders in 2018, which we refer to as our 2018 annual meeting.

Proposals that a stockholder intends to present at our 2018 annual meeting of stockholders and wishes to be considered for inclusion in our proxy statement and form of proxy for that meeting must be received by us no later than December 28, 2017. All such proposals must comply with Rule 14a-8 under the Exchange Act, which lists the requirements for the inclusion of stockholder proposals in company-sponsored proxy materials.

Proposals that a stockholder intends to present at our 2018 annual meeting of stockholders, but does not intend to have included in our proxy statement and form of proxy for that meeting, as well as any director nominations, must be received by us not earlier than the close of business on January 25, 2018 and not later than the close of business on February 23, 2018. All such proposals and director nominations must comply with the advance notice provisions of our by-laws.

Notice of any stockholder proposals and director nominations must be in writing and mailed to NxStage Medical, Inc., 350 Merrimack Street, Lawrence, MA, 01843, Attention: Winifred L. Swan, Secretary.

 

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WHERE YOU CAN FIND MORE INFORMATION

The SEC allows us to “incorporate by reference” information into this proxy statement, which means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is deemed to be part of this proxy statement, except for any information superseded by information contained directly in this proxy statement. This proxy statement incorporates by reference the documents described below that NxStage has previously filed with the SEC, as well as the annexes to this proxy statement. These documents contain important information about NxStage and its financial condition.

The following NxStage filings with the SEC are incorporated by reference:

 

    Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed with the SEC on February 28, 2017;

 

    Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2017 and June 30, 2017, filed with the SEC on May 9, 2017 and August 8, 2017, respectively;

 

    Definitive Proxy Statement on Schedule 14A, filed with the SEC on April 27, 2017; and

 

    Current Reports on Form 8-K, filed with the SEC on April 28, 2017, May 26, 2017 and August 7, 2017.

We also incorporate by reference into this proxy statement additional documents that we may file with the SEC between the date of this proxy statement and the earlier of the date of the special meeting, including any adjournments or postponements, or the termination of the merger agreement. These documents include periodic reports, such as Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, as well as Current Reports on Form 8-K and proxy solicitation materials. Notwithstanding anything herein to the contrary, any information furnished under Item 2.02 or Item 7.01 of NxStage’s Current Reports on Form 8-K, and any other information which is furnished but not filed with the SEC, is not incorporated herein by reference.

You may read and copy any reports, statements or other information that we file with the SEC at the SEC’s public reference room located at: Station Place, 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information. Our public filings are also available in electronic format to the public from commercial document retrieval services and at the website maintained by the SEC at http://www.sec.gov. You can also review our SEC filings on our website at www.nxstage.com. Information included on our website is not a part of, and is not incorporated in, this proxy statement.

Documents incorporated by reference in this proxy statement are also available from us without charge, excluding all exhibits unless specifically incorporated by reference in such documents. You may obtain documents incorporated by reference in this proxy statement by requesting them in writing or by telephone from us at the following address:

Investor Relations

NxStage Medical, Inc.

350 Merrimack St.

Lawrence, MA 01843

Telephone: (978) 687-4700

If you would like to request documents, please do so by                 , 2017 to receive them before the special meeting. If you request any incorporated documents, we will strive to mail them to you by first-class mail, or another equally prompt means, within one business day of receipt of your request.

 

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If you have any questions about this proxy statement, the special meeting or the merger or need assistance with voting procedures, you should contact:

 

LOGO

1290 Avenue of the Americas, 9th Floor

New York, NY 10104

Call Toll Free: 888-658-5755

Email: NxStage@Georgeson.com

 

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MISCELLANEOUS

NxStage has supplied all information relating to NxStage, and Fresenius has supplied, and NxStage has not independently verified, all of the information relating to Fresenius and Merger Sub contained in “Summary — Parties Involved in the Merger,” “Summary — Financing of the Merger,” “The Merger — Parties Involved in the Merger” and “The Merger — Financing of the Merger.”

You should not send in your NxStage share certificates until you receive transmittal materials after the merger is completed.

You should rely only on the information contained in this proxy statement, the annexes to this proxy statement and the documents we refer to in this proxy statement to vote on the merger. We have not authorized anyone to provide you with information that is different from what is contained in this proxy statement. This proxy statement is dated                 , 2017. You should not assume that the information contained in this proxy statement is accurate as of any date other than that date (or as of an earlier date if so indicated in this proxy statement) and the mailing of this proxy statement to stockholders does not create any implication to the contrary. This proxy statement does not constitute a solicitation of a proxy in any jurisdiction where, or to or from any person to whom, it is unlawful to make a proxy solicitation.

 

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Annex A

AGREEMENT AND PLAN OF MERGER

by and among

FRESENIUS MEDICAL CARE HOLDINGS, INC.

BROADWAY RENAL SERVICES, INC.

and

NxSTAGE MEDICAL, INC.

dated as of August 7, 2017

 

 


TABLE OF CONTENTS

ARTICLE I

THE MERGER

 

Section 1.1

  The Merger      A-1  

Section 1.2

  Closing; Effective Time      A-2  

Section 1.3

  Governing Documents; Directors and Officers      A-2  

Section 1.4

  Conversion of Shares; Conversion of Merger Sub Common Stock      A-2  

Section 1.5

  Surrender of Certificates      A-3  

Section 1.6

  Appraisal Rights  &nbs