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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
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.
Natus Medical Incorporated
(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 all boxes that apply):
No fee required.
Fee paid previously with preliminary materials.
Fee computed on the table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

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PRELIMINARY PROXY STATEMENT—SUBJECT TO COMPLETION

NATUS MEDICAL INCORPORATED
3150 Pleasant View Road
Middleton, WI 53562
[•], 2022
To the stockholders of Natus Medical Incorporated:
On April 17, 2022, your Board of Directors approved an Agreement and Plan of Merger (as amended from time to time, the “Merger Agreement”) by and among Natus Medical Incorporated (“Natus,” the “Company,” “we,” “us,” or “our”), Prince Parent Inc. (“Parent”) and Prince Mergerco Inc. (“Merger Sub”), which are legal entities formed by funds managed by ArchiMed to facilitate its acquisition of Natus. Under the terms of the Merger Agreement, Merger Sub will be merged into Natus, each outstanding share of our common stock (other than shares, if any, owned directly or indirectly by Parent or Merger Sub) will be cancelled and converted into the right to receive $33.50 in cash (without interest and less any applicable withholding taxes) and Natus will become a privately held subsidiary of Parent. We refer to this transaction as the “Merger.” We cannot complete the Merger until our stockholders have adopted the Merger Agreement and we have obtained necessary regulatory approvals. Accordingly, you are cordially invited to attend a special meeting of stockholders of the Company (the “Company Stockholder Meeting”) to be held via a virtual meeting on [•], 2022, at [•] Eastern Time in order to vote on a proposal to adopt the Merger Agreement.
At the Company Stockholder Meeting, you will also be asked to consider and vote on a proposal to adjourn the Company Stockholder Meeting from time to time, if necessary or appropriate, as determined in good faith by the Board of Directors, including to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Company Stockholder Meeting, and a proposal to approve, by non-binding, advisory vote, certain compensation that will or may become payable by Natus to its named executive officers in connection with the Merger.
If our stockholders adopt the Merger Agreement in accordance with applicable law, the other closing conditions in the Merger Agreement are satisfied and the Merger is completed, our stockholders will be entitled to receive $33.50 in cash, without interest and less any applicable withholding taxes, for each share of Natus common stock (the “Company Common Stock”) held at the effective time of the Merger. This price represents a premium of approximately 28.6% from the closing price of $26.05 on April 14, 2022, the last trading day prior to the execution of the Merger Agreement.
After considering the factors more fully described in the enclosed proxy statement, your Board of Directors has unanimously (1) determined that it is in the best interests of the Company and Natus’ stockholders (the “Company Stockholders”), and declared it advisable, to enter into the Merger Agreement and consummate the Merger in accordance with the Delaware General Corporation Law (“DGCL”) upon the terms and subject to the conditions set forth in the Merger Agreement; (2) approved the execution and delivery of the Merger Agreement by the Company, the performance by the Company of its covenants and other obligations thereunder, and the consummation of the Merger upon the terms and conditions set forth in the Merger Agreement; and (3) resolved to recommend, subject to certain provisions in the Merger Agreement, that the Company Stockholders adopt the Merger Agreement in accordance with the DGCL.
Accordingly, your Board of Directors recommends that you vote (1) “FOR” the adoption of the Merger Agreement; (2) “FOR” the proposal to adjourn the Company Stockholder Meeting from time to time, if necessary or appropriate, as determined in good faith by the Board of Directors, including to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Company Stockholder Meeting; and (3) “FOR” the proposal to approve, by non-binding, advisory vote, certain compensation that will or may become payable by Natus to its named executive officers in connection with the Merger.
The enclosed proxy statement provides detailed information about the Merger Agreement and the Merger, as well as the Company Stockholder Meeting. In addition, a copy of the Merger Agreement is attached as Annex A to the proxy statement. The enclosed proxy statement also describes the process by which the Board of Directors considered, negotiated and ultimately approved the Merger Agreement and the Merger, as well as the reasons the Board of Directors approved the Merger Agreement and recommends that Natus’ stockholders adopt it. We encourage you to read the proxy statement and its annexes, including the Merger Agreement, carefully and in their entirety, as they contain important information. You may also obtain more information about Natus from documents Natus has filed with the Securities and Exchange Commission (the “SEC”).
Whether or not you plan to attend the Company Stockholder Meeting, please sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the internet or by telephone. If you attend the virtual Company Stockholder Meeting and vote by ballot, your vote will revoke any proxy that you have previously submitted. The failure of any stockholder to vote will have the same effect as a vote against adopting the Merger Agreement.
If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your bank, broker or other nominee cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions.
We cannot complete the Merger unless the proposal to adopt the Merger Agreement is adopted by the affirmative vote of the holders of a majority of the voting power of the outstanding shares of the Company’s capital stock entitled to vote thereon. For this purpose, failures to vote will be counted as votes against the Merger Agreement and the Merger. Your affirmative vote is very important regardless of the number of shares of Company Common Stock that you own.
If you have any questions or need assistance voting your shares, please contact our Proxy Solicitor:
MacKenzie Partners, Inc.
1407 Broadway, 27th Floor
New York, NY 10018
Toll-Free: +1 (800) 322-2885
E-mail: proxy@mackenziepartners.com
On behalf of the Board of Directors, I thank you for your support and appreciate your consideration of this matter.
 
Sincerely,
 
 
 
Joshua H. Levine
 
Chairperson of the Board of Directors
The accompanying proxy statement is dated [•], 2022 and, together with the enclosed form of proxy card, is first being mailed to stockholders of Natus on or about [•], 2022.
Neither the SEC nor any state securities commission has approved or disapproved the Merger, passed upon the merits or fairness of the Merger Agreement or the proposed Merger, or passed upon the adequacy or accuracy of the information contained in this proxy statement. Any representation to the contrary is a criminal offense.

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PRELIMINARY PROXY STATEMENT—SUBJECT TO COMPLETION

NATUS MEDICAL INCORPORATED
3150 Pleasant View Road
Middleton, WI 53562
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held [•], 2022
Notice is hereby given that a special meeting of stockholders of the Company (the “Company Stockholder Meeting”) of Natus Medical Incorporated, a Delaware corporation (“Natus,” the “Company,” “we,” “us,” or “our”), will be held solely by means of remote communications described below on [•], 2022, at [•] Eastern Time, for the following matters:
1.
To consider and vote on the proposal to adopt the Agreement and Plan of Merger, made and entered into as of April 17, 2022 (as amended from time to time, the “Merger Agreement”), by and among Natus, Prince Parent Inc. (“Parent”), and Prince Mergerco Inc. (“Merger Sub”). Each of Parent and Merger Sub is affiliated with an investor group comprised of funds managed by ArchiMed, an investment firm focused on the healthcare industry. Pursuant to the terms of the Merger Agreement, Merger Sub will be merged with and into Natus and Natus will continue as the surviving corporation of the Merger and a wholly owned subsidiary of Parent (the “Merger”);
2.
To consider and vote on the proposal to adjourn the Company Stockholder Meeting from time to time, if necessary or appropriate, as determined in good faith by the Board of Directors, including to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Company Stockholder Meeting; and
3.
To consider and vote on the proposal to approve, by non-binding, advisory vote, certain compensation that will or may become payable by Natus to its named executive officers in connection with the Merger.
Only stockholders of record as of the close of business on [•], 2022 are entitled to notice of the Company Stockholder Meeting and to vote at the Company Stockholder Meeting or any adjournment, postponement or other delay thereof.
The Board of Directors recommends that you vote (1) “FOR” the adoption of the Merger Agreement in accordance with the DGCL; (2) “FOR” the proposal to adjourn the Company Stockholder Meeting from time to time, if necessary or appropriate, as determined in good faith by the Board of Directors, including to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Company Stockholder Meeting; and (3) “FOR” the proposal to approve, by non-binding, advisory vote, certain compensation that will or may become payable by Natus to its named executive officers in connection with the Merger.
All stockholders, whether of record or beneficially, are cordially invited to attend the Company Stockholder Meeting virtually. The Company Stockholder Meeting will be held solely by means of a live webcast on the Internet at www.virtualshareholdermeeting.com/NTUS2022SM.
Only stockholders of record are entitled to participate in, vote at and examine the stockholders list during the Company Stockholder Meeting.
All stockholders with a 16-digit control number have the ability to vote, participate in Q&A and view the stockholders list by logging in to the above Internet address at the time of the meeting. Beneficial stockholders who did not receive a 16-digit control number from their bank or brokerage firm who wish to attend the meeting should follow the instructions from their bank or brokerage firm, including any requirement to obtain a legal proxy. Most brokerage firms or banks allow a stockholder to obtain a legal proxy either online or by mail.

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The adoption of the Merger Agreement requires the affirmative vote of the holders of a majority of the voting power of the outstanding shares of the Company’s capital stock entitled to vote thereon. Whether or not you plan to attend the Company Stockholder Meeting, please sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the internet or by telephone.
If you attend the Company Stockholder Meeting and vote by ballot, your vote will revoke any proxy that you have previously submitted. If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your bank, broker or other nominee cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions.
 
By the Order of the Board of Directors,
 
 
 
 
 
Douglas Balog
 
Vice President and General Counsel
 
 
 
Dated: [•], 2022

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YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE COMPANY STOCKHOLDER MEETING, WE ENCOURAGE YOU TO SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE (1) BY TELEPHONE; (2) THROUGH THE INTERNET; OR (3) BY SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE POSTAGE-PAID ENVELOPE PROVIDED. IF YOU ARE A STOCKHOLDER OF RECORD, YOU MAY REVOKE YOUR PROXY OR CHANGE YOUR VOTE AT ANY TIME BEFORE IT IS VOTED AT THE COMPANY STOCKHOLDER MEETING. If you are a stockholder of record, voting by ballot at the Company Stockholder Meeting will revoke any proxy that you previously submitted. If you hold your shares through a bank, broker or other nominee, you must obtain a “legal proxy” in order to vote in person (virtually) at the Company Stockholder Meeting.
If you fail to (1) return your proxy card; (2) grant your proxy electronically over the internet or by telephone; or (3) attend the Company Stockholder Meeting in person (virtually), your shares will not be counted for purposes of determining whether a quorum is present at the Company Stockholder Meeting; and if a quorum is present, your shares will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement, but will have no effect on the other proposals.
We encourage you to read the accompanying proxy statement and its annexes, including all documents incorporated by reference into the accompanying proxy statement, carefully and in their entirety. If you have any questions concerning the Merger, the Company Stockholder Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of Company Common Stock, please contact our Proxy Solicitor:
MacKenzie Partners, Inc.
1407 Broadway, 27th Floor
New York, NY 10018
Toll-Free: +1 (800) 322-2885
E-mail: proxy@mackenziepartners.com

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SUMMARY
This summary highlights selected information from this proxy statement related to the merger (the “Merger”) of Prince Mergerco Inc. with and into Natus Medical Incorporated, and may not contain all of the information that is important to you. To understand the Merger more fully and for a more complete description of the legal terms of the Merger, you should carefully read this entire proxy statement, the annexes to this proxy statement and the documents that we refer to in this proxy statement. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under the section of this proxy statement captioned “Where You Can Find More Information.” The Agreement and Plan of Merger, made and entered into as of April 17, 2022 (as amended from time to time, the “Merger Agreement”), by and among Natus, Parent and Merger Sub is attached as Annex A to this proxy statement. We encourage you to read the Merger Agreement, which is the legal document that governs the Merger, carefully and in its entirety.
Except as otherwise specifically noted in this proxy statement, “Natus,” the “Company,” “we,” “our,” “us,” and similar words refer to Natus Medical Incorporated, including, in certain cases, our subsidiaries. Throughout this proxy statement, we refer to Prince Parent Inc. as “Parent,” and Prince Mergerco Inc. as “Merger Sub.” In addition, throughout this proxy statement we refer to the Agreement and Plan of Merger, dated April 17, 2022, among Natus, Parent and Merger Sub, as it may be amended from time to time, as the “Merger Agreement.”
The Companies
Natus Medical Incorporated
Natus delivers innovative and trusted solutions to screen, diagnose, and treat disorders affecting the brain, neural pathways, and eight sensory nervous systems to advance the standard of care and improve patient outcomes and quality of life. The Company offers hardware, advanced software and algorithms, and consumables that provide stimulus, acquire and monitor physiological signals, and capture the body’s response. With sales in over 100 countries, Natus is a leader in neurodiagnostics, pediatric retinal imaging, and infant hearing screening, as well as a leading company in hearing assessment, hearing instrument fitting, balance, and intracranial pressure monitoring.
Natus’ common stock is quoted on the Nasdaq Global Select Market (“NASDAQ”) under the symbol “NTUS.”
Natus’ principal executive office is located at 3150 Pleasant View Road, Middleton, WI 53562, and its telephone number is 608-829-8500.
Prince Parent Inc.
Parent was formed by funds managed by ArchiMed on April 11, 2022 for the purpose of engaging in the transactions contemplated by the Merger Agreement, and has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement and arranging of the equity financing and any debt financing in connection with the Merger.
Prince Mergerco Inc.
Merger Sub is a wholly owned direct subsidiary of Parent and was formed by funds managed by ArchiMed on April 11, 2022 for the purpose of engaging in the transactions contemplated by the Merger Agreement, and has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement and arranging of the equity financing and any debt financing in connection with the Merger.
Parent and Merger Sub are affiliated with an investor group comprised of funds managed by ArchiMed, an investment firm focused on the healthcare industry. Parent, Merger Sub and Natus will cause the Merger to be consummated pursuant to the Delaware General Corporation Law (“DGCL”) by filing a certificate of merger in customary form and substance (the “Certificate of Merger”) with the Secretary of State of the State of Delaware to be effective on the date and time specified in the Certificate of Merger or the date and time of filing if no such date and time is specified in the Certificate of Merger (the “Effective Time”). Upon consummation of the Merger, Natus, as the Surviving Corporation, will be indirectly owned by ArchiMed.
Parent and Merger Sub have obtained equity and debt financing commitments for the transactions contemplated by the Merger Agreement, which will be available to fund the aggregate purchase price and certain other payments contemplated by, and subject to the terms and conditions of, the Merger Agreement. In addition,
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Med Platform II S.L.P., a société de libre partenariat incorporated under the laws of France (the “Fund”) has also provided Natus with a limited guaranty in favor of Natus, which guarantees the payment of the Parent Termination Fee that may become payable by Parent under the Merger Agreement.
The Merger
The Merger and the Per Share Price
Upon the terms and subject to the conditions of the Merger Agreement, Merger Sub will merge with and into Natus, with Natus continuing as the surviving corporation and as a wholly owned direct subsidiary of Parent (the “Surviving Corporation”). As a result of the Merger, at the Effective Time, each share of common stock, par value $0.001 per share, of the Company (“Company Common Stock”) outstanding as of immediately prior to the Effective Time (other than any shares of Company Common Stock held in treasury, held by Parent, Merger Sub or their respective subsidiaries or as to which appraisal rights have been perfected in accordance with the DGCL, but including each share of Company Restricted Stock (as defined below)) will be cancelled and extinguished and automatically converted into the right to receive cash in an amount equal to $33.50, without interest thereon and less any applicable withholding taxes (the “Per Share Price”). After the Merger is completed, you will no longer own any shares of the capital stock or any other rights or interest in the Surviving Corporation and you will have the right to receive the Per Share Price, but you will no longer have any rights as a stockholder.
Each holder of shares of Company Common Stock will be entitled to receive, upon (i) surrender to the payment agent of a certificate or certificates, together with a properly completed letter of transmittal, or (ii) receipt of an “agent’s message” by the payment agent (or such other evidence, if any, of transfer as the payment agent would reasonably request) in the case of a book-entry transfer of uncertificated shares, the Per Share Price payable for each share of Company Common Stock represented by a certificate or for each uncertificated share, without interest.
Treatment of Natus Equity-Based Awards
Pursuant to the Merger Agreement, at the Effective Time:
except as set forth below with respect to Employee Interim Awards (as defined below), each share of Company Common Stock subject to vesting restrictions or a risk of forfeiture (“Company Restricted Stock”) outstanding as of immediately prior to the Effective Time, whether vested or unvested and whether or not granted pursuant to any of the Company’s equity plans (“Company Stock Plans”), will be cancelled and converted into and will become a right to receive an amount in cash, without interest and subject to any required tax withholding, equal to the Per Share Price;
except as set forth below with respect to Employee Interim Awards or as set forth in the CEO Retention Agreement (as defined below), each restricted stock unit in respect of shares of Company Common Stock, which includes time-vesting restricted stock units, market stock units and other performance-vesting restricted stock units (each, a “Company Restricted Stock Unit”) outstanding as of immediately prior to the Effective Time, whether vested or unvested and whether or not granted pursuant to any Company Stock Plan, will be cancelled and be converted into and will become a right to receive an amount in cash, without interest and subject to any required tax withholding, equal to (i) the amount of the Per Share Price; multiplied by (ii) (1) with respect to Company Restricted Stock Units that are only subject to time-vesting requirements, the total number of shares of Company Common Stock subject to such Company Restricted Stock Unit, and (2) with respect to Company Restricted Stock Units that are subject to time- and performance-vesting requirements, the total number of shares of Company Common Stock determined to be performance vested with the performance goals deemed achieved at maximum levels and with the remaining time-vesting requirements deemed satisfied;
any Company Restricted Stock and Company Restricted Stock Units granted after the date of the Merger Agreement, other than awards that may be granted to non-employee directors after the date of the Merger Agreement (such awards, “Employee Interim Awards”), that are outstanding as of immediately prior to the Effective Time, whether vested or unvested and whether or not granted pursuant to any Company Stock Plan, will be treated at the Effective Time in the manner set forth
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above, provided that any applicable performance goals will be deemed achieved at target levels (rather than at maximum) and the number of shares subject to such Employee Interim Awards that will vest at the Effective Time will be prorated to reflect the portion of the applicable vesting period that has elapsed from the date of grant until the Effective Time (rather than vesting in full), and the remaining unvested portion of any Employee Interim Awards will be forfeited at the Effective Time;
each option (or portion thereof) to purchase a share of Company Common Stock (a “Company Option”) that is outstanding as of immediately prior to the Effective Time, whether vested or unvested and whether or not granted pursuant to any Company Stock Plan, and that has an exercise price per share less than the Per Share Price (each, an “In-the-Money Company Option”) will be cancelled and converted into and will become a right to receive an amount in cash, without interest and subject to any required tax withholding, equal to (i) the amount of the Per Share Price (less the exercise price per share attributable to such Company Option), multiplied by (ii) the total number of shares of Company Common Stock that are issuable upon the full exercise of such Company Option; and
each Company Option that is not an In-the-Money Company Option will be cancelled without any cash payment being made in respect thereof.
CEO Retention Agreement
To ensure the continued retention of the Company’s President and Chief Executive Officer, Thomas J. Sullivan, following the Closing, in connection with entering into the Merger Agreement, Parent required Mr. Sullivan to enter into a retention agreement, dated as of April 17, 2022, with Parent and the Company (the “CEO Retention Agreement”).
Pursuant to the CEO Retention Agreement, Mr. Sullivan agreed that, notwithstanding the treatment of Company Restricted Stock Units set forth in the Merger Agreement (as described above), he would not receive payment in respect of his Company Restricted Stock Units that are market stock units (“MSUs”) based on deemed achievement of performance goals at maximum levels. Instead, Mr. Sullivan’s MSUs will be deemed attained at the level of performance actually achieved through the Closing based on the Per Share Price (which is approximately 143.4% of target, in the case of MSUs granted to Mr. Sullivan in December 2021, and 139.6% of target, in the case of MSUs granted to Mr. Sullivan in January 2022), consistent with the level of return to the Company’s stockholders pursuant to the Merger Agreement. The consequence to Mr. Sullivan will be a reduction by over $3,000,000 in the amount of gross proceeds that he otherwise was entitled to receive and would have received in respect of his MSUs.
Furthermore, pursuant to the CEO Retention Agreement, Mr. Sullivan agreed that an amount equal to $6,000,000 (the “Retention Payment”) payable to him at the Effective Time in respect of his Company Restricted Stock Units would not become payable at the Effective Time and, instead, would become payable 50% on the six-month anniversary of the Closing and 50% on the one-year anniversary of the Closing, subject to his continued employment with the Company until the relevant retention date. If Mr. Sullivan’s employment is terminated by the Company without cause, by Mr. Sullivan with good reason, or due to his death or disability, any then-unpaid portion of the Retention Payment will be paid to him upon his termination (subject to, in the case of a termination by the Company without cause or by Mr. Sullivan for good reason, his execution and non-revocation of a release of claims). If Mr. Sullivan’s employment terminates for any other reason prior to the relevant retention date, he will immediately forfeit all portions of the Retention Payment that relate to a future retention date. Mr. Sullivan’s right to receive the Retention Payment is further subject to his continued compliance with certain restrictive covenants. At the Effective Time, all other amounts payable to Mr. Sullivan in respect of his Company Restricted Stock and Company Restricted Stock Units will become payable in accordance with the Merger Agreement, as described above.
The CEO Retention Agreement was signed at the same time the Merger Agreement was signed, but if the Merger Agreement is terminated and the Closing does not occur, it will automatically become null and void.
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Expected Timing of the Merger
We currently expect to complete the Merger in the third calendar quarter of 2022. However, the exact timing of completion of the Merger cannot be predicted because the Merger is subject to the closing conditions described in the section of this proxy statement captioned “The Merger Agreement—Conditions to the Merger,” many of which are outside of our control.
Material U.S. Federal Income Tax Consequences of the Merger
For U.S. federal income tax purposes, the receipt of cash by a U.S. Holder (as defined in the section of this proxy statement captioned “Material U.S. Federal Income Tax Consequences of the Merger”) in exchange for such U.S. Holder’s shares of Company Common Stock in the Merger generally will result in the recognition of gain or loss in an amount measured by the difference, if any, between the amount of cash that such U.S. Holder receives in the Merger and such U.S. Holder’s adjusted tax basis in the shares of Company Common Stock surrendered in the Merger.
A Non-U.S. Holder (as defined in the section of this proxy statement captioned “Material 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 Company Common Stock for cash in the Merger, unless such Non-U.S. Holder has certain connections to the United States.
Stockholders should 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 U.S. federal non-income tax laws or the laws of any state, local or non-U.S. tax jurisdiction.
Regulatory Approvals Required for the Merger
The completion of the Merger is conditioned on, among other things, any applicable waiting period (and any extensions thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) and certain other antitrust and foreign investment laws having expired or been terminated, or all requisite consents pursuant thereto being obtained.
Upon the terms and subject to the conditions set forth in the Merger Agreement, Parent and Merger Sub, on the one hand, and Natus, on the other hand, will use their respective reasonable best efforts (x) to take (or cause to be taken) all actions; (y) do (or cause to be done) all things; and (z) assist and cooperate with the other Parties in doing (or causing to be done) all things, in each case as are necessary, proper or advisable pursuant to applicable law (as defined in the Merger Agreement) or otherwise to consummate and make effective, in the most expeditious manner practicable, the Merger, including by using its reasonable best efforts to cause the conditions to the Merger in the Merger Agreement to be satisfied.
On April 29, 2022 and May 5, 2022, Natus and Parent, respectively, filed notification of the proposed Merger with the United States Federal Trade Commission (“FTC”) and the Antitrust Division of the United States Department of Justice (the “Antitrust Division”) under the HSR Act. The waiting period under the HSR Act is expected to expire at 11:59 p.m., Eastern time, on June 6, 2022.
See the section of this proxy statement captioned “The Merger Agreement—Required Efforts to Consummate the Merger” for a more detailed discussion of the parties’ obligations with respect to obtaining regulatory approvals in connection with the Merger.
Appraisal Rights
If the Merger is consummated, Company Stockholders who do not vote their shares of Company Common Stock in favor of the adoption of the Merger Agreement, who continuously hold such shares of Company Common Stock from the date they make the demand through the Effective Time, and who properly perfect appraisal of their shares of Company Common Stock will be entitled to appraisal rights in connection with the Merger under Section 262 of the DGCL if certain conditions set forth in Section 262(g) of the DGCL are met. This means that such stockholders would be entitled to have their shares of Company Common Stock appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of their shares of Company Common Stock, exclusive of any elements of value arising from the accomplishment or expectation of the Merger, together with interest to be paid on the amount determined to be fair value, if any, as determined by the court (subject, in the case of interest payments, to any
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voluntary cash payments made by the Surviving Corporation pursuant to subsection (h) of Section 262 of the DGCL). Due to the complexity of the appraisal process, stockholders who wish to seek appraisal of their shares of Company Common Stock are encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights. Stockholders considering seeking appraisal should be aware that the fair value of their shares of Company Common Stock as determined pursuant to Section 262 of the DGCL could be more than, the same as or less than the value of the consideration that they would receive pursuant to the Merger Agreement if they did not seek appraisal of their shares of Company Common Stock. For more information, please see the section of this proxy statement captioned “The Merger—Appraisal Rights.
Conditions to the Merger
Each party’s obligation to consummate the Merger, with the exception of the absence of the Company Material Adverse Effect condition which is only applicable to Parent and Merger Sub’s obligation to consummate the Merger, is subject to the satisfaction or (where permitted by applicable law) written waiver of the following conditions:
at and as of the consummation of the Merger (the “Closing”), the adoption of the Merger Agreement by the requisite affirmative vote of stockholders;
at and as of the Closing, the expiration or termination of the applicable waiting period under the HSR Act and the other antitrust laws and foreign direct investments laws set forth in the Merger Agreement, or all requisite consents pursuant thereto will have been obtained;
at and as of the Closing, no order or injunction issued by any court of competent jurisdiction in any jurisdiction where the Company or its Subsidiaries has material operations will be in effect, and no law will have been enacted by any Governmental Authority of competent jurisdiction in any jurisdiction where the Company or its Subsidiaries has material operations after the date of the Merger Agreement, that in each case prohibits, makes illegal, or enjoins the consummation of the Merger;
at or prior to the Effective Time, the accuracy of the representations and warranties of Natus, Parent and Merger Sub in the Merger Agreement, made at and as of the date of the Merger Agreement and as of the Closing Date or the date in respect of which such representation or warranty was specifically made, with the exception of certain representations and warranties of Natus, made at and as of the Closing Date or the date in respect of which such representation or warranty was specifically made. For more information, please see the section of this proxy statement captioned “The Merger Agreement—Representations and Warranties”;
at or prior to the Effective Time, the performance in all material respects by Natus, Parent and Merger Sub of their respective covenants and obligations required to be performed by them under the Merger Agreement at or prior to the Closing;
at or prior to the Effective Time, receipt of certificates executed by authorized officers of Natus, on the one hand, and Parent and Merger Sub, on the other hand, to the effect that the conditions described in the preceding two bullets have been satisfied; and
the absence of any Company Material Adverse Effect (as defined in the section of this proxy statement captioned “The Merger Agreement—Representations and Warranties”) having occurred after the date of Merger Agreement that is continuing.
Financing of the Merger
Concurrently with the execution of the Merger Agreement, MED Platform II S.L.P., a société de libre partenariat incorporated under the laws of France (the “Fund”) delivered to Parent an executed equity commitment letter (the “Equity Commitment Letter”) pursuant to which the Fund has committed to invest up to $840,000,000 in Parent for the purpose of financing the transactions contemplated by the Merger Agreement and paying related fees and expenses, subject to the terms and conditions set forth therein. Natus is an express third party beneficiary of the Equity Commitment Letter. In addition, pursuant to the Limited Guaranty, dated April 17, 2022, from Med Platform II S.L.P., a société de libre partenariat incorporated under the laws of France (the “Guarantor”), who has also provided Natus with a limited guaranty in favor of Natus, which guarantees the payment of certain monetary obligations that may be owed by Parent pursuant to the Merger Agreement, including any reverse termination fee that may become payable by Parent to Natus.
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In addition, pursuant to a debt commitment letter delivered to Parent (the “Debt Commitment Letter”), Jefferies Finance LLC (the “Lead Arranger”) has committed to provide a senior secured term loan and a senior secured revolving credit facility (collectively, the “Credit Facilities”) for the purpose of financing the transactions contemplated by the Merger Agreement and paying related fees and expenses, subject to the terms and conditions set forth therein. The obligation of the Lead Arranger to provide debt financing under the Debt Commitment Letter is subject to a number of customary conditions.
The completion of the Merger is not subject to any financing conditions. Although the obligation of the parties to consummate the Merger is not subject to any financing condition, the Merger Agreement provides that the Closing of the Merger will not occur earlier than the sixtieth day following the date of the Merger Agreement. For more information, please see the section of this proxy statement captioned “The Merger—Financing of the Merger.”
Recommendations of the Board of Directors
After considering various factors more fully described in the section of this proxy statement captioned “The Merger—Recommendation of the Board of Directors and Reasons for the Merger,” the Board of Directors of Natus (the “Board of Directors” or “Board”) has unanimously (1) determined that it is in the best interests of the Company and the Company Stockholders, and declared it advisable, to enter into the Merger Agreement and consummate the Merger in accordance with the DGCL upon the terms and subject to the conditions set forth in the Merger Agreement; (2) approved the execution and delivery of the Merger Agreement by the Company, the performance by the Company of its covenants and other obligations thereunder, and the consummation of the Merger upon the terms and conditions set forth in the Merger Agreement; and (3) resolved to recommend, subject to certain provisions in the Merger Agreement, that the Company Stockholders adopt the Merger Agreement in accordance with the DGCL.
Accordingly, the Board of Directors recommends that you vote (1) “FOR” the adoption of the Merger Agreement in accordance with the DGCL; (2) “FOR” the proposal to adjourn the Company Stockholder Meeting from time to time, if necessary or appropriate, as determined in good faith by the Board of Directors, including to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Company Stockholder Meeting; and (3) “FOR” the proposal to approve, by non-binding, advisory vote, certain compensation that will or may become payable by Natus to its named executive officers in connection with the Merger.
Notwithstanding the foregoing, if an Intervening Event (as defined in the section of this proxy statement captioned “The Merger Agreement—Other Covenants Under the Merger Agreement—Acquisition Proposals; Change in the Recommendation of Natus’ Board of Directors”) occurs at any time prior to the adoption of the Merger Agreement by Company Stockholders, the Board of Directors may withdraw or change its recommendation regarding the Merger Agreement and the Merger, provided that the Board of Directors has determined in good faith (after consultation with its financial advisor and outside legal counsel) that the failure to do so would reasonably be expected to be inconsistent with its fiduciary duties pursuant to applicable law, as further described and subject to compliance with the obligations described in the section of this proxy statement captioned “The Merger Agreement—Other Covenants Under the Merger Agreement—Acquisition Proposals; Change in the Recommendation of Natus’ Board of Directors.”
In addition, at any time prior to the adoption of the Merger Agreement by Company Stockholders, if Natus receives a bona fide written competing acquisition proposal for Natus that was not solicited in material breach of the non-solicitation provisions of the Merger Agreement and that the Board of Directors has determined in good faith (after consultation with its financial advisor and outside legal counsel) that such competing acquisition proposal constitutes or would reasonably be expected to lead to a Superior Proposal (as defined in the Merger Agreement) , then the Board of Directors may, subject to compliance with certain procedural protections, (i) withdraw or change its recommendation regarding the Merger Agreement and the Merger, or (ii) terminate the Merger Agreement to concurrently enter into a definitive agreement with respect to such Superior Proposal, provided that in either case the Board of Directors determines in good faith, after consultation with its outside legal counsel, that the failure to take the actions described in clauses (i) or (ii) above would reasonably be expected to be inconsistent with its fiduciary duties pursuant to applicable law.
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Opinion of Stifel Nicolaus & Company, Incorporated
In connection with the Merger, Natus retained Stifel, Nicolaus & Company, Incorporated (“Stifel”) to provide it with financial advisory services and to provide the Board of Directors an opinion in connection with the possible sale of Natus. Natus selected Stifel as its financial advisor based on the fact that Stifel is a reputable investment banking firm with substantial experience advising companies in the healthcare and medical technology sectors and in providing strategic advisory services in general. On April 17, 2022, Stifel delivered its oral opinion, subsequently confirmed in writing by delivery of a written opinion dated April 17, 2022 (the “Opinion”), to the Board of Directors as to the fairness, from a financial point of view and as of such date, and based upon and subject to the various limitations, matters, qualifications and assumptions set forth therein, to the holders of Company Common Stock (other than Excluded Shares) of the Per Share Price to be received by such holders in the Merger pursuant to the Merger Agreement.
The full text of the Opinion is attached to this proxy statement as Annex B and is incorporated into this proxy statement by reference. The description of the Opinion set forth in this proxy statement is qualified in its entirety by reference to the full text of such Opinion. Company Stockholders are urged to read the Opinion carefully and in its entirety for a discussion of the assumptions made, procedures followed, matters considered and limits of the review undertaken by Stifel in connection with the Opinion. The Opinion was for the information of, and directed to, the Board of Directors (in its capacity as such) for its information and assistance in connection with its consideration of the financial terms of the Merger, was only one of many factors considered by the Board of Directors in its evaluation of the Merger and only addresses the fairness, from a financial point of view and as of the date of the Opinion, of the Per Share Price to be received in the Merger by holders of the Company Common Stock (other than Excluded Shares). The Opinion does not address the relative merits of the Merger as compared to other transactions or strategies that might be available to Natus or the underlying business decision of Natus to proceed with the Merger, and is not intended to, and does not, constitute a recommendation to the Board of Directors as to how the Board of Directors should vote or otherwise act on the Merger or any other matter or to any shareholder of the Company as to how any such shareholder should act with respect to the Merger or any other matter.
Interests of Natus’ Directors and Executive Officers in the Merger
When considering the recommendation of the Board of Directors that you vote to adopt the Merger Agreement, you should be aware that our directors and executive officers may have interests in the Merger that are different from, or in addition to, your interests as a stockholder. In (i) evaluating and negotiating the Merger Agreement; (ii) adopting the Merger Agreement; and (iii) recommending that the Merger Agreement be adopted by Company Stockholders, the Board of Directors was aware of and considered these interests to the extent that they existed at the time, among other matters. These interests include the following:
accelerated vesting and cash out of Company Options, Company Restricted Stock and Company Restricted Stock Units at the Effective Time, with any performance conditions applicable to outstanding Company Restricted Stock Units (including those held by our executive officers) deemed to have been achieved at the maximum levels and with the remaining time vesting requirements deemed satisfied (except that, pursuant to the CEO Retention Agreement, a portion of Mr. Sullivan’s Company Restricted Stock Units are deemed achieved at the actual level of achievement based on the Per Share Price and a portion of the proceeds otherwise payable at the Effective Time in respect of Mr. Sullivan’s Company Restricted Stock Units will not become payable to him at the Effective Time and, instead, will be subject to vesting based on his continued service following the Effective Time);
in the case of our currently employed executive officers (other than Dr. Chung), the opportunity to receive payments and benefits under each executive officer’s respective employment agreement upon either (1) an involuntary termination of service other than for “cause,” death, or disability or (2) voluntary resignation for “good reason,” in each case, occurring, in the case of Mr. Sullivan, within the 3-month period preceding or 24-month period following the Effective Time or, in the case of Messrs. Davies and Noll, within the 6-month period following the Effective Time. These payments and benefits may include:
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cash severance equal to, in the case of Mr. Sullivan, two times the sum of his annual base salary and target annual bonus, and in the case of each of Messrs. Davies and Noll, the sum of his annual base salary and target annual bonus;
solely in the case of Mr. Sullivan, a prorated target annual bonus for the year of termination, with the prorated amount based on the number of days that he was employed during the year prior to termination of service; and
payment of the premium costs for continuing health benefits for a period of time following termination;
in the case of our executive officers and directors who have an account balance pursuant to our nonqualified deferred compensation plan, we intend to terminate our nonqualified deferred compensation plan prior to the Effective Time, resulting in the cessation of deferrals under the plan and accelerated payment of each such balance (which is fully vested regardless of the Merger), promptly following the Effective Time; and
continued indemnification and directors’ and officers’ liability insurance.
If the proposal to adopt the Merger Agreement is approved, the shares of Company Common Stock held by our directors and executive officers will be treated in the same manner as outstanding shares of Company Common Stock held by all other stockholders.
Insurance and Indemnification of Directors and Executive Officers
From and after the Effective Time and ending on the sixth anniversary of the Effective Time, the Surviving Corporation will (and Parent will cause the Surviving Corporation to) indemnify and hold harmless, to the fullest extent permitted by DGCL or pursuant to any and all provisions of any certificate of incorporation, bylaws or other similar organizational documents of the Company or its Subsidiaries and any indemnification agreements with Natus and any of its Subsidiaries in effect on the date of April 17, 2022, each current or former director and officer of Natus (and any person who becomes a director or officer of Natus or any of its Subsidiaries prior to the Effective Time) (“Indemnified Person”) from and against any costs, fees and expenses (including reasonable and documented attorneys’ fees and investigation expenses), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement or compromise in connection with any legal proceeding, whether civil, criminal, administrative or investigative, to the extent that such legal proceeding arises, directly or indirectly, out of or pertains, directly or indirectly, with respect to any action or omission, or alleged action or omission, in such Indemnified Person’s capacity as a director, officer, employee or agent of Natus or any of its Subsidiaries or other Affiliates to the extent that such action or omission, or alleged action or omission, occurred prior to or at the Effective Time (including any matters arising in connection with the Merger Agreement or the Merger).
During the period commencing at the Effective Time and ending on the sixth anniversary of the Effective Time, the Surviving Corporation and its Subsidiaries will (and Parent will cause the Surviving Corporation and its Subsidiaries to) cause the certificates of incorporation, bylaws and other similar organizational documents of the Surviving Corporation and its Subsidiaries to contain provisions with respect to indemnification, exculpation and the advancement of expenses that are at least as favorable as the indemnification, exculpation and advancement of expenses provisions set forth in the charter, the bylaws and the other similar organizational documents of the Subsidiaries of Natus, as applicable, as of the date of the Merger Agreement that have been made available to Parent. During such six-year period, such provisions may not be repealed, amended or otherwise modified in any manner except as required by applicable law.
The Merger Agreement also provides during the period commencing at the Effective Time and ending on the sixth anniversary of the Effective Time, the Surviving Corporation will (and Parent will cause the Surviving Corporation to) maintain Natus’ current directors’ and officers’ liability insurance and fiduciary liability insurance (collectively, “D&O Insurance”) in respect of acts or omissions occurring at or prior to the Effective Time on terms (including with respect to coverage, conditions, retentions, limits and amounts) that are substantially equivalent to those of the D&O Insurance; provided that Parent may substitute therefor policies with a substantially comparable insurer (of the same or better credit worthiness and financial capability) of at least the same coverage and amounts containing terms and conditions that are no less advantageous to the insured thereunder. The Surviving Corporation will not be obligated to pay annual premiums in excess of 300% of the annual premium amount paid by Natus for coverage for its last full fiscal year (such 300% amount, the “Maximum Annual Premium”). If the annual premiums
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of such insurance coverage exceed the Maximum Annual Premium, then the Surviving Corporation will be obligated to obtain a policy with the greatest coverage available for a cost not exceeding the Maximum Annual Premium from an insurance carrier with the same or better credit rating as Natus’ current directors’ and officers’ liability insurance carrier. Prior to the Effective Time, Natus may (and if Natus is unable to purchase such a policy prior to Closing, Parent shall) purchase a prepaid six-year “tail” policy with respect to the D&O Insurance from an insurance carrier with the same or better credit rating as Natus’ current directors’ and officers’ liability insurance carrier so long as the aggregate cost for such “tail” policy does not exceed the Maximum Annual Premium. If Natus (or Parent) purchases such a “tail” policy prior to the Effective Time, the Surviving Corporation will (and Parent will cause the Surviving Corporation to) maintain such “tail” policy in full force and effect and continue to honor its obligations thereunder for so long as such “tail” policy is in full force and effect for a period of no less than six years after the Effective Time.
Go Shop Period & Non-Solicitation of Competing Acquisition Proposals After Go Shop Period
Go Shop Period
Until 11:59 p.m., Eastern time, on May 17, 2022 (the “Go-Shop Period End Date”), Natus was permitted to:
solicit, initiate and encourage, facilitate and assist any proposal or inquiry that constitutes, or could reasonably be expected to lead to, a competing acquisition proposal for Natus;
subject to the execution of an acceptable confidentiality agreement, furnish to any person public and/or non-public information relating to Natus or afford to any such person access to the business, properties, assets, books, records or other non-public information, or to any personnel, of Natus, in any such case with the intent to induce the making, submission or announcement of, or to encourage, facilitate and assist, any proposal or inquiry that constitutes, or could reasonably be expected to lead to, a competing acquisition proposal for Natus or any inquiries or the making of any proposal that could reasonably be expected to lead to any such competing acquisition proposals, provided that Natus must substantially concurrently provide access to Parent or Merger Sub any non-public information provided to such person if such information was not previously made available to Parent or Merger Sub; or
subject to the execution of an acceptable confidentiality agreement, participate or engage in discussions or negotiations with any person with respect to a competing acquisition proposal for Natus or any proposal that could reasonably be expected to lead to a competing acquisition proposal for Natus.
Non-Solicitation After Go Shop Period
Commencing at 11:59 p.m., Eastern time, on May 17, 2022, Natus and its Subsidiaries, and its and their respective directors and officers may not:
solicit, initiate, propose or induce the making, submission or announcement of, or knowingly encourage, facilitate or assist, any proposal or inquiry that constitutes, or could reasonably be expected to lead to a competing acquisition proposal for Natus;
furnish to any person (other than to Parent, Merger Sub or any designees of Parent or Merger Sub) any non-public information relating to Natus or afford to any person access to the business, properties, assets, books, records or other non-public information, or to any personnel, of Natus (other than Parent, Merger Sub or any designees of Parent or Merger Sub), in any such case with the intent to induce the making, submission or announcement of, or to knowingly encourage, facilitate or assist, a competing acquisition proposal for Natus or any inquiries or the making of any proposal that would reasonably be expected to lead to a competing acquisition proposal for Natus;
participate, engage in or continue discussions or negotiations with any person with respect to a competing acquisition proposal for Natus or inquiry that could reasonably be expected to lead to a competing acquisition proposal for Natus;
approve, endorse or recommend any proposal that constitutes, or could reasonably be expected to lead to, a competing acquisition proposal for Natus;
enter into any letter of intent, memorandum of understanding, merger agreement, acquisition agreement or other contract relating to a competing acquisition proposal for Natus;
waive the applicability of all or any portion of any anti-takeover laws in respect of any person (other than Parent and its Affiliates); or
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resolve or agree to take any of the foregoing actions.
Notwithstanding the foregoing, if any person submits a competing acquisition proposal prior to the Go-Shop Period End Date, then Natus may continue discussions and negotiations with the person that submitted such competing acquisition proposal, provide non-public information to such person, and otherwise facilitate such competing acquisition proposal after the Go-Shop Period End Date until the date which is five days after the Go-Shop Period End Date, subject to certain restrictions included in the Merger Agreement.
In addition, under certain circumstances, after the Go-Shop Period End Date and prior to the adoption of the Merger Agreement by the stockholders, Natus may engage in discussions or negotiations with, furnish any non-public information to, or and afford access to the business, properties, assets, books, records or other non-public information, or to any personnel, of Natus to any person that has made or delivered to Natus a bona fide written competing acquisition proposal for Natus after the date of the Merger Agreement that has not been withdrawn, or otherwise facilitate or assist such competing acquisition proposal or assist such person with such competing acquisition proposal, provided that such competing acquisition proposal was not solicited in material breach the foregoing non-solicitation provisions of the Merger Agreement and (i) the Company Board has determined in good faith (after consultation with its financial advisor and outside legal counsel) that such competing acquisition proposal either constitutes a Superior Proposal (as defined in the Merger Agreement) or could reasonably be expected to lead to a Superior Proposal, (ii) the Board of Directors has determined in good faith (after consultation with its financial advisor and outside legal counsel) that the failure to take such actions would reasonably be expected to be inconsistent with its fiduciary duties pursuant to applicable law; and (iii) Natus promptly (and in any event within 24 hours) makes available to Parent any non-public information that is provided to any such person that was not previously made available to Parent. For more information, see the section of this proxy statement captioned “The Merger Agreement—Termination of the Merger Agreement; Termination Fees.”
Termination of the Merger Agreement
The Merger Agreement may be terminated at any time prior to the Effective Time in the following ways:
by mutual written agreement of Natus and Parent;
by either Natus or Parent if, whether prior to or after the receipt of the adoption of the Merger Agreement by its stockholder:
(1) any order or injunction issued by any court of competent jurisdiction in any jurisdiction where Natus or its Subsidiaries has material operations will be in effect, or any action has been taken by any government, governmental or regulatory authority, entity or body, department, commission, board, agency, accreditation organization or instrumentality, and any court, tribunal, arbitrator or judicial body, in each case whether federal, state, county or provincial, and whether local or foreign (a “Governmental Authority”) of competent jurisdiction in any jurisdiction where Natus or its Subsidiaries has material operations, that, in each case, prohibits, makes illegal or enjoins the consummation of the Merger and has become final and non-appealable; or (2) any law that will be enacted after the date of the Merger Agreement that prohibits, makes illegal or enjoins the consummation of the Merger;
the Effective Time has not occurred by 5:00 p.m., Eastern time, on October 14, 2022 (the “Outside Date”), except that the Outside Date shall automatically be extended to January 12, 2023, if on the initial Outside Date all of the conditions to the Merger have been satisfied or waived (to the extent waivable) other than conditions relating to antitrust approvals; or
by either Natus or Parent if stockholders of Natus fail to adopt the Merger Agreement at the Company Stockholder Meeting or any adjournment or postponement thereof at which a vote is taken on the Merger;
by Natus if:
whether prior to or after receipt of the adoption of the Merger Agreement by its stockholders, Parent or Merger Sub has breached or failed to perform in any material respect any of its respective representations, warranties, covenants or other agreements set forth in the Merger
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Agreement such that certain conditions set forth in the Merger Agreement are not satisfied, and such breach is not capable of being cured, or is not cured, before the earlier of the Outside Date or the date that is 30 calendar days following Natus’ delivery of written notice of such breach;
at any time prior to receipt of the adoption of the Merger Agreement by its stockholders if (1) Natus has received a Superior Proposal; (2) the Board of Directors has authorized Natus to enter into a definitive Alternative Acquisition Agreement with respect to such Superior Proposal; (3) Natus has complied in all material respects with the Merger Agreement with respect to such Superior Proposal; (4) substantially concurrently with such termination Natus pays, or causes to be paid the Company Termination Fee (as defined below) and (5) promptly after such termination Natus enters into an Alternative Acquisition Agreement with respect to such Superior Proposal; or
whether prior to or after receipt of the adoption of the Merger Agreement by its stockholders if (1) the Merger is not consummated on the date upon which Parent is required to consummate the Closing pursuant to the Merger Agreement; (2) all conditions to Parent and Merger Sub’s obligation to consummate the Merger set forth in the Merger Agreement are satisfied (other than those conditions that by their terms are to be satisfied at closing, each of which is capable of being satisfied at Closing) are satisfied; (3) Natus has irrevocably notified Parent in writing that it is ready, willing and able to consummate the Closing and that as of such time, based on the information then available to Natus, all of Natus’ closing conditions are satisfied or waived; (4) Natus has provided Parent three days which are not a Saturday, Sunday or other day on which the Company is closed for business or the Federal Reserve Bank of New York is closed (each a “Business Day”) written notice prior to the termination stating Natus’ intention to terminate the Merger Agreement if Parent and Merger Sub fail to consummate the Merger on the date required by the Merger Agreement; and (5) Parent and Merger Sub fail to consummate the Merger Sub on the later of (x) the expiration of the three Business Day period contemplated by the foregoing clause, and (y) the date of Closing contemplated by the Merger Agreement; and
by Parent if:
whether prior to or after the receipt of the adoption of the Merger Agreement by its stockholders, Natus has breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreements set forth in the Merger Agreement such that certain conditions set forth in the Merger Agreement are not satisfied and such breach is not capable of being cured, or is not cured, before the earlier of the Outside Date or the date that is 30 calendar days following Parent’s delivery of written notice of such breach; or
prior to receipt of the adoption of the Merger Agreement by stockholders of Natus, the Board of Directors has effected a Company Board Recommendation Change.
In the event that the Merger Agreement is terminated pursuant to the termination rights above, the Merger Agreement will be of no further force or effect without liability of any party to the other parties, as applicable, except certain sections of the Merger Agreement will survive the termination of the Merger Agreement in accordance with their respective terms, including terms relating to reimbursement of expenses and indemnification. Notwithstanding the foregoing, nothing in the Merger Agreement will relieve any party from any liability for any willful and intentional breach of the Merger Agreement or for fraud.
Termination Fee
Except in specified circumstances, whether or not the Merger is completed, Natus, on the one hand, and Parent and Merger Sub, on the other hand, are each responsible for all of their own respective costs and expenses incurred in connection with the Merger and the other transactions contemplated by the Merger Agreement.
Under the terms of the Merger Agreement, if the Merger Agreement is terminated by Natus in order for it to enter into an alternative acquisition agreement with respect to a Superior Proposal, (i) prior to the Cut-Off Date, Natus will be obligated to pay to Parent a one-time fee equal to $19,753,676 in cash or (ii) after the Cut-Off Date, Natus will be obligated to pay Parent a one-time fee equal to $39,507,352 in cash.
Additionally, if (i) prior to the adoption of the Merger Agreement by the Company Stockholders, the Merger Agreement is terminated by Parent because the Board withdraws or adversely modifies its recommendation that the
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stockholders of Natus vote in favor of adopting the Merger Agreement or (ii) (1)(A) the Merger Agreement is terminated as a result of either (x) the Merger not occurring on or before the Outside Date, (y) the approval of Company Stockholders not being obtained at a meeting of Company Stockholders at which a vote is taken on the Merger or (z) Natus breaching or failing to perform in any material respect any representation, warranty or covenant that results in the failure of the related closing condition to be satisfied, subject to a cure period in certain circumstances, and (B) an alternative acquisition proposal is publicly announced (or in the case of termination due to the Merger not occurring on or before the Outside Date, a bona fide written acquisition proposal is communicated to the Board) and not withdrawn or otherwise abandoned or (2) the Merger Agreement is terminated by Parent under the termination right in clause (z) above due to Natus’ willful and material breach of its no-shop obligations, and in the case (1) and (2), within one year after such termination of the Merger Agreement, an alternative acquisition transaction is consummated or Natus enters into a definitive agreement with respect to an alternative acquisition transaction, then, in each case, Natus will be obligated to pay Parent a one-time fee equal to $39,507,352 in cash promptly after entry into such definitive agreement.
Under the terms of the Merger Agreement, Parent has agreed to pay Natus a fee of $79,014,704 in cash in the event that the Merger Agreement is terminated (i) by Natus (A) if all of the closing conditions have been satisfied (other than those conditions that by their terms are to be satisfied at the Closing) and Natus is prepared to consummate the Merger but Parent and Merger Sub fail to consummate the Merger in accordance with the Merger Agreement or (B) in connection with Parent or Merger Sub breaching or failing to perform in any material respect its representations, warranties or covenants in a manner that would cause the related closing conditions to not be satisfied (subject to a cure period in certain circumstances), or (ii) if either party terminates because the Merger has not been consummated by the Outside Date, and at the time of such termination, Natus was otherwise entitled to terminate the Merger Agreement for either of the foregoing reasons (the “Parent Termination Fee”).
Pursuant to the limited guaranty delivered by Med Platform II in favor of Natus, dated as of April 17, 2022 (the “Limited Guaranty”), Med Platform II has guaranteed the payment of the Parent Termination Fee if it becomes payable under the Merger Agreement, subject to an aggregate cap equal to $79,014,704.
Remedies
Natus, Parent and Merger Sub agree that irreparable damage for which monetary damages, even if available, would not be an adequate remedy would occur in the event that the parties do not perform the provisions of the Merger Agreement (including any party failing to take such actions as are required of it thereunder in order to consummate the Merger Agreement) in accordance with its specified terms or otherwise breach such provisions. Parent and Merger Sub, on the one hand, and Natus, on the other hand, will be entitled, in addition to any other remedy to which they are entitled at law or in equity, to an injunction, specific performance and other equitable relief to prevent breaches (or threatened breaches) of the Merger Agreement and to enforce specifically the terms and provisions thereof.
Notwithstanding the foregoing, it is explicitly agreed that Natus will have the right to an injunction or specific performance to cause the Equity Financing to be funded and to cause Parent and Merger Sub to consummate the Merger if and only if (1) all conditions to each party’s obligations to effect the Merger and conditions to the obligations of Parent and Merger Sub have been satisfied (other than those conditions that, by their nature, are to be satisfied at the Closing (provided such conditions would be satisfied as of such date)) at the time when the Closing was required to have occurred pursuant the Merger Agreement, (2) the Debt Financing (or any alternative financing) has been funded in accordance with the terms and conditions thereof or will be funded in accordance with the terms and conditions thereof at the Closing if the Equity Financing is funded to fund the Merger at the Closing, and (3) Natus has irrevocably confirmed in writing to Parent that if specific performance is granted and the Equity Financing is funded and Parent and Merger Sub comply with their obligations in the Merger Agreement, then Natus is ready, willing and able to, and will take such actions as are within its control, to consummate the Closing pursuant the Merger Agreement. However, Natus may not be entitled to receive both a grant of specific performance that results in the occurrence of the Closing and monetary damages (including any monetary damages in lieu of specific performance and all or any portion of a termination fee paid by Parent).
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Market Price of Natus Stock
The Per Share Price of $33.50 represents a premium of approximately 28.6% over Natus’ closing share price on April 14, 2022, the last trading day prior to the announcement that Natus had entered into the Merger Agreement and a premium of approximately 23.1% to Natus’ closing share price on March 3, 2022, which is 30 trading days prior the execution of the Merger Agreement. The closing price of Company Common Stock on the NASDAQ on [•], 2022, the most recent practicable date prior to the date of this proxy statement, was $[•] per share. You are encouraged to obtain current market prices of Company Common Stock in connection with voting your shares of Company Common Stock.
Litigation Related to the Merger
As of the date of this proxy statement, there are no pending lawsuits challenging the Merger. However, potential plaintiffs may file lawsuits challenging the merger. The outcome of any future litigation is uncertain.
Such litigation, if not resolved, could prevent or delay consummation of the merger and result in substantial costs to Natus, including any costs associated with the indemnification of directors and officers. One of the conditions to the consummation of the Merger is that no order or injunction issued by any court of competent jurisdiction in any jurisdiction where the Company or its Subsidiaries has material operations will be in effect that prohibits, makes illegal, or enjoins the consummation of the Merger. Therefore, if a plaintiff were successful in obtaining an injunction prohibiting the consummation of the Merger on the agreed-upon terms, then such injunction may prevent the Merger from being consummated, or from being consummated within the expected timeframe.
For additional information regarding the pending litigation, please see the section entitled “The Merger—Litigation Related to the Merger.”
Company Stockholder Meeting
Date, Time and Place
The Company Stockholder Meeting of Natus will be held virtually on [•], 2022, at [•], Eastern Time. You may attend the Company Stockholder Meeting solely via a live interactive webcast on the Internet at www.virtualshareholdermeeting.com/NTUS2022SM. We refer to the special meeting, and any adjournment, postponement or other delay of the Company Stockholder Meeting, as the “Company Stockholder Meeting.” You will need the control number found on your proxy card or voting instruction form in order to participate in the Company Stockholder Meeting (including voting your shares). We elected to use a virtual meeting due to the ongoing public health impact of the coronavirus outbreak (COVID-19) and to support the health and well-being of our directors, employees and stockholders, as well as our positive experiences with virtual meetings.
Record Date; Shares of Company Common Stock Entitled to Vote
You are entitled to receive notice of and vote at the Company Stockholder Meeting if you owned shares of Company Common Stock at the close of business on [•], 2022 (the “record date”). You will have one vote at the Company Stockholder Meeting for each share of Company Common Stock that you owned and are entitled to vote at the close of business on the record date. If you own shares that are registered in the name of someone else, such as a broker, you need to direct that person to vote those shares or obtain an authorization (i.e. obtain a legal proxy) from them and vote the shares yourself at the meeting.
Only stockholders of record are entitled to participate in, vote at and examine the stockholders list during the Company Stockholder Meeting. All stockholders with a 16-digit control number have the ability to vote, participate in Q&A and view the stockholders list. Beneficial stockholders who did not receive a 16-digit control number from their bank or brokerage firm who wish to attend the meeting should follow the instructions from their bank or brokerage firm, including any requirement to obtain a legal proxy. Most brokerage firms or banks allow a stockholder to obtain a legal proxy either online or by mail.
Purpose
At the Company Stockholder Meeting, we will ask stockholders to vote on proposals to (1) adopt the Merger Agreement; (2) adjourn the Company Stockholder Meeting from time to time, if necessary or appropriate, as determined in good faith by the Board of Directors, including to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Company Stockholder Meeting; and (3) to approve, by non-binding, advisory vote, certain compensation that will or may become payable by Natus to its named executive officers in connection with the Merger.
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Quorum
As of the record date, there were [•] shares of Company Common Stock outstanding and entitled to vote at the Company Stockholder Meeting. The stockholders of Natus representing a majority of the issued and outstanding Company Common Stock entitled to vote at the Company Stockholder Meeting, present in person (virtually) or represented by proxy, will constitute a quorum for purposes of transacting business at the Company Stockholder Meeting.
Required Vote
The affirmative vote of the holders of a majority of the voting power of the outstanding shares of Company capital stock entitled to vote thereon is required to adopt the Merger Agreement. An abstention, a failure to vote your shares of Company Common Stock or a broker non-vote (if any) will all have the same effect as a vote “AGAINST” the Merger Agreement proposal.
Approval of the proposal to adjourn the Company Stockholder Meeting, regardless of whether a quorum is present at the Company Stockholder Meeting, requires the affirmative vote of a majority of the votes cast affirmatively or negatively at the Company Stockholder Meeting. An abstention, a failure to vote your shares of Company Common Stock or a broker non-vote (if any) will each have no effect on the outcome of this proposal.
Approval, by non-binding, advisory vote, of certain compensation that will or may become payable to Natus’ executive officers in connection with the Merger requires the affirmative vote of a majority of the votes cast affirmatively or negatively at the Company Stockholder Meeting. Assuming a quorum is present, an abstention, a failure to vote your shares of Company Common Stock or a broker non-vote (if any) will each have no effect on the outcome of this proposal.
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 Company Common Stock, representing approximately [•]% of the shares of Company Common Stock outstanding on the record date. All of our directors and executive officers have informed us that they intend to vote all of their shares of Company Common Stock (1) “FOR” the adoption of the Merger Agreement; (2) “FOR” the proposal to adjourn the Company Stockholder Meeting from time to time, if necessary or appropriate, as determined in good faith by the Board of Directors, including to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Company Stockholder Meeting; and (3) “FOR” the proposal to approve, by non-binding, advisory vote, certain compensation that will or may become payable by Natus to its named executive officers in connection with the Merger.
Voting and Proxies
Any stockholder of record entitled to vote at the Company Stockholder Meeting may submit a proxy by returning a signed proxy card by mail in the accompanying prepaid reply envelope or granting a proxy electronically over the internet or by telephone, or may vote in person (virtually) by appearing at the Company Stockholder Meeting. If you are a beneficial owner and hold your shares of Company Common Stock in “street name” through a bank, broker or other nominee, you should instruct your bank, broker or other nominee on how you wish to vote your shares of Company Common Stock using the instructions provided by your bank, broker or other nominee. Under applicable stock exchange rules, banks, brokers or other nominees have the discretion to vote on routine matters. The proposals expected to be considered at the Company Stockholder Meeting are non-routine matters, and banks, brokers and other nominees cannot vote on these proposals without your instructions. Therefore, it is important that you cast your vote or instruct your bank, broker or nominee on how you wish to vote your shares.
If you are a stockholder of record on the record date, you may change your vote or revoke your proxy at any time before it is voted at the Company Stockholder Meeting by (1) signing another proxy card with a later date and returning it to us prior to the Company Stockholder Meeting; (2) submitting a new proxy electronically over the internet or by telephone after the date of the earlier submitted proxy; (3) delivering a written notice of revocation to our corporate secretary; or (4) attending the Company Stockholder Meeting and voting in person (virtually) by ballot.
If you hold your shares of Company Common Stock in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may also vote in person (virtually) at the Company Stockholder Meeting.
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All shares represented by properly executed proxies received in time for the Company Stockholder Meeting will be voted at the Company Stockholder Meeting in accordance with the instructions of the stockholder. Properly executed proxies that do not contain voting instructions will be voted (1) “FOR” the proposal regarding adoption of the Merger Agreement; (2) “FOR” the proposal to adjourn the Company Stockholder Meeting from time to time, if necessary or appropriate, as determined in good faith by the Board of Directors, including to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Company Stockholder Meeting; and (3) “FOR” the proposal to approve, by non-binding, advisory vote, certain compensation that will or may become payable by Natus to its named executive officers in connection with the Merger.
Shares of Company Common Stock represented at the Company Stockholder Meeting but not voted, including shares of Company Common Stock for which proxies have been received but for which stockholders have abstained, will be treated as present at the Company Stockholder Meeting for purposes of determining the presence or absence of a quorum for the transaction of all business.
Only shares affirmatively voted for the proposal regarding adoption of the Merger Agreement, including properly executed proxies that do not contain specific voting instructions, will be counted “FOR” that proposal. If you attend the Company Stockholder Meeting in person (virtually) or by proxy but abstain from voting, it will have the same effect as a vote “AGAINST” the proposal regarding adoption of the Merger Agreement, but will have no effect on the other proposals. If you do not execute a proxy card and do not attend the Company Stockholder Meeting in person (virtually), it will have the same effect as a vote “AGAINST” the proposal regarding adoption of the Merger Agreement, but will not have any effect on the other proposals (assuming, in the case of the proposal to approve, by non-binding advisory vote, certain compensation that will or may become payable by Natus to its named executive officers in connection with the Merger, that a quorum is present).
Effect on Natus if the Merger is Not Completed
If the Merger Agreement is not adopted by stockholders or if the Merger is not completed for any other reason, Company Stockholders will not receive any payment for their shares of Company Common Stock. Instead, Natus will remain an independent public company, Company Common Stock will continue to be listed and traded on NASDAQ and registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and we will continue to file periodic reports with the SEC. Under specified circumstances, Natus will be required to pay to Parent a termination fee upon the termination of the Merger Agreement.
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QUESTIONS AND ANSWERS
The following questions and answers address some commonly asked questions regarding the Merger, the Merger Agreement and the Company Stockholder Meeting. These questions and answers may not address all questions that are important to you. 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 we refer to in this proxy statement. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions in the section of this proxy statement captioned “Where You Can Find More Information.”
Q:
Why am I receiving these materials?
A:
The Board of Directors is furnishing this proxy statement and form of proxy card to the holders of shares of Company Common Stock of Natus in connection with the solicitation of proxies to be voted at the Company Stockholder Meeting.
Q:
What am I being asked to vote on at the Company Stockholder Meeting?
A:
You are being asked to vote on the following proposals:
1)
To adopt the Merger Agreement pursuant to which Merger Sub will be merged with and into Natus and Natus will continue as the surviving corporation of the Merger and a wholly owned subsidiary of Parent (the “Merger”);
2)
To approve the adjournment of the Company Stockholder Meeting from time to time, if necessary or appropriate, as determined in good faith by the Board of Directors, including to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Company Stockholder Meeting; and
3)
To approve, by non-binding, advisory vote, certain compensation that will or may become payable by Natus to its named executive officers in connection with the Merger.
Q:
Who is entitled to vote at the Company Stockholder Meeting?
A:
Holders of Company Common Stock as of [], 2022 (the “record date”) are entitled to notice of the Company Stockholder Meeting and to vote at the Company Stockholder Meeting. Each holder of shares of Company Common Stock is entitled to cast one vote on each matter properly brought before the Company Stockholder Meeting for each share of Company Common Stock owned as of the record date.
Q:
Why are you having a virtual Company Stockholder Meeting?
A:
We elected to use a virtual meeting due to the ongoing public health impact of the coronavirus outbreak (COVID-19) and to support the health and well-being of our directors, employees and stockholders, as well as our positive experiences with virtual meetings.
Q:
How can I attend a virtual Company Stockholder Meeting?
A:
The Company Stockholder Meeting will be held on [], 2022, at [], Eastern Time via live webcast on the Internet at www.virtualshareholdermeeting.com/NTUS2022SM. Only stockholders of record of shares of our Company Common Stock as of the close of business on the record date, may participate in the Company Stockholder Meeting, including voting and asking questions during the virtual meeting. You will not be able to attend the Company Stockholder Meeting physically in person.
Only stockholders of record are entitled to participate in, vote at and examine the stockholders list during the Company Stockholder Meeting. All stockholders with a 16-digit control number have the ability to vote, participate in Q&A and view the stockholders list. Beneficial stockholders who did not receive a 16-digit control number from their bank or brokerage firm who wish to attend the meeting should follow the instructions from their bank or brokerage firm, including any requirement to obtain a legal proxy. Most brokerage firms or banks allow a stockholder to obtain a legal proxy either online or by mail.
Even if you plan to attend the Company Stockholder Meeting virtually, to ensure that your shares will be represented and voted at the Company Stockholder Meeting we encourage you to sign, date and return the
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enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the internet or by telephone. If you attend the Company Stockholder Meeting and vote virtually by ballot, your vote will revoke any proxy previously submitted by you with respect to the shares so voted at the Company Stockholder Meeting.
If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your broker or other agent cannot vote on any of the proposals, including the proposal to adopt the Merger Agreement, without your instructions. If you hold your shares in “street name,” you may not vote your shares at the Company Stockholder Meeting unless you obtain a “legal proxy” from your bank, broker or other nominee and submit it to the Company in the manner described above.
Q:
What is the proposed Merger and what effects will it have on Natus?
A:
The proposed Merger is the acquisition of Natus by Parent. If the proposal to adopt the Merger Agreement is adopted by stockholders and the other closing conditions under the Merger Agreement have been satisfied or waived, Merger Sub will merge with and into Natus with Natus continuing as the Surviving Corporation. As a result of the Merger, Natus will become a wholly owned subsidiary of Parent, and Company Common Stock will no longer be publicly traded and will be delisted from NASDAQ. In addition, Company Common Stock will be deregistered under the Exchange Act, and we will no longer file periodic reports with the SEC.
Q:
What will I receive if the Merger is completed?
A:
Upon completion of the Merger, you will be entitled to receive the Per Share Price for each share of Company Common Stock that you own. For example, if you own 100 shares of Company Common Stock, you will receive $3,350.00 in cash in exchange for your shares of Company Common Stock, less any applicable withholding taxes.
Q:
How does the Per Share Price compare to the unaffected market price of the Company Common Stock?
A:
The relationship of the Per Share Price to the trading price of the Company Common Stock constituted a premium of approximately 28.6% to the closing price of $26.05 on April 14, 2022, the last trading day prior to the execution of the Merger Agreement.
Q:
What do I need to do now?
A:
We encourage you to read this proxy statement, the annexes to this proxy statement and the documents that we refer to in this proxy statement carefully and consider how the Merger affects you. Then sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying reply envelope, or grant your proxy electronically over the internet or by telephone, so that your shares can be voted at the Company Stockholder Meeting. If you hold your shares in “street name,” please refer to the voting instruction forms provided by your bank, broker or other nominee to vote your shares. Please do not send your stock certificates with your proxy card.
Q:
Should I send in my stock certificates now?
A:
No. After the Merger is completed, you will receive a letter of transmittal containing instructions for how to send your stock certificates to the payment agent in order to receive the appropriate cash payment for the shares of Company Common Stock represented by your stock certificates, as described in the section of this proxy statement captioned “The Merger Agreement—Exchange of Certificates and Payment Procedures.” You should use the letter of transmittal to exchange your stock certificates for the cash payment to which you are entitled. Please do not send your stock certificates with your proxy card.
If your shares are held in “street name” by your broker, bank, or other nominee, you will receive instructions from your broker, bank or other nominee as to how to effect the surrender of your shares held in “street name.”
Q:
What happens if I sell or otherwise transfer my shares of Company Common Stock after the record date but before the Company Stockholder Meeting?
A:
The record date for the Company Stockholder Meeting is earlier than the date of the Company Stockholder Meeting and the date the Merger is expected to be completed. If you sell or transfer your shares of
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Company Common Stock after the record date but before the Company Stockholder Meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you sell or otherwise transfer your shares and each of you notifies Natus in writing of such special arrangements, you will transfer the right to receive the Per Share Price, if the Merger is completed, to the person to whom you sell or transfer your shares, but you will retain your right to vote those shares at the Company Stockholder Meeting. Even if you sell or otherwise transfer your shares of Company Common Stock after the record date, we encourage you to sign, date and return the enclosed proxy card in the accompanying reply envelope or grant your proxy electronically over the internet or by telephone.
Q:
How does the Board of Directors recommend that I vote?
A:
The Board of Directors, after considering the various factors described in the section of this proxy statement captioned “The Merger—Recommendation of the Board of Directors and Reasons for the Merger,” has unanimously (1) determined that it is in the best interests of Natus and Company Stockholders, and declared it advisable, to enter into the Merger Agreement and consummate the Merger upon the terms and subject to the conditions set forth therein; (2) approved the execution and delivery of the Merger Agreement by Natus, the performance by Natus of its covenants and other obligations thereunder, and the consummation of the Merger upon the terms and conditions set forth therein; and (3) resolved to recommend that Company Stockholders adopt the Merger Agreement in accordance with the DGCL.
The Board of Directors recommends that you vote (1) “FOR” the adoption of the Merger Agreement in accordance with the DGCL; (2) “FOR” the proposal to adjourn the Company Stockholder Meeting from time to time, if necessary or appropriate, as determined in good faith by the Board of Directors, including to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Company Stockholder Meeting; and (3) “FOR” the proposal to approve, by non-binding, advisory vote, certain compensation that will or may become payable by Natus to its named executive officers in connection with the Merger.
Q:
What happens if the Merger is not completed?
A:
If the Merger Agreement is not adopted by stockholders or if the Merger is not completed for any other reason, stockholders will not receive any payment for their shares of Company Common Stock. Instead, Natus will remain an independent public company, Company 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. Please see the section of this proxy statement captioned “The Merger—Effect on Natus if the Merger is Not Completed.”
Under specified circumstances, Natus will be required to pay Parent a termination fee upon the termination of the Merger Agreement, as described in the section of this proxy statement captioned “The Merger Agreement—Termination of the Merger Agreement; Termination Fees.”
Q:
What constitutes a quorum?
A:
The stockholders of Natus representing a majority of the issued and outstanding Company Common Stock entitled to vote at the Company Stockholder Meeting, present in person (virtually) or represented by proxy, will constitute a quorum for the transaction of any business at such meeting. As of the record date, [] shares of Company Common Stock will be required to obtain a quorum. Abstentions and any broker non-votes (if any) are considered as present for the purpose of determining the presence of a quorum.
Q:
What vote is required to adopt the Merger Agreement?
A:
The affirmative vote of the holders of a majority of the voting power of the outstanding shares of the Company’s capital stock entitled to vote thereon is required to adopt the Merger Agreement.
The failure of any stockholder of record to (1) submit a signed proxy card; (2) grant a proxy over the internet or by telephone; or (3) vote virtually by ballot at the Company Stockholder Meeting will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement. If you hold your shares in “street name”, the failure to instruct your bank, broker or other nominee how to vote your shares will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement. Abstentions will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement.
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Q:
What vote is required to approve the proposal to adjourn the Company Stockholder Meeting from time to time, if necessary or appropriate, as determined in good faith by the Board of Directors, including to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Company Stockholder Meeting?
A:
Approval of the proposal to adjourn the Company Stockholder Meeting requires the affirmative vote of a majority of the votes cast affirmatively or negatively at the Company Stockholder Meeting, regardless of whether a quorum is present.
The failure of any stockholder of record to: (1) submit a signed proxy card; (2) grant a proxy over the Internet or by telephone; or (3) vote virtually by ballot at the Company Stockholder Meeting will not have any effect on the adjournment proposal. If you hold your shares in “street name,” the failure to instruct your bank, broker or other nominee how to vote your shares will not have any effect on the adjournment proposal. Abstentions will not have any effect on the adjournment proposal.
Q:
What vote is required to approve, by non-binding, advisory vote, certain compensation that will or may become payable by Natus to its named executive officers in connection with the Merger?
A:
Approval, by non-binding, advisory vote, of certain compensation that will or may become payable by Natus to its named executive officers in connection with the Merger requires the affirmative vote of a majority of the votes cast affirmatively or negatively at the Company Stockholder Meeting.
The failure of any stockholder of record to (1) submit a signed proxy card; (2) grant a proxy over the internet or by telephone; or (3) vote virtually by ballot at the Company Stockholder Meeting will not, assuming a quorum is present, have any effect on the proposal to approve, by non-binding advisory vote, of certain compensation that will or may become payable by Natus to its named executive officers in connection with the Merger. If you hold your shares in “street name,” the failure to instruct your bank, broker or other nominee how to vote your shares will not, assuming a quorum is present, have any effect on the compensation proposal. Abstentions will not, assuming a quorum is present, have any effect on the compensation proposal.
Q:
Why am I being asked to cast a non-binding, advisory vote regarding certain compensation that will or may become payable by Natus to its named executive officers in connection with the Merger?
A:
SEC rules require Natus to seek a non-binding, advisory vote regarding certain compensation that will or may become payable by Natus to its named executive officers in connection with the Merger.
Q:
What is the compensation that will or may become payable by Natus to its named executive officers in connection with the Merger for purposes of this advisory vote?
A:
The compensation that will or may become payable by Natus to its named executive officers in connection with the Merger is certain compensation that is tied to or based on the Merger and payable to certain of Natus’ named executive officers. For further detail, please see the section in this proxy statement captioned “Proposal 3: Advisory, Non-Binding Vote to Approve Certain Merger Related Executive Compensation Arrangements.”
Q:
What will happen if stockholders do not approve the compensation that will or may become payable by Natus to its named executive officers in connection with the Merger at the Company Stockholder Meeting?
A:
Approval of the compensation that will or may become payable by Natus to its named executive officers in connection with the Merger is not a condition to completion of the Merger. The vote with respect to the compensation that will or may become payable by Natus to its named executive officers in connection with the Merger is an advisory vote and will not be binding on Natus or Parent. If the Merger Agreement is adopted by the stockholders and the Merger is completed, the compensation that will or may become payable by Natus to its named executive officers in connection with the Merger may be paid to Natus’ named executive officers even if stockholders do not adopt the payment of that compensation. The underlying plans and arrangements providing for such compensation are contractual in nature and are not, by their terms, subject to stockholder approval.
Q:
Are there any other risks to me from the Merger that I should consider?
A:
Yes. There are risks associated with all business combinations, including the Merger. For further detail, please see the section of this proxy statement captioned “Forward-Looking Statements.”
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Q:
What is the difference between holding shares as a stockholder of record and as a beneficial owner?
A:
If your shares are registered directly in your name with our transfer agent, Broadridge Financial Solutions, Inc., you are considered, with respect to those shares, to be the “stockholder of record” as of the record date. In this case, this proxy statement and your proxy card have been sent directly to you by Natus.
If your shares are held through a bank, broker or other nominee as of the record date, you are considered the “beneficial owner” of shares of Company Common Stock held in “street name.” In that case, this proxy statement has been forwarded to you by your bank, broker or other nominee who is considered, with respect to those shares, to be the stockholder of record. As the beneficial owner, you have the right to direct your bank, broker or other nominee how to vote your shares by following their instructions for voting. You are also invited to attend the Company Stockholder Meeting. However, because you are not the stockholder of record, you may not vote your shares in person (virtually) at the Company Stockholder Meeting unless you obtain a “legal proxy” from your bank, broker or other nominee.
Q:
Will my shares held in “street name” or another form of record ownership be combined for voting purposes with shares I hold of record?
A:
No. For voting purposes, any shares you may hold in “street name” will be deemed to be held by a different stockholder than any shares you hold of record, and as a result, any shares held in “street name” will not be combined for voting purposes with shares that you hold of record. Similarly, if you own shares in various registered forms, such as jointly with your spouse, as trustee of a trust or as custodian for a minor, you will receive, and will need to sign and return, a separate proxy card for the shares held in each such form, because they are held in a different form of record ownership. Shares of Company Common Stock held by a corporation or business entity must be voted by an authorized officer of the entity.
Q:
How may I vote?
A:
If you are a stockholder of record (that is, if your shares of Company Common Stock are registered in your name with Broadridge Financial Solutions, Inc., our transfer agent), there are four ways to vote:
by signing and returning the enclosed proxy card in the accompanying prepaid reply envelope;
by visiting the internet at the address on your proxy card;
by calling toll-free (within the U.S. or Canada) the phone number on your proxy card; or
by attending the Company Stockholder Meeting and voting virtually by ballot.
A control number, located on your proxy card, is designed to verify your identity and allow you to vote your shares of Company Common Stock, and to confirm that your voting instructions have been properly recorded when voting electronically over the internet or by telephone. Please be aware that, although there is no charge for voting your shares, if you vote electronically over the internet or by telephone, you may incur costs such as internet access and telephone charges for which you will be responsible.
Even if you plan to attend the Company Stockholder Meeting in person (virtually), you are strongly encouraged to vote your shares of Company Common Stock by proxy. If you are a record holder or if you obtain a “legal proxy” to vote shares that you beneficially own, you may still vote your shares of Company Common Stock virtually by ballot at the Company Stockholder Meeting even if you have previously voted by proxy. If you are present at the Company Stockholder Meeting and vote virtually by ballot, your previous vote by proxy will not be counted.
If your shares are held in “street name” through a bank, broker or other nominee, you may vote through your bank, broker or other nominee by completing and returning the voting form provided by your bank, broker or other nominee, or, if such a service is provided by your bank, broker or other nominee, electronically over the internet or by telephone. To vote over the internet or by telephone through your bank, broker or other nominee, you should follow the instructions on the voting form provided by your bank, broker or nominee.
Q:
If my broker holds my shares in “street name,” will my broker vote my shares for me without receiving voting instructions from me?
A:
No. Your bank, broker or other nominee is permitted to vote your shares on any proposal currently
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scheduled to be considered at the Company Stockholder Meeting only if you instruct your bank, broker or other nominee how to vote. You should follow the procedures provided by your bank, broker or other nominee to vote your shares. Without instructions, your shares will not be voted on such proposals, which will have the same effect as if you voted against adoption of the Merger Agreement, but will have no effect on the proposal to adjourn the Company Stockholder Meeting from time to time, if necessary or appropriate, as determined in good faith by the Board of Directors, including to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Company Stockholder Meeting, or, assuming a quorum is present, the proposal to approve, by non-binding, advisory vote, certain compensation that will or may become payable by Natus to its named executive officers in connection with the Merger.
Q:
May I change my vote after I have mailed my signed proxy card?
A:
Yes. If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the Company Stockholder Meeting by:
signing another proxy card with a later date and returning it to us in accordance with the instructions therein prior to the Company Stockholder Meeting;
submitting a new proxy electronically over the internet or by telephone after the date of the earlier submitted proxy but prior to the Company Stockholder Meeting;
delivering a written notice of revocation to the corporate secretary; or
attending the Company Stockholder Meeting and voting virtually by ballot.
If you hold your shares of Company Common Stock in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may also vote virtually at the Company Stockholder Meeting if you obtain a “legal proxy” from your bank, broker or other nominee.
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 Company Common Stock. The written document describing the matters to be considered and voted on at the Company Stockholder Meeting is called a “proxy statement.” The document used to designate a proxy to vote your shares of Company Common Stock is called a “proxy card.” Thomas J. Sullivan is the proxy holder for the Company Stockholder Meeting.
Q:
If a stockholder gives a proxy, how are the shares voted?
A:
Regardless of the method you choose to vote, the proxy holders will vote your shares in the way that you indicate. When completing the internet or telephone process or the proxy card, you may specify whether your shares 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 Company Stockholder Meeting.
If you properly sign your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted (1) “FOR” the adoption of the Merger Agreement; (2) “FOR” the proposal to adjourn the Company Stockholder Meeting from time to time, if necessary or appropriate, as determined in good faith by the Board of Directors, including to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Company Stockholder Meeting; and (3) “FOR” the proposal to approve, by non-binding, advisory vote, certain compensation that will or may become payable by Natus to its named executive officers in connection with the Merger.
Q:
What should I do if I receive more than one set of voting materials?
A:
Please sign, date and return (or grant your proxy electronically over the internet or by telephone) each proxy card and voting instruction card that you receive.
You may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you will receive more than one proxy card.
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Q:
Where can I find the voting results of the Company Stockholder Meeting?
A:
Natus will publish final voting results in a Current Report on Form 8-K to be filed with the SEC following the Company Stockholder Meeting. All reports that Natus files with the SEC are publicly available when filed. Please see the section of this proxy statement captioned “Where You Can Find More Information.”
Q:
Will I be subject to U.S. federal income tax upon the exchange of Company Common Stock for cash pursuant to the Merger?
A:
If you are a U.S. Holder (as defined in the section of this proxy statement captioned “Material U.S. Federal Income Tax Consequences of the Merger”), the exchange of Company Common Stock for cash pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes, which generally will require a U.S. Holder to recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between the amount of cash received by such U.S. Holder in the Merger and such U.S. Holder’s adjusted tax basis in the shares of Company Common Stock surrendered in the Merger.
A Non-U.S. Holder (as defined in the section of this proxy statement captioned “Material 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 Company Common Stock for cash in the Merger unless such Non-U.S. Holder has certain connections to the United States.
Because particular circumstances may differ, we recommend that you consult your tax advisor to determine the U.S. federal income tax consequences relating to the Merger in light of your own particular circumstances and any consequences arising under U.S. Federal non-income tax laws or the laws of any state, local or non-U.S. tax jurisdiction. A more complete description of the material U.S. federal income tax consequences of the Merger is provided in the section of this proxy statement captioned “Material U.S. Federal Income Tax Consequences of the Merger.”
Q:
What will the holders of Company Restricted Stock, Company Restricted Stock Units and Company Options receive in the Merger?
A:
At the Effective Time, except as set forth below with respect to Employee Interim Awards, each share of Company Restricted Stock outstanding as of immediately prior to the Effective Time, whether vested or unvested and whether or not granted pursuant to any Company Stock Plan, will be cancelled and converted into and will become a right to receive an amount in cash, without interest and subject to any required tax withholding, equal to the Per Share Price.
At the Effective Time, except as set forth below with respect to Employee Interim Awards or as set forth in the CEO Retention Agreement, each Company Restricted Stock Unit outstanding as of immediately prior to the Effective Time, whether vested or unvested and whether or not granted pursuant to any Company Stock Plan, will be cancelled and be converted into and will become a right to receive an amount in cash, without interest and subject to any required tax withholding, equal to (i) the amount of the Per Share Price; multiplied by (ii) (1) with respect to Company Restricted Stock Units that are only subject to time-vesting requirements, the total number of shares of Company Common Stock subject to such Company Restricted Stock Unit, and (2) with respect to Company Restricted Stock Units that are subject to time- and performance-vesting requirements, the total number of shares of Company Common Stock determined to be performance vested with the performance goals deemed achieved at maximum levels and with the remaining time-vesting requirements deemed satisfied.
At the Effective Time, any Company Restricted Stock and Company Restricted Stock Units that are Employee Interim Awards and are outstanding as of immediately prior to the Effective Time, whether vested or unvested and whether or not granted pursuant to any Company Stock Plan, will be treated at the Effective Time in the manner set forth above, provided that any applicable performance goals will be deemed achieved at target levels (rather than at maximum) and the number of shares subject to such Employee Interim Awards that will vest at the Effective Time will be prorated to reflect the portion of the applicable vesting period that has elapsed from the date of grant until the Effective Time (rather than vesting in full), and the remaining unvested portion of any Employee Interim Awards will be forfeited at the Effective Time.
At the Effective Time, each Company Option that is outstanding as of immediately prior to the Effective Time, whether vested or unvested and whether or not granted pursuant to any Company Stock Plan, and is an
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In-the-Money Company Option will be cancelled and converted into and will become a right to receive an amount in cash, without interest and subject to any required tax withholding, equal to (i) the amount of the Per Share Price (less the exercise price per share attributable to such Company Option), multiplied by (ii) the total number of shares of Company Common Stock that are issuable upon the full exercise of such Company Option.
At the Effective Time, each Company Option that is not an In-the-Money Company Option will be cancelled without any cash payment being made in respect thereof.
Pursuant to the CEO Retention Agreement, Mr. Sullivan agreed that he will not receive payment in respect of his Company Restricted Stock Units that are MSUs based on deemed achievement of performance goals at maximum levels and, instead Mr. Sullivan’s MSUs will be deemed attained at the level of performance actually achieved through the Closing based on the Per Share Price (which is approximately 143.4% of target, in the case of MSUs granted to Mr. Sullivan in December 2021, and 139.6% of target, in the case of MSUs granted to Mr. Sullivan in January 2022), consistent with the level of return to the Company’s stockholders pursuant to the Merger Agreement. The consequence to Mr. Sullivan will be a reduction by over $3,000,000 in the amount of gross proceeds that he otherwise was entitled to receive and would have received in respect of his MSUs.
Furthermore, pursuant to the CEO Retention Agreement, Mr. Sullivan agreed that an amount equal to $6,000,000 (the “Retention Payment”) payable to him at the Effective Time in respect of his Company Restricted Stock Units would not become payable at the Effective Time and, instead, would become payable 50% on the six-month anniversary of the Closing and 50% on the one-year anniversary of the Closing, subject to his continued employment with the Company until the relevant retention date. If Mr. Sullivan’s employment is terminated by the Company without cause, by Mr. Sullivan with good reason, or due to his death or disability, any then-unpaid portion of the Retention Payment shall be paid to him upon his termination (subject to, in the case of a termination by the Company without cause or by Mr. Sullivan for good reason, his execution and non-revocation of a release of claims). If Mr. Sullivan’s employment terminates for any other reason prior to the relevant retention date, he will immediately forfeit all portions of the Retention Payment that relate to a future retention date. Mr. Sullivan’s right to receive the Retention Payment is further subject to his continued compliance with certain restrictive covenants.
Q:
What will happen to the Employee Stock Purchase Plan?
A:
There are no outstanding purchase rights under the Company’s 2011 Employee Stock Purchase Plan. Even if the Company’s Amended and Restated 2011 Employee Stock Purchase Plan (“ESPP”) is adopted by the Company’s stockholders at its 2022 annual meeting, the Merger Agreement does not permit any employee to commence participation in the ESPP and requires that the ESPP be terminated as of the Effective Time.
Q:
When do you expect the Merger to be completed?
A:
We are working toward completing the Merger as quickly as possible and currently expect to complete the Merger in the third calendar quarter of 2022. However, the exact timing of completion of the Merger cannot be predicted because the Merger is subject to the closing conditions described in the section of this proxy statement captioned “The Merger Agreement—Conditions to the Merger,” many of which are outside of our control.
Q:
If the Merger is completed, how will I receive the cash for my shares?
A:
If the Merger is completed and your shares of Company Common Stock are held as uncertificated shares, the payment agent will issue and deliver to you a check or wire transfer for your shares without any further action on your part. If you are a stockholder of record with your shares held in certificated form, you will receive a letter of transmittal with instructions on how to send your shares of Company Common Stock to the payment agent in connection with the Merger. The payment agent will issue and deliver to you a check or wire transfer for your shares after you comply with these instructions. Please do not send your stock certificates with your proxy card. Please see the section in this proxy statement captioned “The Merger Agreement—Exchange of Certificates and Payment Procedures.”
If your shares are held in “street name” by your broker, bank, or other nominee, you will receive instructions from your broker, bank or other nominee as to how to effect the surrender of your shares held in “street name.”
Q:
Am I entitled to appraisal rights under the Delaware General Corporation Law?
A:
If the Merger is completed, stockholders who do not vote in favor of the adoption of the Merger Agreement,
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who continuously hold shares from the date they demand appraisal through the Effective Time, and who properly demand appraisal of their shares of Company Common Stock will be entitled, provided certain conditions set forth in Section 262(g) of the DGCL are met, to appraisal rights in connection with the Merger under Section 262 of the DGCL. This means that holders of shares of Company Common Stock may be entitled to have their shares of Company Common Stock appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of the shares of Company Common Stock, exclusive of any elements of value arising from the accomplishment or expectation of the Merger, together with interest to be paid on the amount determined to be fair value, if any, as determined by the court (subject, in the case of interest payments, to any voluntary cash payments made by the Surviving Corporation pursuant to subsection (h) of Section 262 of the DGCL). Stockholders who wish to seek appraisal of their shares of Company Common Stock are 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 additional detail in this proxy statement, and the relevant section of the DGCL regarding appraisal rights is reproduced in Annex C to this proxy statement.
Q:
Do any of Natus’ directors or officers have interests in the Merger that may differ from those of Company Stockholders generally?
A:
Yes. In considering the recommendation of the Board of Directors with respect to the proposal to adopt the Merger Agreement, you should be aware that our directors and executive officers have interests in the Merger that may be different from, or in addition to, the interests of stockholders generally. In (i) evaluating and negotiating the Merger Agreement; (ii) adopting the Merger Agreement and the Merger; and (iii) recommending that the Merger Agreement be adopted by stockholders, the Board of Directors was aware of and considered these interests to the extent that they existed at the time, among other matters. For more information, please see the section of this proxy statement captioned “The Merger—Interests of Natus’ Directors and Executive Officers in the Merger.”
Q:
Who can help answer my questions?
A:
If you have any questions concerning the Merger, the Company Stockholder Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of Company Common Stock, please contact our Proxy Solicitor:
MacKenzie Partners, Inc.
1407 Broadway, 27th Floor
New York, NY 10018
Toll-Free: +1 (800) 322-2885
E-mail:proxy@mackenziepartners.com
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FORWARD-LOOKING STATEMENTS
The following constitutes a “Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995: This proxy statement, the documents incorporated by reference in this proxy statement and information included in oral statements or other written statements made or to be made by us or on our behalf contain “forward-looking statements” that do not directly or exclusively relate to historical facts. These forward-looking statements generally can be identified by the use of words such as “anticipate,” “expect,” “plan,” “should,” “could,” “may,” “will,” “believe,” “estimate,” “forecast,” “goal,” “project,” and other words of similar meaning. Forward-looking statements in this proxy statement include, but are not limited to, statements about the benefits and effects of the transaction, the expected timing of the completion of the transaction, the amounts to be received by stockholders. Each forward-looking statement contained in this communication is subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statement. Applicable risks and uncertainties include, among others, the expected benefits of recent and anticipated corporate governance initiatives and the Company’s strategies for driving growth and long-term value for our stockholders. These statements relate to current estimates and assumptions of our management as of the date of this proxy statement and involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance, or achievements to differ materially from those expressed or implied by the forward-looking statements. Forward-looking statements are only predictions, and the actual events or results may differ materially. Natus cannot provide any assurance that its future results or the results implied by the forward-looking statements will meet expectations. The Company’s future results could differ materially due to a number of factors, including the business, social and economic impact of the COVID-19 outbreak on the Company’s business and results of operations, the ability of the Company to realize the anticipated benefits of corporate governance initiatives, its consolidation strategy and recent and anticipated governance initiatives, effects of competition, the Company’s ability to successfully integrate and achieve its profitability goals, the demand for Natus products and services, the impact of adverse global economic conditions and changing governmental regulations, including foreign exchange rate changes, on the Company’s target markets, the Company’s ability to expand its sales in international markets, the Company’s ability to maintain current sales levels in a mature domestic market, the Company’s ability to control costs, risks associated with bringing new products to market, the impact of supply chain disruptions, and the Company’s ability to fulfill product orders on a timely basis; and the risks identified under the heading “Risk Factors” in Natus’ Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on February 25, 2022, Natus’ Quarterly Report on Form 10-Q, filed with the SEC on May 6, 2022, as well as Natus’ subsequent Current Reports on Form 8-K and other information filed by Natus with the SEC. Please consult these documents for a more complete understanding of these risks and uncertainties. This list of factors is not intended to be exhaustive. Factors that may impact such forward-looking statements include:
The impact of the COVID-19 pandemic on Natus’ businesses, including our supply chain, projected results of operations, financial performance or other financial metrics;
The occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement, including a termination of the Merger Agreement under circumstances that could require Natus to pay a termination fee;
The failure to receive, on a timely basis or otherwise, the required approvals by Company Stockholders with regard to the merger agreement;
The risk that a closing condition to the Merger Agreement may not be satisfied;
Natus’ and Parent’s ability to complete the proposed Merger on a timely basis or at all;
The failure of the Merger to be completed on a timely basis or at all for any other reason;
The risks that Natus’ business may suffer as a result of uncertainties surrounding the merger;
The ability of Natus to retain and hire key personnel and maintain relationships with customers, suppliers and other business partners pending the consummation of the Merger;
The possibility of disruption to Natus’ business from the proposed Merger, including increased costs and diversion of management time and resources;
Limitations placed on Natus’ ability to operate its business under the merger agreement;
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General economic, business and political conditions;
The outcome of any legal proceedings that may be instituted against Natus or others relating to the Merger Agreement or the Merger;
Other financial, operational and legal risks and uncertainties detailed from time to time in Natus’ SEC reports;
The amount of the costs, fees, expenses and charges related to the Merger Agreement or the Merger; and
Risks that our stock price may decline significantly if the Merger is not completed.
Consequently, all of the forward-looking statements that we make in this proxy statement are qualified by the information contained or incorporated by reference herein, including (1) the information contained under this caption; and (2) the information contained under the caption “Risk Factors” and information in our consolidated financial statements and notes thereto included in our most recent filings on Forms 10-K and 10-Q. 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. Stockholders are advised to consult any future disclosures that 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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THE COMPANIES
Natus Medical Incorporated
Natus delivers innovative and trusted solutions to screen, diagnose, and treat disorders affecting the brain, neural pathways, and eight sensory nervous systems to advance the standard of care and improve patient outcomes and quality of life. The Company offers hardware, advanced software and algorithms, and consumables that provide stimulus, acquire and monitor physiological signals, and capture the body’s response. With sales in over 100 countries, Natus is a leader in neurodiagnostics, pediatric retinal imaging, and infant hearing screening, as well as a leading company in hearing assessment, hearing instrument fitting, balance, and intracranial pressure monitoring.
Natus’ common stock is quoted on the Nasdaq Global Select Market (“NASDAQ”) under the symbol “NTUS.”
Natus’ principal executive office is located at 3150 Pleasant View Road, Middleton, WI 53562, and its telephone number is 608-829-8500.
Prince Parent Inc.
Parent was formed by funds managed by ArchiMed on April 11, 2022 for the purpose of engaging in the transactions contemplated by the Merger Agreement, and has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement and arranging of the equity financing and any debt financing in connection with the Merger.
Prince Mergerco Inc.
Merger Sub is a wholly-owned direct subsidiary of Parent and was formed by funds managed by ArchiMed on April 11, 2022 for the purpose of engaging in the transactions contemplated by the Merger Agreement, and has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement and arranging of the equity financing and any debt financing in connection with the Merger.
Parent and Merger Sub are affiliated with an investor group comprised of funds managed by ArchiMed, a leading investment firm focused exclusively on the healthcare industry. Parent, Merger Sub and Natus will cause the Merger to be consummated pursuant to the DGCL by filing the Certificate of Merger with the Secretary of State of the State of Delaware at the Effective Time. Natus, as the Surviving Corporation, will be indirectly owned by ArchiMed.
Parent and Merger Sub have obtained equity and debt financing commitments for the transactions contemplated by the Merger Agreement, which will be available to fund the aggregate purchase price and certain other payments contemplated by, and subject to the terms and conditions of, the Merger Agreement. In addition, Med Platform II has also provided Natus with a limited guaranty in favor of Natus, which guarantees the payment of the Parent Termination Fee that may become payable by Parent under the Merger Agreement.
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THE COMPANY STOCKHOLDER MEETING
The enclosed proxy is solicited on behalf of the Board of Directors for use at the Company Stockholder Meeting.
Date, Time and Place
The Company Stockholder Meeting is scheduled to be held exclusively online via live webcast on the internet at www.virtualshareholdermeeting.com/NTUS2022SM on [•], 2022, at [•], Eastern Time.
Only stockholders of record are entitled to participate in, vote at and examine the stockholders list during the Company Stockholder Meeting. All stockholders with a 16-digit control number have the ability to vote, participate in Q&A and view the stockholders list. Beneficial stockholders who did not receive a 16-digit control number from their bank or brokerage firm who wish to attend the meeting should follow the instructions from their bank or brokerage firm, including any requirement to obtain a legal proxy. Most brokerage firms or banks allow a stockholder to obtain a legal proxy either online or by mail.
Purpose of the Company Stockholder Meeting
At the Company Stockholder Meeting, we will ask stockholders to vote on proposals to (i) adopt the Merger Agreement; (ii) adjourn the Company Stockholder Meeting from time to time, if necessary or appropriate, as determined in good faith by the Board of Directors, including to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Company Stockholder Meeting; and (iii) approve, by non-binding, advisory vote, certain compensation that will or may become payable by Natus to its named executive officers in connection with the Merger.
Record Date; Shares Entitled to Vote; Quorum
Only stockholders of record as of [•], 2022 (the “record date”) are entitled to notice of the Company Stockholder Meeting and to vote at the Company Stockholder Meeting. A list of stockholders entitled to vote at the Company Stockholder Meeting will be available at our principal executive offices, located at 3150 Pleasant View Road, Middleton, WI 53562, during regular business hours beginning for a period of no less than 10 days before the Company Stockholder Meeting and will be made available on the meeting website during the Company Stockholder Meeting.
As of the record date, there were [•] shares of Company Common Stock outstanding and entitled to vote at the Company Stockholder Meeting.
The stockholders of Natus representing a majority of the issued and outstanding Company Common Stock entitled to vote at the Company Stockholder Meeting, present in person (virtually) or represented by proxy, will constitute a quorum at the Company Stockholder Meeting. In the event that a quorum is not present at the Company Stockholder Meeting, it is expected that the meeting will be adjourned to solicit additional proxies.
Vote Required; Abstentions and Broker Non-Votes
Each share of Company Common Stock outstanding at the close of business on the record date is entitled to one vote on each of the proposals to be considered at the Company Stockholder Meeting.
The affirmative vote of the holders of a majority of the voting power of the outstanding shares of the Company’s Capital stock entitled to vote thereon as of the close of business on the record date is required to adopt the Merger Agreement. Adoption of the Merger Agreement by stockholders is a condition to the Closing of the Merger.
Regardless of whether a quorum is present, either the chairman of the meeting or the stockholders by the affirmative vote of a majority of the votes cast affirmatively or negatively, will have the power to adjourn the Company Stockholder Meeting. In the event that a quorum is not present at the Company Stockholder Meeting, the Company currently expects that the meeting will be adjourned to solicit additional proxies.
The affirmative vote of a majority of the votes cast affirmatively or negatively at the Company Stockholder meeting is required to approve the non-binding, advisory vote, of certain compensation that will or may become payable to Natus’ executive officers in connection with the Merger.
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If a stockholder abstains from voting, that abstention will have the same effect as if the stockholder voted “AGAINST” the proposal to adopt the Merger Agreement, but will have the no effect on the other proposals (assuming, in the case of the proposal to approve certain compensation that will or may become payable to Natus’ executive officers in connection with the Merger, that a quorum is present).
Each “broker non-vote” (if any) will also count as a vote “AGAINST” the proposal to adopt the Merger Agreement, but will have no effect on the other proposals. A “broker non-vote” generally occurs with respect to a specific proposal when a bank, broker or other nominee holding shares of Company Common Stock on your behalf is entitled to vote on at least one proposal at a meeting, so that such shares are present at the meeting, but does not vote on the proposal at issue because the bank, broker or other nominee has not received your voting instructions and lacks discretionary power to vote the shares of Company Common Stock on such proposal. Under applicable stock exchange rules, brokers, banks or other nominees have the discretion to vote your shares on routine matters if you fail to instruct your broker, bank or other nominee on how to vote your shares with respect to such matters. The proposals in this proxy statement are non-routine matters, and brokers, banks and other nominees therefore cannot vote on the proposals without your instructions such that it is anticipated that there will be no broker non-votes at the meeting.
Shares Held by Natus’ 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 Company Common Stock, representing approximately [•]% of the shares of Company Common Stock outstanding on the record date. All of our directors and executive officers have informed us that they intend to vote all of their shares of Company Common Stock (1) “FOR” the adoption of the Merger Agreement; (2) “FOR” the proposal to adjourn the Company Stockholder Meeting from time to time, if necessary or appropriate, as determined in good faith by the Board of Directors, including to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Company Stockholder Meeting; and (3) “FOR” the proposal to approve, by non-binding, advisory vote, certain compensation that will or may become payable by Natus to its named executive officers in connection with the Merger.
Voting of Proxies
If your shares are registered in your name with our transfer agent, Broadridge Financial Solutions, Inc., you may cause your shares to be voted by returning a signed and dated proxy card in the accompanying prepaid envelope, or you may vote at the Company Stockholder Meeting using the control number located on the enclosed proxy card. Additionally, you may grant a proxy electronically over the internet or by telephone 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 grant 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 according to your directions.
If you plan to attend the Company Stockholder Meeting and wish to vote virtually, you will need the control number located on the enclosed proxy card. If your shares are registered in your name, you are encouraged to vote by proxy even if you plan to attend the Company Stockholder Meeting virtually. If you attend the Company Stockholder Meeting and vote virtually by ballot, your vote will revoke any previously submitted proxy.
Voting instructions are included on your proxy card. All shares represented by properly signed and dated proxies received in time for the Company Stockholder Meeting will be voted at the Company Stockholder Meeting in accordance with the instructions of the stockholder. Properly signed and dated proxies that do not contain voting instructions will be voted (1) “FOR” the adoption of the Merger Agreement; (2) “FOR” the proposal to adjourn the Company Stockholder Meeting from time to time, if necessary or appropriate, as determined in good faith by the Board of Directors, including to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Company Stockholder Meeting; and (3) “FOR” the proposal to approve, by non-binding, advisory vote, certain compensation that will or may become payable by Natus to its named executive officers in connection with the Merger.
With respect to any other matters properly presented for a vote at the Company Stockholder Meeting, the proxy holders will vote your shares in accordance with their best judgment. If you fail to return your proxy card (and fail to grant a proxy by telephone or the Internet) and you are a holder of record on the record date, unless you attend the Company Stockholder Meeting and vote virtually, the effect will be that your shares of Company Common Stock will not be considered for purposes of determining whether a quorum is present at the Company
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Stockholder Meeting, will have the same effect as a vote against the proposal to adopt the Merger Agreement and will not have any effect on the other proposals (assuming, in the case of the proposal to approve certain compensation that will or may become payable to Natus’ executive officers in connection with the Merger, that a quorum is present).
If your shares of Company Common Stock are held in “street name” through a bank, broker or other nominee, you may vote through your bank, broker or other nominee by completing and returning the voting form provided by your bank, broker or other nominee or attending Company Stockholder Meeting and voting in person (virtually) with a “legal proxy” from your bank, broker or other nominee. If such a service is provided, you may vote over the Internet or telephone through your bank, broker or other nominee by following the instructions on the voting form provided by your bank, broker or other nominee. If you do not return your bank’s, broker’s or other nominee’s voting form, do not vote via the Internet or telephone through your bank, broker or other nominee, if possible, or do not attend the Company Stockholder Meeting and vote virtually with a “legal proxy” from your bank, broker or other nominee, it will have the same effect as if you voted “AGAINST” the proposal to adopt the Merger Agreement, but will not have any effect on the other proposals (assuming, in the case of the proposal to approve certain compensation that will or may become payable to Natus’ executive officers in connection with the Merger, that a quorum is present).
Revocability of Proxies
If you are a stockholder of record on the record date, you may change your vote or revoke your proxy at any time before it is voted at the Company Stockholder Meeting by:
signing another proxy card with a later date and returning it to us prior to the Company Stockholder Meeting;
submitting a new proxy electronically over the internet or by telephone after the date of the earlier submitted proxy and before the Company Stockholder Meeting;
delivering a written notice of revocation to our corporate secretary before the Company Stockholder Meeting; or
attending the Company Stockholder Meeting and voting in person (virtually) by ballot.
If you have submitted a proxy, your appearance at the Company Stockholder Meeting, in the absence of voting in person (virtually) or submitting an additional proxy or revocation, will not have the effect of revoking your prior proxy.
If you hold your shares of Company Common Stock in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may also vote in person (virtually) at the Company Stockholder Meeting by delivering a legal proxy pursuant to your bank, broker or other nominee's requirements.
Any adjournment, postponement or other delay of the Company Stockholder Meeting, including for the purpose of soliciting additional proxies, will allow stockholders who have already sent in their proxies to revoke them at any time prior to their use at the Company Stockholder Meeting as adjourned, postponed or delayed.
Board of Directors’ Recommendation
The Board of Directors, after considering various factors described under the section of this proxy statement captioned “The Merger—Recommendation of the Board of Directors and Reasons for the Merger,” has unanimously (1) determined that it is in the best interests of Natus and Company Stockholders, and declared it advisable, to enter into the Merger Agreement and consummate the Merger upon the terms and subject to the conditions set forth therein; (2) approved the execution and delivery of the Merger Agreement by Natus, the performance by Natus of its covenants and other obligations thereunder, and the consummation of the Merger upon the terms and conditions set forth therein; and (3) resolved to recommend that Company Stockholders adopt the Merger Agreement in accordance with the DGCL.
The Board of Directors recommends that you vote (1) “FOR” the adoption of the Merger Agreement in accordance with the DGCL; (2) “FOR” the proposal to adjourn the Company Stockholder Meeting from time to time, if necessary or appropriate, as determined in good faith by the Board of Directors, including to solicit additional
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proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Company Stockholder Meeting; and (3) “FOR” the proposal to approve, by non-binding, advisory vote, certain compensation that will or may become payable by Natus to its named executive officers in connection with the Merger.
Tabulation of Votes
A representative from MacKenzie Partners will serve as the inspector of election.
Solicitation of Proxies
The expense of soliciting proxies will be borne by Natus. We have retained MacKenzie Partners, Inc., a proxy solicitation firm (the “Proxy Solicitor”), to solicit proxies in connection with the Company Stockholder Meeting at a cost of $20,000, plus certain expenses. We will also indemnify the Proxy Solicitor against certain losses arising out of its provision of these services on our behalf. In addition, we may reimburse banks, brokers and other nominees representing beneficial owners of shares for their expenses in forwarding soliciting materials to such beneficial owners. Proxies may also be solicited by our directors, officers and employees, personally or by telephone, email, fax, over the internet or by 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 stockholders of the proposal to adopt the Merger Agreement, we anticipate that the Merger will be completed in the third calendar quarter of 2022.
Appraisal Rights
If the Merger is consummated, stockholders who do not vote in favor of the adoption of the Merger Agreement, who continuously hold such shares from the date they demand appraisal through the Effective Time and who properly perfect appraisal of their shares of Company Common Stock will be entitled, provided certain conditions set forth in Section 262 of the DGCL are met, to appraisal of their shares of Company Common Stock in connection with the Merger under Section 262 of the DGCL. This means that such holders of shares of Company Common Stock may be entitled to have their shares of Company Common Stock appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of their shares of Company Common Stock, exclusive of any elements of value arising from the accomplishment or expectation of the Merger, together with interest to be paid on the amount determined to be fair value, if any, as determined by the court (subject, in the case of interest payments, to any voluntary cash payments made by the Surviving Corporation pursuant to subsection (h) of Section 262 of the DGCL), so long as they comply with the procedures established by Section 262 of the DGCL. Due to the complexity of the appraisal process, Natus stockholders who wish to seek appraisal of their shares of Company Common Stock are encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights.
Stockholders considering seeking appraisal should be aware that the fair value of their shares of Company Common Stock as determined pursuant to Section 262 of the DGCL could be more than, the same as or less than the value of the Per Share Price that they would receive pursuant to the Merger Agreement if they did not seek appraisal of their shares of Company Common Stock.
To exercise your appraisal rights, you must (1) submit a written demand for appraisal to Natus before the vote is taken on the adoption of the Merger Agreement; (2) not vote, in person (virtually) or by proxy, in favor of the proposal to adopt the Merger Agreement; and (3) continue to hold the subject shares of Company Common Stock of record through the time (the “Effective Time”) Parent, Merger Sub and Natus cause the Merger to be consummated pursuant to the DGCL. Your failure to follow exactly the procedures specified under the DGCL will result in the loss of your appraisal rights. In addition, the Delaware Court of Chancery will dismiss appraisal proceedings as to all Natus stockholders who assert appraisal rights unless (x) the total number of shares of Company Common Stock entitled to appraisal exceeds 1% of Natus’ outstanding shares of Company Common Stock eligible for appraisal or (y) the value of the aggregate Per Share Price in respect of such shares exceeds $1 million. The DGCL requirements for exercising appraisal rights are described in further detail in this proxy statement, and the relevant section of the DGCL regarding appraisal rights is reproduced and attached as
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Annex C to this proxy statement. If you hold your shares of Company Common Stock through a bank, brokerage firm or other nominee and you wish to exercise appraisal rights, you should consult with your bank, brokerage firm or other nominee to determine the appropriate procedures for the making of a demand for appraisal by such bank, brokerage firm or nominee.
Householding of Company Stockholder Meeting Materials
Unless we have received contrary instructions, we may send a single copy of this proxy statement to any household at which two or more stockholders reside if we believe the stockholders are members of the same family. 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 you would like to receive your own set of our disclosure documents, follow the instructions described below. Similarly, if you share an address with another stockholder and together both of you would like to receive only a single set of our disclosure documents, follow these instructions.
If you are a stockholder of record, you may contact us by writing to Broadridge ICS, Householding Department, 51 Mercedes Way, Edgewood, New York 11717, or calling toll-free +1 800-542-1061. Eligible stockholders of record receiving multiple copies of this proxy statement can request householding by contacting us in the same manner. If a bank, broker or other nominee holds your shares, please contact your bank, broker or other nominee directly.
Questions and Additional Information
If you have any questions concerning the Merger, the Company Stockholder Meeting or the proxy statement, would like additional copies of the proxy statement or need help voting your shares of Company Common Stock, please contact our Proxy Solicitor:
MacKenzie Partners, Inc.
1407 Broadway, 27th Floor
New York, NY 10018
Toll-Free: +1 (800) 322-2885
E-mail: proxy@mackenziepartners.com
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PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT
We are asking you to adopt the Merger Agreement.
For a summary of and detailed information regarding this proposal, see the information about the Merger Agreement and the Merger throughout this proxy statement, including the information set forth in the sections captioned “The Merger” and “The Merger Agreement.” A copy of the Merger Agreement is attached to this proxy statement as Annex A. You are urged to read the Merger Agreement carefully in its entirety.
Under applicable law, we cannot complete the Merger without the affirmative vote of the holders of a majority of the voting power of the outstanding shares of Company capital stock entitled to vote thereon. If you abstain from voting or fail to cast your vote, in person (virtually) or by proxy, it will have the same effect as a vote against the proposal to adopt the Merger Agreement.
The Board of Directors unanimously recommends that you vote “FOR” this proposal.
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PROPOSAL 2: ADJOURNMENT OF THE COMPANY STOCKHOLDER MEETING
We are asking you to approve a proposal for one or more adjournments of the Company Stockholder Meeting from time to time, if necessary or appropriate, as determined in good faith by the Board of Directors, including to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Company Stockholder Meeting. If the stockholders of Natus approve the adjournment proposal, we could adjourn the Company Stockholder Meeting, and any adjourned session of the Company Stockholder Meeting, and use the additional time, among other things, to solicit additional proxies.
If, at the Company Stockholder Meeting, the number of shares of Company Common Stock present in person (virtually) or by proxy and voting in favor of the proposal to adopt the Merger Agreement is not sufficient to approve that proposal, we may move to adjourn the Company Stockholder Meeting in order to enable our directors, officers and employees to solicit additional proxies for the adoption of the Merger Agreement. In that event, we will ask the stockholders of Natus to vote only upon the adjournment proposal, and not the Merger Agreement proposal.
We retain full authority to the extent set forth in our bylaws and the DGCL (subject to the terms of the Merger Agreement) to adjourn the Company Stockholder Meeting for any other purpose without the consent of any stockholders of Natus.
The Board of Directors unanimously recommends that you vote “FOR” this proposal.
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PROPOSAL 3: ADVISORY, NON-BINDING VOTE TO APPROVE
CERTAIN MERGER RELATED EXECUTIVE COMPENSATION ARRANGEMENTS
Section 14A of the Exchange Act, which was enacted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, requires that we provide stockholders with the opportunity to vote to approve, on an advisory, non-binding basis, the payment of certain compensation that will or may become payable to Natus’ named executive officers by Natus in connection with the Merger, as disclosed in the section of this proxy statement captioned “The Merger—Interests of Natus’ Directors and Executive Officers in the Merger—Golden Parachute Compensation.”
We are asking stockholders to indicate their approval of the various compensation payments that will or may become payable by Natus to its named executive officers in connection with the Merger. These payments are set forth in the section of this proxy statement captioned “The Merger—Interests of Natus’ Directors and Executive Officers in the Merger—Golden Parachute Compensation” and the accompanying footnotes. In general, the various plans and arrangements pursuant to which these compensation payments may be made have previously formed part of Natus’ overall compensation program for our named executive officers and previously have been disclosed to stockholders as part of the compensation discussion and analysis and related sections of our annual proxy statements (other than the acceleration of vesting of equity-based awards pursuant to the Merger Agreement). These historical arrangements were approved and adopted by the Compensation Committee of the Board of Directors, which believed them to be reasonable and in line with marketplace norms. The CEO Retention Agreement, which was entered into with Mr. Sullivan by the Company and Parent in connection with the Merger, has the consequence of reducing the amounts that would otherwise be payable to Mr. Sullivan pursuant to the Merger Agreement and causing him to receive less favorable treatment of his equity-based awards as compared to the treatment of equity-based awards held by other employees of the Company.
Accordingly, we are seeking approval of the following resolution at the Company Stockholder Meeting:
“RESOLVED, that the stockholders of Natus Medical Incorporated approve, on a nonbinding, advisory basis, the compensation that will or may become payable by Natus to its named executive officers that is based on or otherwise relates to the Merger as disclosed pursuant to Item 402(t) of Regulation S-K in the section of this proxy statement captioned “The Merger—Interests of Natus’ Directors and Executive Officers in the Merger—Golden Parachute Compensation.”
Stockholders should note that this proposal is not a condition to completion of the Merger, and as an advisory vote, the result will not be binding on Natus, the Board of Directors or Parent. Further, the underlying plans and arrangements are contractual in nature and not, by their terms, subject to stockholder approval. Accordingly, regardless of the outcome of the advisory vote, if the Merger is consummated, our named executive officers will be eligible to receive the compensation that is based on or otherwise relates to the Merger in accordance with the terms and conditions applicable to those payments.
The Board of Directors unanimously recommends that you vote “FOR” this proposal.
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THE MERGER
This discussion of the merger (the “Merger”) of Prince Mergerco Inc. (“Merger Sub”) with and into Natus Medical Incorporated (“Natus”) is qualified in its entirety by reference to the Agreement and Plan of Merger, made and entered into as of April 17, 2022 (as amended from time to time, the “Merger Agreement”) by and among Natus, Prince Parent Inc. (“Parent”), and Merger Sub, 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.
Effect of the Merger
Upon the terms and subject to the conditions set forth in the Merger Agreement, if the Merger is completed, Merger Sub will be merged with and into Natus and Natus will continue as the Surviving Corporation of the Merger and a wholly owned subsidiary of Parent. As a result of the Merger, Company Common Stock will no longer be publicly traded and will be delisted from NASDAQ. At this time, all of the property, rights, privileges, powers and franchises of Natus, and Merger Sub will vest in the Surviving Corporation; and all debts, liabilities and duties of Natus and Merger Sub will become the debts, liabilities and duties of the Surviving Corporation. In addition, all outstanding shares of Company Common Stock will be deregistered under the Exchange Act, and we will no longer file periodic reports with the SEC. If the Merger is completed, you will not own any shares of the capital stock or any other rights or interest in the Surviving Corporation.
The Effective Time will occur upon the filing of the Certificate of Merger with the Secretary of State of the State of Delaware or at such later time as would be specified in the Certificate of Merger.
Effect on Natus if the Merger is Not Completed
If the Merger Agreement is not adopted by stockholders or if the Merger is not completed for any other reason, Company Stockholders will not receive any payment for their shares (or interests in shares) of Company Common Stock. Instead, Natus will remain an independent public company, Company 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. In addition, if the Merger is not completed, we expect that management will operate the business in a manner similar to that in which it is being operated today and that stockholders will continue to be subject to the same risks and opportunities to which they are currently subject, including risks related to the highly competitive industry in which Natus operates and risks related to adverse economic conditions.
Accordingly, if the Merger is not completed, we cannot assure you as to the effect of these risks and opportunities on the future value of your shares of Company Common Stock. If the Merger is not completed, the Board of Directors of Natus (the “Board of Directors”) will continue to evaluate and review Natus’ business operations, strategic direction and capitalization, among other things, and will make such changes as are deemed appropriate. If the Merger Agreement is not adopted by stockholders or if the Merger is not completed for any other reason, there can be no assurance that any other transaction acceptable to the Board of Directors will be offered or that Natus’ business, prospects or results of operation will not be adversely impacted.
In addition, upon termination of the Merger Agreement under specified circumstances, Natus will be required to pay Parent a termination fee. If the termination fee becomes payable by Natus due to (x) Natus’ termination of the Merger Agreement on or prior to 11:59 p.m., Eastern time, on May 22, 2022 (the “Cut-Off Date”) with respect to Natus entering into an alternative acquisition agreement with an Excluded Party (as such term is defined in the Merger Agreement), the amount of the termination fee will be $19,753,676, and (y) if the termination fee becomes payable under any other circumstance, the amount of the termination fee will be $39,507,352. For more information please see the section of this proxy statement captioned “The Merger Agreement—Termination of the Merger Agreement; Termination Fees.”
If the Merger Agreement is terminated (i) by the Company (A) if all of the closing conditions have been satisfied (other than those conditions that by their terms are to be satisfied at the Closing) and the Company is prepared to consummate the Merger but Parent and Merger Sub fail to consummate the Merger in accordance with the Merger Agreement or (B) in connection with Parent or Merger Sub breaching or failing to perform in any material respect its representations, warranties or covenants in a manner that would cause the related closing conditions to not be satisfied (subject to a cure period in certain circumstances), or (ii) if either party terminates because the Merger has not been consummated by the Outside Date (as defined in the section of this proxy
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statement captioned “The Merger Agreement—Termination of the Merger Agreement; Termination Fees”), and at the time of such termination, the Company was otherwise entitled to terminate the Merger Agreement for either of the foregoing reasons, then, in each case, Parent will be obligated to pay to the Company a one-time fee equal to $79,014,704 in cash. For more information please see the section of this proxy statement captioned “The Merger Agreement—Termination of the Merger Agreement; Termination Fees.”
The Per Share Price
At the Effective Time, and without any action required by any stockholder, each share of Company Common Stock that is outstanding immediately prior to the Effective Time (other than Owned Company Shares or Dissenting Company Shares (each as such terms are defined in the Merger Agreement), but including each share of Company Restricted Stock) will be cancelled and extinguished, and automatically converted into the right to receive cash in an amount equal to $33.50 without interest thereon and less any applicable withholding taxes.
After the Merger is completed, you will have the right to receive the Per Share Price, but you will no longer have any rights as a stockholder (except that stockholders who properly exercise their appraisal rights may have the right to receive a payment for the “fair value” of their shares of Company Common Stock as determined pursuant to an appraisal proceeding as contemplated by Delaware law, as described below under the caption “The Merger Agreement—Appraisal Rights”).
For more information regarding the treatment of Company Options and Company Restricted Stock Units, please see the section of this proxy statement captioned “—Interests of Natus’ Directors and Executive Officers in the Merger—Treatment of Natus Equity-Based Awards.”
Background of the Merger
The following chronology summarizes the key meetings and events that led to the signing of the Merger Agreement. This chronology does not purport to catalogue every conversation of or among the Board of Directors, Natus’ representatives or other parties.
As part of the ongoing consideration and evaluation of Natus’ long-term strategic goals and plans, the Board of Directors and Natus’ senior management periodically review, consider and assess Natus’ operations and financial performance, as well as overall industry conditions, as they may affect those strategic goals and plans. This review includes, among other items, the consideration of potential opportunities for business combinations, acquisitions and other financial and strategic alternatives.
In early January 2021, a private equity sponsor (“Financial Sponsor A”) submitted a proposal to acquire the Company for a per share price of $28 to $30 in cash. In mid-January 2021, the Board of Directors met and discussed and considered this proposal, and also in attendance were members of management and outside counsel. Outside counsel reviewed with the Board of Directors their fiduciary duties under Delaware law. In light of that conversation, the Board of Directors determined to retain a financial advisor. Shortly after that meeting, the Board of Directors met again to interview two financial advisors, one of whom was Stifel, Nicolaus & Company, Incorporated (“Stifel”). After evaluating both financial advisors, and discussing each financial advisor’s qualifications, credentials and independence in connection with serving as the Company’s financial adviser, the Board of Directors retained Stifel to be the Company’s financial advisor, based on Stifel’s expertise and experience in similar transactions and absence of conflicts. At a subsequent meeting, the Board of Directors met again, with representatives of Stifel and outside counsel in attendance. Outside counsel reviewed with the Board of Directors their fiduciary duties under Delaware law. Based on instruction by the Board of Directors, Stifel encouraged Financial Sponsor A to improve the terms of its proposal before due diligence access would be granted by the Company.
In early February 2021, Financial Sponsor A subsequently increased its proposal for a business combination with the Company to a per share price of $35 to $37 in cash. Outside counsel reviewed with the Board of Directors their fiduciary duties under Delaware law. The Board of Directors met, and also in attendance were members of management and outside counsel. The Board of Directors discussed and considered this improved proposal, and in mid-February 2021, at the direction of the Board of Directors, the Company and Financial Sponsor A entered into a confidentiality agreement (which contained a “standstill” provision that, among other things, would automatically terminate if the Company were to enter into a definitive agreement to sell more than 50% of its capital stock or consolidated assets), and the Company provided due diligence access to Financial Sponsor A.
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In early March 2021, while Financial Sponsor A was continuing its due diligence on the Company, outside counsel to Financial Sponsor A provided a draft merger agreement to the Company and its outside counsel. Thereafter, during March 2021, outside counsel for Financial Sponsor A and outside counsel for the Company discussed and negotiated the terms of the merger agreement.
In late March 2021, Financial Sponsor A informed Stifel that it no longer was willing to pay a price per share of $35 to $37 in cash. Shortly thereafter, the Board of Directors met, and also in attendance were members of management and representatives from Stifel and outside counsel. After outside counsel reviewed with the Board of Directors their fiduciary duties under Delaware law, the Board of Directors discussed this development, and determined to contact other potential financial and strategic parties who might have interest in the Company. The Board of Directors noted that contacting other parties had the risk of creating opportunities for public speculation that the Company was pursuing a sale, and that such speculation could be harmful to the Company and its employees and business partners. In light of these considerations, the Board of Directors determined that the risks of broadly contacting too many additional potential acquirers outweighed the benefits, and instead determined to instruct Stifel to contact a more tailored set of other potential parties. In late March 2021, pursuant to instructions from the Board of Directors, Stifel contacted two strategic parties and one financial sponsor, who the Board of Directors, in consultation with Stifel, believed would have synergies in connection with an acquisition of the Company. The two strategic parties declined to enter into confidentiality agreements. The one financial sponsor did sign a confidentiality agreement with the Company (which contained a “standstill” provision that, among other things, would automatically terminate if the Company were to enter into a definitive agreement to sell more than 50% of its capital stock or consolidated assets) and conducted limited due diligence but declined to proceed further.
At the end of March 2021, Financial Sponsor A communicated to Stifel that they would be willing to proceed at a price per share of $31. Shortly thereafter, the Board of Directors met, and also in attendance were members of management and representatives from Stifel and outside counsel. Outside counsel reviewed with the Board of Directors their fiduciary duties under Delaware law, after which the Board of Directors discussed this development and reviewed this revised proposal from Financial Sponsor A. The Board of Directors declined to make a definitive decision on the revised proposal by Financial Sponsor A at that time. The Board of Directors determined to contact additional other potential financial and strategic parties who might have interest in the Company. The Board of Directors again discussed and weighed the benefits of a targeted approach versus a broad approach to contacting other parties noted above. In light of these considerations, the Board of Directors again determined that the risks of broadly contacting too many additional potential acquirers outweighed the benefits, and instead determined to instruct Stifel to contact a more tailored set of other potential parties.
In early April 2021, pursuant to instructions from the Board of Directors, Stifel contacted an additional strategic party and three financial sponsors. The strategic party declined to enter into a confidentiality agreement with the Company, but each of the three financial sponsors entered into confidentiality agreements with the Company (each of which contained a “standstill” provision that, among other things, would automatically terminate if the Company were to enter into a definitive agreement to sell more than 50% of its capital stock or consolidated assets). Two of the three financial sponsors proceeded with due diligence but declined to proceed further. The third declined to proceed with due diligence.
The Board of Directors met again in early to mid-April 2021, and also in attendance were members of management and representatives from Stifel and outside counsel. After outside counsel reviewed with the Board of Directors their fiduciary duties under Delaware law, the Board of Directors further discussed the revised proposal of $31 per share in cash from Financial Sponsor A. The Board of Directors authorized Thomas Sullivan, then the senior independent director, to speak with Financial Sponsor A to encourage it to improve its proposal. In mid to late April 2021, Mr. Sullivan spoke with a representative at Financial Sponsor A, and Financial Sponsor A thereafter signaled a willingness to improve its proposal, offering to acquire the Company for a per share price of $31.50 in cash. However, in early May 2021, Financial Sponsor A notified the Company that it was no longer willing to proceed with a transaction with the Company.
In mid-2021, the Company and ArchiMed SAS (“ArchiMed”) had discussions concerning the Company’s interest in acquiring a portfolio company of ArchiMed (the “Portfolio Company”). These discussions were preliminary and high level. The Company received information on the Portfolio Company and conducted preliminary due diligence, but the Company did not provide any information of the Company to ArchiMed.
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In August 2021, the Company’s management met with a strategic party (“Strategic Party A”) as part of the normal course of business. During this meeting, Strategic Party A expressed interest in pursuing a strategic transaction with the Company. In mid-August 2021, the Board of Directors met, and also in attendance were members of management and representatives from Stifel and outside counsel. After outside counsel reviewed with the Board of Directors their fiduciary duties under Delaware law, the Board of Directors discussed this interest from Strategic Party A, and authorized management to cause the Company to enter into a confidentiality agreement with Strategic Party A. The Board of Directors also determined to contact other financial sponsors and strategic parties to assess their interest in a business combination transaction with the Company. The Board of Directors again discussed and weighed the benefits of a targeted approach versus a broad approach to contacting other parties noted above. In light of these considerations, the Board of Directors again determined that the risks of broadly contacting too many additional potential acquirers outweighed the benefits, and instead determined to instruct Stifel to contact a more tailored set of other potential parties.
In late August 2021, the Company entered into a confidentiality agreement with Strategic Party A (which contained a “standstill” provision that, among other things, would automatically terminate if the Company were to enter into a definitive agreement to sell more than 50% of its capital stock or consolidated assets). Subsequent to entering into the confidentiality agreement, the Company’s management met with Strategic Party A’s management to provide due diligence information.
In September 2021, Stifel, at the instruction of the Board of Directors, contacted two additional financial sponsors and one strategic party to assess their interest in a business combination transaction with the Company. Each of these parties signed a confidentiality agreement with the Company (which contained a “standstill” provision that, among other things, would automatically terminate if the Company were to enter into a definitive agreement to sell more than 50% of its capital stock or consolidated assets). All three parties were then given access to due diligence information. The two financial sponsors declined to proceed further. The strategic party indicated interest in certain segments of the Company but not the entire Company, but such a transaction would not, in the view of the Board of Directors, have been viewed favorably by the Company Stockholders. The strategic party did not indicate a definitive price it would be willing to pay for the segments in which it was interested.
During the month of September 2021, Strategic Party A continued its due diligence investigation of the Company. In late September 2021, Strategic Party A submitted a proposal to acquire the Company for $28 per share in cash.
In early October 2021, the Board of Directors met, and also in attendance were members of management and representatives from Stifel and outside counsel. After outside counsel reviewed with the Board of Directors their fiduciary duties under Delaware law, the Board of Directors discussed the proposal from Strategic Party A. The Board of Directors authorized the chairman of the Board of Directors and the senior independent director, and Stifel, to encourage Strategic Party A to improve the terms of its proposal. The Board of Directors also discussed that Strategic Party A may make a request of exclusivity, and that such a request would be acceptable if Strategic Party A improved its proposal. In early October 2021, after the chairman of the Board of Directors, the senior independent director and Stifel met with Strategic Party A, Strategic Party A submitted an improved proposal, which it stated was its best and final offer, to acquire the Company for $32 per share in cash, conditioned upon a short period of exclusivity. Thereafter, the Company and Strategic Party A signed an exclusivity agreement providing for a short period of exclusivity. The Company’s outside counsel then sent a draft merger agreement to Strategic Party A’s outside counsel, and the parties negotiated that merger agreement, and Strategic Party A continued its due diligence, during the remainder of October 2021 and early November 2021. In early November 2021, Strategic Party A declined to proceed with the transaction.
On December 17, 2021, the Company announced the transition of its chief executive officer from Jonathan Kennedy to Thomas J. Sullivan, as further described in the Company’s Current Report on Form 8-K filed by the Company with the SEC on December 17, 2021.
On December 21, 2021, Mr. Denis Ribon from ArchiMed SAS contacted Mr. Sullivan to see if Mr. Sullivan would be interested in meeting.
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On January 5, 2022, Mr. Sullivan and Mr. Ribon, along with two colleagues, met by video conference to discuss their two companies. Only public information was discussed at this meeting. The parties agreed to a face to face meeting on January 19, 2022. Mr. Sullivan informed the Chairman of the Board of Directors of this planned meeting on January 7, 2022.
On January 18, ArchiMed sent a presentation, which contained solely public information, about ArchiMed to Mr. Sullivan.
On January 19, 2022, Mr. Sullivan met with representatives of ArchiMed to discuss their companies. Mr. Sullivan only disclosed publicly available financial information about the Company at this meeting. Two days later, on January 21, 2022, Mr. Sullivan held a video call with representatives of ArchiMed to discuss the Company’s interest in the Portfolio Company. Again, Mr. Sullivan only disclosed publicly available financial information about the Company at this meeting.
On January 25, 2022, ArchiMed’s representative, Mr. Bateman, and Mr. Sullivan discussed the Company’s interest in the Portfolio Company. An additional meeting was held on January 28, 2022 for the same purpose.
On February 1, 2022 Mr. Sullivan informed the Board of Directors of meetings he had had with external parties in the normal course of the Board meeting. Mr. Sullivan noted that he suspected ArchiMed had an interest in acquiring the Company.
On February 4, 2022, Mr. Bateman informed Mr. Sullivan that ArchiMed was considering submitting a proposal for a business combination with the Company. Mr. Sullivan said he would promptly bring any offer to the Board of Directors. On February 7, 2022, Mr. Sullivan informed the Chairman of the Board of Directors that ArchiMed may be submitting a proposal for a business combination with the Company.
On February 9, 2022, Mr. Sullivan and Mr. Bateman discussed the Company’s interests in the Portfolio Company.
On February 16, 2022, ArchiMed submitted a written proposal to Mr. Sullivan to acquire the Company for $32 per share in cash (the “Initial ArchiMed Proposal”). Mr. Sullivan promptly forwarded the proposal to the Board of Directors.
The Board of Directors met on February 20, 2022, to discuss the Initial ArchiMed Proposal, and also in attendance was outside counsel. Outside counsel reviewed with the Board of Directors their fiduciary duties under Delaware law. The Board of Directors reviewed the financials for the five year strategic plan presented by management. The Board of Directors determined to direct Stifel to engage with ArchiMed and to encourage ArchiMed to improve the terms of the Initial ArchiMed Proposal. The Board of Directors also authorized the Company to enter into a confidentiality agreement with ArchiMed, if management determined such action would be helpful in encouraging ArchiMed to improve the terms of its proposal.
On February 21, 2022, representatives of Stifel spoke with representatives of ArchiMed. Stifel encouraged ArchiMed to improve the terms of the Initial ArchiMed Proposal.
On February 23, 2022, Jefferies LLC, financial advisor to ArchiMed (“Jefferies”), contacted Stifel. Jefferies communicated that ArchiMed may be willing to increase the per share price in the Initial ArchiMed Proposal but would require access to due diligence information as a first step.
On February 25, 2022, the Company and ArchiMed entered into a confidentiality agreement (which contained a “standstill” provision that, among other things, would automatically terminate if the Company were to enter into a definitive agreement to sell more than 50% of its capital stock or consolidated assets).
During March 2021, ArchiMed conducted its due diligence of the Company.
On March 17, 2022, the Board of Directors met, with representatives from Stifel in attendance. The Board of Directors confirmed that the Management Projections were authorized and directed to be used by Stifel for the purposes of Stifel’s financial analysis of fairness of the consideration proposed to be paid in the proposed transaction. The representatives from Stifel then reviewed the Initial ArchiMed Proposal from a financial point of view based on information provided by the Company’s management, including the Management Projections, and publicly available information. Representatives from Stifel also briefed the Board of Directors on ArchiMed’s progress to date on due diligence matters. The representatives from Stifel briefed the Board of Directors on the absence of any material relationships between Stifel and ArchiMed.
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On March 28, 2022, ArchiMed submitted a revised written proposal to acquire the Company for $33 per share in cash (the “1st Revised ArchiMed Proposal”).
On March 30, 2022, the Board of Directors held a meeting. Also in attendance were members of management, representatives from Stifel and a representative from Davis Polk & Wardwell LLP, the Company’s outside counsel (“Davis Polk”). The representative of Davis Polk reviewed with the Board of Directors their fiduciary duties under Delaware law. The Board of Directors discussed the 1st Revised ArchiMed Proposal. The representatives from Stifel reviewed the 1st Revised ArchiMed Proposal from a financial point of view based on information provided by the Company’s management, including the Management Projections, and publicly available information. The Board of Directors then temporarily adjourned the meeting. Later that day, the Board of Directors resumed the meeting with only the directors in attendance. The Board of Directors determined to instruct Stifel to encourage ArchiMed to improve the terms of the 1st Revised ArchiMed Proposal. The Board of Directors also determined to instruct Davis Polk to prepare a form of Merger Agreement with terms that are consistent with the terms of the merger agreement that had been negotiated with Financial Sponsor A in March 2021 that could be used for a transaction between the Company and ArchiMed.
On March 31, 2022, Stifel provided to Jefferies the form of Merger Agreement prepared by Davis Polk for a proposed transaction between the Company and ArchiMed, but also communicated to Jefferies that in order for the Company to be willing to continue discussions with ArchiMed and to continue to provide due diligence information to ArchiMed, that ArchiMed would need to improve its 1st Revised ArchiMed Proposal.
On April 1, 2022, Jefferies, on behalf of ArchiMed, delivered to Stifel a further revised proposal to acquire the Company for $33.50 per share in cash (the “2nd Revised ArchiMed Proposal”). Jefferies communicated, on behalf of ArchiMed, that this was ArchiMed’s best and final offer, and would be conditioned upon ArchiMed receiving exclusivity through 11:59 p.m. Pacific time on April 13, 2022.
On April 2, 2022, the Board of Directors met. Also in attendance were members of management, representatives from Stifel and representatives from Davis Polk. Representatives from Stifel reviewed with the Board of Directors the 2nd Revised ArchiMed Proposal from a financial point of view, and informed the Board of Directors that the 2nd Revised ArchiMed Proposal was ArchiMed’s best and final offer. The Board of Directors noted that ArchiMed had twice raised its price per share, and that there was a significant risk that were the Board of Directors to delay the process by seeking a further increase in the price per share, that ArchiMed would discontinue discussions. The representative from Davis Polk reviewed with the Board of Directors the terms of the Merger Agreement that had been provided to ArchiMed and noted for the Board of Directors that, consistent with the Board of Directors’ instruction, the terms of the Merger Agreement were substantially similar to the merger agreement that had been negotiated with Financial Sponsor A in March 2021, including the presence of a “go shop” provision that would permit the Company to actively solicit more favorable offers. The Board of Directors also discussed the ArchiMed request for exclusivity until 11:59 p.m. Pacific time on April 13, 2022, noting that it was a short period of time encompassing 11 days of exclusivity and, in light of the absence of other interested parties and the presence of the “go-shop period” in the Merger Agreement, was not likely to discourage other, more favorable offers. Representatives from Stifel and Davis Polk also reviewed with the Board of Directors the structure of the “go-shop” provision. After discussion, the Board of Directors authorized and directed management, Stifel and Davis Polk to proceed with discussions and negotiations with ArchiMed and its advisors, including on the Merger Agreement and the exclusivity letter.
Also on April 2, 2022, Stifel contacted Jefferies and communicated that the Company was willing to continue discussions. Later during that same day, ArchiMed’s counsel, Latham & Watkins LLP (“Latham”) sent a draft exclusivity letter to Davis Polk which provided for exclusivity through 11:59 p.m. Pacific time on April 13, 2022, which Latham and Davis Polk negotiated. The exclusivity agreement was signed by the Company and ArchiMed on April 2, 2022.
On April 3, 2022, ArchiMed and Latham began conducting confirmatory due diligence on the Company. This confirmatory due diligence also included video conferences with members of Company management and continued review of information in a virtual dataroom. On April 4, 2022, Davis Polk sent a draft of the Company disclosure letter to Latham.
On April 7, 2022, Latham sent a markup of the proposed Merger Agreement to Davis Polk. On April 8, 2022, Davis Polk reviewed the markup with members of management, and then held a conference call with Latham to negotiate the terms of the Merger Agreement, including, among other provisions, the “go shop” and
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no solicitation clauses, the break-up fee and reverse break-up fee, the termination provisions, the interim operating covenants and other covenants, and the representations and warranties. Davis Polk sent a revised draft of the Merger Agreement to Latham during the evening of April 8, 2022.
On April 10, 2022, Latham sent a markup of the revised Merger Agreement and a markup of the Company disclosure letter to Davis Polk.
On April 11, 2022, Latham sent drafts of the equity commitment letter, the debt commitment letter and the limited guaranty to Davis Polk.
Also on April 11, 2022, Davis Polk reviewed the markups with members of management, and then held a conference call with Latham to negotiate the terms of the Merger Agreement, the Company disclosure letter and the other transaction agreements. Davis Polk sent a revised draft of the Merger Agreement and the Company disclosure letter to Latham during the evening of April 11, 2022.
On April 12, 2022, Mr. Bateman spoke with Mr. Sullivan. Mr. Bateman stated that, in order for ArchiMed to be willing to enter into the transaction with the Company, ArchiMed would require that Mr. Sullivan sign a retention letter (the “Retention Letter”) pursuant to which, among other things, Mr. Sullivan would agree to receive less favorable treatment of his equity awards as compared to other employees of the Company. Mr. Sullivan said he would consider this request and updated the chairman of the Board of Directors of such request.
Also on April 12, 2022, during discussions between Mr. Bateman and Mr. Sullivan, Mr. Bateman expressed ArchiMed’s concern over the treatment of outstanding MSUs proposed by Natus in the Merger Agreement, namely, that all MSUs would be treated as if all performance hurdles had been fully satisfied, which in the view of ArchiMed would increase costs associated with the transaction while diminishing the post-closing retention incentives in place for key managers. After further discussions, Mr. Sullivan communicated to Mr. Bateman that, if necessary for ArchiMed to proceed with the proposed transaction, Mr. Sullivan would be willing to agree to less favorable treatment of his outstanding MSUs as compared to all other MSU holders (resulting in Mr. Sullivan receiving $3,000,000 less than he would otherwise receive under the terms of the Merger Agreement), and Mr. Sullivan would agree that $6,000,000 of proceeds in respect of his outstanding equity-based awards that he would otherwise be entitled to receive at closing would instead be held back and paid to Mr. Sullivan as compensation for his services for certain periods after closing. Mr. Sullivan’s rationale for being willing to agree to these concessions was: (i) his concern that ArchiMed would be otherwise unwilling to proceed with the proposed transaction (and that would deprive the Company Stockholders of the choice as to whether or not to vote to accept a transaction that would provide a substantial premium); (ii) in the unlikely event that ArchiMed were otherwise willing to proceed, Mr. Sullivan believed that (a) ArchiMed would decrease the price per share payable to the Company Stockholders to an amount less than $33.50 per share and (b) ArchiMed would require that all of the Company’s employees forego acceleration of all or a portion of their equity awards, which would make employees less likely to remain at the Company pending closing and potentially jeopardize the operation of the Company’s business; and (iii) Mr. Sullivan’s MSUs would be paid out at the level of performance actually achieved through the closing based on the per share price of $33.50, consistent with the level of return to the Company’s stockholders.
On April 13, 2022, Latham sent revised drafts of the Merger Agreement and the Company disclosure letter to Davis Polk.
Later that evening on April 13, 2022, the Board of Directors met. Also in attendance were members of management, representatives of Stifel and representatives of Davis Polk. Copies of the Merger Agreement and other transaction agreements and a financial presentation by Stifel and a legal presentation by Davis Polk, had been provided to the Board of Directors in advance of the meeting. A representative of Davis Polk reviewed with the Board of Directors their fiduciary duties under Delaware law, the material terms of the Merger Agreement and the other transaction agreements, as well as the outstanding issues. A representative from Stifel reviewed their preliminary financial analyses with respect to the fairness, from a financial point of view, of the $33.50 per share in cash price that ArchiMed was proposing. Mr. Sullivan noted for the Board of Directors that there were still outstanding issues to be resolved, including the amount of the break-up fee and reverse break-up fee, the events that would trigger payment of those fees, the no solicitation clause and on the regulatory undertaking covenant. The Board of Directors instructed management, Stifel and Davis Polk to continue to work toward resolving the remaining outstanding issues in a manner as favorably as possible to the Company Stockholders.
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At 11:59 p.m. Pacific time on April 13, 2022, the exclusivity period expired. In light of a potential transaction with ArchiMed being close to signing, the Board of Directors noted that contacting other parties at this time had the risk of creating opportunities for public speculation that the Company was pursuing a sale, and that such speculation could be harmful to the Company and its employees and business partners, and could cause the loss of the potential transaction with ArchiMed. In light of these considerations, the Board of Directors determined that the risks of contacting additional potential acquirers outweighed the benefits.
On April 14, 2022, Davis Polk spoke with Latham to negotiate the outstanding issues in the Merger Agreement and the other transaction agreements, including, among others, as to the break-up fee, the reverse break-up fee, the circumstances under which each was payable, and the regulatory undertaking covenant. Later on April 14, 2022, Davis Polk sent revised drafts of the Merger Agreement and the other transaction agreements to Latham.
On April 15, 2022, Mr. Sullivan spoke with Mr. Bateman regarding the outstanding issues. Later that day, Latham sent revised drafts of the Merger Agreement and other transaction agreements to Davis Polk. Davis Polk and Latham negotiated the outstanding issues. Davis Polk sent revised drafts of the Merger Agreement and the other transaction agreements to Latham late in the evening on April 15, 2022.
On April 16, 2022, Mr. Sullivan spoke again with Mr. Bateman regarding the remaining outstanding issues. Thereafter, Davis Polk and Latham finalized the Merger Agreement and the other transaction agreements.
On the morning of April 17, 2022, the Board of Directors met. Also in attendance were members of management, representatives of Stifel and representatives of Davis Polk. Copies of the Merger Agreement and other transaction agreements and a financial presentation by Stifel and a legal presentation by Davis Polk, had been provided to the Board of Directors in advance of the meeting. A representative of Davis Polk reviewed with the Board of Directors their fiduciary duties under Delaware law, as well as the material terms of the Merger Agreement and the other transaction agreements. The representative of Davis Polk also reviewed with the Board of Directors the resolution of the outstanding issues. A representative from Stifel reviewed Stifel’s financial analysis of the $33.50 per share in cash merger consideration and rendered an oral opinion, confirmed by delivery of a written opinion dated April 17, 2022, to the Board of Directors to the effect that, as of that date and based on and subject to the matters considered, the procedures followed, the assumptions made and various limitations of and qualifications to the review undertaken, the $33.50 per share in cash merger consideration was fair, from a financial point of view, to holders of the Company’s common stock. Stifel also reviewed again with the Board of Directors its relationships with ArchiMed (as more fully described in the section of this proxy statement captioned “—Opinion of Stifel Nicolaus & Company, Incorporated”). The Board of Directors, after considering the reasons and factors more fully described in the section of this proxy statement captioned “—Recommendation of the Board of Directors and the Reasons for the Merger,” (1) determined that the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement were in the best interests of the Company and its stockholders and (2) approved the execution and delivery of the Merger Agreement by the Company, the performance by the Company of its covenants and other obligations thereunder, and the consummation of the Merger and the other transactions contemplated by the Merger Agreement and (3) resolved to recommend that the Company Stockholders adopt the Merger Agreement. Subsequently, the compensation committee of the Board of Directors met and adopted resolutions providing for the treatment of equity awards in the Merger Agreement, and certain other matters.
The Company and entities formed by ArchiMed subsequently signed the Merger Agreement and the other transaction agreements.
Early on April 18, 2022, before the opening of trading on the NASDAQ, the Company publicly disclosed the proposed transaction.
During the Go-Shop Period, at the direction and under the supervision of the Board of Directors, representatives of Stifel contacted parties that, in the view of the Board of Directors, based on advice from Stifel, might be capable of, and might be interested in, pursuing an acquisition of the Company on terms that could reasonably be expected to be more favorable to the Company and its stockholders. During the go-shop period, and at the direction of the Board of Directors, representatives of Stifel contacted a total of 31 parties (collectively, the “Go Shop Parties”), including 12 strategic parties (including Strategic Party A) and 19 financial sponsors (including Financial Sponsor A), to solicit their interest in a possible acquisition of the Company.
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Of the Go Shop Parties contacted by representatives of Stifel, 3 parties executed confidentiality agreements and were granted access to certain non-public information regarding the Company. Certain of the parties that executed confidentiality agreements asked diligence questions of, and received answers from, the Company and engaged in additional discussion with representatives of Stifel. None of the Go Shop Parties contacted, nor any other party, has submitted an alternative acquisition proposal to the Company as of the date of this proxy statement that the Board of Directors believes could reasonably be expected to lead to a Superior Proposal.
Recommendation of the Board of Directors and Reasons for the Merger
Recommendation of the Board of Directors
The Board of Directors has unanimously (1) determined that it is in the best interests of the Company and the Company Stockholders, and declared it advisable, to enter into the Merger Agreement and consummate the Merger in accordance with the DGCL upon the terms and subject to the conditions set forth in the Merger Agreement; (2) approved the execution and delivery of the Merger Agreement by the Company, the performance by the Company of its covenants and other obligations thereunder, and the consummation of the Merger upon the terms and conditions set forth therein; and (3) resolved to recommend, subject to certain provisions in the Merger Agreement, that the Company Stockholders adopt the Merger Agreement in accordance with the DGCL;
The Board of Directors unanimously recommends that you vote (1) “FOR” the adoption of the Merger Agreement; (2) “FOR” the proposal to adjourn the Company Stockholder Meeting from time to time if necessary or appropriate, as determined in good faith by the Board of Directors, including to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Company Stockholder Meeting; and (3) “FOR” the proposal to approve, by non-binding, advisory vote, certain compensation that will or may become payable by Natus to its named executive officers in connection with the Merger.
Reasons for the Merger
In evaluating the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement, the Board of Directors consulted with management, its financial advisor and outside legal counsel. In recommending that stockholders vote in favor of the adoption of the Merger Agreement, the Board of Directors considered a variety of factors, including without limitation the following principal factors (not in any relative order of importance):
historical information regarding (i) Natus’ business, financial performance and results of operations, (ii) market prices, volatility and trading activity with respect to the Company Common Stock, and (iii) market prices with respect to other industry participants and general market indices;
current information regarding (i) Natus’ business, prospects, financial condition, operations, technology, products, services, management, competitive position and strategic business goals and objectives, (ii) general economic, industry and financial market conditions, (iii) geopolitical conditions (including, without limitation, tariffs, COVID-19, supply chain disruptions, the shortage of semiconductors and the war in Ukraine) which are affecting Natus’ business, and (iv) opportunities and competitive factors within Natus’ industry;
ongoing efforts and uncertainty relating to COVID-19 and the war in Ukraine;
the historically high multiples of public companies in the equity markets generally;
the fact that the all-cash Per Share Price would provide certainty of value and liquidity to stockholders, while eliminating the effect of long-term business and execution risk to stockholders;
Natus’ business, current and projected financial performance and condition and future prospects in relation to the Per Share Price of $33.50;
the fact that the Per Share Price represented an attractive premium of approximately 28.6% from the closing stock price per share of Company Common Stock of $26.05 on April 14, 2022, the last trading day prior to the execution of the Merger Agreement, and approximately 23.1% from the closing stock price per share of Company Common Stock of $27.22 on March 3, 2022, which is 30 trading days prior to the execution of the Merger Agreement;
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the timing of the Merger and the risk that if Natus did not accept the ArchiMed offer (as provided for in the Merger Agreement), it may not have another opportunity to do so or to accept a comparable opportunity;
the Board of Directors’ belief that the Merger was more favorable to the Company Stockholders compared to the alternative of remaining a standalone independent company, which belief was based on and informed by consideration of a number of factors, risks and uncertainties, including without limitation:
the competitive landscape and the dynamics of the market for Natus’ products, and the assessment that other alternatives were not reasonably likely to create greater value for stockholders than the Merger, taking into account execution risk as well as business, competitive, industry and market risk; and
the perceived risk of continuing as an independent public company or pursuing other alternatives, including (1) the continuation of Natus’ business plan as an independent enterprise; (2) potential modifications to Natus’ strategy; (3) potential divestitures of Natus’ business lines, which could possibly result in a more focused company; and (4) potential expansion opportunities into new business lines through acquisitions and combinations of Natus with other businesses;
the Board of Directors’ view that the Merger Agreement was the product of arm’s-length negotiation and contained customary terms and conditions;
the Board of Directors’ belief, based on discussions and negotiations with Parent, that the Per Share Price was the highest price the Parent would be willing to pay and the highest price reasonably obtainable, each as of the date of the Merger Agreement;
the review of Natus’ strategic and financial alternatives, including:
the fact that during the approximately 14-month period leading up to the execution of the Merger Agreement, the Board of Directors explored and evaluated various potential strategic alternatives, including a sale of the whole company, including to Financial Sponsor A and to Strategic Party A, each of which had submitted a final acquisition proposal with a price per share that was lower than the Per Share Price;
the fact that the various other strategic parties and financial sponsors that were contacted by Stifel over a 14-month period did not submit any proposal for a business combination with Natus; and
the Board of Directors’ belief that it was unlikely that another party would be willing or able to pay more than the Per Share Price in cash;
Natus’ ability during the Go-Shop Period to actively solicit alternative proposals, and Natus’ ability, under certain other circumstances after the Go-Shop Period, to furnish information to and conduct negotiations with an Excluded Party regarding alternative acquisition proposals, and that a reduced break-up fee would be payable by Natus were it to terminate the Merger Agreement to accept a Superior Proposal during the Go-Shop Period;
the Board of Directors’ “fiduciary out” with respect to third-party acquisition proposals made after the Go-Shop Period which would reasonably be expected to result in Superior Proposals, the Board of Directors’ ability to negotiate with another party regarding a Superior Proposal and, subject to paying a termination fee to Parent, accept a Superior Proposal;
the Board of Directors’ view that the terms of the Merger Agreement would be unlikely to deter interested third parties from making a Superior Proposal, including the Merger Agreement’s terms and conditions as they relate to changes in the recommendation of the Board of Directors and terminating the Merger Agreement, and the belief that the termination fee potentially payable to Parent is reasonable in light of the circumstances, and not preclusive of other offers (see the section of this proxy statement captioned “The Merger Agreement—Other Covenants Under the Merger Agreement—Acquisition Proposals; Change in the Recommendation of Natus’ Board of Directors”);
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the fact that Natus’ legal and financial advisors assisted Natus throughout the process and negotiations and updated the Board of Directors directly and regularly, which provided the Board of Directors with additional perspectives on the negotiations in addition to those of Natus’ management;
the financial analyses and opinion of Stifel, dated April 17, 2022, to the 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 Price to be received in the Merger by holders of Company Common Stock (other than Owned Company Shares and Dissenting Company Shares), as more fully described below in the section of this proxy statement captioned “—Opinion of Stifel Nicolaus & Company, Incorporated”;
the material terms and conditions of the Merger Agreement and the related agreements, including:
the conditions to the consummation of the Merger, including the approval by the affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock entitled to vote;
the fact that the financing contemplated by the Equity Commitment Letter and the Debt Commitment Letter, together with Natus’ cash on hand, were sufficient to fund the aggregate purchase price and the other payments contemplated by, and subject to the terms and conditions of, the Merger Agreement, and that Natus is a named third party beneficiary of the Equity Commitment Letter;
the absence of a financing condition to the closing of the Merger, and Parent’s representations and warranties relating to the Equity Commitment Letter, the Debt Commitment Letter and the Limited Guaranty;
Natus’ ability to terminate the Merger Agreement in order to accept a Superior Proposal, subject to Parent’s right to match such Superior Proposal and subject to paying Parent (x) a termination fee of $19.7 million (representing approximately 1.65% of the equity value of the transaction), with respect to Natus entering into an alternative acquisition agreement with an Excluded Party prior to the Cut-Off Date or (y) a termination fee of $39.5 million (representing approximately 3.3% of the equity value of the transaction) if payable otherwise;
Natus’ entitlement to a reverse termination fee from Parent of $79.0 million (representing approximately 6.6% of the equity value of the transaction) if (i) the Merger Agreement is terminated by Natus (A) if all of the closing conditions have been satisfied (other than those conditions that by their terms are to be satisfied at the Closing) and Natus is prepared to consummate the Merger but Parent and Merger Sub fail to consummate the Merger in accordance with the Merger Agreement or (B) in connection with Parent or Merger Sub breaching or failing to perform in any material respect its representations, warranties or covenants in a manner that would cause the related closing conditions to not be satisfied (subject to a cure period in certain circumstances), or (ii) if either party terminates the Merger Agreement because the Merger has not been consummated by the Outside Date, and at the time of such termination, Natus was otherwise entitled to terminate the Merger Agreement for either of the foregoing reasons;
the fact that that Med Platform II S.L.P. provided the Limited Guaranty in favor of Natus that guarantees the payment of the termination fee that may become payable by Parent under the Merger Agreement;
the scope of the representations, warranties and covenants of Natus, Parent and Merger Sub;
the fact that the adoption of the Merger Agreement is not subject to the approval of Parent’s stockholders;
the availability of appraisal rights under Delaware law to the Company Stockholders who do not vote in favor of the adoption of the Merger Agreement and comply with all of the required procedures under Delaware law for perfection of such appraisal rights, which rights provide eligible stockholders with an opportunity to have the Delaware Court of Chancery determine the fair value of their shares of Company Common Stock, which may be more than, less than or the same as the amount such stockholders would have received under the Merger Agreement, and
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the Board of Directors’ multiple reviews and discussions with Natus management and its financial and legal advisors;
the fact that Natus engaged in negotiations primarily with Parent regarding a potential transaction rather than conducting a broad “auction” or sale process for Natus, as well as that Natus previously engaged in extensive discussions with Financial Sponsor A and Strategic Party A;
the fact that the announcement and pendency of the Merger, or the failure to complete the Merger, could cause substantial harm to Natus’ relationships with its employees (including making it more difficult to attract and retain key personnel and the possible loss of key management, technical, sales and other personnel), vendors, customers and commercial partners and may divert management and employees’ attention away from Natus’ day-to-day business operations;
the fact that stockholders will not participate in any future earnings or growth of Natus and will not benefit from any appreciation in value of Natus, including any appreciation in value that could be realized as a result of improvements to our operations or future strategic or other transactions by Natus;
the requirement that Natus pay Parent (x) a termination fee of $19.8 million, with respect to Natus entering into an alternative acquisition agreement with respect to a Superior Proposal prior to the Cut-Off Date or (y) a termination fee of $39.5 million in certain other circumstances, including if the Board of Directors terminates the Merger Agreement to accept a Superior Proposal after the Cut-Off Date;
the restrictions on the conduct of Natus’ business prior to the consummation of the Merger, including the requirement that Natus conduct its business in the ordinary course, subject to specific limitations, which may delay or prevent Natus from undertaking business opportunities that may arise before the completion of the Merger and that, absent the Merger Agreement, Natus might have pursued;
the fact that an all cash transaction will generally be a taxable transaction for U.S. federal income tax purposes;
the fact that under the terms of the Merger Agreement, Natus is unable to solicit other acquisition proposals after the Go-Shop Period End Date during the pendency of the Merger;
the significant costs involved in connection with entering into the Merger Agreement and completing the Merger and the substantial time and effort of management required to complete the Merger, which may disrupt Natus’ business operations;
the fact that if the Merger is not consummated, Natus will be required to pay its own expenses associated with the Merger Agreement;
the fact that Natus’ business, sales operations and financial results could suffer in the event that the Merger is not consummated;
the risk that the Merger might not be completed and the effect of the resulting public announcement of termination of the Merger Agreement on the trading price of the Company Common Stock;
the fact that the completion of the Merger will require antitrust clearance in the United States and certain other countries; and
the fact that Natus’ directors and officers may have interests in the Merger that may be different from, or in addition to, those of the other Company Stockholders (see below in the section of this proxy statement captioned “—Interests of Natus’ Directors and Executive Officers in the Merger”).
After considering the foregoing potentially negative and potentially positive factors, the Board of Directors concluded that the potentially positive factors relating to the Merger Agreement and the Merger substantially outweighed the potentially negative factors.
The foregoing discussion of the information and factors considered by the Board of Directors is not meant to be exhaustive, but is intended to reflect the material factors considered by the Board of Directors in its consideration of the Merger. In view of the large number of and variety of factors considered by the Board of Directors and the complexity of these factors, the Board of Directors did not find it practicable to, and did not, quantify or otherwise assign relative weights to the foregoing factors in reaching its determination and
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recommendations. Moreover, each member of the Board of Directors applied his or her own personal business judgment to the process and may have assigned different weights to different factors. The Board of Directors unanimously recommends that you vote “FOR” the proposal to adopt the Merger Agreement, based upon the totality of the information presented to and considered by the Board of Directors.
The foregoing discussion of the information and factors considered by the Board of Directors is forward-looking in nature. This information should be read in light of the factors set forth in the section of this proxy statement entitled “Forward-Looking Statements.”
Opinion of Stifel Nicolaus & Company, Incorporated
In connection with the Merger, Natus retained Stifel, Nicolaus & Company, Incorporated (“Stifel”) to provide it with financial advisory services and to provide the Board of Directors an opinion in connection with the possible sale of Natus. As part of that engagement, on April 17, 2022, Stifel delivered to the Board of Directors its oral opinion, subsequently confirmed in writing by delivery of a written opinion dated April 17, 2022 (the “Opinion”), that, as of that date and based upon and subject to the various limitations, matters, qualifications and assumptions set forth therein, the Per Share Price to be received by holders of Company Common Stock (other than Owned Company Shares and Dissenting Company Shares (each as defined in the Merger Agreement) (collectively, the “Excluded Shares”) pursuant to the Merger Agreement was fair to such holders, from a financial point of view.
Natus did not impose any limitations on Stifel with respect to the investigations made or procedures followed in rendering the Opinion. In selecting Stifel, the Board of Directors considered, among other things, the fact that Stifel is a reputable investment banking firm with substantial experience advising companies in the healthcare and medical technology sectors and in providing strategic advisory services in general. Stifel, as part of its investment banking business, is regularly engaged in the independent valuation of businesses and securities in connection with mergers, acquisitions, underwritings, sales, and distributions of listed and unlisted securities, private placements, and valuations for estate, corporate and other purposes. In the ordinary course of business, Stifel and its clients may transact in the equity securities of Natus and Parent or its affiliates and may at any time hold a long or short position in such securities.
The full text of the Opinion that Stifel delivered to the Board of Directors is attached to this proxy statement as Annex B and is incorporated into this document by reference. The summary of the Opinion set forth in this proxy statement is qualified in its entirety by reference to the full text of the Opinion. Company Stockholders are urged to read the Opinion carefully and in its entirety for a discussion of the assumptions made, procedures followed, matters considered and limits of the review undertaken by Stifel in connection with the Opinion.
The Opinion was for the information of, and directed to, the Board of Directors (in its capacity as such) for its information and assistance in connection with its consideration of the financial terms of the Merger. The Opinion did not constitute a recommendation to the Board of Directors as to how the Board of Directors should vote or otherwise act on the Merger or any other matter or to any stockholder of Natus as to how any such stockholder should act with respect to the Merger or any other matter, including, without limitation, how to vote at any stockholders’ meeting at which the Merger is considered, or whether or not to enter into a voting, stockholders’, or affiliates’ agreement with respect to the Merger, or exercise any dissenters’ or appraisal rights that may be available to such stockholder. In addition, the Opinion did not compare the relative merits of the Merger with any other alternative transactions or business strategies that may have been available to Natus and did not address the underlying business decision of the Board of Directors or Natus to proceed with or effect the Merger.
In connection with the Opinion, Stifel, among other things:
discussed the Merger and related matters with Natus’ management and counsel and reviewed the financial terms of the Merger contained in a draft dated April 16, 2022, of the Merger Agreement (the “Draft Merger Agreement”);
reviewed the audited consolidated financial statements of Natus contained in its Annual Reports on Form 10-K for the three years ended December 31, 2021;
reviewed and discussed with Natus’ management certain other publicly available information concerning Natus;
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reviewed and discussed with Natus’ management certain non-publicly available information concerning Natus, including, without limitation, internal financial analyses, financial projections, reports, and other information prepared by its management, including, without limitation, Natus’ strategic plan (the “Natus Strategic Plan”), utilized by Stifel pursuant to instructions from Natus, and held discussions with Natus’ senior management regarding recent developments;
reviewed and analyzed certain publicly available information concerning the terms of selected merger and acquisition transactions that Stifel considered relevant to its analysis;
reviewed and analyzed certain publicly available financial and stock market data relating to selected public companies that Stifel deemed relevant to its analysis;
participated in certain discussions and negotiations between representatives of Natus and the Parent;
reviewed the reported prices and trading activity of the equity securities of Natus;
reviewed and analyzed, based on the Natus Strategic Plan, the cash flows generated by Natus to determine the present value of those discounted cash flows;
considered the results of Stifel’s efforts, at the direction of Natus, to solicit indications of interest from selected third parties with respect to a merger or other transaction with Natus;
conducted such other financial studies, analyses, and investigations and considered such other information as Stifel deemed necessary or appropriate for purposes of the Opinion; and
took into account its assessment of general economic, market, and financial conditions and Stifel’s experience in other transactions, as well as Stifel’s experience in securities valuations and its knowledge of Natus’ industry generally.
In conducting its review and rendering the Opinion, Stifel relied upon and assumed, without independent verification, the accuracy and completeness of all of the financial and other information that was provided to Stifel by or on behalf of Natus, or that was otherwise reviewed by Stifel, and Stifel did not assume any responsibility for independently verifying any of such information. With respect to the financial forecasts supplied to Stifel by Natus (including, without limitation, the financial forecasts contained in the Natus Strategic Plan and the price to be received for certain assets (the “Specified Assets”) assumed to be divested in the Natus Strategic Plan), Stifel assumed, at the direction of Natus, that they were reasonably prepared on the basis reflecting the best currently available estimates and judgments of the management of Natus as to the future operating and financial performance of Natus and that they provided a reasonable basis upon which Stifel could form its opinion. Such forecasts and projections were not prepared with the expectation of public disclosure. All such forecasted and projected financial information was based on numerous variables and assumptions that are inherently uncertain, including, without limitation, factors related to general economic and competitive conditions, including, without limitation, assumptions regarding the widespread disruption, extraordinary uncertainty, and unusual volatility arising from the effects of the COVID-19 pandemic and the conflict in Ukraine. Accordingly, actual results could vary significantly from those set forth in such forecasted and projected financial information. Stifel relied on this forecasted and projected information, including, without limitation, estimates of the management of Natus of the price to be received for the Specified Assets, without independent verification or analyses and did not in any respect assume any responsibility for the accuracy or completeness thereof. Stifel expressed no opinion as to any such forecasted or projected information or any other estimates or the assumptions on which they were made.
Stifel also assumed that there were no material changes in the assets, liabilities, financial condition, results of operations, business, or prospects of Natus since the date of the last financial information made available to Stifel. Stifel did not make or obtain any independent evaluation, appraisal, or physical inspection of Natus’ assets or liabilities, nor was Stifel furnished with any such evaluation or appraisal. Estimates of values of companies and assets do not purport to be appraisals or necessarily reflect the prices at which companies or assets may actually be sold. Because such estimates are inherently subject to uncertainty, Stifel assumed no responsibility for their accuracy.
Stifel assumed that the definitive Merger Agreement would not differ materially from the Draft Merger Agreement. Stifel also assumed the Merger would be consummated substantially on the terms and conditions described in the Merger Agreement without any waiver of material terms or conditions by Natus or any other
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party and without any anti-dilution or other adjustment to the Merger Consideration, and that obtaining any necessary regulatory approvals or satisfying any other conditions for the consummation of the Merger would not have an adverse effect on Natus or the Merger. Stifel also assumed that the Merger would be consummated in a manner that complies with the applicable provisions of the Securities Act of 1933, as amended (the “Securities Act”), the Securities Exchange Act of 1934, as amended, and all other applicable federal, state and foreign statutes, rules and regulations. Stifel further assumed that Natus has relied upon the advice of its counsel, independent accountants, and other advisors (other than Stifel) as to all legal, financial reporting, tax, accounting, and regulatory matters with respect to Natus, the Merger, and the Merger Agreement.
The Opinion was limited to whether, as of the date of the Opinion, the Merger Consideration is fair to the holders of Company Common Stock (other than Excluded Shares), from a financial point of view, and did not address any other terms, aspects or implications of the Merger, including, without limitation, the form or structure of the Merger, any consequences of the Merger on Natus, its stockholders, creditors or otherwise, or any terms, aspects or implications of any voting, support, stockholder or other agreements, arrangements or understandings contemplated or entered into in connection with the Merger or otherwise. The Opinion also did not consider, address or include: (i) any other strategic alternatives currently (or which have been or may be) contemplated by the Board of Directors or Natus; (ii) the legal, financial reporting, tax, accounting or regulatory consequences of the Merger on Natus or the holders of Shares; (iii) the fairness of the amount or nature of any compensation to any of Natus’ officers, directors or employees, or class of such persons, relative to the compensation to the holders of Natus’ securities or otherwise; (iv) the effect of the Merger on, or the fairness of the consideration to be received by, holders of any class of securities of Natus, or any class of securities of any other party to any transaction contemplated by the Merger Agreement; (v) whether the Parent had sufficient cash, available lines of credit or other sources of funds to enable it to pay the Merger Consideration to the holders of Company Common Stock at the closing of the Merger; or (vi) the treatment of, or effect of the Merger on, Company Restricted Stock, Company Restricted Stock Units or Company Options. Furthermore, Stifel did not express any opinion herein as to the prices, trading range, or volume at which Natus’ securities would trade following the public announcement of the Merger.
The Opinion was necessarily based on economic, market, financial, and other conditions as they existed on, and on the information made available to Stifel by or on behalf of Natus or its advisors, or information otherwise reviewed by Stifel as of the date of the Opinion. It is understood that subsequent developments may affect the conclusion reached in the Opinion and that Stifel does not have any obligation to update, revise or reaffirm the Opinion. Further, as the Board of Directors was aware, the credit, financial and stock markets have been experiencing unusual volatility and Stifel expressed no opinion or view as to any potential effects of such volatility on Natus, the Parent, or the Merger.
Stifel is not a legal, tax, regulatory or bankruptcy advisor. Stifel has not considered any potential legislative or regulatory changes currently being considered or recently enacted by the United States Congress, the various federal banking agencies, the SEC, or any other regulatory bodies, or any changes in accounting methods or generally accepted accounting principles that may be adopted by the SEC or the Financial Accounting Standards Board, or any changes in regulatory accounting principles that may be adopted by any or all of the federal banking agencies. The Opinion is not a solvency opinion and did not in any way address the solvency or financial condition of Natus or the Parent or any other person. The Opinion was approved by Stifel’s fairness opinion committee.
The following is a brief summary of the material financial analyses performed by Stifel in arriving at the Opinion and presented by Stifel to the Board of Directors. In accordance with customary investment banking practice, Stifel employed generally accepted valuation methods and financial analyses in reaching the Opinion. These summaries of financial analyses alone do not constitute a complete description of the financial analyses Stifel employed in reaching its conclusions. None of the analyses performed by Stifel were assigned a greater significance by Stifel than any other, nor does the order of analyses described represent relative importance or weight given to those analyses by Stifel. The financial analyses summarized below include information presented in tabular format. The per share equity values implied by Stifel’s analyses are rounded to the nearest dollar. In order to fully understand the financial analyses used by Stifel, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. The summary text describing each financial analysis does not constitute a complete description of Stifel’s financial analyses, including the methodologies and assumptions underlying the analyses, and if viewed in isolation could create a
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misleading or incomplete view of the financial analyses performed by Stifel. The summary text set forth below does not represent and should not be viewed by anyone as constituting conclusions reached by Stifel with respect to any of the analyses performed by it in connection with the Opinion. Rather, Stifel made its determination as to the fairness, from a financial point of view, of the Merger Consideration to be received by the holders of Company Common Stock (other than Excluded Shares) pursuant to the Merger Agreement on the basis of its experience and professional judgment after considering the results of all of the analyses performed.
Except as otherwise noted, the information utilized by Stifel in its analyses, to the extent based on market data, was based on market data as it existed on or before April 17, 2022, and is not necessarily indicative of current market conditions. The analyses described below do not purport to be indicative of actual future results or to reflect the prices at which any securities may trade in the public markets, which may vary depending upon various factors, including changes in interest rates, dividend rates, market conditions, economic conditions and other factors that influence the price of securities.
Selected Public Companies Analysis
Stifel reviewed certain publicly available financial data and stock market information for several selected public companies in the medical technology sector. The selected public companies were:
Avanos Medical, Inc.
CONMED Corporation
ConvaTec Group Plc
ICU Medical, Inc.
Integra LifeSciences Holdings
LivaNova Plc
Merit Medical Systems, Inc.
NuVasive, Inc.
Orthofix Medical, Inc.
For each selected public company, Stifel calculated multiples of enterprise value (defined as equity value, based on closing stock prices on April 14, 2022 (the last trading day prior to the announcement of the Merger), plus total debt less cash, as obtained from publicly available sources) compared to actual or estimated earnings before interest, taxes, depreciation, and amortization, commonly referred to as EBITDA, for calendar years 2021, 2022 and 2023. The third quartile and first quartile multiples for the selected public companies implied by this analysis are set forth in the table below:
 
2021A EBITDA
2022P EBITDA
2023P EBITDA
3rd Quartile
17.3x
18.8x
16.8x
1st Quartile
15.5x
12.7x
11.4x
Stifel then applied these EBITDA multiples to the corresponding Natus actual EBITDA for the fiscal year 2021 (“2021 EBITDA”) and the projected EBITDA for the fiscal year 2022 (“projected 2022 EBITDA”) and for the fiscal year 2023 (“projected 2023 EBITDA”), which pursuant to the Natus Strategic Plan reflected the pro forma impact of certain potential divestitures, or the “Potential Divestitures,” to determine ranges of implied enterprise values for Natus. Based on these implied enterprise value ranges, Stifel calculated ranges of implied equity values for Natus (calculated as enterprise value minus total debt plus cash), with the implied equity values based on projected 2022 EBITDA and projected 2023 EBITDA adjusted to include the net present value of the after-tax proceeds from the Potential Divestitures as set forth in the Natus Strategic Plan (the “Estimated Divestiture Proceeds”), as estimated by Natus management. The per share equity value ranges for Natus implied by this analysis are set forth in the table below:
 
2021A EBITDA
2022P EBITDA
2023P EBITDA
3rd Quartile – Implied Equity Value Per Share
$33
$32
$36
1st Quartile – Implied Equity Value Per Share
$30
$23
$26
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No company utilized in the selected public company analysis is identical to Natus. Stifel chose the selected public companies on the basis of various factors, including the size of the companies, the similarity of the lines of business and the similarity of the financial profiles, although no company is identical to Natus. Accordingly, these analyses are not purely mathematical, but also involve complex considerations and judgments concerning the differences in financial and operating characteristics of the selected companies and other factors.
Selected Precedent Transactions Analysis
Stifel reviewed certain publicly available information relating to 22 selected business combination transactions announced on or subsequent to February 26, 2015, involving medical technology companies. The selected precedent transactions are set forth in the table below:
Date
Announced
Target Name
Acquiror Name
09/08/21
Smiths Medical
ICU Medical
09/02/21
Hill-Rom Holdings, Inc.
Baxter International, Inc.
07/30/19
Hu-Friedy Mfg. Co.
Cantel Medical Corp.
05/02/19
Acelity, Inc.
3M Company
11/20/18
BTG plc
Boston Scientific Corporation
11/19/18
DJO Global Inc.
Colfax Corporation
06/26/18
SciCan & MicroMega
Coltene
06/06/18
Advanced Sterilization Products
Fortive Corporation
05/03/18
Integer’s Advanced Surgery & Orthopedics business
MedPlast LLC (Viant)
04/10/18
Analogic Corporation
Altaris Capital Partners, LLC
11/01/17
Halyard Health’s Surgical & Infection Prevention Business
Owens & Minor, Inc.
10/23/17
Exactech, Inc.
TPG Capital
04/02/17
Syneron
Apax Partners
02/20/17
Vention Medical, Advanced Technologies Business
Nordson Corporation
02/15/17
DePuy Synthes, Inc., Codman Neurosurgery Business
Integra LifeSciences Holdings
10/06/16
Hospira’s Infusion Systems Business
ICU Medical, Inc.
09/16/16
Abbott Medical Optics
Johnson & Johnson
06/18/15
Lumenis Ltd.
XIO Group
06/17/15
Welch Allyn
Hill Rom Holdings
03/02/15
American Medical Systems (Men’s Health & Prostate Health)
Boston Scientific Corporation
02/27/15
Optos Plc
Nikon Corporation
02/26/15
Sorin SpA
Cyberonics Inc.
For each selected precedent transaction, Stifel calculated the enterprise value implied for the target company, based on the upfront consideration payable in the selected transaction, as a multiple of the target company’s last twelve months (“LTM”) and next twelve months (“NTM”) estimated EBITDA. Estimated financial data of the selected transactions were based on publicly available information. The third quartile and first quartile multiples for the selected precedent transactions implied by this analysis are set forth in the table below:
 
LTM EBITDA
NTM EBITDA
3rd Quartile
16.1x
15.3x
1st Quartile
11.8x
11.9x
Stifel then applied the LTM EBITDA multiples to Natus’ actual 2021 EBITDA and the NTM EBITDA multiples to Natus’ projected 2022 EBITDA, adjusted to include the net present value of the after-tax proceeds (as estimated by Natus management) from the Estimated Divestiture Proceeds. Based on these implied enterprise value ranges, Stifel calculated ranges of implied equity values for Natus. The implied range based on projected 2022 EBITDA was adjusted to include the Estimated Divestiture Proceeds. The per share equity value ranges for Natus implied by this analysis are set forth in the table below:
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2021A EBITDA
2022P EBITDA
3rd Quartile – Implied Equity Value Per Share
$31
$27
1st Quartile – Implied Equity Value Per Share
$23
$22
No transaction utilized in the selected precedent transaction analysis is identical to the Merger. Stifel chose the selected precedent transactions on the basis of various factors and no company is identical to Natus. Accordingly, these analyses are not purely mathematical, but also involve complex considerations and judgments concerning the differences in financial and operating characteristics of the companies involved in the selected precedent transactions and other factors.
Discounted Cash Flow Analysis
Stifel used Natus management’s financial projections of unlevered free cash flow for fiscal years 2022 through 2026 contained in the Natus Strategic Plan to perform a discounted cash flow analysis of Natus. Financial projections for the fiscal year 2022 reflected the pro forma impact of the Potential Divestitures assuming the Potential Divestitures occurred on June 30, 2022.
Stifel calculated the terminal value of Natus’ projected unlevered free cash flow by applying a range of perpetuity growth rates of 2.0% to 4.0% to Natus’ projected calendar year 2026 free cash flow. Stifel then discounted the cash flows and terminal value to present values using discount rates ranging from 10% to 12%, based on Natus’ weighted average cost of capital, using the capital asset pricing model, considering Natus’ company-specific circumstances and Stifel’s judgment. This analysis yielded a range of implied enterprise values for Natus from which Stifel calculated a range of implied equity values for Natus. The per share equity value range for Natus implied by this analysis ranges from $24 to $36.
Other Information
For the information of the Board of Directors, Stifel also prepared certain other analyses for illustrative purposes only and not as part of its fairness analysis.
Premiums Paid Analysis
For illustrative purposes only, Stifel reviewed the premiums paid for acquisitions of 278 publicly traded U.S. companies announced, and subsequently completed, from January 1, 2016 to April 14, 2022, where the total transaction value was between $500.0 million and $2.0 billion, excluding spinoffs, minority stakes, and insolvency-related deals. Stifel calculated the percentage by which the upfront per share consideration paid in such transactions exceeded the target company’s closing share price one day prior to the announcement of such precedent transaction. The resultants of Stifel’s calculations are as follows:
 
1-Day (%)
Offer Premiums
3rd Quartile
43.6
1st Quartile
9.7
Stifel then applied these premiums to the closing price of Natus’ shares on April 14, 2022, the last trading day prior to the announcement of the Merger, resulting in implied per share values set forth in the table below.
3rd Quartile – Implied Equity Value Per Share
$37
1st Quartile – Implied Equity Value Per Share
$29
Historical Trading Range for the Company Common Stock
For illustrative purposes only, Stifel reviewed the historical trading prices of the Company Common Stock for the 52 weeks prior to the date of the announcement of the Merger. During this period, the closing price per share of the Company Common Stock ranged from $22 to $30.
Miscellaneous
The preparation of a fairness opinion is a complex process and is not necessarily susceptible to a partial analysis or summary description. In arriving at its Opinion, Stifel considered the results of all of its analyses as a whole and did not attribute any particular weight to any analysis or factor considered by it. Stifel believes that
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the summary provided and the analyses described above must be considered as a whole and that selecting portions of these analyses, without considering all of them, would create an incomplete view of the process underlying Stifel’s analyses and Opinion; therefore, the ranges of valuations and relative valuations resulting from any particular analysis described above should not be taken to be Stifel’s view of the actual valuation of the company or its relative valuation.
Stifel is acting as financial advisor to Natus in connection with the Merger. Natus agreed to pay Stifel a fee for its services that as of the date of the Merger Agreement was estimated to be approximately $18 million, $1.5 million of which became payable upon the delivery of the Opinion, and the remaining portion of which is contingent upon the closing of the Merger. Natus has also agreed to reimburse Stifel for its expenses incurred in connection with Stifel’s engagement and to indemnify Stifel and its affiliates and their respective officers, directors, employees and agents, and any persons controlling Stifel or any of its affiliates, against specified liabilities. In the ordinary course of business, Stifel and its clients may transact in the equity securities of each of Natus or Parent or its affiliates and may at any time hold a long or short position in such securities. Stifel may seek to provide investment banking or financial advisory services to Natus or Parent and its affiliates in the future, for which Stifel would seek customary compensation.
In their Opinion, Stifel also confirmed to the Board of Directors that there were no material relationships that existed during the two years prior to the date of the Opinion or that were mutually understood to be contemplated in which any compensation was received or was intended to be received as a result of the relationship between Stifel and any party to the Merger.
Management Projections
Natus does not as a matter of course make public projections as to future performance or earnings beyond the current fiscal year and is especially wary of making projections for extended earnings periods given, among other reasons, the unpredictability and uncertainty of the underlying assumptions and estimates. However, Natus is including in this proxy statement certain financial projections prepared by Natus management in February 2022, which we refer to as the “Management Projections,” to reflect Natus management’s then-current expectations of Natus’ financial performance for fiscal years 2022 through 2026.
We have included a summary of the Management Projections to give stockholders access to certain nonpublic information prepared by Natus management for the Board of Directors in connection with its evaluation of the Merger and the Per Share Price, which were also provided to Stifel, who was directed by the Board of Directors to use the Management Projections in their financial analyses with respect to the fairness of the $33.50 per share consideration to be paid pursuant to the Merger Agreement. These Management Projections were also made available to Parent and Merger Sub, at Parent’s request, in connection with their due diligence review of Natus. The inclusion of the Management Projections should not be regarded as an indication that Natus, Parent, Merger Sub or any of their respective affiliates, officers, directors, advisors or other representatives or any other recipient of this information considered, or now considers, it to be an assurance of the achievement of actual future results.
The Management Projections were developed by Natus management on a standalone basis without giving effect to the Merger and the other transactions contemplated by the Merger Agreement. Furthermore, the Management Projections do not take into account the effect of any failure of the transactions contemplated by the Merger Agreement to be completed and should not be viewed as accurate or continuing in that context. The Management Projections and the underlying assumptions upon which the Management Projections were based are subjective in many respects. The Management Projections constitute forward-looking information and reflect numerous estimates and assumptions with respect to industry performance, general business, economic, market and financial conditions, changes to the business, financial condition or results of operations of Natus and other matters, including those described under “Forward-Looking Statements,” many of which are difficult to predict, subject to significant economic and competitive uncertainties, are beyond Natus’ control and may cause the Management Projections or the underlying assumptions not to be realized. Since the Management Projections cover multiple years, such information by its nature becomes less predictive with each successive year. The Management Projections do not take into account any circumstances or events occurring after the date they were prepared. As a result, there can be no assurance that the Management Projections will be realized or that actual results will not be significantly higher or lower than projected. The Management Projections were not prepared with a view toward public disclosure or toward complying with GAAP, the published guidelines of the SEC
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regarding projections or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. For example, certain metrics included in the Management Projections are non-GAAP measures, and the Management Projections do not include footnote disclosures as may be required by GAAP. The prospective financial information included in this document has been prepared by, and is the responsibility of, Natus’ management. Natus’ Independent Registered Public Accounting Firm has not audited, reviewed, examined, compiled, nor applied agreed-upon procedures with respect to the accompanying prospective financial information and, accordingly, Natus’ Independent Registered Public Accounting Firm does not express an opinion or any other form of assurance with respect thereto.
Readers of this proxy statement are cautioned not to place undue reliance on the specific portions of the Management Projections below. No one has made or makes any representation to any stockholder regarding the information included in the Management Projections. The Management Projections should be evaluated, if at all, in conjunction with the historical financial statements and other information about Natus contained in Natus’s public filings with the SEC. For more information, please see the section of this proxy statement captioned “Where You Can Find More Information.”
For the foregoing reasons the inclusion of specific portions of the Management Projections in this proxy statement should not be regarded as necessarily predictive of actual future events, and they should not be relied on as such.
 
2022E
2023E
2024E
2025E
2026E
 
(dollars in millions)
EBITDA (Non-GAAP)
$52
$67
$83
$100
$119
Pre-Tax Income
$36
$44
$62
$79
$108
Net Operating Profit After Tax
$28
$34
$48
$62
$84
Unlevered Free Cash Flow (without proposed divested assets)(2)
$51
$45
$57
$70
$84
Unlevered Free Cash Flow (plus proposed divested assets)(1)(2)
$138
$45
$57
$70
$84
(1)
Represents the divestiture proceeds of selected business lines on April 11, 2022, of approximately $112mm. Proceeds are taxed at 22.19% (assuming no cost basis).
(2)
Assumes that revenue is projected to grow 6% per year in 2023 – 2026 along with costs growing at half the rate of sales.
The summary of such information above is included solely to give stockholders access to the information that was made available to the Board of Directors, Stifel, Parent and Merger Sub, and is not included in this proxy statement in order to influence any stockholder to make any investment decision with respect to the Merger, including whether or not to seek appraisal rights with respect to their shares of Company Common Stock. In addition, the Management Projections have not been updated or revised to reflect information or results after the date they were prepared or as of the date of this proxy statement, and except as required by applicable securities laws, Natus does not intend to update or otherwise revise the Management Projections or the specific portions presented to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the underlying assumptions are shown to be in error.
Interests of Natus’ Directors and Executive Officers in the Merger
When considering the recommendation of the Board of Directors that you vote to adopt the Merger Agreement, you should be aware that our directors and executive officers may have interests in the Merger that are different from, or in addition to, the interests of stockholders generally, as more fully described below. In (i) evaluating and negotiating the Merger Agreement; (ii) recommending the adoption of the Merger Agreement; and (iii) recommending that the Merger Agreement be adopted by Company Stockholders, the Board of Directors was aware of and considered these interests to the extent that they existed at the time, among other matters.
Insurance and Indemnification of Directors and Executive Officers
During the period commencing at the Effective Time and ending on the sixth anniversary of the Effective Time, the Surviving Corporation will (and Parent will cause the Surviving Corporation to) indemnify and hold harmless, to the fullest extent permitted by DGCL, each current or former director and officer of Natus (and any person who becomes a director or officer of Natus or any of its Subsidiaries prior to the Effective Time) (“Indemnified Person”) from and against any costs, fees and expenses (including reasonable and documented
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attorneys’ fees and investigation expenses), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement or compromise in connection with any legal proceeding, whether civil, criminal, administrative or investigative, to the extent that such Legal Proceeding arises, directly or indirectly, out of or pertains, directly or indirectly, with respect to any action or omission, or alleged action or omission, in such Indemnified Person’s capacity as a director, officer, employee or agent of Natus or any of its Subsidiaries or other Affiliates to the extent that such action or omission, or alleged action or omission, occurred prior to or at the Effective Time (including any matters arising in connection with the Merger Agreement or the Merger).
During the period commencing at the Effective Time and ending on the sixth anniversary of the Effective Time, the Surviving Corporation and its Subsidiaries will (and Parent will cause the Surviving Corporation and its Subsidiaries to) cause the certificates of incorporation, bylaws and other similar organizational documents of the Surviving Corporation and its Subsidiaries to contain provisions with respect to indemnification, exculpation and the advancement of expenses that are at least as favorable as the indemnification, exculpation and advancement of expenses provisions set forth in the charter, the bylaws and the other similar organizational documents of the Subsidiaries of Natus, as applicable, as of the date of the Merger Agreement that have been made available to Parent prior to the date thereof. During such six-year period, such provisions may not be repealed, amended or otherwise modified in any manner except as required by applicable law.
The Merger Agreement also provides during the period commencing at the Effective Time and ending on the sixth anniversary of the Effective Time, the Surviving Corporation will (and Parent will cause the Surviving Corporation to) maintain Natus’ current directors’ and officers’ liability insurance and fiduciary liability insurance (collectively, “D&O Insurance”) in respect of acts or omissions occurring at or prior to the Effective Time on terms (including with respect to coverage, conditions, retentions, limits and amounts) that are substantially equivalent to those of the D&O Insurance; provided that Parent may substitute therefor policies with a substantially comparable insurer (of the same or better credit worthiness and financial capability) of at least the same coverage and amounts containing terms and conditions that are no less advantageous to the insured thereunder. The Surviving Corporation will not be obligated to pay annual premiums in excess of 300% of the annual premium amount paid by Natus for coverage for its last full fiscal year (such 300% amount, the “Maximum Annual Premium”). If the annual premiums of such insurance coverage exceed the Maximum Annual Premium, then the Surviving Corporation will be obligated to obtain a policy with the greatest coverage available for a cost not exceeding the Maximum Annual Premium from an insurance carrier with the same or better credit rating as Natus’ current directors’ and officers’ liability insurance carrier. Prior to the Effective Time, Natus may (and if Natus is unable to purchase such a policy prior to Closing, Parent shall) purchase a prepaid six-year “tail” policy with respect to the D&O Insurance from an insurance carrier with the same or better credit rating as Natus’ current directors’ and officers’ liability insurance carrier so long as the aggregate cost for such “tail” policy does not exceed the Maximum Annual Premium. If Natus (or Parent) purchases such a “tail” policy prior to the Effective Time, the Surviving Corporation will (and Parent will cause the Surviving Corporation to) maintain such “tail” policy in full force and effect and continue to honor its obligations thereunder for so long as such “tail” policy is in full force and effect for a period of no less than six years after the Effective Time.
Treatment of Natus Equity-Based Awards
The Merger Agreement provides that Natus’ equity awards that are outstanding immediately prior to the Effective Time will be subject to the following treatment at the Effective Time:
Company Options
As of the record date, there were outstanding Company Options to purchase [•] shares of Company Common Stock (all of which were In-the-Money Company Options), of which Company Options to purchase [•] shares of Company Common Stock were held by our executive officers. No Company Options were held by our non-employee directors. At the Effective Time, each Company Option that is outstanding as of immediately prior to the Effective Time, whether vested or unvested and whether or not granted pursuant to any Company Stock Plan, and that is an In-the-Money Company Option will be cancelled and converted into and will become a right to receive an amount in cash, without interest and subject to any required tax withholding, equal to (i) the amount of the Per Share Price (less the exercise price per share attributable to such Company Option), multiplied by (ii) the total number of shares of Company Common Stock that are issuable upon the full exercise of such Company Option.
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Each Company Option that is not an In-the-Money Company Option will be cancelled without any cash payment being made in respect thereof.
Company Restricted Stock
As of the record date, there were outstanding [•] shares of Company Restricted Stock, of which [•] were held by our non-employee directors and executive officers. At the Effective Time, except as set forth below with respect to Employee Interim Awards, each share of Company Restricted Stock outstanding as of immediately prior to the Effective Time, whether vested or unvested and whether or not granted pursuant to any Company Stock Plan, will be cancelled and converted into and will become a right to receive an amount in cash, without interest and subject to any required tax withholding, equal to the Per Share Price.
Company Restricted Stock Units
As of the record date, there were outstanding Company Restricted Stock Units in respect of [•] shares of Company Common Stock (at the maximum level with respect awards subject to performance-based vesting criteria), of which [•] were subject only to time-vesting criteria, [•] were MSUs and [•] were subject to vesting based on achievement of certain total shareholder return or earnings per share metrics (“PSUs”). Of the total number of outstanding Company Restricted Stock Units as of the record date, our current non-employee directors and executive officers held Company Restricted Stock Units in respect of [•] shares (at the maximum level with respect to awards subject to performance-based vesting criteria). At the Effective Time, except as set forth below with respect to Employee Interim Awards or as set forth in the CEO Retention Agreement, each Company Restricted Stock Unit outstanding as of immediately prior to the Effective Time, whether vested or unvested and whether or not granted pursuant to any Company Stock Plan, will be cancelled and be converted into and will become a right to receive an amount in cash, without interest and subject to any required tax withholding, equal to (i) the amount of the Per Share Price; multiplied by (ii) (1) with respect to Company Restricted Stock Units that are only subject to time-vesting requirements, the total number of shares of Company Common Stock subject to such Company Restricted Stock Unit, and (2) with respect to Company Restricted Stock Units that are subject to time- and performance-vesting requirements, the total number of shares of Company Common Stock determined to be performance vested with the performance goals deemed achieved at maximum levels and with the remaining time-vesting requirements deemed satisfied.
Employee Interim Awards
As of the record date, there were no outstanding shares of Company Restricted Stock or Company Restricted Stock Units that were Employee Interim Awards. At the Effective Time, any Employee Interim Awards that are outstanding as of immediately prior to the Effective Time, whether vested or unvested and whether or not granted pursuant to any Company Stock Plan, will be treated at the Effective Time in the manner set forth above, provided that any applicable performance goals will be deemed achieved at target levels (rather than at maximum) and the number of shares subject to such Employee Interim Awards that will vest at the Effective Time will be prorated to reflect the portion of the applicable vesting period that has elapsed from the date of grant until the Effective Time (rather than vesting in full), and the remaining unvested portion of any Employee Interim Awards will be forfeited at the Effective Time.
CEO Retention Agreement
Pursuant to the CEO Retention Agreement, Mr. Sullivan agreed that, notwithstanding the treatment of Company Restricted Stock Units set forth in the Merger Agreement (as described above), he would not receive payment in respect of his Company Restricted Stock Units that are MSUs based on deemed achievement of performance goals at maximum levels. Instead, Mr. Sullivan’s MSUs will be deemed attained at the level of performance actually achieved through the Closing based on the Per Share Price (which is approximately 143.4% of target, in the case of MSUs granted to Mr. Sullivan in December 2021, and 139.6% of target, in the case of MSUs granted to Mr. Sullivan in January 2022), consistent with the level of return to the Company’s stockholders pursuant to the Merger Agreement. The consequence to Mr. Sullivan will be a reduction by over $3,000,000 in the amount of gross proceeds that he otherwise was entitled to receive and would have received in respect of his MSUs.
Furthermore, pursuant to the CEO Retention Agreement, Mr. Sullivan agreed that an amount equal to $6,000,000 (the “Retention Payment”) payable to him at the Effective Time in respect of his Company
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Restricted Stock Units would not become payable at the Effective Time and, instead, would become payable 50% on the six-month anniversary of the Closing and 50% on the one-year anniversary of the Closing, subject to his continued employment with the Company until the relevant retention date. If Mr. Sullivan’s employment is terminated by the Company without cause, by Mr. Sullivan with good reason, or due to his death or disability, any then-unpaid portion of the Retention Payment shall be paid to him upon his termination (subject to, in the case of a termination by the Company without cause or by Mr. Sullivan for good reason, his execution and non-revocation of a release of claims). If Mr. Sullivan’s employment terminates for any other reason prior to the relevant retention date, he will immediately forfeit all portions of the Retention Payment that relate to a future retention date. Mr. Sullivan’s right to receive the Retention Payment is further subject to his continued compliance with certain restrictive covenants.
Treatment of ESPP
There are no outstanding purchase rights under the Company’s 2011 Employee Stock Purchase Plan. Even if the Amended and Restated 2011 Employee Stock Purchase Plan is adopted by the Company’s stockholders at its 2022 annual meeting, the Merger Agreement does not permit any employee to commence participation in the ESPP and requires that the ESPP be terminated as of the Effective Time.
Payments Upon Termination In Connection with a Change of Control
Change of Control Severance Benefits.
We have entered into employment agreements with each of our currently employed named executive officers (except for Dr. Chung) that provide for severance payments and benefits upon certain terminations of employment, including following a change of control, subject to the named executive officer’s execution of an effective release of claims and continued compliance with an 18-month (or, for Mr. Sullivan, 24-month) post-termination of employment employee non-solicitation covenant and other restrictive covenants. The severance payments and benefits that could become payable under these agreements in connection with a change of control are summarized below. As used in the summary below, the terms “cause,” “good reason,” and “change of control” have the meanings set forth in the applicable employment agreement:
Employment Agreement and CEO Retention Agreement with Mr. Sullivan
In connection with his appointment as President and Chief Executive Officer on December 27, 2021, we entered into an employment agreement with Mr. Sullivan. Pursuant to his employment agreement with us, in the event that Mr. Sullivan’s employment terminates other than for cause, death or disability or Mr. Sullivan resigns for good reason, in each case, within three months prior to or 24 months following the Effective Time, he would be entitled to the following severance payments and benefits:
A lump sum payment equal to two times the sum of his annual base salary and target annual bonus as then in effect or, if greater, as in effect immediately prior to our entering into the Merger Agreement, payable within 30 days following such termination;
A prorated target annual bonus for the year of termination, with the prorated amount based on the number of days that Mr. Sullivan was employed during the year prior to termination of service, paid no later than March 15 of the year following such termination; and
Continuation of the level of group health coverage provided by the Company to Mr. Sullivan and his eligible dependents at the time of termination until the third December 31st from the effective date of such termination (or, if earlier, the date that Mr. Sullivan and each of his eligible dependents become covered under similar plans).
Mr. Sullivan’s entitlement to the foregoing severance payments is conditioned upon (i) the executive executing and not revoking a release of claims in favor of the Company and its officers and directors and (ii) the executive’s compliance with a 24-month employee and customer non-solicitation covenant (and in the event of a breach, Mr. Sullivan is required to return to the Company a prorated amount of the foregoing cash severance payments, determined by multiplying the amount of cash payments by a fraction, the numerator of which is 24 minus the number of months from the date of termination to the date of breach, and the denominator of which is 24).
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If, prior to the 12-month anniversary of the Effective Time, Mr. Sullivan’s employment is terminated by the Company, Parent or one of their respective affiliates without cause, by Mr. Sullivan for good reason or as a result of Mr. Sullivan’s death or disability, in accordance with the CEO Retention Agreement, all unpaid portions of the Retention Payment will be paid to Mr. Sullivan by the Company as soon as practicable but no later than the earlier of (x) 55 days after the date of such termination and (y) the second regular payroll date following the Effective Date. Notwithstanding the foregoing, in the event of a termination without cause or for good reason, a condition precedent to the Company’s obligation to pay any portion of the Retention Payment that relates to a Retention Date that has not yet occurred as of Mr. Sullivan’s termination date shall be Mr. Sullivan’s execution and delivery of a release of claims and compliance with his non-solicitation obligation described above.
Employment Agreement with Mr. Davies
Pursuant to his employment agreement with us, in the event that Mr. Davies’ employment terminates other than for cause, death or disability or Mr. Davies resigns for good reason, in each case, within six months following the Effective Time, he would be entitled to the severance payments and benefits listed below:
Continued payment of his annual base salary for 12 months and payment of his target annual bonus (over the same 12-month period) as then in effect or, if greater, as in effect immediately prior to our entering into the Merger Agreement, payable on the Company’s normal payroll dates commencing within 70 days following such termination; and
Continued payment by the Company of the health continuation coverage premiums for Mr. Davies and his eligible dependents for 12 months following the termination (or, if earlier, the date that Mr. Davies and his eligible dependents become covered under similar plans).
Mr. Davies’ receipt of the foregoing severance payments and benefits is conditioned upon Mr. Davies (i) signing and not revoking a release of claims in favor of the Company and (ii) complying with certain restrictive covenants, including a noncompetition covenant (for the duration of the severance period) and an 18-month employee non-solicitation covenant.
Employment Agreement with Mr. Noll
Pursuant to his employment agreement with us, Mr. Noll would be entitled to the following severance payments and benefits in the event that Mr. Noll’s employment terminates other than for cause, death or disability or if he resigns for good reason, in each case, within six months following the Effective Time, he would be entitled to the severance payments and benefits listed below:
Continued payment of his annual base salary for 12 months and payment of a target annual bonus (paid over the same 12-month period) as then in effect or, if greater, as in effect immediately prior to our entering into the Merger Agreement, payable on the Company’s normal payroll dates commencing within 70 days following such termination; and
Continued payment by the Company of the health continuation coverage premiums for Mr. Noll and his eligible dependents for six months following the termination (or, if earlier, the date that Mr. Noll and his eligible dependents become covered under similar plans).
Mr. Noll’s receipt of the foregoing severance payments and benefits is conditioned upon Mr. Noll (i) signing and not revoking a release of claims in favor of the Company and (ii) complying with certain restrictive covenants, including a noncompetition covenant (for the duration of the severance period) and an 18-month employee non-solicitation covenant.
Part-Time Employment Agreement with Dr. Chung
Dr. Chung’s full-time employment agreement with us was terminated on April 1, 2022 due to his retirement. In connection with his retirement, he entered into a part-time employment agreement with us effective April 2, 2022, which does not provide for any benefits in connection with his termination of employment or a change of control, except as described in the following sentence. However, pursuant to Dr. Chung’s part-time employment agreement, the equity-based awards that he held on April 1, 2022 remained outstanding and will continue to vest based on his service and, if outstanding at the Effective Time, will be treated in accordance with the Merger Agreement.
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Internal Revenue Code Section 280G
The Employment Agreements with Messrs. Sullivan, Davies and Noll provide that the payments and benefits that the applicable executive officer otherwise would receive in connection with a change of control will be reduced to the extent necessary to avoid imposition of the “golden parachute” excise tax pursuant to Section 280G of the Internal Revenue Code, but only if such reduction would result in such executive officer retaining a greater amount of such payments and benefits on a net after-tax basis than had no reduction been made.
Golden Parachute Compensation
In accordance with Item 402(t) of Regulation S-K, the table below sets forth the compensation that is based on or otherwise relates to the Merger or that will or may become payable to each of our named executive officers in connection with the Merger. Please see “Treatment of Natus Equity-Based Awards” and “Payments Upon Termination in Connection with Change of Control” for further information regarding this compensation.
The amounts indicated in the table below are estimates of the amounts that would be payable assuming, solely for the purposes of this table, that the Merger is consummated on June 30, 2022, and with respect to the cash payments and perquisite/benefit amounts, that the employment of each of the named executive officers is subject to an involuntary termination without “cause”, or the named executive officer resigns with “good reason”, on such date. Natus’ named executive officers will not receive pension, non-qualified deferred compensation enhancements, tax reimbursements or other benefits in connection with the Merger. However, we intend to terminate our nonqualified deferred compensation plan prior to the Effective Time, in which case deferrals under the plan will cease and each named executive officer (as well as each other participant) who has an account balance under such plan would receive accelerated payment of such balance (which is fully vested regardless of the Merger) promptly following the Effective Time.
Some of the amounts set forth in the table would be payable solely by virtue of the consummation of the Merger (i.e. without regard to whether a termination of employment occurs). In addition to the assumptions regarding the consummation date of the Merger and the termination of employment, these estimates are based on certain other assumptions that are described in the footnotes accompanying the table below. Accordingly, the ultimate values to be received by named executive officers in connection with the Merger may differ from the amounts set forth below.
Golden Parachute Compensation Table
 
Cash ($)(1)
Equity ($)(2)
Perquisites/
Benefits ($)(3)
Total
Payments ($)(4)
Thomas J. Sullivan
$10,128,567
$17,471,407
$75,000
$27,674,974
B. Drew Davies
788,700
5,260,170
30,000
6,078,870
Austin F. Noll, III
758,200
4,841,492
15,000
5,614,692
D. Christopher Chung, M.D.(5)
2,877,208
2,877,208
Jonathan A. Kennedy(6)
(1)
This amount represents the “double trigger” cash severance payments to which each of Messrs. Sullivan, Davies and Noll may become entitled under his employment agreement, as described in the section of this proxy statement captioned “Interests of Natus’ Directors and Executive Officers in the Merger – Payments Upon Termination in Connection with a Change of Control,” and, in the case of Mr. Sullivan, the Retention Payment pursuant to the CEO Retention Agreement. In the case of Mr. Sullivan, the amount set forth above represents (i) an amount equal to two times the sum of his annual base salary and target annual bonus as currently in effect, (ii) an amount representing his prorated annual bonus for the year of termination and (iii) his Retention Payment. For Messrs. Davies and Noll, the amount represents the named executive officer’s annual base salary and target annual bonus as currently in effect. For Messrs. Sullivan, Davies and Noll, the cash severance payments are contingent upon the effectiveness of a release of claims and compliance with restrictive covenants, as described in the section of this proxy statement captioned “Interests of Natus’ Directors and Executive Officers in the Merger – Payments Upon Termination in Connection with a Change of Control.” Furthermore, in the case of Mr. Sullivan, in the event of his termination without cause or for good reason, the Company’s obligation to pay any portion of the Retention Payment that relates to a retention date that has not yet occurred as of his termination date is contingent on the effectiveness of a release of claims and compliance with such restrictive covenants. The individual components of this column are quantified in the table immediately below.
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Multiple of Annual
Base Salary and
Target Annual
Bonus
Prorated Target
Annual Bonus
Retention Payment
Thomas J. Sullivan
$3,654,000
$474,567
$6,000,000
B. Drew Davies
788,700
Austin F. Noll, III
758,200
(2)
This amount represents the “single trigger” payments due with respect to each named executive officer’s Company Options, Company Restricted Stock and Company Restricted Stock Units under the Merger Agreement. This amount represents the sum of (x) in the case of Company Options, an amount equal to (i) the amount of the Per Share Price (less the exercise price per share attributable to such Company Option), multiplied by (ii) the total number of shares of Company Common Stock that are issuable upon the full exercise of such Company Option; (y) in the case of Company Restricted Stock Units, an amount equal to (i) the amount of the Per Share Price; multiplied by (ii) (1) with respect to Company Restricted Stock Units that are only subject to time-vesting requirements, the total number of shares of Company Common Stock subject to such Company Restricted Stock Unit, and (2) with respect to Company Restricted Stock Units that are subject to time- and performance-vesting requirements, the total number of shares of Company Common Stock determined to be performance vested with the performance goals deemed achieved at maximum levels and with the remaining time-vesting requirements deemed satisfied (except with respect to Mr. Sullivan) and (z) in the case of each share of Company Restricted Stock, an amount in cash equal to the Per Share Price. For Mr. Sullivan, pursuant to the Merger Agreement and the CEO Retention Agreement, the amount reflects Mr. Sullivan’s MSUs deemed attained at the level of performance actually achieved through the Closing based on the Per Share Price (which is approximately 143.4% of target, in the case of MSUs granted to Mr. Sullivan in December 2021, and 139.6% of target, in the case of MSUs granted to Mr. Sullivan in January 2022), consistent with the level of return to the Company’s stockholders; furthermore, pursuant to the Merger Agreement and the CEO Retention Agreement, the amount otherwise payable in respect of Mr. Sullivan’s Company Restricted Stock Units has been reduced in the table above by an amount equal to the $6,000,000 Retention Payment. The Retention Payment would otherwise have been payable to Mr. Sullivan at the Effective Time in respect of his Company Restricted Stock Units but will not become payable at the Effective Time and, instead, will become payable 50% on the six-month anniversary of the Closing and 50% on the one-year anniversary of the Closing, subject to his continued employment with the Company until the relevant retention date (except as described in Note (1) above).
(3)
This amount equals the estimated value of the “double trigger” health insurance benefits to which each named executive officer may become entitled to under his or her employment agreement, as described in the section of this proxy statement captioned “Interests of Natus’ Directors and Executive Officers in the Merger – Payments Upon Termination in Connection with Change of Control.” For Mr. Sullivan, the amount above represents the cost of continuation of the level of group health coverage currently provided by the Company to him and his eligible dependents until the third December 31st from the effective date of such termination. For Messrs. Davies and Noll, the amount above represents continued payment by the Company of the health continuation coverage premiums for the named executive officer and his eligible dependents for 12 months following termination (in the case of Mr. Davies) or six months following termination (in the case of Mr. Noll). For Messrs. Sullivan, Davies and Noll, the health insured benefits are contingent upon the effectiveness of a release of claims and compliance with restrictive covenants as described in “Interests of Natus’ Directors and Executive Officers in the Merger—Payments Upon Termination in Connection with a Change of Control.”
(4)
Under the respective employment agreements, amounts are subject to reduction in the event the named executive officer would be better off on an after-tax basis being cutback to a level such that the penalties and excise taxes under Sections 280G and 4999 of the Internal Revenue Code do not apply. The amounts in this table do not reflect any such reduction.
(5)
Dr. Chung’s full-time employment agreement with us was terminated on April 1, 2022 due to his retirement. In connection with his retirement, he entered into a part-time employment agreement with us effective April 2, 2022, which does not provide for any benefits in connection with his termination of employment or a change of control, except as described in the following sentence. However, pursuant to Dr. Chung’s part-time employment agreement, the equity-based awards that he held on April 1, 2022 remained outstanding and will continue to vest based on his service and, if outstanding at the Effective Time, will be treated in accordance with the Merger Agreement.
(6)
Mr. Kennedy resigned from his employment on December 13, 2021, and will not be receiving any cash or equity compensation in connection with the Merger.
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Equity Awards of Natus’ Executive Officers and Non-Employee Directors
The following table provides a summary of the outstanding and unvested In-the-Money Options, Company Restricted Stock and Company Restricted Stock Units (including time-vesting units, MSUs and PSUs) that were held by Natus’ non-employee directors and executive officers as of May 16, 2022. No new shares of Company Common Stock or equity awards were granted to any executive officer or non-employee director in contemplation of the Merger.
Name
Number
of Shares
Subject to
Unvested
Company
Options(1)
Aggregate
Value of
Unvested
Company
Options ($)
Number of
Shares
of Unvested
Company
Restricted Stock(2)
Aggregate
Value of
Unvested
Company
Restricted Stock
($)(2)
Number of
Shares
Subject to
Company
Restricted
Stock Units(3)
Aggregate
Value of
Unvested
Company
Restricted
Stock Units ($)(3)
Total Value ($)
Thomas J. Sullivan
$
57,298
$1,919,483
648,555
$21,726,593
$23,646,076
B. Drew Davies
43,253
1,448,976
113,767
3,811,195
5,260,170
Austin F. Noll, III
54,400
697,408
61,738
2,068,223
61,966
2,075,861
4,841,492
D. Christopher Chung, M.D.
35,360
453,315
37,299
1,249,517
35,056
1,174,376
2,877,208
Jonathan A. Kennedy(4)
Ilan Daskal
5,214
174,669
174,669
Lisa Wipperman Heine
5,214
174,669
174,669
Joshua H. Levine
5,214
174,669
174,669
Bryant M. Moore
5,799
194,267
194,267
Alice Schroeder
5,214
174,669
174,669
Eric J. Guerin
5,799
194,267
194,267
(1)
This amount represents each individual’s outstanding unvested In-the-Money Options (i.e. options to purchase shares of Company Common Stock with an exercise price of less than the Per Share Price). See the section of this proxy captioned “Interests of Natus’ Directors and Executive Officers in the Merger – Treatment of Natus Equity-Based Awards” for additional details.
The aggregate value is the product of (a) the Per Share Price and (b) the total number of shares subject to each individual’s outstanding unvested In-the-Money Options, less the aggregate exercise price attributable to such Company Option.
(2)
This amount represents each individual’s outstanding shares of Company Restricted Stock (i.e., unvested shares). See the section of this proxy captioned “Interests of Natus’ Directors and Executive Officers in the Merger – Treatment of Natus Equity-Based Awards” for additional details.
This amount includes, in the case of Messrs. Sullivan, Daskal and Levine and Ms. Wipperman Heine and Schroeder, 5,214 shares of Company Restricted Stock that are scheduled to vest on June 17, 2022, and in the case of Messrs. Moore and Guerin, 5,799 shares of Company Restricted Stock that are scheduled to vest on August 18, 2022. In the case of Mr. Sullivan, the grant was made to him in connection with his service as a non-employee director prior to becoming our President and Chief Executive Officer. Our non-employee directors will receive regular annual grants of shares of Company Restricted Stock in the ordinary course following our 2022 annual shareholder meeting on June 15, 2022, the grant date values of which were previously disclosed in the Company’s annual meeting proxy statement on Schedule 14A, filed with the SEC on April 28, 2022, and with the grants to Messrs. Moore and Guerin prorated to reflect that their service began after our 2021 annual shareholder meeting.
The aggregate value is the product of (a) the Per Share Price and (b) the total number of shares of unvested Company Restricted Stock.
(3)
This amount represents each individual’s outstanding Company Restricted Stock Units (inclusive of time-based vesting units, PSUs and MSUs). See the section of this proxy captioned “Interests of Natus’ Directors and Executive Officers in the Merger – Treatment of Natus Equity-Based Awards” for additional details. The individual components of the Company Restricted Stock Units column are quantified in the table immediately below.
Name
Number of
Shares
Subject to
Time-Based
Company
Restricted
Stock Units
Aggregate
Value of
Unvested
Time-Based
Company
Restricted
Stock Units
($)
Number of
Shares
Subject to
PSUs*
Number of
Shares
Subject to
MSUs*
Aggregate Value
of Unvested
PSUs and MSUs
($)*
Thomas J. Sullivan
$
422,376
226,179
$21,726,593
B. Drew Davies
7,733
259,056
72,350
33,684
3,811,195
Austin F. Noll, III
51,250
10,716
2,075,861
D. Christopher Chung, M.D.
28,168
6,888
1,174,376
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*
Assumes 200% of the target number of shares subject to PSUs and MSUs (except for Mr. Sullivan, whose MSUs are deemed attained at the level of performance actually achieved through the Closing based on the Per Share Price (which is approximately 143.4% of target, in the case of MSUs granted to Mr. Sullivan in December 2021, and 139.6% of target, in the case of MSUs granted to Mr. Sullivan in January 2022)). In respect of Mr. Sullivan’s Company Restricted Stock Units, $6,000,000 of the aggregate value in the table will not be paid as of the Effective Time and, instead, will become payable 50% on the six-month anniversary of the Closing and 50% on the one-year anniversary of the Closing, subject to his continued employment with the Company until the relevant retention date (except as otherwise provided in the CEO Retention Agreement), pursuant to the Merger Agreement and CEO Retention Agreement.
(4)
Mr. Kennedy resigned from his employment on December 13, 2021, and does not hold any Natus equity-based awards.
Please refer to the section of this proxy statement captioned “Interests of Natus’ Directors and Executive Officers in the Merger—Treatment of Natus Equity Based Awards” for additional details.
Financing of the Merger
We anticipate that the total amount of funds necessary to complete the Merger and the related transactions will be approximately $1.2 billion. This amount includes the funds needed to: (1) pay stockholders the amounts due under the Merger Agreement; (2) make payments in respect of our outstanding equity-based awards pursuant to the Merger Agreement; and (3) pay all fees and expenses payable by Parent and Merger Sub under the Merger Agreement.
Although the obligation of Parent and Merger Sub to consummate the Merger is not subject to any financing condition, the Merger Agreement provides that, in no event, will the Closing of the Merger occur before June 16, 2022.
Equity Financing
Pursuant to the Equity Commitment Letter (as such term is defined in the Merger Agreement), Med Platform II has agreed to provide Parent with an equity commitment of up to approximately $840,000,000 in cash, which will be available to fund the aggregate purchase price and the other payments contemplated by, and subject to the terms and conditions of, the Merger Agreement.
The Equity Commitment Letter provides, among other things, that: (1) Natus is an express third party beneficiary thereof in connection with Natus’ exercise of its rights related to specific performance under the Merger Agreement; and (2) Natus will be entitled to specific performance in connection with the exercise of such third party beneficiary rights. The Equity Commitment Letter may not be waived, amended or modified except by a written instrument signed by Parent, Med Platform II and the Company.
Limited Guaranty
Pursuant to the limited guaranty delivered by Med Platform II in favor of Natus, dated as of April 17, 2022 (the “Limited Guaranty”), Med Platform II has agreed to guaranty the payment of the Parent Termination Fee and certain other expenses that may be payable by Parent under the Merger Agreement.
The obligations of Med Platform II under the Limited Guaranty are subject to an aggregate cap equal to $89,014,704. Subject to specified exceptions, the Limited Guaranty will terminate upon the earliest of:
the Closing;
the valid termination of the Merger Agreement by mutual written consent of Parent and Natus, or under circumstances in which Parent and Merger Sub would not be obligated to pay the Parent Termination Fee under the Merger Agreement; and
subject to certain exceptions in the Merger Agreement, the two month anniversary after any valid termination of the Merger Agreement in accordance with its terms (other than the circumstances described in the foregoing clause).
Debt Financing
In connection with the Merger Agreement, Merger Sub entered into a debt commitment letter on April 17, 2022 with Jefferies Finance LLC (together with each person (if any) that becomes an arranger for any facility pursuant to and in accordance with Section 2 of the Debt Commitment Letter, the “Lead Arranger”) pursuant to which the Lead Arranger has committed to provide (i) a $400,000,000 first lien term facility and (ii) a $50,000,000 revolving facility for the purpose of financing the transactions contemplated by the Merger
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Agreement and paying related fees and expenses, subject to the terms and conditions set forth therein (as amended, restated, amended and restated, modified or supplemented from time to time, the “Debt Commitment Letter”). The obligation of the Lead Arranger to provide debt financing under the Debt Commitment Letter is subject to a number of customary conditions, including, without limitation, the following (subject to certain exceptions and qualifications as set forth in the Debt Commitment Letter):
the consummation of the Merger in accordance with the Merger Agreement substantially concurrently with the funding of the Credit Facilities;
no amendment, supplementation, waiver or modification of the Merger Agreement in a manner that is materially adverse to the Lead Arranger without the Lead Arranger’s consent;
the refinancing of certain of Natus’ existing indebtedness prior to or substantially concurrently with the funding of the Credit Facilities;
since April 17, 2022, the absence of a Company Material Adverse Effect (as defined in the Merger Agreement) that would result in the failure of a condition precedent to Merger Sub’s (or its affiliates’) obligation to consummate certain transactions contemplated by the Merger Agreement or that would give Merger Sub or its affiliates the right (taking into account any notice and cure provisions) to terminate its (or their) obligations pursuant to the terms of the Merger Agreement;
the receipt of certain specified financial statements of Natus and the Borrower (as defined in the Debt Commitment Letter);
the execution and delivery of definitive documentation with respect to the Credit Facilities;
the accuracy in all material respects of certain specified representations and warranties in the Merger Agreement and in the definitive documents with respect to the Credit Facilities; and
the delivery by of documentation required under applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act.
The commitment of the lenders under the Debt Commitment Letter expires upon the earliest to occur of (i) five business days after the Outside Date (as defined in the Merger Agreement), (ii) the date on which the Lead Arranger is notified of the valid termination of the Merger Agreement prior to the consummation of the Merger and (iii) the consummation of the Merger and payment of the consideration therefor and related transactions with or without the use of the Credit Facilities.
Closing and Effective Time of the Merger
The Closing of the Merger will take place on the later of (a) the third Business Day after the satisfaction or waiver of the applicable conditions to the Closing (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver in accordance with the Merger Agreement by the party having the benefit of the applicable condition) of all conditions at the Closing; or (b) at such other place, date and time as Natus and Parent may agree in writing; provided that in no event will the Closing occur before June 16, 2022. For more information, see the section of this proxy statement captioned “The Merger Agreement—Closing and Effective Time of the Merger.”
Appraisal Rights
If the Merger is consummated and certain conditions set forth in Section 262 of the DGCL are met, Natus stockholders who do not vote in favor of the adoption of the Merger Agreement, who properly demand an appraisal of their shares of Company Common Stock, who continuously hold such shares of Company Common Stock from the date of demand through the Effective Time of the Merger and who otherwise comply with the procedures of Section 262 of the DGCL will be entitled to appraisal rights in connection with the Merger under Section 262 of the DGCL (“Section 262”). Unless the context requires otherwise, all references in Section 262 and in this summary to a “stockholder” are to a record holder of Company Common Stock.
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 and incorporated into this proxy statement by reference. The following summary does not constitute any legal or other advice and does not constitute a recommendation that Natus stockholders exercise their
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appraisal rights under Section 262. Only a holder of record of shares of Company Common Stock is entitled to demand appraisal rights for the shares of Company Common Stock registered in that holder’s name. A person having a beneficial interest in shares of Company Common Stock held of record in the name of another person, such as a bank, broker or other nominee, must act promptly to cause the record holder to demand an appraisal of such holder’s shares. If you hold your shares of Company Common Stock through a bank, broker or other nominee and you wish to exercise appraisal rights, you should consult with your bank, broker or the other nominee to ensure that appraisal rights are exercised.
Under Section 262, holders of record of shares of Company Common Stock who (1) deliver a written demand for appraisal of such stockholder’s shares of Company Common Stock to Natus prior to the vote on the adoption of the Merger Agreement; (2) do not vote in favor of the adoption of the Merger Agreement; (3) continuously are the record holders of such shares of Company Common Stock from the date of demand through the Effective Time; and (4) otherwise comply with the procedures set forth in Section 262 may be entitled to have their shares of Company Common Stock appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of the shares of Company Common Stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest, if any, to be paid on the amount determined to be fair value as determined by the Delaware Court of Chancery. However, the Delaware Court of Chancery will dismiss appraisal proceedings as to all Natus stockholders who assert appraisal rights unless (a) the total number of shares of Company Common Stock entitled to appraisal exceeds 1% of the outstanding shares of Company Common Stock eligible for appraisal; or (b) the value of the aggregate Per Share Price in respect of such shares exceeds $1 million (conditions (a) and (b) referred to as the “ownership thresholds”). Unless the Delaware Court of Chancery, in its discretion, determines otherwise for good cause shown, interest on an appraisal award will accrue and compound quarterly from the Effective Time through the date the judgment is paid at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during such period. However, at any time before the Delaware Court of Chancery enters judgment in the appraisal proceedings, the Surviving Corporation may pay to each stockholder entitled to appraisal an amount in cash, in which case such interest will accrue after the time of such payment only on the sum of (1) the difference, if any, between the amount paid and the “fair value” determined by the Court of Chancery, and (2) any interest accrued prior to the time of such voluntary payment, unless paid at such time. The Surviving Corporation is under no obligation to make such voluntary cash payment prior to such entry of judgment.
Under Section 262, where a merger agreement is to be submitted for adoption at a meeting of stockholders, the corporation, not less than twenty (20) days prior to the stockholder meeting, must notify each of its stockholders of record as of the record date for notice of such meeting that appraisal rights are available and include in the notice a copy of Section 262. This proxy statement constitutes Natus’ notice to 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 shares of Company Common Stock 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 will 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 Price without interest. Moreover, because of the complexity of the procedures for exercising the right to seek appraisal of shares of Company Common Stock, Natus believes that if a stockholder considers exercising such rights, that stockholder should seek the advice of legal counsel.
Stockholders wishing to exercise the right to seek an appraisal of their shares of Company Common Stock must do ALL of the following:
the stockholder must not vote in favor of the proposal to adopt the Merger Agreement;
the stockholder must deliver to Natus a written demand for appraisal before the vote on the Merger Agreement at the Company Stockholder Meeting; and
the stockholder must continuously hold the shares of Company Common Stock from the date of making the demand through the Effective Time (a stockholder will lose appraisal rights if the stockholder transfers the shares of Company Common Stock before the Effective Time).
In addition, one of the ownership thresholds must be met.
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Because a proxy that does not contain voting instructions will, unless revoked, be voted in favor of the adoption of the Merger Agreement, a stockholder who votes by proxy and who wishes to exercise appraisal rights must vote against the adoption of the Merger Agreement, abstain or not vote his, her or its shares of Company Common Stock.
Filing Written Demand
A stockholder wishing to exercise appraisal rights must deliver to Natus, before the vote on the adoption of the Merger Agreement at the Company Stockholder Meeting at which the proposal to adopt the Merger Agreement will be submitted to the stockholders, a written demand for the appraisal of such stockholder’s shares of Company Common Stock, and that stockholder must not vote, in person (virtually) or by proxy, in favor of the adoption of the Merger Agreement. A stockholder exercising appraisal rights must hold of record the shares of Company Common Stock on the date the written demand for appraisal is made and must continue to hold the shares of Company Common Stock of record through the Effective Time. Neither voting (in person (virtually) or by proxy) against the adoption of 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 adoption of the Merger Agreement. A stockholder’s failure to make the written demand prior to the taking of the vote on the adoption of the Merger Agreement at the Company Stockholder Meeting will constitute a waiver of appraisal rights.
Only a holder of record of shares of Company 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 Company Common Stock should be executed by or on behalf of the holder of record, and must reasonably inform Natus of the identity of the holder and state that the stockholder intends thereby to demand an appraisal of such stockholder’s shares of Company Common Stock. If the shares of Company Common Stock are owned of record in the name of another person, such as a broker, fiduciary, depositary or other nominee, such demand must be executed by or on behalf of the record owner, and if such shares of Company Common Stock are owned of record by more than one person, as in a joint tenancy and tenancy in common, the demand must 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. If a stockholder holds shares of Company Common Stock through a broker who in turn holds the shares through a central securities depository nominee such as Cede & Co., a demand for appraisal of such shares must be made by or on behalf of the depository nominee and must identify the depository nominee as record holder.
STOCKHOLDERS WHO HOLD THEIR SHARES OF COMPANY COMMON STOCK IN BROKERAGE OR BANK ACCOUNTS OR OTHER NOMINEE FORMS AND WHO WISH TO EXERCISE APPRAISAL RIGHTS SHOULD CONSULT WITH THEIR BANK, BROKER OR OTHER NOMINEES, AS APPLICABLE, TO DETERMINE THE APPROPRIATE PROCEDURES FOR THE BANK, BROKER OR OTHER NOMINEE TO MAKE A DEMAND FOR APPRAISAL OF THOSE SHARES OF COMPANY COMMON STOCK. A PERSON HAVING A BENEFICIAL INTEREST IN SHARES OF COMPANY COMMON STOCK HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A BANK, BROKER 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:
Natus Medical Incorporated
3150 Pleasant View Road
Middleton, WI 53562
Attention: Corporate Secretary
Any holder of shares of Company Common Stock who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw his, her or its demand for appraisal and accept the consideration offered pursuant to the Merger Agreement by delivering to Natus a written withdrawal of the demand for appraisal. However, any such attempt to withdraw the demand made more than sixty (60) days after the Effective Time will require written approval of the Surviving Corporation. Notwithstanding the foregoing, no appraisal proceeding in the Delaware Court of Chancery will be dismissed as to any stockholder without the approval of the Delaware Court of
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Chancery, and such approval may be conditioned upon such terms as the Delaware Court of Chancery deems just; provided, however, that this shall not affect the right of any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such stockholder’s demand for appraisal and to accept the Per Share Price within sixty (60) days after the Effective Time.
Notice by the Surviving Corporation
If the Merger is completed, within ten (10) days after the Effective Time, the Surviving Corporation will notify each record holder of shares of Company Common Stock who has made a written demand for appraisal pursuant to Section 262, and who has not voted in favor of the adoption of the Merger Agreement, that the Merger has become effective and the effective date thereof.
Filing a Petition for Appraisal
Within one hundred and twenty (120) days after the Effective Time, but not thereafter, the Surviving Corporation or any holder of shares of Company Common Stock who has complied with Section 262 and is entitled to appraisal rights under Section 262 (or a beneficial owner in the circumstances described in the next paragraph) may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery, with a copy served on the Surviving Corporation 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 Corporation is under no obligation, and has no present intention, to file a petition, and holders should not assume that the Surviving Corporation will file a petition or initiate any negotiations with respect to the fair value of the shares of Company Common Stock. Accordingly, any holders of shares of Company Common Stock who desire to have their shares appraised should initiate all necessary action to perfect their appraisal rights in respect of their shares of Company Common Stock within the time and in the manner prescribed in Section 262. If no petition for appraisal is filed with the Delaware Court of Chancery within 120 days after the Effective Time, stockholders’ rights to appraisal shall cease, and all holders of shares of Company Common Stock will be entitled to receive the consideration offered pursuant to the Merger Agreement.
Within one hundred and twenty (120) days after the Effective Time, any holder of shares of Company Common Stock who has complied with the requirements for an appraisal of such holder’s shares pursuant to Section 262 will be entitled, upon written request, to receive from the Surviving Corporation a statement setting forth the aggregate number of shares of Company Common Stock not voted in favor of the adoption of the Merger Agreement and with respect to which Natus has received demands for appraisal, and the aggregate number of holders of such shares of Company Common Stock. The Surviving Corporation must give this statement to the requesting stockholder within ten (10) days after receipt of the written request for such a statement or within ten (10) days after the expiration of the period for delivery of demands for appraisal, whichever is later. A beneficial owner of shares of Company Common Stock 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 Corporation the foregoing statements. 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 Company Common Stock and a copy thereof is served upon the Surviving Corporation, the Surviving Corporation will then be obligated within twenty (20) days after such service to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all stockholders who have demanded appraisal of their shares of Company Common Stock 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, at the hearing on such petition, the Delaware Court of Chancery will determine the 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 appraisal for their shares of Company Common Stock 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 the proceedings as to such stockholder.
Pursuant to Section 262(g), the Delaware Court of Chancery will dismiss appraisal proceedings as to all Natus stockholders who assert appraisal rights unless (1) the total number of shares of Company Common Stock entitled to appraisal exceeds 1% of Natus’ outstanding shares of Company Common Stock eligible for appraisal; or (2) the value of the aggregate Per Share Price in respect of such shares exceeds $1 million.
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Determination of Fair Value
Where proceedings are not dismissed, the appraisal proceeding will be conducted in accordance with the rules of the Court of Chancery, including any rules specifically governing appraisal proceedings. Through such proceeding, the Delaware Court of Chancery will determine the “fair value” of the shares of Company Common Stock, 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. 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 Time 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 Time and the date of payment of the judgment. However, the Surviving Corporation has the right, at any point prior to the Delaware Court of Chancery’s entry of judgment in the proceedings, to make a voluntary cash payment to each stockholder seeking appraisal. If the Surviving Corporation makes a voluntary cash payment pursuant to subsection (h) of Section 262, interest will accrue thereafter only on the sum of (1) the difference, if any, between the amount paid by the Surviving Corporation in such voluntary cash payment and the fair value of the shares as determined by the Delaware Court of Chancery and (2) interest accrued before such voluntary cash payment, 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 Supreme Court of Delaware 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 v. UOP, Inc., 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 may not in any manner address, fair value under Section 262 of the DGCL. 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 Price. Neither Natus nor Parent anticipates offering more than the Per Share Price to any stockholder exercising appraisal rights, and each of Natus and Parent reserves the rights to make a voluntary cash payment pursuant to subsection (h) of Section 262 and to assert, in any appraisal proceeding, that for purposes of Section 262, the “fair value” of a share of Company Common Stock is less than the Per Share Price. 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 any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorney’s fees and the fees and expenses of experts, be charged pro rata against the value of all the shares of Company Common Stock entitled to an appraisal. In the absence of such determination or assessment, each party bears its own expenses.
If any stockholder who demands appraisal of his, her or its shares of Company Common Stock under Section 262 fails to perfect, or loses or validly withdraws, such holder’s right to appraisal, the stockholder’s shares of Company Common Stock will be deemed to have been converted at the Effective Time into the right to receive the Per Share Price as provided in the Merger Agreement.
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From and after the Effective Time, no stockholder who has demanded appraisal rights will be entitled to vote such shares of Company Common Stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior to the Effective Time).
 Failure to comply strictly with all of the procedures set forth in Section 262 will result in the loss of a stockholder’s statutory appraisal rights. Consequently, any stockholder wishing to exercise appraisal rights is encouraged to consult legal counsel before attempting to exercise those rights.
Accounting Treatment
The Merger will be accounted for as a “purchase transaction” for financial accounting purposes.
Regulatory Approvals Required for the Merger
The completion of the Merger is conditioned on, among other things, any applicable waiting period (and any extensions thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) and certain other antitrust and foreign investment laws having expired or been terminated, or all requisite consents pursuant thereto being obtained. Specifically, the Merger is conditioned on (i) merger control approval by (a) the Austrian Federal Competition Authority; (b) the Spanish National Markets and Competition Commission; (c) the European Commission, but only in the event of the Merger having been referred to the European Commission pursuant to Article (22)(1) of the EU Merger Regulation; and (d) the Competition and Markets Authority of the United Kingdom (“CMA”), or written confirmation in response to a briefing note that the CMA does not intend to open a Phase I investigation into the Merger; and (ii) foreign investment approval by (a) the Danish Business Authority and (b) the Italian Government.
Upon the terms and subject to the conditions set forth in the Merger Agreement, Parent and Merger Sub, on the one hand, and Natus, on the other hand, will use their respective reasonable best efforts (x) to take (or cause to be taken) all actions; (y) do (or cause to be done) all things; and (z) assist and cooperate with the other Parties in doing (or causing to be done) all things, in each case as are necessary, proper or advisable pursuant to applicable Law or otherwise to consummate and make effective, in the most expeditious manner practicable, the Merger, including by using its reasonable best efforts to cause the conditions to the Merger in the Merger Agreement to be satisfied.
On April 29, 2022 and May 5, 2022, Natus and Parent, respectively, filed notification of the proposed Merger with the FTC and the Antitrust Division under the HSR Act. The waiting period under the HSR Act is expected to expire at 11:59 p.m., Eastern time, on June 6, 2022.
See the section entitled “The Merger Agreement—Required Efforts to Consummate the Merger” of this proxy statement for a more detailed discussion of the parties’ obligations with respect to obtaining regulatory approvals in connection with the Merger.
Delisting and Deregistration of Company Common Stock
Upon completion of the Merger, the Company Common Stock currently listed on NASDAQ will cease to be listed on NASDAQ and will subsequently be deregistered under the Exchange Act.
Litigation Related to the Merger
As of the date of this proxy statement, there are no pending lawsuits challenging the Merger. However, potential plaintiffs may file lawsuits challenging the merger. The outcome of any future litigation is uncertain.
Such litigation, if not resolved, could prevent or delay consummation of the merger and result in substantial costs to Natus, including any costs associated with the indemnification of directors and officers. One of the conditions to the consummation of the Merger is that no order or injunction issued by any court of competent jurisdiction in any jurisdiction where the Company or its Subsidiaries has material operations will be in effect that prohibits, makes illegal, or enjoins the consummation of the Merger. Therefore, if a plaintiff were successful in obtaining an injunction prohibiting the consummation of the Merger on the agreed-upon terms, then such injunction may prevent the Merger from being consummated, or from being consummated within the expected timeframe.
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THE MERGER AGREEMENT
Explanatory Note Regarding the Merger Agreement
The following summary describes the material provisions of the Merger Agreement. The descriptions of the Merger Agreement in this summary and elsewhere in this proxy statement are not complete and are qualified in their entirety by reference to the Merger Agreement, a copy of which is attached to this proxy statement as Annex A and is incorporated into this proxy statement by reference. We encourage you to read the Merger Agreement carefully and in its entirety because this summary may not contain all the information about the Merger Agreement that is important to you. The rights and obligations of the parties are governed by the express terms of the Merger Agreement and not by this summary or any other information contained in this proxy statement. Capitalized terms in this section but not defined in this proxy statement have the meaning ascribed to such terms in the Merger Agreement.
The representations, warranties, covenants and agreements described in this section and included in the Merger Agreement (1) were made only for purposes of the Merger Agreement and as of specific dates; (2) were made solely for the benefit of the parties to the Merger Agreement; and (3) may be subject to important qualifications, limitations and supplemental information agreed to by Parent, Natus and Merger Sub in connection with negotiating the terms of the Merger Agreement. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to reports and documents filed with the SEC and, in some cases, were qualified by matters disclosed to Parent and Merger Sub by Natus. In addition, the representations and warranties may have been included in the Merger Agreement for the purposes of allocating contractual risk between the parties to the Merger Agreement, rather than to establish matters as facts, and may be subject to standards of materiality applicable to such parties that differ from those applicable to investors. Stockholders should not rely on the representations, warranties, covenants and agreements or any descriptions thereof as characterizations of the actual state of facts or condition of Natus, Parent or Merger Sub or any of their respective affiliates or businesses. Moreover, information concerning the subject matter of the representations and warranties may have changed after the Merger Agreement date and does not purport to be accurate as of the date of this proxy statement. In addition, you should not rely on the covenants in the Merger Agreement as actual limitations on the respective businesses of Natus, Parent and Merger Sub because the parties may take certain actions that are either expressly permitted or as otherwise consented to by the appropriate party, which consent may be given without prior notice to the public. The Merger Agreement is described below, and included as Annex A, only to provide you with information regarding its terms and conditions, and not to provide you with any other factual information regarding Natus, Parent, Merger Sub or their respective businesses or affiliates.
Form and Effects of the Merger; Directors and Officers; Articles of Incorporation and Bylaws
Upon the terms and subject to the conditions of the Merger Agreement and the applicable provisions of the DGCL, on the closing date, Merger Sub will be merged with and into Natus and Natus will continue as the Surviving Corporation of the Merger and a private subsidiary of Parent.
At the Effective Time, all of the property, rights, privileges, powers and franchises of Natus and Merger Sub will vest in the Surviving Corporation and debts, liabilities and duties of Natus and Merger Sub will become the debts, liabilities and duties of the Surviving Corporation.
At Effective Time, the initial directors of the Surviving Corporation will be the directors of Merger Sub as of immediately prior to the Effective Time, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until their respective successors are duly elected or appointed and qualified or until their earlier death, resignation or removal.
At the Effective Time, the initial officers of the Surviving Corporation will be the officers of Merger Sub as of immediately prior to the Effective Time, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until their respective successors are duly appointed or until their earlier death, resignation or removal.
At the Effective Time, the Amended and Restated Certificate of Incorporation of Natus as amended (the “Charter”), will be amended and restated in its entirety to read substantially identically to the certificate of incorporation of Merger Sub as in effect immediately prior to the Effective Time, and such amended and restated
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certificate of incorporation will become the certificate of incorporation of the Surviving Corporation until thereafter amended in accordance with the applicable provisions of the DGCL and such certificate of incorporation; provided, however, (i) the name of the Surviving Corporation will be the name of the Company, (ii) the certificate of incorporation of the Surviving Company shall omit any provisions of the certificate of incorporation of Merger Sub which named the incorporator or incorporators, the initial board of directors and the original subscribers for shares and (iii) the certificate of incorporation of the Surviving Company shall contain provisions with respect to indemnification, exculpation and advancement of expenses that are identical to the indemnification, exculpation and advancement of expenses provisions set forth in the Charter.
At the Effective Time, the bylaws of Merger Sub, as in effect immediately prior to the Effective Time, will become the bylaws of the Surviving Corporation until thereafter amended in accordance with the applicable provisions of the DGCL, the certificate of incorporation of the Surviving Corporation and such bylaws.
Closing and Effective Time of the Merger
The Closing of the Merger will take place at a closing to occur at 9:00 a.m., Eastern time, by electronic exchange of documents, on the later of (a) a date which shall be the third Business Day after the date the conditions to the Merger set forth in the Merger Agreement and described in the section of this proxy statement captioned “—Conditions to the Merger” have been satisfied or waived (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver in accordance with the Merger Agreement by the party having the benefit of the applicable condition) of all conditions at the Closing; or (b) at such other place, date and time as Natus and Parent may agree in writing; provided that in no event will the Closing occur before June 16, 2022.
Upon the terms and subject to the conditions set forth in the Merger Agreement, on the closing date, Parent, Merger Sub and Natus will cause the Merger to be consummated pursuant to the DGCL by filing a Certificate of Merger in customary form and substance with the Secretary of State of the State of Delaware in accordance with the applicable provisions of the DGCL. As of the date of this proxy statement, we expect to complete the Merger in the third calendar quarter of 2022; however, consummation of the Merger is subject to the satisfaction or waiver of the conditions to the completion of the Merger more fully described in the section of this proxy statement captioned “—Conditions to the Merger” and we cannot specify when, or assure you that, Natus and Parent will satisfy or waive all conditions to the Merger. There may be a substantial amount of time between the date of the Company Stockholder Meeting and the consummation of the Merger and it is possible that factors outside the control of Natus or Parent could delay the consummation of the Merger, or prevent the Merger from being consummated; however, we expect to consummate the Merger promptly following the satisfaction or waiver of the conditions more fully described below in the section of this proxy statement captioned “—Conditions to the Merger.”
The Per Share Price
Effect of the Merger on Natus’ Capital Stock
At the Effective Time, each share of Company Common Stock that is outstanding as of immediately prior to the Effective Time (other than Owned Company Shares and Dissenting Company Shares but including each share of Company Restricted Stock), will be cancelled and extinguished, and automatically converted into the right to receive an amount equal to $33.50 in cash, without interest thereon and less any applicable withholding taxes.
As of the Effective Time, all shares of Company Common Stock and rights or interests will no longer be outstanding and will be cancelled and will cease to exist and will thereafter represent only the right to receive the Per Share Price to be paid in accordance with, and subject to, the conditions of the Merger Agreement. At the Effective Time, each share of Company Common Stock that is (1) held by Natus as treasury stock; (2) owned by Parent or Merger Sub; or (3) owned directly or indirectly by Parent or Merger Sub, in each case as of immediately prior to the Effective Time, will be cancelled and extinguished without any conversion thereof or consideration paid therefor. All shares of Company Common Stock that are issued and outstanding as of immediately prior to the Effective Time and held by Company Stockholders (as defined in the Merger Agreement) who shall have neither voted in favor of the adoption of the Merger Agreement nor consented thereto in writing and who shall have properly and validly demanded their statutory rights of appraisal in respect of such shares of Company Common Stock in accordance with Section 262 of the DGCL (the “Dissenting Company Shares”) will not be converted into, or represent the right to receive, the Per Share Price pursuant to
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the Merger Agreement. Such Company Stockholders will be entitled to receive payment of the appraised value of such Dissenting Company Shares in accordance with the provisions of Section 262 of the DGCL, except that all Dissenting Company Shares held by Company Stockholders who shall have failed to perfect or who shall have effectively withdrawn or lost their rights to appraisal of such Dissenting Company Shares pursuant to Section 262 of the DGCL will thereupon be deemed to have been converted into, and to have become exchangeable for, as of the Effective Time, the right to receive the Per Share Price, without interest thereon, upon surrender of the Certificates or Uncertificated Shares (each as defined below) that formerly evidenced such shares of Company Common Stock in the manner provided in the Merger Agreement (or in the case of a lost, stolen or destroyed Certificate, upon delivery of an affidavit (and bond, if required) in accordance with the provisions of the Merger Agreement). The Per Share Price will be adjusted appropriately to reflect the effect of any stock split, reverse stock split, stock dividend (including any dividend of securities convertible into Company Common Stock), reclassification, combination, or other similar change with respect to the Company Common Stock occurring on or after the date of the Merger Agreement and prior to the Effective Time.
Treatment of Natus Equity-Based Awards
Outstanding Equity Awards
The Merger Agreement provides that Natus’ equity awards that are outstanding immediately prior to the Effective Time will be subject to the following treatment at the Effective Time:
Company Options
At the Effective Time, each Company Option that is outstanding as of immediately prior to the Effective Time, whether vested or unvested and whether or not granted pursuant to any Company Stock Plan, and that is an In-the-Money Company Option will be cancelled and converted into and will become a right to receive an amount in cash, without interest and subject to any required tax withholding, equal to (i) the amount of the Per Share Price (less the exercise price per share attributable to such Company Option), multiplied by (ii) the total number of shares of Company Common Stock that are issuable upon the full exercise of such Company Option.
Each Company Option that is not an In-the-Money Company Option will be cancelled without any cash payment being made in respect thereof.
Company Restricted Stock
At the Effective Time, except as set forth below with respect to Employee Interim Awards, each share of Company Restricted Stock outstanding as of immediately prior to the Effective Time, whether vested or unvested and whether or not granted pursuant to any of the Company Stock Plans, will be cancelled and converted into and will become a right to receive an amount in cash, without interest and subject to any required tax withholding, equal to the Per Share Price.
Company Restricted Stock Units
At the Effective Time, except as set forth below with respect to Employee Interim Awards or as set forth in the CEO Retention Agreement, each Company Restricted Stock Unit outstanding as of immediately prior to the Effective Time, whether vested or unvested and whether or not granted pursuant to any Company Stock Plan, will be cancelled and be converted into and will become a right to receive an amount in cash, without interest and subject to any required tax withholding, equal to (i) the amount of the Per Share Price; multiplied by (ii) (1) with respect to Company Restricted Stock Units that are only subject to time-vesting requirements, the total number of shares of Company Common Stock subject to such Company Restricted Stock Unit, and (2) with respect to Company Restricted Stock Units that are subject to time- and performance-vesting requirements, the total number of shares of Company Common Stock determined to be performance vested with the performance goals deemed achieved at maximum levels and with the remaining time-vesting requirements deemed satisfied.
Employee Interim Awards
At the Effective Time, any Employee Interim Awards that are outstanding as of immediately prior to the Effective Time, whether vested or unvested and whether or not granted pursuant to any Company Stock Plan, will be treated at the Effective Time in the manner set forth above, provided that any applicable performance goals will be deemed
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achieved at target levels (rather than at maximum) and the number of shares subject to such Employee Interim Awards that will vest at the Effective Time will be prorated to reflect the portion of the applicable vesting period that has elapsed from the date of grant until the Effective Time (rather than vesting in full), and the remaining unvested portion of any Employee Interim Awards will be forfeited at the Effective Time.
ESPP
There are no outstanding purchase rights under the Company’s 2011 Employee Stock Purchase Plan. Even if the ESPP is adopted by the Company’s stockholders at its 2022 annual meeting, the Merger Agreement does not permit any employee to commence participation in the ESPP and requires that the ESPP be terminated as of the Effective Time.
CEO Retention Agreement
Pursuant to the CEO Retention Agreement, Mr. Sullivan agreed that, notwithstanding the treatment of Company Restricted Stock Units set forth in the Merger Agreement (as described above), he would not receive payment in respect of his Company Restricted Stock Units that are MSUs based on deemed achievement of performance goals at maximum levels. Instead, Mr. Sullivan’s MSUs will be deemed attained at the level of performance actually achieved through the Closing based on the Per Share Price (which is approximately 143.4% of target, in the case of MSUs granted to Mr. Sullivan in December 2021, and 139.6% of target, in the case of MSUs granted to Mr. Sullivan in January 2022), consistent with the level of return to the Company’s stockholders pursuant to the Merger Agreement. The consequence to Mr. Sullivan will be a reduction by over $3,000,000 in the amount of gross proceeds that he otherwise was entitled to receive and would have received in respect of his MSUs.
Furthermore, pursuant to the CEO Retention Agreement, Mr. Sullivan agreed that an amount equal to $6,000,000 (the “Retention Payment”) payable to him at the Effective Time in respect of his Company Restricted Stock Units would not become payable at the Effective Time and, instead, would become payable 50% on the six-month anniversary of the Closing and 50% on the one-year anniversary of the Closing, subject to his continued employment with the Company until the relevant retention date. If Mr. Sullivan’s employment is terminated by the Company without cause, by Mr. Sullivan with good reason, or due to his death or disability, any then-unpaid portion of the Retention Payment shall be paid to him upon his termination (subject to, in the case of a termination by the Company without cause or by Mr. Sullivan for good reason, his execution and non-revocation of a release of claims). If Mr. Sullivan’s employment terminates for any other reason prior to the relevant retention date, he will immediately forfeit all portions of the Retention Payment that relate to a future retention date. Mr. Sullivan’s right to receive the Retention Payment is further subject to his continued compliance with certain restrictive covenants.
Exchange of Certificates and Payment Procedures
Payment Agent
Prior to the Closing, Parent will (i) select a bank or trust company reasonably acceptable to Natus to act as the payment agent for the Merger and (ii) enter into a payment agent agreement, in form and substance reasonably acceptable to Natus, with such payment agent.
Exchange Fund
At or prior to the Closing, Parent will deposit (or cause to be deposited) with the Payment Agent, by wire transfer of immediately available funds, (i) for payment to the holders of shares of Company Common Stock, an amount of cash equal to the aggregate consideration to which such holders of Company Common Stock have become entitled pursuant to the terms of the Merger Agreement, and (ii) for payment to the holders of Company Restricted Stock, Company Restricted Stock Units and/or In-the-Money Company Options who are not current or former employees of the Company or any of its Subsidiaries (collectively, “Non-Employee Holders”), an amount in cash equal to the aggregate consideration to which such holders of Company Restricted Stock, Company Restricted Stock Units and/or In-the-Money Company Options have become entitled pursuant to the terms of the Merger Agreement. Until disbursed in accordance with the terms and conditions of the Merger Agreement, such cash will be invested by the payment agent, as directed by Parent or the Surviving Corporation, in (i) obligations of or fully guaranteed by the United States or any agency or instrumentality thereof and backed by the full faith
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and credit of the United States with a maturity of no more than 30 days; (ii) commercial paper obligations rated A-1 or P-1 or better by Moody’s Investors Service, Inc. or Standard & Poor’s Corporation, respectively; or (iii) certificates of deposit, bank repurchase agreements or banker’s acceptances of commercial banks with capital exceeding $1.0 billion (based on the most recent financial statements of such bank that are then publicly available) (such cash and any proceeds thereon, the “Exchange Fund”). To the extent that (1) there are any losses with respect to any investments of the Exchange Fund; (2) the Exchange Fund diminishes or is otherwise for any reason below the level required for the payment agent to promptly pay the cash amounts owed pursuant to the Merger Agreement; or (3) all or any portion of the Exchange Fund is unavailable for Parent (or the payment agent on behalf of Parent) to promptly pay the cash amounts owed pursuant to the Merger Agreement for any reason, Parent will, or will cause the Surviving Corporation to, promptly replace or restore the amount of cash in the Exchange Fund so as to ensure that the Exchange Fund is at all times fully available for distribution and maintained at a level sufficient for the payment agent to make the payments owed pursuant to the Merger Agreement. Any income from investment of the Exchange Fund will be payable to Parent or the Surviving Corporation, as Parent directs.
Payment Procedure
Promptly following the Effective Time (and in any event within three Business Days of the Closing), Parent and the Surviving Corporation will cause the payment agent to mail to each holder of record (as of immediately prior to the Effective Time) of (1) a certificate or certificates that immediately prior to the Effective Time represented outstanding shares of Company Common Stock (other than Dissenting Company Shares, Owned Company Shares and shares of Company Restricted Stock) (the “Certificates”); and (2) uncertificated shares of Company Common Stock that represented outstanding shares of Company Common Stock (other than Dissenting Company Shares, Owned Company Shares and shares of Company Restricted Stock) (the “Uncertificated Shares”) (A) a letter of transmittal in customary form (which will specify that delivery will be effected, and risk of loss and title to the Certificates will pass, only upon delivery of the Certificates to the Payment Agent); and (B) instructions for use in effecting the surrender of the Certificates and Uncertificated Shares in exchange for the Per Share Price payable in respect thereof pursuant to the Merger Agreement. Upon surrender of Certificates for cancellation to the payment agent, together with such letter of transmittal duly completed and validly executed in accordance with the instructions thereto (or in the case of a lost, stolen or destroyed Certificate, upon delivery of an affidavit (and bond, if required) in accordance with the provisions of the Merger Agreement), the holders of such Certificates will be entitled to receive in exchange therefor an amount in cash equal to the product obtained by multiplying (x) the aggregate number of shares of Company Common Stock represented by such Certificate; by (y) the Per Share Price (less any applicable withholding taxes payable in respect thereof), and the Certificates so surrendered will forthwith be cancelled. Upon receipt of an “agent’s message” by the Payment Agent (or such other evidence, if any, of transfer as the Payment Agent may reasonably request) in the case of a book-entry transfer of Uncertificated Shares, the holders of such Uncertificated Shares will be entitled to receive in exchange therefor an amount in cash equal to the product obtained by multiplying (I) the aggregate number of shares of Company Common Stock represented by such holder’s transferred Uncertificated Shares; by (II) the Per Share Price (less any applicable withholding Taxes (as defined in the Merger Agreement) payable in respect thereof), and the transferred Uncertificated Shares so surrendered will be cancelled. The payment agent will accept such Certificates and transferred Uncertificated Shares upon compliance with such reasonable terms and conditions as the payment agent may impose to cause an orderly exchange thereof in accordance with normal exchange practices. No interest will be paid or accrued for the benefit of holders of the Certificates and Uncertificated Shares on the Per Share Price payable upon the surrender of such Certificates and Uncertificated Shares pursuant to the Merger Agreement. Until so surrendered, outstanding Certificates and Uncertificated Shares will be deemed from and after the Effective Time to evidence only the right to receive the Per Share Price, without interest thereon, payable in respect thereof pursuant to the Merger Agreement. Notwithstanding anything to the contrary in the Merger Agreement, no holder of Uncertificated Shares will be required to provide a Certificate or an executed letter of transmittal to the Payment Agent in order to receive the payment that such holder is entitled to receive pursuant to the Merger Agreement.
DTC Payment
Prior to the Effective Time, Parent and Natus will cooperate to establish procedures with the payment agent and the Depository Trust Company (“DTC”) with the objective that the payment agent will transmit to DTC or its nominees on the first Business Day after the Closing Date an amount in cash, by wire transfer of immediately
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available funds, equal to (x)(i) the number of shares of Company Common Stock (other than Owned Company Shares, Company Restricted Stock and Dissenting Company Shares) held of record by DTC or such nominee immediately prior to the Effective Time; multiplied by (ii) the Per Share Price plus (y) the aggregate amount in cash owed to Non-Employee Holders pursuant to the terms of the Merger Agreement.
Transfers of Ownership
If a transfer of ownership of shares of Company Common Stock is not registered in the stock transfer books or ledger of Natus, or if the Per Share Price is to be paid in a name other than that in which the Certificates surrendered or transferred in exchange therefor are registered in the stock transfer books or ledger of Natus, the Per Share Price may be paid to a person other than the person in whose name the Certificate so surrendered or transferred is registered in the stock transfer books or ledger of Natus only if such Certificate is properly endorsed and otherwise in proper form for surrender and transfer and the person requesting such payment has paid to Parent (or any agent designated by Parent) any transfer Taxes required by reason of the payment of the Per Share Price to a person other than the registered holder of such Certificate, or established to the satisfaction of Parent (or any agent designated by Parent) that such transfer Taxes have been paid or are otherwise not payable. Payment of the applicable Per Share Price with respect to Uncertificated Shares will only be made to the person in whose name such Uncertificated Shares are registered.
No Liability
None of the Payment Agent, Parent, the Surviving Corporation or any other Party will be liable to a holder of shares of Company Common Stock for any amount properly paid to a public official pursuant to any applicable abandoned property, escheat or similar law.
Distribution of Exchange Fund to Parent
Any portion of the Exchange Fund that remains undistributed to the holders of the Certificates or Uncertificated Shares on the date that is one year after the Effective Time will be delivered to Parent upon demand, and any holders of shares of Company Common Stock that were issued and outstanding immediately prior to the Merger who have not theretofore surrendered or transferred their Certificates or Uncertificated Shares representing such shares of Company Common Stock for exchange pursuant to the Merger Agreement will thereafter look for payment of the Per Share Price payable in respect of the shares of Company Common Stock represented by such Certificates or Uncertificated Shares solely to Parent (subject to abandoned property, escheat or similar laws), solely as general creditors thereof, for any claim to the Per Share Price to which such holders may be entitled pursuant to the Merger Agreement. Any amounts remaining unclaimed by holders of any such Certificates or Uncertificated Shares two years after the Effective Time, or at such earlier date as is immediately prior to the time at which such amounts would otherwise escheat to, or become property of, any Governmental Authority, will, to the extent permitted by applicable law, become the property of the Surviving Corporation free and clear of any claims or interest of any such holders (and their successors, assigns or personal representatives) previously entitled thereto.
No Further Ownership Rights in Company Common Stock
From and after the Effective Time, (a) all shares of Company Common Stock will no longer be outstanding and will automatically cease to exist; and (b) each holder of a Certificate or Uncertificated Shares theretofore representing any shares of Company Common Stock will cease to have any rights with respect thereto, except the right to receive the Per Share Price payable therefor in accordance with the Merger Agreement, or in the case of Dissenting Company Shares, the rights pursuant to the Merger Agreement. The Per Share Price paid in accordance with the terms described in the section of this proxy statement captioned “The Merger” will be deemed to have been paid in full satisfaction of all rights pertaining to such shares of Company Common Stock. From and after the Effective Time, there will be no further registration of transfers on the records of the Surviving Corporation of shares of Company Common Stock that were issued and outstanding immediately prior to the Effective Time, other than transfers to reflect, in accordance with customary settlement procedures, trades effected prior to the Effective Time. If, after the Effective Time, Certificates or Uncertificated Shares are presented to the Surviving Corporation for any reason, they will (subject to compliance with the exchange procedures described herein) be cancelled and exchanged as described in the section of this proxy statement captioned “The Merger.”
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Lost, Stolen or Destroyed Certificates
In the event that any Certificates have been lost, stolen or destroyed, the payment agent will issue in exchange therefor, upon the making of an affidavit of that fact by the holder thereof, the Per Share Price payable as described herein. Parent or the payment agent may, in its discretion and as a condition precedent to the payment of such Per Share Price, require the owners of such lost, stolen or destroyed Certificates to deliver a bond in such amount as it may direct as indemnity against any claim that may be made against Parent, the Surviving Corporation or the Payment Agent with respect to the Certificates alleged to have been lost, stolen or destroyed.
Required Withholding
Each of the payment agent, Parent, Natus and the Surviving Corporation will be entitled to deduct and withhold from cash amounts payable pursuant to the Merger Agreement to any holder or former holder of shares of Company Common Stock, Company Restricted Stock, Company Restricted Stock Units or Company Options or any other individual, corporation (including any non-profit corporation), limited liability company, joint stock company, general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, firm, Governmental Authority or other enterprise, association, organization or entity (any “Person”) such amounts as are required to be deducted or withheld therefrom pursuant to any applicable tax laws. To the extent that such amounts are so deducted or withheld, such amounts will be treated for all purposes of the Merger Agreement as having been paid to the person to whom such amounts would otherwise have been paid.
No Dividends or Distributions
No dividends or other distributions with respect to capital stock of the Surviving Corporation with a record date on or after the Effective Time will be paid to the holder of any unsurrendered Certificates or Uncertificated Shares.
Representations and Warranties
The Merger Agreement contains representations and warranties of Natus, Parent and Merger Sub. Some of the representations and warranties in the Merger Agreement made by Natus are qualified as to “materiality” or “Company Material Adverse Effect.” For purposes of the Merger Agreement, “Company Material Adverse Effect” means, with respect to Natus, any change, event, effect or circumstance or development (each, an “Effect”) that, individually or taken together with all other Effects have occurred prior to the date of determination of the occurrence of the Company Material Adverse Effect (1) has had, or would reasonably be expected to have a material adverse effect on the business, financial condition or results of operations of Natus and its Subsidiaries, taken as a whole or (2) prevents or prohibits the consummation of the Merger, excluding, however, in the case of clause (1) only, the impact of any Effect to the extent resulting from or arising out of the following:
changes in general economic conditions in the United States or any other country or region in the world, or changes in conditions in the global economy generally;
changes in conditions in the financial markets, credit markets or capital markets in the United States or any other country or region in the world, including (1) changes in interest rates or credit ratings in the United States or any other country; (2) changes in exchange rates for the currencies of any country; or (3) any suspension of trading in securities (whether equity, debt, derivative or hybrid securities) generally on any securities exchange or over-the-counter market operating in the United States or any other country or region in the world;
changes in conditions in the industries in which Natus and its Subsidiaries conduct business;
changes in regulatory, legislative or political conditions in the United States or any other country or region in the world;
(x) any geopolitical conditions (including international trade related matters, trade agreements, tariffs, anti-dumping actions and other trade actions), outbreak of hostilities, acts of war (whether or not declared), sabotage, terrorism or military actions, epidemic or pandemic or outbreak of infectious disease (including continuation or escalation of the COVID-19 pandemic or orders or guidelines issued by a Governmental Authority in response to the COVID-19 pandemic and any quarantine restrictions (including any shelter in place, stay at home or similar orders or guidelines)) or other comparable events or outbreaks in the United States or any other country or region in the world, or any escalation
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or general worsening of the foregoing, (y) any production or supply chain disruptions affecting the industries, businesses or segments in which the Company and its Subsidiaries operate or (z) any computer hacking, data breaches, cyber-attack, ransom-ware attack, or outage of or termination by an internet web hosting service, affecting or suffered by the Company or its Subsidiaries;
earthquakes, hurricanes, tsunamis, tornadoes, floods, mudslides, electrical blackouts, nuclear incidents, wild fires or other natural disasters, weather conditions and other natural disasters in the United States or any other country or region in the world;
any Effect resulting from the announcement of the Merger Agreement or the pendency or consummation of the Merger, including the impact thereof on the relationships, contractual or otherwise, of Natus and its Subsidiaries with employees, suppliers, customers, partners, vendors or any other third person;
the compliance by Parent, Merger Sub or Natus with the terms of the Merger Agreement, including any action taken or refrained from being taken pursuant to or in accordance with the Merger Agreement;
any action taken or refrained from being taken, in each case to which Parent has expressly approved, consented to or requested in writing following the date of the Merger Agreement;
changes in generally accepted accounting principles, consistently applied, in the United States (“GAAP”) or in any applicable Laws or regulations after the date of the Merger Agreement (or the enforcement or official published interpretation of any of the foregoing by Governmental Authorities);
changes in the price or trading volume of Company Common Stock, in and of itself (it being understood that any cause of such change, to the extent not otherwise excluded from being taken into account when determining whether a Company Material Adverse Effect has occurred, may be taken into consideration when determining whether a Company Material Adverse Effect has occurred);
any failure, in and of itself, by Natus and its Subsidiaries to meet (1) any public estimates or expectations of Natus’ revenue, earnings or other financial performance or results of operations for any period; or (2) any internal budgets, plans, projections or forecasts of its revenues, earnings or other financial performance or results of operations (it being understood that any cause of any such failure, to the extent not otherwise excluded from being taken into account when determining whether a Company Material Adverse Effect has occurred may be taken into consideration when determining whether a Company Material Adverse Effect has occurred); and
any transaction litigation or other legal proceeding threatened, made or brought by any of the current or former stockholders of Natus (on their own behalf or on behalf of Natus) against Natus, any of its executive officers or other employees or any member of the Board of Directors arising out of the Merger or any other transaction contemplated by the Merger Agreement.
In the Merger Agreement, Natus has made customary representations and warranties to Parent and Merger Sub that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement. These representations and warranties relate to, among other things:
due incorporation, valid existence, good standing, corporate power and authority and qualification to conduct business with respect to Natus and its subsidiaries;
Natus’ corporate power and authority to execute, deliver and enter into and perform the Merger Agreement, the enforceability of the Merger Agreement and the absence of conflicts with laws, Natus’ organizational documents and Natus’ contracts;
the organizational documents of Natus and specified subsidiaries;
the necessary approval of the Board of Directors;
the rendering of Stifel’s fairness opinion to the Board of Directors;
the inapplicability of anti-takeover statutes to the Merger;
the necessary vote of stockholders in connection with the Merger Agreement;
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the absence of any conflict, violation or material alteration of any organizational documents, existing contracts, applicable laws to Natus or its subsidiaries or the resulting creation of any lien upon Natus’ assets due to the performance of the Merger Agreement;
required consents, approvals and regulatory filings in connection with the Merger Agreement and performance thereof;
the capital structure of Natus as well as the ownership and capital structure of its subsidiaries;
the absence of any undisclosed exchangeable security, option, warrant or other right convertible into Company Common Stock of Natus or any of Natus’ subsidiaries;
the absence of any contract relating to the voting of, requiring registration of, or granting any preemptive rights, anti-dilutive rights or rights of first refusal or other similar rights with respect to any of Natus’ securities;
the accuracy and required filings of Natus’ and its subsidiaries’ SEC filings and financial statements;
Natus’ disclosure controls and procedures;
Natus’ internal accounting controls and procedures;
Natus’ and its subsidiaries’ indebtedness;
the absence of specified undisclosed liabilities;
the conduct of the business of Natus and its subsidiaries in the ordinary course consistent with past practice and the absence of any change, event, development or state of circumstances that has had or would be reasonably expected to have, individually or in the aggregate, a Company Material Adverse Effect, in each case since December 31, 2021;
the existence and enforceability of specified categories of Natus’ material contracts, and any notices with respect to termination or intent not to renew those material contracts therefrom;
real property owned, leased or subleased by Natus and its subsidiaries;
environmental matters;
trademarks, patents, copyrights and other intellectual property matters;
tax matters;
employee benefit plans;
labor matters;
Natus’ compliance with laws and possession of necessary permits;
litigation matters;
insurance matters;
absence of any transactions, relations or understandings between Natus or any of its Subsidiaries and any affiliate or related person;
payment of fees to brokers in connection with the Merger Agreement;
compliance with export controls matters and compliance with all Sanctions Laws, Ex-Im Laws, anti-money laundering Laws (each as defined in the Merger Agreement), and anti-boycott requirements; and
compliance with applicable healthcare laws and device regulatory laws since December 31, 2018.
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In the Merger Agreement, Parent and Merger Sub have made customary representations and warranties to Natus that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement. These representations and warranties relate to, among other things:
due incorporation, good standing and authority and qualification to conduct business with respect to Parent and Merger Sub and availability of these documents;
Parent’s and Merger Sub’s corporate authority to enter into and perform the Merger Agreement, the enforceability of the Merger Agreement and the absence of conflicts with laws, Parent’s or Merger Sub’s organizational documents and Parent’s or Merger Sub’s contracts;
the absence of any conflict, violation or material alteration of any organizational documents, existing contracts, applicable laws or the resulting creation of any lien upon Parent or Merger Sub’s assets due to the performance of the Merger Agreement;
required consents and regulatory filings in connection with the Merger Agreement;
the absence of litigation, orders and investigations;
ownership of capital stock of Natus;
payment of fees to brokers in connection with the Merger Agreement;
operations of Parent and Merger Sub;
the absence of any required consent of holders of voting interests in Parent or Merger Sub;
delivery and enforceability of the Limited Guaranty;
matters with respect to Parent’s financing and sufficiency of funds;
the absence of agreements between Parent and members of the Board of Directors or Natus management;
the absence of any stockholder or management arrangements related to the Merger;
the solvency of Parent and the Surviving Corporation following the consummation of the Merger;
the absence of ownership interests in, or negotiations with, competitors of Natus; and
the exclusivity and terms of the representations and warranties made by Natus.
The representations and warranties contained in the Merger Agreement will not survive the consummation of the Merger.
Conduct of Business Pending the Merger
The Merger Agreement provides that, except: (1) as expressly contemplated by the Merger Agreement; (2) as approved in writing by Parent (which approval will not be unreasonably withheld, conditioned or delayed); (3) as required by applicable Law; (4) for any actions or refraining from any actions taken reasonably and in good faith in response to COVID-19 or COVID-19 measures; or (5) as disclosed in the confidential disclosure letter to the Merger Agreement, during the period of time between the date of the signing of the Merger Agreement and the Effective Time, Natus will, and will cause each of its Subsidiaries to:
use its respective reasonable best efforts to maintain its existence pursuant to applicable law;
subject to the restrictions and exceptions in the Merger Agreement, use reasonable best efforts to conduct its business and operations in the ordinary course of business in all material respects consistent with past practice; and
use its reasonable best efforts to preserve intact its material business organizations, to keep available the services of its current executive officers and employees, and to preserve the current relationships with key customers and suppliers with which it has material business relationships.
In addition, Natus has also agreed that, except (1) as expressly contemplated by the Merger Agreement; (2) as approved in writing by Parent (which approval will not be unreasonably withheld, conditioned or delayed); (3) as required by applicable Law; (4) for any actions or refraining from any actions taken reasonably and in good faith in
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response to COVID-19 or COVID-19 measures; or (5) as disclosed in the confidential disclosure letter to the Merger Agreement, during the period of time between the date of the signing of the Merger Agreement and the Effective Time, Natus will not, and will cause each of its Subsidiaries not to, among other things:
intentionally fail to maintain, let lapse, assign, dispose of, abandon, or exclusively license any material Natus intellectual property, or grant permission to enter into the public domain any material trade secrets included in Natus intellectual property, in each case, other than in the ordinary course of business.
amend the Charter, the bylaws or any other similar organizational document of Natus or any significant Subsidiary (as defined in the Merger Agreement);
propose or adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization with respect to Natus or any significant Subsidiary;
issue, sell, deliver or agree or commit to issue, sell or deliver or grant any shares of capital stock or any options, warrants, commitments, subscriptions or rights to purchase any similar capital stock or securities of Natus or any of its Subsidiaries;
directly or indirectly acquire, repurchase or redeem any securities of Natus or any of its Subsidiaries;
split, combine, or reclassify any shares of capital stock of Natus or any of its subsidiaries;