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Item 1.01
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Entry into a Material Definitive Agreement.
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On June 28, 2018, Echelon Corporation (the
“Company”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Adesto Technologies Corporation (“Parent”) and Circuit Acquisition Corporation, a wholly owned subsidiary of Parent (“Merger
Sub”).
The Merger Agreement provides for the merger of Merger Sub with and into the Company (the “Merger”), with the Company surviving as
a wholly owned subsidiary of Parent.
At the effective time of the Merger, each share of common stock, par value $0.01 per share (the “Common
Stock”), of the Company issued and outstanding as of immediately prior to the effective time of the Merger (other than shares held by (1) Parent, the Company or their respective subsidiaries; or (2) stockholders who have properly and
validly exercised their appraisal rights under Delaware law) will be cancelled and automatically converted into the right to receive cash in an amount equal to $8.50 per share, without interest (the “Per Share Price”).
At the effective time of the Merger, whether vested or unvested, all shares of Common Stock underlying (1) option awards will be converted into the right
to receive the spread between the Per Share Price and the applicable exercise price and (2) restricted stock unit awards will be converted into the right to receive the Per Share Price, with any performance targets deemed to be satisfied at the
target level of performance.
Consummation of the Merger is subject to certain conditions, including (1) the receipt of the necessary approval from
the Company’s stockholders; and (2) the absence of any law or order prohibiting the Merger. Each of Parent’s and the Company’s obligations to consummate the Merger are also subject to certain additional customary conditions,
including (1) subject to specific standards, the accuracy of the representations and warranties of the other party; (2) performance in all material respects by the other party of its obligations under the Merger Agreement; and (3) the
absence of a material adverse effect with respect to the Company since the date of the Merger Agreement. The Merger is not conditioned upon Parent’s receipt of financing.
The Company has made customary representations and warranties in the Merger Agreement and has agreed to customary covenants regarding the operation of the
business of the Company and its subsidiaries prior to the closing of the Merger. The Company is also subject to customary restrictions on its ability to solicit alternative acquisition proposals from third parties and to provide information to, and
enter into discussions or negotiations with, third parties regarding alternative acquisition proposals. However, prior to the receipt of the approval of the Merger from the Company’s stockholders, the solicitation restrictions are subject to a
customary “fiduciary out” provision that allows the Company, under certain circumstances, to provide information to, and enter into discussions or negotiations with, third parties with respect to an alternative acquisition proposal if the
Company’s Board of Directors (the “Board”) determines in good faith (after consultation with its independent financial advisor and outside legal counsel) that (1) such alternative acquisition proposal constitutes or would
reasonably be expected to lead to a superior proposal and (2) the failure to take such actions would be reasonably expected to be inconsistent with its fiduciary duties pursuant to applicable law.
The Merger Agreement contains certain termination rights for the Company and Parent, including that either Parent or the Company may terminate the Merger
Agreement, subject to certain limitations, if the Merger is not consummated by December 1, 2018. Upon termination of the Merger Agreement under specified circumstances, the Company will be required to pay Parent a termination fee of $1,540,000,
less the amount of any expenses previously paid to Parent. Specifically, this termination fee will be payable by the Company to Parent if the Merger Agreement is terminated by (1) Parent if at any time the Board has withdrawn or modified its
recommendation of the Merger; or (2) the Company in connection with the Company accepting a superior proposal. This termination fee will also be payable by the Company to Parent if the Merger Agreement is terminated in certain circumstances and
prior to such termination (but after the date of the Merger Agreement), a proposal to acquire at least 50% of the Company’s stock or assets is made by a third party and the Company subsequently consummates, or enters into a definitive agreement
providing for, a transaction involving the acquisition of at least 50% of its stock or assets within one year of the termination and such transaction is subsequently consummated. Generally, the Company will be required to reimburse Parent for up to
$440,000 of its expenses if the Merger Agreement is terminated because (1) the Merger is not consummated by December 1, 2018 and the Company’s stockholders have not approved the Merger; or (2) the Company fails to obtain the
requisite stockholder approval of the Merger and the termination fee is not then otherwise payable by the Company to Parent.
Upon termination of the Merger Agreement under specified circumstances, Parent will be required to pay the
Company a termination fee of $4,410,000. Specifically, if the Merger Agreement is terminated by the Company after Parent fails to consummate the Merger within three business days after the satisfaction or waiver of all closing conditions, then
this termination fee will be payable by Parent to the Company. This termination right is not available to the Company until the later of (1) three business days after obtaining the requisite stockholder approval or (2) September 15,
2018. The Merger Agreement permits Adesto to extend this date to September 30, 2018, in certain circumstances.
The Merger Agreement also provides
that the Company, on one hand, or Parent and Merger Sub, on the other hand, may specifically enforce each party’s respective obligations under the Merger Agreement.
The Merger Agreement contains representations and warranties by each of Parent, Merger Sub and the Company. These representations and warranties were made
solely for the benefit of the parties to the Merger Agreement and:
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should not be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
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may have been qualified in the Merger Agreement by disclosures that were made to the other party in connection with the negotiation of the Merger Agreement;
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may apply contractual standards of “materiality” that are different from “materiality” under applicable securities laws; and
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were made only as of the date of the Merger Agreement or such other date or dates as may be specified in the Merger Agreement.
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In connection with the Merger, on June 28, 2018, the Board approved an amendment (the “Tax Plan Amendment”) to the Tax Benefit Preservation
Plan, dated as of April 22, 2016, as amended on April 17, 2017 (as amended, the “Tax Plan”), by and between the Company and Computershare Inc., as rights agent (the “Rights Agent”), to exclude Parent from the definition
of “Acquiring Person” provided under the Tax Plan. On June 28, 2018, the Company and the Rights Agent executed the Tax Plan Amendment.
The
foregoing description of the Merger Agreement, the transactions contemplated thereby and the Tax Plan Amendment is only a summary, does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger
Agreement, a copy of which is filed as Exhibit 2.1, and to the full text of the Tax Plan Amendment, a copy of which is attached as Exhibit 4.1 each of which is incorporated by reference.