

12.	Subsequent Events

Fiscal 2012 and 2013 Performance Plans

On September 20, 2012, the Compensation Committee of the Board adopted the Fiscal 2013 Performance Plan pursuant to which 170,000 restricted shares may be granted under the 2005 Equity Incentive Plan following fiscal 2013 if certain performance criteria are met. The Company will measure performance using an adjusted EBITDA measurement similar to that used for prior performance plans but without making an adjustment to EBITDA for restructuring expense (if any). The Compensation Committee also granted 175,000 restricted shares to participants in the Fiscal 2012 Performance Plan on a discretionary basis as the plan's adjusted EBITDA target was not met but adjusted EBITDA excluding currency expense exceeded plan targets

Executive Officer Compensation

On September 20, 2012, the Compensation Committee of the Board approved fiscal 2013 salaries for its executive officers, including a 10% salary reduction from fiscal 2012 salary levels to lower the operating expenses of the Company to help offset the impact of the slowdown in orders seen in the first fiscal quarter of 2013. This reduction will be evaluated by the Compensation Committee during fiscal 2013 on the basis of the Company's revenue and expenses later in fiscal 2013.

Private Placement of Preferred Stock

On September 18, 2012, the Company issued 8,000 shares of Preferred Stock, at a price of $1,000 per share to Hale Capital for total gross proceeds to the Company of $8 million. The Preferred Stock was offered and sold to Hale Capital pursuant to an exemption from registration with the SEC under Rule 506 under the Securities Act of 1933, as amended. The Company received net proceeds of approximately $$7.6 million from the issuance of the Preferred Stock, after deducting estimated expenses payable by the Company. The total number of shares of Common Stock issuable upon conversion of the Preferred Stock and as dividends is not to exceed 19.9% of the Company's currently outstanding shares of Common Stock. Holders of Preferred Stock will be entitled to receive dividends payable quarterly in arrears payable, at the election of the Company either in cash or, subject to certain equity conditions, in Common Stock. Dividends on the Preferred Stock will accrue at Prime Rate (Wall Street Journal Eastern Edition) plus 3% (up to a maximum amount of 4%).

Each share of the Preferred Stock will be convertible, at the option of the holder and upon certain mandatory conversion events described below, at a conversion rate of $4.60.

If on or after the first anniversary of the issuance of the Preferred Stock, the Common Stock price exceeds the “Applicable Percentage” (meaning, 200% from the first anniversary to the second anniversary, 175% until the third anniversary, and 150% thereafter) for a consecutive 60 days, such price is maintained until conversion, and certain equity conditions providing that such shares of Common Stock issued upon conversion can be immediately saleable by the holders (the Equity Conditions”), the Company can convert the Preferred Stock up to an amount equal to the greater of the then-one week trading volume of the Common Stock (the “Volume Limit”) or the amount of an identified bona fide block trade at a price not less than the then-current market price.

Starting 18 months after issuance of the Preferred Stock, if the trading price of the Common Stock is more than 110% of the conversion price for a specified period, the Company may convert up to 10% of the Preferred Stock issued pursuant to the Securities Purchase Agreement per quarter at 100% of the original price plus the amount of any accrued and unpaid dividends, subject to a maximum conversion equal to the Volume Limit per month and subject to the Equity Conditions. The ability to require conversion requires that the Company (i) maintains on deposit such amount of cash and cash equivalents and (ii) satisfies such EBITDA threshold, in each case as is mutually determined by the Company and Silicon Valley Bank and reasonably acceptable to Hale Capital. If the Company cannot convert the Preferred Stock due to its failure to satisfy the conditions, then it may redeem the shares for cash at the same price subject to agreement of the Holder.

Upon certain triggering events, such as bankruptcy, insolvency or a material adverse effect or failure of the Company to issue shares upon conversion of the Preferred Stock in accordance with its obligations, the Holders may require the Company to redeem all or some of the Preferred Stock at a price equal to 100% of the conversion amount, and in certain events, the higher trading price of the Common Stock underlying the Preferred Stock between the date of the redemption notice and redemption, plus accrued and unpaid dividends.

On or after September 30, 2016, each holder can require the Company to redeem its Preferred Stock in cash at a price equal to 100% of the conversion amount being redeemed plus accrued and unpaid dividends.

Election of Director

On September 18, 2012, Martin Hale Jr. became a member of the Adept Board of Directors. Mr. Hale was designated by Hale Capital as a nominee for election to serve on the Board pursuant to its rights in the Side Letter Agreement entered into in connection with Adept's preferred stock financing consummated on the same date.

Amendments to Silicon Valley Bank Loan Agreements

On September 5 and September 18, 2012, Adept entered into amendments to its Loan and Security Agreement, dated May 1, 2009 (as previously amended), for its revolving line of credit with Silicon Valley Bank (“SVB”). The revolving line of credit and recent amendments are also described in this annual report on Form 10-K under the section entitled “Liquidity and Capital Resources”.

The September 18, 2012 amendment modified the financial covenants Adept must meet during the term of the Revolving Line. As modified, Adept must maintain (a) liquidity (domestic cash plus the available domestic borrowing base, measured monthly) of at least $5 million (previously $3.5 million), and (b) minimum aggregate rolling six-month EBITDA (measured at the end of each fiscal quarter for the six months ending on such date and applying the EBITDA definition set forth in the Loan and Security Agreement) equal to or exceeding specified amounts for each quarter (which are lower than the amounts applicable prior to this amendment). The quarterly EBITDA amounts in the Loan and Security Agreement are minimum amounts for financial covenant purposes only, and do not represent projections of Adept's financial results.

The Loan and Security Agreement requires Adept to cause its U.S. customers to transmit payments on accounts receivable to a lockbox account at SVB. During the second quarter of 2012, SVB began applying all qualifying daily domestic cash receipts on either the next or second business day to repay outstanding obligations under the Loan and Security Agreement with any excess transferred to Adept's deposit account with SVB. In February 2012, the Loan and Security Agreement was amended to perpetuate this mechanism for applying cash receipts and remove the threshold that previously triggered it. The September 18, 2012 amendment reinstituted a new threshold so that Adept is no longer automatically subject to this mechanism, and will become subject to it if Adept fails to meet the threshold. Under this amendment, if Adept's liquidity (domestic cash plus the available domestic borrowing base) is $7.5 million or above and there is no event of default under the revolving line, SVB will transfer all collections from the lockbox account to Adept's deposit account. If Adept's liquidity falls below $7.5 million, SVB will first apply all collections from this lockbox account toward repayment of Adept's obligations to SVB, and then transfer any excess to Adept's designated deposit account with SVB. Adept may continue to borrow funds under the revolving line if there is available borrowing base to do so, and Adept meets the other conditions precedent for borrowing set forth in the loan documents. A collateral monitoring fee of $850 per month, which was payable every month pursuant to the February 2012 amendment, is now payable only if Adept's liquidity falls below $7.5 million and if there is any principal or interest outstanding under the revolving line of credit during the month.

The September 5 amendment modifies certain covenants in the revolving line to permit Adept to meet dividend payment and mandatory redemption provisions under the terms, rights, obligations and preferences of the preferred stock issued to Hale Capital. This amendment also requires SVB approval before certain specified types of changes may be made to the terms, rights, obligations and preferences of the preferred stock.

Adept paid a $25,000 fee to SVB in September 2012, and will pay certain bank expenses, in connection with entry into the September amendments.