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Financing Arrangements (Notes)
3 Months Ended
Sep. 29, 2012
Debt Disclosure [Abstract]  
Financing Arrangements
Financing Arrangements
Redeemable Convertible Preferred Stock
On September 18, 2012, the Company issued 8,000 shares of the Company's preferred stock, par value $0.001 per share (the "Preferred Stock"), at a price of $1,000 per share to Hale Capital Partners, LP ("Hale Capital"). The Company received net proceeds of approximately $7.6 million from the issuance of the Preferred Stock, after deducting expenses paid by the Company.
Holders of Preferred Stock (the "Holders") are entitled to receive dividends payable quarterly in arrears, at the election of the Company either in cash or, subject to certain equity conditions, in common stock. Dividends on the Preferred Stock accrue at Prime Rate (Wall Street Journal Eastern Edition) plus 3% (up to a maximum amount of 4%). The interest rate for the first quarter of fiscal 2013 was 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 Company's 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 Company's 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 Company's 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 amount equal to the Volume Limit per month, 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 Company's 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.
Silicon Valley Bank Line of Credit
Adept has a revolving line of credit with Silicon Valley Bank, or SVB. Adept originally entered into the Loan and Security Agreement and related agreements for the revolving line in May 2009. In March 2011, Adept entered into an additional Loan and Security Agreement (EX-IM Loan Facility) and related agreements with SVB, pursuant to which a portion of the revolving line (the “EX-IM Line”) is guaranteed by the Export-Import Bank of the United States, and Adept is able to borrow against foreign accounts receivable and export-related inventory. The loan documents have been amended in previous quarters, and on September 5 and September 18, 2012, Adept entered into further amendments to the May 2009 Loan and Security Agreement. The revolving line of credit and recent amendments are also described in this Quarterly Report on Form 10-Q 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 our 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 and certain bank expenses to SVB in September 2012 in connection with entry into the September amendments. Please refer to the audited consolidated financial statements and Note 6 thereto for the fiscal year ended June 30, 2012 included in Adept's Annual Report on Form 10-K as filed with the SEC on September 24, 2012 for additional disclosures regarding the revolving line of credit.