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Financing Arrangements (Notes)
9 Months Ended
Mar. 30, 2013
Debt Disclosure [Abstract]  
Financing Arrangements
Financing Arrangements
Redeemable Convertible Preferred Stock
On September 18, 2012, the Company issued to a Hale Capital Partners affiliate 8,000 shares of its Series A redeemable convertible preferred stock (the "redeemable convertible preferred stock"), par value $0.001 per share, at a price of $1,000 per share, subject to the terms of its Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock (the "Certificate of Designations"). The Company received net proceeds of approximately $7.6 million from the issuance of the redeemable convertible preferred stock, after deducting expenses paid by the Company. The Certificate of Designations sets forth the terms, rights, obligations and preferences of the redeemable convertible preferred stock and provides that holders of the redeemable convertible preferred stock are entitled to receive dividends payable quarterly in arrears, at the election of Adept either in cash, or subject to certain equity conditions not met during the first three quarters of fiscal 2013, in common stock. Dividends on the redeemable convertible preferred stock accrue at the prime rate (Wall Street Journal Eastern Edition) plus 3% up to a maximum amount of 4%. Each share of redeemable convertible preferred stock is convertible, at the option of the holder and upon certain mandatory conversion events, at a conversion rate of $4.60 (as adjusted for stock splits, stock dividends, reverse stock splits, stock combinations, reclassifications and similar events). For the nine months ended March 30, 2013, the Company had a total of $171,000 in redeemable convertible preferred stock dividends, of which $91,000 has been paid in cash and $80,000 is accrued in redeemable convertible preferred stock.
On March 27, 2013, Adept entered into a letter agreement with the holders of the redeemable convertible preferred stock (the “Letter Agreement”), with respect to the waiver and deferrals of certain rights related to the redeemable convertible preferred stock.
Pursuant to the Certificate of Designations and the Letter Agreement, if on or after 103 days following the first anniversary of the issuance of the redeemable convertible preferred stock, the common stock price exceeds the “Applicable Percentage” (meaning, 200% of the conversion rate until 103 days after the second anniversary of the issuance date, 175% until 103 days after the third anniversary of the issuance date, and 150% thereafter) for a consecutive 60 days, such price is maintained until conversion, and certain equity conditions met such that shares of common stock issued upon conversion can be immediately saleable by the redeemable convertible preferred stockholders, Adept can convert the redeemable convertible preferred stock up to an amount equal to the greater of the arithmetic average of the weekly trading volume of the common stock for each of the 20 consecutive trading days immediately preceding the applicable determination date (the “Volume Limit”) or the amount of an identified bona fide block trade at a price reasonably acceptable to the applicable redeemable convertible preferred stockholder, but which price is not less than the arithmetic average of the weighted average prices of the common stock for the five trading days immediately preceding such sale.
Pursuant to the Certificate of Designations and the Letter Agreement, starting 103 days after the date that is18 months after issuance of the redeemable convertible preferred stock, if the trading price of Adept's common stock is more than 110% of the conversion price for each of the five trading days immediately preceding the date of determination, Adept may convert up to 10% of the redeemable convertible preferred stock issued pursuant to the Securities Purchase Agreement plus certain amounts that the Company was not previously allowed to convert or redeem pursuant to the terms of the Certificate of Designations or under applicable law 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 certain equity conditions. The ability to require this installment conversion requires that Adept (i) maintain on deposit such amount of cash and cash equivalents and (ii) satisfies such EBITDA threshold, in each case as is mutually determined by Adept and Silicon Valley Bank and reasonably acceptable to Hale Capital Partners (which acceptance shall not be unreasonably withheld or delayed). If Adept cannot convert the redeemable convertible preferred stock due to its failure to satisfy such conditions, then it may redeem the shares for cash at the same price subject to agreement of the redeemable convertible preferred stockholder. The amended and restated loan and security agreement with Silicon Valley Bank requires no EBITDA or cash threshold for conversion, but does require a minimum EBITDA and cash threshold at the end of the quarter preceding an installment cash redemption.
Upon certain triggering events, such as bankruptcy, insolvency or a material adverse effect or failure of Adept to issue shares upon conversion of the redeemable convertible preferred stock in accordance with its obligations, the redeemable convertible preferred stockholders may require Adept to redeem all or some of the redeemable convertible preferred stock at a price equal to 100% of the conversion amount, and in the event certain equity conditions are not satisfied during a certain period, the greater of (i) the conversion amount being redeemed and (ii) the product of the conversion amount being redeemed and the quotient determined by dividing the highest trading price of the common stock underlying the redeemable convertible preferred stock during the period beginning on the date immediately preceding such triggering event and ending on the date the redeemable convertible preferred stockholder delivers a redemption notice by the conversion price, plus accrued and unpaid dividends. On and after September 30, 2016, each redeemable convertible preferred stockholder can require Adept to redeem its redeemable convertible 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
The company 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, and entered into an additional Loan and Security Agreement (EX-IM Loan Facility) and related agreements in March 2011. These loan documents were amended in previous quarters. On March 25, 2013, Adept and SVB entered into an Amended and Restated Loan and Security Agreement for the domestic portion of the revolving line, a new Loan and Security Agreement (EX-IM Loan Facility), which replaced the expiring agreement for the portion of the revolving line guaranteed by the Export-Import Bank of the United States (the “EX-IM Sublimit”), and related loan agreement amendments. The EX-IM Sublimit permits Adept to borrow against foreign accounts receivable and export-related inventory. The revolving line of credit and loan agreements are also described in this quarterly report on Form 10-Q under the section entitled “Liquidity and Capital Resources”.
Pursuant to the loan agreements, Adept may borrow up to $8 million (net of borrowings under the EX-IM sublimit), at an 80% advance rate, against eligible domestic accounts receivable that SVB has specifically agreed to finance. Under the EX-IM Sublimit, Adept may borrow up to $6 million against eligible foreign accounts receivable (at specified advance rates of 90% or 70%, depending on the currency in which the receivable is payable), and eligible export-related inventory (at a 75% advance rate), in each case that SVB has specifically agreed to finance. The advance rates are subject to adjustment in SVB's discretion. The loan agreements specify the criteria for determining eligible accounts receivable and inventory, and ongoing conditions precedent to Adept's ability to borrow under the line of credit.
The maturity date of the SVB line of credit is March 24, 2014. The maximum aggregate borrowing under the loan agreements may not exceed $8 million, and the face amount of financed domestic accounts receivable may not exceed $10 million. The amount of export-related inventory advances outstanding at any time may not exceed the lesser of $3.6 million or 60% of the outstanding obligations under the EX-IM Sublimit. If outstanding obligations at any time exceed any of these limits, Adept must repay the excess. Accounts receivable and inventory financed by SVB will bear interest or a finance charge equal to SVB's announced prime rate plus 1.75% per annum. The applicable interest or finance charge is calculated based on the full face amount of financed accounts receivable, and the gross amount of financed export-related inventory, rather than the actual amount of the advances.
Adept is no longer required to meet financial covenants tied to maintaining minimum liquidity or minimum EBITDA, but remains obligated to comply with various other covenants. Adept must repay advances against accounts receivable, together with related finance charges, when it receives payment on the financed receivables (or earlier as specified in the loan agreements), and must repay all outstanding obligations under the line of credit on the maturity date. Adept is required to maintain its primary operating deposit accounts with SVB, and to direct all customers to transmit payments to a lockbox account at SVB. Provided that there is no event of default under the line, SVB will apply collections from the lockbox to repayment of the financed accounts receivables, accrued finance charges and bank expenses, and transfer the remaining proceeds to Adept's designated deposit account with SVB.
In April 2013, Adept paid facility fees of $82,100 to SVB and $37,500 in other bank expenses in connection with entry into the loan agreements. During the second quarter of fiscal 2013, Adept repaid the remaining outstanding loan balance under the revolving line of credit. Adept was in compliance with the covenants in the loan documents as of June 30, 2012 and March 30, 2013. At March 30, 2013, Adept had no outstanding principal balance under the revolving line.