<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 19, 1997
REGISTRATION NO. 333-39015
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
AMENDMENT NO. 1
TO
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ANAREN MICROWAVE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
NEW YORK 16-0928561
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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6635 KIRKVILLE ROAD
EAST SYRACUSE, NEW YORK 13057
(315) 432-8909
(ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
LAWRENCE A. SALA, PRESIDENT AND CEO
6635 KIRKVILLE ROAD
EAST SYRACUSE, NEW YORK 13057
(315) 432-8909
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
It is requested that copies of notices and communications be sent to:
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GEORGE J. GETMAN, ESQ. DAVID A. WESTENBERG, ESQ.
DAVID M. FERRARA, ESQ. HALE AND DORR LLP
BOND, SCHOENECK & KING, LLP 60 STATE STREET
ONE LINCOLN CENTER BOSTON, MASSACHUSETTS 02109
SYRACUSE, NEW YORK 13202 (617) 526-6000
(315) 422-0121
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
- ------------------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ------------------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value.......... 1,897,500 shares $24.00 $45,540,000 $13,800.00(2)
===========================================================================================================
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(1) Determined in accordance with Rule 457 and estimated solely for the purpose
of calculating the registration fee.
(2) Previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED NOVEMBER 19, 1997
1,650,000 SHARES
[ANAREN MICROWAVE, INC. LOGO]
ANAREN MICROWAVE, INC.
COMMON STOCK
------------------------
Of the 1,650,000 shares of Common Stock offered hereby, 1,000,000 shares
are being sold by Anaren Microwave, Inc. (the "Company") and 650,000 shares are
being sold by the Selling Stockholders. See "Principal and Selling
Stockholders." The Company will not receive any of the proceeds from the sale of
shares by the Selling Stockholders.
The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "ANEN." On November 15, 1997, the last reported sale price for the
Company's Common Stock on the Nasdaq National Market was $21.69 per share. See
"Price Range of Common Stock."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS(3)
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<S> <C> <C> <C> <C>
Per Share.............................. $ $ $ $
Total.................................. $ $ $ $
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(1) See "Underwriting" for information concerning indemnification of the
Underwriters and for other information.
(2) Before deducting expenses of the offering payable by the Company estimated
at $600,000.
(3) The Company and a Selling Stockholder have granted options to the
Underwriters, exercisable within thirty (30) days of the date hereof, to
purchase up to an aggregate of 247,500 additional shares of Common Stock for
the purpose of covering over-allotments, if any. If the Underwriters
exercise such over-allotment options in full, the total Price to Public,
Underwriting Discount, Proceeds to Company and Proceeds to Selling
Stockholders will be $ , $ , $ and $ ,
respectively. See "Underwriting."
------------------------
The shares of Common Stock are offered severally by the Underwriters when,
as and if delivered to and accepted by them, subject to their right to withdraw,
cancel or reject orders in whole or in part and subject to certain other
conditions. It is expected that delivery of the certificates representing the
shares will be made against payment on or about , 1997,
at the office of CIBC Oppenheimer Corp., Oppenheimer Tower, World Financial
Center, New York, New York 10281.
------------------------
CIBC OPPENHEIMER
NEEDHAM & COMPANY, INC.
PACIFIC GROWTH EQUITIES, INC.
The date of this Prospectus is , 1997
<PAGE> 3
[INSERT ARTWORK]
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING
TRANSACTIONS IN THE COMPANY'S SECURITIES ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 103 UNDER REGULATION M. SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is not intended to be complete and is qualified in
its entirety by the more detailed information and the financial statements
appearing elsewhere in this Prospectus. Unless otherwise indicated, all
financial and share information in this Prospectus assumes the Underwriters'
over-allotment options are not exercised. Unless the context otherwise requires,
references in this Prospectus to the "Company" and "Anaren" are to Anaren
Microwave, Inc. and its consolidated subsidiaries. This Prospectus contains
forward-looking statements which involve risks and uncertainties. The Company's
actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including those set
forth under "Risk Factors" and elsewhere in this Prospectus.
THE COMPANY
Anaren designs, develops, manufactures and sells complex microwave signal
distribution networks and components for the wireless communications, satellite
communications and defense electronics markets. The Company utilizes its
advanced, proprietary "Multi-Layer Stripline" technology to deliver compact,
light-weight, cost effective and highly integrated microwave products into the
rapidly expanding markets for cellular/PCS base stations, microcells and new
generations of communications satellites. The Company is also a leading provider
of electronic counter measure subsystems which primarily protect fighter
aircraft. The Company has leveraged over 30 years of microwave expertise to
rapidly develop and implement leading commercial microwave products, with
commercial sales growing from $982,000 in fiscal 1995 to over $16 million,
representing 67% of total Company sales, in fiscal 1997.
The growing demand for wireless and satellite-based services is placing
increasing demands upon providers of infrastructure equipment, both in terms of
volume, complexity and design requirements. Wireless subscriber use is estimated
to increase from 136 million subscribers at the end of 1996 to 520 million by
the end of 2000. The rollout of digital PCS, which operates at twice the
frequency as analog cellular, will require several times as many base stations.
The increased demand for cell sites is driving equipment manufacturers to
provide smaller, more cost effective and highly integrated equipment solutions.
Additionally, the satellite communications market is experiencing significant
growth, driven by opportunities where satellite based communications offer cost
and logistical advantages over land based communications. According to industry
sources, there are an estimated 1,335 commercial satellites scheduled to launch
between 1997 and 2006, including large scale communications projects (Iridium,
Global Star, ICO and Teledesic) in various stages of implementation. Key design
factors for new satellite systems being launched are increased complexity,
higher frequency communications, and smaller and more cost effective payload
packages.
The Company's proprietary Multi-Layer Stripline technology enables the
Company to eliminate discrete components and discrete microwave cables,
dramatically reducing size, cost and weight while improving performance. The
Multi-Layer Stripline technology is used in combination with the Company's
proprietary turnkey design, development and manufacturing capabilities to
provide custom solutions for major customers. The Company's technology has been
implemented in products utilizing passive components, including beamforming and
signal distribution networks, and is currently being utilized by the Company to
incorporate active devices, including switches, phase shifters and amplifiers.
The Company has a strong base of major customers in each of its key market
segments. In the wireless market, the Company supplies custom designed
assemblies and its standard line of Xinger(R) components to leading
manufacturers of base station equipment, such as Motorola, Inc., Lucent
Technologies Inc., Northern Telecom, Ltd. and Ericsson, Inc. These integrated
assemblies, which range from simple splitting and combining networks to complete
microwave backplanes, distribute microwave signals throughout the base station,
from reception at the antenna, to multiple radios, to multiple amplifiers, and
back to the antenna for transmission. Key customers in the satellite market are
the world's leading satellite manufacturers, including Lockheed Martin
Corporation, Hughes Space and Communications International, Inc., Loral Space &
Communications Ltd. and TRW Inc. The Company's subsystems, which include
beamforming networks and signal distribution networks, are found on low Earth
orbit ("LEO") satellite networks including Motorola's Iridium program, as well
as a regional geosynchronous Earth orbit ("GEO") system. Defense customers for
the Company's electronic counter measure subsystems include Raytheon Company,
the Avionics division of ITT Defense and Electronics Company, Lockheed Martin
Corporation and Racal, Ltd.
The Company's strategy is to continue to leverage its proprietary,
Multi-Layer Stripline technology and microwave turnkey design and manufacturing
expertise to further expand penetration in the satellite communications and
terrestrial wireless communications markets. The key components of the Company's
strategy are to: (i) increase levels of component integration and value added
content; (ii) further expand into commercial markets; (iii) maintain leadership
in microwave technology; (iv) strengthen and expand customer relationships; and
(v) enhance capabilities as a turnkey supplier.
The Company was incorporated in New York in 1967. The Company's executive
offices are located at 6635 Kirkville Road, East Syracuse, New York 13057. The
phone number is (315) 432-8909.
3
<PAGE> 5
THE OFFERING
Common Stock offered by the Company......... 1,000,000 shares
Common Stock offered by the Selling
Stockholders................................ 650,000 shares
Common Stock to be outstanding after the
offering.................................... 5,233,442 shares(l)
Use of proceeds............................. Working capital and general
corporate purposes. See "Use of
Proceeds."
Nasdaq National Market symbol............... ANEN
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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YEARS ENDED THREE MONTHS
--------------------------------------------------- ENDED
JUNE JUNE JUNE SEPTEMBER 30,
26, JULY 2, JULY 1, 30, 30, ----------------
1993 1994(2) 1995 1996 1997 1996 1997
------- ------- ------- ------- ------- ------ ------
(UNAUDITED)
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STATEMENT OF OPERATIONS DATA:
Net sales...................... $26,996 $20,237 $17,996 $17,082 $24,227 $5,066 $7,721
Gross profit................... 7,690 4,252 4,615 5,935 7,984 1,494 2,868
Operating income (loss)........ 758 (1,504) (1,753) (1,105) 2,035 213 1,098
Net income (loss).............. $ 278 $(2,357) $(1,472) $(1,080) $ 2,055 $ 210 $ 760
======= ======= ======= ======= ======= ====== ======
Net income (loss) per common
and common equivalent share:
Primary................... $ 0.06 $ (0.53) $ (0.36) $ (0.27) $ 0.50 $ 0.05 $ 0.17
======= ======= ======= ======= ======= ====== ======
Assuming full dilution.... $ 0.06 $ (0.53) $ (0.36) $ (0.27) $ 0.46 $ 0.05 $ 0.17
======= ======= ======= ======= ======= ====== ======
Shares used in computing net
income (loss) per common and
common equivalent share:
Primary................... 4,530 4,435 4,047 4,057 4,106 4,103 4,504
Assuming full dilution.... 4,530 4,435 4,047 4,057 4,440 4,103 4,524
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SEPTEMBER 30, 1997
-----------------------
AS
ACTUAL ADJUSTED(3)
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(UNAUDITED)
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BALANCE SHEET DATA:
Cash and cash equivalents.............................................. $ 3,998 $23,828
Working capital........................................................ 16,040 35,870
Total assets........................................................... 27,521 47,351
Long-term debt, less current installments.............................. 453 453
Total stockholders' equity............................................. 21,431 41,261
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(1) Based on the number of shares outstanding at September 30, 1997. Excludes
718,400 shares of Common Stock reserved for issuance pursuant to the
Company's stock option plans, of which options to purchase 567,400 shares of
Common Stock at a weighted average exercise price of $5.22 per share are
currently outstanding and options to purchase 151,000 shares of Common Stock
are currently available for issuance. See Note 6 of Notes to Consolidated
Financial Statements.
(2) The year ended July 2, 1994 represented a 53 week fiscal year.
(3) Adjusted for the sale by the Company of 1,000,000 shares of Common Stock
offered hereby at an assumed public offering price of $21.69 per share after
deducting the estimated underwriting discount and the estimated offering
expenses.
4
<PAGE> 6
RISK FACTORS
An investment in the Common Stock offered hereby is speculative in nature
and involves a high degree of risk. In addition to the other information
contained in this Prospectus, the following factors should be considered
carefully in evaluating the Company and its business before purchasing the
Common Stock offered hereby. This Prospectus contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), such as statements of the Company's plans, objectives,
expectations and intentions. Discussions containing such forward-looking
statements may be found in the material set forth under "Prospectus
Summary -- The Company," "Risk Factors," "Management's Discussion and Analysis
of Financial Condition and Results of Operations," and "Business," as well as
the Prospectus generally. Actual events or results may differ materially from
those discussed in the forward-looking statements as a result of various
factors, including, without limitation, the risk factors set forth below and the
matters set forth in the Prospectus generally.
Uncertain Market Development. Historically, the Company's business has
been almost exclusively focused on the defense electronics market. With the
contraction of the defense industry, the Company has had to increase its focus
on the commercial markets, particularly the wireless and satellite
communications markets. The Company believes that its future growth depends on
continued success in these markets. A number of the commercial markets for the
Company's products in the wireless and satellite communications area have only
recently begun to develop. Because these markets are relatively new, it is
difficult to predict the rate at which these markets will grow, if at all.
Existing or potential wireless and satellite communications market applications
for the Company's products may fail to develop or may erode for many different
reasons, including insufficient growth to support expensive infrastructure
equipment, insufficient consumer demand for wireless products or services
because of pricing or otherwise, or real or perceived security risks associated
with wireless communications. If the markets for the Company's products in
commercial wireless and satellite communications fail to grow, or grow more
slowly than anticipated, the Company's business, financial condition and results
of operations could be materially adversely affected.
In addition, while the Company believes that the technologies used in the
defense and commercial markets are very similar, the two markets differ
significantly in terms of, among other things, the customer base, contractual
terms, manufacturing requirements and lead times, and the need to expend
substantial resources for research and development without the assurance of
reimbursement or recovery of those costs. As a result, the Company is subject to
risks inherent in the operation of an expanding commercial enterprise, including
risks associated with managing the expansion of a business operation and
attracting and retaining qualified engineering, manufacturing and marketing
personnel with commercial industry experience. No assurance can be given as to
the continuing viability of the Company's commercial markets or the Company's
ability to successfully meet the challenges inherent in competing in those
markets.
Reliance on a Limited Number of Prime Contractors and Original Equipment
Manufacturers ("OEMs"). During the fiscal year ended June 30, 1997,
approximately 16% of the Company's consolidated net sales were attributable to
contracts with prime contractors to the United States government. The Company
had two customers who received shipments in excess of 10% of consolidated net
sales. Approximately 14% of the Company's consolidated net sales resulted from
shipments to Raytheon Company ("Raytheon") and approximately 11% resulted from
shipments to Motorola, Inc. ("Motorola"). Other than Raytheon and Motorola, the
Company derives a majority of its revenues from a limited group of customers,
including Hughes Space and Communications International, Inc. ("Hughes"), Loral
Space & Communications Ltd. ("Loral Space & Communications"), Northern Telecom,
Ltd. ("Nortel"), Lucent Technologies Inc. ("Lucent"), Ericsson, Inc.
("Ericsson"), the Avionics division of ITT Defense and Electronics Company
("ITT"), Texas Instruments Incorporated, Lockheed Martin Corporation ("Lockheed
Martin"), TRW Inc. ("TRW"), Harris Corporation ("Harris") and the United States
Department of Defense. The Company anticipates that it will continue to sell
products to a relatively small group of customers. As a result, any
cancellation, reduction or delay in orders by or shipments to a significant
customer, as a result of manufacturing or supply difficulties or otherwise,
would materially adversely affect the Company's business, financial condition
and results of operations. In addition, a substantial portion of the Company's
products are designed to address the needs of individual customers. The
Company's future success depends in significant
5
<PAGE> 7
part upon the decision of the Company's current customers to continue to
purchase products from the Company, as well as the decision of prospective
customers to develop and market wireless communications systems that incorporate
the Company's products. There can also be no assurance that the Company's
current customers will continue to place orders with the Company or that the
Company will be able to obtain orders from new customers. The Company's future
success will also depend in part upon the financial condition and success of its
customers. Customers' orders are affected by factors such as new product
introductions, regulatory approvals, product life cycles, inventory levels,
manufacturing strategy, contract awards, competitive conditions and general
economic conditions. If the Company were to lose a major customer, or if orders
by a major customer were to otherwise decrease or be delayed, including
reductions due to market or competitive conditions in the wireless
communications markets or decreases in government defense spending, the
Company's business, financial condition and results of operations would be
materially adversely affected. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business -- Customers."
Rapid Technological Change. The markets in which the Company competes are
characterized by rapidly changing technologies, evolving industry standards and
frequent improvements in products and services. If technologies supported by the
Company's products become obsolete or fail to gain widespread commercial
acceptance, the Company's business, financial condition and results of
operations could be materially adversely affected. The Company's future success
will depend in part on its ability to enhance the functionality of its existing
products in a timely and cost-effective manner; to identify, develop and achieve
market acceptance of new products that address new technologies and meet
customer needs in wireless communications markets; and to continue to apply its
expertise and technologies to existing and emerging commercial wireless and
satellite communications markets. The Company's success in penetrating these
commercial markets also depends upon the success of new product introductions by
the Company, which is dependent upon several factors, including timely
completion and introduction of new product designs, achievement of acceptable
product costs, establishment of close working relationships with major customers
for the design of their new wireless transmission systems incorporating the
Company's products and market acceptance. Developing these enhancements, new
designs and technologies requires significant investments by the Company in
research and development efforts, and there can be no assurance that funds for
such investments will be available when needed on acceptable terms or that such
efforts will be successful. No assurance can be given that the Company's product
development efforts for commercial products will be successful or that any new
commercial products it develops will achieve market acceptance. If the Company
is unable to design, manufacture and market new products for existing or
emerging commercial markets successfully, its business, financial condition and
results of operations will be materially adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business -- Products" and "-- Customers."
Limitation on Protection of Proprietary Technology; Risk of Third Party
Claims. The Company's ability to compete will depend, in part, on its ability
to obtain and enforce intellectual property protection for its technology in the
United States and internationally. Although the Company holds several U.S.
patents, it currently relies primarily on a combination of trade secret,
copyright and trademark laws and employee and third-party nondisclosure
agreements. It also limits access to and distribution of proprietary
information. There can be no assurance that the steps taken by the Company to
protect its intellectual property rights will be adequate to prevent
misappropriation of the Company's technology or to preclude competitors from
independently developing such technology. Furthermore, there can be no assurance
that, in the future, third parties will not assert infringement claims against
the Company or with respect to its products for which the Company has
indemnified certain of its customers. Asserting the Company's rights or
defending against third party claims could involve substantial costs and
diversion of resources, thus materially adversely affecting the Company's
business, financial condition and results of operations. In the event a third
party were successful in a claim that one of the Company's products infringed
its proprietary rights, the Company may have to pay substantial royalties or
damages, remove that product from the marketplace or expend substantial amounts
in order to modify the product so that it no longer infringes such proprietary
rights, any of which could have a material adverse effect on the Company's
business, financial condition and results of operations. See
"Business -- Intellectual Property."
6
<PAGE> 8
Fluctuations in Quarterly Results. The Company's quarterly results have in
the past been, and will continue to be, subject to significant fluctuations due
to a number of factors, any one of which could substantially affect the
Company's results of operations for any particular fiscal quarter. In
particular, quarterly results of operations can fluctuate due to the timing,
cancellation or rescheduling of customer orders and shipments, the pricing and
mix of products sold, new product introductions by the Company, competitive
conditions, the Company's ability to obtain components and subassemblies from
contract manufacturers and suppliers, and variations in manufacturing
efficiencies. Accordingly, the Company's performance in any one fiscal quarter
is not necessarily indicative of financial trends or future performance. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Management of Growth. The growth in size and complexity of the Company's
business and the expansion of its product lines and customer base have placed,
and are expected to continue to place, significant demands on the Company's
management and operations. The pace of the Company's expansion, in combination
with the complexity of the technology involved in the manufacture of the
Company's systems, demands an unusually high level of managerial effectiveness
in anticipating, planning, coordinating and meeting the operational needs of the
Company and the needs of the Company's customers for quality, reliability,
timely delivery and post-installation field support. Given the small number of
existing and potential customers for the Company's systems, a lack of effective
management in any of these areas will magnify the potential adverse effect on
the Company. The Company's systems, procedures or controls may not be adequate
to support the Company's operations and Company management may not be able to
achieve the rapid expansion necessary to exploit potential market opportunities
for the Company's products. The Company's ability to compete effectively and to
manage future growth will depend on its ability to improve its manufacturing
capabilities to meet the high volume, low cost demands for the commercial
wireless market, and will also require the Company to continue to implement and
improve operational and financial systems on a timely basis. There can be no
assurance that the Company will be able to manage its future growth, and the
failure to do so could have a material adverse effect on the Company's business,
financial condition and results of operations.
Uncertain Nature of Defense Market. The United States defense budget has
been reduced in recent years and may be further reduced. The Company expects to
continue to derive a substantial portion of its revenues from its existing
defense products and to develop microwave products for defense applications. As
a result, the Company could be materially adversely impacted by government
spending cuts, general budgetary constraints, and complex and competitive
government procurement processes. In addition, during fiscal 1997, sales to
foreign customers, most of which were prime contractors to foreign governments,
accounted for approximately 19% of the Company's consolidated net sales, and
included shipments to 23 countries. Export sales of certain military
applications must be approved by the United States Department of State, and any
tightening of restrictions on the export of military hardware could materially
adversely affect the Company's sales of defense electronics products to foreign
customers. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Business Interruptions and Dependence on a Single U.S. Facility. The
Company's primary operations, including engineering, manufacturing, management
information systems, customer service, distribution and general administration,
are housed in a single facility in East Syracuse, New York. Any material
disruption in the Company's operations due to fire, natural disaster or
otherwise, could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Facilities."
Competition. The markets for the Company's products are extremely
competitive and are characterized by technological change, new product
development, product obsolescence and evolving industry standards. In addition,
price competition is intense and significant price erosion generally occurs over
the life of a product. The Company faces some competition from component
manufacturers which have integration capabilities, including Electromagnetic
Sciences, Inc. (satellite), S.T. Microwave, Inc. (defense), the M/A-Com division
of AMP, Inc., Mini Circuits, Inc. and Filtronic Comtek, Inc. The Company
believes that its primary competition is from the internal capabilities of large
telecommunications OEMs (including all of the major telecommunications equipment
providers) and defense prime contractors. The Company's future success is
dependent upon the extent to which these OEMs and defense prime contractors
elect to purchase from outside
7
<PAGE> 9
sources rather than manufacture their own microwave components. The Company's
customers and large manufacturers of components could also elect to enter into
the non-captive market for microwave products and compete directly with the
Company. Many of the Company's current and potential competitors have
substantially greater technical, financial, marketing, distribution and other
resources than the Company and have greater name recognition and market
acceptance of their products and technologies. No assurance can be given that
the Company's competitors will not develop new technologies or enhancements to
existing products or introduce new products that will offer superior price or
performance features, or that new products or technologies will not render
obsolete the products of the Company's customers. See "Business -- Competition."
Risks of Cost Overruns and Product Non-Performance; Loss of Investment in
Design and Engineering. The Company's customers establish demanding
specifications for product performance, reliability and cost. The majority of
the Company's contracts with prime contractors to United States and foreign
governmental departments or their agencies, as well as satellite communications
and wireless infrastructure equipment customers, are fixed price contracts, some
of which require delivery over periods of time in excess of one year. With this
type of contract, the Company agrees to deliver products at an agreed upon
price, except for costs incurred as a result of change orders issued by the
customer. Some of these contacts contain provisions for escalation due to
inflation incurred between the effective contract date, and some are subject to
various statutes, regulations and provisions governing defense contracts. Most
of these contracts contain termination clauses, which allow the customer to
terminate the contract for convenience upon proper notice and payment of
predetermined charges. The Company, therefore, faces the risk of experiencing
cost overruns or order cancellation if it fails to achieve forecasted product
design and manufacturing efficiencies or if products cost more to produce
because of increased cost of materials, components or labor or otherwise.
Manufacture of the Company's products is an extremely complex process and the
Company has in the past experienced cost overruns on fixed price contracts.
There can be no assurance that cost overruns or problems with performance or
reliability of Company products will not occur in the future. Any such cost
overruns or performance problems may have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
the Company often makes significant investments in design and engineering of new
products for customers without any commitment by the customer for the future
purchase of such products. Failure to receive initial or follow-on orders may
have a material adverse effect on results of operations. See
"Business -- Backlog" and "-- Manufacturing."
Declining Average Selling Prices. Many of the Company's wireless customers
are under continuous pressure to reduce costs and, therefore, the Company
expects to continue to experience downward pricing pressure on its products. The
Company's customers frequently negotiate supply arrangements well in advance of
delivery dates, requiring the Company to commit to price reductions before it is
determined that assumed cost reductions can be achieved. To offset declining
average sales prices, the Company believes that it must achieve manufacturing
cost reductions and obtain orders for higher volume products. If the Company is
unable to offset declining average selling prices, the Company's gross margins
will decline, and such decline could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Backlog. The Company's order backlog as of June 30, 1997 was approximately
$32.8 million, approximately 57% of which was attributable to defense
electronics, approximately 37% of which was attributable to satellite
communications, and approximately 6% of which was attributable to wireless
products. All of the orders included in backlog are covered by signed contracts.
Backlog is not necessarily indicative of future sales, particularly with respect
to the Company's wireless group. As part of the Company's close working
relationships with its major wireless communications customers, these customers
expect the Company to respond quickly to changes in the volume and delivery
schedule of the orders, and if necessary, to inventory products at the Company's
facilities for just-in-time delivery. Although contracts with these customers
typically specify aggregate dollar volumes of products to be purchased over an
extended time period, these contracts also provide that scheduled shipment dates
of particular volumes are generally released to the Company only a few days or
weeks prior to the actual required delivery dates. Accordingly, the Company does
not believe that its backlog as of any particular date is representative of
actual sales for any
8
<PAGE> 10
succeeding period, and there can be no assurance that current order backlog will
necessarily lead to sales in any future period. In addition, the Company's
customers may cancel or defer orders without significant penalty. Cancellations
of pending purchase orders or termination or reductions of purchase orders in
progress from customers of the Company could have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Backlog."
Government Regulation. The Company's products are incorporated into
wireless telecommunications systems that are subject to regulation domestically
by the Federal Communications Commission ("FCC") and internationally by other
government agencies. Although the equipment operators and not the Company are
responsible for compliance with such regulations, regulatory changes, including
changes in the allocation of available frequency spectra, could materially
adversely affect the Company's operations by restricting development efforts by
the Company's customers, rendering current products obsolete or increasing the
opportunity for additional competition. Changes in, or the failure by the
Company to manufacture products in compliance with, applicable domestic and
international regulations could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, the
increasing demand for wireless and satellite communications has exerted pressure
on regulatory bodies worldwide to adopt new standards for such products,
generally following extensive investigation of and deliberation over competing
technologies. The delays inherent in this governmental approval process have in
the past caused and may continue to cause the cancellation, postponement or
rescheduling of the installation of communications systems by the Company's
customers, which in turn may have a material adverse effect on the sale of
products by the Company to such customers. Because of its participation in the
defense industry, the Company is subject to audit from time to time for
compliance with government regulations by various agencies, including the
Defense Contract Audit Agency, the Defense Investigative Service and the Office
of Federal Control Compliance Programs. These and other governmental agencies
may also from time to time conduct inquiries or investigations that cover a
broad range of Company activity. Responding to any such audits, inquiries or
investigations may involve significant expense and divert management attention.
An adverse finding in any such audit, inquiry or investigation could involve
penalties that may have a material adverse effect on the Company's business,
financial condition or results of operations. See "Business -- Government
Regulation."
Environmental Regulations and Risks. The Company is subject to a variety
of local, state and federal governmental regulations relating to the storage,
discharge, handling, emission, generation, manufacture and disposal of toxic or
other hazardous substances used to manufacture the Company's products. The
failure to comply with current or future regulations could result in the
imposition of substantial fines on the Company, suspension of production,
alteration of its manufacturing processes or cessation of operations. News
reports have asserted that power levels associated with hand held cellular
telephones and infrastructure equipment may pose certain health risks. If it
were determined or perceived that electromagnetic waves carried through wireless
telecommunications equipment create a significant health risk, the market for
these products could be materially adversely affected, which could have a
material adverse effect on the Company's business, financial condition and
results of operations. Moreover, if wireless telecommunications systems or other
systems or devices that rely on or incorporate the Company's products are
determined or alleged to create a significant health risk, the Company could be
named as a defendant, and held liable, in product liability lawsuits commenced
by individuals alleging that the Company's products harmed them, which could
have a material adverse effect on the Company's business, financial condition
and results of operations.
Dependence on Suppliers and Contract Manufacturers. The Company relies on
contract manufacturers and suppliers, in some cases limited groups of suppliers,
to provide it with services and materials necessary for the manufacture of its
products. The Company has one vendor from which it makes approximately 10% of
its total raw material purchases. While the Company believes that substitute
sources of supply at reasonably similar costs are available for these and other
products purchased, the Company's reliance on limited groups of suppliers
involves several risks, including a potential inability to obtain critical
materials or services and reduced control over production costs, delivery
schedules, reliability and quality of components or assemblies. Any inability to
obtain timely deliveries of acceptable quality, or any other circumstance that
would require the Company to seek alternative contract manufacturers or
suppliers, could delay the Company's ability to
9
<PAGE> 11
deliver products to customers, which in turn would have a material adverse
effect on the Company's business, financial condition and results of operations.
In addition, in the event that costs for the Company's contract manufacturers or
suppliers increase, the Company may suffer losses due to an inability to recover
such cost increases under fixed price production commitments to its customers.
See "Business -- Manufacturing."
Dependence on Key Personnel. The Company is highly dependent on the
continued service of, and on its ability to attract and retain, qualified
engineering, management, manufacturing, quality assurance, marketing and support
personnel. The Company maintains key man life insurance on Lawrence A. Sala, its
President and Chief Executive Officer. The loss of Mr. Sala's services could
have a material adverse effect on the Company's business, financial condition
and results of operations. Competition for key personnel is intense, and there
can be no assurance that the Company will be successful in attracting or
retaining such personnel. For example, the Company believes that engineers with
the skills necessary to develop products for the wireless and satellite
communications market currently are in high demand and that the Company may not
be able to attract and retain sufficient engineering expertise. See
"Business -- Employees" and "Management."
Influence by Significant Stockholder. Upon completion of this offering,
Global Securities, Inc. will own 15.44% of the outstanding shares of the
Company's Common Stock (13.56% if the Underwriter over-allotment options are
exercised in full), as to which Herbert I. Corkin, a Director of the Company and
owner of 24% of the Capital Stock of Global Securities, Inc., disclaims
beneficial ownership. As a result, Global Securities, Inc. has the ability to
exercise significant influence over matters requiring stockholder approval,
including the election of directors and approval of significant corporate
transactions. Such influence may have a significant effect in delaying,
deferring or preventing a change in control of the Company. See "Principal and
Selling Stockholders."
Volatility of Stock Price. The market price of the shares of Common Stock,
like the stock prices of many technology companies, is subject to wide
fluctuations in response to such factors as actual or anticipated operating
results, announcements of technological innovations, new products or new
contracts by the Company, its competitors or their customers, government
regulatory action, developments with respect to wireless and satellite
communications, general market conditions and other factors. In addition, the
stock market has from time to time experienced significant price and volume
fluctuations that have particularly affected the market prices for the stocks of
technology companies and that have often been unrelated to the operating
performance of particular companies. In the 12 month period from November 18,
1996 to November 17, 1997, the price of the Common Stock has ranged from $5.87
to $35.75. In the 30-day period from October 17, 1997 to November 17, 1997, the
price of the Common Stock has ranged from $14.25 to $35.75. The market price of
the Company's Common Stock has been volatile and may continue to be highly
volatile. See "Price Range of Common Stock."
Dilution. The public offering price is expected to be substantially higher
than the net tangible book value per share of Common Stock. Investors purchasing
shares of Common Stock in this offering will therefore incur immediate and
substantial net tangible book value dilution. To the extent that stock options
(currently outstanding or subsequently granted) to purchase Common Stock are
exercised, there will be further dilution.
Shares Eligible for Future Sale. Sales of substantial amounts of shares in
the public market or the prospect of such sales could adversely affect the
market price of the Common Stock. Upon completion of this offering, the Company
will have outstanding 5,233,442 shares of Common Stock. Immediately upon the
effectiveness of this offering, the 1,650,000 shares offered hereby (plus any
shares issued upon exercise of the Underwriters' over-allotment options) will be
freely tradeable. Of the remaining 3,583,442 shares, 1,143,080 are subject to
lock-up agreements pursuant to which the holders of such shares have agreed not
to sell, offer, contract to sell, make any short sale, pledge or otherwise
dispose of any shares of Common Stock or any securities convertible into or
exchangeable or exercisable for or any other rights to purchase Common Stock for
a period of 90 days after the effective date of this offering without the prior
written consent of CIBC Oppenheimer Corp. The shares not subject to lock-up
agreements may be freely sold after the offering. In addition, the Company has
filed registration statements under the Securities Act covering the sale of an
10
<PAGE> 12
aggregate of 718,400 shares of Common Stock reserved for issuance under the
Company's Incentive Stock Option Plans. See "Shares Eligible for Future Sale"
and "Underwriting."
Management's Discretion Over Use of Proceeds. The Company has no current
specific plan for a significant portion of the proceeds of this offering. As a
consequence, the Company's management will have discretion over a significant
portion of the proceeds for the foreseeable future. There can be no assurance
that the proceeds can or will be invested to yield a return as great as the
Company has historically experienced or any significant return at all. See "Use
of Proceeds."
Dividends. The Company has not declared or paid any cash dividends in the
past and does not expect to pay cash dividends in the foreseeable future. The
Company currently intends to retain its future earnings, if any, to finance the
development of its business. Any future dividend policy will be determined by
the Board of Directors in light of conditions then existing, including the
Company's earnings and its financial condition and requirements. See "Dividend
Policy."
Anti-Takeover Measures. The Company maintains a plan providing for
severance compensation to employees after a hostile takeover, as defined therein
("Severance Plan"). All full-time employees of the Company who have completed at
least two years of continuous full-time employment with the Company are
participants in the Severance Plan. The Severance Plan could discourage
potential acquisition proposals, could delay or prevent a change in control of
the Company and could make removal of management more difficult. In addition,
the Severance Plan could diminish the opportunities for stockholders to
participate in tender offers, including tender offers that are priced above the
then current market value of the Common Stock, and may inhibit increases in the
market price of the Common Stock that could result from takeover attempts.
11
<PAGE> 13
USE OF PROCEEDS
The net proceeds to the Company from the sale of 1,000,000 shares of Common
Stock offered by the Company hereby are estimated to be approximately $19.8
million based on an assumed public offering price of $21.69 per share, after
deducting the estimated underwriting discount and the estimated offering
expenses. The Company will not receive any of the proceeds from the sale of
Common Stock by the Selling Stockholders.
The Company expects to use the net proceeds from this offering primarily
for working capital and general corporate purposes. With the recent growth of
its Satellite Communications group, the Company has sought larger, higher
dollar-volume satellite contracts. The Company expects that it will use a
substantial portion of the net proceeds to fund working capital for these larger
contracts, as well as to fund the continued growth of its Wireless group. As
part of its business strategy, the Company occasionally evaluates potential
acquisitions of businesses, products and technologies. Accordingly, a portion of
the net proceeds may be used for the acquisition of complementary businesses,
technologies or products. The Company currently has no understanding,
commitment, agreement or present intentions with respect to any acquisitions.
Pending such uses, the Company intends to invest the net proceeds of this
offering in short-term, investment grade, interest-bearing securities.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on shares of its
Common Stock. The Company currently intends to retain all future earnings, if
any, for use in the operation and development of its business and does not
expect to declare or pay any cash dividends on its Common Stock in the
foreseeable future.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "ANEN." The following table sets forth for the periods indicated the
high and low sale prices for the Company's Common Stock as reported by the
Nasdaq National Market.
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
-------------------
HIGH LOW
------- -------
<S> <C> <C>
Fiscal Year Ended June 30, 1996
First Quarter.......................................... $ 8.500 $ 5.250
Second Quarter......................................... 8.375 5.500
Third Quarter.......................................... 7.250 5.500
Fourth Quarter......................................... 8.750 5.750
Fiscal Year Ended June 30, 1997
First Quarter.......................................... $ 7.625 $ 4.250
Second Quarter......................................... 8.000 5.000
Third Quarter.......................................... 9.125 6.250
Fourth Quarter......................................... 14.250 7.625
Fiscal Year Ending June 30, 1998
First Quarter.......................................... $28.250 $13.000
Second Quarter (through November 15, 1997)............. 35.750 14.250
</TABLE>
The last reported sale price of the Company's Common Stock as reported by
the Nasdaq National Market on November 15, 1997 was $21.69 per share. As of
September 30, 1997, there were approximately 610 holders of record of the
Company's Common Stock.
12
<PAGE> 14
CAPITALIZATION
The following table sets forth the actual capitalization of the Company as
of September 30, 1997, and as adjusted to reflect the sale of 1,000,000 shares
of Common Stock offered by the Company hereby, at an assumed public offering
price of $21.69 per share, after deducting the estimated underwriting discount
and estimated offering expenses.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-----------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt, less current installments.............................. $ 453 $ 453
Stockholders' equity(1):
Common stock, $0.01 par value, Authorized 12,000,000 shares;
5,125,716 shares issued, 4,233,442 shares outstanding, actual;
6,125,716 shares issued, 5,233,442 shares outstanding, as
adjusted.......................................................... 51 61
Additional paid-in capital............................................. 15,927 35,747
Retained earnings...................................................... 7,465 7,465
Less cost of 892,274 treasury shares................................... (2,012) (2,012)
------- -------
Total stockholders' equity............................................. 21,431 41,261
------- -------
Total capitalization......................................... $21,884 $41,714
======= =======
</TABLE>
- ---------------
(1) Based on the number of shares outstanding at September 30, 1997. Excludes
718,400 shares of Common Stock reserved for issuance pursuant to the
Company's stock option plans, of which options to purchase 567,400 shares of
Common Stock at a weighted average exercise price of $5.22 per share are
currently outstanding and options to purchase 151,000 shares of Common Stock
are currently available for issuance. See Note 6 of Notes to Consolidated
Financial Statements.
13
<PAGE> 15
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below with respect to
the Company's statements of operations for each of the years in the three year
period ended June 30, 1997, and with respect to the balance sheets at June 30,
1996 and 1997, are derived from the consolidated financial statements that have
been audited by KPMG Peat Marwick LLP, independent auditors, which are included
elsewhere in this Prospectus and are qualified by reference to such consolidated
financial statements. The statement of operations data for the years ended June
26, 1993 and July 2, 1994 and the balance sheet data at June 26, 1993, July 2,
1994 and July 1, 1995 are derived from audited consolidated financial statements
not included in this Prospectus. The statement of operations data for the three
months ended September 30, 1996 and September 30, 1997, and the balance sheet
data at September 30, 1997 are derived from unaudited consolidated financial
statements which are included elsewhere in this Prospectus. The unaudited
consolidated financial statements include all adjustments, consisting only of
normal recurring adjustments, which the Company considers necessary for a fair
presentation of the financial position and the results of operations for these
periods. Operating results for the three months ended September 30, 1997 are not
necessarily indicative of the results that may be expected for the year ending
June 30, 1998. The following selected financial data should be read in
conjunction with the Consolidated Financial Statements for the Company and notes
thereto and Management's Discussion and Analysis of Financial Condition and
Results of Operations included elsewhere herein.
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED ENDED
------------------------------------------------------ SEPTEMBER 30,
JUNE 26, JULY 2, JULY 1, JUNE 30, JUNE 30, ----------------
1993 1994(1) 1995 1996 1997 1996 1997
-------- ------- ------- -------- -------- ------ ------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................. $ 26,996 $20,237 $17,996 $ 17,082 $ 24,227 $5,066 $7,721
Cost of sales......................................... 19,306 14,415 13,081 11,147 16,243 3,572 4,853
Provision for losses on contracts..................... -- 1,570 300 -- -- -- --
------- ------- ------- ------- ------- ------ ------
Gross profit.......................................... 7,690 4,252 4,615 5,935 7,984 1,494 2,868
------- ------- ------- ------- ------- ------ ------
Operating expenses:
Marketing........................................... 3,158 2,931 3,028 2,970 3,170 668 940
Research and development............................ 923 559 939 1,185 540 109 189
General and administrative.......................... 2,399 2,266 2,041 2,075 2,239 504 641
Restructuring....................................... 452 -- 360 810 -- -- --
------- ------- ------- ------- ------- ------ ------
Total operating expenses..................... 6,932 5,756 6,368 7,040 5,949 1,281 1,770
------- ------- ------- ------- ------- ------ ------
Operating income (loss)............................... 758 (1,504) (1,753) (1,105) 2,035 213 1,098
------- ------- ------- ------- ------- ------ ------
Other income (expense):
Interest expense.................................... (434) (271) (213) (123) (94) (22) (25)
Other, primarily interest income.................... 134 298 164 148 114 19 62
------- ------- ------- ------- ------- ------ ------
Total other income (expense)................. (300) 27 (49) 25 20 (3) 37
------- ------- ------- ------- ------- ------ ------
Income (loss) before income taxes and cumulative
effect of change in accounting principle............ 458 (1,477) (1,802) (1,080) 2,055 210 1,135
Income taxes.......................................... 180 (115) (330) -- -- -- 375
------- ------- ------- ------- ------- ------ ------
Income (loss) before cumulative effect of change in
accounting principle................................ 278 (1,362) (1,472) (1,080) 2,055 210 760
Cumulative effect of change in accounting for
post-retirement benefits............................ -- (995) -- -- -- -- --
------- ------- ------- ------- ------- ------ ------
Net income (loss)..................................... $ 278 $(2,357) $(1,472) $ (1,080) $ 2,055 $ 210 $ 760
======= ======= ======= ======= ======= ====== ======
Net income (loss) per common and common equivalent
share:
Primary........................................... $ 0.06 $ (0.53) $ (0.36) $ (0.27) $ 0.50 $ 0.05 $ 0.17
======= ======= ======= ======= ======= ====== ======
Assuming full dilution............................ $ 0.06 $ (0.53) $ (0.36) $ (0.27) $ 0.46 $ 0.05 $ 0.17
======= ======= ======= ======= ======= ====== ======
Shares used in computing net income (loss) per common
and common equivalent share:
Primary........................................... 4,530 4,435 4,047 4,057 4,106 4,103 4,504
Assuming full dilution............................ 4,530 4,435 4,047 4,057 4,440 4,103 4,524
</TABLE>
<TABLE>
<CAPTION>
JUNE JUNE JUNE
26, JULY 2, JULY 1, 30, 30, SEPTEMBER 30,
1993 1994(1) 1995 1996 1997 1997
------- ------- ------- ------- ------- -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 4,172 $ 3,557 $ 2,140 $ 1,740 $ 3,807 $ 3,998
Working capital........................................... 17,560 16,245 13,258 12,914 15,042 16,040
Total assets.............................................. 28,470 27,942 23,365 21,794 25,973 27,521
Long-term debt, less current installments................. 2,482 1,760 1,052 680 453 453
Stockholders' equity...................................... 24,098 21,679 18,824 18,195 20,327 21,431
</TABLE>
- ---------------
(1) The year ended July 2, 1994 represented a 53 week fiscal year.
14
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with the consolidated
financial statements for the Company and the notes thereto appearing elsewhere
in this Prospectus. The following discussion contains forward-looking statements
that involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth under "Risk Factors" and
elsewhere in this Prospectus.
OVERVIEW
The Company was incorporated in New York in 1967. Historically, the Company
has principally engaged in designing and manufacturing microwave components and
subsystems for the defense industry. In fiscal 1995, the Company expanded its
capabilities in order to serve the emerging commercial wireless and satellite
communications markets.
In order to better serve its emerging commercial markets, the Company
reorganized into three internal business groups during the first quarter of
fiscal 1996: Wireless, Satellite Communications (formerly known as Radar and
Telecommunications) and Defense Electronics (formerly known as Electronic
Warfare). Each business group is composed of an independent engineering and
marketing/sales team whose purpose is to develop, market and deliver products to
its customers. The Company believes that the reorganization has resulted in
better responsiveness to customer needs and has enhanced fiscal accountability
throughout the organization.
During the third quarter of fiscal 1996, the Company terminated the
manufacturing operations of its European subsidiary, Anaren Microwave, Ltd. The
disposition of the net assets of this subsidiary resulted in a restructuring
charge of $810,000 during fiscal 1996. See Note 10 of Notes to Consolidated
Financial Statements.
The Company recognizes sales at the time products are shipped to its
customers. Provisions for estimated losses on uncompleted contracts are made in
the period in which such losses are determined.
The Company believes that it develops a significant amount of intellectual
capital through funded research and development. Customer-funded design and
development in fiscal 1997 represented approximately $6.2 million in sales
compared to $2.0 million in fiscal 1996.
15
<PAGE> 17
RESULTS OF OPERATIONS
The following table sets forth the percentage relationships of certain
items from the Company's consolidated statements of operations as a percentage
of net sales for the periods indicated:
<TABLE>
<CAPTION>
YEAR THREE MONTHS ENDED
ENDED YEARS ENDED JUNE 30, SEPTEMBER 30,
JULY 1, -------------------- ------------------
1995 1996 1997 1996 1997
--------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Net sales........................... 100.0% 100.0% 100.0% 100.0 % 100.0 %
Cost of sales....................... 72.7 65.3 67.1 70.5 62.9
Provision for losses on contracts... 1.7 0.0 0.0 0.0 0.0
----- ----- ----- ----- -----
Gross profit........................ 25.6 34.7 32.9 29.5 37.1
----- ----- ----- ----- -----
Operating expenses:
Marketing......................... 16.8 17.4 13.1 13.2 12.2
Research and development.......... 5.2 6.9 2.2 2.2 2.4
General and administrative........ 11.3 12.2 9.2 9.9 8.3
Restructuring..................... 2.0 4.7 0.0 0.0 0.0
----- ----- ----- ----- -----
Total operating
expenses................ 35.3 41.2 24.5 25.3 22.9
----- ----- ----- ----- -----
Operating income (loss)............. (9.7) (6.5) 8.4 4.2 14.2
----- ----- ----- ----- -----
Other income (expense):
Interest expense.................. (1.2) (0.7) (0.4) (0.4) (0.3)
Other, primarily interest
income......................... 0.9 0.9 0.5 0.3 0.8
----- ----- ----- ----- -----
Total other income
(expense)............... (0.3) 0.2 0.1 (0.1) 0.5
----- ----- ----- ----- -----
Income (loss) before income taxes... (10.0) (6.3) 8.5 4.1 14.7
Income taxes........................ (1.8) 0.0 0.0 0.0 4.9
----- ----- ----- ----- -----
Net income (loss)................... (8.2)% (6.3)% 8.5% 4.1 % 9.8 %
===== ===== ===== ===== =====
</TABLE>
The following table sets forth the Company's net sales by industry segment
for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED JUNE 30, SEPTEMBER 30,
YEAR ENDED -------------------- ------------------
JULY 1, 1995 1996 1997 1996 1997
------------ ------- ------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Wireless............................. $ 341 $2,097 $7,645 $ 862 $3,599
Satellite communications............. 3,239 5,642 8,518 2,478 1,496
Defense electronics.................. 14,416 9,343 8,064 1,726 2,626
------- ------- ------- ------ ------
$ 17,996 $17,082 $24,227 $5,066 $7,721
======= ======= ======= ====== ======
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1996
Net Sales. Net sales increased 52.4% to $7.7 million for the three months
ended September 30, 1997 from $5.1 million for the three months ended September
30, 1996. Sales of Wireless products consist of surface mount and custom
components used in building wireless base station equipment. Wireless sales
increased 317.5% to $3.6 million for the three months ended September 30, 1997
from $862,000 for the three months ended September 30, 1996. The increase was
due to continued strong demand in the worldwide market for base station
equipment. Sales of Satellite Communications products consist of custom
multi-layer components, such as Butler matrices and beamforming networks for
commercial and military communications. Satellite Communications sales decreased
39.6% to $1.5 million for the three months ended September 30, 1997 from $2.5
million for the three months ended September 30, 1996. The decrease was a result
of the completion of the initial product order for the Iridium program in the
last quarter of fiscal 1997 and a delay
16
<PAGE> 18
from the first to the second quarter of approximately $900,000 in shipments of
parts for satellite programs for Harris and Hughes. Sales of Defense Electronic
products consist of Digital Frequency Discriminators ("DFDs"), Digital RF
Memories ("DRFMs"), ESM receivers and Microwave Integrated Circuit components
("MICs"). Defense Electronics sales increased 52.1% to $2.6 million for the
three months ended September 30, 1997 from $1.7 million for the three months
ended September 30, 1996. The increase was a result of increased shipments of
DFDs and DRFMs for foreign sales of the Airborne Self Protection Jammer ("ASPJ")
system.
Gross Profit. Cost of sales consists primarily of engineering design
costs, material, fabrication costs, assembly costs and test costs. Gross profit
increased 92.0% to $2.9 million for the three months ended September 30, 1997
from $1.5 million for the three months ended September 30, 1996. Gross margin
was 37.1% for the three months ended September 30, 1997 compared to 29.5% for
the three months ended September 30, 1996. The increase in gross margin was due
to economies of scale and improved manufacturing efficiencies.
Marketing. Marketing expenses consist mainly of employee related expenses,
commissions paid to sales representatives, trade show, advertising and related
travel expenses. Marketing expenses increased 40.7% to $940,000 (12.2% of net
sales) for the three months ended September 30, 1997 from $668,000 (13.2% of net
sales) for the three months ended September 30, 1996. The increase was a result
of higher commission and advertising expenses related to increased sales volume
and further development of the marketing organization to support the Company's
expanding commercial markets.
Research and Development. Research and development expenses consist of
material and salaries and related overhead costs of employees engaged in ongoing
research, design and development activities associated with new products and
technology development. Gross research and development costs are reduced by
expense reimbursements received under a Technology Reinvestment Program through
Raytheon, for the Advance Research Project Agency of the United States
Government. Net research and development expenses increased 73.4% to $189,000
(2.4% of net sales) for the three months ended September 30, 1997, from $109,000
(2.2% of net sales) for the three months ended September 30, 1996. Research and
development expenses expanded to support the increased development of wireless
infrastructure products.
General and Administrative. General and administrative expenses increased
27.2% to $641,000 (8.3% of net sales) for the three months ended September 30,
1997 from $504,000 (9.9% of net sales) for the three months ended September 30,
1996. General and administrative expenses increased due to the hiring of
additional employees, increased staffing levels, higher professional fees and
normal increases in compensation levels for existing personnel.
Interest Expense. Interest expense represents interest paid on the
Company's outstanding term loan and letter of credit. Interest expense increased
13.6% to $25,000 (0.3% of net sales) for the three months ended September 30,
1997 from $22,000 (0.4% of net sales) for the three months ended September 30,
1996.
Other Income. Other income is primarily interest income received on
invested cash balances. Other income increased 226.3% to $62,000 (0.8% of net
sales) for the three months ended September 30, 1997 from $19,000 (0.3% of net
sales) for the three months ended September 30, 1996, due to a higher level of
investable cash balances in the current three month period.
Income Taxes. Income tax expense for the three months ended September 30,
1997 was $375,000 (4.9% of net sales), an effective tax rate of 33%. The Company
incurred no income tax for the three months ended September 30, 1996 due to the
utilization of substantially all of its available loss carryforwards and
recognizing available tax credits in fiscal 1997.
FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996
Net Sales. Net sales increased 41.8% to $24.2 million for fiscal 1997 from
$17.1 million for fiscal 1996. Wireless sales increased 264.6% to $7.6 million
for fiscal 1997 from $2.1 million for fiscal 1996. The increase was primarily
due to significant shipments of custom base station components being built for
Lucent, Motorola and Nortel. Satellite Communications sales increased 51.0% to
$8.5 million for fiscal 1997 from $5.6
17
<PAGE> 19
million for fiscal 1996. The increase was a result of substantial sales for
contract engineering design work on two beamformers for commercial satellite
applications for Loral Space & Communications and Martin Marietta Overseas Corp.
Defense Electronics sales decreased 13.7% to $8.1 million for fiscal 1997 from
$9.3 million for fiscal 1996. The decrease was a result of the continuing
decline in the overall worldwide defense market, as well as the completion of a
large DFD program in fiscal 1996.
Gross Profit. Gross profit increased 34.5% to $8.0 million for fiscal 1997
from $5.9 million for fiscal 1996. Gross margin was 32.9% for fiscal 1997
compared to 34.7% for fiscal 1996. The decline in gross margin was a direct
result of lower margins on initial product runs of Wireless custom components
during the period due to excess scrap costs and rework costs incurred in
repairing production units above normal levels in fiscal 1997.
Marketing. Marketing expenses increased 6.7% to $3.2 million (13.1% of net
sales) for fiscal 1997 from $3.0 million (17.4% of net sales) for fiscal 1996.
This increase was caused mainly by additions to marketing personnel in Europe,
and a rise in commission expense due to a 41.8% increase in sales and a 23.7%
increase in advertising expenditures targeted mainly for the Company's wide
variety of new commercial Wireless products.
Research and Development. Research and development expenses decreased
54.4% to $540,000 (2.2% of net sales) for fiscal 1997 from $1.2 million (6.9% of
net sales) for fiscal 1996. This decline resulted from a significant increase in
customer funded engineering design work in both the Defense Electronics and
Satellite Communications groups during fiscal 1997.
General and Administrative. General and administrative expenses increased
7.9% to $2.2 million (9.2% of net sales) for fiscal 1997 from $2.1 million
(12.2% of net sales) for fiscal 1996. Approximately half of this increase was
attributable to normal increases in payroll costs for existing personnel, while
the remaining increase represents a small increase in new personnel, as well as
minor increases in professional services and stockholder expense.
Interest Expense. Interest expense decreased 23.6% to $94,000 (0.4% of net
sales) in fiscal 1997 from $123,000 (0.7% of net sales) in fiscal 1996,
reflecting the Company's continuing reduction of long-term debt.
Other Income. Other income decreased 23.0% to $114,000 (0.5% of net sales)
for fiscal 1997 from $148,000 (0.9% of net sales) for fiscal 1996, due to lower
investable cash balances caused by the Company's reduction of long-term debt.
Income Taxes. The Company incurred no income tax for fiscal 1997, versus
an expected tax expense of approximately $699,000 based on a 34% tax rate. The
difference between the actual tax expense and the expected tax calculated on
income before income taxes was due to the utilization of previously unrecognized
net operating loss carryforwards and to a decrease in the deferred tax asset
valuation allowance.
FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995
Net Sales. Net sales decreased 5.1% to $17.1 million for fiscal 1996 from
$18.0 million for fiscal 1995. Wireless sales increased 515.0% to $2.1 million
for fiscal 1996 from $340,000 for fiscal 1995. The increase was primarily due to
sales of catalog microwave components and pilot production runs of custom
components for base station manufacturers. Satellite Communications sales
increased 74.2% to $5.6 million for fiscal 1996 from $3.2 million for fiscal
1995. The increase was attributable to increased shipments under the Army Ground
Based Radar program and shipments of beamforming networks to Raytheon for the
Iridium project. Defense Electronics sales decreased 35.2% to $9.3 million for
fiscal 1996 from $14.4 million for fiscal 1995. The decrease was a result of the
continuing decline in the overall worldwide defense market, as well as the
completion of a number of large DFD programs in fiscal 1994 and early fiscal
1995.
Gross Profit. Gross profit increased 28.6% to $5.9 million for fiscal 1996
from $4.6 million for fiscal 1995. Gross margin was 34.7% for fiscal 1996
compared to 25.6% for fiscal 1995. The increase in gross margin was the result
of higher sales volume at the Company's U.S. manufacturing facility, which
allowed for better absorption of fixed overhead costs, as well as personnel
reductions made in the second quarter of fiscal 1995.
18
<PAGE> 20
Marketing. Marketing expenses were flat at $3.0 million for fiscal 1996
and fiscal 1995, but increased as a percentage of net sales to 17.4% for 1996
from 16.8% for 1995.
Research and Development. Research and development expenses increased
26.2% to $1.2 million (6.9% of net sales) for fiscal 1996 compared to $939,000
(5.2% of net sales) for fiscal 1995. This increase represented the continuing
rise in the prototype development efforts for the Company's new wireless
commercial product line, as development efforts were targeted on adapting
existing Company technologies to produce new wireless component products to fit
specific customer requirements.
General and Administrative. General and administrative expenses increased
1.7% to $2.1 million (12.2% of net sales) for fiscal 1996 from $2.0 million
(11.3% of net sales) for fiscal 1995. This increase represented normal recurring
increases in payroll expenditures.
Interest Expense. Interest expense decreased 42.3% to $123,000 (0.7% of
net sales) for fiscal 1996 from $213,000 (1.2% of net sales) for fiscal 1995,
reflecting the Company's reduction of long-term debt.
Other Income. Other income decreased 9.8% to $148,000 (0.9% of net sales)
for fiscal 1996 from $164,000 (0.9% of net sales) for fiscal 1995, due to lower
investable cash balances caused by the Company's reduction of long-term debt.
Income Taxes. The Company incurred no income tax for fiscal 1996, versus
an expected tax benefit of approximately $367,000 based on a 34% tax rate. The
primary difference between the actual tax expense and the expected tax benefit
calculated on the loss before income taxes was due to the Company's equity in
the operating loss of its English subsidiary, which is not subject to U.S.
taxation, and offset by a decrease in the deferred tax asset valuation
allowance.
19
<PAGE> 21
QUARTERLY RESULTS OF OPERATIONS
The following tables set forth certain unaudited quarterly financial
information for each of the Company's last nine quarters and such data expressed
as a percentage of net sales. The data have been prepared on a basis consistent
with the Company's audited consolidated financial statements included elsewhere
in this Prospectus and include all necessary adjustments, consisting only of
normal recurring accruals that management considers necessary for a fair
presentation. The operating results for any quarter are not necessarily
indicative of results for any future period. See "Risk Factors."
<TABLE>
<CAPTION>
QUARTERS ENDED
-----------------------------------------------------------------------------------------------------
SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30,
1995 1995 1996 1996 1996 1996 1997 1997 1997
--------- -------- --------- -------- --------- -------- --------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................. $ 4,449 $4,442 $ 4,102 $4,089 $ 5,066 $5,314 $ 6,059 $7,788 $ 7,721
Cost of sales............. 2,809 2,745 2,914 2,679 3,572 3,481 3,996 5,194 4,853
------ ------ ------ ------ ------ ------ ------ ------ ------
Gross profit.............. 1,640 1,697 1,188 1,410 1,494 1,833 2,063 2,594 2,868
------ ------ ------ ------ ------ ------ ------ ------ ------
Operating expenses:
Marketing............... 667 798 831 674 668 762 896 844 940
Research and
development........... 385 376 229 195 109 122 150 159 189
General and
administrative........ 508 533 529 505 504 564 562 609 641
Restructuring........... -- -- 810 -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------
Total operating
expenses.......... 1,560 1,707 2,399 1,374 1,281 1,448 1,608 1,612 1,770
------ ------ ------ ------ ------ ------ ------ ------ ------
Operating income (loss)... 80 (10) (1,211) 36 213 385 455 982 1,098
------ ------ ------ ------ ------ ------ ------ ------ ------
Other income (expense):
Interest expense........ (43) (31) (26) (23) (22) (30) (20) (22) (25)
Other, primarily
interest income....... 28 53 39 28 19 16 28 51 62
------ ------ ------ ------ ------ ------ ------ ------ ------
Total other income
(expense)......... (15) 22 13 5 (3) (14) 8 29 37
------ ------ ------ ------ ------ ------ ------ ------ ------
Income (loss) before
income taxes............ 65 12 (1,198) 41 210 371 463 1,011 1,135
Income taxes.............. -- -- -- -- -- -- -- -- 375
------ ------ ------ ------ ------ ------ ------ ------ ------
Net income (loss)......... $ 65 $ 12 $(1,198) $ 41 $ 210 $ 371 $ 463 $1,011 $ 760
====== ====== ====== ====== ====== ====== ====== ====== ======
Net income (loss) per
common and common
equivalent share
Primary............... $ 0.02 $ -- $ (0.30) $ 0.01 $ 0.05 $ 0.09 $ 0.11 $ 0.25 $ 0.17
====== ====== ====== ====== ====== ====== ====== ====== ======
Assuming full
dilution............ $ 0.02 $ -- $ (0.30) $ 0.01 $ 0.05 $ 0.09 $ 0.11 $ 0.23 $ 0.17
====== ====== ====== ====== ====== ====== ====== ====== ======
Shares used in computing
net income (loss) per
common and common
equivalent share(1):
Primary............... 3,998 4,032 4,045 4,057 4,103 4,104 4,104 4,106 4,504
Assuming full
dilution............ 3,998 4,032 4,045 4,057 4,103 4,104 4,104 4,440 4,524
</TABLE>
<TABLE>
<CAPTION>
QUARTERS ENDED
-----------------------------------------------------------------------------------------------------
SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30,
1995 1995 1996 1996 1996 1996 1997 1997 1997
--------- -------- --------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............. 63.1 61.8 71.0 65.5 70.5 65.5 66.0 66.7 62.9
------ ------ ------ ------ ------ ------ ------ ------ ------
Gross profit.............. 36.9 38.2 29.0 34.5 29.5 34.5 34.0 33.3 37.1
------ ------ ------ ------ ------ ------ ------ ------ ------
Operating expenses:
Marketing............... 15.0 18.0 20.3 16.5 13.2 14.3 14.8 10.8 12.2
Research and
development........... 8.7 8.4 5.6 4.8 2.2 2.3 2.5 2.1 2.4
General and
administrative........ 11.4 12.0 12.9 12.3 9.9 10.6 9.2 7.8 8.3
Restructuring........... -- -- 19.7 -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------
Total operating
expenses.......... 35.1 38.4 58.5 33.6 25.3 27.2 26.5 20.7 22.9
------ ------ ------ ------ ------ ------ ------ ------ ------
Operating income (loss)... 1.8 (0.2) (29.5) 0.9 4.2 7.3 7.5 12.6 14.2
------ ------ ------ ------ ------ ------ ------ ------ ------
Other income (expense):
Interest expense........ (0.9) (0.7) (0.6) (0.6) (0.5) (0.6) (0.3) (0.3) (0.3)
Other, primarily
interest income....... 0.6 1.2 0.9 0.7 0.4 0.3 0.4 0.7 0.8
------ ------ ------ ------ ------ ------ ------ ------ ------
Total other income
(expense)......... (0.3) 0.5 0.3 0.1 (0.1) (0.3) 0.1 0.4 0.5
------ ------ ------ ------ ------ ------ ------ ------ ------
Income (loss) before
income taxes............ 1.5 0.3 (29.2) 1.0 4.1 7.0 7.6 13.0 14.7
Income taxes.............. -- -- -- -- -- -- -- -- 4.9
------ ------ ------ ------ ------ ------ ------ ------ ------
Net income (loss)......... 1.5% 0.3% (29.2)% 1.0% 4.1% 7.0% 7.6% 13.0% 9.8%
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
- ---------------
(1) Summation of the quarterly net income (loss) per common and common
equivalent share does not necessarily equal the annual amount due to the
averaging effect of the number of shares throughout the year.
20
<PAGE> 22
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations for fiscal 1996, 1997 and for the
three months ended September 30, 1997 primarily from cash flow from operations.
Net cash provided by operations for the fiscal years ended June 30, 1996 and
1997 was $978,000 and $3.5 million, respectively, while net cash provided by
operations for the three months ended September 30, 1997 was $227,000. The
increase in cash provided by operations in fiscal 1997 compared to fiscal 1996
was due primarily to the $2.1 million profit in fiscal 1997 and a $754,000
increase in advance payments from customers which offset the increases in
inventory and receivables caused by higher sales volume. The decrease in cash
provided by operations for the three months ended September 30, 1997, compared
to the same period in fiscal 1997, resulted primarily from continuing increases
in inventory levels due to higher production volume.
Net cash used in investing activities consists solely of capital
expenditures. Capital equipment additions in fiscal 1996, fiscal 1997 and for
the three months ended September 30, 1997 amounted to $1.1 million, $1.2 million
and $378,000, respectively. These capital investments consisted primarily of
equipment needed to further automate production for the Company's new Wireless
and Satellite Communications products, as well as testing and production
equipment required to produce Defense Electronics products for the initial
production of the ASPJ program. Capital equipment expenditures for fiscal 1998
have been budgeted at approximately $1.5 million and are expected to consist
primarily of additional automated high volume production equipment to further
expand production capacity for the new Wireless products. The Company believes
that cash generated from operations and currently existing cash balances will be
adequate to meet these financing needs.
Net cash used in financing activities for fiscal 1996 and 1997 was $239,000
and $316,000, respectively, and consisted primarily of scheduled payments on
long-term debt and, to a lesser extent, proceeds from the exercise of stock
options. Net cash provided by financing activities in the first three months of
fiscal 1998 was $342,000 and was primarily cash generated by the exercise of
stock options, as no payments on the Company's term loan were due in the first
quarter.
Long-term liabilities, which consist of the Company's unfunded liability
for postretirement benefit costs, long-term debt in the form of a commercial
term loan and deferred income taxes, decreased $309,000 and $119,000 in fiscal
1996 and 1997, respectively. The decline in both fiscal years represents
scheduled repayment of debt. The Company presently has no plans to fund the
long-term liability recognized for postretirement benefit costs. No new
long-term debt, other than the transfer of its term loan to a new lender, was
taken on during this two year period, as the Company's cash balances were more
than adequate to fund both long- and short-term cash needs. Long-term
liabilities decreased $43,000 for the three months ended September 30, 1997, due
mainly to a change in deferred income taxes.
In October 1996, the Company signed an agreement for a credit facility with
a bank providing for a $3.0 million working capital revolving line of credit
bearing interest at the prime rate plus 1% and maturing on November 30, 1998, as
well as a $907,000 term loan payable in semi-annual installments of $113,000
through May 2000 and bearing interest at the prime rate plus 1.25%. The proceeds
of the term loan were used to refinance existing Onondaga County Industrial
Development Agency Revenue bonds of the Company, while the revolving line of
credit has been and will be used to supplement short-term working capital needs
brought about by expected growth in production and sales volumes. Borrowings
under this credit facility are secured by substantially all the assets of the
Company. The terms of the credit facility require the Company to maintain a
minimum tangible net worth, ratio of cash flows to maturities, and leverage
ratio, as defined in the respective agreements; the Company was in compliance
with all restrictions and covenants under its credit facilities at September 30,
1997.
The Company believes that its cash requirements for at least the next 12
months will be satisfied by the proceeds from this offering, currently invested
cash balances, expected cash flow from operations and funds available under its
credit facilities. See "Use of Proceeds."
21
<PAGE> 23
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Company adopted Statement of Financial Accounting Standard No. 123,
Accounting for Stock-based Compensation ("SFAS 123"), beginning with the first
quarter of fiscal 1997. Upon adoption of SFAS 123, the Company continued to
measure compensation expense for its stock-based employee compensation plans
using the intrinsic value method prescribed by APB No. 25, Accounting for Stock
Issued to Employees. The consolidated financial statements appearing elsewhere
in this Prospectus include pro forma disclosures of the effect on net income and
earnings per share as if the fair value-based method prescribed by SFAS 123 has
been applied in measuring compensation expense. See Note 6 of Notes to
Consolidated Financial Statements.
Statement of Financial Accounting Standard No. 128, Earnings Per Share
("SFAS 128"), was issued in February 1997. SFAS 128 specifies the computation,
presentation, and disclosure requirements for earnings per share. Adoption of
SFAS 128 will be required for the Company beginning in the second quarter of
fiscal 1998. Adoption of SFAS 128 is not expected to have a material effect on
the Company's operating results.
Additionally, Statement of Financial Accounting Standard No. 131,
Disclosures About Segments of an Enterprise and Related Information ("SFAS 131")
was issued in 1997. SFAS 131 establishes standards for the reporting of
information about operating segments and related disclosures about products and
services, geographic areas, and major customers. Adoption of SFAS 131 will be
required in fiscal 1999, and will require interim disclosures beginning in
fiscal 2000. Adoption of SFAS 131 is not expected to have a material effect on
the Company's financial statement disclosures.
22
<PAGE> 24
BUSINESS
GENERAL
Anaren designs, develops, manufactures and sells complex microwave signal
distribution networks and components for the wireless communications, satellite
communications and defense electronics markets. The Company utilizes its
advanced, proprietary "Multi-Layer Stripline" technology to deliver compact,
lightweight, cost effective and highly integrated microwave products into the
rapidly expanding markets for cellular/Personal Communications Systems ("PCS")
base stations, microcells and new generations of communications satellites.
Anaren's customer base includes leading global systems suppliers for these
markets, including Motorola, Lucent, Nortel, Ericsson, Lockheed Martin, Loral
Space Communications and Hughes. The Company is also a leading provider of
electronic counter measure subsystems which primarily protect fighter aircraft.
The Company has leveraged over 30 years of microwave expertise to rapidly
develop and implement leading commercial microwave products, with commercial
sales growing from $982,000 in fiscal 1995 to over $16 million, representing 67%
of total Company sales, in fiscal 1997.
INDUSTRY BACKGROUND
Worldwide demand for telecommunications services has grown rapidly in
recent years, including basic telephony, mobile cellular communications, video
broadcast, high speed data transmission and paging. Mobile communications serve
basic needs for convenience and flexibility and have grown at rates higher than
the overall market for telecommunications services. This trend has led to
increased growth in the number of subscribers for existing and emerging wireless
applications that are served by terrestrial and satellite based networks. This
demand has resulted in an increased need for cost effective and reliable
telecommunications equipment among service providers.
Telecommunications networks require interconnections and transmission
systems to link geographically dispersed nodes and to provide access to
customers and end users. Available transmission technologies include
twisted-pair copper, coaxial cable, fiber optic cable, microwave radio
technology and satellite broadcast technology. Wireless solutions, microwave and
satellite, offer advantages over wireline, including typically lower cost of
implementation and relatively rapid infrastructure deployment. Wireless
solutions are especially superior where geographically dispersed customers or
operations, difficult terrain and environmental constraints render the
installation of copper, coaxial cable or fiber optic cable impractical or
prohibitively expensive.
Wireless Communications
The demand for cellular, PCS and wireless local loop ("WLL") (collectively,
"wireless") communications services has grown significantly during the past
decade, fueled by decreasing prices for wireless handsets, a more favorable
regulatory environment, increasing competition among service providers and a
greater availability of services and microwave spectrum. In addition, many
developing countries are installing wireless telephone networks as an
alternative to installing, expanding or upgrading traditional wireline networks.
Emerging bi-directional wireless data transmission applications have the
potential to further expand the market for wireless communications by allowing
service providers to increase revenue-generating traffic on their networks.
Industry sources estimate that the number of cellular and PCS subscribers in
North America will increase from approximately 47 million at the end of 1996 to
approximately 140 million by the end of 2000. In addition, industry sources
project that the number of cellular and PCS subscribers worldwide will grow from
136 million at the end of 1996 to 520 million by the end of 2000.
The growth in wireless communications has required, and will continue to
require, substantial investment by service providers in infrastructure
equipment. Industry sources estimate that spending by wireless service providers
on infrastructure equipment was approximately $21.0 billion at the end of 1996
and will increase to approximately $44.0 billion by the end of 2000.
23
<PAGE> 25
A typical wireless communications system comprises a geographic region
containing a number of cells, each of which contains a cell site (or base
station), which are networked to form a service provider's coverage area. Each
base station houses the equipment that receives incoming telephone calls from
the switching offices of the local wireline telephone company and broadcasts
calls to the wireless users within the cell. A base station can process a fixed
number of radio channels, through the use of multiple transceivers, power
amplifiers and tunable filters, along with an antenna to receive and transmit
signals to and from the wireless telephone user.
Traditional cellular systems, which are based on analog technology, are
capable of carrying only one call per channel of spectrum. The continuing growth
of the wireless communications market has resulted in the crowding of
transmissions within the available spectrum. Because the radio frequencies
assigned to transmissions are fixed, service providers are now seeking new
methods to more efficiently use the spectrum to increase capacity. Analog
systems are being supplanted by digital systems, which convert voice
transmissions into bits of electronic information, allowing more calls per
carrier frequency, improved quality and improved security, thereby significantly
increasing the performance of a given wireless network. In addition to digital
cellular networks, which operate within the 800 MHz and 900 MHz bandwidths,
service providers have also begun to construct PCS networks operating within the
1800 MHz and 2000 MHz bandwidths. PCS networks generally require two to three
times as many base stations as cellular networks. As a consequence of these
factors, wireless service providers must anticipate evolving industry standards,
and must invest in infrastructure equipment that both maximizes efficiency in
the management of the limited spectrum licensed to them, and is available in
volume for rapid deployment. There is also strong demand for wireless
infrastructure manufacturers to provide improved performance in smaller, more
cost effective cells and microcells which operate at higher frequencies.
Satellite Communications
Satellites provide a number of advantages over terrestrial facilities for
many high-speed communications service applications. First, satellites enable
high-speed communications service where there is no suitable terrestrial
alternative available, or where the terrestrial alternative is inadequate.
Second, unlike the cost of terrestrial networks, the cost to provide services
via satellite does not increase with the distance between sending and receiving
stations. Finally, in contrast to the installation of fiber optic cable,
satellite networks can be rapidly and cost-effectively deployed.
Demand for commercial satellites is determined by several factors
including: growth in demand for new satellite-based applications such as mobile
telephone services, business networking, direct-to-home television and related
voice, video and data systems; development of new satellite-based communications
architectures to provide basic telephone and television services in developing
regions of the world; and replenishment of orbiting satellite constellations
nearing the end of their useful lives. During the ten year period from 1997 to
2006, substantial launch activity for commercial satellites is expected.
Industry sources estimate that during this period 1,062 commercial satellites
will be launched into either low Earth orbit ("LEO") or medium Earth orbit
("MEO"), and 273 commercial satellites will be launched into geostationary Earth
orbit ("GEO"). There are at least four large-scale telecommunications projects
(Iridium, Global Star, ICO and Teledesic) in various stages of development and
implementation that are contributing to the demand for commercial satellites.
Launch cost and capacity, which are directly related to satellite size and
weight, are significant factors in the viability of these proposed systems. As a
result, current commercial satellite designs are being driven to incorporate
lighter weight, smaller and more highly integrated subsystems and components.
Due to the narrowband frequency (10MHz) allocated for commercial
satellites, system planners have moved from the traditional approach of
broadcasting signals over a large area of the Earth, to receiving and
transmitting via many small beams that cover much smaller areas of the Earth
(multi-beam transmission). The advantage of multi-beam transmission and
reception is that the same frequency can be used by different callers in
different beams (frequency re-use), allowing for significantly higher caller
capacity with the same amount of frequency allocation and increased system
sensitivity to allow for the use of lower-powered
24
<PAGE> 26
handsets. Caller capacity and system sensitivity increase approximately in
proportion to the number of beams per satellite.
In addition, new multi-satellite systems are being developed in order to
provide the same global coverage for wideband (500MHz) services such as
video-conferencing, data transmission, Internet access, and other multi-media
applications. These applications require significantly more bandwidth than
current voice communications systems because the information content in the
transmitted signal is much greater for these new applications. To implement
these systems, much wider frequency band allocations are required than have been
granted for existing voice communications systems. Such large bandwidth
allocations are not available at the operating frequencies of current
communications systems and regulatory authorities, therefore, have provided
wideband frequency allocations at 20-30GHz, where a more limited base of
technology is available to implement the proposed systems. These proposed
systems are significantly more complex than current systems in that system
operators desire substantially more beams and increased flexibility. With
real-time adjustment of the size and location of the Earth being covered by a
particular beam and by incorporating signal switching networks into the
satellite payload, substantial improvements in system performance and
utilization rates can be achieved, thereby substantially increasing the revenue
generating ability of a satellite system. Increasingly, satellite system
developers are incorporating what has traditionally been ground-based
infrastructure into the satellite payload to improve system performance.
THE ANAREN SOLUTION
Anaren has developed a system of proprietary processes, called "Multi-Layer
Stripline" ("MLS") technology, which enable the Company to deliver compact,
lightweight, cost effective and highly integrated complex microwave signal
distribution and interconnection networks for wireless and satellite
communication systems. The MLS process integrates multiple layers of microwave
circuitry, allowing the elimination of discrete components and discrete
microwave cables, dramatically reducing size, cost and weight while improving
performance. The MLS technology is used in combination with the Company's
extensive proprietary design libraries and turnkey design, development and
manufacturing capabilities which are required to provide custom solutions for
major OEM customers. This technology has been implemented into products
utilizing passive components, including beamforming networks and signal
distribution networks, and is currently being utilized by the Company to
incorporate active devices, including switches, phase shifters and amplifiers.
TECHNOLOGY
Traditional stripline technology, which the Company has historically
utilized in its Defense Electronics product line, consists of circuit runs
etched on dielectric sheets that are sandwiched in a precision machined aluminum
case. The case provides grounding on the top and bottom, and also provides a
structure on the edge for mounting connectors. Integration is achieved through
connecting multiple stripline components via numerous cables.
Multi-Layer Stripline technology is a technique of processing stripline
circuits, in which multiple layers of etched stripline circuits are laminated
together in a manner that is similar to digital Printed Circuit Board ("PCB")
manufacturing, but with superior microwave characteristics. Like PCB
manufacturing, layers can be interconnected via plated-through holes. The
Company's proprietary techniques, however, enable it to implement multi-layer
transitions that perform optimally at microwave frequencies. Unlike PCB
manufacturing, simply connecting the appropriate points on the multi-layer board
does not ensure adequate performance. In order to achieve optimal microwave
performance consistently, material and process variations must be tightly
controlled, and the circuit design must take into consideration all variation in
the manufacturing process. The Company's microwave design engineering staff has
developed proprietary modeling techniques and component design libraries that
allow for consistent and efficient design and production of complex microwave
products.
25
<PAGE> 27
['MULTI-LAYER STRIPLINE GRAPHIC']
After laminating multiple layers of etched stripline layers into a
multi-layer assembly, the entire exterior of the assembly is plated, rather than
being incorporated into a machined aluminum case. Extensive integration is
achieved through the multi-layer integration process, resulting in increased
performance and substantial size, weight and cost reductions.
The Company's microwave antenna beamforming technology, developed in the
defense industry, coupled with its MLS manufacturing process, produces
lightweight, cost-effective L band beamforming networks for Motorola's Iridium
Program. These passive networks provide multibeam coverage where the size and
direction of beams is fixed. Additionally, the Company is utilizing its MLS
technology and microwave design experience to develop cost effective solutions
for high data rate transmission applications, such as Internet access and
multi-media communications. In conjunction with Raytheon, the Company is
developing a next generation of its MLS technology to address applications at
20-30GHz. In addition, the Company has developed high density microwave switch
matrices by incorporating active microwave switches into its passive MLS
technology, and is currently qualifying a production subsystem for a commercial
communications satellite program. These switch matrices are a key element in
providing the flexibility that system designers desire. In addition, the Company
is developing active beamforming networks, in which the size and direction of
the beams being produced can be remotely manipulated in real-time. Through these
advancements, system operators can direct capacity in response to changes in
demand, and more efficiently utilize their space infrastructure assets.
STRATEGY
The Company's strategy is to continue to leverage its proprietary
Multi-Layer Stripline technology, extensive proprietary microwave design
libraries, and turnkey design, development and manufacturing capabilities to
further expand its penetration in the wireless communications and satellite
communications markets. Key components of the Company's strategy include the
following:
Increase Levels of Component Integration and Value Added Content. The
Company plans to increase the value of its content in wireless and satellite
communications systems. Through its MLS manufacturing technology, the Company is
able to integrate multiple discrete functions into a single assembly.
Integration of active technologies, such as switching and amplification, into
its MLS assemblies would significantly broaden the array of functions that can
be integrated by the Company on satellite and terrestrial wireless communication
systems.
Further Expansion into Commercial Markets. The Company has 30 years'
experience in microwave technology used in designing and manufacturing complex
microwave subsystems for the defense market. During the past three years, the
Company has successfully expanded into the commercial satellite and wireless
communications markets as demonstrated by its revenue growth from commercial
applications to 67% of net sales in fiscal 1997 from 5% in fiscal 1995.
Maintain Leadership in Microwave Technology. The Company intends to pursue
further technological advances through continued investment in research and
development. The Company will seek to advance its
26
<PAGE> 28
leadership in microwave technology by continuing its participation in selected
defense and satellite programs that involve highly sophisticated,
state-of-the-art microwave technology. The Company will continue to leverage
these technological advancements into its terrestrial wireless products, as well
as other commercial applications.
Strengthen and Expand Customer Relationships. The commercial wireless and
satellite communications markets are driven by a limited number of large systems
manufacturers. The Company has developed customer relationships with many of
these manufacturers, including Motorola, Lucent, Ericsson and Nortel for
wireless communications and Lockheed Martin, Hughes, Loral Space &
Communications and TRW for satellite communications. The Company intends to
continue to build strong technical and business relationships with major
customers that are global industry leaders that will provide opportunities for
recurring high volume supply contracts.
Enhance Capabilities as Turnkey Supplier. The Company has in place
extensive design libraries, automated manufacturing equipment and statistical
process controls which have enabled it to competitively manufacture high volume
MLS assemblies. The Company intends to continue to expand, improve and automate
its design, manufacturing and test capabilities to provide innovative, cost
effective solutions. The Company believes that these investments are necessary
to maintain and enhance its position as a turnkey supplier to industry-leading
OEMs.
PRODUCTS
Wireless Communications
The Company provides custom microwave signal distribution networks to
leading wireless infrastructure equipment manufacturers. Traditionally, all of
the signal distribution (combining and splitting) within a base station has been
accomplished with discrete signal splitting/combining components with discrete
microwave cables providing the necessary interconnectivity. Through the use of
its MLS technology, the Company provides highly integrated microwave signal
distribution networks that eliminate the need for discrete componentry and
interconnecting cables. These integrated assemblies, which range from simple
splitting and combining networks to complete microwave backplanes, distribute
microwave signals throughout the base station, from reception at the antenna, to
multiple radios, to multiple amplifiers, and back to the antenna for
transmission. Much like the mother board in a personal computer efficiently
provides interconnectivity of digital signals between multiple subsystems, the
Company's microwave signal distribution networks provide efficient
interconnectivity of microwave signals between subsystems in wireless base
stations.
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<PAGE> 29
A typical base station is made up of a receive/transmit antenna and an
array of radios and signal amplifiers, as depicted below.
[Graphic showing path of signals from antenna to base station, through the
interior of the base station and back out to antenna. The location of the
Company's "Xinger(R)" and custom products used in amplifiers is identified.
Locations showing areas of opportunity for the Company's signal
distribution/combination assemblies are shown. The caption reads as follows:
"Signals that are received from a subscriber's handset at the base station
antenna are distributed to one of several (typically dozens) radios within the
base station to be processed and to be passed to the digital wireline network.
The radios also take the incoming signals from the wireline network, process
them for transmission and distribute them to power amplifiers to boost the
strength of the signal. The amplified signals are then combined and sent back
out the base station antenna to the subscriber's handset."]
In addition to providing custom integrated system level signal distribution
solutions to wireless OEMs, the Company has developed and markets a line of
standard surface mount microwave signal splitting and combining components,
trade named Xinger(R), that are used in terrestrial wireless communications base
station amplifiers. The Company originally developed these products in response
to customers' needs for economical, high power signal splitting and combining
components that could be utilized in an automated production environment. The
Company is currently the market leader in this product area, supplying industry
leading OEMs such as Ericsson, Motorola and Lucent, as well as leading power
amplifier manufacturers such as Powerwave Technologies, Inc. and Spectrian
Corporation.
Satellite Communications
The Company is a supplier of passive (fixed) beamforming networks for
communications satellite multi-beam antennas. These products are custom designed
for a particular satellite program, and determine the number, size and quality
of beams that are produced from a single antenna array. Multibeam satellite
antennas, which can have more than 100 independently modulated beams, require
very complex microwave signal distribution matrices, which would be too bulky,
heavy and unreliable for use in satellites if they used
28
<PAGE> 30
conventional microwave interconnection techniques. These networks are utilized
by leading communications satellite manufacturers to achieve the desired ground
coverage and to provide the desired capacity allocation. Through the forming of
multiple beams, service providers are able to allocate a satellite's capacity
based on projected demand, and to increase the number of callers that can be
serviced simultaneously. In addition, the Company has recently developed the
capability to produce high-density microwave switch matrices which allow the
dynamic allocation of satellite capacity, thereby increasing utilization and
revenue generation.
[Graphic showing two communications stations on the ground transmitting
information to two orbiting satellites. A group of satellites form a grid in
the sky, with two communications satellites forming multiple beams, which are
projected on the ground, to allocate capacity based on the projected demand. The
caption reads as follows: "Multi-beam transmission allows different beams to
use the same frequency for different callers (frequency re-use) thereby greatly
expanding caller capacity with the same amount of frequency allocation."]
Defense Electronics
The Company is a leading supplier of certain subsystem products to the
defense electronics market, including Digital Frequency Discriminators ("DFDs")
and Digital RF Memories ("DRFMs"). These products are vertically integrated
within the Company utilizing advanced stripline, Application Specific Integrated
Circuits ("ASIC"), digital and signal processing technologies. DFD products
rapidly measure the frequency and other characteristics of radar signals. This
information is then used in electronic warfare systems to identify, classify
and/or counter radar systems. DRFM products digitize and store radar signals,
and can reproduce them in real time to counter advanced radar systems. DRFM
products are currently the only technology available that can replicate radar
signals with sufficient fidelity to counter today's advanced radar systems.
The Company also produces a wide range of standard component products for
defense applications. These products include mixers, couplers, power dividers,
pin attenuators and correlators that are utilized in a variety of electronic
warfare applications to perform various RF and microwave functions including
signal distribution, measurement and frequency conversion.
CUSTOMERS
Wireless Communications. The Company sells its custom wireless products to
major wireless infrastructure OEMs including Motorola, Nortel, Lucent and
Ericsson. In addition, the Company sells its standard line of Xinger(R)
components to leading OEMs and a broad range of other wireless equipment
manufacturers.
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<PAGE> 31
Satellite Communications. The Company currently sells satellite
communications subsystems to the world's leading satellite manufacturers,
including Lockheed Martin, Hughes, Loral Space & Communications and TRW. The
Company's subsystems are found on LEO satellite communications networks like
Motorola's Iridium program, as well as regional GEO communications satellites
for Lockheed Martin. The Company is now actively involved in developing products
for a number of major, near-term commercial satellite programs.
Defense Electronics. The Company currently sells its defense electronics
products to the United States and foreign governments through prime contractors
such as Raytheon, ITT, Lockheed Martin and Racal, Ltd. The Company's DRFMs are
being utilized in ITT Avionic's portion of the Sanders division of Lockheed
Martin's IDECM program, an RF countermeasures subsystem to be used on multiple
platforms, including Navy F/A-18s and Air Force B-1B Lancer Jet bombers. In
addition, the Defense Electronics group has teamed with Lockheed Martin in the
development of a passive emitter location subsystem. The Company has also teamed
with a large defense OEM on a new, custom ASIC converter chip for
next-generation receivers.
SALES AND MARKETING
The Company markets its products worldwide to OEMs in commercial markets
and prime contractors in defense markets primarily through a sales force of 15
people generally organized by geographic territory and market segment. In
addition, the Company has contracts with 17 manufacturers' representatives in
the United States and 24 international representatives which are located in
Western Europe, the Middle East and Asia. As part of its marketing efforts, the
Company advertises in major trade publications and attends major industry shows
in the commercial wireless communications and defense markets.
After the Company has identified key potential customers in its market
segments, the Company makes sales calls with its own sales, management and
engineering personnel and its manufacturers' representatives. Many of the
companies entering the wireless communications markets possess expertise in
digital processing, but have relatively little experience in analog signal
processing and wireless transmission. In order to promote widespread acceptance
of its products and provide customers with support for their wireless
communications needs, the Company's sales and engineering teams work closely
with its customers to develop tailored solutions to their wireless requirements.
The Company believes that its customer engineering support provides it with a
key competitive advantage.
BACKLOG
The Company's total backlog of orders was $32.8 million and $23.3 million
at June 30, 1997 and 1996, respectively. The Company's wireless products
accounted for approximately 6% and 16% of backlog at June 30, 1997 and 1996,
respectively. Satellite communications products comprised approximately 37% and
18% of backlog at June 30, 1997 and 1996, respectively. Defense Electronics
products accounted for approximately 57% and 66% of backlog at June 30, 1997 and
1996, respectively.
All of the orders included in backlog are covered by signed contracts or
purchase orders. However, backlog is not necessarily indicative of future sales,
particularly with respect to the Company's Wireless group. Accordingly, the
Company does not believe that its backlog as of any particular date is
representative of actual sales for any succeeding period. As part of the
Company's close working relationships with its major wireless communications
customers, these customers expect the Company to respond quickly to changes in
the volume and delivery schedule of their orders, and if necessary, to inventory
products at the Company's facilities for just-in-time delivery. Therefore,
although contracts with these customers typically specify aggregate dollar
volumes of products to be purchased over an extended time period, these
contracts also provide that scheduled shipment dates of particular volumes are
generally released to the Company only a few days or weeks prior to the actual
required delivery dates. In addition, the Company's customers may cancel or
defer orders without significant penalty.
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<PAGE> 32
RESEARCH AND DEVELOPMENT
The Company's research and development efforts are focused on design,
development, engineering and implementation activities. These activities include
customer-funded design and development, as well as efforts funded directly by
the Company.
The Company's net sales for fiscal 1997 included approximately $6.2 million
paid by customers for the design and development of products to meet their
specific requirements. In any given year, the amount of customer funding for
design and development can vary widely depending upon the status of particular
contracts. The Company typically is not restricted in its use of technologies
developed through customer funding.
Research and development costs are charged to expense as incurred. The
Company receives fees under a technology development contract and such fees are
recorded as a reduction of research and development costs as work is performed
pursuant to the related contract and as defined milestones are attained. In
fiscal 1997, Company funded research and development expenses were $540,000, net
of recognized product development fees of $339,000 under the contract. Prior to
fiscal 1997, the Company did not engage in technology development contracts.
Company funded research and development expenses were $939,000 in fiscal
1995 and $1.2 million in fiscal 1996 and were funded solely from the Company's
current operating budget. Company funded research and development expenditures
during the three months ended September 30, 1997 were approximately $189,000.
The Company's current development efforts include: (i) advanced MLS
manufacturing processes for use in low-cost, light-weight satellite and wireless
applications; (ii) advanced manufacturing technology to produce millimeter wave
stripline structures for communication satellite applications; (iii) products
for use in cellular, PCS and other terrestrial wireless base station equipment
for both mobile and fixed wireless applications; and (iv) technologies for
airborne receiver systems.
MANUFACTURING
The Company's manufacturing operations are vertically integrated from the
production of specialized hybrid circuits to the final assembly of complete
subsystems such as DRFMs and antenna beamforming networks. Most of the Company's
contracts for assemblies and subsystems have required engineering efforts to
modify existing Company products to meet a particular customer's technical
needs.
The Company manufactures its products from standard components, as well as
from items which are manufactured by vendors to the Company's specifications. A
majority of the Company's commercial and defense electronics assemblies and
subsystem products contain proprietary MLS technology which is designed and
tested by the Company's engineers and technicians and is manufactured at the
Company's own facilities.
The Company continues to invest in the advancement of its proprietary MLS
manufacturing processes and in automation of the manufacturing processes of its
Wireless group. Automation is critical in meeting its customers' demands for
price improvement competitiveness, world class quality and on-time delivery. The
Company is also investing to enhance its responsiveness to increased production
demands from its wireless customers, as well as the need to accommodate
unpredictable surges in production rates that are common in this market.
The raw materials utilized in the Company's various product areas are
readily accessible. The Company purchases most of its raw materials from a
variety of vendors and most of these raw materials are available from a number
of sources. The Company has one vendor from which it makes approximately 10% of
its total raw material purchases, but the Company believes that alternate
sources of supply are readily available for these and all other products
purchased.
The Company utilizes skilled permanent and contract personnel in the
manufacture of its products. Quality assurance checks are performed on
manufacturing processes, purchased items, work-in-process and
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<PAGE> 33
finished products. Due to the complexity of the Company's products, final tests
are performed on some products by highly skilled engineers and technicians.
COMPETITION
The microwave component and subsystems industry is highly competitive and
the Company competes against many companies, both foreign and domestic, many of
which are larger, have greater financial resources and are better known. As a
supplier to prime contractors and OEMs, the Company also experiences significant
competition from the in-house capabilities of its actual and prospective
customers in all three of its market segments. Other competitors include
Electromagnetic Sciences, Inc. (satellite), S.T. Microwave, Inc. (defense), the
M/A-Com division of AMP, Inc., Mini Circuits Inc. and Filtronic Comtek, Inc.
The principal competitive factors in both the domestic and foreign markets
are technical performance, reliability, ability to produce, on time delivery and
price. Based on a combination of these factors, the Company believes that it
competes favorably in its markets. The Company's most important competitive
attributes are its emphasis on technical superiority and its ability to produce
in quantity to specific delivery schedules.
GOVERNMENT REGULATION
The Company's wireless communications products are incorporated into
wireless telecommunications systems that are subject to regulation domestically
by the FCC and internationally by other government agencies. In addition,
because of its participation in the defense industry, the Company is subject to
audit from time to time for its compliance with government regulations by
various governmental agencies. The Company is also subject to a variety of
local, state and federal governmental regulations relating to, among other
things, the storage, discharge, handling, emission, generation, manufacture and
disposal of toxic or other hazardous substances used to manufacture the
Company's products. The Company believes that it operates its business in
material compliance with applicable laws and regulations. However, any failure
to comply with existing or future laws or regulations could have a material
adverse impact on the Company's business, financial condition and results of
operations. See "Risk Factors -- Government Regulation" and "-- Environmental
Regulations and Risks."
INTELLECTUAL PROPERTY
While the Company holds several patents, the Company relies primarily on a
combination of trade secret, copyright and trademark laws and employee and
third-party nondisclosure agreements to protect its intellectual property, as
well as limiting access to and distribution of proprietary information. There
can be no assurance that the steps taken by the Company to protect its
intellectual property rights will be adequate to prevent misappropriation of the
Company's technology or to preclude competitors from independently developing
such technology. Furthermore, there can be no assurance that, in the future,
third parties will not assert infringement claims against the Company or with
respect to its products for which the Company has indemnified certain of its
customers. Asserting the Company's rights or defending against third party
claims could involve substantial costs and diversion of resources, thus
materially and adversely affecting the Company's business, financial condition
and results of operations. In the event a third party were successful in a claim
that one of the Company's products infringed its proprietary rights, the Company
may have to pay substantial royalties or damages, remove that product from the
marketplace or expend substantial amounts in order to modify the product so that
it no longer infringes such proprietary rights, any of which could have a
material adverse effect on the Company's business, financial condition and
results of operations.
EMPLOYEES
As of September 30, 1997, the Company employed 232 persons full time. Of
these employees, 64 comprise the engineering staff, 134 constitute manufacturing
personnel, 15 occupy sales and marketing positions, and 19 are in management and
support functions. In addition, the Company utilizes approximately 45 temporary
personnel in various positions throughout its organization.
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<PAGE> 34
FACILITIES
The Company's principal facility is a 105,000 square foot building located
on a thirty acre parcel owned by the Company in East Syracuse, New York. The
plant was constructed during fiscal 1981 and expanded during fiscal 1985. This
facility houses all of the Company's marketing, manufacturing, administrative,
research and development, systems design and engineering experimentation
activities. The Company believes that its existing facilities are adequate to
meet its current needs and that suitable additional or alternative space will be
available on commercially reasonable terms as needed.
Anaren Microwave, Ltd., the Company's wholly-owned subsidiary in the United
Kingdom, leases a 20,000 square foot facility in Frimley, England which
previously housed the administrative, marketing, and manufacturing operations of
that subsidiary prior to the Company's divestiture of its electronic warfare
simulator manufacturing operation in March 1996. Annual rental cost of this
facility is approximately $385,000 and the Company is presently subletting the
facility at the full lease rental value. The existing lease term on this
facility extends until 2014, however, and there can be no assurance that the
Company will be able to sublet the facility during the remaining unexpired term
of the lease to an extent that is sufficient to offset its rental cost in whole
or in part.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- ------------------------------------------
<S> <C> <C>
Hugh A. Hair.............................. 62 Chairman of the Board
Carl W. Gerst, Jr......................... 60 Vice Chairman, Chief Technical Officer,
Treasurer and Director
Lawrence A. Sala.......................... 34 President, Chief Executive Officer and
Director
Gert R. Thygesen.......................... 42 Vice President of Operations
Joseph E. Porcello........................ 45 Vice President of Finance
Stanley S. Slingerland.................... 50 Vice President of Human Resources
Abraham Manber(1)......................... 68 Director
Herbert I. Corkin(1)...................... 75 Director
Dale F. Eck(1)............................ 54 Director
David Wilemon............................. 60 Director
</TABLE>
- ---------------
(1) Member of Compensation Committee and Audit Committee
Mr. Hair was a founder of the Company and has been actively engaged in its
business since its founding in 1967. Mr. Hair served as Chairman of the Board,
President and Chief Executive Officer of the Company from its founding until May
1995 when he resigned from the office of President and in September 1997 when he
resigned as Chief Executive Officer. Mr. Hair holds a Bachelor of Science degree
from the University of Glasgow, Scotland.
Mr. Gerst was a founder of the Company and has been actively engaged in the
Company's business since its founding in 1967. Mr. Gerst served as Executive
Vice President from 1967 until May 1995, when he became Chief Technical Officer
and Vice Chairman. Mr. Gerst has also served as Treasurer since 1992 and as a
Director of the Company since 1968. Mr. Gerst currently serves as a Director of
Skaneateles Savings Bank. Mr. Gerst holds a Bachelors degree from Youngstown
University and a Masters in Business Administration from Syracuse University.
Mr. Sala joined the Company in 1984. He has held various engineering and
management positions with the Company, including Vice President of Marketing.
Mr. Sala has served as President of the Company and a Director since May 1995
and as Chief Executive Officer since September 1997. Mr. Sala holds a Bachelors
Degree in Electrical Engineering, a Masters Degree in Electrical Engineering and
a Masters in Business Administration, all from Syracuse University.
Mr. Porcello joined the Company in 1977. He has served as Controller from
1981 to 1995, and as Vice President of Finance and Controller since May 1995.
Mr. Porcello holds a Bachelors degree from the State University of New York at
Buffalo and is a Certified Public Accountant licensed in the State of New York.
Mr. Thygesen joined the Company in 1981. He served as Program Manager, DRFM
& Advanced Systems, from 1988 to 1992, as Operations Manager from 1992 until
1995, and has served as Vice President of Operations since April 1995. Mr.
Thygesen holds a Masters in Electrical Engineering from Aalborg University
Center, Denmark.
Mr. Slingerland joined the Company in 1980 and served as Human Resource
Manager until 1996. Since November 1996, he has served as Vice President of
Human Resources. Mr. Slingerland holds a Bachelors degree from Hope College.
Mr. Manber has served as a Director of the Company since 1971. He was
President of Amtech Patent Licensing Corp., a privately-held corporation created
to license certain patents, from 1979 until his retirement
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<PAGE> 36
in March 1993. Mr. Manber has served as President of Ad Connect, an advertising
and promotional imprint firm, since July 1997. Mr. Manber holds a degree from
the College of the City of New York.
Mr. Corkin has served as a Director of the Company since 1989. Mr. Corkin
has been Chairman of the Board of The Entwhistle Company, a defense contractor
located in Hudson, Massachusetts providing mobile equipment directly to the
United States government, since 1959. Mr. Corkin served as the President of The
Entwhistle Company from 1959 through December 1993 and has served as its Chief
Executive Officer since December 1993. Mr. Corkin is also a Director of Bird
Corporation, a roofing shingle manufacturer located in Norwood, Massachusetts.
Mr. Eck was Vice President of Finance and Treasurer of The Entwhistle
Company from 1978 until his retirement in February 1997. Mr. Eck has also served
as a Director of The Entwhistle Company since 1978, and continues to serve in
that capacity. Mr. Eck has provided consulting services to the Company since
March 1997. Mr. Eck holds a Bachelors degree from Augustana College and a
Masters in Business Administration from Harvard Business School.
Dr. Wilemon was elected as a Director of the Company at the annual meeting
of stockholders held on November 10, 1997. Dr. Wilemon has been a Professor of
Marketing and Innovation Management at the Syracuse University -- School of
Management since 1966. He has also served as Director of the Snyder Innovation
Management Program at the University since 1980, and as Co-Director of the
Entrepreneurship and Emerging Enterprises Program at Syracuse University since
1993. Dr. Wilemon has also been a frequent speaker at the University of
Wisconsin -- College of Engineering Professional Development since 1978.
Members of the Company's Board of Directors are each elected for one year
terms at the annual stockholders' meeting. Officers are elected at the first
Board of Directors meeting following the stockholders' meeting at which
Directors are elected, and serve at the discretion of the Board of Directors.
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<PAGE> 37
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 12,000,000 shares
of Common Stock, par value $0.01 per share (the "Common Stock"). As of September
30, 1997, there were 4,233,442 shares of Common Stock outstanding held of
record, with approximately 610 stockholders of record.
Holders of Common Stock are entitled to one vote per share on all matters
to be voted upon by the stockholders of the Company. The holders of Common Stock
are entitled to a ratable distribution of any dividends that may be declared by
the Board of Directors out of funds legally available therefor. In the event of
a liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining after payment of
liabilities. The Common Stock has no preemptive, redemption or conversion
rights. The outstanding shares of Common Stock are, and the shares offered by
the Company in the offering, when issued and paid for, will be, fully paid and
nonassessable.
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<PAGE> 38
PRINCIPAL AND SELLING STOCKHOLDERS
The following sets forth certain information with respect to beneficial
ownership of the Common Stock as of September 30, 1997 and as adjusted to
reflect the sale of the Common Stock offered hereby, by: (i) each of the
Company's Directors and executive officers; (ii) all Directors and executive
officers as a group; (iii) each person who is known by the Company to own
beneficially more than 5% of the Common Stock; and (iv) the Selling
Stockholders:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(1) NUMBER OF OFFERING(1)
---------------------- SHARES -------------------
DIRECTORS AND EXECUTIVE OFFICERS NUMBER PERCENT OFFERED NUMBER PERCENT
- ---------------------------------------- --------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
Hugh A. Hair(2)......................... 207,100 4.81 80,000 127,100 2.39
Carl W. Gerst. Jr.(3)................... 359,931 8.35 25,000 334,931 6.31
Lawrence A. Sala(4)..................... 43,200 1.01 14,000 29,200 *
Abraham Manber.......................... -- -- -- -- --
Dale F. Eck(5).......................... 10,000 * -0- 10,000 *
Herbert I. Corkin(6).................... 7,500 * -0- 7,500 *
Gert R. Thygesen(7)..................... 35,500 * 15,000 20,500 *
Joseph E. Porcello(8)................... 24,490 * 9,000 15,490 *
Stanley S. Slingerland(9)............... 41,559 1.00 7,000 34,559 *
David Wilemon(10)....................... 9,000 * -0- 9,000 *
All directors and executive officers
as a group (10 persons)(11)........... 738,280(10) 16.46 150,000 588,280 10.72
5% STOCKHOLDERS
Global Securities, Inc.(12) ............ 1,307,800 30.89 500,000 807,800 15.44
Dimensional Fund Advisors, Inc.(13) .... 239,100 5.65 -- 239,100 4.57
OTHER SELLING STOCKHOLDER
Renee A. Hair(14)....................... 207,100 4.81 80,000 127,100 2.39
</TABLE>
- ---------------
* Indicates less than one percent of the outstanding shares of Common Stock.
(1) Except as otherwise indicated, as of September 30, 1997, all of such shares
are owned with sole voting and investment power.
(2) The number of Shares Beneficially Owned Prior to Offering includes 75,000
shares which Mr. Hair has the right to acquire within 60 days after
September 30, 1997 pursuant to outstanding stock options and 82,300 shares
owned by Mr. Hair's wife, Renee A. Hair. The Number of Shares Offered
includes 40,000 shares to be offered by Mrs. Hair. The number of Shares
Beneficially Owned After Offering includes 42,300 shares to be owned by
Mrs. Hair after the offering.
(3) Includes 54,331 shares held in trust for, or owned by, Mr. Gerst's family
and relatives and includes 75,000 shares which Mr. Gerst has the right to
acquire within 60 days after September 30, 1997 pursuant to outstanding
stock options. Mr. Gerst's address is c/o Anaren Microwave, Inc., 6635
Kirkville Road, East Syracuse, New York 13057.
(4) Includes 28,000 shares which Mr. Sala has the right to acquire within 60
days after September 30, 1997 pursuant to outstanding stock options, and
15,200 shares (including the 14,000 to be offered hereby) held jointly with
his wife, Tracy C. Sala.
(5) Includes 10,000 shares which Mr. Eck has the right to acquire within 60
days after September 30, 1997 pursuant to outstanding stock options.
(6) Does not include 1,307,800 shares owned by Global Securities, Inc.
("Global"), as to which Mr. Corkin, the owner of 24% of the capital stock
of Global, disclaims beneficial ownership.
(7) Includes 20,500 shares which Mr. Thygesen has the right to acquire within
60 days after September 30, 1997 pursuant to outstanding stock options.
(8) Includes 21,500 shares which Mr. Porcello has the right to acquire within
60 days after September 30, 1997 pursuant to outstanding stock options.
(9) Includes 14,000 shares which Mr. Slingerland has the right to acquire
within 60 days after September 30, 1997 pursuant to outstanding stock
options. Mr. Slingerland owns 11,559 shares in his own name and 16,000
(including the 7,000 shares to be offered hereby) jointly with his wife,
Kathleen M. Slingerland.
(10) Includes 9,000 shares which Dr. Wilemon has the right to acquire within 60
days after September 30, 1997 pursuant to outstanding stock options.
(11) Includes 253,000 shares which all directors and officers as a group have
the right to acquire within 60 days after September 30, 1997 pursuant to
outstanding stock options.
(12) Global's address is P.O. Box 560, Sudbury, Massachusetts 01776. If the
over-allotment option granted by Global to the Underwriters is exercised,
Global will sell 575,000 shares of Common Stock in this Offering and will
then own 13.56% of the outstanding Common Stock (assuming the Underwriters'
over-allotment options are exercised in full). See "Underwriting."
(13) Dimensional Fund Advisors, Inc.'s address is 1299 Ocean Avenue, Santa
Monica, California 90401.
(14) The number of Shares Beneficially Owned Prior to Offering includes 49,800
shares owned by Hugh A. Hair and 75,000 shares that Mr. Hair has the right
to acquire within 60 days of September 30, 1997 pursuant to outstanding
stock options. The Number of Shares Offered includes 40,000 shares to be
offered by Mr. Hair. The Number of Shares Beneficially Owned After Offering
includes 84,800 shares to be beneficially owned by Mr. Hair after the
offering.
37
<PAGE> 39
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have outstanding
5,233,442 shares of Common Stock. Of these shares, the 1,650,000 shares sold in
this offering (plus any shares issued upon exercise of the Underwriters'
over-allotment option) will be freely tradeable without restriction under the
Securities Act, unless purchased by "affiliates" of the Company as that term is
defined in Rule 144 under the Securities Act. Of the remaining 3,583,442 shares,
holders of 1,143,080 shares, including all executive officers and directors and
Global Securities, Inc., have entered into contractual "lock-up" agreements
generally providing that they will not, directly or indirectly, sell, offer,
contract to sell, make any short sale, pledge or otherwise dispose of any shares
of Common Stock or any securities convertible into or exchangeable or
exercisable for or any other rights to purchase Common Stock for a period of 90
days after the effective date of this offering without the prior written consent
of CIBC Oppenheimer Corp. The remaining 2,440,362 shares outstanding prior to
this offering that are not subject to lockup agreements and are not held by the
affiliates of the Company may be freely sold after the offering. In addition,
the Company has filed registration statements under the Securities Act covering
the sale of up to an aggregate of 718,400 shares of Common Stock issuable under
the Company's Incentive Stock Option Plans. Pursuant to Rule 144, affiliates may
not sell in any three-month period a number of shares exceeding the greater of:
(i) one percent of the number of shares of Common Stock then outstanding (which
will equal approximately 52,334 shares immediately after this offering); or (ii)
the average weekly trading volume of the Common Stock during the four calendar
weeks preceding the filing of a Form 144 with respect to such sale.
No predictions can be made as to the effect, if any, that market sales of
shares of Common Stock will have on the market price of the Common Stock
prevailing from time to time. Nevertheless, sales of significant numbers of
shares of the Common Stock in the public market could adversely affect the
market price of the Common Stock, and could impair the Company's future ability
to raise capital through an offering of its equity securities.
38
<PAGE> 40
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") among the Company, the Selling Stockholders and
CIBC Oppenheimer Corp., Needham & Company, Inc., and Pacific Growth Equities,
Inc., as Representatives (the "Representatives") of the Underwriters of this
offering, the Company and the Selling Stockholders have agreed to sell to the
Underwriters, and the Underwriters named below have severally agreed to purchase
from the Company and the Selling Stockholders, the number of shares of Common
Stock set forth opposite their names below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
------------------------------------------------------------------ ---------
<S> <C>
CIBC Oppenheimer Corp. ...........................................
Needham & Company, Inc. ..........................................
Pacific Growth Equities, Inc. ....................................
---------
Total................................................... 1,650,000
=========
</TABLE>
The Underwriters propose to offer the shares of Common Stock directly to
the public at the offering price set forth on the cover page of this Prospectus
and at such price less a concession of not in excess of $ per share to
certain securities dealers, of which a concession of not in excess of $ per
share may be reallowed to certain other securities dealers. After this offering,
the public offering price, allowances, concessions and other selling terms may
be changed by the Representatives.
The Underwriting Agreement provides that the obligations of the
Underwriters to purchase Common Stock are subject to certain conditions,
including that if any of the Common Stock is purchased by the Underwriters
pursuant to the Underwriting Agreement, all such shares must be so purchased.
The Company and Global Securities, Inc. have granted options to the
Underwriters, exercisable within 30 days after the date of this Prospectus, to
purchase from the Company and Global Securities, Inc. up to an aggregate of
172,500 and 75,000 additional shares of Common Stock, respectively, to cover
over-allotments, if any, at the public offering price less the underwriting
discount set forth on the cover page of this Prospectus. If the Underwriters
exercise their over-allotment options to purchase any of such 247,500 additional
shares of Common Stock, the Underwriters have severally agreed, subject to
certain conditions, to purchase approximately the same percentage thereof as the
number of shares to be purchased by each of them bears to the 1,650,000 shares
of Common Stock offered hereby. The Company and Global Securities, Inc. will be
obligated to sell shares of Common Stock to the Underwriters to the extent such
over-allotment options are exercised.
Certain of the Company's officers, directors and significant stockholders
have agreed that they will not, without the prior written consent of CIBC
Oppenheimer Corp., offer, sell, contract to sell, make any short sale, pledge or
otherwise dispose of any shares of Common Stock or securities convertible into
or exchangeable or exercisable for or any other rights to purchase Common Stock
until 90 days after the effective date of this offering. The Company has also
agreed that it will not, without the consent of CIBC Oppenheimer Corp., offer,
sell, contract to sell, make any short sale, pledge or otherwise dispose of any
shares of Common Stock or securities convertible into or exchangeable or
exercisable for or other rights to purchase Common Stock until 90 days after the
effective date of this offering (except for (i) shares issued pursuant to stock
options outstanding on the date hereof and (ii) stock options issued pursuant to
employee benefit or incentive compensation plans in effect on the date hereof).
39
<PAGE> 41
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act, and to contribute to certain payments that the Underwriters
may be required to make in respect thereof.
The Representatives do not intend to confirm sales of the Common Stock to
any account over which they exercise discretionary authority.
In connection with this offering, the Representatives, the several
Underwriters, and the selling group members (if any) or their respective
affiliates intend to engage in passive market making transactions in the Common
Stock of the Company on the Nasdaq National Market in accordance with Rule 103
under Regulation M during the two business day period before commencement of
offers or sales of the shares of Common Stock offered hereby. The passive market
making transactions must be identified as such and comply with applicable volume
and price limits. In general, a passive market maker may display its bid at a
price not in excess of the highest independent bid for security, if all
independent bids are lowered below the passive market makers bid; however, such
bid must then be lowered when certain purchase limits are exceeded.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Bond, Schoeneck & King, LLP, Syracuse, New York. Certain legal
matters relating to the offering will be passed upon for the Underwriters by
Hale and Dorr LLP, Boston, Massachusetts.
EXPERTS
The consolidated financial statements of the Company as of June 30, 1996
and 1997, and for each of the years in the three year period ended June 30,
1997, have been included in this Prospectus and Registration Statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents are incorporated in this Prospectus by reference:
(i) The Company's Annual Report on Form 10-K for the year ended June
30, 1997;
(ii) The Company's Quarterly Report on Form 10-Q for the three months
ended September 30, 1997;
(iii) Schedule 14A information filed by the Company with respect to
its 1997 annual stockholders meeting; and
(iv) All other reports filed by the Company pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), since June 30, 1997.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide, without charge and upon oral or written request,
to each person to whom this Prospectus is delivered, a copy of any or all of the
documents that have been incorporated by reference in this Prospectus (other
than exhibits to such documents). Requests for such documents should be directed
to Anaren Microwave, Inc., 6635 Kirkville Road, East Syracuse, New York 13057,
Attention: David M. Ferrara, Corporate Secretary, (315) 432-8909.
40
<PAGE> 42
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act. In accordance therewith, the Company files proxy statements, annual reports
and other information with the United States Securities and Exchange Commission
(the "Commission"). Such material concerning the Company is available for
inspection and copying at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices located at 7 World Trade Center, Suite 1300, New
York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material also can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. Such material may also be accessed electronically by means of
the Commission's home page on the Internet at http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1993, as amended, with respect to the Common
Stock offered hereby. This Prospectus does not contain all the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is hereby made to the Registration Statement.
41
<PAGE> 43
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors......................................................... F-2
Consolidated Balance Sheets as of June 30, 1996 and 1997 (audited) and as of September
30, 1997 (unaudited)................................................................. F-3
Consolidated Statements of Operations for the years ended July 1, 1995, June 30, 1996
and June 30, 1997 (audited) and for the three months ended September 30, 1996 and
1997 (unaudited)..................................................................... F-4
Consolidated Statements of Stockholders' Equity for the years ended July 1, 1995, June
30, 1996 and June 30, 1997 (audited) and for the three months ended September 30,
1997 (unaudited)..................................................................... F-5
Consolidated Statements of Cash Flows for the years ended July 1, 1995, June 30, 1996
and June 30, 1997 (audited) and for the three months ended September 30, 1996 and
1997 (unaudited)..................................................................... F-6
Notes to Consolidated Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE> 44
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Anaren Microwave, Inc.:
We have audited the accompanying consolidated balance sheets of Anaren
Microwave, Inc. and subsidiaries as of June 30, 1996 and 1997, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three year period ended June 30, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Anaren Microwave,
Inc. and subsidiaries as of June 30, 1996 and 1997, and the results of their
operations and their cash flows for each of the years in the three year period
ended June 30, 1997, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Syracuse, New York
August 14, 1997
F-2
<PAGE> 45
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30,
------------------- SEPTEMBER 30,
1996 1997 1997
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ 1,740 $ 3,807 $ 3,998
Receivables, less allowance for bad debts of $13 in 1996
and 1997 and at September 30, 1997 (Unaudited)........ 5,168 6,717 6,880
Refundable income taxes.................................. 321 -- --
Inventories (Note 2)..................................... 7,210 7,736 8,924
Prepaid expenses......................................... 256 197 278
Deferred income taxes (Note 9)........................... -- 532 394
------ ------ ------
Total current assets............................. 14,695 18,989 20,474
Net property, plant and equipment (Note 3)................. 7,055 6,969 7,034
Other assets, net.......................................... 44 15 13
------ ------ ------
$21,794 $25,973 $27,521
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt (Note 5).......... $ 395 $ 229 $ 227
Accounts payable......................................... 664 1,501 2,013
Income taxes payable..................................... -- 494 281
Accrued expenses (Note 4)................................ 472 719 894
Customer advance payments................................ 250 1,004 1,019
------ ------ ------
Total current liabilities........................ 1,781 3,947 4,434
Postretirement benefit obligation (Note 8)................. 1,138 1,181 1,181
Long-term debt, less current installments (Note 5)......... 680 453 453
Deferred income taxes (Note 9)............................. -- 65 22
------ ------ ------
Commitments and concentrations (Note 11 and Note 12)
Total liabilities................................ 3,599 5,646 6,090
------ ------ ------
Stockholders' equity:
Common stock of $0.01 par value. Authorized 12,000,000
shares; issued 4,992,116 and 5,012,116 shares in 1996
and 1997, respectively, and 5,125,716 shares at
September 30, 1997 (Unaudited)........................ 50 50 51
Additional paid-in capital............................... 15,507 15,584 15,927
Retained earnings........................................ 4,650 6,705 7,465
------ ------ ------
20,207 22,339 23,443
Less cost of 892,274 treasury shares in 1996 and 1997 and
at September 30, 1997 (Unaudited)..................... 2,012 2,012 2,012
------ ------ ------
Total stockholders' equity....................... 18,195 20,327 21,431
------ ------ ------
$21,794 $25,973 $27,521
====== ====== ======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE> 46
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED JUNE THREE MONTHS ENDED
30, SEPTEMBER 30,
YEAR ENDED ------------------- ----------------------
JULY 1, 1995 1996 1997 1996 1997
------------ ------- ------- ----------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales............................... $ 17,996 $17,082 $24,227 $ 5,066 $7,721
Cost of sales........................... 13,081 11,147 16,243 3,572 4,853
Provision for losses on contracts....... 300 -- -- -- --
------ ------ ------ ----- -----
Gross profit............................ 4,615 5,935 7,984 1,494 2,868
------ ------ ------ ----- -----
Operating expenses:
Marketing............................. 3,028 2,970 3,170 668 940
Research and development.............. 939 1,185 540 109 189
General and administrative............ 2,041 2,075 2,239 504 641
Restructuring (Note 10)............... 360 810 -- -- --
------ ------ ------ ----- -----
Total operating expenses...... 6,368 7,040 5,949 1,281 1,770
------ ------ ------ ----- -----
Operating income (loss)................. (1,753) (1,105) 2,035 213 1,098
------ ------ ------ ----- -----
Other income (expense):
Interest expense...................... (213) (123) (94) (22) (25)
Other, primarily interest income...... 164 148 114 19 62
------ ------ ------ ----- -----
Total other income
(expense)................... (49) 25 20 (3) 37
------ ------ ------ ----- -----
Income (loss) before income taxes....... (1,802) (1,080) 2,055 210 1,135
Income taxes (Note 9)................... (330) -- -- -- 375
------ ------ ------ ----- -----
Net income (loss)....................... $ (1,472) $(1,080) $ 2,055 $ 210 $ 760
====== ====== ====== ===== =====
Net income (loss) per common and common
equivalent share:
Primary............................ $ (0.36) $ (0.27) $ 0.50 $ 0.05 $ 0.17
====== ====== ====== ===== =====
Assuming full dilution............. $ (0.36) $ (0.27) $ 0.46 $ 0.05 $ 0.17
====== ====== ====== ===== =====
Shares used in computing net income
(loss) per common and common
equivalent share:
Primary............................ 4,047 4,057 4,106 4,103 4,504
Assuming full dilution............. 4,047 4,057 4,440 4,103 4,524
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 47
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK TOTAL
------------------ PAID-IN RETAINED ----------------- STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT EQUITY
---------- ------ ---------- -------- -------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at July 2, 1994............... 4,824,216 $ 48 $ 14,982 $ 7,202 399,974 $ (553) $21,679
Net loss............................ -- -- -- (1,472) -- -- (1,472)
Stock options exercised (Note 6).... 25,800 1 75 -- -- -- 76
Purchase of treasury shares......... -- -- -- -- 492,300 (1,459) (1,459)
--------- --- ------- ------- ------- ------- -------
Balance at July 1, 1995............... 4,850,016 49 15,057 5,730 892,274 (2,012) 18,824
Net loss............................ -- -- -- (1,080) -- -- (1,080)
Stock options exercised (Note 6).... 142,100 1 450 -- -- -- 451
--------- --- ------- ------- ------- ------- -------
Balance at June 30, 1996.............. 4,992,116 50 15,507 4,650 892,274 (2,012) 18,195
Net income.......................... -- -- -- 2,055 -- -- 2,055
Stock options exercised (Note 6).... 20,000 -- 77 -- -- -- 77
--------- --- ------- ------- ------- ------- -------
Balance at June 30, 1997.............. 5,012,116 50 15,584 6,705 892,274 (2,012) 20,327
Net income (Unaudited).............. -- -- -- 760 -- -- 760
Stock options exercised (Unaudited)
(Note 6)......................... 113,600 1 343 -- -- -- 344
--------- --- ------- ------- ------- ------- -------
Balance at September 30, 1997
(Unaudited)......................... 5,125,716 $ 51 $ 15,927 $ 7,465 892,274 $(2,012) $21,431
========= === ======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE> 48
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED JUNE THREE MONTHS ENDED
30, SEPTEMBER 30,
YEAR ENDED ------------------ --------------------------
JULY 1, 1995 1996 1997 1996 1997
------------ ------- ------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................... $ (1,472) $(1,080) $ 2,055 $ 210 $ 760
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization... 1,722 1,565 1,240 320 313
Deferred income taxes........... -- -- (467) -- 95
Net loss on disposition of
Anaren Microwave, Ltd. net
assets....................... -- 810 -- -- --
Changes in operating assets and
liabilities, exclusive of
disposition of Anaren
Microwave, Ltd. net assets:
Provision for losses on
contracts............... (982) (588) -- -- --
Receivables................ 948 945 (1,549) (953) (163)
Refundable income taxes.... (229) 9 321 321 --
Inventories................ 1,870 (748) (526) 222 (1,188)
Prepaid expenses........... 56 (21) 59 (42) (81)
Other assets............... 89 34 29 3 2
Accounts payable........... 169 (41) 837 344 512
Income taxes payable....... -- -- 494 -- (213)
Accrued expenses........... 119 (219) 247 68 175
Customer advance
payments................ -- 250 754 124 15
Postretirement benefit
obligation.............. 62 62 43 -- --
------- ------- ------- ----- ------
Net cash provided by
operating activities.... 2,352 978 3,537 617 227
------- ------- ------- ----- ------
Cash flows from investing activities:
Capital expenditures................. (1,297) (1,139) (1,154) (215) (378)
------- ------- ------- ----- ------
Net cash used in investing
activities.............. (1,297) (1,139) (1,154) (215) (378)
------- ------- ------- ----- ------
Cash flows from financing activities:
Proceeds from long-term debt......... -- -- 907 -- --
Principal payments on long-term
debt.............................. (726) (690) (1,300) (97) (2)
Net repayments under revolving line
of credit......................... (363) -- -- -- --
Proceedings from issuance of common
stock............................. 76 451 77 6 344
Purchase of treasury stock........... (1,459) -- -- -- --
------- ------- ------- ----- ------
Net cash provided by (used
in) financing
activities.............. (2,472) (239) (316) (91) 342
------- ------- ------- ----- ------
Net increase (decrease) in cash and
cash equivalents..................... (1,417) (400) 2,067 311 191
Cash and cash equivalents at beginning
of year.............................. 3,557 2,140 1,740 1,740 3,807
------- ------- ------- ----- ------
Cash and cash equivalents at end of
year................................. $ 2,140 $ 1,740 $ 3,807 $ 2,051 $ 3,998
======= ======= ======= ===== ======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE> 49
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation
The consolidated financial statements include the accounts of Anaren
Microwave, Inc. and its wholly-owned subsidiaries ("the Company"). All
significant intercompany balances and transactions have been eliminated in
consolidation. In fiscal 1996, the Company changed its financial reporting
period to a calendar month end.
(b) Operations
The Company is engaged in the design, development and manufacture of
microwave signal processing devices which receive and analyze radar signals and
other microwave transmissions. Its primary products include devices and systems
used in the wireless communications market, the satellite communications market,
and defense electronics market.
Anaren Microwave, Ltd., a wholly-owned subsidiary, is incorporated in
England. As discussed in note 10, during fiscal 1996, the Company disposed of
substantially all of the net assets of Anaren Microwave, Ltd. and discontinued
its manufacturing operations. Currently, the Company continues to maintain its
marketing function in England to serve the European marketplace.
(c) Sales Recognition
The Company recognizes sales at the time products are shipped to its
customers. Provisions for estimated losses on uncompleted contracts are made in
the period in which such losses are determined.
(d) Cash Equivalents
Cash equivalents of $1.4 million and $3.8 million at June 30, 1996 and
1997, respectively, consist of certificates of deposit and money market
instruments having maturities of three months or less. Cash equivalents are
stated at cost which approximates fair value.
(e) Inventories
Inventories are stated at the lower of cost or market, cost being
determined on a first-in, first-out basis.
(f) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation of land
improvements and buildings is calculated by the straight-line method over an
estimated service life of 25 years. Machinery and equipment are depreciated
primarily by the straight-line method based on estimated useful lives of five to
ten years.
(g) Net Income Per Share
Net income per common and common equivalent share are computed using the
weighted average number of shares outstanding adjusted for the incremental
shares attributed to outstanding options to purchase common stock pursuant to
the treasury stock method, unless the results would be anti-dilutive or not
material. Common equivalent shares consist of outstanding stock options.
(h) Pension Plan
The projected unit credit method is utilized for measuring net periodic
pension costs over the employees' service life. Contributions are intended to
provide not only for benefits attributed to service to date but also for
F-7
<PAGE> 50
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
those expected to be earned in the future, and such contributions meet the
minimum funding requirements set forth in the Employee Retirement Income
Security Act of 1974.
(i) Research and Development Costs
Research and development costs are charged to expense as incurred. The
Company receives fees under a technology development contract and such fees are
recorded as a reduction of research and development costs as work is performed
pursuant to the related contract and as defined milestones are attained. In
fiscal 1997, the Company recognized product development fees of $339,000 under
the contract, which were netted with research and development costs. Prior to
fiscal 1997, the Company did not engage in technology development contracts.
(j) Income Taxes
The Company utilizes the asset and liability method of accounting for
income taxes. Under this method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates.
(k) Financial Instruments
The Company's financial instruments, which include cash and cash
equivalents, accounts receivable, accounts payable, and long-term debt, are
stated at cost which approximates their fair values at June 30, 1996 and 1997.
(l) Stock-based Compensation
The Company adopted Statement of Financial Accounting Standard No. 123,
Accounting for Stock-based Compensation (Statement 123), beginning with the
Company's first quarter of fiscal 1997. Upon adoption of Statement 123, the
Company continued to measure compensation expense for its stock-based employee
compensation plans using the intrinsic value method prescribed by APB No. 25,
Accounting for Stock Issued to Employees, and has provided pro forma disclosures
of the effect on net income and earnings per share as if the fair value-based
method prescribed by Statement 123 has been applied in measuring compensation
expense.
(m) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of certain assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of sales and expenses during the reporting
period. Actual results could differ from those estimates.
(n) Interim Results (Unaudited)
The accompanying consolidated balance sheet at September 30, 1997 and the
related consolidated statements of operations and cash flows for the three
months ended September 30, 1996 and 1997, and the statement of stockholders'
equity for the three months ended September 30, 1997 are unaudited. In the
opinion of management, these consolidated statements have been prepared on the
same basis as the audited consolidated financial statements and include all
adjustments, consisting only of normal recurring adjustments,
F-8
<PAGE> 51
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
necessary for the fair statement of results of the interim periods. The data
disclosed in these notes to the consolidated financial statements at such dates
and for such periods are also unaudited.
(o) Recent Pronouncements
Statement of Financial Accounting Standard No. 128, Earnings Per Share
(Statement 128), was issued in February 1997. Statement 128 specifies the
computation, presentation, and disclosure requirements for earnings per share.
Adoption of Statement 128 will be required for the Company beginning in the
second quarter of fiscal 1998. Adoption of Statement 128 is not expected to have
a material effect on the Company's operating results.
Statement of Financial Accounting Standard No. 131, Disclosures About
Segments of an Enterprise and Related Information (Statement 131) was issued in
1997. Statement 131 establishes standards for the reporting of information about
operating segments and related disclosures about products and services,
geographic areas, and major customers. Adoption of Statement 131 will be
required in fiscal 1999 and require interim disclosures beginning in fiscal
2000. Adoption of Statement 131 is not expected to have a material effect on the
Company's financial statement disclosures.
(p) Reclassifications
Certain 1995 and 1996 amounts have been reclassified to conform with the
1997 presentation.
NOTE 2: INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
JUNE 30,
----------------- SEPTEMBER 30,
1996 1997 1997
------ ------ -------------
<S> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Raw materials........................................ $3,028 $3,685 $ 3,720
Work-in-process...................................... 3,031 3,072 4,084
Finished goods....................................... 1,151 979 1,120
------ ------ ------
$7,210 $7,736 $ 8,924
====== ====== ======
</TABLE>
NOTE 3: PROPERTY, PLANT & EQUIPMENT
Components of property, plant and equipment are as follows:
<TABLE>
<CAPTION>
JUNE 30,
------------------- SEPTEMBER 30,
1996 1997 1997
------- ------- -------------
<S> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Land and land improvements......................... $ 1,362 $ 1,362 $ 1,362
Buildings.......................................... 5,120 5,129 5,129
Machinery and equipment............................ 22,444 23,589 23,967
------- ------- -------
28,926 30,080 30,458
Less accumulated depreciation and amortization..... 21,871 23,111 23,424
------- ------- -------
$ 7,055 $ 6,969 $ 7,034
======= ======= =======
</TABLE>
F-9
<PAGE> 52
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 4: ACCRUED EXPENSES
Accrued expenses are summarized as follows:
<TABLE>
<CAPTION>
JUNE 30,
------------- SEPTEMBER 30,
1996 1997 1997
---- ---- -------------
<S> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Compensation............................................ $169 $313 $ 420
Commissions............................................. 180 242 273
Other................................................... 123 164 202
---- ---- ----
$472 $719 $ 895
==== ==== ====
</TABLE>
NOTE 5: LONG-TERM DEBT
Long-term debt is comprised as follows:
<TABLE>
<CAPTION>
JUNE 30,
--------------- SEPTEMBER 30,
1996 1997 1997
------ ---- -------------
<S> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Industrial Development Revenue
Bonds............................................... $ 907 $ -- $ --
Term loan............................................. -- 680 680
Capitalized lease obligation.......................... 168 2 --
------ ---- ----
1,075 682 680
Less current installments............................. 395 229 227
------ ---- ----
$ 680 $453 $ 453
====== ==== ====
</TABLE>
In August 1985, Onondaga County Industrial Development Agency (OCIDA)
issued revenue bonds bearing interest at 75% of the prime rate in the amount of
$3.4 million. The proceeds from the bonds were used to construct additions to
the Company's manufacturing facility and for the purchase of additional land and
equipment. The related lease agreement, which matured on May l, 2000, required
semi-annual principal payments of $113,000, plus interest. In October 1996, the
bonds were extinguished with the proceeds of the term loan described below.
In October 1996, the Company entered into an agreement for a credit
facility providing for (i) a $3.0 million working capital revolving line of
credit bearing interest at prime plus 1% (9.5% at June 30, 1997), maturing on
November 30, 1998, and (ii) a $907,000 term loan payable in semi-annual
installments of $113,000 through May 1, 2000, bearing interest at prime plus
1.25% (9.75% at June 30, 1997). The proceeds of the term loan were used to
refinance the OCIDA revenue bonds. Borrowings under the credit facility are
secured by substantially all assets of the Company.
The terms of the credit facility require maintenance of a minimum tangible
net worth, ratio of cash flow to current maturities, and leverage ratio, as
defined in the respective agreement. The Company was in compliance with all
restrictions and covenants at June 30, 1997.
Maturities of long-term debt at June 30, 1997 are $229,000 in 1998; and
$227,000 in each of 1999 and 2000.
Cash payments for interest were $187,000, $111,000 and $92,000 during
fiscal 1995, 1996 and 1997, respectively.
F-10
<PAGE> 53
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6: STOCK OPTION PLANS
Under the Company's 1988 Incentive Stock Option Plan (1988 ISO), 1,000,000
shares of common stock were reserved for the granting of options to officers and
key employees. Options were granted at the fair market value of shares at the
date of grant, become exercisable 20% at the date of grant and 20% per year
thereafter, and must be exercised within ten years of the date of grant. No
shares are available for grant under the 1988 plan as of June 30, 1997.
During fiscal 1996, an Incentive Stock Option Plan (1996 ISO) was approved,
under which 400,000 shares of common stock were reserved for issuance to
eligible employees. Options are granted at a price not less than fair market
value of shares at the date of grant, become exercisable 20% twelve months from
the date of grant and 20% per year thereafter, and must be exercised within 10
years of the date of grant.
The Company also has a Non-Statutory Stock Option Plan (NSO) which allows
for the granting of options to Board members and nonemployees. Under the Plan,
100,000 shares of common stock were reserved for the granting of options at
prices to be determined by the Board (options granted to Board members may not
be less than the fair market value on the date of grant). Options become
exercisable immediately and must be exercised within five years of the date of
grant.
F-11
<PAGE> 54
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Information for the three years ended June 30, 1997 and the three months
ended September 30, 1997 (unaudited) with respect to these plans are as follows:
<TABLE>
<CAPTION>
SHARES
--------------------------------- WEIGHTED AVERAGE
ISO NSO TOTAL EXERCISE PRICE EXERCISE PRICE
-------- ------- -------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
Outstanding at July 2,
1994....................... 621,550 82,500 704,050 $1.38 to $6.88 $ 3.78
Issued..................... 100,000 -- 100,000 $4.13 $ 4.13
Canceled................... (25,930) (7,500) (33,430) $1.38 to $6.88 $ 4.70
Exercised.................. (10,800) (15,000) (25,800) $1.38 to $4.13 $ 2.97
-------- ------- --------
Outstanding at July 1,
1995....................... 684,820 60,000 744,820 $1.38 to $6.88 $ 3.81
Issued..................... 68,000 -- 68,000 $6.50 to $7.50 $ 7.43
Canceled................... (30,000) -- (30,000) $1.38 to $6.88 $ 4.90
Exercised.................. (82,100) (60,000) (142,100) $1.38 to $6.88 $ 3.19
Expired.................... (12,850) -- (12,850) $6.00 $ 6.00
-------- ------- --------
Outstanding at June 30,
1996....................... 627,870 -- 627,870 $1.38 to $7.50 $ 4.25
Issued..................... 95,000 10,000 105,000 $6.50 to $8.25 $ 6.95
Exercised.................. (20,000) -- (20,000) $1.38 to $7.50 $ 2.97
Expired.................... (31,870) -- (31,870) $6.88 $ 6.88
-------- ------- --------
Outstanding at June 30,
1997....................... 671,000 10,000 681,000 $1.38 to $8.25 $ 4.58
Exercised (Unaudited)...... (113,600) -- (113,600) $1.38 to $7.50 $ 3.02
-------- ------- --------
Outstanding at September 30,
1997 (Unaudited)........... 557,400 10,000 567,400 $1.38 to $8.25 $ 5.22
======== ======= ========
Shares exercisable at June
30, 1997................... 461,600 10,000 471,600 $1.38 to $8.25 $ 3.86
======== ======= ========
Shares exercisable at
September 30, 1997
(Unaudited)................ 348,000 10,000 358,000 $1.38 to $8.25 $ 4.44
======== ======= ========
Shares available for grant at
June 30, 1997 and September
30, 1997 (Unaudited)....... 137,000 14,000 151,000
======== ======= ========
</TABLE>
The following table summarizes significant ranges of outstanding and
exercisable options at June 30, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------------------------- OPTIONS EXERCISABLE
RANGE OF WEIGHTED AVERAGE ----------------------------
EXERCISE REMAINING WEIGHTED AVERAGE WEIGHTED AVERAGE
PRICES SHARES LIFE IN YEARS EXERCISE PRICE SHARES EXERCISE PRICE
- -------------- ------- ---------------- ---------------- ------- ----------------
<S> <C> <C> <C> <C> <C>
$1.38 to
$4.12....... 205,000 3.25 $ 1.38 205,000 $ 1.38
$4.13 to
$6.00....... 306,000 3.45 $ 5.30 246,000 $ 5.30
$6.01 to
$8.25....... 170,000 8.64 $ 7.13 20,600 $ 7.82
------- -------
681,000 471,600
======= =======
</TABLE>
F-12
<PAGE> 55
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The per share weighted average fair value of stock options granted during
fiscal year 1996 and 1997 was $4.94 and $4.71, respectively. The fair value of
options at the date of the grant was estimated using the Black-Scholes model
with the following weighted average assumptions for the respective fiscal year:
<TABLE>
<CAPTION>
JUNE 30,
-------------------
1996 1997
------- -------
<S> <C> <C>
Expected life............................................. 5 years 5 years
Interest rate............................................. 5.63% 6.08%
Volatility................................................ 77% 78%
Dividend yield............................................ 0% 0%
</TABLE>
Stock based compensation costs would have reduced pretax income by $67,000
and $166,000 in fiscal 1996 and 1997 ($67,000 and $162,000 after tax and $0.02
and $0.04 per share in fiscal 1996 and 1997, respectively) if the fair values of
options granted in that year had been recognized as compensation expense on a
straight-line basis over the vesting period of the grant. The pro forma effect
on net income for fiscal 1996 and 1997 is not representative of the pro forma
effect on net income in future years because it does not take into consideration
pro forma compensation expense related to grants made prior to fiscal 1996.
NOTE 7: EMPLOYEE BENEFIT PLANS
The Company has a non-contributory defined benefit pension plan covering
substantially all of its employees. Benefits under this plan generally are based
on the employee's years of service and compensation. The following table sets
forth the plan's funded status at June 30, 1996 and 1997:
<TABLE>
<CAPTION>
JUNE 30,
-----------------
1996 1997
------ ------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of accumulated benefit obligation (vested
$3,886 in 1996 and $4,196 in 1997)............................... $3,945 $4,260
Effect of assumed increase in compensation levels.................. 341 369
------ ------
Projected benefit obligation for services rendered to date......... 4,286 4,629
Plan assets at fair value.......................................... 4,401 4,971
------ ------
Plan assets in excess of projected benefit obligation.............. 115 342
Unrecognized net gain.............................................. (270) (502)
Unrecognized prior service cost.................................... 152 134
Unrecognized net transition asset (15 year amortization)........... 66 57
------ ------
Prepaid pension asset.............................................. $ 63 $ 31
====== ======
</TABLE>
The following table details the components of net periodic pension cost:
<TABLE>
<CAPTION>
JUNE 30,
JULY 1, -------------
1995 1996 1997
------- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost................................................. $ 146 $149 $141
Interest cost................................................ 259 292 317
Actual return on plan assets................................. (795) (406) (549)
Net amortization and deferral................................ 572 115 223
----- ----- -----
Net periodic pension cost.................................. $ 182 $150 $132
===== ===== =====
</TABLE>
F-13
<PAGE> 56
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The projected benefit obligation was determined using an assumed discount
rate of 7.5% and an assumed long-term rate of increase in compensation of 5.0%
for 1996 and 1997. The assumed long-term rate of return on plan assets was 8.0%
for 1996 and 1997.
Plan assets consist principally of equity securities, and U.S. government
and corporate obligations.
The Company maintains a voluntary contributory salary savings plan to which
participants may contribute up to 15% of their total compensation. During fiscal
1995 and 1996, the Company contributed an amount equal to 50% of the
participants' contribution up to a maximum of 3% of the participants'
compensation. In fiscal 1997, the Company increased its matching contribution to
an amount equal to 50% of the participants' contribution up to a maximum of 5%
of the participants' compensation. During fiscal 1995, 1996 and 1997, the
Company contributed $112,000, $81,000 and $129,000, respectively, to this plan.
NOTE 8: POSTRETIREMENT BENEFITS
The Company provides medical coverage for current and future eligible
retirees of the Company plus their eligible dependents. Employees generally
become eligible for retiree medical coverage by retiring from the Company after
attaining at least age 55 with 15 years of service (active employees at June 27,
1993 were eligible by retiring after attaining at least age 55 with 10 years of
service). Retirees at June 27, 1993 pay approximately $30 per month for health
care coverage and the Company is responsible for paying the remaining costs. For
this group, any increase in health care coverage costs for retired employees
will be shared by the Company and retirees on a fifty-fifty basis, while any
increase in coverage costs for retiree dependents will be totally paid by the
retirees. For eligible employees retiring after June 26, 1993, the Company
contributes a fixed dollar amount towards the cost of the medical plan. Any
future cost increases for the retiree medical program for these participants
will be charged to the retiree.
The following table presents the accumulated postretirement benefit
obligation at June 30, 1996 and 1997:
<TABLE>
<CAPTION>
JUNE 30,
-----------------
1996 1997
------ ------
(IN THOUSANDS)
<S> <C> <C>
Retirees........................................................... $ 550 $ 554
Fully eligible active plan participants............................ 284 144
Other active participants.......................................... 296 494
Unrecognized net gain (loss)....................................... 8 (11)
------ ------
Accumulated postretirement benefit obligation...................... $1,138 $1,181
====== ======
</TABLE>
The following table details the components of net periodic postretirement
benefit cost:
<TABLE>
<CAPTION>
JUNE 30,
JULY 1, -------------
1995 1996 1997
------- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost................................................. $ 31 $ 29 $ 33
Interest cost................................................ 71 78 85
---- ---- ----
Net periodic postretirement benefit cost................... $ 102 $107 $118
==== ==== ====
</TABLE>
For measurement purposes, a 10% annual rate of increase in the per capita
cost of covered benefits (i.e., health care cost trend rate) was assumed for
fiscal 1997; the rate was assumed to decrease gradually to 5% by the year 2013
and remain at that level thereafter. The health care cost trend rate assumption
has an effect on the amounts reported. However, as the Company contributes a
fixed dollar amount to the plan for the active employee group, this impact is
minimized. For example, increasing the assumed health care cost trend rates
F-14
<PAGE> 57
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
by one percentage point in each year would increase the accumulated
postretirement benefit obligation as of June 30, 1997 by approximately $83,000
and the aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the year ended June 30, 1997 by approximately
$6,300.
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% at June 30, 1996 and 1997.
NOTE 9: INCOME TAXES
Income tax expense (benefit) consists of:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Year ended July 1, 1995:
U.S. Federal........................................... $(330) $ -- $(330)
State.................................................. -- -- --
----- ----- -----
$(330) $ $(330)
===== ===== =====
Year ended June 30, 1996:
U.S. Federal........................................... $ -- $ -- $ --
State.................................................. -- -- --
----- ----- -----
$ -- $ -- $ --
===== ===== =====
Year ended June 30, 1997:
U.S. Federal........................................... $ 450 $ (739) $(289)
State.................................................. 17 272 289
----- ----- -----
$ 467 $ (467) $ --
===== ===== =====
Three months ended September 30, 1997 (Unaudited):
U.S. Federal........................................... $ 253 $ 42 $ 295
State.................................................. 27 53 80
----- ----- -----
$ 280 $ 95 $ 375
===== ===== =====
</TABLE>
A reconciliation of the expected consolidated income tax expense (benefit),
computed by applying the U.S. Federal corporate income tax rate of 34% to income
(loss) before income taxes, to income tax expense (benefit), is as follows:
<TABLE>
<CAPTION>
YEARS ENDED JUNE
30,
YEAR ENDED -------------------
JULY 1, 1995 1996 1997
------------ ----- -------
SEPTEMBER 30,
1997
-------------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C>
Expected consolidated income tax
expense (benefit)................... $ (613) $(367) $ 699 $ 386
State income taxes, net of federal
income tax benefit.................. -- -- 190 52
Foreign tax effect, net............... 199 497 138 43
Change in valuation allowance......... 58 (141) (1,061) (114)
Other, net............................ 26 11 34 8
----- ----- ----- -----
$ (330) $ -- $ -- $ 375
===== ===== ===== =====
</TABLE>
F-15
<PAGE> 58
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences that give rise to the deferred tax
assets and deferred tax liabilities are presented below:
<TABLE>
<CAPTION>
JUNE 30,
----------------- SEPTEMBER 30,
1996 1997 1997
------ ------ -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred tax assets:
Inventories........................................ $ 43 $ 53 $ 54
Retirement benefits................................ 7 -- 2
Postretirement benefits............................ 444 461 461
General business credit carryforwards.............. 31 31 31
Federal net operating loss carryforwards........... 724 -- --
State net operating loss carryforwards............. 171 37 --
State investment tax credit carryforwards.......... 766 805 805
Alternative minimum tax credit carryforwards....... 212 492 326
Nondeductible reserves............................. 11 11 11
----- ------ ------
Total deferred tax assets.................. 2,409 1,890 1,690
Less valuation allowance................... 1,644 583 469
----- ------ ------
Net deferred tax asset..................... 765 1,307 1,221
----- ------ ------
Deferred tax liabilities:
Plant and equipment, principally due to differences
in depreciation................................. (765) (838) (849)
Retirement benefits................................ -- (2) --
----- ------ ------
Total deferred tax liabilities............. (765) (840) (849)
----- ------ ------
Net deferred taxes......................... $ -- $ 467 $ 372
===== ====== ======
Presented as:
Current deferred tax asset......................... $ -- $ 532 $ 394
Long-term deferred tax liability................... -- (65) (22)
----- ------ ------
$ -- $ 467 $ 372
===== ====== ======
</TABLE>
The valuation allowance for deferred tax assets as of June 30, 1996 and
1997 was $1.6 million and $583,000, respectively. The net change in the total
valuation allowance for the years ended June 30, 1996 and 1997 was a decrease of
$141,000 and $1.1 million, respectively. In assessing the realizability of
deferred tax assets, management considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary differences
become deductible. Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income, and tax planning strategies in
making this assessment. Based upon the level of historical taxable income and
projections for future taxable income over the periods which the deferred tax
assets are deductible, management believes it is more likely than not the
Company will realize the benefits of these deductible differences, net of the
existing valuation allowances at June 30, 1997.
At June 30, 1997, the Company has net operating loss carryforwards for
state income tax purposes of $403,000 which are available to offset future state
taxable income, if any, through 2012. The Company also has investment tax credit
carryforwards for state income tax purposes of $805,000 which are available to
reduce future state income taxes, if any, through 2006. In addition, the Company
has alternative minimum tax
F-16
<PAGE> 59
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
credit carryforwards of $492,000 which are available to reduce future federal
regular income taxes, if any, over an indefinite period.
Cash payments for income taxes were $30,000 in fiscal 1995, and $0 in
fiscal 1996 and 1997.
NOTE 10: RESTRUCTURING
In fiscal 1995, the Company implemented cost cutting measures designed to
reduce overhead costs and improve operating efficiencies. This program included
severance of employees and reorganization of the manufacturing and engineering
functions of the Company. A restructuring charge amounting to $360,000,
consisting of severance costs, was recognized as a result of the restructuring
program.
During the third quarter of fiscal 1996, the Company recorded a
restructuring charge of $810,000 resulting from the disposition of the net
assets of the Company's European subsidiary, Anaren Microwave, Ltd. The charge
includes provisions for the writedown of assets to net realizable value, legal
and professional fees, and costs to complete an existing electronic warfare
simulator contract in excess of expected revenues.
NOTE 11: COMMITMENTS
The Company is obligated under an operating lease for a building. Future
minimum payments under the noncancelable operating lease for the next five years
and thereafter are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDING
JUNE 30, IN THOUSANDS
------------------------------------------------ ------------
<S> <C>
1998......................................... $ 385
1999......................................... 385
2000......................................... 385
2001......................................... 385
2002......................................... 385
Thereafter...................................... 4,489
------
6,414
Less amounts representing sublease income....... 337
------
$6,077
======
</TABLE>
Rent expense for the years ended July 1, 1995, June 30, 1996 and June 30,
1997 was $378,000, $374,000 and $385,000, respectively. Rent expense for fiscal
1996 and 1997 was offset by sublease income of $53,000 and $126,000,
respectively.
The Company maintains a letter of credit arrangement with a bank. Under the
arrangement, the bank issued a letter of credit in the amount of approximately
$600,000 as required under a contract between the Company and a customer. At
June 30, 1997, the Company was required to maintain a compensating balance of
approximately $600,000 in support of this letter of credit.
As discussed in note 1(i), the Company is currently engaged under a
technology development contract. Under this contract, the Company is committed
to provide research and development services through September 1998. Technology
development fees and related costs under the contract are anticipated to
aggregate approximately $500,000 and $107,000 in fiscal 1998 and 1999,
respectively.
NOTE 12: CONCENTRATIONS
In 1995, sales to two customers (approximately $4.6 million and $3.0
million, respectively) exceeded 10% of consolidated net sales. In 1996, sales to
two customers (approximately $4.4 million and $1.7 million,
F-17
<PAGE> 60
ANAREN MICROWAVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
respectively) exceeded 10% of consolidated net sales. In 1997, sales to two
customers (approximately $3.4 million and $2.7 million, respectively) exceeded
10% of consolidated net sales.
The Company and others, which are engaged in supplying defense-related
equipment to the United States Government (the Government), are subject to
certain business risks peculiar to the defense industry. Sales to the Government
may be affected by changes in procurement policies, budget considerations,
changing concepts of national defense, political developments abroad and other
factors. Sales to the Government accounted for approximately 48%, 20% and 16% of
consolidated net sales in fiscal 1995, 1996 and 1997, respectively. While
management believes there is a high probability of continuation of the Company's
current defense-related programs, it continues to reduce its dependence on sales
to the Government through development of its commercial electronic business.
NOTE 13: FOREIGN OPERATIONS
The following table shows financial information about the Company's foreign
operations:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
YEAR ENDED ---------------------
JULY 1, 1995 1996 1997
------------ ------- -------
THREE MONTHS ENDED
SEPTEMBER 30, 1997
------------------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales:
United States................. $ 14,929 $15,901 $24,227 $7,721
European subsidiary........... 3,067 1,181 -- --
------- ------- ------- -------
Consolidated............... $ 17,996 $17,082 $24,227 $7,721
======= ======= ======= =======
Operating income (loss):
United States................. $ (1,426) $ 392 $ 2,035 $1,098
European subsidiary*.......... (327) (1,497) -- --
------- ------- ------- -------
Consolidated.......... $ (1,753) $(1,105) $ 2,035 $1,098
======= ======= ======= =======
</TABLE>
- ---------------
* Includes the net loss on dissolution of the net assets of $810,000 in fiscal
1996 (see note 10).
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
YEAR ENDED ---------------------
JULY 1, 1995 1996 1997
------------ ------- -------
THREE MONTHS ENDED
SEPTEMBER 30, 1997
------------------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C>
Identifiable assets:
United States................. $ 20,941 $20,675 $25,973 $ 27,521
European subsidiary........... 2,424 1,119 -- --
------- ------- ------- -------
Consolidated.......... $ 23,365 $21,794 $25,973 $ 27,521
======= ======= ======= =======
</TABLE>
Sales to customers located outside the United States amounted to $9.5
million in 1995, $6.1 million in 1996 and $4.7 million in 1997.
F-18
<PAGE> 61
============================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER
OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY OR THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................... 3
Risk Factors............................... 5
Use of Proceeds............................ 12
Dividend Policy............................ 12
Price Range of Common Stock................ 12
Capitalization............................. 13
Selected Consolidated Financial Data....... 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 15
Business................................... 23
Management................................. 34
Description of Capital Stock............... 36
Principal and Selling Stockholders......... 37
Shares Eligible for Future Sale............ 38
Underwriting............................... 39
Legal Matters.............................. 40
Experts.................................... 40
Incorporation of Certain Information by
Reference................................ 40
Available Information...................... 41
Index to Consolidated Financial
Statements............................... F-1
</TABLE>
============================================================
============================================================
1,650,000 SHARES
[ANAREN MICROWAVE, INC. LOGO]
COMMON STOCK
--------------------
PROSPECTUS
--------------------
CIBC OPPENHEIMER
NEEDHAM & COMPANY, INC.
PACIFIC GROWTH EQUITIES, INC.
, 1997
============================================================
<PAGE> 62
PART II:
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the issuance and distribution of the
securities being registered hereby, other than underwriting discounts and
commissions, are as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............. $ 13,800.00
National Association of Securities Dealers Filing Fee........... 5,054.00
Legal Fees*..................................................... 120,000.00
Accounting Fees*................................................ 135,000.00
Transfer Agent and Registrar*................................... 10,000.00
Printing, Postage and Handling Expenses*........................ 130,000.00
Miscellaneous Expenses*......................................... 186,146.00
Total................................................. 600,000.00
</TABLE>
- ---------------
* Estimated
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Under the New York Business Corporation Law ("NYBCL"), a corporation may
indemnify its directors and officers made, or threatened to be made, a party to
any action or proceeding, except for stockholder derivative suits, if such
director or officer acted in good faith, for a purpose which he or she
reasonably believed to be in or, in the case of service to another corporation
or enterprise, not opposed to, the best interests of the corporation, and, in
criminal proceedings, had no reasonable cause to believe his or her conduct was
unlawful. In the case of stockholder derivative suits, the corporation may
indemnify a director or officer if he or she acted in good faith for a purpose
which he or she reasonably believed to be in or, in the case of service to
another corporation or enterprise, not opposed to the best interests of the
corporation, except that no indemnification may be made in respect of (i) a
threatened action, or a pending action which is settled or otherwise disposed
of, or (ii) any claim, issue or matter as to which such person has been adjudged
to be liable to the corporation, unless and only to the extent that the court in
which the action was brought, or, if no action was brought, any court of
competent jurisdiction, determines upon application that, in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such portion of the settlement amount and expenses as the court
deems proper.
Any person who has been successful on the merits or otherwise in the
defense of a civil or criminal action or proceeding will be entitled to
indemnification. Except as provided in the preceding sentence, unless ordered by
a court pursuant to the NYBCL, any indemnification under the NYBCL pursuant to
the above paragraph may be made only if authorized in the specific case and
after a finding that the director or officer met the requisite standard of
conduct by (i) the disinterested directors if a quorum is available, (ii) the
board upon the written opinion of independent legal counsel or (iii) the
stockholders.
The indemnification described above under the NYBCL is not exclusive of
other indemnification rights to which a director or officer may be entitled,
whether contained in the certificate of incorporation or bylaws or when
authorized by (i) such certificate of incorporation or bylaws; (ii) a resolution
of stockholders, (iii) a resolution of directors or (iv) an agreement providing
for such indemnification, provided that no indemnification may be made to or on
behalf of any director or officer if a judgment or other final adjudication
adverse to the director or officer establishes that his or her acts were
committed in bad faith or were the result of active and deliberate dishonesty
and were material to the cause of action so adjudicated, or that he or she
personally gained in fact a financial profit or other advantage to which he or
she was not legally entitled.
The foregoing statement is qualified in its entirety by reference to
Sections 715, 717, 721 through 725 of the NYBCL.
II-1
<PAGE> 63
The Bylaws of the Company provide that the Company shall indemnify any
officer or director who is made or is threatened to be made a party to an action
by or in right of the Company to procure a judgment in its favor by reason of
the fact that he, his testator or intestate, is or was a director or officer of
the Company or is or was serving at the request of the Company as a director or
officer of any other corporation of any type or kind, domestic or foreign, or
any partnership, joint venture, trust, employee benefit plan or other enterprise
against amounts paid in settlement and reasonable expenses, including attorneys'
fees, actually and necessarily incurred by him, in connection with the defense
or settlement of such action, or in connection with an appeal therein, if such
director or officer acted in good faith for a purpose which he reasonably
expected to be in or, in the case of service for any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise,
not opposed to the best interests of the Company, except that no indemnification
shall be made in respect to (1) a threatened action, or a pending action which
is settled or otherwise disposed of, or (2) any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Company; unless
and only to the extent that the court in which the action was brought, or if no
action was brought, any court of competent jurisdiction, determines upon
application that, in view of the circumstances of the case, the person is fairly
and reasonably entitled to indemnity for such portion of the settlement amount
and expenses as the court deems proper.
ITEM 16. EXHIBITS
The following exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement
5.1 Opinion of Bond, Schoeneck & King, LLP
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Bond, Schoeneck & King, LLP (included in Exhibit 5.1)
24.1 Power of Attorney*
</TABLE>
- ---------------
* Previously filed
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE> 64
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 65
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in East Syracuse, New York on this 19th day of November, 1997.
ANAREN MICROWAVE, INC.
By: /s/ LAWRENCE A. SALA
------------------------------------
Lawrence A. Sala
President and CEO
Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated below.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ---------------------- ------------------
<C> <S> <C>
/s/ LAWRENCE A. SALA Director, President November 19, 1997
- --------------------------------------------- and CEO (Principal
Lawrence A. Sala Executive Officer)
* Chairman of the Board November 19, 1997
- ---------------------------------------------
Hugh A. Hair
* Treasurer and Director November 19, 1997
- ---------------------------------------------
Carl W. Gerst, Jr.
* Vice President of November 19, 1997
- --------------------------------------------- Finance
Joseph E. Porcello (Principal Financial
Officer and
Principal Accounting
Officer)
* Director November 19, 1997
- ---------------------------------------------
Herbert I. Corkin
* Director November 19, 1997
- ---------------------------------------------
Dale F. Eck
* Director November 19, 1997
- ---------------------------------------------
Abraham Manber
Director
- ---------------------------------------------
David Wilemon
*By: /s/ LAWRENCE A. SALA
- ---------------------------------------------
Lawrence A. Sala
as Attorney-in-Fact
</TABLE>
II-4
<PAGE> 66
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------ -------------------------------------------------------------------------- ------------
<C> <S> <C>
1.1 Form of Underwriting Agreement
5.1 Opinion of Bond, Schoeneck & King, LLP
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Bond, Schoeneck & King, LLP (included in Exhibit 5.1)
24.1 Power of Attorney*
</TABLE>
- ---------------
* Previously filed
<PAGE> 1
EXHIBIT 1.1
1,650,000 Shares
ANAREN MICROWAVE, INC.
Common Stock
November__, 1997
CIBC Oppenheimer Corp.
Needham & Company, Inc.
Pacific Growth Equities, Inc. as
Representatives of the Several Underwriters
c/o CIBC Oppenheimer Corp.
Oppenheimer Tower
World Financial Center
New York, New York 10281
On behalf of the Several
Underwriters named on
Schedule I attached hereto.
Ladies and Gentlemen:
Anaren Microwave, Inc., a New York corporation (the Company"), and the
persons listed on Schedule I to this Agreement (the "Selling Stockholders")
propose to sell to you and the other underwriters named on Schedule II to this
Agreement (the "Underwriters"), for whom you are acting as the representatives
(the "Representatives"), an aggregate of 1,650,000 shares (the "Firm Shares") of
the Company's Common Stock, $0.01 par value (the "Common Stock"), of which
1,000,000 shares will be sold by the Company and 650,000 shares will be sold by
the Selling Stockholders, as set forth on Schedule I hereto. In addition, the
Company and certain of the Selling Stockholders, as indicated on Schedule I to
this Agreement, propose to grant to the Underwriters an option to purchase up to
an additional 247,500 shares (the "Option Shares") of Common Stock, of which
172,500 shares will be purchased from the Company and 75,000 shares will be
purchased from certain of the Selling Stockholders as set forth on Schedule I
hereto for the purpose of covering over-allotments in connection with the sale
of the Firm Shares. The Firm Shares and the Option Shares are together called
the "Shares."
<PAGE> 2
1. Sale and Purchase of the Shares.
On the basis of the representations, warranties and agreements
contained in, and subject to the terms and conditions of, this Agreement:
(a) The Company and the Selling Stockholders agree to sell to
each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company and the Selling
Stockholders, at $_____ per share (the "Initial Price"), the number of
Firm Shares set forth opposite the name of such Underwriter on Schedule
II to this Agreement.
(b) The Company and certain of the Selling Stockholders, as
indicated on Schedule I to this Agreement, grant to the several
Underwriters an option to purchase, severally and not jointly, all or
any part of the Option Shares at the Initial Price. The number of
Option Shares to be purchased by each Underwriter shall be the same
percentage (adjusted by the Representatives to eliminate fractions) of
the total number of Option Shares to be purchased by the Underwriters
as such Underwriter is purchasing of the Firm Shares. Such option may
be exercised only to cover over-allotments in the sales of the Firm
Shares by the Underwriters and may be exercised in whole or in part at
any time on or before 12:00 noon, New York City time, on the business
day before the Firm Shares Closing Date (as defined below), and only
once thereafter within 30 days after the date of this Agreement, in
each case upon written or telegraphic notice, or verbal or telephonic
notice confirmed by written or telegraphic notice, by the
Representatives to the Company no later than 12:00 noon, New York City
time, on the business day before the Firm Shares Closing Date or at
least two business days before the Option Shares Closing Date (as
defined below), as the case may be, setting forth the number of Option
Shares to be purchased and the time and date (if other than the Firm
Shares Closing Date) of such purchase. No Option Shares shall be sold
or delivered unless the Firm Shares have been or simultaneously are
sold and delivered.
2. Delivery and Payment. Delivery by the Company and the
Selling Stockholders of the Firm Shares to the Representatives for the
respective accounts of the Underwriters, and payment of the purchase price by
wire transfer of next day funds or certified or official bank check or checks
payable in New York Clearing House (next day) funds to the Company and to the
Custodian, on behalf of the Selling Stockholders, shall take place at the
offices of CIBC Oppenheimer Corp., at Oppenheimer Tower, World Financial Center,
New York, New York 10281, at 10:00 a.m., New York City time, on the third
business day following the date of this Agreement, or at such time on such other
date, not later than 10 business days after the date of this Agreement, as shall
be agreed upon by the Company and the Representatives (such time and date of
delivery and payment are called the "Firm Shares Closing Date").
2
<PAGE> 3
In the event the option with respect to the Option Shares is exercised,
delivery by the Company and the applicable Selling Stockholders of the Option
Shares to the Representatives for the respective accounts of the Underwriters
and payment of the purchase price by certified or official bank check or checks
payable in New York Clearing House (next day) funds to the Company and to the
Custodian, on behalf of the applicable Selling Stockholders, shall take place at
the offices of CIBC Oppenheimer Corp. specified above at the time and on the
date (which may be the same date as, but in no event shall be earlier than, the
Firm Shares Closing Date) specified in the notice referred to in Section 1(b)
(such time and date of delivery and payment are called the "Option Shares
Closing Date"). The Firm Shares Closing Date and the Option Shares Closing Date
are called, individually, a "Closing Date" and, together, the "Closing Dates."
Certificates evidencing the Shares shall be registered in such names
and shall be in such denominations as the Representatives shall request at least
two full business days before the Firm Shares Closing Date or, in the case of
Option Shares, on the day of notice of exercise of the option as described in
Section 1(b) and shall be made available to the Representatives for checking and
packaging, at such place as is designated by the Representatives, on the full
business day before the Firm Shares Closing Date (or the Option Shares Closing
Date in the case of the Option Shares).
3. Registration Statement and Prospectus; Public Offering. The
Company has prepared in conformity with the requirements of the Securities Act
of 1933, as amended (the "Securities Act"), and the published rules and
regulations thereunder (the "Rules") adopted by the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (No.
333-39015), including a preliminary prospectus relating to the Shares, and has
filed with the Commission the Registration Statement (as hereinafter defined)
and such amendments thereof as may have been required to the date of this
Agreement. Copies of such Registration Statement (including all amendments
thereof), of the related preliminary prospectus and of all documents
incorporated by reference therein that were filed with the Commission on or
prior to the date of this Agreement have heretofore been delivered by the
Company to you. The term "preliminary prospectus" means any preliminary
prospectus (as described in Rule 430 of the Rules) included at any time as a
part of the Registration Statement. The Registration Statement as amended at the
time and on the date it becomes effective (the "Effective Date"), including all
exhibits and information, if any, deemed to be part of the Registration
Statement pursuant to Rule 424(b) and Rule 430A of the Rules, together with any
registration statement filed by the Company pursuant to Rule 462(b) of the
Securities Act, is called the "Registration Statement." The term "Prospectus"
means the prospectus in the form first used to confirm sales of the Shares
(whether such prospectus was included in the Registration Statement at the time
of effectiveness or was subsequently filed with the Commission pursuant to Rule
424(b) of the Rules). Any reference in this Agreement to the Registration
Statement or the Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein (and the exhibits to such
incorporated documents) pursuant to Item 12 of Form S-3 under the Securities
Act, as of the date of the
3
<PAGE> 4
Registration Statement or the prospectus, as the case may be, and any reference
to any amendment or supplement to the Registration Statement or the Prospectus
shall be deemed to refer to and include any documents filed after such date
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
which, upon filing, are incorporated by reference therein, as required by
paragraph (b) of Item 12 of Form S-3. As used herein, the term "Incorporated
Documents" means the documents which at the time are incorporated by reference
in the Registration Statement, the Prospectus, or any amendment or supplement
thereto.
The Company understands that the Underwriters propose to make a public
offering of the Shares, as set forth in and pursuant to the Prospectus, as soon
after the Effective Date and the date of this Agreement as the Representatives
deem advisable. The Company and the Selling Stockholders hereby confirm that the
Underwriters and dealers have been authorized to distribute or cause to be
distributed each preliminary prospectus and are authorized to distribute the
Prospectus (as from time to time amended or supplemented if the Company
furnishes amendments or supplements thereto to the Underwriters).
4. Representations and Warranties of the Company and the
Selling Stockholders.
(a) The Company and the Selling Stockholders hereby severally
represent and warrant to each Underwriter as follows:
(i) The Company and the transactions contemplated by
this Agreement meet the requirements for using Form S-3 under
the Securities Act. On the Effective Date the Registration
Statement complied, and on the date of the Prospectus, on the
date any post-effective amendment to the Registration
Statement shall become effective, on the date any supplement
or amendment to the Prospectus is filed with the Commission
and on each Closing Date, the Registration Statement and the
Prospectus (and any amendment thereof or supplement thereto)
will comply, in all material respects, with the applicable
provisions of the Securities Act and the Rules and the
Exchange Act, and the rules and regulations of the Commission
thereunder; the Registration Statement did not, as of the
Effective Date, contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein
not misleading; and on the other dates referred to above
neither the Registration Statement nor the Prospectus, nor any
amendment thereof or supplement thereto, will contain any
untrue statement of a material fact or will omit to state any
material fact required to be stated therein or necessary in
order to make the statements therein not misleading. When any
related preliminary prospectus was first filed with the
Commission (whether filed as part of the Registration
Statement or any amendment thereto or pursuant to Rule 424(a)
of the Rules) and when any
4
<PAGE> 5
amendment thereof or supplement thereto was first filed with
the Commission, such preliminary prospectus as amended or
supplemented complied in all material respects with the
applicable provisions of the Securities Act and the Rules and
did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not
misleading. Notwithstanding the foregoing, the Company and the
Selling Stockholders make no representation or warranty as to
the paragraphs with respect to stabilization and passive
market making on the inside front cover page of the Prospectus
and the statements contained under the caption "Underwriting"
in the Prospectus. The Company and the Selling Shareholders
acknowledge that the statements referred to in the previous
sentence constitute the only information furnished in writing
by the Representatives on behalf of the several Underwriters
specifically for inclusion in the Registration Statement, any
preliminary prospectus or the Prospectus.
(ii) The Incorporated Documents heretofore filed,
when they were filed (or, if any amendment with respect to any
such document was filed, when such amendment was filed),
complied, in all material respects, with the applicable
provisions of the Exchange Act and the rules and regulations
of the Commission thereunder, any further Incorporated
Documents when filed will comply, in all material respects,
with the applicable provisions of the Exchange Act and the
rules and regulations of the Commission thereunder; no such
Incorporated Document when it was filed (or, if an amendment
with respect to any such document was filed, when such
amendment was filed) contained an untrue statement of a
material fact or omitted to state any material fact required
to be stated therein or necessary in order to make the
statements therein not misleading; and no such further
Incorporated Document, when it is filed, will contain an
untrue statement of a material fact or will omit to state any
material fact required to be stated therein or necessary in
order to make the statements therein not misleading.
(iii) All contracts and other documents required to
be filed as exhibits to the Registration Statement or to any
of the Incorporated Documents have been filed with the
Commission as exhibits to the Registration Statement or to the
applicable Incorporated Document, as the case may be.
(iv) The consolidated financial statements of the
Company and its subsidiaries (including all notes and
schedules thereto) included or incorporated by reference in
the Registration Statement and Prospectus present fairly the
consolidated financial position, results of operations and
cash flows and stockholders' equity and the other information
purported to be shown therein of the Company and its
subsidiaries at the respective dates and for the respective
periods to which they apply; and such financial statements
have been
5
<PAGE> 6
prepared in conformity with generally accepted accounting
principles, consistently applied throughout the periods
involved, and all adjustments necessary for a fair
presentation of the results for such periods have been made.
(v) KPMG Peat Marwick LLP, whose reports are filed
with the Commission as a part of the Registration Statement,
are and, during the periods covered by their reports, were
independent public accountants as required by the Securities
Act and the Rules.
(vi) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of New York. Anaren Microwave, Ltd., a
company organized under the Companies Act of England and
Wales, and Anaren V.I. Inc., a company organized in the U.S.
Virgin Islands, are the only subsidiaries of the Company, and
each has been duly organized and is validly existing as a
corporation in good standing under the laws of its respective
jurisdiction. The Company and each of its subsidiaries
(hereinafter collectively referred to as the "Company") is
duly qualified and in good standing as a foreign corporation
in each jurisdiction in which the character or location of its
assets or properties (owned, leased or licensed) or the nature
of its business makes such qualification necessary except for
such jurisdictions where the failure to so qualify would not
have a material adverse effect on the assets or properties,
business, results of operations, prospects or condition
(financial or otherwise) of the Company. Except as disclosed
in the Registration Statement and the Prospectus, the Company
does not own, lease or license any asset or material property
or conduct any business outside the United States of America.
The Company has all requisite corporate power and authority,
and all necessary authorizations, approvals, consents, orders,
licenses, certificates and permits of and from all
governmental or regulatory bodies or any other person or
entity, to own, lease and license its assets and properties
and conduct its business as now being conducted and as
described in the Registration Statement and the Prospectus
except for such authorizations, approvals, consents, orders,
licenses, certificates and permits the failure to so obtain
would not have a material adverse effect upon the assets or
properties, business, results of operations, prospects or
condition (financial or otherwise) of the Company; no such
authorization, approval, consent, order, license, certificate
or permit contains a materially burdensome restriction other
than as disclosed in the Registration Statement and the
Prospectus, and the Company has all such corporate power and
authority, and such authorizations, approvals, consents,
orders, licenses, certificates and permits to enter into,
deliver and perform this Agreement and to issue and sell the
Shares (except as may be required under state securities). To
the Company's knowledge, all of the properties now or formerly
owned or leased by the Company, all research and manufacturing
operations conducted thereon (including discharges and
6
<PAGE> 7
emissions therefrom) and all research and manufacturing
equipment now or formerly used at said properties, have been
and are in compliance with all Federal, state, local and
foreign statutes, ordinances, regulations, rules and standards
concerning or relating to industrial hygiene and the
protection of health, safety, welfare and the environment
(collectively, "the Environmental Laws"), except to the extent
that any failure to be in compliance, singly or in the
aggregate, would not have a material adverse effect upon the
assets or properties, business, results of operations,
prospects or condition (financial or otherwise) of the
Company. The Company has not received notice, and does not
have knowledge, of any claim, demand, investigation,
regulatory action, suit or other action instituted or
threatened against it or said property relating to any of the
Environmental Laws.
(vii) The Company owns or possesses adequate and
enforceable rights to use all patents, patent applications,
trademarks, trademark applications, trade names, service
marks, copyrights, copyright applications, licenses, know-how,
proprietary techniques, including processes and substances,
and other similar rights and proprietary knowledge
(collectively, "Intangibles") necessary for the conduct of its
business as described in the Registration Statement and the
Prospectus. The Company has not received any notice of, and
does not have any knowledge of, any infringement of or
conflict with asserted rights of others with respect to any
Intangibles which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would have a
material adverse effect upon the assets or properties,
business, results of operations, prospects or condition
(financial or otherwise) of the Company. The Company is not
aware of any infringement of any of the Company's Intangibles
by any third party which could have a material adverse effect
upon the assets or properties, business, results of
operations, prospects or condition (financial or otherwise) of
the Company.
(viii) The Company has good title to each of the
items of personal property which are reflected in the
financial statements referred to in Section 4(a)(iv) or are
referred to in the Registration Statement and the Prospectus
as being owned by it and valid and enforceable leasehold
interests in each of the items of real and personal property
which are referred to in the Registration Statement and the
Prospectus as being leased by it, in each case free and clear
of all liens, encumbrances, claims, security interests and
defects, other than those described in the Registration
Statement and the Prospectus or those which do not and will
not have a material adverse effect upon the assets or
properties, business, results of operations, prospects or
condition (financial or otherwise) of the Company.
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<PAGE> 8
(ix) There is no litigation or governmental or other
proceeding or investigation before any court or before or by
any public body or board pending or, to the Company's
knowledge, threatened (and the Company does not know of any
basis therefor) against, or involving the assets, properties
or business of, the Company which would materially adversely
affect the value or the operation of any such assets or
properties or the business, results of operations, prospects
or condition (financial or otherwise) of the Company.
(x) Subsequent to the respective dates as of which
information is given in the Registration Statement and the
Prospectus, except as described therein, (i) there has not
been any material adverse change in the assets or properties,
business, results of operations, prospects or condition
(financial or otherwise) of the Company, whether or not
arising from transactions in the ordinary course of business;
(ii) the Company has not sustained any material loss or
interference with its assets, businesses or properties
(whether owned or leased) from fire, explosion, earthquake,
flood or other calamity, whether or not covered by insurance,
or from any labor dispute or any court or legislative or other
governmental action, order or decree; and (iii) since the date
of the latest balance sheet included in the Registration
Statement and the Prospectus, except as reflected therein, the
Company has not (a) issued any securities or incurred any
liability or obligation, direct or contingent, for borrowed
money, except such liabilities or obligations incurred in the
ordinary course of business, (b) entered into any transaction
not in the ordinary course of business or (c) declared or paid
any dividend or made any distribution on any shares of its
stock or redeemed, purchased or otherwise acquired or agreed
to redeem, purchase or otherwise acquire any shares of its
stock.
(xi) There is no document or contract of a character
required to be described in the Registration Statement or
Prospectus or to be filed as an exhibit to the Registration
Statement or any Incorporated Document which is not described
or filed as required. Each agreement listed in the exhibits to
the Registration Statement or any Incorporated Document is in
full force and effect and is valid and enforceable by and
against the Company in accordance with its terms, assuming the
due authorization, execution and delivery therefor by each of
the other parties thereto. Neither the Company nor, to the
Company's knowledge, any other party is in default in the
observance or performance of any term or obligation to be
performed by it under any such agreement, and no event has
occurred which with notice or lapse of time or both would
constitute such a default in any such case, which default or
event would have a material adverse effect on the assets or
properties, business, results of operations, prospects or
condition (financial or otherwise) of the Company. No default
exists, and no event has occurred which with notice or lapse
of time or both would constitute a default, in the due
performance and observance of any term,
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<PAGE> 9
covenant or condition, by the Company of any other agreement
or instrument to which the Company is a party or by which it
or its properties or business may be bound or affected which
default or event would have a material adverse effect on the
assets or properties, business, results of operations,
prospects or condition (financial or otherwise) of the
Company.
(xii) The Company is not in violation of any term or
provision of its charter or by-laws or of any franchise,
license, permit, judgment, decree, order, statute, rule or
regulation, where the consequences of such violation would
have a material adverse effect on the assets or properties,
business, results of operations, prospects or condition
(financial or otherwise) of the Company.
(xiii) Neither the execution, delivery and
performance of this Agreement by the Company nor the
consummation of any of the transactions contemplated hereby
(including, without limitation, the issuance and sale by the
Company of the Shares) will give rise to a right to terminate
or accelerate the due date of any payment due under, or
conflict with or result in the breach of any term or provision
of, or constitute a default (or an event which with notice or
lapse of time or both would constitute a default) under, or
require any consent or waiver under, or result in the
execution or imposition of any lien, charge or encumbrance
upon any properties or assets of the Company pursuant to
the terms of, any indenture, mortgage, deed of trust or other
agreement or instrument to which the Company is a party or by
which it or any of its properties or businesses is bound, or
any franchise, license, permit, judgment, decree, order,
statute, rule or regulation applicable to the Company or
violate any provision of the charter or by-laws of the
Company, except for such consents or waivers which have
already been obtained and are in full force and effect.
(xiv) The Company has an authorized and outstanding
capital stock as set forth under the caption "Capitalization"
in the Prospectus. All of the outstanding shares of Common
Stock have been duly and validly issued and are fully paid and
nonassessable and none of them was issued in violation of any
preemptive or other similar right. The Shares, when issued and
sold pursuant to this Agreement, will be duly and validly
issued, fully paid and nonassessable and none of them will be
issued in violation of any preemptive or other similar right.
Except as disclosed in the Registration Statement and the
Prospectus, other than options issued on November 10, 1997,
to purchase an aggregate of 84,500 shares of the Company's
Common Stock issued pursuant to the Company's stock option
plans, there is no outstanding option, warrant or other right
calling for the issuance of, and there is no commitment, plan
or arrangement to issue, any share of stock of the Company or
any security convertible into, or exercisable or exchangeable
for, such stock. The Common Stock and the Shares conform in
all material respects to all statements in relation thereto
contained in the Registration Statement and the Prospectus.
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<PAGE> 10
(xv) No holder of any security of the Company has the
right to have any security owned by such holder included in
the Registration Statement or to demand registration of any
security owned by such holder. Each director and executive
officer of the Company and each Selling Stockholder has
delivered to the Representatives an enforceable written
agreement that he or it will not, for a period of 90 days
after the date of this Agreement, sell, offer, contract to
sell, make any short sale, pledge, or otherwise dispose of,
directly or indirectly, any shares of Common Stock or any
securities convertible into or exchangeable exercisable for
any other rights to purchase or acquire Common Stock without
the prior written consent of the CIBC Oppenheimer Corp.
(xvi) All necessary corporate action has been duly
and validly taken by the Company to authorize the execution,
delivery and performance of this Agreement and the issuance
and sale of the Shares by the Company. This Agreement has been
duly and validly authorized, executed and delivered by the
Company and constitutes a legal, valid and binding obligation
of the Company enforceable against the Company in accordance
with its respective terms, except (A) as the enforceability
thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general
equitable principles and (B) to the extent that rights to
indemnity or contribution under this Agreement may be limited
by Federal and state securities laws or the public policy
underlying such laws.
(xvii) The Company is not involved in any labor
dispute nor, to the knowledge of the Company, is any such
dispute threatened, which dispute would have a material
adverse effect on the assets or properties, business, results
of operations, prospects or condition (financial or otherwise)
of the Company.
(xviii) No transaction has occurred between or among
the Company and any of its officers or directors or any
affiliate or affiliates of any such officer or director that
is required to be described in and is not described in the
Registration Statement and the Prospectus.
(xix) The Company has not taken, nor will it take,
directly or indirectly, any action designed to or which might
reasonably be expected to cause or result in, or which has
constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of
the Common Stock to facilitate the sale or resale of any of
the Shares.
(xx) The Company has filed all Federal, state, local
and foreign tax returns which are required to be filed by it
through the date hereof, or has received extensions thereof,
and has paid all taxes shown on such returns and all
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<PAGE> 11
assessments received by it to the extent that the same are
material and have become due.
(xxi) The Company was in compliance with all
restrictions and covenants under the Credit Facility
Agreement, dated October 1, 1996 by and between the Company
and Manufacturers and Traders Trust Company and the related
Term Note, Revolving Credit Note and Security Agreement, each
dated October 1, 1996 by and between the Company and
Manufacturers and Traders Trust Company (together, the "Credit
Facility"), including but not limited to the minimum tangible
net worth, the ratio of cash flows to maturities and leverage
ratio, at September 30, 1997 [and as of the date hereof].
(xxii) The Shares have been duly authorized for
quotation on Nasdaq National Market.
(b) Each Selling Stockholder severally represents and warrants
to each Underwriter and the Company as follows:
(i) All authorizations and consents necessary for the
execution and delivery by it of this Agreement and the sale
and delivery of the Shares to be sold by such Selling
Stockholder hereunder have been given and are in full force
and effect on the date hereof and will be in full force and
effect on the Firm Shares Closing Date (and, if applicable,
the Option Shares Closing Date).
(ii) Such Selling Stockholder has, and on the Firm
Shares Closing Date (and, if applicable, the Option Shares
Closing Date) will have, good and valid title to the Shares to
be sold by such Selling Stockholder, free and clear of all
liens, mortgages, pledges, encumbrances, claims, equities and
security interests whatsoever, and will have full right, power
and authority to enter into this Agreement and to sell,
assign, transfer and deliver the Shares to be sold by such
Selling Stockholder hereunder.
(iii) Upon delivery of and payment for such Shares
hereunder, the several Underwriters will acquire valid and
unencumbered title to such Shares to be sold by such Selling
Stockholder hereunder, free and clear of all liens, mortgages,
pledges, encumbrances, claims, equities and security interests
whatsoever.
(iv) The consummation by such Selling Stockholder of
the transactions contemplated herein and the fulfillment by
such Selling Stockholder of the terms hereof will not result
in a violation or breach of any terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of
trust, note, loan agreement, sale and leaseback arrangement or
other agreement or instrument to which such Selling
Stockholder is a party or by which such Selling Stockholder is
bound, or of any order, rule or regulation applicable to such
Selling Stockholder of any court or of any regulatory body of
an administrative agency or other governmental body having
jurisdiction.
(v) Such Selling Stockholder has not taken and will
not take, directly or indirectly, any action designed to or
which might be reasonably expected to cause or result in
stabilization or manipulation of the price of the Common
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<PAGE> 12
Stock, and such Selling Stockholder is not aware of any such
action taken or to be taken by affiliates of such Selling
Stockholder.
(vi) When the Registration Statement becomes
effective and at all times subsequent thereto, such
information in the Registration Statement and Prospectus and
any amendments or supplements thereto as specifically refers
to such Selling Stockholder will not contain any untrue
statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading.
(vii) Certificates in negotiable form representing
all of the Shares to be sold by such Selling Stockholder
hereunder have been placed in the custody of the Company (the
"Custodian") under a Custody Agreement (the "Custody
Agreement"), duly executed and delivered by such Selling
Stockholder, with the Custodian having the authority to
deliver the Shares to be sold by such Selling Stockholder
hereunder, and such Selling Stockholder has duly executed and
delivered a Power of Attorney (the "Power of Attorney")
appointing Lawrence A. Sala and Joseph E. Porcello as such
Selling Stockholder's attorneys-in-fact (the
"Attorneys-in-Fact") with the Attorneys-in-Fact having
authority to execute and deliver this Agreement on behalf of
such Selling Stockholder, to determine the purchase price to
be paid by the Underwriters to the Selling Stockholder as
provided in Section 1(a), to authorize the delivery of the
Shares to be sold by it hereunder and otherwise to act on
behalf of such Selling Stockholder in connection with the
transactions contemplated by this Agreement and the Custody
Agreement.
(viii) The Shares represented by the certificates
held in custody for such Selling Stockholder under the Custody
Agreement are subject to the interests of the Underwriters
hereunder, and the arrangements made by such Selling
Stockholder for such custody, and the appointment by such
Selling Stockholder of the Custodians under the Custody
Agreement and of the Attorneys-in-Fact under the Power of
Attorney, are to that extent irrevocable.
(ix) The obligations of such Selling Stockholder
hereunder shall not be terminated by operation of law, whether
by the death or incapacity of any individual Selling
Stockholder or by the occurrence of any other event, and if
any Selling Stockholder should die or become incapacitated, or
if any other such event should occur before the delivery of
the Shares hereunder, certificates representing the Shares
shall be delivered by or on behalf of each Selling Stockholder
in accordance with the terms and conditions of this Agreement
and of the Custody Agreement, and actions taken by the
Custodian pursuant to the Custody Agreement or by the
Attorneys-in-Fact pursuant to the Power of Attorney shall be
as valid as if such death, incapacity or other event had not
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<PAGE> 13
occurred, regardless of whether or not the Custodians or
Attorneys-in-Fact, or any of them, shall have received notice
of such death, incapacity or other event.
(x) Such Selling Stockholder is not prompted to sell
shares of Common Stock by any information concerning the
Company which is not included or incorporated by reference in
the Registration Statement or the Prospectus.
(c) Any certificates signed by any officer of the Company and
delivered to you or to counsel for the Underwriters shall be deemed a
representation and warranty by the Company to each Underwriter as to
the matters covered thereby; and any certificate signed by or on behalf
of the Selling Stockholders as such and delivered to you or to counsel
for the Underwriters shall be deemed a representation and warranty by
the Selling Stockholders to each Underwriter as to the matters covered
thereby.
5. Conditions of the Underwriters' Obligations. The
obligations of the Underwriters under this Agreement are several and not joint.
The respective obligations of the Underwriters to purchase the Shares are
subject to each of the following terms and conditions:
(a) The Prospectus shall have been timely filed with the
Commission in accordance with Section 6(A)(a) of this Agreement.
(b) No order preventing or suspending the use of any
preliminary prospectus or the Prospectus shall have been or shall be in
effect and no order suspending the effectiveness of the Registration
Statement shall be in effect and no proceedings for such purpose shall
be pending before or threatened by the Commission, and any requests for
additional information on the part of the Commission (to be included in
the Registration Statement or the Prospectus or otherwise) shall have
been complied with to the satisfaction of the Representatives.
(c) The representations and warranties of the Company and the
Selling Stockholders contained in this Agreement and in the
certificates delivered pursuant to this Section 5 shall be true and
correct when made and on and as of each Closing Date as if made on such
date and the Company and the Selling Stockholders shall have performed
all covenants and agreements and satisfied all the conditions contained
in this Agreement required to be performed or satisfied by it and them
at or before such Closing Date.
(d) The Representatives shall have received on each Closing
Date a certificate, addressed to the Representatives and dated such
Closing Date, of the chief executive officer and the chief financial
officer of the Company to the effect that the signers of such
certificate have carefully examined the Registration Statement, the
13
<PAGE> 14
Prospectus and this Agreement and that the representations and
warranties of the Company in this Agreement are true and correct on and
as of such Closing Date with the same effect as if made on such Closing
Date and the Company has performed all covenants and agreements and
satisfied all conditions contained in this Agreement required to be
performed or satisfied by it at or prior to such Closing Date.
(e) The Representatives shall have received on each Closing
Date a certificate, addressed to the Representatives and dated such
Closing Date, of the Selling Stockholders to the effect that (i) the
representations and warranties of the Selling Stockholders in this
Agreement are true and correct on and as of such Closing Date with the
same effect as if made on such Closing Date and (ii) such Selling
Stockholders have performed all covenants and agreements and have
satisfied all conditions contained in this Agreement required to be
performed or satisfied by the Selling Stockholders at or prior to such
Closing Date.
(f) The Representatives shall have received on the Effective
Date, at the time this Agreement is executed and on each Closing Date a
signed letter from KPMG Peat Marwick LLP addressed to the
Representatives and dated, respectively, the Effective Date, the date
of this Agreement and each such Closing Date, in form and substance
satisfactory to the Representatives.
(g) The Representatives shall have received on each Closing
Date from Bond, Schoeneck & King, LLP, counsel for the Company, an
opinion, addressed to the Representatives and dated such Closing Date,
and stating in effect that:
(i) The Company has been duly organized and is
validly existing as a corporation in good standing under the laws of
the State of New York. Anaren Microwave, Ltd. and Anaren V.I. Inc. are
the only subsidiaries of the Company and each has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its respective jurisdiction. The Company is duly
qualified and in good standing as a foreign corporation in each
jurisdiction in which the character or location of its assets or
properties (owned, leased or licensed) or the nature of its business
makes such qualification necessary except for such jurisdictions where
the failure to so qualify would not have a material adverse effect on
the assets or properties, business, results of operations, prospects or
condition (financial or otherwise) of the Company.
(ii) The Company has all requisite corporate power
and authority, and all necessary authorizations, approvals, consents,
orders, licenses, certificates and permits of and from all governmental
or regulatory bodies or any other person or entity, to own, lease and
license its assets and properties as described in the Registration
Statement and the Prospectus and conduct its business as now being
conducted, as described in the Registration Statement and the
Prospectus; and the Company has all requisite corporate power and
authority and all
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<PAGE> 15
necessary authorizations, approvals, consents, orders, licenses,
certificates and permits to enter into, deliver and perform this
Agreement and to issue and sell the Shares (except as may be required
under state securities laws).
(iii) To such counsel's knowledge, all of the
properties now or formerly owned or leased by the Company or any
subsidiary, all research and manufacturing operations conducted thereon
(including discharges and emissions therefrom) and all research and
manufacturing equipment now or formerly used at said properties, have
been and are in compliance with all Federal, state, local and foreign
statutes, ordinances, regulations, rules and standards concerning or
relating to industrial hygiene and the protection of health, safety,
welfare and the environment (collectively, "the Environmental Laws"),
except to the extent that any failure to be in compliance, singly or in
the aggregate, would not have a material adverse effect upon the assets
or properties, business, results of operations, prospects or condition
(financial or otherwise) of the Company. To such counsel's knowledge,
the Company has not received notice of and does not have knowledge, of
any claim, demand, investigation, regulatory action, suit or other
action instituted or threatened against it or said property relating to
any of the Environmental Laws.
(iv) The authorized and issued capital stock of the
Company is as set forth in the Registration Statement and the
Prospectus, except for issuances and forfeitures subsequent to the date
of the information provided in the Registration Statement and
Prospectus pursuant to employee stock plans and/or option agreements
referred to in the Prospectus; the certificates evidencing the Shares
are in due and proper legal form under New York law and have been duly
authorized for issuance by the Company; all of the outstanding shares
of Common Stock of the Company have been duly and validly authorized
and have been duly and validly issued and are fully paid and
nonassessable and none of them was issued in violation of any
preemptive or other similar right or any provision of any agreement to
which, to such counsel's knowledge, the Company is a party. The Shares
when issued and sold pursuant to this Agreement will be duly and
validly issued, outstanding, fully paid and nonassessable and none of
them will have been issued in violation of any preemptive or other
similar right or any provision of any agreement to which, to such
counsel's knowledge, the Company is a party. To such counsel's
knowledge, except as disclosed in the Registration Statement and the
Prospectus, there is no outstanding option, warrant or other right
calling for the issuance of, and no commitment, plan or arrangement to
issue, any share of stock of the Company or any security convertible
into, exercisable for, or exchangeable for stock of the Company. The
Common Stock and the Shares conform in all material respects to the
descriptions thereof contained in the Registration Statement and the
Prospectus or in any Incorporated Document.
(v) The agreement of each director and executive
officer of the Company and each Selling Stockholder stating that they
will not directly or indirectly
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<PAGE> 16
sell, offer, contract to sell, make any short sale, pledge or otherwise
dispose of any shares of Common Stock or any securities convertible
into, or exercisable for other rights to purchase or acquire Common
Stock for a period of 90 days from the date of this Agreement, without
the prior written consent of CIBC Oppenheimer Corp., has been duly and
validly delivered by such persons and constitutes the legal, valid and
binding obligation of each such person enforceable against each such
person in accordance with its terms, except as enforceability thereof
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles.
(vi) The Company is qualified to file a Registration
Statement with the Commission using Form S-3. All necessary corporate
action has been duly and validly taken by the Company to authorize the
execution, delivery and performance of this Agreement, the execution
and filing of the Registration Statement and the issuance and sale of
the Shares. This Agreement has been duly and validly authorized,
executed and delivered by the Company and this Agreement constitutes
the legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms except (A) as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles and (B) to the extent that rights to indemnity or
contribution under this Agreement may be limited by Federal or state
securities laws or the public policy underlying such laws.
(vii) To such counsel's knowledge, after due inquiry,
neither the execution, delivery and performance of this Agreement by
the Company nor the consummation of any of the transactions
contemplated hereby (including, without limitation, issuance and sale
by the Company of the Shares) will give rise to a right to terminate or
accelerate the due date of any payment due under or conflict with or
result in the breach of any term or provision of, or constitute a
default (or any event which with notice or lapse of time, or both,
would constitute a default) under, or require consent or waiver (which
consent or waiver has not previously been obtained) under, or result in
the execution or imposition of any lien, charge or encumbrance upon any
properties or assets of the Company pursuant to the terms of any
indenture, mortgage, deed of trust, note or other agreement or
instrument to which the Company is a party or by which it or any of its
properties or businesses is bound, or any franchise, license, permit,
judgment, decree, order, statute, rule or regulation or violate any
provision of the charter or by-laws of the Company.
(viii) To such counsel's knowledge, no default
exists, and no event has occurred which with notice or lapse of time,
or both, would constitute a default, in the due performance and
observance of any term, covenant or condition by the Company of any
indenture, mortgage, deed of trust, note or any other agreement or
instrument to which the Company is a Party or by which it or any of its
assets or properties or businesses may be bound or affected, where the
consequences of such default would
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<PAGE> 17
have a material and adverse effect on the assets, properties, business,
results of operations, prospects or condition (financial or otherwise)
of the Company.
(ix) The Company is not in violation of any term or
provision of its charter or by-laws or to such counsel's knowledge any
franchise, license, permit, judgment, decree, order, statute, rule or
regulation, where the consequences of such violation would have a
material and adverse effect on the assets or properties, businesses,
result of operations, prospects or condition (financial or otherwise)
of the Company.
(x) No consent, approval, authorization, license,
certificate, permit or order of any court or governmental agency or
body is required for the execution, delivery or performance of this
Agreement by the Company or the consummation of the transactions
contemplated hereby or thereby, including without limitation the sale
of the Shares, except such as have been obtained under the Securities
Act and such as may be required under state securities laws in
connection with the purchase and distribution of the Shares by the
several Underwriters.
(xi) To such counsel's knowledge, there is no
litigation or governmental or other proceeding or investigation, before
any court or before or by any public body or board pending or
threatened against, or involving the assets, properties or businesses
of, the Company which would have a material adverse effect upon the
assets or properties, business, results of operations, prospects or
condition (financial or otherwise) of the Company.
(xii) The statements in the Prospectus under the
captions ["Description of Capital Stock," "Liquidity and Capital
Resources," "Risk Factors - Shares Eligible for Future Sales" and
"Shares Eligible for Future Sale,"] insofar as such statements
constitute a summary of documents referred to therein or matters of
law, are fair summaries in all material respects and accurately present
the information called for with respect to such documents and matters.
To such counsel's knowledge, all contracts and other documents required
to be filed as exhibits to, or described in, the Registration Statement
or any Incorporated Document have been so filed with the Commission or
are fairly described in the Registration Statement, as the case may be.
(xiii) To such counsel's knowledge, no holder of any
security of the Company has the right to have any security owned by
such holder included in the Registration Statement or, except as
described in the Registration Statement, to demand registration of any
security of the Company.
(xiv) The Registration Statement, all preliminary
prospectuses and the Prospectus and each amendment or supplement
thereto (except for the financial statements and schedules and other
financial and statistical data included therein, as to which such
counsel need not express no opinion) comply as to form in all material
17
<PAGE> 18
respects with the requirements of the Securities Act and the Rules, and
the Incorporated Documents (except for the financial statements and
schedules, and other financial and statistical data included therein,
as to which such counsel need not express an opinion), when they were
filed with the Commission appeared on their face to comply in all
material respects with the requirements of the Exchange Act and the
rules and regulations of the Commission thereunder.
(xv) The Registration Statement has become effective
under the Securities Act, and no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or, to such counsel's
knowledge, are threatened, pending or contemplated.
To the extent deemed advisable by such counsel, they may rely as to
matters of fact on certificates of responsible officers of the Company and
public officials and on the opinions of other counsel satisfactory to the
Representatives as to matters which are governed by laws other than the laws of
the State of New York and the Federal laws of the United States; provided that
such counsel shall state that, in their opinion, the Underwriters and they are
justified in relying on such other opinions. Copies of such certificates and
other opinions shall be furnished to the Representatives and counsel for the
Underwriters.
In addition, such counsel shall state that such counsel has
participated in conferences with officers and other representatives of the
Company, representatives of the Representatives and representatives of the
independent certified public accountants of the Company, at which conferences
the contents of the Registration Statement and the Prospectus and related
matters were discussed and, although such counsel is not passing upon and does
not assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement and the Prospectus (except as
specified in the foregoing opinion), on the basis of the foregoing, no facts
have come to the attention of such counsel which lead such counsel to believe
that the Registration Statement at the time it became effective (except with
respect to the financial statements and notes and schedules thereto and other
financial data, as to which such counsel need express no belief) contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or that the Prospectus as amended or supplemented (except with respect to the
financial statements and notes schedules thereto and other financial data, as to
which such counsel need make no statement) on the date thereof contained any
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(h) The Representatives shall have received on each Closing
Date from Bond, Schoeneck & King, LLP, counsel to the Selling
Stockholders, an opinion, addressed to the Representatives and dated
such Closing Date, and stating in effect that:
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<PAGE> 19
(i) Each Selling Stockholder has duly authorized,
executed and delivered the Custody Agreement and Power of
Attorney (a) appointing the Company as such Selling
Stockholder's Custodian with authority to take custody of and
deliver the Shares as represented by certificates on behalf of
such Selling Stockholder in connection with the transactions
contemplated by this Agreement and the Custody Agreement and
(b) appointing Lawrence A. Sala and Joseph E. Porcello, as
such Selling Stockholder's attorneys-in-fact with authority to
execute and deliver this Agreement on behalf of such Selling
Stockholder and otherwise to act on behalf of such Selling
Stockholder in connection with the transactions contemplated
by this Agreement and the Power of Attorney.
(ii) This Agreement has been duly executed and
delivered on behalf of the Selling Stockholders and this
Agreement constitutes the legal, valid and binding obligation
of each Selling Stockholder enforceable against each Selling
Stockholder in accordance with its terms except (A) as such
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and
by general equitable principles and (B) to the extent that
rights to indemnity or contribution under this Agreement may
be limited by Federal or state securities laws or the public
policy underlying such laws.
(iii) Each Selling Stockholder has full legal right
and any approval required by law (other than as required by
state securities laws) to sell, assign, transfer and deliver
the Shares to be sold by such Selling Stockholder.
(iv) No consent, approval, authorization or order of
any court, or governmental agency or body is required for
consummation of the transactions contemplated by this
Agreement in connection with the Shares to be sold by each
Selling Stockholder hereunder except such as may be required
under state securities laws.
(v) To such counsel's knowledge, each Selling
Stockholder has good and valid title to the Shares being sold
by such Selling Stockholder hereunder, free and clear of all
liens, mortgages, pledges, encumbrances, claims, equities and
security interests;
(vi) To such counsel's knowledge, upon delivery of
the Shares to be sold by each Selling Stockholder pursuant to
this Agreement and payment therefor as contemplated herein,
and assuming that the Underwriters purchase such Shares in
good faith and without notice of an adverse claim, each
Selling Stockholder will have transferred to the Underwriters
good and valid title to the Shares being sold by such Selling
Stockholder on the Closing Date, free and
19
<PAGE> 20
clear of all liens, mortgages, pledges, encumbrances, claims,
equities and security interests whatsoever.
(vii) The agreement of each Selling Stockholder
stating that he or it will not, directly or indirectly, sell,
offer, contract to sell, make any short sale, pledge or
otherwise dispose of any shares of Common Stock or any
securities convertible into or exchangeable or exercisable for
any other rights to purchase or acquire Common Stock for a
period of 90 days from the date of this Agreement without the
prior written consent of CIBC Oppenheimer Corp. has been duly
and validly delivered by each Selling Stockholder and
constitutes the legal, valid and binding obligation of each
Selling Stockholder, enforceable against such Selling
Stockholder in accordance with the terms thereof, except as
enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles.
In rendering the foregoing opinion, such counsel may rely, provided
that the opinion shall state that you and they are entitled to so rely, as to
matters involving laws of any jurisdiction other than the State of New York or
the United States, upon opinions addressed to the Underwriters of other counsel
satisfactory to them and to counsel for the Underwriters; and as to all matters
of fact, upon certificates and written statements of the Selling Stockholders.
(i) All proceedings taken in connection with the sale of the
Firm Shares and the Option Shares as herein contemplated shall be
satisfactory in form and substance to the Representatives and their
counsel and the Underwriters shall have received from Hale and Dorr
LLP, counsel to the Underwriters ("Hale and Dorr"), a favorable
opinion, addressed to the Representatives and dated such Closing Date,
with respect to the Shares, the Registration Statement and the
Prospectus, and such other related matters, as the Representatives may
reasonably request, and the Company shall have furnished to Hale and
Dorr such documents as they may reasonably request for the purpose of
enabling them to pass upon such matters.
(j) The Representatives shall have received on each Closing
Date from the Company and the Selling Stockholders such other
certificates or documents as may be reasonably requested by the
Representatives.
6. Covenants of the Company.
(A) The Company covenants and agrees as follows:
(a) The Company shall prepare the Prospectus in a form
approved by the Representatives and file such Prospectus pursuant to
Rule 424(b) under the Securities
20
<PAGE> 21
Act not later than the Commission's close of business on the second
business day following the execution and delivery of this Agreement,
or, if applicable, such earlier time as may be required by Rule
430A(a)(3) under the Securities Act, and shall promptly advise the
Representatives (i) when any amendment to the Registration Statement
shall have become effective, (ii) of any request by the Commission for
any amendment of the Registration Statement or the Prospectus or for
any additional information, (iii) of the prevention or suspension of
the use of any preliminary prospectus or the Prospectus or of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the institution or
threatening of any proceeding for that purpose and (iv) of the receipt
by the Company of any notification with respect to the suspension of
the qualification of the Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose. The
Company shall not file any amendment of the Registration Statement or
supplement to the Prospectus or any document that upon filing becomes
an Incorporated Document unless the Company has furnished the
Representatives a copy for its review prior to filing and shall not
file any such proposed amendment or supplement to which the
Representatives reasonably object. The Company shall use its best
efforts to prevent the issuance of any such stop order and, if issued,
to obtain as soon as possible the withdrawal thereof.
(b) If, at any time when a prospectus relating to the Shares
is required to be delivered under the Securities Act and the Rules, any
event occurs as a result of which the Prospectus as then amended or
supplemented would include any untrue statement of a material fact or
omit to state any material fact necessary to make the statements
therein in the light of the circumstances under which they were made
not misleading, or if it shall be necessary to amend or supplement the
Prospectus (or to file under the Exchange Act any document which, upon
filing, becomes an Incorporated Document) to comply with the Securities
Act or the Rules, the Company promptly shall prepare and file with the
Commission, subject to the second sentence of paragraph (a) of this
Section 6(A), an amendment or supplement which shall correct such
statement or omission or an amendment which shall effect such
compliance.
(c) The Company shall make generally available to its security
holders and to the Representatives as soon as practicable, but not
later than 45 days after the end of the 12-month period beginning at
the end of the fiscal quarter of the Company during which the Effective
Date occurs (or 90 days if such 12-month period coincides with the
Company's fiscal year), an earning statement (which need not be
audited) of the Company, covering such 12-month period, which shall
satisfy the provisions of Section 11(a) of the Securities Act or Rule
158 of the Rules.
(d) The Company shall furnish to the Representatives and
counsel for the Underwriters, without charge, signed copies of the
Registration Statement (including all exhibits thereto and amendments
thereof) and such number of copies of
<PAGE> 22
Incorporated Documents (including all exhibits thereto and amendments
thereof) as the Representatives may request, and shall furnish to each
other Underwriter a copy of the Registration Statement (without
exhibits thereto) and all amendments thereof and, so long as delivery
of a prospectus by an Underwriter or dealer may be required by the
Securities Act or the Rules, as many copies of any preliminary
prospectus and the Prospectus and any amendments thereof and
supplements thereto as the Representatives may reasonably request.
(e) The Company shall cooperate with the Representatives and
their counsel in endeavoring to qualify the Shares for offer and sale
under the laws of such jurisdictions as the Representatives may
designate and shall maintain such qualifications in effect so long as
required for the distribution of the Shares; provided, however, that
the Company shall not be required in connection therewith, as a
condition thereof, to qualify as a foreign corporation or to execute a
general consent to service of process in any jurisdiction or subject
itself to taxation as doing business in any jurisdiction.
(f) For a period of five years after the date of this
Agreement, the Company shall supply to the Representatives, and to each
other Underwriter who may so request in writing, copies of such
financial statements and other periodic and special reports as the
Company may from time to time distribute generally to the holders of
any class of its capital stock and shall furnish to the Representatives
a copy of each annual or other report it shall be required to file with
the Commission.
(g) Without the prior written consent of the Representatives,
for a period of 90 days after the date of this Agreement, the Company
shall not issue, sell, offer, contract to sell, make any short sale
pledge or register with the Commission (other than on Form S-8 or on
any successor form), or otherwise dispose of, directly or indirectly,
any equity securities of the Company (or any securities convertible
into or exchangeable or exercisable for equity securities of the
Company), except for the issuance of the Shares pursuant to the
Registration Statement and the issuance of shares pursuant to existing
stock option plans.
(h) On or before completion of the offering, the Company shall
make all filings required under applicable securities law and by the
Nasdaq National Market.
(B) The Company agree to pay, or reimburse if paid by the
Representatives, whether or not the transactions contemplated hereby are
consummated or this Agreement is terminated, all costs and expenses incident to
the public offering of the Shares and the performance of the obligations of the
Company and the Selling Stockholders under this Agreement including those
relating to: (i) the preparation, printing, filing and distribution of the
Registration Statement including all exhibits thereto, each preliminary
prospectus, the Prospectus, all amendments and supplements to the Registration
Statement and the
22
<PAGE> 23
Prospectus, and the printing, filing and distribution of this Agreement; (ii)
the preparation and delivery of certificates for the Shares to the Underwriters;
(iii) the registration or qualification of the Shares for offer and sale under
the securities laws of the various jurisdictions referred to in Section 6(A)(e),
including the reasonable fees and disbursements of counsel for the Underwriters
in connection with such registration and qualification and the preparation,
printing, distribution and shipment of preliminary and supplementary Blue Sky
memoranda; (iv) the furnishing (including costs of shipping and mailing) to the
Representatives and to the Underwriters of copies of each preliminary
prospectus, the Prospectus and all amendments or supplements to the Prospectus,
and of the several documents required by this Section 6 to be so furnished, as
may be reasonably requested for use in connection with the offering and sale of
the Shares by the Underwriters or by dealers to whom Shares may be sold; (v) the
filing fees of the National Association of Securities Dealers, Inc. in
connection with its review of the terms of the public offering; (vi) the
furnishing (including costs of shipping and mailing) to the Representatives and
to the Underwriters of copies of all reports and information required by Section
6(A)(f); (vii) inclusion of the Shares for quotation on the Nasdaq National
Market; and (viii) all transfer taxes, if any, with respect to the sale and
delivery of the Shares by the Company and the Selling Stockholders to the
Underwriters. Subject to the provisions of Section 9, the Underwriters agree to
pay, whether or not the transactions contemplated hereby are consummated or this
Agreement is terminated, all costs and expenses incident to the performance of
the obligations of the Underwriters under this Agreement not payable by the
Company pursuant to the preceding sentence.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act against any and all losses, claims, damages and
liabilities, joint or several (including any reasonable investigation,
legal and other expenses incurred in connection with, and any amount
paid in settlement of, any action, suit or proceeding or any claim
asserted), to which they, or any of them, may become subject under the
Securities Act, the Exchange Act or other Federal or state law or
regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus, the Registration
Statement or the Prospectus or any amendment thereof or supplement
thereto (or in any Incorporated Document), or arise out of or are based
upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that such indemnity shall
not inure to the benefit of any Underwriter (or any person controlling
such Underwriter) on account of any
23
<PAGE> 24
losses, claims, damages or liabilities (or actions in respect thereof)
arising from the sale of the Shares to any person by such Underwriter
if such untrue statement or omission or alleged untrue statement or
omission was made in such preliminary prospectus, the Registration
Statement or the Prospectus, or such amendment or supplement, in
reliance upon and in conformity with information furnished in writing
to the Company by the Representatives on behalf of any Underwriter
specifically for use therein; and provided, further, that the Company
shall not be liable to any Underwriter with respect to any preliminary
prospectus or any preliminary prospectus supplement, to the extent that
any such loss, claim, damage or liability of such Underwriter results
solely form an untrue statement of a material fact contained in, or the
omission of a material fact from, such preliminary prospectus, which
untrue statement or omission was corrected in the Prospectus, if the
Company shall sustain the burden of proving that (i) such Underwriter
sold Shares to the person alleging such loss, claim, damage or
liability without sending or giving or making available electronically,
at or prior to the written confirmation of such sale, a copy of the
Prospectus to such person, (ii) delivery of a Prospectus was required
under the Securities Act, and (iii) the Company delivered to such
Underwriter copies of such Prospectus in such quantities as it shall
have reasonably required. This indemnity agreement will be in addition
to any liability which the Company may otherwise have.
(b) Each Selling Stockholder agrees, severally and not
jointly, to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act
against any losses, claims, damages and liabilities, joint or several
(including any reasonable investigation, legal and other expenses
incurred in connection with, and any amount paid in settlement of, any
action, suit or proceeding or any claim asserted), to which they, or
any of them, may become subject under the Securities Act, the Exchange
Act or other Federal or state law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in
any preliminary prospectus, the Registration Statement, the Prospectus
or any amendment thereof or supplement thereto (or in any Incorporated
Document), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that such indemnity shall not inure to the benefit
of any Underwriter (or any person controlling such Underwriter) on
account of any losses, claims, damages or liabilities (or actions in
respect thereof) arising from the sale of the Shares to any person by
such Underwriter if such untrue statement or omission or alleged untrue
statement or omission was made in such preliminary prospectus, the
Registration Statement or the Prospectus, or such amendment or
supplement, in reliance upon and in conformity with information
furnished in writing to the Company by the Representatives on behalf of
any Underwriter specifically for use therein; and provided
24
<PAGE> 25
further that the obligation of each Selling Stockholder to indemnify
the Underwriters (and any controlling persons thereof) shall be limited
to the net proceeds received by such Selling Stockholder from the
Underwriters hereunder. This indemnity agreement will be in addition to
any liability which the Selling Stockholders may otherwise have.
(c) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, each person, if any, who
controls the Company within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, each director of the Company,
each officer of the Company who signs the Registration Statement and
each Selling Stockholder to the same extent as the foregoing indemnity
from the Company and each Selling Stockholder to each Underwriter, but
only insofar as such losses, claims, damages or liabilities arise out
of or are based upon any untrue statement or omission or alleged untrue
statement or omission which was made in any preliminary prospectus, the
Registration Statement or the Prospectus, or any amendment thereof or
supplement thereto, contained in the paragraphs relating to
stabilization and passive market making on the inside front cover page
of the Prospectus and the statements contained under the caption
"Underwriting" in the Prospectus; provided, however, that the
obligation of each Underwriter to indemnify the Company (including any
controlling person, director or officer thereto) and each Selling
Stockholder shall be limited to the net proceeds received by the
Company and each such Selling Stockholder from such Underwriter
hereunder.
(d) Any party that proposes to assert the right to be
indemnified under this Section 7 will, promptly after receipt of notice
of commencement of any action, suit or proceeding against such party in
respect of which a claim is to be made against an indemnifying party or
parties under this Section 7, notify each such indemnifying party of
the commencement of such action, suit or proceeding, enclosing a copy
of all papers served. No indemnification provided for in Section 7(a),
7(b) or 7(c) shall be available to any party who shall fail to give
notice as provided in this Section 7(d) if the party to whom notice was
not given was unaware of the proceeding to which such notice would have
related and was prejudiced by the failure to give such notice but the
omission so to notify such indemnifying party of any such action, suit
or proceeding shall not relieve it from any liability that it may have
to any indemnified party for contribution or otherwise than under this
Section 7. In case any such action, suit or proceeding shall be brought
against any indemnified party and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent that it shall wish,
jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and
the approval by the indemnified party of such counsel, the indemnifying
party shall not be liable to such indemnified party for any legal or
other expenses,
25
<PAGE> 26
except as provided below and except for the reasonable costs of
investigation subsequently incurred by such indemnified party in
connection with the defense thereof. The indemnified party shall have
the right to employ its counsel in any such action, but the fees and
expenses of such counsel shall be at the expense of such indemnified
party unless (i) the employment of counsel by such indemnified party
has been authorized in writing by the indemnifying parties, (ii) the
indemnified party shall have reasonably concluded that there may be a
conflict of interest between the indemnifying parties and the
indemnified party in the conduct of the defense of such action (in
which case the indemnifying parties shall not have the right to direct
the defense of such action on behalf of the indemnified party) or (iii)
the indemnifying parties shall not have employed counsel to assume the
defense of such action within a reasonable time after notice of the
commencement thereof, in each of which cases the fees and expenses of
counsel shall be at the expense of the indemnifying parties. An
indemnifying party shall not be liable for any settlement of any
action, suit, proceeding or claim effected without its written consent
(which consent shall not be unreasonably withheld or delayed).
8. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in
Sections 7(a) and 7(b) is due in accordance with its terms but for any reason is
held to be unavailable from the Company or the Selling Stockholders, the
Company, the Selling Stockholders and the Underwriters shall contribute to the
aggregate losses, claims, damages and liabilities (including any investigation,
legal and other expenses reasonably incurred in connection with, and any amount
paid in settlement of, any action, suit or proceeding or any claims asserted,
but after deducting any contribution received by the Company or the Selling
Stockholders from persons other than the Underwriters, such as persons who
control the Company within the meaning of the Securities Act, officers of the
Company who signed the Registration Statement and directors of the Company, who
may also be liable for contribution) to which the Company, the Selling
Stockholders and one or more of the Underwriters may be subject in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Selling Stockholders on the one hand and the Underwriters on the
other from the offering of the Shares or, if such allocation is not permitted by
applicable law or indemnification is not available as a result of the
indemnifying party not having received notice as provided in Section 7 hereof,
in such proportion as is appropriate to reflect not only the relative benefits
referred to above but also the relative fault of the Company and the Selling
Stockholders on the one hand and the Underwriters on the other in connection
with the statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by, as applicable, the Company, the Selling
Stockholders and the Underwriters shall be deemed to be in the same proportion
as (x) the total proceeds from the offering (net of underwriting discounts but
before deducting expenses) received by the Company or by the Selling
Stockholders, as set forth in the table on the cover page of the Prospectus,
bear to (y) the underwriting discounts received by the Underwriters, as set
forth in the table on the cover page of the Prospectus.
26
<PAGE> 27
The relative fault of the Company and the Selling Stockholders or the
Underwriters shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact related to information
supplied by the Company, the Selling Stockholders or the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company, the Selling
Stockholders and the Underwriters agree that it would not be just and equitable
if contribution pursuant to this Section 8 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this Section 8, (i) in no case shall any Underwriter be liable or responsible
for any amount in excess of the underwriting discount applicable to the Shares
purchased by such Underwriter hereunder, and (ii) the Company and the Selling
Stockholders shall be liable and responsible for any amount in excess of such
underwriting discount; provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person, if
any, who controls an Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act shall have the same rights to
contribution as such Underwriter, and each person, if any, who controls the
Company within the meaning of the Section 15 of the Securities Act or Section 20
of the Exchange Act, each officer of the Company who shall have signed the
Registration Statement and each director of the Company shall have the same
rights to contribution as the Company, subject in each case to clauses (i) and
(ii) in the immediately preceding sentence of this Section 8. Any party entitled
to contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under this Section 8,
notify such party or parties from whom contribution may be sought, but the
omission so to notify such party or parties from whom contribution may be sought
shall not relieve the party or parties from whom contribution may be sought from
any other obligation it or they may have hereunder or otherwise than under this
Section 8. No party shall be liable for contribution with respect to any action,
suit, proceeding or claim settled without its written consent (which consent
shall not be unreasonably withheld or delayed). The Underwriters' obligations to
contribute pursuant to this Section 8 are several in proportion to their
respective underwriting commitments and not joint.
9. Termination. This Agreement may be terminated with respect
to the Shares to be purchased on a Closing Date by the Representatives by
notifying the Company and the Selling Stockholders, at any time,
(a) in the absolute discretion of the Representatives at or
before any Closing Date: (i) if on or prior to such date, any domestic
or international event or act or occurrence has materially disrupted,
or in the opinion of the Representatives will in the future materially
disrupt, the securities markets in the United States; (ii) if there has
27
<PAGE> 28
occurred any new outbreak or material escalation of hostilities or
other calamity or crisis the effect of which on the financial markets
of the United States is such as to make it, in the judgment of the
Representatives, inadvisable to proceed with the offering; (iii) if
there shall be such a material adverse change in general financial,
political or economic conditions or the effect of international
conditions on the financial markets in the United States is such as to
make it, in the judgment of the Representatives, inadvisable or
impracticable to market the Shares; (iv) if trading in the Shares has
been suspended by the Commission or trading generally on the New York
Stock Exchange, on the American Stock Exchange or on the Nasdaq
National Market has been suspended or limited, or minimum or maximum
ranges for prices for securities shall have been fixed, or maximum
ranges for prices for securities have been required, by said exchanges
or by order of the Commission, the National Association of Securities
Dealers, Inc., or any other governmental or regulatory authority; or
(v) if a banking moratorium has been declared by any state or Federal
authority, or
(b) at or before any Closing Date, that any of the conditions
specified in Section 5 shall not have been fulfilled when and as
required by this Agreement.
If this Agreement is terminated pursuant to any of its
provisions, the Company and the Selling Stockholders shall not be under any
liability to any Underwriter, and no Underwriter shall be under any liability to
the Company and the Selling Stockholders, except that (y) if this Agreement is
terminated by the Representatives or the Underwriters because of any failure,
refusal or inability on the part of the Company or the Selling Stockholders to
comply with the terms or to fulfill any of the conditions of this Agreement, the
Company and the Selling Stockholders will reimburse the Underwriters for all
out-of-pocket expenses (including the reasonable fees and disbursements of their
counsel) incurred by them in connection with the proposed purchase and sale of
the Shares or in contemplation of performing their obligations hereunder and (z)
no Underwriter who shall have failed or refused to purchase the Shares agreed to
be purchased by it under this Agreement, without some reason sufficient
hereunder to justify cancellation or termination of its obligations under this
Agreement, shall be relieved of liability to the Company, the Selling
Stockholders or the other Underwriters for damages occasioned by its failure or
refusal.
10. Substitution of Underwriters. If one or more of the
Underwriters shall fail (other than for a reason sufficient to justify the
cancellation or termination of this Agreement under Section 9) to purchase on
any Closing Date the Shares agreed to be purchased on such Closing Date by such
Underwriter or Underwriters, the Representatives may find one or more substitute
underwriters to purchase such Shares or make such other arrangements as the
Representatives may deem advisable or one or more of the remaining Underwriters
may agree to purchase such Shares in such proportions as may be approved by the
Representatives, in each case upon the terms set forth in this Agreement. If no
such arrangements have been made by the close of business on the business day
following such Closing Date,
28
<PAGE> 29
(a) if the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date shall not exceed 10% of the Shares
that all the Underwriters are obligated to purchase on such Closing
Date, then each of the nondefaulting Underwriters shall be obligated to
purchase such Shares on the terms herein set forth in proportion to
their respective obligations hereunder; provided, that in no event
shall the maximum number of Shares that any Underwriter has agreed to
purchase pursuant to Section 1 be increased pursuant to this Section 10
by more than one-ninth of such number of Shares without the written
consent of such Underwriter, or
(b) if the number of Shares to be purchased by the defaulting
Underwriters on such Closing Date shall exceed 10% of the Shares that
all the Underwriters are obligated to purchase on such Closing Date,
then the Company shall be entitled to an additional business day within
which it may, but is not obligated to, find one or more substitute
underwriters reasonably satisfactory to the Representatives to purchase
such Shares upon the terms set forth in this Agreement.
In any such case, either the Representatives or the Company shall have
the right to postpone the applicable Closing Date for a period of not more than
five business days in order that necessary changes and arrangements (including
any necessary amendments or supplements to the Registration Statement or
Prospectus) may be effected by the Representatives and the Company. If the
number of Shares to be purchased on such Closing Date by such defaulting
Underwriter or Underwriters shall exceed 10% of the Shares that all the
Underwriters are obligated to purchase on such Closing Date, and none of the
nondefaulting Underwriters or the Company shall make arrangements pursuant to
this Section within the period stated for the purchase of the Shares that the
defaulting Underwriters agreed to purchase, this Agreement shall terminate with
respect to the Shares to be purchased on such Closing Date without liability on
the part of any nondefaulting Underwriter to the Company and without liability
on the part of the Company and the Selling Stockholders, except in both cases as
provided in Sections 6(B), 7, 8 and 9. The provisions of this Section 10 shall
not in any way affect the liability of any defaulting Underwriter to the
Company, the Selling Stockholders or the nondefaulting Underwriters arising out
of such default. A substitute underwriter hereunder shall become an Underwriter
for all purposes of this Agreement.
11. Default of Selling Stockholders. Failure or refusal by any
of the Selling Stockholders to sell and deliver on the Closing Date the Shares
agreed to be sold and delivered by such Selling Stockholder shall in no manner
relieve the other Selling Stockholders or the Company of their respective
obligations under this Agreement. If any Selling Stockholder should fail or
refuse to sell and deliver his or its Shares, the remaining Selling Stockholders
shall have the right hereby granted to increase, pro rata or otherwise, the
number of Shares to be sold by them hereunder to the total number of Shares to
be sold by all Selling Stockholders as set forth in Schedule I. If the remaining
Selling Stockholders do not fully exercise the right to increase the number of
Shares to be sold by them, the Underwriters, at your option, will
29
<PAGE> 30
have the right to elect to purchase or not to purchase the Shares to be sold by
the Company and the remaining Selling Stockholders. In the event the
Underwriters purchase the Shares of the Company and such other Selling
Stockholders pursuant to this Section 11, the Closing Date shall be postponed
for a period of not more than five business days in order that the Registration
Statement and Prospectus or other documents may be amended or supplemented if
and to the extent necessary under the provisions of the Act and the Rules and
Regulations or under the securities laws of any jurisdiction. If the
Underwriters determine not to purchase the Shares of the Company and the other
Selling Stockholders, if any, this Agreement shall terminate and neither the
Company nor the Underwriters nor any other Selling Stockholder shall be under
any obligation under this Agreement except as provided in Sections 6(B), 7, 8
and 9.
12. Miscellaneous. The respective agreements, representations,
warranties, indemnities and other statements of the Company or its officers, of
the Selling Stockholders and of the Underwriters set forth in or made pursuant
to this Agreement shall remain in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or the Selling
Stockholders, the Company or any of the officers, directors or controlling
persons referred to in Sections 7 and 8 hereof, and shall survive delivery of
and payment for the Shares. The provisions of Sections 6(B), 7, 8 and 9 shall
survive the termination or cancellation of this Agreement.
This Agreement has been and is made for the benefit of the
Underwriters, the Company and the Selling Stockholders and their respective
successors and assigns, and, to the extent expressed herein, for the benefit of
persons controlling any of the Underwriters or the Company, and directors and
officers of the Company, and their respective successor and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include any purchaser of
Shares from any Underwriter merely because of such purchase.
All notices and communications hereunder shall be in writing and mailed
or delivered or by telephone or telegraph if subsequently confirmed in writing,
(a) if to the Representatives, c/o CIBC Oppenheimer Corp., Oppenheimer Tower,
World Financial Center, New York, New York 10281 Attention: Equity Syndicate,
(b) if to the Company, to its agent for service as such agent's address appears
on the cover page of the Registration Statement and (c) if to the Selling
Stockholders, to
---------------------------.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to principles of conflict of
laws.
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
30
<PAGE> 31
Please confirm that the foregoing correctly sets forth the agreement
among us.
Very truly yours,
ANAREN MICROWAVE, INC.
By
------------------------------
Title:
SELLING STOCKHOLDERS
By:
------------------------------
as Attorney-in-Fact
By:
------------------------------
as Attorney-in-Fact
Confirmed:
CIBC Oppenheimer Corp.
- ----------------------------
Acting severally on behalf of itself
and as representative of the several
Underwriters named in Schedule II annexed
hereto.
By CIBC Oppenheimer Corp.
By
------------------------
Title:
31
<PAGE> 32
SCHEDULE I
Selling Stockholders
<TABLE>
<CAPTION>
Number of Number of
Firm Shares Option Shares
Name to be Sold to be Sold
- ---- ---------- ----------
<S> <C> <C>
--------------- ----------------
TOTAL
=============== ================
</TABLE>
32
<PAGE> 33
SCHEDULE II
<TABLE>
<CAPTION>
Number of
Firm Shares to
Name be Purchased
- ---- ------------
<S> <C>
CIBC Oppenheimer Corp.
Needham & Company, Inc.
Pacific Growth Equities, Inc.
------------
Total
============
</TABLE>
33
<PAGE> 1
Exhibit 5.1
November 18, 1997
Anaren Microwave, Inc.
6635 Kirkville Road
East Syracuse, New York 13057
Ladies and Gentlemen:
We have acted as counsel to Anaren Microwave, Inc., a New York corporation
(the "Company"), in connection with the Registration Statement on Form S-3 (No.
333-39015) filed with the Securities and Exchange Commission, as amended (the
"Registration Statement"), in connection with the registration of 1,000,000
authorized but unissued shares of the Company's Common Stock, par value $.01
per share (the "Common Stock") being offered by the Company, and up to 172,500
authorized but unissued shares of Common Stock which may be sold by the Company
upon exercise of an over-allotment option granted to the underwriters by the
Company. The Common Stock is to be sold to the underwriters as described in the
Registration Statement for resale to the public.
In our capacity as counsel to the Company in connection with such
registration, we are familiar with the proceedings taken and proposed to be
taken by the Company in connection with the issuance and sale of the shares of
Common Stock, and for purposes of this opinion have assumed that such
proceedings will be timely completed in the manner proposed. In addition, we
have examined the originals or copies, identified to our satisfaction, of such
documents and records of the Company and such other documents and records as we
have deemed necessary as a basis for our opinion.
Based on the foregoing, and having regard for such legal considerations as
we have deemed relevant, we are of the opinion that the 1,172,500 shares of
Common Stock which may be offered and sold by the Company, upon issuance,
delivery and payment therefor in the manner described in the Registration
Statement, will be legally issued, fully paid, and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption
"Legal Matters" in the Registration Statement.
Very truly yours,
BOND, SCHOENECK & KING, LLP
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT ACCOUNTANT'S CONSENT
The Board of Directors
Anaren Microwave, Inc.
We consent to the use of our report included herein and to the reference to
our firm under the headings "Selected Consolidated Financial Data" and "Experts"
in the prospectus.
KPMG PEAT MARWICK LLP
Syracuse, New York
November 17, 1997
