<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 29, 1999
REGISTRATION NO. 333-83889
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
ANADIGICS, INC.
(Exact name of registrant as specified in its charter)
------------------------------
<TABLE>
<S> <C> <C>
DELAWARE 35 TECHNOLOGY DRIVE 22-2582106
(State or other jurisdiction WARREN, NEW JERSEY 07059 (I.R.S. Employer
of (908) 668-5000 Identification
incorporation or organization) (Address, including zip code, and telephone number, No.)
including area code, of registrant's principal executive
offices)
</TABLE>
------------------------
DR. BAMI BASTANI
CHIEF EXECUTIVE OFFICER AND PRESIDENT
ANADIGICS, INC.
35 TECHNOLOGY DRIVE
WARREN, NEW JERSEY 07059
(908) 668-5000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
With copies of all orders, notices and communications to:
<TABLE>
<S> <C>
STEPHEN A. GREENE, ESQ. ROBERT S. RISOLEO, ESQ.
CAHILL GORDON & REINDEL SULLIVAN & CROMWELL
80 PINE STREET 125 BROAD STREET
NEW YORK, NY 10005 NEW YORK, NEW YORK 10004
(212) 701-3000 (212) 558-4000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective. 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, 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. / /
------------------------
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 SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION. DATED SEPTEMBER 29, 1999.
3,000,000 Shares
[LOGO]
ANADIGICS, INC.
Common Stock
-------------
The common stock is traded on the Nasdaq National Market under the symbol
"ANAD". The last reported sale price of the common stock on July 26, 1999 was
$30.81 per share.
SEE "RISK FACTORS" ON PAGE 4 TO READ ABOUT FACTORS YOU SHOULD CONSIDER
BEFORE BUYING SHARES OF THE COMMON STOCK.
------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------
<TABLE>
<CAPTION>
Per Share Total
----------- -----
<S> <C> <C>
Initial price to public.................................................. $ $
Underwriting discount.................................................... $ $
Proceeds, before expenses, to ANADIGICS.................................. $ $
</TABLE>
To the extent that the underwriters sell more than 3,000,000 shares of
common stock, the underwriters have the option to purchase up to an additional
450,000 shares from ANADIGICS at the initial price to public less the
underwriting discount.
------------------
The underwriters expect to deliver the shares against payment in New York,
New York on , 1999.
GOLDMAN, SACHS & CO.
PRUDENTIAL SECURITIES
CIBC WORLD MARKETS
NEEDHAM & COMPANY, INC.
------------------
<PAGE>
Prospectus dated , 1999.
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS. BEFORE INVESTING IN OUR COMMON STOCK, YOU SHOULD READ THE ENTIRE
PROSPECTUS CAREFULLY, INCLUDING OUR CONSOLIDATED FINANCIAL STATEMENTS AND THE
NOTES TO THOSE STATEMENTS AND THE RISKS OF INVESTING IN OUR COMMON STOCK
DESCRIBED UNDER "RISK FACTORS".
TECHNICAL TERMS USED IN THIS PROSPECTUS ARE EXPLAINED IN THE GLOSSARY
BEGINNING ON PAGE 36. MARKET DATA INCLUDED IN THIS PROSPECTUS HAVE BEEN OBTAINED
FROM INDEPENDENT SOURCES THAT WE BELIEVE ARE RELIABLE.
ANADIGICS
We are a leading supplier of radio frequency/microwave integrated circuit
solutions for the communications industry. Our products are used to send and
receive signals in a variety of wireless and broadband communications
applications. Our innovative high frequency integrated circuits enable
manufacturers of communications equipment to enhance overall system performance
and reduce manufacturing cost and time to market.
In the wireless market we focus on applications for cellular and personal
communications systems, or PCS, handsets. The global proliferation of wireless
communication has substantially enhanced the attractiveness of this market for
our products. According to Gartner Group's Dataquest, the worldwide market for
cellular/PCS wireless handsets has grown from 18.7 million units produced in
1993 to 175.4 million units in 1998. This represents a compound annual growth
rate of 56%. Dataquest projects that cellular/PCS handset production will exceed
550 million units per year by 2003. In the broadband market we focus on
applications for cable television systems, cable modems and fiber optic
communication systems. We believe the broadband communications market offers
significant growth opportunities driven by the emergence of interactive cable
systems offering increased video content, internet connection services and
telephony and fiber optic networks providing capacity for internet and
communications services. We serve these standards-driven markets with strong
customer relationships, radio frequency/microwave integrated circuit design
expertise, short development and production cycle time and competitive pricing.
We design, develop and manufacture our integrated circuits primarily using
gallium arsenide, or GaAs, semiconductor material, which provides our products
with several advantages over products based on silicon. For example, GaAs-based
integrated circuits can operate at three to five times higher frequency, have
lower noise figures, are better at facilitating integration of passive
components and are more power efficient than silicon-based products. The
industry transition from analog to digital data processing has resulted in
products that require faster digital integrated circuits which, in turn, require
higher performing analog interfaces to the outside world.
We recently began production in our new six-inch analog GaAs wafer
fabrication facility, which we believe to be the first and only six-inch analog
GaAs wafer fabrication facility in our industry. Using a six-inch wafer allows
us to produce, at a small incremental cost, more than twice the integrated
circuit dice per wafer than can be produced from the current industry norm
four-inch wafer. In addition, we are in the process of developing products using
Heterojunction Bipolar Transistor or HBT technology, which will reduce design
complexity and power usage for our next-generation power amplifiers. With our
strong fabrication capability, significant management experience and innovative
designs, we believe we can rapidly develop products in line with market
requirements.
We believe our competitive advantages are our radio frequency/microwave
integrated circuit design, development and applications expertise, our high
volume, low-cost GaAs technology manufacturing expertise, as well as our strong
working relationships with leading original equipment
1
<PAGE>
manufacturers in each of our target markets. Our principal customers, based on
net sales, include LM Ericsson AB, General Instrument Corp., Lucent
Technologies, Inc., Methode Electronics, Inc., Motorola Inc., Nortel Ltd.,
Scientific-Atlanta, Inc. and Toshiba Corp.
Our goal is to become the leading supplier of radio frequency/microwave
integrated circuit solutions for the wireless and broadband markets. The key
elements of our strategy are to:
- be first-to-market with proprietary value-added products that provide
cost-effective integrated circuit solutions;
- capitalize on our world class manufacturing capabilities;
- forge new relationships and leverage existing customer relationships with
original equipment manufacturers; and
- pursue strategic acquisitions and alliances to gain access to and benefit
from complementary technologies.
ANADIGICS was incorporated in Delaware in 1984. Our executive offices are
located at 35 Technology Drive, Warren, New Jersey 07059. Our telephone number
is (908) 668-5000. Our internet site is http://www.anadigics.com. Our internet
site does not form a part of this prospectus.
THE OFFERING
The following information assumes that the underwriters do not exercise the
option granted by ANADIGICS to purchase additional shares in the offering. See
"Underwriting".
<TABLE>
<S> <C>
Common stock offered by ANADIGICS............ 3,000,000 shares
Common stock to be outstanding after the
offering................................... 17,871,937 shares (1)
Use of proceeds.............................. We expect to use the net proceeds from this
offering for general corporate purposes,
including capital expenditures and working
capital. We may use all or a portion of the
net proceeds to acquire complementary
businesses or technologies. Pending these
uses, we intend to invest the net proceeds
from this offering in investment-grade,
income-producing securities.
Nasdaq National Market symbol................ ANAD
</TABLE>
- ------------------------
(1) Based on shares outstanding as of July 4, 1999. Excludes 4,731,666 shares of
common stock reserved for issuance under our stock purchase and stock option
plans and warrants outstanding on July 4, 1999, of which 3,826,541 shares of
common stock are issuable upon exercise of options and warrants outstanding
on July 4, 1999. See notes 1, 8 and 11 to the audited consolidated financial
statements.
2
<PAGE>
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
---------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C>
1996 1997 1998 JUNE 28, 1998 JULY 4, 1999
---------- ---------- ---------- -------------- ------------
<CAPTION>
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Net sales........... $ 68,864 $ 102,536 $ 86,075 $ 41,460 $ 55,582
Gross profit........ 29,977 46,443 19,847 14,827 19,434
Income (loss) from
operations........ 9,735 17,539 (19,029) (2,428) (1,278)
Net income (loss)
(2)............... 11,991 15,329 (9,558) (752) (4,541)
Diluted earnings per
share (1)(2)...... $ 0.93 $ 1.02 $ (0.65) $ (0.05) $ (0.31)
Weighted average
common and
dilutive
securities
outstanding....... 12,907,851 15,063,879 14,723,941 14,711,323 14,811,687
</TABLE>
<TABLE>
<CAPTION>
AT JULY 4, 1999
--------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED(3)
--------- ---------------
BALANCE SHEET DATA:
Working capital................................................. $ 53,527 $ 140,604
Total assets.................................................... 169,255 256,332
Current maturities of long-term debt............................ 1,000 1,000
Current maturities of capital lease obligations................. 160 160
Long-term debt, less current portion............................ 3,500 3,500
Capital lease obligations, less current portion................. 117 117
Stockholders' equity............................................ 134,809 221,886
</TABLE>
- ------------------------
(1) Includes recognition of a net deferred tax benefit of approximately $3.6
million and $1.9 million in 1996 and 1997, respectively.
(2) Includes a restructuring charge of $7.1 million for fiscal year ended
December 31, 1998, a restructuring charge of $1.1 million for the six months
ended June 28, 1998 and a provision for litigation settlement of $6.9
million for the six months ended July 4, 1999. See "Management's Discussion
and Analysis of Results of Operations."
(3) Adjusted to reflect our sale of 3,000,000 shares of common stock in this
offering at an estimated initial price to public of $30.81 per share and the
application of the estimated net proceeds from this offering. See "Use of
Proceeds".
3
<PAGE>
RISK FACTORS
BEFORE PURCHASING SHARES, YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS
DESCRIBED BELOW. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCURS, IT COULD
MATERIALLY ADVERSELY AFFECT OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF
OPERATIONS. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES WE
ARE FACING. WE MAY HAVE OTHER RISKS AND UNCERTAINTIES OF WHICH WE ARE NOT YET
AWARE OR WHICH WE CURRENTLY BELIEVE ARE IMMATERIAL THAT MAY ALSO IMPAIR OUR
BUSINESS OPERATIONS. IN LIGHT OF THESE RISKS AND UNCERTAINTIES, THE TRADING
PRICE OF OUR COMMON STOCK COULD DECLINE AND YOU MAY LOSE ALL OR PART OF THE
MONEY YOU PAID TO BUY OUR COMMON STOCK.
BUSINESS RISKS
WE DEPEND ON A SMALL NUMBER OF CUSTOMERS; THE LOSS OF OR A DECREASE IN PURCHASES
BY ONE OF THESE CUSTOMERS WOULD MATERIALLY AND ADVERSELY AFFECT OUR REVENUES.
We receive most of our revenues from a few significant customers. Sales to
Ericsson, General Instrument and Qualcomm Personal Electronics accounted for
16%, 16% and 12%, respectively, of 1996 net sales, and 33%, 13% and 16%,
respectively, of 1997 net sales. Ericsson and General Instrument accounted for
34% and 17%, respectively, of 1998 net sales, and 40% and 21%, respectively, of
net sales during the six month period ended July 4, 1999. No other customer
accounted for greater than 10% of net sales during these periods. Substantially
all of our sales of wireless applications are to Ericsson. Our operating results
have been materially and adversely affected in the past by the failure of
anticipated orders to be realized and by deferrals or cancellations of orders as
a result of changes in customer requirements. If we were to lose Ericsson,
General Instrument or another major customer, or if sales to Ericsson, General
Instrument or another major customer were to decrease materially, our results of
operations would be materially and adversely affected. See "Business--Target
Markets and Products".
OUR BUSINESS COULD BE ADVERSELY AFFECTED BY OUR FAILURE TO DEVELOP AND MARKET
GAAS HBT TECHNOLOGY.
We are developing GaAs HBT process technology to manufacture power
amplifiers and certain other integrated circuits. Some of our competitors
already offer products using this technology. We are pursuing our development
effort initially with a third party foundry. We hope to begin production of GaAs
HBT products in our own manufacturing facility in the year 2000. We cannot
assure you that our efforts will result in commercially successful GaAs HBT
products in a timely or cost effective manner, if at all. Our in-house design
efforts may be delayed or fail to deliver viable GaAs HBT products. Our third
party foundry may delay or fail to deliver GaAs HBT technology or products to
us. Our results of operations could be materially and adversely affected by our
failure to develop this technology. Even if we are successful, our customers may
purchase their GaAs HBT requirements from our competitors.
DECREASES IN OUR CUSTOMERS' SALES VOLUMES COULD RESULT IN DECREASES IN OUR SALES
VOLUMES.
A substantial portion of our sales are derived from sales to original
equipment manufacturers. Where our products are designed into an original
equipment manufacturer's product, our sales volumes depend upon the commercial
success of the original equipment manufacturer's product. Our operating results
have been materially and adversely affected in the past by the failure of
anticipated orders to be realized and by deferrals or cancellations of orders as
a result of changes in demands for our customers' products.
WE WILL NEED TO KEEP PACE WITH RAPID PRODUCT AND PROCESS DEVELOPMENT AND
TECHNOLOGICAL CHANGES TO BE COMPETITIVE.
Rapid changes in both product and process technologies characterize the
markets for our products. Because these technologies are continually improving,
we believe that our future success
4
<PAGE>
will depend, in part, upon our ability to continue to improve our product and
process technologies and develop new products and process technologies. If a
competing technology emerges that is superior to our existing technology and we
are unable to develop and/or implement the new technology successfully or to
develop and implement a competitive and economic alternative technology, our
results of operations would be materially and adversely affected. We will need
to make substantial investments to develop these enhancements and technologies,
and we cannot assure you that funds for these investments will be available or
that these enhancements and technologies will be successful. See
"Business--Competition" and "--Research and Development".
OUR PRODUCTS HAVE EXPERIENCED RAPIDLY DECLINING UNIT PRICES.
In each of the markets where we compete, prices of established products tend
to decline significantly over time. Accordingly, in order to remain competitive,
we believe that we must continue to develop product enhancements and new
technologies that will either slow the price declines of our products or reduce
the cost of producing and delivering our products. If we fail to do so, our
results of operations would be materially and adversely affected.
THE VARIABILITY OF OUR MANUFACTURING YIELDS MAY AFFECT OUR GROSS MARGINS.
Our manufacturing yields vary significantly among products, depending on the
complexity of a particular GaAs integrated circuit's design and our experience
in manufacturing that type of GaAs integrated circuit. Although our process
technology uses standard silicon semiconductor manufacturing equipment,
aggregate production quantities of GaAs integrated circuits manufactured by us
and the GaAs integrated circuit industry in general have been relatively low
compared with silicon integrated circuit production volumes. We have in the past
experienced difficulties in achieving planned yields, which have adversely
affected our gross margins.
Regardless of the process technology used, the fabrication of integrated
circuits is a highly complex and precise process. Problems in the fabrication
process can cause a substantial percentage of wafers to be rejected or numerous
integrated circuits on each wafer to be nonfunctional, thereby reducing yields.
These difficulties can include:
- defects in masks, which are used to transfer circuit patterns onto our
wafers;
- impurities in the materials used;
- contamination of the manufacturing environment; and
- equipment failure.
Because a large portion of our costs of manufacturing are relatively fixed
and average selling prices for our products tend to decline over time, it is
critical for us to improve the number of shippable integrated circuits per wafer
and increase the production volume of wafers in order to maintain and improve
our results of operations. Yield decreases can result in substantially higher
unit costs, which could materially and adversely affect our operating results
and have done so in the past. We cannot assure you that we will be able to
continue to improve yields in the future or that we will not suffer periodic
yield problems, particularly during the early production of new products or
introduction of new process technologies. In either case, our results of
operations could be materially and adversely affected. See
"Business--Manufacturing, Assembly and Testing".
DELAYS IN COMPLETING THE TRANSITION OF PRODUCTION FROM OUR FOUR-INCH WAFER
FABRICATION FACILITY TO OUR SIX-INCH WAFER FABRICATION FACILITY COULD RESULT IN
DELAYS IN PRODUCT SHIPMENTS AND A LOSS OF CUSTOMERS AS A RESULT OF SUCH DELAYS.
Some of our customers are currently in the process of qualifying our
six-inch wafer fabrication facility. We expect qualification activities to be
completed by the end of 1999. We cannot assure you that all of our customers
will qualify our products produced in the six-inch wafer fabrication facility.
5
<PAGE>
We also face numerous risks in the successful operation of our new six-inch
wafer fabrication facility as well as in our overall production operations. We
will need to train and manage production personnel successfully in order to
effectively operate our new six-inch wafer fabrication facility.
Our failure to accomplish any of the foregoing could result in delays in
product shipments, adversely affect our relations with our customers and have a
material and adverse effect on our results of operations.
WE MAY FACE CONSTRAINTS ON OUR MANUFACTURING CAPACITY WHICH WOULD LIMIT OUR
ABILITY TO INCREASE SALES VOLUMES.
We believe that our new six-inch wafer fabrication facility should be able
to satisfy our production needs for the next twelve months. However, if
production volumes were to increase significantly from expected levels, we might
be required to hire, train and manage additional production personnel in order
to successfully increase production capacity at this facility. We cannot assure
you that we would be able to implement these changes successfully. A delay for
any reason in capacity increase would limit our ability to increase sales
volumes. In addition, if we fail to increase production and do not have
sufficient capacity to satisfy the demand for our products, our relationships
with customers could be harmed.
WE DEPEND ON FOREIGN SEMICONDUCTOR ASSEMBLY CONTRACTORS AND A LOSS OF AN
ASSEMBLY CONTRACTOR COULD RESULT IN DELAYS OR REDUCTIONS IN PRODUCT SHIPMENT.
We do not assemble our integrated circuits or our multi-chip modules.
Instead, we provide the GaAs integrated circuit dice and, in some cases,
packaging and other components to assembly vendors located primarily in Asia. We
maintain one qualified service supplier for each assembly process. If we are
unable to obtain sufficient high quality and timely assembly service, or if we
lose any of our current assembly vendors, we would experience delays or
reductions in product shipment, and/or reduced product yields that could
materially and adversely affect our results of operations.
WE MAY FACE CONSTRAINTS ON OUR TEST CAPACITY WHICH COULD RESULT IN MANUFACTURING
DELAYS.
We use automated test equipment that is currently in short supply. As a
result, we need to order the test equipment from the manufacturer far in advance
of our anticipated need. We cannot assure you that we can obtain the appropriate
equipment in a timely or cost effective manner. Our inability to obtain
appropriate test equipment in a timely manner could result in manufacturing
delays which would have a material and adverse effect on our results of
operations.
THE SHORT LIFE CYCLES OF SOME OF OUR PRODUCTS MAY LEAVE US WITH OBSOLETE OR
EXCESS INVENTORIES.
The life cycles of some of our products depend heavily upon the life cycles
of the end products into which our products are designed. We estimate that
current life cycles for cellular and PCS telephone handsets, and in turn our
cellular and PCS products, are approximately 12 to 24 months. Products with
short life cycles require us to manage closely production and inventory levels.
We cannot assure you that obsolete or excess inventories, which may result from
unanticipated changes in the estimated total demand for our products and/or the
estimated life cycles of the end products into which our products are designed,
will not affect us. In 1998, we recorded a significant charge for obsolete
inventory. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--1998 Compared to 1997--Gross Margin".
6
<PAGE>
SOURCES FOR CERTAIN COMPONENTS, MATERIALS AND EQUIPMENT ARE LIMITED WHICH COULD
RESULT IN DELAYS OR REDUCTIONS IN PRODUCT SHIPMENTS.
We do not manufacture any of the starting wafers or packaging components
used in the production of our GaAs integrated circuits. Starting wafers and
packaging components are available from a limited number of sources. If we are
unable to obtain these wafers or components in the required quantities and
quality we could experience delays or reductions in product shipments, which
would materially and adversely affect our results of operations. Although we
have not experienced any significant difficulty to date in obtaining wafers or
components, we cannot assure you that shortages will not arise in the future.
We depend on a limited number of vendors to supply equipment used in our
manufacturing processes. When demand for semiconductor manufacturing equipment
is high, lead times for delivery of such equipment can be substantial. We cannot
assure you that we would not lose potential sales if required manufacturing
equipment is unavailable and, as a result, we are unable to maintain or increase
our production levels. See "We may face constraints on our manufacturing
capacity which would limit our ability to increase sales volumes".
OUR INTERNATIONAL SALES AND OPERATIONS INVOLVE FOREIGN EXCHANGE RISKS.
Sales to customers located outside North America (based on shipping
addresses and not on the locations of ultimate end users) accounted for
approximately 65%, 57%, 58% and 61% of total net sales for 1996, 1997, 1998 and
the six month period ended July 4, 1999, respectively. We expect that revenues
derived from international sales will continue to represent a significant
portion of our total net sales. In addition, independent third parties located
in Asia supply a substantial portion of the starting wafers and packaging
components that we use in the production of GaAs integrated circuits, and
assemble nearly all of our products.
Due to our reliance on international sales and on foreign suppliers and
assemblers, we are subject to risks of conducting business outside of the United
States, including primarily those arising from currency fluctuations, which
could affect the price of our products and/or the cost of producing them.
OUR ORGANIZATIONAL DOCUMENTS AND DELAWARE LAW MAY MAKE IT HARDER FOR US TO BE
ACQUIRED WITHOUT THE CONSENT AND COOPERATION OF OUR BOARD OF DIRECTORS AND
MANAGEMENT.
Several provisions of our certificate of incorporation and our by-laws may
deter or prevent a takeover attempt, including a takeover attempt in which the
potential purchaser offers to pay a per share price greater than the current
market price for our common stock. These provisions include:
- PREFERRED STOCK--our board of directors can issue preferred stock senior
to our common stock at any time. This may make it more difficult and more
expensive to acquire us;
- STAGGERED BOARD--only a minority of the total number of board members can
be elected each year. This may make it more difficult for a potential
purchaser to elect enough directors to assure control of ANADIGICS; and
- STOCKHOLDER RIGHTS PLAN--our stockholder rights plan may make it more
difficult and more expensive to acquire us, unless the stockholder rights
are first redeemed by our board.
In addition, we are subject to Section 203 of the Delaware General
Corporation Law which restricts business combinations with some stockholders
once the stockholder acquires 15% or more of our common stock.
7
<PAGE>
INDUSTRY RISKS
WE FACE INTENSE COMPETITION WHICH COULD RESULT IN A DECREASE OF OUR PRODUCTS'
PRICES AND SALES.
The semiconductor industry is intensely competitive and is characterized by
rapid technological change. We compete with manufacturers of discrete GaAs and
silicon semiconductors and with manufacturers of GaAs and silicon integrated
circuits. We expect increased competition from:
- other GaAs integrated circuit manufacturers who may replace us as a single
source supplier to an original equipment manufacturer or otherwise dilute
our sales to an original equipment manufacturer;
- silicon analog integrated circuit manufacturers; and
- companies which may penetrate the radio frequency/microwave integrated
circuit communications market with other technologies, such as those based
on silicon germanium.
In addition, some of our customers compete with us and we have lost business
in the past to this type of competition. We expect that sales of low data rate
fiber optic products used in SONET fiber optic transmissions, could decline
significantly over the next few quarters, as current customers begin to obtain
these products from in-house supply sources.
Increased competition could result in:
- decreased prices of GaAs integrated circuits;
- reduced demand for our products; and
- a reduction in our ability to recover development-engineering costs.
Any of these developments could materially and adversely affect our results of
operations.
Most of our current and potential competitors, which include Alpha
Industries, Inc., Conexant Systems, Inc., Fujitsu Compound Semiconductor Inc.,
Hitachi Ltd., Lucent Technologies, Inc., Maxim Integrated Products, RF Micro
Devices, Inc., Royal Philips Electronics, N.V., TriQuint Semiconductor, Inc. and
Vitesse Semiconductor Corporation, have significantly greater financial,
technical, manufacturing and marketing resources than we do. We cannot assure
you that we will be able to compete successfully with our existing or new
competitors. See "Business-- Competition".
OUR OPERATING RESULTS CAN VARY SIGNIFICANTLY.
The semiconductor industry has been characterized by cyclicality. The
industry has experienced significant economic downturns at times, involving
diminished product demand, accelerated erosion of average selling prices and
production over-capacity. Although the semiconductor industry in general, and
the portion of the industry serving the communications industry in particular,
are currently experiencing a period of increased demand, we cannot assure you
that these conditions will continue. We may experience substantial period to
period fluctuations in future operating results. You should not rely on our
operating results for the six months ended July 4, 1999 as an indicator of our
results for the year ending December 31, 1999.
WE MAY NOT BE SUCCESSFUL IN AVOIDING CLAIMS THAT WE INFRINGE THE INTELLECTUAL
PROPERTY RIGHTS OF OTHERS OR IN PROTECTING OUR OWN INTELLECTUAL PROPERTY RIGHTS.
Our success depends in part on our ability to obtain patents and copyrights,
maintain trade secret protection and operate without infringing on the
proprietary rights of third parties.
As is typical in the semiconductor industry, we have been notified, and may
be notified in the future, that we are infringing certain patent and/or other
intellectual property rights of others. If it is
8
<PAGE>
determined that we have infringed on others' intellectual property rights, we
cannot assure you that we would be able to obtain any required licenses on
commercially reasonable terms.
Currently, there are two unresolved notices claiming that we are infringing
intellectual property rights of others. We intend to defend ourselves vigorously
against these allegations. One such assertion is LEMELSON V. ANADIGICS, ET AL.,
brought against Lucent Technologies, Cypress Semiconductor, LSI Logic Corp. and
a number of other companies in the U.S. District Court for the District of
Arizona in February 1999. The other is an assertion by Rockwell International
Corporation that we are infringing upon a patent on the processing of
semiconductor wafers. The patent will expire in March 2000.
In addition to patent and copyright protection, we also rely on trade
secrets, technical know-how and other unpatented proprietary information
relating to our product development and manufacturing activities which we seek
to protect, in part, by confidentiality agreements with our collaborators and
employees. We cannot assure you that these agreements will not be breached, that
we would have adequate remedies for any breach or that our trade secrets and
proprietary know-how will not otherwise become known or independently discovered
by others. See "Business--Patents, Licenses and Proprietary Rights" and "--Legal
Matters".
RISKS RELATED TO THIS OFFERING
THE VOLATILITY OF OUR STOCK PRICE COULD AFFECT YOUR INVESTMENT IN OUR STOCK.
The market price of our stock has fluctuated widely. Between January 29,
1998 and October 8, 1998 our common stock price dropped from approximately
$33.81 to $5.13 per share. Between October 8, 1998 and July 14, 1999 the price
of our common stock rose from approximately $5.13 to $39.25 per share. The
current market price of our common stock may not be indicative of future market
prices and we may not be able to sustain or increase the value of your
investment in our common stock.
IN THE PAST, WE HAVE MADE PUBLIC STATEMENTS REGARDING OUR HOPES AND EXPECTATIONS
FOR OUR FUTURE REVENUES. THE CONTEXT IN WHICH THESE STATEMENTS WERE MADE MAKES
THEM HIGHLY SPECULATIVE AND OUR ACTUAL RESULTS MAY VARY SIGNIFICANTLY FROM THOSE
STATED. AS A RESULT, YOU SHOULD BASE YOUR INVESTMENT DECISION ONLY UPON THE
INFORMATION IN THIS PROSPECTUS AND NOT ON ANY OTHER PUBLIC STATEMENTS.
The February 8, 1999 and the August 30, 1999 editions of Electronic Buyers'
News referred to statements made by Dr. Bami Bastani, our Chief Executive
Officer, regarding our future revenues. In particular, the articles referred to
Dr. Bastani's statement:
- that in setting ANADIGICS' targets, he hopes to double ANADIGICS' revenue
every two years (Electronic Buyers' News, February 8, 1999); and
- AT&T Corp.'s push into the cable communications business is sparking
interest in the industry's potential and as a result he sees revenue
growing at nearly 35% per year in ANADIGICS' cable set-top and cable-model
business (Electronic Buyers' News, August 30, 1999).
The context within which Dr. Bastani's forward-looking statements were made
makes them highly speculative, based on numerous assumptions and subject to
numerous risks and uncertainties, any of which could cause our actual revenues
to be less than those referenced in these articles. ANADIGICS does not intend
for potential investors to rely upon these statements in making their investment
decisions. You should base your investment decision solely upon the information
contained in this prospectus and not upon the statements above or similar
statements.
9
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements include,
among other things, statements concerning:
- the development of new communication technologies and services;
- the trend in communication systems toward higher operating frequencies;
- the evolution of communication systems from analog to digital modulation;
- the growth opportunities in markets for our products;
- the manufacturing capability of our new six-inch wafer fabrication
facility;
- descriptions of our plans and objectives for our business and the
assumptions that underlie these plans and objectives;
- our future financial performance; and
- other statements regarding matters that are not historical facts.
They also include statements relating to acquisitions and other business
development activities, future capital expenditures, manufacturing capacity,
financing sources and availability and the effects of regulation and
competition. We base these statements on our current expectations, but many
factors and uncertainties, including changes in the securities or financial
markets or in general economic conditions, the availability of equity and debt
financing, competition and the other factors described under "Risk Factors"
above and elsewhere in this prospectus could cause actual results to differ
materially from those described in the forward-looking statements.
We caution you not to place undue reliance on any forward-looking
statements.
10
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the 3,000,000 shares of our common stock
offered with this prospectus after deducting the underwriting discount and
estimated offering expenses are estimated to be $87,077,000, or $100,214,000 if
the underwriters' over-allotment option is exercised in full, assuming an
initial price to public of $30.81 per share. We expect to use the net proceeds
from this offering for general corporate purposes, including capital
expenditures and working capital. We may use all or a portion of the net
proceeds to acquire complementary businesses or technologies. However, we
currently have no agreements or understandings with respect to any acquisitions.
Pending these uses, we intend to invest the net proceeds from this offering in
investment-grade, income-producing securities.
DIVIDEND POLICY
We have never paid cash dividends on our capital stock. Our bank credit
agreement prohibits the payment of cash dividends without the consent of our
bank credit agreement lender. We currently anticipate that we will retain all
available funds for use in the operation and expansion of our business, and do
not anticipate paying any cash dividends in the foreseeable future.
PRICE RANGE OF COMMON STOCK
Our common stock is traded on the Nasdaq National Market under the symbol
"ANAD". The following table shows for the periods indicated the high and low
sale prices for our common stock.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1997
First Quarter.............................................. $ 37.68 $ 24.00
Second Quarter............................................. 35.50 22.50
Third Quarter.............................................. 54.25 30.50
Fourth Quarter............................................. 51.38 21.00
1998
First Quarter.............................................. $ 33.81 $ 13.19
Second Quarter............................................. 16.81 11.00
Third Quarter.............................................. 21.00 7.81
Fourth Quarter............................................. 14.19 5.13
1999
First Quarter.............................................. $ 18.63 $ 11.29
Second Quarter............................................. 37.19 16.00
Third Quarter (through July 26, 1999)...................... 39.25 28.50
</TABLE>
On July 26, 1999 the last reported sale price of our common stock on the
Nasdaq National Market was $30.81 per share. As of July 4, 1999, there were
approximately 340 holders of record of our common stock.
11
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization at July 4, 1999 (1) on an
actual basis and (2) as adjusted to give effect to our sale of 3,000,000 shares
of our common stock at the initial price to public of $30.81 per share, after
deducting the underwriting discount and estimated offering expenses. This table
should be read in conjunction with the consolidated financial statements and
notes thereto appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
AT JULY 4, 1999
-----------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
--------- ------------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Current maturities of long-term debt............................... $ 1,000 $ 1,000
Current maturities of capital lease obligations.................... 160 160
--------- ------------
--------- ------------
Long-term debt, less current portion............................... $ 3,500 $ 3,500
Capital lease obligations, less current portion.................... 117 117
Stockholders' equity(1):
Common stock, par value $.01 per share, 68,000,000 shares
authorized; 14,871,937 shares issued and outstanding;
17,871,937 shares issued and outstanding as adjusted........... 149 179
Additional paid-in capital....................................... 161,843 248,890
Accumulated deficit................................................ (27,139) (27,139)
Accumulated other comprehensive income (loss)...................... (44) (44)
--------- ------------
Total stockholders' equity..................................... 134,809 221,886
--------- ------------
Total capitalization............................................... $ 139,586 $ 226,663
--------- ------------
--------- ------------
</TABLE>
- ------------------------
(1) Excludes 4,731,666 shares of common stock reserved for issuance under our
stock purchase and stock option plans and warrants outstanding on July 4,
1999, of which 3,826,541 shares of common stock are issuable upon exercise
of options and warrants outstanding on July 4, 1999. See notes 1, 8 and 11
to the audited consolidated financial statements.
12
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data for the fiscal years ended December 31, 1994,
1995, 1996, 1997 and 1998 are derived from our consolidated financial
statements, which have been audited by Ernst & Young LLP, independent auditors.
See "Experts". The selected financial data for the six months ended June 28,
1998 and July 4, 1999 are derived from our unaudited condensed consolidated
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six month period ended July 4, 1999 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1999. You should read the following selected financial data
together with the section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our financial statements,
including related notes, and other financial information, all of which are
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
--------------------------------------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
JUNE 28, JULY 4,
1994 1995 1996 1997 1998 1998 1999
--------- ---------- ---------- ---------- ---------- ----------- -----------
<CAPTION>
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales......................... $34,832 $51,460 $68,864 $102,536 $86,075 $41,460 $55,582
Cost of sales..................... 18,454 24,995 38,887 56,093 66,228 26,633 36,148
Gross profit...................... 16,378 26,465 29,977 46,443 19,847 14,827 19,434
Research and development.......... 9,195 11,733 12,036 16,765 18,824 9,750 11,968
Selling and administrative
expense......................... 4,530 6,640 8,206 12,139 12,926 6,405 8,744
Restructuring charges............. -- -- -- -- 7,126 1,100 --
Operating income (loss)........... 2,653 8,092 9,735 17,539 (19,029) (2,428) (1,278)
Interest income (expense), net.... (488) 728 1,368 3,229 2,296 1,225 995
Provision for litigation
settlement...................... -- -- -- -- -- -- 6,925
Income (loss) before income
taxes........................... 2,165 8,820 11,103 20,768 (16,733) (1,203) (7,208)
Provision (benefit) for income
taxes(1)........................ 300 1,527 (888) 5,439 (7,175) (451) (2,667)
Net income (loss) (1)............. $1,865 $7,293 $11,991 $15,329 $(9,558) $(752) $(4,541)
Basic earnings per share.......... $0.23 $0.67 $0.97 $1.07 $(0.65) $(0.05) $(0.31)
Diluted earnings per share(1)..... $0.23 $0.64 $0.93 $1.02 $(0.65) $(0.05) $(0.31)
Weighted average common and
dilutive securities
outstanding..................... 8,260,430 11,374,745 12,907,851 15,063,879 14,723,941 14,711,323 14,811,687
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------------- AT JULY 4,
1994 1995 1996 1997 1998 1999
--------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Working capital.............................................. $ 11,349 $ 35,953 $ 37,825 $ 65,061 $ 57,123 $ 53,527
Total assets................................................. 30,885 66,250 86,996 168,084 154,098 169,255
Current maturities of long-term debt......................... -- -- -- -- 1,000 1,000
Current maturities of capital lease obligations.............. 3,829 1,718 1,292 425 229 160
Long-term debt, less current portion......................... -- -- -- -- 4,000 3,500
Capital lease obligations, less current portion.............. 2,807 1,919 627 389 183 117
Total stockholders' equity................................... 20,520 53,823 70,557 146,463 137,807 134,809
</TABLE>
- ------------------------------
(1) Includes recognition of a net deferred tax benefit of approximately $1.2
million, $3.6 million and $1.9 million in 1995, 1996 and 1997, respectively.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations--1997 Compared to 1996" and note 9 to the audited consolidated
financial statements.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
We were organized in 1984 and initially focused on the development and
manufacture of GaAs integrated circuits for low volume defense and aerospace
applications. In 1988 we began shifting our strategy to focus on radio
frequency/microwave communications systems for high volume applications, and
began production for these applications in 1989. In 1992 we introduced
integrated circuits for cable television. In late 1994 we entered the wireless
communications market with the introduction of cellular telephone integrated
circuits. In 1998 we expanded our fiber optic product offerings with the
introduction of transimpedence amplifiers for the gigabit ethernet market.
In the next few years, we believe there are opportunities to develop
integrated circuits in silicon or silicon germanium which would enhance our GaAs
integrated circuits in modules. Silicon germanium is a technology that improves
the performance of silicon by improving silicon's electron mobility. The
recently established RF Standard Products Group at ANADIGICS will be exploring
the use of these technologies in wireless applications.
We strive to achieve market advantage through the application of our radio
frequency/ microwave design and application knowledge. With our design expertise
we have led the industry with the introduction of innovative products. Recent
examples include dual-band power amplifiers for use in wireless handsets, cable
television 256 QAM upconverters and cable television reverse amplifiers, all of
which offer greater levels of product performance and reduce original equipment
manufacturers' production costs.
We aim to achieve cost advantage through the scale and efficiency of our
manufacturing operations. We recently began production in our new six-inch
analog GaAs wafer fabrication facility, which we believe to be the first and
only six-inch analog GaAs wafer fabrication facility in our industry. Using a
six-inch wafer allows us to produce, at a small incremental cost, more than
twice the integrated circuit dice per wafer than can be produced from the
industry norm four-inch wafer.
RESULTS OF OPERATIONS
The following table sets forth statements of operations data as a percentage
of net sales for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
------------------------------- ------------------------
<S> <C> <C> <C> <C> <C>
JUNE 28, JULY 4,
1996 1997 1998 1998 1999
--------- --------- --------- ----------- -----------
Net sales......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales..................................... 56.5 54.7 76.9 64.2 65.0
--------- --------- --------- ----- -----
Gross profit...................................... 43.5 45.3 23.1 35.8 35.0
Research and development.......................... 17.5 16.4 21.9 23.5 21.6
Selling and administrative expense................ 11.9 11.8 15.0 15.5 15.7
Restructuring charges............................. -- -- 8.3 2.7 --
--------- --------- --------- ----- -----
Operating income (loss)........................... 14.1 17.1 (22.1) (5.9) (2.3)
Interest income, net.............................. 2.0 3.1 2.7 3.0 1.8
Provision for litigation settlement............... -- -- -- -- 12.5
--------- --------- --------- ----- -----
Income (loss) before income taxes................. 16.1 20.2 (19.4) (2.9) (13.0)
Provision (benefit) for income taxes.............. (1.3) 5.3 (8.3) (1.1) (4.8)
--------- --------- --------- ----- -----
Net income (loss)................................. 17.4% 14.9% (11.1)% (1.8)% (8.2)%
--------- --------- --------- ----- -----
--------- --------- --------- ----- -----
</TABLE>
14
<PAGE>
SIX MONTHS 1999 COMPARED TO SIX MONTHS 1998
NET SALES. Net sales during the six month period ended July 4, 1999
increased 34% to $55.6 million from $41.5 million in the six month period ended
June 28, 1998. Sales of integrated circuits for cellular and PCS applications
increased 36% during the six month period ended July 4, 1999 to $22.5 million
from $16.5 million in the six month period ended June 28, 1998 as demand for our
dual-band power amplifiers increased.
Sales of integrated circuits for cable and broadcast applications increased
25% during the six month period ended July 4, 1999 to $20.5 million from $16.4
million in the six month period ended June 28, 1998. Included in the sales of
integrated circuits for cable and broadcast applications are sales of low noise
block converters (which we ceased production of during the third quarter of
1998) of $0.7 million and $2.8 million during the six month period ended July 4,
1999 and June 28, 1998, respectively. The increase in sales of integrated
circuits for cable and broadcast applications during the six month period ended
July 4, 1999 was due to increases in demand for our chip sets used in digital
set-top converters and cable modems, and our line amplifiers used as a repeater
in cable television distribution networks.
Sales of integrated circuits for fiber optic telecommunication and data
communication applications increased 52% during the six month period ended July
4, 1999 to $12.5 million from $8.2 million in the six month period ended June
28, 1998 as demand for transimpedence amplifiers for SONET fiber optic
telecommunications applications and data communication applications increased.
We expect increased competition from internally sourced silicon integrated
circuits at certain of our customers for SONET OC-12 and OC-24 fiber optic
transimpedence amplifiers. Increased competition could result in decreased
prices of our integrated circuits and/or reduced demand for our products. Sales
of SONET OC-12 and OC-24 fiber optic transimpedence amplifiers were
approximately $4.5 million during the first half of 1999.
Engineering service sales, which reflect customers' contributions to
research and development, decreased $0.3 million during the six month period
ended July 4, 1999 to $0.1 million from $0.4 million in the six month period
ended June 28, 1998.
Generally, selling prices for same product sales were lower during the six
month period ended July 4, 1999 compared to the six month period ended June 28,
1998.
GROSS MARGIN. Gross margin during the six month period ended July 4, 1999
declined to 35.0% from 35.8% in the six month period ended June 28, 1998.
Excluding the accelerated depreciation expense of $5.3 million, gross margin
during the six month period ended July 4, 1999 was 44.5%. The accelerated
depreciation expense was due to a reduction in the useful lives of the
fabrication facility equipment and leasehold improvements with original lives
ranging from five to twenty years that were reduced to a life of nine months
beginning October 1, 1998. The reduction in estimated useful life followed our
October 1998 decision to close our four-inch wafer fabrication facility. The
accelerated depreciation expense associated with the closing of our four-inch
wafer fabrication facility that was recorded during the first half of 1999, was
mostly offset by increased sales volume, manufacturing cost structure
improvements and improved yields.
RESEARCH AND DEVELOPMENT. ANADIGICS-funded research and development expense
increased 23% during the six month period ended July 4, 1999 to $12.0 million
from $9.8 million in the six month period ended June 28, 1998. The increase was
primarily attributable to increased research and development (1) of integrated
circuits for cellular and PCS, cable television and fiber optic applications and
(2) of new process technologies. As a percent of sales, ANADIGICS-funded
research and development decreased to 21.6% during the six month period ended
July 4, 1999 from 23.5% in the six month period ended June 28, 1998.
15
<PAGE>
SELLING AND ADMINISTRATIVE. Selling and administrative expenses increased
37% during the six month period ended July 4, 1999 to $8.7 million from $6.4
million in the six month period ended June 28, 1998. The increase was due in
part to increases in performance-related compensation costs, consulting fees and
costs related to our marketing activities. As a percentage of sales, selling and
administrative expenses increased to 15.7% during the six month period ended
July 4, 1999 from 15.5% in the six month period ended June 28, 1998.
RESTRUCTURING CHARGES. During the first quarter of 1998, we recorded a
charge of $1.1 million associated with a reduction in staff of 100 employees.
The employees who were involuntarily terminated were notified, received
information regarding their benefit arrangement and were severed on March 2,
1998. The terminated employees represented all areas of our operations,
including production, research and development, and selling and administrative
areas. The reduction in work force charge primarily consisted of severance pay,
extended medical coverage and outplacement service costs. The $1.1 million was
paid during 1998.
INTEREST INCOME, NET. Interest income, net decreased 19% during the six
month period ended July 4, 1999 to $1.0 million from $1.2 million in the six
month period ended June 28, 1998.
PROVISION FOR LITIGATION SETTLEMENT. We recorded a provision for litigation
settlement of $6.9 million during the second quarter of 1999, as we reached an
agreement in principle with the plaintiffs' counsel to settle a consolidated
class action lawsuit and a derivative lawsuit. The $6.9 million provision
consists of an expected payment of $11.75 million offset by insurance proceeds
of $5.3 million, and $0.4 million of additional legal, settlement, notification
and court related fees, of which $0.2 million was paid as of July 4, 1999.
BENEFIT FOR INCOME TAXES. The benefit for income taxes during the six month
period ended July 4, 1999 was recorded at an estimated annual effective tax rate
of 37.0% of the loss before income taxes.
1998 COMPARED TO 1997
NET SALES. Net sales during 1998 decreased 16% to $86.1 million from $102.5
million in 1997. Net sales consist of product sales and engineering service
sales. Net product sales decreased 15% to $85.4 million in 1998 from $101.0 in
1997. Engineering service sales, which reflect customers' contributions to
research and development, decreased 54% during 1998 to $0.7 million from $1.5
million in 1997.
Sales of integrated circuits for cellular and PCS applications decreased 44%
during 1998 to $33.7 million from $59.7 million during 1997. The lower demand
was due to several factors, including increased competition, a shift in demand
to lower cost phones not using our parts, customer delays in ramp-up of new
generation dual-band phones using our new parts, and in part, the effect of the
Asian financial crisis on the wireless communications markets.
Sales of integrated circuits for cable and broadcast applications increased
36% during 1998 to $28.3 million from $20.8 million in 1997. The increase in
sales of integrated circuits for cable and broadcast applications during 1998
was due to increases in demand for our integrated circuits used in digital
set-top converters and cable modems, and our integrated circuit line amplifier
used as a repeater in hybrid fiber coaxial distribution networks.
Sales of integrated circuits for fiber optic telecommunication and data
communication applications increased 53% during 1998 to $17.6 million from $11.5
million in 1997. The increase was primarily due to an increase in demand for
transimpedence amplifiers for SONET fiber optic telecommunications applications
and sales of a new family of integrated circuits for data
16
<PAGE>
communication applications. ANADIGICS expects increased price competition for
lower data rate fiber optic telecommunications products from other silicon-based
solution providers during 1999.
Sales of integrated circuits for direct broadcast satellite applications
decreased 36% during 1998 to $5.7 million from $9.0 million in 1997. During the
third quarter of 1998, we decided to cease production of our low noise block
converter integrated circuits that were used in direct broadcast satellite
applications because of reduced demand for low noise block converter integrated
circuits and the effects of the Asian financial crisis.
Generally, selling prices for same product sales were lower during 1998
compared to 1997.
GROSS MARGIN. Gross margin during 1998 declined to 23.1% from 45.3% in
1997. The reduction in gross margin was primarily due to increased inventory
reserves totalling $13.8 million, including a special charge of $6.6 million
(substantially all of which was scrapped prior to December 31, 1998) and
accelerated depreciation charges (related to the planned closing of our existing
wafer fabrication facility) of $2.7 million that were recorded during 1998. The
inventory special charges (which were primarily work-in-progress and finished
goods) consisted of the following: $3.4 million of older generation, single-band
power amplifier integrated circuits used in cellular applications, $2.1 million
of low noise block converter integrated circuits used in direct broadcast
satellite applications, and $1.1 million of older generation line amplifiers
used in cable television applications. ANADIGICS was aggressively attempting to
sell these integrated circuits in certain markets (primarily secondary
communications markets in Asia). ANADIGICS experienced limited success in
selling these integrated circuits during 1998 and reevaluated our selling
efforts and the potential markets for these products during 1998. Based upon
this reevaluation, we decided during the third quarter of 1998 that we would
curtail our efforts to sell these products.
The remaining portion of the reserves recorded during 1998 of $7.2 million
(which were primarily work-in-progress and finished goods) consists of inventory
reserves for excess or obsolete inventory which were recorded based upon our
on-going inventory analysis during 1998.
We are currently not aware of any known or expected additional inventory
reserves.
Lower factory utilization and higher fixed costs associated with our new
test and manufacturing administration facilities placed into service during the
second quarter of 1998 also contributed to the reduction in gross margin during
1998 compared to 1997.
RESEARCH AND DEVELOPMENT. ANADIGICS-funded research and development
expenses increased 12% during 1998 to $18.8 million from $16.8 million in 1997.
The increase was primarily attributable to increased research and development of
integrated circuits for fiber optic and cellular and PCS applications. As a
percent of sales, ANADIGICS-funded research and development increased to 21.9%
during 1998 from 16.4% in 1997.
SELLING AND ADMINISTRATIVE. Selling and administrative expenses increased
6% during 1998 to $12.9 million from $12.1 million in 1997. The increase was due
in part to executive relocation costs, an increase in operating costs associated
with our information systems, and other consulting costs. As a percentage of
sales, selling and administrative expenses increased to 15.0% during 1998 from
11.8% in 1997.
RESTRUCTURING CHARGES. In connection with our plan to lower manufacturing
costs and streamline our manufacturing operations, we recorded restructuring
charges totaling $7.1 million during 1998. The restructuring charges consisted
of writedowns of impaired assets of $4.5 million, reductions in force of $1.6
million and wafer fabrication facility shutdown and removal costs of $1.0
million.
17
<PAGE>
WRITEDOWNS OF IMPAIRED ASSETS. We evaluated the on-going value of certain
assets. Based upon our plan to dispose of certain assets with a carrying amount
of $4.6 million and our estimate of sales value, net of related costs to sell,
at $0.1 million, we recorded an impairment loss of $4.5 million, which consisted
of the following items (in millions):
<TABLE>
<S> <C>
Write-down of assets associated with the conversion of the new wafer fabrication
facility from four-inch to six-inch wafers......................................... $ 2.2
Write-down of assets associated with the closure of our in-house assembly
operations......................................................................... 1.0
Write-off of software in connection with our on-going information systems
improvements....................................................................... 0.8
Unused production assets previously used in the production of direct broadcast
satellite low noise block converter integrated circuits............................ 0.5
---
Total write-down on impairment of long-lived assets.............................. $ 4.5
---
---
</TABLE>
REDUCTIONS IN FORCE. We recorded charges of $1.1 million during the first
quarter of 1998 and $0.5 million during the fourth quarter of 1998 associated
with reductions in our workforce. The workforce reduction charges primarily
consisted of severance pay, extended medical coverage and outplacement service
costs for approximately 165 employees primarily involved in our production
operations. Approximately $1.1 million of severance pay, extended medical
coverage, and outplacement service costs were paid through December 31, 1998 for
the termination of approximately 120 employees. We expect to pay the remaining
liability of $0.5 million during the first half of 1999.
FACILITY SHUTDOWN AND REMOVAL COSTS. We recorded charges of $1.0 million
associated with the shutdown and removal of our existing wafer fabrication
facility. See "Business--Manufacturing, Assembly and Testing".
INTEREST INCOME, NET. Interest income, net decreased 29% during 1998 to
$2.3 million from $3.2 million in 1997. The reduction in interest income, net of
$0.9 million was primarily due to a lower amount of investments during 1998,
caused by plant and equipment purchases that were primarily for our new wafer
fabrication facility.
BENEFIT FOR INCOME TAXES. We recorded a benefit for income taxes during
1998 of $7.2 million, or 42.9% of the loss before income taxes. The benefit for
income taxes primarily related to the 1998 federal and state net operating
losses, federal and state research and development credits and state
manufacturing credits, all of which we plan to carry forward.
1997 COMPARED TO 1996
NET SALES. Net sales during 1997 increased 49% to $102.5 million from $68.9
million in 1996. Net sales consist of product sales and engineering service
sales. Net product sales increased 54% to $101.0 million from $65.7 million in
1996. Engineering service sales decreased 51% during 1997 to $1.5 million from
$3.2 million in 1996.
Sales of integrated circuits for cellular and PCS applications increased
144% during 1997 to $59.7 million from $24.5 million in 1996 as a result of
higher volumes. During 1997, we sold power amplifier integrated circuits for all
three major wireless digital standards, including GSM, TDMA and CDMA. As a
percentage of total sales, sales of integrated circuits for the GSM, TDMA and
CDMA frequency bands were approximately 37%, 24% and 28%, respectively in 1997.
Sales of integrated circuits for cable television applications in 1997 increased
51% to $20.8 million from $13.8 million in 1996 as demand for integrated
circuits used in set top converters and cable modems increased.
Sales of integrated circuits for fiber optic SONET, SDH and asynchronous
transfer mode telecommunication applications decreased 1% during 1997 to $11.5
million from $11.6 million in 1996. Sales of integrated circuits for DBS
television applications decreased 43% during 1997 to
18
<PAGE>
$9.0 million from $15.8 million in 1996 as demand from European manufacturers of
direct broadcast satellite equipment for the European market decreased.
Generally, selling prices for same product sales were lower in 1997 compared
to 1996.
GROSS MARGIN. Gross margin during 1997 increased to 45.3% from 43.5% in
1996. The increase was due to manufacturing efficiencies, which resulted in part
from the conversion from three-inch wafers used in 1996 to four-inch wafers used
during 1997, higher production volume and improved production yields. These
factors were partially offset by additional costs associated with assembly and
packaging quality problems on certain products that were incurred during the
fourth quarter of 1997 and a shift in sales mix to lower margin products during
1997 compared to 1996.
RESEARCH AND DEVELOPMENT. Research and development expenses we sponsored
increased 39% during 1997 to $16.8 million from $12.0 million during 1996. The
increase was primarily attributable to increased research and development of
integrated circuits for cellular, PCS and other wireless applications. As a
percentage of sales, these expenses declined to 16.4% during 1997 from 17.5%
during 1996.
During 1997, approximately two-thirds of our research and development
expenses were for the development of integrated circuits for cellular, PCS and
other wireless applications, compared to approximately one-half in 1996.
SELLING AND ADMINISTRATIVE. Selling and administrative expenses increased
48% during 1997 to $12.1 million from $8.2 million during 1996. As a percentage
of sales, these expenses declined during 1997 to 11.8% from 11.9% during 1996.
Administrative expenses increased 64% in 1997 due in part to increased
compensation, recruiting and training costs. Selling expenses increased by 32%
in 1997 due to staffing increases primarily associated with the expansion of our
wireless integrated circuit sales efforts, increased consulting fees and
increased sales commission expense.
INTEREST INCOME, NET. Interest income increased $1.7 million during 1997 to
$3.4 million from $1.7 million during 1996. The increase was due to higher
invested cash balances following the receipt of proceeds from the public
offering of our common stock in February, 1997. Interest expense decreased by
$0.2 during 1997 to $0.2 million from $0.4 million during 1996 on lower levels
of indebtedness.
PROVISION (BENEFIT) FOR INCOME TAXES. The provision for income taxes during
1997 was $5.4 million, or 26.2% of pre-tax income. The benefit for income taxes
in 1996 was $0.9 million, or 8% of pre-tax income. The provision for income
taxes in 1997 included a $1.9 million reduction in the valuation allowance,
which is explained below, which had been recorded prior to 1997 with respect to
deferred tax assets (primarily federal net operating loss net operating loss
carryforwards). The benefit for income taxes in 1996 arose from a $5.2 million
reduction in the valuation allowance, which had been recorded prior to 1996 with
respect to deferred tax assets (primarily net operating loss carryforwards).
As of December 31, 1996, we had net deferred tax assets of approximately
$15.7 million, which primarily consisted of federal net operating loss
carryforwards of $12.6 million and general business credit carryforwards of $0.8
million. A valuation allowance of $10.8 million was provided for the federal net
operating loss and general business credit carryforwards as of December 31,
1996. As of December 31, 1997, we had net deferred tax assets of approximately
$3.5 million and no valuation allowance.
The reductions in the net deferred tax assets and the valuation allowance
from 1996 to 1997 primarily resulted from: (1) our determination that certain
pre-1989 federal net operating loss and general business credit carryforwards
that were severely restricted under Section 382 of the Internal Revenue Code
would not be utilized prior to their expiration, and (2) the results of an
Internal
19
<PAGE>
Revenue Service examination completed in 1997 which resolved uncertainties
regarding possible limitations of federal net operating loss carryforwards and
general business credit carryforwards generated between 1989 and 1992. We had
been providing taxes in 1996 and prior years as if the use of these federal net
operating loss and general business carryforwards were restricted.
The reduction in the pre-1989 net operating loss and general business credit
carryforwards noted above had no effect on net income. The reduction in the
federal net operating loss and general business credit carryforwards generated
between 1989 and 1992 resulted in a reduction of the current federal provision
for income tax expense. The effect of this reduction was an increase in net
income in 1997 of approximately $1.9 million.
LIQUIDITY AND SOURCES OF CAPITAL
As of July 4, 1999, we had $25.3 million in cash and cash equivalents and
$18.3 million in marketable securities. We have $4.5 million of bank debt
outstanding as of the end of the second quarter of 1999. We entered into an
interest rate swap agreement, which effectively fixes the interest rate on this
debt at 7.09%. The swap effectively changed the variable interest rate of this
bank debt to a fixed rate for which the present value of the cash flow is
approximately the same. As of the end of the second quarter of 1999, we also
have available $15.0 million under a term loan facility. The term loan facility
drawdown period expires on July 1, 2001. The outstanding bank debt and the term
loan facility are subject to a number of financial covenants. Substantially all
of our assets are pledged as security for repayments of the outstanding bank
debt and borrowings, if any, under the term loan facility.
Net cash provided by operating activities was $10.1 million during the six
month period ended July 4, 1999.
Net cash used in investing activities (to purchase equipment) was $9.8
million during the six month period ended July 4, 1999.
Net cash provided by financing activities was $1.0 million during the six
month period ended July 4, 1999. Cash provided by financing activities was
primarily from the issuance of our common stock from stock options exercised
during the period.
We expect to spend approximately $30.0 million on equipment, furniture and
fixtures and leasehold improvements during the twelve month period ending June
30, 2000. At July 4, 1999, we have committed to purchase approximately $7.5
million of equipment, furniture and fixtures and leasehold improvements through
the remainder of 1999.
We believe that our current cash and cash equivalent balances, together with
cash anticipated to be generated from operations and the equity offering
described in this prospectus will satisfy anticipated capital needs for the next
twelve months and beyond.
IMPACT OF YEAR 2000
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of our computer
programs or hardware that have date-sensitive software or embedded chips may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices or engage in similar normal business activities.
Our year 2000 initiative is being managed by a senior team of internal staff
and outside consultants. The team's activities are designed to ensure that there
is no adverse effect on our core business operations and that transactions with
customers, suppliers, and financial institutions are fully supported.
20
<PAGE>
Over the past year, we have invested in new computer hardware and software
to improve our business operations. To date we have upgraded the majority of our
critical information systems such that they are now year 2000 ready. Remaining
critical systems are on target for their year 2000 upgrades at the end of
September 1999. As a result of this effort, we do not believe that any year
2000-related failures of critical systems will cause a significant interruption
to our business.
We have also completed a comprehensive review of our equipment and
facilities. Based on this review, we do not believe that any year 2000-related
failures of critical systems will result in a significant disruption to our
business. A number of minor upgrades will be completed by the end of September
1999.
The total cost of the year 2000 project is estimated at $1.6 million and is
being funded through operating cash flows. Of the total project cost,
approximately $1.0 million is for the purchase of new hardware and software,
which will be capitalized. As of July 4, 1999 we have spent approximately $0.8
million on hardware and software purchases and the remaining amount represents
equipment purchases expected to be delivered and installed during the third
quarter of 1999. As of July 4, 1999 we have incurred and expensed approximately
$0.4 million, primarily for assessment of the year 2000 issue, development of a
modification plan and remediation efforts. The remaining $0.2 million is
expected to be incurred and expensed in the third quarter of 1999.
We have contacted our significant suppliers and other third party vendors
with which we have a material relationship in order to determine whether those
entities have adequate plans in place to ensure their year 2000 readiness. We
have also reviewed public disclosures made by our material customers in order to
determine their year 2000 readiness. To date, we have not identified any major
issues with respect to our material customers, our significant suppliers or
other third party vendors.
We believe that a "worst case" scenario would involve third parties'
failures to address year 2000 issues. Such failures could result in, but not
limited to, any of the following:
(1) our utility services are interrupted resulting in our inability to
continue our manufacturing operations;
(2) our shipping services are interrupted preventing us from getting our
product to and from our off-shore packaging facility and to our customers
on a timely basis;
(3) our off-shore assembly contractors operations are interrupted resulting
in our inability to obtain our packaged products on a timely basis.
As of July 4, 1999, we have not developed an overall contingency plan. We do
not intend on doing so unless, as a result of ongoing tests, we determine that
contingency plans are warranted. Based on our assessment to date and our
expectations that our year 2000 initiative will be substantially complete by the
end of September 1999, we believe that adequate time will be available to ensure
alternatives can be assessed, developed and implemented, if necessary, prior to
a year 2000 issue having a negative impact on our operations. However, we can
not guarantee that such contingencies, if required, will be completed on a
timely basis. While we believe our efforts will be adequate to address our year
2000 concerns, there can be no guarantee that we will not experience
unanticipated negative consequences or material costs caused by undetected
errors or defects in the technology used in our internal systems or that third
parties upon which we rely will not experience similar negative consequences.
Our products do not have specific date functions or date dependencies and
will operate according to specifications through the year 2000 and beyond.
21
<PAGE>
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB issued Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities, which is required to be adopted in years
beginning after June 15, 2000. The statement permits early adoption as of the
beginning of any fiscal quarter after its issuance. We expect to adopt the new
statement effective January 1, 2001. The statement will require us to recognize
all derivatives on the balance sheet at fair value. Derivatives that are not
hedges must be adjusted to fair value through income. If a derivative is a
hedge, depending on the nature of the hedge, changes in the fair value of the
derivative will either be offset against the change in fair value of the hedged
asset, liability, or firm commitment through earnings, or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. We do not anticipate that the adoption of this statement
will have a significant effect on our results of operations or financial
position.
22
<PAGE>
BUSINESS
We supply radio frequency/microwave integrated circuit solutions to the
communications industry, enabling manufacturers to enhance overall system
performance and reduce manufacturing cost and time to market. In the wireless
market we focus on applications for cellular and personal communications systems
handsets. In the broadband market we focus on applications (or solutions) for
cable television systems, cable modems and fiber optic communications systems.
We believe our competitive advantages are our design, development and
applications expertise, our high volume, low-cost GaAs technology manufacturing
expertise and our strong working relationships with leading original equipment
manufacturers in our target markets.
We design, develop and manufacture our integrated circuits primarily using
GaAs semiconductor material with MESFET and PHEMT technology. We are currently
in the process of developing products using HBT technology, which we believe
will reduce design complexity and power usage for our next-generation power
amplifiers. We recently began production in our new six-inch analog GaAs wafer
fabrication facility, which we believe to be the first and only six-inch analog
GaAs wafer fabrication facility in our industry. Using a six-inch wafer allows
us to produce, at a small incremental cost, more than twice the integrated
circuit dice per wafer than can be produced from the industry norm four-inch
wafer. With our strong fabrication capability, significant management expertise
and innovative designs, we believe we can rapidly develop products in line with
market requirements.
INDUSTRY OVERVIEW
Over the last decade there have been remarkable developments in electronic
communications, as evidenced by the emergence of wireless communications,
internet services and digital television services. Radio frequency/microwave and
integrated circuit technologies have enabled increases in communications
capacity and significant reductions in systems costs. The wireless and broadband
communications markets are beneficiaries of current technological trends,
including higher frequencies, digital modulation and higher levels of electronic
integration.
Wireless communications, led by cellular and PCS telephone services, are
growing rapidly and wireless services are replacing wireline telephone services
in some markets. According to Gartner Group's Dataquest, the worldwide market
for cellular/PCS wireless handsets has grown from 18.7 million units produced in
1993 to 175.4 million units in 1998. This represents a compound annual growth
rate of 56%. Dataquest projects that cellular/PCS handset production will exceed
550 million units per year in 2003.
Broadband markets are also benefiting from these technological changes.
Cable television systems are moving from one-way analog TV signal distribution
systems to interactive digital systems offering increased and new video content,
internet connection services and telephony. The increased demand for
communication services, such as the internet, is also driving expansion of fiber
optic telecommunications networks.
Given these developments, original equipment manufacturers are facing the
following challenges:
- SHORTER CYCLE TIMES. In the wireless communications market, handset
manufacturers must bring new products to market quickly in order to
maintain their market position. We see new handset platforms being
introduced every six months;
- NEED FOR LOW-COST PRODUCTS. Handset and set-top boxes are increasingly
becoming consumer-driven products. The wide use of these products forces
original equipment manufacturers to offer them at attractive prices. As a
result, suppliers of components must be cost effective in order for
original equipment manufacturers to stay competitive; and
23
<PAGE>
- STRONGER SUPPLIER RELATIONSHIPS. The digital, wireless, cable and fiber
optic industries are standards driven. Companies in the communications
industry must work very closely with their suppliers in order to develop
new products. Companies therefore limit themselves to a small number of
suppliers in order to keep their competitive advantages.
THE GAAS ADVANTAGE
Over the past fourteen years, through our research and development efforts,
we have developed expertise in producing cost-effective GaAs-based integrated
circuits for high-volume commercial applications which offer the performance
attributes required for radio frequency/ microwave applications that are not
easily obtainable with silicon-based integrated circuits. GaAs transistors can
operate at frequencies up to three to five times greater than those possible
with silicon and therefore can handle the requirements of radio
frequency/microwave applications. GaAs integrated circuits have a lower noise
figure than silicon-based integrated circuits, providing increased sensitivity,
less distortion and interference and better dynamic range, thereby enabling
systems to handle a wide range of signal strengths. GaAs is a semi-insulating
material which facilitates integration of the passive components required in
radio frequency/microwave applications. Finally, GaAs integrated circuits used
in transmitter applications are also more power-efficient than silicon-based
circuits, allowing for longer battery life or use of smaller batteries.
OUR STRATEGY
Our objective is to be the leading supplier of radio frequency integrated
circuits for the wireless and broadband communications markets. The cornerstone
of our strategy is to capitalize on opportunities in the wireless and broadband
communications markets by addressing applications which leverage our radio
frequency integrated circuit design and manufacturing expertise and our
established relationships with leading original equipment manufacturers in these
markets. The key elements of our strategy are to:
BE FIRST-TO-MARKET WITH PROPRIETARY VALUE-ADDED PRODUCTS
We intend to continue to design timely, cost-effective integrated circuit
solutions for our target markets. The combination of our experienced engineering
staff and our "quick-turn" wafer fabrication and assembly service allows us to
develop prototypes that can be ready for testing in less than one month. This
design efficiency contributes to customer satisfaction and allows us to improve
product designs rapidly for manufacturing efficiency. For example, we were the
first manufacturer to offer an integrated circuit chip set for tuner
applications in cable television set-top boxes. We were also the first
manufacturer to offer a dual-band power amplifier that combines the functions of
two power amplifiers for cellular handsets into a single integrated circuit.
CAPITALIZE ON OUR WORLD CLASS MANUFACTURING CAPABILITIES
We will continue to focus on improving manufacturing performance and
customer service, while reducing costs. We believe that we can effectively
control the critical phases of our production process in order to realize high
manufacturing yields, product quality and customer satisfaction. A key element
of our manufacturing strategy is our new six-inch fabrication facility. We
believe this new facility will provide increased manufacturing capacities at a
low incremental cost and will allow us to maintain short cycle times.
FORGE STRONG CUSTOMER RELATIONSHIPS
We have developed strong working relationships with our customers, many of
whom are leading original equipment manufacturers in their markets. Because our
target markets are standards-driven, customer relationships are important. We
have been working with Ericsson on wireless handsets since 1994 and with General
Instrument on cable set-top boxes since 1992.
24
<PAGE>
These relationships provide us with product development opportunities and the
ability to anticipate future market needs. The rapid feedback we receive from
customers during the product design phase increases the likelihood that our
products will meet our customers' cost and performance requirements.
PURSUE STRATEGIC ACQUISITIONS AND ALLIANCES
We intend to pursue strategic acquisitions and alliances to expand and
improve upon our technologies, industry expertise, products and market share. We
expect that our alliances and acquisitions will be complementary to our current
businesses and will enhance our ability to work with leading original equipment
manufacturers to develop next generation solutions. We have formed strategic
alliances with several firms to accelerate our capabilities in our core wireless
and broadband markets. For example, we entered into an agreement with Global
Communication Semiconductors, Inc. to develop HBT products, which we anticipate
will accelerate our introduction of GaAs HBT products to the first half of 2000.
We also entered into an agreement with TEMIC Semiconductor GmbH to develop HBT
products suitable for fabrication with silicon germanium.
TARGET MARKETS AND PRODUCTS
WIRELESS COMMUNICATIONS. The wireless communications market is a growing,
dynamic market as a result of increasing demand for:
- portable voice and data communications;
- smaller, lighter, less expensive handsets;
- reliable access and voice quality comparable to land lines; and
- longer talktime and standby time.
Our radio frequency integrated circuit products are used in transmitters and
receivers of cellular and PCS handsets where small size, multi-band operation
and low power consumption are key features. In the United States, there are two
primary digital cellular standards, TDMA and CDMA. GSM is the most widely
deployed digital standard in the world with a high degree of acceptance in
Europe and Asia. In addition, some GSM systems have been deployed in North
America. We currently provide power amplifiers primarily for the TDMA and GSM
standards and plan to introduce power amplifiers for the CDMA standard in 2000.
We also offer infrastructure products for the GSM standard.
We are actively developing single- and multi-band HBT power amplifier
modules for all major digital standards. HBT technology offers high efficiency
and low power consumption, and will allow our customers to build the transmitter
section of the wireless handset more easily and more quickly by reducing design
complexity and component counts. Initially we are developing our HBT products
using an external foundry. We intend to begin production of HBT wafers in our
own manufacturing facilities in the first half of 2000. We are also developing a
family of standard radio frequency switches targeting handset applications using
both GaAs MESFET and PHEMT technologies. We believe that the market for radio
frequency/microwave switches will grow rapidly with the move to multi-band,
multi-mode handsets.
25
<PAGE>
Our principal customer in the wireless market is Ericsson. Ericsson
accounted for 16%, 33%, 34% and 40% of net sales during 1996, 1997, 1998 and the
six month period ended July 4, 1999, respectively. The following table sets
forth information regarding our principal products in the wireless
communications market:
<TABLE>
<CAPTION>
PRODUCT APPLICATION
<S> <C>
POWER AMPLIFIERS:
- Single-band, single-mode Used in the transmitter section of cellular handsets to send voice or
power amplifiers data
- Multi-band, multi-mode Used in the transmitter section of cellular handsets to send voice or
power amplifiers data over multiple frequencies and standards thereby allowing a
service provider to handle more calls
- Integrated high power Used in cellular base stations in the transmit chain
amplifiers
- Modules* A "plug in" package, containing a power amplifier along with necessary
components otherwise provided externally to the amplifier, which
provides ease of use for our customer
RADIO FREQUENCY STANDARD
PRODUCTS:
- Switches* Used in cellular handsets to switch from receive and transmit modes
and multiband functions
- Receivers Used in cellular handsets to receive voice or data
* These products are at the sampling stage.
</TABLE>
CABLE TELEVISION/CABLE MODEMS. The trends that currently drive product
development in the cable television and cable modem markets are:
- shift to digital cable television with interactive services;
- demand for internet access; and
- emergence of cable telephony.
The convergence of these trends, enabled by digital transmission, creates
the need for innovative radio frequency integrated circuits for cable television
and cable modem applications.
Our cable products are used in cable modem, cable television set-top box and
cable television infrastructure applications. Cable television systems which
traditionally delivered one way analog television programming, limited to a few
channels, are increasingly used to deliver a wide array of interactive video and
other services, such as high speed internet access and telephony. In order to
support these new applications, cable system operators must upgrade the
bandwidth (i.e., capacity) of both the infrastructure and terminal equipment.
The new equipment must also be able to handle digital as well as analog
modulations.
For cable modems and cable television set-top boxes we currently offer tuner
integrated circuits which can receive analog and digital signals in the 50-860
megahertz frequency band. Our reverse amplifiers are used in cable modems and in
cable set-top boxes which require a reverse path to provide interactivity. These
tuner and reverse amplifier integrated circuits enable our customers to
accelerate and simplify their designs, and reduce manufacturing complexity and
26
<PAGE>
costs. We are actively engaged in developing integrated multi-chip double
conversion tuner modules. We expect that these modules will be cost-competitive
with single conversion tuners and will provide improved performance for cable
modem and other single-conversion tuner applications.
We have also developed GaAs integrated circuit line amplifiers for use by
operators in 50-860 megahertz cable television distribution systems. We have
recently expanded our product offerings in this area by introducing line
amplifiers which operate at 24 volts.
The following table sets forth information regarding our principal products
in the cable television/cable modems market:
<TABLE>
<CAPTION>
PRODUCT APPLICATION
<S> <C>
CABLE AND BROADCAST TERMINAL
PRODUCTS:
- Upconverters Used in set-top box video tuner, cable modems and cable telephony in the
- Downconverters video tuner
- Synthesizers* See above
- 256 QAM upconverters Used in the digital set-top box video tuner, providing a more efficient use
of bandwidth and thus the transmission of more channels of digital TV
signals
- Reverse amplifiers Used in set-top boxes, cable modems and cable telephony to transmit signals
from a set-top box to a cable company for interactive applications
CABLE AND BROADCAST
INFRASTRUCTURE PRODUCTS:
- Line amplifiers Used in cable television systems to distribute signals from cable headends
to neighborhoods
- Drop amplifiers Used in cable television systems to amplify signals at the home
</TABLE>
* These products are at the sampling stage.
Our principal customers in the cable television and cable modem markets are
Com21, Inc., General Instrument, Komatsu Murata Manufacturing Company, Ltd.,
Motorola, Scientific-Atlanta and 3Com, Inc. In addition, we have been selected
by Cisco Systems for their Global Alliance cable modem design. The Global
Alliance includes customers such as Samsung and Sony.
FIBER OPTIC MARKET. Growth in the fiber optic market is being driven by:
- the rapid increase in data traffic driven by internet use;
- the increasing implementation of corporate local area networks which
require high speed data transfer capability; and
- the ongoing upgrade of existing telecommunication and data communication
systems with fiber optic systems.
Fiber optic telecommunications systems use low loss fiber optic cable to
link central office switches with one another and to connect the central office
to the serving area. Most telecommunication networks today are based on SONET
(United States and Japan) or SDH (Europe) standards. These standards require
high sensitivity, high bandwidth, and wide dynamic range receivers.
27
<PAGE>
The front end of most fiber optic receivers contains a photodetector and a
transimpedance amplifier. Our transimpedance amplifier integrated circuits are
used in both fiber optic telecommunications and data communications networks.
Our GaAs integrated circuit transimpedance amplifiers are designed to meet the
requirements of SONET systems covering data speeds of OC-3, OC-12, OC-24 and
OC-48. We also sell products for use in the growing DWDM systems. We are
currently developing GaAs PHEMT-based next generation transimpedance amplifiers
specifically for DWDM and 3 volt applications. For data communications receivers
we sell integrated photodiode and transimpedance amplifier products for the
short wavelength (850 nanometer) and long wavelength (1300 nanometer) gigabit
ethernet application. We are developing higher speed (2.5 gigabits per second)
receiver products for the gigabit ethernet market in anticipation of increased
data speeds.
Fiber optic data communications systems use either fibre channel or gigabit
ethernet standards to achieve high-speed data transfer. Gigabit ethernet
standards are emerging as the most widely used standard in local area networking
situations. It addresses the need for very fast transfers of large volumes of
information and is effective in applications where large blocks of data must be
transferred within buildings and over short distances. We believe that demand
for gigabit ethernet solutions will grow substantially over the next few years.
The following table sets forth information regarding our principal products
in the fiber optic market:
<TABLE>
<CAPTION>
PRODUCT APPLICATION
<S> <C>
FIBER PRODUCTS:
- Transimpedance amplifiers Used in the transceiver of a fiber optic link to amplify signal received
- Metal semiconductor metal Used in the transceiver of a datacom fiber optic link to detect and amplify
transimpedance amplifiers shorter wavelength optical signals
(MSM-TIA)
- Positive intrinsic negative Used in the transceiver of a datacom fiber optic link to detect and amplify
transimpedance amplifiers longer wavelength optical signals
(PIN-TIA)
</TABLE>
Our principal customers in the fiber optic market are Hewlett-Packard,
Lucent, Methode and Nortel.
MARKETING, SALES, DISTRIBUTION AND CUSTOMER SUPPORT
We sell our products primarily directly to our customers worldwide. We have
developed close working relationships with leading companies in the broadband
and wireless communications markets. During 1999, we are undertaking a major
initiative to expand our field sales force to provide local support to our
customers. We believe this is critical to our objective of expanding our
customer base, especially as we expand our product portfolio. We also
selectively use independent manufacturers' representatives and distributors to
complement our direct sales and customer support efforts.
We believe that the technical nature of our products and markets demands an
extraordinary commitment to close relationships with our customers. The sales
and marketing staff, assisted by the technical staff and senior management,
visit prospective and existing customers worldwide on a regular basis, and
between visits both field and factory sales personnel communicate regularly with
our customers. We believe that these contacts are vital to the development of
close long-term working relationships with our customers, and in obtaining
regular forecasts, market updates and information regarding technical and market
trends.
28
<PAGE>
Our design and applications engineering staff is actively involved with
customers during all phases of design and production by publishing and providing
our customers with engineering data, up-to-date product application notes,
communicating with our customers' engineers on a regular basis and assisting in
resolving technical problems by working with our customers' engineers both on
and off site. In most cases the design and applications engineers obtain
prototypes from our customers in order to troubleshoot and identify potential
improvements to the design in parallel with our customers' efforts. This
strategy helps our customers speed up their design process, achieve
cost-effective and manufacturable designs, and ensure a smooth transition into
high volume production.
Our policy is to provide our customers with applications engineering support
at our customers' factories throughout the world, generally within 48 hours of a
customer request. Our sales are typically made pursuant to customer purchase
orders, and such orders may be canceled by our customers without penalty.
MANUFACTURING, ASSEMBLY AND TESTING
We have begun to fabricate our integrated circuits in our six-inch diameter
GaAs wafer fabrication facility in our new class 100 cleanroom in Warren, New
Jersey. Present production capacity is approximately 14,500 six-inch diameter
analog GaAs wafers per year. We are in the process of closing our existing
four-inch wafer fabrication facility. With additional equipment and staffing,
the six-inch fabrication facility could run up to approximately 26,000 six-inch
wafers per year. See "Risk Factors--We may face constraints on our manufacturing
capacity which would limit our ability to increase sales volumes" and "--Delays
in completing the transition of production from our four-inch wafer fabrication
facility to our six-inch wafer fabrication facility could result in delays in
product shipments and a loss of customers as a result of such delays".
Our wafer processing technologies have been developed for low cost, high
yield, rapid through put and short-cycle time manufacturing. We have developed
GaAs MESFET processes that we use to produce most of our products. By using ion
implant variations, we can optimize performance and yield, allowing us to
produce, for example, high linearity, low-noise, receiver integrated circuits or
transmitter integrated circuits with high power and efficiency.
We have also developed a GaAs PHEMT manufacturing process, which achieves
extremely high electron mobility. Devices manufactured using our PHEMT
manufacturing process have better sensitivity and bandwidth than conventional
MESFET devices and hence are an enabling technology that serves high bit rate
fiber optic systems. We have introduced devices for fiber optic communications
applications using our recently developed PHEMT manufacturing process.
Fabricated wafers are shipped to contractors in Asia for assembly in
integrated circuit packages. Once assembled by the contractor, packaged
integrated circuits are shipped back to our Warren, New Jersey facility for
final testing. We believe that our flexible automated test systems are important
to our ability to manufacture high quality integrated circuits at a low cost. We
have devoted substantial capital over the last 18 months to increase our
capacity of automated testors, resulting in shortened product cycle times,
reduced test-costs and improved test reliability. See "Risk Factors--We may face
constraints on our manufacturing capacity which would limit our ability to
increase sales volumes," "--We may face constraints on our test capacity which
could result in manufacturing delays" and "--We depend on foreign semiconductor
assembly contractors and a loss of an assembly contractor could result in delays
or reductions in product shipment".
Our design and manufacturing processes were certified as ISO 9001 compliant
in December 1993. Since then, we have maintained compliance with this standard.
RAW MATERIALS
GaAs wafers, other raw materials, and equipment used in the production of
our integrated circuits are available from several suppliers. See "Risk
Factors--Sources for certain components,
29
<PAGE>
materials and equipment are limited which could result in delays or reductions
in product shipments".
RESEARCH AND DEVELOPMENT
We have made significant investments in our proprietary processes, including
product design, wafer fabrication and integrated circuit testing, which we
believe gives us a competitive advantage. To date, our research and development
efforts have focused on developing low cost, high volume production of GaAs
integrated circuit products for the telecommunication and cable television
industries. At July 4, 1999, we had approximately 80 engineers assigned
primarily to research and development.
We have increased our research and development efforts in our broadband
communications applications, such as cable and broadcast and fiber optic, during
1999 and expect our wireless communications research and development efforts to
remain consistent with 1998 levels.
The ability to simulate and model circuits is a critical technology for
analog integrated circuit design, especially at high frequencies. We have
developed a set of simulation tools and device models, which are custom-fit to
our process. Recognizing the importance of powerful electronic design automation
tools, in 1998 we formed a partnership with a leading manufacturer of radio
frequency/analog electronic design automation systems to develop and enhance
design tools to improve our research and development efficiency. The
partnership's primary objectives are to improve package modeling, design tool
training and design tool integration.
We are also in the process of researching and developing other wafer
processing technologies. For our GaAs HBT technology we have formed both foundry
and technological partnerships. These agreements generally require us to share
our expertise and proprietary technology over a limited time period with our
partner in exchange for access to their expertise and proprietary technology. In
addition, we have the right to obtain foundry services on favorable terms. In
certain cases we may pay licensing fees, reimburse expenses and/or commit to
purchase a portion of our wafer needs from the other party. We plan to implement
this technology in our manufacturing facility by the first half of 2000. We have
recently hired a chief scientist specifically devoted to HBT technology and have
started HBT design runs with our foundry partner. We believe these actions will
position us to be the first to market with products based on six-inch GaAs HBT
technology.
We believe there are opportunities to develop integrated circuits in silicon
or silicon germanium which would supplement our GaAs integrated circuits in
modules. Although GaAs provides performance advantages over silicon in high
performance radio frequency integrated circuits, silicon is a more
cost-effective solution for the lower performance part of a system. Silicon
radio frequency chips are used by our customers in conjunction with our GaAs
chips to perform less complex radio frequency functions. As we seek to increase
our integrated circuit content in product applications, we are expanding our
product offerings to include low end radio frequency integrated circuits
manufactured with silicon products. Further, we believe some of these silicon
integrated circuits may have significant market potential as stand alone
integrated circuits. The recently established RF Standard Products Group at
ANADIGICS will be exploring the use of these technologies in the wireless
application. We currently do not intend to manufacture in either of these
technologies as we believe there will be adequate foundry capacity available.
COMPETITION
Competition in all of the markets for our current products is intense and we
compete on the basis of performance, price and delivery. Competitors in the
wireless market are suppliers of discrete devices and integrated circuits. Our
competitors include Alpha, Conexant Systems, Fujitsu Compound Semiconductor,
Hitachi, Infineon Technologies (a subsidiary of Siemens AG), Matsushita Electric
Industrial, Motorola, RF Micro Devices, Royal Philips Electronics N.V., and
TriQuint Semiconductor.
30
<PAGE>
In the cable and broadcast television markets, our integrated circuits
compete primarily with manufacturers of discrete components and integrated
circuits. Our competitors include Fujitsu Compound Semiconductor, Infineon,
Maxim Integrated Products, Mitel Corporation, Mitsubishi Electric Corp., NEC
Corp. and Royal Philips Electronics.
In the fiber optic market, we compete with other GaAs and silicon integrated
circuit manufacturers. Principal competitors in this market are Royal Philips
Electronics, TriQuint Semiconductor and Vitesse Semiconductor as well as some of
our customers who design and fabricate their own in-house solutions. In
particular, we expect to face increased competition in our fiber optic products
used in low data rate SONET fiber optic transmissions. See "Risk Factors--We
face intense competition which could result in a decrease of our products'
prices and sales."
Many of our competitors have significantly greater financial, technical,
manufacturing and marketing resources than us. Increased competition could
adversely affect our revenue and profitability by causing us to reduce prices or
by reducing demand for our products.
CUSTOMERS
We receive most of our revenues from a few significant customers. Sales to
Ericsson, General Instrument and Qualcomm Personal Electronics accounted for
16%, 16% and 12%, respectively, of 1996 net sales, and 33%, 13% and 16%,
respectively, of 1997 net sales. Ericsson and General Instrument accounted for
34% and 17%, respectively, of 1998 net sales, and 40% and 21%, respectively, of
net sales during the six month period ended July 4, 1999. No other customer
accounted for greater than 10% of net sales during these periods. Substantially
all of our sales of wireless applications are to Ericsson.
EMPLOYEES
At July 4, 1999, we had approximately 488 employees, none of whom was a
member of a labor union. We believe our labor relations to be good and have
never experienced a work stoppage.
PATENTS, LICENSES AND PROPRIETARY RIGHTS
It is our practice to seek U.S. and foreign patent and copyright protection
on our products and developments where appropriate and to protect our valuable
technology under U.S. and foreign laws affording protection for trade secrets
and for semiconductor chip designs. We own seventeen U.S. patents and have six
pending U.S. patent applications and one pending foreign patent application
filed under the Patent Cooperation Treaty. The U.S. patents were issued between
1988 and 1999 and will expire between 2006 and 2016.
We rely primarily upon trade secrets, technical know-how and other
unpatented proprietary information relating to our product development and
manufacturing activities. To protect our trade secrets, technical know-how and
other proprietary information, our employees are required to enter into
agreements providing for maintenance of confidentiality and the assignment of
rights to inventions made by them while in our employ. We also have entered into
non-disclosure agreements to protect our confidential information delivered to
third parties, in conjunction with possible corporate collaborations and for
other purposes.
ENVIRONMENTAL MATTERS
Our operations are subject to many federal, state and local environmental
laws, regulations and ordinances that govern activities or operations that may
have adverse effects on human health or the environment. These laws, regulations
or ordinances may impose liability for the cost of remediating, and for certain
damages resulting from, sites of past releases of hazardous materials. We
believe that we currently conduct, and in the past have conducted, our
activities and operations in substantial compliance with applicable
environmental laws, and that costs arising from existing
31
<PAGE>
environmental laws will not have a material adverse effect on our results of
operations. We cannot assure you, however, that the environmental laws will not
become more stringent in the future or that we will not incur significant costs
in the future in order to comply with these laws.
LEGAL MATTERS
SHAREHOLDER LITIGATION
In March and April 1998, seven lawsuits were filed against ANADIGICS and
various of our officers and directors in the United States District Court for
the District of New Jersey. The lawsuits are: ASSUNCAO v. ANADIGICS, INC., ET
AL., OFFICE AND PROFESSIONAL EMPLOYEES INTERNATIONAL UNION LOCAL 153 PENSION
FUND v. ANADIGICS, INC., ET AL., KOTLER v. ANADIGICS, INC., ET AL., GRAY v.
ANADIGICS, INC., ET AL., MIRPURI v. ANADIGICS, INC., ET AL., GRAYSON v.
ROSENZWEIG, ET AL., and MORGANTE v. ANADIGICS, INC., ET AL.
Each complaint names as defendants one or more of the following directors
and officers of ANADIGICS: Ronald Rosenzweig, George Gilbert, Harry T. Rein,
John F. Lyons, Charles Huang, Javed Patel, Sheo Khetan and Robert Bayruns. The
complaints allege that ANADIGICS and certain of its officers and directors
violated the federal securities laws by making misstatements and/or omissions
during the period from August 1, 1997 through January 29, 1998 concerning our
performance and financial projections. The complaints also allege common law
fraud and/or negligent misrepresentation and seek unspecified damages. The seven
lawsuits have been consolidated into one class action action lawsuit captioned
IN RE ANADIGICS, INC. SECURITIES LITIGATION.
In August 1998, a shareholders derivative lawsuit, captioned DEEGAN v.
ROSENZWEIG, ET AL., was filed in the United States District Court for the
District of New Jersey against ANADIGICS and the following of our officers and
directors: Charles Burton, Paul Bachow, Robert Bayruns, Ronald Rosenzweig,
George Gilbert, John Lyons, Harry Rein, Sheo Khetan, Javed Patel, Charles Huang
and Phillip Wallace. The complaint alleges claims based upon the above listed
lawsuits, and seeks damages, contribution, indemnification and equitable relief.
On July 8, 1999, we and attorneys representing the plaintiffs in the
lawsuits described above entered into a memorandum of understanding setting
forth proposed settlement terms. Accordingly, we expect that all of the lawsuits
described above will be settled for a total payment of $11.75 million of which
approximately $5.3 million will be reimbursed by our insurance companies. The
proposed settlement is subject to various conditions, including the entering
into of a definitive settlement agreement and final court approval.
PATENT LITIGATION AND CLAIMS
In February 1999, The Lemelson Medical, Education and Research Foundation,
Limited Partnership filed a lawsuit against ANADIGICS and a number of other
companies in the United States District Court for the District of Arizona. The
lawsuit alleges that the defendants named have infringed upon patents held by
Lemelson. In addition, there is an unresolved notice from Rockwell International
Corporation asserting that we are infringing upon a patent on the processing of
semiconductor wafers. The patent will expire in March 2000. We intend to
vigorously defend against these allegations.
OTHER
We have provided information to and have cooperated with the SEC in
connection with a formal SEC investigation into trading in our stock which
occurred in January 1998.
32
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our directors, executive officers and key employees are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------- --- --------------------------------------------------------
<S> <C> <C>
Bami Bastani................ 45 President, Chief Executive Officer and Director
Ronald Rosenzweig........... 61 Chairman of the Board of Directors and Director
Charles Huang............... 52 Executive Vice President and Chief Technical Officer
Tom Shields................. 40 Senior Vice President and Chief Financial Officer
Bruce Diamond............... 39 Senior Vice President, Operations
Paul S. Bachow.............. 47 Director
David M. Fellows............ 46 Director
Bruns Grayson............... 51 Director
Harry T. Rein............... 54 Director
Lewis Solomon............... 65 Director
</TABLE>
Dr. Bastani joined ANADIGICS effective October 2, 1998 as President and
Chief Executive Officer and a director. Prior to joining ANADIGICS, Dr. Bastani
served as Executive Vice President, System LSI Group for Fujitsu
Microelectronics, Inc., from 1996 to 1998. From 1985 to 1996, Dr. Bastani held
various positions at National Semiconductor. Dr. Bastani received a B.S.E.E.
from the University of Arkansas and a Ph.D. and M.S. in electrical engineering
from Ohio State University.
Mr. Rosenzweig, a co-founder of ANADIGICS in 1985, served as a director
since our inception and Chairman of the Board of Directors since 1998. Prior to
that, Mr. Rosenzweig served as our President and Chief Executive Officer. He
serves as a director on the board of General Semiconductor. He was co-founder of
Microwave Semiconductor Corporation, or MSC. He served as President and CEO of
MSC from 1968 to 1983. Mr. Rosenzweig received his B.Ch.E degree from City
College of New York.
Dr. Huang, a co-founder of ANADIGICS in 1985, has served as Executive Vice
President and a director since our inception. He was director of GaAs research
and development and water fabrication services at Avantek, Inc. from 1980 to
1984. Dr. Huang received his Ph.D.E.E. at the University of California,
Berkeley.
Mr. Shields joined ANADIGICS effective July 30, 1999 as Senior Vice
President and Chief Financial Officer. Prior to joining ANADIGICS, Mr. Shields
served as Vice President and Controller of Fisher Scientific Company from 1997
to 1999. From 1994 to 1997, Mr. Shields served as Vice President and Controller
for Harman Consumer Group. From 1986 to 1994, Mr. Shields served in various
positions with Baker & Taylor, Inc. Mr. Shields received his B.S. and M.B.A.
degree from Fairleigh Dickinson University in New Jersey.
Mr. Diamond joined ANADIGICS in 1997 and currently serves as Senior Vice
President, Operations. Prior to joining us, Mr. Diamond served as the Managing
Director of National Semiconductor Company's wafer fabrication plant in Scotland
from 1994 to 1997. From 1982 to 1994 Mr. Diamond served in various positions
with National Semiconductor Company. Mr. Diamond received his B.S.E.G. from the
University of Illinois.
Mr. Bachow has served as a director of ANADIGICS since January 1993. He has
been President of Bachow & Associates, Inc. since its formation in December
1989, and its predecessors, Bachow and Elkin Co., Inc. and Paul S. Bachow
Company from December 1985 to December 1989. Mr. Bachow also acts as President
of the general partner of each of Paul S. Bachow Co-Investment Fund, L.P.,
Bachow Investment Partners III, L.P. and Bachtel Cellular Liquidity, L.P. He has
a B.A. from American University, a J.D. from Rutgers University and a master's
33
<PAGE>
degree in tax law from New York University, and is a C.P.A. Mr. Bachow serves as
director of the following publicly traded companies: Crusader Holding
Corporation, Deb Shops, Inc. and Digital Microwave Corporation, as well as
several private companies.
Mr. Fellows has served as a director of ANADIGICS since September 1994. Mr.
Fellows has been president of Fellows Associates since 1998. Prior to that he
was Chief Technology Officer of MediaOne and Senior Vice President at
Continental Cablevision, Inc. (acquired by MediaOne), since 1992. From 1987
until 1992, Mr. Fellows was employed by Scientific Atlanta's Transmission
Systems Business Division, where he served as President. Mr. Fellows received
his bachelor's degree in engineering and applied physics from Harvard College
and a master's degree in electrical engineering from Northeastern University.
Mr. Grayson has served as a director of ANADIGICS since 1985. He is Managing
General Partner of Calvert Capital Management Co., which manages ABS Ventures.
Before joining Calvert Capital Management Co., Mr. Grayson was an associate of
Adler & Co. and McKinsey & Co. in New York. He is a director of Cascade
Communications Corp. and several private companies. He has a B.A. from Harvard
College, an M.A. from Oxford University and a J.D. from the University of
Virginia.
Mr. Rein has served as a director of ANADIGICS since 1985. He was a
principal founder of Canaan Venture Partners in 1987 and has served as Managing
General Partner since its inception. From 1979 to 1987, Mr. Rein held various
positions at GE, directing several of GE's lighting businesses as general
manager before becoming President and CEO of GE Venture Capital Corporation. He
is a director of several private companies.
Mr. Solomon has served as a director of ANADIGICS since September 1994 and,
previously, from 1985 to 1989. Mr. Solomon has been Chairman of G&L Investments
since 1990 in addition to serving as a director of Anacomp Inc., Artesyn
Technologies, Inc., Terayon Communications, Inc. and several private companies.
Prior to joining G&L Investments, Mr. Solomon was an Executive Vice President
with Alan Patricof Associates from 1983 to 1986, and a Senior Vice President of
General Instrument from 1967 to 1983. Mr. Solomon received a bachelor's degree
in physics from St. Joseph's College and a master's degree in industrial
engineering from Temple University.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement we filed with the
Securities and Exchange Commission ("SEC") to register the shares offered in
this offering. It does not repeat important information that you can find in our
registration statement or in the reports and other documents that we file with
the SEC. For further information about us and our common stock, you should read
the registration statement and the exhibits to the registration statement.
Statements contained in this prospectus concerning documents we have filed with
the SEC as exhibits to the registration statement or otherwise are not
necessarily complete and, in each instance, you should refer to the actual filed
document.
We have not authorized anyone to provide you any information different from
that contained in this prospectus. The common stock may be offered for sale only
in jurisdictions where offers and sales are permitted. The information contained
in this prospectus is accurate only as of the date of this prospectus,
regardless of the time of delivery of this prospectus or of any sale of the
common stock.
34
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information electronically with the SEC. You may read and copy any document we
file at the SEC's public reference rooms at 450 Fifth Street, Mail Stop 1-2,
N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available
from the Nasdaq National Market and at the SEC's website at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file with
them. This means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is an
important part of this prospectus and information that we file later with the
SEC will automatically update and supersede this information. We incorporate by
reference the documents listed below, and any future filings made by us with the
SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended:
- The description of ANADIGICS' capital stock contained in ANADIGICS'
registration statement on Form 8-A filed on March 6, 1995,
- Annual Report on Form 10-K for the fiscal year ended December 31, 1998,
- Quarterly Report on Form 10-Q for the quarter ended April 4, 1999,
- The definitive proxy statement dated April 16, 1999 for the 1999 Annual
Meeting of Stockholders,
- Quarterly Report on Form 10-Q for the quarter ended July 4, 1999, and
- The description of ANADIGICS' preferred share purchase rights contained in
ANADIGICS' registration statement on Form 8-A/A filed on September 9,
1999.
VALIDITY OF COMMON STOCK
The validity of the common stock offered hereby will be passed upon for
ANADIGICS by Cahill Gordon & Reindel (a partnership including a professional
corporation), New York, New York, and for the underwriters by Sullivan &
Cromwell, New York, New York.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at December 31, 1997 and 1998, and for each of the three
years in the period ended December 31, 1998, as set forth in their report. We
have included our financial statements in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.
35
<PAGE>
GLOSSARY
PHEMT--Pseudomorphic High Electron Mobility Transistor.
PHEMT is a type of transistor that can be manufactured in GaAs. PHEMT is a
high performance design that uses similar processing to MESFET but a more
expensive starting wafer material. PHEMT offers higher performance than
silicon.
MESFET--Metal Semiconductor Field Effect Transistor.
MESFET is a type of transistor that can be manufactured in GaAs. MESFET is a
very cost effective design. MESFET offers higher performance than silicon.
HBT--Heterojunction Bipolar Transistor.
HBT is a type of transistor that can be manufactured in GaAs. HBT uses a
more expensive material than MESFET and PHEMT and requires additional
processing steps but offers a smaller chip size. HBT offers higher
performance than silicon.
GAAS--Gallium Arsenide.
GaAs is a semiconductor material similar to silicon with certain unique
properties, such as high frequency operation for microwave circuits and
optical properties for fiber optic applications.
CDMA--Code Division Multiple Access.
A United States digital wireless standard that increases capacity by coding
voice messages and spreading information over many channels.
TDMA--Time Division Multiple Access.
A United States digital wireless standard that increases capacity by placing
three or more calls in the same channel separated by time.
GSM--Global System Mobile.
The European digital cellular standard that is the most widely deployed
digital standard in the world.
SDH--Synchronous Digital Hierarchy.
The European fiber optic communications standard compiled by the
International Telecommunications Union. Defines performance requirements for
public switched telephone networks.
SONET--Synchronous Optical Network.
The United States fiber optic communications standard compiled by Bellcore
(now Telcordia). Defines performance requirements for public switched
telephone networks.
GIGABIT ETHERNET--Gigabit Ethernet is a local area network transmission standard
that provides a data rate of 1 billion bits per second (one gigabit),
usually on optical fiber.
SENSITIVITY--The sensitivity of a device is a measure of its ability to detect a
change in the input signal as reflected in a change in the output of the
device.
RADIO FREQUENCY/MICROWAVE INTEGRATED CIRCUIT--Integrated circuit used in the
radio section of a network or device to transmit, receive, or process a
radio/microwave frequency communication signal.
BANDWIDTH--Bandwidth is a measure of the range of frequencies a communications
signal occupies. In digital systems, bandwidth is data speed in bits per
second. In analog systems, bandwidth is defined in terms of the difference
between the highest-frequency signal component and the lowest-frequency
signal component.
DWDM--Dense Wavelength Division Multiplexing.
A fiber optic communications technology that allows broadband data
transmission by simultaneously transmitting multiplex signals, carried in
distinct wavelengths of light, over a single optical fiber.
36
<PAGE>
ANADIGICS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Condensed consolidated balance sheet as of July 4, 1999 (Unaudited)................. F-2
Condensed consolidated statements of operations for the six months ended June 28,
1998 and July 4, 1999 (Unaudited)................................................. F-3
Condensed consolidated statements of comprehensive income (loss) for the six months
ended June 28, 1998 and July 4, 1999 (Unaudited).................................. F-4
Condensed consolidated statements of cash flows for the six months ended June 28,
1998 and July 4, 1999 (Unaudited)................................................. F-5
Notes to unaudited condensed consolidated financial statements...................... F-6
Report of Independent Auditors...................................................... F-10
Consolidated balance sheets as of December 31, 1997 and 1998........................ F-11
Consolidated statements of operations for the years ended December 31, 1996, 1997
and 1998.......................................................................... F-12
Consolidated statements of comprehensive income for the years ended December 31,
1996, 1997 and 1998............................................................... F-12
Consolidated statements of stockholders' equity for the years ended December 31,
1996, 1997 and 1998............................................................... F-13
Consolidated statements of cash flows for the years ended December 31, 1996, 1997
and 1998.......................................................................... F-14
Notes to audited consolidated financial statements.................................. F-15
</TABLE>
F-1
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
ANADIGICS, INC.
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JULY 4, 1999 DECEMBER 31, 1998
------------ -------------------
<S> <C> <C>
(UNAUDITED) (NOTE 1)
ASSETS
Current assets:
Cash and cash equivalents................................ $ 25,343 $ 23,987
Marketable securities.................................. 14,736 16,923
Accounts receivable, net............................... 18,191 11,848
Inventory.............................................. 10,256 8,729
Prepaid expenses and other current assets.............. 2,466 2,531
Insurance settlement receivable........................ 5,325
Deferred taxes......................................... 6,856 4,345
------------ ----------
Total current assets..................................... 83,173 68,363
Marketable securities.................................. 3,568 1,486
Property and equipment:
Equipment and furniture.............................. 80,823 71,625
Leasehold improvements............................... 16,424 15,717
Projects in process.................................. 34,150 34,286
Less accumulated depreciation and amortization......... 56,117 44,199
------------ ----------
75,280 77,429
Other assets........................................... 1,279 865
Deferred taxes......................................... 5,955 5,955
------------ ----------
Total assets............................................. $ 169,255 $ 154,098
------------ ----------
------------ ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................... $ 9,043 $ 6,138
Accrued litigation settlement costs.................... 12,050 --
Accrued liabilities.................................... 5,952 2,306
Accrued restructuring costs............................ 1,441 1,567
Current maturities of long-term debt................... 1,000 1,000
Current maturities of capital lease obligations........ 160 229
------------ ----------
Total current liabilities................................ 29,646 11,240
Capital lease obligations, less current portion........ 117 183
Other long-term liabilities............................ 1,183 868
Long-term debt, less current portion................... 3,500 4,000
------------ ----------
Total liabilities........................................ 34,446 16,291
Stockholders' equity
Common stock, $0.01 par value, 68,000,000 shares
authorized, 14,871,937 and 14,738,356 issued and
outstanding at July 4, 1999 and December 31, 1998,
respectively......................................... 149 147
Additional paid-in capital............................. 161,843 160,215
Accumulated deficit.................................... (27,139) (22,598)
Accumulated other comprehensive income (loss).......... (44) 43
------------ ----------
Total stockholders' equity............................... 134,809 137,807
------------ ----------
Total liabilities and stockholders' equity............... $ 169,255 $ 154,098
------------ ----------
------------ ----------
</TABLE>
See notes to condensed consolidated financial statements.
F-2
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
ANADIGICS, INC.
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------------
<S> <C> <C>
JULY 4, 1999 JUNE 28, 1998
------------ --------------
<CAPTION>
(UNAUDITED)
<S> <C> <C>
Net sales..................................................... $ 55,582 $ 41,460
Cost of sales................................................. 36,148 26,633
------------ --------------
Gross profit.................................................. 19,434 14,827
Research and development expenses............................. 11,968 9,750
Selling and administrative expenses........................... 8,744 6,405
Restructuring charge.......................................... -- 1,100
------------ --------------
Operating income (loss)....................................... (1,278) (2,428)
Interest income, net.......................................... 995 1,225
Provision for litigation settlement, net...................... 6,925 --
------------ --------------
Income (loss) before income taxes............................. (7,208) (1,203)
Provision (benefit) for income taxes.......................... (2,667) (451)
------------ --------------
Net income (loss)............................................. $ (4,541) $ (752)
------------ --------------
------------ --------------
Basic earnings (loss) per share............................... $ (0.31) $ (0.05)
------------ --------------
------------ --------------
Weighted average common shares outstanding.................... 14,811,687 14,711,323
------------ --------------
------------ --------------
Diluted earnings (loss) per share............................. $ (0.31) $ (0.05)
------------ --------------
------------ --------------
Weighted average common and dilutive securities outstanding... 14,811,687 14,711,323
------------ --------------
------------ --------------
</TABLE>
See notes to condensed consolidated financial statements.
F-3
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
ANADIGICS, INC.
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------------------
<S> <C> <C>
JULY 4, 1999 JUNE 28, 1998
------------- -----------------
<CAPTION>
(UNAUDITED)
<S> <C> <C>
Net income (loss)............................................. $ (4,541) $ (752)
Unrealized gain (loss) on marketable securities............... (87) 20
------------- ------
Comprehensive income (loss)............................... $ (4,628) $ (732)
------------- ------
------------- ------
</TABLE>
See notes to condensed consolidated financial statements.
F-4
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
ANADIGICS, INC.
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------------
JULY 4, 1999 JUNE 28, 1998
------------ --------------
<S> <C> <C>
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss...................................................... $ (4,541) $ (752)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation.................................................. 11,721 5,342
Amortization.................................................. 197 404
Deferred taxes................................................ (2,511) (451)
Provision for litigation settlement, net...................... 6,725
Changes in operating assets and liabilities
Accounts receivable......................................... (6,343) 5,673
Inventory................................................... (1,527) (973)
Prepaid expenses and other current assets................... 65 (1,183)
Other assets................................................ (414) 60
Accounts payable............................................ 2,905 (6,531)
Accrued liabilities and other long-term liabilities......... 3,835 (432)
Income taxes payable........................................ -- (2,439)
------------ --------------
Net cash provided by (used in) operating activities........... 10,112 (1,282)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment............................... (9,769) (8,818)
Purchase of marketable securities............................. (14,094) (14,456)
Proceeds from sale of marketable securities................... 14,112 17,912
------------ --------------
Net cash used in investing activities......................... (9,751) (5,362)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock...................................... 1,630 294
Repayment of long-term debt................................... (500) --
Payment of capital lease obligations.......................... (135) (229)
------------ --------------
Net cash provided by financing activities..................... 995 65
------------ --------------
Net increase (decrease) in cash and cash equivalents.......... 1,356 (6,579)
Cash and cash equivalents at beginning of period.............. 23,987 25,675
------------ --------------
Cash and cash equivalents at end of period.................... $ 25,343 $ 19,096
------------ --------------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid................................................. $ 103 $ 36
------------ --------------
------------ --------------
Taxes paid.................................................... $ 180 $ 2,774
------------ --------------
------------ --------------
</TABLE>
See notes to condensed consolidated financial statements.
F-5
<PAGE>
ANADIGICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JULY 4, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited, condensed, consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six month period
ended July 4, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999.
The condensed balance sheet at December 31, 1998 has been derived from the
audited financial statements at that date but does not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1998.
The condensed, consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, Broadcast and Wireless Investors,
Inc. and ANADIGICS Foreign Sales Corporation. All significant intercompany
accounts have been eliminated in consolidation.
2. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market. Inventories consist of the following:
<TABLE>
<CAPTION>
JULY 4, DEC. 31,
1999 1998
----------- -----------
<S> <C> <C>
Raw materials.................................... $ 2,323 $ 784
Work in process.................................. 4,900 3,662
Finished goods................................... 3,033 4,283
----------- -----------
$ 10,256 $ 8,729
----------- -----------
----------- -----------
</TABLE>
F-6
<PAGE>
ANADIGICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JULY 4, 1999 (CONTINUED)
3. EARNINGS PER SHARE
The reconciliation of shares used to calculate basic and diluted earnings
per share consists of the following:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------
<S> <C> <C>
JULY 4, JUNE 28,
1999 1998
----------- -----------
Weighted average common shares outstanding used
to calculate basic earnings per share.......... 14,811,687 14,711,323
Net effect of diluted stock options based upon
the treasury stock method using an average
market price................................... --* --*
Weighted average common and dilutive securities
outstanding used to calculate diluted earnings
per share...................................... 14,811,687 14,711,323
----------- -----------
</TABLE>
- ------------------------
* The dilutive stock options are not included as their effect is
anti-dilutive.
4. SEGMENT INFORMATION
REVENUES BY APPLICATION
The Company classifies its revenues based upon the end application of the
product in which its integrated circuits are used. Net sales by end application
are regularly reviewed by the chief operating decision maker and are as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------
<S> <C> <C>
JULY 4, JUNE 28,
1999 1998
----------- -----------
Cellular and PCS Applications.................... $ 22,490 $ 16,486
Cable and Broadcast Applications................. 20,506 16,359
Fiber Optic Applications......................... 12,486 8,190
Engineering service sales........................ 100 425
----------- -----------
Total............................................ $ 55,582 $ 41,460
----------- -----------
----------- -----------
</TABLE>
F-7
<PAGE>
ANADIGICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JULY 4, 1999 (CONTINUED)
4. SEGMENT INFORMATION (CONTINUED)
GEOGRAPHIC INFORMATION
The Company primarily sells to four geographic regions; Europe, Asia, North
America (primarily U.S.A.), and South America. The geographic region is
determined by the destination of the shipped product. Net sales to each of the
four geographic regions are as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------
<S> <C> <C>
JULY 4, JUNE 28,
1999 1998
----------- -----------
Europe........................................... $ 13,583 $ 11,762
Asia............................................. 14,810 11,856
North America (primarily U.S.A.)................. 21,482 16,354
South America.................................... 5,707 1,488
----------- -----------
Total............................................ $ 55,582 $ 41,460
----------- -----------
----------- -----------
</TABLE>
5. LEGAL PROCEEDINGS
In March and April 1998, seven proposed class action lawsuits (collectively
the "Class Action Lawsuits") were filed against the Company and certain of its
officers and directors in the United States District Court for the District of
New Jersey. The Complaints filed in the Class Action Lawsuits claim alleged
common law fraud and negligent misrepresentation. The Complaints alleged that,
as a result of certain material misstatements and omissions made by the Company
in connection with its business, the price of the Company's common stock was
artificially inflated during the proposed class periods (July 17, 1997 through
January 30, 1998).
On December 20, 1998, the United States District Court for the District of
New Jersey consolidated the Class Action Lawsuits into one action, captioned In
re Anadigics, Inc. Securities Litigation, No. 98-CV-917 (the "Consolidated Class
Action Lawsuit"), and appointed Lead Plaintiffs and Lead Plaintiffs' Counsel.
On or about August 3, 1998, a shareholder's derivative lawsuit ("Derivative
Lawsuit") was filed in the United States District Court for the District of New
Jersey against the Company (as nominal defendant) and certain of its officers
and directors. The Complaint in the Derivative Lawsuit alleged claims, which are
predicated upon the Class Action Lawsuits, seeking damages, contribution,
indemnification and equitable relief.
On July 8, 1999, the Company and attorneys representing the plaintiffs in
the lawsuits described above entered into a memorandum of understanding setting
forth proposed settlement terms. Accordingly, we expect that all of the lawsuits
described above will be settled for a total payment of $11.75 million. In
connection with such settlement, the Company has entered into separate written
agreements with its insurance companies pursuant to which such insurance
companies will pay the Company an aggregate of $5.3 million no later than ten
days after final court approval of the settlement. The proposed settlement is
subject to various conditions including the entering into of a definitive
settlement agreement and final court approval.
F-8
<PAGE>
ANADIGICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JULY 4, 1999 (CONTINUED)
6. SUBSEQUENT EVENT
On July 22, 1999, the Company approved a public offering (the "Offering") of
an additional 3,000,000 shares of common stock (plus an additional 450,000
shares of common stock that may be issued upon exercise of an overallotment
option by the underwriters). The Company intends to use the net proceeds from
the offering for capital expenditures, working capital, and other general
corporate purposes. The Company may use all or a portion of the net proceeds to
acquire complementary businesses if the opportunity arises, however it currently
has no commitments or agreements with respect to any such transactions.
F-9
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
ANADIGICS, Inc.
We have audited the accompanying consolidated balance sheets of ANADIGICS,
Inc. as of December 31, 1997 and 1998, and the related consolidated statements
of operations, comprehensive income, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of ANADIGICS, Inc.
as of December 31, 1997 and 1998, and the consolidated results of their
operations, comprehensive income and their cash flows for each of the three
years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
MetroPark, New Jersey
January 25, 1999
F-10
<PAGE>
ANADIGICS, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
<S> <C> <C>
1997 1998
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents............................................................. $ 25,675 $ 23,987
Marketable securities................................................................. 15,826 16,923
Accounts receivable, net of allowance for doubtful accounts of $396 and $128 in 1997
and 1998, respectively.............................................................. 17,999 11,848
Inventories........................................................................... 19,678 8,729
Prepaid expenses and other current assets............................................. 1,470 2,531
Deferred taxes........................................................................ 4,461 4,345
----------- -----------
Total current assets.................................................................... 85,109 68,363
Marketable securities................................................................... 9,801 1,486
Plant and equipment:
Equipment and furniture............................................................... 58,916 71,625
Leasehold improvements................................................................ 4,212 15,717
Projects in process................................................................... 39,540 34,286
----------- -----------
102,668 121,628
Less accumulated depreciation and amortization........................................ 30,419 44,199
----------- -----------
72,249 77,429
Deferred taxes.......................................................................... -- 5,955
Deposits................................................................................ 925 865
----------- -----------
$ 168,084 $ 154,098
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................................................... $ 11,223 $ 6,138
Accrued liabilities................................................................... 5,961 2,306
Income taxes payable.................................................................. 2,439 --
Current maturities of capital lease obligations....................................... 425 229
Accrued restructuring costs........................................................... -- 1,567
Current maturities of long-term debt.................................................. -- 1,000
----------- -----------
Total current liabilities............................................................... 20,048 11,240
Deferred taxes.......................................................................... 959 --
Capital lease obligations, less current portion......................................... 389 183
Other long-term liabilities............................................................. 225 868
Long-term debt, less current portion.................................................... -- 4,000
Commitments and contingencies Stockholders' equity:
Preferred stock, $0.01 par value, 5,000,000 shares authorized, none issued or
outstanding.........................................................................
Common stock, convertible, non-voting, $0.01 par value, 1,000,000 shares authorized,
none issued or outstanding..........................................................
Common stock, $0.01 par value, 34,000,000 shares authorized, 14,657,089 and 14,738,356
issued and outstanding at December 31, 1997 and 1998, respectively.................. 147 147
Additional paid-in capital............................................................ 159,319 160,215
Accumulated deficit................................................................... (13,040) (22,598)
Accumulated other comprehensive income................................................ 37 43
----------- -----------
Total stockholders' equity.............................................................. 146,463 137,807
----------- -----------
$ 168,084 $ 154,098
----------- -----------
----------- -----------
</TABLE>
See accompanying notes.
F-11
<PAGE>
ANADIGICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
<S> <C> <C> <C>
1996 1997 1998
-------------- -------------- --------------
Net sales....................................................... $ 68,864 $ 102,536 $ 86,075
Cost of sales................................................... 38,887 56,093 66,228
-------------- -------------- --------------
Gross profit.................................................... 29,977 46,443 19,847
Research and development expenses............................... 12,036 16,765 18,824
Selling and administrative expenses............................. 8,206 12,139 12,926
Restructuring charges........................................... 7,126
-------------- -------------- --------------
20,242 28,904 38,876
-------------- -------------- --------------
Operating income (loss)......................................... 9,735 17,539 (19,029)
Interest income, net............................................ 1,368 3,229 2,296
-------------- -------------- --------------
Income (loss) before income taxes............................... 11,103 20,768 (16,733)
Provision (benefit) for income taxes............................ (888) 5,439 (7,175)
-------------- -------------- --------------
Net income (loss)............................................... $ 11,991 $ 15,329 (9,558)
-------------- -------------- --------------
-------------- -------------- --------------
Basic earnings (loss) per share................................. $ 0.97 $ 1.07 $ (0.65)
-------------- -------------- --------------
-------------- -------------- --------------
Weighted average common shares outstanding...................... 12,355,311 14,279,957 14,723,941
-------------- -------------- --------------
-------------- -------------- --------------
Diluted earnings (loss) per share............................... $ 0.93 $ 1.02 $ (0.65)
-------------- -------------- --------------
-------------- -------------- --------------
Weighted average common and dilutive securities outstanding..... 12,907,851 15,063,879 14,723,941
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
ANADIGICS, INC.
STATEMENTS OF COMPREHENSIVE INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1996 1997 1998
--------- --------- ---------
Net income (loss).............................................................. $ 11,991 $ 15,329 $ (9,558)
Unrealized gain (loss) on marketable securities................................ (18) 46 6
--------- --------- ---------
Total comprehensive income (loss).............................................. $ 11,973 $ 15,375 $ (9,552)
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes.
F-12
<PAGE>
ANADIGICS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON ACCUMULATED
STOCK COMMON ADDITIONAL OTHER
COMMON CONVERTIBLE STOCK PAID-IN ACCUMULATED COMPREHENSIVE
STOCK NON-VOTING SUBSCRIBED CAPITAL DEFICIT INCOME (LOSS)
----------- ------------- ------------- ----------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995............ $ 116 $ 5 ($ 3) $ 94,056 $ (40,360) $ 9
Exercise of warrants.................. 3 3,607
Conversion of non-voting Common Stock
to Common Stock..................... 5 (5)
Stock options exercised............... 1 366
Repayment of employee receivables..... 3
Shares issued under employee stock
purchase plan....................... 1 780
Unrealized losses on market-able
securities, net of tax.............. (18)
Net income............................ 11,991
----- ----- ------ ----------- ------------- -----
Balance, December 31, 1996............ 126 -- -- 98,809 (28,369) (9)
Issuance of Common Stock in public
offering, net of expenses........... 19 55,373
Stock options exercised............... 2 1,700
Shares issued under employee stock
purchase plan....................... 978
Tax effect of stock options
exercised........................... 2,505
Unrealized gains on market-able
securities.......................... 46
Net income............................ 15,329
----- ----- ------ ----------- ------------- -----
Balance, December 31, 1997............ 147 -- -- 159,319 (13,040) 37
Stock options exercised............... 402
Shares issued under employee stock
purchase plan....................... 425
Tax effect of stock options
exercised........................... 69
Unrealized gains on market able
securities.......................... 6
Net loss.............................. (9,558)
----- ----- ------ ----------- ------------- -----
Balance, December 31, 1998............ $ 147 -- -- $ 160,215 ($ 22,598) $ 43
----- ----- ------ ----------- ------------- -----
----- ----- ------ ----------- ------------- -----
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
--------------
<S> <C>
Balance, December 31, 1995............ $ 53,823
Exercise of warrants.................. 3,610
Conversion of non-voting Common Stock
to Common Stock.....................
Stock options exercised............... 367
Repayment of employee receivables..... 3
Shares issued under employee stock
purchase plan....................... 781
Unrealized losses on market-able
securities, net of tax.............. (18)
Net income............................ 11,991
--------------
Balance, December 31, 1996............ 70,557
Issuance of Common Stock in public
offering, net of expenses........... 55,392
Stock options exercised............... 1,702
Shares issued under employee stock
purchase plan....................... 978
Tax effect of stock options
exercised........................... 2,505
Unrealized gains on market-able
securities.......................... 46
Net income............................ 15,329
--------------
Balance, December 31, 1997............ 146,463
Stock options exercised............... 402
Shares issued under employee stock
purchase plan....................... 425
Tax effect of stock options
exercised........................... 69
Unrealized gains on market able
securities.......................... 6
Net loss.............................. (9,558)
--------------
Balance, December 31, 1998............ $ 137,807
--------------
--------------
</TABLE>
See accompanying notes.
F-13
<PAGE>
ANADIGICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
<S> <C> <C> <C>
1996 1997 1998
--------- --------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)............................................................. $ 11,991 $ 15,329 $ (9,558)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation................................................................ 3,865 7,644 14,409
Amortization................................................................ 2,323 945 707
Impairment of long-lived assets (non-cash).................................. 4,510
Write-down of inventory..................................................... 6,603
Deferred taxes.............................................................. (3,614) 1,328 (6,798)
Changes in operating assets and liabilities:
Accounts receivable......................................................... (3,317) (7,303) 6,151
Inventory................................................................... (166) (10,777) 4,346
Prepaid expenses and other current assets................................... (240) (249) (1,061)
Deposits.................................................................... (215) (430) 60
Accounts payable............................................................ 4,502 4,050 (5,085)
Income taxes payable........................................................ 1,584 1,268 (2,439)
Accrued liabilities......................................................... (356) 2,515 (1,644)
--------- --------- ----------
Net cash provided by operating activities..................................... 16,357 14,320 10,201
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of plant and equipment............................................... (16,444) (52,105) (24,607)
Purchase of marketable securities............................................. (15,453) (43,768) (24,145)
Proceeds from sales of marketable securities.................................. 29,233 27,149 31,369
--------- --------- ----------
Net cash used in investing activities......................................... (2,664) (68,724) (17,383)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of obligations under capital leases................................... (1,718) (1,105) (402)
Borrowings of long-term debt.................................................. 5,000
Exercise of warrants.......................................................... 3,610
Issuances of common stock..................................................... 1,130 58,072 896
Proceeds of common stock subscribed........................................... 3
--------- --------- ----------
Net cash provided by financing activities..................................... 3,025 56,967 5,494
--------- --------- ----------
Net increase (decrease) in cash and cash equivalents.......................... 16,718 2,563 (1,688)
Cash and cash equivalents at beginning of period.............................. 6,394 23,112 25,675
--------- --------- ----------
Cash and cash equivalents at end of period.................................... $ 23,112 $ 25,675 $ 23,987
--------- --------- ----------
--------- --------- ----------
Interest paid................................................................. $ 343 $ 155 $ 72
--------- --------- ----------
--------- --------- ----------
Taxes paid.................................................................... $ 1,142 $ 2,843 $ 3,132
--------- --------- ----------
--------- --------- ----------
</TABLE>
See accompanying notes.
F-14
<PAGE>
ANADIGICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS AND BASIS OF PRESENTATION
ANADIGICS, Inc. (the "Company") is a leading supplier of radio frequency
("RF") integrated circuit solutions for the communications markets. The
Company's products are used to receive and transmit signals in a variety of
broadband and wireless communications applications. The Company's efforts in the
broadband area are focused applications for cable television systems ("CATV")
and fiber optic communications systems. In the wireless area the Company's
efforts are directed towards applications in cellular telephone and personal
communication systems ("PCS"). The Company designs, develops and manufactures
its integrated circuits primarily using gallium arsenide ("GaAs") semiconductor
material. GaAs offers certain advantages in RF/microwave applications including
the integration of numerous RF/microwave functions which cannot be easily
integrated in silicon-based circuits. The Company's high frequency integrated
circuits can typically replace 30 to 100 discrete components, permitting
manufacturers of end products to reduce the size and weight of their products,
increase power efficiency, improve reliability, reduce manufacturing time and
cost and enhance system performance.
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, ANADIGICS Foreign Sales Corporation. All
significant inter-company accounts and transactions have been eliminated in
consolidation.
CONCENTRATION OF CREDIT RISK
The Company grants trade credit to its customers, which are primarily
foreign manufacturers of wireless communication devices, cable and broadcast
television receivers and fiber optic communication devices. The Company performs
periodic credit evaluations of its customers and generally does not require
collateral. Accounts receivable from customers are denominated in U.S. dollars.
The Company has not experienced significant losses related to receivables from
individual customers.
Approximately 45% of the Company's net sales in 1996 were to three
customers, accounting for 16%, 16%, and 12% of net sales. Approximately 62% of
the Company's net sales in 1997 were to three customers, accounting for 33%, 16%
and 13% of net sales. Approximately 51% of the Company's net sales in 1998 were
to two customers, accounting for 34% and 17% of net sales; accounts receivable
from these customers accounted for 64% of total accounts receivable at December
31, 1998. Net sales to individual customers who accounted for 10% or more of the
Company's total net sales and corresponding end application information are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996 APPLICATION 1997 APPLICATION 1998 APPLICATION
--------- ----------- --------- ----------- --------- -----------
Largest customer............................... $ 11,283 CATV $ 33,935 Wireless* $ 29,173 Wireless*
Second largest customer........................ 11,127 Wireless* 16,792 Wireless* 14,664 CATV
Third largest customer......................... 8,404 Wireless* 12,851 CATV
</TABLE>
- ------------------------
* - Wireless includes net sales of integrated circuits for cellular and PCS
applications.
F-15
<PAGE>
ANADIGICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Production revenue is recorded when products are shipped to customers.
Revenues under customer-funded research and development contracts, which are
recorded relative to the deliverables and other contractual obligations were
$3,193 in 1996, $1,566 in 1997, and $715 in 1998, and are included in net sales
on the consolidated statements of operations. The costs associated with the
customer-funded research and development contracts approximates the revenue
recorded and are included in cost of sales on the consolidated statements of
operations.
WARRANTY COSTS
The Company provides, by a current charge to income, an amount it estimates
will be needed to cover future warranty obligations for products sold during the
year. The accrued liability for warranty costs is included in Accrued
Liabilities in the consolidated balance sheet.
COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE
All direct internal and external costs incurred in connection with the
designing of software configuration and software interface, installing hardware
and testing systems are capitalized. All other costs associated with internal
use software are expensed when incurred. Amounts capitalized are amortized on a
straight-line basis over three years.
PLANT AND EQUIPMENT
Plant and equipment are stated at cost. Depreciation of plant and equipment
has been provided on the straight-line method over 3-5 years.
The cost of equipment acquired under capital leases was $13,045 and $11,987
at December 31, 1997 and 1998, respectively, and accumulated amortization was
$11,941 and $11,639 at December 31, 1997 and 1998, respectively. Equipment
acquired under a capital lease is amortized over the useful life of the leased
equipment or the life of the lease, whichever is shorter.
INCOME TAXES
Deferred income taxes reflect the net effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
F-16
<PAGE>
ANADIGICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RESEARCH AND DEVELOPMENT COSTS
The Company charges all research and development costs associated with the
development of new products to expense when incurred. Engineering and design
costs related to customer-funded research and development contracts are
classified as cost of sales.
CASH EQUIVALENTS
The Company considers as cash equivalents all highly liquid marketable
securities with an original maturity of three months or less.
MARKETABLE SECURITIES
Available for sale securities are stated at fair value, with the unrealized
gains and losses, net of tax, reported in other comprehensive income or loss.
The cost of securities sold is based upon the specific identification method.
The amortized cost of debt securities is adjusted for amortization of premium
and accretion of discounts to maturity. Such amortization, realized gains and
losses, interest and dividends are included in interest income.
STOCK BASED COMPENSATION
As permitted by FASB Statement No. 123, "Accounting for Stock-Based
Compensation" (FASB 123), the Company has elected to follow Accounting Principal
Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and
related interpretations in accounting for its employee stock option plans. Under
APB 25, no compensation expense is recognized at the time of option grant
because the exercise price of the Company's employee stock option equals the
fair market value of the underlying common stock on the date of grant.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company records impairment losses on long-lived assets including
capitalized software costs used in operations or expected to be disposed when
events and circumstances indicate that the undiscounted cash flows estimated to
be generated by these assets are less than the carrying amounts of those assets
(See Note 12.-RESTRUCTURING CHARGES)
EARNINGS PER SHARE
Basic and diluted earnings per share are calculated in accordance with FASB
Statement No. 128, "Earnings Per Share". All earnings per share amounts for all
periods have been presented, and where appropriate, restated to conform to the
requirements of FASB 128.
COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted FASB Statement No. 130,
Reporting Comprehensive Income ("FASB 130"). FASB 130 establishes new rules for
the reporting and display of comprehensive income (or loss) and its components
in the financial statements. The adoption of FASB 130 had no effect on the
Company's financial position or results of operations.
F-17
<PAGE>
ANADIGICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Statement 130 requires unrealized gains (losses) on the Company's
available-for-sale securities, which previously were reported in stockholders'
equity, to be included in other comprehensive income and the disclosure of total
comprehensive income.
RECLASSIFICATIONS
Certain amounts as of December 31, 1997 have been reclassified to conform
with the December 31, 1998 presentation.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB issued Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities. The Company expects to adopt the new
Statement effective January 1, 2000. The Statement will require the Company to
recognize all derivatives on the balance sheet at fair value. The Company does
not anticipate that the adoption of this Statement will have a significant
effect on its results of operations or financial position.
2. INVESTMENTS
The following is a summary of available-for-sale securities:
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE SECURITIES
---------------------------------------
<S> <C> <C> <C>
GROSS ESTIMATED
UNREALIZED FAIR
COST GAINS VALUE
--------- --------------- -----------
U.S Treasury and Agency Securities........................................... $ 2,117 $ 7 $ 2,124
U.S. Corporate Securities.................................................... 16,249 36 16,285
--------- --- -----------
Total at December 31, 1998................................................. $ 18,366 $ 43 $ 18,409
--------- --- -----------
--------- --- -----------
U.S Treasury and Agency Securities........................................... $ 8,058 $ 5 $ 8,063
U.S. Corporate Securities.................................................... 17,532 32 17,564
--------- --- -----------
Total at December 31, 1997................................................. $ 25,590 $ 37 $ 25,627
--------- --- -----------
--------- --- -----------
</TABLE>
The amortized cost and estimated fair value of debt and marketable equity
securities at December 31, 1998, by contractual maturity, are shown below.
Expected maturities may differ from contractual maturities because the issuers
of the securities may have the right to prepay obligations without prepayment
penalties.
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE
SECURITIES
----------------------
<S> <C> <C>
ESTIMATED
FAIR
COST VALUE
--------- -----------
Due in one year or less................................................................... $ 16,900 $ 16,923
Due after one year through three years.................................................... 1,466 1,486
--------- -----------
Total................................................................................... $ 18,366 $ 18,409
--------- -----------
--------- -----------
</TABLE>
F-18
<PAGE>
ANADIGICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
3. INVENTORIES
Inventories are stated at the lower of cost (first in-first out method) or
market. Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1997 1998
--------- ---------
Raw materials........................................................... $ 1,670 $ 784
Work in process......................................................... 12,054 3,662
Finished goods.......................................................... 5,954 4,283
--------- ---------
$ 19,678 $ 8,729
--------- ---------
--------- ---------
</TABLE>
4. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1997 1998
--------- ---------
Accrued compensation..................................................... $ 4,599 $ 842
Warranty reserve......................................................... 550 304
Other.................................................................... 812 1,160
--------- ---------
$ 5,961 $ 2,306
--------- ---------
--------- ---------
</TABLE>
5. LEASES
The Company leases manufacturing, warehousing and office space under
noncancelable operating leases that expire through 2016. The Company also leases
certain equipment under capital leases that expire through 2000. Rent expense
was $1,810, $1,640 and $3,148 in 1996, 1997 and 1998, respectively. The future
minimum lease payments under the noncancelable operating leases and the present
value of the minimum capital lease payments are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR LEASES LEASES
- -------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
1999................................................................ $ 253 $ 2,377
2000................................................................ 190 2,531
2001................................................................ 2,576
2002................................................................ 2,640
2003................................................................ 2,533
Thereafter.......................................................... 25,581
----- ------------
Total minimum lease payments........................................ 443 $ 38,238
----- ------------
----- ------------
Less amount representing interest................................... 31
-----
Present value of net minimum lease payments......................... $ 412
-----
-----
</TABLE>
F-19
<PAGE>
ANADIGICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
6. EARNINGS PER SHARE
The reconciliation of shares used to calculate basic and diluted earnings
per share consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
<S> <C> <C> <C>
1996 1997 1998
------------- ------------- -------------
Weighted average common shares outstanding used
to calculate basic earnings per share......... 12,355,311 14,279,957 14,723,941
Net effect of dilutive stock options-- based on
treasury stock method using average market
price......................................... 552,540 783,922 --*
------------- ------------- -------------
Weighted average common and dilutive securities
outstanding used to calculate diluted earnings
per share..................................... 12,907,851 15,063,879 14,723,941
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
- ------------------------
* --The dilutive stock options are not included as their effect is
anti-dilutive.
7. DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
Effective January 1, 1998, the Company adopted Statement No. 131,
Disclosures About Segments of an Enterprise and Related Information ("FASB
131"). FASB 131 establishes standards for reporting information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports to shareholders. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers.
The Company believes it operates in one segment. Since all of the Company's
integrated circuits are manufactured using the same manufacturing facilities
located in the same geographic area, all operating expenses and assets of the
Company are combined and reviewed by the chief operating decision maker on an
enterprise-wide basis, resulting in no additional discrete financial information
or reportable segment information.
F-20
<PAGE>
ANADIGICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
7. DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
(CONTINUED)
FACTORS MANAGEMENT USED TO IDENTIFY THE COMPANY'S REPORTABLE SEGMENT
The Company classifies its revenues based upon the end application of the
product in which its integrated circuits are used. Net sales by end application
are regularly reviewed by the chief operating decision maker and are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
<S> <C> <C> <C>
1996 1997 1998
--------- ----------- ---------
Cellular and PCS Applications................................................ $ 24,501 $ 59,676 $ 33,716
CATV Applications............................................................ 13,822 20,848 28,327
Fiber Optic Applications..................................................... 11,579 11,457 17,582
Direct Broadcast Satellite Applications...................................... 15,769 8,989 5,735
Engineering service sales.................................................... 3,193 1,566 715
--------- ----------- ---------
Total........................................................................ $ 68,864 $ 102,536 $ 86,075
--------- ----------- ---------
--------- ----------- ---------
</TABLE>
GEOGRAPHIC INFORMATION
The Company primarily sells to four geographic regions; Europe, Asia, North
America (primarily U.S.A.), and South America. The geographic region is
determined by the destination of the shipped product. Net sales to each of the
four geographic regions are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
<S> <C> <C> <C>
1996 1997 1998
--------- ----------- ---------
Europe................................................... $ 24,819 $ 32,097 $ 20,459
Asia..................................................... 19,836 26,142 24,470
North America (primarily U.S.A.)......................... 24,209 44,297 36,416
South America............................................ -- -- 4,730
--------- ----------- ---------
$ 68,864 $ 102,536 $ 86,075
--------- ----------- ---------
--------- ----------- ---------
</TABLE>
8. STOCKHOLDERS' EQUITY
The Company has warrants outstanding, which entitle holders to purchase
30,000 shares of common stock at an exercise price of $10.38 per share. The
warrants become exercisable one year from the date of grant, or November 17,
1999, and expire on November 17, 2001. None of these warrants were exercisable
as of December 31, 1998.
The Company has additional warrants outstanding which entitle the holder to
purchase 22,500 shares of common stock at exercise prices ranging from $21.50 to
$48.25 per share, all of which are exercisable as of December 31, 1998. The
warrants expire between September of 2001 and 2003.
F-21
<PAGE>
ANADIGICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
9. INCOME TAXES
The components of the provision (benefit) for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C> <C>
1996 1997 1998
--------- --------- ---------
Current provision: Federal................................ $ 2,726 $ 3,780 $ (377)
State.................................. 331
Deferred provision (benefit): Federal................................ (3,214) 826 (5,316)
State.................................. (400) 502 (1,482)
--------- --------- ---------
Total........................................................................... $ (888) $ 5,439 $ (7,175)
--------- --------- ---------
--------- --------- ---------
</TABLE>
Significant components of the Company's net deferred tax assets and
liabilities as of December 31, 1997 and 1998 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1997 1998
--------- ---------
Current:
Accruals/reserves......................................................................... $ 4,193 $ 3,926
Net operating loss carryforwards.......................................................... 419
Research and development credits.......................................................... 268
--------- ---------
4,461 4,345
Long-term:
Net operating loss carryforwards.......................................................... 107 4,211
General business and research and development credits..................................... 268 1,350
Deferred rent expense..................................................................... 332
Difference in basis of plant and equipment................................................ (1,334) 62
--------- ---------
Net long-term deferred tax assets (liabilities)............................................. (959) 5,955
--------- ---------
Net deferred tax assets..................................................................... $ 3,502 $ 10,300
--------- ---------
--------- ---------
</TABLE>
As of December 31, 1998, the Company has net operating loss carryforwards of
approximately $12,000 for both federal and state tax reporting purposes. The
federal carryforward will expire in 2018, and the state carryforwards will
expire in 2005.
F-22
<PAGE>
ANADIGICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
9. INCOME TAXES (CONTINUED)
The reconciliation of income tax expense computed at the U.S. federal
statutory rate to the provision (benefit) for income taxes is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996 1997 1998
-------------------- -------------------- --------------------
Tax at U.S. statutory rate........................... $ 3,775 34.0% $ 7,268 35.0% $ (5,857) (35.0)%
Change in federal valuation allowance................ (4,673) (42.1) (1,913) (9.2)
Tax benefit of foreign sales corporation............. (472) (2.3)
State tax expense (benefit), net of
Federal tax effect................................. 542 2.6 (963) (5.8)
Other................................................ 10 0.1 14 0.1 (364) (2.1)
--------- --------- --------- --- --------- ---------
Provision (benefit) for income taxes................. $ (888) (8.0)% $ 5,439 26.2% $ (7,175) (42.9)%
--------- --------- --------- --- --------- ---------
--------- --------- --------- --- --------- ---------
</TABLE>
10. LONG-TERM DEBT, CREDIT FACILITY AND INTEREST RATE SWAP AGREEMENT
The Company has a secured $20,000 term loan facility under which $5,000 was
drawn down on December 30, 1998 and was outstanding as of December 31, 1998. The
$5,000 consists of a term-loan that requires equal principal repayments of $250
due quarterly through December 31, 2003, plus interest.
Interest on the credit facility is calculated at LIBOR plus 1.75%. The LIBOR
rate was 5.34% at December 31, 1998. The Company enters into interest rate swap
agreements to manage its exposure to interest rate movements by effectively
converting its debt from variable to fixed rates. Maturity dates of the interest
rate swap agreements will generally match those of the underlying debt or
financial arrangements. As of December 31, 1998, the Company has entered into
one interest rate swap with a maturity of five years and involved the exchange
of variable rate payments for fixed rate payments without the exchange of the
underlying principal amounts. In accordance with the terms of the swap
agreement, the Company pays 7.09% interest and receives LIBOR plus 1.75%
calculated on the notional amount. The notional amount of the interest rate swap
was $5,000 at December 31, 1998. The Company concluded that the swap effectively
changed the variable interest rate characteristics to a fixed rate for which the
present value of the cash flows are approximately the same, and as a result,
there is no adjustment to mark the swap to market. Cash flows associated with
the financial instrument are classified consistent with the cash flows from the
transactions being hedged.
The remaining $15,000 under the term loan facility provides for interest at
the bank's base rate minus 25 basis points or, at the Company's discretion,
other market-based rates. The Company has the option to swap floating rate for
fixed rate loans at the time of drawdown. The drawdown period expires on July 1,
1999. Any drawdowns may be paid over a term of up to sixty months. Its
availability is subject to a number of financial covenants. Under this facility,
the payment of dividends, among other things, requires approval by the bank.
Substantially all assets of the Company are pledged as security for the
repayment of amounts drawn under this credit facility. On a quarterly basis, the
Company pays an annual commitment fee equal to 0.125% of the daily unused line
of credit.
F-23
<PAGE>
ANADIGICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
11. EMPLOYEE BENEFIT PLANS
In 1995, the Company adopted an employee stock purchase plan ("ESP
Plan")under Section 423 of the Internal Revenue Code. All full-time employees of
the Company and part-time employees, as defined in the ESP Plan, are eligible to
participate in the ESP Plan. An aggregate of 562,500 shares of common stock are
reserved for offering under the ESP Plan. Offerings are made at the commencement
of each calendar year and must be purchased by the end of that calendar year. In
1997, 44,515 shares of common stock were purchased at a price of $21.99 per
share, as determined by the ESP Plan, which approximates fair value. During
1998, 43,627 shares of common stock were purchased at a price of $9.75 per
share, as determined by the ESP Plan, which approximates fair value.
Certain executives and key employees have been granted options to purchase
shares of common stock under stock option plans adopted in 1994, 1995 and 1997.
An aggregate of 326,087, 2,775,000 and 1,200,000 shares of common stock were
reserved for issuance under the 1994 Long-Term Incentive Share and Award Plan,
the 1995 Long-Term Incentive Share Award Plan and the 1997 Long-Term Incentive
and Share Award Plan for Employees (the "Plans"), respectively. The Plans
provide for the granting of stock options, stock appreciation rights, restricted
shares, or other share based awards to eligible employees and directors, as
defined in the Plans. Options granted under the Plans become exercisable in
varying amounts over periods of up to three years.
FASB 123 requires pro forma information regarding net income and earnings
per share as if the Company has accounted for its employee stock options and
warrants granted subsequent to December 31, 1994 and shares of common stock
purchased by employees in connection with the ESP Plan ("equity awards") under
the fair value method of FASB 123. The fair value of these equity awards was
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted average assumptions for 1996, 1997 and 1998,
respectively: risk-free interest rate of 5.17%, 5.90%, and 4.50%; expected
volatility of 0.50, 0.50, and 0.60; expected option life of one year from
vesting and an expected dividend yield of 0.0%.
For purposes of pro forma disclosures, the estimated fair value of the
equity awards is amortized to expense over the options' vesting period. The
Company's pro forma information is as follows:
<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ----------
<S> <C> <C> <C>
Pro forma net income (loss)................................................... $ 10,555 $ 11,777 $ (13,092)
Pro forma basic earnings (loss) per share..................................... $ 0.85 $ 0.82 $ (0.89)
</TABLE>
Because FASB 123 is applicable only to equity awards granted subsequent to
December 31, 1994, its pro forma effect was not fully reflected until 1997.
F-24
<PAGE>
ANADIGICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
11. EMPLOYEE BENEFIT PLANS (CONTINUED)
A summary of the Company's stock option activity, and related information
for the years ended December 31, 1996 and 1997 follows:
<TABLE>
<CAPTION>
1996 1997 1998
------------------------ ------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
WEIGHTED WEIGHTED WEIGHTED
COMMON AVERAGE COMMON AVERAGE COMMON AVERAGE
STOCK EXERCISE STOCK EXERCISE STOCK EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
----------- ----------- ----------- ----------- ----------- -----------
Outstanding at beginning of year........ 686,565 $ 6.13 1,088,221 $ 9.77 1,558,075 $ 19.77
Granted................................. 484,575 14.64 710,931 31.54 2,083,256 10.87
Exercised............................... (59,068) 6.14 (219,246) 7.78 (36,724) 9.76
Forfeited............................... (23,851) 13.14 (21,831) 24.74 (142,448) 22.77
----------- ----------- -----------
Outstanding at end of year.............. 1,088,221 9.77 1,558,075 19.77 3,462,159 14.39
----------- ----------- -----------
----------- ----------- -----------
Exercisable at end of year.............. 481,426 6.20 745,963 10.30 1,154,789 16.80
----------- ----------- -----------
----------- ----------- -----------
Weighted average fair value of options
granted during the year............... $ 5.50 $ 12.15 $ 10.75
</TABLE>
Stock options outstanding at December 31, 1998 are summarized as follows:
<TABLE>
<CAPTION>
OUTSTANDING WEIGHTED AVERAGE WEIGHTED AVERAGE
RANGE OF OPTIONS AT REMAINING EXERCISE
EXERCISE PRICES DECEMBER 31, 1998 CONTRACTUAL LIFE PRICE
- ------------------- --------------------- ---------------------- ----------------------
<S> <C> <C> <C>
$ .57 109,639 5.17 $ .57
$ 6.25 to $ 8.00 1,554,044 9.02 $ 7.32
$ 8.44 to $15.93 793,758 8.11 $ 14.59
$16.34 to $29.69 409,552 9.03 $ 18.78
$30.00 to $47.50 595,166 8.06 $ 32.15
----------
$ .57 to $47.50 3,462,159 8.53 $ 14.39
</TABLE>
12. RESTRUCTURING CHARGES
The Company recorded restructuring charges totaling $7,126 during 1998. The
restructuring charges consisted of writedowns of impaired long-lived assets of
$4,510, reductions in work force of $1,616 and wafer fabrication facility
shutdown and removal costs of $1,000 which are expected to be completed in 1999.
In connection with the impairment evaluation, the Company determined that
certain other equipment related to the conversion of the new wafer fabrication
facility has shorter depreciable lives. Accordingly, the Company accelerated
depreciation on these assets during the year for which the effect on net loss
was approximately $(1,517) or $(0.10) per share. These assets, which now have
revised estimated useful lives of nine months, had original estimated useful
lives of five to twenty years.
F-25
<PAGE>
ANADIGICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
12. RESTRUCTURING CHARGES (CONTINUED)
WRITEDOWNS OF IMPAIRED ASSETS. The Company evaluated the on-going value of
certain assets. Based upon this evaluation, the Company plans to dispose of
certain assets during the next twelve months with a carrying amount of $4,635
and estimated the sales value, net of related costs to sell, at $125. The
estimated sales value was based on quoted market prices or on the best
information available in the circumstances. In most instances, there was no
market for the impaired asset and therefore the fair value was zero. As a
result, the Company recorded an impairment loss of $4,510, which consisted of
the following items:
<TABLE>
<CAPTION>
<S> <C>
Write-down of assets associated with the conversion of the new
wafer fabrication facility from 4-inch to 6-inch wafers.......... $ 2,149
Write-down of assets associated with the closure of the Company's
in-house assembly operations..................................... 1,004
Write-off of software, in connection with the Company's on-going
information systems improvements................................. 842
Unused production assets previously used in the production of DBS
LNB converter integrated circuits................................ $ 515
---------
Total write-down on impairment of long-lived assets................ $ 4,510
---------
---------
</TABLE>
The effect of suspending depreciation on these assets was approximately $220
during 1998.
REDUCTIONS IN FORCE. The Company recorded charges of $1,100 during the
first quarter of 1998 and $516 during the fourth quarter of 1998 associated with
reductions in its workforce. The workforce reduction charges primarily consisted
of severance pay, extended medical coverage, and outplacement service costs for
approximately 165 employees primarily involved in the Company's production
operations. Approximately $1,049 of severance pay, extended medical coverage,
and outplacement service costs were paid through December 31, 1998 for the
termination of 120 employees. The remaining liability of $567 is expected to be
paid during the first half of 1999.
FACILITY SHUTDOWN AND REMOVAL COSTS. The Company recorded charges of $1,000
associated with the shutdown and removal of its existing wafer fabrication
facility, which is expected to be completed in 1999.
F-26
<PAGE>
ANADIGICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
13. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MARCH 30, JUNE 29, SEPT. 28, DEC. 31, MARCH 29, JUNE 28, SEPT. 27, DEC. 31,
1997 1997 1997 1997 1998 1998 1998 1998
----------- --------- --------- --------- ----------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales..................... $ 22,860 $ 24,969 $ 26,727 $ 27,980 $ 18,785 $ 22,675 $ 22,041 $ 22,574
Cost of sales................. 12,321 13,159 13,688 16,925 12,068 14,565 21,758 17,838
----------- --------- --------- --------- ----------- --------- --------- ---------
Gross profit.................. 10,539 11,810 13,039 11,055 6,717 8,110 283 4,736
Research and development...... 3,439 4,185 4,375 4,767 4,642 5,108 4,334 4,739
Selling and administrative
expense..................... 2,746 3,028 3,226 3,138 3,345 3,060 3,084 3,437
Restructuring charges......... 1,100 1,357 4,669
----------- --------- --------- --------- ----------- --------- --------- ---------
Operating income (loss)....... 4,354 4,597 5,438 3,150 (2,370) (58) (8,492) (8,109)
Interest income, net.......... 561 1,003 833 831 656 570 560 511
----------- --------- --------- --------- ----------- --------- --------- ---------
Income (loss) before income
taxes....................... 4,915 5,600 6,271 3,981 (1,714) 512 (7,932) (7,598)
Provision (benefit) for income
taxes (1)................... 1,745 1,988 2,310 (605) (643) 192 (2,975) (3,749)
----------- --------- --------- --------- ----------- --------- --------- ---------
Net income (loss)............. $ 3,170 $ 3,612 $ 3,961 $ 4,586 $ (1,071) $ 320 $ (4,957) $ (3,849)
----------- --------- --------- --------- ----------- --------- --------- ---------
----------- --------- --------- --------- ----------- --------- --------- ---------
Basic earnings (loss) per
share....................... $ 0.24 $ 0.25 $ 0.28 $ 0.31 $ (0.07) $ 0.02 $ (0.34) $ (0.26)
----------- --------- --------- --------- ----------- --------- --------- ---------
----------- --------- --------- --------- ----------- --------- --------- ---------
Diluted earnings (loss) per
share....................... $ 0.23 $ 0.24 $ 0.26 $ 0.30 $ (0.07) $ 0.02 $ (0.34) $ (0.26)
----------- --------- --------- --------- ----------- --------- --------- ---------
----------- --------- --------- --------- ----------- --------- --------- ---------
Market price per share of
common stock:
High.......................... $ 37.68 $ 35.50 $ 54.25 $ 51.38 $ 33.81 $ 16.81 $ 21.00 $ 14.19
Low........................... $ 24.00 $ 22.50 $ 30.50 $ 21.00 $ 13.19 $ 11.00 $ 7.81 $ 5.13
</TABLE>
- ------------------------
(1) The benefit for income taxes for the quarter ended December 31, 1997
resulted from a reduction in the valuation allowance related to deferred tax
assets.
14. COMMITMENTS AND CONTINGENCIES
In March and April 1998, there were filed against the Company and certain of
its officers and directors in the United States District Court for the District
of New Jersey seven proposed class action lawsuits (collectively, the "Class
Action Lawsuits"), captioned Assuncao v. Anadigics, Inc., et al., No. 98-917;
Office and Professional Employees International Union Local 153 Pension Fund v.
Anadigics, Inc., et al., No. 98-919; Kotler v. Anadigics, Inc., et al., No.
98-923; Gray v. Anadigics, Inc., et al., No. 98-1337; Mirpuri v. Anadigics,
Inc., et al., No. 98-1811; Grayson v. Rosenzweig, et al., No. 98-1688; and
Morgante v. Anadigics, Inc., et al., No. 98-2024. The Complaints filed in the
Class Action Lawsuits (each of which names a combination of the following
directors and officers of
F-27
<PAGE>
ANADIGICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
14. COMMITMENTS AND CONTINGENCIES (CONTINUED)
the Company: Ronald Rosenzweig, George Gilbert, Harry T. Rein, John F. Lyons,
Charles Huang, Javed Patel, Sheo Khetan and Robert Bayruns) seek unspecified
damages in connection with claims under Sections 10(b) (and Rule 10b-5
promulgated thereunder) and 20(a) of the Securities Exchange Act of 1934 and, as
set forth in the Union Local 153, Kotler, Gray and Mirpuri Complaints, claims
alleging common law fraud and negligent misrepresentation. The Complaints allege
that, as a result of certain material misstatements and omissions made by the
Company in connection with its business, the price of the Company's common stock
was artificially inflated during the proposed class periods. The longest
proposed class period alleged by the plaintiffs in the Class Action Lawsuits is
the period from July 17, 1997 through January 30, 1998. On December 20, 1998,
the United States District Court for the District of New Jersey entered an Order
consolidating the Class Action Lawsuits into one action, captioned In re
Anadigics, Inc. Securities Litigation, No. 98-CV-917 (the "Consolidated Class
Action Lawsuit"), and appointing Lead Plaintiffs and Lead Plaintiffs' Counsel.
The parties to the Consolidated Class Action Lawsuit have jointly requested the
Court to extend to April 5, 1999 the deadline by which plaintiffs must file
their Amended Consolidated Complaint. The Company is unable at this time to
assess the probable outcome of the Consolidated Class Action Lawsuit or the
materiality of the risk of loss in connection therewith (given that none of the
original Complaints had alleged damages with any particularity and the Amended
Consolidated Complaint has not yet been served).
On or about August 3, 1998, a shareholders derivative lawsuit, captioned
Deegan v. Rosenzweig, et al., No. 98-CV-3640 (the "Derivative Lawsuit"), was
filed in the United States District Court for the District of New Jersey against
the Company (as nominal defendant) and the following officers and directors
thereof: Charles Burton, Paul Bachow, Robert Bayruns, Ronald Rosenzweig, George
Gilbert, John Lyons, Harry Rein, Sheo Khetan, Javed Patel, Charles Huang and
Phillip Wallace. The Complaint in the Derivative Lawsuit alleges claims, which
are predicated upon the Class Action Lawsuits, seeking damages, contribution,
indemnification and equitable relief. On October 28, 1998, the United States
District Court for the District of New Jersey stayed the Derivative Lawsuit
pending the earlier of (1) the disposition of any motion to dismiss the
Complaint (or any Consolidated Amended Complaint) in the Class Action Lawsuits
or (2) the commencement of discovery in the Class Action Lawsuits. As a result,
on October 29, 1998, the Court administratively dismissed the Derivative Lawsuit
without prejudice. The Company is unable at this time to assess the probable
outcome of the Derivative Lawsuit or the materiality of the risk of loss in
connection therewith (given that the original Complaint did not allege damages
with any particularity and no operative pleading presently exists).
The Company is also involved in other threatened and pending legal
proceedings arising in the course of the Company's business. The adverse outcome
of any of these other legal proceedings is not expected to have a material
adverse effect on the results of operations or financial condition of the
Company.
At December 31, 1998, the Company had committed to purchase approximately
$10,000 of equipment and furniture, and leasehold improvements during 1999.
F-28
<PAGE>
UNDERWRITING
ANADIGICS and the underwriters for the offering named below have entered
into an underwriting agreement with respect to the shares being offered. Subject
to certain conditions, each underwriter has severally agreed to purchase the
number of shares indicated in the following table. Goldman, Sachs & Co.,
Prudential Securities Incorporated, CIBC World Markets Corp. and Needham &
Company, Inc. are the representatives of the underwriters.
<TABLE>
<CAPTION>
Underwriters Number of Shares
- -------------------------------------------------------- ------------------
<S> <C>
Goldman, Sachs & Co.....................................
Prudential Securities Incorporated......................
CIBC World Markets Corp. ...............................
Needham & Company, Inc..................................
----------
Total............................................... 3,000,000
----------
----------
</TABLE>
------------------
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional 450,000
shares from ANADIGICS to cover such sales. They may exercise that option for 30
days after the date of this prospectus. If any shares are purchased pursuant to
this option, the underwriters will severally purchase shares in approximately
the same proportion as shown in the table above.
The following table shows the per share and total underwriting discounts and
commissions to be paid to the underwriters by ANADIGICS. These amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares.
<TABLE>
<CAPTION>
Paid by ANADIGICS
No Exercise Full Exercise
------------------- -------------------
<S> <C> <C>
Per Share...................................... $ $
Total.......................................... $ $
</TABLE>
Shares sold by the underwriters to the public will initially be offered at
the initial price to public set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial price to public. Any such securities
dealers may resell any shares purchased from the underwriters to certain other
brokers or dealers at a discount of up to $ per share from the initial
price to public. If all the shares are not sold at the initial price to public,
the representatives may change the offering price and the other selling terms.
ANADIGICS and its directors and executive officers have agreed with the
underwriters not to dispose of or hedge any of their common stock or securities
convertible into or exchangeable for shares of common stock during the period
from the date of this prospectus continuing through the date 90 days after the
date of this prospectus, except with the prior written consent of the
representatives of the underwriters. This agreement does not apply to any
existing employee benefit plans.
In connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering.
U-1
<PAGE>
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the common
stock while the offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives of the underwriters have
purchased shares sold by or for the account of the underwriter in stabilizing or
short covering transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.
ANADIGICS estimates that its share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately
$501,836.
ANADIGICS has agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
The underwriters and their affiliates have in the past provided, and may in
the future from time to time provide, investment banking services to ANADIGICS,
for which they may receive customary fees.
U-2
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
sell only the shares offered hereby, but only under the circumstances and in the
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary........................................................ 1
Risk Factors.............................................................. 4
Forward-Looking Statements................................................ 10
Use of Proceeds........................................................... 11
Dividend Policy........................................................... 11
Price Range of Common Stock............................................... 11
Capitalization............................................................ 12
Selected Financial Data................................................... 13
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 14
Business.................................................................. 23
Management................................................................ 33
About This Prospectus..................................................... 34
Where You Can Find More Information....................................... 35
Validity of Common Stock.................................................. 35
Experts................................................................... 35
Glossary.................................................................. 36
Index to Financial Statements............................................. F-1
Underwriting.............................................................. U-1
</TABLE>
3,000,000 Shares
ANADIGICS, INC.
Common Stock
-------------
[LOGO]
-------------
GOLDMAN, SACHS & CO.
PRUDENTIAL SECURITIES
CIBC WORLD MARKETS
NEEDHAM & COMPANY, INC.
Representatives of the Underwriters
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable in connection with the sale of
the shares of common stock being registered hereby. All amounts are estimates
except the registration fee, the NASD filing fee and the Nasdaq NMS fee.
<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
-----------
<S> <C>
Registration fee................................................................. $ 28,562
NASD filing fee.................................................................. 10,774
Nasdaq NMS fees.................................................................. 17,500
Printing expenses................................................................ 150,000
Legal fees and expenses.......................................................... 175,000
Accounting fees and expenses..................................................... 100,000
Blue Sky fees and expenses....................................................... 0
Transfer agent and registrar fees................................................ 10,000
Miscellaneous.................................................................... 10,000
-----------
Total........................................................................ $ 501,836
-----------
-----------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act of 1933. Article VI of the
registrant's restated certificate of incorporation and section 4 of article VII
of the registrant's by-laws provide for indemnification of its directors,
officers, employees, and other agents to the maximum extent permitted by the
Delaware General Corporation Law. Reference is also made to section 8 of the
underwriting agreement contained in exhibit 1.1 hereto, which provides for the
indemnification of officers, directors, and controlling persons of the
registrant against certain liabilities.
ITEM 16. EXHIBITS
<TABLE>
<S> <C>
1.1 Form of underwriting agreement.*
4.1 Form of common stock certificate. Filed as an exhibit to ANADIGICS' registration
statement (Registration No. 33-89928), and incorporated herein by reference.
4.2 Form of certificate of amendment to amended and restated certificate of
incorporation.*
4.3 Rights agreement dated as of December 17, 1998 between the registrant and Chase
Mellon Shareholder Services L.L.C., as rights agent. Filed as an exhibit to
ANADIGICS' current report on form 8-K filed December 17, 1998, and incorporated
herein by reference.
5.1 Opinion of Cahill Gordon & Reindel (a partnership including a professional
corporation).*
10.1 Fourth Amendment to Amended and Restated Agreement dated as of June 30, 1999 between
ANADIGICS and First Union National Bank.*
10.2 Second Amendment to Amended and Restated Agreement dated as of July 1, 1997 between
ANADIGICS and First Union National Bank.
10.3 Third Amendment to Amended and Restated Agreement dated as of December 30, 1998
between ANADIGICS and First Union National Bank.
23.1 Consent of Ernst & Young LLP.
</TABLE>
II-1
<PAGE>
<TABLE>
<S> <C>
23.2 Consent of Cahill Gordon & Reindel (included in Exhibit 5.1).*
24.1 Power of attorney.*
</TABLE>
- ------------------------
* Previously filed.
ITEM 17. UNDERTAKINGS
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 purposes 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.
(3) 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.
(4) 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 herein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-2
<PAGE>
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 the
requirements for filing on Form S-3 and has duly caused this amendment no. 2 to
the registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the Township of Warren, State of New Jersey, on
the 29th day of September, 1999.
ANADIGICS, INC.
BY: /S/ DR. BAMI BASTANI
-----------------------------------------
Dr. Bami Bastani
CHIEF EXECUTIVE OFFICER
AND PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED:
NAME TITLE DATE
- ------------------------------ --------------------------- -------------------
Chief Executive Officer and
/s/ DR. BAMI BASTANI President (Chief
- ------------------------------ Executive Officer); September 29, 1999
Dr. Bami Bastani Director
Senior Vice President and
/s/ TOM SHIELDS Chief Financial Officer
- ------------------------------ (Chief Financial Officer September 29, 1999
Tom Shields and Principal Accounting
Officer)
* Chairman of the Board of
- ------------------------------ Directors and Director September 29, 1999
Ronald Rosenzweig
* Director
- ------------------------------ September 29, 1999
Paul S. Bachow
Director
- ------------------------------ September 29, 1999
David Fellows
* Director
- ------------------------------ September 29, 1999
Bruns Grayson
Director
- ------------------------------ September 29, 1999
Harry T. Rein
* Director
- ------------------------------ September 29, 1999
Lewis Solomon
<TABLE>
<S> <C> <C> <C>
*By: /s/ DR. BAMI BASTANI
-------------------------
(AS ATTORNEY-IN-FACT)
</TABLE>
II-3
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS
- -----------
<C> <S>
1.1 Form of underwriting agreement.*
4.1 Form of common stock certificate. Filed as an exhibit to ANADIGICS' registration statement (Registration
No. 33-89928), and incorporated herein by reference.
4.2 Form of certificate of amendment to amended and restated certificate of incorporation.*
4.3 Rights agreement dated as of December 17, 1998 between the registrant and Chase Mellon Shareholder
Services L.L.C., as rights agent. Filed as an exhibit to ANADIGICS' current report on form 8-K filed
December 17, 1998, and incorporated herein by reference.
5.1 Opinion of Cahill Gordon & Reindel (a partnership including a professional corporation).*
10.1 Fourth Amendment to Amended and Restated Agreement dated as of June 30, 1999 between ANADIGICS and First
Union National Bank.*
10.2 Second Amendment to Amended and Restated Agreement dated as of July 1, 1997 between ANADIGICS and First
Union National Bank.
10.3 Third Amendment to Amended and Restated Agreement dated as of December 30, 1998 between ANADIGICS and
First Union National Bank.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Cahill Gordon & Reindel (included in Exhibit 5.1).*
24.1 Power of attorney.*
</TABLE>
- ------------------------
* Previously filed.
<PAGE>
EXHIBIT 10.2
SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT
This SECOND AMENDMENT ("Amendment") dated as of July 1, 1997 by and
between FIRST UNION NATIONAL BANK (the "Bank") and ANADIGICS, INC. (the
"Borrower") to that certain Amended and Restated Loan Agreement dated as of
January 25, 1996 between the Borrower and the Bank, as amended by the First
Amendment dated as December 23, 1996 (the Amended and Restated Loan Agreement as
amended by the First Amendment and this Amendment is collectively referred to
herein as the "Loan Agreement").
W I T N E S S E T H:
WHEREAS, the Borrower has requested that the term loan facility
maintained pursuant to the Loan Agreement be amended; and
WHEREAS, the Bank has agreed to the request of the Borrower on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), parties hereto hereby agree as follows:
1. DEFINED TERMS; EFFECT OF AMENDMENT.
(a) All capitalized terms used herein which are defined in the Loan
Agreement and not otherwise defined herein are used herein as defined therein
(b) This Amendment is an amendment to the Loan Agreement. Unless the
context of this Amendment otherwise requires, the Loan Agreement and this
Amendment shall be read together and shall have effect as if the provisions of
the Loan Agreement and this Amendment were contained in one agreement. After the
effective date of this Amendment, all references in the Loan Agreement to the
"Loan Agreement", "this Agreement", "hereto", "hereof", "hereunder" or words of
like import referring to the Loan Agreement shall mean the Loan Agreement as
amended by this Amendment, and all references in the Notes and the other Loan
Documents to the Loan Agreement shall mean the Loan Agreement as amended by this
Amendment.
2. AMENDMENTS TO LOAN AGREEMENT.
(a) All references in the Loan Agreement to a "Base Rate Loan" shall be
deemed to mean a "Prime Rate Loan".
(b) The following definitions set forth in ARTICLE I of the Loan
Agreement are hereby amended in their entirety to read as follows:
"Term Loan Availability Expiration Date shall mean July 1,
1999."
<PAGE>
(c) Section 2.1(b)(i) of the Loan Agreement is hereby amended in its
entirety to read as follows:
"(b) INTEREST. Prior to an Event of Default, interest shall
accrue on each Term Loan (x) if Borrower chooses not to exercise the
Swap Option, at one of the rates set forth in subsection (i) below (as
selected by the Borrower at the time each Term Loan is requested) ; and
(y) at the rate set forth in subsection (ii) below if the Borrower
elects the Swap Option and communicates it to the Bank in accordance
with section 2.1(d) hereof:
(i) an annual rate equal at all times to one (1) of the
following rates, which shall be selected by the Borrower and
communicated to the Bank pursuant to Section 2.1(d):
(x) the Prime Rate minus 50 basis points (.50%);
(y) LIBOR corresponding to an Interest Period of
one (1), three (3), or six (6) months, plus
one hundred twenty-five (125) basis points;
Interest with respect to Prime Rate Loans shall be payable
monthly in arrears on the last day of each calendar month
commencing on the last day of the first calendar month after
such Term Loan is advanced to the Borrower and at the Term
Loan Maturity Date. Interest with respect to LIBOR Loans shall
be payable on the last day of the Interest Period with respect
thereto and, in the case of an Interest Period greater than
three (3) months, interest shall also be payable on the 90th
day of such Interest Period, and at the Term Loan Maturity
Date.
(ii) an annual rate equal at all times to LIBOR corresponding
to an Interest period of three (3) months plus one hundred
twenty-five (125) basis points. The commencement date
("Commencement Date") of the initial three (3) month interest
period will be determined by the Bank and set forth in the
Term Loan Note. After the Commencement Date each Interest
Period will commence on the last day of the immediately
preceding Interest Period and end three (3) months thereafter
(subject to the qualifications contained in the definition of
Interest Period set forth herein), but in no event after the
Term Loan Maturity Date."
(d) Section 6.2 (b) of the Loan Agreement is hereby amended by deleting
"forty-five (45)" in the first line and substituting "sixty (60)" in lieu
thereof.
(e) Schedule 7.12 of the Loan Agreement is hereby deleted and replaced
by Schedule 7.12 annexed hereto.
-2-
<PAGE>
(f) The form of Term Loan Note, attached as Exhibit 2.1 (c) to the
Amended and Restated Loan Agreement is hereby amended by deleting the bracketed
language in paragraph 2 and substituting the following in lieu thereof:
"[the Prime Rate minus 50 basis points (.50%) or LIBOR plus one hundred
twenty five basis points based on an Interest Period of _____ months]"
3. FULL FORCE AND EFFECT. Except as expressly modified by this
Amendment, all of the terms and conditions of the Loan Agreement shall continue
in full force and effect, and all parties hereto shall be entitled to the
benefits thereof. This Amendment is limited as written and shall not be deemed
(i) to be an amendment of or a consent under or waiver of any other term or
condition of the Loan Agreement or (ii) to prejudice any right or rights which
the Bank now has or may have in the future under or in connection with the Loan
Agreement or such other agreements.
4. SECURITY INTERESTS. It is agreed and confirmed that after giving
effect to this Amendment, the security interests granted by the Borrower
pursuant to the Security Agreement secure, inter alia, the payment of the
obligations arising under the Loan Agreement, as amended by this Amendment.
5. REPRESENTATIONS AND WARRANTIES. In order to induce the Bank to enter
into this Amendment, the Borrower makes the following representations and
warranties to the Bank, which shall survive the execution and delivery hereof:
(a) The execution and delivery of this Amendment has been authorized by
all necessary corporate action on its part, this Amendment has been duly
executed and delivered by it, and this Amendment and the Loan Agreement, as
amended hereby, constitutes the legal, valid and binding obligations of it
enforceable against it in accordance with its terms subject to applicable
bankruptcy, insolvency, reorganization and other laws affecting creditors'
rights generally, moratorium laws from time to time in effect and general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law);
(b) No Event of Default has and is continuing under the Loan Agreement,
and no event has occurred which, with notice, lapse of time or both, would
constitute such an Event of Default; and
(c) The representations and warranties set forth in the Loan Agreement
and the other Loan Documents are true and correct as of the date hereof in all
material respects.
6. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original,
and all which when taken together shall constitute one and the same agreement.
-3-
<PAGE>
7. GOVERNING LAW. This Amendment, including the validity thereof and
the rights and obligations of the parties hereunder, shall be construed in
accordance with and governed by the laws of the State of New Jersey.
8. CONDITIONS PRECEDENT. This Amendment shall not be effective until
(i) the Bank shall have received counterparts of this Amendment, duly executed
by each of the parties hereto, and (ii) the Borrower shall have paid all
reasonable costs and expenses of the Bank, including, without limitation, the
reasonable legal fees and expenses incurred by the Bank in connection with the
preparation, negotiation, execution and delivery and review of this Amendment.
-4-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the day and year first above written.
ATTEST: ANADIGICS, INC.
By: By:
------------------------------- -------------------------------
Name: Name:
Title: Title:
FIRST UNION NATIONAL BANK
By:
-------------------------------
Name:
Title:
-5-
<PAGE>
SCHEDULE 7.12
This Schedule is a part of the Amended and Restated Loan Agreement,
dated as of January 25, 1996, by and between First Union National Bank and
Anadigics, Inc.
A. QUICK RATIO. The Borrower shall have a ratio of cash, marketable
securities and accounts receivable to Current Liabilities of not less than 1.50
to 1.00. This covenant will be tested at the end of each fiscal quarter of the
Borrower.
B. FIXED CHARGE COVERAGE RATIO. The Borrower shall have a Fixed Charge
Coverage Ratio of not less than the respective amounts set forth below during
the periods designated below:
<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
FROM THROUGH
---- -------
<S> <C> <C> <C>
Date hereof - 12/30/98 3.50 to 1.00
12/31/98 - 12/30/99 2.50 to 1.00
12/31/99 and at all times thereafter 2.90 to 1.00
</TABLE>
This covenant will be tested on a rolling four (4) quarter basis at the
end of each fiscal quarter of the Borrower.
C. EFFICIENCY RATIO. The Borrower shall have a ratio of net earnings
before federal, state and local income taxes to Total Assets of not less than
the respective amounts set forth below during the periods designated below:
<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
FROM THROUGH
---- -------
<S> <C> <C> <C>
Date hereof - 12/30/99 10%
12/31/99 and at all times thereafter 14%
</TABLE>
This covenant will be tested on a rolling four (4) quarter basis at the
end of each fiscal quarter of the Borrower.
For purposes of this Schedule, all capitalized terms used herein and
not otherwise defined shall have the meanings given to them, respectively, in
the Amended and Restated Loan Agreement, and the following terms shall have the
following meanings:
"Current Assets" shall mean, at any time, all assets which, in
accordance with GAAP, should be classified as current assets of the Borrower.
Sch-1
<PAGE>
"Current Liabilities" shall mean, at any time, all liabilities which,
in accordance with GAAP, should be classified as current liabilities of the
Borrower.
"EBIT" shall mean, at any time, for any period, the sum of (i) Net
Income, (ii) interest expense, and (iii) federal, state and local income taxes
computed in accordance with GAAP.
"Fixed Charge Coverage Ratio" shall mean, at any time, for the
applicable period of determination, the ratio of (a) the sum of (i) EBIT and
(ii) lease and rental expense to (b) the sum of (i) lease and rental expense,
(ii) the aggregate principal and interest payable on all indebtedness (excluding
any principal payments made under the $10,000,000.00 line of credit), and (iii)
the current portion of Capital Lease Obligations.
"Net Income" shall mean, for any period, the net income of the
Borrower, determined in accordance with GAAP, excluding:
(a) the proceeds of any insurance policy;
(b) any gain or loss arising from:
(1) the sale or other disposition of any assets
(other than Current Assets);
(2) any write-up of assets; or
(3) the acquisition of outstanding securities
representing Indebtedness of the Borrower;
(c) any earnings, prior to the date of acquisition, of any
Person acquired in any manner;
(d) any earnings of a successor to or transferee of the assets
of the Borrower prior to becoming such successor or transferee;
(e) any deferred credit (or amortization of a deferred credit)
arising from the acquisition of any Person; and
(f) any other item constituting an extraordinary gain or loss
under GAAP.
"Total Assets" shall mean, at any time, all assets which, in accordance
with GAAP, should be classified as assets of the Borrower.
Sch-2
<PAGE>
SECOND AMENDMENT TO SECURITY AGREEMENT
This SECOND AMENDMENT TO SECURITY AGREEMENT ("Agreement") dated as of
this 1st day of July, 1997 is by and between FIRST UNION NATIONAL BANK (the
'Bank"), formerly known as First Fidelity Bank, National Association, which was
successor in interest to First Fidelity Bank, N.A., New Jersey, and ANADIGICS,
INC. (the "Borrower").
BACKGROUND
A. First Fidelity Bank, N.A., New Jersey ("FFBNJ") and the Borrower
entered into that certain Security Agreement (the "Original Security Agreement")
dated as of September 16, 1993 pursuant to which the Borrower granted to FFBNJ a
security interest in, among other things, its accounts, inventory, equipment and
the proceeds thereof.
B. The Original Security Agreement was given to secure all Liabilities
of the Borrower to FFBNJ.
C. The Borrower and First Fidelity Bank, N.A. ("FFB"), successor in
interest to FFBNJ entered into that certain Amended and Restated Loan Agreement,
dated as of October 14, 1994, pursuant to which FFB agreed to make available to
the Borrower a revolving credit facility in the maximum principal amount of
$5,000,000 (the "Revolver") and a term loan facility in the maximum principal
amount of $3,000,000 (the "Term Loan").
D. FFB is now known as First Union National Bank.
E. The Borrower and the Bank entered into that certain Amended and
Restated Loan Agreement dated as of January 25, 1996, pursuant to which the Bank
agreed to make available to the Borrower a Term Loan Facility (the "Term Loan
Facility") in the maximum principal amount of $10,000,000 to replace the Term
Loan, and terminated the Revolver.
F. The Borrower and the Bank entered into that certain First Amendment
dated as of December 23, 1996 (the "First Amendment"), pursuant to which the
Bank agreed, among other things, to increase the Term Loan Facility to
$20,000,000.
G. On or about December 31, 1996 the Borrower executed and delivered to
the Bank a certain promissory note (the "Line of Credit Note") pursuant to which
the Bank made available to the Borrower a line of credit in the principal amount
of up to $l0,000,000.
H. On the date hereof the Borrower is executing and delivering to the
Bank a certain Offering Basis Loan Agreement (the "Offering Basis Loan
Agreement") in renewal and replacement of the Line of Credit Note, pursuant to
which the Bank is making
<PAGE>
available a discretionary line of credit in the principal amount of up to
$10,000,000 (the "Line of Credit").
I. On the date hereof the Borrower and the Bank are entering into that
certain Second Amendment (the "Second Amendment"), pursuant to which the Bank
has agreed, among other things, to change the interest rate and extend the Term
Loan Facility to July 1, 1999.
J. The Amended and Restated Loan Agreement, as amended by the First
Amendment and the Second Amendment shall be referred to herein as the "Loan
Agreement." The Original Security Agreement, as amended by the First Amendment
to Security Agreement dated January 25, 1996, together with all other amendments
and modifications thereto shall be referred to herein as the "Security
Agreement"). The Loan Agreement, the Security Agreement and all notes and other
loan documents executed in connection with the Term Loan Facility, together with
all amendments and modifications thereto from time to time, and the Offering
Basis Loan Agreement, as same may be hereinafter amended, modified, renewed or
replaced, shall be referred to herein as the "New Loan Documents."
K. The Bank and the Borrower, pursuant to the terms hereof, wish to
amend certain of the terms of the Security Agreement.
NOW THEREFORE, incorporating the foregoing Background herein by
reference and for other good and valuable consideration, the receipt and legal
sufficiency of which is hereby acknowledged, and intending to be legally bound
hereby, the parties agree as follows:
1. DEFINED TERMS. Terms used herein which are capitalized but not
defined shall have the meanings ascribed to such terms in the Security Agreement
and the Loan Agreement.
2. AMENDMENT. Paragraph A.3.b. of the Security Agreement, relating to
"Inventory", is hereby deleted in its entirety.
3. REPRESENTATIONS AND WARRANTIES. In order to induce the Bank to enter
into this Agreement the Borrower hereby represents and warrants to the Bank that
the representations and warranties contained in the Security Agreement, except
those that are specifically limited to an earlier date, are true and correct on
and as of the date of this Agreement.
4. REAFFIRMATION. Except as amended hereby, all of the terms,
provisions, covenants and conditions of the Security Agreement are ratified,
reaffirmed and confirmed and shall continue in full force and effect. Borrower
hereby acknowledges and agrees that the Security Agreement continues to secure
all Liabilities, including but not limited to the Term Loan Facility, the Line
of Credit and the New Loan Documents.
-2-
<PAGE>
5. BINDING EFFECT. This Agreement shall be binding upon, and shall
inure to the benefit of the Borrower, the Bank and their respective heirs,
executors, administrators, successors and assigns.
6. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties on separate counterparts. Each such
counterpart shall be deemed to be an original, but all such counterparts shall
together constitute one and the same agreement.
7. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws governing the construction and interpretation of the
Loan Documents.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
ATTEST: ANADIGICS, INC.
By: By:
------------------------------- -------------------------------
Name: Name:
Title: Title:
FIRST UNION NATIONAL BANK
By:
-------------------------------
Name:
Title:
-3-
<PAGE>
GRID NOTE - NJ
Obligor No._____
Obligation No._____
September __, 1997
_____________, New Jersey
FOR VALUE RECEIVED, and intending to be legally bound hereby,
ANADIGICS, INC. (the "Borrower") unconditionally promises to pay to the order of
FIRST UNION NATIONAL BANK (the "Bank") on July 1, 1998, ("maturity") the
principal amount of all unpaid and outstanding advances and/or any extensions or
renewals thereof (individually, an "Advance" and collectively, the "Advances"),
that may now or hereafter be made by the Bank hereunder in its sole and absolute
discretion, together with accrued and unpaid interest thereon. The amount of
each Advance, if any, made hereunder shall be determined by the Bank, in its
sole and absolute discretion, following a request therefor by the Borrower. The
Borrower shall not request the Bank to make an Advance pursuant to this Grid
Note which, if made, would cause the outstanding principal balance of this Grid
Note to exceed Ten Million Dollars ($10,000,000.00) (the "face amount").
Notwithstanding the foregoing, in the event that the Bank makes Advances causing
the outstanding principal balance hereof to exceed the face amount, this Grid
Note shall evidence the Borrower's obligation to pay the face amount of the Grid
Note together with such additional Advances together with accrued, unpaid
interest thereon.
Requests for Advances hereunder may be made by writing or telephone.
The Bank may enter in its business records and/or on the grid attached hereto
(the "Grid") the amount and payment terms of each such Advance made hereunder.
The Bank's records of each such Advance shall, in the absence of manifest error,
be conclusively binding upon the Borrower. In the event the Bank provides
confirmation of the terms of any Advance to the Borrower, the Borrower agrees
that unless the Bank receives a written notification of exceptions to such
statement or notice within thirty (30) calendar days after such confirmation is
mailed, the confirmation shall be deemed an account stated, correct, acceptable
and conclusively binding upon the Borrower.
A. TERMS OF GRID NOTE.
1. INTEREST RATE AND PAYMENT OF INTEREST. Interest on the
outstanding principal balance of each Advance hereunder shall
accrue at an annual rate equal to: (i) the Prime Rate (as
defined below) minus seventy five basis points (.75%), or (ii)
LIBOR as defined below) plus one hundred basis points (1.00%),
as quoted by the Bank and accepted by the Borrower from time
to time. Interest
<PAGE>
on the amount of each Advance made hereunder shall begin to
accrue on the date such Advance is made. Except as provided on
the Grid, interest on the outstanding principal of each Prime
Rate Advance shall be payable in arrears on the ______ day of
each consecutive month for as long as a principal balance is
outstanding thereunder. Except as provided on the Grid,
interest on the outstanding principal balance of each LIBOR
Advance, shall be payable on the last day of each Interest
Period applicable thereto; provided that interest on a LIBOR
Advance with an Interest Period of greater than three (3)
months shall also be payable on the day which falls three (3)
months from the date of such Advance and on the same day of
each third month thereafter, if applicable, and upon payment
in full of the outstanding principal balance thereof. At least
three (3) Working Days prior to the last day of any Interest
Period with respect to a LIBOR Advance, the Borrower shall
give the Bank notice of its request to continue the relevant
LIBOR Advance as such (with the same or a different Interest
Period). Any such request shall be deemed to be a request for
a new Advance hereunder. If the Borrower shall fail to give
such notice at the end of any Interest Period, any LIBOR
Advance affected thereby shall be automatically due and
payable in full at the end of such Interest Period.
Notwithstanding the foregoing, upon and following an Event of
Default, interest shall be payable upon demand.
2. PRINCIPAL PAYMENTS. Except as provided on the Grid, the
principal balance outstanding however shall be due and payable
to the Bank at maturity.
3. INTEREST COMPUTATION. Interest shall be computed on the basis
of a 360-day year for the actual number of days elapsed
("Actual/360 Computation"). The Bank's Actual/360 computation
determines the annual effective interest yield by taking the
stated (nominal) interest rate for a year's period and then
dividing said rate by 360 to determine the daily periodic rate
to be applied for each day in the relevant period.
4. LATE CHARGE. If any payment is not paid in full when due, the
Borrower shall pay the Bank a fee on such unpaid amount equal
to the amount which is past due multiplied by the interest
rate applicable to such amount plus two percent (2%),
multiplied by the number of days such payment is past due,
divided by 360.
5. PAYMENT TERMS. All payments made hereunder shall be made on
the due date thereof, in immediately available funds and in
lawful currency of the United States of America. All payments
made hereunder shall be made to the Bank at its offices set
forth in this Grid Note or at such other address as the Bank
shall notify the Borrower of in writing.
-2-
<PAGE>
6. ADVANCE. Advances made under this Grid Note, the interest rate
applicable thereto and any repayments thereof may be set forth
on the Grid; however the failure of the Bank to make a
notation(s) on the Grid as to Advances or repayments made
hereunder shall not affect the validity or enforceability of
this Grid Note for the full amount of all Advances, accrued
and unpaid interest thereon and any fees and costs to which
the Bank is entitled hereunder or under applicable law.
7. CREDITING OF ACCOUNT. Each Advance (excluding any extension,
renewal or readvance of any outstanding Advance) hereunder
shall be made by crediting the Borrower's account (the
"Account") at the Bank. All Advances made by crediting the
Account shall be conclusively presumed to have been properly
authorized by the Borrower. Requests for Advances to be made
by any means other than crediting the Account shall be made in
writing by the Borrower to the Bank.
8. DEBITING OF ACCOUNT. The Borrower agrees to maintain the
Account at the Bank continuously until the Liabilities due
hereunder are paid in full. The Bank may, and the Borrower
authorizes the Bank to, debit the Accounts for the amount of
any payment as and when such payment becomes due hereunder. If
there are insufficient funds in the Account at the time the
Account is debited, and the debiting creates an overdraft, the
Bank may charge the Borrower an administrative fee in an
amount established from time to time by the Bank. The
foregoing rights of the Bank to debit the Borrower's accounts
shall be in addition to, and not in limitation of, any rights
of set-off which the Bank may have hereunder or under any Loan
Document.
9. INDEMNIFICATION. The Borrower shall indemnify the Bank against
the Bank's loss or expense in employing deposits as a
consequence of (i) the Borrower's failure to make any payment
when due under this Note, or (ii) any payment of any LIBOR
Advance on a date other than the last day of an interest
Period ("Indemnified Loss or Expense").
10. ADDITIONAL COSTS. If, at any time, a new, or a revision in any
existing law or interpretation or administration (including
reversals) thereof by any Government authority, central bank
or comparable agency imposes, increases or modifies any
reserve or similar requirement against assets, deposits or
credit extended by the Bank, or subjects the Bank to any tax,
duty, or other charge (except tax on the Bank's net income),
and any of the foregoing increase the cost to the Bank of
maintaining its commitment or reduce the amount of any sum
received or receivable by the Bank under this Note, within
fifteen (15) days after demand by the Bank, the Borrower
agrees to pay the Bank such ad-
-3-
<PAGE>
ditional amounts as will compensate the Bank for such
increased costs or reductions ("Additional Costs").
11. MATCH FUNDING. The amount of such (i) Indemnified Loss or
Expense, or (ii) Additional Costs outlined above shall be
determined, in the Bank's sole discretion, based upon the
assumption that the Bank funded 100% of that portion of the
Advance to which LIBOR applies in the applicable London
interbank market.
12. UNAVAILABILITY OF INTEREST RATE. If, at any time, (i) the Bank
shall determine that, by reason of circumstances affecting
foreign exchange and interbank markets generally, LIBOR
deposits in the applicable amounts are not being offered to
the Bank or (ii) a new, or a revision in any existing law or
interpretation or administration (including reversals) thereof
by any government authority, central bank or comparable agency
shall make it unlawful or impossible for the Bank to honor its
obligations under this Note, (A) the Bank's obligation to make
or maintain a LIBOR Advance shall be suspended, and (B) the
applicable LIBOR rate shall immediately be converted to the
Prime Rate for the remainder of the term of the Advance
provided, that if the event or events outlined in subsections
(i) and (ii) above giving rise to the conversion of a LIBOR
Advance shall cease to exist, the Bank agrees, upon receipt of
a written request from the Borrower and subject to the terms
hereof, to convert the Prime Rate Advance to a LIBOR Advance.
13. PREPAYMENT. Prepayment of Prime Rate Advances under this Grid
Note may be made at any time without prepayment penalty or
premium. Prepayment of LIBOR Advances may not be made except
on the last day of the Interest Period applicable thereto. All
payments received on this Grid Note may be applied in such
order as the Bank in its sole discretion shall determine.
14. OBLIGATIONS TO MAKE ADVANCES. THE BORROWER ACKNOWLEDGES AND
AGREES THAT THE BANK SHALL HAVE NO OBLIGATION TO MAKE ANY
ADVANCES HEREUNDER AND THAT ADVANCES, IF ANY, MAY OR MAY NOT
BE MADE HEREUNDER IN THE BANK'S SOLE AND ABSOLUTE DISCRETION.
THE BORROWER HEREBY WAIVES ANY RIGHTS THAT IT MAY HAVE ARISING
OUT OF ANY PAST OR PRESENT AGREEMENT OR REPRESENTATION THAT
WOULD REQUIRE THE BANK TO MAKE ANY SUCH ADVANCES. THIS GRID
NOTE SHALL NOT BE DEEMED TO BE A COMMITMENT OR AGREEMENT BY
THE BANK TO MAKE ANY ADVANCES AT ANY TIME, AND IS BEING
EXECUTED AND DELIVERED BY THE BORROWER SOLELY TO SET FORTH
CERTAIN TERMS AND
-4-
<PAGE>
CONDITIONS IN THE EVENT THE BANK DETERMINES, IN ITS SOLE AND
ABSOLUTE DISCRETION TO MAKE ANY ADVANCES HEREUNDER.
B. DEFINITIONS. As used herein. the following terms shall have the
following meanings:
1. AFFILIATE. The term "Affiliate" means First Union Corporation
and any of its direct and indirect affiliates and
subsidiaries.
2. BORROWER. The term "Borrower" means Anadigics, Inc.
3. GRID NOTE. The term "Grid Note" shall mean this Grid Note
together with any attachments hereto and any modifications or
amendments hereto in effect from time to time.
4. INTEREST PERIOD. The term "Interest Period" means, with
respect to any LIBOR Advance:
a. initially, the period commencing on, as the case may be,
the date of borrowing or conversion with respect to such LIBOR
Advance and ending one, three, or six months thereafter as
selected by the Borrower and approved by the Bank; and
b. thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such LIBOR
Advance and ending one, three or six months thereafter as
selected by the Borrower and approved by the Bank prior to the
last day of the then current Interest Period with respect to
such LIBOR Advance;
provided that the foregoing provisions relating to Interest
Periods are subject, to the following:
(1) if any Interest Period pertaining to a LIBOR Advance would
otherwise end on a day which is not a Working Day, that
Interest Period shall be extended to the next succeeding
Working Day unless the result of such extension would be to
carry such Interest Period into another calendar month in
which event such Interest Period shall end on the immediately
preceding Working Day;
(2) any Interest Period pertaining to a LIBOR Advance that
begins on the last Working Day of a calendar month (or on a
day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end
on the last Working Day of a calendar month; and
-5-
<PAGE>
(3) any Interest Period that would otherwise extend beyond
maturity shall end on maturity.
5. LIABILITIES. The term "Liabilities" means any and all
obligations and indebtedness of every kind any description of
the Borrower owing to the Bank or to an Affiliate whether such
debts or obligations are primary or secondary, direct or
indirect, absolute or contingent. sole, joint or several,
secured or unsecured, due or to become due, contractual or
tortuous, arising by operation of law or otherwise, or now or
hereafter existing, including, without limitation, principal,
interest, fees, late fees, expenses, reasonable attorneys'
fees and costs, and/or allocated fees and costs of the Bank's
in-house legal counsel, that have been or may hereafter be
contracted or incurred.
6. LIBOR ADVANCE. The term "LIBOR Advance" means an Advance which
bears interest based upon LIBOR.
7. LIBOR. The term "LIBOR" shall mean, with respect to each day
during each Interest Period, a rate PER ANNUM (rounded to the
next higher 1/100 of 1%) for U.S. Dollar deposits for a one,
three or six month maturity as reported on Telerate Page 3750
as of 11:00 a.m., London time, on the second London business
day before the relevant Interest Period begins (or if not so
reported, then as determined by the Bank from another
recognized source or interbank quotation), adjusted for
reserves by dividing that rate by 1.00 minus the LIBOR
Reserve.
8. LIBOR RESERVE. The term "LIBOR Reserve" shall mean the maximum
percentage reserve requirement (rounded to the next higher
1/100 of 1% and expressed as a decimal) in effect for any day
during the Interest Period under the Federal Reserve Board's
Regulation D for Eurocurrency Liabilities. as defined therein.
9. OBLIGOR. The term "Obligor" means the Borrower and each and
every maker, endorser, guarantor or surety of or for the
Liabilities.
10. PRIME RATE. The term "Prime Rate" means the rate of interest
announced by the Bank from time to time as its prime rate and
is one of several interest rate bases used by the Bank. The
Bank lends at rates both above and below the Bank's Prime
Rate, and the Borrower acknowledges that the Bank's Prime Rate
is not represented to be the lowest or most favorable rate of
interest offered by the Bank. The applicable rate will change
automatically and immediately as of the date of any change in
the Bank's Prime Rate without notice to the Borrower.
-6-
<PAGE>
11. PRIME RATE ADVANCE. The term "Prime Rate Advance" means an
Advance which bears interest based upon the Prime Rate.
12. TELERATE PAGE 3750. The term "Telerate Page 3750" means, the
display designated as "Page 3750" on the Dow Jones Telerate
Service (or such other page as may replace that page on that
service for the purpose of displaying London interbank offered
rates of major banks).
13. WORKING DAY. The term "Working Day" means any day on which
dealings in foreign currencies and exchange between banks may
be carried on in the places where the Bank's eurodollar
lending office is located and in Newark, New Jersey.
C. REPRESENTATIONS AND WARRANTIES. The Borrower hereby agrees that any
request for an Advance pursuant to this Grid Note shall constitute a
representation and warranty that: (i) each Advance is authorized and
the person making a request for any Advance is authorized to do so;
(ii) there has been no material adverse change in the financial
condition of the Borrower since the condition of the Borrower reflected
in the Borrower's last financial statements provided to the Bank; (iii)
there has been no material change in the management or ownership of the
Borrower since the date of this Grid Note; (iv) the Borrower is in
compliance with all applicable laws, rules, regulations and orders,
including, without limitation, those concerning the environment,
employees' pension or benefit funds and the payment of taxes,
assessments and other governmental charges; (v) an Event of Default (as
hereinafter defined) has not occurred and is not then continuing
hereunder, nor shall one occur with notice or the passage of time or
both; and (vi) the Borrower has no knowledge of: (a) the discovery,
discharge or release of any hazardous substances at or about properties
owned, occupied or controlled by the Borrower in violation of any
applicable federal or state environmental law, (b) the existence of any
event or condition which presents a risk of creating a material
liability in the Borrower under 29 U.S.C.ss. 1001 eT Seq. (ERISA), or
(c) the occurrence or existence -- --- of any other event, condition or
fact which may impact negatively upon the financial condition of the
Borrower.
D. EVENTS OF DEFAULT. Each of the following shall constitute an event of
default ("Event of Default") hereunder:
1. BREACH. A breach by the Borrower of any term, provision,
obligation covenant, representation, or warranty arising under
this Grid Note, including failure to make any payment when
due; provided, however, that the Borrower shall have a grace
period of (i) three (3) business days to cure any Event of
Default with respect to the payment of interest and amounts
due hereunder other than principal or (ii) ten (10) business
days to cure any non-monetary Event of Default;
-7-
<PAGE>
2. BANKRUPTCY; INSOLVENCY. (i) The Borrower commences any
bankruptcy, reorganization, debt arrangement, or other case or
proceeding under the United States Bankruptcy Code or under
any similar foreign, federal, state, or local statute, or any
dissolution or liquidation proceeding, or makes a general
assignment for the benefit of creditors, or takes any action
for the purpose of effecting any of the foregoing; (ii) Any
bankruptcy, reorganization, debt arrangement, or other case or
proceeding under the United States Bankruptcy Code or under
any similar foreign, federal. state or local statute, or any
dissolution or liquidation proceeding, is involuntarily
commenced against or in respect of the Borrower or an order
for relief is entered in any such proceeding; (iii) The
appointment or the filing of a petition seeking the
appointment, of a custodian, receiver, trustee, or liquidator
for the Borrower any of its property, or the taking of
possession of any part of the property of the Borrower at the
instance of any governmental authority; or (iv) The Borrower
becomes insolvent (however defined), is generally not paying
its debts as they become due, or has suspended transaction of
its usual business;
3. DEFAULTS IN OTHER AGREEMENTS. The Borrower fails to perform or
observe any term, covenant, agreement or condition contained
in, or there shall occur any default under or as defined in,
any, other agreement applicable to the Borrower or by which it
is bound involving indebtedness in an amount in excess of
$100,000.00 which default could result in the acceleration of
such indebtedness and shall not be remedied within the period
of time (if any) within which such other agreement permits
such default to be remedied, unless such default is waived in
writing by the other parry thereto or excused a matter of law;
4. JUDGMENTS. A final judgment or judgments is entered, or an
order or orders of any judicial authority or governmental
entity is issued against the Borrower (such judgment(s) and
order(s) hereinafter collectively referred to as "Judgment"):
(a) for payment of money, which Judgment, in the aggregate,
exceeds One Hundred Thousand Dollars ($100,000.00) outstanding
at any one time; or (b) for injunctive or declaratory relief
which would have a material adverse effect on the ability of
the Borrower to conduct its business, and such Judgment is not
discharged or execution thereon or enforcement thereof stayed
pending appeal, within thirty (30) days after entry or
issuance thereof, or, in the event of such a stay, such
Judgment is not discharged within thirty (30) days after such
stay expires;
5. CROSS DEFAULT. The occurrence of a default under any other
obligation by Borrower in favor of Bank, including obligations
arising under any "swap agreement" (as defined in 11 U.S.C.
ss. 101) or under any instrument securing or evi-
-8-
<PAGE>
dencing such obligation. whether or not such obligation is
otherwise secured beyond any applicable period of grace;
6. REORGANIZATION. The dissolution, merger, consolidation, or
reorganization of the Borrower (other than a secondary
offering);
7. MATERIAL MISSTATEMENT AND/OR ADVERSE CHANGE. Any statement,
representation or warranty made in or pursuant to this Grid
Note or to induce the Bank to enter into this Grid Note or to
enter into the transactions referred to in this Grid Note
shall prove to be untrue or misleading in any material respect
or expiration of five (5) days after the Bank has given the
Borrower notice of the Bank's good faith determination that
the Borrower has suffered any material adverse change in its
business or financial condition; or
8. TRANSFER OF ASSETS. The Borrower transfers or sells all or
substantially all of its assets, without the prior written
consent of the Bank.
E. REMEDIES.
1. ACCELERATION OF LIABILITIES; RIGHTS OF BANK. Upon the
occurrence of an Event of Default (other than the Events of
Default described in Paragraphs D.2. above) at the Bank's sole
option all Liabilities shall become immediately due and
payable in full, without protest, presentment, demand or
further notice of any kind to the Borrower, all of which are
expressly waived. Upon and following the occurrence of the
Event of Default described in Paragraph D.2. above,
immediately and automatically, all Liabilities shall become
due and payable in full, all without protest, presentment,
demand or further notice of any kind to the Borrower, all of
which are expressly waived. Upon and following an Event of
Default. the Borrower shall not make any further requests for
Advances hereunder and the Bank may, at its option, exercise
any and all rights and remedies it has under this Grid Note,
and/or applicable law, including, without limitation, the
right to charge and collect interest on the principal portion
of the Liabilities from the date of nonpayment of the
Liabilities, at a rate equal to the lesser of: (i) two percent
(2%) above the highest rate of interest otherwise payable
hereunder or (ii) the highest rate of interest allowed by law
(the "Default Rate") which Default Rate shall apply to the
Liabilities, at the Bank's option, upon and after an Event of
Default, maturity, whether by acceleration or otherwise, and
after the entry of a judgment in favor of the Bank with
respect to any or all of the Liabilities. Upon and following
an Event of Default, the Bank may proceed to protect and
enforce the Bank's rights by action at law, in equity or other
appropriate proceeding including, without limitation, any
action for specific performance to enforce or aid in the
enforcement of any provision hereof.
-9-
<PAGE>
2. RIGHT OF SET-OFF. If any of the Liabilities shall be due and
payable or any one or more Events of Default shall have
occurred, whether or not the Bank shall have made any demand
under this Grid Note and regardless of the adequacy of any
Collateral for the Liabilities or other means of obtaining
repayment of the Liabilities, the Bank shall have the right,
without notice to the Borrower, and is specifically authorized
by the Borrower to apply toward and set-off against and apply
to the then unpaid balance of the Liabilities any items or
funds of the Borrower held by the Bank or any Affiliate, any
and all deposits (whether general or special, time or demand,
matured or unmatured) or any other property of the Borrower,
including, without limitation, securities and/or certificates
of deposit, now or hereafter maintained by the Borrower for
its own account with the Bank or any Affiliate, and any other
indebtedness at any time held or owing by the Bank or any
Affiliate to or for the credit or the account of the Borrower,
even if effecting such set-off results in a loss or reduction
of interest to the Borrower or the imposition of a penalty
applicable to the early withdrawal of time deposits. For such
purpose the Bank shall have, and the Borrower hereby grants to
the Bank a first lien on and security interest in such
deposits, property, funds and accounts and the proceeds
thereof. The Borrower hereby confirms the Bank's lien on such
accounts and funds and the right of set-off, and nothing in
this Grid Note shall be deemed a waiver or prohibition of such
lien and right of set-off.
3. REMEDIES CUMULATIVE; NO WAIVER. The rights, powers and
remedies of the Bank provided in this Grid Note are cumulative
and not exclusive of any right, power or remedy provided by
law or equity. No failure or delay on the part of the Bank in
the exercise of any right, power or remedy shall operate as a
waiver thereof, nor shall any single or partial exercise
preclude any other or further exercise thereof, or the
exercise of any other right. power or remedy.
4. CONTINUING EFFECT OF THIS GRID NOTE. If, after receipt of any
payment of all or any part of the Grid Note or the
Liabilities, the Bank is compelled or agrees, for settlement
purposes, to surrender such payment to any person or entity
for any reason, then this Grid Note shall continue in full
force and effect or be reinstated, as the case may be. The
provisions of this Paragraph shall survive the termination of
this Grid Note and shall be and remain effective
notwithstanding payment of the Liabilities, the cancellation
of the Grid Note, the release of any security interest, lien
or encumbrance securing the Liabilities or any other action
which the Bank may have taken in reliance upon its receipt of
such payment.
-10-
<PAGE>
F. MISCELLANEOUS.
1. WAIVER OF DEMAND. The Borrower hereby (i) waives demand,
presentment, protest, notice of protest and notice of dishonor
of this Grid Note; (ii) consents to any and all extensions of
time, renewals, waivers, or modifications that may be granted
by the Bank with respect to the payment or other provisions of
this Grid Note, and to the release of any Collateral, with or
without substitution; and (iii) agrees that makers, endorsers,
Guarantors, and sureties may be added or released without
notice and without affecting their liability hereunder. The
liability of the Borrower hereunder shall be absolute and
unconditional.
2. COMPLETION OF GRID NOTE. The Borrower hereby authorizes the
Bank to date this Grid Note as of the date when the initial
Advance, if any, is made hereunder and to complete this Grid
Note with any other particulars according to the terms of the
Bank's understanding of the terms of any such Advance.
3. NOTICES. Notices and communications under this Grid Note shall
be in writing and shall be given by either (i) hand-delivery,
(ii) first class mail (postage prepaid), (iii) reliable
overnight commercial courier (charges prepaid), or (iv)
telecopy. So the addresses and telecopy numbers listed in this
Grid Note, provided that if no telecopier numbers appear on
this Grid Note, to the telecopier numbers that the parties
notify one another from time to time. Notice given by telecopy
shall be deemed to have been given and received when sent.
Notice by overnight courier shall be deemed to have been given
and received on the date scheduled for delivery. Notice by
mail shall be deemed to have been given and received three (3)
calendar days after the date first deposited 'in the United
States Mail. Notice by hand delivery shall be deemed to have
been given and received upon delivery. A parry may change its
address and/or telecopier number by giving written notice to
the other party as specified herein.
4. COSTS AND EXPENSES. The Borrower shall promptly pay, or
reimburse, as the Bank may elect, all reasonable costs and
expenses which the Bank may hereafter incur in connection with
(i) the interpretation, perfection, protection of collateral.
monitoring, administration and enforcement of this Grid Note,
(ii) the collection of all amounts due under this Grid Note,
and (iii) all amendments, modifications. consents or waivers,
if any, to this Grid Note. The Borrower's reimbursement
obligations under this Paragraph shall survive any termination
of this Grid Note.
5. PAYMENT DUE ON A DAY OTHER THAN A BUSINESS DAY. If any payment
due or action to be taken under this Grid Note falls due or is
required to be taken on a day that the Bank is not open for
business, such payment or action shall be
-11-
<PAGE>
made or taken on the next succeeding day when the Bank is open
for business and such extended time shall be included in the
computation of interest.
6. GOVERNING LAW. This Grid Note shall be construed in accordance
with and governed by the substantive laws of the State of New
Jersey without reference to conflict of laws principles.
7. INTEGRATION; AMENDMENT. This Grid Note constitutes the sole
agreement of the parties with respect to the subject matter
hereof and supersedes all oral negotiations and prior writings
with respect to the subject matter hereof. No amendment of
this Grid Note and no waiver of any one or more of the
provisions hereof shall be effective unless set forth in
writing and signed by the parties hereto.
8. SUCCESSORS AND ASSIGNS. This Grid Note (i) shall be binding
upon the Borrower and the Bank and, where applicable, their
respective heirs, executors, administrators, successors and
permitted assigns, and (ii) shall inure to the benefit of that
Borrower and the Bank and, where applicable, their respective
heirs, executors, administrators, successors and permitted
assigns; provided, however, that the Borrower may not assign
its rights hereunder or any interest herein without the prior
written consent of the Bank, and any such assignment or
attempted assignment by the Borrower shall be void and of no
effect with respect to the Bank. The Bank may from time to
time sell or assign, in whole or in part, or grant
participation in some or all of this Grid Note and/or the
obligations evidenced hereby. The Borrower authorizes the Bank
to provide information concerning the Borrower to any
prospective purchaser, assignee or participant.
9. SEVERABILITY AND CONSISTENCY. The illegality, unenforceability
and/or consistency of any provision of this Grid Note or any
instrument or agreement required hereunder shall not in any
way affect or impair the legality, enforceability or
consistency of the remaining provisions of this Grid Note or
any instrument or agreement required hereunder. The Borrower
agrees that in the event of any ambiguity in this Grid Note,
the Grid Note shall not be construed against one party but
shall be interpreted consistent with the Bank's policies and
procedures.
10. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. The Borrower
irrevocably appoints its Chief Executive Officer and Chief
Financial Officer, and if such officers do not exist or are
unavailable, each and every authorized officer of the
Borrower, as its attorney upon whom may be served, by regular
or certified mail at the address set forth in this Grid Note,
any notice. process or pleading in any action or proceeding
against it arising out of or in connection with this
-12-
<PAGE>
Grid Note or any of the other Loan Documents. The Borrower
hereby consents that any action or proceeding against it may
be commenced and maintained in any court within the State of
New Jersey or in the United States District Court for the
District of New Jersey by service of process on any authorized
officer. The Borrower further agrees that such courts shall
have jurisdiction with respect to due subject matter hereof
and the person of the Borrower and all collateral for the
Liabilities. Notwithstanding the foregoing, the Borrower
agrees that any action brought by the Borrower shall be
commenced and maintained only, in a court in the federal
judicial district or county in which the Bank and/or the
Borrower has its principal place of business in New Jersey. If
the Bank ceases to have a place of business in New Jersey, the
Borrower may commence an action in any court in which it can
obtain jurisdiction.
11. JUDICIAL PROCEEDING WAIVERS. THE BANK AND THE BORROWER
ACKNOWLEDGE AND AGREE THAT (i) ANY SUIT, ACTION OR PROCEEDING
WHETHER CLAIM OR COUNTERCLAIM. BROUGHT OR INSTITUTED BY EITHER
THE BANK OR THE BORROWER HEREUNDER OR ANY SUCCESSOR OR ASSIGN
OF EITHER THE BANK OR THE BORROWER, ON OR WITH RESPECT TO THIS
GRID NOTE OR THE DEALINGS OF THE PARTIES WITH RESPECT HERETO,
OR THERETO, SHALL BE TRIED ONLY BY A COURT AND NOT BY A JURY;
(ii) EACH WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER, IN
ANY SUCH SUIT, ACTION OR PROCEEDING, ANY SPECIAL EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN,
OR IN ADDITION TO ACTUAL DAMAGES; AND (iii) THIS SECTION IS A
SPECIFIC AND MATERIAL ASPECT OF THIS GRID NOTE AND THAT THE
BANK WOULD NOT EXTEND CREDIT TO THE BORROWER IF THE WAIVERS
SET FORTH IN, THIS SECTION WERE NOT A PART OF THIS GRID NOTE.
12. USURY. Anything contained herein to the contrary
notwithstanding, if for any reason the effective rate of
interest on any Advance should exceed the maximum lawful rate,
the effective rate shall be deemed reduced to and shall be
such maximum lawful rate, and (i) the amount which would be
excessive interest shall be deemed applied to the reduction of
the principal balance of the Advance and not to the payment of
interest, and (ii) if the Advance has been or is thereby paid
in full, the excess shall be returned to the party paying
same, such application to the principal balance of the Advance
or the refunding of the excess to be a complete settlement and
acquittance thereof.
13. ARBITRATION. Paragraphs 10 and 11 above notwithstanding, upon
demand of the Borrower or the Bank, whether made before or
after institution of any judi-
-13-
<PAGE>
cial proceeding, any dispute. claim or controversy arising out
of, connected with or relating to this Note and any other
documents executed in connection herewith ("Disputes") shall
be resolved by binding arbitration as provided herein.
Institution of a judicial proceeding by a party does not waive
the right of that parry to demand arbitration hereunder.
Disputes may include, without limitation, tort claims,
counterclaims, disputes as to whether a matter is subject to
arbitration, claims brought as class actions, claims arising
from loan documents executed in the future, or claims arising
out of or connected with the transaction reflected by this
Note.
Arbitration shall be conducted under and governed by the
Commercial Financial Disputes Arbitration Rules (the
"Arbitration Rules") of the American Arbitration Association
(the "AAA") and Title 9 of the U.S. Code. All arbitration
hearings shall be conducted in the city in which the Bank is
located as stated herein. The expedited procedures set forth
in Rule 51 ET SEQ. of the Arbitration Rules shall be
applicable to claims of less than $1,000,000.00. All
applicable statutes of limitation shall apply to any Dispute.
A judgment upon the award may be entered in any court having
jurisdiction. The panel from which all arbitrators are
selected shall be comprised of licensed attorneys. The single
arbitrator selected for expedited procedure shall be a retired
judge from the highest court of general jurisdiction, state or
federal, of the state where the hearing will be conducted or
if such person is not available to serve, the single
arbitrator may be a licensed attorney. Notwithstanding the
foregoing. this arbitration provision does not apply to
disputes under or related to swap agreements.
14. PRESERVATION AND LIMITATION OF REMEDIES. Notwithstanding the
preceding binding arbitration provisions, the Bank and the
Borrower agree to preserve, without diminution, certain
remedies that any party hereto may employ or exercise freely,
independently or in connection with an arbitration proceeding
or after an arbitration action is brought. The Bank and the
Borrower shall have the right to proceed in any court of
proper jurisdiction or by self-help to exercise or prosecute
the following remedies, as applicable: (i) all rights to
foreclose against any real or personal property or other
security by exercising a power of sale granted under any loan
documents or under applicable law or by judicial foreclosure
and sale, including a proceeding to confirm the sale; (ii) all
rights of self-help including peaceful occupation of real
property and collection of rents, set-off and peaceful
possession of personal property; (iii) obtaining provisional
or ancillary remedies including injunctive relief,
sequestration, garnishment, attachment, appointment of
receiver and filing an involuntary bankruptcy proceeding; and
(iv) when applicable, a judgment by confession of judgment.
Preservation of these remedies does not limit the power of an
arbitrator to grant similar remedies that may be requested by
a party in a Dispute.
-14-
<PAGE>
15. RENEWAL; SECURITY. This Note constitutes a replacement of a
certain Promissory Note dated December 31, 1996. This
agreement is secured by, among other things, a Security
Agreement dated as of September 16, 1993, as amended.
IN WITNESS WHEREOF, the Borrower has executed and delivered to the Bank
this Grid Note on the day and year first above written.
ATTEST: ANADIGICS, INC.
By: By:
------------------------------- -------------------------------
Name: Name:
Title: Title:
Address: Address: 35 Technology Drive
Warren, NJ 07059
ACKNOWLEDGED AND ACCEPTED:
FIRST UNION NATIONAL BANK
By:
-------------------------------
Name:
Title:
Address:
-15-
<PAGE>
ATTACHMENT TO GRID NOTE
<TABLE>
<CAPTION>
- --------------------- --------------- --------------- --------------- --------------- ---------------- -------------
INTEREST RATE
OBLIGATION DATE OF PRINCIPAL (if PRINCIPAL
NO. ADVANCE MATURITY applicable) REPAID
- --------------------- --------------- --------------- --------------- --------------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C>
- --------------------- --------------- --------------- --------------- --------------- ---------------- -------------
- --------------------- --------------- --------------- --------------- --------------- ---------------- -------------
- --------------------- --------------- --------------- --------------- --------------- ---------------- -------------
- --------------------- --------------- --------------- --------------- --------------- ---------------- -------------
- --------------------- --------------- --------------- --------------- --------------- ---------------- -------------
- --------------------- --------------- --------------- --------------- --------------- ---------------- -------------
- --------------------- --------------- --------------- --------------- --------------- ---------------- -------------
- --------------------- --------------- --------------- --------------- --------------- ---------------- -------------
- --------------------- --------------- --------------- --------------- --------------- ---------------- -------------
- --------------------- --------------- --------------- --------------- --------------- ---------------- -------------
- --------------------- --------------- --------------- --------------- --------------- ---------------- -------------
- --------------------- --------------- --------------- --------------- --------------- ---------------- -------------
- --------------------- --------------- --------------- --------------- --------------- ---------------- -------------
- --------------------- --------------- --------------- --------------- --------------- ---------------- -------------
- --------------------- --------------- --------------- --------------- --------------- ---------------- -------------
- --------------------- --------------- --------------- --------------- --------------- ---------------- -------------
- --------------------- --------------- --------------- --------------- --------------- ---------------- -------------
- --------------------- --------------- --------------- --------------- --------------- ---------------- -------------
- --------------------- --------------- --------------- --------------- --------------- ---------------- -------------
- --------------------- --------------- --------------- --------------- --------------- ---------------- -------------
- --------------------- --------------- --------------- --------------- --------------- ---------------- -------------
- --------------------- --------------- --------------- --------------- --------------- ---------------- -------------
- --------------------- --------------- --------------- --------------- --------------- ---------------- -------------
- --------------------- --------------- --------------- --------------- --------------- ---------------- -------------
</TABLE>
<PAGE>
Exhibit 10.3
THIRD AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT
This THIRD AMENDMENT ("Amendment") dated as of December 30, 1998 by
and between FIRST UNION NATIONAL BANK (the "Bank") and ANADIGICS, INC. (the
"Borrower") to that certain Amended and Restated Loan Agreement dated as of
January 25, 1996 between the Borrower and the Bank, as amended. by the First
Amendment thereto dated as of December 23, 1996 (the "First Amendment") and the
Second Amendment dated as of July 1, 1997 (the "Second Amendment") (the Amended
and Restated Loan Agreement as amended by the First Amendment, the Second
Amendment and this Amendment is collectively referred to herein as the "Loan
Agreement").
W I T N E S S E T H:
WHEREAS, the Borrower has requested that the term loan facility
maintained pursuant to the Loan Agreement be amended; and
WHEREAS, the Bank has agreed to the request of the Borrower on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties hereto hereby agree as follows:
1. DEFINED TERMS; EFFECT OF AMENDMENT.
(a) All capitalized terms used herein which are defined in the Loan
Agreement and not otherwise defined herein are used herein as defined therein.
(b) This Amendment is an amendment to the Loan Agreement. Unless the
context of this Amendment otherwise requires, the Loan Agreement and this
Amendment shall be read together and shall have effect as if the provisions of
the Loan Agreement and this Amendment were contained in one agreement. After the
effective date of this Amendment, all references in the Loan Agreement to the
"Loan Agreement", "this Agreement", "hereto", "hereof", "hereunder" or words of
like import referring to the Loan Agreement shall mean the Loan Agreement as
amended by this Amendment, and all references in the Notes and the other Loan
Documents to the Loan Agreement shall mean the Loan Agreement as amended by this
Amendment..
2. AMENDMENTS TO LOAN AGREEMENT.
Section 2. 1 (b) of the Loan Agreement is hereby amended in its
entirety to read as follows:
"(b) INTEREST. Prior to an Event of Default, interest shall accrue
on each Term Loan (x) if Borrower chooses not to exercise the Swap Option, at
one of the rates set forth in
<PAGE>
subsection below (as selected by the Borrower at the time each Term Loan is
requested); and (y) at the rate set forth in subsection (ii) below if the
Borrower elects the Swap Option and communicates it to the Bank in accordance
with Section 2. 1 (d) hereof-, provided, however, that, in either case, the
applicable margin with respect to such annual rates of interest shall be subject
to reduction pursuant to subsection (iii) below:
(i) an annual rate equal at all times to one (1) of the following
rates, which shall be selected by the Borrower and
communicated to the Bank pursuant to Section 2. 1 (d):
(x) the Prime Rate minus twenty-five (25) basis points (.25%);
(y) LIBOR corresponding to an Interest Period of one (1),
three (3), or six (6) months, plus one hundred seventy-five
(1.75) basis points(1.75%);
(ii) an annual rate equal at all times to LIBOR corresponding to an
Interest Period of three (3) months plus one hundred
seventy-five (175) basis points(1.75%). The commencement date
("Commencement Date") of the initial three (3) month interest
period will be determined by the Bank and set forth in the
Term Loan Note. After the Commencement Date each Interest
Period will commence on the last day of the immediately
preceding, Interest Period and end three (3) months thereafter
(subject to the qualifications contained in the definition of
Interest Period set forth herein), but in no event after the
Term Loan Maturity Date.
(iii) notwithstanding the foregoing, the annual rate of interest
established under clauses (i) and (ii) above shall be reduced
by fifty (50) basis points (.50%) effective as of the end of
the fiscal quarter in which the Borrower shall have achieved
compliance with the "Efficiency Ratio", based upon the ratio
thresholds, and tested quarterly on a rolling four (4) quarter
basis, in accordance with the applicable provisions of the
Second Amendment (but after giving effect to the modifications
to the numerator and denominator of said ratio set forth
herein, said preexisting ratio, as so modified, being referred
to herein as the "Second Amendment Efficiency Ratio");
provided, however, that, said rate reduction shall be
rescinded as of the fiscal quarter in which the Borrower is no
longer in compliance with the Second Amendment Efficiency
Ratio."
Interest with respect to Prime Rate Loans shall be payable monthly
in arrears on the last day of each calendar month commencing on the
last day of the first calendar month after such Tern Loan is
advanced to the Borrower and at the Term Loan Maturity Date.
Interest with respect to LIBOR Loans shall be payable on the last
day of the Interest Period with respect thereto and, in the case
-2-
<PAGE>
of an Interest Period greater than three (3) months, interest shall
also be payable on the 90th day of such Interest Period, and at the
Term Loan Maturity Date.
(b) Schedule 7.12 of the Loan Agreement is hereby deleted and
replaced by Schedule 7.12 annexed hereto.
(c) The form of Term Loan Note, attached as Exhibit 2.1(c) and the
form of Request for Term Loan attached as, Exhibit 2.1(d), in each case to the
Amended and Restated Loan Agreement, are hereby deleted and replaced with
Exhibit 2. 1 (c) and Exhibit 2, 1 (d) annexed hereto.
(d) Immediately following Section 10. 17 of the Loan Agreement there
shall be inserted the following new Section 10. 18 and 10. 19:
"10.18 YEAR 2000 COMPLIANCE. The Borrower has conducted a
comprehensive review and assessment of its computer applications
with respect to the "year 2000 problem" (that is, the risk that
computer applications may not be able to properly perform
data-sensitive functions after December 31, 1999) and, based on that
review, the Borrower does not believe the year 2000 problem will
result in a material adverse change in Borrower's business condition
(financial or otherwise) operations, properties, or business
prospects or its ability to repay the Liabilities. The Borrower
covenants to inquire as to each new key supplier or vendor retained
by the Borrower as to that vendor's or supplier's respective year
2000 compliance."
"10.19 ARBITRATION. Notwithstanding any provision to the contrary
herein set forth, any disputes or conflicts arising between the
Borrower and the Bank under this Agreement shall be subject to
resolution in accordance with the conditions of the dispute
resolution mechanism described in Annex I attached hereto and made a
part hereof."
3. FULL FORCE AND EFFECT. Except as expressly modified by this
Amendment, all of the terms and conditions of the Loan Agreement
shall continue in full force and effect, and all parties hereto
shall be entitled to the benefits thereof. This Amendment is limited
as written and shall riot be deemed (i) to be an amendment of or a
consent under or waiver of any other term or condition of the Loan
Agreement or (ii) to prejudice any right or rights which the Bank
now has or may have in the future under or in connection with the
Loan Agreement or such other agreements.
4. SECURITY INTERESTS. It is agreed and confirmed that after giving
effect to this Amendment, the security interests granted by the
Borrower pursuant to the Se-
-3-
<PAGE>
curity Agreement secure, inter alia, the payment of the obligations
arising under the Loan Agreement, as amended by this Amendment.
5. REPRESENTATIONS AND WARRANTIES. In order to induce the Bank to enter
into this Amendment, the Borrower makes the following
representations and warranties to the Bank, which shall survive the
execution and delivery hereof:
(i) The execution and delivery of this Amendment has been
authorized by all necessary corporate action on its part, this
Amendment has been duly executed and delivered by it, and this
Amendment and the Loan Agreement, as amended hereby,
constitutes the legal, valid and binding obligations of it
enforceable against it in accordance with its terms subject to
applicable bankruptcy, insolvency, reorganization and other
laws affecting creditors' rights generally, moratorium laws
from time to time in effect and general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law);
(ii) No Event of Default has occurred and is continuing under the
Loan Agreement, and no event has occurred which, with notice,
lapse of time or both, would constitute such an Event of
Default; and
(iii) The representations and warranties set forth in the Loan
Agreement and the other Loan Documents are true and correct as
of the date hereof in all material respects.
6. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which when so executed shall be deemed to be
an original, and all which when taken to-ether shall constitute one
and the same agreement.,
7. GOVERNING LAW. This Amendment, including the validity thereof and
the rights and obligations of the parties hereunder, shall be
construed in accordance with and governed by the laws of the State
of New Jersey.
8. CONDITIONS PRECEDENT. This Amendment shall not be effective until
(i) the Bank shall have received counterparts of this Amendment,
duly executed by each of the parties hereto, and (ii) the Borrower
shall have paid all reasonable costs and expenses of the Bank,
including, without limitation, the reasonable legal fees and
expenses incurred by the Bank in connection with the preparation,
negotiation, execution and delivery and review of this Amendment.
-4-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the day and year first above written.
ATTEST: ANADIGICS, INC.
By:_________________________ By:__________________________
Name: Name:
Title: Title:
FIRST UNION NATIONAL BANK
By:__________________________
Name:
Title:
-5-
<PAGE>
Schedule 7.12
This Schedule is a part of the Amended and Restated Loan Agreement,
dated as of January 25, 1996, by and between First Union National Bank and
Anadigics, Inc, as amended.
A. QUICK RATIO. The Borrower shall have a ratio of cash, marketable
securities and accounts receivable to Current Liabilities of not less than I. 50
to I -00, This covenant will be tested at the end of each fiscal quarter of the
Borrower.
B. FIXED CHARGE COVERAGE RATIO. The Borrower shall have a Fixed
Charge Coverage Ratio of not less than the respective amounts set forth below
during the fiscal quarters occurring in the periods designated below:
<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
FROM THROUGH
---- -------
<S> <C> <C>
3/31/99 - 12/30/98 1.50 to 1.00
3/31/2000 - 12/30/99 2.00 to 1.00
3/31/2001 and at all times thereafter 2.50 to 1.00
</TABLE>
This covenant will be tested on a rolling four (4) quarter basis at
the end of each fiscal quarter of the Borrower.
C. EFFICIENCY RATIO. The Borrower shall have a ratio of (a)
operating income determined in accordance with GAAP) 1@@ interest expense to (b)
Total Assets less cash and marketable securities, of not less than the
respective amounts set forth below as of the end of the fiscal year set forth
below.
<TABLE>
<CAPTION>
FISCAL YEAR RATIO
----------- -----
<S> <C>
12/31/99 5%
12/31/2000 9%
12/31/2001 and 14%
each fiscal year thereafter
</TABLE>
This covenant will be tested annually as of the end of each fiscal
year of the Borrower.
D. TANGIBLE NET WORTH. The Borrower shall maintain at all times a
Tangible Net Worth of not less than $132,500,000. This covenant shall be tested
no less frequently than quarterly-
-6-
<PAGE>
For purposes of this Schedule, all capitalized terms used herein and
not otherwise defined shall have the meanings given to them, respectively, in
the Amended and Restated Loan Agreement, and the following terms shall have the
following meanings:
"Current Assets" shall mean, at any time, all assets which, in
accordance with GAAP, -should be classified as current assets of the Borrower.
"Current Liabilities" shall mean, at any time, all liabilities
which, in accordance with GAAP, should be classified as current liabilities of
the Borrower.
"EBIT" shall mean, at any time, for any period, the sum of (i) Net
Income, (h) interest expense, and (iii) federal, state and local income taxes
computed in accordance with GAAP.
"Fixed Charge Coverage Ratio" shall mean, at any time, for the
applicable period of determination, the ratio of (a) the sum of W EBIT and (ii)
lease and rental expense to (b) the sum of (i) lease and rental expense, (ii)
the aggregate principal and interest payable on all Indebtedness and (iii) the
current portion of Capital Lease Obligations.
"Net Income" shall mean, for any period, the net income of the
Borrower, determined in accordance with GAAP, excluding:
(a) the proceeds of any insurance policy-,
(b) any gain Or loss arising from:
(1) the sale or other disposition of any assets (other than
Current Assets);
(2) any write-up of assets: or
(3) the acquisition of outstanding securities representing
Indebtedness of the Borrower;
(4) non-cash charges-,
(c) any earnings, prior to the date of acquisition, of any Person,
required in any manner;
(d) any earnings of a successor to or transferee of the assets of
the Borrower prior to becoming such successor or transferee;
(e) any defer-red credit (or amortization of a deferred credit)
arising from the acquisition of any Person; and
-7-
<PAGE>
(f) any other item constituting an extraordinary gain or loss under
GAAP.
"Tangible Net Worth" shall mean total assets MINUS total
liabilities, as determined in accordance with GAAP, applied on a consistent
basis. For purposes of this computation, the aggregate amount of any asset
classified as an intangible asset in accordance with GAAP (but in any event,
including, without limitation, patents, trade or service marks, franchises.
trade names goodwill, copyrights, brand names and amounts due from shareholders
or other Affiliates of the Borrower) shall be subtracted from total assets.
"Total Assets" shall mean, at any time, all assets which, in
accordance with GAAP, should be classified as assets of the Borrower.
-8-
<PAGE>
ANNEX I
PROVISIONS FOR ALTERNATIVE DISPUTE RESOLUTION
1. ARBITRATION. Upon demand Of any party hereto, whether made before or after
institution of any judicial proceeding, any claim or controversy arising
out of, connected with or relating to the Loan Agreement ("Disputes")
between or among parties to the Loan Agreement shall be resolved by
binding arbitration -conducted by the Commercial Financial Disputes
Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association (the "AAA") and the Federal Arbitration Act. Disputes may
include, without limitation, tort claims, counterclaims, disputes as to
whether a matter is subject to arbitration, claims brought as class
actions or claims arising from loan documents executed in the future.
2. SPECIAL RULE. All arbitration hearings shall be conducted in the city in
which the New Jersey headquarters of the Bank is located. A hearing shall
begin within 90 days of demand for arbitration and all hearings shall be
concluded within 120 days of demand for arbitration. These link
limitations may not be extended unless a party shows cause for extension
and then for no more than a total of 60 days. The expedited procedures set
forth in Rule 51 ET SEQ. of the Arbitration Rules shall be applicable to
claims of less than $1,000,000. Arbitrators shall be comprised of licensed
attorneys selected from the Commercial Financial Dispute Arbitration Panel
of the AAA. The parties do not waive applicable Federal or -state
substantive law except as provided herein.
3. PRESERVATION AND LIMITATION OF REMEDIES. Notwithstanding the preceding
binding arbitration provisions, Bank and Borrower agree to preserve,
without diminution, certain remedies that any party hereto may exercise
before or after an arbitration proceeding is brought. Bank and Borrower
shall have the right to proceed in any court of proper Jurisdiction or by
self-help to exercise or prosecute the following remedies, as applicable:
(i) all rights to foreclose against any real or personal property or other
security by exercising a power of sale granted under the Loan Documents or
under applicable law or by judicial foreclosure and sale, including a
proceeding to confirm the sale, (ii) all rights of self-help including
peaceful occupation of real property and collection of rents.. set-off,
and peaceful possession of personal property; (iii) obtaining provisions
or ancillary remedies including injunctive relief, sequestration,
garnishment, attachment, appointment of receiver and filing of an
involuntary bankruptcy proceeding; and (iv) when applicable, a judgment by
confession of judgment. This paragraph 3 is not intended, and therefore
shall not limit the availability of arbitration generally to either party
pursuant to paragraph 1 above.
<PAGE>
Borrower- and Bank agree that they shall not have a remedy of
punitive or exemplary damages against the other in any Dispute and hereby waive
any right or claim to punitive or exemplary damages they have now or which may
arise in the future in connection with any Dispute whether the Dispute is
resolve by arbitration or judicially.
WAIVER OF JURY TRIAL. BANK AND BORROWER ACKNOWLEDGE THAT BY AGREEING TO BINDING
ARBITRATION THEY HAVE IRREVOCABLY WAIVED ANY RIGHT THEY MAY HAVE TO A JURY TRIAL
WITH REGARD TO A DISPUTE.
-2-
<PAGE>
EXHIBIT 2.1(c)
TERM LOAN NOTE
_____________________, 19__
Summit, New Jersey
FOR VALUE RECEIVED, and intending to be legally bound hereby,
ANADIGICS, INC. (the "Borrower") unconditionally promises to pay to the order of
FIRST UNION NATIONAL BANK, a national banking association with offices located
at 190 River Road, Summit, New Jersey 07901 ("the "Bank") the principal sum of
Dollars ($_____________________) together with interest thereon in accordance
with the payment provisions hereinafter set forth.
A. TERMS OF NOTE.
1. PAYMENT OR PRINCIPAL. The principal balance hereunder shall be paid
in __________________________(_____) equal consecutive quarterly
installments in the amount of _____________________ Dollars ($ )
each, commencing _____________________, 19__ and on the day of each
consecutive calendar quarter thereafter, with a final installment in
the amount of the remaining unpaid principal outstanding hereunder
due and payable, on _____________________.
2. INTEREST PAYMENTS. The Borrower agrees to pay to the Bank interest,
in arrears, on the outstanding principal balance hereunder until the
entire principal balance hereunder, together with accrued, unpaid
interest thereon is paid in full. Interest shall accrue on the
outstanding principal balance at an annual rate equal to (the Prime
Rate minus twenty-five (25) basis points (.25%) or LIBOR plus one
hundred seventy-five (175) basis points based on an Interest Period
of _____ months] as selected by the Borrower pursuant to, and shall
be payable at the times set forth in, that certain Amended and
Restated Loan Agreement, dated as of January 25, 1996, by and
between the Borrower and the Batik (together with all amendments and
modifications in effect from time to time, including, without
limitation, the First Amendment thereto dated as of December 23,
1996, the Second Amendment thereto dated as of July 1, 1997 and the
Third Amendment thereto dated December 30, 1998, the "Loan
Agreement"); provided, however that the foregoing margins above the
base interest rates set forth above shall he subject to adjustment
pursuant to Section 2.1(b)(iii) of the Loan Agreement. [If Swap
Option is elected pursuant to the terms of the Loan Agreement, the
interest payment dates may be specifically set forth herein.]
<PAGE>
3. PAYMENT TERMS. All payments made hereunder shall be made on or
before 10:00 a.m. on the due date thereof, in immediately available
funds and in lawful currency of the United States of America and
free and clear of and without deduction or withholding for, any
taxes or other payments. Payments shall be deemed made when
delivered to the Bank at its offices set forth in this Note or at
such other office of the Banks the Bank shall notify the Borrower of
in writing,
4. Bank Records of Advance. The Bank may enter in its business records
information regarding the interest rate(s) applicable to the Term
Loan (or portions thereof) including, but not limited to, the
applicable rate, the effective date, and the Interest Period. The
Bank's records shall, in the absence of manifest error, be
conclusively binding upon the Borrower. In the event the Bank gives
notice or renders a statement by mailing such notice or statement to
the Borrower, concerning the Term Loan and the interest rate(s)
applicable thereto or the amount of principal and interest due on
this Note, the Borrower agrees that, unless the Bank receives a
written notification of exceptions to this statement within thirty
(30) calendar days after such statement or notice is mailed, the
statement or notice shall be an account stated, correct and
acceptable and binding upon the- Borrower.
5. INCORPORATION BY REFERENCE. This Note is the Term Note referred to
in the Loan Agreement and is subject to the terms and conditions
thereof, which terms and conditions are incorporated herein
including, without limitation, terms pertaining to payment,
definitions, representations. warranties, covenants, events Of
default and remedies. Any capitalized term used herein without
definition shall have the meaning set forth in the Loan Agreement.
6. DEFAULT RATE. At the Bank's option, interest will be assessed on any
principal which remains unpaid at the maturity of this Note, whether
by acceleration or otherwise, or upon and following an Event of
Default, at a rate which is two percent (2%) higher than the rate
otherwise charged hereunder (the "Default Rate") provided that at no
time shall the Default Rate exceed the highest rate of interest
allowed by law. Such Default Rate of interest shall also be charged
on the amounts owed by the Borrower to the Bank pursuant to any
judgments entered in favor of Bank with respect to this Note,
7. PREPAYMENT. Prepayment of principal may be made at the times and in
the manner prescribed in Section 2.3 of the Loan Agreement.
-2-
<PAGE>
B. REMEDIES.
1. GENERALLY. Upon and following an Event of Default, the Bank, at its
option, may exercise any and all rights and remedies it has under
this Note, the other Loan Documents and under applicable law,
including, without limitations the right to charge and collect
interest on the principal portion of the amounts Outstanding
hereunder at the Default Rate. Upon and following an Event of
Default hereunder, the Bank may proceed to protect and enforce the
Bank's rights hereunder and/or applicable law by action at law, in
equity, or other appropriate proceeding, including, without
limitation, an action for specific performance to enforce or aid in
the enforcement of any provision contained herein or in any other
Loan Document.
2. REMEDIES CUMULATIVE; NO WAIVER. The remedies hereunder and under the
other Loan Documents are cumulative and concurrent, and are not
exclusive of any other remedies available to the Bank. No failure or
delay on the part of the Bank in the exercise of any right, power,
remedy or privilege shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power, remedy or privilege
preclude any other Or further exercise thereof, or the exercise of
any other right, power, remedy or privilege preclude any other or
further exercise thereof, or the exercise of any other right, power,
remedy or privilege.
C. MISCELLANEOUS.
1. GOVERNING LAW. This Note shall be construed in accordance with and
governed by the substantive laws of the State of New Jersey without
reference to conflict of laws principles.
2. INTEGRATION. This Note and the other Loan Documents constitute the
sole agreement of the parties with respect to the subject matter
hereof and thereof and supersede all oral negotiations and prior
writings with respect to the subject matter hereof and thereof.
3. AMENDMENT; WAIVER. No amendment of this Note, and no waiver of any
one or more of the provisions hereof shall be effective unless set
forth in writing and signed by the parties hereto.
4. SUCCESSORS AND ASSIGNS; PARTICIPANTS. This Note shall be binding
upon and inure to the benefit of the respective successors and
assigns of the Borrower and the Bank.
-3-
<PAGE>
5. SEVERABILITY. The illegality or unenforceability of any provision of
this Note or any instrument or agreement required hereunder shall
not in any way affect or impair the legality or enforceability of
the remaining provisions of this Note or any instrument or agreement
required hereunder. In lieu of any illegal or unenforceable
provision in this Note, there shall be added automatically as part
of this Note a legal and enforceable provision as similar in terms
to such illegal or unenforceable provision as may be possible.
6. INCONSISTENCIES. The Loan Documents are intended to be consistent.
However, in the event of any inconsistencies among any of the Loan
Documents, such inconsistency shall not affect the validity or
enforceability of each Loan Document. The Borrower agrees that in
the event of any inconsistency or ambiguity in any of the Loan
Documents, the Loan Documents shall not be construed against any one
party but shall be interpreted consistent with the Bank's policies
and procedures.
7. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. Section 10. 15 of
the Loan Agreement is hereby incorporated herein.
8. HEADINGS. The headings of sections and paragraphs have been included
herein for convenience only and shall not be considered in
interpreting this Note.
9. JUDICIAL PROCEEDING; WAIVER.
a. THE BORROWER AGREES THAT ANY SUIT, ACTION OR PROCEEDING,
WHETHER CLAIM OR COUNTERCLAIM, BROUGHT OR INSTITUTED BY THE
BANK OR THE BORROWER OR ANY SUCCESSOR OR ASSIGN OF THE BANK OR
THE BORROWER, ON OR WITH RESPECT TO THIS NOTE OR ANY OTHER
LOAN DOCUMENT OR THE DEALINGS OF THE PARTIES WITH RESPECT
HERETO., OR THERETO, SHALL, BE TRIED ONLY BY A COURT AND NOT
BY A JURY.
b. THE BANK AND THE BORROWER EACH HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY
SUCH SUIT, ACTION OR PROCEEDING. FURTHER, THE BORROWER WAIVES
ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER, IN ANY SUCH SUIT,
ACTION OR PROCEEDING, ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES OR ANY DAMAGE OTHER THAN, OR IN ADDITION
TO, ACTUAL DAMAGES.
-4-
<PAGE>
c. THE BORROWER ACKNOWLEDGES AND AGREES THAT THIS SECTION IS A
SPECIFIC AND MATERIAL ASPECT OF THIS NOTE AND THAT THE BANK
WOULD NOT EXTEND CREDIT TO THE BORROWER IF THE WAIVERS SET
FORTH IN THIS SECTION WERE NOT A PART OF THIS NOTE.
10. ARBITRATION. Notwithstanding any provisions of this Note to the
contrary, conflicts arising between the Borrower and the Bank under
this Note shall be subject to resolution in accordance with the
conditions of the dispute resolution mechanism described in Annex I
attached to the Loan Agreement.
-5-
<PAGE>
IN WITNESS WHEREOF, the Borrower has duly executed and delivered to
the Bank this
Note as of the day and year first above written.
ATTEST: ANADIGICS, INC.
By:_________________________ By:__________________________
Name: Name:
Title: Title:
Address:
Telecopier No.:______________
ACKNOWLEDGED AND ACCEPTED:
FIRST UNION NATIONAL BANK
By:_________________________
Name:
Title:
Address:
Telecopier No.:
-6-
<PAGE>
EXHIBIT 2.1(D)
REQUEST FOR TERM LOAN
Date of Request: ______________________, 199__
Amount: $__________________
Requested Interest Rate: |_| Prime Rate minus -25% [.50%]; or |_| LIBOR plus
1.75% [1.25%] per annum
Requested Interest Period: |_| One Month |_| Three Month |_| Six Month
Requested Term: |_|Three Years |_| Four Years |_| Five Years
Swap Option: |_| Yes |_| No
The Borrower hereby requests a term loan ("Borrowing") under the
Amended and Restated Loan Agreement, dated January 25, 1996 (together with any
amendments or modifications thereto in effect from time to time, the "Loan
Agreement") in the amount set forth above. The Borrowing will be funded by
crediting Borrower's Account at the Bank. In order to induce the Bank to fund
such Borrowing, the Borrower hereby affirms the following:
1. The representations and warranties of the Borrower contained in the
Loan Agreement are true and correct as of the date of this Request
for Borrowing and the Authorized Representatives previously notified
and/or confirmed are the same and have the same authority to bind
the Borrower.
2. No Event of Default (as defined in the Loan Agreement) has occurred
and is continuing.
3. There has been no adverse change in the Borrower's condition,
financial or otherwise, since the date of the Loan Agreement.
4. All of the Loan Documents (as defined in the Loan Agreement) remain
in full force and effect. without modification.
5. Use of Borrowing will be to purchase the following equipment (the
"Equipment"):
____________________________________________________________________
____________________________________________________________________
6. The bill(s) of sale and/or invoice(s) and/or paid receipts for the
Equipment is/are, attached hereto.
7. The Borrowing requested hereunder does not exceed 80% of the
purchase price of the Equipment as revealed in the attached bill(s)
of sale and/or invoice(s).
<PAGE>
8. The Equipment has been delivered to, and accepted by the Borrower,
and is located at the following address:
_________________________________; and the Equipment is owned by
Borrower free and clear of any liens, claims and encumbrances, and
Borrower did not and will not obtain any other financing for such
Equipment.
ATTEST: ANADIGICS, INC.
By:_________________________ By:__________________________
Name: Name:
Title: Title:
-2-
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Financial Data" and "Experts" in Amendment No. 2 to the Registration Statement
(Form S-3 No. 333-83889) and related Prospectus of ANADIGICS, Inc. for the
registration of 3,450,000 shares of its common stock and to the use of our
report dated January 25, 1999, with respect to the financial statements of
ANADIGICS, Inc. for the year ended December 31, 1998 included herein.
<TABLE>
<S> <C> <C>
/s/ ERNST & YOUNG LLP
---------------------------------------------
Ernst & Young LLP
</TABLE>
MetroPark, New Jersey
September 28, 1999
