<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JULY 4, 1999.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM ____________ TO ____________.
Commission File No. 0-25662
ANADIGICS, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-2582106
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
35 Technology Drive
Warren, New Jersey 07059
- ---------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
(908) 668-5000
----------------------------------------------------
(Registrant's telephone number, including area code)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES [ X ] NO [ ]
THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S COMMON STOCK AS OF JULY 26,
1999 WAS 14,871,937.
<PAGE>
INDEX
ANADIGICS, Inc.
Part. I. Financial Information
Item 1. Financial Statements (unaudited)
Condensed consolidated balance sheets - July 4, 1999 and December
31, 1998.
Condensed consolidated statements of operations and comprehensive
income (loss) - Three and six months ended July 4, 1999 and June
28, 1998.
Condensed consolidated statements of cash flows - Six months
ended July 4, 1999 and June 28, 1998.
Notes to condensed consolidated financial statements - July 4,
1999.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Part II. Other Information
Item 1. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
2
<PAGE>
PART I - FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
CONDENSED CONSOLIDATED BALANCE SHEETS
ANADIGICS, INC.
(Amounts in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
July 4, 1999 December 31, 1998
------------ -----------------
(unaudited) (Note 1)
<S> <C> <C>
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.
3
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
ANADIGICS, INC.
(Amounts in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Three months ended Six months ended
--------------------------------- ---------------------------------
July 4, 1999 June 28, 1998 July 4, 1999 June 28, 1998
------------ ------------- ------------ -------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $ 30,534 $ 22,675 $ 55,582 $ 41,460
Cost of sales 19,248 14,565 36,148 26,633
------------ ------------ ------------ ------------
Gross profit 11,286 8,110 19,434 14,827
Research and development expenses 6,387 5,108 11,968 9,750
Selling and administrative expenses 4,885 3,060 8,744 6,405
Restructuring charge -- -- -- 1,100
------------ ------------ ------------ ------------
Operating income (loss) 14 (58) (1,278) (2,428)
Interest income, net 478 570 995 1,225
Provision for litigation settlement, net 6,925 -- 6,925 --
------------ ------------ ------------ ------------
Income (loss) before income taxes (6,433) 512 (7,208) (1,203)
Provision (benefit) for income taxes (2,380) 192 (2,667) (451)
------------ ------------ ------------ ------------
Net income (loss) $ (4,053) $ 320 $ (4,541) $ (752)
============ ============ ============ ============
Basic earnings (loss) per share $ (0.27) $ 0.02 $ (0.31) $ (0.05)
============ ============ ============ ============
Weighted average common
shares outstanding 14,838,546 14,718,286 14,811,687 14,711,323
============ ============ ============ ============
Diluted earnings (loss) per share $ (0.27) $ 0.02 $ (0.31) $ (0.05)
============ ============ ============ ============
Weighted average common and
dilutive securities outstanding 14,838,546 14,976,998 14,811,687 14,711,323
============ ============ ============ ============
</TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
ANADIGICS, INC.
(Amounts in thousands)
<TABLE>
<CAPTION>
Three months ended Six months ended
--------------------------------- ---------------------------------
July 4, 1999 June 28, 1998 July 4, 1999 June 28, 1998
------------ ------------- ------------ -------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net income (loss) $ (4,053) $ 320 $ (4,541) $ (752)
Unrealized gain (loss) on
marketable securities (81) (7) (87) 20
------------ ------------ ------------ ------------
Comprehensive income (loss) $ (4,134) $ 313 $ (4,628) $ (732)
============ ============ ============ ============
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
ANADIGICS, INC.
(Amounts in thousands)
<TABLE>
<CAPTION>
Six months ended
------------------------------
July 4, 1999 June 28, 1998
------------ -------------
(unaudited) (unaudited)
<S> <C> <C>
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.
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 three 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:
July 4, 1999 Dec. 31, 1998
------------ -------------
Raw materials $ 2,323 $ 784
Work in process 4,900 3,662
Finished goods 3,033 4,283
---------- ----------
$ 10,256 $ 8,729
========== ==========
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>
Three months ended Six months ended
------------------------------ -------------------------------
July 4, 1999 June 28, 1998 July 4, 1999 June 28, 1998
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Weighted average common shares
outstanding used to calculate
basic earnings per share 14,838,546 14,718,286 14,811,687 14,711,323
Net effect of diluted stock options
based upon the treasury stock method
using an average market price - * 258,712 - * - *
---------- ---------- ---------- ----------
Weighted average common and
dilutive securities outstanding
used to calculate diluted earnings
per share 14,838,546 14,976,998 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>
Three months ended Six months ended
---------------------------- ----------------------------
July 4, 1999 June 28, 1998 July 4, 1999 June 28, 1998
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Cellular and PCS Applications $13,073 $ 7,479 $22,490 $16,486
Cable and Broadcast Applications 10,575 10,072 20,506 16,359
Fiber Optic Applications 6,886 4,809 12,486 8,190
Engineering service sales -- 315 100 425
------- ------- ------- -------
Total $30,534 $22,675 $55,582 $41,460
======= ======= ======= =======
</TABLE>
GEOGRAPHIC INFORMATION
The Company primarily sells to four geographic regions; Europe, Asia, North
America, 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>
Three months ended Six months ended
---------------------------- ----------------------------
July 4, 1999 June 28, 1998 July 4, 1999 June 28, 1998
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Europe $ 7,772 $ 6,624 $13,583 $11,762
Asia 7,385 6,698 14,810 11,856
North America 12,172 8,424 21,482 16,354
South America 3,205 929 5,707 1,488
------- ------- ------- -------
Total $30,534 $22,675 $55,582 $41,460
======= ======= ======= =======
</TABLE>
7
<PAGE>
ANADIGICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - JULY 4, 1999
(CONTINUED)
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 $11.8
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.
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.
8
<PAGE>
ANADIGICS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
RESULTS OF OPERATIONS
The following table sets forth unaudited consolidated statements of
operations data as a percent of net sales for the periods presented:
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF OPERATIONS
Three months ended Six months ended
----------------------------- ----------------------------
July 4, 1999 June 28, 1998 July 4, 1999 June 28, 1998
------------ ------------- ------------ -------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 63.0% 64.2% 65.0% 64.2%
-------- -------- -------- --------
Gross profit 37.0% 35.8% 35.0% 35.8%
Research and development expenses 20.9% 22.5% 21.6% 23.5%
Selling and administrative expenses 16.0% 13.5% 15.7% 15.5%
Restructuring charge -- -- -- 2.7%
-------- -------- -------- --------
Operating income (loss) 0.1% (0.2%) (2.3%) (5.9%)
Interest income, net 1.5% 2.5% 1.8% 3.0%
Provision for litigation settlement, net 22.7% -- 12.5% --
-------- -------- -------- --------
Income (loss) before income taxes (21.1%) 2.3% (13.0%) (2.9%)
Provision (benefit) for income taxes (7.8%) 0.9% (4.8%) (1.1%)
-------- -------- -------- --------
Net income (loss) (13.3%) 1.4% (8.2%) (1.8%)
======== ======== ======== ========
</TABLE>
SECOND QUARTER 1999 (Ended July 4, 1999) COMPARED TO SECOND QUARTER 1998 (Ended
June 28, 1998)
NET SALES. Net sales during the second quarter of 1999 increased 35% to
$30.5 million from $22.7 million in the second quarter of 1998. Sales of
integrated circuits for cellular and PCS applications increased 75% during the
second quarter of 1999 to $13.0 million from $7.5 million in the second quarter
of 1998 as demand for the Company's dual-band power amplifiers increased.
Sales of integrated circuits for cable and broadcast applications increased
5% during the second quarter of 1999 to $10.6 million from $10.1 million in the
second quarter of 1998. Included in the sales of integrated circuits for cable
and broadcast applications are sales of low noise block converter integrated
circuits (which the Company ceased production of during the third quarter of
1998) of $0.3 million and $1.6 million during the second quarter of 1999 and
1998, respectively. The increase in sales of integrated circuits for cable and
broadcast applications during the second quarter of 1999 was due to increases in
demand for the Company's integrated circuit chip set used in digital set-top
converters and cable modems and the Company's integrated circuit line amplifier
used as a repeater in cable television distribution networks.
Sales of integrated circuits for fiber optic telecommunications and data
communications ("fiber optic") applications increased 43% during the second
quarter of 1999 to $6.9 million from $4.8 million in the second quarter of 1998.
The increase was primarily due to an increase in demand for transimpedence
amplifiers for Synchronous Optical Network (SONET) fiber optic
telecommunications applications and sales of the Company's new transimpedence
amplifiers for Gigabit Ethernet applications.
9
<PAGE>
The Company expects increased competition from internally sourced silicon
integrated circuits at certain of its customers for SONET OC-12 and OC-24 fiber
optic transimpedence amplifiers. Increased competition could result in decreased
prices of the Company's integrated circuits and/or reduced demand for its
products. Sales of OC-12 and OC-24 SONET transimpedence amplifiers were
approximately $3.3 million during the second quarter of 1999.
Engineering service sales, which reflect customers' contributions to
research and development, were $0.3 million during the second quarter of 1998.
GROSS MARGIN. Gross margin during the second quarter of 1999 increased to
37.0% from 35.8% in the second quarter of 1998. Excluding the accelerated
depreciation expense of $2.7 million, gross margin during the second quarter of
1999 was 45.7%. The increase in gross margin was primarily due to increased
sales volume and manufacturing cost structure improvements, which were mostly
offset by $2.7 million of accelerated depreciation expense (associated with the
planned closing of the Company's existing wafer fabrication facility) that was
recorded during the second quarter of 1999.
RESEARCH AND DEVELOPMENT. Company sponsored research and development
expense increased 25% during the second quarter of 1999 to $6.4 million from
$5.1 million during the second quarter of 1998. The increase was primarily
attributable to: (1) increased research and development of integrated circuits
for cellular and PCS, CATV, and fiber optic applications, and (2) increased
research and development of new process technologies. As a percentage of sales,
research and development expense decreased to 20.9% in the second quarter of
1999 from 22.5% in the second quarter of 1998.
The Company expects research and development expense to continue to
increase from the level incurred during the second quarter of 1999.
SELLING AND ADMINISTRATIVE. Selling and administrative expenses increased
60% during the second quarter of 1999 to $4.9 million from $3.1 million in the
second quarter of 1998. The increase in selling and administrative expenses
during the second quarter of 1999 was primarily due to increases in performance
related compensation costs, costs associated with staffing changes, consulting
fees, recruiting and relocation expenses, and in costs related to the Company's
marketing activities. As a percentage of sales, selling and administrative
expenses increased to 16.0% in the second quarter of 1999 from 13.5% in the
second quarter of 1998.
INTEREST INCOME, NET. Interest income, net decreased 16% to $0.5 million
during the second quarter of 1999 from $0.6 million during the second quarter of
1998.
PROVISION FOR LITIGATION SETTLEMENT, NET. The Company recorded a provision
for litigation settlement of $6.9 million during the second quarter of 1999, as
it 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 $11.8 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. (See
Part II - Item 1. Legal Proceedings for additional information regarding the
consolidated class action lawsuit, the derivative lawsuit, and details of the
settlement).
BENEFIT FOR INCOME TAXES. The benefit for income taxes during the second
quarter of 1999 was recorded at an estimated annual effective tax rate of 37.0%
of the loss before income taxes.
10
<PAGE>
SIX MONTHS 1999 (Ended July 4, 1999) COMPARED TO SIX MONTHS 1998
(Ended June 28, 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 the
Company's 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 the Company 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 the Company's chip sets used in digital set-top converters and cable
modems, and the Company's 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 Synchronous Optical Network
(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 (associated with the closing of the
Company's 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. Company-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 of
(1) integrated circuits for cellular and PCS, cable television and fiber
optic applications and (2) new process technologies. As a percent of
sales, company-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.
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 the Company's 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.
11
<PAGE>
RESTRUCTURING CHARGES. During the first quarter of 1998, the Company
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 the
Company's 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, NET. The Company recorded a provision
for litigation settlement of $6.9 million during the second quarter of 1999, as
it 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 $11.8 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. (See
Part II - Item 1. Legal Proceedings for additional information regarding the
consolidated class action lawsuit, the derivative lawsuit, and details of the
settlement).
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.
LIQUIDITY AND CAPITAL RESOURCES
As of July 4, 1999, the Company had $25.3 million in cash and cash
equivalents and $18.3 million in marketable securities. The Company has $4.5
million of bank debt outstanding as of the end of the second quarter of 1999.
The Company 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 characteristics to a fixed rate for which the
present value of cash flows are approximately the same. As of the end of the
second quarter of 1999, the Company also has 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 the assets of the Company
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 the Company's common stock from stock options
exercised during the period.
The Company expects 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, the Company has committed to
purchase approximately $7.5 million of equipment, furniture and fixtures, and
leasehold improvements through the remainder of 1999.
The Company believes that its current cash and cash equivalent balances,
together with cash anticipated to be generated from operations and the
planned equity offering (See "Notes to Condensed Consolidated Financial
Statements (unaudited) - July 4, 1999 - Note 6. -Subsequent Event" contained
in Item 1. herein) will satisfy anticipated capital needs for the next twelve
months. There can be no assurance that the planned equity offering will be
completed.
12
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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 the
Company's 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.
The Company's comprehensive 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 the Company's core
business operations and that transactions with customers, suppliers, and
financial institutions are fully supported.
Over the past year, the Company has invested in new computer hardware
and software to improve its business operations. To date we have upgraded the
majority of our critical information systems such that they are now Y2K ready.
Remaining critical systems are on target for their Y2K upgrades at the end of
September 1999. As a result of this effort, we do not believe that any year 2000
related failures will cause a significant interruption to our business.
The Company has also completed a comprehensive review of its 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 as a result of the year 2000 issue. 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. To date, the Company has 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. To date, the Company has 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.
The Company has also completed formal communications with its
significant suppliers and other third party vendors with which it has a
material relationship in order to determine whether those entities have
adequate plans in place to ensure their Year 2000 readiness. To date, the
Company has not identified any major issues with respect to its significant
suppliers and other third party vendors.
As of the end of the second quarter of 1999, the Company has not
developed a "worst case" scenario or an overall contingency plan. It does not
intend on doing so unless, as a result of ongoing tests, it determines that
contingency plans are warranted. Based on our assessment to date and our
expectations that our Y2K Program 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
Y2K issue having a negative impact on our operations. However, we cannot
guarantee that such contingencies, if required, will be completed on a timely
basis. While the Company believes its efforts will be adequate to address its
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.
The Company's products do not have specific date functions or date
dependencies and will operate according to specifications through the Year 2000
and beyond.
13
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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. The Company expects
to adopt the new statement effective January 1, 2001. The Statement will require
the Company 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. Th ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. The Company does not anticipate that the
adoption of this statement will have a significant effect on our results of
operations or financial position.
RISKS AND UNCERTAINTIES
Except for historical information contained herein, this Management's
Discussion and Analysis of Financial Condition and Results of Operation contains
forward-looking statements that involve risks and uncertainties, including, but
not limited to, order rescheduling or cancellation, changes in customer's
forecasts of product demand, timely product and process development, individual
product pricing pressure, variation in production yield, changes in estimated
product lives, difficulties in obtaining components and assembly services needed
for production of integrated circuits, change in economic conditions of the
various markets the Company serves, as well as the other risks detailed from
time to time in the Company's reports filed with the Securities and Exchange
Commission, including the report on Form 10-K for the year ended December 31,
1998. These forward-looking statements can generally be identified as such
because the context of the statement will include words such as the Company
"believes", "anticipates", "expects", or words of similar import. Similarly,
statements that describe the Company's future plans, objectives, estimates or
goals are forward-looking statements. The cautionary statements made in this
Form 10-Q should be read as being applicable to all related forward-looking
statements wherever they appear in this Form 10-Q. Important factors that could
cause actual results and developments to be materially different from those
expressed or implied by such statements include those factors discussed herein.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to changes in interest rates primarily from its
credit facility and its investments in certain available-for-sale securities. To
date, the Company has managed its exposure to changes in interest rates from its
credit facility by entering into an interest rate swap agreement which allows
the Company to convert its debt from variable to fixed interest rates. The
Company plans to continue to reduce its exposure to changes in interest rates
from its credit facility by using interest rate derivative instruments. The
Company's available-for-sale securities consist of fixed income investments
(U.S. Treasury and Agency securities and short-term commercial paper). The
Company continually monitors its exposure to changes in interest rates from its
available-for-sale securities. Accordingly, the Company believes that the
effects of changes in interest rates are limited and would not have a material
impact on its financial condition or results of operations. However, it is
possible that the Company is at risk if interest rates change in an unfavorable
direction. The magnitude of any gain or loss will be a function of the
difference between the fixed rate of the financial instrument and the market
rate and the Company's financial condition and results of operations could be
materially affected.
14
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ANADIGICS, INC.
PART II.
OTHER INFORMATION
ITEM 1. 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 $11.8
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of stockholders on May 25, 1999 at
which the Company's stockholders voted on:
(a) The election of two Class I Directors of ANADIGICS (Bruns Grayson and
Harry Rein) to hold office until 2002.
(b) The ratification of Ernst & Young LLP as independent auditors of
ANADIGICS, Inc. for the fiscal year ending December 31, 1999.
The two matters listed above were voted upon and approved by the
shareholders of the Company as follows:
(a) The election of Bruns Grayson as a Class I Director was approved by
holders of 13,386,232 shares of the Company's outstanding capital
stock. Holders of 167,526 shares withheld from voting on such
election. The election of Harry Rein as a Class I Director was
approved by holders of 13,399,372 shares of the Company's outstanding
capital stock. Holders of 154,386 shares withheld from voting on such
election.
(b) The ratification of the appointment of Ernst & Young LLP as
independent auditors was approved by holders of 13,509,085 shares of
the Company's outstanding capital stock. Holders of 25,478 shares
voted against the ratification, and holders of 19,195 shares abstained
from voting on such ratification.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included herein:
Exhibit 10.1 - Employment agreement between ANADIGICS and
Dr. Bami Bastani, dated September 17, 1998
Exhibit 10.2 - Employment agreement between ANADIGICS and
Ronald Rosenzweig, dated September 17, 1998
Exhibit 10.3 - Employment agreement between ANADIGICS and
Ronald Rosenzweig, dated June 1, 1999.
Exhibit 10.4 - Employment agreement between ANADIGICS and
John Lyons, dated June 1, 1999.
Exhibit 27.1 - Financial Data Schedule
(b) Reports on Form 8-K during the quarter ended July 4, 1999.
The Company did not file any reports on Form 8-K during the
quarter ended July 4, 1999.
15
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ANADIGICS, INC.
By: /s/ John F. Lyons
---------------------------
John F. Lyons
Senior Vice President
and Chief Financial Officer
Dated: July 28, 1999
16
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ANADIGICS, INC.
EXHIBIT INDEX
Exhibit 10.1 Employment agreement between ANADIGICS and
Dr. Bami Bastani, dated September 17, 1998
Exhibit 10.2 Employment agreement between ANADIGICS and
Ronald Rosenzweig, dated September 17, 1998
Exhibit 10.3 Employment agreement between ANADIGICS and
Ronald Rosenzweig, dated June 1, 1999.
Exhibit 10.4 Employment agreement between ANADIGICS and
John Lyons, dated June 1, 1999.
Exhibit 27.1 Financial Data Schedule
17
<PAGE>
Exhibit 10.1
EMPLOYMENT AGREEMENT
This Agreement is made and entered into as of September 17, 1998,
between ANADIGICS, INC., a Delaware corporation (the "Company"), and BAMDAD
(BAMI) BASTANI (the "Executive").
WHEREAS, the Company desires to employ the Executive on the terms
and subject to the conditions set forth herein.
WHEREAS, the Executive is willing to accept employment on such terms
and conditions.
NOW, THEREFORE, in consideration of the mutual covenants contained
in this Agreement, the parties hereby agree as follows:
I.
EMPLOYMENT
A. The Company agrees to employ the Executive and the Executive
agrees to be employed by the Company for the term of employment as provided in
Article II below and upon the terms and conditions provided in this Agreement.
B. The Executive represents and warrants to the Company that by
entering into and performing the Executive's obligations under this Agreement,
the Executive has not breached and will not breach duties or obligations
(whether fiduciary, contractual or arising by operation of law or otherwise)
owed to any third party in connection with any prior employment or position.
II.
TERM
The Executive's term of employment under this Agreement shall
commence on October 2, 1998 (the "Closing Date") and shall terminate as provided
in Article VI hereof (the "Stated Term of Employment").
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III.
POSITION AND RESPONSIBILITIES
A. During the Stated Term of Employment, the Executive agrees to
serve as President and Chief Executive Officer of the Company and each
subsidiary of the Company and to serve as a member of the Company's Board of
Directors (the "Board") and to be responsible for the general management of the
operations of the Company and its subsidiaries, subject to the direction of the
Board. The Executive shall report directly to the Board.
B. During the Stated Term of Employment, the Executive shall devote
all of his business time, attention and skill exclusively to the business and
affairs of the Company and its subsidiaries and as otherwise approved by the
Board. Subject to the Board's consent, which shall not be unreasonably withheld,
the Executive may engage in civic or charitable activities and serve on the
boards of directors of other corporations. The Executive shall perform
faithfully the duties which may be assigned to him from time to time by the
Board and shall use his best efforts and skills to promote the Company's and its
subsidiaries' business and shall follow, at all times during the course of his
employment hereunder, prudent and ethical business practices. During the
continuance of the Executive's employment hereunder the Executive shall comply
with all reasonable requests and directions from time to time given to the
Executive (consistent with his position as the President and Chief Executive
Officer) by the Board and with all rules and regulations from time to time
promulgated by the Company and its subsidiaries concerning its employees.
IV.
COMPENSATION
For services rendered by the Executive hereunder, the Executive
shall be compensated as follows:
A. Base Salary
The Company shall pay the Executive a fixed base salary of $420,000
per calendar year (or prorated portion thereof), subject to increase in the sole
discretion of the
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Board (the "Base Salary"), payable in installments on the Company's regular
payroll dates commencing on the Closing Date. If, in the sole discretion of the
Board, the Executive's Base Salary is increased, such increased Base Salary
shall then constitute the "Base Salary" for purposes of this Agreement.
B. Sign-on Bonus
The Company shall pay the Executive a sign-on bonus of $100,000 on
the Closing Date.
C. Performance Bonus
In addition to the Base Salary, the Executive shall be eligible for
bonuses as well as other incentive compensation as may be authorized from time
to time by the compensation committee of the Board (the "Compensation
Committee"). The bonuses shall be based upon satisfactory achievement of the
Company's operational and strategic business plan and financial projections
("Plan"), proposed by the Executive to the Board and agreed to by the Board,
with the targeted annual bonus being 100% of the Executive's then annual Base
Salary for achieving Plan and 120% of Base Salary for exceeding Plan, subject to
determinations of the Compensation Committee. The bonus shall be earned and paid
out quarterly with respect to achieving or exceeding Plan for such quarter.
D. Business Related Expenses
The Company shall reimburse the Executive, in accordance with
Company policy, for all actual documented out-of-pocket travel, entertainment,
business and other expenses reasonably and properly incurred by the Executive in
performing his duties and obligations under this Agreement.
E. Stock Options
The Company shall, in connection with the Executive's employment
under this Agreement, grant to the Executive options to purchase that number of
shares of the Company's Common Stock, par value $.01 per share (the "Common
Stock"), as set forth on Annex A attached hereto. The options are subject to the
terms and conditions of the Stock Option Agreement attached hereto as Exhibit A.
The Board intends to review Executive's performance under this Agreement with a
view to the possible grant of additional stock options to Executive on an annual
basis to reward Executive for performance hereunder.
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F. Relocation Expenses
As consideration for Executive's relocating his residence to the
East Coast from California, the Company agrees to reimburse Execute for:
1. reasonable storage costs up to six months for household items;
2. reasonable moving expenses from California, including three
cars, and transportation of one or two horses;
3. mortgage costs on Executive's California residence up to six
months from the Closing Date (not to exceed $6,000 per month)
until the residence is sold;
4. realtor fees and closing costs (including up to three points)
associated with the sale of the California residence and
purchase of a new residence on the East Coast;
5. costs of a temporary residence and car rental on the East
Coast for 60 days (not to exceed $200 per day); and
6. 12 round trip first class airplane tickets between California
and the East Coast.
To the extent that the Company's payments under this Section IV.F are includible
in the Executive's taxable income, the Company shall increase such payments by
an additional amount calculated to ensure that the Executive's net proceeds,
after paying federal, state and local income taxes on such payments and such
additional amount, are equal to the Executive's expenses described in this
Section IV.F.
G. General Benefits
During the term of this Agreement, the Executive will be eligible to
receive such benefits as are generally provided to executive officers of the
Company as determined from time to time by the Board.
The Executive will be entitled to normal sick leave during the term
of this Agreement, when the Executive is not Disabled, as that term is defined
in Section VI.A.
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V.
RESTRICTIONS
A. Non-Interference and Non-Solicitation
1. During the Stated Term of Employment and for a period of two
years thereafter with respect to clause (i) below and for a period of one year
thereafter with respect to clauses (ii) and (iii) below, the Executive shall not
directly or indirectly:
(i) encourage or solicit any officer or employee of the Company or
any of its subsidiaries to leave the employ of any such entity;
(ii) interfere with or otherwise disrupt in any material respect (A)
the relationships between the Company and its subsidiaries, on the one
hand, and any customer of the Company and its subsidiaries, on the other
hand, or (B) the supply to the Company and its subsidiaries of any
services by any supplier or agent who during the period of twenty-four
(24) months immediately preceding the Executive's termination shall have
supplied product or services to the Company or any of its subsidiaries,
nor will the Executive interfere with the terms on which such supply or
agency services during such period as aforesaid have been made or provided
or cause any such supplier, agent or broker to discontinue its
relationship with the Company and its subsidiaries; or
(iii) solicit away from the Company or any of its subsidiaries the
business of any person, firm or company who during the period of
twenty-four (24) months preceding the date of the Executive's termination
was a customer of the Company.
2. As used in this Article V, "customer" shall include any third
party with whom the Company or any of its subsidiaries was during the said
period in substantive negotiation in respect of the sale of products by the
Company or any of its subsidiaries or to whom the Company or any of its
subsidiaries had (during the said period) made or been requested to make an
offer to sell products or provide services.
3. While the restrictions set forth in this Article V are considered
by both parties to be reasonable in all the
<PAGE>
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circumstances it is recognized that restrictions of the nature in question may
fail for reasons unforeseen and accordingly it is hereby declared and agreed
that if any of such restrictions shall be adjudged to be void as going beyond
what is reasonable in all the circumstances for the protection of the interests
of the Company and its subsidiaries but would be valid if part of the wording
thereof were deleted and/or the periods (if any) thereof reduced and/or the area
dealt with thereby reduced in scope then said restrictions shall apply with such
modifications as may be necessary to make them valid and effective.
4. The limitations on the Executive set forth in this Article V
shall also apply to any agent or other representative acting in his or her
capacity as an agent or representative of the Executive.
5. Nothing contained in this Article V shall limit in any manner any
additional obligations to which the Executive may be bound pursuant to any other
agreement or any applicable law, rule or regulation.
B. Proprietary Rights; Confidentiality
1. The Executive agrees that the products of the Company and its
subsidiaries shall constitute the exclusive property of the Company and its
subsidiaries. The Executive hereby assigns to the Company and its subsidiaries
all of the Executive's right, title and interest, if any, pertaining to the
products developed or improved upon by the Executive for the businesses that are
being conducted or developed by the Company or any of its subsidiaries while
employed by the Company, including any patent, trademark, trade name, copyright
or other right that may pertain thereto. As used herein, "products" shall
include prospective products under development during the Executive's employment
with the Company.
2. For the avoidance of doubt, all trademarks, trade names, service
marks, designs, utility models, copyrights, know-how and confidential
information, applications for registration of any of the foregoing and the right
to apply for them in any part of the world (whether any of the foregoing shall
be registered or unregistered) created or discovered or participated in by the
Executive during the course of his employment with the Company or under the
instructions of the Company for the businesses that are being conducted or
developed by the Company or any of its subsidiaries shall be the absolute
property of the Company.
<PAGE>
-7-
3. The Executive recognizes and acknowledges that, by reason of his
employment with the Company, he may have acquired, and will acquire, information
of a proprietary, confidential, or secret nature regarding the Company and its
subsidiaries and their respective businesses and operations, including but not
limited to, information concerning trade secrets, know-how, software, data
processing systems, inventions, designs, processes, formulae, notations,
improvements, financial information, business plans, prospects, referral
sources, lists of suppliers and customers and other information with respect to
the affairs, business, customers, agents or other business relationships of the
Company and its subsidiaries, (the "Confidential Information"). The Executive
shall hold in a fiduciary capacity for the benefit of the Company, all
Confidential Information relating to the Company and any of its subsidiaries and
their respective businesses, which shall have been obtained by the Executive
during his employment by the Company. The Executive agrees that he will not,
during, or for a period of three (3) years after, his employment with the
Company, disclose the Confidential Information, or any part thereof, to any
person, firm, corporation, association or other entity for any reason or purpose
whatsoever. Notwithstanding the foregoing, the provisions of this Section V.B.3
shall not apply to Confidential Information which (a) becomes or is generally
available to the public (other than by acts of the Executive or his
representatives); (b) becomes known to the Executive on a non-confidential basis
from a source other than the Company, provided that such source is not bound by
a confidentiality agreement with or other obligation of secrecy to the Company;
or (c) the Executive is required to disclose in a judicial, administrative or
governmental proceeding (any such proceeding, a "Legal Proceeding"). In the
event the Executive is required to disclose Confidential Information in a Legal
Proceeding, the Executive shall provide the Company with prompt notice of such
request so that the Company may timely seek an appropriate protective order or
waive compliance with this Section V.B.3.
C. Remedies
The Executive acknowledges that the Company will suffer irreparable
injury, not readily susceptible of valuation in monetary damages, if the
Executive breaches his obligations under this Article V. Accordingly, the
Executive agrees that notwithstanding Section VII.D, the Company will be
entitled, in addition to any other available remedies, to obtain injunctive
relief against any breach or prospective breach by the Executive of his
obligations under this Article V in any Federal or
<PAGE>
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state court sitting in the State of New Jersey, or, at the Company's election,
in any other jurisdiction in which the Executive maintains his principal
residence or his principal place of business. The Executive hereby submits to
the exclusive jurisdiction of all those courts, regardless of where the
Executive may be resident, for the purposes of any actions or proceedings
instituted by the Company to obtain that injunctive relief, and the Executive
agrees that process in any or all of those actions or proceedings may be served
by registered mail, addressed to the last address of the Executive known to the
Company, or in any other manner authorized by law.
VI.
TERMINATION OF EMPLOYMENT
A. Termination Due to Death or Disability
The Company may terminate the Executive's employment hereunder due
to Disability. For purposes of this Agreement, "Disability" shall occur if the
Executive is unable (other than by reason of death), in the view of the Board,
to perform the duties of his occupation hereunder for at least 180 days during
any twelve month period. In the event of the Executive's death or a termination
of the Executive's employment by the Company due to Disability, the Executive,
his estate or his legal representative, as the case may be, shall be entitled
to:
(a) any Base Salary accrued or earned but not yet paid as of the
date of termination;
(b) any bonus earned but not yet paid;
(c) reimbursement for all out-of-pocket expenses that are
reimbursable pursuant to Section IV.C and that are incurred, but not yet
paid, prior to such death or Disability; and
(d) any short- or long-term disability or death benefits provided
under the Company's plans.
B. Resignation by Executive or Termination by the Company for Cause
(a) The Executive may resign, or the Company may terminate the
Executive's employment hereunder for Cause (as
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-9-
defined below) as provided in this Section VI.B. If the Executive resigns or the
Company terminates the Executive's employment hereunder for Cause, the Executive
shall be entitled to (i) reimbursement for all out-of-pocket expenses that are
reimbursable pursuant to Section IV.D and that are incurred, but not yet paid,
prior to such termination of employment; and (ii) any Base Salary and bonuses
accrued or earned but not yet paid as of the date of termination. All stock
options held by Executive that have not yet vested as of the date of resignation
or termination shall be canceled. The Executive may exercise his vested stocks
options within six (6) months of the date of resignation or termination.
(b) If the Executive is to be terminated for Cause as provided in
this Section VI.B, the Executive shall be given thirty (30) days written notice
of such termination. Such written notice shall specify the particular act or
acts, or failure to act, which is or are the basis for the termination of the
Executive's employment for Cause. The Executive shall be given the opportunity
during such thirty-day period to correct such act or failure to act. Upon
failure of the Executive, within such thirty-day period, to correct such act or
failure to act, or to provide the Board with a corrective action plan acceptable
to the Board, the Executive's employment by the Company shall automatically be
terminated under this Section VI.B for Cause.
C. Termination Without Cause or Termination for Good Reason
The Company may terminate the Executive's employment hereunder
without Cause (as defined below) and the Executive may terminate his employment
hereunder for Good Reason (as defined below). If the Company terminates the
Executive's employment hereunder without Cause, other than due to death or
Disability, or if the Executive terminates his employment for Good Reason, the
Executive shall be entitled to:
(a) an amount equal to (x) 200% of the sum of (A) his then annual
Base Salary plus (B) his bonus, if any, earned during the immediately
preceding calendar year (assuming for the purposes of this paragraph that
Executive's bonus for 1998 is deemed to be equal to Executive's annual
Base Salary for 1998) for any termination occurring on or prior to
December 31, 2001 or (y) 200% of his then annual Base Salary if such
termination occurs subsequent to December 31, 2001, such payments to be
paid out within
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thirty (30) days from the date of termination of employment under this
Section VI.C;
(b) any Base Salary accrued or earned but not yet paid as of the
date of termination;
(c) any annual bonus earned but not yet paid;
(d) reimbursement for all out-of-pocket expenses that are
reimbursable pursuant to Section IV.D and that are incurred, but not yet
paid, prior to such termination of employment;
(e) continuation of the Executive's and his dependent's health
benefits, if any, at the level in effect on the date of termination
through the earlier to occur of (i) twenty-four (24) months from such
termination of employment or (ii) the date Executive commences employment
with another entity; and
(f) immediate vesting of Executive's stock options; Executive may
exercise such options within twelve (12) months of the date of termination
of employment.
If the Executive intends to terminate his employment for Good
Reason, the Executive shall give written notice to the Company which notice
shall specify the particular act or acts, or failure to act, which is or are the
purported basis for the termination of his employment for Good Reason. The
Company shall be given the opportunity for a period of forty-five days after its
receipt of such notice to correct such act or acts or failure to act. Upon
failure of the Company, within such forty-five day period, to correct such act
or failure to act, the Executive's employment by the Company shall automatically
be terminated under this Section VI.C for Good Reason.
For purposes of this Agreement, "Cause" means
(i) Unauthorized use or disclosure of the confidential information
or trade secrets of the Company in violation of Article V;
(ii) Conviction of, or a plea of "guilty" or "no contest" to, a
felony under the laws of the United States or any state thereof;
(iii) Embezzlement or misappropriation off the assets of the
Company; or
<PAGE>
-11-
(iv) Misconduct or gross negligence in the performance of duties
assigned to the Executive under this Agreement.
For purposes of this Agreement, "Good Reason" means and shall be
deemed to exist if, without the prior express written consent of the Executive,
(a) the Executive is assigned any duties or responsibilities inconsistent in any
material respect with the scope of the duties or responsibilities associated
with the Executive's titles or positions, as set forth and described in Article
III of this Agreement; (b) the Executive suffers a reduction in the duties,
responsibilities or authority associated with his titles and positions, as set
forth and described in Article III of this Agreement; (c) the Executive is not
appointed to, or is removed from the offices provided for in Article III of this
Agreement or (d) the Executive's compensation is reduced in violation of Article
IV hereof.
D. Termination Upon Change of Control
(i) In addition to the Executive's rights under Article VI(C) of
this Agreement in the event of a Change in Control (as defined below) of the
Company and the termination of the Executive's employment by Executive under
this paragraph, the Executive shall be entitled to the severance compensation
set forth in clauses (a)-(f) of Article VI(C) of this Agreement. The following
shall constitute termination under this paragraph:
The Executive terminates his employment under this Agreement pursuant to a
written notice to that effect delivered to the Board within twelve (12)
months after the occurrence of the Change in Control.
(ii) For purposes of this paragraph, the term "Change in Control"
shall mean the following occurring after the date of this Agreement:
1. Any person or group (as such terms are used in Section 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended ("Exchange
Act")), directly or indirectly, becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly
or indirectly, of 50% or more of the total number of shares of
Common Stock then issued and outstanding; or
<PAGE>
-12-
2. Any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes the beneficial owner (as defined in
clause (g)(ii)(1) above, except that for purposes of this clause (2)
such person shall be deemed to have "beneficial ownership" of all
shares that any such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the total voting power
represented by all the Common Stock then outstanding; or
3. During any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of the Company
(together with any new directors whose election by such Board or
whose nomination for election by the shareholders of the Company was
approved by a vote of 66 2/3% of the directors of the Company then
still in office who were either directors at the beginning of such
period or whose election or nomination for election was previously
so approved) cease for any reason to constitute a majority of the
Board then in office; or
4. The merger or consolidation of the Company with or into another
person or the merger or consolidation of another person with or into
the Company, or the sale of all or substantially all the assets of
the Company to another person, and, in the case of any such merger
or consolidation, the securities of the Company that are outstanding
immediately prior to such transaction and which represent 100% of
the aggregate voting power of the Common Stock are changed into or
exchanged for cash, securities or property); or
5. The consummation of a merger or consolidation of the Company with or
into another entity or any other corporate reorganization, if more
than 50% of the combined voting power of the continuing or surviving
entity's securities outstanding immediately after such merger,
consolidation or other reorganization is owned by persons who were
not stockholders of the Company immediately prior to such merger,
consolidation or other reorganization.
(iii) In the event that it is determined that any payment or
distribution of any type to or for the benefit of the Executive made by the
Company, by any of its affiliates, by any
<PAGE>
-13-
person who acquires ownership or effective control of the Company or ownership
of a substantial portion of the Company's assets (within the meaning of section
280G of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations thereunder) or by any affiliate of such person, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise (the "Total Payments"), would be subject to the excise tax imposed
by section 4999 of the Code or any interest or penalties with respect to such
excise tax (such excise tax, together with any such interest or penalties, are
collectively referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment (a "Gross-Up Payment") in an amount
that shall fund the payment by the Executive of any Excise Tax on the Total
Payments as well as all income taxes imposed on the Gross-Up Payment, any Excise
Tax imposed on the Gross-Up Payment and any interest or penalties imposed with
respect to taxes on the Gross-Up Payment or any Excise Tax.
(iv) All mathematical determinations and all determinations of
whether any of the Total Payments are "parachute payments" (within the meaning
of section 280G of the Code) that are required to be made under this Section
VI.D, including all determinations of whether a Gross-Up Payment is required, of
the amount of such Gross-Up Payment and of amounts relevant to the last sentence
of this Section VI.D, shall be made by the independent accounting firm of Ernst
& Young LLP (the "Accounting Firm"), which shall provide its determination (the
"Determination"), together with detailed supporting calculations regarding the
amount of any Gross-Up Payment and any other relevant matters, both to the
Company and to the Executive within seven business days of the Executive's
termination date, if applicable, or such earlier time as is requested by the
Company or by the Executive (if the Executive reasonably believes that any of
the Total Payments may be subject to the Excise Tax). If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall furnish the
Executive with a written statement that such Accounting Firm has concluded that
no Excise Tax is payable (including the reasons therefor) and that the Executive
has substantial authority not to report any Excise Tax on the Executive's
federal income tax return. If a Gross-Up Payment is determined to be payable, it
shall be paid to the Executive within five business days after the Determination
is delivered to the Company or the Executive. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive, absent
manifest error.
<PAGE>
-14-
E. Other
1. Upon any termination of the Executive's employment pursuant to
this Article VI, the Executive (or, if applicable, his estate) shall immediately
deliver to the Company all documents, correspondence, memoranda, notes, records,
reports, plans, designs, studies and any other papers or items made or received
by the Executive in connection with his employment with the Company (whether or
not constituting Confidential Information) (including copies of the foregoing),
and all computer equipment, disks and software, keys, credit cards, books and
other property of or relating to the Company or any of its subsidiaries
(including without limitation all documents prepared by the Executive or which
may have come into his possession in the course of the Executive's employment
hereunder including copies thereof) then in the Executive's (or if applicable,
his estate's) possession.
2. After any termination of the Executive's employment hereunder,
the Executive shall not at any time thereafter represent himself as being in any
way connected with or interested in the business of or employed by the Company
or any of its subsidiaries, or use for trade or other purposes the name of the
Company or of its subsidiaries or any name capable of confusion therewith.
3. Upon the termination of the Executive's employment for whatever
reason the Executive shall immediately be deemed to have resigned from all
directorships, if any, and offices the Executive holds in the Company or any of
its subsidiaries and any directorships held at the request of or on behalf of
the Company or any of its subsidiaries.
VII.
MISCELLANEOUS PROVISIONS
A. Entire Agreement; Indemnification
1. Except as provided in paragraph 2 below, this Agreement contains
all the understandings between the parties hereto and supersedes all prior
discussions and agreements between the Company, on the one hand, and the
Executive, on the other hand, with respect to the subject matter hereof.
<PAGE>
-15-
2. On or before the Closing Date, the Executive and the Company
shall enter into an indemnification agreement providing for the indemnification
of the Executive by the Company to the maximum extent authorized by Section 145
of the Delaware General Corporation Law, as amended.
B. Modification; Waiver
This Agreement may not be modified, amended or supplemented except
in writing and signed by the party against whom any modification, amendment or
supplement is sought. No term or condition of this Agreement may be, or will be
deemed to have been, waived except in writing by the party charged with the
waiver. A waiver shall operate only as to the specific term or condition waived
and will not constitute a waiver for the future or act on anything other than
that which is specifically waived.
C. Severability
If any one or more of the provisions contained in this Agreement
will be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability will not affect any other provision
hereof.
D. Legal Counsel
The Executive and the Company acknowledge that this is a legally
binding contract and acknowledge and agree that they have had the opportunity to
consult with legal counsel of their choice in connection with the drafting,
negotiation and execution of this Agreement. The Company agrees to reimburse the
Executive for the reasonable fees of his legal counsel incurred in reviewing
this Agreement not to exceed $10,000.
E. Rights and Remedies Cumulative
No right or remedy herein conferred upon the Company is intended to
be exclusive of any other right or remedy, and every right and remedy shall, to
the extent permitted by law, be cumulative and in addition to every other right
and remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or implementation of any
other appropriate right or remedy.
<PAGE>
-16-
F. Assignment
This Agreement shall inure to the benefit of, and be enforceable by,
the Company and its successors and assigns. This Agreement is personal to the
Executive and may not be assigned by him.
G. Governing Law
The validity and effects of this Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New Jersey
without giving effect to its principles of conflicts of laws.
H. Survivorship
The respective rights and obligations of the parties hereunder that
specifically provide for such survival shall survive any termination of this
Agreement and the Executive's Stated Term of Employment hereunder for any
reason to the extent necessary to the intended provision of such rights and the
intended performance of such obligations.
I. Notice
Any notice or other communications required or permitted to be given
pursuant to this Agreement shall be in writing and shall be sent by registered
or certified mail, return receipt requested, postage prepaid, by hand delivery
(including courier services), or by telex or telecopier, as follows:
If to the Company:
ANADIGICS, INC.
33 Technology Drive
Warren, NJ 07059
Telecopy: 908-668-5068
Attention: Board of Directors
with copies to:
Stephen A. Greene, Esq.
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Telecopy: 2l2-269-5420
<PAGE>
-17-
If to the Executive:
Mr. Bamdad (Bami) Bastani
4254 Quail Run Drive
Danville, CA 94506
Telecopy: 925-736-5770
with a copy to:
Daniel Niehans, Esq.
Gunderson Dettmer
155 Constitution Drive
Menlo Park, CA 94025
Telecopy: 650-321-2800
Any notice or communication shall be deemed given or made (i) when
delivered by hand (or courier service), (ii) when mailed, five business days
after being deposited in the mail, postage prepaid, sent by certified mail,
return receipt requested, (iii) when telexed, answer-back received and (iv) when
telecopied, receipt acknowledged.
<PAGE>
-18-
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Executive has hereunto set his
hand as of the day and year first above written.
ANADIGICS, INC.
By: /s/ Ronald Rosenzweig
------------------------------------
Name:
Title:
/s/ Bamdad Bastani
----------------------------------------
Bamdad (Bami) Bastani
<PAGE>
Exhibit A
Stock Option Agreement
<PAGE>
Annex A
Options
As of the Closing Date Executive shall be granted non-qualified
options for the purchase of 450,000 shares of Common Stock of the Company at an
exercise price equal to the last reported sales price of the Company's Common
Stock on the NASDAQ National Market on the business day immediately prior to the
Closing Date. The Options shall have a term of 10 years and shall become
exercisable over a period of three years from the Closing Date: 150,000 shares
on the first anniversary of the Closing Date; 150,000 shares on the second
anniversary of the Closing Date; and 150,000 shares on the third anniversary of
the Closing Date.
<PAGE>
Amendment to Employment Agreement
For Bami Bastani
Section II F.3. Relocation Expenses
3. Mortgage or residence costs (not to exceed $6,000 per month) on the
Executive's California residence shall be covered until the end of July 1999.
/s/ Bami Bastani /s/ Lewis Solomon
- ------------------------------------ --------------------------------
Bami Bastani Lewis Solomon
Date: 3/11/99 Date: 2/10/99
<PAGE>
Exhibit 10.2
September 17, 1998
Mr. Ronald Rosenzweig
22 Roberts Drive
Short Hills, NJ 07078
Dear Ron:
This letter will confirm the agreement reached between you and
Anadigics, Inc. (the "Company") regarding your employment by the Company.
1. Effective on October 2, 1998 (the "Effective Date"), you will
resign as President and Chief Executive Officer of the Company, and will agree
to serve as Chairman of the Board of Directors (the "Board") of the Company. As
Chairman of the Board you shall have such powers and duties as may from time to
time be assigned to you by the Board.
2. Your annual salary shall be $241,500.
3. You will be granted on or prior to the Effective Date 150,000
options to purchase shares of the Company's Common Stock. The exercise price
shall be the last reported sales price on the NASDAQ National Market on the last
trading day immediately prior to the date of grant ("Date of Grant"). The
options shall vest as follows: 50,000 shares on the first anniversary of the
Date of Grant with the remaining 100,000 shares vesting at the rate of 12,500
shares at the end of each 90 day period subsequent to the Date of Grant.
4. During your employment under this Agreement you shall remain
eligible to receive such benefits as are generally provided to executive
officers of the Company as determined from time to time by the Board.
5. In the event the Company terminates your employment hereunder
without "Cause" (as defined below), you shall be entitled to:
(a) an amount equal to the sum of (A) your annual salary set
forth in paragraph 2 hereof plus (B) your bonus, if any, earned
during the immediately preceding calendar year, such payments to be
paid to you within thirty (30) days of termination of your
employment;
(b) any annual salary earned but not yet paid;
(c) any bonus earned but not yet paid;
<PAGE>
-2-
(d) reimbursement for out-of-pocket expenses, properly
reimbursable, that have been incurred but not yet reimbursed;
(e) continuation of your and your dependents' health benefits,
if any, at the level in effect on the date of termination through
the earlier to occur of (i) twenty-four (24) months from such
termination of employment or (ii) the date you commence employment
with another entity; and
(f) the immediate vesting of any stock options you hold which
would have vested within twelve months of the date of termination of
your employment; you may exercise such options within twelve (12)
months following the date of termination of your employment.
For purposes of this Agreement, "Cause" means
(i) Unauthorized use or disclosure of the confidential
information or trade secrets of the Company;
(ii) Conviction of, or a plea of "guilty" or "no contest" to,
a felony under the laws of the United States or any state thereof;
(iii) Embezzlement or misappropriation of the assets of the
Company; or
(iv) Misconduct or gross negligence in the performance of
duties assigned to you as Chairman of the Board.
If you are in agreement with the foregoing, please sign and return
to us a copy of this letter.
Very truly yours,
ANADIGICS, INC.
By /s/ John F. Lyons
-------------------------------------
Accepted and Agreed to as of
the date first above written.
/s/ Ronald Rosenzweig
- ---------------------------------
(Ronald Rosenzweig)
<PAGE>
Exhibit 10.3
Anadigics, Inc.
35 Technology Drive
Warren, New Jersey 07059
June 1, 1999
Ronald Rosenzweig
22 Roberts Drive
Short Hills, New Jersey 07076
Dear Ron:
This letter will confirm the agreement reached between you and
Anadigics, Inc. (the "Company") regarding your employment by the Company on and
subsequent to the Effective Date referred to below.
1. Commencing on January 1, 2000 (the "Effective Date"), you will
agree to serve as Chairman of the Board of Directors (the "Board") of the
Company until the expiration of the Second Term (as defined below). As Chairman
of the Board you shall have such powers and duties as may from time to time be
assigned to you by the Chief Executive Officer of the Company.
2. Your annual salary shall be $200,000 for a period from January 1,
2000 through December 31, 2000 (the "First Term"). During the First Term you
shall be entitled to a bonus of up to $100,000 provided you meet the targets for
your performance set by the Chief Executive Officer of the Company.
[CONFIDENTIAL STAMP]
<PAGE>
-2-
3. Your salary for the period from January 1, 2001 through July 2,
2002 (the "Second Term") shall be at the annual rate of $100,000. During the
Second Term you shall be entitled to a bonus of up to 50% of the salary paid
during the Second Term provided you meet the targets for your performance set by
the Chief Executive Officer of the Company.
4. You hereby agree to devote 51% of your time to your duties as an
employee of the Company during the First Term and hereby agree to devote 25% of
your time to such duties during the Second Term.
5. During your employment under this Agreement you shall remain
eligible to receive such health and insurance benefits as are generally provided
to executive officers of the Company as determined from time to time by the
Board.
6. In the event the Company terminates your employment hereunder
without "Cause" (as defined below), you shall be entitled to:
(a) an amount equal to the sum of (A) your annual salary set
forth in paragraph 2 or 3 hereof as the case may be depending on
whether such employment is terminated during the First or Second
<PAGE>
-3-
Term plus (B) your bonus, if any, earned during the immediately
preceding calendar year, such payments to be paid to you within
thirty (30) days of termination of your employment;
(b) any annual salary earned but not yet paid;
(c) any bonus earned but not yet paid;
(d) reimbursement for out-of-pocket expenses, properly
reimbursable, that have been incurred but not yet reimbursed;
(e) continuation of your and your dependents' health benefits,
if any, at the level in effect on the date or termination through
the earlier to occur of (i) twenty-four (24) months from such
termination of employment or (ii) the date you commence employment
with another entity which provides you with comparable benefits; and
(f) the immediate vesting of any stock options you hold; you
may exercise such options within twelve (12) months following the
date of termination of your employment.
<PAGE>
-4-
For purposes of this Agreement "Cause" shall mean:
(i) Unauthorized use or disclosure of the confidential
information or trade secrets of the Company;
(ii) Conviction of, or a plea of "guilty" or "no contest" to,
a felony under the laws of the United States or any state thereof;
(iii) Embezzlement or misappropriation of the assets of the
Company; or
(iv) Misconduct or gross negligence in the performance of
duties assigned to you as Chairman of the Board.
7. In the event you voluntarily terminate your employment with the
Company or in the event your employment hereunder is terminated by the Company
for "Cause" as defined in paragraph 6 hereof during the First or Second Term of
this Agreement, you shall be entitled to (a) any annual salary earned but not
yet paid to the date of your termination; (b) any bonus earned but not yet paid
to the date of termination; and (c) reimbursement of out of pocket expenses that
have been incurred but not yet reimbursed.
8. You hereby agree that during the First and Second Terms of this
Agreement and for a period of two years following termination of your employment
with the Company that you will not directly or indirectly (i) encourage or
solicit any
<PAGE>
-5-
officer or employee of the Company or any of its subsidiaries to leave the
employ of such entity; (ii) that you will not, directly or indirectly, as
principal, partner, director, employee or consultant engage in any activities in
the geographic area of the Company's and its subsidiaries' operations if such
activities are in direct competition with businesses that are currently being
conducted by the Company and its subsidiaries.
9. You recognize and acknowledge that, by reason of your employment
with the Company, you may have acquired, and will acquire, information of a
proprietary, confidential, or secret nature regarding the Company and its
subsidiaries and their respective businesses and operations, including but not
limited to, information concerning trade secrets, know-how, software, data
processing systems, inventions, designs, processes, formulas, notations,
improvements, financial information, business plans, prospects, referral
sources, lists of suppliers and customers and other information with respect to
the affairs, business, customers, agents or other business relationships of the
Company and its subsidiaries, (the "Confidential Information"). You hereby agree
to hold in a fiduciary capacity for the benefit of the Company, all Confidential
Information relating to the Company and any of its subsidiaries and their
respective businesses, which shall have been obtained
<PAGE>
-6-
by you during your employment by the Company. You hereby agree that you will
not, during or for three (3) years after your employment with the Company,
disclose the Confidential Information, or any part thereof, to any person, firm,
corporation, association or other entity for any reason or purpose whatsoever.
Notwithstanding the foregoing, the provisions of this paragraph 9 shall not
apply to Confidential Information which (a) becomes or is generally available to
the public (other than by your acts or the acts of your representatives); (b)
becomes known to you on a non-confidential basis from a source other than the
Company, provided that such source is not bound by a confidentiality agreement
with or other obligation of secrecy to the Company; or (c) you are required to
disclose in a judicial, administrative or governmental proceeding (any such
proceeding, a "Legal Proceeding"). In the event you are required to disclose
Confidential Information in a Legal Proceeding, you shall provide the Company
with prompt notice of such request so that the Company may timely seek an
appropriate protective order or waive compliance with this paragraph 9.
You and the Company hereby agree that on the Effective Date this
letter agreement supersedes and replaces the letter agreement dated September
17, 1998 between you and the
<PAGE>
-7-
Company which letter shall be of no further effect on and after the Effective
Date.
<PAGE>
-8-
If you are in agreement with the foregoing, please sign and return
to us a copy of this letter.
Very truly yours,
ANADIGICS, INC.
By /s/ Bami Bastani
--------------------------
Accepted and Agreed to as of
the date first above written.
/s/ Ronald Rosenzweig
- ------------------------------------
Ronald Rosenzweig
<PAGE>
Exhibit 10.4
Anadigics, Inc.
35 Technology Drive
Warren, New Jersey 07059
June 1, 1999
John Lyons
39 Olden Drive
Flemington, New Jersey 08822
Dear John:
This letter will confirm the agreement reached between you and
Anadigics, Inc. (the "Company") regarding your employment by the Company.
1. Effective on June 1, 1999 (the "Effective Date"), you will be
employed by the Company for a period of seven months from the Effective Date
(the "Term") at an annual salary of $160,000, such employment to be at will.
During the Term you will focus your effort on an equity offering for the Company
and such transition activities as the CEO may request. You will be allowed some
time to pursue other business interests.
2. During the Term, your 1999 bonus will be paid on the previously
scheduled payment dates. The 1999 bonus plan shall be paid out following
termination per scheduled dates, provided, however, that if you voluntarily
leave the employment of the Company prior to the expiration of the Term, the
unpaid
[CONFIDENTIAL STAMP]
<PAGE>
-2-
part of the bonus referred to in this paragraph shall not be paid to you.
3. The 30,000 Stock options in the Company that you hold as of the
Effective Date which were granted on January 17, 1997, of which 7,500 shares
were not vested as of the Effective Date shall immediately vest on the Effective
Date and you shall have twenty-four months from the date of termination of your
employment hereunder to exercise the 30,000 options.
4. The 30,000 Stock options in the Company that you hold as of the
Effective Date which were granted May 11, 1998, of which 15,000 shares will not
be vested as of December 31, 1999 shall immediately vest on the Effective Date
and you shall have twenty-four months from the date of termination of your
employment hereunder to exercise the 15,000 options with accelerated vesting.
The 15,000 options that were previously vested will not be adjusted.
5. The 20,000 Stock options in the Company that you hold as of the
Effective Date which were granted October 30, 1998, of which 13,333 options will
not be vested as of December 31, 1999 shall immediately vest on the Effective
Date and you shall have twenty-four months from the date of termination of your
employment hereunder to exercise the 13,333 options with
<PAGE>
-3-
accelerated vesting. The 6,667 options that were previously vested will not be
adjusted.
6. In the event your employment with the Company is terminated by
the Company without "Cause" (as defined below) during the Term, you shall
continue to receive your salary for a period ending on the earlier to occur of
(i) June 1, 2000, or (ii) your securing employment with another entity at a base
annual salary of not less than $160,000. If your base annual salary is less than
$160,000, the Company shall pay you through June 1, 2000 an annual salary at a
rate to compensate you for the difference between $160,000 per year and the
annual base salary you are receiving from your new employer. If you voluntarily
terminate your employment with the Company prior to the expiration of the Term,
the Company shall have no further obligation to pay you any salary.
For purposes of this Agreement "Cause" shall mean:
(i) Unauthorized use or disclosure of the confidential
information or trade secrets of the Company;
(ii) Conviction of, or a plea of "guilty" or "no contest" to,
a felony under the laws of the United States or any state thereof;
(iii) Embezzlement or misappropriation of the assets of the
Company; or
<PAGE>
-4-
(iv) Misconduct or gross negligence in the performance of
duties assigned to you.
7. The Company shall continue to provide you and your dependents
with health and insurance benefits that you currently are entitled to for a
period expiring on the earlier to occur of (i) June 1, 2000, (ii) your obtaining
comparable health and insurance coverage from your new employer, or (iii) your
voluntarily leaving the employment of the Company prior to the expiration of the
Term.
8. You hereby agree that for a period of two years following
termination of your employment with the Company that you will not directly or
indirectly (i) encourage or solicit any officer or employee of the Company or
any of its subsidiaries to leave the employ of such entity; (ii) that you will
not, directly or indirectly, as principal, partner, director, employee or
consultant engage in any activities in the geographic area of the Company's and
its subsidiaries' operations if such activities are in direct competition with
businesses that are currently being conducted by the Company and its
subsidiaries, provided, however, that nothing in this clause (ii) shall prohibit
you from becoming a principal, partner, director or employee of an entity that
invests in any businesses that are in competition with the Company, provided
that you do not directly
<PAGE>
-5-
participate in such investment decisions or directly participate in any
managerial decisions regarding such businesses.
9. You recognize and acknowledge that, by reason of your employment
with the Company, you may have acquired, and will acquire, information of a
proprietary, confidential, or secret nature regarding the Company and its
subsidiaries and their respective businesses and operations, including but not
limited to, information concerning trade secrets, know-how, software, data
processing systems, inventions, designs, processes, formulas, notations,
improvements, financial information, business plans, prospects, referral
sources, lists of suppliers and customers and other information with respect to
the affairs, business, customers, agents or other business relationships of the
Company and its subsidiaries, (the "Confidential Information"). You hereby agree
to hold in a fiduciary capacity for the benefit of the Company, all Confidential
Information relating to the Company and any of its subsidiaries and their
respective businesses, which shall have been obtained by you during your
employment by the Company. You hereby agree that you will not, during or for
three (3) years after your employment with the Company, disclose the
confidential Information, or any part thereof, to any person, firm, corporation,
association or other entity for any reason or purpose whatso-
<PAGE>
-6-
ever. Notwithstanding the foregoing, the provisions of this paragraph 7 shall
not apply to Confidential Information which (a) becomes or is generally
available to the public (other than by your acts or the acts of your
representatives); (b) becomes known to you on a non-confidential basis from a
source other than the Company, provided that such source is not bound by a
confidentiality agreement with or other obligation of secrecy to the Company; or
(c) you are required to disclose in a judicial, administrative or governmental
proceeding (any such proceeding, a "Legal Proceeding"). In the event you are
required to disclose Confidential Information in a legal proceeding, you shall
provide the Company with prompt notice of such request so that the Company may
timely seek an appropriate protective order or waive compliance with this
paragraph 7.
If you are in agreement with the foregoing, please sign and return
to us a copy of this letter.
Very truly yours,
ANADIGICS, INC.
By /s/ Bami Bastani
--------------------------
Bami Bastani
Accepted and Agreed to as of
the date first above written.
/s/ John Lyons
- ------------------------------------
John Lyons
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted for the six
month period ended July 4, 1999 and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUL-04-1999
<CASH> 25,343,000
<SECURITIES> 14,736,000
<RECEIVABLES> 18,191,000
<ALLOWANCES> 0
<INVENTORY> 10,256,000
<CURRENT-ASSETS> 83,173,000
<PP&E> 131,397,000
<DEPRECIATION> 56,117,000
<TOTAL-ASSETS> 169,255,000
<CURRENT-LIABILITIES> 29,646,000
<BONDS> 0
0
0
<COMMON> 149,000
<OTHER-SE> 134,660,000
<TOTAL-LIABILITY-AND-EQUITY> 169,255,000
<SALES> 55,582,000
<TOTAL-REVENUES> 55,582,000
<CGS> 36,148,000
<TOTAL-COSTS> 36,148,000
<OTHER-EXPENSES> 20,712,000
<LOSS-PROVISION> (6,925)
<INTEREST-EXPENSE> (995,000)
<INCOME-PRETAX> (7,208,000)
<INCOME-TAX> (2,667,000)
<INCOME-CONTINUING> (4,541,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,541,000)
<EPS-BASIC> (0.31)
<EPS-DILUTED> (0.31)
</TABLE>
