STOCK BASED COMPENSATION

9 Months Ended

Oct. 01, 2011

STOCK BASED COMPENSATION

STOCK BASED COMPENSATION

7. STOCK BASED COMPENSATION

Equity Compensation Plans

 The Company had 4 equity compensation plans under which equity securities are authorized for issuance to employees and/or directors:

�   The 1995 Long-Term Incentive and Share Award Plan for Officers and Directors (terminated February 28, 2005)  (1995 Plan);

�   The 1997 Long Term Incentive and Share Award Plan (1997 Plan);

�   The 2005 Long Term Incentive and Share Award Plan (2005 Plan, collectively with the 1995 Plan and the 1997 Plan, the Plans); and

�   The Employee Stock Purchase Plan (ESP Plan).

 Employees and outside directors have been granted restricted stock shares or units (collectively, restricted stock) and options to purchase shares of common stock under stock option plans adopted in 1995, 1997 and 2005. An aggregate of 4,913, 5,100 and 16,050 shares of common stock were reserved for issuance under the 1995 Plan, the 1997 Plan and the 2005 Plan, respectively. The Plans provide for the granting of stock options, stock appreciation rights, restricted stock and other share based awards to eligible employees and directors, as defined in the Plans. Option grants have terms of ten years and become exercisable in varying amounts over periods of up to three years. To date, no stock appreciation rights have been granted under the Plans. On February 1, 2009, a CEO inducement award of 700 stock options was granted outside of the Plans and the unvested portion of that award contractually vested upon separation on March 28, 2011.

 In 1995, the Company adopted the ESP Plan under Section 423 of the Internal Revenue Code. All full-time employees of ANADIGICS, Inc. and part-time employees, as defined in the ESP Plan, are eligible to participate in the ESP Plan. An aggregate of 6,694 shares of common stock were reserved for offering under the ESP Plan. Offerings are made at the commencement of each calendar year and must be purchased by the end of that calendar year. Pursuant to the terms of the ESP Plan, shares purchased and the applicable per share price were 488 and $3.83, respectively for the year ended December 31, 2010.

 The table below summarizes stock based compensation by source and by financial statement line item for the three and nine month periods:

	Three months ended				Nine months ended
	October 1, 2011		October 2, 2010		October 1, 2011			October 2, 2010
Amortization of restricted stock	$	1,698	$	1,948	$	6,584		$	5,609
Amortization of ESP Plan		100		200		500			600
Amortization of stock option awards		432		275		1,212			1,075
Total stock based compensation	$	2,230	$	2,423	$	8,296		$	7,284
By Financial Statement line item
Cost of sales	$	400	$	590	$	1,603		$	1,752
Research and development expenses		512		879		2,785			2,562
Selling and administrative expenses		1,318		954		3,988			2,970
Restructuring charge		-		-		(80	)		-

 No tax benefits have been recorded due to the Company's full valuation allowance position.

 Stock based compensation for the nine months ended October 1, 2011 includes $684 for equity awards associated with the management separation charge recorded during the first quarter of 2011.

Restricted Stock and Stock Option Awards

 The value of restricted stock grants are fixed upon the date of grant and amortized over the related vesting period of six months to three years.  Restricted stock is subject to forfeiture if employment terminates prior to vesting.  The Company estimates that approximately 2.5% of its restricted stock and stock option awards are forfeited annually (exclusive of LTI's, as described below).  The restricted stock shares carry voting and certain forfeitable dividend rights commencing upon grant, whereas restricted stock units do not. Neither restricted stock shares nor restricted stock units may be traded or transferred prior to vesting.  Grant, vest and forfeit activity and related weighted average (WA) price per share for restricted stock and for stock options during the period from January 1, 2010 to October 1, 2011 is presented in tabular form below:

	Restricted Stock Shares					Restricted Stock Units					Stock Options
	Shares			WA price/ share		Units			WA price/ unit		Issuable upon exercise			WA exercise price
Outstanding at January 1, 2010		638		$	9.90		828		$	3.36		5,307		$	5.32
Granted		-			-		2,009			4.33		121			5.08
Shares vested/options exercised		(279	)		9.74		(1,338	)		3.56		(758	)		1.99
Forfeited/expired		(179	)		11.66		(39	)		4.16		(527	)		12.90
Balance at December 31, 2010		180		$	8.39		1,460		$	4.49		4,143		$	4.96
Granted		-			-		2,525			5.97		1,063			3.29
Shares vested/options exercised		(179	)		8.38		(1,233	)		5.13		(139	)		2.32
Forfeited/expired		(1	)		9.72		(399	)		6.03		(130	)		11.28
Balance at October 1, 2011		-			-		2,353		$	5.48		4,937		$	4.50

 In June 2011, the Company's Chief Executive Officer and Chief Financial Officer were awarded a base grant of 417 long-term incentive (LTI) stock options contingent upon the Company's shareholder return performance against the performance of the Philadelphia Semiconductor Index component companies.  The award and performance will be evaluated annually in one-third increments measuring Company shareholder returns during the one, two and three year periods following the award. Depending upon performance, the number of shares issuable pursuant to the LTI stock options can range from 50% to 150% of the base option shares.  Company performance below the 25th-percentile in a measurement period would result in no vesting for that period.  The LTI stock options have an exercise price of $3.24, a ten year term to expiration, and an average fair value of $2.62.  The fair value estimate was calculated with the assistance of a valuation consultant using a Monte Carlo Simulation model.

 Stock based compensation for the nine months ended October 1, 2011 includes $684 for equity awards associated with the management separation charge recorded during the nine months ended October 1, 2011.

	As of October 1, 2011
Unrecognized stock based compensation cost
Option plans	$	2,358
Restricted stock	$	9,652
Weighted average remaining recognition period
Option plans	2.1 years
Restricted stock	2.2 years

Stock options outstanding at October 1, 2011 are summarized as follows:

Range of exercise prices		Outstanding Options at October 1, 2011		Weighted average remaining contractual life		Weighted average exercise price		Exercisable at October 1, 2011		Weighted average exercise price
$	1.39 - $2.03		2,055		3.3	$	1.99		1,876	$	1.99
$	2.08 - $3.84		1,325		8.1	$	3.17		271	$	2.89
$	4.15 - $8.79		664		4.0	$	6.61		569	$	6.82
$	8.84 - $18.98		893		3.6	$	10.71		893	$	10.71

Valuation Method for ESP Plan and Stock Option Awards

 The fair value of these equity awards was estimated at the date of grant using a Black-Scholes option pricing model. The weighted average assumptions and fair values for stock based compensation grants used for the nine month periods ended October 1, 2011 and October 2, 2010 were (excludes the aforementioned LTI option grants):

	Nine months ended
	October 1, 2011			October 2, 2010
Stock option awards:
Risk-free interest rate		2.2	%		2.6	%
Expected volatility		65	%		85	%
Average expected term (in years)		5.0			5.0
Expected dividend yield		0.0	%		0.0	%
Weighted average fair value of options granted	$	1.85		$	3.26
ESP Plan:
Risk-free interest rate		0.1	%		0.3	%
Expected volatility		61	%		61	%
Average expected term (in years)		1.0			1.0
Expected dividend yield		0.0	%		0.0	%
Weighted average fair value of purchase option	$	0.75		$	1.44

 For equity awards with expected terms of greater than one year, the assumption for expected volatility is based on a combination of implied and historical volatility, whereas for equity awards with an expected term of one year or less, the assumption is solely based on the Company's historical volatility.