STOCK BASED COMPENSATION

3 Months Ended

Mar. 31, 2012

STOCK BASED COMPENSATION

STOCK BASED COMPENSATION

6. 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 (terminated February 28, 2005) (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 384 and $2.00, respectively for the year ended December 31, 2011.

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

	Three months ended
	March 31, 2012		April 2, 2011
Amortization of restricted stock	$	1,422	$	2,688
Amortization of ESP Plan		135		200
Amortization of stock option awards		218		602
Total stock based compensation	$	1,775	$	3,490
By Financial Statement line item
Cost of sales	$	217	$	610
Research and development expenses		412		1,546
Selling and administrative expenses		1,097		1,334
Restructuring charge		49		-

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

 Stock based compensation for the three months ended April 2, 2011 includes $684 for equity awards associated with the management separation charge recorded.

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 five 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, 2011 to March 31, 2012 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, 2011		180		$	8.39		1,460		$	4.49		4,143		$	4.96
Granted (1)		-			-		2,573			5.91		1,065			3.29
Shares vested/options exercised		(179	)		8.38		(1,654	)		5.08		(442	)		2.12
Forfeited/expired (2)		(1	)		9.72		(409	)		6.03		(491	)		9.37
Balance at December 31, 2011		-			-		1,970		$	5.52		4,275		$	4.32
Granted		-			-		515			2.48		4			2.64
Shares vested/options exercised		-			-		(532	)		6.22		(635	)		2.02
Forfeited/expired		-			-		(54	)		5.99		(73	)		14.06
Balance at March 31, 2012		-			-		1,899		$	4.49		3,571		$	4.53

(1)   Year 2011 stock options granted include 417 performance stock option shares

(2)   Year 2011 stock options forfeited include 167 performance stock option shares

 In June 2011, the Company's Chief Executive Officer and Chief Financial Officer were awarded a base grant of 417 long-term incentive stock options (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.  During the fourth quarter of 2011, 167 shares of the 417 LTI stock options were forfeited upon the separation of our former Chief Financial Officer.

 On February 16, 2012, subject to stockholder approval of additional 2005 Long-Term Incentive and Share Award Plan shares at the Company's 2013 Annual Stockholder Meeting, the Company awarded 260 restricted stock units to two of its officers.  50% of the restricted stock units will have time-based vesting conditions (time-based) and 50% will have performance-based vesting conditions (performance-based).  The time-based restricted stock units will vest 1/3rd on May 20, 2013, 1/3rd on February 18, 2014 and 1/3rd on February 18, 2015.  The performance-based restricted stock units will vest based on absolute total stockholder return for one-year, two-year and three-year periods starting from the baseline date of December 31, 2011, compared to total stockholder return targets for each of the respective periods.  In May, 2012, subject to stockholder approval at the Company's 2013 Annual Stockholder Meeting, an additional 608 time-based and 105 performance-based restrictive stock units were awarded to employees of the Company.  These restricted stock units will vest consistent with the aforementioned officer awards.  Due to the uncertainty of the 2013 shareholder approval vote, neither compensation expense nor inclusion in disclosure tables for these awards is reported herein.

	As of March 31, 2012
Unrecognized stock based compensation cost
Option plans	$	1,037
Restricted stock	$	6,674
Weighted average remaining recognition period
Option plans	2.1 years
Restricted stock	1.6 years

Stock options outstanding at March 31, 2012 are summarized as follows:

Range of exercise prices		Outstanding Options at March 31, 2012		Weighted average remaining contractual life		Weighted average exercise price		Exercisable at March 31, 2012		Weighted average exercise price
$	1.39 - $2.53		1,225		4.2	$	2.01		1,221	$	2.01
$	2.65 - $3.24		993		6.2	$	3.20		362	$	3.12
$	3.30 - $7.27		683		2.6	$	6.27		627	$	6.35
$	8.79 - $18.98		670		4.2	$	9.37		670	$	9.37

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 three month periods ended March 31, 2012 and April 2, 2011 were:

	Three months ended
	March 31, 2012			April 2, 2011
Stock option awards:
Risk-free interest rate		1.0	%		2.2	%
Expected volatility		70	%		65	%
Average expected term (in years)		5.0			5.0
Expected dividend yield		0.0	%		0.0	%
Weighted average fair value of options granted	$	1.53		$	3.79
ESP Plan:
Risk-free interest rate		0.2	%		0.3	%
Expected volatility		65	%		62	%
Average expected term (in years)		1.0			1.0
Expected dividend yield		0.0	%		0.0	%
Weighted average fair value of purchase option	$	0.80		$	1.50

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