-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B/IWdXzoBonrqZ2BxJVxF0xSBxUNgmVvXl9nFXtC0pOAOnGADhLbAp5y7Vv6SxH9 CNN1RfiN9Bj6Yo6I1WFHyw== 0001047469-99-028805.txt : 19990729 0001047469-99-028805.hdr.sgml : 19990729 ACCESSION NUMBER: 0001047469-99-028805 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19990704 FILED AS OF DATE: 19990728 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANADIGICS INC CENTRAL INDEX KEY: 0000940332 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 222582106 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-25662 FILM NUMBER: 99671366 BUSINESS ADDRESS: STREET 1: 35 TECHNOLOGY DR CITY: WARREN STATE: NJ ZIP: 07059 BUSINESS PHONE: 9086685000 MAIL ADDRESS: STREET 1: 35 TECHNOLOGY DRIVE CITY: WARREN STATE: NJ ZIP: 07059 10-Q 1 10-Q 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. 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 PART I - FINANCIAL STATEMENTS ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) CONDENSED CONSOLIDATED BALANCE SHEETS ANADIGICS, INC. (Amounts in thousands, except share and per share amounts)
July 4, 1999 December 31, 1998 ------------ ----------------- (unaudited) (Note 1) ASSETS Current assets: Cash and cash equivalents $ 25,343 $ 23,987 Marketable securities 14,736 16,923 Accounts receivable, net 18,191 11,848 Inventory 10,256 8,729 Prepaid expenses and other current assets 2,466 2,531 Insurance settlement receivable 5,325 Deferred taxes 6,856 4,345 --------- --------- Total current assets 83,173 68,363 Marketable securities 3,568 1,486 Property and equipment: Equipment and furniture 80,823 71,625 Leasehold improvements 16,424 15,717 Projects in process 34,150 34,286 Less accumulated depreciation and amortization 56,117 44,199 --------- --------- 75,280 77,429 Other assets 1,279 865 Deferred taxes 5,955 5,955 --------- --------- Total assets $ 169,255 $ 154,098 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 9,043 $ 6,138 Accrued litigation settlement costs 12,050 -- Accrued liabilities 5,952 2,306 Accrued restructuring costs 1,441 1,567 Current maturities of long-term debt 1,000 1,000 Current maturities of capital lease obligations 160 229 --------- --------- Total current liabilities 29,646 11,240 Capital lease obligations, less current portion 117 183 Other long-term liabilities 1,183 868 Long-term debt, less current portion 3,500 4,000 --------- --------- Total liabilities 34,446 16,291 Stockholders' equity Common stock, $0.01 par value, 68,000,000 shares authorized, 14,871,937 and 14,738,356 issued and outstanding at July 4, 1999 and December 31, 1998, respectively 149 147 Additional paid-in capital 161,843 160,215 Accumulated deficit (27,139) (22,598) Accumulated other comprehensive income (loss) (44) 43 --------- --------- Total stockholders' equity 134,809 137,807 --------- --------- Total liabilities and stockholders' equity $ 169,255 $ 154,098 ========= =========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. 3 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ANADIGICS, INC. (Amounts in thousands, except share and per share amounts)
Three months ended Six months ended --------------------------------- --------------------------------- July 4, 1999 June 28, 1998 July 4, 1999 June 28, 1998 ------------ ------------- ------------ ------------- (unaudited) (unaudited) 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 ============ ============ ============ ============
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) ANADIGICS, INC. (Amounts in thousands)
Three months ended Six months ended --------------------------------- --------------------------------- July 4, 1999 June 28, 1998 July 4, 1999 June 28, 1998 ------------ ------------- ------------ ------------- (unaudited) (unaudited) 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) ============ ============ ============ ============
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. 4 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ANADIGICS, INC. (Amounts in thousands)
Six months ended ------------------------------ July 4, 1999 June 28, 1998 ------------ ------------- (unaudited) (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (4,541) $ (752) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation 11,721 5,342 Amortization 197 404 Deferred taxes (2,511) (451) Provision for litigation settlement, net 6,725 Changes in operating assets and liabilities Accounts receivable (6,343) 5,673 Inventory (1,527) (973) Prepaid expenses and other current assets 65 (1,183) Other assets (414) 60 Accounts payable 2,905 (6,531) Accrued liabilities and other long-term liabilities 3,835 (432) Income taxes payable -- (2,439) -------- -------- Net cash provided by (used in) operating activities 10,112 (1,282) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of plant and equipment (9,769) (8,818) Purchase of marketable securities (14,094) (14,456) Proceeds from sale of marketable securities 14,112 17,912 -------- -------- Net cash used in investing activities (9,751) (5,362) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock 1,630 294 Repayment of long-term debt (500) -- Payment of capital lease obligations (135) (229) -------- -------- Net cash provided by financing activities 995 65 -------- -------- Net increase (decrease) in cash and cash equivalents 1,356 (6,579) Cash and cash equivalents at beginning of period 23,987 25,675 -------- -------- Cash and cash equivalents at end of period $ 25,343 $ 19,096 ======== ======== SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid $ 103 $ 36 ======== ======== Taxes paid $ 180 $ 2,774 ======== ========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. 5 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 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:
Three months ended Six months ended ------------------------------ ------------------------------- July 4, 1999 June 28, 1998 July 4, 1999 June 28, 1998 ------------ ------------- ------------ ------------- 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 ========== ========== ========== ==========
* - 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:
Three months ended Six months ended ---------------------------- ---------------------------- July 4, 1999 June 28, 1998 July 4, 1999 June 28, 1998 ------------ ------------- ------------ ------------- 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 ======= ======= ======= =======
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:
Three months ended Six months ended ---------------------------- ---------------------------- July 4, 1999 June 28, 1998 July 4, 1999 June 28, 1998 ------------ ------------- ------------ ------------- 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 ======= ======= ======= =======
7 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 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:
CONSOLIDATED STATEMENT OF OPERATIONS Three months ended Six months ended ----------------------------- ---------------------------- July 4, 1999 June 28, 1998 July 4, 1999 June 28, 1998 ------------ ------------- ------------ ------------- (unaudited) (unaudited) 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%) ======== ======== ======== ========
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 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 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 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 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 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 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 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 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 EX-10.1 2 EXHIBIT 10.1 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"). -2- 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 -3- 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. -4- 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. -5- 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 -6- 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. -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 -8- 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 -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 -10- 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 -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 -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 -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. -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. -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. -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 -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. -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 Exhibit A Stock Option Agreement 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. 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 EX-10.2 3 EXHIBIT 10.2 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; -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) EX-10.3 4 EXHIBIT 10.3 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] -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 -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. -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 -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 -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 -7- Company which letter shall be of no further effect on and after the Effective Date. -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 EX-10.4 5 EXHIBIT 10.4 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] -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 -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 -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 -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- -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 EX-27.1 6 FINANCIAL DATA SCHEDULE
5 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. 6-MOS DEC-31-1999 JUL-04-1999 25,343,000 14,736,000 18,191,000 0 10,256,000 83,173,000 131,397,000 56,117,000 169,255,000 29,646,000 0 0 0 149,000 134,660,000 169,255,000 55,582,000 55,582,000 36,148,000 36,148,000 20,712,000 (6,925) (995,000) (7,208,000) (2,667,000) (4,541,000) 0 0 0 (4,541,000) (0.31) (0.31)
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