<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Analogy, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
ANALOGY, INC.
9205 SW GEMINI DRIVE
BEAVERTON, OR 97008
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 23, 1999
To the Shareholders of Analogy, Inc.:
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders (the "Annual
Meeting") of Analogy, Inc. (the "Company") will be held on Friday, July 23,
1999, at 10:00 a.m., local time, at the Company's principal executive offices at
9205 S.W. Gemini Drive, Beaverton, Oregon 97008, for the following purposes:
1. ELECTION OF DIRECTORS. To elect three directors, each to serve for a
three-year term and until their successors are duly elected and qualified
(Proposal No. 1);
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS. To ratify the
appointment by the Board of Directors of KPMG Peat Marwick, LLP as
independent auditors of the Company for the fiscal year ending March 31,
2000 (Proposal No. 2); and
3. OTHER BUSINESS. To transact such other business as may properly come
before the Annual Meeting or any adjournments or postponements thereof.
The Board of Directors of the Company has fixed the close of business on June 1,
1999 as the record date for the determination of shareholders entitled to notice
of and to vote at the Annual Meeting. Only shareholders of record at the close
of business on that date will be entitled to notice of and to vote at the Annual
Meeting or any adjournments or postponements thereof.
By Order of the Board of Directors,
/s/ Gary P. Arnold
Gary P. Arnold
President and Chief Executive Officer
Beaverton, Oregon
June 18, 1999
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT YOU
PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE COMPLETE, DATE, AND
SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH REQUIRES
NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
ANALOGY, INC.
9205 SW GEMINI DRIVE
BEAVERTON, OR 97008
- -------------------------------------------------------------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 23, 1999
- -------------------------------------------------------------------------------
INTRODUCTION
GENERAL
This Proxy Statement is being furnished to the shareholders of Analogy, Inc.,
an Oregon corporation ("Analogy" or the "Company"), as part of the
solicitation of proxies by the Company's Board of Directors (the "Board of
Directors") from holders of the outstanding shares of Analogy common stock,
no par value per share (the "Common Stock"), for use at the Company's Annual
Meeting of Shareholders to be held at 10:00 a.m. local time, on July 23,
1999, and at any adjournments or postponements thereof (the "Annual
Meeting"). The Annual Meeting will be held at the Company's principal
executive offices at 9205 S.W. Gemini Drive, Beaverton, Oregon 97008. At the
Annual Meeting, shareholders will be asked to elect three members of the
Board of Directors; ratify the appointment by the Board of Directors of KPMG
Peat Marwick, LLP as independent auditors of the Company for the fiscal year
ending March 31, 2000; and transact such other business as may properly come
before the meeting or any adjournments or postponements thereof. This Proxy
Statement, together with the enclosed proxy card, is first being mailed to
shareholders of Analogy on or about June 18, 1999.
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
The Board of Directors has fixed the close of business on June 1, 1999 as the
record date for the determination of the shareholders entitled to notice of and
to vote at the Annual Meeting. Accordingly, only holders of record of shares of
Common Stock at the close of business on such date will be entitled to vote at
the Annual Meeting, with each such share entitling its owner to one vote on all
matters properly presented at the Annual Meeting. On the record date, there were
approximately 2,416 beneficial holders of the 9,536,357 shares of Common Stock
then outstanding. The presence, in person or by proxy, of a majority of the
total number of outstanding shares of Common Stock entitled to vote at the
Annual Meeting is necessary to constitute a quorum at the Annual Meeting.
If the enclosed form of proxy is properly executed and returned in time to be
voted at the Annual Meeting, the shares represented thereby will be voted in
accordance with instructions on the proxy. EXECUTED BUT UNMARKED PROXIES WILL BE
VOTED FOR THE ELECTION OF THE THREE NOMINEES FOR ELECTION TO THE BOARD OF
DIRECTORS AND FOR THE RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK, LLP
AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING MARCH 31, 2000.
The Board of Directors does not know of any matters other than those described
in the Notice of Annual Meeting that are to come before the Annual Meeting. If
any other matters are properly brought before the Annual Meeting, the persons
named in the proxy will vote the shares represented by such proxy upon such
matters as determined by a majority of the Board of Directors.
Shareholders who execute proxies retain the right to revoke them at any time
prior to the exercise of the powers conferred thereby by filing a written notice
of revocation with, or by delivering a duly executed proxy bearing a later date
to, Corporate Secretary, Analogy, Inc., 9205 S.W. Gemini Drive, Beaverton,
Oregon 97008, or by attending the Annual Meeting and voting in person. All
valid, unrevoked proxies will be voted at the Annual Meeting.
1
<PAGE>
ELECTION OF DIRECTORS
PROPOSAL NO. 1
At the Annual Meeting, three directors will be elected, each for a three-year
term and until their successors are duly elected and qualified. Unless
otherwise specified on the proxy, it is the intention of the persons named in
the proxy to vote the shares represented by each properly executed proxy for
the election of the nominees named below. The Board of Directors believes
that the nominees will stand for election and will serve as directors if
elected. However, if any of the persons nominated by the Board of Directors
fails to stand for election or is unable to accept election, the proxies will
be voted for the election of such other persons as the Board of Directors may
recommend. The Company's Second Restated Bylaws provide that the Board of
Directors shall be comprised of not less than three (3) nor more than twelve
(12) directors. The Board of Directors has currently set the number of
directors at seven (7).
Under the Company's Third Restated Articles of Incorporation, the directors
are divided into three classes and serve for terms of three years, with one
class being elected by the shareholders each year. The term of office of only
one class of directors expires in each year, and their successors are elected
for terms of three years and until their successors are duly elected and
qualified. There is no cumulative voting for election of directors.
INFORMATION AS TO NOMINEES AND CONTINUING DIRECTORS
The following table sets forth the names of the Board of Directors' nominees for
election as a director and those directors who will continue to serve after the
Annual Meeting. Also set forth is certain other information with respect to each
such person's age, principal occupation or employment, the periods during which
he has served as a director of Analogy and positions currently held with the
Company.
<TABLE>
<CAPTION>
DIRECTOR EXPIRATION
DIRECTOR NOMINEES AGE SINCE OF TERM POSITIONS HELD WITH THE COMPANY
- ----------------- --- -------- ---------- -------------------------------
<S> <C> <C> <C> <C>
Gary P. Arnold 58 1993 1999 Chairman of the Board of Directors,
President and Chief Executive Officer
Neil E. Goldschmidt 60 1996 1999 Director
Charles E. Sporck 71 1996 1999 Director
CONTINUING DIRECTORS
John H. Faehndrich 72 1991 2000 Director
Martin Vlach 48 1989 2000 Vice President, Chief Scientist and Director
Robert L. Cattoi 73 1992 2001 Director
Frank Roehr 63 1995 2001 Director
</TABLE>
GARY P. ARNOLD. Mr. Arnold joined the Company as President, Chief Executive
Officer and Chairman of the Board in January 1993. From May 1990 to November
1992, Mr. Arnold was Chief Financial Officer at Tektronix, Inc. and from June
1980 to April 1990, he was Chief Financial Officer of National Semiconductor
Corp. Mr. Arnold has extensive experience in the electronics industry in the
areas of finance, strategic planning and operations, both in domestic and
international markets. Mr. Arnold is a member of the Board of Directors of
National Semiconductor Corporation. He holds a J.D. degree from the
University of Tennessee College of Law and a bachelor's degree in Accounting
from East Tennessee State University and received training in electronics
while in the U.S. Navy.
NEIL E. GOLDSCHMIDT. Mr. Goldschmidt has served as a director of the Company
since January 1996. Since January 1991, Mr. Goldschmidt has conducted a private
law practice focused primarily on strategic planning for national and
international business clients. From January 1987 to January
2
<PAGE>
1991, Mr. Goldschmidt served as Governor of the State of Oregon. Prior to his
1986 gubernatorial campaign, Mr. Goldschmidt was an executive of Nike, Inc.,
serving as International Vice President from 1981 to 1985 and as President of
Nike Canada from 1986 to 1987. Mr. Goldschmidt served as Secretary of
Transportation in the Carter Administration from 1979 to 1981, and was known
for his efforts to revive the ailing automotive industry.
CHARLES E. SPORCK. Mr. Sporck has served as a director of the Company since
January 1996. From 1967 to 1991, Mr. Sporck served as President and Chief
Executive Officer of National Semiconductor Corporation, a developer of
advanced, proprietary semiconductor and systems products. Mr. Sporck has
continued to serve as a director of National Semiconductor Corporation since
his retirement in 1991. Mr. Sporck was a founding member of the Semiconductor
Industry Association (SIA) and a former board member of the SIA and SEMATECH.
JOHN H. FAEHNDRICH. Mr. Faehndrich has served as a director of the Company
since January 1991. From 1981 to 1987 Mr. Faehndrich served as Director of
Finance at Lavino S.A. South Africa. From 1985 to 1991 he also served as
director for IMC Italy, IMC France and IMC UK.
MARTIN VLACH. Mr. Vlach was a founder of the Company. Mr. Vlach has been a
director of the Company since November 1989. From 1972 to 1986 Mr. Vlach was
involved in several projects in the area of circuit simulation in the
Department of Electrical Engineering at the University of Waterloo and at
Bell Northern Research, Ltd. Mr. Vlach received his bachelor's degree in
Mathematics in 1975, and degrees in Electrical Engineering of MA Science in
1980 and Ph.D. in 1984, from the University of Waterloo, Waterloo, Ontario,
Canada.
ROBERT L. CATTOI. Mr. Cattoi has served as a director of the Company since
March 1992. From 1950 to 1995 Mr. Cattoi was employed by Rockwell
International. From 1984 to 1995, he was Senior Vice President, Research &
Engineering and Chief Technical Officer. In 1996 he was a consultant to the
DoD Defense Manufacturing Council. He currently serves as an independent
technical consultant to Rockwell, and is vice head of the U.S. Delegation for
Intelligent Manufacturing Systems, a collaborative initiative involving the
U.S., European Union, Japan, Canada and Australia.
FRANK ROEHR. Mr. Roehr has served as a director of the Company since
February 1995. Mr. Roehr is a co-founder and Chairman of the Board of Young &
Roehr Advertising. Mr. Roehr retired from Young & Roehr in 1990. Young &
Roehr is an advertising agency specializing in technology and transportation.
BOARD OF DIRECTORS COMMITTEES AND NOMINATIONS BY SHAREHOLDERS
The Board of Directors has appointed a standing Audit Committee and a
Compensation Committee. The Audit Committee, comprised of Messrs. Faehndrich,
Goldschmidt and Sporck, met once during fiscal year 1999. The Audit Committee
reviews the scope of the independent annual audit and the Company's financial
and accounting controls. The Compensation Committee, comprised of Messrs.
Cattoi, Roehr, and Goldschmidt met once during fiscal year 1999. The
Compensation Committee reviews executive compensation, establishes executive
compensation levels and administers the Company's stock option and stock
purchase plans.
During the year ended March 31, 1999 the Company's Board of Directors held
five meetings. Each incumbent director attended more than 75% of the
aggregate of the total number of meetings held by the Board of Directors and
the total number of meetings held by all committees of the Board on which he
served during the period that he served.
The Board of Directors has appointed a Nominating Committee comprised of the
three non-employee directors who are not standing for re-election. The
Nominating Committee is comprised of Messrs. Cattoi, Faehndrich, and Roehr.
The Company's Second Restated Bylaws also permit shareholders to make
nominations for the election of directors, if such nominations are made
pursuant to timely notice in writing to the Company's Secretary. To be
timely, notice must be delivered to, or mailed to and received at, the
principal executive offices of the Company not less
3
<PAGE>
than 60 days nor more than 90 days prior to the date of the meeting, provided
that at least 60 days' notice or prior public disclosure of the date of the
meeting is given or made to shareholders. If less than 60 days' notice or
prior public disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholder to be timely must be received by the
Company not later than the close of business on the tenth day following the
date on which such notice of the date of the meeting was mailed or such
public disclosure was made. A shareholder's notice of nomination must also
set forth certain information specified in Article III, Section 3.16 of the
Company's Second Restated Bylaws concerning each person the shareholder
proposes to nominate for election and the nominating shareholder.
See "Management - Director Compensation" for certain information regarding
compensation of directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
ELECTION OF ITS NOMINEES FOR DIRECTOR. If a quorum is present, directors are
elected by a plurality of the votes cast by the shares entitled to vote.
Abstentions and broker non-votes are counted for purposes of determining
whether a quorum exists at the Annual Meeting, but are not counted and have
no effect on the determination of whether a plurality exists with respect to
a given nominee.
4
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
executive officers of the Company. Executive officers are elected by the
Board of Directors and hold office until their successors are duly elected
and qualified.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Gary P. Arnold 58 Chairman of the Board of Directors, President and Chief Executive Officer
Martin Vlach 48 Vice President, Chief Scientist and Director
David W. Smith 43 Vice President, Chief Scientist
Christopher Brigden 51 Senior Vice President, Sales & Marketing
Howard Fu-Hwa Ko 43 Vice President, Engineering
</TABLE>
Information concerning the principal occupation of Messrs. Arnold and Vlach
is set forth under the heading "Election of Directors." Information
concerning the principal occupation during at least the last five years of
the executive officers of the Company who are not also directors of the
Company is set forth below.
DAVID W. SMITH. Mr. Smith, Vice President, Chief Scientist, was a founder of
the Company. Mr. Smith has served in his current position since December
1995. From December 1992 to December 1995, Mr. Smith served as Vice
President, Advanced Product Development. Prior to that time Mr. Smith served
as Vice President of Engineering. Prior to joining the Company Mr. Smith was
the Engineering Group Manager with Metheus-Computervision and was a Senior
Engineer at General Dynamics in Pomona, California, working in IC design and
analysis. Mr. Smith holds a bachelor's degree in Electrical Engineering from
California Polytechnic in Pomona and has taken graduate level courses in
computer science from the University of Southern California and California
Polytechnic.
CHRISTOPHER BRIGDEN. Mr. Brigden, Senior Vice President, Sales & Marketing,
was appointed to his current position with the Company effective May 14,
1998. Prior to his appointment, Mr. Brigden served from 1991 as European
Manager of the Company's European subsidiaries located in the United Kingdom,
Germany and France. Prior to joining the Company, Mr. Brigden was employed by
Daisix, Inc. where he held the position of Vice President, Asia-Pacific. Mr.
Brigden holds a bachelor's degree in Electrical Engineering and a Certificate
in Education from the University of London.
DR. HOWARD FU-HWA KO. Dr. Ko, Vice President, Engineering, has served in his
current position since December 1996. From November 1995 to November, 1996,
Dr. Ko served as the Company's Director of Software Product Engineering. From
June 1995 to October 1995, Dr. Ko was the Engineering Director of Analog and
Mixed Signal Simulation and Modeling for Mentor Graphics Corporations' IC and
Mixed signal Division and from July 1993 to May 1995, he was the Engineering
Director for the Simulation Technology Division and Analog and Mixed Signal
Division. From December 1988 to June 1993, Dr. Ko held various engineering
management responsibilities at Mentor Graphics Corporation. In prior
employment, Dr. Ko held various technical and management positions at Shiva
MultiSystems, Simucad, HHB, and Cadnetix Corporation. Dr. Ko holds a
bachelor's degree in Electrical Engineering from the National Taiwan
University of Taipei, Taiwan, and a Ph.D. from the University of California,
Berkeley.
5
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information for the fiscal years
ended March 31, 1996, 1997, 1998, and 1999 concerning compensation of the
Company's Chief Executive Officer and each of the four other most highly
compensated executive officers of the Company (collectively, the "named
executive officers"), for the fiscal year ended March 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
--------------------------------------- --------------
STOCK
OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) GRANTED(#) COMPENSATION($)
- --------------------------- ---- --------- ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Gary P. Arnold 1999 $217,708 $40,000 -- $4,800(3)
President and Chief 1998 198,885 17,667 -- 3,200(3)
Executive Officer 1997 170,843 53,000 100,000(2) 4,123(3)
Martin Vlach 1999 154,167 28,000 -- 4,800(3)
Vice President, 1998 138,979 6,667 5,000(4) 2,917(3)
Chief Scientist 1997 113,895 20,000 10,000(5) 2,544(3)
David W. Smith 1999 174,167 28,000 -- 4,800(3)
Vice President, 1998 144,051 6,667 5,000(4) 3,019(3)
Chief Scientist 1997 117,083 30,000 10,000(5) 2,675(3)
Christopher Brigden 1999 145,371(6) 75,984 100,000 --
Senior Vice President, 1998 121,097 79,537 12,000 --
Sales & Marketing 1997 117,496 70,269 -- --
Howard Ko 1999 159,177 20,000 -- 4,800(3)
Vice President, 1998 143,542 6,000 6,000(4) 2,995(3)
Engineering 1997 124,375 9,158 30,000(5) 2,671(3)
</TABLE>
(1) Represents bonuses paid pursuant to a formula set by the Compensation
Committee.
(2) This is an incentive-based option approved by the Compensation Committee.
Vesting of this option is dependent on achieving specific revenue growth
rates and selected net income goals. These objectives were not met and
option has since terminated.
(3) Represents matching amounts contributed by the Company to the named
executive officer's 401(k) plan.
(4) Options to purchase 5,000 shares of the Company's Common Stock were granted
on October 1, 1997, to Messrs. Vlach, Smith, and Ko, respectively, at
$5.875 per share.
(5) Options to purchase 10,000, 30,000, and 10,000 shares of the Company's
Common Stock originally granted on April 24, 1996, to Messrs. Vlach, Ko,
and Smith, respectively, at $9.00 per share, were repriced on August 9,
1996, at $5.125 per share. The Board of Directors believed it was in the
best interest of the Company that the named executive officers, along with
all other employees who were granted options at $9.00 per share, to receive
a lower option price through the cancellation of the options issued at
$9.00 per share and the reissuance of replacement options at the $5.125 per
share exercise price.
(6) Effective May 14, 1998, Mr. Brigden was appointed to the position of Senior
Vice President, Sales & Marketings.
6
<PAGE>
STOCK OPTIONS
The following table sets forth certain information concerning options granted
to the named executive officers during the year ended March 31, 1999 under
the Company's 1993 Stock Incentive Plan (the "1993 Plan").
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------
PERCENT OF
TOTAL POTENTIAL REALIZABLE
OPTIONS VALUE AT ASSUMED ANNUAL
GRANTED TO RATES OF
EMPLOYEES STOCK PRICE
IN LAST EXERCISE APPRECIATION FOR
OPTIONS FISCAL PRICE EXPIRATION OPTION TERM(3)
NAME GRANTED(#)(1) YEAR(%) ($/SH)(2) DATE ($) 5% ($) 10%
- ---- ------------- ------- --------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Gary P. Arnold -- -- -- -- -- --
Martin Vlach -- -- -- -- -- --
David W. Smith -- -- -- -- -- --
Christopher Brigden 100,000 22.15 5.8125 5/15/2008 $369,476 $936,324
Howard Ko -- -- -- -- -- --
</TABLE>
(1) Options granted become exercisable starting 12 months after the date of
grant, with one-quarter of the total number of options granted becoming
exercisable at that time and with an additional one-quarter of such
options becoming exercisable on the second, third and fourth
anniversary dates of the option grant, respectively.
(2) Options were granted at an exercise price equal to fair market value of
the Common Stock on the close of trading the day before the date of
grant, May 14, 1998.
(3) The potential realizable value is calculated based upon the term of the
option at its time of grant (10 years) and is calculated by assuming
that the stock price on the date of grant appreciates at the indicated
annual rate compounded annually for the entire term of the option and
that the option is exercised and sold on the last day of its term for
the appreciated price. The 5% and 10% assumed rates of appreciation are
derived from the rules of the Securities and Exchange Commission and do
not represent the Company's estimates or projection of the future
Common Stock price. There can be no assurance that the Common Stock
will appreciate at any particular rate or at all in future years.
7
<PAGE>
OPTION EXERCISES AND HOLDING
The following table sets forth certain information with respect to the named
executive officers concerning the exercise of options granted under the
Company's 1993 Plan during the year ended March 31, 1999, and the number and
value of unexercised options held as of March 31, 1999.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED MARCH 31, 1999(#) AT MARCH 31, 1999(1)
ON VALUE ----------------- -----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------- -------- -------- ----------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gary P. Arnold ---- ---- 375,000 25,000 $630,000 $----
Martin Vlach ---- ---- 31,250 8,750 27,500 ----
David W. Smith ---- ---- 31,250 8,750 27,500 ----
Christopher Brigden ---- ---- 70,500 84,000 34,250 ----
Howard Ko ---- ---- 35,250 25,750 ---- ----
</TABLE>
(1) The value of unexercised in-the-money options is calculated based on
the closing price of the Company's Common Stock on March 31, 1999, at $3.50
per share. Amounts reflected are based on the market price on such date
minus the exercise price and do not necessarily indicate that the optionee
sold such stock.
CHANGE IN CONTROL AGREEMENT
The Company and Gary P. Arnold, the Company's President and Chief Executive
Officer, have entered into a Control Change Agreement. Under this Agreement,
upon a Control Change (defined as a sale of a majority of the voting stock
in, or substantially all of the assets of, the Company to an entity
controlled by persons other than those who have a majority ownership or
effective control of the Company prior to the sale), the vesting schedule of
all stock options held by Mr. Arnold is accelerated such that all options
become fully exercisable. In addition, if Mr. Arnold is terminated without
cause during the Control Change Window (defined as the period beginning 60
days before the date of a letter of intent, term sheet or other similar
document is first presented to the Company and ending one year after the
closing of the transaction in which the Control Change occurs), all of Mr.
Arnold's stock options will become exercisable prior to the termination date
and the Company must pay Mr. Arnold 2.99 times his average annual salary
during the period of his employment with the Company or during the
immediately preceding five years, whichever is shorter. In addition, if Mr.
Arnold's title is removed, if his duties are materially changed or if his pay
is reduced during a Control Change Window, or if Mr. Arnold's duties change
materially as a result of a Control Change, Mr. Arnold may treat such action
as a termination without cause.
DIRECTOR COMPENSATION
For the fiscal year ended March 31, 1999, the non-employee members of the
Board of Directors received no payment for their services as a director. The
members of the Company's Board of Directors are reimbursed for out-of-pocket
and travel expenses incurred in attending Board meetings. In the fiscal year
ended March 31, 1999, non-employee members of the Board of Directors received
stock options under the Company's 1995 Stock Option Plan for Nonemployee
Directors (the "1995 Nonemployee Director Plan") based on the number of years
in the term each director is elected to serve. Under the 1995 Nonemployee
Director Plan, upon election to the Board of Directors, commencing with the
1996 Annual Meeting of Shareholders, each nonemployee director was granted an
option to purchase 5,000 shares of Common Stock for each year of such
director's elected term. The first 5,000 shares vested immediately upon grant
and 5,000 shares vest on each anniversary of the grant date for the
director's elected term.
8
<PAGE>
COMPENSATION COMMITTEE REPORT
Under rules established by the Securities and Exchange Commission (the
"Commission"), the Company is required to provide certain data and
information regarding the compensation and benefits provided to the Company's
President and Chief Executive Officer and the four other most highly
compensated executive officers. In fulfillment of this requirement, the
Compensation Committee, at the direction of the Board of Directors, has
prepared the following report for inclusion in this Proxy Statement.
EXECUTIVE COMPENSATION PHILOSOPHY. The Compensation Committee of the Board
of Directors is composed entirely of nonemployee directors. The Compensation
Committee is responsible for setting and administering the policies and
programs that govern both annual compensation and stock ownership programs
for the executive officers of the Company. The Company's executive
compensation policy is based on principles designed to ensure that an
appropriate relationship exists between executive compensation and corporate
performance, while at the same time motivating and retaining executive
officers.
EXECUTIVE COMPENSATION COMPONENTS. The key components of the Company's
compensation program are base salary, bonuses and equity participation. These
components are administered with the goal of providing total compensation
that is competitive in the marketplace, rewards successful financial
performance and aligns executive officers' interests with those of
shareholders. The Compensation Committee reviews each component of executive
compensation on an annual basis.
BASE SALARY. Base salaries for executive officers are set at levels believed
by the Compensation Committee to be sufficient to attract and retain
qualified executive officers. Base pay increases are provided to executive
officers based on an evaluation of each executive's performance, as well as
the performance of the Company as a whole. In establishing base salaries, the
Compensation Committee not only considers the financial performance of the
Company, but also the success of the executive officers in developing and
executing the Company's strategic plans, developing managers and employees
and exercising leadership. The Compensation Committee believes that executive
officer base salaries for the year ended March 31, 1999 were reasonable as
compared to amounts paid by companies of similar size.
CASH BONUSES. The Compensation Committee believes that a proportion of total
cash compensation for executive officers should be subject to attainment of
specific company performance criteria. This approach creates a direct
incentive for executive officers to achieve desired performance goals and
places a significant percentage of each executive officer's compensation at
risk. Consequently, each year the Compensation Committee establishes cash
bonuses for executive officers based on the Company's achievement of certain
performance criteria.
STOCK OPTIONS. The Compensation Committee believes that equity participation
is a key component of its executive compensation program. Stock options are
granted to executive officers primarily based on the officer's actual and
potential contribution to the Company's growth and profitability and
competitive marketplace practices. Option grants are designed to retain
executive officers and motivate them to enhance stockholder value by aligning
the financial interests of executive officers with those of stockholders.
Stock options also provide an effective incentive for management to create
shareholder value over the long term since the full benefit of the
compensation package cannot be realized unless an appreciation in the price
of the Company's Common Stock occurs over a number of years.
COMPENSATION OF CHIEF EXECUTIVE OFFICER. Consistent with the executive
compensation policy and components described above, the Compensation
Committee determined the salary and stock options received by Gary P. Arnold,
the Company's President and Chief Executive Officer and a director of the
Company, for services rendered during the year ended March 31, 1999. Mr.
Arnold's base salary was set at $225,000 for the year ended March 31, 1999,
and based on achieving performance goals established by the Compensation
Committee, was paid a bonus of $40,000 during fiscal year 1999.
9
<PAGE>
COMPENSATION COMMITTEE
Robert L. Cattoi
Neil E. Goldschmidt
Frank Roehr
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during the fiscal year ended March
31, 1999, were Messrs. Cattoi, Goldschmidt, and Roehr, none of whom is, or
has been, an officer or an employee of the Company.
STOCK PERFORMANCE GRAPH
The Commission requires that registrants include in their proxy statement a
line-graph presentation comparing total cumulative five-year shareholder
returns on an indexed basis, assuming a $100 initial investment and
reinvestment of dividends, of (a) the registrant, (b) a broad-based equity
market index and (c) an industry-specific index. The Company completed its
initial public offering on March 22, 1996. Accordingly, the following graph
includes the required information from March 22, 1996 through the end of the
last fiscal year (March 31, 1999). The broad-based market index used is the
NASDAQ Stock Market (U.S.) Index and the industry-specific index used is the
Hambrecht & Quist ("H&Q") Technology Index.
COMPARISON OF 36 MONTH CUMULATIVE TOTAL RETURN
AMONG ANALOGY, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE HAMBRECHT & QUIST TECHNOLOGY INDEX
<TABLE>
<CAPTION>
Date Analogy, Inc. Nasdaq US Index H&Q Index
------- ------------- --------------- ---------
<S> <C> <C> <C>
3/22/96 100 100 100
3/31/96 107 100 99
3/31/97 53 111 116
3/31/98 107 168 172
3/31/99 47 227 241
</TABLE>
The above graph compares the performance of the Company with that of the
Nasdaq Stock Market U.S. Index and the H&Q Technology Index with the
investment weighted on market capitalization. The past performance of the
Company's Common Stock is not an indication of future performance. There can
be no assurances that the price of the Company's Common Stock will appreciate
at any particular rate or at all in future years.
10
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's directors and executive officers and
persons who own more than ten percent of a registered class of the Company's
equity securities, to file initial reports of ownership and reports of
changes in ownership of shares with the Securities and Exchange Commission.
Such persons also are required to furnish the Company with copies of all
Section 16(a) reports they file.
Based solely on its review of the copies of such reports received by it with
respect to fiscal 1999, or written representations from certain reporting
persons that no other reports were required, the Company believes that all
filing requirements applicable to its directors, officers and persons who own
more than ten percent of a registered class of the Company's equity
securities have been complied with for fiscal 1999.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the last fiscal year, to the best of the Company's knowledge, there
has been no transaction that merits disclosure under this section.
11
<PAGE>
STOCK OWNED BY MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the ownership of
the Company's Common Stock as of June 1, 1999, with respect to: (i) each
person known by the Company to beneficially own more than 5% of the
outstanding shares of Common Stock; (ii) each of the Company's continuing
directors; (iii) each of the Company's nominees for election as director;
(iv) each of the Company's named executive officers; and (v) all directors
and executive officers as a group.
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK BENEFICIALLY PERCENT OF COMMON
NAME AND BUSINESS ADDRESS OWNED (1) STOCK OUTSTANDING
- ------------------------- ------------------ -----------------
<S> <C> <C>
State of Wisconsin Investment Board(2)
121 East Wilson Street
Madison WI 53707 756,000 7.93%
Gary P. Arnold
9205 SW Gemini
Beaverton, OR 97008 739,252 7.75%
Martin Vlach
9205 SW Gemini Drive
Beaverton, OR 97008 280,182 2.94%
David W. Smith 241,250 2.53%
Christopher Brigden 70,500 *
Howard Ko 58,050 *
Robert L. Cattoi 15,000 *
John Faehndrich 157,400 1.65%
Neil E. Goldschmidt 15,000 *
Frank Roehr 37,500 *
Charles E. Sporck 15,000 *
All Directors and Executive Officers as a Group 1,629,134 17.08%
(10 persons)
</TABLE>
(*) Represents beneficial ownership of less than 1% of the outstanding
Common Stock.
(1) Beneficial ownership is determined in accordance with rules of the
Commission, and includes voting power and investment power with respect
to shares. Shares issuable upon the exercise of outstanding stock
options that are currently exercisable or become exercisable within 60
days from June 1, 1999, are considered outstanding for the purpose of
calculating the percentage of Common Stock owned by such person, but
not for the purpose of calculating the percentage of Common Stock owned
by any other person. The number of shares that are issuable upon the
exercise of options that are currently exercisable or exercisable
within 60 days of June 1, 1999, is as follows: Mr. Arnold - 406,252;
Mr. Vlach - 31,250; Mr. Brigden - 70,500; Mr. Ko - 35,250; Mr. Smith -
31,250; Mr. Cattoi -15,000; Mr. Faehndrich - 20,000; Mr. Goldschmidt -
15,000; Mr. Roehr - 15,000; Mr. Sporck - 15,000; all Executive Officers
and Directors as a group - 574,502.
(2) This information as to beneficial ownership is based on a Schedule 13G
dated January 16, 1999, filed by the State of Wisconsin Investment
Board. The State of Wisconsin Investment Board has sole voting and
dispositive power for all 756,000 shares.
12
<PAGE>
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
PROPOSAL NO. 2
The Board of Directors has appointed KPMG Peat Marwick, LLP to act as
independent auditors for the Company for the fiscal year ending March 31,
2000, subject to ratification of such appointment by the Company's
shareholders.
Unless otherwise indicated, properly executed proxies will be voted in favor
of ratifying the appointment of KPMG Peat Marwick, LLP to audit the books and
accounts of the Company for the fiscal year ending March 31, 2000. No
determination has been made as to what action the Board of Directors would
take if the shareholders do not ratify the appointment.
KPMG Peat Marwick, LLP was the independent auditor for the Company for the
fiscal year ended March 31, 1999. A representative of KPMG Peat Marwick, LLP
is expected to be present at the Annual Meeting and will be given an
opportunity to make a statement if he or she desires to do so and will be
available to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THIS
PROPOSAL. If a quorum is present, this proposal will be approved if the votes
cast by the shareholders entitled to vote favoring the ratification exceeds
the votes cast opposing the ratification. Abstentions and broker non-votes
are counted for purposes of determining whether a quorum exists at the Annual
Meeting but are not counted and have no effect on determination of the
outcome of this proposal.
DATE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
Any shareholder proposal intended for inclusion in the proxy statement and
form of proxy relating to the Company's 2000 annual meeting of shareholders
must be received by the Company not later than February 18, 2000, pursuant to
the proxy soliciting regulations of the Securities and Exchange Commission
(the "Commission"). In addition, the Company's Bylaws require that notice of
shareholder proposals and nominations for director be delivered to the
Secretary of the Company not less than 60 days, nor more than 90 days, prior
to the date of an annual meeting, unless notice or public disclosure of the
date of the meeting occurs less than 60 days prior to the date of such
meeting, in which event, shareholders may deliver such notice not later than
the 10th day following the day on which notice of the date of the meeting was
mailed or public disclosure thereof was made. Nothing in this paragraph shall
be deemed to require the Company to include in its proxy statement and form
of proxy for such meeting any shareholder proposal which does not meet the
requirements of the Commission in effect at the time.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors does not know of
any other matters to be presented for action by the shareholders at the 1999
Annual Meeting. If, however, any other matters not now known are properly
brought before the meeting, the persons named in the accompanying proxy will
vote such proxy in accordance with the determination of a majority of the Board
of Directors.
COST OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. In addition to
use of the mails, proxies may be solicited personally or by telephone by
directors, officers and employees of the Company, who will not be specially
compensated for such activities. Such solicitations may be made by mail,
facsimile, telephone, telegraph or messenger. The Company will also request
persons, firms and companies holding shares in their names or in the name of
their nominees, which are beneficially owned by others, to send proxy
materials to and obtain proxies from such beneficial owners. The Company will
reimburse such persons for their reasonable expenses incurred in that
connection.
13
<PAGE>
ADDITIONAL INFORMATION
A copy of the Company's Combination Annual Report to Shareholders for the
fiscal year ended March 31, 1999/Report on Form 10-K accompanies this Proxy
Statement. The Company is required to file an Annual Report on Form 10-K for
its fiscal year ended March 31, 1999 with the Securities and Exchange
Commission. Shareholders may obtain, free of charge, a copy of the Form 10-K
(without exhibits) by writing to Mr. Gary Arnold, President, Analogy, Inc.,
9205 S.W. Gemini Drive, Beaverton, Oregon 97008.
By Order of the Board of Directors,
/s/ Gary P. Arnold
Gary P. Arnold
President and Chief Executive Officer
Beaverton, Oregon
June 18, 1999
14
<PAGE>
ANALOGY, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JULY 23, 1999
The undersigned shareholder of Analogy, Inc., an Oregon corporation (the
"Company"), hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement, each dated June 18, 1999 and hereby names,
constitutes and appoints Gary Arnold and Martin Vlach, or either of them, with
full power of substitution in each, my true and lawful attorneys and Proxies for
me and in my place and stead to vote all shares of Common Stock of the Company
entitled to be voted by the undersigned on the Record Date of June 1, 1999, with
all the powers that the undersigned would possess if she or he were personally
present at the Annual Meeting. The Annual Meeting of Shareholders of the Company
will be held at 10:00 am on July 23, 1999, at the Company's principal offices at
9205 SW Gemini Drive, Beaverton, Oregon 97008 where shareholders shall vote upon
the following matters:
<TABLE>
<S> <C> <C> <C>
1. PROPOSAL 1--Election / / FOR all nominees listed below / / WITHHOLD AUTHORITY
of three Directors (EXCEPT AS MARKED TO THE CONTRARY BELOW) (TO VOTE FOR NOMINEES BELOW)
</TABLE>
(Instructions: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name below.)
GARY P. ARNOLD NEIL E. GOLDSCHMIDT CHARLES F. SPORCK
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE NOMINEES
NAMED ABOVE.
2. PROPOSAL 2--To ratify the appointment of KPMG Peat Marwick, LLP as the
Company's independent auditors for the year ending March 31, 2000.
/ / FOR PROPOSAL 2 / / AGAINST PROPOSAL 2 / / ABSTAIN ON PROPOSAL 2
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF
PROPOSAL 2.
3. If any other matters are properly brought before the Annual Meeting, the
persons named in the proxy will vote the shares represented by such proxy
upon such matters as determined by a majority of the Board of Directors. The
Company is not presently aware of any such matters to be presented for
action at the meeting.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY. IF NO
SPECIFIC DIRECTION IS GIVEN AS TO ANY OF THE ABOVE ITEMS, THIS PROXY WILL BE
VOTED FOR THE NOMINEES NAMED IN PROPOSAL 1, FOR PROPOSAL 2 AND IN ACCORDANCE
WITH THE RECOMMENDATIONS OF THE MAJORITY OF THE BOARD OF DIRECTORS AS TO OTHER
MATTERS. THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE COMPANY'S PROXY
STATEMENT AND HEREBY REVOKES ANY OTHER PROXY OR PROXIES PREVIOUSLY GIVEN.
(CONTINUED ON REVERSE SIDE)
<PAGE>
PLEASE SIGN BELOW EXACTLY AS YOUR NAME APPEARS ON THE PROXY CARD. IF SHARES
ARE REGISTERED IN MORE THAN ONE NAME, THE SIGNATURES OF BOTH SUCH PERSONS ARE
REQUIRED. A CORPORATION SHOULD SIGN IN ITS FULL CORPORATE NAME BY A DULY
AUTHORIZED OFFICER, STATING HIS/HER TITLE. TRUSTEES, GUARDIANS, EXECUTORS AND
ADMINISTRATORS SHOULD SIGN IN THEIR OFFICIAL CAPACITY, GIVING THEIR FULL TITLE
AS SUCH. IF A PARTNERSHIP IS SIGNING, PLEASE SIGN IN THE PARTNERSHIP NAME BY
AUTHORIZED PERSON(S).
IF YOU RECEIVE MORE THAN ONE PROXY CARD, PLEASE SIGN AND RETURN ALL SUCH
CARDS IN THE ACCOMPANYING ENVELOPE.
Dated _____________________________
___________________________________
Shareholder (print name)
___________________________________
Shareholder (sign name)
I do / / do not / / plan to attend
the meeting. (Please check)
The shareholder signed above reserves the right to revoke this Proxy at any
time prior to its exercise by written notice delivered to the Company's
Secretary at the Company's corporate offices, 9205 SW Gemini Drive, Beaverton,
OR 97008, prior to the Annual Meeting. The power of the Proxy holders shall also
be suspended if the shareholder signed above appears at the Annual Meeting and
elects in writing to vote in person.
