<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
ONTRACK DATA INTERNATIONAL, 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>
ONTRACK DATA INTERNATIONAL, INC.
___________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
___________________
Notice is hereby given that the Annual Meeting of Shareholders of ONTRACK
Data International, Inc. (the "Company") will be held at the Eden Prairie City
Center, 8080 Mitchell Road, Eden Prairie, Minnesota 55344 on May 21, 1998 at
3:00 p.m. for the following purposes:
1. To elect six directors.
2. To ratify and approve the selection of independent accountants for the
Company for the current fiscal year.
3. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on March 26, 1998 as
the record date for the determination of shareholders entitled to notice of and
to vote at the meeting.
By Order of the Board of Directors
Michael W. Rogers
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Eden Prairie, Minnesota
April 15, 1998
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE AND RETURN YOUR
PROXY ON THE ENCLOSED PROXY CARD WHETHER OR NOT YOU EXPECT TO ATTEND IN PERSON.
SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON
IF THEY DESIRE.
<PAGE>
ONTRACK DATA INTERNATIONAL, INC.
___________________
PROXY STATEMENT
___________________
This Proxy Statement is furnished to the shareholders of ONTRACK Data
International, Inc. (the "Company") in connection with the solicitation of
proxies by the Board of Directors of the Company to be voted at the Annual
Meeting of Shareholders to be held on May 21, 1998, or any adjournments
thereof. The Company's principal offices are located at 6321 Bury Drive, Eden
Prairie, Minnesota, 55346. The mailing of this Proxy Statement to
shareholders of the Company commenced on or about April 15, 1998.
Any proxy may be revoked at any time before it is voted by written
notice, mailed or delivered to the Secretary of the Company, or by revocation
of a written proxy by request in person at the Annual Meeting; but if not so
revoked, the shares represented by such proxy will be voted according to your
directions. If your proxy card is signed and returned without specifying a
vote or an abstention on any proposal, it will be voted according to the
recommendation of the Board of Directors on each proposal.
Under Minnesota law, each item of business properly presented at a
meeting of shareholders generally must be approved by the affirmative vote of
the holders of a majority of the voting power of the shares present, in
person or by proxy, and entitled to vote on that item of business. However,
if the shares present and entitled to vote on that item of business would not
constitute a quorum for the transaction of business at the meeting, then the
item must be approved by a majority of the voting power of the minimum number
of shares that would constitute such a quorum. Votes cast by proxy or in
person at the Annual Meeting of Shareholders will determine whether or not a
quorum is present. Abstentions will be treated as shares that are present and
entitled to vote for purposes of determining the presence of a quorum, but as
unvoted for purposes of determining the approval of the matter submitted to
the shareholders for a vote. If a broker indicates on the proxy that it does
not have discretionary authority as to certain shares to vote on a particular
matter, those shares will not be considered as present and entitled to vote
with respect to that matter.
The total number of shares of stock outstanding and entitled to vote at the
Annual Meeting as of March 26, 1998 consisted of 9,928,716 shares of $.01 par
value common stock. Each share of common stock is entitled to one vote and
there is no cumulative voting. Only shareholders of record at the close of
business on March 26, 1998 will be entitled to vote at the meeting. The
presence, in person or by proxy, of holders of a majority of the shares of
common stock entitled to vote at the Annual Meeting of Shareholders constitutes
a quorum for the transaction of business.
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 26, 1998 by (i) each person
known to the Company to beneficially own more than five percent (5%) of Common
Stock, (ii) each director of the Company, (iii) each executive officer named in
the table on page 6 and (iv) all directors and executive officers of the Company
as a group. Except as otherwise indicated below, to the knowledge of the
Company, all shareholders have sole voting and investment power over the shares
beneficially owned, except to the extent authority is shared by spouses under
applicable law.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES PERCENT
BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
---------------- ------------------ --------
<S> <C> <C>
Michael W. Rogers (1)(2)(3)(4)(8)........... 1,753,300 17.6%
6321 Bury Drive
Eden Prairie, MN 55346
John E. Pence (1)(2)(4)(5)(8)............... 1,720,601 17.3%
6321 Bury Drive
Eden Prairie, MN 55346
Gary S. Stevens (1)(2)(4)(6)(8)............. 1,811,300 18.2%
6321 Bury Drive
Eden Prairie, MN 55346
Kopp Investment Advisors, Inc.(7)........... 992,100 10.0%
7701 France Avenue South
Suite 500
Edina, MN 55435
Jacqueline C. Morby (1)(8).................. 29,901 *
Roger D. Shober (1)(8)...................... 19,750 *
Robert M. White, Ph.D (1)(8)................ 13,750 *
Richard J. Runbeck (1)(8)................... 8,125 *
Marshall A. Warwaruk (2)(8)................. 63,640 *
John M. Bujan (2)(8)........................ 17,394 *
Thomas P. Skiba (2)(8)...................... 78,000 *
All executive officers and directors as
a group (10 persons)(8).................... 5,472,631 54.2%
_______________________
</TABLE>
* Less than 1%
(1) Serves as a director of the Company.
2
<PAGE>
(2) Serves as an executive officer of the Company and appears on the table on
page 6 hereof. As of January 22, 1998, Mr. Warwaruk is no longer an
executive officer of the Company.
(3) Includes 641,430 shares of Common Stock owned by the Rogers Family Limited
Partnership, of which Mr. Rogers is the General Partner.
(4) See "Certain Transactions" for a description of the Stock Transfer
Agreement among these individuals.
(5) Includes 274,996 shares of Common Stock owned by the Pence Family Limited
Partnership, of which Mr. Pence is the General Partner, and 5,000 shares of
Common Stock owned by the Pence Family Foundation, of which Mr. Pence is
the Director with sole dispositive power.
(6) Includes 29,946 shares of Common Stock owned by the Stevens Family Limited
Partnership, of which Mr. Stevens is the General Partner.
(7) According to the Schedule 13G filed with the Securities and Exchange
Commission on March 9, 1998, all such shares are held in a fiduciary or
representative capacity for other recordholders.
(8) Includes the following number of shares which could be purchased under
stock options exercisable on the date hereof: Mr. Rogers, 15,000 shares;
Mr. Pence, 13,000 shares; Mr. Stevens, 13,000 shares; Ms. Morby, 16,250
shares; Mr. Shober, 2,500 shares; Dr. White, 2,500 shares; Mr. Runbeck,
2,500 shares; Mr. Bujan, 14,750 shares; Mr. Skiba, 78,000 shares; and all
executive officers and directors as a group, 167,283 shares.
1. ELECTION OF DIRECTORS
As a result of the decision of Jacqueline C. Morby not to stand for
re-election as a director at the Annual Meeting, six directors will be
elected by the Company's shareholders at the Annual Meeting, each to serve
until the next annual meeting of shareholders or until a successor is
elected. The Bylaws of the Corporation provide that the Board of Directors
may consist of not less than three (3) nor more than nine (9) directors. The
Board of Directors has nominated for election the six persons named below.
It is intended that proxies will be voted for such nominees. The Company
believes that each nominee named below will be able to serve, but should any
such nominee be unable to serve as a director, the persons named in the
proxies have advised that they will vote for the election of such substitute
nominee as the Board of Directors may propose.
3
<PAGE>
The names and ages of the nominees and their principal occupations are set
forth below, based upon information furnished to the Company by such persons.
<TABLE>
<CAPTION>
DIRECTOR
NAME AND AGE PRINCIPAL OCCUPATION SINCE
- ------------ -------------------- -----
<S> <C> <C>
Michael W. Rogers (42) Chairman and CEO of 1985
the Company
John E. Pence (51) President of the Company 1985
Gary S. Stevens (41) Senior Vice President, Engineering 1985
of the Company
Robert M. White, Ph.D. (59) Professor and Head of the Department 1994
of Electrical and Computer Engineering
Carnegie Mellon University
Roger D. Shober (59) Retired Executive 1995
Richard J. Runbeck (52) President 1996
Runbeck & Associates, P.A.
</TABLE>
BUSINESS EXPERIENCE OF NOMINEES
Michael W. Rogers has served as Chief Executive Officer of the Company
since 1986 and as Chairman since 1989. Additionally, Mr. Rogers has served
as a Director of the Company since 1985 and from 1989 to May 1996 as Chief
Financial Officer. From 1980 to 1985, Mr. Rogers was employed by Control
Data Corporation ("CDC"), where he served as a Senior Developer of diagnostic
software routines and as a Senior Electrical Engineer and an Electrical
Engineer for software and hardware development. From 1978 to 1980, he was an
Associate Engineer with Westinghouse Bettis Atomic Power Laboratory, a
subsidiary of Westinghouse Electric Corporation.
John E. Pence has served as President and as a Director of the Company
since 1985. From 1971 to 1985, he was employed by CDC, where he served as
Department Head for the Program Management Office for CDC's mini-micro
peripheral development (1984 to 1985), managed the Technical Support
organization for worldwide support of CDC's plug compatible peripheral
business (1981 to 1984) and served in various other capacities related to
software development and computer programming (1971 to 1981).
Gary S. Stevens has served as Senior Vice President, Engineering and as
a Director of the Company since 1985. From 1979 to 1985, Mr. Stevens was a
designer and diagnostic programmer of disk subsystems for CDC.
Robert M. White, Ph.D. is a University Professor and has served as the
Head of the Department of Electrical and Computer Engineering at Carnegie
Mellon University since 1993. He previously served as Vice President and
Chief Technical Officer of CDC, and in 1990 was appointed by President Bush
and served as the first Under Secretary of Commerce for Technology until
1993. He is also a director of ENSCO, Inc., a
4
<PAGE>
contract research firm, and SGS-Thomson Microelectronics, a manufacturer of
semiconductors. He is a member of the National Academy of Engineering.
Roger D. Shober is a retired executive with 33 years of management
experience within the computer industry. Most recently, he served as Executive
Vice President of World Wide Operations at Control Data Systems from 1991 to
1994, as President and Chief Operating Officer of Rigidyne, Inc., a hard disk
drive research and development company that was subsequently acquired by
Seagate, from 1988 to 1991 and as Executive Vice-President of Micom Systems,
Inc., a manufacturer of data communications equipment, from 1986 to 1988.
Richard J. Runbeck is a certified public accountant and has served as
President of Runbeck & Associates, P.A., an accounting and consulting firm,
since 1985. Runbeck & Associates has provided the Company with tax accounting
and financial advisory services since 1987. Mr. Runbeck is also a director of
Tech2, Inc., a distributor and value added reseller of Macintosh computer
peripherals, and Mission Technologies, an electronic component sales
representative company which focuses upon computer original equipment
manufacturers (OEMs).
OTHER INFORMATION REGARDING THE BOARD
MEETINGS. During 1997, the Board of Directors met four times and held
one telephonic meeting. Each director attended more than 75% of the meetings
of the Board of Directors or any Committee on which such director served.
BOARD COMMITTEES. The Audit Committee, consisting of Mr. Runbeck
(Chairman) and Ms. Morby, met two times in 1997. Among other duties, the Audit
Committee reviews the Company's accounting, auditing and reporting practices,
makes recommendations concerning the work of the Company's independent auditors
and reviews the adequacy of internal controls.
The Compensation Committee, consisting of Mr. Shober (Chairman) and Dr.
White, met twice formally and once informally in 1997. The Compensation
Committee's duties include establishing salaries, bonuses and other
compensation for the Company's executive officers, and for the administration
of the Non-Qualified Stock Option Plan, the 1996 Stock Incentive Plan and the
Employee Stock Purchase Plan.
5
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION. The following table sets
forth, for the years ended December 31, 1997, 1996 and 1995, the compensation
earned by the Chief Executive Officer and each of the other five most highly
compensated executive officers of the Company whose salary and bonus exceeded
$100,000 for the year ended December 31, 1997 (collectively, the "Named
Executives"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL ------------
COMPENSATION NO. OF SECURITIES ALL OTHER
NAME AND ----------------------- UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) ($)(1)
- ------------------ ---- ---------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Michael W. Rogers 1997 $230,000 $250,000 25,000 $ 10,500
Chairman and Chief 1996 190,000 190,000 50,000 9,000
Executive Officer 1995 196,000 250,000 -- 10,275
John E. Pence 1997 200,000 205,000 15,000 10,500
President 1996 185,000 185,000 50,000 9,000
1995 191,000 250,000 -- 10,275
Gary S. Stevens 1997 200,000 225,000 15,000 10,500
Senior Vice President, 1996 180,000 180,000 50,000 9,000
Engineering 1995 184,000 250,000 -- 10,275
Marshall A. Warwaruk (2) 1997 135,000 135,000 -- 10,500
Vice President of 1996 130,000 130,000 -- 7,400
Business Development 1995 101,000 100,000 75,000 --
John M. Bujan (3) 1997 125,000 145,000 15,000 10,500
General Counsel and 1996 92,000 92,000 13,750 --
Secretary 1995 -- -- 11,250(4) --
Thomas P. Skiba(5) 1997 135,000 152,000 15,000 10,500
Vice President and 1996 78,000 118,000(6) 75,000 --
Chief Financial Officer 1995 -- -- -- --
</TABLE>
__________________
(1) Amounts indicated represent contributions by the Company to the Company's
401(k) Profit Sharing Plan on behalf of the named individuals.
(2) Mr. Warwaruk became Vice President of Business Development in February
1995 and received a salary for only 11 months in 1995.
(3) Mr. Bujan became General Counsel and Secretary in March 1996 and received a
salary for only ten months in 1996.
(4) Non-qualified stock options were awarded to Mr. Bujan in his capacity as a
consultant to the Company.
(5) Mr. Skiba became Vice President and Chief Financial Officer in May 1996 and
received a salary for only 8 months in 1996.
(6) Includes a signing bonus of $20,000 paid to Mr. Skiba upon joining the
Company in May 1996.
6
<PAGE>
The following table summarizes option grants in 1997 to each of the Named
Executives:
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
PERCENT OF TOTAL APPRECIATION FOR
NUMBER OF SECURITIES OPTIONS GRANTED OPTION TERM(2)
UNDERLYING OPTIONS EMPLOYEES EXERCISE PRICE EXPIRATION -------------------
NAME GRANTED (#) IN 1997 (%) ($/SHAREHOLDER) DATE 5%($) 10%($)
- ---- ----------- ---------------- -------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Michael W. Rogers 25,000(1) 9.5% $14.00 1-23-07 220,113 557,810
John E. Pence 15,000(1) 5.7 14.00 1-23-07 132,068 334,686
Gary S. Stevens 15,000(1) 5.7 14.00 1-23-07 132,068 334,686
Marshall A. Warwaruk -- -- -- --
John M. Bujan 15,000(1) 5.7 14.00 1-23-07 132,068 334,686
Thomas P. Skiba 15,000(1) 5.7 14.00 1-23-07 132,068 334,686
</TABLE>
_______________________
(1) The options vest as follows: 20% on each of January 23, 1998, 1999, 2000,
2001 and 2002.
(2) Potential realizable value is based on the assumption that the price per
share of Common Stock appreciates at the assumed annual rate of stock
appreciation for the option term. The assumed 5% and 10% annual rates of
appreciation (compounded annually) over the term of the option set forth in
accordance with the rules and regulations established by the Securities and
Exchange Commission. The actual value of these option grants is dependent
on future performance of the Common Stock and overall stock market
conditions. There is no assurance that the values reflected in this table
will be achieved.
The following table summarizes the exercises of options by the Named
Executives in 1997 and the value of options held at December 31, 1997 by the
Named Executives.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1997 (#) DECEMBER 31, 1997 ($)(1)
SHARES ACQUIRED VALUE ----------------------------- ----------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael W. Rogers -- -- 10,000 65,000 $129,375 $790,938
John E. Pence -- -- 10,000 55,000 129,375 681,563
Gary S. Stevens -- -- 10,000 55,000 129,375 681,563
Marshall A. Warwaruk 75,000 $1,378,500(2) -- -- --
John M. Bujan 6,000 106,000(2) 11,750 20,000 240,351 228,750
Thomas P. Skiba -- -- 75,000 15,000 1,571,063 164,063
</TABLE>
___________________________
(1) The amounts set forth represent the difference between the closing sale
price of $24 15/16 per share of Common Stock on December 31, 1997 and the
exercise price of the options, multiplied by the applicable number of
shares underlying the options.
(2) Represents the difference between the fair market value of one share of
Common Stock on the date of exercise and the exercise price of the options,
multiplied by the applicable number of shares underlying the options.
7
<PAGE>
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements with each of Messrs.
Rogers, Pence and Stevens (the "Founders") as of August 6, 1996 pursuant to
which their base salaries were established at $190,000, $185,000 and
$180,000, respectively. For 1998, these base salaries were increased by the
Board to $240,000, $125,000 and $211,000, respectively. The employment
agreements also provide that the Founders will be eligible for cash incentive
compensation in amounts to be determined from time to time by the
Compensation Committee. If the Company terminates a Founder for cause, such
Founder shall receive severance payments equal to two times his base salary
payable in the then-current fiscal year. Upon the termination of a Founder
without cause, the Founder shall receive severance payments equal to two
times his base salary payable in the then-current fiscal year, plus an amount
equal to his prior year's base salary and bonus. In addition, the Founders
were each granted a non-qualified stock option to purchase 50,000 shares of
Common Stock under the 1996 Stock Incentive Plan at a price of $12.00 per
share, vesting over a five-year period from the date of grant and exercisable
for ten years from the date of grant. The Founders are also prohibited from
competing for two years after termination of their employment.
The Company entered into letter agreements with each of Messrs. Bujan
and Skiba and Ms. Moore upon the commencement of each officer's employment on
March 1996, May 1996 and June 1997, respectively. Messrs. Bujan and Skiba,
and Ms. Moore's 1998 base salaries are $132,000, $142,000, and $154,000,
respectively. The letter agreements for Messrs. Bujan and Skiba generally
provide for severance payments upon their termination for reasons other than
gross misconduct equal to twelve and 6 months of base salary, respectively.
Ms. Moore's letter agreement states that she is entitled to twelve months'
base salary if she is terminated within one year of a Change in Control, as
such term is defined in the letter agreements for reasons other than
disability or gross misconduct.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee. The role of the Compensation Committee, which is
currently comprised of two outside non-employee directors, is to review and
approve the base salaries, bonuses, stock options and other compensation of
the executive officers of the Company. The Compensation Committee also has
the power to prescribe, amend, and rescind rules relating to the Company's
1995 Non-Qualified Stock Option Plan, 1996 Employee Stock Purchase Plan, and
1996 Stock Incentive Plan (collectively, the "Plans"), to grant options and
other awards under the Plans and to interpret the Plans.
The Compensation Committee's executive compensation policies are
designed to attract and retain executives capable of leading the Company in a
rapidly evolving computer service and software marketplace and to motivate
such executives to maximize profitability and stockholder value. The
Compensation Committee has designed the Company's Executive Performance Plan
with three principal components to achieve this objective - base salary;
quarterly and annual cash incentives; and long-term incentive compensation in
the form of stock options. A significant portion of each executive's total
compensation is dependent on the attainment of predefined performance
objectives which are designed to be consistent with the maximization of
shareholder value. The Compensation Committee believes this philosophy will
enable the Company to attract and retain management personnel with the
talents and skills required to meet the challenges of a highly competitive
industry.
8
<PAGE>
During fiscal year 1997, the Company experienced some changes in its
senior management. In June, 1997, the Company hired Tanna L. Moore as Vice
President, Sales and Marketing, and in November, 1997, Stuart J. Hanley was
promoted to the position of Vice President, Worldwide Operations. Marshall
A. Warwaruk, Vice President of Business Development, announced his retirement
from the Company, effective November 15, 1998, and John E. Pence, President
and one of the Company's founders, announced that he will be reducing his
level of employment during 1998 by approximately 40%.
BASE SALARY. In determining salaries for executive officers for fiscal
1997, the Compensation Committee considered the individual experience and
performance of its executive officers, the achievements of the executive
officers in bringing the Company to its present place of worldwide prominence
in the disk subsystem software and data recovery service fields, the
competitive environment in which the Company must recruit and retain quality
executive talent, the Company's operating performance for fiscal 1997 and
attainment of specific financial, strategic and individual objectives. The
Committee compared the salaries of its executive officers with salaries of
executive officers of other companies of similar revenue size and
profitability and considered the cost of recruiting executives with
experience in large, high tech organizations with international distribution
experience. The Committee tried to establish compensation packages, which in
total, would be competitive in the Company's marketplace. The base salary of
the executive officers increased by an average of 11% (on an annualized
basis) from 1996 to 1997.
BONUSES. For fiscal year 1997, the Compensation Committee approved the
Executive Performance Plan, in which cash bonuses for executive officers were
determined with reference to specified financial performance targets for the
Company, both on a quarterly and annual basis, and also with reference to the
attainment of predefined individual performance objectives consistent with
the maximization of shareholder value. The Company's 1997 Executive
Performance Plan established specific percentages for three categories:
annual earnings per share, quarterly earnings per share, and Management By
Objectives ("MBO") individual goals. The bonuses under the plan equal 100%
of base salary for achievement of certain targeted levels, which can be
exceeded if the performance objectives are exceeded. The quarterly and
annual earnings per share components were determined by comparison between
actual results and the 1997 budget. The MBO individual goals were
established by the Committee for the Chief Executive Officer, and by the
Chief Executive Officer with respect to all other executive officers. The
1997 bonuses for some executives exceeded their base salaries due to
achievements in excess of their individual goals.
EQUITY-BASED COMPENSATION. For fiscal year 1997, the Compensation
Committee also considered and awarded equity-based compensation, in the form
of stock options, as a component of the Company's Executive Performance Plan.
Equity awards are typically set by the Compensation Committee based on each
officer's individual performance and achievements, and the recommendations of
management. In fiscal year 1997, executive officers were eligible to receive
grants of stock options under the Company's 1996 Stock Incentive Plan
("SIP"). In addition, certain executive officers were eligible to participate
in the Company's Employee Stock Purchase Plan.
In 1997, six executive officers of the Company received new option grants
under the 1996 SIP. The options granted to the executives in 1997 were the
first options granted as part of the Executive Performance Plan and were the
first grants made to executives since the Company's initial public offering.
All executives who received options were granted options to purchase 15,000
shares, except Mr. Rogers, who received options to purchase 25,000 shares and
Ms. Moore, who received options to purchase 75,000 shares as part of her
recruitment package. The options were granted under the 1996 SIP at an exercise
price equal to the fair market value of the Common Stock on the date of grant,
and generally vest in equal increments over a three, four or
9
<PAGE>
five-year period after grant, subject to the participant's continued
employment with the Company. All options granted under the 1996 SIP expire
ten years from the date of grant, unless a shorter term is provided in the
option agreement or the participant's employment with the Company ends before
the end of such ten-year period.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. In setting Mr. Rogers'
base salary, the Committee considered his contribution in bringing the
Company to its present prominence, the Company's operating performance for
1997 and attainment of specific objectives. The Committee also compared his
salary with salaries of chief executive officers of other companies of
similar revenue size and profitability. Mr. Roger's salary increased
approximately 21% from fiscal 1996 to fiscal 1997, which included a market
adjustment based on the Committee's review of salaries of other chief
executive officers. With respect to bonus, Mr. Rogers' performance
objectives related to the hiring of a senior marketing/sales executive,
achievement of specified revenue growth, establishment of a structured
performance review process for the Company, and management of international
operations and growth. Mr. Rogers received a bonus equal to 108% of his 1997
base salary. Mr. Rogers also received options to purchase 25,000 shares of
Common Stock at the fair market value on the date of grant.
MEMBERS OF THE COMPENSATION COMMITTEE
Roger D. Shober Robert M. White, Ph.D.
PERFORMANCE GRAPH
The Securities and Exchange Commission requires that the Company include
in this Proxy Statement a line graph presentation comparing cumulative,
five-year shareholder returns on an indexed basis with a broad market index
and either a nationally-recognized industry standard or an index of peer
companies selected by the Company. The Company has chosen the use of the
Nasdaq Stock Market (U.S. Companies) Index as its broad market index and the
Nasdaq Computer and Data Processing Index as its peer group index. The table
below compares the cumulative total return as of the end of each of the
Company's last two fiscal years on $100 invested as of October 21, 1996 (the
date of the Company's initial public offering) in the Common Stock of the
Company, the Nasdaq Stock Market Index and the Nasdaq Computer and Data
Processing Index, assuming the reinvestment of all dividends. The
performance graph is not necessarily indicative of future investment
performance.
10
<PAGE>
<TABLE>
<CAPTION>
Oct. 21, 1996 Dec. 31, 1996 Dec. 31, 1997
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<S> <C> <C> <C>
Ontrack Data International, Inc. $100.00 $125.00 $207.81
Nasdaq Stock Market (U.S. Companies Index) 100.00 104.78 128.63
Nasdaq Computer and Data Processing Index 100.00 104.31 128.16
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COMPENSATION OF DIRECTORS
On January 22, 1998, the Company's Board of Directors approved a grant
under the Company's 1996 Stock Incentive Plan of options to purchase 10,000
shares to each director who is not an employee of the Company, and who will be
standing for re-election at the next Annual Meeting of the Company's
Shareholders. The exercise price for each share under this grant was the fair
market value of the Company's common stock
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at the closing price on the date of grant, with vesting over a four-year
period, 2,500 shares each on the first, second, third and fourth anniversary
dates of the date of grant, and a ten-year term. This grant was a reflection
of the increased dedication and time commitment required during 1997 of the
Company's non-employee directors, and was in lieu of an increase in the cash
compensation provided for non-employee directors. Cash compensation remains
unchanged for directors who are not employees of the Company at $2,500 for
each meeting of the Board of Directors attended in person (plus reimbursement
of travel expenses). No additional fees are paid for attendance at
telephonic meetings or committee meetings. Directors who are officers of the
Company will not receive any additional compensation for serving on the Board
of Directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers to file with the Securities and Exchange Commission
reports of ownership and changes in ownership of the Company's common stock,
and the Company is required to identify any of those persons who fail to file
such reports on a timely basis. To the Company's knowledge, all insiders of
the Company filed in a timely manner all such reports for 1997, except that
the Form 3 for Stuart J. Hanley was filed after the date required.
CERTAIN TRANSACTIONS
December 31, 1997, the Company was indebted to Bert O. Sullivan, Jr. in
the principal amount of $142,723 pursuant to a promissory note entered into
in 1989. The note bears interest at a rate of 8.34% per annum, with principal
and accrued interest payable in monthly installments through October 1999.
Mr. Sullivan is the father-in-law of Michael W. Rogers, the Chairman and
Chief Executive Officer of the Company. This note was paid in full in
January 1998.
_________________________________
2. RATIFICATION OF INDEPENDENT ACCOUNTANTS
The accounting firm of Price Waterhouse LLP has been the Company's
auditing firm since 1991. Price Waterhouse LLP has been re-appointed by the
Board of Directors as the Company's auditing firm for the current year.
Although shareholder approval is not required, the Board of Directors
requests shareholder ratification of Price Waterhouse LLP's reappointment.
A representative from Price Waterhouse LLP will be available at the Annual
Meeting of Shareholders to answer any appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
RATIFICATION OF THE RE-APPOINTMENT OF PRICE WATERHOUSE LLP
___________________________________
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SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
The proxy rules of the Securities and Exchange Commission permit
shareholders, after timely notice to issuers, to present proposals for
shareholder action in issuer proxy statements where such proposals are
consistent with applicable law, pertain to matters appropriate for
shareholder action and are not properly omitted by issuer action in
accordance with the proxy rules. The Company's annual meeting for the fiscal
year ending December 31, 1998 is expected to be held on or about May 27,
1999, and proxy materials in connection with that meeting are expected to be
mailed on or about April 15, 1999. Except as indicated below, shareholder
proposals prepared in accordance with the proxy rules must be received by the
Company on or before December 16, 1998.
The Bylaws of the Company establish an advance notice procedure with regard
to (i) certain business to be brought before an annual meeting of shareholders
of the Company; and (ii) the nomination by shareholders of candidates for
election as directors.
PROPERLY BROUGHT BUSINESS. The Bylaws provide that at the annual
meeting only such business may be conducted as is of a nature that is
appropriate for consideration at an annual meeting and has been either
specified in the notice of the meeting, otherwise properly brought before the
meeting by or at the direction of the Board of Directors, or otherwise
properly brought before the meeting by a shareholder who has given timely
written notice to the Secretary of the Company of such shareholder's
intention to bring such business before the meeting. To be timely, the
notice must be given by such shareholder to the Secretary of the Company not
less than 60 days nor more than 90 days prior to the meeting. Notice
relating to the conduct of such business at an annual meeting must contain
certain information as described in Article II of the Company's Bylaws, which
are available for inspection by shareholders at the Company's principal
executive offices pursuant to Section 302A.461, subd. 4 of the Minnesota
Statutes. Nothing in the Bylaws precludes discussion by any shareholder of
any business properly brought before the annual meeting in accordance with
the Company's Bylaws.
SHAREHOLDER NOMINATIONS. The Bylaws provide that a notice of proposed
shareholder nominations for the election of directors must be timely given in
writing to the Secretary of the Company prior to the meeting at which directors
are to be elected. To be timely, the notice must be given by such shareholder
to the Secretary of the Company not less than 60 days nor more than 90 days
prior to the meeting. The notice to the Company from a shareholder who intends
to nominate a person at the meeting for election as a director must contain
certain information as described in Article III of the Company's Bylaws, which
are available for inspection by shareholders at the Company's principal
executive offices pursuant to Section 302A.461, subd. 4 of the Minnesota
Statutes. If the presiding officer of a meeting of shareholders determines that
a person was not nominated in accordance with the foregoing procedure, such
person will not be eligible for election as a director.
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GENERAL
All proxies properly executed will be voted in the manner directed by
shareholders. If no direction is made, proxies will be voted "FOR" the
election of the Board of Director's nominees for directors and "FOR" proposal 2.
The management of the Company knows of no matter other than the
foregoing to be brought before the meeting. However, the enclosed proxy
gives discretionary authority in the event any additional matters should be
presented.
All expenses in connection with solicitation of proxies will be borne by
the Company. The Company will pay brokers, nominees, fiduciaries, or other
custodians their reasonable expenses for sending proxy material to, and
obtaining instructions from, persons for whom they hold stock of the Company.
The Company expects to solicit proxies by mail, but directors, Officers, and
other employees of the Company may also solicit in person, by telephone, by
facsimile or by mail.
The Annual Report of the Company for the year ended December 31, 1997 is
enclosed herewith. Shareholders may receive without charge a copy of the
Company's Form 10-K Annual Report, including financial statements and schedules
thereto, as filed with the Securities and Exchange Commission, by writing to:
Thomas P. Skiba, ONTRACK Data International, Inc., 6321 Bury Drive, Eden
Prairie, Minnesota, 55346.
By Order of the Board of Directors
John M. Bujan
GENERAL COUNSEL AND SECRETARY
April 15, 1998
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ONTRACK DATA INTERNATIONAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 21, 1998
The undersigned hereby appoint Michael W. Rogers or John M. Bujan, or either
of them, as proxies, with full power of substitution to vote all shares of
common stock which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Shareholders of ONTRACK Data International,
Inc., to be held in Eden Prairie, Minnesota on May 21, 1998 or at any
adjournments thereof, upon any and all matters which may properly be brought
before the meeting or adjournments thereof, hereby revoking all former proxies.
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(1) ELECTION OF DIRECTORS: / / FOR all nominees listed below / / WITHHOLD AUTHORITY
(EXCEPT AS MARKED TO THE TO VOTE FOR THE NOMINEES
CONTRARY)
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(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE
THROUGH NOMINEE'S NAME IN THE LIST BELOW.)
Michael W. Rogers, John E. Pence, Gary S. Stevens, Roger D. Shober
Robert M. White, Ph.D., Richard J. Runbeck
(2) PROPOSAL TO APPROVE THE APPOINTMENT OF PRICE WATERHOUSE LLP AS INDEPENDENT
ACCOUNTANTS OF THE COMPANY.
/ / FOR / / AGAINST / / ABSTAIN
(3) In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment
thereof.
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THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED ON PROPOSALS (1) AND (2)
IN ACCORDANCE WITH THE SPECIFICATIONS MADE AND "FOR" SUCH PROPOSALS IF THERE IS
NO SPECIFICATION.
Dated: _______________________ , 1998
Signed: _____________________________
(Signature)
_________________________________
(Signature)
PLEASE DATE AND SIGN exactly as your
name(s) appears above indicating,
where proper, official position or
representative capacity in which you
are signing. When signing as
executor, administrator, trustee or
guardian, give full title as such;
when shares have been issued in names
of two or more persons, all should
sign.
