SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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 Under Section 240.14a-12
ONTRACK DATA INTERNATIONAL, INC.
(Name of Registrant as Specified in Its Charter)
N/A
(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 transactions
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:
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(3) Filing Party:
(4) Date Filed:
<PAGE>
ONTRACK DATA INTERNATIONAL, INC.
-------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 25, 2000
-------------------
Notice is hereby given that the Annual Meeting of Shareholders of
ONTRACK Data International, Inc. ( "Ontrack") will be held at the offices of
ONTRACK Data International, Inc., 9023 Columbine Road, Eden Prairie, Minnesota
55347, on May 25, 2000 at 3:00 p.m. for the following purposes:
1. To elect five directors.
2. To amend Ontrack's 1996 Stock Incentive Plan to increase the
number of shares reserved for issuance under the plan.
3. To ratify and approve the selection of independent accountants
for Ontrack for the current fiscal year.
4. To transact such other business as may properly come before
the Annual Meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on March 31,
2000 as the record date for the determination of shareholders entitled to notice
of and to vote at the Annual Meeting.
By Order of the Board of Directors
/s/ Michael W. Rogers
Michael W. Rogers
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Eden Prairie, Minnesota
April 14, 2000
================================================================================
YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD
TODAY, WHETHER OR NOT YOU EXPECT TO ATTEND IN PERSON. IF YOU ATTEND THE ANNUAL
MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON IF YOU WISH.
================================================================================
<PAGE>
ONTRACK DATA INTERNATIONAL, INC.
---------------
PROXY STATEMENT
---------------
This Proxy Statement is furnished to the shareholders of ONTRACK Data
International, Inc. ("Ontrack") in connection with the solicitation of proxies
by the Board of Directors of Ontrack to be voted at the Annual Meeting of
Shareholders to be held at the offices of Ontrack at 9023 Columbine Road, Eden
Prairie, Minnesota 55347, on Thursday, May 25, 2000 at 3:00 p.m., or any
adjournments thereof. The mailing of this Proxy Statement to shareholders of
Ontrack commenced on or about April 14, 2000.
The total number of shares of stock outstanding and entitled to vote at
the Annual Meeting as of March 31, 2000 consisted of 10,049,588 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 31, 2000 will be entitled to vote at the Annual Meeting.
Shares represented by proxies properly signed, dated and returned will
be voted at the Annual Meeting in accordance with the instructions set forth
therein. If your proxy card is signed and returned without specifying a vote or
an abstention on any proposal, your shares will be voted FOR each director
nominee, FOR the proposal to amend the 1996 Stock Incentive Plan, FOR the
ratification and approval of the selection of independent accountants and at the
discretion of the proxy holders as to any other matters which may properly come
before the Annual Meeting. You may revoke your proxy at any time before it is
voted by signing and returning a proxy bearing a later date, by giving written
notice to the Secretary of Ontrack, or by attending the Annual Meeting and
voting in person.
The presence in person or by proxy of a majority of the voting power of
shares entitled to vote at the Annual Meeting will constitute a quorum for the
transaction of business. An item of business will be approved if it receives the
affirmative vote of the holders of a majority of the shares present and entitled
to vote on that item of business. Abstentions will be treated as shares present
and entitled to vote for purposes of determining the presence of a quorum and in
tabulating votes cast on proposals presented to shareholders. Consequently,
abstentions (or "withhold authority" as to directors) will have the same effect
as a negative vote. If a broker indicates on a proxy that it does not have
authority to vote on an item of business, the shares represented by the proxy
will not be considered present and entitled to vote and, therefore, will have no
effect on the outcome of the vote.
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of Ontrack's Common Stock as of March 25, 2000 by (a) each person
known to Ontrack to beneficially own more than five percent (5%) of Common
Stock, (b) each director of Ontrack and nominee to serve as a director, (c) each
executive officer named in the table on page 5 and (d) all directors and
executive officers of Ontrack as a group. Except as otherwise indicated below,
to the knowledge of Ontrack, 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.
NAME AND ADDRESS OF NUMBER OF SHARES PERCENT
BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF CLASS
---------------- --------------------- --------
Michael W. Rogers (2)................. 1,775,800 17.6%
9023 Columbine Road
Eden Prairie, MN 55347
Gary S. Stevens (3)................... 1,849,800 18.3%
9023 Columbine Road
Eden Prairie, MN 55347
John E. Pence (4)..................... 1,448,751 13.9%
HCR 52
Box 102 - A6
Hot Springs, SD 57747
John M. Bujan ........................ 38,394 *
Thomas P. Skiba ..................... 95,250 *
Lee B. Lewis.......................... 25,278 *
Roger D. Shober ...................... 69,750 *
Robert M. White, Ph.D ................ 23,750 *
All executive officers and directors
as a group (10 persons)........... 5,326,773 51.0%
- ----------------------
* Less than 1%
(1) Includes the following number of shares which could be purchased under
stock options exercisable within 60 days of the date hereof: Mr.
Rogers, 57,500 shares; Mr. Stevens, 51,500 shares; Mr. Pence, 70,000
shares; Mr. Bujan, 35,750 shares; Mr. Skiba, 95,250 shares; Mr. Shober,
62,500 shares; Dr. White, 12,500 shares; Mr. Lewis, 25,000 shares; and
all executive officers and directors as a group, 410,000 shares.
(2) Includes 621,430 shares of Common Stock owned by the Rogers Family
Limited Partnership, of which Mr. Rogers is the General Partner.
(3) Includes 29,946 shares of Common Stock owned by the Stevens Family
Limited Partnership, of which Mr. Stevens is the General Partner.
(4) Includes 262,996 shares of Common Stock owned by the Pence Family
Limited Partnership, of which Mr. Pence is the General Partner, and
4,150 shares of Common Stock owned by the Pence Family Foundation, of
which Mr. Pence is the Director with sole dispositive power.
2
<PAGE>
1. ELECTION OF DIRECTORS
Five directors will be elected by Ontrack's shareholders at the Annual
Meeting, each to serve until the next annual meeting of shareholders or until a
successor is elected. Ontrack's Bylaws provide that the Board of Directors may
consist of not less than three nor more than nine directors.
The Board of Directors has nominated for election the five persons
named below all of whom are current directors of Ontrack. Mr. Lee B. Lewis has
declined to stand for re-election. Mr. Lewis will continue as Ontrack's Vice
President and General Manager. It is the recommendation of Ontrack's Board of
Directors that the five nominees named below be re-elected as directors. Unless
otherwise directed, the proxies solicited by the Board of Directors will be
voted for the election as directors of the nominees named below. Ontrack
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.
The names and ages of the nominees and their principal occupations and
tenure as directors are set forth below, based upon information furnished to
Ontrack by such persons.
DIRECTOR
NAME AND AGE PRINCIPAL OCCUPATION SINCE
- ------------ -------------------- -----
Michael W. Rogers (44) Chairman and Chief Executive Officer 1985
of Ontrack.
John E. Pence (52) Retired President of Ontrack. 1985
Gary S. Stevens (43) Senior Vice President, Engineering 1985
of Ontrack.
Robert M. White, Ph.D. (61) University Professor and Director of 1994
Data Storage Systems Center,
Carnegie Mellon University.
Roger D. Shober (61) Retired Executive. 1995
BUSINESS EXPERIENCE OF NOMINEES
MICHAEL W. ROGERS has served as Chief Executive Officer of Ontrack
since 1986 and as Chairman since 1989. Additionally, Mr. Rogers has served as a
Director of Ontrack 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 served as President of Ontrack from 1985 until 1998 and
has served as a Director of Ontrack since 1985. From 1971 to 1985, he was
employed by CDC, where he served as Department Head for
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<PAGE>
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 Ontrack 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 served as the Head
of the Department of Electrical and Computer Engineering at Carnegie Mellon
University ("CMU") from 1993 to 1999 when he became Director of the Data Storage
Systems Center at CMU. He has served as a Director of Ontrack since 1994. 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
contract research firm, and STMicroelectronics, a manufacturer of
semiconductors, and Read-Rite, a manufacturer of magnetic recording heads. He is
a member of the National Academy of Engineering.
ROGER D. SHOBER served as President and Chief Operating Officer of
Ontrack from September 1998 until February 1999. He has served as a Director of
Ontrack since 1995. He is a retired executive with 38 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.
OTHER INFORMATION REGARDING THE BOARD
MEETINGS. During 1999, the Board of Directors met seven times. 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 Dr. White
(Chairman) and Mr. Shober, met once in 1999. Among other duties, the Audit
Committee reviews Ontrack's accounting, auditing and reporting practices, makes
recommendations concerning the work of Ontrack's independent auditors and
reviews the adequacy of internal controls.
The Compensation Committee, consisting of Mr. Shober (Chairman), Mr.
Pence and Dr. White, met three times in 1999. The Compensation Committee's
duties include establishing salaries, bonuses and other compensation for
Ontrack'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.
COMPENSATION OF DIRECTORS. Directors who are not employees of Ontrack
receive $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 Ontrack do not receive any additional compensation for serving on
the Board of Directors. Directors are also eligible to receive options under
Ontrack's 1996 Stock Incentive Plan. Each non-employee director who is elected
to the Board for the first time will automatically be granted an option under
the Plan to purchase 10,000
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<PAGE>
shares of stock at the fair market value of Common Stock on the date of first
election, with the option vesting in equal installments over four years. If the
non-employee director is re-elected by shareholders after the fourth anniversary
of the director's first election, the director will receive an option to
purchase an additional 10,000 shares on the same terms.
In 1998, Ontrack entered into a six-month Consulting Agreement with
Roger D. Shober under which Mr. Shober served as interim president and chief
operating officer of Ontrack from September 21, 1998 through February 11, 1999.
Mr. Shober was entitled to receive none of the benefits accorded other executive
management of Ontrack other than reimbursement of reasonable out-of-pocket
expenses. In 1999, Mr. Shober received an aggregate of $82,875 as compensation
under the agreement as well as for certain other project specific consulting
services.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION. The following table
sets forth, for the years ended December 31, 1999, 1998 and 1997, the
compensation earned by the Chief Executive Officer and each of the other four
most highly compensated executive officers of Ontrack whose salary and bonus
exceeded $100,000 for the year ended December 31, 1999 (collectively, the "Named
Executives"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL ------------
COMPENSATION NO. OF SECURITIES ALL OTHER
NAME AND ------------------------- UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) ($)(1)
- ------------------ ---- --------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Michael W. Rogers........... 1999 $201,000 $ 95,000 -0- $4,200
Chairman and Chief 1998 241,000 -0- 25,000 3,600
Executive Officer 1997 230,000 250,000 25,000 10,500
Gary S. Stevens............. 1999 $212,000 $ 16,000 -0- $4,200
Senior Vice President, 1998 212,000 -0- 25,000 3,600
Engineering 1997 200,000 225,000 15,000 10,500
John M. Bujan............... 1999 $142,000 $ 72,000 20,000 $3,700
Vice President, General 1998 133,000 -0- 15,000 3,600
Counsel and Secretary 1997 125,000 145,000 15,000 10,500
Thomas P. Skiba............. 1999 $143,000 $ 63,000 15,000 $3,700
Vice President and 1998 143,000 -0- 15,000 3,600
Chief Financial Officer 1997 135,000 152,000 15,000 10,500
Lee B. Lewis (2)............ 1999 $133,000 $ 32,000 100,000 -0-
Vice President and
General Manager
</TABLE>
- ---------------------
(1) Amounts indicated represent contributions by Ontrack to its 401(k)
Profit Sharing Plan on behalf of the named individuals.
(2) Mr. Lewis joined Ontrack in February 1999.
5
<PAGE>
The following table summarizes option grants in 1999 to each of the
Named Executives:
OPTION GRANTS IN 1999
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
PERCENT OF TOTAL APPRECIATION FOR
NUMBER OF SECURITIES OPTIONS GRANTED OPTION TERM($)(1)
UNDERLYING OPTIONS EMPLOYEES EXERCISE PRICE EXPIRATION ----------------------
NAME GRANTED(#) IN 1999(%) PER SHARE($) DATE 5% 10%
- ---- -------------------- ---------------- -------------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Michael W. Rogers....... 0 -- -- -- -- --
Gary S. Stevens......... 0 -- -- -- -- --
John M. Bujan........... 20,000(3) 3.6% $5.63 01/26/09 $ 70,814 $179,455
Thomas P. Skiba......... 15,000(3) 2.7% 5.63 01/26/09 53,110 134,592
Lee B. Lewis............ 100,000(2) 17.9% 4.63 02/11/09 291,178 737,903
</TABLE>
- -----------------------
(1) Potential realizable value is based on the assumption that the price
per share of Common Stock appreciates at the assumed annual rate of
stock appreciation for the option term. The actual value of these
option grants is dependent on future performance of the Common Stock
and overall stock market conditions. There is no assurance that the
values reflected in this table will be achieved.
(2) The options vest as follows: 25% on each of February 11, 2000, 2001,
2002, and 2003.
(3) The options vest as follows: 25% on each of January 26, 2000, 2001,
2002, and 2003.
The following table summarizes the exercises of options by the Named
Executives in 1999 and the value of options held at December 31, 1999 by the
Named Executives:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1999(#) DECEMBER 31, 1999($)(1)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael W. Rogers......... 0 $ 0 46,250 53,750 $193,464 $224,836
Gary S. Stevens........... 0 0 42,250 47,750 176,732 199,738
John M. Bujan............. 0 0 24,000 42,750 145,467 223,823
Thomas P. Skiba........... 0 0 84,750 35,250 646,259 181,201
Lee B. Lewis.............. 0 0 -- 100,000 -0- 743,300
</TABLE>
- -----------------------
(1) The amounts set forth represent the difference between the closing sale
price of $12.063 per share of Common Stock on December 31, 1999 and the
exercise price of the options, multiplied by the applicable number of
shares underlying the options.
EMPLOYMENT AGREEMENTS
Ontrack entered into employment agreements with each of Messrs. Rogers
and Stevens (the "Founders") in 1996. If Ontrack terminates a Founder for cause,
such Founder will 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. The Founders are also prohibited from
competing for two years after termination of their employment.
6
<PAGE>
Ontrack entered into letter agreements with each of Messrs. Bujan and
Skiba upon the commencement of each officer's employment in 1996. As amended,
these letter agreements generally provide for severance payments upon their
termination for reasons other than gross misconduct equal to one year of base
salary. In addition, any decrease in salary or a change in reporting
responsibility, duties or title due to a change in control of Ontrack is
considered a termination which entitles the executive to the same severance
payments. Upon a change of control, all options held by the executive will
become fully vested.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
Ontrack's executive compensation program is administered by the
Compensation Committee (the "Committee"). The role of the Committee, which is
currently comprised of three non-employee directors, is to review and approve
the base salaries, bonuses, stock options and other compensation of the
executive officers of Ontrack. The Committee also has the power to prescribe,
amend, and rescind rules relating to Ontrack'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 Committee's executive compensation policies are designed to attract
and retain executives capable of leading Ontrack in a rapidly evolving computer
service and software marketplace and to motivate such executives to maximize
profitability and stockholder value. The Committee has designed Ontrack's
Executive Performance Plan with three principal components to achieve this
objective - base salary; 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 Committee believes this philosophy will enable Ontrack
to attract and retain management personnel with the talents and skills required
to meet the challenges of a highly competitive industry.
BASE SALARY. In determining salaries for executive officers for fiscal
1999, the Committee considered the individual experience and performance of its
executive officers, the achievements of the executive officers in bringing
Ontrack to its present place of worldwide prominence in the disk subsystem
software and data recovery service fields, the competitive environment in which
Ontrack must recruit and retain quality executive talent, Ontrack's operating
performance in 1998 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 Ontrack's marketplace. The 1999 base
salary of the executive officers, excluding Messrs. Bujan and Rogers, remained
the same as in 1998. Mr. Bujan received an increase of $9,000, reflecting his
additional responsibilities in several areas, notably in assisting in the
management of Ontrack's UK subsidiary. Mr. Rogers requested and was granted a
17% decrease in his base salary for 1999.
BONUSES. For 1999, the Committee approved the Executive Performance
Plan, in which cash bonuses for executive officers were determined with
reference to specified financial performance targets for Ontrack, on an annual
basis, and also with reference to the attainment of predefined individual
performance objectives consistent with the maximization of shareholder value.
Ontrack's 1999 Executive Performance Plan established specific percentages for
two categories: annual earnings per share and Management By Objectives ("MBO")
individual goals. The annual earnings per share component was determined by
comparison between actual
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<PAGE>
results and the 1999 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. As a result of Ontrack's
performance in 1999, particularly the extraordinary performance in the second
half of the year, the Committee determined the following bonuses be paid:
Michael W. Rogers, $95,000; John M. Bujan, $72,000; Thomas P. Skiba, $63,000;
Lee B. Lewis, $32,000; and Gary S. Stevens, $16,000.
EQUITY-BASED COMPENSATION. For 1999, the Committee also considered and
awarded equity-based compensation, in the form of stock options, as a component
of Ontrack's Executive Performance Plan. Equity awards are typically set by the
Committee based on each officer's individual performance and achievements, and
the recommendations of management. In 1999, executive officers were eligible to
receive grants of stock options under Ontrack's 1996 Stock Incentive Plan (the
"1996 Plan"). In addition, certain executive officers were eligible to
participate in Ontrack's Employee Stock Purchase Plan.
In 1999, four executive officers of Ontrack received new option grants
under the 1996 Plan. The Committee determined the number of options granted to
each officer based on the officer's level of responsibility and team
performance. The options granted in 1999 had an exercise price equal to the fair
market value of the Common Stock on the date of grant, and generally vest in
equal installments over a four-year period after grant, subject to the
participant's continued employment with Ontrack.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. In setting Mr. Rogers'
base salary for 1999, the Committee considered his contributions to Ontrack,
Ontrack's operating performance for 1998 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. During this
process, Mr. Rogers requested a $40,000 reduction in his base salary. The
Committee accepted his recommendation and set his 1999 salary at $201,000. With
respect to his bonus, Mr. Rogers' performance objectives relating to expanding
Ontrack's product and service offerings, the acquisition and license agreements
entered into during the year and Ontrack's improved financial performance in the
second half of the year were the main factors considered in determining Mr.
Rogers' $95,000 bonus.
The foregoing report shall not be deemed incorporated by reference by
any general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933 (the "1933 Act") or the Securities
Exchange Act of 1934 (the "1934 Act"), except to the extent that Ontrack
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under the 1933 Act or the 1934 Act.
MEMBERS OF THE COMPENSATION COMMITTEE
ROGER D. SHOBER JOHN E. PENCE ROBERT M. WHITE, PH.D.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Roger D. Shober was a member of the Compensation Committee through
September 21, 1998. On that date, Mr. Shober was appointed as interim president
and chief operating officer of Ontrack, positions in which he served until
February 11, 1999. In April 1999, following his service as an officer, Mr.
Shober was appointed to be a member of the Compensation Committee.
8
<PAGE>
On September 21, 1998, John E. Pence became a member of the
Compensation Committee. Mr. Pence was a founder of Ontrack and served as its
President until September 18, 1998. Mr. Pence was an employee of Ontrack through
December 31, 1998.
PERFORMANCE GRAPH
The Securities and Exchange Commission requires that Ontrack 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 Ontrack. Ontrack 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 Ontrack's last three fiscal
years on $100 invested as of October 21, 1996 (the date of Ontrack's initial
public offering) in the Common Stock of Ontrack, 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.
<TABLE>
<CAPTION>
10/21/96 12/31/96 12/31/97 12/31/98 12/31/99
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Ontrack $ 100 $ 125 $ 208 $ 53 $ 101
Nasdaq Composite 100 105 128 181 327
Computer and Data Processing 100 104 128 229 484
</TABLE>
Ontrack's Common Stock closed at $12.063 per share on December 31, 1999
and closed at $10.063 per share on March 21, 2000. The foregoing performance
graph shall not be deemed incorporated by reference by any general statement
incorporating by reference this proxy statement into any filing under the 1933
Act or the 1934 Act, except to the extent that Ontrack specifically incorporates
this information by reference, and shall not otherwise be deemed filed under the
1933 Act or the 1934 Act.
9
<PAGE>
2. APPROVAL OF AMENDMENTS TO 1996 STOCK INCENTIVE PLAN
In February 2000, Ontrack's Board of Directors approved an amendment to
Ontrack's 1996 Stock Incentive Plan (the "Plan"), subject to shareholder
approval. The amendment increases the number of shares reserved for issuance
under the Plan from 1,400,000 shares to 2,400,000 shares.
SUMMARY OF THE 1996 STOCK INCENTIVE PLAN
On August 6, 1996, the Board adopted the Plan, which was approved by
the shareholders on September 20, 1996. In May 1999, Ontrack's shareholders
amended the Plan to increase the number of shares reserved for issuance under
the Plan to 1,400,000 shares and to limit the number of shares subject to
options that may be granted to any participant under the Plan in a single fiscal
year to 500,000 shares.
The purpose of the Plan is to enable Ontrack to retain and attract
executives and other key employees, non-employee directors and consultants who
contribute to Ontrack's success by their ability, ingenuity and industry, and to
enable such individuals to participate in the long-term success and growth of
Ontrack by giving them a proprietary interest in Ontrack. The Plan permits the
granting of stock options, stock appreciation rights, restricted stock and
deferred stock awards; however, only stock options have been granted under the
Plan.
ELIGIBILITY. All salaried officers and key employees, non-employee
directors, consultants and advisors of Ontrack or any subsidiary of Ontrack are
eligible to receive awards under the Plan. Ontrack currently has approximately
340 employees and has three non-employee directors.
TERM. Incentive stock options currently may be granted pursuant to the
Plan through January 27, 2009. This date will be extended to February 3, 2010
assuming the shareholders adopt the proposed increase in the number of shares
reserved under the Plan. Non-qualified stock options and other awards may be
granted pursuant to the Plan until the Plan is discontinued or terminated by the
Board of Directors.
ADMINISTRATION. The Plan is administered by a Committee (the
"Committee") appointed by the Board from time to time which shall consist of not
less than two members of the Board who are non-employee directors within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934 or any successor
rule. The Plan vests broad powers in the Committee to administer and interpret
the Plan, including the authority to select the individuals to be granted awards
and to prescribe the type, form and conditions of the awards (which may vary
among participants). The Board has appointed the Compensation Committee to serve
as the Committee administering the Plan.
OPTIONS. When an option is granted under the Plan, the Committee in its
discretion specifies the number of shares of Common Stock which may be purchased
upon exercise of the option, the option price (which may not be less than 100%
of the fair market value of Ontrack's Common Stock on the date the option is
granted), the term of the option and whether it will be an incentive or
nonqualified stock option. The closing sale price of Ontrack's Common Stock was
$10.063 on March 21, 2000.
The term during which the option may be exercised and whether the
option will be exercisable immediately, in stages, or otherwise will be set by
the Committee when the option is granted, but in no event will the term of an
incentive stock option exceed ten years. Each option granted under the Plan is
nontransferable during the lifetime of the optionee. The Committee may impose
additional or alternative conditions and
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restrictions on the incentive or nonqualified stock options granted under the
Plan; however, each incentive stock option must contain such limitations and
restrictions upon its exercise as are necessary to ensure that the option will
be an incentive stock option as defined under the Code.
Upon exercise of an option under the Plan, the exercise price is to be
paid by check, by other forms of consideration deemed sufficient by the
Committee, or by surrender of previously acquired shares of Common Stock of
Ontrack which, in the case of stock acquired upon exercise of an option, has
been owned for more than six months on the date of surrender, valued at its then
fair market value.
Each non-employee director who is elected to the Board for the first
time will automatically be granted an option under the Plan to purchase 10,000
shares of stock at the fair market value of Common Stock on the date of
election, with the option vesting in equal installments over four years. If the
non-employee director is re-elected by shareholders after the fourth anniversary
of the director's first election, the director will receive an option to
purchase an additional 10,000 shares on the same terms.
The number of shares of Common Stock that may be covered by option
grants to any participant during any calendar year may not exceed 500,000
shares. This limitation is intended to permit compensation under the Plan to be
excluded from the calculation of the $1 million cap on deductibility of
compensation to the most highly compensated executive officers under Section
162(m) under the Internal Revenue Code. However, even after shareholder approval
of this limitation in May 1999, options under the Plan will not immediately
comply with Section 162(m), because Ontrack does not have at least two
non-employee directors who qualify as "outside" directors under Section 162(m).
Shareholder approval of the amendment will enable Ontrack to bring the Plan into
compliance with Section 162(m) when another qualifying non-employee director is
elected to the Board. This will enable Ontrack to maximize the deductibility of
compensation of executive officers upon exercise of their future stock option
grants under the 1996 Stock Incentive Plan.
OTHER AWARDS. The Plan also provides for the following awards in
addition to stock options: (1) Stock appreciation rights, which may be granted
in conjunction with a stock option to permit the holder to elect to receive the
difference between the option exercise price and the market price of the stock
in cash and/or stock; (2) Restricted stock awards, consisting of shares that are
issued subject to forfeiture if specified performance goals are not achieved;
and (3) Deferred stock awards, consisting of shares that may be issued
conditioned upon the performance of specified goals. No awards other than stock
options have been granted under the Plan to date.
AMENDMENT. The Board of Directors may from time to time suspend or
discontinue the Plan or revise or amend it in any respect; provided, however,
that no such revision or amendment shall impair the terms and conditions of any
option or other award without the consent of the participant. The Plan may not,
without approval of Ontrack's shareholders, be amended in any manner which will
cause the Plan to no longer comply with Rule 16b-3 under the Securities Act of
1934, Section 422 of the Internal Revenue Code or other regulatory requirements.
The Committee may adjust the maximum number of shares of Common Stock
reserved for issuance under the Plan, the number of shares covered by each
outstanding option and the option price per share in the event of any merger,
reorganization, consolidation, stock dividend or other change in corporate
structure affecting the Common Stock.
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FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
Some of the options to be granted to employees pursuant to the Plan may
be intended to qualify as incentive stock options under Section 422 of the
Internal Revenue Code. Under such Section, the optionee realizes no taxable
income when the incentive stock option is granted. In addition, an optionee
generally will not realize taxable compensation income upon the exercise of an
incentive stock option if he or she exercises it as an employee or within three
months after termination of employment (or within one year after termination if
the termination results from a permanent and total disability). The amount by
which the fair market value of the shares purchased exceeds the aggregate option
price at the time of exercise will be alternative minimum taxable income for
purposes of applying the alternative minimum tax. If the optionee does not
dispose of the shares acquired upon such exercise for a period of two years from
the granting of the incentive stock option and one year after exercise of the
option, the optionee will receive capital gains treatment on any gain realized
when he or she sells the shares. Ontrack is not entitled to any compensation
expense deduction under these circumstances. If the applicable holding periods
are not satisfied, then any gain realized in connection with the disposition of
such stock will generally be taxable as ordinary compensation income in the year
in which the disposition occurred, in the amount by which the lesser of (i) the
fair market value of such stock on the date of exercise, or (ii) the amount
realized on the disposition of the shares (if the disposition is the result of a
sale, or exchange other than to a related taxpayer), exceeds the option exercise
price. Ontrack is entitled to a tax deduction only to the extent, and at the
time, the participant realizes compensation income as a result of the early
disposition. The balance of any gain will be characterized as a capital gain.
Nonqualified stock options granted under the Plan are not intended to
and do not qualify for the tax treatment described above for incentive stock
options. Under present law, an optionee generally will not realize any taxable
income on the date an option is granted to the optionee pursuant to the Plan.
Upon exercise of the option, however, the optionee will realize, in the year of
exercise, ordinary compensation income to the extent of the difference between
the fair market value of such stock on the date of exercise and the option
exercise price. Upon the sale of shares, any resulting gain or loss will be
treated as capital gain or loss. Ontrack will receive a corresponding tax
deduction in its fiscal year in which options are exercised, equal to the amount
of compensation required to be included as ordinary income by those optionees
exercising options.
PROPOSED AMENDMENT TO THE 1996 STOCK INCENTIVE PLAN
The proposed amendment increases the maximum aggregate number of shares
issuable for stock grants under the Plan from 1,400,000 shares to 2,400,000
shares. As of December 31, 1999, without giving effect to this amendment,
1,311,469 shares were subject to outstanding options under the Plan and a total
of 38,145 shares remained available for further option grants.
VOTE REQUIRED
The Board recommends that the shareholders approve the proposal to
amend the 1996 Stock Incentive Plan. The affirmative vote of a majority of the
shares represented at the Annual Meeting and entitled to vote is required for
approval.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMENDMENT TO ONTRACK'S 1996 STOCK INCENTIVE PLAN.
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3. RATIFICATION OF INDEPENDENT ACCOUNTANTS
The accounting firm of Grant Thornton LLP has been Ontrack's auditing
firm since July 1998. Grant Thornton LLP has been re-appointed by the Board of
Directors as Ontrack's auditing firm for the current year. Although shareholder
approval is not required, the Board of Directors requests shareholder
ratification of Grant Thornton LLP's reappointment.
A representative from Grant Thornton 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 GRANT THORNTON LLP
SHAREHOLDER PROPOSALS FOR 2001 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. Ontrack's annual meeting for the fiscal year ending December 31,
2000 is expected to be held on or about May 24, 2001, and proxy materials in
connection with that meeting are expected to be mailed on or about April 13,
2001. The deadline for submission of shareholder proposals pursuant to Rule
14a-8 under the Securities Exchange Act of 1934, as amended, for inclusion in
Ontrack's proxy statement for its 2001 Annual Meeting of Shareholders is
December 16, 2000. Additionally, if Ontrack receives notice of a separate
shareholder proposal after February 29, 2001, such proposal will be considered
untimely pursuant to Rules 14a-4 and 14a-5(e) and the persons named in proxies
solicited by the Board of Directors of Ontrack for its 2001 Annual Meeting of
Shareholders may exercise discretionary voting power with respect to such
proposal.
The Bylaws of Ontrack establish an advance notice procedure with regard
to (i) certain business to be brought before an annual meeting of shareholders
of Ontrack; 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 Ontrack 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 Ontrack 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 Ontrack's
Bylaws, which are available for inspection by shareholders at Ontrack'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 Ontrack'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 Ontrack 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
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Ontrack not less than 60 days nor more than 90 days prior to the meeting. The
notice to Ontrack 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 Ontrack's Bylaws, which are available for inspection by
shareholders at Ontrack'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.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Ontrack's directors and
executive officers to file with the Securities and Exchange Commission reports
of ownership and changes in ownership of Ontrack's Common Stock, and Ontrack is
required to identify any of those persons who fail to file such reports on a
timely basis. To Ontrack's knowledge, all such persons filed in a timely manner
all such reports for 1999.
GENERAL
The management of Ontrack 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 Ontrack. Ontrack 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 Ontrack. Ontrack expects
to solicit proxies by mail, but directors, officers, and other employees of
Ontrack may also solicit in person, by telephone, by facsimile or by mail.
The Annual Report of Ontrack for the year ended December 31, 1999 is
enclosed herewith. Shareholders may receive without charge a copy of the
financial schedule and exhibits thereto, as filed with the Securities and
Exchange Commission, by writing to: Thomas P. Skiba, ONTRACK Data International,
Inc., 9023 Columbine Road, Eden Prairie, Minnesota 55347.
By Order of the Board of Directors
/s/ John M. Bujan
John M. Bujan
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
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APPENDIX
ONTRACK DATA INTERNATIONAL, INC.
ANNUAL MEETING OF SHAREHOLDERS
THURSDAY, MAY 25, 2000
3:00 P.M. CENTRAL TIME
9023 COLUMBINE ROAD
EDEN PRAIRIE, MN 55347
ONTRACK DATA INTERNATIONAL, INC.
9023 COLUMBINE ROAD, EDEN PRAIRIE, MINNESOTA 55347 PROXY
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, a shareholder of ONTRACK Data International, Inc. (the
"Company"), hereby appoints John M. Bujan and Thomas P. Skiba, and either of
them, as proxies, with full power of substitution, to vote on behalf of the
undersigned the number of shares which the undersigned is then entitled to vote,
at the Annual Meeting of the Shareholders of ONTRACK Data International, Inc. to
be held at 9023 Columbine Road, Eden Prairie, MN 55347, on Thursday, May 25,
2000, at 3:00 p.m., and any adjournments or postponements thereof, upon any and
all matters which may properly be brought before the meeting or any adjournments
thereof, with all the powers which the undersigned would possess if personally
present.
The undersigned hereby revokes all previous proxies relating to the shares
covered hereby and acknowledges receipt of the Notice and Proxy Statement
relating to the Annual Meeting.
It will be voted on the matters set forth on the reverse side of this form as
directed by the shareholder, but if no direction is made in the space provided,
it will be voted FOR proposals (1), (2) and (3).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
SEE REVERSE FOR VOTING INSTRUCTIONS.
<PAGE>
[ARROW] PLEASE DETACH HERE [ARROW]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3.
<TABLE>
<S> <C>
1. Election of directors: 01 Michael W. Rogers 04 Robert M. White [ ] Vote FOR [ ] Vote WITHHELD
02 John E. Pence 05 Roger D. Shober all nominees from all nominees
03 Gary S. Stevens (except as marked)
_________________________________________
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE, | |
WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.) |_________________________________________|
2. Amendment to the Company's 1996 Stock Incentive Plan to increase the
number of shares reserved for issuance under the Plan. [ ] For [ ] Against [ ] Abstain
3. Ratification of selection of Grant Thornton LLP as independent
accountants for the year 2000. [ ] For [ ] Against [ ] Abstain
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR EACH
PROPOSAL AND, IN THE DISCRETION OF THE PROXIES, ON ANY OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENTS OR POSTPONEMENTS THEREOF.
Address Change? Mark Box [ ] Indicate changes below: Date __________________________
_________________________________________
| |
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Signature(s) in Box
Please sign exactly as your name(s) appear
on Proxy. If held in joint tenancy, all
persons must sign. Trustees, administrators,
etc., should include title and authority.
Corporations should provide full name of
corporation and title of authorized officer
signing the proxy.
</TABLE>
