<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 Section240.14a-11(c) or
Section240.14a-12
RACOTEK, 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.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
7301 OHMS LANE, SUITE 200
MINNEAPOLIS, MN 55439
December 8, 1997
To Our Stockholders:
You are cordially invited to attend a Special Meeting of Stockholders of
Racotek, Inc. to be held at the Radisson Hotel South, 7800 Normandale Blvd.,
Bloomington, Minnesota 55439 on Wednesday, December 31, 1997 at 10:00 a.m.
Central Time.
The matter expected to be acted upon at the meeting is described in detail
in the following Notice of Special Meeting of Stockholders and Proxy Statement.
It is important that you use this opportunity to take part in the affairs of
your Company by voting on the business to come before this meeting. WHETHER OR
NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND PROMPTLY
RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO THAT YOUR
SHARES MAY BE REPRESENTED AT THE MEETING. Returning the Proxy does not deprive
you of your right to attend the meeting and to vote your shares in person.
We look forward to seeing you at the meeting.
Sincerely,
/s/ Michael A. Fabiaschi
Michael A. Fabiaschi
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
RACOTEK, INC.
7301 OHMS LANE, SUITE 200
MINNEAPOLIS, MINNESOTA 55439
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
---------------------
To Our Stockholders:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Racotek,
Inc. (the "Company") will be held at the Radisson Hotel South, 7800 Normandale
Blvd., Bloomington, Minnesota 55439 on Wednesday, December 31, 1997 at 10:00
a.m. Central Time for the following purpose:
1. To consider and vote upon a proposal to amend the Company's 1993 Equity
Incentive Plan (the "Equity Incentive Plan") to (i) increase the number
of shares of Common Stock reserved for issuance thereunder from 3,200,000
to 5,700,000 shares, (ii) increase the maximum number of shares of Common
Stock that may be received under the Equity Incentive Plan from 750,000
shares over the term of the Equity Incentive Plan to 1,000,000 shares per
calendar year, and (iii) make this maximum grant limitation applicable to
all employees of the Company participating in the Equity Incentive Plan.
The foregoing item of business is more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on November 21, 1997
are entitled to notice of and to vote at the meeting or any adjournment or
postponement thereof.
By Order of the Board of Directors
/s/ Michael A. Fabiaschi
Michael A. Fabiaschi
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Minneapolis, Minnesota
December 8, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO
THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
<PAGE>
RACOTEK, INC.
7301 OHMS LANE, SUITE 200
MINNEAPOLIS, MINNESOTA 55439
------------------------
PROXY STATEMENT
---------------------
DECEMBER 8, 1997
The accompanying proxy is solicited on behalf of the Board of Directors of
Racotek, Inc., a Delaware corporation (the "Company" or "Racotek"), for use at a
Special Meeting of Stockholders of the Company to be held at the Radisson Hotel
South, 7800 Normandale Blvd., Bloomington, Minnesota 55439, on Wednesday,
December 31, 1997 at 10:00 a.m. Central Time (the "Meeting"). All proxies will
be voted in accordance with the instructions contained therein, and, if no
choice is specified, the proxies will be voted in favor of the proposal set
forth in the accompanying Notice of Special Meeting and this Proxy Statement.
This Proxy Statement and the accompanying form of proxy were first mailed to
stockholders on or about December 8, 1997.
VOTING RIGHTS AND SOLICITATION OF PROXIES
At the close of business on November 21, 1997, the Company had 24,998,057
shares of Common Stock outstanding and entitled to vote. No shares of the
Company's Preferred Stock were outstanding. Only holders of record of the
Company's Common Stock at the close of business on November 21, 1997 will be
entitled to vote at the Meeting. A majority of such shares, present in person or
represented by proxy, will constitute a quorum for the transaction of business.
Holders of the Company's Common Stock are entitled to one vote for each share
held as of the above record date.
Approval of the amendment to the Company's 1993 Equity Incentive Plan
requires the affirmative vote of the majority of shares of Common Stock present
in person or represented by proxy at the Meeting entitled to vote. All votes
will be tabulated by the inspector of election appointed for the Meeting who
will tabulate affirmative and negative votes, abstentions and broker non-votes.
Abstentions will be counted towards a quorum and have the same effect as
negative votes with regard to the proposal. Broker non-votes will also be
counted towards a quorum but will not be counted for any purpose in determining
whether the proposal has been approved.
The cost of preparing, assembling, printing and mailing the Proxy Statement
and the accompanying form of proxy, as well as the expenses of soliciting
proxies to be voted at the Meeting, will be borne by the Company. The Company
has retained Corporate Investor Communications, Inc. ("CIC") to assist the
Company in soliciting proxies in connection with the Meeting. The Company
estimates that an aggregate amount of approximately $6,000 in fees and expenses
will be paid to CIC in connection with such services. Following the original
mailing of the proxies and other soliciting materials, the Company and/or its
agents may also solicit proxies by mail, telephone, telecopy or in person. No
additional compensation will be paid for any such services. Following the
original mailing of the proxies and other soliciting materials, the Company will
request that brokers, custodians, nominees and other record holders of the
Company's Common Stock forward copies of the proxy and other soliciting
materials to persons for whom they hold shares of Common Stock and request
authority for the exercise of proxies. In such cases, the Company, upon the
request of the record holders, will reimburse such holders for their reasonable
expenses.
<PAGE>
REVOCABILITY OF PROXIES
Any person signing a proxy in the form accompanying this Proxy Statement has
the power to revoke it prior to the Meeting or at the Meeting prior to the vote
pursuant to the proxy. A proxy may be revoked by a written instrument delivered
to the Company stating that the proxy is revoked, by a subsequent proxy that is
signed by the person who signed the earlier proxy and is presented at the
Meeting, or by attendance at the Meeting and voting in person. However, if a
stockholder's shares are held of record by a broker, bank or other nominee and
that stockholder wishes to vote at the Meeting, the stockholder must bring to
the Meeting a letter from the broker, bank or other nominee confirming the
stockholder's beneficial ownership of the shares.
PROPOSAL NO. 1--APPROVAL OF AMENDMENT TO THE
1993 EQUITY INCENTIVE PLAN
Stockholders are being asked to approve an amendment to the Company's 1993
Equity Incentive Plan (the "Equity Incentive Plan") to (i) increase the number
of shares of Common Stock reserved for issuance thereunder from 3,200,000 shares
to 5,700,000 shares (an increase of 2,500,000 shares), (ii) increase the maximum
number of shares of Common Stock that may be granted under the Equity Incentive
Plan from 750,000 shares over the term of the Equity Incentive Plan to 1,000,000
shares per calendar year, and (iii) apply the foregoing maximum grant
limitation, which currently only applies to the Company's Named Executive
Officers, to all employees of the Company participating in the Equity Incentive
Plan. The Board of Directors of the Company (the "Board") approved the proposed
amendment described above on November 11, 1997 to be effective upon stockholder
approval. Stockholder approval of the amendment requires the affirmative vote of
a majority of the Company's voting shares that are present in person or
represented by proxy and entitled to vote at the Meeting.
The Board believes that the availability of additional option shares is an
important element in the successful development of Racotek's systems integration
business. Due to market conditions, Racotek is currently undergoing a transition
from a product oriented business to a services oriented systems integration
company. The Board believes that a critical success factor in this transition is
the Company's ability to recruit and retain personnel with strong information
technology and consulting expertise. Given the intense competition for such
personnel, the Board believes that its ability to offer competitive compensation
packages, including those with equity incentive components, is particularly
important to attracting and retaining the most qualified candidates. In
addition, the Board believes that by using equity based incentives, the
interests of its management and employees will be aligned with the interests of
its shareholders. The Company believes that increasing the size of the maximum
grant under the Equity Incentive Plan is important to give the Company
flexibility in providing equity incentives to key employees. The Company has
been advised that making this limitation applicable to all employees is required
by applicable law.
Unless otherwise indicated, the following summary of the principal
provisions of the Equity Incentive Plan assumes the approval of this Proposal
No. 1. This summary is qualified in its entirety by reference to the full text
of the Equity Incentive Plan which is set forth as APPENDIX A.
1993 EQUITY INCENTIVE PLAN
EQUITY INCENTIVE PLAN HISTORY. The Board adopted the Equity Incentive Plan
on October 21, 1993 and it was approved by stockholders on November 12, 1993.
The Equity Incentive Plan offers eligible persons an opportunity to participate
in the Company's future performance through awards of stock options, restricted
stock and stock bonuses. At the time that it adopted the Equity Incentive Plan,
the Company reduced the number of shares in its 1989 Stock Option Plan to
2,400,673--the number of options then outstanding. Since then, all stock option
grants have been made pursuant to the Equity Incentive Plan; however, shares
underlying options issued under the 1989 Stock Option Plan that expire
unexercised
2
<PAGE>
become available for grant under the Equity Incentive Plan. The Equity Incentive
Plan was amended on March 21, 1996 to increase the number of shares of Common
Stock reserved for issuance thereunder from 1,200,000 to 2,200,000, and on March
28, 1997 to increase the number of shares of Common Stock reserved for issuance
thereunder from 2,200,000 to 3,200,000 shares.
SHARES SUBJECT TO THE EQUITY INCENTIVE PLAN. Subject to stockholder
approval of this Proposal No. 1, an aggregate of 5,700,000 shares of the
Company's Common Stock have been reserved for issuance under the Equity
Incentive Plan. If any option granted pursuant to the Company's 1989 Stock
Option Plan or the Equity Incentive Plan expires or terminates for any reason
without being exercised in whole or in part, or any award is forfeited or
repurchased by the Company at the original issue price or terminates without
being issued, the shares released from such award will again become available
for grant and issuance under the Equity Incentive Plan. In addition, any shares
issuable upon exercise of options granted pursuant to the Company's 1989 Stock
Option Plan that expire or become unexercisable for any reason without having
been exercised in full also will become available for distribution under the
Equity Incentive Plan. Subject to stockholder approval of this Proposal No. 1,
as of November 21, 1997, options to purchase 2,763,832 shares of the Company's
Common Stock are available for future awards under the Equity Incentive Plan.
ADMINISTRATION. The Equity Incentive Plan is administered by the
Compensation Committee (the "Committee"), the members of which are appointed by
the Board. The Committee currently consists of Yuval Almog and Dixon R. Doll,
both of whom are "disinterested persons" as that term is defined under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and "outside
directors" as that term is defined pursuant to Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code").
Subject to the terms of the Equity Incentive Plan, the Committee determines
the persons who are to receive awards, the number of shares subject to each such
award and the terms and conditions of such awards. The Committee also has the
authority to construe and interpret any of the provisions of the Equity
Incentive Plan or any awards granted thereunder. See the Compensation Committee
Report on Executive Compensation contained herein.
ELIGIBILITY. Employees, officers, directors, consultants, independent
contractors and advisers of the Company (and of any parent and subsidiaries)
whom the Board deems to have any potential to contribute to the future success
of the Company (the "Participants") will be eligible to receive awards under the
Equity Incentive Plan, provided such consultants, independent contractors and
advisers render bona fide services not in connection with the offer and sale of
securities in a capital-raising transaction. The Equity Incentive Plan (without
stockholder approval of this Proposal No. 1) permits a "Named Executive
Officer," as that term is defined under Item 402(a)(3) of Regulation S-K
promulgated under the Securities Act of 1933, as amended (the "Securities Act")
and the Exchange Act (a "Named Executive Officer"), to receive a maximum of
750,000 shares of Common Stock over the term of the Equity Incentive Plan.
Subject to stockholder approval of this Proposal No. 1, the Company's employees
participating in the Equity Incentive Plan may not receive more than 1,000,000
shares of Common Stock per calendar year. As of November 21, 1997, approximately
48 persons were eligible to receive awards under the Equity Incentive Plan,
115,331 shares had been issued upon exercise of options and 2,820,837 shares
were subject to outstanding options. As of that date, 2,763,832 shares were
available for future awards, after taking into account the proposed increase. As
of that date, the fair market value of the Company's Common Stock was $1.375 per
share. As of November 21, 1997, the Company's current Named Executive Officers
have been granted options to purchase shares of Common Stock under the Equity
Incentive Plan as follows: Michael A. Fabiaschi, 578,200 shares; Isaac
Shpantzer, 232,308 shares; and Paul Edelhertz, 200,000 shares. Current executive
officers as a group have been granted options to purchase 1,594,769 shares, and
all employees as a group, other than executive officers, have been granted
options to purchase 1,118,902 shares. The benefits to be received from the
amendment to the Equity Incentive Plan by the Company's directors, executive
officers and employees are not determinable at this time.
3
<PAGE>
STOCK OPTIONS. The Equity Incentive Plan permits the granting of options
that are intended to qualify either as Incentive Stock Options ("ISOs") or
Nonqualified Stock Options ("NQSOs").
ISOs may be granted only to employees. The option exercise price for each
ISO must be no less than 100% of the fair market value (as defined in the Equity
Incentive Plan) of a share at the time such option is granted (except in the
case of a 10% stockholder, in which case the exercise price must be no less than
110% of the fair market value). The option exercise price for each NQSO must be
no less than 85% of the fair market value of a share at the time of grant.
The exercise price of options granted under the Equity Incentive Plan,
generally must be paid in cash or by check or, when approved by the Committee in
its sole discretion, by cancellation of indebtedness of the Company to the
Participant; by surrender of shares that either (i) have been owned by the
Participant for more than six months and have been paid for within the meaning
of Rule 144 of the Securities Act or (ii) were obtained by the Participant in
the public market; by tender of a full recourse promissory note; by waiver of
compensation due to or accrued by the Participant for services rendered; by
tender of property; by a "same-day sale" commitment from the Participant and a
NASD broker; by a "margin" commitment from the Participant and a NASD broker; or
by any combination of the foregoing.
RESTRICTED STOCK AWARDS. The Committee may grant Participants restricted
stock awards to purchase stock either in addition to, or in tandem with, other
awards under the Equity Incentive Plan, under such terms, conditions and
restrictions as the Committee may determine. The purchase price for such awards
must be no less than 85% of the fair market value of the Company's Common Stock
on the date of the award (except in the case of a 10% stockholder, in which case
the purchase price must be 100% of the fair market value), and can be paid for
as described under "Stock Options" above (except through a "same-day sale" or
"margin" commitment).
STOCK BONUS AWARDS. The Committee may grant Participants stock bonus awards
either in addition to, or in tandem with, other awards under the Equity
Incentive Plan, under such terms, conditions and restrictions as the Committee
may determine.
MERGERS, CONSOLIDATIONS, CHANGE OF CONTROL. In the event of a merger,
consolidation, dissolution or liquidation of the Company, the sale of
substantially all the assets of the Company or any other similar corporate
transaction, the successor corporation, if any, may assume or replace awards,
substitute equivalent awards in exchange for those granted under the Equity
Incentive Plan or provide substantially similar consideration, shares or other
property subject to repurchase restrictions no less favorable to the
Participants under the Equity Incentive Plan. In the event that the successor
corporation does not assume or substitute the awards, outstanding options will
accelerate and become exercisable in full prior to the consummation of such
transaction.
AMENDMENT OF THE EQUITY INCENTIVE PLAN. The Board may at any time terminate
or amend the Equity Incentive Plan in any respect, including amending any form
of award agreement or instrument to be executed pursuant to the Equity Incentive
Plan. The Board may not amend the Equity Incentive Plan in any manner that
requires stockholder approval pursuant to the Code or the regulations
promulgated thereunder or pursuant to the Exchange Act or Rule 16b-3 promulgated
thereunder (or its successor) without such approval.
TERM OF THE EQUITY INCENTIVE PLAN. The Equity Incentive Plan will terminate
on October 21, 2003, ten years from the date the Equity Incentive Plan was
adopted by the Board.
FEDERAL INCOME TAX INFORMATION
THE FOLLOWING IS INTENDED AS A GENERAL SUMMARY AS OF THE DATE OF THIS PROXY
STATEMENT OF THE FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY AND PARTICIPANTS
UNDER THE EQUITY INCENTIVE PLAN. THE FEDERAL TAX LAWS
4
<PAGE>
MAY CHANGE AND THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES FOR ANY PARTICIPANT
WILL DEPEND UPON HIS OR HER INDIVIDUAL CIRCUMSTANCES. EACH PARTICIPANT IS
ENCOURAGED TO SEEK THE ADVICE OF A QUALIFIED TAX ADVISOR REGARDING THE TAX
CONSEQUENCES OF PARTICIPATION IN THE EQUITY INCENTIVE PLAN.
INCENTIVE STOCK OPTIONS. A Participant will recognize no income upon grant
of an ISO and incur no tax on its exercise (unless the Participant is subject to
the alternative minimum tax (the "AMT")). If the Participant holds the stock
acquired upon exercise of an ISO (the "ISO Shares") for more than one year after
the date the option was exercised and for more than two years after the date the
option was granted, the Participant generally will realize long-term capital
gain or loss (rather than ordinary income or loss) upon disposition of the ISO
Shares. This gain or loss will be equal to the difference between the amount
realized upon such disposition and the amount paid for the ISO Shares.
If the Participant disposes of ISO Shares prior to the expiration of either
required holding period (a "disqualifying disposition"), the gain realized upon
such disposition, up to the difference between the fair market value of the ISO
Shares on the date of exercise (or, if less, the amount realized on a sale of
such shares) and the option exercise price, will be treated as ordinary income.
Any additional gain will be long-term, mid-term or short-term capital gain,
depending upon the amount of time the ISO Shares were held by the Participant.
ALTERNATIVE MINIMUM TAX. The difference between the fair market value of
the ISO Shares on the date of exercise and the exercise price is an adjustment
to income for purposes of the AMT. The AMT (imposed to the extent it exceeds the
taxpayer's regular tax) is 26% of that portion of an individual taxpayer's
alternative minimum taxable income that would otherwise be taxable as ordinary
income (28% in the case of alternative minimum taxable income in excess of
$175,000). A maximum 20% AMT applies with respect to alternative minimum taxable
income that would otherwise be taxable as net capital gain. Alternative minimum
taxable income is determined by adjusting regular taxable income for certain
items, increasing that income by certain tax preference items (including the
difference between the fair market value of the ISO Shares on the date of
exercise and the exercise price) and reducing this amount by the applicable
exemption amount ($45,000 in the case of a joint return, subject to reduction
under certain circumstances). If a disqualifying disposition of the ISO Shares
occurs in the same calendar year as exercise of the ISO, there is no AMT
adjustment with respect to those ISO Shares. Also, upon a sale of ISO Shares
that is not a disqualifying disposition, alternative minimum taxable income is
reduced in the year of sale by the excess of the fair market value of the ISO
Shares at exercise over the amount paid for the ISO Shares.
NONQUALIFIED STOCK OPTIONS. A Participant will not recognize any taxable
income at the time a NQSO is granted. However, upon exercise of a NQSO the
Participant will include in income as compensation an amount equal to the
difference between the fair market value of the shares on the date of exercise
and the Participant's exercise price. The included amount will be treated as
ordinary income by the Participant and may be subject to withholding by the
Company (either by payment in cash or withholding out of the Participant's
salary). Upon resale of the shares by the Participant, any subsequent
appreciation or depreciation in the value of the shares will be treated as
capital gain or loss.
RESTRICTED STOCK AND STOCK BONUS AWARDS. Restricted stock and stock bonus
awards will generally be subject to tax at the time of receipt, unless there are
restrictions that enable the Participant to defer tax. At the time that tax is
incurred, the tax treatment will be similar to that discussed above for NQSOs.
TAX RATES. The maximum rate applicable to ordinary income is 39.6%. Long
term capital gain will be taxed at a maximum tax rate of 20%. For this purpose,
in order to receive long-term capital gain treatment, the stock must be held for
more than eighteen months. Mid-term capital gain will be taxed at a maximum of
28%. For this purpose, in order to receive mid-term capital gain treatment, the
stock must be held for more than one year but not for more than eighteen months.
Capital gains will be offset by capital losses
5
<PAGE>
and up to $3,000 of capital losses may be offset annually against ordinary
income. The alternative minimum tax with respect to alternative minimum taxable
income that would otherwise be taxable as ordinary income is 26% (28% for
alternative minimum taxable income in excess of $175,000). A maximum 20% AMT
rate applies to alternative minimum taxable income that would otherwise be
taxable as net capital gain.
TAX TREATMENT OF THE COMPANY. The Company generally will be entitled to a
deduction in connection with the exercise of a NQSO by a Participant or the
receipt of restricted stock or stock bonuses by a Participant to the extent that
the Participant recognizes ordinary income. The Company will be entitled to a
deduction in connection with the disposition of ISO Shares only to the extent
that the Participant recognizes ordinary income on a disqualifying disposition
of the ISO Shares.
POTENTIAL LIMITATION ON COMPANY DEDUCTIONS. As part of the Omnibus Budget
Reconciliation Act of 1993, the U.S. Congress amended the Code to add Section
162(m), which denies a deduction to any publicly held corporation for
compensation paid to certain employees in a taxable year to the extent that
compensation exceeds $1,000,000 for a covered employee. It is possible that
compensation attributable to stock options, when combined with all other types
of compensation received by a covered employee from the Company, may cause this
limitation to be exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with Treasury regulations issued under Section 162(m), compensation
attributable to stock options will qualify as performance-based compensation,
provided that the option is granted by a compensation committee comprised solely
of "outside directors" and either: (i) the option plan contains a per-employee
limitation on the number of shares for which options may be granted during a
specified period, the per-employee limitation is approved by the stockholders,
and the exercise price of the option is no less than the fair market value of
the stock on the date of grant; or (ii) the option is granted (or exercisable)
only upon the achievement (as certified in writing by the compensation
committee) of an objective performance goal established in writing by the
compensation committee while the outcome is substantially uncertain, and the
option is approved by stockholders.
ERISA
The Equity Incentive Plan is not subject to any of the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA").
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL
OF THE AMENDMENT TO THE 1993 EQUITY INCENTIVE PLAN.
6
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company, as
of November 21, 1997, with respect to beneficial ownership of the Company's
Common Stock by (i) each stockholder known by the Company to be the beneficial
owner of more than 5% of the Company's Common Stock, (ii) each present director,
(iii) each of the Named Executive Officers and (iv) all executive officers and
directors as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS(2)
- --------------------------------------------------------------------------------- ------------------ -------------
<S> <C> <C>
Yuval Almog(3)................................................................... 4,211,460 16.8%
Motorola, Inc.(4)................................................................ 2,237,797 9.0
Joseph B. Costello(5)............................................................ 524,187 2.1
Michael A. Fabiaschi(6).......................................................... 410,075 1.6
Isaac Shpantzer(7)............................................................... 195,085 *
Dixon R. Doll(8)................................................................. 173,988 *
Donald L. Lucas(9)............................................................... 131,727 *
Norm Smith(10)................................................................... 122,500 *
Paul Edelhertz(11)............................................................... 55,688 *
James Osborn(12)................................................................. 45,000 *
David J. Maenke(13).............................................................. 37,500 *
Richard A. Cortese............................................................... 35,400 *
Ronald Bosrock................................................................... -- --
James Flaherty................................................................... -- --
Emmett B. Hume................................................................... -- --
All executive officers and directors as a group (12 persons)(14)................. 5,941,504 22.4%
</TABLE>
- ------------------------
* Less than 1%.
(1) Based upon information supplied by officers, directors and principal
stockholders, as well as Schedules 13G filed with the Securities and
Exchange Commission. Unless otherwise noted, each person or group identified
possesses sole voting and sole investment power with respect to such shares,
subject to community property laws where applicable. A person is deemed to
be the beneficial owner of securities that can be acquired by such person
within 60 days of November 21, 1997 upon the exercise of options or
warrants.
(2) Based upon 24,998,057 shares of Common Stock outstanding on November 21,
1997. Each beneficial owner's percentage ownership is determined by assuming
that options that are held by such person (but not those held by any other
person) and that are exercisable within 60 days of November 21, 1997 have
been exercised.
(3) Includes 61,187 shares of Common Stock owned of record by Mr. Almog and
129,383 shares underlying options that are exercisable within 60 days of
November 21, 1997 that, if exercised, would be subject to vesting
restrictions with respect to 40,250 shares. Also includes 1,504,374 shares
owned of record by Coral Partners II (known as IAI Ventures Partners II
prior to November 1, 1993), of which Mr. Almog is managing general partner
of the general partner, and 2,516,516 shares owned of record by Coral
Partners I-Superior (known as Superior Ventures prior to November 1, 1993),
of which Mr. Almog is managing general partner of the general partner. Mr.
Almog disclaims beneficial ownership with respect to the shares held by
these entities except to the extent attributable to him as a result of any
ownership interest he may have in such entities. Mr. Almog is Chairman of
the Board of Directors of the Company. Mr. Almog's address is Coral Group,
Inc., 60 South Sixth Street,
7
<PAGE>
Suite 3510, Minneapolis, Minnesota 55402. The address of Coral Partners is
60 South Sixth Street, Suite 3510, Minneapolis, MN 55402.
(4) The address of Motorola, Inc. is 1303 East Algonquin Road, Schaumburg,
Illinois 60196.
(5) Includes 400,000 shares of Common Stock owned of record by Mr. Costello and
64,187 shares held by the Costello Family Trust dated 10/21/92. Also
includes 60,000 shares of Common Stock underlying options exercisable within
60 days of November 21, 1997 that, if exercised, would be subject to vesting
restrictions with respect to 40,313 shares. Mr. Costello is a director of
the Company.
(6) Represents 410,075 shares of Common Stock underlying options exercisable
within 60 days of November 21, 1997. Mr. Fabiaschi is President, Chief
Executive Officer and a director of the Company.
(7) Includes 41,858 shares of Common Stock owned of record by Dr. Shpantzer and
136,058 shares underlying options exercisable within 60 days of November 21,
1997. Also includes an aggregate of 17,142 shares, representing 5,714 shares
owned by each of Dr. Shpantzer's three children. Dr. Shpantzer disclaims
beneficial ownership of the shares owned by his children. Dr. Shpantzer is
Fellow and Senior Vice President of Technology of the Company.
(8) Includes 117,988 shares of Common Stock owned of record by Dr. Doll, and
48,000 shares underlying options exercisable within 60 days of November 21,
1997 which, if exercised, would be subject to vesting restrictions with
respect to 26,250 shares. Also includes 5,000 shares held by the University
of Michigan Business School Growth Fund, and 3,000 shares owned by Dr.
Doll's son. Dr. Doll is an alumni investment manager for the University of
Michigan Business School Growth Fund. Dr. Doll disclaims beneficial
ownership with respect to the shares held by his son and this entity. Dr.
Doll is a director of the Company.
(9) Includes 58,551 shares owned of record by the Donald L. and Lygia S. Lucas
Trust dated 12/3/84, 2,500 of which are subject to vesting restrictions and
73,176 shares subject to options exercisable within 60 days of November 21,
1997 which, if exercised, would be subject to vesting restrictions with
respect to 28,750 shares. Mr. Lucas is a director of the Company.
(10) Includes 60,000 shares of Common Stock owned of record by Mr. Smith and
62,500 shares underlying options exercisable within 60 days of November 21,
1997. Mr. Smith is a director of the Company.
(11) Includes 1,000 shares of Common Stock owned of record by Mr. Edelhertz and
54,688 shares underlying options exercisable within 60 days of November 21,
1997. Mr. Edelhertz is the Vice President of Customer Solutions of the
Company.
(12) Represents 45,000 shares of Common Stock underlying options exercisable
within 60 days of November 21, 1997 that, if exercised, would be subject to
vesting restrictions with respect to 39,375 shares. Mr. Osborn is a director
of the Company and is the Vice President and General Manager, Worldwide
Network Services Division of Motorola, Inc.
(13) Represents 37,500 shares of Common Stock underlying options exercisable
within 60 days of November 21, 1997.
(14) Includes shares described in notes (3) through (12) above.
8
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by, or
paid for services rendered in all capacities to the Company during each of the
fiscal years ended December 31, 1994, 1995 and 1996 by each of the Named
Executive Officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION SECURITIES
--------------------------- UNDERLYING
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY($) BONUS($) OPTIONS(#)
- ------------------------------------------------------------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Michael A. Fabiaschi(1) ..................................... 1996 $ 194,103(2) $ 95,000(2) 250,000
President and Chief Executive Officer 1995 200,000(2) -- 30,000
1994 200,000(2) -- 50,000
Richard A. Cortese(3) ....................................... 1996 167,981 -- --
Former President and Former Vice Chairman of the Board 1995 224,843 -- 356,727(4)
1994 234,230 52,500 --
Isaac Shpantzer ............................................. 1996 174,179 27,300 20,000
Fellow and Senior Vice President of Technology 1995 159,000 19,000 30,000
1994 148,362 28,000 80,000
Emmett B. Hume(5) ........................................... 1996 147,789 6,750 --
Former Vice President of Marketing 1995 132,625 27,000 165,000
1994 -- -- --
Paul Edelhertz .............................................. 1996 63,718 41,667 175,000
Vice President of Customer Solutions 1995 -- -- --
1994 -- -- --
David J. Maenke(6) .......................................... 1996 50,193 10,417 150,000
Former Chief Financial Officer and Secretary 1995 -- -- --
1994 -- -- --
Ronald M. Bosrock(7) ........................................ 1996 142,941 -- --
Former Vice President of International Operations 1995 59,856 -- 100,000
1994 -- -- --
James E. Flaherty(8) ........................................ 1996 102,204 9,000 --
Former Chief Financial Officer and Secretary 1995 94,789 8,000 10,000
1994 88,673 13,700 20,000
</TABLE>
- ------------------------
(1) Mr. Fabiaschi was appointed President and Chief Executive Officer of the
Company in February 1996.
(2) Includes $80,000 of guaranteed commissions in each of fiscal 1994 and fiscal
1995, and includes $18,333 of draw or commissions prior to February 1996,
the date that Mr. Fabiaschi was appointed President and Chief Executive
Officer of the Company. Mr. Fabiaschi's employment agreement provided that
he was eligible for a bonus in 1996 of $90,000; the Board of Directors of
the Company awarded a bonus of $95,000.
(3) Mr. Cortese resigned as President and Chief Executive Officer of the Company
in February 1996 and resigned as Vice Chairman of the Board of Directors in
June 1996.
9
<PAGE>
(4) Includes options to purchase 206,727 shares of the Company's Common Stock
that were issued by the Company to Mr. Cortese to replace shares of stock
that he sold back to the Company at his original cost of $0.10 per share.
(5) Mr. Hume resigned as Vice President of Marketing of the Company in February
1997. The Company and Mr. Hume entered into a Severance Agreement and Mutual
Release dated February 26, 1997, as amended March 18, 1997, pursuant to
which the Company agreed to pay Mr. Hume an amount equal to his regular base
salary in effect at the time of his resignation semi-monthly through
December 1997 and an amount equal to an additional three months of salary in
December 1997, and Mr. Hume agreed to forfeit options to purchase 155,000
shares of the Company's Common Stock. Prior to his resignation, Mr. Hume had
exercised options to purchase 10,000 shares of the Company's Common Stock in
1997.
(6) Mr. Maenke resigned as Chief Financial Officer and Secretary in October
1997.
(7) Mr. Bosrock resigned as Vice President of International Operations in March
1996. The Company paid Mr. Bosrock an amount equal to his regular base
salary in effect at the time of his resignation semi-monthly through May 15,
1997.
(8) Mr. Flaherty resigned as Controller of the Company in December 1996.
OPTION GRANTS
The following table sets forth information regarding individual option
grants pursuant to the Company's equity incentive plans during fiscal 1996 to
each of the Named Executive Officers. In accordance with the rules of the
Securities and Exchange Commission, the table sets forth the hypothetical gains
or "option spreads" that would exist for the options at the end of their
respective terms. These gains are based on assumed rates of annual compound
stock appreciation of 5% of 10% from the date the option was granted to the end
of the option term. Actual gains, if any, on option exercises are dependent on
the future performance of the Company's Common Stock.
OPTION GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ------------------------
NAME GRANTED(1) FISCAL 1996 SHARE DATE 5%(2) 10%(2)
- ----------------------------------- ----------- ------------- --------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Michael A. Fabiaschi............... 250,000 23.7% $ 4.80 02/28/2006 $ 754,674 $ 1,912,491
Richard A. Cortese................. -- -- -- -- -- --
Isaac Shpantzer.................... 20,000 1.9 4.6875 04/30/2006 58,959 149,413
Emmett B. Hume..................... -- -- -- -- -- --
Paul Edelhertz..................... 175,000 16.6 3.9375 09/05/2006 433,348 1,098,188
David J. Maenke.................... 150,000 14.2 4.1250 08/19/2006 389,129 986,128
Ronald M. Bosrock.................. -- -- -- -- -- --
James E. Flaherty.................. -- -- -- -- -- --
</TABLE>
- ------------------------
(1) These securities are subject to incentive stock options that were granted at
fair market value and become exercisable with respect to 25% of the shares
on the first anniversary date after the date of grant and with respect to
6.25% of the shares each quarter thereafter.
(2) The 5% and 10% assumed rates of annual compound stock price appreciation are
mandated by the rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of future Common Stock
prices.
10
<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth certain information concerning the exercise
of options by each of the Named Executive Officers during fiscal 1996, including
the aggregate amount of gain on the date of exercise. In addition, the table
includes the number of shares covered by both exercisable and unexercisable
stock options held on December 31, 1996 by each of the Named Executive Officers.
Also reported are values for "in-the-money" stock options that represent the
positive spread between the respective exercise prices of outstanding stock
options and the fair market value of the Common Stock as of December 31, 1996 as
determined by the closing price of the Company's Common Stock as reported on the
Nasdaq National Market.
AGGREGATED OPTION EXERCISES IN FISCAL 1996 AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR IN-THE-MONEY OPTIONS AT
SHARES END(#) FISCAL YEAR END($)(2)
ACQUIRED ON VALUE -------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- -------------- ------------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Michael A. Fabiaschi......... -- -- 280,700 297,500 $ 1,047,285 $ 26,563
Richard A. Cortese........... 530,532 $ 2,654,949 108,384 -- 331,354 --
Isaac Shpantzer.............. 26,000 118,456 92,308 94,000 70,078 23,547
Emmett B. Hume(3)............ -- -- 66,563 98,437 50,157 150,474
Paul Edelhertz............... -- -- -- 175,000 -- 65,625
David J. Maenke.............. -- -- -- 150,000 -- 28,125
Ronald M. Bosrock............ -- -- 31,250 68,750 -- --
James E. Flaherty............ 20,000 100,188 37,875 -- 107,662 --
</TABLE>
- ------------------------
(1) "Value Realized" represents the fair market value of the shares of Common
Stock underlying the option on the date of exercise less the aggregate
exercise price of the option.
(2) The values of the options shown have not been and may never be realized and
are based on the positive spread between the respective exercise prices of
outstanding stock options and the closing price of the Company's Common
Stock on December 31, 1996 ($4.3125).
(3) Mr. Hume resigned as Vice President of Marketing of the Company in February
1997. The Company and Mr. Hume entered into a Severance Agreement and Mutual
Release dated February 26, 1997, as amended March 18, 1997, pursuant to
which the Company agreed to pay Mr. Hume an amount equal to his regular base
salary in effect at the time of his resignation semi-monthly through
December 1997 and an amount equal to an additional three months of salary in
December 1997, and Mr. Hume agreed to forfeit options to purchase 155,000
shares of the Company's Common Stock. Prior to his resignation, Mr. Hume had
exercised options to purchase 10,000 shares of the Company's Common Stock in
1997.
EMPLOYMENT AGREEMENTS
On February 29, 1996, the Company amended its agreement with Michael A.
Fabiaschi dated July 23, 1991. The amended agreement (the "Fabiaschi Agreement")
provides that Mr. Fabiaschi will be appointed President and Chief Executive
Officer of the Company. The Fabiaschi Agreement also provides that the Board
will use its best efforts to cause him to be nominated and elected to the Board
for each fiscal year during the term of his employment. The Fabiaschi Agreement
provides for employment at will, and has an indefinite term. Mr. Fabiaschi's
salary under this agreement is currently $225,000, which salary will be reviewed
by the Board annually for possible increases to be effective at the start of
each succeeding fiscal year. Mr. Fabiaschi is entitled to receive a cash bonus
at the end of each fiscal year at the discretion of the Compensation Committee,
subject to achieving in whole or in part Company and personal performance
11
<PAGE>
milestones that are agreed upon by Mr. Fabiaschi and the Board in advance.
Pursuant to the Fabiaschi Agreement, the Company has also granted Mr. Fabiaschi
an option to purchase 250,000 shares of the Company's Common Stock. This option
is in addition to the options to purchase 280,700 shares granted pursuant to the
agreement dated July 23, 1991. In the event that the Company terminates Mr.
Fabiaschi's employment other than for cause, the Company must continue to pay
Mr. Fabiaschi his base salary and to provide him with benefits for six months
and, if such termination is due to a change of control of the Company (with such
termination occurring within six months of the change of control), then the
Company must pay Mr. Fabiaschi an additional amount equal to his base salary and
guaranteed bonus for the preceding twelve month period.
The Company has entered into a standard employment agreement with each of
its employees (except Mr. Fabiaschi) which provides for protection of the
Company's confidential information, assignment to the Company of certain
inventions, and a prohibition against competition with the Company for two years
following termination. Mr. Edelhertz and Dr. Shpantzer, among others, are
subject to such agreements. No assurance can be given, however, that any such
noncompetition agreement would be enforced by a court. The Company's agreements
with Messrs. Edelhertz, Smith, Swantek and Kelman and Dr. Shpantzer also provide
for severance payments equal to six months (12 months in the case of Dr.
Shpantzer) of salary in the event of certain events of termination by the
Company.
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee Report on Executive Compensation shall not be
deemed to be incorporated by reference by any general statement incorporating by
reference this Proxy Statement into any filing under the Securities Act of 1933,
as amended, or under the Securities Exchange Act of 1934, as amended, except to
the extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
GENERAL
The Compensation Committee of the Board of Directors (the "Committee") makes
decisions regarding non-equity compensation for executives which are approved by
the entire Board or by the Executive Committee. Final decisions regarding stock
option grants to executives are made by the Committee itself. The Committee is
composed of two independent non-employee directors, neither of whom has any
interlocking relationships as defined by the Securities and Exchange Commission.
Each of the members of the Committee is a "disinterested" director within the
meaning of Section 16 of the Securities Act of 1934, as amended, and an "outside
director" within the meaning of Section 162(m) of the Internal Revenue Code of
1986, as amended. Although Michael A. Fabiaschi attends the meetings of the
Committee, he does not participate in deliberations that relate to his own
compensation.
GENERAL COMPENSATION POLICY
The Committee acts on behalf of the Board to establish the general
compensation policy of the Company for all employees of the Company. The
Committee typically reviews base salary levels and target bonuses for the Chief
Executive Officer ("CEO") and other executive officers and employees of the
Company before the beginning of each year. The Committee administers the
Company's incentive plans, including the 1993 Equity Incentive Plan (the "Equity
Incentive Plan"). Stock options granted under the Equity Incentive Plan provide
long-term incentives for officers because they generally have value only if the
price of the Company's stock increases above the fair market value on the grant
date and the officer remains in the Company's employ for the period required for
the shares to vest.
The Committee's philosophy in compensating executive officers, including the
CEO, is to consider (1) the Company's financial performance during the past
year, (2) the individual's performance during the
12
<PAGE>
past year, and (3) the salaries of executive officers in similar positions of
companies of comparable size and other companies in the telecommunications
industry. With respect to executive officers other than the CEO, the Committee
places considerable weight upon the recommendations of the CEO. The method for
determining compensation varies from case to case based on a discretionary and
subjective determination of what is appropriate at the time. In general, for
1996 no one factor was given greater consideration in determining compensation
than the other factors listed above.
1996 EXECUTIVE COMPENSATION
BASE COMPENSATION. Prior to the beginning of fiscal 1996, the Committee
reviewed the performance and market data outlined above and established a base
salary level for each executive officer, including the CEO.
INCENTIVE COMPENSATION. The Company awards cash bonuses only if an
executive officer achieves or exceeds individual performance goals and the
Company meets the relevant corporate objectives that are set by the Committee at
the beginning of the year. These factors receive approximately equal weighing,
but subjective factors can alter the weighing in any specific case. The CEO's
subjective judgment of executives' performances (other than his own) is taken
into account in determining whether individual performance goals have been
satisfied. Because the Company's business is still at an early stage of
development, the Company's corporate objectives include the establishment of
strategic relationships with corporate partners, continuing development of the
Company's products, and organizational growth, as well as typical measurements
of operational performances, such as number of customers, revenues and
profitability. The specific Company objectives, which are considered by the
Company to be confidential business information, do not necessarily have an
immediate or direct effect on the trading price of the Common Stock of the
Company. Target bonuses generally are set at 20% of an executive officer's base
compensation. The Committee retains discretion to award full, partial or pro
rata bonus payments or awards to executives for partial achievement of
objectives.
STOCK OPTIONS. In 1996, stock options were granted to certain executive
officers as incentives for them to become employees or to aid in the retention
of executive officers and to align their interests with those of the
stockholders. Stock options typically have been granted to executive officers
when the executive first joins the Company, in connection with a significant
change in responsibilities, and, occasionally, to achieve equity within a peer
group. The Committee may, however, grant additional stock options to executives
for other reasons. The number of shares subject to each stock option granted is
determined by the Committee in its sole discretion and is based on anticipated
future contributions and ability to impact corporate and/or business unit
results, past performance where applicable and consistency within the
executive's peer group. In the discretion of the Committee executive officers
may also be granted stock options under the Equity Incentive Plan to provide
greater incentives to those officers to continue their employment with the
Company and to strive to increase the value of the Company's Common Stock. The
relative importance of these factors varies from case to case based on a
discretionary and subjective determination by the Committee of what is
appropriate at the time. The stock options generally become exercisable over a
four-year period (25% at the end of the first year and 6.25% each quarter
thereafter) and are granted at a price that is equal to the fair market value of
the Company's Common Stock on the date of grant.
COMPANY PERFORMANCE AND CEO COMPENSATION
The Committee based Mr. Fabiaschi's compensation for fiscal 1996 on the
Company's financial performance, Mr. Fabiaschi's performance in his prior
position of Vice President of Sales and Support, the salaries of CEO's in
similar positions of companies of comparable size and other companies in the
telecommunications industry.
13
<PAGE>
COMPLIANCE WITH SECTION 162(m) OF THE INTERNAL REVENUE CODE OF 1986
The Company's Equity Incentive Plan complies with the requirements of
Section 162(m) of the Internal Revenue Code of 1986, as amended, and (subject to
approval of Proposal No. 1) limits the total number of options any employee
receives to 1,000,000 shares per calendar year. The Company does not expect cash
compensation to be affected by the requirements of Section 162(m) for fiscal
year 1997.
COMPENSATION COMMITTEE
Yuval Almog
Dixon R. Doll
COMPANY STOCK PRICE PERFORMANCE
The stock price performance graph below includes companies required by the
Securities and Exchange Commission and 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, as amended, or under
the Securities Exchange Act of 1934, as amended, except to the extent the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed soliciting material or filed under such Acts.
The following graph demonstrates a comparison of cumulative total returns
based upon an initial investment of $100.00 in the Company's Common Stock as
compared with the Hambrecht & Quist Technology Index and Nasdaq Stock
Market--U.S. Index. The stock price performance shown on the graph below is not
necessarily indicative of future price performance and only reflects the
Company's relative stock price on December 10, 1993 (the date the Company's
Common Stock began trading on the Nasdaq National Market), December 31, 1993,
December 31, 1994, December 31, 1995 and December 31, 1996.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
RACOTEK, INC. H&Q TECHNOLOGY INDEX NASDAQ STOCK MARKET - U.S. INDEX
<S> <C> <C> <C>
12/10/93 $ 100.00 $ 100.00 $ 100.00
12/31/93 $ 144.64 $ 102.88 $ 102.05
12/30/94 $ 48.21 $ 119.42 $ 99.79
12/29/95 $ 73.21 $ 179.31 $ 140.96
12/31/96 $ 61.61 $ 215.15 $ 173.61
</TABLE>
14
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Yuval Almong and Dixon R. Doll served on the Compensation Committee of the
Board of Directors during the fiscal year ended December 31, 1996.
COMPLIANCE UNDER SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16 of the Securities Exchange Act of 1934, as amended, requires the
Company's directors and officers, and persons who now more than 10% of a
registered class of the Company's equity securities, to file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission and the Nasdaq National Market. Such persons are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such forms furnished to the
Company and representations for the executive officers and directors, the
Company believes that all Section 16(a) filing requirements were met during
1996.
OTHER BUSINESS
The Board does not presently intend to bring any other business before the
Meeting, and, so far as is known to the Board, no matters are to be brought
before the Meeting except as specified in the notice of the Meeting. As to any
business that may properly come before the Meeting, however, it is intended that
proxies, in the form enclosed, will be voted in respect thereof in accordance
with the judgment of the persons voting such proxies.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Company's 1998
Annual Meeting of Stockholders must have been received by the Company at its
principal executive offices no later than November 28, 1997 in order to be
included in the Company's Proxy Statement and form of proxy relating to that
meeting.
Dated: December 8, 1997
By Order of the Board of Directors
/s/ Michael A. Fabiaschi
Michael A. Fabiaschi
PRESIDENT CHIEF EXECUTIVE OFFICER AND
SECRETARY
15
<PAGE>
APPENDIX A
RACOTEK, INC.
1993 EQUITY INCENTIVE PLAN
AS ADOPTED OCTOBER 21, 1993
AS AMENDED DECEMBER 22, 1995
AS AMENDED FEBRUARY 19, 1997
AS AMENDED NOVEMBER 11, 1997
1. PURPOSE. The purpose of the Plan is to provide incentives to attract,
retain and motivate eligible persons whose present and potential contributions
are important to the success of the Company, its Parents, Subsidiaries and
Affiliates, by offering them an opportunity to participate in the Company's
future performance through awards of Options, Restricted Stock and Stock
Bonuses. Capitalized terms not defined in the text are defined in Section 24.
2. SHARES SUBJECT TO THE PLAN.
2.1 NUMBER OF SHARES AVAILABLE. Subject to Sections 2.2 and 18, the
total number of Shares reserved and available for grant and issuance pursuant to
the Plan shall be five million seven hundred thousand (5,700,000) Shares. Any
Shares issuable upon exercise of options granted pursuant to the 1989 Stock
Option Plan (the "Prior Plan") that expire or become unexercisable for any
reason without having been exercised in full shall no longer be available for
distribution under the Prior Plan, but shall be available for distribution under
this Plan. Subject to Sections 2.2 and 18, Shares shall again be available for
grant and issuance in connection with future Awards under the Plan that: (a) are
subject to issuance upon exercise of an Option but cease to be subject to such
Option for any reason other than exercise of such Option, (b) are subject to an
Award granted hereunder but are forfeited or are repurchased by the Company at
the original issue price, or (c) are subject to an Award that otherwise
terminates without Shares being issued.
2.2 ADJUSTMENT OF SHARES. In the event that the number of outstanding
Shares is changed, a stock dividend, recapitalization, stock split, reverse
stock split, subdivision, combination, reclassification or similar change in the
capital structure of the Company without consideration, then (a) the number of
Shares reserved for issuance under the Plan, (b) the Exercise Prices of and
number of Shares subject to outstanding Options, and (c) the number of Shares
subject to other outstanding Awards shall be proportionately adjusted, subject
to any required action by the Board or the stockholders of the Company and
compliance with applicable securities laws; provided, however, that fractions of
a Share shall not be issued but shall either be paid in cash at Fair Market
Value or shall be rounded up to the nearest Share, as determined by the
Committee; and provided, further, that the Exercise Price of any Option may not
be decreased to below the par value of the Shares.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted only
to employees (including officers and directors who are also employees) of the
Company or of a Parent or Subsidiary of the Company. All other Awards may be
granted to employees, officers, directors, consultants, independent contractors
and advisers of the Company or any Parent, Subsidiary or Affiliate of the
Company; provided such consultants, contractors and advisers render bona fide
services not in connection with the offer and sale of securities in a
capital-raising transaction. Employees shall each be eligible to receive up to
an aggregate maximum of one million (1,000,000) Shares each calendar year. A
person may be granted more than one Award under the Plan.
4. ADMINISTRATION.
4.1 COMMITTEE AUTHORITY. The Plan shall be administered by the
Committee or the Board acting as the Committee. Subject to the general purposes,
terms and conditions of the Plan, and to the direction
1
<PAGE>
of the Board, the Committee shall have full power to implement and carry out the
Plan. The Committee shall have the authority to:
(a) construe and interpret the Plan, any Award Agreement and any
other agreement or document executed pursuant to the Plan;
(b) prescribe, amend and rescind rules and regulations relating to
the Plan;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration subject to
Awards;
(f) determine whether Awards will be granted singly, in combination,
in tandem, in replacement of, or as alternatives to, other Awards under the Plan
or any other incentive or compensation plan of the Company or any Parent,
Subsidiary or Affiliate of the Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting, exercisability and payment of Awards;
(i) correct any defect, supply any omission, or reconcile any
inconsistency in the Plan, any Award or any Award Agreement;
(j) determine whether an Award has been earned; and
(k) make all other determinations necessary or advisable for the
administration of the Plan.
4.2 COMMITTEE DISCRETION. Any determination made by the Committee with
respect to any Award shall be made in its sole discretion at the time of grant
of the Award or, unless in contravention of any express term of the Plan or
Award, at any later time, and such determination shall be final and binding on
the Company and all persons having an interest in any Award under the Plan. The
Committee may delegate to one or more officers of the Company the authority to
grant an Award under the Plan to Participants who are not Insiders of the
Company.
4.3 EXCHANGE ACT REQUIREMENTS. If two or more members of the Board are
Outside Directors, the Committee shall be comprised of at least two members of
the Board, all of whom are Outside Directors and Disinterested Persons. The
Company will take appropriate steps to comply with the disinterested
administration requirements of Section 16(b) of the Exchange Act, which shall
consist of the appointment by the Board of a Committee consisting of not less
than two members of the Board, each of whom is a Disinterested Person.
5. OPTIONS. The Committee may grant Options to eligible persons and shall
determine whether such Options shall be Incentive Stock Options within the
meaning of the Code ("ISOs") or Nonqualified Stock Options ("NQSOs"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:
5.1 FORM OF OPTION GRANT. Each Option granted under the Plan shall be
evidenced by an Award Agreement which shall expressly identify the Option as an
ISO or NQSO ("Stock Option Agreement"), and be in such form and contain such
provisions (which need not be the same for each Participant) as the Committee
shall from time to time approve, and which shall comply with and be subject to
the terms and conditions of the Plan.
5.2 DATE OF GRANT. The date of grant of an Option shall be the date on
which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy of
the Plan will be delivered to the Participant within a reasonable time after the
granting of the Option.
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5.3 EXERCISE PERIOD. Options shall be exercisable within the times or
upon the events determined by the Committee as set forth in the Stock Option
Agreement; provided, however, that no Option shall be exercisable after the
expiration of one hundred twenty (120) months from the date the Option is
granted, and provided further that no ISO granted to a person who directly or by
attribution owns more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Parent or Subsidiary of the
Company ("Ten Percent Stockholder") shall be exercisable after the expiration of
five (5) years from the date the Option is granted. The Committee also may
provide for the exercise of Options to become exercisable at one time or from
time to time, periodically or otherwise, in such number or percentage as the
Committee determines.
5.4 EXERCISE PRICE. The Exercise Price shall be determined by the
Committee when the Option is granted and may be not less than 85% of the Fair
Market Value of the Shares on the date of grant; provided that (i) the Exercise
Price of an ISO shall be not less than 100% of the Fair Market Value of the
Shares on the date of grant and (ii) the Exercise price of any ISO granted to a
Ten Percent Stockholder shall not be less than 110% of the Fair Market Value of
the Shares on the date of grant. Payment for the Shares purchased may be made in
accordance with Section 8 of the Plan.
5.5 METHOD OF EXERCISE. Options may be exercised only by delivery to
the Company of a written stock option exercise agreement (the "Exercise
Agreement") in a form approved by the Committee (which need not be the same for
each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares, if any, and such representations and
agreements regarding Participant's investment intent and access to information,
if any, as may be required or desirable by the Company to comply with applicable
securities laws, together with payment in full of the Exercise Price for the
number of Shares being purchased.
5.6 TERMINATION. Notwithstanding the exercise periods set forth in the
Stock Option Agreement, exercise of an Option shall always be subject to the
following:
(a) If the Participant is Terminated for any reason except death or
Disability, then Participant may exercise such Participant's Options only to the
extent that such Options would have been exercisable upon the Termination Date
no later than ninety (90) days after the Termination Date (or such shorter time
period as may be specified in the Stock Option Agreement), but in any event, no
later than the expiration date of the Options.
(b) If the Participant is terminated because of death or Disability
(or the Participant dies within three months of such termination), then
Participant's Options may be exercised only to the extent that such Options
would have been exercisable by Participant on the Termination Date and must be
exercised by Participant (or Participant's legal representative or authorized
assignee) no later than twelve (12) months after the Termination Date (or such
shorter time period as may be specified in the Stock Option Agreement), but in
any event no later than the expiration date of the Options.
5.7 LIMITATIONS ON EXERCISE. The Committee may specify a reasonable
minimum number of Shares that may be purchased on any exercise of an Option,
provided that such minimum number will not prevent Participant from exercising
the Option for the full number of Shares for which it is then exercisable.
5.8 LIMITATIONS ON ISOS. The aggregate Fair Market Value (determined
as of the date of grant) of Shares with respect to which ISOs are exercisable
for the first time by a Participant during any calendar year under the Plan or
under any other incentive stock option plan of the Company or any Affiliate,
Parent or Subsidiary of the Company) shall not exceed $100,000. If the Fair
Market Value of Shares on the date of grant with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year exceeds
$100,000, the Options for the first $100,000 worth of Shares to become
exercisable in such calendar year shall be ISOs and the Options for the amount
in excess of $100,000 that become exercisable in that calendar year shall be
NQSOs. In the event that the Code or the regulations promulgated
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thereunder are amended after the Effective Date of the Plan to provide for a
different limit on the Fair Market Value of Shares permitted to be subject to
ISOs, such different limit shall be automatically incorporated herein and shall
apply to any Options granted after the effective date of such amendment.
5.9 MODIFICATION, EXTENSION OR RENEWAL. The Committee may modify,
extend or renew outstanding Options and authorize the grant of new Options in
substitution therefor, provided that any such action may not, without the
written consent of Participant, impair any of Participant's rights under any
Option previously granted. Any outstanding ISO that is modified, extended,
renewed or otherwise altered shall be treated in accordance with Section 424(h)
of the Code. The Committee may reduce the Exercise Price of outstanding Options
without the consent of Participants affected by a written notice to them;
provided, however, that the Exercise Price may not be reduced below the minimum
Exercise Price that would be permitted under Section 5.4 of the Plan for Options
granted on the date the action is taken to reduce the Exercise Price; provided,
further, that the Exercise Price shall not be reduced below the par value of the
Shares, if any.
5.10 NO DISQUALIFICATION. Notwithstanding any other provision in the
Plan, no term of the Plan relating to ISOs shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be
exercised, so as to disqualify the Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the Company
to sell to an eligible person Shares that are subject to restrictions. The
Committee shall determine to whom an offer will be made, the number of Shares
the person may purchase, the price to be paid (the "Purchase Price"), the
restrictions to which the Shares shall be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1 FORM OF RESTRICTED STOCK AWARD. All purchases under a Restricted
Stock Award made pursuant to the Plan shall be evidenced by an Award Agreement
("Restricted Stock Purchase Agreement") that shall be in such form (which need
not be the same for each Participant) as the Committee shall from time to time
approve, and shall comply with and be subject to the terms and conditions of the
Plan. The offer of Restricted Stock shall be accepted by the Participant's
execution and delivery of the Restricted Stock Purchase Agreement and full
payment for the Shares to the Company within thirty (30) days from the date the
Restricted Stock Purchase Agreement is delivered to the person. If such person
does not execute and deliver the Restricted Stock Purchase Agreement along with
full investment for the Shares to the Company within thirty (30) days, then the
offer shall terminate, unless otherwise determined by the Committee.
6.2 PURCHASE PRICE. The Purchase Price of Shares sold pursuant to a
Restricted Stock Award shall be determined by the Committee and shall be at
least 85% of the Fair Market Value of the Shares when the Restricted Stock Award
is granted, except in the case of a sale to a Ten Percent Stockholder, in which
case the Purchase Price shall be 100% of the Fair Market Value. Payment of the
Purchase Price may be made in accordance with Section 8 of the Plan.
6.3 RESTRICTIONS. Restricted Stock Awards shall be subject to such
restrictions as the Committee may impose. The Committee may provide for the
lapse of such restrictions in installments and may accelerate or waive such
restrictions, in whole or part, based on length of service, performance or such
other factors or criteria as the Committee may determine.
7. STOCK BONUSES.
7.1 AWARDS OF STOCK BONUSES. A Stock Bonus is an award of Shares
(which may consist of Restricted Stock) for services rendered to the Company or
any Parent, Subsidiary or Affiliate of the Company. A Stock Bonus may be awarded
for past services already rendered to the Company, or any Parent, Subsidiary or
Affiliate of the Company pursuant to an Award Agreement (the "Stock Bonus
Agreement") that shall be in such form (which need not be the same for each
Participant) as the
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Committee shall from time to time approve, and shall comply with and be subject
to the terms and conditions of the Plan. A Stock Bonus may be awarded upon
satisfaction of such performance goals as are set out in advance in
Participant's individual Award Agreement (the "Performance Stock Bonus
Agreement") that shall be in such form (which need not be the same for each
Participant) as the Committee shall from time to time approve, and shall comply
with and be subject to the terms and conditions of the Plan. Stock Bonuses may
vary from Participant to Participant and between groups of Participants, and may
be based upon the achievement of the Company, Parent, Subsidiary or Affiliate
and/or individual performance factors or upon such other criteria as the
Committee may determine.
7.2 TERMS OF STOCK BONUSES. The Committee shall determine the number
of Shares to be awarded to the Participant and whether such Shares shall be
Restricted Stock. If the Stock Bonus is being earned upon the satisfaction of
performance goals pursuant to a Performance Stock Bonus Agreement, then the
Committee shall determine: (a) the nature, length and starting date of any
period during which performance is to be measured (the "Performance Period") for
each Stock Bonus; (b) the performance goals and criteria to be used to measure
the performance, if any; (c) the number of Shares that may be awarded to the
Participant; and (d) the extent to which such Stock Bonuses have been earned.
Performance Periods may overlap and Participants may participate simultaneously
with respect to Stock Bonuses that are subject to different Performance Periods
and different performance goals and other criteria. The number of Shares may be
fixed or may vary in accordance with such performance goals and criteria as may
be determined by the Committee. The Committee may adjust the performance goals
applicable to the Stock Bonuses to take into account changes in law and
accounting or tax rules and to make such adjustments as the Committee deems
necessary or appropriate to reflect the impact of extraordinary or unusual
items, events or circumstances to avoid windfalls or hardships.
7.3 FORM OF PAYMENT. The earned portion of a Stock Bonus may be paid
currently or on a deferred basis with such interest or dividend equivalent, if
any, as the Committee may determine. Payment may be made in the form of cash,
whole Shares, including Restricted Stock, or a combination thereof, either in a
lump sum payment or in installments, all as the Committee shall determine.
7.4 TERMINATION DURING PERFORMANCE PERIOD. If a Participant is
Terminated during a Performance Period for any reason, then such Participant
shall be entitled to payment (whether in Shares, cash or otherwise) with respect
to the Stock Bonus only to the extent earned as of the date of Termination in
accordance with the Performance Stock Bonus Agreement, unless the Committee
shall determine otherwise.
8. PAYMENT FOR SHARE PURCHASES.
8.1 PAYMENT. Payment for Shares purchased pursuant to the Plan may be
made in cash (by check) or, where expressly approved for the Participant by the
Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of Shares that either: (1) have been owned by
Participant for more than six (6) months and have been paid for within the
meaning of SEC Rule 144 (and, if such shares were purchased from the Company by
use of a promissory note, such note has been fully paid with respect to such
Shares); or (2) were obtained by Participant in the public market;
(c) by tender of a full recourse promissory note having such terms
as may be approved by the Committee and bearing interest at a rate sufficient to
avoid imputation of income under Sections 483 and 1274 of the Code; provided,
however, that Participants who are not employees of the Company shall not be
entitled to purchase Shares with a promissory note unless the note is adequately
secured by collateral other than the Shares; provided, further, that the portion
of the Purchase Price equal to the par value of the Shares, if any, must be paid
in cash;
(d) by waiver of compensation due or accrued to Participant for
services rendered;
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(e) by tender of property;
(f) with respect only to purchases upon exercise of an Option, and
provided that a public market for the Company's stock exists:
(1) through a "same day sale" commitment from Participant and a
broker-dealer that is a member of the National Association of Securities Dealers
(an "NASD Dealer") whereby Participant irrevocably elects to exercise the Option
and to sell a portion of the Shares so purchased to pay for the Exercise Price,
and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Company; or
(2) through a "margin" commitment from Participant and an NASD
Dealer whereby Participant irrevocably elects to exercise the Option and to
pledge the Shares so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount of the Exercise Price,
and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the exercise price directly to the Company; or
(g) by any combination of the foregoing.
8.2 LOAN GUARANTEES. The Committee may help the Participant pay for
Shares purchased under the Plan by authorizing a guarantee by the Company of a
third-party loan to the Participant.
9. WITHHOLDING TAXES.
9.1 WITHHOLDING GENERALLY. Whenever Shares are to be issued in
satisfaction of Awards granted under the Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for Shares. Whenever, under the Plan, payments in
satisfaction of Awards are to be made in cash, such payment shall be net of an
amount sufficient to satisfy federal, state, and local withholding tax
requirements.
9.2 STOCK WITHHOLDING. When, under applicable tax laws, a Participant
incurs tax liability in connection with the exercise or vesting of any Award
that is subject to tax withholding and the Participant is obligated to pay the
Company the amount required to be withheld, the Committee may allow the
Participant to satisfy the minimum withholding tax obligation by electing to
have the Company withhold from the Shares to be issued that number of Shares
having a Fair Market Value equal to the minimum amount required to be withheld,
determined on the date that the amount of tax to be withheld is to be determined
(the "Tax Date"). All elections by a Participant to have Shares withheld for
this purpose shall be made in writing in a form acceptable to the Committee and
shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax
Date;
(b) once made, then except as provided below, the election shall be
irrevocable as to the particular Shares as to which the election is made;
(c) all elections shall be subject to the consent or disapproval of
the Committee;
(d) if the Participant is an Insider and if the Company is subject
to Section 16(b) of the Exchange Act: (1) the election may not be made within
six (6) months of the date of grant of the Award, except as otherwise permitted
by SEC Rule 16b-3(e) under the Exchange Act, and (2) either (A) the election to
use stock withholding must be irrevocably made at least six (6) months prior to
the Tax Date (although such election may be revoked at any time at least six (6)
months prior to the Tax Date) or (B) the exercise of the Option or election to
use stock withholding must be made in the ten (10) day period beginning on the
third day following the release of the Company's quarterly or annual summary
statement of sales or earnings; provided, that, prior to the date the Company
elects to comply with the requirements of Rule 16b-3, as amended effective May
l, 1992, the provisions of former Rule 16b-3(e) of the Exchange Act shall apply
with respect to any such elections; and
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(e) in the event that the Tax Date is deferred until six (6) months
after the delivery of Shares under Section 83(b) of the Code, the Participant
shall receive the full number of Shares with respect to which the exercise
occurs, but such Participant shall be unconditionally obligated to tender back
to the Company the proper number of Shares on the Tax Date.
10. PRIVILEGES OF STOCK OWNERSHIP.
10.1 VOTING AND DIVIDENDS. No Participant shall have any of the rights
of a stockholder with respect to any Shares until the Shares are issued to the
Participant. After Shares are issued to the Participant, the Participant shall
be a stockholder and have all the rights of a stockholder with respect to such
Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company shall be subject to the same restrictions as
the Restricted Stock; provided, further, that the Participant shall have no
right to retain such dividends or distributions with respect to Shares that are
repurchased at the Participant's original Purchase Price pursuant to Section 12.
10.2 FINANCIAL STATEMENTS. The Company shall provide financial
statements to each Participant prior to such Participant's purchase of Shares
under the Plan, and to each Participant annually during the period such
Participant has Options outstanding; provided, however, the Company shall not be
required to provide such financial statements to Participants whose services in
connection with the Company assure them access to equivalent information.
11. TRANSFERABILITY. Awards granted under the Plan, and any interest
therein, shall not be transferable or assignable by Participant, and may not be
made subject to execution, attachment or similar process, otherwise than by will
or by the laws of descent and distribution or as consistent with the specific
Plan and Award Agreement provisions relating thereto. During the lifetime of the
Participant an Award shall be exercisable only by the Participant, and any
elections with respect to an Award, may be made only by the Participant.
12. RESTRICTIONS ON SHARES. At the discretion of the Committee, the
Company may reserve to itself and/or its assignee(s) in the Award Agreement (a)
a right of first refusal to purchase all Shares that a Participant (or a
subsequent transferee) may propose to transfer to a third party, and/or (b) a
right to repurchase a portion of or all Shares held by a Participant following
such Participant's Termination at any time within ninety (90) days after the
later of Participant's Termination Date and the date Participant purchases
Shares under the Plan, for cash or cancellation of purchase money indebtedness,
at: (A) with respect to Shares that are "Vested" (as defined in the Award
Agreement), the higher of: (1) Participant's original Purchase Price, or (2) the
Fair Market Value of such Shares on Participant's Termination Date, provided,
such right of repurchase terminates when the Company's securities become
publicly traded; or (B) with respect to Shares that are not "Vested" (as defined
in the Award Agreement), at the Participant's original Purchase Price, provided,
that the right to repurchase at the original Purchase Price lapses at the rate
of at least 20% per year over 5 years from the date the Shares were purchased,
and if the right to repurchase is assignable, the assignee must pay the Company,
upon assignment of the right to repurchase, cash equal to the excess of the Fair
Market Value of the Shares over the original Purchase Price.
13. CERTIFICATES. All certificates for Shares or other securities
delivered under the Plan shall be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed.
14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates, together with stock powers or other instruments
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of transfer approved by the Committee, appropriately endorsed in blank, with the
Company or an agent designated by the Company to hold in escrow until such
restrictions have lapsed or terminated, and the Committee may cause a legend or
legends referencing such restrictions to be placed on the certificates. Any
Participant who is permitted to execute a promissory note as partial or full
consideration for the purchase of Shares under the Plan shall be required to
pledge and deposit with the Company all or part of the Shares so purchased as
collateral to secure the Payment of Participant's obligation to the Company
under the promissory note; provided, however, that the Committee may require or
accept other or additional forms of collateral to secure the payment of such
obligation and, in any event, the Company shall have full recourse against the
Participant under the promissory note notwithstanding any pledge of the
Participant's Shares or other collateral. In connection with any pledge of the
Shares, Participant shall be required to execute and deliver a written pledge
agreement in such form as the Committee shall from time to time approve. The
Shares purchased with the promissory note may be released from the pledge on a
prorata basis as the promissory note is paid.
15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or from
time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, Shares (including
Restricted Stock) or other consideration, based on such terms and conditions as
the Committee and the Participant shall agree.
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award shall not be
effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed, as they are in effect on the date of grant of the
Award and also on the date of exercise or other issuance. Notwithstanding any
other provision in the Plan, the Company shall have no obligation to issue or
deliver certificates for Shares under the Plan prior to (a) obtaining any
approvals from governmental agencies that the Company determines are necessary
or advisable, and/or (b) completion of any registration or other qualification
of such shares under any state or federal law or ruling of any governmental body
that the Company determines to be necessary or advisable. The Company shall be
under no obligation to register the Shares with the SEC or to effect compliance
with the registration, qualification or listing requirements of any state
securities laws, stock exchange or automated quotation system, and the Company
shall have no liability for any inability or failure to do so.
17. NO OBLIGATION TO EMPLOY. Nothing in the Plan or any Award granted
under the Plan shall confer or be deemed to confer on any Participant any right
to continue in the employ of, or other relationship with, the Company or any
Parent, Subsidiary or Affiliate of the Company or limit in any way the right of
the Company or any Parent, Subsidiary or Affiliate of the Company to terminate
Participant's employment or other relationship at any time, with or without
cause.
18. CORPORATE TRANSACTIONS.
18.1 ASSUMPTION OR REPLACEMENT OF AWARDS BY SUCCESSOR. In the event of
(a) a merger or consolidation in which the Company is not the surviving
corporation (other than a merger or consolidation with a wholly-owned
subsidiary, a reincorporation of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in the stockholders of
the Company and the Awards granted under the Plan are assumed or replaced by the
successor corporation, which assumption shall be binding on all Participants),
(b) a dissolution or liquidation of the Company, (c) the sale of substantially
all of the assets of the Company, or (d) any other transaction which qualifies
as a "corporate transaction" under Section 424(a) of the Code wherein the
stockholders of the Company give up all of their equity interest in the Company
(except for the acquisition, sale or transfer of all or substantially all of the
outstanding shares of the Company), any or all outstanding Awards may be assumed
or replaced by the successor corporation, which assumption or replacement shall
be binding on all Participants. In the
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alternative, the successor corporation may substitute equivalent Awards or
provide substantially similar consideration to Participants as was provided to
stockholders (after taking into account the existing provisions of the Awards).
The successor corporation may also issue, in place of outstanding Shares of the
Company held by the Participant, substantially similar shares or other properly
subject repurchase restrictions no less favorable to the Participant.
18.2 EXPIRATION OF OPTIONS. In the event such successor corporation,
if any, refuses to assume or substitute the Options as provided above, pursuant
to a transaction described in Subsection 18.l(a), (b), (c) or (d) above, such
Option shall, notwithstanding any contrary terms of the Award, accelerate and
become exercisable in full prior to the consummation of such transaction.
18.3 OTHER TREATMENT OF AWARDS. Subject to any greater rights granted
to Participants under the foregoing provisions of this Section 18, in the event
of the occurrence of any transaction described in Section 18.1, any outstanding
Awards shall be treated as provided in the applicable agreement or plan of
merger, consolidation, dissolution, liquidation, sale of assets or other
"corporate transaction."
18.4 ASSUMPTION OF AWARDS BY THE COMPANY. The Company, from time to
time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either (a) granting an Award under the Plan in substitution of
such other company's award, or (b) assuming such award as if it had been granted
under the Plan if the terms of such assumed award could be applied to an Award
granted under the Plan. Such substitution or assumption shall be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under the Plan if the other company had applied the rules of
the Plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award shall remain unchanged
(except that the exercise price and the number and nature of Shares issuable
upon exercise of any such option will be adjusted appropriately pursuant to
Section 424(a) of the Code). In the event the Company elects to grant a new
Option rather than assuming an existing option, such new Option may be granted
with a similarly adjusted Exercise Price.
19. ADOPTION AND STOCKHOLDER APPROVAL. The Plan shall become effective on
the date that it is adopted by the Board (the "Effective Date"). The Plan shall
be approved by the stockholders of the Company (excluding Shares issued pursuant
to this Plan), consistent with applicable laws, within twelve months before or
after the Effective Date. Upon the Effective Date, the Board may grant Awards
pursuant to the Plan; provided, however, that: (a) no Option may be exercised
prior to initial stockholder approval of the Plan; (b) no Option granted
pursuant to an increase in the number of Shares approved by the Board shall be
exercised prior to the time such increase has been approved by the stockholders
of the Company; and (c) in the event that stockholder approval is not obtained
within the time period provided herein, all Awards granted hereunder shall be
canceled, any Shares issued pursuant to any Award shall be canceled and any
purchase of Shares hereunder shall be rescinded. After the Company becomes
subject to Section 16(b) of the Exchange Act, the Company will comply with the
requirements of Rule 16b-3 (or its successor), as amended, with respect to
stockholder approval.
20. TERM OF PLAN. The Plan will terminate ten (10) years from the
Effective Date or, if earlier, the date of stockholder approval.
21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time terminate
or amend the Plan in any respect, including without limitation amendment of any
form of Award Agreement or instrument to be executed pursuant to the Plan;
provided, however, that the Board shall not, without the approval of the
stockholders of the Company, amend the Plan in any manner that requires such
stockholder approval pursuant to the Code or the regulations promulgated
thereunder as such provisions apply to ISO plans or pursuant to the Exchange Act
or Rule 16b-3 (or its successor), as amended, thereunder.
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22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by the
Board, the submission of the Plan to the stockholders of the Company for
approval, nor any provision of the Plan shall be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and bonuses otherwise than under the Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.
23. GOVERNING LAW. The Plan and all agreements, documents and instruments
entered into pursuant to the Plan shall be governed by and construed in
accordance with the internal laws of the State of Minnesota except to the extent
required to be governed under the General Corporation Law of the State of
Delaware.
24. DEFINITIONS. As used in the Plan, the following terms shall have the
following meanings:
"AFFILIATE" means any corporation that directly, or indirectly through
one or more intermediaries, controls or is controlled by, or is under common
control with, another corporation, where "control" (including the terms
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to cause the direction of the management and policies of
the corporation, whether through the ownership of voting securities, by contract
or otherwise.
"AWARD" means any award under the Plan, including any Option, Restricted
Stock or Stock Bonus.
"AWARD AGREEMENT" means, with respect to each Award, the signed written
agreement between the Company and the Participant setting forth the terms and
conditions of the Award.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the committee appointed by the Board to administer the
Plan, or if no committee is appointed, the Board.
"COMPANY" means Racotek, Inc., a corporation organized under the laws of
the State of Delaware, or any successor corporation.
"DISABILITY" means a disability, whether temporary or permanent, partial
or total, within the meaning of Section 22(e)(3) of the Code, as determined by
the Committee.
"DISINTERESTED PERSON" shall have the meaning set forth in Rule
16b-3(c)(2)(i) as promulgated by the SEC under Section 16(b) of the Exchange
Act, as such rule is amended from time to time and as interpreted by the SEC.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXERCISE PRICE" means the price at which a holder of an Option may
purchase the Shares issuable upon exercise of the Option.
"FAIR MARKET VALUE" means, as of any date, the value of a share of the
Company's Common Stock determined as follows:
(a) of such Common Stock is then quoted on the NASDAQ National
Market System, its last reported sale price on the NASDAQ National Market System
or, if no such reported sale takes place on such date, the average of the
closing bid and asked prices;
(b) if such Common Stock is publicly traded and is then listed on a
national securities exchange, the last reported sale price or, if no such
reported sale takes place on such date, the average of the closing bid and asked
prices on the principal national securities exchange on which the Common Stock
is listed or admitted to trading;
10
<PAGE>
(c) if such Common Stock is publicly traded but is not quoted on the
NASDAQ National Market System nor listed or admitted to trading on a national
securities exchange, the average of the closing bid and asked prices on such
date, as reported by The Wall Street Journal, for the over-the-counter market;
or
(d) if none of the foregoing is applicable, by the Board of
Directors of the Company in good faith.
"INSIDER" means an officer or director of the Company or any other
person whose transactions in the Company's Common Stock are subject to Section
16 of the Exchange Act.
"OPTION" means an award of an option to purchase Shares pursuant to
Section 5.
"OUTSIDE DIRECTOR" shall mean any director who is not (i) a current
employee of the Company or any Parent, Subsidiary or Affiliate of the Company,
(ii) a former employee of the Company or any Parent, Subsidiary or Affiliate of
the Company who is receiving compensation for prior services (other than
benefits under a tax-qualified pension plan), (iii) a current or former officer
of the Company or any Parent, Subsidiary or Affiliate of the Company or (iv)
currently receiving compensation for personal services in any capacity, other
than as a director, from the Company or any Parent, Subsidiary or Affiliate of
the Company; provided, however, that at such time as the term "Outside
Director", as used in Section 162(m) is defined in regulations promulgated under
Section 162(m) of the Code, "Outside Director" shall have the meaning set forth
in such regulations, as amended from time to time and as interpreted by the
Internal Revenue Service.
"PARENT" means any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company, if at the time of the granting of
an Award under the Plan, each of such corporations other than the Company owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
"PARTICIPANT" means a person who receives an Award under the Plan.
"PLAN" means this Racotek, Inc. 1993 Equity Incentive Plan, as amended
from time to time.
"RESTRICTED STOCK AWARD" means an award of Shares pursuant to Section 6.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means shares of the Company's Common Stock, $0.01 par value,
reserved for issuance under the Plan, as adjusted pursuant to Sections 2 and 15,
and any successor security.
"STOCK BONUS" means an award of Shares, or cash in lieu of Shares,
pursuant to Section 7.
"SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the time of
granting of the Award, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
"TERMINATION" or "TERMINATED" means, for purposes of the Plan with
respect to a Participant, that the Participant has ceased to provide services as
an employee, director, consultant, independent contractor or adviser, to the
Company or a Parent, Subsidiary or Affiliate of the Company, except in the case
of sick leave, military leave, or any other leave of absence approved by the
Committee, provided, that such leave is for a period of not more than ninety
(90) days, or reinstatement upon the expiration of such leave is guaranteed by
contract or statute. The Committee shall have sole discretion to determine
whether a Participant has ceased to provide services and the effective date on
which the Participant ceased to provide services (the "TERMINATION DATE").
11
<PAGE>
RACOTEK, INC.
7301 OHMS LANE, SUITE 200
MINNEAPOLIS, MINNESOTA 55439
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF RACOTEK, INC.
The undersigned hereby appoints Michael A. Fabiaschi and Ian Nemerov as
proxies, each with full powers of substitution, and hereby authorizes them to
represent and to vote, as designated below, all shares of Common Stock, $.01 par
value, of Racotek, Inc. ("RACOTEK") held of record by the undersigned on
November 21, 1997, at the Special Meeting of Stockholders of Racotek to be held
on Wednesday, December 31, 1997, and at any continuations or adjournments
thereof.
This Proxy, when properly executed and returned in a timely manner, will be
voted at the Special Meeting and any adjournments thereof in the manner
described herein. If no contrary indication is made, the proxy will be voted FOR
Proposal 1.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
CONTINUED AND TO BE SIGNED AND DATED ON REVERSE SIDE.
SEE REVERSE SIDE
<PAGE>
/X/ Please mark votes as in this example.
The Board of Directors unanimously recommends that you vote FOR Proposal 1.
1. Proposal to approve the amendment to the 1993 Equity Incentive Plan to (i)
increase the number of Shares of Common Stock reserved for issuance
thereunder (ii) increase the maximum number of shares of Common Stock that
may be granted thereunder, and (iii) make the foregoing maximum grant
limitation applicable to all employees.
/ / FOR / / AGAINST / / ABSTAIN
This Proxy must be signed exactly as your name appears hereon. If more than
one name appears, all persons so designated should sign. Attorneys, executors,
administrators, trustees and guardians should indicate their capacities. If the
signer is a corporation, please print full corporate name and indicate capacity
of duly authorized officer executing on behalf of the corporation. If the signer
is a partnership, please print full partnership name and indicate capacity of
duly authorized person executing on behalf of the partnership.
Signature: _______________________
Date _______________________, 1997
Signature: _______________________
Date _______________________, 1997
(Reverse Side)
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THIS PROXY CARD AND RETURN IT PRIOR TO THE MEETING IN THE ENCLOSED ENVELOPE.
