<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____
COMMISSION FILE NUMBER 0-22718
RACOTEK, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE #41-1636021
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7301 OHMS LANE, SUITE 200, MINNEAPOLIS, MINNESOTA, 55439
(Address of principal executive offices, including zip code)
(612) 832-9800
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--------- ----------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Class June 30, 1997
----- -------------
Common Stock, $.01 par value 24,932,271
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THIS REPORT CONSISTS OF 17 SEQUENTIALLY NUMBERED PAGES. THE EXHIBIT INDEX
APPEARS ON SEQUENTIALLY NUMBERED PAGE 14.
<PAGE>
RACOTEK, INC.
INDEX
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements Page No.
Statements of Operations
Three Months Ended June 30, 1997 and 1996 3
and Six Months Ended June 30, 1997 and 1996
Balance Sheets
June 30, 1997 and December 31, 1996 4
Statements of Cash Flows
Six Months Ended June 30, 1997 and 1996 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II -- OTHER INFORMATION
Items
1-5. Not applicable 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
RACOTEK, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- --------------------------
1997 1996 1997 1996
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net revenues:
Products $372 $330 $561 $692
Services 1,070 1,380 2,620 2,565
----------- ---------- ----------- -----------
1,442 1,710 3,181 3,257
Cost and expenses:
Cost of products 432 223 611 1,507
Cost of services 1,147 882 2,227 1,843
Research and development 964 1,010 1,989 2,048
Sales and marketing 1,145 1,638 2,674 3,542
General and administrative 423 454 901 1,179
----------- ---------- ----------- -----------
Loss from operations (2,669) (2,497) (5,221) (6,862)
Interest income 107 261 234 434
----------- ---------- ----------- -----------
Net loss ($2,562) ($2,236) ($4,987) ($6,428)
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
Net loss per share ($0.10) ($0.09) ($0.20) ($0.27)
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
Number of shares used in computation 24,923 24,240 24,894 24,174
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
RACOTEK, INC.
BALANCE SHEETS
(In thousands, except per share data)
<TABLE>
<CAPTION>
ASSETS
June 30, December 31,
1997 1996
------------ -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $4,344 $2,956
Short-term investments 4,003 8,991
Accounts receivable, net 942 1,616
Inventories 253 374
Prepaid expenses and other current assets 156 294
------------ -------------
Total current assets 9,698 14,231
Property and equipment, net 1,651 1,932
Restricted cash 470 470
Capitalized software development costs, net 61 121
Other long-term assets 145 165
------------ -------------
Total assets $12,025 $16,919
------------ -------------
------------ -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $474 $656
Accrued expenses 862 882
------------ -------------
Total current liabilities 1,336 1,538
------------ -------------
Commitments
Stockholders' equity :
Common stock, $0.01 Par value, 35,000 shares
authorized, 24,932 and 24,740 issued and
outstanding at June 30, 1997 and December 31, 1996,
respectively 249 247
Additional paid-in capital 71,171 70,878
Accumulated deficit (60,731) (55,744)
------------ -------------
Total stockholders' equity 10,689 15,381
------------ -------------
Total liabilities and stockholders' equity $12,025 $16,919
------------ -------------
------------ -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
RACOTEK, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands) Six Months Ended
June 30,
-------------------------------
1997 1996
--------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($4,987) ($6,428)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 488 426
Provision for bad debts 60 257
Write-down of inventories - 900
Amortization of discounts on investments (12) (8)
Stock issued for consulting services 65 -
Changes in operating assets and liabilities:
Accounts receivable 614 (166)
Inventories 121 (4)
Prepaid expenses and other current assets 138 291
Accounts payable and accrued expenses (202) (390)
-------------- --------------
Net cash used in operating activities (3,715) (5,122)
Cash flows from investing activities:
Purchase of investments (1,000) (12,820)
Proceeds from maturity of investments 6,000 15,613
Purchase of property and equipment (102) (153)
Other (25) -
-------------- --------------
Net cash provided from investing activities 4,873 2,640
Cash flows from financing activities:
Proceeds from exercises of stock options 230 86
-------------- --------------
Net cash provided from financing activities 230 86
-------------- --------------
Net change in cash and cash equivalents 1,388 (2,396)
Cash and cash equivalents, beginning of period 2,956 4,397
-------------- --------------
Cash and cash equivalents, end of period $4,344 $2,001
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE A. BASIS OF PRESENTATION:
The unaudited financial statements of Racotek, Inc. ("Racotek" or the
"Company") as of June 30, 1997 and for the periods ended June 30, 1997 and
1996 reflect, in the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to fairly state the financial
position at June 30, 1997 and the results of operations and cash flows for
the reported periods. The results of operations for any interim period are
not necessarily indicative of the results to be expected for any other
interim period or for the full year. The year-end balance sheet data was
derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles. These
financial statements should be read in conjunction with the Company's audited
financial statements and related notes for the year ended December 31, 1996,
which were included in the Company's 1996 Annual Report and incorporated by
reference in its 1996 Form 10-K.
In March 1997, the Financial Accounting Standards Board issued Statement No.
128 "Earnings per Share," which the Company will adopt effective for its 1997
year end reporting. The Company will be required to report basic net income
(loss) per share based on weighted average common shares outstanding, without
considering common equivalent shares, and diluted net income (loss) per share
based on weighted average common and, when dilutive, common equivalent shares
outstanding. Diluted net income (loss) per share would be equivalent to the
Company's current reporting of net loss per share.
NOTE B. SELECTED BALANCE SHEET INFORMATION (IN THOUSANDS):
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
<S> <C> <C>
ACCOUNTS RECEIVABLE, NET: (Unaudited)
Accounts receivable $1,180 $1,956
Less allowance for doubtful accounts (238) (340)
------- ------
$ 942 $1,616
------- ------
------- ------
PROPERTY AND EQUIPMENT, NET:
Computer equipment $3,165 $3,064
Furniture and equipment 817 816
Leasehold improvements 213 213
------- ------
4,195 4,093
Less accumulated depreciation and
amortization (2,544) (2,161)
------- ------
$1,651 $1,932
------- ------
------- ------
</TABLE>
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THIS FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT
CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED
BELOW IN "FACTORS THAT MAY AFFECT FUTURE RESULTS" AS WELL AS THOSE IDENTIFIED
IN THE COMPANY'S OTHER SEC FILINGS.
OVERVIEW
Racotek provides solutions to customers that allow them to increase the
productivity of their remote workers. To accomplish this, Racotek provides
consulting services, wireless networking software and network management
support. The Company expects to incur substantial losses through 1997 and into
1998 because customers are delaying implementation of wireless mobile data
systems. These delays are the result of several factors including:
- Most prospective customers wish to test the Company's products and
services during an evaluation period before implementing a wireless
network throughout their user base. This reduces the amount of
revenues the Company can expect to receive in the near term.
- Wireless networks such as cellular digital packet data and low-earth
orbit satellites have limited commercial availability and geographic
coverage.
- Implementation of a wireless network requires a significant capital
investment for mobile computing devices.
The Company believes that the commercial availability and coverage of
wireless networks are increasing and that capital costs are beginning to
decline. The Company also believes that its extensive experience in designing,
implementing and supporting wireless networks will enable the Company to
continue to add new customers. The Company has an increasing percentage of net
revenues derived from consulting services including system planning, software
development, system integration, training and installation management. The
Company expects that customers who purchase consulting services may become
purchasers of its other products and services. In the long-term, the Company
believes that the recurring revenue from providing monthly support, software
maintenance and transmission services to customers will constitute a substantial
source of revenue.
RESULTS OF OPERATIONS
NET REVENUES
During 1996, the Company made the decision to discontinue the production,
purchase and distribution of specialized mobile radio ("SMR") products. As a
result, product revenues for the six months ended June 30, 1997 were $561,000,
down from $692,000 for the six months ended June 30, 1996. Product revenues
increased from $330,000 for the quarter ended June 30, 1996, to $372,000 for the
quarter ended June 30, 1997. The increase was primarily due to a single
hardware transaction with one customer during the quarter ended June 30, 1997.
Product revenues will continue to fluctuate based on product mix and the timing
and extent of customer roll-outs.
7
<PAGE>
Service revenues for the quarter ended June 30, 1997 were $1,070,000, down
from $1,380,000 for the quarter ended June 30, 1996. Services revenues for the
six months ended June 30, 1997 were $2,620,000, up from $2,565,000 for the six
months ended June 30, 1996. The Company derives a substantial amount of its
revenue from a small number of customers. Accordingly, the timing and amount of
consulting services work performed for these customers may cause the Company's
services revenues to fluctuate. The decrease in volume caused the decrease in
service revenues for the second quarter of 1997. The Company expects continued
volatility in services revenue throughout the remainder of 1997.
COST OF REVENUES
Cost of product revenues decreased from $1,507,000 for the six months ended
June 30, 1996, to $611,000 for the six months ended June 30, 1997. The decrease
is primarily due to a $900,000 charge recorded in the first quarter of 1996,
resulting from the write-down of the Company's remaining SMR inventories to
their net realizable values as a result of the decision to discontinue the SMR
products described above. Cost of product revenues for the quarter ended June
30, 1997, were $432,000, up from $223,000 for the quarter ended June 30, 1996.
Product gross margins were negative 16% for the second quarter of 1997 compared
to 32% for the second quarter of 1996. The decrease in product gross margins is
due to product mix and insufficient revenue volume to absorb the Company's fixed
costs.
Cost of services increased from $882,000 for the quarter ended June 30,
1996, to $1,147,000 for the quarter ended June 30, 1997. Cost of services
increased from $1,843,000 for the six months ended June 30, 1996, to $2,227,000
for the six months ended June 30, 1997. The increases in the cost of services
are due to an increase in the number of consulting and customer support
personnel. Service gross margins decreased from 36% for the quarter ended June
30, 1996 to negative 7% for the quarter ended June 30, 1997. Service gross
margins decreased from 28% for the six months ended June 30, 1996 to 15% for the
corresponding six month period in 1997. The decrease in the gross margin rate
was due to under-utilized consulting personnel as a result of the lower services
revenue in the second quarter of 1997 compared to the same period in 1996.
RESEARCH AND DEVELOPMENT
Research and development expenses decreased from $1,010,000 for the quarter
ended June 30, 1996, to $964,000 for the quarter ended June 30, 1997. These
expenses also decreased from $2,048,000 for the six month period ended June 30,
1996, to $1,989,000 for the corresponding six month period in 1997. The Company
expects research and development expenses to remain essentially constant from
the second to the third quarter of 1997 and to decrease in the fourth quarter.
SALES AND MARKETING
Sales and marketing expenses decreased from $1,638,000 for the quarter
ended June 30, 1996, to $1,145,000 for the quarter ended June 30, 1997. These
expenses also decreased from $3,542,000 for the six month period ended June 30,
1996, to $2,674,000 for the corresponding six month period in 1997. The
decrease was due to cost-reduction measures implemented by the Company during
1997. The Company expects sales and marketing expenses to remain essentially
constant from the second to the third quarter of 1997 and to decrease in the
fourth quarter due to these cost-reduction measures.
8
<PAGE>
GENERAL AND ADMINISTRATIVE
General and administrative expenses decreased from $454,000 for the
quarter ended June 30, 1996, to $423,000 for the quarter ended June 30, 1997.
These expenses also decreased from $1,179,000 for the six month period ended
June 30, 1996, to $901,000 for the corresponding six month period in 1997.
The decrease was due to cost-reduction measures implemented by the Company
throughout 1996 and 1997. The Company expects general and administrative
expenses to remain essentially constant from the second to the third quarter
of 1997 and to decrease in the fourth quarter due to these cost-reduction
measures.
INTEREST INCOME
Interest income decreased from $261,000 for the quarter ended June 30,
1996, to $107,000 for the quarter ended June 30, 1997. Interest income
decreased from $434,000 for the six month period ended June 30, 1996, to
$234,000 for the corresponding six month period in 1997. The decrease is the
result of a decrease in investments, which were used to fund operating
activities during 1997. The decrease is also related to declining interest
rates on these investments.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1997, the Company had no significant capital spending or purchase
commitments and had cash and investments totaling $8,347,000 and working capital
of $8,362,000. For the six months ended June 30, 1997, the Company used
$3,714,000 of cash in its operating activities, compared to $5,122,000 of cash
for the six months ended June 30, 1996. The amount of cash used in operating
activities decreased as a result of cost-reduction efforts, including the
decision to discontinue producing, purchasing and distributing SMR products
during 1996, and improved collections of accounts receivable. During the third
quarter of 1997, the Company expects to reduce headcount and consolidate
facilities to further reduce expenses by the fourth quarter of 1997; however,
the Company expects to continue to incur negative cash flows from operating
activities throughout 1997 and into 1998. Net cash of $4,873,000 provided by
investing activities during the six months ended June 30, 1997, resulted
primarily from investments that matured during the period, net of investment
purchases. The Company generated $230,000 of cash from financing activities for
the six months ended June 30, 1997, from the exercise of stock options.
The Company believes that with the implementation of the cost-reduction
measures, its existing capital resources will be sufficient to meet the
Company's cash requirements into 1998.
FACTORS THAT MAY AFFECT FUTURE RESULTS
There can be no assurance that the Company's business will grow as
anticipated or that the Company will achieve or sustain profitability on a
quarterly or annual basis in the future. The Company derives a substantial
part of its revenue from a small number of customers whom, after evaluating
the Company's products, proceed to install the Company's products throughout
their total user base. A decision by any one of these customers to delay or
abandon roll-out of the Company's products across an entire fleet may have a
material adverse effect on the Company's business and results of operations.
9
<PAGE>
A substantial portion of the Company's revenue is derived from providing
consulting services to mobile data users. Consulting services cannot be
standardized and mass-marketed as readily as software, and they may not provide
as consistent a source of recurring revenue as monthly support, software
maintenance and transmission services are expected to provide. In order for the
Company's revenues from consulting services to continue to grow, the Company
must continue to add more customers and larger projects to build, enable and
support data mobility systems. The Company's inability to identify customers
for its large-scale consulting services and/or the Company's inability to use
its consulting services to obtain additional customers for its software
licenses, support and transmission services could materially and adversely
affect the growth of its business.
Delays in the commercial availability and geographic coverage of new
wireless networks may continue to impede or prevent substantial growth of the
Company's business. There can be no assurance that the services offered by new
wireless networks will attain commercial availability, that they will be
available in a significant number of metropolitan areas or that they will
provide a scope of geographic coverage attractive to customers in the
metropolitan areas where they are available. The Company's inability to offer
products and services to customers on new wireless networks could have a
material adverse effect on the Company's business.
The Company's ability to provide communication services is dependent upon
contractual relationships with wireless network providers. There can be no
assurance that the Company will be able to enter into or maintain relationships
with wireless network providers, that any such relationships will be on
economically favorable terms or that wireless network providers may not choose
to compete against rather than cooperate with the Company. Furthermore, there
can be no assurance that wireless network providers will have the capacity,
ability and FCC authorization to provide high-quality airtime to the Company's
customers on a continuous basis. The Company's inability to obtain high-
quality, reliable, continuous airtime from or maintain cooperative relationships
with wireless network providers would materially and adversely affect the
Company's business.
The Company's success is affected by application software developers who
help create a market for the Company's products by writing their application
software programs so that the programs implement mobile data transmission
through KeyWare. There can be no assurance that the application software
developers will choose to make their computer programs compatible with KeyWare.
Furthermore, there can be no assurance that the application software developers
who implement mobile data transmission through KeyWare will be successful in
developing and marketing their Racotek-compatible products or will continue to
use the Company's products in their business. In addition, delays by these
developers in completing their wireless application software integration is
impeding the Company's efforts to persuade existing and prospective customers to
implement the products across their total user base. Continuing delays in
wireless application software integration could have a material adverse impact
on the Company's business.
The Company depends on third-party hardware manufacturers to develop and
maintain computer hardware devices that are suitable for mobile data
applications, such as handheld and vehicle-mounted devices, and to make these
devices available to customers at attractive prices. The prices for these
hardware devices have declined and are expected to continue to decline. The
Company's ability to sell its products is affected by the price of these
hardware devices. Unless dependable, fully-featured KeyWare-compatible mobile
devices are available at attractive prices, customers will be reluctant to
implement mobile data systems and become Racotek customers, which would
materially and adversely affect the Company's business.
10
<PAGE>
Competition in the communication industry is intense. Major software
development companies, as well as computer, database and communications
companies, are possible sources of future direct competition for the Company's
products and services. Many of the Company's current and possible direct
competitors have financial, technical, marketing, sales, manufacturing,
distribution and other resources substantially greater than those of the
Company. In addition to direct competitors, the Company presently faces
competition from providers of other mobile communication services that customers
might view as substitutes for wireless data transmission, such as cellular
telephone, paging and conventional two-way voice radio.
In addition to the factors listed above, actual results could vary
materially from the foregoing forward-looking statements due to the Company's
inability to hire and retain qualified personnel, the risk that the Company may
need to enhance products beyond what was initially planned, the levels of
promotion and marketing required to promote the Company's products and services
so as to attain a competitive position in the marketplace, or other risks and
uncertainties identified in this Form 10-Q and the Company's other filings with
the SEC.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 13, 1997 an annual meeting of the Company's stockholders was held to
elect directors, approve an amendment to the Company's 1993 Equity Incentive
Plan to increase the number of shares of Common Stock reserved for issuance from
2,200,000 to 3,200,000, and to ratify the selection of Coopers & Lybrand L.L.P.
as independent accountants for the fiscal year ending December 31, 1997. A
total of 21,986,696 shares of Common Stock were present in person or by proxy at
the meeting.
Yuval Almog was elected a director of the Company by the vote of 20,665,584
shares. Stockholders holding 1,321,112 shares of Common Stock withheld
authority to vote. Jamie B. Bader was elected a director of the Company by the
vote of 20,323,085 shares. Stockholders holding 1,663,611 shares of Common
Stock withheld authority to vote. Joseph B. Costello was elected a director of
the Company by 20,666,926 shares. Stockholders holding 1,319,770 shares of
Common Stock withheld authority to vote. Dixon R. Doll was elected a director
of the Company by the vote of 20,679,285 shares. Stockholders holding 1,307,411
shares of Common Stock withheld authority to vote. Micahel A. Fabiaschi was
elected director of the Company by 20,668,577 shares. Stockholders holding
1,318,119 shares of Common Stock withheld authority to vote. Donald L. Lucas
was elected a director of the Company by 20,678,685 shares. Stockholders
holding 1,308,011 shares of Common Stock withheld authority to vote.
The amendment of the 1993 Equity Incentive Plan was approved by 19,956,228
shares. Stockholders holding 1,925,651 shares of Common Stock voted against
this matter, and stockholders holding 104,817 shares of Common Stock abstained
from voting for this matter.
The selection of Coopers & Lybrand L.L.P. as independent accountants for
the year ending December 31, 1997 was approved by 21,867,835 shares.
Stockholders holding 50,868 shares of Common Stock voted against this matter,
and stockholders holding 67,993 shares of Common Stock abstained from voting for
this matter.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 30, 1997.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RACOTEK, INC.
By: Michael Fabiaschi
--------------------------
Michael Fabiaschi
President and Chief Executive Officer
By: David J. Maenke
--------------------------
David J. Maenke
Chief Financial Officer and Secretary
Dated: August 7, 1997
13
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER TITLE SEQUENTIALLY NUMBERED
PAGE
- -------------------------------------------------------------------------------
10.01** Letter agreement by and between
Registrant and Steve Swantek dated
April 9, 1997. 15
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10.02** Letter agreement by and between
Registrant and Isaac Shpantzer
dated April 4, 1997. 16
- -------------------------------------------------------------------------------
10.03** Letter agreement by and between
Registrant and Norm Smith dated
June 30, 1997 17
- -------------------------------------------------------------------------------
**Management contract or compensation plan.
14
<PAGE>
Exhibit 10.01
April 9, 1997
Mr. Steve Swantek
649 Minnetonka Highland Lane
Orono, MN 55356
Dear Steve:
This letter confirms our offer and your acceptance for the position of Vice
President, Sales and Marketing Communications, reporting to Mike Fabiaschi,
President & CEO
Your base salary will be $175,000.00 ($14,583.00 per month) with a first year
$50,000 non-recoverable draw that will be applied toward your incentive
compensation. You will be eligible for participation in the executive
compensation plan which will pay $100,000 at 100% achievement. This plan
will be defined in a separate document. You will also be eligible for a
stock option to purchase 200,000 shares of Racotek stock at its current fair
market value, subject to vesting over a four year period. Final approval of
your stock option requires Racotek Board of Directors approval, which will be
requested.
Steve, should your employment be terminated without cause the Company will
pay you your base salary for the following six months. Your vesting status
will continue during that timeframe as well as your eligibility for the
Company's benefit plan. Please understand that this letter does not
constitute a contract of employment for any specific period of time but will
create an "employment at will" relationship.
Included in this offer is the standard Racotek employee benefits which you
are familiar with, however will be described during your orientation.
Steve, we are pleased you have decided to join Racotek and look forward to
working with you again.
Sincerely,
Kay Lee
Kay Lee
Human Resource Director
cc: Mike Fabiaschi
15
<PAGE>
Exhibit 10.02
April 4, 1997
Mr. Isaac Shpantzer
Racotek, Inc.
7301 Ohms Lane
Minneapolis, MN
Dear Isaac:
The Company and you agree that the Company will give you 12 months prior
notice if the Company terminates your employment for any reason other than
gross misconduct, or, will give you 12 months salary at your prevailing rate
of pay, not to be less than $16,666.00 a month.
Sincerely,
Mike Fabiaschi
Michael Fabiaschi
Agreed and accepted: Isaac Shpantzer
---------------
Isaac Shpantzer
16
<PAGE>
Exhibit 10.03
June 27, 1997
Mr. Norm Smith
8215 Navidad Drive
Austin, Texas 78735
Dear Norm:
Racotek is pleased to offer you the position of Sr. Vice President, Systems
Integration, reporting to Michael Fabiaschi, President & CEO. The start date is
June 30, 1997. As Sr. Vice President, Systems Integration, you will work
independently and with teams to identify and develop opportunities at target
companies in multiple vertical industries.
Your initial compensation, will be in the form of company paid benefits,
including three weeks vacation, and stock options in the amount of 500,000
shares issued at its current fair market value on July 21, 1997, with a vesting
start date of June 30, 1997. Of these options, 62,500 will vest on your first
day of employment and the remaining shares are subject to vesting over a four
year period. You will vest 25% at the end of your first year and an additional
6.25% each quarter thereafter. Final approval of your stock option requires
Racotek Board of Directors approval.
Per your discussion with Michael Fabiaschi, within the next 6 months there will
be a joint evaluation to determine the possibility of entering into a continuing
employment arrangement going forward which may include: compensation, relocation
and stock.
Enclosed is an employee agreement that we ask you to sign and bring with you on
your first day. Please understand that this letter does not constitute a
contract of employment for any specific period of time but will create an
"employment at will" relationship. We wish to impress upon you that we do not
wish you to bring with you any confidential or proprietary material of any
former employer or to violate any other obligation to your former employers.
In addition, the Immigration Conform and Control Act requires that all employees
complete an I-9 form and provide documentation to show employment eligibility in
the United States. A copy of the I-9 form is enclosed.
We are extremely pleased to make this offer to you and look forward to working
with you.
Sincerely,
Kay E. Lee
Kay E. Lee
Director, Human Resources
cc: Michael Fabiaschi
I accept the offer for the position of Sr. Vice President, Systems Integration.
Norm Smith June 30, 1997
- ------------------------------ -------------
Norm Smith Date
17
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM SECOND QUARTER FORM 10Q AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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<BONDS> 0
0
0
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<SALES> 561
<TOTAL-REVENUES> 3,181
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