<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for use of the Commission only (as permitted by
Rule 14a-61(e)
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 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)(4) 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 pur-
suant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
RS
March 19, 1998
To Our Stockholders:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders
of Racotek, Inc. to be held at the Minneapolis Marriott City Center located at
30 South Seventh Street, Minneapolis, Minnesota 55402, on Thursday, April 30,
1998, at 11:00 a.m. Central Time.
The matters expected to be acted upon at the meeting are described in detail
in the following Notice of Annual 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 PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN, AND PROMPTLY
RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE PRIOR TO 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,
[LOGO]
Michael A. Fabiaschi
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
RACOTEK, INC.
7301 OHMS LANE, SUITE 200
MINNEAPOLIS, MINNESOTA 55439
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Racotek,
Inc. (the "Company") will be held at the Minneapolis Marriott City Center
located at 30 South Seventh Street, Minneapolis, Minnesota 55402 on Thursday,
April 30, 1998, at 11:00 a.m. Central Time, for the following purposes:
1. To elect five directors of the Company, each to hold office until
the next Annual Meeting of Stockholders and until his successor has been
elected and qualified or until his earlier resignation or removal. The
following persons are the nominees for election as directors:
<TABLE>
<S> <C>
Joseph B. Costello Dixon R. Doll
Michael A. Fabiaschi James L. Osborn
Norman D. Smith
</TABLE>
2. To ratify the selection of Coopers & Lybrand L.L.P. as independent
accountants for the Company for the current fiscal year.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on March 9, 1998, are
entitled to notice of and to vote at the meeting or any adjournment thereof.
By Order of the Board of Directors
[LOGO]
Michael A. Fabiaschi
PRESIDENT AND CHIEF EXECUTIVE OFFICER
MINNEAPOLIS, MINNESOTA
MARCH 19, 1998
WHETHER OR NOT YOU PLAN 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
March 19, 1998
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
the Annual Meeting of Stockholders of the Company to be held at the Minneapolis
Marriott City Center located at 30 South Seventh Street, Minneapolis, Minnesota
55402 on Thursday, April 30, 1998, at 11:00 a.m. Central Time (the "Meeting").
All proxies will be voted in favor of the nominees and the proposals set forth
in the accompanying Notice of Meeting and this Proxy Statement. This Proxy
Statement and the accompanying form of proxy were first mailed to stockholders
on or about March 19, 1998.
VOTING RIGHTS AND SOLICITATION OF PROXIES
At the close of business on March 9, 1998, the Company had 25,000,557 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 March 9, 1998 (the "Record Date"), will be
entitled to vote at the Meeting. A majority of the shares outstanding on the
Record Date 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 Record Date. Shares of Common Stock may not be voted cumulatively.
With respect to proposal no. 1, the affirmative vote of a plurality of the
votes of the shares of Common Stock present in person or represented by proxy at
the Meeting and entitled to vote on the election of directors is required to
approve the election of each of the five directors. The affirmative vote of the
majority of shares present in person or represented by proxy at the Meeting and
entitled to vote on proposal no. 2 is required to approve this proposal. The
aggregate number of votes entitled to be cast by all stockholders present in
person or represented by proxy at the Meeting who vote for or against the
proposals, whether those stockholders vote "for," "against," or give no
instructions, will be counted for purposes of determining the minimum number of
affirmative votes required to approve proposal no. 2 and the total number of
shares cast "for" this proposal or giving no instructions will be counted for
purposes of determining whether sufficient affirmative votes have been cast. An
abstention from voting on a matter by a stockholder will be counted for purposes
of determining both the presence or absence of a quorum for the transaction of
business and the total number of shares present entitled to vote with respect to
that matter. Accordingly, an abstention will have the same effect as a vote
"against" the proposal. In the event that a broker indicates on a proxy that it
does not have discretionary authority as to certain shares to vote on a
particular matter, those shares will be counted for purposes of determining the
presence or absence of a quorum for the transaction of business but will not be
considered present and entitled to vote with respect to that matter.
In the event that sufficient votes in favor of the proposals are not
received by the date of the Meeting, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitations of
proxies. Any such adjournment would require the affirmative vote of the majority
of the shares present in person or represented by proxy at the Meeting.
The cost of preparing, assembling, printing and mailing the Proxy Statement,
the Notice of Annual Meeting of Stockholders and the enclosed form of proxy, as
well as the cost of soliciting proxies relating to the Meeting, will be borne by
the Company. Following the original mailing of the proxies and other soliciting
materials, the Company will request that the brokers, custodians, nominees and
other record holders forward copies of the proxy and other soliciting material
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. The
original
<PAGE>
solicitation of proxies by mail may be supplemented by telephone, telegram and
personal solicitation by directors, officers and regular employees of the
Company. No additional compensation will be paid for any such services.
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. Please note,
however, that 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 that stockholder's beneficial ownership of the shares.
PROPOSAL NO. 1--ELECTION OF DIRECTORS
NOMINEES
At the Meeting, stockholders will elect directors to hold office until the
next Annual Meeting of Stockholders and until their respective successors have
been elected and qualified or until such directors' earlier resignation or
removal. The size of the Company's Board of Directors (the "Board") is currently
set at five members, and five nominees will be elected at the Meeting. Proxies
cannot be voted for a greater number of persons than the number of nominees
named. Shares represented by the accompanying proxy will be voted for the
election of each of the five nominees named below, unless the proxy is marked in
such a manner as to withhold authority so to vote. If any nominee for any reason
is unable to serve or for good cause will not serve, the proxies may be voted
for such substitute nominee as the proxy holder may determine. The Company is
not aware of any nominee who will be unable to or for good cause will not serve
as a director.
The names of the five nominees, each of who is currently a director of the
Company, and certain information about them as of March 9, 1998, are set forth
below:
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
- ----------------------------------- --- -----------------------------------------------------------------------
<S> <C> <C>
Joseph B. Costello(1)(2)(3)........ 44 Chairman of the Board of the Company and President and Chairman of the
Board, Cad Lab
Dixon R. Doll(2)(3)................ 55 Venture Capitalist and Managing General Partner, Doll Capital
Management
Michael A. Fabiaschi(3)............ 42 President, Chief Executive Officer and Acting Chief Financial Officer
of the Company
James L. Osborn(1)................. 50 Vice President, Motorola, Inc.
Norman D. Smith.................... 49 Executive Vice President and Chief Operating Officer of the Company
</TABLE>
- ------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Executive Committee.
Mr. Costello has been Chairman of the Company since January 1998, and a
director of the Company since April 1996. Mr. Costello has been Chairman of the
Board of Cad.Lab, Inc., a privately-held supplier of computer-aided design
technology, since February 1998, and was the Chief Executive Officer of Cadence
Design Systems, Inc., a supplier of electronic design automation software and
services, from May 1988 to October 1997. Mr. Costello holds a Bachelor of
Science degree in mathematics and physics
2
<PAGE>
from Harvey Mudd College, a Master of Science degree in physics from Yale
University and a Master of Science degree in physics from the University of
California, Berkeley.
Dr. Doll has been a director of the Company since May 1989. In December
1996, he founded Doll Capital Management, a private venture capital firm that
invests in entrepreneurial companies in the information technology and
communications markets, where he serves as Managing General Partner. From
September 1994 to December 1996, Dr. Doll was actively engaged in venture
capital activities as a private investor. From September 1985 to September 1994,
Dr. Doll was a partner of Accel Partners, a venture capital firm. Dr. Doll holds
a Bachelor of Science degree in electrical engineering from Kansas State
University and Master of Science and Ph.D. degrees in electrical engineering
from the University of Michigan. Dr. Doll is also a director of Network
Equipment Technologies, Inc. and numerous private companies.
Mr. Fabiaschi has been President, Chief Executive Officer and a director of
the Company since February 1996, and was its Vice President of Sales and Support
from August 1991 to February 1996. He has also been Acting Chief Financial
Officer since October 1997. From September 1978 to August 1991, he held various
positions with MAI Systems Corporation, a vendor of computer systems and
applications and operating systems software, and was most recently Vice
President of U.S. Sales and Service from December 1989 to August 1991. Mr.
Fabiaschi holds a Bachelor of Science degree in accounting from Fairfield
University. MAI Systems Corporation filed a petition for reorganization under
the Bankruptcy Code in 1993, and emerged from bankruptcy in 1997.
Mr. Osborn has been a director of the Company since August 1997. Mr. Osborn
is a Vice President of Motorola, Inc. and the general manager of the
International iDEN Infrastructure Division of Motorola's Land Mobile Products
Sector, and has worked in various capacities at Motorola since 1969. Mr. Osborn
holds a Bachelor of Science degree in electrical engineering from Purdue
University and a Masters Degree in Digitial Communications from the Armour
College of Engineering at the Illinois Institute of Technology.
Mr. Smith has been a director of the Company since November 1997, and
Executive Vice President and Chief Operating Officer of the Company since August
1997. From July to August 1997, Mr. Smith was Senior Vice President of Systems
Integration of the Company. From January 1994 to November 1996, Mr. Smith was an
Executive Vice President at BSG, a client/server systems integrator. From 1977
to December 1993, Mr. Smith was with Andersen Consulting, serving as a Partner
from September 1989 to December 1993. Mr. Smith holds a Bachelor of Science
degree in economics from the Wharton School at the University of Pennsylvania,
and an M.B.A. from George Mason University.
BOARD OF DIRECTORS' MEETING AND COMMITTEES
The Board met six times, including telephone conference meetings, and acted
by written consent three times during fiscal year 1997. No director attended
fewer than 75% of the aggregate of the total number of meetings of the Board
held during the period for which he was a director and the total number of
meetings held by all committees of the Board on which he served during the
period that he served during fiscal 1997.
Standing committees of the Board include an Audit Committee, a Compensation
Committee and an Executive Committee. The Board does not have a nominating
committee or a committee performing similar functions.
Messrs. Costello and Osborn are currently the members of the Audit
Committee. The Audit Committee met four times during fiscal 1997. The Audit
Committee meets with the Company's independent accountants to review the
adequacy of the Company's internal control systems and financial reporting
procedures, reviews the general scope of the Company's annual audit and the fees
charged by the independent accountants, reviews and monitors the performance of
non-audit services by the Company's independent accountants, and reviews the
fairness of any proposed transaction between management of the Company and the
Company, making recommendations, after such review, to the full Board.
3
<PAGE>
Messrs. Costello and Doll are currently the members of the Company's
Compensation Committee. The Compensation Committee met once and acted by written
consent 30 times during fiscal 1997. The Compensation Committee is responsible
for granting options and stock awards under the Company's employee benefit
plans, including to executive officers, and is responsible for setting the
compensation of all executive officers of the Company.
Messrs. Costello, Fabiaschi, and Doll are currently the members of the
Company's Executive Committee. The Executive Committee met once during fiscal
1997. The Executive Committee has all the powers and authority of the Board
while the Board is not in session, except those powers that may not be lawfully
delegated by the Board under the Delaware General Corporation Law and the
Company's By-laws and except those specific powers delegated by the Board to
another committee.
DIRECTOR COMPENSATION
The Company does not pay fees to members of its Board, but directors receive
reimbursement of authorized expenses.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
ALL FIVE NOMINEES LISTED ABOVE.
PROPOSAL NO. 2--RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board has selected Coopers & Lybrand L.L.P. as the Company's independent
accountants to perform the audit of the Company's financial statements for the
fiscal year ending December 31, 1998, and the stockholders are being asked to
ratify such selection. Notwithstanding the selection, the Board, in its
discretion may direct the appointment of new independent accountants at any time
during the year, if the Board feels that such a change would be in the best
interests of the Company and its stockholders. In the event of a negative vote
of such ratification, the Board will reconsider its selection.
Representatives of Coopers & Lybrand L.L.P. are expected to be present at
the Meeting, will have the opportunity to make a statement at the meeting if
they desire to do so and are expected to be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE RATIFICATION OF THE SELECTION OF COOPERS & LYBRAND L.L.P.
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company, as
of March 9, 1998, 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 director, (iii) each of
the Named Executive Officers, and (iv) all executive officers and directors as a
group. Except as otherwise noted, the address of each person below is c/o the
Company, 7301 Ohms Lane, Suite 200, Minneapolis, MN 55439.
<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)............................................................ 1,072,187 4.3
Michael A. Fabiaschi(6).......................................................... 463,200 1.8
Dixon R. Doll(7)................................................................. 257,988 1.0
Isaac Shpantzer(8)............................................................... 202,825 *
Norman D. Smith(9)............................................................... 121,500 *
Vladimir Kelman(10).............................................................. 79,861 *
James L. Osborn(11).............................................................. 57,000 *
Steve Swantek(12)................................................................ 1,100 *
Paul Edelhertz(13)............................................................... 1,000 *
Emmett Hume(14).................................................................. -- *
All executive officers and directors as a group (Nine Persons)(15)............... 2,256,661 9.0%
</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 March 9, 1998, upon the exercise of options or warrants.
(2) Based upon 25,000,557 shares of Common Stock outstanding on March 9, 1998.
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 March 9, 1998, have been
exercised.
(3) Includes 61,187 share of Common Stock owned of record by Mr. Almog and
129,383 shares underlying options that are exercisable within 60 days of
March 9, 1998, that, if exercised, would be subject to vesting restrictions
with respect to 32,250 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 an
ownership interest he may have in such entities. Mr. Almog was Chairman of
the Board of Directors of the Company through December 1997. Mr. Almog's
address is Coral Group, Inc., 60 South Sixth Street, Suite 3510,
Minneapolis, Minnesota 55402. The Address of Coral Partners is 60 South
Sixth Street, Suite 3510, Minneapolis, Minnesota 55402.
(4) The address of Motorola, Inc. is 1303 East Algonquin Road, Schaumburg,
Illinois 60196.
5
<PAGE>
(5) Includes 934,000 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 74,000 shares of Common Stock underlying options exercisable within
60 days of March 9, 1998, that, if exercised, would be subject to vesting
restrictions with respect to 37,500 shares. Mr. Costello is Chairman of the
Board of Directors of the Company.
(6) Represents 463,200 shares of Common Stock underlying options exercisable
within 60 days of March 9, 1998. Mr. Fabiaschi is President, Chief Executive
Officer, Acting Chief Financial Officer, and a director of the Company.
(7) Includes 117,988 shares of Common Stock owned of record by Dr. Doll, 80,000
shares of Common Stock owned of record by the Dixon and Carol Doll Trust,
and 60,000 shares underlying options exercisable within 60 days of March 9,
1998 which, if exercised, would be subject to vesting restrictions with
respect to 27,938 shares. Also includes 13,000 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 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.
(8) Includes 29,000 shares of Common Stock owned of record by Dr. Shpantzer and
156,683 shares underlying options exercisable within 60 days of March 9,
1998. 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.
(9) Includes 59,000 shares of Common Stock owned of record by Mr. Smith and
62,500 shares underlying options exercisable within 60 days of March 9,
1998. Mr. Smith is Executive Vice President, Chief Operating Officer and a
director of the Company.
(10) Includes 7,500 shares of Common Stock owned of record by Mr. Kelman and
72,361 shares underlying options exercisable within 60 days of March 9,
1998. Mr. Kelman is Vice President of Product Development of the Company.
(11) Represents 57,000 shares of Common Stock underlying options exercisable
within 60 days of March 9, 1998 that, if exercised, would be subject to
vesting restrictions with respect to 44,313 shares. Mr. Osborn is a director
of the Company and is the Vice President and General Manager, Worldwide
Network Services Division of Motorola, Inc.
(12) Represents 1,100 shares of Common Stock owned of record by Mr. Swantek. Mr.
Swantek is the Vice President of Sales and Marketing of the Company.
(13) Includes 1,000 shares of Common Stock owned of record by Mr. Edelhertz. Mr.
Edelhertz is the Vice President of Customer Solutions of the Company.
(14) Mr. Hume resigned as Vice President of Marketing in February 1997.
(15) Includes shares described in notes (5) through (13) above.
6
<PAGE>
EXECUTIVE OFFICERS
The following table lists certain information regarding the Company's
executive officers as of March 9, 1998, except as otherwise noted.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------ --- ---------------------------------------------------------
<S> <C> <C>
Michael A. Fabiaschi............................ 42 President, Chief Executive Officer, Acting Chief
Financial Officer and Director
Paul Edelhertz.................................. 35 Vice President of Customer Solutions
Vladimir Kelman................................. 38 Vice President of Product Development
Isaac Shpantzer................................. 52 Fellow and Senior Vice President of Technology
Norman D. Smith................................. 49 Executive Vice President, Chief Operating Officer and
Director
Steve Swantek................................... 41 Vice President of Sales and Marketing
</TABLE>
- ------------------------
Information regarding Michael A. Fabiaschi is listed under "Proposal No.
1--Election of Directors."
Mr. Edelhertz has been Vice President of Customer Solutions of the Company
since September 1996. From 1984 to September 1996 he was employed by Andersen
Consulting, a business consulting firm, serving as an Associate Partner from
1994 to 1996, and in consulting positions before that time. Mr. Edelhertz holds
a Bachelor of Arts degree in economics from Claremont McKenna College.
Mr. Kelman has been Vice President of Product Development of the Company
since March 1997, was Director of its Systems Group in Technical Solutions and
Services from May 1995 to March 1997, Manager of its Systems Group in Research
and Development from December 1993 to May 1995 and a software systems engineer
with the Company from September 1989 to December 1993. Mr. Kelman holds a
Bachelor of Science degree in electrical engineering from the Technion-Israel
Institute of Technology.
Dr. Shpantzer has been Fellow and Senior Vice President of Technology of the
Company since March 1997 and had been its been its Chief Technical Officer from
April 1996 to March 1997, its Vice President of Research and Development from
January 1991 to March 1997 and its director of research from June 1989 to
January 1991. From August 1985 to February 1989, he served as DSP Systems and
Applications Manager for Zoran Corporation, a vendor of VLSI digital signal
processors. Dr. Shpantzer holds Bachelor and Master of Science degrees in
electrical engineering from the Technion-Israel Institute of Technology and a
Ph.D. in networking from the University of Manitoba in Winnipeg, Canada.
Information regarding Norman D. Smith is listed under "Proposal No.
1--Election of Directors."
Mr. Swantek has been Vice President of Sales and Marketing of the Company
since April 1997, rejoining the Company after having been Director of Sales from
November 1993 to November 1995. Between November 1995 and March 1997, Mr.
Swantek was President and Chief Executive Officer of Goretek Data Systems, an
application software corporation. From October 1991 to November 1993, Mr.
Swantek was Vice President of U.S. Sales and Services for Bachman Information
Systems, a provider of data modeling and database re-engineering tools for
enterprise systems. Mr. Swantek holds a Bachelor of Science degree in Marketing
from Fairfield University (Connecticut).
7
<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, 1997, 1996, and 1995 by each of the Named
Executive Officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
FISCAL -------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION
- ------------------------------------------------------------ ------ --------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Michael A. Fabiaschi(1) .................................... 1997 229,327 -- -- --
President and Chief Executive Officer 1996 194,103(2) 95,000(2) 250,000 --
1995 220,000(2) -- 30,000 --
Isaac Shpantzer ............................................ 1997 223,784 -- 50,000 --
Fellow and Senior Vice President of Technology 1996 174,179 27,300 20,000 --
1995 159,500 19,000 30,000 --
Paul Edelhertz ............................................. 1997 200,000 33,333 25,000 94,274(3)
Vice President of Customer Solutions 1996 63,718 41,667 175,000 --
1995 -- -- -- --
Emmett B. Hume(4) .......................................... 1997 190,786 -- -- --
Former Vice President of Marketing 1996 147,789 6,750 -- --
1995 132,625 27,000 165,000 --
Steve Swantek(5) ........................................... 1997 139,824 25,000 200,000 --
Vice President of Sales and Marketing 1996 -- -- -- --
1995 79,231 70,620 10,000 --
Vladimir Kelman ............................................ 1997 140,802 7,875 134,769 --
Vice President of Product Development 1996 86,720 -- 30,000 --
1995 71,271 -- 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 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) Reimbursement for relocation expenses.
(4) 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
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.
(5) Mr. Swantek resigned from the Company in 1995, and returned to the Company
as Vice President of Sales and Marketing in April 1997.
8
<PAGE>
OPTION GRANTS
The following table sets forth information regarding individual option
grants pursuant to the Company's equity incentive plans during fiscal 1997 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% or 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 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION 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................ -- -- -- -- -- --
Norman D. Smith..................... 500,000 27.5% $ 1.6880 07/21/07 $ 530,787 $ 1,345,119
Isaac Shpantzer..................... 50,000 2.8 3.8750 02/28/07 121,848 308,788
Emmett B. Hume...................... -- -- -- -- -- --
Paul Edelhertz...................... 25,000 1.4 3.8750 02/28/07 60,924 154,394
Vladimir Kelman..................... 10,000 0.6 3.2500 03/31/07 20,439 51,797
52,000 2.9 2.5000 04/29/07 81,756 207,187
72,769 4.0 2.5000 04/30/07 114,410 289,938
Steven Swantek...................... 200,000 11.0 3.0000 04/09/07 377,337 956,245
</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.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth certain information concerning the exercise
of options by each of the Named Executives Officers during fiscal 1997,
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, 1997, 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 Common Stock as reported
on the Nasdaq National Market.
9
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES FISCAL YEAR END(#) FISCAL YEAR END($)(2)
ACQUIRED VALUE -------------------------- --------------------------
NAME ON EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- --------------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael A. Fabiaschi....... -- -- 410,075 168,125 $ 322,660 --
Norman D. Smith............ -- -- 62,500 437,500 -- --
Isaac Shpantzer............ 4,000 $ 13,700 92,308 94,000 -- --
Steve Swantek.............. -- -- -- 200,000 -- --
Vladimir Kelman............ -- -- 31,794 160,706 2,625 --
Paul Edelhertz............. -- -- 43,750 156,250 -- --
Emmett B. Hume(3).......... 10,000 8,125 -- -- -- --
</TABLE>
- ------------------------
(1) "Value Realized" represents the fair market value of 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, 1997 ($1.50).
(3) See Note 4 to Summary Compensation Table on Page 9.
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
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
milestones that are agreed upon by Mr. Fabiaschi and the Board in advance.
Pursuant to the Fabiaschi Agreement, the Company 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. 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 termination by the Company. The Company has
also entered into agreements with Messrs. Fabiaschi, Swantek and Edelhertz that,
upon a change in control of ownership of the Company at any time on or before
January 10, 2000, grants each of them an employment
10
<PAGE>
contract of thirteen (13) months duration and provides for full acceleration of
all outstanding unvested options upon the completion of the term of the
employment contract.
CERTAIN TRANSACTIONS
During 1997, the Company provided Mr. Smith with $150,000 to assist him with
costs incurred to relocate to Minnesota. In December 1997, the Company loaned
Dr. Shpantzer $150,000 on an unsecured basis, with simple interest at the
Applicable Federal Rate, to be repaid three years from the date of the loan.
Except for these transactions and certain other transactions identified in
"Executive Compensation" and "Director Compensation" above, from January 1,
1997, to the present there have been no transactions involving in excess of
$60,000, between the Company and any current executive officer, director, 5%
beneficial owner of the Common Stock or member of the immediate family of any of
the foregoing persons, in which one of the foregoing individuals or entities had
a material interest.
All transactions from January 1, 1997, to the present between the Company
and any current executive officer or director have been approved by a majority
of the disinterested members of the Company's Board of Directors. Any future
transactions with officers, directors or affiliates will be approved by a
majority of the disinterested members of the Board of Directors and will be on
terms that are no less favorable to the Company than could be obtained from
unaffiliated third parties and that may reasonably be expected to benefit the
Company.
The Company's policy is to enter into agreements with each of its directors
and executive officers providing for the indemnification of such persons to the
fullest extent permitted by law for any liability they may incur by reason of
their service as officers and/or directors to the Company.
11
<PAGE>
COMPENSATION COMMITTEE
REPORT ON EXECTIVE COMPENSATION
This 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 (the
"Acts"), 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 Exchange Act of 1934, as amended, and an
"outside director" within the meaning of Section 16(m) of the Internal Revenue
Code of 1986, as amended. Although Michael A. Fabiaschi attends the meetings of
the Committee, he does not vote nor 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 that
Company's incentive plans, including the 1993 Equity Incentive Plan (the "Equity
Incentive Plan") and the 1998 Non-Officer Stock Option 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 exercise price of the stock option 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 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 1997, no one factor was
given greater consideration in determining compensation than the other factors
listed above.
1997 EXECUTIVE COMPENSATION
BASE COMPENSATION. Prior to the beginning of 1997, 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 if an executive
officer achieves or exceeds individual performance goals and the Company meets
relevant corporate objectives that are set by the Committee at the beginning of
the year. These factors receive approximately equal weighting, but subjective
factors can alter the weighting 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
12
<PAGE>
goals have been satisfied. 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 performance, 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 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 1997, 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 interest 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 1997 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.
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 limits the
total number of options any Named Executive Officer receives to 750,000 during
any fiscal year. The Company does not expect cash compensation to be affected by
the requirements of Section 162(m) for fiscal year 1998.
COMPENSATION COMMITTEE
Joseph B. Costello
Dixon R. Doll
13
<PAGE>
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 or 1934, as amended, except to the extent the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed soliciting material of 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 the 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 30, 1994, December 29, 1995, December 31, 1996, and December 31, 1997.
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 $ 103.00 $ 102.05
12/30/94 $ 48.21 $ 123.73 $ 99.79
12/29/95 $ 73.21 $ 185.02 $ 141.08
12/31/96 $ 61.61 $ 229.95 $ 173.53
12./31/97 $ 21.43 $ 269.57 $ 212.94
</TABLE>
14
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Dixon R. Doll served on the Compensation Committee of the Board of Directors
during the fiscal year ended December 31, 1997. Mr. Doll was not at any time
during 1997, or at any other time, an officer or employee of the Company. No
executive officer of the Company serves as a member of the board of directors or
compensation committee of any entity that has one or more executive officers
serving as a member of the Company's Board of Directors or Compensation
Committee.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the Company's 1999
Annual Meeting of Stockholders must be received by the Company at its principal
executive offices no later than November 25, 1998, in order to be included in
the Company's Proxy Statement and form of proxy relating to that meeting.
SECTION 16(A) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934, as amended, requires the
Company's directors and officers, and persons who own 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
regulations 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 from the executive officers and directors, the
Company believes that all Section 16(a) filing requirements were met during the
fiscal year ended December 31, 1997.
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.
Dated: March 19, 1998
By Order of the Board of Directors
[LOGO]
Michael A. Fabiaschi
PRESIDENT AND CHIEF EXECUTIVE OFFICER
15
<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 March
9, 1998, at the Annual Meeting of Stockholders of Racotek to be held on
Thursday, April 30, 1998, and at any continuations or adjournments thereof.
This Proxy, when properly executed and returned in a timely manner, will be
voted at the Annual Meeting and any adjournments thereof in the manner described
herein. If no contrary indication is made, the proxy will be voted FOR the Board
of Director nominees and for Proposal 2 and in accordance with the judgment of
the persons named as proxies herein on any other matters that may properly come
before the Annual Meeting.
/X/ Please mark votes as in this example.
The Board of Directors unanimously recommends that you vote FOR the Board of
Director nominees and FOR Proposal 2.
1. ELECTION OF DIRECTORS FOR all nominees WITHHOLD AUTHORITY
listed below TO VOTE FOR ALL
EXCEPT AS MARKED. NOMINEES. / /
/ /
To withhold authority to vote for any individual nominee, strike a line
through that nominee's name:
Joseph B. Costello, Dixon R. Doll, Michael A. Fabiaschi, James L. Osborn,
and Norman D. Smith
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>
2. Proposal to ratify the appointment of Coopers & Lybrand L.L.P. as
independent auditors for fiscal 1998.
/ / 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: ______________________, 1998
Signature: _______________________
Date: ______________________, 1998
(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.
