<PAGE> 1
================================================================================
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
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
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Section 240.14a-11(c) or Section 240.14a-12
MTI Technology Corporation
------------------------------------------------
(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
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box, if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
================================================================================
<PAGE> 2
[MTI LOGO]
MTI TECHNOLOGY CORPORATION
4905 EAST LA PALMA AVENUE
ANAHEIM, CALIFORNIA 92807
August 6, 1998
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders
of MTI Technology Corporation, to be held on Thursday, September 10, 1998, at
the Company's offices, 4905 East La Palma Avenue, Anaheim, California 92807,
beginning at 10:00 a.m. local time.
The business to be conducted at the meeting includes the election of a
director, ratification of the selection of independent auditors and
consideration of any other matters that may properly come before the meeting and
any adjournment thereof.
It is important that your shares be represented, so, even if you presently
plan to attend the meeting, please complete, sign, date and promptly return the
enclosed proxy card. If you do attend the meeting and wish to vote in person,
you may withdraw your proxy at that time.
Sincerely,
/s/ EARL M. PEARLMAN
--------------------------------------
Earl M. Pearlman
President and Chief Executive Officer
<PAGE> 3
MTI TECHNOLOGY CORPORATION
4905 EAST LA PALMA AVENUE
ANAHEIM, CALIFORNIA 92807
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 10, 1998
The Annual Meeting of Stockholders of MTI Technology Corporation, a
Delaware corporation (the "Company"), will be held at the Company's offices,
4905 East La Palma Avenue, Anaheim, California 92807, on Thursday, September 10,
1998 at 10:00 a.m., local time, for the following purposes:
(1) To elect one member of the Board of Directors to serve for a term of 3
years or until his successor is elected and qualified;
(2) To consider and act upon the ratification of the selection of KPMG Peat
Marwick LLP as the Company's independent auditors for the Company for
fiscal year 1999; and
(3) To transact any such other business as may properly come before the
Annual Meeting or any adjournment thereof.
A copy of the Company's Annual Report for the fiscal year ended April 4,
1998, containing consolidated financial statements, is included with this
mailing.
The Board of Directors has fixed the close of business on July 13, 1998 as
the record date for determining stockholders entitled to receive notice of and
to vote at the Annual Meeting and at any adjournment thereof. A list of such
stockholders will be available for examination by any stockholder at the Annual
Meeting and, for any purpose germane to the Annual Meeting, at the office of the
Secretary of the Company, 4905 East La Palma Avenue, Anaheim, California for a
period of ten days prior to the Annual Meeting. The officers and directors of
the Company cordially invite you to attend the Annual Meeting.
By Order of the Board of Directors
/s/ DALE R. BOYD
--------------------------------------
Dale R. Boyd
Chief Financial Officer and Secretary
Anaheim, California August 6, 1998
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE,
SIGN AND RETURN IT IN THE ENVELOPE PROVIDED, WHICH IS ADDRESSED FOR YOUR
CONVENIENCE AND NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. IN ORDER TO
AVOID THE ADDITIONAL EXPENSE TO THE COMPANY OF FURTHER SOLICITATION, WE ASK YOUR
COOPERATION IN PROMPTLY MAILING IN YOUR PROXY CARD.
- --------------------------------------------------------------------------------
<PAGE> 4
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of MTI Technology Corporation ("MTI" or the
"Company") for use at the Company's Annual Meeting of Stockholders to be held on
Thursday, September 10, 1998 (the "Annual Meeting"), at 10:00 a.m., local time,
at the Company's offices, 4905 East La Palma Avenue, Anaheim, California 92807
and at any adjournment thereof. This Proxy Statement and the accompanying proxy
are first being sent to stockholders entitled to vote at the Annual Meeting on
or about August 6, 1998.
THE PROXY
The persons named as proxyholders, Earl M. Pearlman and Dale R. Boyd, were
selected by the Board of Directors of the Company and are executive officers of
the Company.
All shares represented by each properly executed, unrevoked proxy received
in time for the Annual Meeting will be voted in the manner specified therein. If
no specification is made on the proxy as to any one or more of the proposals,
the Common Stock of the Company represented by the proxy will be voted for the
election of the director named in the Proxy Statement, for the ratification of
the selection of KPMG Peat Marwick LLP as the Company's independent auditors for
the 1999 fiscal year and, with respect to any other matters that may come before
the Annual Meeting, at the discretion of the proxyholders. The Company does not
presently know of any other such business. An executed proxy may be revoked at
any time before its exercise by filing with the Secretary of the Company a
written notice of revocation or a duly executed proxy bearing a later date. The
execution of the enclosed proxy will not affect a stockholder's right to vote in
person should such stockholder find it convenient to attend the Annual Meeting
and desire to vote in person.
VOTING AT THE ANNUAL MEETING
The only issued and outstanding voting securities of the Company are its
shares of Common Stock, $.001 par value (the "Common Stock"), of which
28,370,096 shares were outstanding at the close of business on July 13, 1998.
Only holders of record at the close of business on July 13, 1998 are entitled to
receive notice of and to vote at the Annual Meeting and any adjournment thereof.
Except as described below, the holders of the Common Stock of the Company are
entitled to one vote per share on each matter submitted to a vote of the
stockholders. The Company's Bylaws do not provide for cumulative voting by
stockholders.
The holders of a majority of the Company's outstanding Common Stock,
present in person or by proxy, will constitute a quorum for the transaction of
business at the Annual Meeting or any adjournment thereof. While there is no
definitive statutory or case law authority in Delaware as to the proper
treatment of abstentions (also referred to as withheld votes), the Company
believes that abstentions should be counted for purposes of determining if a
quorum is present at the Annual Meeting for the transaction of business. With
respect to broker nominee votes, the Delaware Supreme Court has held that broker
nominee votes may be counted as present or represented for purposes of
determining the presence of a quorum. Abstentions are included in determining
the number of shares voted on the proposals submitted to stockholders (other
than the election of directors) and will have the same effect as a no vote on
such proposals, whereas broker non-votes are not counted. Directors are elected
by plurality of the votes of the shares of Common Stock represented and voted at
the meeting and abstentions and broker non-votes will have no effect on the
outcome of the election of directors. The affirmative vote of a majority of the
shares of Common Stock represented and voted at the meeting is required for
approval of Proposal Two.
SOLICITATION
The expense of soliciting proxies will be borne by the Company. Proxies
will be solicited principally through the use of the mail, but directors,
officers and regular employees of the Company may solicit proxies personally or
by telephone or special letter without any additional compensation. The Company
also will reimburse banks, brokerage houses and other custodians, nominees and
fiduciaries for any reasonable expenses in forwarding proxy materials to
beneficial owners. The Company has engaged Corporate Investor Communications,
Inc. to supplement the Company's solicitation efforts, and the Company will pay
the customary fee, estimated to be approximately $5,000.
1
<PAGE> 5
PROPOSAL ONE
ELECTION OF DIRECTOR
At the Annual Meeting, one individual will be elected as director for a
three year term and until his successor is elected. The Board of Directors has
nominated Raymond J. Noorda for election at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO APPROVE THE NOMINEE FOR
ELECTION AS A MEMBER OF THE BOARD OF DIRECTORS.
The proxies given to the proxyholders will be voted or not voted as
directed thereon, and if no direction is given, will be voted FOR approval of
the nominee. The Board of Directors knows of no reason why the nominee should be
unable or unwilling to serve, but if the nominee should, for any reason, be
unable or unwilling to serve, the proxies will be voted for the election of such
other person to the office of director as the Board of Directors may recommend
in the place of such nominee.
NOMINEES FOR DIRECTOR
The following table sets forth the names, ages and positions of all
directors and the nominee as of July 2, 1998. A summary of the background and
experience of each of these individuals is set forth after the table.
Information regarding MTI's executive officers is set forth in Part I of its
Annual Report on Form 10-K under the heading "Executive Officers of the
Registrant."
DIRECTORS
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Raymond J. Noorda*..................... 73 Chairman of the Board of Directors,
Nominee
Val Kreidel*........................... 43 Director
David Proctor*......................... 58 Director
Earl Pearlman.......................... 54 Director, President and Chief Executive
Officer
John Repp*............................. 60 Director
</TABLE>
- ---------------
* Member of Audit Committee and Compensation Committee.
MTI's Bylaws provide for the Board of Directors to be divided into three
classes, with each class to be as nearly equal in the number of directors as
possible. At each annual meeting of stockholders, the successors to the class of
directors whose term expires at that time are elected to hold office for a term
of three years until their respective successors are elected and qualified, so
that the term of one class of directors expires at each such annual meeting. The
terms of office expire as follows: Mr. Noorda, 1998; Mr. Repp, 2000; Mr.
Proctor, 2000; Ms. Kreidel, 1999; and Mr. Pearlman, 1999.
Ms. Kreidel is the daughter of Mr. Noorda. There are no other family
relationships among the directors or executive officers of MTI.
Raymond J. Noorda has been Chairman of the Board of Directors of the
Company since 1987. Mr. Noorda previously served as the President, Chief
Executive Officer and Chairman of the Board of Directors of Novell, Inc. Prior
to joining Novell, Inc., Mr. Noorda served as Chief Executive Officer of
Boschert, Inc. and System Industries, Inc.
Val Kreidel was elected a Director of the Company in January 1994. Ms.
Kreidel has served as a financial analyst for NFT Ventures, Inc. and DSC
Ventures, Inc., private investment companies, since May 1989. From
2
<PAGE> 6
May 1985 to May 1989, Ms. Kreidel served as a Vice President of Atlantic
Financial Savings Bank in its Real Estate Loan Department.
David Proctor was elected a Director of the Company in October 1995. Mr.
Proctor is currently a consultant. He served as President and Chief Operating
Officer of Platinum Software Corporation, a supplier of financial software
application programs, from May 1994 to December 1995. Prior to joining Platinum
Software, Mr. Proctor was Vice President of software products for the Personal
Software Products Division of IBM from April 1993 to May 1994. From October 1991
to April 1993, Mr. Proctor was a private consultant providing executive
management services to technology companies. From May 1990 to October 1991, Mr.
Proctor was with Ashton-Tate Corporation, a supplier of business applications
software products, and served as both the Vice President of the Database
Division and as President and Chief Operating Officer. Prior to joining
Ashton-Tate, Mr. Proctor spent 23 years with IBM in several executive
capacities. Mr. Proctor presently serves on the Board of Directors of CyberGuard
Corporation.
Earl Pearlman was named President and Chief Executive Officer of the
Company in April 1996. From April 1995 to March 1996, Mr. Pearlman was Vice
President, U.S. Sales for the Company. Prior to joining the Company, Mr.
Pearlman was the President and Chief Executive Officer of National Peripherals,
Inc., a supplier of cross-platform RAID-based storage products, which he founded
in 1980, acquired by the Company in 1995.
John Repp has been a Director of the Company since January 1998. Mr. Repp
has been a consultant to several high technology firms beginning in 1995. Prior
to this time, Mr. Repp was the Vice President of Sales for Seagate Technology
from 1989 until 1995. Prior to joining Seagate, Mr. Repp spent 22 years with
Control Data Corporation in various positions in sales and operations.
DIRECTORS' FEES AND OPTIONS
The Company's Directors did not receive cash compensation for serving on
the Board of Directors for the fiscal year ended April 4, 1998, but they were
reimbursed for expenses incurred in attending Board meetings.
Each non-employee Director of the Company is granted a nonqualified option
to purchase 10,000 shares of Common Stock under the Directors' Non-Qualified
Stock Option Plan (the "Directors' Plan") and upon election or appointment to
the Board of Directors. In addition, the Directors' Plan provides that each non-
employee Director who is a director immediately prior to an annual meeting of
the Company's stockholders and who continues to be a Director after such meeting
(i.e., Mr. Proctor, Ms. Kreidel and Mr. Noorda, in the event he is re-elected)
will be granted an option to purchase 2,500 shares of Common Stock, provided
that such Director has served as such for at least one year. Mr. Noorda, Ms.
Kreidel and Mr. Proctor each received options to purchase 2,500 shares of Common
Stock with an exercise price of $12.88 per share following the Company's 1997
Annual Meeting and Mr. Repp received an option to purchase 10,000 shares of
Common Stock with an exercise price of $11.88 per share upon his appointment as
a director. Each option granted under the Directors' Plan has an exercise price
equal to the fair market value of the Common Stock on the date of grant and
vests monthly over a 12-month period.
COMMITTEES OF THE BOARD
The Company currently has two committees, the Audit Committee and the
Compensation Committee. The Audit Committee, currently consisting of Mr. Noorda,
Mr. Proctor, Ms. Kreidel and Mr. Repp, recommends the appointment of the
independent public accountants of the Company, reviews and approves the scope of
the annual audit and reviews the results thereof with the Company's independent
accountants. The Audit Committee also assists the Board in fulfilling its
fiduciary responsibilities relating to accounting and reporting policies,
practices and procedures, and reviews the continuing effectiveness of the
Company's business ethics and conflicts of interest policies. The Company does
not have an executive committee.
The Compensation Committee, currently consisting of Mr. Noorda, Mr.
Proctor, Ms. Kreidel and Mr. Repp, recommends to the Board of Directors the
salaries, bonuses and stock awards received by the officers of the Company. The
Compensation Committee is also responsible for administering the Company's
3
<PAGE> 7
Stock Incentive Plan. The Compensation Committee determines the recipients of
awards, sets the exercise price of shares granted, and determines the terms,
provisions and conditions of all rights granted.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 1998, the Compensation Committee consisted of Mr.
Noorda, Mr. Proctor, Ms. Kreidel and, upon his election, Mr. Repp. None of these
persons is or has been an officer or employee of the Company or any of its
subsidiaries. In addition, there are no Compensation Committee interlocks
between MTI and other entities involving MTI executive officers and Board
members who serve as executive officers of such entities.
ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
During the fiscal year ended April 4, 1998, the Board of Directors met four
times. In addition, the Audit Committee and Compensation Committee met one and
four times, respectively. No director attended fewer than 75% of the aggregate
number of meetings held by the Board of Directors and all committees of the
Board on which such director served.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires that the Company's executive officers and directors file reports of
beneficial ownership on Form 3 and changes in beneficial ownership on Forms 4
and 5 with the Securities and Exchange Commission ("SEC"). Executive officers
and directors are also required by the SEC rules to furnish the Company with
copies of all Section 16(a) reports they file. As part of a Section 16
compliance program established by the Company for its executive officers and
directors, the Company undertakes to file these reports on behalf of such
individuals. Based solely on its review of the Forms 3, 4 and 5 filed on behalf
of its executive officers and directors, as well as written representations from
certain individuals that no Forms 5 are required by such individuals, the
Company believes that, during the fiscal year ended April 4, 1998, all Section
16(a) filing requirements applicable to its executive officers and directors
were complied with pursuant to the SEC rules, except that one of Steven J.
Hamerslag's (a former Director of the Company) filings on Form 4 was filed nine
days late.
VOTING SECURITIES
AND
PRINCIPAL HOLDERS THEREOF
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of July 2, 1998 by (i) each person known by the
Company to own more than 5% of such shares, (ii) each of the Company's
Directors, (iii) the Company's Chief Executive Officer and each of its four most
highly compensated executive officers who served as executive officers at April
4, 1998, and (iv) all Directors and executive officers as a group. As of July 2,
1998, there were 28,363,971 issued and outstanding shares of Common Stock of the
Company, not including treasury shares or shares issuable upon exercise of
options or warrants. Ownership information has been supplied by the person
concerned.
4
<PAGE> 8
SECURITY OWNERSHIP TABLE
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
--------------------
NAME NUMBER PERCENT
---- ---------- -------
<S> <C> <C>
NFT Ventures, Inc........................................... 14,463,285 50.99%
10050 N. Wolfe Road SW2
Cupertino, California 95014
Kennedy Capital Management.................................. 1,606,446 5.66%
10829 Olive Boulevard
St. Louis, Missouri 63141
Steven J. Hamerslag(2)...................................... 1,880,500 6.63%
P.O. Box 7227
Rancho Santa Fe, California 92067
Raymond J. Noorda(3)........................................ 14,480,368 51.02%
Val Kreidel(4).............................................. 17,083 *
David Proctor(5)............................................ 19,583 *
Earl M. Pearlman(6)......................................... 151,668 *
John Repp (7)............................................... 5,833 *
Dale R. Boyd(8)............................................. 72,750 *
Thomas P. Raimondi(9)....................................... 180,850 *
Gary M. Scott(10)........................................... 509,250 1.78%
Venki Venkataraman (11)..................................... 30,600 *
All directors and officers as a group (13 persons)(12)...... 15,520,711 53.22%
</TABLE>
- ---------------
* Less than 1%
(1) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the Company believes that the persons
named in the table have sole voting and investment power with respect to
all shares.
(2) Includes 1,793,000 shares held in a family trust in which Mr. Hamerslag has
shared voting and investment power with his wife.
(3) The address for Mr. Noorda is c/o MTI Technology Corporation, 4905 East La
Palma Avenue, Anaheim, California 92807. Represents shares owned by NFT
Ventures, Inc. ("NFT"), and 17,083 shares issuable to Mr. Noorda upon
exercise of options exercisable within 60 days of July 2, 1998. Mr. Noorda,
Chairman of the Board of Directors of the Company, is Chairman of the Board
of NFT. Mr. Noorda disclaims beneficial ownership of all shares held by
NFT.
(4) Includes 17,083 shares issuable upon exercise of options exercisable within
60 days of July 2, 1998.
(5) Includes 14,583 shares issuable upon exercise of options exercisable within
60 days of July 2, 1998.
(6) Includes 151,668 shares issuable upon exercise of options exercisable
within 60 days of July 2, 1998.
(7) Includes 5,833 shares issuable upon exercise of options exercisable within
60 days of July 2, 1998.
(8) Includes 72,750 shares issuable upon exercise of options exercisable within
60 days of July 2, 1998.
(9) Includes 180,850 shares issuable upon exercise of options exercisable
within 60 days of July 2, 1998.
(10) Includes 258,750 shares issuable upon exercise of options exercisable
within 60 days of July 2, 1998.
(11) Includes 30,000 shares issuable upon exercise of options exercisable within
60 days of July 2, 1998.
(12) Includes shares held by entities affiliated with directors and executive
officers of the Company as described above, including 798,350 shares
issuable upon exercise of stock options and warrants exercisable within 60
days of July 2, 1998.
5
<PAGE> 9
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS AND OTHER INFORMATION
SUMMARY OF EXECUTIVE COMPENSATION
The following table sets forth for each of the Company's last three
completed fiscal years the compensation of Earl M. Pearlman, the Company's
President and Chief Executive Officer, and the four most highly compensated
executive officers other than Mr. Pearlman whose total annual salary and bonus
for the last fiscal year exceeded $100,000 (collectively, the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION NUMBER OF
------------------------------------------------ SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1) OPTIONS(#) COMPENSATION($)(2)
- --------------------------- ---- --------- -------- ------------------ ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Earl M. Pearlman(3)....... 1998 260,577 202,070 * 285,000 0
President, Chief Executive 1997 213,846 0 * 250,000 0
Officer 1996 186,362 0 * 375,000 14,068
Gary M. Scott(4).......... 1998 254,609 103,022 * 80,000 2,584
Senior Vice President, 1997 210,098 0 24,650 0 1,130
European Operations 1996 216,116 0 31,938 315,000 1,169
Dale R. Boyd(5)........... 1998 189,750 91,522 * 0 2,864
Vice President, Chief 1997 175,048 11,250 * 120,000 1,300
Financial Officer 1996 122,500 0 * 50,000 39
Thomas P. Raimondi(6)..... 1998 207,343 90,522 * 0 3,020
Senior Vice President 1997 200,000 10,000 * 100,000 1,875
and General Manager 1996 175,000 0 * 232,500 1,189
Venki Venkataraman (7).... 1998 182,673 96,772 * 0 17,748
Vice President, Operations 1997 110,000 27,000 * 85,000 26,648
</TABLE>
- ---------------
* Amount does not exceed the lesser of $50,000 or ten percent of the total
annual salary and bonus reported for the individual.
(1) 1997 amount for Mr. Scott includes $6,898 for tax services and $17,752 for
an automobile allowance. 1996 amount for Mr. Scott includes $615 for medical
insurance, $11,861 for tax services and $19,462 for an automobile allowance.
(2) Amounts represent the dollar value of insurance premiums paid by the Company
during the fiscal year with respect to term life insurance for the benefit
of the Named Executive Officer, with the exception of the 1998 and 1997
amounts for Mr. Venkataraman, which also include $16,035 and $24,523 for
reimbursement of relocation expenses, respectively.
(3) Includes options to purchase an aggregate of 125,000 shares that were
repriced in May 1995.
(4) Includes options to purchase an aggregate of 190,000 shares granted in
previous fiscal years that were repriced in May 1995.
(5) Includes options to purchase an aggregate of 25,000 shares granted in
previous fiscal years that were repriced in May 1995.
(6) Includes options to purchase an aggregate of 132,500 shares granted in
previous fiscal years that were repriced in May 1995.
(7) Mr. Venkataraman joined the Company on April 29, 1996.
6
<PAGE> 10
SUMMARY OF OPTION GRANTS
The following table sets forth the individual grants of stock options made
by the Company during the fiscal year ended April 4, 1998 to each of the Named
Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE
------------------------------------------------ VALUE AT ASSUMED
NUMBER OF % TOTAL ANNUAL RATES OF
SECURITIES OPTIONS STOCK
UNDERLYING GRANTED TO PRICE APPRECIATION
OPTIONS EMPLOYEES EXERCISE FOR OPTION TERM(2)
GRANTED IN FISCAL PRICE EXPIRATION ------------------------
NAME (#) YEAR(1) ($/SH)(1) DATE 5%($) 10%($)
---- ---------- ---------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Earl M. Pearlman.............. 285,000 18% $12.50 09/26/07 2,240,437 5,677,708
Gary Scott.................... 80,000 5% $12.88 09/25/07 647,760 1,641,555
Dale R. Boyd.................. 0 0 n/a n/a n/a n/a
Thomas P. Raimondi, Jr........ 0 0 n/a n/a n/a n/a
Venki Venkataraman............ 0 0 n/a n/a n/a n/a
</TABLE>
- ---------------
(1) Based on an aggregate of 1,564,200 options granted to directors and
employees of the Company in fiscal year 1998, including the Named Executive
Officers.
(2) The potential realizable value is calculated based on the term of the option
at its time of grant (ten years). It is calculated by assuming that the
stock price appreciates at the indicated annual rate compounded annually for
the entire term of the option and that the option is exercised and sold on
the last day of its term for the appreciated stock price. No gain to the
option holder is possible unless the stock price increases over the option
term.
Mr. Pearlman's option grant to purchase 285,000 shares at $12.50, which
expires September 26, 2007, vests 50% on September 25, 1998, and 50% on
September 25, 1999. Mr. Scott's option grant to purchase 80,000 shares at
$12.88, which expires September 25, 2007, vests 25% one year after the
commencement date of the grant, and one-twelfth of the remaining shares subject
to the option grant vest each quarter thereafter.
SUMMARY OF OPTIONS EXERCISED
The following table sets forth information concerning exercises of stock
options during the year ended April 4, 1998 by each of the Named Executive
Officers and the value of unexercised options at April 4, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
FISCAL 1998
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR FISCAL YEAR
SHARES END (#) END ($)
ACQUIRED ON VALUE --------------- -------------------
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($)(1) UNEXERCISABLE UNEXERCISABLE(2)
---- ----------- --------- --------------- -------------------
<S> <C> <C> <C> <C>
Earl M. Pearlman.................... 208,332 2,895,555 291,668/285,000 4,213,562/1,175,625
Gary Scott.......................... 0 -- 227,500/167,500 3,384,063/1,601,163
Dale R. Boyd........................ 4,000 58,938 57,250/108,750 803,469/1,503,031
Thomas P. Raimondi, Jr. ............ 18,650 237,357 168,850/145,000 2,499,144/2,119,375
Venki Venkataraman.................. 0 -- 21,250/63,750 287,506/862,519
</TABLE>
- ---------------
(1) Value realized is based on estimated fair market value of Common Stock on
the date of exercise minus the exercise price.
(2) Value is based on estimated fair market value of Common Stock as of April 4,
1998 ($16.625) minus the exercise price.
7
<PAGE> 11
SEVERANCE AGREEMENTS
The Board of Directors has approved Severance Agreements with the following
executive officers: Earl Pearlman, Dale Boyd, Thomas Raimondi, Venki
Venkataraman, Gary Scott, Chuck Sitzman, Pat Conroy, Peter Shambora and William
Decker. Once executed and delivered by the parties, these agreements will have
two year terms and be automatically renewable for successive one year terms
thereafter. Pursuant to the approved terms, if the executive's employment with
the Company is terminated within twelve months of a change in control of the
Company (as defined in the agreement), he will receive benefits at the level
determined by the reason for such termination. If the termination is for cause
(as defined in the agreement), by reason of the executive's disability or death,
or by the employee for other than "good reason" (as defined in the agreement),
the Company will pay the employee all accrued, unpaid compensation, and, except
where terminated by the Company for cause, a pro rata portion of the annual
bonus under the bonus plan. If the executive is terminated for any other reason
by the Company or the executive terminates his employment with good reason, the
Company will pay to the executive (i) all accrued, unpaid compensation, (ii) a
pro rata portion of the annual bonus under the bonus plan and (iii) an amount
equal to one year of annual base salary and annual bonus under the bonus plan,
and, for a period of twelve months following termination, will provide the
executive and his dependents medical insurance benefits.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
During the fiscal year ended April 4, 1998, the Compensation Committee,
consisting of Mr. Noorda, Mr. Proctor, Ms. Kreidel and Mr. Repp, was responsible
for establishing and administering the policies that govern the compensation of
executive officers, including the Named Executive Officers. The Compensation
Committee has furnished the following report on executive compensation:
COMPENSATION COMMITTEE REPORT
The Compensation Committee ("Committee") of the Board of Directors is
composed of independent outside directors. The Committee reviews and administers
the Company's various incentive plans, including the cash compensation levels of
members of management, the Company's bonus plan and the Company's stock
incentive plans.
General Compensation Policy. The Committee's fundamental compensation
policy is to make a substantial portion of an executive's total potential
compensation contingent upon the financial performance of the Company.
Accordingly, in addition to each executive's base salary, the Company offers the
opportunity for an annual cash bonus which is tied to the Company's achievement
of financial performance goals, and stock option awards to provide incentives to
the executive officers through an equity interest of the Company. The Committee
believes that the stockholders benefit by aligning the long-term interests of
stockholders and employees.
Base Salary. For the fiscal year 1998, the Committee reviewed the
recommendations of the Chief Executive Officer as to proposed base salaries for
all executives other than the Chief Executive Officer. Increases in base
salaries generally reflect increased responsibilities over the prior fiscal year
or strong individual performance in the prior fiscal year.
The Committee performed an annual review of the base salary of each of the
executive officers with reference to the executive's performance, level of
responsibility and experience to determine whether the current base salary is
appropriate and competitive. The Committee evaluated the reasonableness of the
base salary based upon the median salary range paid to executive officers with
comparable duties at companies of similar size in the same geographic area in
the computer technology industry. No specific quantitative weight was given to
any particular performance measurement.
Cash Bonuses. The Company's Board of Directors approved and implemented a
senior management bonus plan ("Bonus Plan") for fiscal 1998. The purpose of this
Bonus Plan was to provide an incentive to certain designated senior managers to
maximize stockholder value by maximizing operational performance of the Company.
Bonus Plan participants included all executive officers of the Company and
certain other key senior managers.
Pursuant to the terms of the Bonus Plan, the criterion for earning a bonus
was based solely on the Company's reported net income for fiscal 1998 ("Actual
Net Income") being equal to or greater than the
8
<PAGE> 12
consolidated net income as set forth in the Company's fiscal 1998 annual
operating plan as approved by the Company's Board of Directors ("AOP net
Income").
Bonus Plan participants were divided into two groups: senior managers who
reported directly to the President and Chief Executive Officer ("Direct
Reporting Senior Managers") and those who reported to a position other than the
President and Chief Executive Officer ("Secondary Senior Managers").
The Bonus Plan provided for two levels of bonus award categories: a base
bonus award ("Base Bonus") and an over-achievement bonus award
("Over-Achievement Bonus"). Base Bonuses were earned if the Company's Actual Net
Income, inclusive of all calculated Base Bonus amounts, was equal to the AOP Net
Income. The Base Bonus for each Direct Reporting Senior Managers was 25% of his
respective annual salary. The Base Bonus for each Secondary Senior Manager was
15% of his respective annual salary. In the event that Actual Net Income,
inclusive of the accrued costs of all Base Bonuses, was in excess of the AOP Net
Income, a bonus pool was created based on 15% of the first $1,500,000 of Actual
Net Income that was in excess of the AOP Net Income and 20% of every dollar
greater than $1,500,000. The bonus pool was divided between the two Bonus Plan
participant groups based on each of the respective group's cumulative Base
Bonuses as a percentage of the total Base Bonuses for both groups. Within each
group, the bonus pool was divided equally among group members.
Stock Option Awards. The Company has granted stock options under its
various stock option plans generally at prices equal to the fair market value of
the Company's Common Stock at the date of grant. Grants to executive officers
are based on their responsibilities and relative positions in the Company and
are considered an integral component of total compensation. The Committee
believes the granting of options to be beneficial to stockholders, because it
increases management's incentive to enhance stockholder value. Grants were
proposed by the Chief Executive Officer and reviewed by the Committee based on
the individual's overall performance. No specific quantitative weight was given
to any particular performance measure. The Committee believes that stock option
grants are necessary to retain and motivate key employees of the Company.
Chief Executive Officer Compensation. The base salary of the Chief
Executive Officer was recommended by the Committee and approved by the Board.
The Committee reviewed the salaries of comparable executive officers at
companies of similar size and in the same geographic area as the Company and in
the computer industry. Mr. Pearlman participated in the same executive
compensation plans as those described above for the other executive officers. As
is true of the other executive officers, the Committee's policy is to have a
large portion of the Chief Executive Officer's compensation based on the
Company's financial performance. Mr. Pearlman received $202,070 in cash bonuses
for fiscal 1998. Mr. Pearlman was awarded options to purchase 285,000 shares of
the Company's Common Stock during fiscal 1998.
Policy Regarding Deductibility of Compensation. Section 162(m) of the
Internal Revenue Code ("Section 162(m)") provides that for federal income tax
purposes, the otherwise allowable deduction for compensation paid or accrued to
a covered employee of a publicly held corporation is limited to no more than $1
million per year. The Company is not presently affected by Section 162(m)
because, for the fiscal year ended April 4, 1998, no executive officer's
compensation exceeded $1 million, and the Company does not believe that the
compensation of any executive officer will exceed $1 million for the 1999 fiscal
year. Options granted under the Company's 1996 Stock Incentive Plan will be
considered performance-based compensation. As performance-based compensation,
compensation attributable to options granted under the Plan and awarded to
covered employees will not be subject to the compensation deduction limitations
of Section 162(m).
COMPENSATION COMMITTEE
Raymond J. Noorda
Val Kreidel
David Proctor
John Repp
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<PAGE> 13
COMPANY STOCK PRICE PERFORMANCE
The following performance graph assumes an investment of $100 on April 7,
1994 (the date the Company became subject to Section 12 of the Exchange Act) and
compares the change to April 4, 1998 in the market prices of the Common Stock
with a broad market index (Nasdaq Stock Market -- U.S.) and an industry index
(Nasdaq Computer Manufacturer Index). The Company paid no dividends during the
periods shown; the performance of the indexes is shown on a total return
(dividend reinvestment) basis. The graph lines merely connect the prices on the
dates indicated and do not reflect fluctuations between those dates.
COMPARISON OF 48 MONTH CUMULATIVE TOTAL RETURN AMONG MTI
TECHNOLOGY CORPORATION, THE NASDAQ STOCK MARKET -- U.S.
INDEX AND THE NASDAQ COMPUTER MANUFACTURER INDEX
<TABLE>
<CAPTION>
MTI NASDAQ
MEASUREMENT PERIOD TECHNOLOGY NASDAQ STOCK COMPUTER
(FISCAL YEAR COVERED) CORPORATION MARKET (U.S.) MANUFACTURER
--------------------- ----------- ------------- ------------
<S> <C> <C> <C>
4/7/94 100 100 100
MAR-95 36 109 116
MAR-96 21 149 179
MAR-97 42 165 196
MAR-98 192 251 348
</TABLE>
- --------------
* $100 invested on 4/07/94 in stock or index, including reinvestment
of dividends, fiscal year ending March 31.
** Figures in dollars.
THE FOREGOING REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS ON EXECUTIVE COMPENSATION AND THE PERFORMANCE GRAPH THAT APPEARS
IMMEDIATELY ABOVE SHALL NOT BE DEEMED TO BE SOLICITING MATERIAL OR TO BE FILED
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934, OR
INCORPORATED BY REFERENCE IN ANY DOCUMENT SO FILED.
10
<PAGE> 14
PROPOSAL TWO
SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has recommended that the stockholders ratify the
selection of KPMG Peat Marwick LLP to serve as independent auditors for the
Company for the fiscal year ending April 5, 1999, or until a successor is
appointed.
KPMG Peat Marwick LLP has been the principal certified public accounting
firm utilized by the Company since March 1986. During this time, KPMG has
examined the Company's consolidated financial statements, made limited reviews
of the interim financial reports, reviewed filings with the Securities and
Exchange Commission and provided general advice regarding related accounting
matters.
The matter is being submitted to the stockholders for approval by the
affirmative vote of the holders of record of a majority of the shares
represented and voting, in person or by proxy, at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THE ADOPTION OF THE FOLLOWING RESOLUTION,
WHICH WILL BE PRESENTED TO THE MEETING:
RESOLVED, that the stockholders of MTI Technology Corporation hereby ratify
the selection of KPMG Peat Marwick LLP as independent auditors of the
Company for the fiscal year ending April 5, 1999.
The persons designated in the enclosed proxy will vote your shares FOR
ratification of the selection unless instructions to the contrary are indicated
in the enclosed proxy.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
Annual Meeting of Stockholders to respond to appropriate questions and to make
statements should they desire to do so.
OTHER BUSINESS
The Board of Directors is not aware of any other matters to come before the
Annual Meeting. If any matter not mentioned herein is properly brought before
the meeting, the persons named in the enclosed proxy will have discretionary
authority to vote all proxies with respect thereto in accordance with their
judgment.
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED APRIL
4, 1998 AS FILED WITH THE SEC WILL BE PROVIDED TO STOCKHOLDERS WITHOUT CHARGE
UPON WRITTEN REQUEST TO INVESTOR RELATIONS, MTI TECHNOLOGY CORPORATION, 4905
EAST LA PALMA AVENUE, ANAHEIM, CALIFORNIA 92807.
11
<PAGE> 15
STOCKHOLDER PROPOSALS FOR THE
1999 ANNUAL MEETING
Stockholders who may wish to present proposals for inclusion in the
Company's proxy materials in connection with the 1999 Annual Meeting of
Stockholders must submit such proposals in writing to the Secretary at the
address shown at the top of page one not later than March 22, 1999. In addition,
to be properly considered at the 1999 Annual Meeting of Stockholders, notice of
any stockholder proposals must be given to the Company's Secretary in writing
not less than 30 nor more than 60 days prior to the meeting; provided, that in
the event that less than 40 days notice of the meeting date is given to
stockholders, proposals must be received not later than the close of business on
the tenth day following the day on which notice of the annual meeting date was
mailed or publicly disclosed. A stockholder's notice to the Secretary must set
forth for each matter proposed to be brought before the annual meeting (a) a
brief description of the matter the stockholder proposes to bring before the
annual meeting, (b) the name and home address of the stockholder proposing such
business, (c) the class and number of shares of Common Stock beneficially owned
by such stockholder, and (d) any material interest of such stockholder in such
business.
By Order of the Board of Directors
/s/ EARL M. PEARLMAN
-------------------------------------
Earl M. Pearlman
President and Chief Executive Officer
Anaheim, California
August 6, 1998
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<PAGE> 16
APPENDIX "A"
MTI TECHNOLOGY CORPORATION
4905 EAST LA PALMA AVENUE, ANAHEIM, CALIFORNIA 92807
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS OF
MTI TECHNOLOGY CORPORATION TO BE HELD ON SEPTEMBER 10, 1998
The undersigned hereby appoints Earl M. Pearlman and Dale R. Boyd, each with
full power of substitution, as proxies of the undersigned, to attend the Annual
Meeting of Stockholders of MTI Technology Corporation (the "Company") to be held
at the Company's offices, 4905 East La Palma Avenue, Anaheim, California 92807,
on September 10, 1998, at 10:00 a.m. local time, and at any and all adjournments
thereof, and to vote all Common Stock of the Company, as designated on the
reverse side of this proxy card, with all the powers the undersigned would
possess if personally present at the meeting.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
<PAGE> 17
[X] Please mark
your votes as
in this example
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS SPECIFIED.
WHERE NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR THE NOMINEE LISTED
AND FOR APPROVAL OF PROPOSAL 2. THIS PROXY CONFERS AUTHORITY FOR THE PERSONS
NAMED ON THE REVERSE SIDE, OR ANY ONE OF THEM, TO VOTE IN HIS DISCRETION WITH
RESPECT TO ANY OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS:
1. ELECTION OF DIRECTORS: Nominee: Raymond J. Noorda
FOR WITHHELD
[ ] [ ]
2. Ratification of Selection of FOR AGAINST ABSTAIN
KPMG Peat Marwick LLP as the [ ] [ ] [ ]
Company's independent auditors
for fiscal year 1999.
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING AND PROXY
STATEMENT FOR THE 1998 ANNUAL MEETING.
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
NOTE: Please sign exactly as name(s) appear(s). When signing as executor,
administrator, attorney, trustee or guardian, please give your full title as
such. If a corporation, please sign in full corporation name by president or
other authorized officer. If a partnership, please sign in partnership name by
authorized person. If a joint tenancy, please have both tenants sign.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Signature: Date: Signature: Date:
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