<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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
</TABLE>
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 20, 1999
Dear Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of Stockholders
of MTI Technology Corporation, to be held on Thursday, September 23, 1999, 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 two
directors, ratification of the selection of independent auditors, approval of an
amendment to the 1996 Stock Incentive Plan to increase the number of shares
subject to the Stock Incentive Plan 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 23, 1999
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 23,
1999 at 10:00 a.m., local time, for the following purposes:
(1) To elect two members of the Board of Directors each to serve for a
term of 3 years or until his or her 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 fiscal
year 2000;
(3) To approve an amendment to the 1996 Stock Incentive Plan to increase
the number of shares subject to the Stock Incentive Plan from
4,704,099 to 6,704,099, plus annual adjustments; and
(4) 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 3,
1999, containing consolidated financial statements, is included with this
mailing.
The Board of Directors has fixed the close of business on July 29, 1999 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 20, 1999
- --------------------------------------------------------------------------------
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 23, 1999 (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 20, 1999.
THE PROXY
The persons named as proxyholders, Earl M. Pearlman and Dale R. Boyd, were
selected by the Board of Directors of the Company. Mr. Pearlman is a director of
the Company and Mr. Pearlman and Mr. Boyd 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 directors named in the Proxy Statement, for the ratification of
the selection of KPMG Peat Marwick LLP as the Company's independent auditors for
the 2000 fiscal year, for approval of the amendment to the 1996 Stock Incentive
Plan to increase the number of shares available for grant, 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
29,396,088 shares were outstanding at the close of business on July 29, 1999.
Only holders of record at the close of business on July 29, 1999 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 and Proposal Three.
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.
2
<PAGE> 5
PROPOSAL ONE
ELECTION OF DIRECTORS
At the Annual Meeting, two individuals will be elected as directors for
three year terms and until his or her successor is elected. The Board of
Directors has nominated Val Kreidel and Earl Pearlman for election at the Annual
Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO APPROVE THE NOMINEES FOR
ELECTION AS MEMBERS 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 nominees. The Board of Directors knows of no reason why the nominees should
be unable or unwilling to serve, but if the nominees should, for any reason, be
unable or unwilling to serve, the proxies will be voted for the election of such
other persons to the office of director as the Board of Directors may recommend
in the place of such nominees.
NOMINEES FOR DIRECTOR
The following table sets forth the names, ages and positions of all
directors and the nominees as of August 1, 1999. 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.......... 75 Chairman of the Board of Directors
*Val Kreidel................ 44 Director, Nominee
Earl Pearlman.............. 55 President and Chief Executive Officer, Director,
Nominee
*John Repp.................. 60 Director
*Al Melrose................. 73 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 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, 2001; Mr. Repp, 2000; Mr.
Melrose, 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 May 1985 to
May 1989, Ms. Kreidel served as a Vice President of Atlantic Financial Savings
Bank in its Real Estate Loan Department.
3
<PAGE> 6
Earl Pearlman was named President and Chief Executive Officer of the
Company in April 1996 and has been a Director of the Company since October 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.
Al Melrose has been a director of the Company since April 1999. Mr. Melrose
has been a marketing and investor relations consultant to numerous companies
since 1994. Prior to this, he worked in investor relations and marketing for
various companies for approximately 30 years.
DIRECTORS' FEES AND OPTIONS
Each non-employee director received meeting fees of $2,500 per Board
meeting attended during the fiscal year ended April 3, 1999, and was reimbursed
for expenses incurred in attending Board meetings. The Company's employee
directors did not receive cash compensation for serving on the Board of
Directors for the fiscal year ended April 3, 1999, but they were reimbursed for
expenses incurred in attending Board meetings. Since February 1999, the Company
has included each non-employee director with the named executives of the Company
in the Company's executive medical plan. During fiscal 1999, the Company paid
$0, $0 and $1,504 for medical expenses not otherwise covered by insurance for
Mr. Noorda, Ms. Kreidel and Mr. Repp, respectively.
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") 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. Noorda, Mr. Repp and Mr. Melrose and Ms. Kreidel in the event she 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
and Ms. Kreidel each received options to purchase 2,500 shares of Common Stock
with an exercise price of $4.3125 per share following the Company's 1998 Annual
Meeting. Each option granted upon 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. In addition, on February 4, 1999 the
Company granted an option to purchase 50,000 shares of Common Stock with an
exercise price of $5.6875 per share, which options vest on February 4, 2000, to
each of Mr. Noorda, Mr. Repp and Ms. Kreidel.
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. Melrose, 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.
Melrose, 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 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.
4
<PAGE> 7
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 1999, the Compensation Committee consisted of Mr.
Noorda, Ms. Kreidel, Mr. Repp and Mr. Proctor (who resigned prior to the end of
the 1999 fiscal year). 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 3, 1999, 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 3, 1999, 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 Earl Pearlman's
filings on Form 4 was filed five days late, the Company has no record of a Form
4 filing for a option to purchase 125,000 shares of Common Stock with an
exercise price of $8.31 per share granted to David Proctor (a former director of
the Company) in August 1998, and the February 1999 Form 4 filings for each of
Ray Noorda, Val Kreidel and John Repp were filed one day late.
5
<PAGE> 8
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of July 9, 1999 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
3, 1999, and (iv) all directors and executive officers as a group. As of July 9,
1999, there were 28,930,660 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.
SECURITY OWNERSHIP TABLE
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
---------------------
NAME NUMBER PERCENT
---- ---------- -------
<S> <C> <C>
The Canopy Group, Inc....................................... 14,463,285 49.99%
240 West Center Street
Orem, Utah 84057
Raymond J. Noorda(2)........................................ 14,483,077 50.03%
Val Kreidel(3).............................................. 19,792 *
Al Melrose(4)............................................... 8,333 *
John Repp(5)................................................ 10,000 *
Earl M. Pearlman(6)......................................... 294,168 1.01%
Dale R. Boyd(7)............................................. 144,000 *
Gary M. Scott(8)............................................ 614,500 2.10%
Chuck Sitzman(9)............................................ 15,000 *
Thomas P. Raimondi, Jr.(10)................................. 288,350 *
All directors and officers as a group (13 persons)(11)...... 16,072,278 53.08%
</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) The address for Mr. Noorda is c/o MTI Technology Corporation, 4905 East La
Palma Avenue, Anaheim, California 92807. Represents shares owned by The
Canopy Group, Inc. ("Canopy"), and 19,792 shares issuable to Mr. Noorda
upon exercise of options exercisable within 60 days of July 9, 1999. Mr.
Noorda, Chairman of the Board of Directors of the Company, is Chairman of
the Board of Canopy. Mr. Noorda disclaims beneficial ownership of all
shares held by Canopy.
(3) Includes 19,792 shares issuable upon exercise of options exercisable within
60 days of July 9, 1999.
(4) Includes 8,333 shares issuable upon exercise of options exercisable within
60 days of July 9, 1999.
(5) Includes 10,000 shares issuable upon exercise of options exercisable within
60 days of July 9, 1999.
(6) Includes 294,168 shares issuable upon exercise of options exercisable
within 60 days of July 9, 1999.
(7) Includes 144,000 shares issuable upon exercise of options exercisable
within 60 days of July 9, 1999.
(8) Includes 362,500 shares issuable upon exercise of options exercisable
within 60 days of July 9, 1999.
(9) Includes 15,000 shares issuable upon exercise of options exercisable within
60 days of July 9, 1999.
(10) Includes 278,350 shares issuable upon exercise of options exercisable
within 60 days of July 9, 1999.
(11) Includes shares held by entities affiliated with directors and executive
officers of the Company as described above, including 1,349,310 shares
issuable upon exercise of stock options and warrants exercisable within 60
days of July 9, 1999.
6
<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............... 1999 285,577 0 * 75,000 0
President and Chief Executive 1998 260,577 202,070 * 285,000 0
Officer 1997 213,846 0 * 250,000 0
Dale R. Boyd................... 1999 218,846 0 * 90,000 936
Senior Vice President,
Finance 1998 189,750 91,522 * 0 2,864
and Administration, Chief 1997 175,048 11,250 * 120,000 1,300
Financial Officer and
Secretary
Thomas P. Raimondi, Jr......... 1999 243,978 0 * 125,000 853
Chief Operating Officer 1998 207,343 90,522 * 0 3,020
1997 200,000 10,000 * 100,000 1,875
Gary M. Scott.................. 1999 261,990 0 * 50,000 1,443
Senior Vice President,
European 1998 254,609 103,022 * 80,000 2,584
Operations 1997 210,098 0 24,650 0 1,130
Chuck Sitzman(3)............... 1999 210,000 0 * 40,000 5,907
Senior Vice President, 1998 89,423 88,000 * 50,000 21,085
Customer Service
</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.
(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 amount for
Mr. Sitzman, which also includes $20,215 for reimbursement of relocation
expenses.
(3) Mr. Sitzman joined the Company on August 18, 1997.
7
<PAGE> 10
SUMMARY OF OPTION GRANTS
The following table sets forth the individual grants of stock options made
by the Company during the fiscal year ended April 3, 1999 to each of the Named
Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME GRANTED(#) FISCAL YEAR(1) ($/SH)(1) DATE 5%($) 10%($)
---- ---------- -------------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Earl M. Pearlman................. 75,000 4% $4.31 09/10/08 203,289 515,176
Dale R. Boyd..................... 90,000 4% $8.31 07/08/08 470,347 1,191,958
Thomas P. Raimondi, Jr........... 125,000 6% $8.31 07/08/08 653,259 1,655,497
Gary Scott....................... 50,000 2% $8.31 07/08/08 261,304 662,199
Chuck Sitzman.................... 40,000 2% $8.31 07/08/08 209,043 529,759
</TABLE>
- ---------------
(1) Based on an aggregate of 2,020,000 options granted to directors and
employees of the Company in fiscal year 1999, 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 75,000 shares at $4.31, which
expires September 10, 2008, vests 100% on September 10, 1999. Mr. Boyd's
option grant to purchase 90,000 shares at $8.31, which expires July 8,
2008, vests 25% one year after the commencement date of the grant, and
one-twelfth of the remaining unvested shares subject to the option grant
vest each quarter thereafter. Mr. Raimondi's option grant to purchase
125,000 shares at $8.31, which expires July 8, 2008, vests 25% one year
after the commencement date of the grant, and one-twelfth of the remaining
unvested shares subject to the option grant vest each quarter thereafter.
Mr. Scott's option grant to purchase 50,000 shares at $8.31, which expires
July 8, 2008, vests 25% one year after the commencement date of the grant,
and one-twelfth of the remaining unvested shares subject to the option
grant vest each quarter thereafter. Mr. Sitzman's option grant to purchase
40,000 shares at $8.31, which expires July 8, 2008, vests 25% on year after
the commencement date of the grant, and one-twelfth of the remaining
unvested shares subject to the option grant vest each quarter thereafter.
All such options have provisions accelerating the vesting in the event of a
change in control.
8
<PAGE> 11
SUMMARY OF OPTIONS EXERCISED
The following table sets forth information concerning exercises of stock
options during the year ended April 3, 1999 by each of the Named Executive
Officers and the value of unexercised options at April 3, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
YEAR END(#) AT FISCAL YEAR END($)
SHARES VALUE ----------------- ---------------------
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) ($)(1) UNEXERCISABLE UNEXERCISABLE(2)
---- ----------- ---------- ----------------- ---------------------
<S> <C> <C> <C> <C>
Earl M. Pearlman............... 140,000 $1,537,884 294,168/217,500 483,442/84,375
Dale R. Boyd................... 2,000 $ 16,625 97,750/156,250 271,516/170,484
Thomas P. Raimondi, Jr. ....... 23,000 $ 153,200 222,100/193,750 790,869/231,641
Gary Scott..................... 0 $ -- 313,750/131,250 1,046,328/115,234
Chuck Sitzman.................. 0 $ -- 18,750/71,250 16,453/27,422
</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 3,
1999 ($5.44) minus the exercise price.
SEVERANCE AGREEMENTS
The Board of Directors has entered into Severance Agreements with the
following executive officers: Earl Pearlman, Dale Boyd, Thomas Raimondi, Gary
Scott, Chuck Sitzman and Venki Venkataraman. These agreements have two year
terms and are automatically renewable for successive one year terms thereafter.
Pursuant to the 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 3, 1999, the Compensation Committee,
consisting of Mr. Noorda, Ms. Kreidel, Mr. Repp and Mr. Proctor (who resigned
prior to the end of the 1999 fiscal year), 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
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<PAGE> 12
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 1999, 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 1999. 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 1999 ("Actual
Net Income") being equal to or greater than the consolidated net income as set
forth in the Company's fiscal 1999 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
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<PAGE> 13
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 no cash bonus for fiscal
1999. Mr. Pearlman was awarded options to purchase 75,000 shares of the
Company's Common Stock during fiscal 1999.
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 3, 1999, 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 2000 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
Al Melrose
John Repp
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<PAGE> 14
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 3, 1999 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 60 MONTH CUMULATIVE TOTAL RETURN AMONG MTI
TECHNOLOGY CORPORATION, THE NASDAQ STOCK MARKET -- U.S.
INDEX AND THE NASDAQ COMPUTER MANUFACTURER INDEX
<TABLE>
<CAPTION>
MTI TECHNOLOGY NASDAQ STOCK MARKET - NASDAQ COMPUTER
CORPORATION U.S. MANUFACTURER INDEX
-------------- --------------------- ------------------
<S> <C> <C> <C>
4/94 100.00 100.00 100.00
3/95 36.00 109.00 116.00
3/96 21.00 149.00 179.00
3/97 42.00 165.00 196.00
3/98 192.00 251.00 348.00
3/99 61.00 337.00 688.00
</TABLE>
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.
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<PAGE> 15
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On July 27, 1999, the Company entered into an agreement with Caldera
Systems, Inc. ("Caldera"), a provider of LINUX-based operating systems for
businesses, to purchase 5,333,333 shares of common stock of Caldera,
approximately 25% of the outstanding capital stock, for a purchase price of
$6,000,000. The Canopy Group, Inc., a major stockholder of the Company,
currently owns substantially all of the remaining issued and outstanding shares
of Caldera. Raymond J. Noorda, Chairman of the Board of Directors of the
Company, is the Chairman of the Board of Directors of The Canopy Group, Inc.
John Repp, a director of the Company, provided sales and marketing
consulting services to the Company during the fiscal year ended April 3, 1999.
Mr. Repp was paid an aggregate of $36,800 for his services. Al Melrose, a
director of the Company, provided investor relations consulting services to the
Company during the fiscal year ended April 3, 1999. Mr. Melrose was paid an
aggregate of $127,396 for his services.
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 2, 2000, 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 2, 2000.
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.
PROPOSAL THREE
AMENDMENT OF 1996 STOCK INCENTIVE PLAN
At the Annual Meeting, the Company's stockholders will be asked to vote on
a proposal to approve an amendment to the 1996 Stock Incentive Plan (the "Plan")
to increase the number of shares subject to the Plan from 4,704,099 to
6,704,099, plus annual adjustments.
The Board of Directors has concluded that the number of shares authorized
and remaining available for issuance under the Plan as currently in effect will
not be sufficient to achieve the Company's objectives and that an amendment to
the Plan is in the best interests of the Company.
The Plan was originally adopted by the Board in June 1996 and by its
stockholders in October 1996. A total of 4,704,099 shares of Common Stock are
currently reserved for issuance under the Plan, of which
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<PAGE> 16
4,581,339 have been granted as of July 30, 1999. In order to have sufficient
shares available for future grants, the number of shares of Common Stock that
can be issued under the Plan is proposed to be increased to 6,704,099, plus
annual adjustments. The Plan also provides that in January of each year the
number of shares available for grant increases by a number equal to 3% of the
number of shares outstanding as of December 31st of the immediately preceding
year (the "annual adjustment").
The essential features of the Plan are discussed below.
Purposes. The purposes of the Plan are to attract and retain the best
available personnel for positions of substantial responsibility, to provide
additional incentive to employees, directors and consultants of the Company and
its subsidiaries and to promote the success of the Company's business.
Administration. With respect to grants of awards to employees who are also
officers or directors of the Company, the Plan will be administered by either
the Board of Directors or a Committee (as applicable, the "Administrator")
designated by the Board. The Administrator will be constituted so as to satisfy
applicable laws and to permit grants and related transactions, for directors and
officers under the Plan to be exempt from Section 16(b) of the Exchange Act and
which, in the case of "covered employees" is intended to constitute
performance-based compensation is made up solely of two or more "outside
directors" as such term is defined under Section 162(m) of the Internal Revenue
Code. With respect to grants of awards to employees or consultants who are
neither directors nor officers of the Company, the Administrator may authorize
any officer(s) to grant awards, and may condition such authority by requiring
that all grants are ratified by the Board within 6 months of the grant date.
Subject to the provisions of the Plan, the Administrator has the final power to
construe and interpret the Plan and the awards granted under it, and to
determine, among other matters, the persons to whom stock awards will be granted
and the number of shares with respect to which awards shall be granted.
Types of Awards. The Administrator may issue any type of arrangement to a
director, employee or consultant that is not inconsistent with the provisions of
the Plan and that by its terms involves or might involve the issuance of (i)
shares of Common Stock of the Company, (ii) on option, SAR or similar right with
an exercise or conversion privilege at a fixed or variable price related to the
Common Stock or the passage of time, the occurrence of one or more events, or
the satisfaction of performance criteria or other conditions, or (iii) any other
security with the value derived from the value of the Common Stock. Performance
criteria may be based on any one of, or combination of, an increase in share
price, earnings per share, total stockholder return, return on equity, return on
assets, return on investment, net operating income, cash flow, revenue, economic
value added, personal management objectives, or other measure of performance
selected by the Administrator.
In the case of stock options, each option will be either an incentive stock
option or a non-qualified stock option. If the aggregate fair market value of
shares subject to incentive stock options which become exercisable for the first
time by an individual during any calendar year under any Company plan exceeds
$100,000, such excess options will be treated as non-qualified stock options.
Stock options may not be transferred, but all other awards may be transferred in
accordance with the terms of the grant. The exercise price of any incentive
stock option may not be less than 100% of the fair market value per share on the
date of grant (110% in the case of a stockholder ("10% Holder") holding 10% or
more of the voting power of the Company's and its subsidiaries' stock). The
exercise price of non-qualified stock options may not be less than 85% of the
fair market value on the date of grant, or 100% in the case of options intended
to qualify performance-based compensation.
The Administrator may accept the following types of consideration for
shares issued under the Plan: (i) cash; (ii) check; (iii) surrender of shares of
Common Stock (including the withholding of shares otherwise deliverable upon
exercise) with a fair market value equal to the aggregate exercise price; (iv)
delivery of a properly executed exercise notice together with such other
documentation as the Administrator and the broker, if applicable, require to
effect an exercise of the award and delivery to the Company of the sale or loan
proceeds required to pay the exercise price; or (v) any combination of the
foregoing.
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<PAGE> 17
The Administrator may establish programs to permit grantees to defer
receipt of consideration upon exercise of an award, satisfaction of performance
criteria, or other event that absent the election would entitle the grantee to
payment or receipt of shares or other consideration.
No shares of Common Stock may be issued under the Plan until the grantee
has made arrangements satisfactory to the Administrator for the satisfaction of
federal, state and local income and employment tax withholding obligations.
The term of each Award will be stated in the Award agreement, provided that
the term of an Incentive Stock Option may not exceed 10 years from the date of
grant or 5 years from the date of grant if the grantee is a 10% Holder.
In the event of any actual or anticipated Corporate Transaction, Change in
Control or Subsidiary Disposition (all as described below), the Administrator
may cause each outstanding award automatically to become fully vested and
exercisable and be released from any restrictions on transfer and repurchase or
forfeiture rights immediately prior to the date of such transaction. The
Administrator may also condition any such acceleration or termination of
restriction on termination of the employee or consultant within a specified time
of the transaction. Effective upon the consummation of the Corporate
Transaction, all outstanding awards under the Plan terminate unless assumed by
the successor company or its parent. A "Corporate Transaction" means any of the
following stockholder-approved transactions to which the Company is a party: (i)
a merger or consolidation in which the Company is not the surviving entity
(other than for a change in domicile); (ii) the sale, transfer or other
disposition of all or substantially all of the assets of the Company in
connection with complete liquidation or dissolution of the Company; or (iii) any
reverse merger in which the Company is the surviving entity, but in which
securities possessing more than 50% of the total combined voting power of the
Company's outstanding securities are transferred to a person or persons
different from those who held such securities immediately prior to such merger.
A "Change in Control" means a change in ownership or control of the Company
effected through either of the following transactions: (i) the direct or
indirect acquisition of beneficial ownership of securities with more than 50% of
the total combined voting power of the Company's outstanding securities pursuant
to a tender or exchange offer made directly to the Company's stockholders which
a majority of the disinterested directors did not approve (other than by the
Company, a Company-sponsored benefit plan, or any current beneficial owner or
group holding in excess of 50% of the combined voting power of such securities);
or (ii) a change in the composition of the board over 36 months or less such
that the majority of Board members ceases, by reason of one or more contested
elections for Board membership, to be comprised of individuals who have been
Board members for at least 36 months or were elected or nominated by such Board
members. A "Subsidiary Disposition" means the disposition by the Company of its
equity holdings in any subsidiary corporation effected by a merger or
consolidation involving that subsidiary, the sale of all or substantially all of
the assets of that subsidiary, or the Company's sale or distribution of
substantially all of the outstanding capital stock of such subsidiary
corporation.
The portion of any incentive stock option accelerated under the Stock
Incentive Plan in connection with a Corporate Transaction, Change in Control or
Subsidiary Disposition remains exercisable as an incentive stock option under
the Code only to the extent the $100,000 limitation of Section 422(d) of the
Code is not exceeded. Any excess portion will be exercisable as a non-qualified
stock option.
Available Shares. Subject to approval of the proposed amendment of the
Plan, the maximum aggregate number of shares of Common Stock which may be issued
under the Stock Incentive Plan initially is 6,704,099 shares, increased by a
number equal to 3% of the number of shares of Common Stock outstanding as of
December 31st of the immediately preceding fiscal year, beginning on the first
business day of 2000. Notwithstanding the foregoing, subject to such amendment,
the maximum aggregate number of shares available for granting incentive stock
options is 4,250,000 and is not subject to any annual adjustment. The maximum
number of shares with respect to which options and stock appreciation rights may
be granted to any employee during a fiscal year is 500,000.
15
<PAGE> 18
Eligible Individuals. Awards other than incentive stock options, which may
only be granted to employees, may be granted to employees (including officers
and directors) and consultants of the Company or any parent or subsidiary.
Amendment. The Board may amend the Plan at any time and for any reason,
subject to certain restrictions on the ability to adversely affect awards
previously granted thereunder and to any legal requirement to obtain stockholder
approval.
Term. The Plan is effective from June 27, 1996, the date of adoption by the
Board, for a term of 10 years unless sooner terminated.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE 1996 STOCK INCENTIVE PLAN
The following is a brief summary of the current United States federal
income tax rules generally applicable to the awards under the Stock Incentive
Plan.
Incentive Stock Options. There are generally no federal income tax
consequences to the optionee or the Company by reason of the grant or exercise
of an incentive stock option.
If an optionee holds stock for more than two years from the date on which
the option is granted and more than one year from the date on which the shares
are transferred to the optionee upon exercise of the incentive stock option, any
gain or loss on a disposition of such stock will be a long term capital gain or
loss. Generally, if the optionee disposes of the stock before the expiration of
either of these holdings periods (a "disqualifying disposition"), at the time of
disposition the optionee will realize taxable ordinary income equal to the
excess of the fair market value on the date of exercise over the exercise price.
If the optionee disposes of the stock in a disqualifying disposition involving a
sale or exchange, however, the optionee will realize taxable ordinary income
equal to the optionee's actual gain, if any, on the sale or exchange, but no
more than the excess of the fair market value on the date of exercise over the
exercise price. The optionee's additional gain or any loss upon the
disqualifying disposition will be a capital gain or loss which will be long-term
or short-term depending on the period of time the stock was held. Slightly
different rules may apply to optionees who acquire stock subject to certain
repurchase options or who are subject to Section 16(b) of the Exchange Act.
Upon exercise of an incentive stock option, the excess of the stock's fair
market value on the date of exercise over the option exercise price will
constitute an adjustment in calculating the optionee's alternative minimum tax
liability, if any.
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will be entitled (subject to the
requirement of reasonableness and perhaps, in the future, the satisfaction of a
withholding obligation) to a corresponding business expense deduction in the tax
year in which the disposition occurs.
Non-Qualified Stock Options. There generally are no tax consequences to the
optionee or the Company by reason of the grant of a non-qualified stock option.
Upon exercise of a non-qualified stock option normally the optionee will
recognize taxable ordinary income equal to the exercise of the stock's fair
market value on the date of exercise over the exercise price. Subject to the
requirement of reasonableness and the satisfaction of any withholding
obligation, the Company will be entitled to a business expense deduction equal
to the taxable ordinary income realized by the optionee. Upon disposition of
stock, the optionee will recognize a capital gain or loss equal to the
difference between the selling price and the sum of the amount paid for such
stock plus any amount recognized as ordinary income upon exercise of the option.
Such gain or loss will be long or short-term depending on the period of time the
stock was held. Slightly different rules may apply to optionees who acquire
stock subject to certain repurchase options or who are subject to Section 16(b)
of the Exchange Act.
Stock Grants, Restricted Stock Grants and Restricted Stock
Purchases. Generally, a recipient of stock under the Stock Incentive Plan would
recognize ordinary income equal to the difference between the fair market value
of the stock on the grant or purchase date and any amount paid or required to be
paid for the stock. If the stock is restricted and subject to vesting, then the
recipient of the stock would recognize ordinary
16
<PAGE> 19
income as the restrictions are removed and the stock vests. On each vesting
date, the recipient would recognize ordinary income equal to the difference
between the fair market value of the shares of stock that have vested on such
date and any amount paid or required to be paid for the shares of stock. The
recipient of the stock would not recognize any income to the extent the rights
to the stock have not vested. A recipient of stock under the Stock Incentive
Plan, however, may make an election under Section 83(b) of the Code within 30
days of the stock award to be taxed at the grant date at ordinary income rates
on the difference between the fair market value of the stock on the grant or
purchase date and any amount paid by the recipient for the stock. If a Section
83(b) election is made, the recipient will not recognize income on subsequent
vesting of the award. However, no loss or deduction will be permitted the
recipient if the restricted stock is forfeited.
Subject to the requirement of reasonableness and the satisfaction of any
withholding obligation, the Company will be entitled to a business expense
deduction equal to the taxable ordinary income realized by the recipient.
Upon disposition of stock, the recipient will recognize a capital gain or
loss equal to the difference between the selling price and the sum of the amount
paid for such stock plus any amount recognized as ordinary income. Such gain or
loss will be long or short term depending on the period of time the stock was
held.
Other Tax Consequences. The foregoing discussion is not a complete
description of the federal income tax aspects of stock awards under the Plan. In
addition, administrative and judicial interpretations of the application of the
federal income tax laws are subject to change. Furthermore, no information is
given with respect to state or local taxes that may be applicable. Participants
in the Plan who are residents or are employed in a country other than the United
States may be subject to taxation in accordance with the tax laws of that
particular country in addition to or in lieu of United States federal income
taxes.
NEW PLAN BENEFITS
Because stock awards under the Plan are discretionary, the benefits to be
received under the stock incentive plan by any director, officer or employee of
the Company cannot presently be determined.
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 HAS UNANIMOUSLY APPROVED THE ADOPTION OF THE
AMENDMENT TO THE 1996 STOCK INCENTIVE PLAN AND UNANIMOUSLY RECOMMENDS THAT
HOLDERS OF SHARES OF COMMON STOCK VOTE "FOR" APPROVAL OF THE FOLLOWING
RESOLUTION, WHICH WILL BE PRESENTED TO THE MEETING:
RESOLVED, that the stockholders of MTI Technology Corporation hereby
approve the adoption of the amendment to Section 3(a) of the 1996 Stock
Incentive Plan to read as follows: "Subject to the provisions of Section 10,
below, the maximum aggregate number of Shares which may be issued pursuant to
Awards initially shall be 6,704,099 Shares, and commencing with the first
business day of each calendar year thereafter beginning with 2000, such maximum
aggregate number of Shares shall be increased by a number equal to three percent
(3%) of the number of Shares outstanding as of December 31st of the immediately
preceding calendar year. Notwithstanding the foregoing, the maximum aggregate
number of Shares available for grant of Incentive Stock Options shall be
4,250,000 Shares, and such number shall not be subject to annual adjustments as
described above. The Shares to be issued pursuant to Awards may be authorized,
but unissued, or reacquired Common Stock."
The persons designated in the enclosed proxy will vote your shares FOR
approval unless instructions to the contrary are indicated in the enclosed
proxy.
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<PAGE> 20
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
3, 1999 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.
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Stockholders who may wish to present proposals for inclusion in the
Company's proxy materials in connection with the 2000 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 April 22, 2000. In addition,
to be properly considered at the 2000 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 20, 1999
18
<PAGE> 21
APPENDIX "A"
PROXY
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 23, 1999
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 23, 1999, 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.
See reverse side (CONTINUED AND TO BE SIGNED ON REVERSE SIDE.) See reverse side
<PAGE> 22
[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 NOMINEES LISTED AND FOR
APPROVAL OF PROPOSALS 2 AND 3. 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: Nominees: Val Kreidel and Earl Pearlman
[ ] ___________________________ FOR WITHHELD
For all nominees except as [ ] [ ]
noted above
2. Ratification of Selection of FOR AGAINST ABSTAIN
KPMG Peat Marwick LLP as the [ ] [ ] [ ]
Company's independent auditors for fiscal
year 2000.
3. Approval of an amendment to the 1996 Stock FOR AGAINST ABSTAIN
Incentive Plan [ ] [ ] [ ]
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING AND PROXY
STATEMENT FOR THE 1999 ANNUAL MEETING.
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
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.
Signature:___________________ Date:_____ Signature:______________ Date:_____
[TO BE REVISED ON RECEIPT OF FINAL FORM OF PROXY CARD]
